cboa descriptive msme

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MSME ADVANCES Financing for Micro Industries, Small Industries, Tiny Industries, Small Scale Industries, Small Scale Service & Business Enterprises (SSSBE- industry related) and Medium Enterprises are defined as MSME Advances 1.GIST OF MSME POLICY OF THE BANK

MSME Sector – Micro, Small and Medium Enterprises Sector defined as per MSMED

Act 2006. Medium Enterprises defined for the first time Micro and Small Enterprises Sector include Road & Water Transport Operators, Small

Business, Retail Trade, Professional and Self Employed & other Service Sector Enterprises.

Items to be included & excluded while calculating Original investment in Plant & Machinery is defined.

Provisions of Memorandum of Micro & Small Enterprises explained. Mandatory target for lending to Micro & Small Enterprises stipulated. 10% annual growth

in Micro Number of Accounts, 20% growth in Micro & Small Enterprises outstanding and Micro Enterprises share constitute 60% of total outstanding under MSE as at March of previous year.

Classification of finance to MSME Sector defined. MSME Wing in HO is established for focused attention to MSME related matters. Exclusive SME Sulabhs for centralized processing of credit proposals emanating from

branches/clients are established at various Centres. Bank has established Specialized SME branches for focused attention to MSMEs (both

existing and prospective clients). Bank has identified branches which have substantial exposure to MSME sector as SME

Focus Branches and SME Designated branches, for increasing credit exposure to MSME sector.

Simplified application forms (irrespective of amount) are devised for Micro and Small Enterprises.

Online system of submission of application by MSMEs with tracking facility is introduced.

Time Norms for disposal of Loan applications in tune with RBI and BCSBI guidelines stipulated.

Guidelines with regard to rejection of MSME applications put in place. No collateral security and/or third party guarantee to betaken for loans upto Rs.10 lakhs

to Micro & Small Enterprises and coverage of all such eligible loans under Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGMSE) is made mandatory.

Covering of all eligible collateral security and/or third party guarantee free loans Upto Rs.100 Lakhs under Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGMSE).

Scheme of SME Debt Restructuring and Scheme of Rehabilitation of SICK Micro and Small Enterprises as per RBI guidelines are put in place.

Rate of interest on loans and service charges to MSMEs are streamlined. Concession in rate of interest and service charges etc are also extended depending on

merits. Takeover norms for MSME accounts described Cluster based approach to lending defined. Area/Cluster specific schemes are

introduced giving due consideration to the potential for the benefit of MSMEs.

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Code of Bank‟s commitment to Micro & Small enterprises under BCSBI defined. 2. DEFINITION OF MSME:

Industries Services Micro Enterprises *

The investment in plant and machinery (original cost) does not exceed Rs.25 lakhs.

The investment in equipment (original cost) does not exceed Rs.10 lakhs.

Small Enterprises

Investment in plant and machinery (original cost) is more than Rs.25 lakhs but does not exceed Rs.500 lakhs.

The investment in equipment (original cost) is more than Rs.10 lakhs but does not exceed Rs.200 lakhs.

Medium Enterprises

Investment in plant and machinery (original cost) is more than Rs.500 lakhs but does not exceed Rs.1000 lakhs.

The investment in equipment (original cost) is more than Rs.200 lakhs but does not exceed Rs.500 lakhs.

* Khadi and Village Industries Sector (KVI) - All advances granted to units in the KVI sector, irrespective of their size of operations, location and amount of original investment in Plant & Machinery / equipments to be considered as advances extended to Micro Enterprises sector.

Credit facilities extended to Micro & Small Industries to be classified as Priority

sector. Credit facilities extended to Medium Enterprises to be classified as Non-Priority

sector Lending to NBFCs and other intermediaries for onward lending to ME Sector may be

classified under ME Sector and such Advances are to be reported under Non-Priority Sector.

Obtaining Memorandum for MSME is not mandatory for MSE and mandatory for Medium industries.

3. INDIRECT FINANCE TO MSME:

- Persons involved in assisting the decentralized sector in the supply of inputs to and marketing of outputs of artisans, village and cottage industries.

- Advances to co-operatives of producers in the decentralized sector viz. artisans, village and cottage industries.

- Bank credit to Micro Finance institutions (MFI) extended on or after 01.04.2011 for onlending to individuals and also to members of Self Help Groups (SHGs)/ Joint Liability Groups (JLGs) under Micro and Small Enterprises (Manufacturing as well as Services) subject to compliance of guidelines specified here below. a) Margin cap at 12% for all MFIs. The interest cost is to be calculated on average

fortnightly balances of outstanding borrowings and interest income is to be calculated on average fortnightly balances of outstanding loan portfolio of qualifying assets.

b) Interest cap on individual loans at 26% per annum for all MFIs to be calculated on a reducing balance basis.

c) Only three components are to be included in pricing of loans viz., a processing fee not exceeding 1% of the gross loan amount, the interest charge andthe insurance premium.

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d) The processing fee is not to be included in the margin cap or the interest cap of 26%. e) Only the actual cost of insurance i.e. actual cost of group insurance for life, health

and livestock for borrower and spouse can be recovered; administrative charges may be recovered as per IRDA guidelines.

f) There should not be any penalty for delayed payment g) No Security Deposit / Margin are to be taken

- Loans granted by banks to NBFCs for on-lending to Small and Micro Enterprises. 4. CLASSIFICATION OF MSME ADVANCES:

- Micro and small – mfg/service including retail trade enterprises to be classified as Priority sector.

- Export credit to MSE units – Priority sector. - Medium enterprises to be classified as Non priority sector.

5. TARGETS FOR LENDING TO MSMEs (HO Cir 469/2013)

Priority sector advances (which include the micro and small enterprises (MSE) sector) constitute 40 per cent of Adjusted Net Bank Credit (ANBC) or credit equivalent amount of Off-Balance Sheet Exposure, whichever is higher.

a. Achieve a 20 % growth over the outstanding MSE of previous financial year closure in credit to Micro and Small Enterprises

b. Achieve 10 % annual growth in the number of Micro Enterprise accounts. c. In order to ensure that sufficient credit is available to Micro Enterprises within the Micro

and Small Enterprises sector, branches/offices should ensure that share of Micro Enterprises in total lending to Micro and Small Enterprises sector is as under:

Out of total advances to Micro and Small Enterprises:

40% of the total advances to Micro and Small Enterprises sector should go to:

Micro (Manufacturing) Enterprises having investment in plant and machinery up to Rs.10 lakhs and Micro (Service) Enterprises having investment in equipment up to Rs.4 lakhs

20% of the total advances to Micro and Small Enterprises sector should go to:

Micro (Manufacturing) Enterprises with investment in plant and machinery above Rs.10 lakhs and up to Rs.25 lakhs, and Micro (Service) Enterprises with investment in equipment above Rs.4 lakhs and up to Rs.10 lakhs

Thus, 60% of Micro and Small Enterprises advances as at the end of March of previous year should go to the Micro Enterprises.

6. TIME NORMS FOR DISPOSAL OF SME PROPOSALS: (HO Cir 48/2014)

Loan amount Category of borrower

Sanctions at

Branch Circle office Head office

Up to Rs 25000/- Micro & Small 2 Weeks Not applicable

Medium 2 Weeks

Beyond Rs 25000/- Micro & Small 2 Weeks 2 Weeks 2 Weeks

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, up to Rs 5 alcs Medium 4 Weeks 4 Weeks 4 Weeks

Beyond Rs 5 alcs, up to Rs 25 lacs

Micro & Small 4 Weeks 4 Weeks 4 Weeks

Medium 30 days 45 days 45 days

Above Rs 25 lacs Micro & Small 8 Weeks 8 Weeks 8 Weeks

Medium 30 days 45 days 8 Weeks

Provided such applications are complete in all respects. Branches to issue Token of Service on receipt of application Rejection Of Credit Proposals of MSME is subject to concurrence of the next higher

authority.

7. DELAYED PAYMENT TO MICRO AND SMALL ENTERPRISES

The buyer to make payment on or before the date agreed in writing. The agreement between seller and buyer shall not exceed more than 45 days.

The buyer fails to make payment of the amount to the supplier, he shall be liable to pay compound interest with monthly rests to the supplier on the amount from the appointed day or, on the date agreed on, at three times of the Bank Rate notified by Reserve Bank.

8. SECURITY NORMS FOR MSME ADVANCES:

- In respect of loans/advances to Micro and Small Enterprises (including loans sanctioned to Khadi & Village Industries and other Govt. sponsored schemes), no collateral security/third party guarantee is insisted, as under:

i. Upto Rs.10 lakhs (which is mandatory). ii. Upto Rs.25 lakhs in respect of units whose track record and financial position are

good as per Bank records. iii. Upto Rs.100 lakhs whose borrowal accounts are covered under Credit

Guarantee Fund Scheme for Micro and Small Enterprises (CGMSE). - In respect of loans/advances to Micro, Small Enterprises other than above a (i) to (iii)

and Medium Enterprises, the guidelines for obtaining collateral security/ third party guarantee on case to case basis as determined by the Bank shall continue.

