Tarun MUDRA Loan: Limit, Benefits, Eligibility and How to Apply

Starting or expanding a small business often requires additional funds. Whether it is purchasing machinery, increasing inventory, opening another outlet or meeting working capital needs, many micro and small businesses look for loan options that support their growth. The Tarun MUDRA Loan is one such option available under the Pradhan Mantri MUDRA Yojana (PMMY).

Sneha, who runs a small garment manufacturing unit in Jaipur, has seen a steady increase in customer orders over the past two years. To purchase additional sewing machines and hire more workers, she needs extra funds but wants a loan designed for small businesses. While exploring government-backed schemes, she comes across the Tarun MUDRA Loan and wants to understand the loan limit, eligibility, interest rates and application process before making a decision.

Understanding what the Tarun MUDRA Loan is can help business owners determine whether it matches their business requirements and repayment capacity. The Pradhan Mantri MUDRA Yojana (PMMY) has sanctioned more than 52 crore loans since its launch in 2015, with cumulative sanctions exceeding ₹32.71 lakh crores, highlighting the scale of its support for micro enterprises across India.

The MSME sector also plays an important role in the Indian economy. According to the Ministry of Micro, Small and Medium Enterprises, the sector comprises more than 6.3 crore enterprises, contributes nearly 30% to the GDP of the country and provides employment to over 11 crore people.

What is Tarun MUDRA Loan?

The Tarun MUDRA Loan is one of the three loan categories available under the Pradhan Mantri MUDRA Yojana (PMMY). It is designed for micro and small businesses that require larger loan amounts to expand their operations after moving beyond the early stages of their business.

The PMMY scheme divides loans into three categories based on the funding requirement of the business.

As businesses grow, their financial requirements often increase. Entrepreneurs may need additional funds to purchase equipment, expand production capacity, open new branches or increase inventory. The MUDRA Tarun category is intended to support these growing business needs.

Unlike grants or subsidies, the Tarun Loan Scheme is a Business Loan that must be repaid according to the terms agreed upon with the lender.

What is the Tarun Loan Limit?

Under the original PMMY structure, the MUDRA Tarun Loan limit ranges from above ₹5 lakhs to ₹10 lakhs.

In the Union Budget 2024-25, the Government announced an increase in the upper limit for eligible borrowers under the Tarun Plus MUDRA Loan, allowing eligible entrepreneurs who have successfully repaid previous MUDRA loans to access loans of up to ₹20 lakhs, subject to the applicable guidelines of the scheme.

The approved loan amount depends on several factors, including:

• Nature of the business
• Business turnover
• Existing operations
• Repayment capacity
• Credit history
• Business cash flow
• Internal assessment of the lender

Receiving the maximum Tarun loan limit is not automatic. Every application is evaluated individually.

How is the Tarun Loan Amount Used?

Businesses can use the loan for various eligible business purposes.

Common uses include:

• Purchasing machinery and equipment
• Buying commercial vehicles for eligible businesses
• Expanding manufacturing capacity
• Opening a new business outlet
• Purchasing inventory
• Meeting working capital requirements
• Business infrastructure improvements
• Business technology upgrades

The exact end use depends on the assessment of the lender and applicable PMMY guidelines.

What is the Tarun MUDRA Loan Interest Rate?

Many borrowers search for the Tarun MUDRA Loan interest rate before applying. Unlike some government schemes that prescribe a fixed rate, the Government does not specify a uniform Tarun loan interest rate.

Instead, the interest rate is determined by the lending institution after considering factors such as:

• Business profile
• Credit assessment
• Loan amount
• Repayment capacity
• Internal lending policy
• Applicable RBI guidelines

This means the Tarun MUDRA Loan interest rate may vary from one bank or financial institution to another.

Borrowers should compare interest rates, processing charges, repayment tenure, EMI and other applicable terms before selecting a lender.

What are the Features of Tarun MUDRA Loan?

The Tarun Loan Scheme offers several features that support growing businesses.

Understanding these features helps business owners evaluate whether MUDRA Tarun is suitable for their current stage of business growth.

