Note: The article has been updated recently with all the updates on loan schemes after Budget 2024 announcements for MSMEs

The need for finance and credit facility is required by all businesses – small and large. For Micro, Small and Medium Enterprises (MSMEs), access to credit and funding is critical. Apart from business loans, invoice finance, and advances, from banks and NBFCs, MSMEs can also avail funding through MSME loan schemes. The government has introduced numerous MSME loan schemes for businesses, each with its unique features and eligibility, catering to diverse MSME funding requirements.

Let us take a closer look at some of the popular MSME loan schemes in India for 2024, understand their features, who is eligible for MSME loan, and how to apply for MSME loan from the government.

MSME loan scheme 2024

The MSME sector is vital to the economy and the government has consistently prioritised the growth of the sector. It has introduced several unique financial yojanas and loan schemes for MSMEs to avail catering to diverse funding requirements.

Who is eligible for MSME loan?

These loans are designed for MSME businesses and come with specific eligibility requirements. Based on the nature and amount of loan being offered the eligibility is specified. There are further relaxations for women entrepreneurs, special status states, SC/STs and others.

This list of businesses that come under MSME will help you understand MSMEs businesses better.

How to apply for MSME loan from government?

Application to most MSME loan schemes can be done online and offline. Details of application can be found on the respective loan scheme portals.

It is however recommended to have a MSME registration certificate to ensure that you are able to leverage the benefits of these financial schemes.

Some of the popular financial yojanas and loan schemes for MSMEs in India are:

• Pradhan Mantri Mudra Yojana (PMMY) scheme
• Credit Linked Capital Subsidy Scheme (CLCSS)
• Prime Minister’s Employment Generation Programme (PMEGP scheme)
• Pradhan Mantri Rozgar Yojana (PMRY) scheme
• PSB Loans in 59 minutes
• Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE scheme)
• Stand-Up India scheme
• SIDBI loan schemes for MSMEs – SMILE and others

1. Pradhan Mantri Mudra Yojana (PMMY scheme)

What is MUDRA loan?

The Pradhan Mantri Mudra Yojana is popularly known as the MUDRA loan. Set up by the government, through the Micro Units Development & Refinance Agency (MUDRA) it offers loans up to ₹10 lakhs ₹20 lakhs (In the recent announcement, this limit is increased from 10 lakhs to 20 lakhs) to MSMEs to businesses in the non-farm sector.

Types of MUDRA loans:

Funding under the PMMY loan scheme can be availed through three categories:

• Shishu: For funding up to ₹50,000 and recommended for startups and new businesses
• Kishore: For funding requirements from ₹50,000 to ₹5,00,000 and recommended for businesses seeking finance for expansion and growth
• Tarun: For loans between ₹5,00,000 to ₹20,00,000 suitable for established MSMEs actively seeking to accelerate business growth

MUDRA loan eligibility:

MUDRA loan is a no-collateral loan, with low interest rates. Listed below are the specific eligibility criteria for MUDRA loans:

• Must be a business with valid MSME registration
• Age of the applicant must be within 18 to 65 years
• Type of business: All non-corporate and non-farm enterprises can apply for PMMY loans, including startups, retailers and wholesalers, across manufacturing, trading and services sectors
• The business should not be a loans defaulter and with a CIBIL score of 650+

How to apply for PMMY loan?

MUDRA loans can be availed via specific financial Member Lending Institutions (MLIs), namely:

• Public and private sector banks (check SBI MUDRA loans)
• Regional Rural Banks and Cooperative Banks
• Small finance banks
• Micro Finance Institutions (MFIs) and NBFCs

You can also an online application by visiting the Udyamimitra portal: udyamimitra.in/

Note: There are no agents through which you can apply for MUDRA loans. Please be advised and apply through MLIs only.

2. Credit Linked Capital Subsidy Scheme (CLCSS)

The next government MSME loan scheme we will talk about is the Credit Linked Capital Subsidy Scheme (CLCSS).

You can view the official website for more details on the scheme: clcss.dcmsme.gov.in/

What is CLCSS?

As can be understood from its name, it’s a capital subsidy scheme designed to enable MSEs avail funding for technology upgrade. MSEs can avail this loan to upgrade their existing technology to advanced ones for productivity enhancement or quality improvement. The subsidy loan can also be availed to buy machinery as per the specified list or update their plants.

The scheme provides subsidy of:

• 15% upfront capital subsidy up to ₹15,00,000 to MSEs including coir, khadi and village industries (for 51 specified sub-sectors)
• For institutional finance, a sum of ₹1 crore is set as the upper limit

CLCSS eligibility:

• To benefit under the CLCSS scheme you will have to be a MSE as per the specified sub-sectors
• Must be MSE registered with a valid UAM number
• Some of the sub-sectors include: Biotech, food processing, rubber processing, leather and leather products, Information Technology, steel furniture, toys, cosmetics, printing industry, etc.

