By Sharda Associates | CA Firm, Bhopal
You have found the right bank. You have prepared your documents. You are ready to apply.
But do you know exactly what interest rate you will be charged and how much that means in actual rupees every month?
Most business owners walk into a bank without knowing the current interest rates. They accept whatever rate the bank offers not realising that choosing the right bank and preparing the right documentation can save them lakhs of rupees over the loan tenure.
One important thing to remember — the interest rate a bank offers you depends heavily on the quality of your loan documentation. A professionally prepared Project Report and CMA Report with strong DSCR and realistic projections puts you in a stronger negotiating position — and can get you a lower interest rate from the same bank.
At Sharda Associates, a qualified CA firm in Bhopal, we prepare bank-ready loan documentation that gives your application the best possible chance of approval at the lowest available rate.
Get Your CA-Certified Project Report →
How Business Loan Interest Rates Work in India
Before comparing rates across banks, it is important to understand how banks calculate interest rates on business loans in India.
MCLR — Marginal Cost of Funds Based Lending Rate Most banks use MCLR as their base rate for business loans. Your actual rate is MCLR plus a spread — based on your credit profile, business vintage, CIBIL score, and loan type.
EBLR — External Benchmark Linked Lending Rate Since 2019, RBI has mandated that all floating rate loans to MSMEs above Rs.1 lakh be linked to an external benchmark — typically the RBI Repo Rate. This means when the RBI cuts the repo rate, your EMI automatically reduces. SBI and PNB offer EBLR-linked loans for qualified MSMEs — so when the RBI cuts rates, your EMI goes down automatically.
Credit Risk Premium Banks add a credit risk premium based on your CIBIL score, business turnover, loan amount, and collateral. A strong loan application — with a professionally prepared Detailed Project Report — reduces the bank’s perceived risk and can lower your credit risk premium.
Get Your Detailed Project Report →
Business Loan Interest Rates — All Major Banks
Public Sector Banks Lowest Rates
State Bank of India (SBI)
SBI offers business loan rates starting as low as 8.00 to 8.25 percent per annum for qualified MSMEs. These rates are EBLR linked — so they reduce automatically when the RBI cuts the repo rate.
| Loan Type | Interest Rate | Linked To |
| MSME Term Loan | 8.00% to 11.50% pa | EBLR/MCLR |
| Working Capital CC/OD | 8.25% to 12.00% pa | MCLR |
| Mudra Loan | 8.00% to 9.00% pa | MCLR |
| PMEGP Loan | 8.50% to 10.00% pa | MCLR |
Best for — Large term loans, established businesses, PMEGP applications. Strong documentation and CIBIL 750 plus gets lowest rates.
Punjab National Bank (PNB)
PNB offers business loan rates starting from 8.25 percent per annum for MSME loans.
| Loan Type | Interest Rate | Linked To |
| MSME Term Loan | 8.25% to 12.50% pa | MCLR |
| Working Capital | 8.50% to 13.00% pa | MCLR |
| Mudra Loan | 8.25% to 10.00% pa | MCLR |
| CGTMSE Loan | 9.00% to 12.00% pa | MCLR |
Best for — Small and medium businesses, CGTMSE collateral-free loans, first-time borrowers.
Bank of Baroda
For MSME loans, Bank of Baroda’s applicable BRLLR is 7.90 percent effective December 2025 — calculated as RBI Repo Rate of 5.25 percent plus Mark-Up of 2.65 percent. Bank of Baroda offers business loan rates ranging from 7.25 to 13.50 percent per annum.
| Loan Type | Interest Rate | Linked To |
| MSME Term Loan | 7.90% to 12.00% pa | BRLLR |
| Working Capital | 8.00% to 12.50% pa | BRLLR/MCLR |
| Women Entrepreneur | 7.80% to 11.90% pa | BRLLR — 0.10% discount |
| Digital MSME Loan | 8.50% to 13.00% pa | MCLR |
Best for — Women entrepreneurs get additional 0.10 percent discount. Strong MSME schemes.