Also Read: Top Government Business Loan Schemes for Small Businesses

Eligibility Criteria of Tarun MUDRA Loan

The Tarun MUDRA Loan is designed for businesses that have moved beyond the early stage and now need a higher loan amount to expand their operations. It is suitable for existing micro and small enterprises that require funds to increase production, purchase equipment, expand their premises or meet growing working capital needs.

Businesses Eligible for Tarun MUDRA Loan

The scheme may be suitable for:

According to the Ministry of Micro, Small and Medium Enterprises (MSME), micro and small enterprises contribute around 36% of the manufacturing output and over 45% of exports of India, making access to Business Loans an important factor in supporting their growth.

You may consider a Business Loan if you need to:

• Expand into multiple locations
• Purchase high-value machinery
• Increase production capacity
• Hire additional employees
• Meet seasonal working capital requirements
• Upgrade technology and business infrastructure
• Invest in business digitisation

For example, Sneha, who owns a small food processing unit in Indore, initially considered a Tarun MUDRA Loan to purchase additional machinery. However, after estimating her expansion cost, she realised she required a larger loan amount than the scheme could provide. She therefore explored other Business Loan options that better matched her business expansion plans.

For MSMEs looking for higher funding requirements, Godrej Finance Limited offers Business Loans for MSMEs with a fully digital application process, minimal documentation, flexible repayment options and competitive interest rates, subject to eligibility and the terms and conditions of the lender.

How Can You Estimate Your EMI Before Applying?

Before applying for any Business Loan, it is useful to estimate your monthly repayment amount. This helps you understand whether the loan fits comfortably within your business cash flow.

A Business Loan EMI Calculator allows you to estimate your EMI by entering:

• Loan amount
• Interest rate
• Repayment tenure

Comparing different loan amounts and repayment periods can help you choose an EMI that suits your business income and repayment capacity.

Also Read: Everything you need to know about Business Loan – A definitive guide

Common Reasons Why a Tarun Loan Application May Be Rejected

Meeting the eligibility criteria does not automatically guarantee loan approval. Financial institutions also evaluate the repayment capacity and business profile of the applicant.

Some common reasons include:

Submitting complete and accurate information improves the chances of faster processing.

Things to Check Before Applying for a Tarun MUDRA Loan

Comparing a few important factors before submitting your application can help you choose the right loan option for your business.

Reviewing these factors prior to the application process makes it smoother and helps you select a loan that matches your business requirements.

Final Thoughts

A Tarun MUDRA Loan can be a suitable option for eligible micro and small businesses looking to expand their operations. It can help businesses purchase machinery, increase inventory, meet working capital needs or support other eligible business activities. The continued scale of PMMY lending reflects the importance of small businesses in the Indian economy, while the Economic Survey has also highlighted MSMEs as one of the major sources of employment in the country after agriculture.

For Sneha, understanding the eligibility criteria, loan limit, documents and application process helped her compare different borrowing options before making a decision. After evaluating her business requirements, she selected the loan option that matched her expansion plans and repayment capacity.

Before applying, carefully compare the loan amount, repayment tenure, eligibility criteria and interest rates. Choosing a loan that aligns with your business goals can help support long-term growth.

Apply Now for Business Loan for MSMEs.

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FAQs

Q.1. Can women entrepreneurs apply for a Tarun MUDRA Loan?

A. Yes, eligible women entrepreneurs can apply under the Pradhan Mantri MUDRA Yojana. Several lenders also provide special support for women-owned MSMEs under their internal lending policies.

Q.2. Is collateral mandatory for every Tarun MUDRA Loan?

A. Loans sanctioned under PMMY are generally collateral-free as per RBI and MUDRA guidelines. However, lenders may still evaluate business viability and repayment capacity before approving the loan.

Q.3. Can partnership firms apply for a Tarun MUDRA Loan?

A. Yes, partnership firms, proprietorships, private limited companies, LLPs and other eligible business entities engaged in non-farm income-generating activities may apply, subject to lender eligibility.

Q.4. Does business vintage affect Tarun Loan eligibility?

A. Yes, many lenders consider the operational history of the business while assessing repayment capacity and overall eligibility.

Q.5. Is GST registration compulsory for a Tarun MUDRA Loan?

A. GST registration is not always compulsory for a Tarun MUDRA Loan. The requirement depends on the nature of the business and applicable statutory regulations. Lenders may request GST registration wherever it is mandatory.

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