MSMEs in India have access to a wide range of government-backed loans, credit
guarantee schemes and subsidies in Tax Year 2026-27. This guide covers
MUDRA loans, CGTMSE collateral-free guarantees, PMEGP subsidy, Stand-Up India,
SIDBI SMILE loans, PSB loans in 59 minutes and Andhra Pradesh-specific schemes
— with eligibility, collateral requirements and how to apply.

Why Government Loan Schemes Matter for MSMEs

Access to affordable credit is one of the biggest challenges for Micro, Small and Medium Enterprises in India. Commercial banks often require extensive collateral, making it difficult for early-stage businesses to borrow. The Government of India, through several ministries and financial institutions, has created dedicated schemes to bridge this gap.

Before applying for any government scheme, ensure your business is registered as an MSME by completing Udyam Registration at udyamregistration.gov.in . Udyam Registration is free, instant and mandatory for all government MSME schemes.

Related: Financial Planning Essentials for MSMEs — Tax Year 2026-27

1. MUDRA Loans — PM Mudra Yojana (PMMY)

Pradhan Mantri MUDRA Yojana is the most widely used government scheme for micro businesses. MUDRA (Micro Units Development and Refinance Agency) does not lend directly — it refinances banks, NBFCs and MFIs, which in turn lend to borrowers.

Loan Categories (Updated — Budget 2024-25)

*Tarun Plus was introduced in the Union Budget 2024-25 for borrowers who have fully repaid previous Tarun loans.*

Key Features

1. No processing fee for Shishu and Kishore loans at most PSBs
2. Interest rate linked to the lender’s MCLR/repo — typically 9–12% p.a.
3. Repayment tenure: up to 5 years
4. MUDRA Card (Rupay debit card-linked credit facility) available for working capital needs
5. Available at all public sector banks, private banks, RRBs, MFIs and NBFCs

How to Apply

1. Online: Apply through any bank’s net banking portal or through the MUDRA portal at [mudra.org.in](https://www.mudra.org.in)
2. Offline: Visit the nearest branch of SBI, Bank of Baroda, Andhra Bank (now Union Bank of India), or any public sector bank
3. Documents: Udyam Registration certificate, Aadhaar, PAN, bank statement (6 months), business address proof, photographs

2. CGTMSE — Collateral-Free Guarantee for MSME Loans

The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) is operated jointly by SIDBI and the Ministry of MSME . It guarantees loans extended by member lending institutions (MLIs) to MSMEs without collateral .

Key Parameters (as of Tax Year 2026-27)

How It Works

The borrower applies to a Member Lending Institution (MLI) — any public sector bank, private bank or NBFC registered with CGTMSE. The bank extends the loan without collateral, and CGTMSE provides a guarantee. If the borrower defaults, CGTMSE reimburses the bank up to the guaranteed percentage.

The guarantee fee is borne by the borrower as part of the loan cost (either paid upfront or included in EMI).

How to Avail CGTMSE Guarantee

1. Identify a CGTMSE Member Lending Institution: [cgtmse.in/MLI_Search](https://www.cgtmse.in)
2. Apply for a term loan or working capital loan
3. The bank files for CGTMSE guarantee — the borrower need not separately apply to CGTMSE
4. Loan is disbursed without collateral

3. PMEGP — Prime Minister’s Employment Generation Programme

PMEGP is a subsidy-linked scheme administered by the Khadi and Village Industries Commission (KVIC) through state agencies, banks and district offices. It supports new enterprises only — not expansions of existing businesses.

Subsidy Structure (Tax Year 2026-27)

The subsidy is the “margin money” — i.e., the portion of the project cost contributed by PMEGP (not the promoter or the bank loan). The bank finances the remaining portion.