Get Your Bank of Baroda Ready Project Report →
Union Bank of India
| Loan Type | Interest Rate | Linked To |
| MSME Term Loan | 8.50% to 13.00% pa | MCLR |
| Working Capital | 8.75% to 13.50% pa | MCLR |
| PMEGP/CGTMSE | 9.00% to 12.00% pa | MCLR |
Get Your Union Bank Ready CMA Report →
Canara Bank
| Loan Type | Interest Rate | Linked To |
| MSME Term Loan | 8.75% to 13.00% pa | MCLR |
| Working Capital | 9.00% to 13.50% pa | MCLR |
| Mudra Loan | 8.50% to 10.50% pa | MCLR |
Central Bank of India
| Loan Type | Interest Rate | Linked To |
| MSME Term Loan | 9.00% to 13.50% pa | MCLR |
| Working Capital | 9.25% to 14.00% pa | MCLR |
| PMEGP Loan | 9.00% to 11.00% pa | MCLR |
Get Your PMEGP Project Report →
Private Banks — Faster Processing, Higher Rates
HDFC Bank
| Loan Type | Interest Rate |
| Business Loan | 10.75% to 22.50% pa |
| Working Capital | 11.00% to 20.00% pa |
Best for — Existing HDFC customers, quick digital processing, urban SMEs.
ICICI Bank
| Loan Type | Interest Rate |
| Business Loan | 10.85% to 19.00% pa |
| Working Capital | 11.00% to 18.00% pa |
| Startup Loan | 12.00% to 20.00% pa |
Best for — Startups and new businesses, flexible repayment, tech-enabled processing.
Axis Bank
| Loan Type | Interest Rate |
| Business Loan | 10.75% to 21.00% pa |
| Working Capital CC | 11.00% to 18.00% pa |
Best for — Working capital loans, fast approvals for existing customers.
Get Your Private Bank Ready Project Report →
Kotak Mahindra Bank
| Loan Type | Interest Rate |
| Business Loan | 16.00% to 26.00% pa |
| MSME Loan | 14.00% to 22.00% pa |
Best for — New businesses and startups where public banks decline.
Government Scheme Rates 2026
Mudra Loan — All Categories
Mudra loans are very affordable because they are linked to the bank’s MCLR. For the Shishu category, rates are often as low as 8 to 9 percent.
| Category | Loan Amount | Interest Rate |
| Shishu | Up to Rs.50,000 | 8.00% to 9.00% pa |
| Kishore | Rs.50,001 to Rs.5 lakh | 8.50% to 11.00% pa |
| Tarun | Rs.5 lakh to Rs.10 lakh | 9.00% to 12.00% pa |
| Tarun Plus | Rs.10 lakh to Rs.20 lakh | 9.50% to 13.00% pa |
Get Your Mudra Loan Project Report →
PMEGP Loan 2026
| Applicant Category | Subsidy | Interest Rate |
| General Category | 15% to 25% | 8.50% to 11.00% pa |
| SC/ST/OBC/Women | 25% to 35% | 8.50% to 10.00% pa |
| NE/Hill/Border Areas | 35% | 8.00% to 10.00% pa |
CGTMSE Loan 2026
| Loan Amount | Guarantee Cover | Interest Rate |
| Up to Rs.2 crore | 75% | 8.50% to 13.00% pa |
| Rs.2 crore to Rs.5 crore | 50% | 9.00% to 13.50% pa |
| Women/SC/ST | 80% | 8.25% to 12.50% pa |
Get Your CGTMSE Detailed Project Report →
Public Sector vs. Private Banks Which is Better?
| Factor | Public Sector Banks | Private Banks |
| Interest Rate | 8% to 13% | 11% to 26% |
| Processing Speed | 15 to 30 days | 7 to 15 days |
| Documentation | Detailed required | Moderate |
| Collateral | Required for large loans | More flexible |
| CGTMSE/PMEGP | All empanelled | Select banks |
| Best For | Large loans, lower rates | Quick approvals |
Government banks offer lower rates and more security, but private banks provide faster service and better digital support.
Get Your Bank-Ready CMA Report →
How Interest Rates Affect Your EMI Real Examples
Example 1 — Rs.10 lakh loan for 5 years
| Bank | Rate | Monthly EMI | Total Interest |
| SBI | 8.50% | Rs.20,516 | Rs.2,30,960 |
| PNB | 10.30% | Rs.21,430 | Rs.2,85,800 |
| HDFC | 14.00% | Rs.23,268 | Rs.3,96,080 |
| ICICI | 16.00% | Rs.24,318 | Rs.4,59,080 |
Choosing SBI over ICICI saves Rs.2,28,120 over 5 years on a Rs.10 lakh loan!
Get Your SBI Project Report Today →
Example 2 — Rs.50 lakh loan for 7 years
| Bank | Rate | Monthly EMI | Total Interest |
| SBI | 8.50% | Rs.78,620 | Rs.16,00,080 |
| Bank of Baroda | 7.90% | Rs.77,406 | Rs.15,02,104 |
| HDFC | 12.00% | Rs.88,950 | Rs.24,71,800 |
Choosing Bank of Baroda over HDFC saves Rs.9,69,696 over 7 years on a Rs.50 lakh loan!
