Interest Subvention Scheme for MSMEs
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Quick Answer
2% interest subvention on MSME loans for GST-registered businesses
- Funding amount
- Varies
- Funding type
- Subsidy
- Provider
- Government of India
- Application deadline
- Rolling
- Location
- Open to startups registered in India
About this subsidy
2% interest subvention on fresh and incremental term loans and working capital for GST-registered MSMEs. The subvention is credited quarterly to the MSME's loan account by the lender, who is reimbursed by the government. No separate application needed by the borrower.
Eligibility
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Full eligibility criteria — entity type, stage, sector, founder profile and registration requirements — plus your fit for this program. Sign up to view.
Subsidy providers
The Government of India operates one of the world's largest startup support ecosystems through its Startup India initiative, launched in 2016 under the Department for Promotion of Industry and Internal Trade (DPIIT). The central government provides funding, tax benefits,…
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What You Get
The Interest Subvention Scheme reduces effective borrowing costs by 2% per annum on fresh and incremental term loans and working capital for eligible MSMEs. The benefit is credited directly to the borrower's loan account by the lending bank on a quarterly basis, with the government reimbursing the lender. No equity is taken and no repayment of the subsidy is required. The scheme helps MSMEs improve cash flow and reduce the burden of credit costs, particularly for working capital cycles.
- Bootstrap friendly
- Yes
Timelines & Process
Applications
Rolling basis
Application Process
- 1
Obtain free Udyam Registration and GST
Obtain free Udyam Registration and GST registration — both are mandatory prerequisites.
You - 2
- 3
- 4
How to apply
Four steps from draft to disbursement — one action each.
- 1
Submit on the official portal
Use the official application link and verify all details before final submission.
- 2
Follow up
Reach out 5–7 days after submitting to confirm receipt and ask about the review timeline.
Frequently Asked Questions
What is the Interest Subvention Scheme for MSMEs?
The scheme provides a 2% interest subvention (reduction) on fresh and incremental term loans and working capital availed by GST-registered MSMEs from scheduled commercial banks.
Who is eligible?
GST-registered MSMEs with Udyam Registration who are availing fresh or incremental term loans or working capital credit from scheduled commercial banks.
Do I need to apply separately for this benefit?
No. The borrower does not need to submit a separate application. The lender bank credits the 2% subvention directly to your loan account on a quarterly basis and then claims reimbursement from the government.
Is this a grant or subsidy?
It is an interest subsidy — your loan account receives a 2% reduction in effective interest rate. You still repay the principal; you simply pay less interest.
How much can I save?
Savings depend on your outstanding loan amount. For example, on a ₹50 lakh loan, 2% subvention saves approximately ₹1 lakh per year in interest cost.
How do I access this benefit?
Inform your bank that you hold Udyam Registration and GST registration. The lender is responsible for crediting the subvention quarterly. You can also check msme.gov.in for the latest guidelines.
Sources
Data on this page is compiled from official program and provider references.
