Business Loan EMI Calculator with True Cost
A generic EMI tool shows only the instalment on the headline rate. A business loan costs more than that, because lenders add a processing fee, 18 percent GST on it, and other charges, so the rate you actually pay is two to four points above the advertised one. This calculator shows your EMI, the real effective rate after all fees and GST, and models the interest-only moratorium period that new businesses often take.
Reducing-Balance EMI and Effective-Cost Model
The sanctioned business loan amount. Unsecured business loans in India commonly run from a few lakh up to around two crore.
Secured or MSME loans can start around 8.5%, while unsecured business loans typically range from 14% to 26%, depending on your profile.
Business loan tenures are usually shorter than home loans, often 12 to 60 months.
Processing fees usually run 1 to 3 percent, and 18 percent GST applies on the fee. Other charges cover insurance, inspection or documentation.
An interest-only setup period new businesses often take, typically 6 to 36 months. Leave 0 for a standard loan. The tenure above is the EMI-paying period after any moratorium.
Monthly EMI
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Principal
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Total interest
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Fees and GST
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Total cost of credit (interest plus fees)
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What your total outgo is made of: principal, interest and fees.
| Charge | Amount |
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The EMI Is the Easy Part, the Real Cost Is Hidden
Every EMI calculator can tell you the monthly instalment on a loan: put in the amount, the rate and the tenure, and out comes a number.
For a business loan, that number is true but incomplete, and relying on it alone is how business borrowers underestimate what their credit actually costs. A business loan carries charges that a home or personal loan calculator never shows, and those charges push the real cost meaningfully above the instalment and the advertised rate.
This calculator does the standard job first, computing your reducing-balance EMI exactly, and then it does the job that matters for a business borrower: it works out what the loan truly costs once the processing fee, the eighteen percent GST on that fee, and any other charges are included, and it expresses that as an effective annual rate you can compare honestly against other offers.
It also models the interest-only moratorium period that new businesses frequently negotiate, which a generic tool cannot represent at all.
Why does this matter so much for business loans specifically? Because business lending is priced and structured differently from consumer lending.
Lenders treat businesses as higher risk, so rates are higher and fees are heavier, and the fine print carries costs that are easy to overlook when you are focused on the headline EMI. A borrower who compares two lenders purely on advertised rate, ignoring that one charges a two percent processing fee and the other charges nothing, can easily choose the more expensive loan.
The honest framing is this: the EMI arithmetic itself is a commodity, identical whether the loan is for a home, a car or a business.
What this tool adds, and what justifies treating a business loan differently, is surfacing the fees and GST that turn a headline rate into a higher effective one, and modelling the moratorium structure unique to business financing. Those are the numbers a business owner actually needs to decide well, and they are exactly the numbers generic calculators leave out.
It is worth being explicit about the honest scope of this tool, because candour serves the borrower better than overclaiming. The EMI, the fee breakdown, the GST and the effective-rate approximation are all reliable for comparing loan offers and understanding true cost.
What the tool does not do is fetch live lender rates, guarantee any particular lender’s fee structure, or replace the sanction letter, since those vary by lender and by your individual profile. Use it to go into a lender conversation informed, to compare offers on a fair basis, and to avoid the common trap of judging a business loan on its headline rate alone; then confirm the exact figures on paper before you sign.
Why the Effective Rate Beats the Headline Rate
The most important number this calculator produces is not the EMI, it is the effective annual rate, and understanding it changes how you shop for a business loan.
The headline rate is what the lender advertises; the effective rate is what you actually pay once the cost of the fees is spread across the life of the loan.
Consider a typical case. A ten lakh business loan at a sixteen percent headline rate looks like a sixteen percent loan. But the lender charges a two percent processing fee, twenty thousand rupees, and eighteen percent GST on that fee adds another three thousand six hundred, and there might be five thousand of documentation or inspection charges with its own GST on top.
That is nearly thirty thousand rupees paid upfront, over and above every rupee of interest. Spread across a three-year loan, those fees add close to a percentage point to the true annual cost, so the sixteen percent loan actually costs closer to seventeen percent. The calculator computes this gap and shows it plainly.
