Ê

 

Small and Medium Enterprises (SMEs) have played a significant role world over in the
economic development of various countries. India, certainly, is no exception. Over a period of
time, it has been proved that SMEs are dynamic, innovative and most importantly, the
employer of first resort to millions of people in the country. SMEs in India have recorded a
sustained growth during last five decades and today, SMEs have substantial share in industrial
production, export and employment. The sector contributes 40 % of the gross value added in
manufacturing, around 35 % to direct exports, provide employment to around 28 million
people in the country and is a breeding ground for entrepreneurship. Keeping in view its
importance, the promotion and development of SMEs has been an important plank in our policy
for industrial development and a well-structured programme of support has been pursued in
successive five-year plans for the promotion and development of SMEs in the country.

Globally, Small and Medium Enterprises (SMEs) form the backbone of all
economies in terms of contribution to economic growth, employment and promotion of
entrepreneurship. In India, SME units account for nearly 40 per cent of industrial production,
close to 50 per cent of exports and 45 per cent of industrial employment. The significance of this
sector cannot be further emphasised. Concurrently, the importance of finance in escalating
business growth of this sector cannot be ignored in any way. The business of business is
business. To be preoccupied by concerns of meeting capital needs and expanding operations is
not what SME units should be anxious about. It is the responsibility of all the stakeholders to
work together towards addressing the just needs of the SME units. In recent times, the very
approach to small business banking has been revolutionized, with banks offering customised
product sets, minimising documentation and encouraging decentralised decision making to
speed up the process. Lower credit requirement from large corporates due to higher internal
generation of funds by them has resulted in banks shifting their focus to other alternatives,
including SME financing. They are offering customized financial solutions to provide for the
funding needs of the SMEs. Most banks have set up special units and cells to target these
enterprises. Units which were once pursuing financial institutions for credit requirements are
now being made the focus of credit strategies. Records show that notwithstanding a healthy
c
growth of bank credit to SSI units in the recent years, the share of bank credit to SMEs is
actually on the decline. At end-March 2006, the credit to SSI sector stood at 6.4 per cent of
outstanding non-food gross bank credit as against 11.8 per cent in 2002 despite the fact that
their contribution to GDP remained almost constant .
Risk that is normally associated with lending to SMEs is relatively higher and
impediments to finance persist. The areas of concern for the financial institutions
include, largely insufficient information disclosure, questionable reliability, timeliness and
frequency of the financial information, uniqueness of each unit so as not to group such units,
lack of expertise at the institution level itself and difficulty in studying qualitative factors
of the unit.

 
 

    
 
   Ê 
There exists several definitions of the term small and medium enterprises (SMEs),varying
from country to country and varying between the sources reporting SME statistics. The
commonly used criteria at the international level to define SMEs are the number of employees,
total net assets, sales and investment level. If employment is the criterion to define, then there
exists variation in defining the upper and lower size limit of a SME.
According to the Micro, Small and Medium Enterprises (MSME) Development Act of
2006, (India) a micro enterprise is where the investment in plant and machinery does not exceed
twenty five lakh rupees. A medium enterprise is where the investment in plant and machinery is
more than five crore rupees but does not exceed ten crore rupees. A small enterprise is where the
investment in plant and machinery is more than twenty five lakh rupees but does not exceed five
crore rupees. In the case of the enterprises engaged in providing or rendering of services, as
(a) a micro enterprise is where the investment in equipment does not exceed ten lakh rupees.
(b) a small enterprise is where the investment in equipment is more than ten lakh rupees but does
not exceed two crore rupees.
(c) a medium enterprise is where the investment in equipment is more than two crore rupees but
does not exceed five crore rupees.

½
G 

 


[‘ ‰orn out of individual initiatives &skills
[‘ Greater operational flexibility
[‘ Low cost of production
[‘ ·igh propensity to adapt technology
[‘ ·igh capacity to innovate & export
[‘ ·igh employment orientation
[‘ Utilization of locally available human & material resources
[‘ Reduction of regional imbalances


 
 
[‘ SMERA Rating is an independent, third-party, comprehensive assessment of the
overall condition of the SME, conducted by SME Rating Agency of India Limited
[‘ It takes into account the financial condition and several qualitative factors that have
bearing on credit worthiness of the SME
[‘ SMERA Rating consists of 2 parts, a Composite Appraisal/Condition indicator and a Size
Indicator
[‘ SMERA Rating categorises SMEs based on size, so as to enable fair evaluation of each
SME amongst its peers
[‘ An SME unit having SMERA Rating would enhance its market standing amongst
trading partners and prospective customers
‰


