Bank of Baroda Mudra Loan: How to Apply, Eligibility Criteria , Interest Rate & More

Are you an aspiring entrepreneur or a small business owner in India looking for financial assistance to grow your venture? The Bank of Baroda Mudra Loan could be the perfect solution to fuel your business aspirations. This scheme, under the Pradhan Mantri Mudra Yojana (PMMY), aims to provide financial support to non-corporate, non-farm small and micro-enterprises. Let’s delve into the details of the Bank of Baroda Mudra Loan, covering everything from how to apply to eligibility criteria and interest rates.

Understanding the Bank of Baroda Mudra Loan

The Pradhan Mantri Mudra Yojana (PMMY) was launched by the Government of India to facilitate easy access to credit for small entrepreneurs. Bank of Baroda, a prominent public sector bank, actively participates in this scheme, offering Mudra loans under three categories:

Goverment Schemes : Check out

• Shishu: Loans up to ₹50,000. This is ideal for starting a new business or for very small working capital requirements. Imagine a budding home-based baker in Bengaluru needing funds to purchase a new oven and raw materials – a Shishu loan could be a great starting point.
• Kishore: Loans ranging from ₹50,001 to ₹5,00,000. This category caters to established small businesses looking to expand their operations or invest in new equipment. For instance, a small tailoring unit in Surat wanting to buy new sewing machines to increase production could opt for a Kishore loan.
• Tarun: Loans ranging from ₹5,00,001 to ₹10,00,000. This is for relatively larger small businesses that require substantial funding for expansion or to meet significant working capital needs. Consider a small manufacturing unit in Faridabad looking to upgrade its machinery or enter new markets – a Tarun loan could provide the necessary financial muscle.
  
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Key Highlight: The primary goal of the Bank of Baroda Mudra Loan is to empower small businesses and generate employment opportunities across India.

Eligibility Criteria for Bank of Baroda Mudra Loan

To avail of a Mudra loan from Bank of Baroda, you need to meet certain eligibility criteria. These generally include:

1. Applicant Type: Who Can Apply?

• Individuals: This is the most common category. Any individual entrepreneur looking to start a new micro-enterprise or expand an existing one can apply. This includes sole proprietors running businesses like small retail shops, service providers (e.g., electricians, plumbers), artisans, etc.
  • Example: A tailor in Mysuru wanting to purchase a new sewing machine to increase their production capacity as a sole proprietor is eligible.
• Proprietorship Firms: These are businesses owned and run by a single person, where there is no legal distinction between the owner and the business.
  • Example: A small grocery store in Hubli operating under the owner’s name as a proprietorship can apply for a Mudra loan.
• Partnership Firms: Businesses owned and managed by two or more individuals who have agreed to share profits or losses of a business. This includes both registered and unregistered partnerships.
  • Example: Two individuals running a small catering business in Mangalore as a partnership can jointly apply for a Mudra loan to expand their services.
• Private Limited Companies: These are privately held small companies. While Mudra loans primarily target micro and small enterprises, some small private limited companies might also be eligible based on the scale of their operations and loan requirements.
  • Important Note: Eligibility for private limited companies might be subject to more stringent evaluation based on their size and financial structure.
• Other Eligible Entities: This can include Self-Help Groups (SHGs), Joint Liability Groups (JLGs), and other such entities that are involved in income-generating activities in the non-farm sector.
  • Example: A group of women in a village near Belagavi running a handicraft business as a Self-Help Group can apply for a Mudra loan.

ALSO READ | How to Secure Mudra Loan for Your Food Business?

2. Business Nature: What Kind of Businesses Qualify?

The core focus of the Mudra scheme is to support non-corporate, non-farm small and micro-enterprises. This broadly covers businesses involved in:

• Manufacturing: This includes the production of goods, from small-scale food processing units to handicraft manufacturing and light engineering works.
  • Example: A small unit in Peenya Industrial Area, Bengaluru, manufacturing nuts and bolts, can apply for a Mudra loan to upgrade its machinery.
• Trading: This involves the buying and selling of goods. This can range from small retail shops to wholesalers.
  • Example: A small garment shop owner in Chickpet, Bengaluru, needing funds to stock up on inventory for the festive season, is eligible.
• Services: This is a vast sector encompassing various activities like repair shops, beauty parlours, tailoring units, transportation services (auto-rickshaw owners, small goods carriers), food stalls, and many more.
  • Example: An electrician in a locality in Chennai (often considered for businesses in Karnataka as well due to proximity and economic ties), wanting to buy new tools and equipment, can apply.
• Allied Agricultural Activities: While primarily focused on non-farm activities, some income-generating activities allied to agriculture, like bee-keeping, poultry farming, and fisheries, might also be considered under the Mudra scheme by some banks. However, it’s crucial to check Bank of Baroda’s specific guidelines on this.

