Your guide to microfinance and small business loans in India
You don’t need a pile of cash to start a business in India. You just need to know where to look.
There are more programs out there than most people realize. Some come from the government. Some come from banks built just for this. Some aren’t even loans; they’re training. I’ll walk you through what’s real, what it actually offers, and what you should check before you apply.
Government schemes you can actually use
Mudra loans (PMMY)
This is the big one, and it’s probably where you should start. The Pradhan Mantri MUDRA Yojana gives you a collateral-free loan for a small, non-farm business. It’s been running since 2015, and it’s usually the first place people look.
The loan comes in four sizes, based on how much you need:
- Shishu: up to ₹50,000
- Kishor: ₹50,000 to ₹5 lakh
- Tarun: ₹5 lakh to ₹10 lakh
- Tarun Plus: ₹10 lakh to ₹20 lakh, for people who already took and paid back a Tarun loan (added in 2024)
You don’t apply to the government directly. You go through a bank, an NBFC, or a microfinance institution.
Stand-Up India
This one is more specific. It’s built for Scheduled Caste, Scheduled Tribe, and women entrepreneurs who want to start something new, not grow a business you already have. Every bank branch has to fund at least one SC/ST borrower and one woman borrower under this scheme.
You can borrow anywhere from ₹10 lakh to ₹1 crore. The 2025-26 budget also opened up a separate track just for first-time SC/ST women entrepreneurs, with loans up to ₹2 crore.
Banks built for people like you
Bandhan Bank
Bandhan built its name on microloans in West Bengal and the northeast. That’s changing now. Over the past couple of years, the bank has been shrinking its microloan book and moving into secured lending instead, things like housing and MSME loans.
If you’re looking at Bandhan, or any microfinance lender right now, don’t trust an old review. Call them and ask what they’re actually approving today.
SEWA Bank
SEWA Bank is a cooperative bank, and it’s run by self-employed women. It offers individual loans, group loans, and small emergency loans, plus some basic business support. If you want a lender built around informal workers instead of a regular retail bank, this is worth a look.
Training that isn’t a loan
Not every program hands you cash. Two are worth knowing about even if you don’t need a loan right now.
- Entrepreneurship Development Institutes (EDIs): government-backed schools that run training and mentorship for new entrepreneurs.
- Rural Self-Employment Training Institutes (RSETIs): free, hands-on training built for rural entrepreneurs, usually tied to a bank loan once you finish.
These matter more than people think. A loan won’t fix a business plan that doesn’t work.
What to check before you apply
Skip the brochure. Ask these questions instead:
- What’s the real interest rate and processing fee, not just the headline number
- Is it really collateral-free, and what happens if you can’t pay it back
- Is the lender registered with the RBI, or otherwise regulated
- Does the scheme even cover your type of business? A lot of them exclude certain sectors
- Does the person you’re talking to actually know this scheme, or are you the first one who’s asked
That last one matters more than it sounds. A lot of these programs exist on paper at every branch, but not every officer knows the details. Bring the scheme name and the government circular if you can find it when you apply.
Money usually isn’t your biggest problem.
There’s more funding out there for small entrepreneurs in India than most people realize. The hard part is rarely finding money. It’s knowing your numbers, having a real plan for the loan, and picking the right program for your situation instead of the first one you hear about.