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 Banks 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.
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.
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
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
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 mandat