Interest Subsidy Eligibility Certificate (ISEC) Scheme

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

The Interest Subsidy Eligibility Certificate (ISEC) Scheme is a credit-support programme run by the Khadi and Village Industries Commission (KVIC) under the Ministry of Micro, Small and Medium Enterprises. According to KVIC, the scheme has been in operation since 1977-78 and was introduced to mobilise funds from banks to supplement the budgetary resources available for the khadi sector.

According to the KVIC website, registered khadi institutions can access working-capital finance from banks and pay interest at only 4% per year; the Government of India pays the difference between 4% and the bank's actual lending rate directly to the financing bank. The "eligibility certificate" in the scheme's name is the document KVIC issues that entitles an institution's loan to this interest subsidy.

Key objectives

• Channel bank credit into the khadi and polyvastra sector at a predictable, low cost.
• Keep working capital affordable for institutions that engage large numbers of rural spinners and weavers.
• Supplement limited budgetary funds with commercial bank finance.

Who is eligible for the ISEC scheme?

An institution can apply if:

• It is registered with KVIC or a state Khadi and Village Industries Board (KVIB).
• It is engaged in the production of khadi and polyvastra and village industry activity.
• It has a working-capital loan sanctioned or proposed from a financing bank against which the subsidy is claimed.

You cannot apply if:

• You are an individual weaver, spinner or artisan seeking a personal loan. ISEC finances institutions, not individuals, individuals cannot apply.
• The unit is not a registered khadi/KVIB institution.
• The credit is not for the khadi/village-industry activity the scheme covers.

Because ISEC is strictly an institutional credit-subsidy scheme, members of the public looking for self-employment finance should instead consider the Prime Minister's Employment Generation Programme (PMEGP) or other MSME schemes.

What documents are required for the ISEC scheme?

How to apply for the ISEC scheme

ISEC is an institutional scheme routed through KVIC and the state boards. These steps are for a registered khadi institution.

1. Ensure the institution is registered with KVIC or a state KVIB and is in active khadi/polyvastra production.
2. Arrange a working-capital loan from a financing bank for the institution's production needs.
3. Approach the KVIC state or divisional office (or the state KVIB) and apply for the Interest Subsidy Eligibility Certificate against that loan.
4. Submit the registration certificate, loan sanction, production records and financial statements for verification.
5. On issue of the certificate, the bank charges the institution 4% interest, and KVIC settles the balance interest with the bank.
6. Maintain records and file the periodic returns KVIC requires so the subsidy continues on the eligible loan.

The online interface for khadi institutions is hosted at kviconline.gov.in; the actual eligibility certificate is processed through KVIC/KVIB offices.

How much benefit does ISEC provide?

The benefit is not a lump sum but a rate concession: the institution's cost of working-capital credit is held at 4% per year, and the government absorbs everything above that up to the bank's lending rate. There is no single fixed cash ceiling — the value depends on the size of the eligible loan and the prevailing market interest rate. This makes ISEC most valuable when interest rates are high and when an institution carries a large working-capital loan to pay its spinners and weavers.

Help and contact

• ISEC is administered by KVIC under the Ministry of MSME.
• A dedicated ISEC helpline is not published; registered institutions should contact their nearest KVIC state or divisional office or the relevant state Khadi and Village Industries Board.
• The online portal for khadi institutions is kviconline.gov.in.

ISEC is a narrow, institution-only credit subsidy. For the general public it is best understood as background support that keeps genuine khadi cheaper to produce, rather than a scheme an individual can apply to.

How to check your application status

ISEC is processed institution-to-institution through KVIC and the state Khadi and Village Industries Boards, not through a public online tracker, so status checks are largely offline and relationship-based.

1. Confirm submission at the KVIC state/divisional office. The office that received the registration certificate, loan proposal and production records is the first point of contact; ask for the file or reference number given at the time of submission.
2. Follow up with the financing bank in parallel. Since the certificate is issued against a specific working-capital loan, the bank's loan/credit department usually knows whether KVIC has confirmed the interest subsidy on its side, even before the institution's own file is updated.
3. Check with the state KVIB if the application was routed there. Institutions registered with a state Khadi and Village Industries Board, rather than directly with KVIC, should track status through that board's office, since KVIB offices forward cases to KVIC for the actual certificate.
4. Use kviconline.gov.in for account-linked services. The portal is built for registered khadi institutions to manage their KVIC-linked records; where an institution has login access, it can check whether its registration and related filings are current, even though a dedicated "ISEC status" module is not published.
5. Escalate through the divisional or zonal KVIC office if the state office does not respond, since ISEC cases that involve larger loan amounts or first-time institutions can require sign-off above the local office.
6. Keep the loan sanction letter and registration certificate on hand for every follow-up call or visit, since staff will ask for the loan account details and KVIC/KVIB registration number to locate the file quickly.

Because there is no published helpline or centralized dashboard for ISEC, the most reliable status check is a direct visit or call to the KVIC office that holds the file, backed up by the bank that sanctioned the loan.

Common reasons for rejection

• The applicant is not a registered khadi institution. ISEC only certifies loans for entities registered with KVIC or a state KVIB. Individual artisans, unregistered cooperatives, or units that have let their registration lapse are turned down outright. The fix is to complete or renew KVIC/KVIB registration before applying for the certificate, not alongside it.
• The loan is not genuinely for khadi/village-industry working capital. If the bank loan is for general business expansion, machinery unrelated to khadi production, or personal use, it falls outside what ISEC covers. Applicants should ensure the loan proposal explicitly ties the funds to khadi/polyvastra production and spinning/weaving wage payments.
• Production records do not support the scale of the loan claimed. KVIC verifies that an institution's actual khadi/polyvastra output and workforce justify the working-capital amount against which the subsidy is sought. Thin or inconsistent production records lead to rejection or a reduced eligible amount; institutions should keep production registers and wage records current and consistent with what is submitted.
• The bank has not actually sanctioned the loan. Some applications are submitted while the working-capital loan is still under negotiation with the bank. KVIC requires the loan sanction (or firm terms) in hand before it will issue a certificate against it, so institutions should complete the bank's sanction process first.
• Financial statements or the bank account details do not reconcile. If the institution's submitted balance sheets, cash flow, or bank account records do not match the loan proposal, the file gets stuck or rejected. Getting the institution's accounts and audited statements in order before applying avoids this back-and-forth.
• Incomplete or outdated registration paperwork. A KVIC/KVIB certificate that has expired, or is under renewal, is treated as if the institution is unregistered for this purpose. Institutions should confirm their registration is current, not just historically valid, before filing for ISEC.
• Filed at the wrong office. Because ISEC is routed through KVIC state/divisional offices or the relevant state KVIB, applications lodged with the wrong office are delayed rather than processed, and can lapse if not redirected in time. Confirming the correct office for the institution's registration avoids this loss of time.