Mudra Loan Interest Rate and EMI: How to Calculate Your Monthly Payment

One of the biggest advantages of Mudra loans is affordable interest rates with no collateral. However, rates vary by bank, loan category, and your credit profile. This guide covers current interest rates, how to calculate your EMI, and tips to get the lowest rate.

Current Mudra Loan Interest Rates (2026)

Interest rates for PMMY loans are not fixed by the government — each bank sets its own rate based on RBI guidelines, cost of funds, and borrower risk profile.

Rates by Loan Category

Rates by Popular Banks

⚠️ Note: These are indicative rates. Actual rates depend on your credit profile, business type, and bank's current pricing. Always confirm with the bank before applying.

How to Calculate Mudra Loan EMI

EMI Formula

EMI = P × r × (1 + r)^n / [(1 + r)^n – 1]

Where:

• P = Loan principal amount
• r = Monthly interest rate (annual rate ÷ 12 ÷ 100)
• n = Number of monthly instalments (tenure in months)

Example Calculations

Example 1: Shishu Loan — ₹50,000 at 11% for 3 years

• P = ₹50,000
• r = 11 ÷ 12 ÷ 100 = 0.00917
• n = 36 months

EMI = ₹1,637 per month Total repayment = ₹58,932 Total interest = ₹8,932

Example 2: Kishore Loan — ₹3,00,000 at 12% for 5 years

• P = ₹3,00,000
• r = 12 ÷ 12 ÷ 100 = 0.01
• n = 60 months

EMI = ₹6,674 per month Total repayment = ₹4,00,440 Total interest = ₹1,00,440

Example 3: Tarun Loan — ₹10,00,000 at 13% for 7 years

• P = ₹10,00,000
• r = 13 ÷ 12 ÷ 100 = 0.01083
• n = 84 months

EMI = ₹17,653 per month Total repayment = ₹14,82,852 Total interest = ₹4,82,852

EMI Quick Reference Table

Factors That Affect Your Interest Rate

1. Credit Score (CIBIL)

2. Loan Category

Shishu loans have the lowest rates because the loan amount is small and risk is low. Tarun loans carry higher rates due to larger amounts.

3. Bank Type

• Public sector banks (SBI, PNB, BoB) generally offer lower rates
• Private banks (HDFC, ICICI) may charge slightly more
• NBFCs and MFIs typically charge the highest rates (14%–18%)

4. Business Type and Vintage

Established businesses with proven revenue get better rates. New businesses or high-risk sectors may face higher rates.

5. Relationship with Bank

Existing customers with good account history often get preferential rates.

Processing Fees and Other Charges

💡 Banks cannot charge processing fees on Shishu loans as per PMMY guidelines.

Tips to Get the Lowest Interest Rate

1. Compare multiple banks — apply through Udyami Mitra to get offers from several lenders
2. Improve your CIBIL score — pay off existing debts before applying
3. Apply at your primary bank — where you hold your main business account
4. Choose public sector banks — they generally offer lower rates than private banks
5. Get Udyam Registration — MSME-registered businesses may qualify for priority sector rates
6. Negotiate — especially for Tarun loans, there's room to negotiate the rate
7. Women entrepreneurs — mention this during application; many banks offer 0.25%–0.50% concession

Repayment Options

EMI (Equated Monthly Instalment)

Most common. Fixed monthly payment that includes both principal and interest.

Moratorium Period

Some banks offer a 3–6 month moratorium (grace period) before EMI starts. This is helpful for new businesses that need time to generate revenue. Ask the bank specifically about this.

Prepayment

You can repay the loan early without penalty for Shishu and most Kishore loans. This saves interest. For Tarun, check prepayment terms with your bank.

Auto-Debit

Set up ECS/NACH auto-debit from your bank account to avoid missing EMI payments. Missed payments damage your CIBIL score and may attract penalties.

What Happens If You Miss EMI Payments?

Avoid missing payments at all costs. If you're facing difficulty, contact the bank immediately to discuss restructuring options.

Frequently Asked Questions

What is the lowest interest rate for Mudra loan?

The lowest rates are offered by public sector banks for Shishu loans — currently around 10%–10.5% per annum at SBI and Bank of Baroda. Your actual rate depends on your credit profile.

Is Mudra loan interest rate fixed or floating?

Most banks offer Mudra loans at floating rates linked to their MCLR or repo rate. This means your rate may change if RBI changes the repo rate. Some banks offer fixed rates for Shishu loans.

Can I negotiate the interest rate on Mudra loan?

For Shishu loans, rates are fairly standard. For Kishore and Tarun, you can negotiate — especially if you have a good CIBIL score and existing relationship with the bank.

Is there any interest subsidy on Mudra loans?

There is no direct interest subsidy on PMMY loans. However, if you're also eligible under schemes like Stand Up India or PMEGP, you may get a subsidy component.

How much EMI will I pay for a ₹5 lakh Mudra loan?

At 12% interest for 5 years: EMI ≈ ₹11,122 per month. At 13% for 5 years: EMI ≈ ₹11,370 per month. Use the formula above to calculate for your specific rate.

Can I prepay my Mudra loan early?

Yes. For Shishu and Kishore loans, there is generally no prepayment penalty. For Tarun loans, check with your bank — some charge 1%–2% on prepaid amount.

Do NBFCs charge higher interest on Mudra loans than banks?

Yes, typically. NBFCs and MFIs charge 14%–18% per annum compared to 10%–14% at banks. Always compare rates across lenders before choosing. Check our Mudra loan application guide for how to compare offers.