Micro, Small, and Medium Enterprises (MSMEs) are the backbone
of India's economy, contributing around 30% to the GDP and
employing over 11 crore people. Their growth is pivotal for India's
economic development. However, access to credit remains a
major hurdle. In response, the Government of India has launched
various schemes to provide financial support, especially after
disruptions like COVID-19. Let’s explore these MSME loan
schemes, their eligibility, and the benefits they offer.
Major Government-Sponsored MSME
Loan Schemes
1. Pradhan Mantri Mudra Yojana (PMMY)
Launched in 2015, this scheme provides loans up to ₹10 lakhs to
non-corporate, non-farm small enterprises (without branding/new
start up). The scheme operates under three categories:
Shishu: Up to ₹50,000
Kishore: ₹50,001 to ₹5 lakh
Tarun: ₹5 lakh to ₹10 lakh
These loans fall under and classified as MUDRA loans. MUDRA
stands for Micro Units Development and Refinance Agency Ltd. It
was established by the Government of India in 2015 under the
Pradhan Mantri Mudra Yojana (PMMY) to provide financial support
to non-corporate, non-farm small/micro enterprises. MUDRA
primarily refinances microloans provided by banks, Non-Banking
Financial Companies (NBFCs), Micro Finance Institutions (MFIs),
and other lending institutions to foster entrepreneurship and
boost the micro-enterprise sector.
Loans are provided through banks small finance banks NBFCs,
and MFIs, with a focus on startups and small businesses,
especially in rural areas. The loans can be applied through the
UdyamiMitra portal.
2. Prime Minister’s Employment Generation
Programme (PMEGP)
A merger of the Prime Minister’s Rojgar Yojana (PMRY) and Rural
Employment Generation Programme (REGP), this scheme aims at
promoting self-employment among the youth and traditional
artisans.
Loan Cap: ₹25 lakh for manufacturing and ₹10 lakh for services.
Subsidy: 15% to 35%, varying by location and category
(urban/rural, general/special).
Eligibility extends to individuals above 18 years, including SHGs,
production cooperatives, and charitable trusts.
3. Credit Guarantee Fund Trust for Micro & Small
Enterprises (CGTMSE)
Established by the Ministry of MSME and SIDBI (Small Industries
Development Bank of India), this scheme provides collateral-free loans up
to ₹2 crore.
Coverage: 85% for loans up to ₹5 lakh, 75% for others, and 50%
for retail trade.
This scheme helps MSMEs secure funding without third-party
guarantees, facilitating faster access to credit.
4. Credit Linked Capital Subsidy Scheme (CLCSS)
Focused on technology upgradation, CLCSS provides a 15%
capital subsidy for loans up to ₹1 crore for purchasing modern
equipment.
Eligible Sectors: Manufacturing units looking to adopt state-of-
the-art technology.
This scheme helps MSMEs enhance productivity and
competitiveness.
5. Equity Infusion through Fund of Funds
Equity infusion is a financial strategy that involves:
Injecting additional capital into a company in the form of equity.
Reducing the company's debt burden and improving its financial health.
Raising funds and deleveraging balance sheets
It can be done through selling shares of ownership, receiving capital
from private equity firms, or existing shareholders buying more shares
To address the equity shortage in MSMEs, this scheme offers
equity funding through venture capital and private equity.
Fund Size: ₹50,000 crore.
Purpose: To help MSMEs with growth potential get listed on
stock exchanges and attract private investments.
6. Credit Guarantee Scheme for Subordinate Debt
(CGSSD)
Launched to support to MSMEs, this scheme provides subordinate
debt funding to promoters of stressed MSMEs.
Loan Limit: 15% of promoters’ equity or ₹75 lakh (whichever is
lower).
Repayment: 10 years with a 7-year moratorium on principal
repayment.
7. SIDBI Make in India Loan for Enterprises (SMILE)
This scheme supports MSMEs under the ‘Make in India’ initiative
by offering soft loans for modernization and expansion.
Loan Size: Minimum ₹10 lakh for equipment and ₹25 lakh for
others.
Repayment: Up to 10 years with a 3-year moratorium.
It aims to boost smaller enterprises in both the manufacturing
and service sectors.
8. MSME Business Loan for Startups in 59 Minutes
This scheme automates and digitizes the loan approval process,
providing loans in principle within 59 minutes.
Loan Amount: ₹1 lakh to ₹5 crore.
Interest Rate: Starts at 8.5%.
Businesses must be IT-compliant and GST-registered (optional for
certain loans). The process is fully online, ensuring quicker
disbursements.
What is the primary objective of MSME loan schemes
offered by the Government of India?
The primary objective is to provide financial support to micro,
small, and medium enterprises to promote entrepreneurship,
enhance economic growth, and generate employment. These
schemes aim to address the funding gap faced by MSMEs,
offering collateral-free loans, subsidies for technology upgrades,
and equity support for business expansion.
Are startups eligible for MSME loan schemes in India?
Yes, many government schemes cater specifically to startups. For
instance, the MSME Business Loan in 59 Minutes offers quick
loans to startups and existing businesses, while schemes like
PMEGP and Pradhan Mantri Mudra Yojana support new ventures
with minimal initial capital requirements.
What types of businesses qualify as MSMEs for these loan
schemes?
MSMEs are classified based on their investment in plant,
machinery, and equipment or their annual turnover. Micro
enterprises have investments up to ₹1 crore or turnover up to
₹5 crore, small enterprises up to ₹10 crore in investment or
₹50 crore in turnover, and medium enterprises up to ₹50 crore
in investment or ₹250 crore in turnover. Both manufacturing and
service sectors are eligible.
Do MSME loans require collateral?
Not all MSME loans require collateral. For example, the Credit
Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE)
offers collateral-free loans up to ₹2 crore, ensuring that even
businesses without substantial assets can access funding.
Similarly, Mudra loans under PMMY are also collateral-free.
How can MSMEs apply for government-sponsored loans?
MSMEs can apply through various channels such as banks, NBFCs,
and online portals like Udyami Mitra. The MSME Business Loan in
59 Minutes portal simplifies the process by offering automated
approvals. Applicants typically need to provide business
registration documents, financial statements, and tax filings.
Are there any specific loan schemes for technology
upgradation?
Yes, the Credit Linked Capital Subsidy Scheme (CLCSS) offers a
15% subsidy for MSMEs investing in advanced technology. This
scheme encourages businesses to adopt modern machinery and
improve productivity, thereby enhancing their competitiveness in
both domestic and international markets.
What is the repayment period for MSME loans?
The repayment period varies depending on the scheme. For
instance, loans under SIDBI’s SMILE scheme have a repayment
tenure of up to 10 years, including a moratorium period of up to 3
years. Similarly, other schemes like CGSSD also offer flexible
repayment options with extended tenures to support stressed
businesses.