Eligibility

1. Individual above 18 years of age
2. No income ceiling
3. 8th Standard pass for projects above ₹10 lakh in manufacturing; above ₹5 lakh in service
4. New enterprise only — business must not exist prior to application
5. One person can get assistance under only one scheme

How to Apply

1. Visit [kviconline.gov.in/pmegpeportal](https://www.kviconline.gov.in/pmegpeportal)
2. Register online, fill in project details
3. Application routed to KVIC/KVIB/DIC
4. Interview and selection by a Task Force Committee
5. Bank sanction and disbursal
6. Subsidy is locked in a Term Deposit Receipts (TDR) for 3 years; released after satisfactory business operation

4. Stand-Up India Scheme

This scheme targets SC/ST entrepreneurs and women who want to set up a greenfield (first-time) enterprise in manufacturing, services or the trading sector.

Key Parameters

Each bank branch is expected to facilitate at least one loan per SC/ST borrower and one per woman borrower under this scheme.

5. SIDBI Loan Schemes

Small Industries Development Bank of India (SIDBI) is the principal financial institution for MSME credit in India. It offers both direct and indirect lending.

SMILE — SIDBI Make in India Loan for Enterprises

SIDBI Refinance

SIDBI refinances commercial banks and NBFCs to lend to MSMEs. If you are borrowing from a bank at MSME rates, your bank may itself be drawing funds from SIDBI — ensuring lower interest cost is passed through.

6. PSB Loans in 59 Minutes

Launched by the Department of Financial Services, this digital platform provides in-principle loan approval within 59 minutes for MSME loan applications up to ₹5 crore, without visiting a bank branch.

After in-principle approval, the borrower visits the bank for documentation and final sanction. The actual disbursal takes 7–14 days.

7. CLCSS — Credit Linked Capital Subsidy Scheme

CLCSS helps existing micro and small enterprises upgrade their technology and plant/machinery.

8. NSIC Schemes — National Small Industries Corporation

NSIC provides non-financial and financial support to MSMEs:

Website: nsic.co.in

9. Andhra Pradesh State Schemes

APSSFC — Andhra Pradesh State Financial Corporation

APSSFC provides term loans to MSMEs in Andhra Pradesh, especially for: Industrial infrastructure (sheds, machinery, equipment) Loans up to ₹1 crore for small industries; up to ₹5 crore for medium industries Collateral: hypothecation of assets; mortgage may be required above ₹25 lakh

APIIC / APSSIDC — Industrial Plots and Sheds

The Andhra Pradesh Industrial Infrastructure Corporation (APIIC) provides developed industrial plots in industrial estates. APSSIDC (Small-Scale Industrial Development Corporation) provides shed facilities on hire-purchase or outright sale.

AP MSME Development Corporation

Provides working capital, equipment finance and marketing assistance to AP-based MSMEs. The AP Government’s Industrial Development Policy periodically offers: 25% capital investment subsidy (for specific zones/districts) Power tariff concessions for new MSME units Interest subvention on term loans for first 5 years

Quick Comparison of Key Schemes

Step-by-Step: How to Get a Collateral-Free MSME Loan in Tax Year 2026-27

1. Obtain Udyam Registration — [udyamregistration.gov.in](https://udyamregistration.gov.in) (free, instant)
2. Choose the right scheme — startup with low investment? Go MUDRA. New unit with machinery? Go PMEGP. Growth capital? Use CGTMSE route through a bank.
3. Prepare documents:
   – Udyam Registration certificate
   – Aadhaar and PAN of promoter
   – Last 2–3 years ITR and financial statements (for existing businesses)
   – GST registration and returns
   – Bank statement (12 months)
   – Project report for new units
   – Quotations for machinery/equipment
4. Apply through a bank — visit your nearest public sector bank branch or use PSB Loans in 59 Minutes portal
5. Mention CGTMSE — explicitly ask the bank to route the loan under CGTMSE guarantee if you lack collateral

The information provided on this website is for general guidance and informational purposes only
and does not constitute professional accounting, tax, or legal advice. For expert guidance tailored to
your specific financial situation, please consult Thammana & Associates, Chartered Accountants.