Glimpse of Interest Subsidy Eligibility Certificate (ISEC)

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The Interest Subsidy Eligibility Certificate (ISEC) Scheme is an important mechanism of funding khadi programme undertaken by khadi institutions. It was introduced to mobilise funds from banking institutions for filling the gap between the actual fund requirements and availability of funds from budgetary sources. Khadi and Village Industries Commission initiated Interest Subsidy Eligibility Certificate (ISEC) in 1977-78 to improve the mechanism of funding. Further, it aims to bridge the gap between the fund requirement and availability (monetary source) by bank fund mobilization. Thus, the Khadi and Village Industries Commission (KVIC) initiative assists to attain the working capital at a subsidized rate.

Features & Benefits of ISEC

The features and benefits of the programme are as follows:

  • Concessional rate of interest of 4% per annum for the working capital is provided to institutions.
  • The difference between the 4% and the actual lending rate is paid to the lending banks by the Central Government through the Khadi and Village Industries Commission (KVIC).
  • A unified scheme to promote seamless release of the interest subsidy to the institutions has been approved by the government for khadi and polyvastra.

Role of KVIC in the Interest Subsidy Eligibility Certificate Scheme 

KVIC has to procure finance from RBI and also, NABARD to fulfill the capital requirements of the Khadi institutions. Further, implement an appropriate campaign that aids the cause. Additionally, encourage credit rating that will aid in the improvement of the institution.

Interest subsidy eligibility certificate(ISEC)

Structure of ISEC scheme 

KVIC monitors the entire ISEC scheme. Further, KVIC’s state and Divisional directors will monitor the bank officers to ensure the proper transaction. Additionally, KVIC requests this scheme to be a common agenda in the State Level Bankers Committee (SLBC).

Eligibility 

Acknowledging that the ISEC scheme aims to benefit the Khadi institutions, all institutions are eligible. However, with a certain specification, such as:

  • Must possess a Khadi certificate
  • Further, enrollment under KVIC
  • Besides, the co-operative societies, if they are under the co-operative societies
  • Additionally, charitable or religious trusts that assist people are eligible

Financial Assistance

As cited earlier, the beneficiary avails a financial aid by the KVIC (from central government), if and when the interest rate exceeds 4%. Thus, the applicant has to pay only 4% while the rest is taken care of. Further, a concession is offered to these interest rates attained by the applicant.  

Applying to avail the Benefits ISEC Scheme 

Initially, the Khadi institution will apply for financial assistance from financial banks. However, the application is sided by the KVIC issued ISEC certificate. Following that, is the sanctioning of the capital. Further, depending on the capital, the bank will apply for reimbursement from respective nodal agencies. Nonetheless, the bank can claim for compensation only if the interest rate is over 4%.

ISEC Registration Process

Khadi institutions have to apply for working capital to the financing bank. They have to apply with the ISEC certificate that is issued by the KVIC. The financing bank will then raise the claim for reimbursement to the nodal bank based on the working capital that is sanctioned. The reimbursement is for the differential interest rate that is over and above the 4%. For detailed process and guidelines and certificate form click here: http://www.kvic.org.in/kvicres/update/circulars/ISEC%20Guideline.pdf.

Takeaway

Interest Subsidy Eligibility Certificate aims to improve the mechanism of funding. Further, it aims to bridge the gap between the fund requirement and availability (monetary source) by bank fund mobilization. Thus, the Khadi and Village Industries Commission (KVIC) initiative assists to attain the working capital at a subsidized rate.

For more information, contact Legal Window.

CA Pulkit Goyal, is a fellow member of the Institute of Chartered Accountants of India (ICAI) having 10 years of experience in the profession of Chartered Accountancy and thorough understanding of the corporate as well as non-corporate entities taxation system. His core area of practice is foreign company taxation which has given him an edge in analytical thinking & executing assignments with a unique perspective. He has worked as a consultant with professionally managed corporates. He has experience of writing in different areas and keep at pace with the latest changes and analyze the different implications of various provisions of the act.

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