In our state, the Govt provide us loan without interference of bank. They give us loans to start new business and plus provide us 35% subsidy on that loan. Which basically equals as if it is a interest free loan or some other scheme where the rate of interest is hardly 4%. I want to start a business and should I go for this schemes? Please help.

Answered according to Hanafi Fiqh by Darulifta-Deoband.com

بسم الله الرحمن الرحيم

(Fatwa: 96/76/N=2/1438)

(1) You may take 35% of subsidy loan on condition that in view of the fixed interest rate of the loan that you will pay be paying in the name of the interest to the government it should not exceed the 35% of subsidy, rather it is less than it or equal to it. But if it is not so then you may also not take 35% of subsidy loan. In the first case it is possible to interpret that whatsoever you paid in the name of interest was as if you returned the amount of the subsidy to the government, while in the second case, it is fully interest according to Shariah and thus there is no explanation possible.

(2) After all, interest is interest, whether the rate of interest is less or more, it is necessary to avoid it. (Fatawa Darul Uloom Deoband 14: 491, Question: 61, Pub. Maktaba Darul Uloom Deoband); Thus, it shall not be lawful to take the loan with 4% interest. The Messenger of Allah (may peace and blessings of Allah be upon him) has cursed those who take interest and give interest. (Muslim Sharif 2:27, pub. Maktaba Ashrafia Deoband).

Allah knows Best!

Darul Ifta,
Darul Uloom Deoband