The Interest Subsidy Eligibility Certificate (ISEC) Scheme is the major source of funding for the khadi programme. It was introduced in May 1977 to mobilise funds from banking institutions to fill the gap in the actual fund requirement and its availability from budgetary sources. Under the ISEC Scheme, credit at the concessional rate of interest of 4 per cent per annum for capital expenditure as well as working capital is given as per the requirement of the institutions. The difference between the actual lending rate and 4 per cent is paid by the Central Government through KVIC to the lending bank and funds for this purpose are provided under the khadi grant head to KVIC.  Institutions registered with the KVIC/State Khadi and Village Industries Boards (KVIBs) can avail of financing under the ISEC scheme. Initially, the entire KVI sector was covered, but with the introduction of REGP for village industries (VI), the ISEC scheme now supports only the khadi and the polyvastra sector. However, all VI units existing on 31 March 1995, have been allowed to avail of this facility for the amount of bank finance availed as on that date or actuals, whichever is less and funds for this purpose are provided under the VI grant head.  The Institutions were able to improve their credit situation during the year under report. The extent of credit flow to the institutions under the scheme during 2002-03 to 2005-06 was Rs. 329.73 crore, Rs. 362.70 crore, Rs. 278.74 crore and Rs. 233.23 crore and subsidy provided by the Government through KVIC were Rs. 21.99, Rs. 18.77 crore, Rs. 26.09 crore and Rs. 22.38 crore respectively. Interest Subsidy Eligibility Certificates worth Rs.392.63 crore have been issued up to December 2006 to meet part of the working capital requirement of the institutions during 2006-07, against which loans actually availed by the institutions was around Rs. 260 crore compared to Rs. 356.94 crore sanctioned and Rs. 174.92 crore availed by the institutions as on 31 December 2005.