The gap between headline and effective rate is not fixed; it depends on the fee structure and, crucially, the tenure. Because upfront fees are paid once but spread over the loan life, a short loan feels their drag more heavily per year than a long one.
The same thirty thousand of fees on a one-year loan adds roughly three percent to the annual cost, but on a five-year loan only about six-tenths of a percent. This is why comparing business loans purely on rate is misleading, and why a lender offering a lower rate but higher fees on a short tenure can be the more expensive choice.
A concrete comparison makes the tenure effect vivid. Take the same thirty thousand rupees of fees on a ten lakh loan. Over one year, those fees alone add about three percentage points to the annual cost, so a fifteen percent headline loan effectively costs around eighteen percent.
Stretch the identical loan and fees over five years and the fee drag falls to roughly six-tenths of a percentage point, making the effective cost about fifteen point six percent. The interest rate did not change and the fees did not change, yet the effective cost swung by well over two points purely on tenure. This is precisely the kind of distortion that judging a loan by its headline rate hides, and precisely what the effective-rate figure on this page exposes.
The practical use is direct: when you have two or more offers, run each through the calculator with its own rate and fees, and compare the effective rates rather than the headline ones.
The lender with the higher advertised rate but lower fees may well be cheaper in truth. This single comparison, which no generic EMI calculator enables, can save a business a substantial sum over the loan, and it is the reason this tool exists as a distinct thing rather than another plain EMI page.
How GST Loads onto Loan Charges
Goods and Services Tax is a quiet but real component of business loan cost, and because it applies to the fees rather than the interest, it is easy to miss when budgeting. Understanding where GST lands helps you read a sanction letter correctly and avoid being surprised at disbursal.
Interest on a loan does not attract GST. But the fee-based charges do, at eighteen percent.
So the processing fee, which is the largest of these, carries eighteen percent GST on top: a two percent processing fee on a ten lakh loan is twenty thousand rupees, and the GST adds three thousand six hundred, making the real processing cost twenty-three thousand six hundred. The same eighteen percent applies to documentation charges, inspection or valuation fees on secured loans, and similar service charges. Only the pure interest escapes it.
This matters at two moments. First, at disbursal, because these charges are usually deducted upfront from the loan amount or collected separately, so the money reaching your business account can be noticeably less than the sanctioned figure.
A ten lakh sanction with thirty thousand of fees and GST deducted disburses as roughly nine lakh seventy thousand, and planning your use of funds around the full ten lakh would leave you short. Second, when comparing offers, because a lender quoting a lower fee percentage still adds the same eighteen percent GST on it, so the comparison must be made on the GST-inclusive figure.
The calculator makes all of this explicit, breaking out the processing fee, the GST on it, any other charges and their GST, and the total upfront cost, so there is no ambiguity about what leaves your account before the loan even begins working for you.
Seeing the GST-inclusive total is often a mild shock, which is exactly the point: it is far better to know it while comparing offers than to discover it on disbursal day.
There is a negotiation angle here too. Because processing fees are set by the lender rather than fixed by regulation, they are often negotiable, particularly if you have a strong profile or an existing relationship with the lender, or if a competing offer carries a lower fee.
A borrower who understands that the fee plus its GST materially affects the effective rate is in a position to push back on it, or to ask for a waiver as a condition of taking the loan. Walking in knowing the true cost, rather than being dazzled by the headline rate, turns the fee from a fixed cost into a point of leverage, and even a partial reduction flows straight through to a lower effective rate.
The Moratorium: Breathing Room That Is Not Free
New businesses and expansion projects often cannot generate revenue immediately, so lenders frequently offer a moratorium, an initial period during which the borrower pays only the interest, or sometimes nothing, before the full EMI begins.
This is genuinely useful for cash flow during a setup phase, but it is not free, and the calculator shows exactly what it costs.
During an interest-only moratorium, you pay the monthly interest on the full principal but repay none of the principal itself, so the loan balance does not reduce at all during that period.
On a ten lakh loan at sixteen percent, the interest-only payment is around thirteen thousand three hundred a month, and over a six-month moratorium that is roughly eighty thousand rupees of interest paid while your outstanding principal stays at the full ten lakh. Only when the moratorium ends does the normal EMI begin and the principal start to fall.
