Top 5 Government MSME Loan Schemes in India 2025

Micro, Small, and Medium Enterprises (MSMEs) are the backbone of the Indian economy. They not only create employment for 20.51 crore individuals but also add 30% to the country’s GDP. This is why the Indian government supports these businesses with many MSME loan schemes.

These MSME loan schemes aim to empower entrepreneurship and fuel business growth. These businesses also face access to business financing, which the schemes provide with ease. Explore the top 5 MSME loan schemes in India, their interest rates, eligibility criteria, and benefits.

What is MSME Loan Scheme?

An MSME loan scheme is a type of business loan that the government of India backs to promote businesses to have easy access to business financing. Unlike traditional business loans, the government offers these loans specifically to MSMEs to help them grow and expand their business.

As of March 2025, there are over 6.2 crore Micro, Small and Medium Enterprises (MSMEs) in India. While business loans have become popular, traditional finance has also grown more difficult to use. The stringent eligibility criteria and high interest rates make it challenging for businesses to get a business loan, let alone repay it.

MSME loan schemes help small business owners and entrepreneurs meet their business requirements without burdening their cash flow. In return, it helps fuel the future of India’s economy. Banks, non-banking financial companies (NBFCs), and government agencies offer loans to MSMEs. These institutions offer loans at reasonable interest rates with limited to no collateral.

Classification of the MSME Sector

The Government of India announced significant revisions in the MSME clarification criteria in the Union Budget 2025. They have increased the investment limits by 2.5 times and doubled the turnover limits.

Eligibility Criteria for MSME Loans

You can apply for a secured or unsecured business loan based on your loan amount, repayment period, and interest rate. While the MSME loan scheme eligibility criteria vary from scheme to scheme, here are the basic requirements you must meet in order to apply for an MSME loan:

We advise you to maintain a good credit score of 700+ to improve your chances of MSME loan scheme approval. However, there are many partners associated with these schemes that also accept a credit score of 650. A good repayment history with no previous loan defaults is another thing that helps you get a business loan successfully.

Essential Documents Required for MSME Loan Scheme 2025

Below is a list of documents required for availing of MSME loans:

Personal KYC (Know Your Customer) Documents

• Driver’s License
• Rent Agreement
• Passport
• Voter ID
• Aadhar Card
• Ration Card

Banking Details

• Bank account number
• Bank account statements

Business KYC Documents

• Shop or Establishment Certificate
• GST registration certificate
• Udyam registration

Financial Documents

• Audited Balance Sheet
• GST Returns (Last Six Months)
• Income Tax Returns (ITR) for the Last Two Years

Top MSME Loan Scheme 2025

Here are all the MSME loan schemes available to you in India:

1. Pradhan Mantri MUDRA Yojana (PMMY)

The Government of India launched the PMMY scheme to provide Mudra loans of up to ₹20 lakh. The scheme initially provided only ₹10 lakh but later increased it to ₹20 lakh. The scheme offers MSME loans to non-corporate and non-farm MSMEs under the PMMY.

The government partners with commercial banks, small finance banks, MFIs, and NBFCs to provide these loans. You can also apply online via the JanSamarth site. Lenders provide Mudra loans under three categories:

Lenders provide these loans to only income-generating SMEs involved in the trading, manufacturing, and service sectors. Banks, NBFCs, and other financial intermediaries provide these loans to assist SMEs in helping them grow and develop their businesses. 

2. MSME Business Loan for Startups in 59 Minutes

The government launched an initiative to provide loans to startups under 59 minutes. The aim of MSME loan in 59 minutes is to provide quick and hassle-free business financing to all the Micro, Small, and Medium Enterprises. The consortium of Public Sector Banks will help small business owners get loans of up to ₹5 crore in 59 minutes.

ICICI Bank, SBI Bank, Kotak Bank, Bank of Baroda, Canara Bank, Yes Bank, and IndusInd Bank are currently offering MSME Business Loans for Startups in 59 minutes. The government is helping small enterprises get loans quickly to fulfil their business objective. They have increased credit levels and provide flexible repayment options.

3. Credit Guarantee Scheme for Startups (CGSS)

The CGSS scheme offers a credit guarantee to all startups. This applies to loans issued by Member Institutions of the scheme. To qualify for the scheme, startups must register with DPIIT (Department of Promotion of Industry and Internal Trade). The scheme offers collateral-free debt funding of up to ₹10 crore.

