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Shubham atkari

Expert

Published on: Apr 20, 2026

SIDBI Cluster Development Fund

Small Industries Development Bank of India (SIDBI) has launched a focused vertical for micro, small and medium enterprises (MSMEs) clusters’ SIDBI Cluster Development Fund along with centric programs to give a thrust to hard infrastructure support to state governments. There are two crucial aspects to a cluster – hard and soft infrastructures. The SIDBI is working on interventions viz., hard infrastructure, and soft infrastructure to strengthen clusters to evolve as model clusters and also to increase MSMEs’ access to services, thus raising the value chain. SIDBI has set up a Cluster Development Fund with the Reserve Bank of India’s support that will attend to the hard infrastructure side of a cluster.

The gist of SIDBI Cluster Development Fund

SIDBI has set up a Cluster Development Fund to boost cluster development for the growth of MSME that will attend to the hard infrastructure (physical infrastructure) side of a cluster.

Business Development Services Intervention program

SIDBI  also launched the Business Development Services Intervention program in five clusters that will attend to the soft infrastructure (training, skilling, marketing, technology access, design, etc.) of it .

Objectives of the scheme:

  • To assist MSES in sustaining and growing by tackling common concerns such as technology, skills and quality, market access, and so on.
  • Increase MSES ability for collaborative action by forming self-help groups, consortia, and upgrading associations, among other things.
  • To construct/improve infrastructure in MSES new/existing Industrial Areas/Clusters.
  • Establishing Common Facility Centers (for testing, training, raw material depots, effluent treatment, and other industrial processes, among other things).
  •  Green and sustainable manufacturing technology promotion for clusters, allowing units to migrate to sustainable and green production methods and products.

Purpose of Assistance

  • MSME cluster infrastructure projects (including greenfield (induced clusters) and brownfield clusters) (exiting clusters)
  • Civil construction for the restoration of existing industrial estates and the establishment of new industrial estates
Furthermore, the scheme's funding would be limited to ideas that fit within one of these three categories.
  • The MSME Eco-space includes the industrial and agro-allied sectors.
  • In and around the MSME cluster, there are a variety of social sectors.
  • MSME cluster connectivity (roads/bridges)

Eligibility criteria

Proposals submitted to SIDBI should be technically feasible and economically viable with:
  • The internal rate of return (IRR) of the company should be greater than 10 %  to apply for the SCDF
  • To become eligible for the SCDF, the company's Benefit-Cost Ratio (BCR) should be greater than 1
  • SIDBI has fixed the Economic Rate of Return (ERR) of the company above 10% for becomes eligible for SCDF

Eligible Enterprises

The Cluster Development Fund is established to support the setting up, upgrading, and renovation of MSME infrastructure.

Quantum of loan

Support under the SCDF will be provided to state governments in the form of a soft loan ranging from 80% to 95% of project costs, subject to any state-specific exposure limits. In respect of the three broad categories of activities allowed under the scheme, the loan eligibility as a percentage of the project cost is as follows:
Activity Category Loan eligibility
The industrial and agri-allied sectors in MSME eco-space 95%
Social sector projects in and around MSME clusters 85%
Connectivity to MSME clusters 80%
90% for Northeast/ Hilly states

Processing fee

To avail of the loan under the SCDF, the borrower does not need to pay any processing fee.

Rate of interest (ROI)

The Reserve Bank of India will set the interest rates on bank deposits and SCDF loans on a regular basis. according to the RBI's allocation letter, The interest rates payable to banks on deposits deposited with SIDBI and loans disbursed by SIDBI from SCDF have been linked to the Bank Rate existing at the time of placement/disbursement, as the case may be. Because interest rates are linked to the Bank Rate, which is a floating rate, interest rates on SCDF will fluctuate with changes in the Bank Rate.

Repayment of Loan

The State Government is responsible for repaying CDF loans in accordance with SIDBI's repayment schedule. Currently, the loan must be returned in seven years from the date of drawl, with a grace period of up to two years and eleven months. If the maximum permitted moratorium term is used, the first installment of Principal Repayment will begin 36 months after the date of disbursement. Installments due on any day after the 10th of the month will be due on the 10th of the following month. Interest is due at the end of each quarter, on the 31st of March, 30th of June, 30th of September, and 31st of December of each year. During the grace period, interest is also due. The state government is required to pay interest on the 10th day of the month following the quarter. If the State Government fails to pay the interest by the due dates, it will be responsible for paying interest on the overdue amount at the same rate as the Principal amount. Currently, the loan must be returned in seven years from the date of drawl, with a grace period of up to two years and eleven months. If the maximum permitted moratorium term is used, the first installment of Principal Repayment will begin 36 months after the date of disbursement. Installment due on any day after the 10th of the month will be due on the 10th of the following month.

Application procedure:

MSME Clusters can participate in the initiative by submitting an online or paper application. While physical applications can be submitted to any of the Ministry of MSME-Dis' state governments/autonomous bodies/field institutes, online applications can be submitted by filling out the online application form on the webpage dedicated to this program. SCDF Application form is attached here for reference:
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