In this article, learn about MSME loans and the interest rate offered on such loans. Also, know about the process of registration for MSME loans.
For the MSME loan scheme 2023, the interest rate is generally 7.65% annually. In this blog, however, we will learn in detail about the different interest rates levied by different banks in India. MSME loans, also known as Micro, Small, and Medium business loans, are available to those who own a business or are an entrepreneur.
This type of loan provides working capital that can be used for various purposes, including, Buying new inventory, buying new equipment, paying employees, or helping them grow their business. There are several lenders in India offering MSME Loans Schemes to their customers. Interest charged will also vary from bank to bank.
Loan Details of MSME
The loan details of MSME are as follows:
| Rate of interest | 7.65% p.a. onwards |
| Loan Amount | ₹ 50,000 onwards |
| Tenure of loan | Up to 15 years |
| Processing charge | Subject to the lender |
New Definition of MSME Loans
The definition of MSME was amended and published by the Government of India on May 13, 2020. The following is a new definition of MSME. MSME classification criteria changed from “Investment” to “Investment and Annual Sales”. The Government of India has also raised the investment limit for classifying MSME units. This means that more companies and businesses can now take advantage of the MSME program.
The MSME classification criteria are unified for the manufacturing and service industries and are shown in the following table.
| Classification | Micro, | Small | Medium |
| Manufacturing and Services Enterprises | Investment, do not go more than ₹1 crore. Turnover does not exceed ₹5 crores. | Investment does not go More than ₹10 crores, And Turnover does not exceed ₹50 crores. | Investment does not go more than ₹ 20 crores. Turnover does not exceed ₹100 crores. |
Small and medium-sized enterprises can use MSME loans to expand their businesses or start new businesses. Interest rates on MSME loans start at an annual rate of 7.65%. A licensed loan can go from as little as ₹ 50,000 to a few crores. Based on the amount of the loan approved, the loan term can be up to 15 years.
Top Banks’ MSME Loan Interest Rates in 2023
| Bank Name | Interest rate |
| Allahabad Bank | Bank’s discretion |
| Oriental Bank of Commerce | 10.70% p.a. onwards |
| Andhra Bank | Bank’s discretion |
| 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 | Bank’s discretion |
| State Bank of India | 7.65% p.a. onwards |
| Syndicate Bank | Bank’s discretion |
| UCO Bank | 8.85% p.a. onwards |
| Union Bank of India | Bank’s discretion |
| United Bank of India | 10.25% – 16.25% p.a. |
Famous Banks Offering MSME Loans in India
Below are some of India’s most popular banks offering 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 |
| Amount of loan | Up to ₹ 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 ₹ 2 crore |
| Loan Repayment Tenure | Depending on the scheme |
Top NBFC MSME Loans Interest Rates
India has various non-bank financial institutions (NBFC) that offer MSME loans to their clients at attractive interest rates. Below are some of the NBFCs available for MSME loans.
| 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 NBFC MSME Loans in India
Below are some of India’s most popular NBFCs offering MSME loans.
| Fullerton Business Loan | |
| Interest Rate | 17% p.a. to 21% p.a. |
| Processing Fee | Up to 6.5% of the loan amount |
| Amount of Loan | Up to ₹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 |
| Amount of Loan | ₹50,000 to ₹1 crore |
| Loan Repayment Tenure | Up to 36 months |
Other Government MSME Loan Schemes
In addition to the loan programs offered by banks and NBFC, there are also various government programs. These schemes are shown below.
| Name of Scheme | Sub-Schemes |
| MUDRA Loan |
|
| Micro and Small Enterprises Credit Guarantee Funds Trust | N/A |
| Prime Minister’s Employment Generation Programme (PMEGP) | N/A |
Registration for MSME
Below are the steps you need to follow to register as a new MSME user
- Click on this link MSME
- If you haven’t registered yet, click ‘New entrepreneurs or entrepreneurs with EMII who are not yet registered as MSME’
- You need to enter the name and Aadhaar details and click Validate to Generate OTP
- A one-time password (OTP) will be sent to your contact number for verification
- Enter the OTP to authenticate. Next, you need to provide and validate the details of your PAN and your organisation
- The next step is to enter your personal data and information about the industry or factory you work in
- After entering all the details, click Submit to get the final OTP. OTP will be sent to your mobile number
- When you enter the OTP, you will see a message about the successful registration of MSME.
