Interest Subsidy Eligibility Certificate - ISEC Scheme gives registered Khadi institutions easy access to working capital by cutting the interest burden on their bank loans. Under this scheme, an eligible institution pays only 4% interest per annum, and the Central Government covers the difference above that rate through the Khadi and Village Industries Commission (KVIC).
This is a central government scheme run by the Ministry of Micro, Small and Medium Enterprises. It stays open for Khadi and Polyvastra institutions that hold a valid Khadi certificate and are registered with KVIC or their State Khadi and Village Industries Boards (KVIBs). Institutions can apply for working capital through their financing bank using the ISEC certificate.
Interest Subsidy Eligibility Certificate - ISEC Scheme - Introduction
ISEC Scheme works as a financial bridge for Khadi and Polyvastra institutions. It helps these organizations get the working capital they need by pulling funds from banks. The scheme fills the gap between the actual money an institution requires and the funds available from the budget.
Under this arrangement, KVIC covers the difference between the bank's lending rate and the concessional rate of 4% per annum. This keeps financing affordable for institutions that work to promote the traditional Khadi sector. The scheme was first introduced by KVIC in May 1977 and continues to support the sector in 2026-27.
Key Information
| Detail | Information |
|---|---|
| Scheme Name | Interest Subsidy Eligibility Certificate - ISEC Scheme |
| Level | Central |
| Target Sector | Khadi and Polyvastra |
| States Covered | All States of India |
| Nodal Ministry | Ministry of Micro, Small and Medium Enterprises |
| Nodal Agency | Khadi and Village Industries Commission (KVIC) |
| Concessional Interest Rate | 4% per annum |
| Primary Objective | Low-cost working capital for Khadi institutions |
| Official Website | kvic.gov.in |
Benefits
This scheme offers real financial relief to Khadi institutions. The main benefits are listed below.
- Affordable Credit: Institutions get working capital at a concessional interest rate of only 4% per annum, which keeps their borrowing cost low.
- Financial Stability: A lower interest burden lets institutions focus on production and on creating jobs in the Khadi sector.
- Smooth Operations: By covering the gap between fund needs and available resources, the scheme keeps day-to-day operations running without money problems.
- Stronger Reach: Supported institutions can manage their finances better and expand their work across more areas.
Eligibility
To get the benefit of this scheme, an institution must meet the following conditions.
- The institution must hold a valid Khadi certificate and have an approved, active Khadi programme.
- The organization must be registered with KVIC or the State Khadi and Village Industries Boards (KVIBs).
- Co-operative societies registered under the Co-operative Societies Act can also apply.
- Trusts created for public, charitable or religious purposes are eligible as well.
- The scheme is available only for units working in the Khadi and Polyvastra sector.
Application Process
Here is how an institution can get the financial benefit under this scheme.
STEP 1 - Get the official ISEC certificate issued by KVIC. For institutions registered with a State Board, the certificate is issued by the State Khadi and Village Industries Board and signed by its CEO, Secretary, Executive Officer or Administrator.
STEP 2 - Submit a formal application for working capital to the financing bank, along with the valid ISEC certificate. The bank takes the final decision on whether to approve the loan.
STEP 3 - Once the bank sanctions the working capital, the financing bank raises a reimbursement claim for the interest above 4% with the nodal branch. The claim is based on the lower of the loan amount in the ISEC certificate or the actual funds used.
Documents
Keep the following documents ready before you start the application process.
- Valid Khadi Certificate issued by KVIC or the State KVIB.
- Bank Account Statements of the institution, properly maintained.
- Sanction letter or related documents for the Khadi programme.
- Registration documents that confirm the institution's status.
References
For official guidelines and updates, visit the Khadi and Village Industries Commission website.
FAQ's
What is the primary purpose of ISEC Scheme?
The scheme provides working capital to Khadi and Polyvastra institutions at a subsidized interest rate of 4% to support the Khadi industry.
Who manages the interest subsidy payout?
The financing bank provides the capital, and the Central Government pays the difference between the actual lending rate and 4% through KVIC.
Are commercial institutions eligible for this scheme?
No, the scheme is made for registered Khadi and Polyvastra institutions that hold valid certificates from KVIC or KVIBs. Co-operative societies and charitable or religious trusts are also covered.
How is the interest subsidy calculated?
The government pays the difference between the bank's normal lending rate and the fixed concessional rate of 4% per annum.
Can an institution apply if it is not registered with KVIB?
Registration with KVIC or a State Khadi and Village Industries Board (KVIB) is required. Institutions registered with KVIC can also get the certificate.
Where can I find more details about the status of the institutional ISEC?
You can contact your nearest KVIC office or the financing bank branch that processed your working capital application.