Interest Subsidy Eligibility Certificate (ISEC)

As a new MSME owner in the Khadi sector, you often face challenges in securing funds at reasonable interest rates. The ISEC Scheme is designed to support Khadi and Polyvastra producing institutions by offering working capital loans at a subsidized interest rate. This scheme helps you focus on business growth without worrying about high borrowing costs, ensuring that your enterprise remains financially healthy and competitive.

What is the Interest Subsidy Eligibility Certificate (ISEC) Scheme?

Launched in May 1977, the ISEC Scheme is a flagship initiative by the Government of India to assist Khadi and Polyvastra producing institutions. It enables you to obtain working capital loans from banks at a concessional interest rate of 4% per annum. The government pays the difference between the bank’s actual lending rate and the subsidized rate through the Khadi and Village Industries Commission (KVIC).

Objectives of the ISEC Scheme

• You get access to affordable working capital, making it easier to manage your daily business needs in the Khadi sector.
• By using this scheme, you can bridge the gap between your actual funding requirements and what’s available through government budgets.
• Through ISEC, you’re able to promote the growth and long-term sustainability of your Khadi enterprise.
• With this support, you help encourage traditional industries and create more employment opportunities in rural areas.
• By reducing your financial burden, you make your Khadi products more competitive in the market.

Key Features of the ISEC Scheme

• You benefit from a concessional interest rate, as loans for working capital are provided to you at just 4% per annum.
• If the bank charges more than 4% interest, the Central Government through KVIC pays the extra interest amount directly to the bank, so you only pay 4% interest.
• If you are registered as a Khadi producing institution with KVIC or the State Khadi and Village Industries Boards (KVIB), you qualify for this scheme.
• When you need working capital, you can use this scheme specifically to meet those business requirements.

Financial Assistance Offered Under the ISEC Scheme

• You can avail loans for working capital at a subsidized interest rate of 4% per annum.
• The difference between the bank’s actual lending rate (which may vary) and 4% is reimbursed to the bank by the Central Government through KVIC.

Example Table:

Note:

The loan amount and tenure are determined by your working capital requirement and the bank’s assessment.

Eligibility Criteria for ISEC

Eligibility

• You must be a Khadi or Polyvastra producing institution.
• Your institution must hold a valid Khadi certificate.
• You should have a sanctioned Khadi programme.
• Registration with KVIC or State KVIB is mandatory.

Non-eligibility

• If you do not have a valid Khadi certificate or sanctioned programme.
• Private companies or individuals not involved in Khadi sector activities.
• MSMEs producing non-Khadi or non-Polyvastra products.

Documents Required for Interest Subsidy Eligibility Certificate

• Aadhaar Card
• Income certificate
• Valid Khadi certificate.
• Registration certificate with KVIC or State KVIB.
• Caste certificate
• Sanctioned Khadi programme details.
• Application form for ISEC.
• Business establishment proof.
• KYC documents of the institution.
• Financial statements as required by the bank.
• Any other document as per scheme guidelines 

How to Apply for the Interest Subsidy Eligibility Certificate?

Step 1: Get your ISEC certificate issued by KVIC.

Step 2: Apply to your financing bank for working capital, and submit your ISEC certificate along with your application.

Step 3: Wait for the bank to assess and sanction your working capital loan based on your requirements.

Step 4: Once your loan is approved, the financing bank will raise a reimbursement claim to the nodal branch for the interest amount above 4%, so you only pay the concessional rate.

Benefits of the ISEC Scheme

• Affordable Working Capital
  You get access to loans at a low interest rate of 4%, reducing your financial burden and improving cash flow.
• Government Subsidy
  The government pays the difference between the actual lending rate and 4%, making your loan more affordable.
• Encourages Traditional Industries
  Helps you sustain and grow your Khadi business, supporting rural employment and traditional crafts.
• Easy Access to Finance
  Simplifies the process of getting working capital from banks, so you can focus on business operations.

Real-World Examples of the ISEC Scheme

• Khadi institutions expanding their production capacity.
• Rural co-operatives setting up new Khadi units.
• Non-profit trusts supporting artisans through subsidized finance.

Related Government Support Plans with Interest Subsidy for MSMEs

Final Words

If you are a new MSME owner in the Khadi sector, the ISEC Scheme is a powerful tool to access affordable finance and grow your business. Take advantage of this government support to strengthen your enterprise and contribute to India’s traditional industries.