Processing of Applications:
The existing Common loan Application-cum-Appraisal Format applicable to all loans irrespective of limit will be applicable for financing to MSE sector.
- Issue of Acknowledgement of Loan Applications :
Each branch will issue an acknowledgement for loan applications received from the borrowers towards financing under this sector and maintain the record of the same.
- Disposal of Applications :
All applications for a credit limit or enhancement in existing credit limit up to Rs 2 lakh within two weeks;
For credit limit up to Rs 5 lakh within 4 weeks from the date of receipt, Provided the application is complete in all respects and is accompanied by all documents as per check list.
Loan applications for amounts exceeding Rs 5 lakh, within reasonable time frame.
- Register of Receipt/Sanction/Rejection of Applications :
a.) A register should be maintained at branch wherein the date of receipt, sanction/disbursement, rejection with reasons, should be recorded. The register should be made available to facilitate verification by the Bank’s officials including Zonal Manager during visit to the branch.
b.) Branch Manager may reject application (except in respect of SC/ST). In the case of proposals from SC/ST, rejection should be done at a level higher than Branch Manager.
c.) The reason for rejection will be communicated to the borrower in line with stipulation mentioned in the Fair Practice Lenders Code.
Types of Loans
MSE Units may be granted a variety of Credit facilities for their different needs which will include the following:
- Term Loan/ Demand Loan/ Deferred Payment guarantee
For acquisition of capital goods (excluding second hand), fixed assets, vehicles, Plant & machinery, purchase of land, construction of buildings etc. There is no provision in the Policy for allowing term loan against purchase of second hand machinery.
- Working Capital by way of Cash Credit, Overdraft etc for:
1. Purchase of raw material, components, stores and maintenance of stock of these items at minimum level and stock in process and finished goods.
2. Finance against receivables including receipted challans/invoices. 3. Meeting marketing expenses where the units have to incur large-scale expenditure towards marketing of their products.
(c) Bills Purchase/Discounting under L/C or outside L/C.
(d) Export Credit facilities like Packing Credit, FBP/UFBP.
(e) Letter of Credit on sight/usance basis for purchase of raw material / capital goods.
(f) Bank Guarantee for performance, advance payment, Tender Money, Security Deposit, Guarantees for getting orders, for procurement of raw materials etc.
Margin
| In case of factory land & building, overall margin of 20% |
25% uniform margin on stocks and receivables. For export credit margin may be stipulated @ 10%. |
| In case of Plant & Machineries and Equipment margin is proposed at 20%. |
|
Rules Relating to Take over of Accounts:
- Consistent growth in sales for last 3 years.
- Continuous profit for last 3 years.
- Credit rating of “A: or equivalent and above and no slippage in credit rating during last 3 years.
- The unit's assets (fixed as also current) are charged to the Bank and Promoter’s/Director’s personal guarantee are available..
- Asset coverage ratio of more than 1:5.
- Other take-over norms are complied with.
The category-wise maximum extent of cover under CGTMSE is as under:
| |
Upto Rs. 5 lakh |
Above Rs. 5 lakh upto Rs. 50 lakh |
Above Rs. 50 lakh upto Rs. 100 lakh |
| Micro Enterprises |
85% of the amount in default subject to a maximum of Rs. 4.25 lakh |
75% of the amount in default subject to maximum of Rs. 37.50 lakh |
Rs. 37.50 lakh plus 50% of amount in default above Rs. 50 lakh subject of overall ceiling of Rs. 62.50 lakh. |
| Women Entrepreneurs/Units located in North Eastern Region (including Sikkim) |
80% of the amount in default subject to a maximum of Rs. 40 lakh |
Rs. 40 lakh plus 50% of the amount in default above Rs. 50 lakh subject to overall ceiling of Rs. 65 lakh. |
Composite Loans:
- As per RBI guidelines, credit assistance to artisans, village and cottage Industries and other MSE units up to Rs. 100.00 Lakh for equipment finance or working capital or both should be considered as composite term loan.
- This will enable majority of Micro & Small Enterprises to avail loans from a single window eliminating the need for borrowing term loan from SFCs and working capital from Banks.
- This will also facilitate to sign one set of documents only instead of signing facility-wise separate documents.
Credit Rating
Considering the feedback received from Field Level functionaries, it has been decided that financing loan upto Rs. 1.00 Crore shall not be subject to internal credit rating.
- For aggregate exposure above Rs 1 crore, the rate of Interest is decided as per credit Rating.
The credit rating module of our Bank for MSEs will be as per Loan Policy document of our Bank.
- Rating from outside rating Agencies :-
Our Bank has entered into MOU with SMERA, Fitch Ratings India (P) Ltd., Dun & Brad Street and ICRA Ltd. for getting the SME borrowers rated by them. The National Small Industries Corporation (NSIC) has been appointed as nodal agency which provides subsidy to the units obtaining credit rating from any of the empanelled agencies to the Micro and Small Enterprises (manufacturing sector, i.e earlier SSI units). The Credit rating awarded by Rating Agencies under NSIC Subsidy Scheme is conclusive for borrower as well as lender.
However, in case of take over a/cs EXTANT guidelines shall continue.
Pricing
Risk of default in the MSME sector is spread amongst a wide base of borrowers and therefore the pricing.
- Would not be linked to credit rating upto certain limit, presently upto Rs. 1.00 Crore.
- Would be linked to credit rating of the constituent for credit limit above Rs. 1 Cr.
Also keeping in view the RBI directives from time to time.
