Latest Mudra Loan Interest Rates 2026: Bank-wise Comparison
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India's small enterprises continue to benefit greatly from the Pradhan Mantri Mudra Yojana. Finding the correct finance is crucial for MSMEs and startups, and the Mudra loan interest rate you pay can have a significant impact on your monthly expenses. This program, which is supported by the government, seeks to maintain credit affordability for people without access to significant corporate capital. But not every bank has the same rates. You can choose a business loan that suits your budget by comparing various lenders. The best method to manage your cash flow and make sure your organisation remains successful and healthy as 2026 progresses is to be informed about these rates.
What is Mudra Loan and How Interest Rates Work?
Under the PMMY scheme, a Mudra loan is a government-supported credit facility designed to help micro and small businesses access formal funding without collateral. The scheme is structured into three categories - Shishu, Kishore, and Tarun, based on the funding requirement and stage of business growth.
- Shishu loans cover amounts up to ₹50,000 and are mainly designed for early-stage or very small businesses.
- Kishore loans range from ₹50,000 to ₹5 lakh and support growing businesses that require working capital or inventory expansion.
- Tarun loans go up to ₹10 lakh and are meant for established businesses planning larger expansion or scaling operations.
There is no fixed uniform Mudra loan interest rate across lenders. Instead, each bank or NBFC determines the rate based on its internal cost of funds, borrower risk profile, credit history, and business stability.
Since the scheme is collateral-free, lenders evaluate repayment capacity carefully. The applicable Mudra interest rate is therefore influenced by how stable and predictable your cash flows are. A strong business profile, consistent income, and good repayment history generally help secure more competitive rates.
Understanding this structure helps borrowers prepare better documentation and choose the right lender under the PMMY scheme.
Latest Mudra Loan Interest Rates 2026 – Bank-wise Comparison
Each bank offers a different Mudra loan interest rate, depending on its internal lending policy, cost of funds, and risk assessment framework. While the PMMY scheme provides a standardized structure for loan categories, the actual borrowing cost can vary significantly across lenders.
Public sector banks generally offer more stable and comparatively lower Mudra interest rates as they operate under priority lending obligations. On the other hand, private banks and NBFCs may charge slightly higher rates but often provide faster processing and more flexible service options.
Because of this variation, comparing lenders becomes extremely important before applying. A well-informed decision not only helps reduce interest burden but also ensures better alignment with your business cash flow and repayment capacity.
Bank-wise Mudra Loan Interest Rate Table
|
Bank Name |
Interest Rate Range (p.a.) |
Loan Category |
Processing Fees |
Suitable For |
|
State Bank of India |
9.50% - 11.50% |
Shishu, Kishore, Tarun |
Nil for Shishu |
Retailers & Manufacturers |
|
Punjab National Bank |
9.60% - 12.00% |
Shishu, Kishore, Tarun |
Low to Nil |
Small Traders |
|
Bank of Baroda |
9.75% - 11.25% |
Shishu, Kishore, Tarun |
Varies |
Service Providers |
|
Canara Bank |
9.80% - 11.90% |
Shishu, Kishore, Tarun |
Nominal |
Startups & MSMEs |
|
Union Bank of India |
9.65% - 11.80% |
Shishu, Kishore, Tarun |
Nil for Shishu |
Micro Units |
|
Private Banks / NBFCs |
12.00% - 16.00% |
Kishore, Tarun |
0.50% - 2% |
Expansion Projects |
Factors Affecting Mudra Loan Interest Rates
The final Mudra loan interest rate offered to a borrower is not fixed and depends on several financial and business-related factors. Lenders assess risk before deciding the pricing, especially under the collateral-free structure of the PMMY scheme.
Key factors include:
Business Vintage: Older and more stable businesses are often considered lower risk and may receive better rates compared to new setups.
Credit Score: A strong personal or business credit history signals repayment discipline and improves eligibility for competitive rates.
Loan Category: The applicable rate may vary depending on whether the borrower falls under Shishu, Kishore, or Tarun category.
Business Revenue: Consistent turnover and stable monthly inflows increase lender confidence in repayment ability.
Repayment Capacity: Banks analyze cash flow after expenses to ensure sufficient surplus for EMI servicing.
Lender Policies: Each bank or NBFC follows its own internal pricing model, which directly impacts the final Mudra interest rate.
Together, these factors determine how affordable or expensive the loan becomes for a business.
How to Choose the Best Mudra Loan Interest Rate for Your Business
Selecting the best Mudra loan interest rate is not just about choosing the lowest number, it requires evaluating the overall loan structure and its impact on business cash flow.
Borrowers should compare interest rates along with repayment tenure, as a lower rate with a shorter tenure may still increase monthly EMI pressure. It is important to check whether the repayment structure aligns with your seasonal or monthly revenue cycles.
Using an EMI calculator helps assess affordability in real terms before applying. Additionally, processing fees and hidden charges should be considered, as they can significantly affect the total cost of borrowing.
Businesses should also evaluate lender flexibility, especially regarding prepayment options and penalty charges. A lender who understands your industry and provides repayment flexibility often proves more beneficial than one offering only a marginally lower Mudra interest rate.
Conclusion
Comparing the latest Mudra loan interest rates across banks is essential for any MSME or startup looking to manage borrowing costs efficiently under the PMMY scheme. Since there is no single fixed rate, the final cost depends on the lender, loan category, credit profile, and business performance.
Choosing the right lender involves evaluating not just the Mudra interest rate, but also repayment flexibility, processing charges, and alignment with business cash flow. A well-informed decision ensures that the loan supports growth rather than creating financial pressure.
Before applying, businesses should compare at least three lenders and assess the total cost of borrowing. This approach helps secure the most suitable financing option for sustainable business expansion and working capital needs.
Frequently Asked Questions
For the majority of public sector banks, interest rates in 2026 typically fall between 9.50% and 12.00%. Depending on the risk of the business and how fast you need the money, private lenders and NBFCs may charge higher fees, sometimes as much as 16%.
Some of the most affordable rates are frequently offered by public sector banks like Bank of Baroda and State Bank of India (SBI). The lowest rate, however, is contingent upon your particular business profile and the category (Tarun, Kishore, or Shishu) for which you are applying.
It can, really. Certain industries may be viewed by lenders as more stable than others. For instance, a manufacturing facility with consistent orders may receive a slightly higher rate than a recently established service-based business with a short sales history.
No, collateral is not necessary. The Pradhan Mantri Mudra Yojana was created expressly to offer business loans without requiring collateral, such as real estate. To encourage banks to lend to small businesses, the government offers them a guarantee.
Because they can demonstrate a history of sales and profitability, established businesses frequently have a greater chance of obtaining reduced rates. You can bargain for better conditions if you have been in business for more than three years and have spotless bank records.
Disclaimer : The information in this blog is for general purposes only and may change without notice. It does not constitute legal, tax, or financial advice. Readers should seek professional guidance and make decisions at their own discretion. IIFL Finance is not liable for any reliance on this content. Read more