Get Your Detailed Project Report for Large Loans →
Factors That Affect Your Business Loan Interest Rate
CIBIL Score Most banks offer their lowest rates to borrowers with CIBIL scores of 750 and above. A CIBIL score below 700 can result in rates of 14 to 18 percent from fintech platforms and NBFCs.
Quality of Project Report and CMA Report A professionally prepared Project Report with strong DSCR and realistic projections reduces the bank’s perceived risk — and directly impacts the credit risk premium they add to your base rate. A weak or self-prepared report often results in a higher rate — or outright rejection.
Business Vintage Businesses operating for 3 or more years with consistent turnover get lower rates than new businesses.
Loan Amount and Tenure Larger loans with longer tenures may attract higher rates depending on the bank’s risk assessment.
Collateral Secured loans attract lower interest rates than unsecured or CGTMSE-backed loans.
Type of Business Manufacturing businesses eligible for SIDBI refinancing often get the lowest rates.
Get Your CMA Report for Best Rate →
How to Get the Lowest Interest Rate on Your Business Loan
1. Maintain CIBIL Score Above 750 Pay all existing EMIs and credit card dues on time — consistently.
2. Get a Professionally Prepared Project Report and CMA Report Banks assess risk through your documentation. A strong CMA Report with healthy DSCR shows the bank that your business is low-risk — resulting in a lower credit risk premium.
3. Apply to Multiple Banks Get pre-approval quotes from 2 to 3 banks before committing. Use the lowest quote to negotiate with your preferred bank.
4. Apply Under Government Schemes PMEGP, Mudra, and CGTMSE loans are subject to RBI-mandated rate ceilings — protecting you from excessive rates.
Get Your PMEGP Project Report →
5. Choose EBLR-Linked Loans For floating rate loans, choose EBLR-linked products — so your rate automatically reduces when the RBI cuts the repo rate.
Conclusion
Choosing the right bank and getting the right interest rate can save your business lakhs of rupees over the loan tenure. Public sector banks — particularly SBI, Bank of Baroda, and PNB — offer the lowest rates for MSMEs in 2026. But to qualify for these rates, your loan documentation must be strong enough to give the bank confidence in your repayment capacity.
A professionally prepared Project Report and CMA Report is not just a formality — it is the document that determines what interest rate you get, whether your loan is approved, and how much you save over the entire loan tenure.
At Sharda Associates our CA team prepares complete loan documentation for 12,500 plus businesses across India — giving every application the best possible chance of approval at the lowest available rate.
Call or WhatsApp — +91 89899 77769
Frequently Asked Questions
Q1 Which bank gives the lowest business loan interest rate in India 2026?
SBI and PNB offer some of the lowest business loan rates in India — starting as low as 8.00 to 8.25 percent per annum for qualified MSMEs. Bank of Baroda also offers competitive rates starting at 7.90 percent for MSME loans. To qualify you need a strong CIBIL score and a professionally prepared Project Report and CMA Report.
Q2 Can I get a business loan at 8 percent interest rate?
Yes — but only from public sector banks under specific MSME schemes with EBLR linkage. You need CIBIL score of 750 plus, valid Udyam Registration, and complete loan documentation including a CA-certified Project Report and CMA Report.
Q3 Do I need a Project Report to get the lowest interest rate?
Yes. Banks use your Project Report and CMA Report to assess your credit risk. A professionally prepared report with strong DSCR reduces your risk profile — and can directly result in a lower interest rate.
Q4 What is the interest rate for CGTMSE collateral-free loans?
CGTMSE loans carry rates between 8.50 and 13.00 percent per annum. To get approved you need a strong Detailed Project Report and Feasibility Report.
Q5 Are private bank business loan rates higher than public banks?
Yes — most private banks start at 11 to 12 percent while public banks like SBI offer rates from 8.00 percent. For long-term loans the difference in total interest can be lakhs of rupees.
Q6 How does CIBIL score affect business loan interest rate?
Most banks offer their lowest rates to CIBIL scores of 750 and above. A score between 700 and 750 results in higher credit risk premium. A score below 700 significantly limits your options.
Q7 Can Sharda Associates help me prepare documentation for the lowest rate banks?
Yes. Our CA team prepares Project Reports, CMA Reports, Detailed Project Reports, and Feasibility Reports accepted by SBI, PNB, Bank of Baroda, and all major banks — starting at Rs.2,999.