Ziraat Times Team Report
Srinagar: Jammu & Kashmir Bank has launched the MSME Aghaaz Scheme for small entrepreneurs under the recently-unveiled Mission Yuva. The scheme, which aims to promote “Focus and Sunrise sectors” — including agriculture, tourism, crafts, high-tech farming, healthcare, and IT — offers financial support of up to ₹125 crore, with bank finance capped at 80% of the project cost. The applicant must contribute at least 20% as margin money.
Ziraat Times analyses the eligibility criteria, feasibility for micro and small businesses, particularly in light of the interest rates, the potential profit margins and the requirement of third-party guarantees or collateral for some applicants.
Interest rates applicable
For micro and small enterprises with loans up to ₹15 lakh, the applicable Interest is repo-linked lending rate (RLLR) + 1.5%. With J&K Bank’s current RLLR at 9.15%, the effective interest for this scheme is expected to be around 10.65%.
For loans above ₹15 lakh, the interest depends on borrower’s internal rating (usually ranging from RLLR + 1.5% to 3.5%), which may suggest a higher bracket compared to the micro and small enterprises.
Is there any interest subvention available?
Yes. The interest subvention from the government would be around 6% per annum for five years for approved projects in eligible sectors. However, the subvention has a cap.
₹5 lakh for micro units (investment up to ₹2.5 crore), it is going to be ₹30 lakh for small enterprises and ₹75 lakh for medium enterprises
Effective net interest rate (after subvention):
The effective net interest rate (after subvention) is going to be around 4.65% (for micro units)
Loan repayment terms
The repayment is stated to be in 66 EMIs (5.5 years), including up to 6 months moratorium. Working capital component is subject to annual renewal and any early repayment reduces the subvention eligibility.
Are there any collateral & guarantor requirements?
Despite being a scheme for “new MSMEs,” most loans under this scheme require:
-
Third-party guarantees from persons with sufficient net worth
-
Mortgage of property with at least 75% of loan value
-
Personal guarantees from promoters/directors
-
CGTMSE (Credit Guarantee Fund Trust) cover for micro units (case-by-case)