All You Need to Know about an MSME Loan Subsidy

28 November, 2023 

Often termed the ‘backbone of Indian economy’, the micro, small and medium enterprise (MSME) segment is expected to play a key role in the country’s economic growth and development. To thrive and flourish, MSMEs require a few things- adequate and timely finance, competitive markets and easy registration processes.

In India, MSMEs can make the most of a wide number of benefits extended to them by the government from time-to-time. From collateral-free loans and easy credit facilities to tax, better interest rates and MSME loan subsidy, the offerings are many. To be eligible for all such government support measures, MSMEs are required to register with the government and get an MSME or Udyam Certificate.

What's more, most public sector as well as private banks in India offer MSME Loans under various government offers. The government announces measures to facilitate the growth of small businesses and to give them the necessary growth boost. There are a number of active MSME Loan schemes, the popular ones being the Mudra Loans, Credit Guarantee Trust Fund for Micro and Small Enterprises (CGTMSE), and the Prime Minister's Employment Generation Programme (PMEGP). At HDFC Bank, MSMEs can avail varying Business Growth Loan products-term loans, working capital loans, etc.- to suit their business needs.

For instance, under the Mudra Loan scheme, the government aims to ensure adequate credit facilities being made available to small businesses, with a focus on the priority sector lending. Then there is the CGTMSE scheme whereby collateral-free loans (of up to Rs 1 crore) are provided to new and existing micro and small industries.

There is also the Interest Subvention Scheme for MSMEs announced by the government, under which both scheduled commercial and co-operative banks are currently eligible lending institutions. Under this MSME loan subsidy scheme, eligible firms can get an interest relief of two percent per annum on their outstanding fresh/incremental term loans or working capital loans during the period for which the scheme is active. All term loans and working capital loans to MSMEs, up to a limit of Rs 1 crore (Rs 100 lakh) are covered under the interest subvention scheme. However, the loan amount should not have been declared a Non-Performing Asset (NPA) at the time of filing of the claim in order to be able to avail relief under this MSME loan subsidy scheme.

The government’s interest subvention scheme or MSME loan interest subsidy scheme is aimed at providing a booster shot to manufacturing as well as service sector MSMEs, and to aid them in increasing productivity. Those MSMEs that come under the purview of GST (have valid GSTIN number) are able to avail of this relief option. Hence, the scheme also provides incentives to MSMEs to ensure GST registration.

If you are a small or medium business owner in need of additional financing or facing a cash crunch, your worries are at an end. HDFC Bank has numerous, customized solutions to help you deal with your money woes. You can also apply for a Business Growth Loan to get started.

Read more about the MSME Loan here.

*Terms and conditions apply. Business Growth Loan at the sole discretion of HDFC Bank limited. Loan disbursal is subject to documentation and verification as per Banks requirement.