How to apply for MUDRA Tarun loan up to ₹10 lakh — complete 2026 guide

PMMY has disbursed over ₹32 lakh crore to 52+ crore loan accounts since launch in April 2015 (MUDRA Annual Report 2024-25). Tarun accounts for ~16% of accounts but ~58% of the disbursed amount — it's where the real productive small-business credit happens. The 2024 Budget announcement of Tarun Plus (up to ₹20 lakh for repeat-good borrowers) has made the scheme far more attractive for second-cycle entrepreneurs.

Pradhan Mantri MUDRA Yojana (PMMY) was launched on 8 April 2015. MUDRA stands for Micro Units Development & Refinance Agency — a SIDBI subsidiary that refinances banks/NBFCs/MFIs for the small-loan business segment.

The three (now four) MUDRA categories:

• Shishu: up to ₹50,000 — first loan for new micro entrepreneurs.
• Kishore: ₹50,001 to ₹5 lakh — for slightly established units.
• Tarun: ₹5,00,001 to ₹10 lakh — for proven small businesses needing growth capital. (This guide.)
• Tarun Plus: ₹10 lakh to ₹20 lakh — only for repeat borrowers who have closed a Tarun loan with full repayment.

You are eligible for Tarun if all of the following are true:

• You run (or are setting up) a non-corporate, non-farm micro or small enterprise — manufacturing, trading, services, or allied agri (dairy, poultry, beekeeping, sericulture, fisheries, agroforestry — not crop cultivation).
• Loan need is above ₹5 lakh and up to ₹10 lakh (for Tarun Plus, up to ₹20 lakh with repaid-Tarun history).
• You're an Indian citizen with PAN + Aadhaar (linked) + bank account.
• You're not a wilful defaulter (CIBIL clean or with explainable score; minimum typically 650-680, but lenders apply discretion).
• Activity is not in the banned negative list (alcohol, tobacco, gambling, restricted weapons).
• Borrower can be: individual proprietor, partnership, LLP, Pvt Ltd (small/micro segment), self-help group, joint liability group.

The legal/policy anchors are the PMMY Operational Guidelines (issued by MUDRA, periodically revised) and RBI's Master Direction on Lending to MSME Sector. CGTMSE (Credit Guarantee Trust for Micro & Small Enterprises) and CGFMU (Credit Guarantee Fund for Micro Units) provide the collateral cover that makes MUDRA truly collateral-free.

While not strictly mandatory for Tarun, in 2026 nearly every lender asks for it.

• https://udyamregistration.gov.in → Aadhaar + PAN.
• Free, ~30 minutes, certificate downloadable instantly.

See: Register your business as Udyam MSME — full guide.

Tarun loans are issued by:

• Public sector banks — SBI, PNB, BoB, Canara, Union, Indian Bank, BoI, Central, IOB, BoM, Punjab & Sind, UCO. (Best route — lowest interest, transparent process, CGTMSE invoked smoothly.)
• Private sector banks — HDFC, ICICI, Axis, Kotak, IndusInd, Federal, IDBI. (Higher rates but faster decisions.)
• Regional rural banks (RRBs) — Aryavart, Baroda UP, etc. (Strong rural reach.)
• Small finance banks — AU SFB, Equitas, Ujjivan, ESAF, Suryoday, Jana, Capital, Utkarsh.
• NBFCs / MFIs — Bandhan, Bharat Financial, Annapurna, etc. (Fast but highest rates — last resort for Tarun.)

Rule of thumb for Tarun: start with the PSU bank where you already have a current account or a prior Kishore/MUDRA loan. Track record at the same bank halves processing time.

