MSME Loan

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Latest News:

MSME interest subvention extended till March 2021. To know more, click here.

MSME Loan Details 

Interest Rate   7.65% p.a. onwards  
Loan Amount   Rs.50,000 onwards 
Loan Tenure   Up to 15 years  
Processing Fee   Subject to the lender 

New definition of MSME

The definition of MSME was altered, and was announced by the Government of India on 13th May 2020. Given below is the new definition of MSME: 

  • The criteria for MSME classification have been changed from Investment to Investment and Annual Turnover. 
  • The Government of India also increased the investment limit for classification of MSME units. This means, that more firms and enterprises can now avail MSME schemes.
  • Criteria for the classification of MSMEs is now uniform for Manufacturing and Services Enterprises which is given below in the table below: 
Classification  Micro  Small  Medium 
Manufacturing and Services Enterprises  Investment does not exceed Rs.1 crore and Turnover does not exceed Rs.5 crore  Investment does not exceed Rs.10 crore and Turnover does not exceed Rs.50 crore  Investment does not exceed Rs.20 crore and Turnover does not exceed Rs.100 crore

Micro, Small, and Medium Enterprises can avail MSME loans for the expansion of businesses or for setting up new enterprises. The interest rates on MSME loans start at 7.65% p.a. The loan amount sanctioned ranges from as low as Rs.50,000 and can go up to a few crores. On the basis of the sanctioned loan amount, the loan repayment tenure can go up to 15 years.

MSME Loan Interest Rates by Top Banks in 2021

Bank Name  Interest rate 
Allahabad Bank  At the discretion of the bank 
Oriental Bank of Commerce  10.70% p.a. onwards 
Andhra Bank  At the discretion of the bank 
ICICI Bank  13% p.a. onwards 
Central Bank of India  11.25% p.a. onwards 
Indian Bank  9.75% p.a. onwards 
Punjab and Sind Bank  9.95% p.a. onwards 
Punjab National Bank  At the discretion of the bank 
State Bank of India  7.65% p.a. onwards 
Syndicate Bank  At the discretion of the bank 
UCO Bank  8.85% p.a. onwards 
Union Bank of India  At the discretion of the bank 
United Bank of India  10.25% - 16.25% p.a. 

Popular Banks offering MSME Loans in India

Listed below are some of the most popular banks in India which offer MSME loans:

SME Loans from SBI
Interest Rate 9.65% p.a. onwards 
Processing Fee Up to 2% of the loan amount 
Loan Amount Depending on the scheme 
Loan Repayment Tenure Up to 120 months 
SME Loans from HDFC Bank
Interest Rate  15.75% p.a. onwards 
Processing Fee  0.99% of the loan amount 
Loan Amount  Up to Rs.50 lakh 
Loan Repayment Tenure  Up to 48 months 
ICICI SME Loans
Interest Rate  13% p.a. onwards 
Processing Fee  Depending on the scheme 
Loan Amount  Up to Rs.2 crore 
Loan Repayment Tenure  Depending on the scheme 

Top NBFCs Offering MSME Loans Interest Rates

There are various Non-Banking Financial Companies (NBFCs) in India who offer MSME Loans to its customers at attractive interest rates. Given below are some of the NBFCs from whom you can avail an MSME Loan.

Bank Name  Interest rate 
LendingKart  At the discretion of the lender 
Fullerton India  17% p.a. to 21% p.a. 
Mahindra Finance  At the discretion of the lender 
Muthoot Fincorp  At the discretion of the lender 

Popular NBFCs offering MSME Loans in India

Listed below are some of the most popular NBFCs in India which offer MSME loans:

Fullerton Business Loan
Interest Rate  17% p.a. to 21% p.a. 
Processing Fee  Up to 6.5% of the loan amount 
Loan Amount  Up to Rs.50 lakh 
Loan Repayment Tenure  Depending on the scheme 
Lendingkart Business Loan
Interest Rate  At the discretion of the lender 
Processing Fee  2% of the loan amount 
Loan Amount  Rs.50,000 to Rs.1 crore 
Loan Repayment Tenure  Up to 36 months 

Other MSME Loan Schemes

In addition to the loan schemes offered by the banks and NBFCs, there are a host of government schemes as well. These schemes have been listed below:

Name of Scheme  Sub-Schemes 
1) MUDRA Loan 
  • Micro-Credit Scheme 
  • Credit for Micro Finance 
  • Refinance Scheme for Banks 
  • Mahila Uddyami Scheme 
  • MUDRA Card 
  • Equipment Finance Scheme 
  • Credit Guarantee Scheme 
2) Credit Guarantee Funds Trust for Micro and Small Enterprises (CGTMSE) N/A 
3) Prime Minister’s Employment Generation Programme (PMEGP)   N/A 

What are the eligibility criteria for availing a MSME Loan? 