How to apply for MSME loan from government?

Application to CLCSS can be initiated online through Primary Lending Institutions (PLIs). The PLIs will upload the application to the attached Nodal Agency. For the subsidy, the Nodal Agency will recommend the same to the Office of DC (MSME). Once approvals are in place, the funds are released to Nodal Agencies who transfer it to the PLIs.

Some of the approved nodal banks are:

• Public sector banks – State Bank of India, State Bank of Bikaner and Jaipur, Bank of Baroda, Indian Bank, Bank of India, Andhra Bank, Corporation Bank, Canara Bank, Punjab National Bank
• Tamil Nadu Industrial Investment Corporation Limited
• NABARD and SIDBI

3. Prime Minister’s Employment Generation Programme (PMEGP scheme)

The next subsidy scheme we will consider is the PMEGP scheme.

What is the PMEGP scheme?

PMEGP MSME loan scheme has been active since 2008 administered by the Ministry of MSME and implemented by KVIC (Khadi and Village Industries Commission).

It is a credit linked subsidy programme designed to create employment opportunities. This would be in rural and urban areas, through the establishment of small businesses in the non-farm category. This would not only generate employment but also reduce migration to urban areas.

Features of the PMEGP scheme:

The subsidy would be extended for two activities:

• The establishment of new micro businesses – !5% and 25% subsidy for urban and rural areas (general category)
• Upgrading existing units under MUDRA/PMEFGP/REGP – 15% subsidy (general)

For upgrade projects, the maximum project cost for manufacturing sector is capped at ₹25 lakh with ₹3,75,000 as subsidy (15%). The maximum project cost for services sector is capped at ₹10 lakhs with subsidy for up to ₹1,50,000 (15%).

How to apply for PMEGP scheme?

KVIC hosts a specific portal to accept applications for PMEGP subsidy programme. You will have to visit the online portal and apply via it, based on whether you are applying for new unit subsidy or for upgradation.

For more details, visit the PMEGP portal: kviconline.gov.in/pmegpeportal/pmegphome/index.jsp

4. Pradhan Mantri Rozgar Yogana (PMRY scheme)

The PMRY scheme is another MSME loan scheme that was started with the goal to provide employment and earning opportunities.

What is the full form of PMRY scheme?

The PMRY scheme or Pradhan Mantri Rozgar Yojana is a MSME loan scheme designed to enable emerging entrepreneurs to get initial funding to start their businesses. Started in 1993 the funding offered via the loan scheme can be utilised to start a business in manufacturing, services, or trading sectors. By doing so, it also generates employment for individuals looking at building their own establishments. The scheme also offers training to enable new entrepreneurs understand the nuances of doing business in India.

Key features of PMRY:

• Up to ₹1,00,000 collateral-free loans
• 3 – 7 years repayment tenure (after initial moratorium)
• Funding for projects ranging between ₹2,00,000 – ₹5,00,000 (for groups)

PMRY scheme eligibility:

• Indian citizen between 18 – 40 years of age (10 years relaxation for physically challenged, SC/ST and women entrepreneurs)
• Family income should not exceed ₹40,000 (monthly)
• Applicant should be unemployed and cleared Standard VIII
• Should not be a defaulter in any bank/NBFC

How to apply for PMRY loan scheme?

• Download the application form online from the official website
• Fill in the details and physically submit the form with requested documents and project profile at PMRY authorised banks or at any DIC (District Industries Centre)
• The application will be reviewed, selected applicants will be called for an interview, and the loan will be approved if relevant (i.e., bank clearance)
• Applicant will have to undergo the required training and acquire the certificate of completion to avail the loan

Note: Please check the official website for more details on how to prepare the project profile for PMRY loans

5. PSB loans in 59 minutes

The PSB loans in 59 minutes scheme is a move towards digital lending in India. Paper based loan application is time consuming. The PSB loan is an attempt to simplify and speed up the application and borrowing purpose by keeping the entire loan process online.

What is PSB loan in 59 minutes?

This is a unique loan application scheme where MSMEs can approach selected public sector banks (PSB) for a business loan or retail loan online. The process will be carried out online and the loan will be approved/denied within 59 minutes.

Type of loans under this scheme includes:

• MUDRA loans and MSME loans for working capital loan and term loan
• Home loan, personal loan and auto loan

Features of PSB 59 minutes loans?

• Quick online approval within 59 minutes
• Minimum documentation required
• One form only for all lenders on the platform
• MSME loan amount up to ₹5 crores
• MUDRA loan amount up to ₹10 lakhs

How to apply for PSB loan in 59 minutes?