Important Exclusion: Large corporations, agricultural farms involved in crop cultivation, and businesses engaged in activities that are not income-generating are generally not eligible.

3. Loan Purpose: Why Do You Need the Money?

The loan should be specifically for income-generating activities. This means the funds should be used to:

• Start a new business venture.
• Expand existing business operations.
• Modernise equipment or adopt new technology.
• Meet working capital requirements (day-to-day operational expenses).
• Purchase raw materials or inventory.
• Acquire business assets.

Ineligible Purposes: The loan cannot be used for personal expenses, speculative activities, or repayment of existing high-interest debts (though refinancing under better terms might be possible in some cases, it’s not the primary purpose).

4. Credit History and Repayment Capacity:

• While the Mudra scheme aims to provide access to credit for those who might not have an extensive credit history, Bank of Baroda will still assess the applicant’s repayment capacity and their past credit behaviour if available.
• A reasonable credit record increases the chances of loan approval and might also lead to more favourable interest rates.
• For new entrepreneurs without a credit history, the viability of their business plan and their ability to manage finances will be crucial factors.
• Bank of Baroda might conduct its own due diligence and may ask for details of existing loans or credit facilities.

5. Age of the Applicant:

• Generally, the applicant should be an adult, typically at least 18 years of age. There might not be a strict upper age limit, but the applicant should be capable of legally entering into a contract and managing the business affairs.

6. Relationship with Bank of Baroda:

• While having an existing account or relationship with Bank of Baroda can be advantageous as the bank already has some of your KYC (Know Your Customer) details and financial history, it is not always mandatory. New customers who meet the other eligibility criteria can also apply for a Mudra loan.

Key Takeaway: The eligibility criteria for the Bank of Baroda Mudra Loan are designed to be inclusive, focusing on the potential of small businesses and entrepreneurs to generate income and contribute to the economy. While a clean credit history is beneficial, the viability of the business proposal and the applicant’s repayment capacity are also critical factors in the evaluation process. It’s always recommended to directly consult with your nearest Bank of Baroda branch for the most accurate and up-to-date eligibility requirements.

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Interest Rates on Bank of Baroda Mudra Loan

The interest rates for Bank of Baroda Mudra Loans are not fixed and can vary based on several factors, including:

Factors Influencing Interest Rates:

• Loan Amount and Category: Mudra loans are categorised under three schemes:
  • Shishu: Loans up to ₹50,000.
  • Kishore: Loans above ₹50,000 and up to ₹5 lakh.
  • Tarun: Loans above ₹5 lakh and up to ₹10 lakh ¹ (and up to ₹20 lakh for Tarun Plus for successful past borrowers).  
  • Generally, interest rates might differ slightly across these categories.
• Borrower’s Credit Profile: Your credit history and credit score play a significant role. Borrowers with a good credit history may be offered more favourable interest rates.
• Nature of Business and Risk Assessment: The bank assesses the viability and risk associated with your business. Businesses with a strong track record and a promising future might get better rates.
• Market Conditions and Bank Policies: Interest rates are also influenced by prevailing market interest rates, the bank’s base rate or MCLR (Marginal Cost of Funds based Lending Rate), and the bank’s specific policies for Mudra loans, which can change over time.
• Loan Tenure: The repayment period you choose can also affect the interest rate.
• Digital Mudra Loans: Bank of Baroda specifies interest rates for its Digital Mudra Loans, which may differ from offline Mudra Loans. As of April 2, 2025, these rates were:
  • Micro Enterprises:
    • Up to ₹50,000: 9.15% p.a.
    • Above ₹50,000 to ₹2 lakh: 11.15% p.a.
    • Above ₹2 lakh to ₹10 lakh: 11.35% p.a.
  • Small Enterprises:
    • Up to ₹50,000: 11.15% p.a.
    • Above ₹50,000 to ₹2 lakh: 11.35% p.a.
    • Above ₹2 lakh to ₹10 lakh: 11.50% p.a.
• Weaver Mudra Loan: The interest rate for the Bank of Baroda Weaver Mudra Loan is linked to the MCLR applicable for the MSME segment. The bank doesn’t explicitly state a range for this scheme.