You’re required to fulfil the eligibility criteria set by your lender to get approved for an MSME loan. The requirements will vary from bank to bank, and even changes with the type of scheme offered. However, listed below are the general criteria you will have to meet:

Particulars  Criteria 
Type of business 
  • Manufacturing Sector 
  • Service Sector 
Size of business (in terms of investment) - Manufacturing Sector 
  • Micro - < Rs.25 lakh 
  • Small - < Rs.5 crore 
  • Medium - < Rs.10 crore 
Size of business (in terms of investment) - Service Sector 
  • Micro - < Rs.10 lakh 
  • Small - < Rs.2 crore 
  • Medium - < Rs.5 crore 

What are documents required to apply for a MSME Loan?

Listed below is a generic list of documents that you can keep in hand for your application: 

Particulars  Document Required 
Proof of Identity  PAN card, Aadhaar card, Voter’s ID, passport 
Proof of Residence  Rental agreement, ration card, utility bills 
Proof of Business Address  Rental agreement, lease agreement, utility bills 
Proof of Income  P/L account and balance sheet copies of last 2 years  
Tax documents  IT returns, sales tax return, PAN card,  
Proof of securities provided  Photocopies of title deeds/lease deeds offered as securities 
Other documents  Projected balance sheet, project report, etc. 

Note: The list of documents mentioned above is indicative only. Applicants might be required to provide other documents as well as per the requirement of the lender.

How to apply MSME Loan? 

There are two ways of sending in your application for an MSME loan. If the lender has an online facility, you can fill the form with the required details and submit the application via the website.  

Alternatively, you can visit the nearest branch and request them for an application form. You can call ahead and ask them what the documentation requirements are. 

MSME Loans FAQs

  1. What is priority sector lending and does it include the MSME sector?

    Lending to the priority sectors, which are sectors that impact large segments of the population, are employment-intensive, and are weaker sections, is known as priority sector lending. The MSME sector falls under the priority sector and hence, can avail the benefits of priority sector lending. Some of the other sectors that can enjoy priority sector lending are education, housing, agriculture, and the export sector.

  2. Do all banks offer MSME loans?

    All private and public sector banks in India have targets prescribed by the Reserve Bank of India (RBI) for lending to the MSE sector. Under these guidelines, domestic scheduled commercial banks (except small finance banks and regional rural banks) and foreign banks with more than 20 branches will allocate 7.5% of their Adjusted Net Bank Credit (ANBC) or credit equivalent amount of off-balance sheet exposure, to the microenterprises sector.

  3. Do MSME borrowers need to have a credit rating?

    Though it is not a mandate for the MSME borrowers to have a credit rating, getting it done will aid in credit pricing which may help them to get better interest rates, lower processing charges, etc.

  4. Is it possible to get MSME loans without providing collateral?

    As per the RBI regulations, banks have been mandated to offer MSME loans of up to Rs.10 lakh without accepting collateral. Sometimes, depending on the financial position and track record of the MSME units, banks can increase this limit to Rs.25 lakh.

  5. What happens if I fail to make the payment for my MSME loan on time?

    In cases where the buyer is unable to pay the supplier, he/she shall be liable to pay compound interest with monthly rests to the supplier on the amount from the appointed day or on the agreed day, at 3 times the bank rate notified by the RBI.

  6. Are there any guidelines laid down by the RBI regarding interest rates on MSME loans?

    Yes, RBI has advised all banks to price the interest rates on MSME loans only with reference to the base rate to enhance transparency in lending rates.

  7. Does the government of India offer any other support to the MSME sector besides offering loans?

    Apart from offering loans to the MSME sector, the Ministry of MSME extends support for the promotion of Information and Communication Touls (ICT), cluster development, skill development, improvement of manufacturing competitiveness, improvement of quality of products, etc. The Ministry also provides market support to the sector through the Marketing Assistance Scheme.

