Rajasthan Industries Minister Rajendra Pareek Thursday announced an interest subsidy of 200-300 basis points for small and medium enterprises that set units in the backward regions of the state and help in their development.

The interest rate will be subsidised by 3 percentage points for small scale units, as per the definition given by the Ministry of Micro, Small and Medium Enterprises of the Government of India and 2 percentage points for medium scale units.

The decision was announced by Minister Pareek based on the subsidy rates recommended by the board of the Rajasthan State Industrial Development and Investment Corp (RIICO), the principal catalyst for industrialisation in the state.

"The subsidy will give a further boost to economically backward and tribal regions in our state. We hope more and more entrepreneurs are encouraged by this scheme to set up industries and create jobs for the local people, leading to all-around development."

The interest rate subsidy scheme would be applicable in the three tribal districts of Banswara, Dungarpur and Sirohi and the five industrially backward districts of Karauli, Baran, Sawai Madhopur, Dholpur and Pratapgarh. 

Financial assistance is provided by RIICO at 14.5 percent per annum. Entrepreneurs already get a rebate of 2 percent on timely service of the interest and installment obligations on the loan, an official statement said. 

They are also eligible for a further 1 percent rebate in the interest rate if they are classified as 'Good Borrowers'. The interest rebates announced under the scheme will be in addition to these rebates and for timely repayment of term loans.

"Hence, the effective rate of interest for 'Good Borrowers' who repay their loan and interest in time has become 8.5 percent per annum for these districts."

To promote development in underdeveloped districts, the Rajasthan government has two incentives schemes -- Tribal Area Industrial Promotional Scheme of 2009-10 and the Regional Industrialisation Promotion Scheme (Backward Districts) of 2011-12.

There are now nearly 2,500 running industries in these areas.

"The government has put in place a far sighted industrial policy to bring investments which ensure inclusive economic growth," the industries minister said.

"We are committed to achieving growth in all the regions and therefore our efforts are geared towards attracting investments to backward regions, to areas where traditional industry flourishes and areas which are rich in natural resources."