The trade-off is clear once you see it laid out. The moratorium reduces your cash outflow in the early months, which can be vital when a new venture has costs but little income, and it lets you direct scarce early capital into the business rather than into repayment.
But every rupee of interest paid during the moratorium is additional cost you would not incur on a loan that began amortising immediately, and the total interest over the life of the loan is higher as a result. The calculator quantifies this extra interest so you can judge whether the early breathing room is worth the added lifetime cost.
The sensible rule is to take a moratorium only when the setup period genuinely needs it, and to keep it as short as your cash flow allows.
A moratorium taken out of caution when the business could have serviced a full EMI is simply money handed to the lender for no benefit. Used deliberately, though, for a project that truly has no early revenue, it can be the difference between a manageable launch and a cash crunch, and modelling it accurately, as this tool does, lets you make that call on the numbers.
It helps to think of the moratorium as buying time with money. The interest paid during the interest-only phase is, in effect, the price of deferring principal repayment until the business can afford it.
Whether that price is worth paying depends entirely on what the deferral enables: if the breathing room lets the business reach revenue that would otherwise have been impossible under an immediate full EMI, the moratorium interest is a sound investment in survival. If the business could have serviced the full EMI anyway, the same interest is dead weight. The calculator puts the price on the table so the judgement is made with eyes open rather than on the vague comfort of lower early payments, which is how moratoriums are too often taken.
Three Businesses, Three True Costs
The same calculator tells very different stories depending on the loan structure. Here are three worked the way it does.
Mumbai: comparing two offers on effective rate
Rakesh in Mumbai needs fifteen lakh and has two offers: one at fifteen percent with a three percent processing fee, another at sixteen percent with no fee.
On headline rate the first looks cheaper. Running both through the calculator, the three percent fee plus GST on the first loan pushes its effective rate above the second once the tenure is factored in, and Rakesh chooses the higher-headline, no-fee loan, saving money the advertised rates would have hidden.
Pune: a startup taking a moratorium
Sneha in Pune borrows twenty lakh to set up a manufacturing unit that will not earn for its first year.
She takes a twelve-month interest-only moratorium, and the calculator shows the interest-only monthly amount she must service during setup, the total interest that year adds, and the EMI that begins afterwards. Seeing the added lifetime cost, she negotiates the moratorium down to nine months once she realises production can start earlier, trimming the extra interest.
Delhi: an MSME secured loan
Arjun in Delhi qualifies for a secured MSME loan at ten percent, far below unsecured rates, against his commercial property.
The calculator shows a much lower EMI and effective rate than an unsecured loan would carry, and the modest processing fee on the larger secured amount still adds GST he factors in. The low effective rate confirms that pledging collateral, where he can, is worth the lower cost of credit for his working-capital needs.
Arjun’s case points to a broader principle worth stating plainly: for a business, the cheapest capital is almost always secured or scheme-backed, and the most expensive is unsecured and urgent. The gap is not small, an unsecured loan at twenty-two percent against a secured one at ten percent more than doubles the cost of the same borrowing, and over a multi-year term that difference can equal a meaningful share of the loan itself.
So before reaching for a quick unsecured loan, it is almost always worth checking whether collateral can be pledged or whether an MSME scheme applies, because the effort of the extra paperwork is repaid many times over in lower effective cost. The calculator makes that saving concrete by letting you compare the two structures side by side on effective rate.
Six Things to Check Before Taking a Business Loan
Compare on effective rate, not headline
Always add the processing fee and GST into an effective annual rate before comparing lenders. A lower advertised rate with heavy fees can cost more than a higher rate with none, especially on short tenures.
Check what actually disburses
Upfront fees and GST are often deducted from the sanctioned amount, so less money reaches your account than the loan figure. Plan your use of funds around the net disbursal, not the gross sanction.
Use a moratorium only if you must
Interest-only breathing room helps a genuine setup phase but adds lifetime interest. Take it only when early cash flow truly cannot support a full EMI, and keep it as short as possible.
Prefer secured or MSME schemes where eligible
Collateral-backed and government MSME loans carry materially lower rates than unsecured business loans. If you qualify for a Mudra, CGTMSE or similar scheme, the saving on effective cost is large.