   
    
  › With each bank having separate rating processes
and disclosure requirements for the purpose of disbursing loans, SMEs find themselves spending
significant time, effort and money while approaching different banks for credit. As SMERA has
adopted a comprehensive, transparent and reliable rating process, it would have a wider
acceptance within the banking system of the country. In addition to this, SMERA would be
supported by SID‰I and a large number of public and private sector banks in the country. Such
wide acceptance would result in SMERA ratings becoming a key requirement in the loan


application process. It will also simplify the process of credit requests and make the process
more cost-effective.
  
   ‰etter ratings from SMERA has already started
benefiting units by way of
(i) morefavourable credit terms in terms of interest rebates
(ii) lower collateral requirements
(iii) reduced interest rates and
(iv) simplified lending norms

  
 G 
 SMERA ratings facilitate banks/lending institutions in reducing
the turnaround time in processing credit applications, thereby providing SMEs access to timely
and adequate credit.
‰


 
  Ê  

(i)‘ SMERA rating adds credibility to the status of the SME unit
(ii)‘ It also helps open doors to deal with large companies especially. those who deal with
a big number of vendors
(iii)‘ SMERA ratings serve as motivation to adopt good governance practices which are
beneficial in the long run
(iv)‘ SMERA ratings also help in international trade and commerce and serve as first point
to generate interest among potential trading partners and
(v)‘ ratings also acts as a tool for self correction and self improvement. In the event of a
0.25 % interest reduction to a unitgetting rated by SMERA the reduction in interest
cost comes to Rs. 25000/- on a loan of Rs 1 crore for 1 year thereby outweighing the
cost of rating from SMERA.
‰


 ‰ 
(i)‘ SMERA ratings facilitates pricing of loan products / attractive terms
(ii)‘ useful in compliance with regulatory and capital adequacy norms and (iii) help the
banker through early warning signals through review ratings as mandated by it.

J
Ê 
  



  

It is said‘ that the number of MSEs has increased steadily in India from 67.87 lakhs in
1990-91 to 133.68 lakhs in 2007-08. This could be possible due to the conducive policy
environment during the liberalization era (post 1991).
Similarly, number of persons employed in MSEs has risen from 158.34 lakhs in 1990-91
to 322.28 lakhs in 2007-08. The yawning gap between the two lines over the years indicates that
employment elasticity of the MSE sector has improved. ·owever, much of the labour absorption
has taken place in the unorganized/ informal enterprises.
It can be witnessed ‘ that the contribution of the MSE sector to overall industrial
production has declined marginally from 39.74% in 1999-2000 to 38.57% in 2006-07. The
contribution of the MSE sector to the gross domestic product (GDP) has increased from 5.86% in
1999-2000 to 5.94% in 2006-07.
This shows‘that exports from the small scale industry has increased from Rs. 9,664 crore
in 1990-91 to Rs. 1,50,242 crore in 2005-06. ·owever, export-oriented SMEs are likely to be
impacted from imminent global slowdown. Little progress has been made to diversify our export
basket. Since the late 1980s, exports from SMEs continues to be dominated by just eight product
groups, (namely, Readymade garments, Engineering goods, Electronic and computer software,
Chemicals and allied products, ‰asic chemicals, pharmaceuticals and cosmetics, Processed
foods, Finished leather and leather products and Plastic products) accounting for over 90 per cent
of total value of exports.


 Ê ÊÊ
With the advent of planned economy from 1951 and the subsequent industrial policy
followed by Government of India, both planners and Government earmarked aspecial role for
small-scale industries and medium scale industries in the Indian economy. Due protection was
accorded to both sectors, and particularly for small scale industries from 1951 to 1991, till the
nation adopted a policy of liberalization and globalization. Certain products were reserved for
small-scale units for a long time, though this list of products is decreasing due to change in
industrial policies and climate.

