Government Business Loan Schemes in India: MSME Loans for a New Business

The main government business loan schemes in India are Mudra loans up to ₹20 lakh, CGTMSE collateral-free cover up to ₹10 crore, PMEGP subsidy of 15% to 35% for new micro units, and the startup guarantee scheme (CGSS) up to ₹20 crore.

The government does not lend directly. You apply to a bank, NBFC or microfinance lender, which lends at its own rate and draws on the scheme’s guarantee or subsidy. For an MSME loan for a new business, Mudra, PMEGP and CGTMSE all accept first-time units. Check the status of each scheme with your lender before you apply, as limits and windows have changed since 2024.

Key facts

RBI’s repo rate is 5.25%, left unchanged at the August 2026 policy, and the next Monetary Policy Committee meeting is on 5–7 October 2026. Most scheme loans are floating and linked to an external benchmark, so a repo change moves your rate. See today’s business loan interest rates.

Who counts as an MSME

Most schemes use the MSME definition under the MSMED Act, 2006, revised from 1 April 2025 by notification S.O. 1364(E). A unit must meet both limits.

Get a free Udyam registration before you apply; lenders ask for it for most MSME loans.

The schemes in detail

Mudra loans (PMMY)

MUDRA is a refinancing body; banks, regional rural banks, small finance banks, cooperative banks, NBFCs and MFIs make the loans. SBI’s scheme page lists four categories:

At SBI, no margin is needed up to ₹50,000 and 20% above that. Repayment runs up to 5 years below ₹5 lakh and up to 7 years for ₹5–10 lakh, moratorium included. MUDRA says it uses no agents or middlemen, so ignore anyone who asks for a fee to “sanction” a loan.

CGTMSE collateral-free cover

The Credit Guarantee Fund Trust for Micro and Small Enterprises guarantees the unsecured part of a loan, up to ₹10 crore. Cover is 85% for micro enterprises on loans up to ₹5 lakh and 90% for women entrepreneurs. SC/ST entrepreneurs, units in aspirational districts and some other groups get 85%, and all others 75%. Units in districts the RBI marks as credit-deficient get 5% more. The annual guarantee fee is 0.37% to 1.20% a year, and the lender may pass it on to you. See CGTMSE collateral-free loans.

PMEGP for a new unit

PMEGP, run by the Ministry of MSME through KVIC, pays a margin-money subsidy on a bank loan for a new micro enterprise. General applicants put in 10% and get 15% (urban) or 25% (rural). Special categories, such as SC, ST, OBC, women and ex-servicemen, put in 5% and get 25% or 35%. Existing units cannot use the first-loan route. The scheme was approved for 2021-22 to 2025-26, so confirm on pmegp.msme.gov.in that new applications are open before you prepare a project report. Our PMEGP guide has worked examples.

Credit Guarantee Scheme for Startups

CGSS covers loans to DPIIT-recognised startups through NCGTC. The guarantee goes to the lender, not to you. Transaction-based cover is 85% of the default amount on loans up to ₹10 crore and 75% above that, with a ceiling of ₹20 crore per borrower.

PM Vishwakarma and PM SVANidhi

PM Vishwakarma lends artisans ₹1 lakh over 18 months after basic training, then ₹2 lakh over 30 months, at a fixed 5%. PM SVANidhi gives street vendors three loans of ₹15,000, ₹25,000 and ₹50,000, with lending extended to 31 March 2030.

Stand-Up India

Launched in April 2016, it helped SC, ST and women borrowers get ₹10 lakh to ₹1 crore for a greenfield enterprise, repayable over 7 years with up to 18 months’ moratorium. The Budget 2025-26 speech announced a new scheme of term loans up to ₹2 crore for 5 lakh first-time women, SC and ST entrepreneurs. Ask your bank whether Stand-Up India loans are being sanctioned now.

