MSME Interest Subvention Scheme: Eligibility & How to Apply
TL;DR - Summary
- What's the MSME interest subvention scheme? - The MSME Interest Subvention Scheme, launched on January 2, 2026, under the Export Promotion Mission, provides a 2.75% upfront interest subsidy on eligible export loans. This initiative reduces borrowing costs from day one to support the global competitiveness of small Indian businesses.
- How much can exporters save? - Eligible MSMEs shall be entitled to a subvention at a flat rate of 2.75% per annum on pre-shipment and post-shipment rupee export credit, subject to a ceiling of ₹50 lakh per IEC per financial year.
- Who can apply? - MSME manufacturers or merchant exporters having valid and active IEC and Udyam registration and exporting products covered in the positive list of tariff lines of the scheme. Most exporters go through the entire MSME interest subvention scheme eligibility checklist before applying to confirm they are eligible.
- How to apply for the MSME interest subvention scheme? - Apply on the DGFT portal for intent to generate a Unique Identification Number (UIN). Provide the UIN to the lending bank. The bank will provide the discount up front and will clear it with the RBI later.
- Is the MSME interest subvention scheme final? - No. It's running on a pilot basis, and DGFT has already revised it several times in 2026 (expanding coverage to steel in April and clarifying UIN timelines in May), so exporters should keep an eye out for fresh trade notices.
What Is the MSME Interest Subvention Scheme 2026?
The Micro, Small and Medium Enterprises (MSME) Interest Subvention Scheme is a government-backed export credit support scheme that provides cover for 2.75% of the annual interest costs on eligible MSME export loans, so the exporter only pays the bank the balance interest cost from day one. The benefit is built into the loan from the start, with the government paying part of the interest cost up front, rather than exporters paying full market interest rates and waiting for a policy rebate down the track.
The scheme was introduced under the Export Promotion Mission (Niryat Prothsahan) through the Directorate General of Foreign Trade (DGFT) Trade Notice No. 20/2025-26 dated 2 January 2026. It replaced the earlier Interest Equalisation Scheme, which ended in 2024.
It is accompanied by a second, related intervention, collateral support for export credit, launched at the same time to address a different pain point (lack of collateral) faced by small exporters. Both interventions are part of a much bigger effort: the Union Cabinet on November 12, 2025, approved the Export Promotion Mission itself, which has a total outlay of ₹25,060 crore and runs from FY 2025-26 to FY 2030-31. The mission is jointly implemented by the Department of Commerce, the Ministry of MSME and the Ministry of Finance.
Here are the key points:
- Replaces the old IES: The previous Interest Equalisation Scheme (IES) ended on December 31, 2024. The new pilot scheme has its own rules.
- Pilot phase: Implemented as a pilot by the DGFT with ongoing rule updates based on stakeholder feedback.
- Export credit only: Applies specifically to pre- and post-shipment rupee export credit for MSMEs, not general working capital loans.
- Interest-only subsidy: Only the interest portion is subsidised; principal and other loan charges are not covered.
- World Trade Organisation (WTO) compliant: It is rule-based and performance-neutral, complying with global trade norms.
✅ PRO TIP
If you have been following guides written around the old Interest Equalisation Scheme, including any interest subvention scheme for MSME 2020-21 documentation you may still have on file, consider them obsolete. The IES ended in 2024, and the new scheme has changed the eligibility, rates, and application process.
What are the Eligibility Criteria under the MSME Interest Subvention Scheme?
An MSME manufacturer or merchant exporter with a valid active IEC and Udyam registration, exporting a product on the scheme's positive list of tariff lines, is eligible. The conditions are specific, so review them carefully:
You qualify if you:
- Are an MSME Merchant or Manufacturer Exporter: Both categories are included.
- Hold a valid, active IEC: You are not eligible if your Importer Exporter Code is suspended, cancelled, or on the Denied Entity List (DEL).
- Have valid Udyam Registration: This serves as proof of your MSME status. Unregistered or expired businesses are ineligible.
- Export an eligible product: The subvention only applies to products on the scheme's positive list of tariff lines (some categories, like steel, may be added or excluded over time).
Both IEC and Udyam conditions must be met at the same time. Many banks also require a signed affidavit stating you satisfy these conditions and haven't claimed the benefit from multiple lenders, so keep it ready with your certificates.
| Evaluation Criteria | Requirement Status / Specification |
|---|---|
| Exporter Type | MSME Manufacturer Exporter or MSME Merchant Exporter |
| IEC Status | Valid and active; not suspended, cancelled, or on DEL |
| MSME Registration | Valid Udyam registration required |
| Type of Credit | Pre-shipment or post-shipment rupee export credit |
| Product Coverage | Must fall within the scheme's positive list of eligible tariff lines |
What Are the Key Benefits of MSME Interest Subvention Scheme?
