The Credit Linked Capital Subsidy Scheme (CLCSS) is an initiative that was launched by the Ministry of Micro, Small and Medium Enterprises in India. It offered a subsidy for eligible businesses in the MSME category, to facilitate quicker and better technological upgradation in the qualifying entities.
The scheme was in effect from 01.04.2017 till 31.03.2020, or till the sanctions of the aggregate capital subsidy disbursed under this initiative reached ₹2,360 Crore, whichever was earlier.
Under the Credit Linked Capital Subsidy Scheme for technology upgradation, eligible businesses could get the advantage of a capital subsidy from the government. This subsidy was expected to make it easier for small and medium enterprises to invest in technology and machinery required to scale up their business operations.
To qualify for this MSME capital subsidy, enterprises had to meet certain eligibility criteria, as outlined in the following section.
The eligibility criteria specified under the Credit Linked Capital Subsidy Scheme (CLCSS) were fairly relaxed. Check out the key eligibility norms, as given below.
The CLCSS subsidy was offered to both existing as well as new enterprises that have an MSE status.
Sole proprietorships, limited liability partnerships, regular partnerships, cooperatives and societies, as well as private limited companies in the MSE sector were eligible for a capital subsidy under this scheme.
The MSEs should have had a valid Udyog Aadhaar Number (UAN) at the time of applying for the CLCSS scheme, to imply they are duly registered as Micro and Small Enterprises (MSEs) under MSMED Act, 2006.
Enterprises with a clear ownership of 51% and above held by women or by individuals belonging to Scheduled Castes and Scheduled Tribes were also eligible.
Businesses scaling up from small-scale to medium-scale entities due to the sanction of an additional loan under CLCSS subsidy schemes were eligible.
In addition to the above criteria, the Ministry of Micro, Small & Medium Enterprises notified 51 sectors and sub-sectors that come under this scheme. Here is a list of some of such sectors.
Drugs and pharmaceuticals
Information technology (hardware)
Gold plating and jewellery
Auto parts and components
The Credit Linked Subsidy Scheme for MSMEs brought several advantages to the entities registered under the initiative. Here is a closer look at the top benefits of the CLCSS scheme.
It was useful in upgrading and improving the standard of technology that MSMEs used in their regular production processes.
Many non-productive industries also benefited from the CLCSS.
The subsidy was useful in significantly reducing the overall financial burden for MSMEs purchasing capital equipment.
It allowed enterprises to upgrade the quality as well as the quantity of the products they manufactured.
It was pivotal in boosting the industrial growth in rural and semi-urban areas of the country.
Under the Credit Linked Capital Subsidy Scheme for technology upgradation, enterprises that were eligible got the benefit of a capital subsidy on the loan availed from financial institutions. The amount of subsidy had been capped at 15% on credit up to ₹1 crore. This effectively came up to a maximum credit subsidy of ₹15 Lakhs.
Apart from this key detail, here are the other primary features that marked the CLSS scheme for MSMEs.
The subsidy was available to those enterprises that have borrowed from eligible financial institutions.
In addition to the 15% subsidy outlined above, an additional subsidy of 10% was offered to MSMEs run by entrepreneurs belonging to Scheduled Castes and Scheduled Tribes.
The term loans that entities avail to be eligible for this subsidy should have been taken from eligible Primary Lending Institutions (PLIs) approved by the Ministry of Micro, Small and Medium Enterprises.
Under the CLCSS subsidy scheme, the following banks and agencies were identified as the nodal agencies to implement the measures laid out under this initiative.
State Bank of India (SBI)
Bank of Baroda (BOB)
Punjab National Bank (PNB)
Bank of India (BOI)
Tamil Nadu Industrial Investment Corporation (TIICL)
To understand how the Credit Linked Capital Subsidy Scheme for technology upgradation was beneficial, it is essential to first understand what upgrading technology meant in this context. Under the CLCSS, upgrading tech involved stepping up from existing technology to newer and innovative technology that was capable of bringing in the following benefits:
Better product quality
Some examples of such technology upgradation included the implementation of anti-pollution strategies, the installation of energy-saving machines, in-house quality testing and technology to implement better quality control measures.
That said, the CLCSS initiative did not offer the subsidy for measures like replacing old machinery with similar new machinery, without any material technological upgrade. Purchase of second-hand and used equipment was also not included in the scheme.
Before the CLCSS scheme was introduced, a vast majority of small scale industries and MSMEs in India relied heavily on manual processes or outdated technology. The primary reason behind this was the difficulty in procuring or affording the funding needed to invest in new and modern technological processes. As a result, productivity took a huge hit and most of these small businesses found it incredibly tough to keep their businesses afloat. Scaling up was also a challenge, since it was nearly impossible due to hampered productivity.
Due to these reasons, technology upgradation was pivotal for the survival of small and medium enterprises in different industries in the country. Recognising this, the Ministry of Micro, Small and Medium Enterprises introduced the CLCSS scheme in India.
Entities that were eligible for the special Credit Linked Capital Subsidy Scheme were required to submit the following documents to initiate the verification process and avail the benefit of the subsidy offered under the scheme.
Identity proof of the applicant (such as Aadhaar card, PAN card, voter’s ID etc.)
Proof of address of the applicant (such as voter’s ID, Aadhaar card, passport etc.)
Proof of business address
Proof of business
PAN card of the business entity
In addition to these documents, applicants were also required to provide any other KYC paperwork that may have been needed to avail the benefits of the Credit Linked Capital Subsidy Scheme.
To apply for the subsidy offered under the CLCSS, here is a step-by-step guide of what eligible enterprises needed to do.
Step 1: Apply for a loan to a listed financial institution to purchase the necessary technological or equipment upgrade.
Step 2: Login with the relevant user ID and password on the official MSME website.
Step 3: Click on the ‘Apply for Subsidy’ option available on the ‘User Task’ menu.
Step 4: Enter the required details and proceed.
Step 5: You will then see a form requiring details about the machinery or equipment purchased. Fill in this information.
After submitting the form, the application would be reviewed and processed after attending to clarifications, if any. Then, based on the eligibility, the emergency level as well as the availability of funds, the loan would be sanctioned. On approval, the funds were transferred to the nodal agency that had been designated, and were then disbursed to the applicant’s account.
The bottom line is that eligible small businesses can borrow up to ₹1 Crore or ₹100 Lakhs. Of this, the amount of subsidy that can be claimed is 15% of the credit availed. For instance, if the loan amount comes up to ₹10 Lakhs, the MSME gets a subsidy of ₹1.5 Lakhs. The maximum amount of subsidy that can be claimed is ₹15 Lakhs (since the loan amount is capped at ₹1 crore).
The primary nature of assistance in the CLSS was a capital subsidy of 15% on institutional credit borrowings up to ₹1 crore.
Technology upgradation in the context of the CLCSS scheme was moving from existing and/or outdated technology to newer and more efficient technology that improved production, brought in more savings and helped with scaling up.
Both new and existing MSMEs were covered under the CLCSS scheme.
Yes, businesses were required to provide the necessary KYC documents to apply for the subsidy under the CLCSS scheme.
No, this scheme was primarily launched to offer a capital subsidy to MSMEs in both the rural as well as the urban regions of the country.
The Credit Linked Capital Subsidy Scheme (CLCSS) required that businesses were in commercial production for a period of at least 3 years to be eligible for the subsidy.
Yes, the scheme covered MSMEs in the Khadi and Village industries. Enterprises in the coir sector were also covered.