Key Points to Remember:

• No Fixed Rate: There isn’t a uniform interest rate for all Bank of Baroda Mudra Loans.
• Bank’s Discretion: The final interest rate offered is at the discretion of the Bank of Baroda based on its assessment of the various factors mentioned above.
• Negotiation Possible (Sometimes): Depending on your creditworthiness and business profile, there might be some room for negotiation on the interest rate.
• Check with the Bank: The most accurate and up-to-date information on interest rates can be obtained by directly contacting your nearest Bank of Baroda branch or checking their official website.
• Compare: It’s always a good idea to compare the interest rates and other terms offered by different banks and financial institutions under the Mudra scheme before making a decision.

In summary, while the Digital Mudra Loan rates provide some indication, the interest rate for your specific Bank of Baroda Mudra Loan will be determined on a case-by-case basis, considering multiple factors. It’s crucial to inquire directly with the bank for the most precise information relevant to your application.

How to Apply for Bank of Baroda Mudra Loan: A Step-by-Step Guide

Applying for a Bank of Baroda Mudra Loan involves a systematic process. Here’s a general guide:

Step 1: Visit the Nearest Bank of Baroda Branch or Explore Online Resources

• In-Person Visit:
  
  • Why it’s important: Visiting a branch allows you to have a direct conversation with bank officials who can provide specific information about the Mudra Loan scheme, current interest rates, and any specific requirements of that particular branch. You can also clarify any doubts you might have upfront.
  • What to do: Locate the nearest Bank of Baroda branch. You can use their branch locator tool on their official website. When you visit, ask to speak with the loan officer or the officer in charge of MSME/SME loans. Express your interest in applying for a Mudra Loan.
  • Information to gather: Inquire about the different Mudra loan categories (Shishu, Kishore, Tarun), the current interest rates applicable to each, the specific documents required, and the overall application process.
• Exploring Online Resources:
  
  • Why it’s important: Bank of Baroda’s official website will likely have information about its Mudra Loan products. You can often find downloadable application forms, eligibility criteria, and FAQs.
  • What to do: Navigate to the “Loans” or “MSME/SME” section of the website. Look for information related to the “Pradhan Mantri Mudra Yojana” or “Mudra Loan.”
  • Information to gather: Download the application form and carefully review the eligibility criteria and the list of required documents mentioned online. Note down any contact information provided for further inquiries.

Click here to apply Bank of Baroda Mudra loan

Step 2: Obtain the Application Form

• Getting the Physical Form:
  
  • At the branch, The bank officer will provide you with the physical Mudra Loan application form. Ensure you receive the correct form for the category you are interested in (Shishu, Kishore, or Tarun).
  • Review the form: Take some time to glance through the form to understand the information required. Don’t hesitate to ask the bank officer if you have any initial questions about any section of the form.
• Downloading the Online Form (if available):
  
  • Printing: If you downloaded the form online, print it on good-quality paper. Ensure all pages are printed clearly.

Step 3: Fill in the Application Form Carefully and Accurately

• Providing Personal Details: This section will require information about you, the applicant, such as your full name, address, date of birth, contact details (phone number, email ID), and marital status.
• Providing Business Details: This is a crucial section. You will need to provide detailed information about your business, including:
  • Name of the Business: The official name under which your business operates.
  • Address of the Business: The complete address of your business premises.
  • Nature of Business Activity: Clearly describe the type of business you are engaged in (e.g., retail trading of garments, manufacturing of food products, providing plumbing services).
  • Type of Organisation: Indicate whether your business is a sole proprietorship, partnership, private limited company, etc.
  • Date of Commencement of Business: When did your business start operating? (If it’s a new venture, mention “New Venture”).
  • Details of Promoters/Partners/Directors: Provide information about all the individuals involved in the business.
• Loan Details: Specify the amount of loan you are applying for and the purpose for which you require the funds (e.g., working capital, purchase of machinery). Clearly state how the loan will help your business.
• Financial Details: You might need to provide some basic financial information about your business, such as existing turnover (if applicable), projected turnover, and details of any existing bank accounts or credit facilities.
• Declaration: Carefully read the declaration section before signing the application form. By signing, you are confirming that the information provided is true and accurate to the best of your knowledge.

