How to Calculate Mudra Loan EMI for Shishu, Kishore & Tarun (2026)

What an EMI actually pays for

An EMI — equated monthly instalment — is a fixed monthly payment that covers both principal and interest. In the early months most of your EMI is interest; in the later months most of it is principal. Banks use this structure because it gives borrowers a predictable cash outflow and lenders predictable cash inflow.

For a Mudra loan, the EMI you see quoted is almost always the simple reducing-balance EMI calculated against the headline floating rate. That headline rate is not what you actually pay over the life of the loan — see the section on hidden costs below.

The formula every bank uses

EMI = P × r × (1 + r)^n / ((1 + r)^n − 1)

• P — principal (loan amount)
• r — monthly interest rate (annual rate ÷ 12 ÷ 100)
• n — tenure in months

That single formula drives every Mudra loan calculator, including ours. If you want to try it without doing the arithmetic, use our free Mudra loan EMI calculator — it also draws the amortisation chart for you.

Worked example — Shishu (Rs 50,000)

A Shishu borrower takes Rs 50,000 at 9.5% p.a. over 36 months.

• P = 50,000
• r = 9.5 / 12 / 100 = 0.0079167
• n = 36
• EMI ≈ Rs 1,602 / month
• Total interest ≈ Rs 7,672
• Total paid ≈ Rs 57,672

Worked example — Kishore (Rs 3,00,000)

Kishore borrower at 10.5% p.a. over 60 months:

• EMI ≈ Rs 6,449 / month
• Total interest ≈ Rs 86,940
• Total paid ≈ Rs 3,86,940

Worked example — Tarun (Rs 8,00,000)

Tarun borrower at 11% p.a. over 84 months (7 years):

• EMI ≈ Rs 13,701 / month
• Total interest ≈ Rs 3,50,884
• Total paid ≈ Rs 11,50,884

Notice how a 1.5 percentage-point spread between Shishu and Tarun nearly doubles the relative interest burden — that's the compounding effect of a longer tenure, not just the rate.

What the EMI does NOT include

This is where most borrowers get blindsided:

1. Processing fee — typically 0.5% to 1% of the loan, sometimes waived for Shishu under PMMY.
2. Documentation / legal charges — Rs 250 to Rs 2,500.
3. GST on processing fee — 18%.
4. Insurance premiums — some lenders bundle credit-life cover.
5. Stamp duty on the loan agreement — state-specific.
6. CIBIL report charge — usually Rs 50 to Rs 250.

Add all of these up and your effective interest rate is often 0.3 to 0.8 percentage points higher than the headline figure.

When to choose a longer tenure (and when not to)

A longer tenure lowers the EMI but increases total interest. The right tenure depends on your free cash flow, not on the lowest possible EMI. As a rough rule:

• Your EMI should not exceed 40% of your projected net monthly business profit.
• Build a 6-month repayment cushion into your working capital plan.
• If you expect your revenue to grow significantly within 18 months, choose a tenure that lets you prepay without penalty.

Prepayment — the lever most borrowers ignore

Most public-sector Mudra lenders do not charge prepayment penalties on Shishu or Kishore loans. Prepaying even one extra EMI per year can cut a 5-year loan by several months and save 8–12% of total interest.

Before you accept any loan offer, ask the bank in writing whether prepayment is allowed without penalty and whether the saved interest is applied as a tenure reduction or an EMI reduction. Make sure your Mudra loan project report shows enough surplus cash flow to make prepayment realistic — it strengthens your application.

Common mistakes when calculating EMI yourself

• Using annual rate as monthly rate (a 12× error — yes, it happens).
• Forgetting to divide tenure in years by 12.
• Treating reducing-balance rate as flat-rate (flat-rate gives a lower-looking EMI but a much higher true cost).
• Ignoring the moratorium period — Mudra loans for some businesses come with a 3–6 month repayment holiday, after which EMIs start.

Quick reference

| Category | Loan range | Typical rate | Typical tenure | | --- | --- | --- | --- | | Shishu | Up to Rs 50,000 | 8.5 – 12% | 1 – 3 years | | Kishore | Rs 50,001 – Rs 5L | 9 – 12% | 3 – 5 years | | Tarun | Rs 5,00,001 – Rs 10L | 10 – 14% | 5 – 7 years |

For category-specific guidance and bank-by-bank rate comparison, generate your custom plan from the Mudra loan project report generator — it picks the tenure and rate band that fit your projections automatically.

Next steps

1. Decide your tenure based on your cash flow, not on the lowest EMI.
2. Confirm your prepayment terms in writing.
3. Run your numbers in our EMI calculator.
4. Build the EMI line into the 5-year projections in your Mudra loan project report.