In India, challenges have always plagued entrepreneurs who are women or are members of the SC/ST community who are looking to obtain a loan to launch their own business venture. However, in a noble effort to not only acknowledge but also address these challenges, faced by members of the SC/ST communities and women, Prime Minister Narendra Modi launched the Stand Up India Scheme in April of 2016.
The objective that this scheme plans to fulfill is to provide bank loans within the range of Rs. 10 lakh up to Rs. 1 crore to at least one SC / ST and one woman borrower from every bank branch to set up a greenfield enterprise which may involve services, manufacturing or trade. If it is a group enterprise, then a minimum of 51% of the controlling and shareholding stake must be held by an entrepreneur who is either a woman or someone who belongs to SC or ST community. The Stand Up India Loan Scheme will be available at all branches of Scheduled Commercial banks.
Features of Stand Up India Loan Scheme
- Nature of loan - The loan provided under this scheme is a composite loan which includes a term loan and the working capital.
- Availability of Scheme - This scheme will be provided by all Scheduled commercial bank branches and can be accessed either directly at the bank branch, via SIDBI’s Stand Up India portal or via the Lead District Manager.
- Quantum of loan - The loans provided under this scheme will range between the amounts of Rs 10 lakh and up to Rs 1 crore. the composite loan amount will cover 75% of the cost of the project. This includes the amount of working capital and the term loan. However, the condition that the loan shall cover 75% of the cost of the project will not be applicable in case the contribution of the borrower, along with financial support being provided from any other scheme amounts to more than 25% of the overall cost of the project.
- Purpose of loan - The loan will be provided to any woman, SC or ST entrepreneur who is undertaking a venture for the first time under the services, trading or manufacturing sector.
- Rate of Interest - The Stand Up India scheme interest rate shall be the lowest interest rates which are offered by the bank for the particular category. The interest rate however must not exceed the Tenor premium + 3% + MCLR.
- Security for loan - In addition to primary security, the loan may require the applicant to provide collateral security or a guarantee of CGFSIL (Credit Guarantee Fund Scheme for Stand Up India Loans), as is required by the bank.
- Repayment of loan - The maximum tenure allowed for repayment of loans taken under this scheme is 7 years, along with a moratorium period of 18 months.
- Working Capital - For the purpose of drawing working capital up to an amount of Rs 10 lakh, the funds will be sanctioned in the form of overdrafts. A RuPay debit card can also be issued to the borrower for added convenience of withdrawing funds easily. If the working capital required is above Rs. 10 lakh, the same will be provided by cash credit limit.
- Margin Money - While this scheme operates under the assumption that 25% of the margin money for the project will be provided by other state/central government schemes which provide subsidies, the loan applicant is expected to contribute a minimum of 10% of the cost of the project from their own funds.
Eligibility for Stand Up India Loan Scheme
In order to be eligible for obtaining a loan under the Stand Up India Loan scheme, an individual must comply with the following eligibility criteria:
- The individual must be above 18 years of age.
- The entrepreneur must either be a woman or belong to the SC or ST community.
- Loans will be provided under this scheme only for funding green field projects, which implies that the venture is the very first one ever being undertaken by the applicant under the trade, services or manufacturing sector.
- If the loan is being taken for a non-individual enterprise, then it is compulsory that a minimum of 51% of the shareholding / controlling stake be held by a woman, SC or ST entrepreneur.
- The loan applicant must not be an existing defaulter to any bank or financial organization.
Factors required to avail Stand up India loan Scheme
There are certain factors which will directly influence the availability/approval of loans under Stand Up India Scheme. These are:
- The borrower’s location of place of residence.
- Which category they belong to -SC, SC or woman.
- Nature of business for which loan is required.
- Whether the planned business premises are available or not.
- Whether the borrower required any assistance to prepare their project plan.
- The amount that the borrower is investing from their own pocket towards the set-up of the business venture.
- Does the borrower require financial aid to raise the amount of margin money.
- Whether the borrower has any prior experience in handling a business.