To avail of the CGSS benefits, startups must approach Member Institutions like banks to obtain the required credit facility. CGSS offers collateral-free funding to help startups source funds for their growth and development. These loans are used to meet various short-term and long-term requirements.

4. Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE)

The government of India launched the CGTMSE scheme in 2000 in collaboration with the Small Industries Development Bank of India (SIDBI). The scheme offers loans to Micro and Small Enterprises without the need for collateral or third-party guarantee. With a revised limit, businesses under the CGTMSE scheme can avail credit guarantee of up to ₹5 crore.

Small enterprises contribute 42% to India’s exports and 40% to industrial production. The government launched the CGTMSE scheme to help small enterprises bridge the gap between availing credit-free loans and increasing their access to sources of funding. The increased fund availability helps businesses borrow loans of up to ₹5 crore and meet the demands of working capital, technology, and infrastructure.

5. Prime Minister’s Employment Generation Programme (PMEGP)

The Ministry of Micro, Small, and Medium Enterprises (MSME) manages the PRMEGP. It is a credit-linked subsidy implemented by the Khadi and Village Industry Commission (KVIC). KVIC ensures its implementation at the state and grassroots levels.

This MSME loan scheme aims to generate non-agricultural micro-business opportunities for youths across the nation. The government expects PMEGP to generate over 40 lakh employment opportunities. The scheme seeks to support unemployed youth and traditional artisans by creating sustainable employment avenues and increasing their earning capacity in rural and urban areas.

6. Startup India Scheme

The Startup India Scheme aims to provide loans to Scheduled Caste (SC), Scheduled Tribe (ST), and women borrowers. You can avail of a business loan to set up enterprises in the fields of manufacturing, trading, and agricultural services. The scheme offers loan amounts of up to ₹1 crore.

The Startup India Scheme has shown to be successful for business. In seven years, it has sanctioned over ₹40,700 crore to more than 1.8 lakh accounts. The applicant, however, must be at least 18 years of age.

The scheme offers hassle-free credit to aspiring entrepreneurs from the less catered segment of the business community. It is now helping create more jobs, add more to the GDP and empower the spirit of entrepreneurship.

7. Agriculture Infrastructure Fund (AIF)

The AIF scheme aims to improve the productivity and efficiency of the agricultural sector. It helps farms to sell on their own terms and facilitates modern packaging and cold storage systems to increase private investments.

With the implementation of AIF schemes, many individuals and entities engaged in agricultural activities can apply for the loan. These include agri-entrepreneurs, farmers, self-help groups, farmer producer organisations, the National Federation of Cooperatives, primary agriculture credit societies, and many more.

Top Lenders that Provide MSME Loan 2025

Private banks, public banks, digital lenders, and NBFCs all partner with the government of India to provide MSME loans. These lenders also offer MSME business financing of their own with varying interest rates. Here are the top lenders in India that provide MSME loans:

How To Apply for MSME Loan Schemes?

Follow these steps to apply for MSME loan schemes:

1. Visit Lender’s Website: Visit the website of the bank/lender/financial institution. Search for the MSME loan scheme and click Apply.
2. Confirm Business Loan Eligibility: Ensure that you are eligible for the MSME loan scheme by considering your business’s turnover, vintage, credit score and more.
3. Fill out the Scheme Application Form: You can apply for the MSME loan scheme online and offline. Fill out the business loan application form with the correct details.
4. Submit Essential Documents: With the application form, you must submit documents like personal KYC, identification, business KYC, bank details and business registration.
5. Verification: The business loan representatives will call you (the applicant) to verify the loan requirements.
6. Loan Approval: Upon verification of the documents, the lender will approve the business loan and send you confirmation.
7. Sign the Loan Agreement: You will receive a loan agreement from the lender. Once the applicant signs the agreement, the lender usually credits the loan amount to the applicant’s account within 48 hours.

Conclusion

Understanding MSME loans is crucial for business owners who are seeking growth and stability. The right understanding will help you identify the right loan for your business needs. Whether you want to expand your business or meet your working capital needs, these MSME loan schemes help you meet all your business objectives.

At FlexiLoans, we understand the challenges you face while running an MSME. This is why we offer collateral-free MSME loans with flexible repayment options and low interest rates. You can also apply for ₹50 lakh amount, which is sufficient for both short-term and long-term objectives.

FAQs about MSME Loan Scheme