Key Consideration: Be meticulous while filling the form. Any incomplete or incorrect information can lead to delays or rejection of your application. If you are unsure about any section, don’t hesitate to seek assistance from the bank officials.

Step 4: Submit Necessary Documents

• Organise Your Documents: Gather all the required documents as per the checklist provided by the bank or mentioned on their website. Make sure you have both the original documents for verification and photocopies for submission.
• Self-Attestation: In most cases, you will need to self-attest all the photocopies of the documents by signing across the copy and writing “True Copy.”
• Document Submission: Submit the completed application form along with all the necessary documents to the designated bank officer at the branch. Ensure you receive an acknowledgement receipt for the submission.

Detailed List of Typical Documents (as mentioned in the previous response):

• Proof of Identity: Aadhaar Card, PAN Card, Voter ID, Driving License, Passport.
• Proof of Address: Aadhaar Card, Utility Bills, Bank Statement, Passport, Ration Card.
• Business-Related Documents: Business Plan, Proof of Business Existence (registration certificate, licenses), Memorandum and Articles of Association (for companies), Partnership Deed (for partnerships).
• Financial Documents: Bank Statements (past 6-12 months), Income Tax Returns (if applicable), Balance Sheet and Profit & Loss Account (if applicable), Sales Tax Returns (if applicable).
• Other Documents: Passport-sized photographs.

Step 5: Loan Processing by the Bank

• Document Verification: The bank officials will scrutinise all the documents you have submitted to ensure they are genuine and in order.
• Eligibility Assessment: They will evaluate your application based on the eligibility criteria discussed earlier, including your business type, loan purpose, and repayment capacity.
• Business Plan Evaluation: The bank will carefully review your business plan to assess the viability and feasibility of your proposed venture or expansion. A well-articulated and realistic business plan is crucial.
• Credit Appraisal: The bank might conduct a credit appraisal to assess your creditworthiness. This could involve checking your credit history (if available) and your ability to repay the loan. They might also conduct site visits to your business premises.
• Sanctioning Authority Approval: Once the initial assessment is complete, the loan application will be forwarded to the appropriate sanctioning authority within the bank for final approval.

Step 6: Loan Sanction and Disbursement

• Loan Sanction Letter: If your application is approved, the bank will issue a loan sanction letter. This letter will contain details of the sanctioned loan amount, the applicable interest rate, repayment terms, any other conditions, and the validity period of the sanction.
• Acceptance of Terms: You will need to carefully read and understand all the terms and conditions mentioned in the sanction letter. If you agree to the terms, you will need to sign and return a copy of the sanction letter to the bank as acceptance.
• Loan Agreement: You might be required to execute a loan agreement with the bank, which legally binds you to the terms and conditions of the loan.
• Disbursement of Funds: Once all the formalities are completed, the bank will disburse the loan amount to your designated bank account. The disbursement process might vary depending on the purpose of the loan. For example, for working capital, the funds might be credited directly to your account, while for the purchase of machinery, the bank might make a direct payment to the supplier.

Important Note: The processing time for a Mudra Loan can vary depending on the bank’s workload, the completeness of your application, and the complexity of your business proposal. It’s advisable to follow up with the bank periodically to check the status of your application. Be patient and cooperative with the bank officials throughout the process.

ALSO READ – How to Get a Business Loan for a Startup in India? A Complete Guide

Documents Required for Bank of Baroda Mudra Loan

While the specific documents required might vary slightly, here’s a general list of documents you will likely need:

• Proof of Identity:
  • Aadhaar Card (This is often a primary document)
  • PAN Card
  • Voter ID Card
  • Driving License
  • Passport
• Proof of Address:
  • Aadhaar Card
  • Utility Bills (Electricity bill, Water bill, Telephone bill – not older than 3 months)
  • Bank Statement (not older than 3 months)
  • Passport
  • Ration Card
• Business-Related Documents:
  • Business Plan (comprehensive document detailing your business, its operations, financial projections, and loan requirements)
  • Proof of Business Existence (e.g., registration certificate, shop and establishment license, etc.)
  • Memorandum and Articles of Association (for companies)
  • Partnership Deed (for partnership firms)
  • Any other relevant licenses or permits required for your business?
• Financial Documents:
  • Bank Statements (for the past 6-12 months)
  • Income Tax Returns (if applicable)
  • Balance Sheet and Profit & Loss Account (if applicable)
  • Sales Tax Returns (if applicable)
• Other Documents:
  • Passport-sized photographs of the applicant(s).
  • Any other documents specifically requested by the Bank of Baroda.

