RBI has deregulated the interest rate on advances and these interest rates are determined by banks with the approval of their respective Board of Directors subject to extant guidelines of RBI. Loans to Micro, Small and Medium Enterprises (MSMEs) are provided as per the interest rate structure of the bank. The interest rate is finalized based on various factors which inter-alia include, cost of funds to the institution, credit rating of the unit, tenure of loan, purpose of loan etc.
The rating of MSEs under erstwhile Performance & Credit Rating Scheme of the Ministry of Micro, Small and Medium Enterprises to provide a third party opinion on their capabilities and creditworthiness so as to create awareness amongst them about the strengths and weakness of their existing operations has been discontinued w.e.f December, 2018.
Further, under the Interest Subventions Scheme for Incremental Credit to MSMEs 2018 offers 2% interest subvention on fresh or incremental loans upto Rs.1 crore to MSMEs.