Banking and Insurance - Laws and Practice · Various Government Schemes

MUDRA, Stand-Up India and PMEGP Credit Linked Schemes

Updated 11 October 2026 · Fact-checked

MUDRA, Stand-Up India and PMEGP are government credit-linked schemes for small businesses. MUDRA gives collateral-free loans up to ₹10 lakh in Shishu, Kishor and Tarun categories. Stand-Up India gives bank loans of ₹10 lakh to ₹1 crore to women and SC/ST entrepreneurs. PMEGP gives a margin money subsidy on new project loans.

Understand Credit Linked Schemes: MUDRA, Stand-Up India and PMEGP

Small and micro businesses often cannot get bank credit. They lack collateral, credit history and formal records. The government therefore designs schemes that push banks to lend to them. These are called credit linked schemes. The bank gives the loan. The government adds support, such as a refinance, a guarantee or a subsidy.

Pradhan Mantri MUDRA Yojana (PMMY) was launched in April 2015. MUDRA stands for Micro Units Development and Refinance Agency. It covers non-farm income-generating activities of micro and small units, in manufacturing, trading and services. Loans are given by banks, NBFCs and micro finance institutions. They are called MUDRA loans, and no collateral is taken. Loans are in three categories: Shishu up to ₹50,000, Kishor above ₹50,000 and up to ₹5 lakh, and Tarun above ₹5 lakh and up to ₹10 lakh. The names show the stage of the business: start, growth, and expansion. A later category, Tarun Plus, was added in the 2024 Union Budget for higher limits. Check the latest limit in your study material before quoting it.

Stand-Up India was launched in April 2016. It aims to promote entrepreneurship among women and Scheduled Caste / Scheduled Tribe borrowers. Each bank branch is expected to lend to at least one SC/ST borrower and at least one woman borrower. The loan is between ₹10 lakh and ₹1 crore. It is for a greenfield enterprise, meaning the first venture of the borrower, in manufacturing, services, the trading sector or activities allied to agriculture. For a non-individual enterprise, at least 51% of the shareholding and controlling stake must be held by an SC/ST or woman entrepreneur. The borrower should not be in default to any bank or financial institution. The loan is composite, covering working capital and term loan. The borrower should contribute at least 10% of the project cost, which may be partly met from admissible subsidies. Repayment is up to 7 years, with a moratorium of up to 18 months. Credit guarantee cover is available through a fund managed by NCGTC.

PMEGP is the Prime Minister's Employment Generation Programme. It is a credit-linked subsidy scheme run by the Ministry of MSME. The nodal agency is the Khadi and Village Industries Commission (KVIC). It helps create self-employment by setting up new micro enterprises. The subsidy is given as margin money by the government, and the bank finances the rest of the project. The subsidy rate depends on the area and the category of the beneficiary. Special categories, such as women, SC/ST, OBC, ex-servicemen, and persons in hill or border areas, get a higher rate. The beneficiary contributes a small share of the project cost, lower for special categories. Students should know the exact current ceiling and rates from the study material.

In the exam, keep the three schemes apart. MUDRA is about loan size bands and no collateral. Stand-Up India is about the target borrower and a loan floor and ceiling. PMEGP is about subsidy on a new project.

Key rules to remember

MUDRA loan categories: Shishu: up to ₹50,000 | Kishor: ₹50,001 to ₹5,00,000 | Tarun: ₹5,00,001 to ₹10,00,000; Loans are collateral-free and for non-farm income-generating activities. Tarun Plus was added later; confirm the limit in your material.
Stand-Up India loan range: ₹10 lakh ≤ loan ≤ ₹1 crore; For a greenfield enterprise of a woman or SC/ST entrepreneur. At least one such borrower of each type per bank branch.
Stand-Up India borrower contribution: Borrower margin ≥ 10% of project cost; Can be partly met from admissible subsidies. Repayment up to 7 years, moratorium up to 18 months.
Stand-Up India non-individual units: Shareholding and controlling stake held by SC/ST or woman ≥ 51%; Applies when the borrower is not an individual.
PMEGP funding structure: Project cost = beneficiary contribution + government margin money subsidy + bank loan; Subsidy rate is higher for special categories and for rural areas. Use the rates in the latest scheme guidelines.

How to solve Credit Linked Schemes: MUDRA, Stand-Up India and PMEGP questions

Use this method for any question on credit linked schemes, whether it is a short note, a comparison or a case.

1Identify which scheme the facts point to: loan band and no collateral means MUDRA, woman or SC/ST borrower with a ₹10 lakh to ₹1 crore loan means Stand-Up India, subsidy on a new project means PMEGP.
2State the objective and the launch or implementing body in one or two lines.
3List the eligibility conditions: who can borrow, type of activity, and whether the unit must be new.
4State the loan size, category or subsidy rule that applies to the facts given.
5Apply the rule to the facts: check the amount, borrower type, existing default, and stake in the entity.
6Compute the figures if required, such as borrower margin or subsidy, showing each step.
7Conclude clearly: eligible or not, which category applies, and what the amount is.
8If the question asks for a comparison, present it point by point: purpose, borrower, amount, collateral, subsidy.

Quickest way: Three-question scheme sort

When to use it: Use when a case question gives facts and asks which scheme applies or whether the borrower qualifies.