For Tarun (₹5 lakh - ₹10 lakh), banks expect more rigour than Shishu/Kishore:

• KYC: Aadhaar, PAN, voter ID/passport (one secondary).
• Address proof: Aadhaar / electricity bill / rent agreement.
• Business proof: Udyam certificate, GST registration (mandatory if turnover crosses ₹40 lakh — most Tarun applicants are above this), shop & establishment licence, trade licence.
• Premises: Rent agreement OR property papers OR NOC from owner.
• Bank statements: Last 12 months, business + savings accounts.
• ITR: Last 2 years (mandatory for Tarun).
• Project cost / utilisation note: Itemised (machinery, working capital, raw material, working salary, etc.) with vendor quotes for capex items.
• Existing loan list: All current bank loans / NBFC loans (CIBIL will reveal anyway — disclose upfront).
• Photos: Two passport size; one of business premises (current state).
• Caste / category certificate: if applicable for any concession.
• PMMY/MUDRA application form: branch hands it; one page with annexures.

Three routes:

• Branch route: Walk in to the chosen branch with the full file. Get a date-stamped acknowledgement with token number.
• Bank's online portal: Most PSU banks now have a “MUDRA” page on their website — apply online; bank contacts you.
• Aggregator portal: https://www.udyamimitra.in (govt) or https://www.mudraloan.org.in (MUDRA's own info portal — note the apply path; some lookalike fake portals exist).
• JanSamarth portal: https://www.jansamarth.in — central credit-linked schemes portal; covers MUDRA among others.

Always keep an acknowledgement.

For Tarun:

• Branch credit officer visits in 7-21 days of complete documents.
• Verifies premises, machinery quotes, inventory, books of accounts.
• Pulls CIBIL Commercial report (you can pre-pull yours from cibil.com to know).
• Internal credit appraisal note prepared; for Tarun amounts, often signed off by the Branch Head + a credit officer.
• CGTMSE/CGFMU invoked — bank pays guarantee fee; partial pass-through to you (typically 1-1.5% upfront + 0.5-0.85% annual on outstanding).

• Sanction in 15-45 days for clean files.
• Tarun loans typically come as Term Loan + Cash Credit / Overdraft combo:
  • Term loan: for capex (chiller, machinery, fit-out) — fixed EMI, 5-7 years.
  • Cash credit / overdraft: for working capital — interest only on utilised portion.
• RuPay MUDRA card: Free debit card linked to the cash-credit portion — you can withdraw working capital at any ATM, swipe at vendors. Especially useful for traders / small manufacturers who buy raw material daily.
• Read the sanction letter cover to cover:
  • Interest type (fixed vs floating).
  • Reset frequency.
  • Processing fee (typically NIL or 0.5%).
  • CGTMSE/CGFMU annual fee.
  • Inspection charges.
  • Penalty for late EMI (typically 2% per annum on overdue).
  • Prepayment terms (usually no penalty on floating).

• Capex portion: Bank pays vendor directly against GST invoice + delivery challan.
• Working capital portion: Disbursed to your business current account; available via RuPay MUDRA card or cheque.
• Open a current account if you don't have one — savings account is not acceptable for business disbursement above Kishore size.

• Quarterly inspection in year 1; thereafter half-yearly.
• Maintain books — even a manual cashbook + sales/purchase register works.
• Pay every EMI on time — this is what unlocks Tarun Plus (₹10-20 lakh) at the next cycle.
• If business stress hits, approach the branch early for restructuring; RBI's MSME restructuring framework allows it before classification as NPA.
• Annual renewal of cash-credit / OD based on stock + book debts statement.

