Government loan schemes
Mudra Loan Interest Rates: Bank-wise Comparison (October 2026)
Quick answer
There is no fixed Mudra loan interest rate. Banks charge their repo-linked benchmark rate plus a spread that depends on your credit record, loan size and tenure. After RBI raised the repo rate to 5.50% on 7 October 2026, large public sector banks' benchmarks are 8.15% to 8.35%, so your Mudra rate will start above that. Your exact rate is on the lender's Key Fact Statement.
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Bank-wise benchmark rates for Mudra loans, October 2026
Most banks don't publish a single Mudra rate. They publish the benchmark their MSME loans are linked to, and your Mudra loan is priced at that benchmark plus a spread. These are the benchmarks after the October 2026 repo hike, lowest first:
| Bank | Now | Before |
|---|---|---|
| Bank of Baroda Repo-based lending rate, from 8 Oct | 8.15% | 7.90% |
| State Bank of India EBLR, from 15 Oct (RLLR 7.75%) | 8.15% | 7.90% |
| Indian Bank RBLR, October 2026 | 8.20% | 7.95% |
| UCO Bank Repo-linked rate, from 8 Oct | 8.30% | 8.05% |
| Punjab National Bank RLLR, from 8 Oct | 8.35% | 8.10% |
| Bank of India RBLR, from 7 Oct | 8.35% | 8.10% |
| Indian Overseas Bank RBLR, from 8 Oct | 8.35% | 8.10% |
| Tamilnad Mercantile Bank Repo-linked rate, October 2026 | 8.50% | 8.25% |
| Karur Vysya Bank Repo-linked rate, from 8 Oct | 8.80% | 8.55% |
As of 23 October 2026, from bank announcements reported by Business Standard, India TV and ETV Bharat (see Sources). Every bank listed raised its benchmark by 0.25 percentage points. Benchmarks are the floor, not your Mudra rate: your rate is the benchmark plus a spread.
How your Mudra loan rate is calculated
- 8.35% Bank's benchmark (repo 5.50% + bank's markup)
- 2.00% Your spread (example)
- 10.35% Your Mudra rate
The spread is where you have some control. Banks set it based on:
- Your credit record: the owner's CIBIL score and any defaults or late payments
- Business vintage and cash flow: how long you've run the business and what your bank statements show
- Loan size and category: Shishu, Kishore, Tarun and Tarun Plus can carry different spreads
- Your relationship with the bank: an existing current account with steady deposits helps
Mudra loans are usually floating-rate. When the bank's benchmark changes, your rate changes at the next reset date in your loan agreement. The spread normally stays the same.
What 1% more interest costs you
Example: a ₹5 lakh Kishore loan repaid over 5 years.
| Interest rate | Monthly EMI | Total interest |
|---|---|---|
| 9.5% | ₹10,501 | ₹1,30,056 |
| 10.5% | ₹10,747 | ₹1,44,817 |
| 11.5% | ₹10,996 | ₹1,59,778 |
| 12.5% | ₹11,249 | ₹1,74,938 |
| 14.5% | ₹11,764 | ₹2,05,848 |
Reducing-balance EMI, for illustration. Rates shown are examples, not bank quotes.
Each extra 1% adds about ₹250 a month and roughly ₹15,000 over five years on ₹5 lakh. If a lender quotes a "flat" rate, convert it with our flat vs reducing interest calculator before comparing.
What the October 2026 repo rate hike means for you
On 7 October 2026 RBI raised the repo rate by 0.25 percentage points, from 5.25% to 5.50%, and changed its stance to "calibrated tightening". Banks passed the increase on to their repo-linked benchmarks within about a week.
- New borrowers: expect quotes about 0.25 points higher than in September.
- Existing floating-rate Mudra loans: your rate rises by 0.25 points at your next reset date. On a ₹5 lakh, 5-year loan that's roughly ₹60 more a month. Some banks lengthen the tenure instead of raising the EMI, so ask which yours will do.
- What next: RBI has signalled that rate cuts are off the table in the near term, so there's little point delaying an application to wait for rates to fall.
Public banks vs private banks vs NBFCs
Public sector banks
Usually the lowest rates, published benchmarks and most Mudra lending. Processing can be slower and branches lend mostly within their area.
Private banks
Often quicker, with more done digitally. Rates are usually higher and rarely published for Mudra, so compare the Key Fact Statement.
