Khadi and Village Industries Commission (KVIC)

Overview:

KVIC is a statutory body formed by the Government of India under the KVIC Act of 1956 that aims to nurse employment and economic uplift in rural India. The term Khadi goes back to the Swadeshi Movement launched by Mahatma Gandhi in 1920 by propagating the use of hand-woven and home-spun fabrics. It was a form of protest to shun British goods and the simplicity of the method was remarkable. Khadi is a hand- made cloth using the simple charkha, an implement common in rural India.

KVIC full form is Khadi and Village Industries Commission constituted as an apex body under the Ministry of Micro, Small and Medium Enterprises to help plan, promote, facilitate, organize and aid in the development of Khadi and Village Industries in rural India in conjunction with other agencies involved in rural development.

Structure of KVIC:

The headquarters of KVIC is located in New Delhi and its six Zonal Offices are spread in a few main cities of India at:

  1. New Delhi.
  2. Bhopal
  3. Bengaluru
  4. Kolkata
  5. Mumbai
  6. Guwahati

Further to the zonal offices, there 29 other offices in different states to oversee the implementation of different programs in alignment with the objectives of the commission.

KVIC Terminology:

It is imperative to get a greater insight into the common terms in use for a comprehensive understanding of the entire KVIC scheme.

1. Khadi: Originating as a political weapon in the Swadeshi Movement, it literally denotes hand-woven or hand-spun fabric by using the common charkha or wheel. The common raw materials used are cotton, silk, wool and synthetic ploy. The usual source area of the fabric in India are:

  • Cotton: Andhra Pradesh, Uttar Pradesh, Bihar and West Bengal.
  • Silk: West Bengal, Bihar, Odisha and North Eastern States.
  • Wool: Haryana, Himachal Pradesh, Jammu and Kashmir.
  • Poly: Gujarat, Rajasthan.

2. Village Industry: It denotes any industry that is located in the rural area using a fixed capital investment per artisan or weaver not exceeding Rs.1 lakh.

KVIC Scheme Details:

There are a host of schemes under the KVIC scheme list aimed at achieving the objectives set for the commission.

1. KVIC PMEGP:

The scheme was launched by replacing The Rural Employment Generation Program (REGP) and the Pradhan Mantri Rozgar Yojana (PMRY) by the Ministry of MSME. The Prime Minister’s Employment Generation Program (PMEGP) is basically a credit-linked subsidy program aimed at creating employment opportunities across all areas of the country.

2. Interest Subsidy Eligibility Certificate (ISEC):

It is designed to be the major source for KVIC Projects involving the institutions registered with KVIC. It mobilizes funds from the banking institutions to bridge the funding gap in relation to budgetary allocations.

3. Scheme of Fund for Regeneration of Traditional Industries (SFURTI):

It aims to promote cluster development involving Khadi and Village Industry products. The nodal agency for implementation of the scheme is KVIC.

4. Market Promotion Development Assistance (MPDA):

It aims to augment the income of the artisans. The distribution of assistance is in the ratio of:

  • Artisans: 40%
  • Producer: 40%
  • Seller: 20%

5. Khadi Reform and Development Program (KRDP):

The prime objective of this scheme is employment generation and the enhanced earning of the artisans. It aids repositioning of the Khadi in alignment with the current needs.

Features of KVIC Loan:

The loans under the commission are routed through and governed by PMEGP guidelines. The financial assistance is based on various criteria related primarily to MSME specifications as under:

1. Quantum of Loan:

  • Manufacturing Sector: Maximum Rs.25lakhs.
  • Business and Service Sector: Maximum Rs.10 lakhs.

2. Per capita investment cap:

  • Plains: Rs.1 lakh.
  • Hills: Rs.1.5 lakhs.

3. Funding Pattern:

The following grid is indicative of the funding pattern defined in KVIC loan components. It is to be importantly noted that the special category includes the reserved, minorities, women, ex-servicemen, disabled, northeast, border areas among others.

Category

Beneficiary contribution

Rate of subsidy

Urban

Rural

General

10% 15% 25%
Special 5% 25%

35%

 

4. KVIC Loan tenure: The normal tenor of the loans provided under the scheme is 3 to 7 years inclusive of a moratorium of 6 months.

5. Margin Money: It is kept in a separate SB account with a lock-in of 3 years but adjusted with the KVIC loan.

6. Income Ceiling:  There are no income ceilings under the KVIC loan, but only that the loan is provided for new ventures and the borrower must not have enjoyed any other loan.

Eligibility Criteria for Khadi and Village Industries Commission Loan:

PMEGP loans are disbursed to both individuals and organizations that meet the eligibility criteria.