  8. Do all branches of public sector banks offer MSME loans or are there any specialised branches?

    The RBI has directed all public sector banks to open at least one specialised branch in each district for lending to the MSME sector. At present, there are 2,032 such branches.

  9. I am an MSE entrepreneur. Will banks extend any guidance to me besides offering me a loan?

    Yes, entrepreneurs in the MSME sector can avail the fullowing services offered by banks:

    • Financial literacy and consultancy support
    • Rural Self Employment Training Institutes (RSEITs)
  10. What is the Stand Up India scheme?

    This scheme offers financial assistance to women entrepreneurs and individuals from the SC/ST caste. The finances can be used to set up greenfield projects. It can be applied for first-time ventures in industries like trading, manufacturing, and service.

  11. How do I check my business’ CIBIL score?

    You can visit CIBIL’s official website and request for your credit report. You can get up to 1 free credit rating check every year.

    Alternatively, you can also go to the bureau and apply for a credit report via post. However, do note, you will be required to furnish certain documents. You will receive your report only after these documents are verified and authenticated.

News About MSME (Micro Small and Medium Enterprises) Loan

  • Rs.15,700 crore to be pumped into MSME sector

    During the Union Budget 2021, the Finance Minister of India Nirmala Sitharaman announced that Rs.15,700 crore will be provided to the MSME sector.

    Sitharaman said the amount pumped is more than double the Ministry of Finance provided in the year 2020.

    2 February 2021

  • MSME interest subvention extended till March 2021

    Micro Small and Medium Enterprises (MSMEs) will have an extension of the interest subvention scheme on loans until March 2021. This is applicable for working capital and term loans of up to Rs.100 lakh. Interest relief per annum is 2% under the scheme. For units that are eligible for Goods and Services Tax (GST), there will not be any requirement for providing the Udyog Aadhaar Number (UAN) anymore. Units which are not required to obtain a GST number should either have their loan account specified as being under the MSME category by the concerned bank or must submit their Permanent Account Number (PAN) from the Income Tax Department. Loan accounts on date of filing the claim should not have been a Non Performing Asset (NPA). For periods that the account was NPA, interest subvention will not be applicable. The Interest Subvention Scheme for MSMEs 2018 was announced for 2018-2019 and 2019-2020 for commercial banks in November 2018. From 3 March 2020, cooperative banks also became eligible to become lending institutions under the scheme. The latest announcement on change of terms has been made by the Reserve Bank of India (RBI).

    22 October 2020

  • Banks sanctioned loans worth Rs.1.77 lakh crore under ECLGS for the MSME sector

    On Thursday, the finance ministry stated that banks have sanctioned loans worth Rs.1.77 lakh crore to 44.2 lakh business units under the Rs.3 lakh crore Emergency Credit Line Guarantee Scheme (ECLGS) for the MSME sector. Until September 21, the disbursement against the sanctioned amount stood at Rs.1,25,425 crore to 25.74 lakh MSME units. As per the latest numbers, the disbursements happened from all the 12 public sector banks, 24 private sector banks and 31 NBFCs. It must be noted here that the scheme is the biggest fiscal component of the Aatmanirbhar Bharat Abhiyan package announced by the Union Finance minister in the month of May to reduce the distress caused by the lockdown because of the coronavirus pandemic.

    24 September 2020

  • RBI extends the provision of restructuring of loans for MSMEs

    In its second bi-monthly monetary meet, the Reserve Bank of India had extended the provision of restructuring of loans which provided many small businesses relief.

    According to RBI Governor, Shaktikanta Das, the scheme had provided relief to many MSMEs across the country. With the COVID-19 pandemic hampering the normal functioning of business and disrupting the flow of cash, this will provide further support to the MSME sector.

    The Monetary Policy Committee has given a decision that the MSME borrowers will be eligible for restructuring their debt under the existing framework. The framework which was provided with their accounts were standard as on 31 March 2020 and the restructuring will need to be implemented by 31 March 2021.