¦
 SMEs always represented the model of socio-economic policies of Government of India
which emphasized judicious use of foreign exchange for import of capital goods and inputs;
labour intensive mode of production; employment generation; non concentration of diffusion of
economic power in the hands of few (as in the case ofbig houses); discouraging monopolistic
practices of production and marketing; and finally effective contribution to foreign exchange
earning of the nation with low import-intensive operations. It was also coupled with the policy of
de-concentration of industrial activities in few geographical centers. It can be observed that by
and large, SMEs in India met the expectations of the Government in this respect. SMEs
developed in a manner, which made it possible for them to achieve the following objectives›
[‘ ·igh contribution to domestic production
[‘ Significant export earnings
[‘ Low investment requirements
[‘ Operational flexibility
[‘ Location wise mobility
[‘ Low intensive imports
[‘ Capacities to develop appropriate indigenous technology
[‘ Import substitution
[‘ Contribution towards defense production
[‘ Technology ± oriented industries
[‘ Competitiveness in domestic and export markets
At the same time one has to understand the limitations of SMEs, which are›
[‘ Low Capital base
[‘ Concentration of functions in one / two persons
[‘ Inadequate exposure to international environment
[‘ Inability to face impact of WTO regime
[‘ Inadequate contribution towards R & D
[‘ Lack of professionalism
In spite of these limitations, the SMEs have made significant contribution towards
technological development and exports.
SMEs have been established in almost all-major sectors in the Indian industry suchas›

ÿ
 [‘ Food Processing
[‘ Agricultural Inputs
[‘ Chemicals & Pharmaceuticals
[‘ Engineering; Electricals; Electronics
[‘ Electro-medical equipment
[‘ Textiles and Garments
[‘ Leather and leather goods
[‘ Meat products
[‘ ‰io-engineering
[‘ Sports goods
[‘ Plastics products
[‘ Computer Software, etc.
As a result of globalization and liberalization, coupled with WTO regime, Indian SMEs have
been passing through a transitional period. With slowing down of economy in India and abroad,
particularly USA and European Union and enhanced competition from China and a few low cost
centers of production from abroad many units have been facing a tough time.
Those SMEs who have strong technological base, international business outlook, competitive
spirit and willingness to restructure themselves shall withstand the present challenges and come
out with shining colours to make their own contribution to the Indian economy.


    
  
 Ê  



[‘ Promotion of Domestic Trade and Export

[‘ Acquire latest technology
[‘ Technology Transfer and Joint Ventures
[‘ Contract manufacturing tie-ups and collaborations
[‘ Source & import quality products, machinery, equipments and hi-tech products
[‘ Information on marketing strategy & investment opportunities
[‘ ‰usiness Matchmaking and ‰uyer-Seller Meet
[‘ Guidance to obtain bank & project finance and credit rating
[‘ Guidance for upgrading skills & knowledge of entrepreneurs
*
 [‘ Ëuality assurance and packaging improvements to meet global standards
[‘ Market Survey and Research on various products and services
[‘ Preparation of project reports & financial documents
[‘ Set up new manufacturing units in India and abroad
[‘ Assistance and support for revival of sick units
[‘ Design, Development and Launch of products
[‘ Indian products and services permanent display centre in various countries
[‘ Liaise with Government Departments & Agencies and Overseas Organisations
[‘ Arrange study tours & visits to factories / industrial plants / trade fairs / exhibitions in
India and abroad
[‘ Arrange business / trade delegations and missions
[‘ Assistance to represent and participate in exhibitions, trade fairs, seminars and
conferences

    
  Ê 

India embarked on the path of opening up its economy and integrating it with the
global economy in 1991. The liberalization of economy, while offering tremendous
opportunities for the growth and development of Indian industry including SMEs, has also
thrown up new challenges in terms of fierce competition both in domestic and international
markets. The very rules which provide increased access for our products in the global
market, also put domestic industry under increased competition from other countries, not only
in exports but also in the domestic market. In today¶s world, technology, competitive strength
together with benchmarking with the best international standards and practices have become the
drivers of change and accelerated growth. Access on a global basis to modern technology,
capital resources and markets have become the most critical determinants of international
competitiveness. This underscores the need for SMEs to be internationally competitive in terms
of quality, delivery, after-sales service, price, etc.

Ô
 The need of the hour for Indian SMEs is to upgrade their technology, quality and adopt
modern management techniques to keep pace with the changes that are taking place in the
global market. Investment would be a prerequisite in these areas to bring about transformation.
The availability of adequate credit at affordable cost, thus, becomes critical for Indian SMEs.

There exist a well-developed network of financial institutions at national and state

level to channelise credit to SMEs. SID‰I is the national level principal financial institution
for promotion, financing and development of SMEs. It provides direct assistance to the SSI
sector through several schemes like direct discounting, project finance, assistance for
technological upgradation and modernisation, marketing, finance, resource support to
institutions engaged in developing SSIs, venture capital, factoring services, etc. It also
provides indirect assistance comprising refinance, bills re-discounting (equipment) and against
inland supply of bills through an organized network of 910 Primary Lending Institutions (PLIs)
including banks and SFCs with more than 65,000 outlets throughout the country.

