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Credit Linked Capital Subsidy Scheme (CLCSS)


The Credit Linked Capital Subsidy Scheme (CLCSS) is a scheme run by the Development Commissioner of the Ministry of MSME. Also, the nodal agencies will be there to help in implementing the scheme properly. It was first initiated on 1st October 2000 with the prime objective to facilitate MSME with the best of upgraded technology.

It is a scheme known to be “Demand Driven Scheme” without any higher limit on overall annual spending on subsidy disbursal. CLCSS is a scheme focusing on technology upgradation as everything in today’s world is technology based. Hence, it becomes necessary for MSMEs to also work with upgraded technology in order to cope up with the competition in the market.

For MSMEs to avoid facing negative impacts in the revenue of the business, the scheme will be helpful as the credit-linked capital subsidy scheme aims at facilitating Technology Upgradation of Micro and Small Enterprises by providing them with capital subsidy on institutional finance availed for induction of well-established and improved technology.

Therefore, this scheme is a savior for MSMEs!

Let us read more about it to know actually MSMEs can avail after opting for Credit Linked Capital Subsidy Scheme (CLCSS).

What do you mean by the term “Technology Upgradation” under CLCSS?

Technology upgradation would ordinarily mean the induction of state-of-the-art or near state-of-the-art technology. In the varying mosaic of technology obtaining in more than 7500 products in the Indian small scale sector.

Technology upgradation would mean a significant step up from the present technology level to a substantially higher one involving improved productivity, and/or improvement in the quality of products and/or improved environmental conditions including the work environment for the unit. It would also include installation of improved packaging techniques as well as anti-pollution measures and energy conservation machinery.

Further, the units in need of introducing facilities for in-house testing and online quality control would qualify for assistance, as the same is a case of technology upgradation. Replacement of existing equipment/technology with the same equipment/technology will not qualify for a subsidy under this scheme, nor would the scheme be applicable to units upgrading with second-hand machinery.

About Credit Linked Capital Subsidy Scheme

The Credit Linked Capital Subsidy Scheme shall offer a 15% capital subsidy to small-scale industries. So, when any MSME will apply for a loan for technology upgradation, then they will be easily able to enjoy a subsidy on such loans. And as per the revised scheme, it shall also be granted to tiny, khadi, village and coir industrial units or institutional finance sectors.

Moreover, in the month of September 2019, certain changes were also made by our Union MSME minister, Nitin Gadkari. The revised scheme states that “an additional 10% subsidy is offered to entrepreneurs belonging to SC/ST categories, women entrepreneurs and hailing from the “117” aspirants districts that belong to North-eastern states and other hilly terrains in the country.

Due to the revised scheme launched, a major role will be played by the scheme as it will increase the contribution to GDP from current 29% to 50% in the next few years and also be helpful in boosting exports from MSME sector from the current 40% to 50%.

Therefore, the conclusion of the subsidy given under CLCSS is mentioned in points.

  1. For General Category – 15% of term loan (only plant & machinery component)
    – max 15 Lakhs
  2. For SC/ST Category – Additional 10% under SCLCSS scheme

Eligible Conditions under CLCSS

As per guidelines passed on 13th August 2019, here is the list of 51 sub sectors or products covered under the up-gradation scheme.

  • Biotech Engineering
  • Effluent Treatment Plants
  • Crenelated Boxes
  • Drugs and Pharmaceuticals
  • Dyes
  • Medicinal and Aromatic plants- based industries
  • Plastic cast/ Extruded Products.
  • Rubber Processing enterprises
  • Food Processing
  • Poultry & Cattle Feed Industry

Units covered under Credit Linked Capital Subsidy Scheme

  1. All the existing Small Scale Industries registered with the State Directorate of Industries those have upgrade their existing plant and machinery with state-of-the-art technology with or without expansion.
  2. The New units that are registered with the State Directorate of Industries and which have set up their facilities only with the appropriate eligible and proven technology duly approved by the GTAB/TSC.

Documents required for CLCSS

The documents required by the eligible micro and small industries have to submit the below-mentioned set of documents, namely:-

  • PAN Card of individual and of the business
  • Aadhaar Card/Voter ID for identity proof
  • Personal address proof
  • Business address proof
  • Recent passport-size photograph
  • Proof of business like a partnership deed, company registration etc.
  • Scheme beneficiary must have KYC documents as and when required

MUST – A valid Udyog Aadhaar Memorandum (UAM) and entry of MSME into the MSME Data Bank is mandatory is availing the benefit provided under Credit Linked Capital Subsidy Scheme (CLCSS).

Duration of CLCSS Scheme

The CLCS component of CLCS-TU Scheme will be operational/valid with effect from 01.04.2017, till 31.03 2020 or till the time, the aggregate capital subsidy disbursed as per the sanction accorded reaches Rs.2360 Cr. The subsidy is applicable only in cases where the loans have been sanctioned / approved having reference date on or after 01.04.2017. The quantum of subsidy would be based on the actual disbursement made at the time of submission of claims for subsidy. The CLC subsidy cases, where the reference date is prior to 01.04.2017, shall not be entertained in any case.

Benefits availed under CLCSS

  1. Credit Linked Capital Subsidy Scheme is there to improve the competitiveness of MSMEs by increasing schemes that aim at up-grading technology.
  2. It shall help in promoting the innovation, digital empowerment of MSMEs, design interventions and support the protection of the intellectual property of MSMEs.
  • This scheme focus on encouraging women empowerment and therefore provides entrepreneurship to SC/STs women, North Easter Region, Hill States, Island Territories (Andaman & Nicobar and Lakshadweep) and the Aspirational Districts/ Left Wing Extremism (LWE) Districts.
  1. The subsidy will be given for investment in the acquisition/replacement of plant & machinery/equipment & technology up-gradation of any kind.
  2. In addition, the scheme through Zero Defect & Zero Effect, components will promote the reduction in emission level of greenhouse gases and improve competitiveness through the reduction in defect/wastage during the manufacturing process of the products.

Eligible Lending Institution under CLCSS

  1. All Scheduled Commercial Banks
    2. Scheduled Cooperative Banks
    3. Regional Rural Banks (RRBs)
    4. State Financial Corporations (SFCs)
    5. North Eastern Development Financial Institution (NEDFI)


All in all, units that have already utilized the benefit of subsidy under the earlier CLCSS up to limit of Rs. 15 Lakh are now not eligible to claim additional subsidy. However, where the units have availed less amount of subsidy will definitely be eligible to claim the balance amount of subsidy granted by CLCSS up to the limit of Rs. 15 Lakh, provided their reference date is on 01.04.2017 or thereafter. In order to limit the disbursement of subsidy within the prescribed ceiling limit of Rs. 15.00 lakh, the PU/Nodal Bank will certify the subsidy amount availed earlier by the unit itself.

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