msmepolicy.pdf
TRANSCRIPT
MSME is defined as per RBI/GOI Definition, which is as follows
MSME constitutes:
Manufacturing Sector
Services Sector
Manufacturing Sector
Manufacturing sector refers to enterprises engaged in manufacture or production,
processing or preservation of goods. Please refer First Schedule to the Industries
(Development and Regulation) Act, 1951 for the list of eligible industries engaged in the
manufacturing sector. The definition of Micro, Small and Medium Enterprises under the
manufacturing sector is as below:
i. A micro enterprise is an enterprise where investment in plant and machinery [original
cost excluding land and building and the items specified by the Ministry of Small Scale
Industries vide its notification No. S.O. 1722(E) dated October 5, 2006 does not exceed
Rs. 25 lakh;
ii. A small enterprise is an enterprise where the investment in plant and machinery
[original cost excluding land and building and the items specified by the Ministry of
Small Scale Industries vide its notification No. S.O. 1722(E) dated October 5, 2006] is
more than Rs.25 lakh but does not exceed Rs.5 crore; and
iii. A medium enterprise is an enterprise where the investment in plant and machinery
(original cost excluding land and building and the items specified by the Ministry of
Small Scale Industries vide its notification No. S.O. 1722(E) dated October 5, 2006) is
more than Rs.5 crore but does not exceed Rs.10 crore.
Services Sector
Services sector refers to enterprises engaged in providing or rendering of services. These
will include small road & water transport operators (owning a fleet of vehicles not
exceeding ten vehicles), small business (whose original cost price of the equipment
used for the purpose of business does not exceed Rs.20 lakh) and professional & self
employed persons (whose borrowing limits do not exceed Rs.10 lakh of which not more
than Rs.2 lakh should be for working capital requirements except in case of
professionally qualified medical practitioners setting up of practice in semi-urban and
rural areas, the borrowing limits should not exceed Rs.15 lakh with a sub-ceiling of Rs.3
lakh for working capital requirements). The definition of Micro, Small and Medium
Enterprises under the services sector is as below:
i. A micro enterprise is an enterprise where the investment in equipment does not
exceed Rs.10 lakh;
ii. A small enterprise is an enterprise where the investment in equipment is more than
Rs.10 lakh but does not exceed Rs.2 crore; and
iii. A medium enterprise is an enterprise where the investment in equipment is more than
Rs.2 crore but does not exceed Rs.5 crore.
SME Defined
The Micro, Small and Medium Enterprises in Manufacturing and service sector are
defined by Reserve Bank of India as under as per MSMED ACT, 2006 -
Particulars Investment(*) in Plant & Machinery
Manufacturing Enterprises
Investment(#) in Equipments
Service Sector Enterprises
Micro Enterprises <= 25 lacs <=10 lacs
Small Enterprises >25 lacs & <= 500 lacs >10 lacs & <=200 lacs
Medium Enterprises >500 lacs & <=1000 lacs >200 lacs & <=500 lacs
(*) Investment in terms of original cost excluding land and building and the items
specified by the Ministry of Small Scale Industries vide its notification no. S.O. 1722 (E)
dated October 5, 2006
(#) original cost excluding land and building and furniture, fittings and other items not
directly related to the service rendered or as may be notified under the MSMED Act,
2006.
The Small and Micro (service) enterprises shall include small road & water transport
operators, small business, professional & self-employed persons, and all other service
enterprises engaged in activities, viz., consultancy services including management
services, composite broker services in risk and insurance management, third party
administration services (TPA) for medical insurance claim for policy holders, seed
grading services, training-cum-incubator centre, educational institutions, training
institutes, practice of law i.e. legal services, placement and management consultancy
services, advertising agency, trading in medical instruments, retail trade, training
centres, etc and which satisfy the definition of micro and small (service) enterprises in
respect of investment in equipment whose original cost price of the equipment used for
the purpose of business does not exceed Rs.10 lakh and Rs.2 crore respectively.
In Addition to above, the bank also selectively classifies certain business segments as
part of SME lending. The Channel funding/Vender financing is part of SME irrespective
of the obligor.