- Coverage under Credit Guarantee Fund for Micro and Small Enterprises (CGMSE):

i. Loans to Micro & Small Enterprises upto Rs.10 Lakhs coverage under CGMSE is mandatory (subject to exclusions noted here below).

ii. Loans/advances granted upto Rs.100 lakhs to Micro and Small Enterprises without collateral security and/or third party guarantee are to be covered under CGMSE unless the borrower provides Collaterals to the extent of 100% or more of the loan amount and hence no authority was empowered to permit waiver of obtention of CGMSE cover.

- This stipulation is relaxed subject to the following:

i. The borrower provides primary security or primary and collateral security put together in the form of land and building to the extent of 100% of the sanctioned

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limit, in addition to the security of assets created out of our finance (exposure, if more than one limits are sanctioned).

ii. The borrower shall be rated as low, normal or moderate risk based on the latest balance sheet available.

iii. All the accounts of the borrower shall be under standard category.

Presently, CGMSE cover is not available for credit facilities extended to retail traders, educational institutions, training institutes, training-cum-incubator centres, Self Help Groups (SHG), Joint Liability Groups (JLG) and Medium Enterprises.

9. TAKE OVER NORMS FOR MSME ADVANCES

The respective Sanctioning Authority may permit take over of Borrowal accounts from other Banks/ FIs upto his normal delegated powers without obtaining permission/ clearance from the next Higher Authority. This is applicable for all branches i.e. both Specialised and other than Specialised SME branches.. However, in case of accounts risk rated as Moderate Risk - to be sanctioned by the circle head as below: If circle is headed by DGM - ,Post sanction clearance from GM (HO) to be obtained If circle is headed by GM and for HO Power accounts - Respective sanctioning authority. ( Ho Cir 270/2012) As far as possible, borrowal accounts of enterprises where project undertaken is yet to be completed may not be taken over from other banks/ FIs. However, in exceptional cases where take over of such project is necessitated, the same can be permitted subject to proper and justifiable reasons and duly undertaking a fresh project appraisal by PAG, CO/HO.- HO Cir 270/2012

Current ratio can be relaxed upto 1. Debt Equity Ratio may be relaxed upto 3. NOC/Consent letter need not be insisted.

10. REJECTION OF CREDIT PROPOSALS UNDER MSME:

- Applications for credit facilities from SC/ST customers shall not be rejected at branch level and such applications shall be referred to the next higher authorities for their prior decision / permission. However, proposals of CAC of the Board/MC Powers may be rejected by C&MD or ED in the absence of C&MD.

- Whenever applications for loans under Govt sponsored schemes are rejected by

the Branch Manager himself / herself for valid reasons, a register is to be maintained to this effect which shall be examined by the controlling authorities during their branch visits.

- Rejection of export credit proposals shall be immediately reported to C&MD

through the concerned Wing at HO.

11. REQUIREMENT OF RISK RATING OF MSME ACCOUNTS:

o The risk rating of eligible borrowers is a pre sanction exercise. All borrowers with exposure of Rs.2 Lakhs and above are rated individually and under the

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appropriate risk rating models developed for the purpose. The individual borrower ratings are subject to annual review.

Internal Rating Model Borrowal accounts with sanctioned/ proposed limit

Risk Assessment Model (RAM)

Over Rs. 2 Crore

Manual Model Over Rs. 20 lakhs and not more than Rs. 2 Crores

Small Value Model Over Rs. 2 Lakhs and not more than Rs.20 Lakhs

Portfolio Model Exposure is analyzed on pooled basis at HO

- All exposures above Rs.5 Crores are to be mandatorily rated External Credit

Assessment Institutions (ECAI). - Bank has also entered into memorandum of understanding with various credit rating

agencies for SME rating of the Micro, Small & Medium Enterprises. Subsidy from NSIC is available towards rating fee in respect of Micro & Small enterprises.

12. SCHEME FOR STANDBY CREDIT FOR CAPITAL EXPENDITURE OF MSME

Purpose: For meeting unforeseen/ urgent requirement for acquisition of Fixed assets like Generator set, balancing equipments, replacement of existing machinery items, tools, moulds, jigs, etc to maintain the production and/or to acquire necessary equipments/ machinery for modernization of unit. Eligibility: Our existing MSME borrowers having satisfactory dealings with Asset Classification as Standard Asset. Nature of facility: will be permitted as Term Loan. Quantum of Loan: 25 % of the original value of the existing Plant & Machinery subject to maximum of Rs 25 lakhs, at the time of each renewal of Working capital Limits. Disbursement: shall be made in one stretch or in stages during the tenability of the limit against proforma invoices/ estimates and minimum disbursement shall be Rs 25,000 at a time. Margin: 15% to 25% of the cost of the fixed asset to be acquired under the loan. Security: Prime: Asset created out of the loan Collateral security & Personal Guarantee: obtained for the existing credit Facility shall continue. Repayment: within a period of over 36 months and within 60 months in monthly/ quarterly installments. Guarantee Cover: CGTMSE is available in respect of aggregate credit facility permitted to MSME units upto Rs 100 lakhs subject to conditions.

13. SCHEME FOR ENERGY SAVINGS FOR SMEs:

Purpose: For acquiring energy saving equipments and / or adopting energy conservation measures.

Eligibility: Units under Small Scale Sector & Medium Enterprises. Borrowal accounts classified as Standard Asset- ASC S1 or S2. Current account holders having dealings exclusively with us

satisfactorily for a period of last one year. Cost of energy consumption to constitute not less than 20% of the total

production presently.

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Unit should possess energy audit report issued by an approved Energy Consultant/ Auditor.

Quantum of Loan: Upto Rs 100.00 lakhs

Margin: 10% of the Project cost.

ROI: 1 % less than applicable rate.

Security: Prime: Asset created out of the credit facility. Collateral security: NIL upto Rs 5 lakhs for MSME units.

For loans above Rs 5 lakhs for SSIs and MEs as determined by the Bank on merits.

Repayment: In 5-7 years including moratorium of 6 months.

Guarantee Cover: CGTMSE is available in respect of aggregate credit facility permitted to MSME units upto Rs.100 lakhs subject to conditions.

Grant: Bank provides 25% of the cost of Energy Audit/ Consultancy charges with a maximum of Rs 25,000 to the first 100 units on a first come first served basis which is in addition to the grant of Rs 25,000 being provided by IREDA (first 100 units)

14. LOAN SCHEME FOR REIMBURSEMENT OF INVESTMENT MADE IN FIXED ASSETS BY MSMEs : (H.O.CIR 285/06 dt 18. 10.2006)

Eligibility: (only for MSMEs) Existing clients with good track record for at least for a period of preceding three years. In respect of Risk Rated (CRR) accounts, upto Low Risk LR3 and categorized under

ASCC S1 or S2. If not Risk Rated, ASCC S1 accounts Accounts classified as Standard Assets continuously in the previous 3 years in respect

those which are not subjected to ASCC norms.

Purpose: To reimburse the investment made on Fixed Assets, excluding land & building. Capital Expenses incurred towards creation/ acquisition of fixed assets during the immediately preceding 6 months may be reimbursed.

Nature of Facility: Term Loan

Quantum of Loan: Upto Rs 50.00 lakhs for new machinery and maximum of Rs 15 lakhs for second hand machinery which is not more than 2 years old from the original date of purchase. For arriving the value of machineries WDV or market price whichever is less is reckoned.

Margin: (a) 25% of the investment made in respect of new machinery (b) 50% for second hand machinery

ROI: As applicable to Term Loan of similar tenure

Security: Prime: Fixed Asset created/ acquired under the Term Loan. Collateral security: Securities held for Working capital limits and /or for existing Term Loans. Additional security to be obtained taking into account of quantum of loan and aggregate limit enjoyed by the party. Personal Guarantee: to be obtained wherever necessary.

Guarantee Cover: CGMSE is available in respect of eligible accounts.

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Upfront fee: As applicable to Term Loans

Repayment: In monthly/ quarterly/ half yearly instalments within a maximum period of 5-7 years. In deserving cases repayment holiday upto 3 months can be permitted. Documentation, Sanctioning Authority, Classification & reporting: - as applicable to Term Loan.

Other points: SME Sulabh at Circle Office shall maintain a record of sanctions made by the branches/

offices under the scheme. Out of the above record C.O shall identify 10% of the case for random checking. Checking of valuation by Chartered Engineers/ Panel Valuers Bank shall absorb the fee payable for panel Valuer for undertaking valuation for the

second time for the purpose of random checking. Documents to be verified/ obtained to ascertain the proof of investment made in fixed

assets: Certificate from Chartered Accountant, Original Bills/ Invoices, Agreement for sale if any in case of second machinery, Advance payment/ initial deposit receipt/ Stamped receipt.

15. SOCC EXCLUSIVELY FOR MSMEs:

Purpose: A liberalized credit facility to MSME and Retail Traders who are not in a

position to maintain detailed stock books for working capital needs.

Quantum of Finance: Upto Rs 5 lakhs

Security: Prime Security- Asset created out of the credit facility

Repayment: Facility is permitted as Running Limit subject to renewal / review every

year.

Guarantee Cover: CGTMSE is available subject to conditions (Except RTs).

Stock Statement submission: Simplified once in a month. Detailed once in six months

for industries and once in 12 months for retail traders.

Book Debts Statement: Detailed book debt statement is submitted once in 6 months.