Read the prepayment terms
Foreclosure and part-payment charges, often up to a few percent after a lock-in, affect the cost of clearing the loan early. If you expect to prepay from business cash flow, favour a lender with low or no such charges.
Match the tenure to the purpose
Fund short-term working capital with short tenures and long-life assets with longer ones. A tenure far longer than the asset or need it funds piles on avoidable interest over the loan’s life.
Term Loan or Working Capital, and Why It Changes the Sum
Business borrowing is not one product but several, and the two most common, the term loan and the working capital facility, behave differently enough that the EMI calculation applies cleanly to one and only loosely to the other. Knowing which you are taking shapes how you read the numbers this tool produces.
A term loan is what this calculator models directly: a fixed amount borrowed for a fixed period, repaid in equated monthly instalments, typically used to buy an asset such as machinery, a vehicle or premises, or to fund a defined expansion.
The EMI, the effective rate and the moratorium logic all fit a term loan precisely, because the structure is exactly the amortising loan the arithmetic assumes. For any term loan, the figures here are directly usable.
Most business borrowers taking a fixed-amount loan for a specific purpose are taking a term loan, so for the common case the calculator applies exactly, and the distinction below matters mainly if a lender steers you toward a revolving facility instead.
A working capital facility, by contrast, is usually a revolving line such as a cash credit or overdraft, where you draw and repay flexibly up to a limit and pay interest only on the amount actually used at any time, rather than a fixed EMI on the full sanction.
For these, an EMI figure is not the right mental model, though the calculator is still useful for the sub-case where a working capital need is funded by a fixed-tenure term loan rather than a revolving line, which is increasingly common for smaller businesses. When in doubt, ask the lender whether the facility amortises in EMIs or revolves, because only the former is an EMI product.
The practical guidance follows from the purpose. Fund a one-time asset purchase or a defined project with a term loan and use this calculator to size the EMI and true cost.
Fund fluctuating day-to-day needs, inventory that turns over, receivables that ebb and flow, with a revolving working capital line, and judge it on the interest rate and the fees rather than on an EMI. Matching the loan structure to the need is a basic discipline that saves both cost and cash-flow strain, and it determines whether the numbers on this page apply as-is.
The Tax Angle That Lowers the Real Cost
One feature of business loans quietly reduces their true cost in a way personal borrowing does not, and it is worth factoring into any comparison: the interest on a business loan is generally a deductible business expense.
This does not appear in the EMI or the effective rate, but it changes the after-tax cost of the loan meaningfully.
Because interest paid on a loan taken for business purposes can typically be set against the business’s taxable profit, the effective cost of that interest is reduced by your marginal tax rate. If a business pays interest and is in a tax bracket where each rupee of expense saves a meaningful fraction in tax, the real, after-tax cost of the borrowing is lower than the headline interest suggests.
A loan that costs sixteen percent before tax might cost noticeably less after the deduction, depending on the applicable rate. Processing fees and other charges incurred for the business are similarly deductible in most cases.
This tax shield is one reason a business loan can be a more sensible way to fund a business need than, say, a personal loan or drawing down personal savings, even at a similar headline rate, because only the business loan’s interest earns the deduction.
It is also why comparing a business loan’s cost purely against a consumer loan’s rate can mislead; the after-tax comparison is the fair one. The calculator shows the pre-tax figures, which are the right basis for comparing one business loan against another, and you then apply your own tax position to judge the after-tax cost against non-business alternatives.
A word of caution keeps this honest: the deductibility depends on the loan genuinely being used for business purposes and on your specific tax situation, and the rules and rates change.
Treat the tax shield as a real but individual benefit to confirm with your accountant rather than a fixed discount to assume. The point for this calculator is that its pre-tax numbers are the correct common basis for comparing business loans with each other, and the tax benefit is an additional, profile-specific reduction on top for genuine business borrowing.
Quick Reference: Business Loan Cost Factors
| Factor | Typical range |
|---|---|
| Unsecured business loan rate | 14% to 26% a year |
| Secured or MSME loan rate | From around 8.5% a year |
| Processing fee | 1% to 3% of the loan |
| GST on fees and charges | 18% |
| Tenure | 12 to 60 months typically |
| Moratorium (setup period) | 6 to 36 months where offered |
| Prepayment or foreclosure charge | 0% to 4% after a lock-in |
| Effective vs headline rate gap | Roughly 2 to 4 points, tenure-dependent |
Frequently Asked Questions on Business Loan EMIs
How is a business loan EMI calculated?