    20 August 2020

  • Nearly 33% of the Emergency Credit Line Guarantee Scheme disbursed

    The government of India had committed Rs.3 lakh crore for the MSMEs under the Emergency Credit Line Guarantee Scheme in May. Out of this, around Rs.98,665.93 crore or 32.8% has been disbursed to 22,77,463 loan accounts. 12 public sector banks have a share of 55.4% and 24 private banks and 31 NBFCs have the remaining share of 44.5%. These banks have disbursed a part of the sanctioned amount.

    22.7 lakh MSMEs has received funds in August and out of those, 19,84,310 MSMEs have been disbursed by the public sector banks while the rest 2,93,153 small businesses were disbursed by the private sector banks and NBFCs.

    The State Bank of India was the biggest lender disbursing funds amounting to more than Rs.16,500 crore and Punjab National Bank was second, disbursing nearly Rs.7,000 crore. Canara Bank and Bank of Baroda disbursed a sum of Rs.6,500 crore and Rs.5,700 crore respectively.

    19 August 2020

  • PSBs disburse loan to MSMEs under emergency credit scheme

    The Finance Ministry has recently announced that Public Sector Banks (PSBs) have disbursed a loan amount of Rs.16,031.39 crore till 12 June 2020 for the MSME sector which has been affected adversely by the ongoing COVID-19 pandemic.

    The loan has been disbursed under the Rs.3-trillion Emergency Credit Line Guarantee Scheme (ECLGS). The PSBs have already sanctioned loans worth more than Rs.32,000 crore which comes under the 100% ECLGS for the MSME sectors. The disbursement has been put into effect since 1 June 2020.

    16 June 2020

  • Standard MSMEs to receive automatic loans of Rs.3 lakh crore

    Finance Minister Nirmala Sitharaman addressed the media about the financial measures to be undertaken by the government as a part of “Atmanirbhar Bharat Abhiyan” or self-reliant India initiative. Among other initiatives that are to be undertaken by the Government to fight the financial distress caused by the coronavirus pandemic, she spoke at length about the financial stimulus to be given to MSMEs.

    The Finance Minister said that for standard MSMEs, collateral-free automatic loans worth of Rs.3 lakh crore will be rolled out. The tenure is of 4 years and the package will last till 21 October 2020. This financial stimulus package is supposed to benefit 45 lakh units to resume their business operations and safeguard their employees from losing jobs.

    13 May 2020

  • Stressed MSMEs to benefit through Rs.20,000 crore subordinate debt

    Finance Minister Nirmala Sitharaman addressed the media about the financial measures to be undertaken by the government as a part of “Atmanirbhar Bharat Abhiyan” initiative. Among other initiatives that are to be undertaken by the Government to fight the financial distress caused by the coronavirus pandemic, she spoke at length about the financial stimulus to be given to MSMEs.

    The Finance Minister said that for stressed MSMEs reeling under have equity problems, Rs.20,000 crore will be infused through subordinate debt. This initiative is supposed to benefit 2 lakh MSMEs, said the Finance Minister.

    13 May 2020

  • Several measures launched to boost MSMEs in Union Budget

    The Ministry of Micro, Small, and Medium Enterprises (MSME) has been allocated an all-time high budget of Rs.7,572.20 crore. Several other measures were also announced, such as a scheme that provides MSME entrepreneurs with a subordinate debt and increasing the threshold of turnover for accounts auditing to Rs.5 crore. The Prime Minister Employment Generation Programme, a flagship program of the MSME received Rs.2,500 crore in budget allocation. This will be used to facilitate opportunities for self-employment for unemployed youth in the urban and rural areas as well as traditional artisans by establishing micro-enterprises in the non-farming sectors. The Reserve Bank of India has also been requested to extend the window of debt restructuring for MSMEs to 31 March 2021. A loan product for invoice financing that will be app-based will also be launched soon. This will help prevent delayed payments which will in turn prevent mismatches in cash flow for MSMEs. Non-Banking Financial Companies (NBFCs) will also be encouraged to extend credit to MSMEs to enhance their financial sustainability. In order to enable this, the Factor Regulation Act 2011 will be amended. In order to enhance the export competitiveness of mid-sized companies related to auto components, pharmaceuticals, R&D, business strategy, technology upgradation, etc., Rs.1,000 crore was allocated through a scheme that would hand-hold them. The National Scheduled Caste/Scheduled Tribe Hub has been allotted Rs.150 crore to provide training and professional support for entrepreneurs.

    5 February 2020

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