1. Individuals above 18 years of age and have passed minimum class eight:

  • Manufacturing Unit: Rs.10 lakhs.
  • Service Unit: Rs.5 lakh.

2. Self Help Groups provided they have not taken any other loan.

3. Registered Societies.

4. Producer Co-operative Societies.

5. Charitable Trusts.

6. Loan Eligible Sectors: As per the norms of the KVIC scheme, the loan is extended to only a few sectors as under:

  • Food processing (Agro-based).
  • Hand-made fibers and paper.
  • Mineral Products.
  • Polymer and chemical products.
  • Forest products.
  • Rural engineering.
  • Biotechnology.
  • Service and textiles.

Documents Required for KVIC Loan:

There are a host of documents that are essential for KVIC online application.

  • Various KYC documents of the borrowers.
  • Caste or community certificate to determine eligibility in one of the specific categories.
  • Subsidy claim as per eligibility.
  • Certified copy bye-laws of the society or association.
  • Copy of rent or lease deed for the premises or shed which is not more than 3 years old.
  • The project report specifying the cost with the break-up of capital expenditure and working capital requirement for 1 cycle.
  • If there is no need for working capital, a certificate to that effect from the controlling office of the bank.

Rate of Interest applied in KVIV Loan:

The rate of interest applicable to PMEGP loan and KVIC is at the normal rate applicable to MSME enterprises. Presently, the rate charged by most banks is in the range of 11 and 12%. However, the rate under ISEC is 4%. The shortfall of this concessional rate and the actual chargeable is met by the commission through the “Grants” head of the budget. This facility is extended only to makers of Khadi and Polyvastra.

Government Loan Schemes for Small Businesses in India

KVIC Online Application:

The portal of KVIC – http://www.kvic.org.in provides a digital interface for online application: https://www.kviconline.gov.in/pmegpeportal/jsp/pmegponline.jsp. It is an elaborate and comprehensive procedure seeking all personal details including aadhaar, date of birth, qualifications, special category details, location of the unit, operational details, loan and bank particulars etc. After saving the application, the digitized format of the application has to be uploaded. After final submission, the application ID and password for future use is transmitted to the registered mobile number.

KVIC FAQs:

1. What are the primary KVIC Objectives?

The commission was formed with a strong bias towards the principles of swadeshi that has been one of the major thrust principles in our freedom movement. In fact, Mahatma Gandhi has likened Khadi to the livery of freedom. Being rooted in the Indian ethos, the objectives of KVIC can be broadly summarized into three basic principles as under:

  • Social Objective: It is aimed to be achieved by providing the scope of employment in the rural.
  • Economic Objective: Aiming to produce easily saleable articles.
  • Greater Objective: The primary aim of the first two is qualified in the third by inculcating a strong sense of community in the rural masses and engendering the spirit of self-reliance among them.

2. How is the KVIC Functions defined?

In order to achieve the objectives set for the commission, there is a strong need to implement and monitor the schemes effectively. The various programs designed for the commission, encompasses the functions of KVIC.

  • Creation of a reserve of raw materials and implements to maintain a continuous supply flow to producers.
  • Form common community service facilities to process raw materials into semi-finished goods.
  • Promote and facilitate the sale and distribution of Khadi and Village Industry products inclusive of handicrafts.
  • Promote research to improve upon the production techniques and equipment to benefit the village industry sector at large.
  • Provide financial assistance and technical know-how to individuals and institutions to develop the Khadi and Village Industry

3. What is the meaning of Khadi Gram Udyog?

It is the marketing arm of KVIC which markets the products manufactured in the rural industries under the aegis of KVIC. The name khadi itself is a fabric sourced from different regions of the country where the raw material is abundantly found. There are also a host of Khadi natural handmade personal care products manufactured at Uttarakhand Khadi Products. The best part is that the products are also available online in keeping the trends at the Khadi Shop.

4. What are the activities not covered by KVIC loan?

Most of the harmful; activities like meat and slaughterhouses, tobacco products, eateries serving liquor, cultivation of cash crops among the indicative few. The activities stated are not exhaustive.

5. Is the rent and cost of land included in the project cost?

The cost of lease and rent if not older than 3 years can be included, whereas there is a bar on the inclusion of the cost of land in the project cost.

Bottom Line:

Employment generation and boosting the labor-intensive rural economy is the major objective of KVIC, most of the NBFCs other than the ones who enjoy good penetration in the country do not figure in the scheme of things pertaining to the commission. Lendingkart a non-deposit seeking NBFC occupies a significant position in the lending sector in the country with ample scope.

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