Mudra Loan Calculator

A simple MUDRA loan EMI calculator helps determine the monthly payment (EMI) for a loan taken under the Pradhan Mantri MUDRA Yojana (PMMY).

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Understanding Mudra Loan: A Guide to PMMY with EMI Calculations

Published on May 10, 2025

Introduction to Mudra Loans

The Pradhan Mantri Mudra Yojana (PMMY), launched in 2015, is a flagship scheme by the Government of India to promote entrepreneurship and support small businesses. The term "Mudra" stands for Micro Units Development and Refinance Agency. It provides collateral-free loans to micro and small enterprises in non-farm sectors like manufacturing, trading, services, and allied agriculture activities.

Mudra Loans empower small entrepreneurs, such as shopkeepers, artisans, and service providers, by offering financial assistance to start or expand their businesses. With loans up to ₹10 lakh (and recently up to ₹20 lakh under Tarun Plus), the scheme has transformed countless lives.

Eligibility and Loan Categories

Any Indian citizen or non-corporate small business engaged in income-generating activities (excluding farming) can apply for a Mudra Loan. The scheme offers three categories based on the loan amount:

  • Shishu: Loans up to ₹50,000 for startups or early-stage businesses.
  • Kishor: Loans from ₹50,001 to ₹5,00,000 for growing businesses.
  • Tarun: Loans from ₹5,00,001 to ₹10,00,000 for established enterprises.

Recently, a Tarun Plus category was introduced, offering up to ₹20,00,000 for eligible Tarun borrowers, but we’ll focus on the standard categories here.

Key Features of Mudra Loans

Mudra Loans are designed to be accessible and flexible:

  • Collateral-Free: No need for assets as security.
  • Interest Rates: Typically 7.3%–12% per annum, varying by lender (banks, NBFCs, MFIs).
  • Tenure: Up to 5 years (60 months) for Shishu and Kishor, up to 7 years (84 months) for Tarun.
  • Purpose: For business expansion, equipment purchase, working capital, or other income-generating activities.

Loans are disbursed through banks, Non-Banking Financial Companies (NBFCs), Microfinance Institutions (MFIs), and Regional Rural Banks (RRBs).

EMI Calculation Formula

The Equated Monthly Installment (EMI) for a Mudra Loan is calculated using the standard loan amortization formula:

\[ \text{EMI} = \frac{P \times r \times (1 + r)^n}{(1 + r)^n - 1} \]

Where:

  • \( P \) = Principal Loan Amount
  • \( r \) = Monthly Interest Rate (Annual Rate ÷ 12 ÷ 100)
  • \( n \) = Tenure in Months

Additional calculations:

  • Total Repayment = EMI × Tenure
  • Total Interest = Total Repayment − Principal

Example Calculation: Kishor Loan

Let’s calculate the EMI for a typical Kishor loan with the following details:

Loan Details:

  • Loan Amount (P): ₹3,00,000
  • Annual Interest Rate: 9.3%
  • Tenure (n): 60 months (5 years)

Step-by-Step Calculation:

  1. Monthly Interest Rate (r):

    \( r = \frac{9.3}{12 \times 100} = 0.00775 \text{ (0.775% per month)} \)

  2. EMI Calculation:

    \( \text{EMI} = \frac{300000 \times 0.00775 \times (1 + 0.00775)^{60}}{(1 + 0.00775)^{60} - 1} \)

    Calculate \( (1 + 0.00775)^{60} \approx 1.5903 \).

    \( \text{EMI} = \frac{300000 \times 0.00775 \times 1.5903}{1.5903 - 1} \)

    \( \text{EMI} = \frac{300000 \times 0.012325}{0.5903} \approx \text{₹6,293.46} \)

  3. Total Repayment:

    \( \text{Total Repayment = 6293.46 × 60} \)

    \( \text{Total Repayment = ₹3,77,607.60} \)

  4. Total Interest:

    \( \text{Total Interest = 377607.60 - 300000} \)

    \( \text{Total Interest = ₹77,607.60} \)

Summary:

  • Monthly EMI: ₹6,293.46
  • Total Interest: ₹77,607.60
  • Total Repayment: ₹3,77,607.60

Benefits of Mudra Loans

Mudra Loans offer several advantages for small entrepreneurs:

  • Accessibility: No collateral or guarantor required.
  • Flexible Use: Funds can be used for various business needs.
  • Empowerment: Supports women entrepreneurs and marginalized groups with concessional rates.
  • Government Backing: Refinancing through MUDRA ensures competitive rates.

How to Apply for a Mudra Loan

Applying for a Mudra Loan is straightforward:

  1. Choose a Lender: Approach a bank, NBFC, MFI, or RRB offering Mudra Loans.
  2. Submit Documents: Provide KYC, business proof, bank statements, and a business plan.
  3. Online Portal: Apply via www.udyamimitra.in for faster processing.
  4. Loan Approval: Lenders assess eligibility and disburse funds within days.

Check with your lender for specific interest rates and terms, as they vary based on your credit profile and business type.

Conclusion

Mudra Loans under PMMY are a game-changer for small businesses in India, offering affordable, collateral-free financing to fuel growth. By understanding the EMI calculation and loan terms, entrepreneurs can plan their repayments effectively. Whether you’re starting a small venture with a Shishu loan or expanding with a Tarun loan, Mudra Loans provide the financial support you need to succeed.

Ready to apply? Visit your nearest bank or explore www.udyamimitra.in to get started!