Inspection : Monthly. 16. LOAN SCHEME FOR SECURING ISO CERTIFICATION

Purpose: For acquiring Testing/ Calibrating equipment and to meet the expenditure on

of consultancy, documentation, audit, certification fee, etc.

Eligibility: Existing MSME clients having dealings with us for at least 2 years; Profit

making; in the preceding 2 years unit should not have defaulted to Bank or FIs for

payment of dues.

Project Cost: Not exceeding Rs. 4 Lacs.

Quantum of Loan: 75 % of the project cost subject to maximum of Rs 3.00 lakhs.

Margin: 25% on the Project cost.

ROI: As applicable.

Repayment: In 3 -5 years

Security: Prime: Asset created out of loan if any.

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Collateral security: Approved securities and unencumbered fixed

assets of the Unit (for clean portion of the loan).

Guarantee Cover: CGTMSE is available subject to conditions.

Debt Equity Ratio: Not less than 2:1.

17. ARTISAN CREDIT CARD SCHEME (ACC):

Purpose: To meet the Working Capital and/or Term Loan of Artisans.

Eligibility: - All artisans involved in production/ manufacturing process - Preference would be given to Artisans registered with Development Commissioner (Handicrafts). - Beneficiaries of other Government Sponsored Schemes will not be eligible. - Thrust in financing would be on clusters of artisans who have joined to form

SHG

Quantum of Loan: Upto Rs 2.00 lakhs (aggregate amount)

Margin : For limits upto Rs 25,000: NIL For limits above Rs 25,000: 15 to 25%

Security: Asset created out of the finance: No Collateral security.

Guarantee Cover: CGTMSE is available subject to conditions

Validity: 3 Years.

Insurance is waived for accounts upto Rs.50000/-.

Monthly stock statement waived. Quarterly inspection to be conducted.

18. COVERAGE OF ARTISANS CREDIT CARD HOLDERS UNDER THE SCHEME OF CGTMSE: (H.O.CIR.223/2006)

Credits qualifying for Guarantee cover: Loans granted under the ACC issued by the Bank. ACC issued to the individuals are eligible. ACC issued to SHGs, Federation SHGs, Co-Operative societies, State Handicrafts

Corporations are not eligible under the scheme of coverage. The guarantee fee is paid by the Development Commissioner Handicrafts only once

to an artisan. Any subsequent renewal/ enhancement, the concerned party has to bear the guarantee fee.

In order to facilitate increased flow of credit to the artisans in handicrafts sector and to obviate the need for seeking reimbursement of Guarantee Fee (GF) / Annual Guarantee Fee (ASF) paid by Member Lending Institutions (MLIs) for guaranteed accounts, the Office of DC (Handicrafts) has proposed to place advance funds every year with CGTMSE for 4 year period so that MLIs need not pay GF / ASF for credit facility extended by them to artisans in handicrafts sector.

The GF / ASF amount would be debited to this corpus by CGTMSE and guarantees issued / validated.

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All GF/ASF received for eligible cases from April 01, 2009 will be reimbursed from the DC (Handicrafts) corpus.

Application procedure for artisans: Application through any one of the following: Regional Director, Office of the Development Commissioner (Handicrafts) State Handicraft Development Corporation Directorate of Cottage and Small Scale Industry of the State Govts. Any other appropriate body of the Concerned State Govt. / Union Territory assigned

with the task of handicraft development. 19. COMPOSITE LOAN SCHEME FOR MSMEs

Purpose: Simplified scheme devised under single window concept of RBI for acquiring equipments, construction of work sheds and to meet WC needs of tiny and MSME.

Eligibility: Artisans, Village and Cottage industries engaged and MSME units in tiny sector in manufacturing, preservation and servicing by utilizing locally available natural resources and/ or human skills.

Quantum of Loan: Maximum of Rs 100.00 lakhs

Margin: Nil upto Rs 2.00 lakhs: 25% for loans above Rs 2.00 lakhs..

DER : 2:1 to be maintained for loans over Rs.2 Lacs.

Security: Prime: Asset created out of the credit facility. Collateral security: NIL upto Rs 5 lakhs: For loans above Rs 5 lakhs as determined by the Bank on merits.

Repayment: In 3 to 10 years including initial moratorium of 12 to 18 months.

Guarantee Cover: CGTMSE is available in respect of aggregate credit facility permitted upto Rs 100.00 lakhs subject to conditions.

20. CREDIT LINKED CAPITAL SUBSIDY SCHEME (CLCSS)

The operation of the scheme has been extended from 01.04.2007 to 31.03.2013 The Ministry of MSME has renamed the Credit Linked Capital Subsidy Scheme for

Technology Up-gradation of Small Enterprises “ Credit Linked Capital Subsidy Scheme (CLCSS)”

Nature Of Limit : Term Loan Purpose: To enable the Small Enterprises (Manufacturing) units in Specified

Industries for induction State of Art Technology with a view to improve productivity and to bring improvement in the quality of products, and/or to improve environmental conditions etc.

Eligibility: Sole Proprietorships / Partnerships / Co-operative Societies / Private or Public

Limited Companies in Small Enterprises (Manufacturing) sector. Priority to Women Entrepreneurs Existing units registered with State Directorate of Industries proposing to upgrade the

State of Art Technology with or without expansion & new units which are registered with the State Directorate of Industries which set up their facilities only with

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appropriate and proven technology duly approved by Governing & Technical Advisory Board.

Maximum Loan: Rs. 100 Lacs. Security: Assets acquired out of loan and collateral/personal guarantee as insisted by Bank. Repayment: 3-7 years. Guarantee Cover: CGTMSE cover available wherever eligible. Margin: 25 % on the project cost. Upfront Fee : 1% of the term loan sanctioned. Insurance Coverage: Assets acquired and security charged is to be insured. Capital Subsidy: Upto 15 % subject to a maximum of Rs.15 lacs, only for such projects where term loan have been availed from Bank and the same is subject to ceiling specified under the scheme. Nodal Agency: Since 04.04.2006, Our Bank (TUF Cell, Prime Corporate Credit Wing, and HO) is also one of the Nodal Agencies (along with SIDBI and NABARD) for implementation / administration of CLCSS independently in respect of loans granted by bank under CLCSS.

21. BE-SE SCHEME

Purpose: To discount/ negotiate Bills of Exchange (pre accepted bills or Bills drawn under LCs) drawn on reputed Joint Stock companies/ Public sector undertakings representing genuine trade transactions.

Eligibility: - Drawer of the Bills should be an MSME unit. - Borrower accounts of the units are classified as Standard Assets.

- Drawee of the Bill should be a reputed JSC/ PSU. - New SME units coming to our fold (taken over accounts) are also

eligible.

Margin: 5% to 10%

ROI: - For Bills upto 90 days usance -8.50 %p.a. - For Bills above 90 days usance but not exceeding 180 days- 9.25 % p.a.

Security: Prime: First charge on receivables.

Collateral security: Aggregate limits upto Rs 5 lakhs : NIL Limits of above Rs 5 lakhs First charge on Fixed assets/ inventory or any other Assets acceptable to Bank.

Personal guarantee of partners / directors / corporate, etc. if the limits are over Rs.5Lac

Incentive: 75% concession in the Bills collection charges. Circle Heads are having Powers to completely waive bill collection charges.

Guarantee Cover: CGMSE is available in respect of aggregate credit facility permitted upto Rs.100 lakhs subject to conditions.

22. LENDING TO MICRO CREDIT GROUPS (CIR. 178/2009):

Objective : The scheme provides credit to MCG of persons belonging to economically disadvantaged sections of the society.

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Group : The loans can be sanctioned for smaller group with 3-5 members in URBAN areas and 5-10 members in RURAL & SEMI-URBAN areas. Finance can be extended for Agriculture and allied activity.

Limit: Per member Rs.50000/- (max.) – Rs.500000/- max. for group. Debt swapping facility to group members is also permitted upto a maximum of Rs.25000/- (For availing debt swap loan facility, the loan availed from money lender should be at least one year old and an undertaking letter from the member that he will not avail the loan from the money lender again).

ROI: As applicable to SHGs.

SB Account: Compulsory for MCG and account in the joint names of member can also be opened. Individual members can also open NO FRILL account in individual name.

Group Meetings: Compulsory.

Records / Register : Compulsory.

23. Laghu Udhyami Credit Card (LUCC):

Objective : To provide hassle free credit to artisans, retail traders and SMEs.

Eligibility : RT, MME Artisans. Existing parties enjoying credit facilities upto Rs.10 Lacs and having satisfactory dealing for 3 years.

Card validity : 3 years with annual review.

Purpose : To meet WC requirements.

Max. Quantum : Rs.10 Lacs.

Margin : Upto Rs.25000/- – NIL

Above Rs.25000/- – 15% to 25%.

Other features:

Insurance upto Rs.50000/- waived.

Cheque book marked LUCC.

Monthly stock statement waived upto Rs.2.00 lakhs,

For SMEs, the accounts shall be covered under CGTMSE.

Renewal:

LUCC is issued for WC requirement and running account facility is permitted as OCC/OD.

Enhancement can be permitted at the time of annual review within the overall ceiling of Rs.10 Lacs.

