Interest Subsidy Scheme for Scheduled Caste and Scheduled Tribe Entrepreneurs gives SC/ST business owners low-interest loans for setting up or modernizing micro, small, and service enterprises in Karnataka. The scheme offers loans between ₹20.00 lakhs and ₹1,000.00 lakhs at an effective interest rate of just 4%, with the government covering the remaining interest gap.
Karnataka State Financial Corporation manages this scheme, and the 4% loan facility is still available through the nearest KSFC branch office in 2026. The official KSFC website lists this scheme under its current loan schemes section.
Interest Subsidy Scheme for Scheduled Caste and Scheduled Tribe Entrepreneurs - Introduction
This scheme helps SC/ST entrepreneurs start new micro or small-scale enterprises and also supports expansion, diversification, and modernization of existing service units. The main aim is to reduce the money burden on borrowers by capping the effective interest cost at 4% per annum.
Eligible entrepreneurs can borrow from ₹20.00 lakhs up to ₹1,000.00 lakhs for their business needs. Working capital support is available up to ₹50.00 lakhs. The scheme is made for micro, small, and service enterprises only.
Key Information
| Key Aspect | Details |
|---|---|
| Scheme Name | Interest Subsidy Scheme for Scheduled Caste/Scheduled Tribe Entrepreneurs |
| State | Karnataka |
| Nodal Agency | Karnataka State Financial Corporation |
| Benefit | Interest subsidy for effective 4% rate |
| Loan Range | ₹20.00 lakhs to ₹1,000.00 lakhs |
| Target Audience | SC/ST entrepreneurs |
Benefits
This scheme eases the repayment journey through a dedicated interest subsidy. The government pays the difference between the normal lending rate and the effective 4% rate charged to the borrower.
| Type | Limit |
|---|---|
| Minimum Loan | ₹20.00 lakhs |
| Maximum Loan | ₹1,000.00 lakhs |
| Working Capital Limit | ₹50.00 lakhs |
Interest Rate: The borrower pays an effective interest rate of just 4% per annum. The government covers the remaining interest gap.
Repayment Terms: Loans up to ₹500.00 lakhs can be repaid in 8 years, while loans above ₹500.00 lakhs get up to 10 years. This period includes the moratorium time.
Eligibility
To get this support, the business must meet the following conditions:
- The unit must be fully owned by SC/ST entrepreneurs. Whether it is a proprietary firm, partnership, or private company, all owners must belong to the SC/ST community.
- Mixed ownership where non-SC/ST individuals hold shares is not eligible for this subsidy.
- The business must not be receiving similar interest subsidies from other Karnataka or Central Government schemes.
- The account must be in good standing. If the borrower defaults on KSFC repayments, eligibility for the subsidy is lost.
Example: If Ravi, who belongs to the SC community, starts a small manufacturing unit, he qualifies. However, if he partners with Rahul, who is from the general category, the unit will not qualify for this interest subsidy.
Application Process
Applying for the Scheme
The application is submitted offline at the nearest KSFC branch office. Follow these steps:
STEP 1 - Visit the nearest KSFC branch office during business hours. The Official Application Guide has full details about the scheme.
STEP 2 - Ask for the official application format from the designated desk and fill in all the fields correctly.
STEP 3 - Gather the supporting documents and make sure the application is self-attested where required.
STEP 4 - Submit the completed forms to the branch. Ask for a formal receipt that includes the date of submission and a unique reference number.
Documents
Keep the following documents ready for a smooth application process:
- Recent passport-size photographs.
- Official proof verifying SC/ST status.
- Detailed Bio-Data and a net worth statement.
- A signed affidavit as per the prescribed format.
- Audited financial statements if expanding an existing business.
- Bank account details for the safe deposit of the loan.
- Any additional documents requested by the KSFC officer handling the file.
References
Useful resources for this scheme:
Download Official Guidelines | Visit KSFC Official Website
FAQ's
What is this scheme about?
This is a Karnataka Government scheme that lowers the business loan interest rate to 4% for SC/ST entrepreneurs, managed through the KSFC.
What is the effective interest rate?
The borrower pays an effective interest rate of 4% per annum.
Who can apply?
Any SC/ST entrepreneur who has full ownership of the enterprise can apply.
Can this be used for business expansion?
Yes, the funds can be used for setting up new units or for expansion, diversification, and modernization of existing ones.
What is the loan limit?
Entrepreneurs can apply for funds between ₹20.00 lakhs and ₹1,000.00 lakhs.
What is the repayment timeline?
The repayment period is 8 years for loans up to ₹500.00 lakhs and up to 10 years for loans above that amount.
Will the subsidy be available if other government benefits are taken?
No, this scheme is for entrepreneurs who are not currently receiving interest subsidies from other government sources.
Are there restrictions on the business type?
The scheme is made for Micro, Small, and Service Enterprises.