Ask: is the loan tied to a subsidy for a new project? If yes, think PMEGP.
Ask: is the borrower a woman or SC/ST, and is the loan ₹10 lakh to ₹1 crore for a first venture? If yes, think Stand-Up India.
Ask: is it a small non-farm loan up to ₹10 lakh without collateral? If yes, think MUDRA and pick Shishu, Kishor or Tarun by amount.
Check the disqualifiers: default to a bank, non-greenfield unit, or less than 51% stake for Stand-Up India.

Common mistakes in Credit Linked Schemes: MUDRA, Stand-Up India and PMEGP

Saying MUDRA gives loans directly to borrowers.
The name sounds like a lender.
Fix: Write that loans are given by banks, NBFCs and micro finance institutions under the scheme, and MUDRA provides refinance support.
Placing ₹5 lakh exactly in the Tarun category.
Students mix up the boundary of the bands.
Fix: Kishor goes up to and including ₹5 lakh. Tarun starts above ₹5 lakh.
Saying Stand-Up India is for all small entrepreneurs.
It is confused with MUDRA.
Fix: Limit it to women and SC/ST borrowers, for greenfield enterprises, with loans of ₹10 lakh to ₹1 crore.
Treating PMEGP as a plain loan scheme.
The word credit-linked hides the subsidy element.
Fix: State that it is a subsidy scheme: government margin money plus a bank loan for a new project, with KVIC as nodal agency.
Ignoring the 51% stake rule for companies or partnerships under Stand-Up India.
Students think of individual borrowers only.
Fix: For a non-individual enterprise, check that an SC/ST or woman holds at least 51% of shareholding and the controlling stake.
Quoting old subsidy percentages from memory.
Rates have been revised over time.
Fix: Quote the rates in your study material, and say that rates differ by area and category.

Worked examples

Example 1

Sunita, a woman, wants to set up her first manufacturing unit costing ₹40 lakh. She has no default with any bank. Is she eligible under Stand-Up India? What minimum margin must she bring?

Show the solution

Check the borrower: she is a woman, so she is a target borrower.
Check the enterprise: it is her first venture, so it is greenfield, and manufacturing is an eligible activity.
Check default: none, so the condition is met.
Check the loan size: the loan will be about ₹40 lakh less her margin, which lies between ₹10 lakh and ₹1 crore.
Compute the minimum margin: 10% of ₹40,00,000 = ₹4,00,000.
Maximum loan therefore = ₹40,00,000 − ₹4,00,000 = ₹36,00,000, which is within the range.

Answer: Sunita is eligible. She must bring at least ₹4,00,000 as margin, which may be partly met from admissible subsidies. The loan can be up to ₹36,00,000.

Example 2

Ravi runs a small tailoring shop. He needs ₹3,20,000 to buy machines and expand. He has no collateral. Which scheme and category fit, and how do the three schemes differ in purpose?

Show the solution

The need is a small non-farm loan for a service or manufacturing activity, with no collateral. This fits MUDRA.
Classify the amount: ₹3,20,000 is above ₹50,000 and up to ₹5 lakh, so the category is Kishor.
The loan may come from a bank, NBFC or micro finance institution, without collateral.
Compare: MUDRA supports micro units by loan bands; Stand-Up India supports greenfield ventures of women and SC/ST borrowers with ₹10 lakh to ₹1 crore; PMEGP gives a margin money subsidy for new micro enterprises through KVIC.

Answer: Ravi can seek a collateral-free MUDRA loan under the Kishor category. Stand-Up India needs a woman or SC/ST borrower and a larger loan. PMEGP is for new projects and carries a subsidy.

Exam tips

Learn the three MUDRA bands with exact boundaries. Examiners often give an amount and ask for the category.
For comparison questions, use a point-wise layout: objective, target group, loan size, collateral, subsidy, agency.
In case questions, test each eligibility condition one by one before concluding.
Do not quote subsidy percentages unless you are sure. State that they vary by area and category, and cite the scheme guidelines.
Link your answer to priority sector lending and credit guarantee when the question is broader.

Practice questions from Various Government Schemes

Credit Linked Schemes: MUDRA, Stand-Up India and PMEGP: frequently asked questions

What are Shishu, Kishor and Tarun under MUDRA?

They are the three loan categories under Pradhan Mantri MUDRA Yojana. Shishu is up to ₹50,000, Kishor is above ₹50,000 up to ₹5 lakh, and Tarun is above ₹5 lakh up to ₹10 lakh. They reflect the stage of the business.

Who is eligible for Stand-Up India?

Women and SC/ST entrepreneurs who are setting up a greenfield enterprise in manufacturing, services, trading or allied agriculture activities. They must not be in default to any bank. For non-individual units, 51% of shareholding and the controlling stake must be with an eligible person.

What is margin money in PMEGP?

It is the government subsidy given to the beneficiary against the project cost, routed through the bank. The bank finances the balance and the beneficiary brings a small own contribution. The subsidy rate depends on the area and the category of the beneficiary.

What is the difference between MUDRA and Stand-Up India?

MUDRA gives collateral-free loans up to ₹10 lakh to micro units for non-farm activities, open to any eligible borrower. Stand-Up India gives ₹10 lakh to ₹1 crore only to women and SC/ST entrepreneurs for greenfield projects. Stand-Up India loans are larger and the borrower group is narrower.