+----------------------------------+--------------------------------------+
| Tarun loan band                  | ₹5,00,001 – ₹10,00,000               |
| Tarun Plus band (repeat borrower)| ₹10,00,001 – ₹20,00,000              |
+----------------------------------+--------------------------------------+
| Interest rate (early 2026, PSU)  | ~9.0% – 13.5% (Repo / EBLR + spread) |
| Private banks / NBFCs            | ~13% – 22%                           |
+----------------------------------+--------------------------------------+
| Margin (your contribution)       | NIL on most working-capital loans;   |
|                                  | 10-25% on capex / equipment loans    |
+----------------------------------+--------------------------------------+
| Processing fee                   | NIL on Shishu / Kishore at PSU banks |
|                                  | 0.5% (max ₹5,000) typical for Tarun  |
+----------------------------------+--------------------------------------+
| CGTMSE / CGFMU fee               | Upfront 1.0-1.5%; annual 0.5-0.85%   |
| (collateral free)                | of outstanding (passed on partly)    |
+----------------------------------+--------------------------------------+
| Repayment tenure                 | 3-7 years (term portion)             |
| CC / OD                          | 12 months, renewable annually        |
+----------------------------------+--------------------------------------+
| Moratorium                       | 0-6 months (capex loans)             |
+----------------------------------+--------------------------------------+
| Pre-payment charge               | NIL on floating-rate (RBI mandate)   |
+----------------------------------+--------------------------------------+
| RuPay MUDRA card                 | Free debit card on CC portion        |
+----------------------------------+--------------------------------------+
| Udyam registration               | NIL (free)                           |
+----------------------------------+--------------------------------------+
| RTI to MUDRA / PSU bank PIO      | ₹10 by IPO. BPL = free.              |
+----------------------------------+--------------------------------------+

• No business vintage / no ITR. Tarun expects 2-3 years of operations. If you're just starting out, apply for Kishore (₹50k-5L) first; Tarun comes after vintage.
• CIBIL Commercial < 650 with adverse remarks. Especially common for borrowers who used Buy-Now-Pay-Later carelessly. Clean up CIBIL first.
• GST mismatch. If your stated turnover in the project note doesn't match GSTR-3B / GSTR-1 filings, banks reject. Reconcile before applying.
• PAN-Aadhaar not linked. Mandatory; without it the bank's CBS won't open the loan account.
• Vendor quote without GST. Capex vendor must be GST-registered for the bank to pay directly. Get formal quotation on GST letterhead.
• Activity sub-classification confusion. “I run a computer shop” — is that retail trade, IT services, or repair? Get the NIC code right in your Udyam; mismatch with GST classification triggers queries.
• CGTMSE / CGFMU branch quota. Some branches are told they've hit their quota for the quarter — they then quietly stall. Push for a written reason, then escalate.
• Multiple parallel applications. Applying at 3 banks at once shows up as 3 enquiries on CIBIL Commercial. Banks become suspicious. Apply at one PSU bank at a time.
• No current account. Disbursement of Tarun amounts cannot land in a savings account; opening a current account in parallel saves 1-2 weeks.
• Fake “MUDRA agents”. No “agent” is needed. PMMY application is fee-free at the lender. Anyone asking ₹2,000-₹10,000 to “process” your loan is a scam.

• Polite written letter (one page) to the Branch Manager. Mention application date, reference / token number, current status, and request a written reason for delay if 30+ days.
• Ask for the bank's MSME Code of Commitment to Customers — every PSU has one; it specifies sanction timelines.

• Write to the Regional Manager (MSME) of your bank circle. Address available on the bank's “Locate us” page.
• Mark a copy to the Lead District Manager (LDM) — every district has one; they convene monthly DLCC reviews on MUDRA performance.
• Quote the RBI MSME credit charter: 14 days for sanction decision on small loans up to ₹10 lakh.

• https://cms.rbi.org.in → file complaint under the Integrated Ombudsman Scheme 2021.
• Required: 30 days from your written complaint to bank without satisfactory reply.
• Free, online, no lawyer needed.

• https://pgportal.gov.in → ministry “Department of Financial Services” → choose your bank.
• Useful for high-visibility nudges — gets to the bank's nodal grievance officer.

PSU banks, MUDRA Ltd (a SIDBI subsidiary), and SIDBI itself are public authorities under §2(h) of the RTI Act. Private banks, NBFCs, and small finance banks are NOT public authorities — RTI on them won't work; instead RTI to the RBI for regulatory data on those entities, or to MUDRA for refinance utilisation.