24. SRTO – SME Services:

Objective : Loans to transport operators for purchase of HCV/LCV.

Margin : Under priority – upto Rs.25000/- - NIL.

Others – 10-15%.

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For used vehicle: 25% of the valuation report / purchase consideration / depreciation value of the vehicle whichever is less.

DSCR: Not less than 1.50.

DER: Not more than 3:1. Can be relaxed upto 4:1.

Repayment period : Not exceeding 6 years excluding moratorium period of maximum 3 months. For used vehicles – Not exceeding 5 years.

Used vehicles:

Vehicles not more than 5 years old and in good running condition.

Disbursement: Directly to the dealer.

Insurance: Compulsory. 25. Credit Guarantee Fund for Micro & Small Enterprises

(187/2007, 14/2008, 69/2008, 104/2009, 274/2009, 422/2009, 66/2010 87/2012, 98/2012, 406/2012))

Govt. of India and SIDBI jointly setup CGTMSE. CGTMSE cover shall be available for eligible collateral free credits upto Rs.100.00 lacs extended by banks by way of term loan and/or working capital facility to eligible SME borrowers including information technology and software industries. CGTMSE coverage is MANDATORY for loans above Rs.10.00 lakhs and upto Rs.100.00 lacs unless borrower is not ready to bear the fee and offer collaterals acceptable to bank (Coverage amount enhanced from Rs.50.00 lacs to Rs. 100.00 lacs wef 08.12.2008). For loans / advances upto Rs.10.00 lacs where collaterals are not to be obtained, CGTMSE coverage is compulsory. Discretion given to the sanctioning authorities to waive obtention of CGMSE cover stands withdrawn.

Credit facilities eligible under the scheme: Fund based and/or Non fund based credit facilities extended by Member Lending Institutions (MLI) to a single eligible borrower in the Micro and Small Enterprises sector for credit facility not exceeding Rs.50.00 lacs (RRBs / FIs) and Rs.100.00 lacs (Scheduled Commercial Banks and select Financial Institutions) by way of term loans and / or working capital facilities on or after entering into agreement with the Trust, without any collateral security and / or third party guarantees. Credit facilities extended by more than one bank and / or financial institution jointly and / or separately to eligible borrower upto a maximum upto Rs.100 lacs per borrower subject to ceiling amount of individual MLI or such amount as may be specified by the Trust.

Time limit for lodgment of applications for guarantee cover:

Loans Sanctioned during the quarter

Lodging of applications prior to the expiry of the quarter

April-June July-September

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July-September October-December October-December January-March January-March April-June

The time limit for lodgment of applications for guarantee cover is linked to the date of sanction of credit facility and NOT to the date of disbursement/release of credit facility to the borrower. Percentage of Cover:

Category

Maximum extent of Guarantee where credit facility is:

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 a maximum of Rs.37.50 lakh

Rs.37.50 lakh plus

50% of amount in

default above Rs.50

lakh subject to

overall ceiling of

Rs.50.00 lakh

Women entrepreneurs/ Units located in North East Region (incl. Sikkim) (other than credit facility upto Rs.5 lakh to micro enterprises)

80% of the amount in default subject to a maximum of Rs.40 lakh

All other category of borrowers

75% of the amount in default subject to a maximum of Rs.37.50 lakh

One time Guarantee Fee: Cir 406/2012:

One-time guarantee fee at specified rate ((a)currently 1.00% for limits upto Rs.5.00 lakhs and 1.50% in case of credit facility above Rs.5.00 lakhs (b) 0.75%, in case of credit facilities upto Rs.50.00 lakhs sanctioned to units situated in North Eastern Region including State of Sikkim) of the credit facility sanctioned (comprising term loan and / or working capital facility) shall be paid upfront to the Trust by the institution availing of the guarantee within 30 days from the date of first disbursement of credit facility (not applicable for Working capital) or 30 days from the date of Demand Advice (CGDAN) of guarantee fee whichever is later or such date as specified by the Trust. However for loans sanctioned on or after 01.01.2013 a composite all in guarantee fee is in place of one time guarantee fee and annual service fee, which is 1.00% for limits upto Rs.100.00 lakhs for others and (b) 0.75%, for credit facilities upto Rs.5.00 lakhs and 0.85 % for more than Rs.5.00 lakhs in respect of Micro, women enterprises and units situated in North Eastern Region including State of Sikkim) of the credit facility sanctioned – Ref HO Cir 406/2012

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ANNUAL GUARANTEE FEE (AGF) in respect of MSE accounts sanctioned on or after 1st January 2013 and guarantee approved by CGMSE as under: Credit Facility Annual Guarantee Fee (AGF) [%

per annum] Women, Micro Enterprises and units in North East Region (incl Sikkim)

Others

Upto Rs 5 lakhs 0.75 1.00 Above Rs 5 lakhs and upto Rs 100 lakhs

0.85 1.00

of sanctioned credit facility shall be paid upfront to the Trust by the Institution availing of the guarantee cover within such period as may be specified by the Trust. The demand on MLI (Bank) for AGF in respect of fresh guarantees would be raised upon approval of guarantee cover. The guarantee start date (i.e., material date in terms of Credit Guarantee Scheme) would be the date on which proceeds of AGF are credited to Trust‟s Bank account. The AGF/guarantee cover would be valid for one year from the material date i.e., Guarantee start date. In the subsequent financial year in the month of April, demand for Annual Guarantee Fee (i.e., for 2nd AGF) would be raised for the guarantees approved in the previous financial year (till March 31st) for which the AGF has been received till March 31. Such demand would be with effect from the date on which previous AGF is expiring till March 31 of that year. The AGF demands for subsequent years would be on “Full Financial Year basis” excepting for the terminal year of guarantee where AGF demand would be till validity of guarantee cover. From September 01, 2013 onwards, CGTMSE shall be generating a composite demand, inclusive of Service tax, together with the Annual Guarantee Fee as applicable.(Cir 583/2013)

ANNUAL SERVICE FEE: The annual service fee at specified rate (currently 0.50% in the case of credit facility upto Rs. 5 Lakh and 0.75% in the case of credit facility above Rs. 5 Lakh) on pro-rata basis for the first and last year and in full for the intervening years on the credit facility sanctioned (comprising term loan and / or working capital facility) shall be paid by the lending institution within 60 days i.e. on or before May 31, of every year. In the event of non-payment of annual service fee by May 31 of that year or any other specified date, the guarantee under the scheme shall not be available to the lending institution unless the Trust agrees for continuance of guarantee and the lending institution pays penal interest on the service fee due and unpaid, with effect from the subsequent June 01, at four per cent over Bank Rate, per annum, or at such rates specified by the Trust from time to time, for the period of delay. For loan sanctioned on or after 1.1.2013 service fee is replaced by composite all in guarantee fee vide HO Cir 406/2012- as mentioned above. Mode of payment of Guarantee Fee/Annual Service Fee: Once the applications are lodged with CGTMSE by SME Section at concerned Circle office, CGTMSE would be sending Demand Advices for payment of Guarantee Fee. Lock in period for preferment of claim:

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Member Lending Institutions (MLI) is permitted to lodge claims for invocation of guarantee in respect of accounts which have turned NPA after a Lock-in period of 18 months. Invocation of Guarantee: Member Lending Institutions are required to inform the date of which the account was classified as NPA. MLIs to indicate the date of NPA in particular calendar quarter, by end of subsequent quarter through online system. The MLIs are to lodge the applications for claim within a maximum period of one year from the date of NPA if NPA is after the lock-in-period or within one year of lock-in-period if the NPA is within lock-in period, if the following conditions are satisfied: ( two years for loan sanctioned on or after 1.1.2013)

The guarantee in respect of that credit facility was in force at the time of account turning

NPA. The lock in period of 24 months from either the date of last disbursement of the loan to

the borrower of the date of payment of the guarantee fee in respect of credit facility to the borrower, whichever is later, has elapsed.

The amount due and payable to the Bank in respect of the credit facility has not been paid and the dues have been classified by the bank as NPA. Provided that the bank shall not make or be entitled to make any claim on the Trust in respect of the said credit facility if the loss in respect of the said credit facility had occurred owing to actions/decisions taken contrary to or in contravention of the guidelines issued by the Trust.

The loan facility has been recalled and the recovery proceedings have been initiated under due process of law. For loan granted on or after 01.01.2013, initiation of legal proceeding as a pre condition for invoking guarantee shall be waived for credit facilities upto 50000/- subject to the condition that the executive committee of MLI headed by an officer not below the rank of General Manager should examine and waive the same( Ref 406/2012)

The claim should be preferred by the Bank in such manner and within such time as may be specified by the Trust in this behalf.

Claim: The Trust will pay 75% of the guaranteed amount on preferring of eligible claim by the

lending institution, within 30 days, subject to the claim being otherwise found in order and complete in all respects. The Trust will pay to the Bank interest on the eligible claim amount at the prevailing Bank Rate for the period of delay beyond 30 days.

The balance 25% of the guaranteed amount will be paid on conclusion of recovery proceedings by the Bank.

In the event of default, the Bank shall exercise its rights, if any, to takeover the assets of the borrowers and the amount realized, if any, from the sale of such assets or otherwise shall first be credited in full by the Bank to the Trust before it claims the remaining 25% of the guaranteed amount.

