Government Revises Concessional Loan Procedure Allowing Startups to Access Up To Rs 2.5 Million

The government has amended the procedure for interest subsidies on concessional loans, enabling startups to access credit at subsidized interest rates for the first time. Under the revised provision, startups can now borrow up to Rs 2.5 million at concessional rates. The government will provide an interest subsidy for up to five years, while banks and financial institutions are allowed to charge no more than 1.5 percentage points above the base rate on such loans. Of the total interest amount, three percentage points will be borne by the government as a subsidy, according to the updated guidelines. The interest subsidy will be provided only after the borrower pays the entire interest amount, security charges, and insurance premiums to the respective bank.

The revised guidelines specify eligibility criteria for startups seeking concessional loans. The enterprise must be registered as a private firm, partnership, company, or cooperative and should not be older than ten years. Additionally, its annual turnover must not exceed Rs 150 million in any fiscal year after establishment. The business should be a new venture, not a split or continuation of an existing enterprise, and must demonstrate innovative and creative ideas with strong growth potential. However, businesses that are not registered as industries, those involved in importing and distributing goods or services from abroad, entities blacklisted under prevailing laws, and companies registered as holding or investment firms under the Industrial Enterprises Act, 2019, will not be eligible for this loan facility.

Along with the inclusion of startups, the government has also increased loan limits under other concessional loan schemes. The loan ceiling for the Educated Youth Project has been raised from Rs 700,000 to Rs 2 million, while the self-employment loan for returnee migrant workers has been increased from Rs 1 million to Rs 2 million. The maximum loan amount for women entrepreneurship has been raised from Rs 1.5 million to Rs 2.5 million, and the Dalit community enterprise development loan has been increased from Rs 1 million to Rs 2 million. Similarly, up to Rs 500,000 can be borrowed at concessional rates for the construction of private houses for disaster victims.

The revised procedure also outlines repayment and other conditions for concessional loans. Such loans will be installment-based with periodic repayment of principal and interest. Once approved, the loan limit cannot be increased, and only one member of a household will be allowed to obtain such a loan. The concessional loan scheme will remain in effect until mid-July 2030. For the purpose of interest subsidies, banks and financial institutions are required to determine the grace period, installment schedule, and repayment terms based on the loan type, amount, business nature, repayment cycle, and risk level.