Key benefits are lower borrowing costs from day one, better liquidity during the export cycle, more competitive access to finance, and a WTO-consistent design with no performance conditions attached. For a small exporter with stretched working capital, the attraction of this scheme is more than just the headline interest rate cut.
- Lower borrowing costs from day one. The 2.75% relief means the effective interest rate is reduced for the same loan amount. You do not pay market rate and wait for a refund; the bank charges you less immediately.
- Greater liquidity in the most capital-intensive phase. For MSMEs, the gap between procuring raw materials or finished goods and receiving payment from a buyer overseas is often where they feel the pinch the most. This scheme addresses exactly that phase.
- Access to export finance on more favourable and competitive terms. The scheme narrows the cost gap with larger exporters who generally receive better rates due to their scale, enabling MSMEs to compete more fairly in the global market.
- No strings attached to performance. There's no quota to meet, no risk of disqualification if a shipment doesn't go through, and no link to export volume, value, or destination. You either qualify, or you don't; the benefit doesn't waver from transaction to transaction.
- Intended to be WTO-consistent and durable. As non-performance-linked support, it's less subject to international trade disputes, unlike export subsidies tied to shipment volumes or pricing.
- Predictable planning. A flat rate of 2.75% for all eligible MSMEs (no more tiered 2-3% by category as under the old scheme) makes it easier to model financing cost upfront.
How Does the Interest Subvention Scheme Work?
The four parties
MSME exporter
Takes the loan
Lending bank
Discounts upfront, claims later
DGFT
Checks eligibility, issues the UIN
RBI
Reimburses the bank
How the discount flows
Hover over a step to see more.
MSME applies for export credit
10% quotedApproach your bank for pre or post-shipment rupee export credit.
The bank first quotes its normal market rate, say 10% per annum.
Register the loan on the DGFT portal
File your intent and generate a UIN, which the bank uses to certify eligibility.
From FY 2026-27, the UIN must be generated within 15 days of disbursal, so do not sit on this step.
Bank applies the discount upfront
7.25% effectiveOnce the UIN is validated, 2.75% comes off your rate instantly.
You then pay interest at the lower rate, 7.25% on a 10% loan, not the original.
Bank claims reimbursement from the RBI
The bank recovers the waived 2.75% from the RBI, not from you.
It bundles all subvention accounts into one claim, which the RBI certifies and repays from government funds.
The scheme works as a four-party process: the bank offers a discounted rate upfront and later claims the interest it waived from the RBI. The four parties involved are the MSME borrower, the lending bank, DGFT (which manages eligibility and issues the UIN), and the RBI (which reimburses the bank) as per the applicable interest subvention scheme RBI circular.
Step 1: MSME applies for export credit. You approach your commercial bank for pre-shipment or post-shipment rupee export credit. The bank first quotes its normal market rate, say 10% per annum.
Step 2: Register the loan on the DGFT portal. Once the loan is disbursed, you log in to the DGFT portal and file an intent to avail the subvention. A Unique Identification Number (UIN) is generated from the DGFT portal, and the bank uses this UIN to certify your eligibility.
Timing note: DGFT says the subvention will be applicable only if the UIN is generated within 15 days of the loan disbursal (from FY 2026-27). DGFT made this easier specifically for FY 2025-26 (the transition year for the scheme) through a clarification in May 2026, under which UINs created up to 31 May 2026 can still be counted from the original disbursal date, in view of delays in banks' onboarding. The rule going forward, though, is the 15-day clock, so don't sit on this step.
Step 3: The bank applies the discount rate in advance. Once the UIN is validated by your bank, you get an instant reduction of 2.75% from your effective interest rate. So if your normal rate is 10%, your effective rate becomes 7.25%. You then pay EMIs or interest at this lower rate thereafter, not the original one.
Step 4: The bank claims reimbursement from the RBI. Your bank isn't going to add that 2.75% on top of its own margin; it aggregates all the subvention accounts and submits one claim to the RBI, which certifies and repays the bank from government funds as per the prevailing interest subvention scheme RBI circular for the relevant financial year.
💡 QUICK INSIGHT
The subvention is really a reimbursement mechanism: the government pays your bank for the interest it gave up, and the bank passes that saving on to you upfront by charging you less.
How To Apply for the MSME Interest Subvention Scheme 2026?
The process involves checking eligibility, taking export credit at a bank as usual, and then registering the loan on the DGFT portal to generate a UIN and sharing it with the bank. The entire process is digital and runs parallel to the normal loan application; there is no separate subsidy paperwork to chase at a government office.
- Check if you're eligible. Ensure your IEC is active (not suspended or DEL-listed) and your Udyam registration is active. Your product should also be covered under the eligible tariff lines of the scheme, and your bank should be part of the scheme.
