Mudra Shishu Loan: Eligibility and How to Apply
Reviewed by: WeCredit Research Team
A Mudra Shishu loan is a collateral-free loan of up to Rs. 50,000 under Pradhan Mantri Mudra Yojana (PMMY). It is meant for very small or early-stage businesses, and you apply to a bank, NBFC or microfinance lender, not to MUDRA itself.
Quick answer: Shishu is the first of four Mudra categories. You can borrow up to Rs. 50,000 for a small non-farm business, with no collateral. Interest rates and fees are set by the lender within RBI guidelines. WeCredit does not sanction government scheme loans, so confirm every detail with the lender and on the official sources listed at the end.
Shishu Loan at a Glance
| Item | Detail |
|---|---|
| Loan amount | Up to Rs. 50,000 |
| Scheme | Pradhan Mantri Mudra Yojana (PMMY), launched 8 April 2015 |
| Security | Collateral-free; PMMY loans up to Rs. 20 lakh are described as collateral-free |
| Who it is for | Very small or early-stage non-corporate, non-farm businesses |
| Who lends | Banks, regional rural banks, small finance banks, NBFCs and microfinance institutions |
| Interest rate and fees | Set by each lender under RBI guidelines; the scheme pages state no single rate |
| Subsidy | No ongoing subsidy is stated on the scheme pages; Mudra is a loan, not a grant |
| Guarantee support | Credit Guarantee Fund for Micro Units, run by NCGTC |
What Shishu Means Inside the Mudra Scheme
The Press Information Bureau (PIB) describes PMMY as collateral-free credit of up to Rs. 20 lakh for non-corporate, non-farm income-generating activities in manufacturing, trading and services, including allied agriculture. The loan is split into four categories by the amount you borrow. Shishu is the smallest and starts the ladder.
Shishu is also the most used category. According to a PIB release of 8 April 2026, with data as on 27 March 2026, Shishu made up 74 percent of all PMMY loans and 32 percent of the amount sanctioned. The same release records 8.80 crore Shishu accounts opened by new borrowers and 57.79 crore loans overall, worth Rs. 40.07 lakh crore since launch.
| Category | Loan amount | Share of loans | Share of amount |
|---|---|---|---|
| Shishu | Up to Rs. 50,000 | 74% | 32% |
| Kishor | Above Rs. 50,000 and up to Rs. 5 lakh | 24% | 43% |
| Tarun | Above Rs. 5 lakh and up to Rs. 10 lakh | 2% | 25% |
| Tarun Plus | Above Rs. 10 lakh and up to Rs. 20 lakh | 0.004% | 0.095% |
Who Is Eligible for a Shishu Loan
In a written Lok Sabha reply of 12 March 2026, the government said any individual who is otherwise eligible to take a loan and has a business plan for a small business enterprise can apply. The loan must fund an income-generating activity in manufacturing, trading or services, or an allied agriculture activity. Shishu does not require a credit history or collateral, and the PIB explainer notes it is open to entrepreneurs who have neither.
That makes Shishu a fit for a roadside tea stall, a tailoring or repair shop, a small kirana, a home-based food business or a beauty service. Crop farming does not qualify because the scheme is for non-farm activity. A registered company is also outside the scheme, since it targets non-corporate units. Our Mudra loan eligibility rules page covers the wider scheme for all four categories.
Who Lends and What Backs the Loan
Shishu loans are given by member lending institutions: scheduled commercial banks, regional rural banks, small finance banks, NBFCs and microfinance institutions. MUDRA, the Micro Units Development and Refinance Agency, refinances these lenders instead of lending to you. This is why the MUDRA website tells borrowers to approach a nearby branch of a lending institution.
The lender is protected by the Credit Guarantee Fund for Micro Units, administered by the National Credit Guarantee Trustee Company. The PIB explainer says this guarantee lowers the lender’s credit risk, which is what allows a loan without collateral. It does not mean approval is automatic. The lender still looks at your business activity, your repayment ability and your documents, and it can say no.
Beneficiary data shows who uses the scheme. PIB reports that about two-thirds of Mudra loans went to women and that 12.15 crore loans, worth Rs. 12 lakh crore, went to new entrepreneurs. If you are starting out, you are in the largest group of borrowers.
Documents Lenders Usually Ask For
MUDRA does not publish one national document list, so each lender sets its own. For a small Shishu loan the usual requests are short:
- Aadhaar and PAN of the applicant
- Address proof, such as a utility bill or rent agreement for the business place
- Proof the business exists, for example a shop licence, Udyam registration, GST registration or a photo of the stall or shop, depending on what you have
- Passport-size photographs
- Savings or current account statement for recent months
- A short business plan or a quotation for the item you plan to buy
Ask the branch for its exact list before you go, because a missing paper is the commonest reason for delay.
How to Apply: Step by Step
There are two official routes. You can walk into a branch of a bank, NBFC or microfinance lender, or you can apply online through the JanSamarth portal, which PIB says offers a self-journey and an assisted journey and lists PMMY among its credit-linked schemes. Our JanSamarth portal registration steps explain the online route. The MUDRA website also names the Udyamimitra portal for online applications.
- Decide the exact amount and what it will buy. Keep it at or below Rs. 50,000 for Shishu.
- Collect your documents and write a half-page business plan: what you sell, expected monthly sales and what the money will pay for.
- Choose a lender. A bank where you already hold an account is usually easier to approach.
- Ask for a Mudra loan in the Shishu category and submit the form offline at the branch or online on JanSamarth.
- Answer the lender’s questions and allow a visit or check of your business place if requested.
- Read the sanction letter. Check the interest rate, repayment period, EMI and every fee before you sign.