In order to enhance the flow of credit to the sector, various initiatives have been taken by
the Government of India/Reserve ‰ank of India from time to time, viz. enhancement of loan
limit under Composite Loan Scheme, increase in project cost limit under National Equity
Fund (NEF) Scheme, launching of Credit Guarantee Fund Trust for Small Industries,
extension of concessional assistance under Technology Development and Modernisation Fund
Scheme, introduction of special schemes for modernization of units under Technology
Upgradation Fund Scheme for textiles and jute industries, Tannery Modernisation Scheme and
Credit Linked Capital Subsidy Scheme for Technology Upgradation.

Further, to give focused attention to the needs of SSIs, public sector banks have so far
opened 391 specialised SSI branches. Last year, the Government of India has announced that
the credit to SMEs would be doubled in the next five years. Various policy directives and
schemes have been announced from time to time to help improve the credit flow to the
sector. The credit rating system for SMEs has recently been introduced to ensure availability
of adequate and timely credit at low cost. Dedicated agencies for credit rating to SSI sector
have been created with a provision of subsidized credit rating charges. The concept and

A
practice of cluster financing has been brought into practice. ‰esides, the R‰I has recently
allowed banks to appoint business correspondents for collecting deposits and delivering
credits. This could be really helpful for micro financing.

·owever, the availability of adequate and timely credit to SMEs continues to be a

major concern. The proportion of credit to SMEs among the total bank credit has shown a
declining trend. The figure speaks for itself. The share of net bank lending to SSI sector has
declined from 17.5 % in 1998 to 8.5 % in 2006. Lack of credit at reasonable rate has hindered the
growth of SMEs in the past.

According to the third All India Census of Small Scale Industries, there are around
11.85 million small scale units in India, out of which, only 1.63 million are registered and rest
are unregistered. Only 14.26 % of the units in registered sector and 3.09 % in unregistered
sector have access to institutional finance. The coverage of institutional finance, thus, is far
from satisfactory. It is no wonder that according to a survey conducted by SSI Ministry in
2003-04, 48 % of the respondents cited shortage of working capital as at the key reason
for sickness in the industry.

Non-availability of acceptable collateral is the major problem at the time of starting a

venture. The problems get further compounded in case of young and women entrepreneurs.
Even though the Government along with SID‰I has set up a Credit Guarantee Fund Trust for
Small Industries (CGTSI), to encourage banks to extend financial assistance to SMEs without
collateral, the banks still seem to be hesitant to extend credit to SMEs. Similarly, despite a
scheme for technology and quality upgradation with a subsidy component, the disbursement
under the scheme is certainly below expectations. It is clear from the above, that despite the best
intentions of the Government to expand the credit to SMEs, the results are far from
satisfactory. It calls for an urgent need to have a relook on the policy measures for the
promotion of SMEs and iron out the problems hindering the growth of credit to this sector.
Following points could be considered›

[‘ First, a very important issue to understand is the composition of Indian SMEs and
their financing needs. As per third All India SSI Survey, out of 11.85 million SSI units
c

 in India, more than 99 % units falls in the category of tiny, i.e. investments in plant
and machinery of these units is less than Rs. 25 lakh. Even in this tiny sector, majority of
them would be very small and would include cottage industries and artisans. Only a
few lakhs would actually form what can be termed here as modern SSI sector having
investments in plant and machinery in the range of Rs. 25 lakh to Rs. 1 crore. The
financing needs of these modern SSIs along with medium enterprises, say with an
investment in plant and machinery less than Rs. 10 crore, are, and machinery less than
Rs. 10 crore, are most of the time, quite different than tha of tiny enterprises. These big
units among the SSI sector would often require fund mainly for diversification and
expansion of the business and technology upgradation that needs to be dealt with
separately. The schemes like credit ratings are most relevant to this sector. On the
other hand, micro financing would be a very effective tool for financing smallest of
small enterprise providing coverage to a large number of small units and also
reducing the risk of banks. Further, there is a need of reorientation of government
functionaries to this vast range of SMEs. It will be in the best interest of the sector if
government officials are properly designated to take care of certain set of SSIs and
the relevan schemes.
[‘ Second, one will have to realistically assess the positions of banks and other
financial institutions in this regard. They have the concerns about the NPAs and the
growing incidences of sickness in SSIs. Obviously, financing of SMEs should be a
profitable venture for banks so that they can extend credit to SMEs. As the large
enterprises have access to alternative sources of financing, like capital markets and
often the rate of interest is very low in case of large enterprises, banks have also started
looking at SMEs as a potential thrust area. ·owever, this needs to be further
strengthened by the right mix of promotional policies reducing the risk of banks while
financing the SMEs. ‰anks, on their part, would do well by providing adequate
publicity to various promotional schemes so that a large number of units could get
benefited.
[‘ Third, it is often observed that there is a lack of understanding of the government policy
directives and guidelines and schemes of the R‰I and the SID‰I on the part of field