- Apply to your commercial bank as you would for rupee export credit (pre-shipment or post-shipment). The bank will price the loan initially at its market rate.
- Log in to the DGFT portal (Services → Export Promotion Mission (EPM) → Apply for EPM Schemes → Start Fresh Application) and apply for interest subvention. This is how you obtain your UIN; do this within 15 days of disbursal.
Export Promotion Mission- Send the UIN to your borrowing bank. If approved, the bank gives you the 2.75% discount and your effective interest rate is lowered from then on. Some lenders will also ask for an MSME interest subvention scheme affidavit, duly executed, before releasing the discounted rate.
- The rest is up to the bank. The bank is responsible for downstream reimbursement claims with the RBI. Once your UIN is submitted and verified, you have nothing more to do.
MSME Interest Subvention Scheme vs Interest Equalisation Scheme: Key Differences
The MSME Interest Subvention Scheme is not a rebrand but a structurally different scheme. Both schemes share the broad purpose of lowering the cost of export credit, but this scheme differs in rate structure, caps, product coverage and policy integration from the old Interest Equalisation Scheme (IES), the scheme many exporters still know from the interest subvention scheme for exporters 2020-21 period.
| Feature / Parameter | MSME Interest Subvention Scheme (2026) | Interest Equalisation Scheme (IES) |
|---|---|---|
| Current Status | Active, pilot framework under the Export Promotion Mission | Formally ended December 31, 2024 |
| Subvention Rate | Flat 2.75% per annum for all eligible MSMEs | Tiered: 2% or 3% depending on exporter/product category |
| Annual Financial Cap | ₹50 lakh per IEC per financial year | No consistent cap through most of its life; restrictions added late |
| Product Eligibility | Positive list of eligible HS tariff lines (expanding) | Broader sectoral coverage, no single positive list model |
| Policy Integration | Part of the long-term Export Promotion Mission (FY26-FY31) | Operated via periodic, ad-hoc extensions |
| Credit Formats Covered | Pre- and post-shipment rupee export credit | Pre- and post-shipment rupee export credit |
Practical implication: If you were eligible under the older interest subvention scheme for MSME 2020-21 framework, this is not an automatic carryover. You will have to re-register under the new scheme on the DGFT portal and separately confirm that your product is covered by the current positive list of tariff lines.
How Does Skydo Help Indian Exporters Receive International Payments?
Skydo helps Indian MSME exporters receive international payments at flat and transparent fees and provides FIRA and eBRC support required for DGFT compliance. Capping interest costs with the subvention scheme is only half the battle for protecting export margins; the other half is ensuring the foreign buyer's payment reaches the exporter's account without silent deductions eating up the money just saved on financing.
Forex markups and correspondent bank charges on traditional banking channels and platforms like PayPal can consume as much as 8% of the value of a payment, easily wiping out the benefit of a 2.75% interest subsidy on a modest loan.
Skydo is built for Indian MSME exporters getting paid by international clients. It provides:
- Transparent pricing: ₹19 flat for payments below $2,000, ₹29 flat for payments between $2,000-$10,000, and 0.3% for anything above $10,000. No monthly fees; exporters only pay when they transact.
- Free virtual accounts: Collect in USD, EUR, GBP, SGD, AUD and CAD so buyers can pay into a local account in their own currency, avoiding SWIFT delays and correspondent bank cuts.
- Automatic FIRC generation: Each transaction generates the FIRC required for compliance, eBRC filing and DGFT paperwork, issued without manual follow-up.
- eBRC closure assistance: Link your DGFT account once, bulk upload shipping bills, auto-map IRMs, and generate eBRC in a click, especially useful for exporters already maintaining DGFT registrations for the interest subvention scheme.
- Fast settlement: Funds typically arrive within one business day, making the working capital cycle predictable.
What is the MSME interest subvention scheme in 2026?
This is an export credit support program launched under the Export Promotion Mission – Niryat Prothsahan through DGFT Trade Notice No. 20/2025-26, dated January 2, 2026, replacing the Interest Equalisation Scheme, which was discontinued in 2024. It provides eligible MSME exporters with a 2.75% per annum interest relief on qualifying pre-shipment and post-shipment rupee export credit. The scheme is being run on a pilot basis and applies only to export credit, not to general MSME business loans.
What is interest subvention for MSME exporters?
Who is eligible for interest subvention under this scheme?
What does 2.75% interest subvention actually mean in rupees?
How does the new scheme differ from the old Interest Equalisation Scheme?
Does interest subvention mean the government pays my EMI?
What is the ₹50 lakh cap and how does it work?
What happens if I miss the 15-day DGFT registration window?
