Interest Subsidy Eligibility Certificate (ISEC) Scheme
The Interest Subsidy Eligibility Certificate (ISEC) Scheme, run by the Khadi and Village Industries Commission since 1977-78, lets registered khadi institutions borrow working-capital finance from banks at just 4% interest per year, with the Government of India paying the difference to the lender. Only registered khadi institutions apply, through KVIC and their state boards.
| Ministry | Ministry of Micro, Small and Medium Enterprises |
|---|---|
| Benefit | Bank credit at 4% interest per year; government pays the difference to the bank |
| Maximum benefit | Difference between 4% and the actual bank lending rate (no fixed cap) |
| Application mode | Through KVIC / state Khadi and Village Industries Boards |
| Helpline | Not published; contact the nearest KVIC state or divisional office |
| Official website | https://www.kviconline.gov.in/ |
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?
| Document | Mandatory | Notes |
|---|---|---|
| KVIC / KVIB registration certificate | Yes | Establishes that the applicant is a registered khadi institution |
| Working-capital loan proposal | Yes | Bank sanction details against which subsidy is claimed |
| Production and khadi/polyvastra records | Yes | Evidence of eligible khadi/village-industry activity |
| Bank account and financial statements | Yes | For routing the loan and computing the interest differential |
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.
- Ensure the institution is registered with KVIC or a state KVIB and is in active khadi/polyvastra production.
- Arrange a working-capital loan from a financing bank for the institution's production needs.
- Approach the KVIC state or divisional office (or the state KVIB) and apply for the Interest Subsidy Eligibility Certificate against that loan.
- Submit the registration certificate, loan sanction, production records and financial statements for verification.
- On issue of the certificate, the bank charges the institution 4% interest, and KVIC settles the balance interest with the bank.
- 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.
Documents required
Frequently asked questions
What interest rate do khadi institutions pay under the ISEC scheme?
Under the ISEC scheme, eligible khadi institutions pay only 4% interest per year on working-capital loans. The Government of India, through the Khadi and Village Industries Commission, pays the difference between 4% and the bank's actual lending rate directly to the lending bank.
Who can apply for the ISEC scheme?
Only institutions registered with the Khadi and Village Industries Commission (KVIC) or a state Khadi and Village Industries Board (KVIB) and engaged in producing khadi and polyvastra can apply. It is an institutional scheme, so individual weavers, artisans or the general public cannot apply directly for a personal loan subsidy.
Which ministry runs the ISEC scheme?
The ISEC scheme is administered by the Khadi and Village Industries Commission (KVIC) under the Ministry of Micro, Small and Medium Enterprises (MSME). It has been in operation since 1977-78 to channel bank finance to the khadi sector at a concessional rate.
Is there a fixed maximum benefit under ISEC?
There is no single fixed cash cap; the benefit is the difference between 4% and the bank's actual lending rate on the sanctioned working-capital loan. The larger the eligible loan and the higher the market rate, the larger the interest the government absorbs on the institution's behalf.
What is the ISEC scheme used for?
ISEC is used to meet the working-capital needs of registered khadi institutions — buying raw material, paying spinners and weavers and sustaining production. By capping the institution's cost of credit at 4%, it keeps khadi production financially viable.
Can an individual weaver get a loan at 4% under ISEC?
No. An individual weaver cannot directly get a 4% loan under ISEC. The scheme finances registered khadi institutions, which in turn engage spinners and weavers. Individuals seeking self-employment credit should look at PMEGP or other KVIC/MSME programmes instead.
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