How to apply for an MSME loan for a new business

1. Register on the Udyam portal, and get GST registration if your turnover or trade requires it.
2. Prepare a project report with the cost of machinery, working capital, expected sales and repayment plan.
3. Pick the scheme that fits: Mudra for up to ₹20 lakh, PMEGP for subsidy on a new unit, or a CGTMSE-covered loan for larger amounts without collateral.
4. Apply online through JanSamarth (Mudra and PMEGP are listed), the PMEGP portal, or directly at a bank branch.
5. Submit KYC (PAN, Aadhaar), address proof for the business, bank statements, quotations and any caste or category certificate.
6. Pay only the fees the lender lists in writing. At SBI, Mudra Shishu and Kishore loans to micro and small units carry no processing fee.
7. After sanction, keep EMIs on time. Late payments go to credit bureaus, which receive data on the 9th, 16th, 23rd and last day of each month from 1 July 2026.

Work out the instalment first with the business loan EMI calculator.

Frequently asked questions

Which government loan suits a new MSME business?

It depends on the amount and your profile. Mudra suits loans up to ₹20 lakh, PMEGP gives a subsidy on new micro units, and CGTMSE cover lets a lender skip collateral up to ₹10 crore.

What are the government business loan schemes in India?

The main ones are PMMY (Mudra), CGTMSE, PMEGP, CGSS for startups, PM Vishwakarma, PM SVANidhi and Stand-Up India. Banks and NBFCs lend under them.

What MSME loan schemes are available in 2026?

Mudra (up to ₹20 lakh), CGTMSE (up to ₹10 crore), CGSS (up to ₹20 crore) and PM SVANidhi (to March 2030) are running. Check PMEGP and Stand-Up India with your bank: PMEGP’s approved period ended with 2025-26, and Stand-Up India is being revamped.

Can I get a government business loan without collateral?

Yes. Mudra loans need no collateral, and CGTMSE and CGSS guarantees let lenders lend without it. The lender still checks your credit history and plan.

What is the interest rate on government business loans?

The lender sets it, usually linked to the repo-based external benchmark; the repo rate is 5.25%. PM Vishwakarma is the exception, at a fixed 5%.

Does the government give business loans directly?

No. Schemes work through banks, NBFCs and MFIs. Treat any call or letter promising a government loan for an upfront fee as a fraud, and report it on 1930 or cybercrime.gov.in.

Sources

• Pradhan Mantri Mudra Yojana — MUDRA (checked 17 Sep 2026)
• PMMY product features — State Bank of India (checked 17 Sep 2026)
• Mudra limit raised to ₹20 lakh — Press Information Bureau (checked 17 Sep 2026)
• About CGTMSE, extent of guarantee — CGTMSE (checked 17 Sep 2026)
• Annual guarantee fee — CGTMSE (checked 17 Sep 2026)
• Notification S.O. 1364(E), revised MSME definition — Ministry of MSME (checked 17 Sep 2026)
• Revised PMEGP guidelines — Delhi Khadi and Village Industries Board (checked 17 Sep 2026)
• PMEGP continuation 2021-22 to 2025-26 — Press Information Bureau (checked 17 Sep 2026)
• PMEGP portal — Ministry of MSME (checked 17 Sep 2026)
• Credit Guarantee Scheme for Startups — Startup India (checked 17 Sep 2026)
• PM Vishwakarma guidelines — Ministry of MSME (checked 17 Sep 2026)
• PM SVANidhi — Ministry of Housing and Urban Affairs (checked 17 Sep 2026)
• Stand-Up India scheme — Press Information Bureau (checked 17 Sep 2026)
• New loan scheme for first-time women, SC and ST entrepreneurs — Press Information Bureau (checked 17 Sep 2026)
• Monetary policy statement, August 2026 — Reserve Bank of India (checked 17 Sep 2026)
• Credit information reporting on 9th, 16th, 23rd and last day of the month — Reserve Bank of India (checked 17 Sep 2026)
• PMEGP on JanSamarth — Government of India (checked 17 Sep 2026)