Rashmi Devi from Varanasi started a small paper and cloth bag manufacturing unit in 2019 with just ₹1.5 lakh under the PMMY (Mudra Loan).
She began with 1 semi-automatic machine and raw materials sourced locally. Today, she supplies eco-friendly bags to 3 departmental stores and employs 6 women. Her monthly income now exceeds ₹45,000. (Source: PIB India)
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Second Mudra Loan Success Story
Kavita Sharma, a 32-year-old woman from Kota, Rajasthan, started a paper and cloth bag manufacturing business in 2021 using a Mudra Kishor Loan of ₹2.5 lakh from Punjab National Bank.
She began with a semi-automatic bag-making machine and trained three local women.
Today, she supplies eco-friendly bags to 40+ local retail shops and government offices. Her business generates over ₹1.2 lakh/month in revenue and has become a model for women-led sustainability enterprises.
How to Start a Paper/Cloth Bag Making Business
- Market Research: The demand of paper bags and cloth bags is increasing day by day. But first of all identify demand in your locality (retailers, sweet shops, groceries, boutiques, etc.). This product is in huge demand due to plastic ban in India. A small shop to big malls using papper carry bags.
- Choose the Type: Decide on paper bags, cloth bags, or both. If you cand manufacture both types of bags then it is very beneficial. You can expand your business in future.
- Location: You need at least 250 sq. ft. space with ventilation and electricity.Your location doesn’t matter whether you are starting it from a village or a town, but your marketing strategy matters a lot. You can deliver it at big as well small shops in the city as well in the villages.
- Machinery:
- Paper Bag Semi-Automatic Machine – ₹70,000–₹1.2 lakh
- Cloth Bag Stitching Machine – ₹25,000–₹60,000
- Printing Machine (optional) – ₹30,000+
- Raw Material: Kraft paper, cotton/fabric rolls, thread, glue, ink
- Manpower: Initially 1–2 workers can handle production. You can start it with family members also.
How to Start This Business with Mudra Loan
- Apply under Shishu (₹50,000), Kishore (₹50,000–5 Lakh), or Tarun (₹5–10 Lakh)
- Paper bag business fits best in the Kishore category
- Create a basic business plan and projected sales
Documents and Eligibility Criteria for Mudra Loan
- Aadhaar and PAN card
- Passport size photos
- Business plan/project report
- Bank account and address proof
- Quotation of machinery
Best Mudra Loan Providers for Bag Business
- State Bank of India (SBI)
- Punjab National Bank (PNB)
- Bank of Baroda
- HDFC Bank
- Canara Bank
How to Expand Paper Bag Business
- Add printing customization services
- Supply to wholesalers and sweet shops
- Sell on Amazon, Flipkart, and B2B portals like IndiaMART
- Collaborate with NGOs for social campaigns
Mudra Loan Providing Banks and Interest Rates (2025)
| Bank | Interest Rate (Approx.) |
|---|---|
| SBI | 10% – 12.15% |
| PNB | 9.60% – 11.50% |
| HDFC Bank | 10.00% – 12.00% |
| Canara Bank | 8.50% – 10.25% |
| Bank of Baroda | 8.65% – 11.00% |
Mudra Loan Impact: Budget, Distribution & Women Participation
- Budget Allocation 2024–25: ₹30,000 crore
- Total Disbursed Loans Till March 2025: Over ₹25.5 lakh crore
- Women Entrepreneurs: 68% of total borrowers
Source: PMMY Annual Report, Ministry of Finance & PIB India
How to Apply For Mudra Loan
The Government has more focus on mudra loan. Every govt and private Bank has clear instructions and annually targets to distribute mudra loan for elegible customers. But most of people prefer to take mudra loan from govt banks. You can apply for online SBI mudra loan on their app. Canara bank also provide emudra loan facility and you can apply for online.Govt has given ven this online facility at their udamimitra portal. You can also apply online at this portal also.
Conclusion
Starting a paper or cloth bag manufacturing unit is a low-investment, high-demand business. With a Mudra Loan and proper planning, you can become a successful entrepreneur while promoting eco-friendliness. Take the first step today and apply through your nearest Mudra-participating bank.