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Bank shall be liable to refund the claim released by the Trust together with penal interest at the rate of 4% above the prevailing Bank Rate, if such a recall is made by the Trust in the event of serious deficiencies having existed in the matter of appraisal/renewal/follow up/conduct of the credit facility or where lodgment of the claim was more than once or where there existed suppression of any material information on part of the Bank for the settlement of claims. The Bank shall pay such penal interest, when demanded by the Trust, from the date of the initial release of the claim by the Trust to the date of refund of the claim.

Guarantee coverage for credit facilities above Rs. 50 lakhs - Internal guidelines. (Cir 104/2009) All proposals for CGMSE cover above Rs.50 lacs upto Rs.100 lacs will have to be rated

internally by bank and should be investment grade. Credit facilities of above Rs. 50 lakhs under CGMSE scheme may be extended to the

eligible enterprises, subject to the following;

Viability parameters (Relaxations can be permitted by the next higher authority at RO / CO.)

Current Ratio 1.25 % and above. Promoter's contribution minimum 30% of project cost. Debt Equity Ratio 2:1 Overall DSCR 1.50 and above Fixed Assets Coverage Ratio(FACR) 1.4 and above Internal Rate of Return (IRR) 5% and above from estimated weighted

average cost of funds. Repayment Period in respect of Term Loans

Up to 6 years excluding moratorium period

All proposals above Rs. 50 lakhs will have to be rated internally and accounts with Risk Rating of LR 1, 2,3 and Normal Risk (NR) only to be considered for financing. ((Relaxations can be permitted by the next higher authority at RO / CO.)

The sanctioning authority to satisfy about the capability of the promoter entrepreneur, to

implement the project and manage the enterprise successfully, keeping in view the past experience, technical knowledge/ availability of professional/ technical & managerial team.

The sanction to be reviewed and confirmed by the next higher authority at RO / CO before disbursement of the loan.

Coverage of loans above Rs. 50 lakhs: Permitting Authority: To enable faster Credit decisions, the said guidelines are since modified and respective

sanctioning authorities are delegated to take decision on coverage of loans above Rs 50 lakhs upto Rs 100 lakhs provided the stipulated benchmarks are complied with.

Scheme of Reimbursement Of 50% of CGMSE One Time Guarantee Fee for New Accounts: (Cir. 66/2010)

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Reimbursement of 50% of entry fee to new Micro and Small Enterprises accounts sanctioned on or after 01.02.2010.and covered under CGMSE scheme.

Reimbursement to be done at the time of closure of the loan or on completion of 5 years, whichever is earlier by debiting to General Charges Account.

Guarantee fee to be reimbursed to those accounts who meet their repayment commitment and is a Standard account at the time of reimbursement.

During the intervening period, if the account becomes NPA and thereafter a performing asset only by recovery of overdues & not by restructuring, in such cases also guarantee fee may be reimbursed.

In the case of running accounts, there could be some enhancements during the 5 year period and in such cases, the details of guarantee fee paid is to be recorded in the Master Sheet so that the particulars are easily available at the time of permitting reimbursement.

Appropriation of amount realized by the Bank in respect of a credit facility after receipt of claim amount Subsequent to the Trust having released a sum to the Bank towards the amount in

default, if Bank recovers money subsequent to the recovery proceedings initiated by it, the same shall be deposited by the Bank with the Trust, (after adjusting towards the cost incurred by Bank for recovery of the amount).

The Trust shall appropriate the same first towards pending service fee, penal interest and other charges due to the Trust, if any, in respect of the credit facility towards which the amount has been recovered by the Bank, and the balance if any, shall be appropriated in such a manner so that losses on account of deficit in recovery of the credit facility between the Trust and the Bank are in the proportion of 75% and 25% respectively.

Appropriation of the amount recovered after closure of the account Where recoveries are effected after writing off the dues and treating the account as

closed, the recoveries are to be deposited by the Bank with the Trust, (after adjusting towards the cost incurred by Bank for recovery of the amount), as mentioned above towards the share of CGTMSE.

However it is to be ensured that remittances made to CGTMSE on account of recovery in borrower‟s account does not exceed the claim settled amount.

However, if any amount due to the Trust remains unpaid beyond a period of 30 days from the date on which it was first recovered, interest shall be payable to the Trust by the Bank at the rate which is 4% above Bank rate for the period for which payment remains outstanding after the expiry of the said 30 days.

Appropriation of amount received from the lending institution The amount received from the Bank shall be appropriated in order in which the service

fee, penal interest and other charges have fallen due. If the service fee and the penal interest have fallen due on the same date, then the

appropriation shall be made first towards service fee and then towards the penal interest and finally towards any other charges payable in respect of the eligible credit facility.

Waiver of CGMSE coverage (HO Cir 399/2013)

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The borrower provides primary security or primary and collateral security put together in the form of land and building to the extent of 100% of the sanctioned limit, in addition to the security of assets created out of our finance (exposure, if more than one limits are sanctioned).

The borrower shall be rated as low, normal or moderate risk based on the latest balance sheet available. All the accounts of the borrower shall be under standard category. Presently CGMSE cover is not available for credit facilities extended to retail traders, educational institutions, training institutes, training-cum-incubator centres, self help groups, joint liability groups and Medium Enterprises.

26. REHABILATATION OF SICK SME UNITS:

Purpose To provide adequate and timely assistance to potentially viable MSE units which have already become sick or likely to become sick.

Definition of Sick MSE units

A Micro And Small Enterprises is considered „sick‟ when

a) Any of the borrowal account of the enterprise remains NPA for three months or more OR

b) There is erosion in the net worth due to accumulated losses to the extent of 50 % of its net worth during the previous accounting year. The stipulation that the unit should have been in commercial production for at least two years has been removed. Based on a viability study, the viable/potentially viable units are to be provided rehabilitation package.

Stipulated time frame for deciding the viability of a unit.

The decision on viability of the unit should be taken at the earliest but not later than 3 months of the unit becoming sick under any circumstances.

Incipient sickness or „handholding stage‟ is defined.

An account may be treated to have reached the „Handholding Stage‟ if any of the following events are triggered:

a. There is delay in commencement of commercial production by more than SIX months for reasons beyond the control of the promoters;

b. The company incurs losses for TWO years or cash loss for ONE year, beyond the accepted timeframe;

c. The capacity utilization is less than 50 % of the projected level in terms of quantity or the sales are less than 50 % of the projected level in terms of value during a year.

Hand holding support to such units should be undertaken within a maximum period of TWO months of identification of such units.

Relief/ concessions extended there under are:

RELIEFS AND CONCESSIONS AVAILABLE FOR THE REHABILITATION OF SICK MICRO AND SMALL ENTERPRISES MICRO ENTERPRISES: The package of reliefs may essentially comprise of rephasing the existing loans into repayment in convenient instalments payable in

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next 5 to 7 years. In case of need to carve out Working Capital Term Loan (WCTL) and Funded Interest Term Loan (FITL), the norms applicable to Small Enterprises can be applied.

SMALL ENTERPRISES:

1. Rephasement/Reschedulement of existing term loans: The repayment programme of the existing term loans is rephased/ rescheduled so as to be repaid within a maximum period of 10 years.

2. Working Capital Term Loan (WCTL): The principal deficit in the working capital may be segregated as working capital term loan (WCTL). Such WCTL may be carved out based on the drawing power as at the end of the month prior to the cut off date arrived at for restructuring. The unduly overdue Bills liability which is considered unrecoverable, if any shall also be treated as a component under deficit to arrive at the WCTL component. WCTL may be repaid in a period of 5 years.

3. Funded Interest Term Loan (FITL): Unrecovered interest if any, on working capital and term loan may be segregated into Funded Interest Term Loan (FITL). This may be payable within 3 years.

4. Deferment of interest: There may be cases when an enterprise would not be generating enough cash to make payment of interest under restructuring due to delay in commencement of operations or achieving break-even. In such cases, the interest accruing for a period maximum of 6 months may be deferred which would be payable within 3 years.

5. Fresh finance: Fresh finance to meet essential capital expenditure and working capital requirements may be provided by way of term loan and working capital credit limits. The term loan shall be repaid within a period of 7 years. Such fresh finance shall be granted only with a minimum margin of 15% from the promoter.

6. Promoter’s contribution: Promoters‟ sacrifice and additional funds brought by them should not be less than 15% of the Bank‟s sacrifice.

7. Financial Benchmark Parameters: The formulation of package will involve evaluation of viability of the enterprise and the same shall be examined by adhering to essential financial benchmark parameters furnished in HO Cir 407/2012 Appendix II

Cir Nos: 103/02,270/2012,407/2012,34/2013

When a SME unit considered potentially viable

- A unit may be regarded as potentially viable if it would be in a position, after implementing a relief package spread over a period not exceeding five years from the commencement of the package from banks, financial institutions, government and other concerned agencies, as may be necessary, to continue to service its repayment

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obligations as agreed upon including those forming part of the package without the help of the concessions after the aforesaid period.

- The repayment period of restructured (past) debts should not exceed SEVEN years from the date of implementation of the package

- In the case of tiny/decentralised sector units, the period of relief‟s / concessions and repayment period of restructured debts have been revised so as not to exceed Five and Seven years respectively as in the case of other SME units

What are the reliefs & concessions for rehabilitation of potentially viable units under interest on cash credit and unadjusted interest?