SFBs, NBFCs and MFIs
They reach smaller and newer borrowers that banks may turn down. Expect the highest rates, and check the all-in annual cost before you sign.
Fees and other charges
- Processing fee: set by each lender. Most banks waive it for Shishu loans. SBI, for example, has charged nil on Shishu and Kishore loans and 0.50% on Tarun loans (as reported in 2023).
- Prepayment charges: for floating-rate business loans to individuals and micro and small enterprises sanctioned or renewed on or after 1 January 2026, commercial banks (other than small finance and regional rural banks) can't charge for early repayment. Small finance banks, RRBs and mid-sized NBFCs can't charge on such loans up to ₹50 lakh.
- Guarantee fee and insurance: ask whether any credit-guarantee fee or insurance premium is added to your cost, and whether the insurance is optional.
- Late payment: penal charges apply on missed EMIs, and missed EMIs hurt your credit score.
How to get a lower Mudra loan rate
- Check your credit report first. Clear small overdue amounts and get errors corrected before applying. See what lenders look at in your credit profile.
- Start with the bank where you have your current account. It can see your cash flow, which makes a lower spread easier to justify.
- Run business money through one account. Six to twelve months of steady deposits support your case.
- Ask for the amount you need, not the maximum. A loan your cash flow clearly covers carries less risk and gets better pricing.
- Get two quotes and compare the APR. JanSamarth shows offers from several lenders. See how to apply for a Mudra loan online.
- Ask about concessions. Some lenders offer lower rates or fees for women entrepreneurs. Ask directly; it isn't the same everywhere.
- Back larger loans with a solid project report. For Tarun and Tarun Plus, a clear project report lowers the bank's uncertainty.
- Repay on time. A clean Tarun repayment record is what qualifies you for Tarun Plus later.
Get your Mudra loan priced right
Tell us about your business and a Kredway loan advisor calls you back to go through your credit profile, the spread you can expect and which lender to approach first. We advise; we don't lend.
Frequently asked questions
What is the Mudra loan interest rate in 2026?
There is no single rate. Banks charge their repo-linked benchmark (8.15% to 8.35% at large public sector banks in October 2026) plus a spread based on your profile. Your exact rate is on the lender's Key Fact Statement.
Which bank gives the lowest Mudra loan interest rate?
Among the banks above, Bank of Baroda and SBI have the lowest benchmark at 8.15%. But your spread can matter more than the benchmark, so compare actual quotes from two lenders, starting with your own bank.
Is the Mudra loan interest rate fixed or floating?
Usually floating. It moves when the bank's benchmark changes, at the reset dates in your loan agreement.
Will my Mudra EMI go up after the October 2026 repo hike?
If your loan is floating-rate and linked to repo, yes: by about 0.25 points from your next reset date, unless the bank extends your tenure instead. On ₹5 lakh over 5 years that's roughly ₹60 a month.
Is there an interest subsidy on Mudra loans?
Not at present. A 2% interest subvention on Shishu loans was a one-time, 12-month relief announced in May 2020. Some state governments run their own interest subvention schemes, so check with your state industries department.
Can I prepay my Mudra loan without a penalty?
For floating-rate loans sanctioned or renewed from 1 January 2026, commercial banks can't charge prepayment fees on business loans to individuals and micro and small enterprises. Check your sanction letter for older loans.
Do women get a lower Mudra loan rate?
Some lenders offer a concession for women borrowers, but it isn't the same everywhere. Ask your lender before you apply.
Mudra loan interest rate kitna hai?
Mudra loan ka koi fixed rate nahi hai. Bank apna repo-linked benchmark rate (October 2026 mein bade sarkari banks ka 8.15% se 8.35%) aur aapki profile ke hisaab se ek spread jodta hai. Aapka exact rate Key Fact Statement mein likha hota hai.
Sources
- SCC Online: RBI hikes repo rate to 5.50% (October 2026)
- Business Standard: Major banks hike loan rates after RBI move
- India TV: PSU banks raise repo-linked rates
- ETV Bharat: SBI raises EBLR, RLLR and MCLR from 15 October
- SCC Online: RBI Pre-payment Charges on Loans Directions, 2025
- PIB: PMMY update, including the 2020 Shishu interest subvention
- Business Standard: SBI e-Mudra fees (2023)