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MSME loan interest rate: bank, NBFC and scheme rates compared

The MSME loan interest rate is set by each lender. On 02-Oct-2026, Bank of Baroda's published formula gave 8.15% to 10.85% a year on regulated MSME loans up to ₹25,00,000, private banks published business loan ranges from about 10.75%, and NBFC unsecured loans started from about 12%.

Loan products, rates, and eligibility are determined by the lenders on our panel. Capnix is not a lender and does not lend its own capital. We run your loan journey end to end.

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MSME loan interest rate: the short answer

There is no fixed MSME loan interest rate. Every lender prices each loan from a benchmark plus a spread. What follows are the rates lenders published on their own pages when we checked on 02-Oct-2026. They are indicative and set by the lender. They are not offers, and Capnix sets none of them.

"MSME" here means a business classified as micro, small or medium. A micro enterprise has investment up to ₹2,50,00,000 and turnover up to ₹10,00,00,000 (Udyam Registration portal).

Lender (type) What the rate applies to Published rate, a year Source
Bank of Baroda (public sector bank) Regulatory MSME loans up to ₹25,00,000 8.15% to 10.85%, by size and enterprise class (worked from the bank's formula) Bank of Baroda
Bank of Baroda (public sector bank) MSME loans above ₹25,00,000 to ₹7,50,00,000 CMR 1: 8.20% to 9.65%; CMR 6: 10.35% to 15.60% (worked) Bank of Baroda
HDFC Bank (private bank) Business loan 10.75% to 22.50% HDFC Bank
Bandhan Bank (private bank) Business loan Secured 11.69% to 15.18%; unsecured 13.00% to 25.91% Bandhan Bank
ICICI Bank (private bank) Non-priority-sector business loan Up to repo + 6.0% secured; up to repo + 6.50% with CGTMSE cover ICICI Bank
IDFC FIRST Bank (private bank) Unsecured business loan From 12.99% (table captioned "August 2025") IDFC FIRST Bank
Bajaj Finance (NBFC) Unsecured business loan 14% to 23% Bajaj Finance
FlexiLoans (NBFC) Unsecured business loan From 12% FlexiLoans
Lendingkart (NBFC) Unsecured loan up to ₹50,00,000 From 17.25% Lendingkart

If the repo rate is 5.25%, as Bank of Baroda's page states, ICICI Bank's caps work out to 11.25% secured and 11.75% with CGTMSE cover (ICICI Bank, Bank of Baroda).

A bank MSME rate card, worked out

Bank of Baroda publishes its MSME pricing as a formula. Its repo-linked lending rate (BRLLR) was 7.90% from 06-Dec-2025, and it adds a strategic premium of 0.25% plus a spread (Bank of Baroda). The grid below adds those up for regulatory loans up to ₹25,00,000.

Loan size Micro Small Medium Source
Up to ₹50,000 8.15% 10.15% 10.85% Bank of Baroda
Above ₹50,000 to ₹2,00,000 10.15% 10.35% 10.85% Bank of Baroda
Above ₹2,00,000 to ₹10,00,000 10.35% 10.50% 10.85% Bank of Baroda
Above ₹10,00,000 to ₹25,00,000 10.50% 10.65% 10.85% Bank of Baroda

Two things stand out. Micro enterprises carry the smallest spreads at every size. And above ₹25,00,000, the bank prices by the business's CIBIL MSME Rank (CMR) and the security it offers, so the range widens (Bank of Baroda).

CMR is a 1 to 10 grade from TransUnion CIBIL, where CMR-1 is the least risky business (TransUnion CIBIL). It is the business's own record, separate from the promoter's CIBIL score.

