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Technological changes are the only constant in today’s business world. The technological advancements play a huge role in giving that edge to the business entities. However, in our country, the majority of small businesses struggle with the technological needs of business organizations and still rely on old or outdated technologies. This is due to the high cost involved in technological up gradation and the limited or scarce source of finance and lenders to small businesses.

This is where the Government assistance plays a huge role or provides that much needed helping hand to such small businesses. The Government of India has come out with a number of schemes over the years to counter the challenges faced by the MSME sector. It provides easy and hassle-free financing options to the MSME sector for capital investments like technological up-gradation as well as working capital needs. The Credit Linked Capital Subsidy Scheme is one such scheme, where the Government provides financial assistance to the small businesses in the form of subsidies for the capital investment in the necessary or upgraded plant and machinery or heavy equipment, especially in rural and semi-urban areas.

The details of this scheme are discussed below.

Eligibility for CLCSS

The eligibility requirements for the borrowers to be eligible for a subsidy on loans under this scheme are mentioned below.

  • The MSME should have a valid UAN (Udyog Aadhaar Number).
  • The target applicants under this scheme are the MSME units. The MSME units that belong to the 51 sub-sectors that have been notified by the Ministry of MSME are eligible for applying for subsidy under CLCSS.
  • The scheme is applicable for MSME units in rural, semi-urban as well as urban areas.
  • The scheme is applicable for new as well as existing units under the MSME sector.
  • The scheme also gives preference to the labor-intensive or export-oriented MSME units.
  • The scheme states that any fabricated or second-hand machinery is not eligible for subsidy under this scheme.

The eligible business entities can be any of the following business units,

  • Sole Proprietary
  • Partnership Firm
  • Limited Liability Firm
  • Private Limited Company

Documents required for CLCSS

The documentation process has been kept very basic and simplistic to provide faster and easier financial assistance to the eligible MSME business organizations. The list of documents required is,

  • Identity proof
  • Address proof
  • Business proof
  • Income Proof
  • Recent Photographs
  • Partnership Deed or Memorandum and Articles of Association as applicable depending on the nature of the business.
  • Any other KYC documents as required by the lender.

Features of CLCSS

The key highlights of this subsidy scheme that make it a very useful tool for the small businesses are mentioned below.

  • The main feature or the scheme is the availability of financial assistance in the form of subsidy up to 15% of the loan amount sanctioned maximum up to Rs. 15,00,000.
  • The maximum amount of loan that can be sanctioned under this scheme to the eligible MSME units is Rs. 1,00,00,000.
  • The unit availing the benefit of the subsidy will receive it in the form of a Term Deposit Receipt (TDR) for a period of 3 years by the lending Bank.
  • This TDR will be credited or transferred to the beneficiary’s account after the completion of 3 years from the date of installation of the plant and machinery or the equipment for which the capital subsidy was sought.
  • Furthermore, the scheme also requires the unit to have commercial production for a period of 3 years for availing the benefit of the subsidy.
  • The term loans for this availing subsidy under this scheme have to be borrowed from the eligible Primary Lending Institutions (PLIs) as approved by the ministry for this purpose.
  • The MSMEs belonging to the SC/ST background are eligible for an additional subsidy of 10% (after disbursement of the prescribed 15% under CLCSS) which will be provided under National SC/ST Hub (NSSH).
  • The MSME units that transform or evolve from being a small scale organization to a medium scale organization on account of loans under CLCSS are also eligible for subsidy under this scheme.

Application Process under CLCSS

The scheme has in place an Online Application and Tracking System since the 1st October 2013. The applicants have to apply for a subsidy under the scheme directly with the Primary Lending Institutions (PLIs) where the MSME will procure the term loan.

The application will then be routed to Nodal Agency upon uploading it by the PLI. The Nodal Agency will further recommend the disbursal of the subsidy to the Office of DC (MSME).

The application will require further processing and approval of the Competent Authority with consensus of the Internal Finance Wing.

Upon sanction of all the above approvals, the subsidy will be granted to the PLI that will grant the term loan to the beneficiary.


1. What is CLCSS?

CLCSS (Credit Linked Capital Subsidy Scheme) is the subsidy that can be received by the MSME units for technological upgradation.

2. What is the period of commercial production needed to avail the subsidy under CLCSS?

The scheme requires a period of 3 years of commercial production for the MSME unit to avail the subsidy.

3. Where can the MSME apply for the subsidy under this scheme?

The applicant is required to apply directly with the PLI sanctioning the term loan for subsidy under this scheme.

4. When was CLCSS launched?

CLCSS was launched in the year 2000-2001.

5. Does the scheme cover Khadi and Village Industries?

Yes, the scheme covers the MSMEs of the Khadi and Village Industries as well as Coir Sector.

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