If penal interest and other changes have been charged, such charges should be waived from the accounting year of the unit in which it started incurring cash losses continuously

After the above is done, the unpaid interest on this term loans and cash credit during the period should be segregated from the liability and funded.

No interest may be charged on funded interest and repayment of such funded interest should be made within a period not exceeding 3 years from the date of commencement of implementation of the rehabilitation programmed

Unadjusted interest dues such as interest charged between the date upto which rehabilitation package was prepared and the date from which actually implemented, may also be funded on the same terms as stated above

What are the reliefs & concessions for rehabilitation of potentially viable units under Term Loans and Working capital Term Loan?

The rate of interest on term loans may be reduced, wherever considered necessary by not more than 3 per cent in the case of Tiny / Decentralised Sector units and by not more than 2 per cent for other SSI units below the document rate.

The unadjusted interest portion of the cash credit account after segregation may be funded as Working capital Term Loan with a repayment schedule not exceeding 5 years. The ROI applicable may be 1.5% to 3% below the prevailing fixed rate / BPLR wherever applicable to all sick SME units including Micro and Decentralised units.

How cash losses are treated?

Cash losses excluding interest as may be incurred during the nursing programme may also be financed by the Bank or FI, if only of them, is a financier.

Future cash losses should be worked out before interest on working capital etc due to Bank and should be financed by the FI if it is one of the financiers of the unit.

The financial institutions should not be asked to provide for interest due to the Bank

in the computation of future cash losses and this should be taken care of by the

future cash accruals.

How working capital is treated?

Interest on working capital may be charged at 1.5% below the prevailing fixed / BPLR wherever applicable.

Addl. WC limits may be extended at a rate not exceeding the BPLR

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27. RESTRUCTURING OF ADVANCES: (HO Cir 245/2010)

It is a process by which bank grants concessions to the borrower for economic or legal reasons relating to borrower‟s financial difficulty.

Any of the following actions distinctly or jointly will be termed as restructuring:

Re-phasing /Rescheduling the repayment in case of an outstanding term loan with or

without change in balance repayment period/ instalments

Downward variation of interest payment terms (not under competitive reasons)

Conversion of irregularities or a portion in outstanding working capital limits into WCTL/FITL payable over a period

Conversion of irregularities or portion in outstanding working capital limits/term loans into debentures/equity.

Rescheduling the payment of interest outstanding/accruing on term loans into FITL / deferment or conversion into FITL/debentures/equity.

Changes in terms of payment of interest/instalment on the prevailing restructured facilities.

Eligible categories -

Standard, Sub-Standard and Doubtful assets

Ineligible categories -

Loss Assets, Non viable entities and not possessing reasonable certainty of repayment of accounts on restructuring.Wilful defaulters and / or borrowers indulging in fraud and malfeasance.BIFR cases without their express approval. Borrowers affected by natural calamities and the advances were already restructured or eligible to be restructured under RBI guidelines. Terms of restructuring not agreed by the borrower client.

IDENTIFICATION: To be done primarily at branch level through evaluation of conduct of the account and based on the intensity of the irregularities and probable chances of continuing default and eventually resulting in classification of the asset as non performing in the books of the bank. An impending default may be considered for an advance being found eligible for restructuring. The borrowers displaying delinquency deficiencies from the Special Watch List. Advances slipped to NPA can also be brought under restructuring.

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Identification of the borrower will have to be confirmed by the committee at C.O.s formed for this in case of advances of above Rs.25.00 lacs and wherein action has been initiated under SARFAESI Act. GENERAL PRINCIPLES: Restructuring cannot take place without the formal consent/application of the debtor. However the process of restructuring can be initiated by the Bank in deserving cases subject to the customer agreeing to the terms and conditions. Restructuring should be based on the viability parameters that primarily look into the cash flows of the borrower. No account will be taken up for restructuring unless financial viability is established and/or there is reasonable certainty of repayment as per the terms of restructuring package, Establishment of Viability and Viability Study: Stages: Industrial / Manufacturing units - Before / after commencement of commercial production/operation. Other than Mfg enterprises - Before / after commencement of operations Consumer loans / Housing Loans / Agri loans / Capital Market exposures / other Advances - Any time before classification as loss assets. Basis for Restructuring: Financial viability of the future operations to be established based on the viability parameters. Reasonable certainty of repayment by the borrower Viability Study: If the proposal is limited to re-phasement / re-schedulement of existing loans, the concerned branch and/or processing section at administrative offices can undertake the exercise satisfying themselves about the viability irrespective of amount of loan or category. In other cases wherein other reliefs are considered with/without re-phasement / re-schedulement: a) Micro Enterprises:

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The viability study shall be based on the cash flow / income generation supported by a viability report prepared by the branch officials. b) All other Enterprises: Outstandings not exceeding Rs. 25.00 lacs - Branch may compile the viability report. Outstanding more than Rs.25.00 lacs and not exceeding Rs. 2.00 Crore: The viability may be through Chartered Accountants//PAC/PAG/TFOs/Valuer from the Banks panel of valuers experienced in conducting such viability study. Outstanding exceeding Rs. 2.00 Crore: Limits sanctioned under the sanctioning powers of Circle Authorities, Viability study to be conducted by the PAC of the C.O. Sanctioning powers of H O - Project Appraisal Group H O. In exceptional circumstances reputed consultants under the panel of CDR / IBA or any other reputed institution can be entrusted with the approval of sanctioning authority or GM HO. Advances to individuals classified under consumer loans - Branches can undertake the studies. Advances granted to pursue agricultural. Activities: In case of agricultural activities beyond Rs.25.00 lacs, assistance of AEOs/Agricultural consultancy cell at H O can be utilized. The screening committee at CO/HO can decide on it. Financial Benchmark Parameters: a) Small Enterprises: i) DSCR - Overall DSCR may not be lower than 1.25:1. In exceptional cases, it can be upto 1.20:1. DSCR in any year may not fall below 1:1 ii) ROCE - A Minimum ROCE equivalent to bank‟s BPLR minus 2% may be considered adequate.(optimum year) iii) I R R: I R R in respect of projects under implementation may be at least to 2% above the cost of capital. (Cost of funds employed). For computing cost of capital, cost of equity may be considered as equal to cost of borrowed funds. iv) Extent of sacrifice: Sacrifice on the part of the bank may be in the form of waivers, reduction in interest rates, conversion of a portion or entire part of the advances into equity / debentures or a combination thereof. The extent of sacrifice would be estimated on the basis of net present value of the sacrifice during the period for which the sacrifice is assumed to be operative computed as under: The difference between the present value of future cash flows (representing the interest at

the existing rate charged on the advance before restructuring and principal) discounted at normal rate of interest specified to similar rated accounts or card rate as applicable

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and The present value of future cash flows (representing the interest at the rate charged on the

advance upon restructuring and principal) discounted at normal rate of interest specified to similar rated accounts or card rate as applicable.

This procedure will be adopted in respect of TL, WCTL and FITL. In respect of working capital facilities the sacrifice component may be computed as indicated in the above para reckoning the limit sanctioned as the principal amount and taking the tenor as one year. The extent of Bank‟s sacrifice amount computed on present value method would not exceed 15% of the amount of restructured dues to the Bank. Large and Medium Enterprises:

1. DSCR - Overall DSCR minimum – 1.33:1, in exceptional cases, it can be upto 1.25:1. In any year it should not fall below 1. In case of Medium Enterprises, DSCR covering entire repayment period – 1.25:1 and in exceptional cases, it can be upto 1.25:1. In any year it should not fall below 1.

2. ROCE - Minimum - Bank‟s BPLR minus 1% is considered adequate. 3. Gap between IRR and the Cost of Capital :

The benchmark gap between IRR and cost of capital may be at least two percentages for projects under implementation and one percentage in other cases if computed.

4. Extent of sacrifice: The sacrifice so computed on present value method will not be more than 10% of the restructured amount due to the bank.

5. Gross Profit Margin: This has to be compared based on the data available in corporate database and industry information available with the Bank.

6. Loan Life Ratio (LLR): LLR = Present value of available cash flow during loan life period ------------------------------------------------------------------------ Maximum amount of loan

Commercial Real Estate:

PAC (CO) shall carry out viability study. H O power account PAG (HO) to prepare viability study.

Compliance to the viability parameters relating to the loan life ratio of 1.25 shall be the deciding factor for considering the financial viability. Micro Enterprises:

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The focus will be on the reasonableness of cash flow and overall DSCR,which may not be less than 1.10. RELIEFS AND CONCESSIONS: SMALL ENTERPRISES:

1. Re-phasement / Re-schedulement of Existing Term loans - Max 10 Years. 2. WCTL may be carved out based on DP as at the end of the month prior to cut off date

arrived at for restructuring and unduly overdue bills which is considered unrecoverable may also be added and repaid in a period of 5 years.

3. FITL - Unrecovered interest on WC and TL to be repaid in 3 years. 4. Deferment of interest - Interest accruing for maximum of 6 months may be deferred to

be repaid within 3 years. 5. Fresh finance - can be considered to meet essential capital expenditure and WC by way

of term loan and WC limits. TL to be repaid within a period of 7 years. 6. Promoter‟s contribution - Not less than 15% of Bank‟ sacrifice to be brought.