Important Consideration: Ensure that all the documents you submit are self-attested and genuine. Providing false information can lead to the rejection of your application and legal consequences.

Benefits of Availing a Bank of Baroda Mudra Loan

Opting for a Bank of Baroda Mudra Loan offers several advantages for small business owners:

• Easy Access to Finance: The scheme simplifies the loan application process and makes it easier for small businesses to access much-needed funds.
• Affordable Interest Rates: While rates vary, Mudra loans generally offer competitive interest rates compared to other forms of unsecured lending.
• No Collateral Required: One of the biggest advantages is that Mudra loans typically do not require any collateral security, making it accessible to entrepreneurs who may not have assets to pledge.
• Flexible Repayment Terms: Banks usually offer flexible repayment schedules to suit the borrower’s cash flow.
• Support for Business Growth: The funds can be used for various business purposes, including working capital, purchasing machinery, expanding operations, and more.
• Empowering Women Entrepreneurs: The scheme has a special focus on encouraging women entrepreneurs by providing them with easier access to credit.

Positive Impact: The Mudra scheme has played a significant role in fostering entrepreneurship and creating employment opportunities, particularly in the informal sector in India. For instance, many small-scale artisans and vendors have benefited from these loans to scale their businesses.

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Conclusion

The Bank of Baroda Mudra Loan stands as a vital financial lifeline for numerous small and micro-enterprises across India. By providing access to affordable credit without the burden of collateral, it empowers entrepreneurs to realise their business dreams, contribute to economic growth, and generate employment. Understanding the eligibility criteria, application process, and the benefits of this scheme is crucial for anyone seeking financial assistance to nurture their small business. Remember to always check with the Bank of Baroda for the latest guidelines and interest rates to make an informed decision.

Frequently Asked Questions (FAQs) 

1 . What is the maximum loan amount I can get under the Bank of Baroda Mudra Loan scheme?

• The maximum loan amount is ₹10,00,000 under the ‘Tarun’ category. The other categories are ‘Shishu’ (up to ₹50,000) and ‘Kishore’ (₹50,001 to ₹5,00,000).

2 . Do I need to provide any collateral or security for a Bank of Baroda Mudra Loan?

• Generally, no collateral or third-party guarantee is required for loans under the Mudra scheme. This is one of its key benefits.

3 . What can I use the Bank of Baroda Mudra Loan for?

• The loan can be used for various income-generating activities, including working capital requirements, purchasing machinery or equipment, expanding existing businesses, and setting up new ventures in the manufacturing, trading, and service sectors.

4 . How is the interest rate determined for a Bank of Baroda Mudra Loan?

• The interest rate is not fixed and depends on factors such as the loan category, the borrower’s credit profile, prevailing market conditions, and Bank of Baroda’s internal policies.

5 . Can women entrepreneurs get any special benefits under the Bank of Baroda Mudra Loan scheme?

• Yes, the Mudra scheme encourages lending to women entrepreneurs, and banks, including Bank of Baroda, often have specific schemes or focus on providing support to women-led businesses.

6 . What is the repayment tenure for a Bank of Baroda Mudra Loan?

• The repayment tenure can vary depending on the loan amount and the borrower’s repayment capacity. It is usually decided by the bank at the time of loan sanction.

7 . Can I apply for a Mudra loan online with Bank of Baroda?

• While Bank of Baroda has a strong online presence, it’s best to check their official website for the latest information on online application facilities for Mudra loans. Typically, you might need to visit a branch for some part of the process.

8 . What if I have a poor credit history? Can I still get a Mudra loan from Bank of Baroda?

• While a good credit history is preferred, the Mudra scheme aims to support even those with limited credit history. Bank of Baroda will assess your repayment capacity and business viability.

9 . How long does it take for the Bank of Baroda Mudra Loan to be processed?

• The processing time can vary depending on the completeness of your application and the bank’s internal procedures. It’s best to inquire about the expected processing time at the time of application.

10 . Whom should I contact for more information about the Bank of Baroda Mudra Loan?

• You can visit your nearest Bank of Baroda branch or check their official website for detailed information and contact details.