A business loan EMI uses the standard reducing-balance formula, the same as any other loan: the instalment depends on the principal, the monthly interest rate and the number of months.
Each EMI covers the interest on the outstanding balance plus a part of the principal, and as the balance falls the interest portion shrinks while the principal portion grows. This calculator computes that EMI exactly, then goes further to show the fees and effective rate that make a business loan cost more than the EMI alone suggests.
Why does a business loan cost more than the EMI shows?
Because the EMI reflects only the interest on the headline rate, while a business loan also carries a processing fee, eighteen percent GST on that fee, and often documentation or inspection charges. These are paid upfront, over and above every EMI, and they raise the true cost of the loan.
Spread across the loan term they add roughly two to four percentage points to the effective annual rate. This calculator surfaces those charges and the effective rate, which a generic EMI tool leaves out entirely.
What is the effective interest rate on a business loan?
The effective rate is what you actually pay once the upfront fees and GST are spread across the loan, as opposed to the headline rate the lender advertises. If a sixteen percent loan carries a two percent processing fee plus GST and some charges, the effective rate over three years is closer to seventeen percent.
The gap depends on the fee size and the tenure, since fees paid once weigh more heavily on a short loan. Comparing effective rates, not headline rates, is the honest way to choose between lenders.
Is GST charged on business loan interest?
No, GST is not charged on the interest itself. It applies to the fee-based charges: the processing fee, documentation charges, inspection or valuation fees, and similar service charges all attract eighteen percent GST.
So while your interest is GST-free, the upfront costs are eighteen percent higher than their headline figure, and a two percent processing fee effectively costs about two point three six percent once GST is added. The calculator breaks out the GST on each charge so you see the true upfront cost.
How much processing fee do business loans charge?
Processing fees on business loans typically range from one to three percent of the loan amount, plus eighteen percent GST on the fee. On a ten lakh loan, a two percent fee is twenty thousand rupees, and GST adds three thousand six hundred.
Some lenders cap the fee or waive it during promotions, while others charge at the higher end for unsecured or higher-risk loans. Because the fee is paid upfront and affects the effective rate, it is a key point of comparison between lenders, not a detail to overlook.
What is a moratorium period on a business loan?
A moratorium is an initial period, often six to thirty-six months, during which you pay only the interest on the loan, or sometimes nothing, before the full EMI begins. It is designed for new businesses or projects that need time to generate revenue before they can service a full instalment.
It eases early cash flow, but because the principal does not reduce during the moratorium, you pay extra interest over the loan’s life. The calculator models this, showing the interest-only amount and the added cost.
Does a moratorium increase my total loan cost?
Yes. During an interest-only moratorium you pay interest on the full principal without reducing it, so that interest is pure additional cost compared with a loan that began amortising immediately.
On a ten lakh loan at sixteen percent, a six-month moratorium adds roughly eighty thousand rupees of interest. The benefit is lower cash outflow during a setup phase; the cost is higher lifetime interest. Take a moratorium only when early cash flow genuinely requires it, and keep it as short as your business can manage.
What is the difference between secured and unsecured business loans?
A secured business loan is backed by collateral such as property, equipment or fixed deposits, which lowers the lender’s risk and so carries a lower interest rate, often from around eight and a half percent.
An unsecured loan requires no collateral, so the lender charges more to cover the higher risk, typically fourteen to twenty-six percent. If you can pledge collateral, a secured loan usually has a much lower effective cost, which the calculator makes clear when you enter the respective rates.
What are MSME loan schemes and are they cheaper?
MSME schemes are government-backed lending programmes for micro, small and medium enterprises, such as Mudra loans under PMMY and collateral-free loans under CGTMSE. They often carry subsidised or lower interest rates and relaxed collateral requirements for eligible businesses, making them materially cheaper than standard unsecured business loans.
Eligibility depends on business size, sector and registration, and processing can take longer. If you qualify, the lower effective rate is usually well worth the extra paperwork, so check these schemes before taking a costlier commercial loan.
How much loan amount can a business get?
