Q. What is a Micro Enterprise?
A. Any manufacturing enterprise in which the original value of investment in plant and machinery is upto Rs.25 lakh and any service enterprise in which the original value of investment in equipments is upto Rs.10 lakh is called a Micro Enterprise.
Frequently Asked Questions on MSME Loans
Q. What is a Micro Enterprise?
Q. What is a Small Enterprises?
A. Any manufacturing enterprise in which the original value of investment in plant and machinery is above Rs.25 lakh and upto Rs.500 lakh and any service enterprise in which the original value of investment in equipments is above Rs. 10 lakh and upto Rs.200 lakh is called a Small Enterprise.
Q. What is a Medium Enterprise?
A. Any manufacturing enterprise in which the original value of investment in plant and machinery is above Rs.500 lakh and upto Rs.1000 lakh and any service enterprise in which the original value of investment in equipments is above Rs.200 lakh and upto Rs.500 lakh is called a Medium Enterprise.
Q. What are the types of loan facilities available in Government Bank for Micro, Small and Medium Enterprises?
A.-Term loans For acquisition of fixed assets (viz, land/building, plant/machinery, other fixed assets) towards setting up of new units and for expansion, modernization and diversification in case of existing units
-Working Capital limits to meet the working capital needs of the MSME units in the form of open cash credit, overdraft against book debts and bills discounting facility.
-standby credit upto a maximum of Rs.25 lakh for capital expenditure of SMEs for meeting unforeseen/contingent requirement for acquisition of fixed assets like generator set, balancing equipments, replacement of existing machinery items, tools, moulds, jigs etc to maintain production and/or to acquire necessary equipments/machinery for modernization of the unit
-Export and import finance schemes such as Pre shipment finance (packing credit, Clean packing credit, reshipment credit in foreign currency), post shipment finance by way of purchase, discount and negotiation of export bills in Indian Rupees/foreign Currency.
-Non fund based limits such as guarantees, letter of credit, foreign bank guarantees, foreign letter of credit etc.
Q. Whether KYC compliance is mandatory for availing loans under MSME?
A. Yes. The loan applicants should open an operative account (Savings Bank/Current Account) which is KYC compliant with proper introduction, address proof, ID proof and photo etc; as stipulated by the Bank.
Q. What are all the documents to be submitted for availing loans under MSME?
A. The documents to be submitted vary based on the purpose of the loan. The general documents required are:
a.Proof of Identity
b.Proof of Residence
c.Proof of Business address
d.Asset and Liability Statement of promoters,guarantors, directors etc with
latest income tax returns
e.Rent Agreement/Lease Deed if business premises rented/leased f.Copy of SSI Registration Certificate/Entrepreneur’s Memorandum g. Profile of the Unit(Name and address of promoters,experience, nature of activity, address of all offices/plants, share holding pattern etc)
h.Last three years’ Balance Sheet with IT/ST returns
i. Projected Balance sheet for next two years
j. Application in the prescribed format
k.CMA data in the prescribed format if limit required is Rs.100 lakh and
I. Position of accounts with existing bankers
m.Project Report for term loan requirements n. Estimates/Quotations/Sanctioned building plan etc o. Partnership Deed/Trust Deed/Rules & Bye laws/Memorandum and Articles
of Association/Certificate of Incorporation etc p.Clearance from Pollution Control Board/Sanction from Electricity Board
and other statutory authorities
q.Monthwise production and sales data for the current financial year, value
of stock in process, finished goods, debtors, creditors etc
Q. What are the margin norms for loans under MSME?
A. There is no margin for loans up to Rs.25000.00. The margin requirement for loans above Rs, 25000.00 is 20-25%.
Q. What is the interest rate for MSME loans?
A. The interest rates are linked to Base Rate of the Bank. The interest rate shall vary based on the variation in Base Rate.Rate of interest is fixed based on compliance to simplified stipulated parameters upto credit limits of Rs.200 lakh and internal/external risk rating for limits above Rs.200 lakh.
Additional term premium is applicable for term loans with repayment period of above 3 years.
Q. What are the Processing charges payable for MSME loans?
A. The processing charges payable for loans under Micro and Small Enterprises are as under:
|Quantum of Limit||Processing Charges payable
for Working Capital Limits
|Upfront Fees payable
for Working for term loans
|Up to Rs.25000.00||NIL||NIL|
|Above Rs.25000.00 and up to Rs.2 lakh||0.15% of the loan amount
Minimum Rs. 250.00
|1% of the loan amount
Minimum Rs. 350.00
Maximum Rs. 2000.00
|Above Rs 2 lakh||Rs.150.00 per lakh of loan amount
Minimum Rs. 450.00
Maximum Rs. 7.50 lakh
|1% of the loan amount
Maximum Rs. 7.50 lakh
For loans under Medium Enterprises, processing charges and up front fees as applicable to non priority loans are payable.
For non fund based limits, processing charges shall be 50% of the applicable processing charges of fund based limits.
Q. What are the security norms for MSME loans?
A. For loans under Micro and Small Enterprises upto Rs.10 lakh, the assets created out of the finance shall only be the security and such accounts have to be covered under the guarantee scheme of CGTMSE( except retail trade,SHGs and Educational Insitutions). No collateral securtity willl be stipulated for such loans.
For loans above Rs.10 lakh and upto Rs.100 lakh in respect of Micro & Small Enterprises, assets created out of Bank’s finance shall be the prime security and such eligible accounts shall be covered under guarantee of CGTMSE.
If borrower is unwilling to cover the loans above Rs. 10 lakh and upto Rs.100 lakh under guarantee of CGTMSE, collateral security equivalent to 100% of the loan amount have to be provided.
In respect of all loans to Medium enterprises and loans above Rs.100 lakh for Micro and small Enterprises, in addition to prime security of assets created out of Bank finance, suitable collateral security to be provided as stipulated by the Bank.
Q. Which type of borrowers can be covered under guarantee scheme of CGTMSE?
A. New and existing Micro and Small Enterprises engaged in manufacturing or service activity except retail trade,SHGs and educational institutions.
Q. What is the quantum of credit that can be covered under CGMSE Scheme?
A. Fund and non fund based credit facilities up to Rs.100 lakh per eligible borrower are covered under the guarantee scheme provided the loans are granted without collateral security or third party guarantee.
Q. What is the premium payable for covering under the guarantee scheme of CGTMSE?
A. Annual guarantee fee of 1% of the limit/liability outstanding as at 31st of March is payable as guarantee fee.For micro enterprises, women entrepreneurs and entrepreneurs at North East Region, the annual guarantee fee is 0.75% for loans upto Rs.5 lakh and 0.85% for loans above Rs.5 lakh
Q. What is the method of assessing working capital requirement for MSME units ?
A. For units requiring working capital limits upto Rs.5 crores, requirement is assessed as 25% of the projected turnover for the next year and the working capital limit shall be 20%of the projected turnover. The balance shall be brought by promoters as their contribution by way of equity/loans.
For limits above Rs.5 crores, the working capital requirement is assessed under Maximum Permissible Bank Finance Method.
Q. What is the repayment period stipulated for term loans:
A. The repayment period varies depending upon the income generation from the unit and generally varies from 5-7 years. However, in exceptional cases it can go up to 11 years.
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