- Use the money only for the business purpose and repay on time.
The MUDRA website states that MUDRA does not lend directly and has no agents or middlemen. Anyone who claims to be a MUDRA agent and asks for money to arrange your loan should be avoided.
Worked Example: A Rs. 50,000 Shishu Loan
Say a home baker wants Rs. 50,000 for an oven and packaging. The rate here is an assumption for illustration only, because real rates differ by lender and change over time. At an assumed 12 percent a year over 36 months, the EMI works out to about Rs. 1,661. Over three years she repays about Rs. 59,786, of which about Rs. 9,786 is interest. If the lender instead sets a 12-month term at the same assumed rate, the EMI rises to about Rs. 4,442 and total interest falls to about Rs. 3,309. A longer term lowers the monthly burden but costs more in total, so pick the EMI your monthly sales can carry comfortably.
Is Shishu Right for You? Checklist
- Is your business non-farm and run by an individual or small unit, not a company? If yes, continue.
- Can you do with Rs. 50,000 or less? If you need more, look at Kishor.
- Do you have no collateral and little or no credit history? Shishu is built for this.
- Can you show the lender some proof of the business, even a photo and an Aadhaar-linked account?
- Can your monthly earnings cover the EMI with room to spare?
Common Rejection Reasons and Fixes
These are common patterns, not an official list. Each lender decides its own cases.
| Common reason | What to do |
|---|---|
| Activity is farming or a registered company | Check that your business is non-farm and non-corporate before applying |
| Name or address differs across documents | Correct Aadhaar, PAN and bank records first |
| No proof the business exists | Get a shop licence, Udyam registration or other local proof the lender accepts |
| Existing loans or missed EMIs | Clear overdue amounts and ask the lender what it needs to reconsider |
| Unclear use of funds | Attach a quotation or short plan showing what you will buy |
| Weak account activity | Route sales through the account for a few months and reapply |
How to Improve Your Chances of Approval
Lenders decide Shishu loans one by one, so a clean, simple application helps. These habits are general good practice and are not scheme rules.
- Ask for an amount that matches a clear need, such as one machine or one stock purchase, and attach a quotation.
- Keep your Aadhaar, PAN, mobile number and bank account details consistent and linked, so verification does not stall.
- Run your daily sales through a bank account for a few months. Even small, regular credits show the lender that the business earns.
- Clear any overdue EMIs or card dues before you apply.
- Approach the bank where you already hold an account, since it can see your transaction history.
If the first lender declines, ask for the reason in plain words and fix that point before you try another lender. Repeated applications to many lenders in a short time can make your record look worse, so apply to one at a time. Because the loan is small, a clear reason for the amount and a realistic EMI matter more than a long business plan. Once you have repaid a Shishu loan on time, you have a track record to show when you ask for a larger Kishor loan.
Timeline: Key Dates for Shishu
| Date | Event |
|---|---|
| 8 April 2015 | PMMY launched with Shishu, Kishor and Tarun |
| 24 June 2020 | Cabinet approved a 2% interest subvention on Shishu loans for 12 months as COVID-19 relief |
| 31 August 2021 | Last day of the subvention windows (1 June 2020 to 31 May 2021, or 1 September 2020 to 31 August 2021 after a moratorium) |
| 24 October 2024 | Tarun Plus added, taking the Mudra ceiling to Rs. 20 lakh |
| 27 March 2026 | PIB data date: 57.79 crore loans sanctioned since launch |
When Another Scheme Fits Better
Shishu suits a small shop or service unit. A street vendor with a vending certificate may do better under the PM SVANidhi street vendor loan, a separate scheme built for vendors. If you need more than Rs. 50,000, ask the lender about Kishor, which covers amounts above Rs. 50,000 and up to Rs. 5 lakh. Repaying on time also helps when you later apply for a bigger Mudra category.
Common Mistakes
- Paying an agent. MUDRA states it has no agents or middlemen, so apply directly.
- Assuming Shishu carries a fixed national interest rate. Rates are set by each lender under RBI guidelines.
- Expecting a subsidy. The 2020 Shishu interest subvention was a time-bound relief that ended in 2021.
- Borrowing the full Rs. 50,000 when a smaller amount would do.
- Signing without reading the sanction letter for fees and the repayment schedule.
Frequently Asked Questions
What is the maximum amount in a Shishu loan?
Up to Rs. 50,000. Anything above that falls into the Kishor category, which runs up to Rs. 5 lakh.
Do I need collateral or a credit history?
No collateral is needed, as PMMY loans up to Rs. 20 lakh are collateral-free. PIB notes that Shishu is open to entrepreneurs with no credit history. The lender still checks that you can repay.
What is the interest rate on a Shishu loan?
It varies by lender. PIB states that rates follow RBI guidelines and gives no single figure. Ask the lender for the rate in writing before you sign.
Who can apply for a Shishu loan?
An individual with a business plan for a small non-farm enterprise in manufacturing, trading or services, including allied agriculture. Companies and crop farming are outside the scheme.
Can I apply for a Shishu loan online?
Yes. The JanSamarth portal lists PMMY and offers self and assisted application journeys, and the MUDRA website names the Udyamimitra portal. You can also apply at a branch.
Is there a subsidy on a Shishu loan?
No ongoing subsidy is part of the loan. A 2 percent interest subvention approved in June 2020 was COVID-19 relief and its windows ended by 31 August 2021.
Does WeCredit sanction Shishu loans?
No. WeCredit does not sanction government scheme loans. It explains how schemes work. Confirm current terms with the lender and on the official sources below.
Where to Go Next
To compare Shishu with other schemes, browse the government loan schemes hub.
