5 Points To Know About Credit Linked Capital Subsidy Scheme (CLCSS) For MSMEs

Technology plays a crucial role in the prosperity and success of MSMEs. To maintain quality and stay ahead of competitors, manufacturers continuously need to invest in advanced technology (machinery and equipment).

However, despite India's status as the hub of technological innovation, many small-scale industries still use antiquated technology, often due to a lack of capital and funding. This is where the Credit Linked Capital Subsidy Scheme comes into play. This blog introduces CLCSS and how it can help with an MSME loan.

What Is Credit Linked Capital Subsidy Scheme (CLCSS)?

The CLCSS subsidy provides financial and capital aid for small and micro enterprises to upgrade their technology. MSMEs can get a 15% subsidy on high-tech machinery investment under the scheme.

5 Things You Should Know About CLCSS For MSMEs

1. Benefits Of CLCSS

CLCSS for MSMEs helps increase efficiency and decrease production costs, resulting in higher profits and growth. Even micro, small, and medium-sized businesses can compete globally with high-quality products. The growth of rural industries increases employment opportunities and improves living conditions for the majority of the population.

2. Eligibility Criteria For CLCSS

• MSMEs must have a valid UAM number to qualify for the CLCSS subsidy.
• The Ministry of MSMEs has identified 51 sub-sectors under which an enterprise must qualify.
• Rural, semi-urban, and urban MSME units are eligible for the scheme.
• New and existing MSME units are eligible for the scheme.
• Labour-intensive or export-oriented MSME units get preference under CLCSS.
• This scheme does not offer subsidies for fabricated or second-hand machinery.
• The scheme distributes funds through 12 nodal agencies: SIDBI, NABARD, Indian Bank, Andhra Bank, Bank of India, Bank of Baroda, Canara Bank, Corporation Bank, State Bank of Bikaner and Jaipur, State Bank of India, PNB, and Tamil Nadu Industrial Investment Corporation.

The eligible business entities can be any of the following types:
• Sole Proprietary
• Partnership Firm
• Private Limited Company
• Limited Liability Firm

3. Documents Required For CLCSS

Keeping the documentation process straightforward has enabled MSME organizations to receive financial assistance faster. The documents required are:

• Identity proof
• Address proof
• Income Proof
• Business proof
• Recent Photographs
• Deed of Partnership or Memorandum and Articles of Association, as applicable.
• Other KYC documents as required by the lender.

4. Application Process Under CLCSS

CLCSS has placed a system for online applications and tracking since October 1, 2013. MSME applicants must apply for a subsidy directly with the Primary Lending Institutions (PLIs) where they will acquire their MSME business loan. The process includes the following steps:

1. The beneficiary will need to complete an application form, which the Primary Lending Institution will upload to the online portal.
2. After uploading the application, it will be sent to the attached nodal agency which will forward it to the Office of the DC (MSME).
3. When the Office of DC (MSME) has reviewed and verified all the details, they approve the release of credit-linked capital subsidies.
4. Following the above approvals, the nodal agency transfers the money to the beneficiary's PLI.

5. Industry And Product List Covered By CLCSS

The following sectors are eligible for subsidies on their MSME loans:

1. Drugs and Pharmaceuticals
2. Bicycle parts
3. Printing industry
4. Paints and Varnishes
5. Biotech industry

You can visit the official website of the Ministry of MSME for the complete list.

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With IIFL Finance, you can borrow money for your MSME business at an affordable rate with a minimal amount of documentation. Make your business dreams a reality with MSME loans from IIFL Finance. Additionally, you have 24-hour access to assistance with MSME business loan approval and repayment.

Frequently Asked Questions

Q1. When can a commercial producer avail of the CLCSS subsidy?
Ans. PLI will hold the subsidy in Term Deposit Receipts (TDRs) in the account of the concerned MSME for 3 years, and lower the interest rate accordingly. After the installation of the eligible plant and machinery, the MSME must remain in commercial production for at least three years to receive a subsidy under CLCSS. After three years of regular installment payments by the MSME, they will receive the TDR in their account.

Q2. What is the maximum subsidy amount you can get under CLCSS?
Ans. To upgrade their technology with well-established and improved technology as approved by the scheme, eligible MSMEs are provided with a 15 per cent capital subsidy, up to a maximum of Rs 15 lakh.