RTI helps here when:

• Application past 30-45 days with no decision — RTI to PIO of the bank's zonal office for file movement, noting, and recorded reason for delay.
• Verbal rejection without written rejection letter — RTI for recorded reason for rejection. (Banks try to reject orally to avoid creating a paper trail; RTI forces the paper trail.)
• “CGTMSE quota over” excuse — RTI to PIO MUDRA / SIDBI for the bank's CGTMSE drawdown vs sanction limit.
• Sanction letter received but disbursement stuck — RTI for the disbursement workflow / pending compliance / pending CGTMSE invocation status.
• Higher interest rate than the bank's published MUDRA rate — RTI for the bank board-approved spread matrix for MUDRA Tarun in your risk grade.
• RuPay MUDRA card not issued despite sanction — RTI to PIO bank for the card issuance log / pending KYC.

PIO addresses: CPIO, [Bank name] Head Office, [city] — every PSU bank's RTI page lists CPIO + First Appellate Authority. For MUDRA: CPIO, MUDRA Limited, MSME Development Centre, Plot C-11, G-Block, Bandra-Kurla Complex, Bandra (East), Mumbai 400051. For SIDBI: CPIO, SIDBI, SIDBI Tower, Plot 15A, Sector 3, CBD-Belapur, Navi Mumbai 400614.

RTI does NOT help here when:

• You want a private bank or NBFC forced to give you a loan — RTI doesn't apply to them.
• Your CIBIL is genuinely low and the rejection is for that reason — RTI gets you the documented reason, but doesn't compel sanction.
• You want to negotiate the interest rate — that's a contract decision; not “information held”.
• You want CIBIL data corrected — wrong channel; go to cibil.com.
• You're already in NPA / SARFAESI proceedings — those are court-driven; RTI runs parallel but doesn't pause action.

See: RTI for stuck PSU bank loan — copy-ready template.

Q. Difference between Tarun and Tarun Plus in 2026?
Tarun: ₹5L-10L for any eligible borrower. Tarun Plus: ₹10L-20L only for borrowers who have fully repaid an earlier Tarun loan (closure certificate required). Tarun Plus was operationalised post the 2024 Budget announcement; banks have rolled out from FY 2024-25.

Q. Can a salaried person take a MUDRA Tarun loan as a side-business?
Yes — provided you have a registered side business (Udyam, GST if applicable, separate current account). The loan goes to the business, not your salary income. Some banks may insist on resignation if the business size grows large; for ₹5-10 lakh band this rarely arises.

Q. Is collateral really not needed?
For loans up to ₹2 crore in the micro & small enterprise segment, CGTMSE provides the credit guarantee — banks should not insist on collateral. Some branch officers ask for “comfort security” anyway (a fixed deposit, an LIC policy assignment); push back, citing the CGTMSE master circular. If they still insist, escalate.

Q. Can I top up my existing Kishore loan to Tarun?
Yes — most PSU banks allow enhancement of an existing MUDRA account once you've crossed the next category threshold based on your turnover and 12-month repayment record. Talk to your branch; new application form + updated docs.

Q. Do MUDRA loans count for income-tax interest deduction?
Interest paid on a business loan (including MUDRA) is fully deductible against business income under §37(1) of the Income Tax Act — keep the loan certificate from the bank. (This is a business expense, not the §80C/80E personal deduction set.)

Q. The bank manager wants ₹5,000 to “process” my MUDRA file. Should I pay?
No. Ever. Refuse, ask for a written demand of any fee (which they cannot give because no such fee exists for Shishu/Kishore and only the published 0.5% for Tarun). File a complaint at https://cvc.gov.in or the bank's vigilance officer. Bribery in MUDRA processing is a CVC-flagged red category.

Q. I run my business from home — am I still eligible?
Yes — home-based units are eligible. Provide premises proof (electricity bill / property tax receipt with your name, NOC from owner if rented). Tailoring units, online sellers, content creators, food prep, beauty services from home all qualify.

• Register your business as Udyam MSME — full guide
• Mahila Udyam Nidhi loan for women — full guide
• RTI for stuck PSU bank loan — copy-ready template
• RTI in 12 simple steps — for first-time filers
• All Indian government helplines — one master directory

Last reviewed: 26 April 2026 by RTI Wiki editorial team. PMMY parameters update annually — verify current Tarun / Tarun Plus operational guidelines at mudraloan.org.in / your bank's website or write to admin@bighelpers.in if you spot a stale figure.