It varies widely by lender and loan type. Unsecured business loans commonly run from a few lakh up to around two crore, while collateral-free MSME schemes often cap lower, and secured loans against substantial collateral can go higher.
The amount a specific business qualifies for depends on its turnover, profitability, credit profile, vintage and the collateral offered. This calculator works for any loan amount you enter, so you can model different sanction sizes and see how the EMI, fees and effective cost change with each.
What tenure should I choose for a business loan?
Match the tenure to the purpose of the loan. Short-term needs like working capital suit short tenures of a year or two, while loans for long-life assets like machinery or premises can justify longer tenures.
A longer tenure lowers the EMI, easing monthly cash flow, but increases the total interest paid, and stretching a tenure well beyond the life of what it funds simply piles on avoidable cost. Use the calculator to see how the EMI and total interest change with tenure and pick the shortest your cash flow comfortably allows.
Can I prepay or foreclose a business loan early?
Usually yes, after an initial lock-in period of six to twelve months, though lenders often charge a prepayment or foreclosure fee of up to about four percent of the outstanding principal, plus GST on that charge.
Prepaying reduces your total interest, so it can be worthwhile if you have surplus business cash flow, but the charges eat into the saving, so check them first. If you expect to prepay, favour a lender with low or no foreclosure charges, since that flexibility can be worth more than a marginally lower rate.
Does my credit score affect the business loan rate?
Yes, significantly, especially for unsecured loans. Both your business credit profile and the promoter’s personal credit score influence the rate offered, with a strong score, often around seven hundred fifty or above, unlocking lower rates and larger limits.
A weak or thin credit history pushes the rate toward the higher end of the range or leads to rejection. Because a lower rate directly reduces both the EMI and the effective cost, maintaining a healthy credit profile before applying is one of the most effective ways to cut what a business loan costs.
How accurate is this calculator?
The EMI arithmetic is exact for the inputs you enter, and the fee, GST and moratorium calculations follow the standard way Indian lenders structure these costs.
The effective rate is a clear, transparent approximation that spreads the upfront fees across the loan term as an annual add-on, which is ample for comparing offers. Actual lender figures can vary slightly with compounding conventions, rounding and specific policies, so treat the result as a well-grounded estimate for decision-making, and confirm the exact numbers against the lender’s sanction letter before signing.
What documents do I need for a business loan?
Lenders typically ask for business registration or incorporation proof, GST registration, Udyam or MSME certificate where applicable, bank statements for the past six to twelve months, audited financials including profit and loss and balance sheet, income tax returns, and KYC documents for the promoters. Secured loans additionally require collateral documents.
Requirements vary by lender and loan size, and stronger documentation of stable turnover and profitability improves both approval odds and the rate offered. Preparing these in advance speeds up processing and strengthens your negotiating position.
Should I choose a business loan or a personal loan for my business?
For most business needs a business loan is more appropriate, as it can offer larger amounts, longer tenures, interest that is a deductible business expense, and features like moratoriums suited to business cash flow.
Personal loans are quicker and need less documentation but usually carry higher rates and smaller limits, and the interest is not a business deduction. For a small, urgent, short-term need a personal loan may occasionally make sense, but for genuine business financing the business loan, especially a secured or MSME one if you qualify, is generally the cheaper and better-structured choice.
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Disclaimer and Editorial Transparency
This business loan EMI calculator computes the monthly instalment using the standard reducing-balance method, then adds the business-loan-specific costs that generic EMI tools omit: the processing fee, eighteen percent GST on fee-based charges, any documentation or inspection charges, and their effect on the effective annual rate.
It also models an optional interest-only moratorium period and its added interest cost. The effective rate is a transparent approximation that spreads upfront fees across the loan term to enable honest comparison between offers.
All figures are estimates based on the inputs you provide. Actual interest rates, fees, GST treatment, moratorium terms and prepayment charges vary by lender, loan type, collateral and your business profile, and lenders may use slightly different compounding or rounding conventions, so confirm every figure against the sanction letter before committing. Nothing here is financial advice or a loan offer. For regulatory information on lending you can refer to the Reserve Bank of India at rbi.org.in, and for GST matters to the Central Board of Indirect Taxes and Customs at cbic.gov.in. This tool stores none of the details you enter.