LARGE AND MEDIUM ENTERPRISES:

1. Re-phasement / Re-schedulement of Existing Term loans - Max 7 - 10 Years. 2. WCTL may be carved out based on DP as at the end of the month prior to cut off date

arrived at for restructuring and unduly overdue bills which is considered unrecoverable may also be added and repaid in a period of 7 years.

3. FITL - Unrecovered interest on WC and TL to be repaid in 3 years and in exceptional cases, can be extended for 5 years..

4. Deferment of interest - Interest accruing for maximum of 6 months may be deferred to be repaid within 2-3 years.

5. Fresh finance - can be considered to meet essential capital expenditure and WC by way of term loan and WC limits. TL to be repaid within a period of 7 years.

6. Promoter‟s contribution - Not less than 15% of Bank‟ sacrifice to be brought. 7. Conversion into debentures/equity - Part of the outstanding. Principal and / or unpaid

interest may be converted as debentures/ equity MICRO ENTERPRISES: Existing loans can be rephrased with repayment in convenient instalment payable in next five to 10 years. WCTL/FITL – As applicable to Small Enterprises. 28.OD SME scheme:

- Enterpreneurs having 2 years satisfactory dealings with us and new clients having satisfactory market report.

- Maximum limit is Rs 3.00 Crores. Limit is to be assessed based on turnover method or MPBF method.

- Stock inspection- Upto 10 lakh- Half Yearly, Beyond 10 lakh-quarterly - Tenability: Upto Rs.2 lakh- 2 years, Beyond Rs.2 lakh dependent on risk rating- LR-18

month, NR- 15 month, MR- 12 month(subject to annual review). - Besides 100% prime Security, Collateral security as Mortgage of land and building with

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value not less than 125% of the limit sanctioned.- Vacant sites with no superstructure thereupon may also be taken as security for the

above purpose provided they are allotted by Govt. approved local bodies/ competent authority and converted for non agricultural purpose by the competent authority. However, the valuation of the same to be in relation to Guideline Value as advised by the competent authority in respective States from time to time.

- All other guidelines similar to Canara Trade.

29. REMOT – REjuvenation MOdernisation and Technology upgradation:

- Scheme for Coir industry. Coir board, Cochin is nodal agency. - Project cost maximum Rs 5.00 lacs with promoters investment of 5%. Government

subsidy 40% project cost. Subsidy is upfront.

- In case of non release of the term loan amount within 10 calender days ,Bank shall pay interest on the prorate grant released by coir board ,at running rate of interest on deposit.

30. WEAVER CREDIT CARD(WCC)

- Loan scheme for Handloom Weavers for working capital and term loan requirements. - Maximum permissible limit per borrower is Rs.2 Lakhs. Repayment for TL is restricted to

36 months. - Card validity is 3 years subject to annual review. - Submission for stock statement waived. Godown inspection half yearly. - 3% interest subvention, CGTMSE fee and Rs 4200 per weaver as subsidy is available

from Government. 31. INTEGRATED DEVELOPMENT OF LEATHER SECTOR SCHEME(IDLS SCHEME):

- SIDBI is the nodal agency for assistance. - Central Leather Research Institute (CLRI), Chennai for Tanneries & Footwear Design &

Development Institute (FDDI), Noida for footwear, footwear components, leather goods and garments and saddlery.

- Grant at 30% for SE and 20% for Non SE units to maximu of Rs 50 lacs. And 20% above Rs 50.00 lacs on cost of P&M by Govt. of India. Overall assistance limit is 2 crores.

- Disbursement of assistance above Rs 25.00 lacs will be released in four instalments. 32. SCHEME FOR RICE SHELLERS / POHA MANUFACTURER:

- In the form of WC limit or TL or both, up to maximum of Rs 25.00 crores, to the beneficiaries in area specific and minimum Rs 10.00 lacs.

- Special ROI based on collateral comfort. - Security Assets created out of loan, Mortgage of immovable property acceptable to the

Bank- Either Primary or Collateral or Primary and Collateral and whose value is not less than 50% of the limits permitted. In case of Term Loan sanctioned under this scheme for the purpose of construction of factory building along with purchase of machineries, before completion of the building, the primary security value by way of equitable mortgage of land of building may not be sufficient to give the required security comfort for the advance and hence, in such cases, collateral security by way of Mortgage of Land and Building to be obtained equivalent to the value of the proposed construction cost .

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- CGTMSE coverage as per the prevailing guidelines.

33. LOAN SCHEME FOR FINANCING ROAD TRANSPORT OPERATORS UNDER MOU with Mahindra Truck & Buses, Volvo Eicher Commercial Vehicle, Tata Motor & Bajaj Auto limited for vehicle financing at our existing term & conditions. Limits to be covered under CGTMSE. 34. CANARA MSE SATKAR

- New scheme for eateries like fast food centres/dabhas/small canteens/restaurants etc subject to guidelines for food act if any of local authorities/ other competent authorities. An undertaking to maintain food safety compliance from the beneficiary of the scheme.

- Finance under the scheme is as 85% of PC for TL, 7 days stock level for STL. WC limits as per assessment.

- Maximum cap for finance is Rs 2.00 lacs -Rural/village, Rs 5.00 lacs - SU/Taluk HQ, Rs 10.00 lacs – Urban/Metro.

- Rate of interest BR + 0.55%. - CGTMSE AGF absorbed by Bank. - 50% concession on Processing Charges. - TL repayment – 5 years and STL within 1 year. - Stock inspection half yearly.

35. CANARA MSE PRAGATI: (HO Cir 382/2013)

- In the form of WC limits / STL or term loans for MSE borrower (Excluding traders, educational institutions, Self Help Group, Joint Liability Group)

- Limit up to Rs 10.00 lacs with WC limit tenability of 3 years, subject to annual review. - Nil margin up to Rs 25000.00 and 15% margin for limit above Rs 25000.00. - ROI – BR + 0.55% with 0.25% concession for CGMSE covered account. - Processing fee/upfront fee 50% of normal fee for loan above Rs 5.00 lacs and up to Rs

5.00 lacs Nil fee. - Margin up to Rs 25000/- : Nil and Above Rs 25000/- : 15%. - Annual CGTMSE fee shall be absorbed by Bank. - TL repayment is maximum of 7 years including RPH. WC limit with 3 years validity

subject to annual review. STL repayable in maximum of 35 months. - Non fund based limit also be considered. - Bank announced every Friday as MSE Pragati day. - Stock statement up to Rs 2.00 lacs – Not necessary. Above Rs 2.00 lacs quarterly

simplified NF 585. Detailed SS every march. Inspection once in 6 months. - Bank has announced new campaign „MISSION 60” to increase micro enterprises

lending. - Special ROI to be RESET in case of any deterioration in Risk Rating of the account,

below moderate risk. - No further interest concessions allowed in this scheme.

36. CANARA MSE UNNATI (HO Cir 381/2013)

- In the form of WC limits / STL or term loans for MSE borrower (Excluding traders, educational institutions, Self Help Group, Joint Liability Group)

- Limit above Rs 10.00 lacs upto Rs 100.00 lacs with WC limit tenability of 3 years, subject to annual review.

- 20% margin for stocks and 25% book debts. - ROI – BR + 1.25% with 0.25% concession for CGMSE covered account and 0.50%

concession for women. - Processing fee/ upfront fee 25% concession on normal fee. - TL repayment : maximum 7 years.

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- Non fund based limit also be considered. - Stock statement quarterly simplified NF 585. Detailed SS every march. Inspection once

in quarter. - Internal Guidelines issued for CGTMSE Guarantee Coverage for credit facilities above

Rs.50 lakhs advised vide Ho Circular 514/2013 are not applicable to the loans sanctioned under this scheme.

- Special ROI to be RESET in case of any deterioration in Risk Rating of the account, below moderate risk.

37. CANARA MSE SUVIDHA Under Phase I - Introduction of Inward Register for MIS reports in Automated Lending Processing System for MSME loans through existing ALPS pacakage. 38. TEQUP – TECHNOLOGY AND QUALITY UPGRADATION SUPPORT SCHEME FOR IMPLEMENTATION OF ENERGY EFFICIENT TECHNOLOGIES FOR MSME

- The scheme is one of the ten components of the National Manufacturing Competitiveness Programme (NMCP), aiming towards reducing cost of production and Emission of Green House Gases (GHG) by upgrading the manufacturing processes towards usage of Energy Efficient Technologies (EET) and encouraging the Micro, Small and Medium Enterprises acquire product quality certification to national/international standards from National Standardization bodies such as Bureau of Indian Standards (BIS) and Bureau of Energy Efficiency (BEE).

- Government grant of 25% of project cost or maximum Rs 10.00 lacs available. - TL with 5 years repayment period excluding holiday period. - Margin 25% for project cost up to Rs 1.00 Crore and 20% for above Rs 1.00 crore. - Viability of project to be assessed as per prevailing guidelines. - CGTMSE coverage as per prevailing guidelines.

