The Interest Subsidy Eligibility Certificate (ISEC) scheme is an initiative of the Khadi and Village Industries Commission (KVIC) aimed at supporting khadi institutions across India. Under this scheme, eligible institutions can access working capital loans from banks at reduced effective interest costs, as KVIC provides an interest subsidy.
The scheme is designed to ensure continuous credit flow to khadi units so that production, employment generation, and rural entrepreneurship are sustained without financial strain.
What is the ISEC scheme?
The ISEC scheme provides interest subsidy on working capital loans taken by eligible khadi institutions from scheduled banks.
Key points:
- Applicable to khadi institutions registered with KVIC or State Khadi and Village Industries Boards (KVIBs)
- Subsidy is applicable only on working capital loans
- Banks charge standard interest rates, while KVIC reimburses the subsidy component
- Ensures uninterrupted khadi production and operations
- Strengthens rural employment opportunities
Key benefits of ISEC scheme
- Reduces effective interest burden on working capital loans
- Improves access to institutional finance for khadi institutions
- Encourages growth of rural and cottage industries
- Supports uninterrupted production and supply of khadi goods
- Promotes self-reliance among rural artisans and weavers
Eligibility criteria for ISEC scheme
Institutions must meet the following conditions:
- Registered with KVIC or State KVIBs
- Engaged in khadi production or village industry activities
- Maintaining proper operational and financial records
- Availing working capital loans from eligible banks
- Complying with KVIC guidelines and reporting requirements
Purpose and objectives of ISEC scheme
The scheme has the following objectives:
- To provide affordable working capital finance to khadi institutions
- To support sustainable khadi production and rural livelihoods
- To promote employment generation in rural areas
- To reduce dependency on high-cost borrowing
- To strengthen the institutional framework of the khadi sector
Loan amount and interest subsidy details
| Particulars | Details |
|---|---|
| Type of loan | Working capital loan |
| Eligible borrowers | KVIC/State KVIB registered institutions |
| Interest rate | As per applicable bank lending rates |
| Subsidy provider | KVIC |
| Nature of subsidy | Interest reimbursement |
| Loan limit | As per requirement of the institution (no fixed cap) |
| Subsidy frequency | Generally released on a quarterly basis |
The scheme effectively reduces borrowing costs, as KVIC reimburses the interest subsidy directly to the lending bank.
Documents required for ISEC application
- Registration certificate issued by KVIC or State KVIB
- Detailed working capital requirement statement or project report
- Bank loan sanction letter
- Audited financial statements (where applicable)
- Identity and address proof of the institution
- Details of khadi or village industry activities
- Bank account details of the institution
- Compliance documents as required by KVIC
How to apply for ISEC scheme
Application process:
- Register with KVIC or the relevant State KVIB
- Prepare a detailed working capital requirement proposal
- Apply for a working capital loan through a recognised bank
- Obtain loan sanction from the bank
- Submit the ISEC application through the KVIC channel
- KVIC verifies eligibility and issues the Interest Subsidy Eligibility Certificate
- Subsidy is reimbursed to the lending bank as per scheme guidelines
Responsibilities of KVIC under ISEC scheme
KVIC is responsible for:
- Verifying eligibility of khadi institutions
- Issuing Interest Subsidy Eligibility Certificates
- Coordinating with banks for subsidy reimbursement
- Monitoring khadi production and utilisation of funds
- Ensuring timely release of subsidy payments
- Maintaining transparency and compliance under the scheme
ISEC scheme vs. PMEGP
| Feature | ISEC scheme | PMEGP |
|---|---|---|
| Objective | Supports working capital needs of khadi institutions | Encourages setting up of new micro enterprises |
| Implementing body | KVIC | KVIC/KVIB/District Industries Centres |
| Financial support | Interest subsidy on working capital loans | Capital subsidy and bank loan assistance |
| Beneficiaries | Existing khadi institutions | New entrepreneurs |
| Loan type | Working capital loan | Term loan for project setup |
| Sector focus | Khadi and village industries | Manufacturing and service sectors |
Conclusion
The ISEC scheme plays a significant role in strengthening khadi institutions by reducing the cost of working capital finance. It supports rural employment, preserves traditional industries, and ensures financial stability for institutions operating under KVIC.
For broader funding needs, businesses may also consider exploring business loans, checking applicable business loan interest rate, or using a business loan EMI calculator to plan repayments effectively.
