The Government of Karnataka has introduced the “Interest Subvention Scheme” to empower micro and small manufacturing enterprises, along with manufacturing-allied activity enterprises. Implemented through the Karnataka State Financial Corporation (KSFC), this scheme aims to provide institutional credit for capital investments at affordable interest rates. By offering an interest subvention of 5.5% per annum, the government seeks to reduce the financial burden on entrepreneurs and promote sustainable industrial growth in the state.
Objective of KSFC MSE Interest Subsidy Scheme
The primary objective of the scheme is to encourage new investments and support existing profit-making enterprises by providing loans at subsidized interest rates. This initiative focuses on fostering expansion, diversification, modernization, and technology upgradation in manufacturing and allied sectors, thereby enhancing productivity and competitiveness.
Key Benefits of the Scheme
- Loan Amount:
- Minimum loan size: ₹5.00 lakhs.
- Maximum loan size:
- ₹500.00 lakhs for micro and small manufacturing enterprises.
- ₹200.00 lakhs for manufacturing and allied services enterprises.
- Interest Subvention:
- The effective interest rate for beneficiaries is reduced by 5.5% per annum , reimbursed by the Government of Karnataka.
- The beneficiary must repay the loan at the prevailing contract rate of interest, but the subsidy is credited directly to their account.
- Subvention Period:
- Eligible units can avail the interest subvention for a period of five years from the date of the first disbursement, even if the repayment period extends beyond five years.
- Eligible Activities:
- Agro & Food Processing, Textile, Ready-made Garments, Engineering, Automobiles, Electrical & Electronics, Paper & Paper Products, Printing & Publishing, Telecommunications, Software & IT-related activities, Wood-based activities, and more.
Eligibility Criteria
To qualify for the benefits under this scheme, applicants must meet the following conditions;
- Type of Enterprise: Proprietary concerns, partnership firms, companies, and other legal entities are eligible.
- Nature of Investment: Loans are available for new investments in buildings, plant, and machinery directly involved in production. Existing enterprises can also apply for expansion, diversification, modernization, or technology upgradation.
- Exclusions:
- Enterprises promoted by SC/ST and Women Entrepreneurs who have already availed interest subsidies under other schemes are not eligible.
- Purchase of land from KIADB/KSSIDC or any other government agency is not covered.
- Infrastructure projects, trading activities, malls, hotels, hospitals, and transport vehicles are excluded.
Terms and Conditions
- Promoters’ contribution, Debt-Equity Ratio (DER), security requirements, and project viability will be assessed as per KSFC’s lending policy.
- Enterprises that have availed interest subsidies under other government schemes are not eligible.
- Gross block refers to the total original purchase/invoice value of all machinery used in production, including self-acquired and financed equipment, subject to the overall limit of ₹500.00 lakhs.
How to Apply – Offline Process
The application process for the scheme is entirely offline. Follow these steps to apply;
- Visit the nearest KSFC Branch Office during office hours and request a hard copy of the prescribed application form.
- Fill in all mandatory fields in the application form and attach self-attested copies of required documents.
- Submit the duly filled and signed application form along with the supporting documents to the branch office.
- Request an acknowledgment receipt containing essential details such as the submission date, time, and a unique identification number (if applicable).
Essential Documents
To ensure smooth processing of your application, make sure you have the following documents ready;
- Passport-size photograph of the applicant.
- Registration certificate of the enterprise.
- PAN Card of the enterprise and promoters.
- Audited financial statements (for existing units seeking expansion).
- Bank account details for loan disbursement.
- Any other documents specified by KSFC during the loan process.
Why Is This Scheme Important?
Access to affordable credit is crucial for the growth of micro and small enterprises, which form the backbone of India’s economy. By reducing the cost of borrowing, the scheme enables entrepreneurs to invest in modern technologies, expand operations, and enhance productivity. This, in turn, contributes to job creation, economic development, and inclusive growth in Karnataka.
Frequently Asked Questions (FAQs)
Q1. Who is eligible to apply?
A1. All categories of borrowers, including proprietary concerns, partnership firms, companies, and other legal entities, are eligible.
Q2. For how long is the interest subvention provided?
A2. The interest subvention is available for five years from the date of the first disbursement.
Q3. Can enterprises that have availed of other subsidies apply?
A3. No, enterprises that have already availed interest subsidies under other government schemes are not eligible.
Q4. What are the eligible uses of the loan under this scheme?
A4. The loan can be used for investments in buildings, plant, and machinery directly involved in production, as well as for expansion, diversification, modernization, or technology upgradation.
Q5. Are SC/ST and women entrepreneurs eligible?
A5. Yes, provided they have not availed interest subsidies under other schemes.
Q6. Is the purchase of land eligible for the loan?
A6. No, the purchase of land from KIADB/KSSIDC or any other government agency is not covered.
Q7. How is the interest subvention reimbursed?
A7. The interest subvention of 5.5% per annum is reimbursed by the Government of Karnataka and credited directly to the borrower’s account.
Q8. What happens if I default on the loan repayment?
A8. Defaulting on loan repayment may disqualify the borrower from receiving further interest subvention benefits.
Q9. Can loans be refinanced under this scheme?
A9. No, refinancing or takeover of loans from other financial institutions is not allowed.
Q10. What is the term of the loan repayment?
A10. The repayment period varies based on the loan amount and project viability, as per KSFC’s lending policy.
Q11. What types of enterprises are not eligible for the scheme?
A11. Infrastructure projects, trading activities, malls, hotels, hospitals, and transport vehicles are not eligible.
Q12. Can I receive the loan for multiple projects?
A12. Yes, provided each project meets the eligibility criteria and individual loan limits.
Q13. Can I apply for both new and existing enterprises?
A13. Yes, the scheme covers both new investments and existing enterprises seeking expansion or modernization.
Q14. How do I ensure that I continue receiving the interest subvention?
A14. To continue receiving the subvention, borrowers must maintain regular repayment of all loans availed from KSFC.
Conclusion
The “Interest Subvention Scheme” is a game-changer for micro and small enterprises in Karnataka. By reducing the cost of borrowing and promoting capital investments, the scheme empowers entrepreneurs to scale their businesses and contribute to the state’s economic growth. If you’re a business owner looking to expand or modernize your enterprise, don’t miss out on this opportunity to access affordable credit.
For more information, visit the official KSFC website or contact your nearest branch office today!
