Government Loan Schemes for MSMEs in India

MSME is the acronym for Micro, Small and Medium Enterprises. The MSME sector makes a significant contribution to the GDP of India. To support the growth of such enterprises, the government of India has introduced specific loan schemes. An MSME loan schemeenables small entrepreneurs to expand their businesses or to set up new enterprises. Here is a look at the top MSME schemes in the country.

• Shishu : AN MSME loan of up to ₹50,000 is provided to startups.
• Kishore : Companies looking to strengthen their operations can avail of a loan of up to ₹1 lakh under this scheme.
• Tarun : A loan of up to ₹10 lakhs is offered to established companies planning expansions.

1. MSME Loans in 59 Minutes This MSME loan scheme provides loans up to ₹1 crore to the MSMEs. The loan approval comes within 59 minutes of application. The actual process, however, takes around 8 to 12 days to be completed. Several public sector banks, as well as the Small Industries Development Bank of India (SIDBI), have been authorized to sanction the loans.If an establishment has GST registration, it is eligible for a rebate of 2%. The nature of the business and its credit rating primarily determine the interest rate charged. The minimum interest rate is fixed at 8%.
2. MUDRA Loans The government established Micro Unit Development and Refinance Agency (MUDRA) to finance micro-enterprises. The low-cost credits are specifically designed to aid small companies and startups. Both public and private sector banks, scheduled commercial banks, co-operative societies, and rural banks are approved for the disbursal of such loans. The MUDRA MSME loan schemeis further classified under three subheads named Shishu, Kishore and Tarun. All three categories have 60 months’ repayment tenure.
3. Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGMSE) CGMSE is a robust credit relief system. It offers collateral-free term loans and working capitals up to a limit of ₹100 lakh to MSMEs. A guarantee fee has to be paid to the lending institution. The Credit Guarantee Fund Trust guarantees reimbursement of 75% - 85% of the loan amount, with a maximum cap of ₹65 lakhs for a loan of ₹50 lakhs. The loan is offered by scheduled commercial banks, SIDBI, regional rural banks, National Small Industries Corporation (NSIC), and North Eastern Development Finance Corporation.

Final word Eligibility for availing an MSME loan scheme varies as per the lending organization. As a general criterion, the business must be in either the manufacturing or the service sector. Most lenders offer online application facilities, making it hassle-free for small business owners to acquire funds for building a successful business.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.