How a lender prices an MSME loan

  1. Benchmark. Banks link most floating MSME loans to an external benchmark such as the repo rate. When RBI changes the repo rate, the benchmark and your rate follow.
  2. Enterprise class. At Bank of Baroda, a micro loan of ₹5,00,000 sits at 10.35% while a medium one sits at 10.85% (Bank of Baroda).
  3. Risk grade. A CMR 6 business can pay 15.60% where a CMR 1 business pays 8.20% to 9.65% (Bank of Baroda).
  4. Security. Secured loans cost less. Bandhan Bank's secured range ends at 15.18% against 25.91% for unsecured (Bandhan Bank).
  5. Lender type. The MSME Pulse report from TransUnion CIBIL and SIDBI found public sector banks leading below ₹10,00,000 of exposure and NBFCs scaling the ₹10,00,000 to ₹2,00,00,000 band (SIDBI). Unsecured NBFC loans publish higher starting points (Bajaj Finance, Lendingkart, FlexiLoans).

MSME loan interest rate under government schemes

Scheme loans come from the same banks, with some rules attached. The detail sits on each scheme page.

Scheme Interest rule Source
Mudra (PMMY) Deregulated; the lender sets a reasonable rate within RBI guidelines Mudra FAQ
Stand-Up India Not above MCLR + 3% + tenor premium Stand-Up India portal
PMEGP The bank's normal rate PMEGP guidelines compendium
CGTMSE cover Not an interest rate, but the annual guarantee fee (0.37% upwards) may be passed on to you by the lender CGTMSE scheme document

See Mudra loan interest rate and CGTMSE fee for the full tables.

RBI rules that lower the cost for micro and small enterprises

  • No collateral up to ₹20,00,000. Banks must not take collateral on micro and small enterprise loans up to ₹20,00,000 sanctioned or renewed from 01-Apr-2026 (RBI notification, 09-Feb-2026).
  • No pre-payment charge on floating-rate loans. For floating-rate business loans to micro and small enterprises sanctioned or renewed from 01-Jan-2026, commercial banks and upper-layer NBFCs charge nothing for early repayment (RBI notification, 02-Jul-2025, RBI notification). Medium enterprises and fixed-rate loans follow the lender's own policy.
  • A decision in 14 working days on micro and small enterprise loans up to ₹25,00,000 (RBI Master Direction, lending to MSME sector).
  • Fee waivers with Udyam. HDFC Bank and Kotak Mahindra Bank charge no processing fee on loans up to ₹5,00,000 to micro and small enterprises that give their Udyam certificate before disbursal (HDFC Bank, Kotak Mahindra Bank).
  • Priority sector status. All bank loans to MSMEs count towards banks' priority sector targets (RBI priority sector lending Directions, 2025), which is one reason banks compete for small loans.

Use the MSME loan EMI calculator to see what a rate means in monthly terms. Then check how lenders are likely to read your file with the free loan readiness check, which gives you a Capnix score from 0 to 100.

Frequently asked questions

It varies by lender and borrower. Bank of Baroda's formula gives 8.15% to 10.85% on regulated loans up to ₹25,00,000 (Bank of Baroda). HDFC Bank published 10.75% to 22.50%, and Bajaj Finance 14% to 23% (HDFC Bank, Bajaj Finance). All were checked on 02-Oct-2026.

At Bank of Baroda, yes. Micro loans carry smaller spreads than small or medium loans at each size band (Bank of Baroda).

Udyam registration does not set a rate. It is how banks classify you as micro, small or medium, and that class affects pricing at banks such as Bank of Baroda (Bank of Baroda). Some banks also waive the processing fee on small loans if you give the Udyam certificate (HDFC Bank, Kotak Mahindra Bank).

Term loans follow the same card. The rate depends on size, class, risk grade and security. Bank of Baroda's card above ₹25,00,000 runs from 8.20% for a CMR 1 business with full security to 15.60% at the top of the CMR 6 range (Bank of Baroda).

Most bank MSME loans are floating and linked to a benchmark such as the repo rate (Bank of Baroda). Some NBFCs lend at fixed rates. The Key Facts Statement tells you which.

Mostly no. Mudra rates are deregulated and set by the lender (Mudra FAQ). Stand-Up India sets a ceiling of MCLR + 3% + tenor premium (Stand-Up India portal).

For a floating-rate business loan to a micro or small enterprise, sanctioned or renewed from 01-Jan-2026, commercial banks and upper-layer NBFCs cannot charge (RBI notification, 02-Jul-2025). Other loans follow the lender's policy, which must be in the KFS (RBI notification).

Sources

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