Are you a Khadi institution looking for financial support? The Interest Subsidy Eligibility Certificate (ISEC) Scheme might be just what you need. This program helps Khadi producers get loans at lower interest rates, making it easier to grow their businesses and keep traditional crafts alive.
What is the ISEC Scheme?
The Interest Subsidy Eligibility Certificate (ISEC) Scheme is a special program started by the Khadi and Village Industries Commission (KVIC) in 1977. Its main goal is to help Khadi institutions get money from banks at lower costs. This scheme is really important for funding Khadi programs run by these institutions.
How Does It Work?
Under the ISEC Scheme, Khadi institutions can get loans from banks at a very low interest rate of just 4% per year. This money is used as working capital, which means it helps with day-to-day business expenses. The best part? If the bank’s actual interest rate is higher than 4%, the government pays the difference. This makes it much cheaper for Khadi institutions to borrow money.
Why Was the ISEC Scheme Created?
The main reason for starting this scheme was to help Khadi institutions get more money. Often, these institutions don’t have enough funds from regular sources. The ISEC Scheme helps fill this gap by making it easier to get loans from banks.
Who Can Apply for the ISEC Scheme?
Not everyone can apply for this scheme. It’s specifically for:
- Khadi institutions that have a valid Khadi certificate
- Institutions that have approved Khadi programs
- Organizations registered with KVIC or State Khadi and Village Industries Boards (KVIBs)
It’s important to note that this scheme mainly supports the Khadi and polyvastra sector. Some village industry institutions that were using this scheme before March 31, 1995, can still use it, but only for the amount they were borrowing at that time.
Benefits of the ISEC Scheme
The ISEC Scheme offers several advantages to Khadi institutions:
- Low-Interest Loans: Institutions only pay 4% interest on their loans. This is much lower than regular bank rates.
- Government Support: The government pays the difference between the bank’s actual interest rate and the 4% that institutions pay.
- More Working Capital: Institutions can get the money they need to run their day-to-day operations.
- Bridging the Funding Gap: It helps institutions get more money than what’s available from regular budget sources.
- Encourages Bank Lending: By making loans cheaper, it encourages banks to lend more to Khadi institutions.
How to Apply for the ISEC Scheme
If you’re a Khadi institution wanting to use this scheme, here’s what you need to do:
- Get an ISEC certificate from KVIC.
- Take this certificate to a bank and apply for a working capital loan.
- The bank will decide how much working capital to give you.
- After that, the bank will ask for the extra interest (above 4%) to be paid back through KVIC’s main branch.
Challenges and Solutions
While the ISEC Scheme is helpful, it has faced some challenges:
- Not Enough Loans: Sometimes, banks don’t give as much money as Khadi institutions need. To fix this, KVIC is talking to the Reserve Bank of India (RBI) and NABARD to ensure Khadi institutions get enough credit.
- Bank Guidelines: KVIC is asking banks to follow RBI guidelines properly when calculating how much credit Khadi institutions need.
- Credit Ratings: KVIC is encouraging Khadi institutions to get credit ratings from well-known agencies. This can help them get more loans.
- Bank Understanding: KVIC is trying to help banks understand how Khadi units work. This can make banks more willing to lend money.
Other Support for Khadi and Village Industries
While the ISEC Scheme is important, it’s not the only way the government helps Khadi and village industries:
- Prime Minister’s Employment Generation Programme (PMEGP): This program gives subsidies for setting up new small businesses. It helps with both equipment costs and working capital.
- Collateral-Free Credit: Recent RBI guidelines allow for loans up to 10 lakh rupees without collateral. This makes it easier for small businesses to get loans.
- Awareness Programs: KVIC runs programs to teach people about different schemes, including ISEC. They do this during yearly exhibitions at various levels.
Conclusion
The Interest Subsidy Eligibility Certificate (ISEC) Scheme is a vital support system for Khadi institutions in India. By making loans cheaper and easier to get, it helps keep traditional Khadi crafts alive and supports many small businesses. If you’re part of a Khadi institution, the ISEC Scheme could be a great way to get the money you need to grow your business. Remember to check if you’re eligible and follow the application process carefully.