Micro and Small Enterprise Charter
The branches would give acknowledgement (with date of receipt and running
serial number) on the duplicate of the application received.
All loan applications for Micro and Small Enterprise up to a credit limit of Rs.
25,000 would be disposed of within 2 weeks and those up to Rs. 5 lacs within 4
weeks provided the loan applications are complete in all respects and
accompanied by a 'check list'. These time limits of 2 weeks /4 weeks are outer
limits only and we would endeavor to dispose of loan applications at the earliest.
While no collateral will be required for limit upto Rs. 5 lacs in the case of Micro
and Small Enterprise units, collateral for limits above Rs 5 lacs and upto Rs 25 lacs
would be called for, if considered necessary.
The Bank has already registered as Member Lending Institution with Credit
Guarantee Fund Trust Scheme for Small Industries (CGTSI) launched by SIDBI,
which provides guarantee cover of 75 % of the amount of default, in respect of
facilities upto Rs 25 lacs, without collateral security and/or third party guarantee.
A schematic product Zero Collateral Loans to SSI is available.
A composite loan limit of Rs 1 crore may be sanctioned to enable the Micro and
Small Enterprise entrepreneurs to avail of their working capital and term loan
requirement through Single Window.
A unit is considered as sick when any of the borrowal accounts of the unit
remains substandard for more than 6 months or there is erosion in the net worth
due to accumulated cash losses to the extent of 50% of its net worth during the
previous accounting year and the unit has been in commercial production for at
least two years. The rehabilitation package should be fully implemented within six
months from the date the unit is declared as potentially viable/viable. During this
six months period of identifying and implementing rehabilitation package we
may do "holding operation" which will allow the sick unit to draw funds from the
cash credit account at least to the extent of deposit of sale proceeds. Following
are broad parameters for grant of relief and concessions for revival of potentially
viable sick Micro and Small Enterprise units:
Interest on
Working Capital
Interest 1.5% below the prevailing fixed / prime lending rate,
wherever applicable
Funded Interest
Term Loan Interest Free
Working Capital
Term Loan
Interest to be charged 1.5% below the prevailing fixed / prime
lending rate, wherever applicable
Term Loan
Concessions in the interest to be given not more than 2 % (not
more than 3 % in the case of tiny / decentralized sector units)
below the document rate.
Contingency Loan
Assistance The concessional rate allowed for Working Capital Assistance
We also provide loans under Technology Upgradation Fund Scheme (TUFS) for
Textile and Jute Industrial units in Micro and Small Enterprise sector and to 21
Specified Industries in Micro and Small Enterprise sector for technology
upgradation under Credit Linked Subsidy Scheme (CLCSS).
Repayment programme would be fixed taking into account the sustenance
requirements, surplus generating capacity, the break-even point, the life of the
asset, etc., and not in an "ad hoc" manner. In respect of composite loan up to
Rs. 50,000 to artisans, village and cottage industries, repayment schedule may
be fixed for term loan component only, subject to SIDBI's requirements being
fulfilled. In the case of other borrowers affected by natural calamities, we may
convert drawings in excess of the value of security into a term loan repayable
over a reasonable period of time and provide further working capital and
extend/re-phase the installments due under term loans.
The rates of interests charged to Micro and Small Enterprise units will be linked to
their ratings (internal) and subject to the Bank's guidelines/Corporate Credit
Policy. The interest rates on loans upto Rs 2 lacs will not exceed BPLR. While no
penal interest will be charged for loans under priority sector upto Rs. 25,000
charging of penal interest in other cases will be as per the Bank/s guidelines.
While there will be no service charges/inspection charges on priority sector loans
upto Rs. 25,000, levy of such charges in other cases will be as per the Bank's
guidelines. We may waive insurance of assets in the following cases:
We may waive insurance of assets in the following cases:
No. Category Type of
Risk Type of Assets
(a) All categories of priority sector advances upto and
inclusive of Rs. 10,000
Fire &
other
risks
Equipment and
current assets
(b)
Advances to SSI sector upto and inclusive of Rs.
25,000 by way of -
Composite loans to artisans, village
and cottage industries Fire Equipment and
current assets
All term loans Fire Equipment
Working capital where these are
against non-hazardous goods Fire Current Assets