39. SCHEME FOR ASSISTANCE TO MSME FOR EXTENDING QUASI EQUITY (RISK CAPITAL) – TERM LOAN

- Borrowers enjoying 3 years credit facility with us with profitable tract record. LR/NR risk rating or AAA/AA/A/BBB or equivalent ratings. OR party with good OPL or market report.

- In the form of Term loan. Minimum Rs 25.00 lacs and maximum Rs 10.00 Crores subject to not exceeding 1/3rd of post project TNW.

- To bridge the gap in means of finance and other expenditure for growth of business. - Security and CGTMSE norms as per prevailing guidelines. In case of Consortium / MBA

arrangement, II charge. - Repayment period 7 years including moratorium period. Moratorium period maximum 3

years. 40. CANARA CONTRACTOR SCHEME: (HO Cir 372/2014):

- Scheme for constractors/sub contractors in form of SOD/LC/BG/TL. Activity should by falling within MSME act 2006.

- Loan amount Minimum Rs 10.00 lacs and maximum Rs 10.00 crores. Term loan restricted to Rs 5.00 Crores.

- No DP or submission of stock statement. Tenability for WC limit is 12 months. Inspection half yearly.

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- Credit facility up to 9 times of TNW or need based whoever is lower. - Loan above Rs 2.00 Cr valuation of property by two panel valuers. - Margin for TL and NFB is 10%. TL repayment is 5 years for activity other than

construction and 7 years for construction purpose. - Limit should be collaterally secured by Immovable properties with value of 125% of the

loan amount. - 25% concession for on applicable charges. - Vaccant sites with no superstructure can be accepted as security provided the same is

allotted by Government approved local bodies and it should be non agriculture purpose. - Working capital limits to be arrived as per the formats given in the circular.

41. CANARA MSME EXPO – (HO Cir 418/2014):

- Term loan for MSME exporters having minimum turnover of Rs 100.00 lacs and three years satisfactory dealing with us. Account rated up to Moderate risk category.

- Purpose: Purchase of software/hardware for fashion designing, abroad visit for business purpose, Participation in trade fairs, exhibitions abroad or international trade fair in India.

- Limit should be fixed as per the export turnover of the preceding year. Maximum loan amount Rs 50.00 lacs. Loan restricted to Rs 25.00 lacs for participation in trade fairs.

- Repayment maximum 3 years with initial RPH 3 months. - 0.25% concession in ROI for accounts covered under CGMSE. - All other guidelines applicable for MSME loans.

42. CANARA CARAVAN – (HO Cir 419/2014):

- Existing Transport operators having 3 years satisfactory dealings. - Purpose: To finance minimum 5 vehicles or min loan amount of Rs 25.00 lacs and

maximum Rs 5.00 cr. - Margin linked to scoring model as per circular. - ROI based on internal CRR. Concessions based on scoring model as per Cir. - Repayment max 60 months. - Prime security: Vehicle financed and coll sec: up to Rs 1.00 Cr CGMSE cover and above

Rs 1.00 Cr, L&B with value min 25% loan amount. - Takeover not allowed. Borrower should have valid licence for operate vehicle.

43. NEW CREDIT SCORING NORMS FOR MSME PROPOSALS: (HO Cir 251/2014)

- The scoring matrix shall be used only for deciding about the eligibility of the borrower for extending finance. The scoring model in vogue to decide the pricing of the loan up to Rs 2 crores under micro, small and medium enterprises and the risk rating as per internal/external risk rating model shall continue to be done as hitherto.

- Model applicable for applicants who apply loan for first time. - Marks earmarked for behavioural, management, business and financial parameters. - Minimum marks 60% or otherwise the proposal to be declined with concurrence of next

higher authority. 44. CANARA MSE SARAL : (HO Cir 250/2014):

- It‟s a revised existing GCCS scheme. Target group non farm sectors under MSE.

Existing customer with 2 years satisfactory dealings and new clients with satisfactory OPL. Only individuals are eligible.

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- Working capital and TL. Maximum loan amount Rs 5.00 lacs. For TL 85% project cost. - Margin up Rs 25000/- - Nil and above 25%. - ROI as per prevailing guidelines. 0.50% concession for women and 0.25% concession

for accounts covered under CGMSE. - Accounts to be mandatorily covered under CGMSE. If the borrower are not eligible

under CGMSE, suitable III party gtee or collateral security to be obtained. - TL repayment maximum 5 years and WC with 3 years validity. - Stock statement NF585 once in a quarter. Detailed once in a year as at March.

Inspection quarterly. 45. CANARA MSE VAHAN : (HO Cir 296/2014):

- Vehicle loan for existing as well as new MSME customers, risk rated up to moderate risk.

- Purchase of brand new two wheelers/passenger cars for business purpose. - 90% of on road cost of vehicle or average last three years profit whichever is lower.

Maximum loan of Rs 25.00 lacs. Above Rs 25 lacs can be permitted by Circle head on case to case basis.

- ROI BR + 0.50%. - Repayment two wheeler max 60 EMIs and 4 wheeler max 84 EMIs. - Existing parties, existing collateral securities to be continued. For new up to Rs 10.00

lacs CGMSE cover to be taken and AGF will be borne by the bank. Above Rs 10.00 lacs at the option of the borrower, ie CGMSE cover or collateral security.

46. CANARA MSE SMART: ( HO Cir: 295/2014):

- Composite loan to MSE Professional for purchase of/construction of office premises/ purchase of P&M /FA and for working capital purpose.

- Professionals should have 2 years experience in the respective field and should possess valid licence / certificate.

- Maximum loan Rs 200.00 lacs and min loan Rs 50.00 lacs. - Loan for purchase of office FA/equipments restricted to 20% to total eligility. And for

construction loan should no exceed 80% eligible loan component. - Working capital max Rs 5.00 lacs. WC limit by way of secured OD. - TL is 75% project cost or 5 times of net annual income for loan up to Rs 10.00 lacs or 10

times of net annual income for loan above Rs 10.00 lacs. - Working capital to be arrived at 10% of previous/expected receipts subject to max Rs

5.00 lacs. - WC limit with tenability of 3 years. TL repayment: 5 to 10 years. - Up to Rs 100.00 lacs, account to be covered under CGMSE and above Rs 100.00 lacs

collateral security of L&B atleast 25% of loan amount. - 50% concession on applicable charges. - ROI according to the internal CRR. - Submission of stock statement and inspection quarterly.

47. CANARA MSE CAP : (HO Cir 301/2014):

- Loan against property for MSME borrowers in the form of Working capital or TL. - Quantum of loan Mfg unit : Max of Rs 500.00 lacs, Service units : Max of Rs 200.00 lacs. - Min loan amount Rs 10.00 lacs and TL restricted to Rs 200.00 lacs. - TL quantum at the maximum of 90% of project cost and WC limit to be arrived under

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Turnover or MPBF method. - Margin 10% for TL and WC limits. - ROI as per internal CRR. No concession in ROI. - WC limit tenability 12 months and TL repayment 5 to 10 years. - 50% concession in applicable charges. - The value of collateral security in form of L&B should be 100% loan amount for Mfg units

and 125% for service units. - Valuation of property to be carried out by two independent panel valuers and least value

to be taken for consideration. - Agriculture and vacant land should not be accepted as security. - Not eligible to cover under CGMSE.

48. CANARA MSE VIJETA: (HO Cir 298/2014):

- Only women entrepreneur of MSME eligible for this type of facility. - Working capital and TL can be considered. Maximum loan amount Rs 200.00 lacs. - Margin facility upto Rs 25000/-: Nil, Above Rs 25000/- to Rs 10.00 lacs : 15% and Above

Rs 10.00 lacs : 20%. - Facility up to Rs 100.00 lacs to be covered under CGTMSE. Facilities Upto Rs 10.00

lacs, AGF will be borne by the Bank. Facilities above Rs 100.00 lacs and ineligible accounts collateral coverage minimum 60% of loan facility.

- Working capital with 2 years validity and TL with maximum 84 months repayment. - ROI up to Rs 10.00 lacs is BR + 0.50% and above Rs 10.00 lacs BR + 1% for Low and

normal risk accounts. BR+1.25% for moderate risk accounts. - Charges, up to Rs 5.00 lacs : NIL, above 5 lacs and up to 10 lacs – 50% concessions.

Above Rs 10.00 lacs : 25% concessions. - Stock statement submission once in 6 months and inspection half yearly. Inspection

charges waived. 49. CANARA DAL MILL SUPER: ( HO Cir 481/2014):

- WC limits/TL to Dal processing units under MSME sector. - Units with low, normal and moderate rating is eligible. - Loan amount Minimum: Rs 10.00 lacs and max: Rs 10.00 crores. - Eligible to cover under CGTMSE. - ROI is for WC BR + 0.75% and for TL BR+1.25%, for the facility with collateral security

value of 100% above the loan amount. For WC BR + 1% and for TL BR + 1.50% for the facilities with collateral security value of above 75% and upto 100% of loan amount.

- Further concessions in ROI up to 0.50% for Women entrepreneur and 0.25% for CGTMSE covered accounts.

- Collateral security should be not less than 75% of the loan amount if stipulated.

cboa descriptive msme

Documents

small enterprises sector

small enterprises investment

small enterprises cgmse

micro enterprises share

small industries

micro industries

service sector enterprises

medium enterprises sector