How to Register if You Already Have UAM?
- If you have registered to UAM
- Click either on ‘Registered as UAM’ or ‘Already registered as UAM’ by submitting support
- Enter the Aadhaar number. You can choose to receive OTPs via either your registered mobile number or email ID
- After providing the OTP, click Validate and Generate OTP
- Enter the OTP sent to your contact number in order to complete the registration process.
Eligibility Criteria to Avail MSME Loan
To be approved for an MSME loan, you must meet the eligibility criteria set by the lender. Requirements vary from bank to bank and also from the type of system offered. However, the following are general criteria that must be met.
| Type of business |
|
| Size of business (in terms of investment) – Manufacturing Sector |
|
| Business size of service sector (In terms of investment) |
|
Documents Needed to Avail an MSME Loan
Below is a general list of documents that your application needs to prepare.
| Name of document | Required documentation details |
| Identity proof | Aadhaar card, voter ID, passport proof, PAN |
| Residence proof | Residence certificate lease contract, distribution card, utility charges |
| Business Address proof | Business content certification Lease contract, lease contract, utility bill |
| Income proof | Proof of copy of income statement and balance sheet for the last two years |
| Tax documents | IT filing, VAT filing, PAN card |
| Securities proof | Evidence of collateral provided with a copy of the certificate of title/certificate provided as collateral |
| Other documents | Project balance sheets, project reports, etc. |
How Can You Apply for MSME Loan?
There are two options for submitting an MSME loan application. If the lender has online capabilities, you can fill out the required information on the form and apply to the website. You can also go to your nearest branch office and request an application form there. You can call in advance to ask for document requirements.
What Are the Collaterals for MSME Loans?
Most lenders in India offer MSME loans that do not require collateral. MSME loans are considered unsecured loans that do not require collateral. However, if the lender needs security, please contact the lender and ask for the security details you need to provide.
Frequently Asked Questions for MSME
1. What is a priority sector loan? Is the MSME sector included?
Lending to the priority sector, a sector that affects most of the population and represents the employment-intensive and vulnerable population, is called the priority sector. Since the MSME sector classifies itself as a priority sector, you can enjoy the benefits of priority sector lending. Some of the other sectors that can benefit from senior loans are the education, housing, agriculture and export sectors
2. Do all banks offer MSME loans?
All private and public sector banks in India have goals set by the Reserve Bank of India (RBI) for lending to the MSE sector. Under these guidelines, domestic planned commercial banks (excluding small and regional banks) and foreign banks with more than 20 branches are off-balance sheets with adjusted net bank borrowings (ANBC) or credit equivalents. 7.5% of the risk is in the micro-enterprise sector.
3.Do MSME borrowers need to have a credit history?
Having a credit rating is not obligatory for MSME borrowers, but it helps in credit pricing that can help them get better interest rates, lower processing fees, etc.
4.Is it possible to get an MSME loan without collateral?
Under RBI regulations, banks must provide MSME loans of up to ₹1 Lakh without accepting collateral. Banks can raise this limit to ₹25 lakh, depending on their financial position and the performance of the MSME unit.
5. What if I don't pay my MSME loan on time?
If the buyer cannot pay the supplier, he will pay the supplier's compound interest from the agreed date or with monthly balance payment of three times the bank interest rate specified by the RBI on the agreed date. I have a duty.
Conclusion
In this article, we have covered all you need to know about MSME Loan Interest Rate in 2022. We have discussed different interest rates provided by the popular and government banks and institutions in the case of MSME loans. Also, we have talked about the registration process, eligibility criteria and documentation needed to avail of the interest rates. Before availing of the loan, carefully read all the schemes and interest rates information.
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