• Visit the official online portal: psbloansin59minutes.com/home
• Click on ‘Login’ and fill in the registration form with your details
• Fill in the applicant profile details
• Check for whether you are seeking a ‘business loan’ or ‘personal loan’
• Fill in GST and income tax details, bank statements, and other business details
• Mention purpose of loans and if you have existing/previous loans
• Select your preferred bank and pay the convenience fees (i.e., ₹1000) to proceed with loan application

6. Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE scheme)

A joint effort of the Government of India, the Ministry of MSME and SIDBI, the objective of the CGTSME scheme is to enable micro and small businesses available collateral-free loans for their business. This loan to MSEs, it is backed by the scheme with 75% to 85% coverage on the loan amount to reduce risk of non-repayment and default.

• Credit guarantee offered for 75% to 85% of the loan amount
• CGTMSE loan limit was extended to ₹5 crores since April 2023 (from the previous limit of ₹2 crores).
• Budget 2024 (FY25) update – “A separately constituted self-financing guarantee fund will
  provide, to each applicant, guarantee cover up to ₹100 crore, while the loan
  amount may be larger. The borrower will have to provide an upfront
  guarantee fee and an annual guarantee fee on the reducing loan balance,” FM N. Sitharaman said.

CGTMSE scheme eligibility:

While this is a popular MSME loan scheme, the scheme is applicable to micro and small enterprises only under the new MSME classification (i.e., Medium scale enterprises not included).

Coverage is also for businesses in manufacturing, services, and retail trading and not for agricultural and self-help-groups (SHGs).

CGTMSE loan scheme application process:

To learn about the CGTMSE loan application process and other details, visit the official website: cgtmse.in/

• Collate all your business documents and financial statements along with MSME certificate (if registered)
• Prepare a business plan that highlights the purpose of availing the loan
• Identify a suitable lender (e.g., bank/NBFC etc.) that offers the scheme and submit your application
• Wait for the verification as the lender verifies your application and sends it to the CGTMSE authorities for coverage guarantee approval
• On approval, a basic coverage charge and service fee has to be paid and the loan will be sanctioned

Also read: CGTMSE new member registration – Steps for lenders to register under CGTMSE scheme

7. Stand-Up India scheme

An MMSE loan scheme designed exclusively for women entrepreneurs and those from the SC/ST communities, the Stand-Up India loan scheme is a unique offering.

This is a collateral-free MSME loan scheme covered under CGTMSE. The loan amount can range between ₹10 lakhs and ₹1 crore and can be used to promote greenfield businesses.

Must Read: Udyogini Yojana Scheme – Empowering women entrepreneurs in India

Stand-Up India loan scheme eligibility:

• Must be a SC/ST or woman entrepreneurs
• Age must be at least 18 years
• At least 51% of shareholding must be by a SC/ST or woman entrepreneur
• Applicable for greenfield projects in manufacturing, services, and trading
• Applicant should not be a previous defaulter

How to apply for loans under Stand-Up India scheme?

You can apply for a MSME loan under Stand-Up India scheme via its online or offline channels.

• Visit the Stand-Up India portal, login and apply for the loan online: standupmitra.in/
• Find the list of Lead District Managers (LDM) on the portal and apply through them
• Visit any branch of listed scheduled commercial banks to understand the process and/or apply offline by downloading and filling in the form

8. SIDBI loan schemes

The next name in our list of MSME loan schemes are the loans by SIDBI – The Small Industries Development Bank of India.

SIDBI offers various loans to businesses, each catering to distinct requirements. To know more, visit the SIDBI website: sidbi.in/

Under the MSME loan category, SIDBI has various options:

• Machinery loan (e.g., SPEED loan scheme and SPEED Plus)
• Green finance loan
• Project loan (e.g., ARISE scheme, Ubharte Sitaare scheme, Sthapan scheme)
• Working capital loan (e.g., SWIFT scheme, STEP scheme)

The eligibility criteria differs for all these schemes and you should visit the online portal to check the criteria and apply online.

Budget 2024 Highlight on SIDBI – “The FM N. Sitharaman said that SIDBI will open new branches to serve all major MSME clusters within three years, with 24 new branches opening this year, expanding service coverage to 168 out of 245 major clusters.”

Finding the right government MSME loan scheme

It must be clear by now that if you are seeking answers to who is eligible for MSME loan or how to apply for MSME loan from government, it will be based on the loan scheme.

Since the loan schemes are designed to provide funding for specific challenges, the eligibility and process of application varies. Also, considering India’s gradual shift towards building a digital economy, most of these loans can be applied via online and offline channels.

The secret is to understand the loan’s key features, requirements, benefits and evaluate if your business fits its eligibility criteria.

Author: Sohini Banerjee

Sohini is a seasoned content writer with 12 years’ experience in developing marketing and business content across multiple formats. At Tata nexarc, she leverages her skills in crafting curated content on the Indian MSME sector, steel procurement, and logistics. In her personal time, she enjoys reading fiction and being up-to-date on trends in digital marketing and the Indian business ecosystem.