J&K Bank’s MSME Aghaaz Scheme launched: Ziraat Times explains Rs 125 cr cap, eligibility, benefits, interest rate, collateral conditions

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)

Financial analysts argue that this could make the scheme inaccessible for many first-time entrepreneurs, especially in rural or low-income backgrounds who may fail to get eligible guarantors.

Is the Scheme financially viable?

Using a hypothetical case of a ₹15 lakh micro enterprise, assuming a net profit margin: 10% (₹1.5 lakh annually), annual interest (gross): ₹1.59 lakh, subvention (up to 6%): ₹90,000, net interest burden: ₹69,000, the remaining profit after interest works out to ₹81,000 (~₹6,750/month).

This slim profit, out of which loan principal, operations and living expenses must be covered may make survival difficult for some enterprises, especially in the early years for new enterprises. Moreover, experts believe that if subvention is delayed or interest rate rises (since it’s floating), the situation could worsen, potentially driving borrowers into default.

However, in case enterprises are able to generate more profit and have a stable income stream, they could be more viable.

Experts Ziraat Times spoke to believe that while the intent of the MSME Aghaaz Scheme is commendable, its current financial structure appears tilted more in favour of medium-sized enterprises. The requirement for guarantors or property, double-digit interest rates and short repayment window make it less suitable for grassroots or rural entrepreneurs starting from scratch.