Is mudra loan collateral free

Yes, Mudra loans are collateral-free. Under the Pradhan Mantri Mudra Yojana (PMMY), eligible micro and small enterprises can avail of loans up to ₹10 lakh without providing any collateral security or third-party guarantee. This is in accordance with RBI guidelines which mandate that banks should not insist on collateral for loans up to this limit in the MSE sector. Instead, these loans are covered under the Credit Guarantee Fund for Micro Units (CGFMU), which provides risk coverage to the lending institutions.