cc
 level functionaries of financial institutions. The officials need to be sensitized
regarding the needs of the SMEs through proper training.
[‘ Fourth, a number of private banks are venturing in the field of SME financing with
innovative schemes. ‰esides, cluster financing and innovative financing schemes like
factoring are emerging as powerful tools for extending credit to SMEs. Credit rating
is also gaining prominence. ·owever, again there is a lack of understanding of these
schemes on the part of banks and other financial institutions as well as SME
entrepreneurs. It, therefore, becomes extremely important to engage SMEs and
financial institutions and apex SME developmental agency in a constructive dialogue
to ensure better understanding of policies and schemes. SME associations should come
forward in this regard and organize programmes in which all the stakeholders could
be invited and the schemes could be popularized.
[‘ Fifth, the SME associations and NGOs should come forward and accept more
responsibilities. Their role should not be limited to only lobbying for their members. The
associations and NGOs can play a crucial role in micro financing. They could also
provide specialized services to the SMEs in preparation of project documents and
help in procedural aspects and could also help banks in assessing the risk for financing
a venture.
[‘ Sixth, a few changes and improvements in the policies could help infuse credit to this
sector. Equity participation ceiling of large companies in small scale sector should be
raised from 24 % to 49 %. It would certainly motivate large enterprises to invest in
small enterprises and thereby expansion of these units. Similarly, technology
upgradation fund of SID‰I needs to be strengthened. The scope of credit linked
capital subsidy scheme should be enhanced to cover a wide spectrum of products, sub-
sectors and technologies.
[‘ Seventh, over the period, it has been observed that small units that are linked to large
corporates as suppliers, service providers, etc. are usually successful. It is relatively
easier for the banks and financial institutions to finance various requirements including
working capital, technology upgradation, etc. of these units. Promotions of clusters
linked to large units, thus, could help expansion of credits to small units. Finally, it has

c½
 been observed that one of the major reasons for delays in sanction and disbursal of
loans is the lengthy documentation and legal procedures involved in the process.
While the large industries can afford to hire specialists for the job, the small scale
entrepreneurs are often ill-equipped to handle this job on their own. It will greatly help
SMEs if facilitation services are provided by various promotional agencies like
SISIs, DICs, SIDCs, industry associations, banks, etc. The evaluation of various
applications should also take place in a time bound manner and a stand should be
taken within a stipulated time period. In case the application is rejected, the bank
must apprise the applicant of the reasons for not granting the loan. For the benefit of
SMEs, which through improved efficiency have managed to reduce the stock, the
banks should give consideration to other factors for computing the maximum
permissible bank finance.

    
  G  ‰ 


 !"ÊG

The ‰ank has adopted a Policy for lending to SME sector, in tune with Govt. of India guidelines
as per MSMED Act, 2006, which has come into force w.e.f. 2nd October, 2006.

The salient features of the policy are›


 
  

d‘ MSME sector comprises, Micro Enterprise, Small Enterprise and Medium Enterprises ±
Industry & Service Segments

Industry Service

Micro The investment in plant and The investment in equipment

Enterprise machinery (original cost) does not (original cost) does not exceed

c
 exceed Rs.25 lacs. Rs.10 lacs.

Small Investment in plant and machinery The investment in equipment

Enterprise (original cost) is more than Rs.25 lacs (original cost) is more than Rs.10
but does not exceed Rs.500 lacs. lacs but does not exceed Rs.200
lacs.

Medium Investment in plant and machinery The investment in equipment

Enterprise (original cost) is more than Rs.500 (original cost) is more than Rs.200
lacs but does not exceed Rs.1000 lacs. lacs but does not exceed Rs.500
lacs.

1.‘ Enterprise means an industrial undertaking or a business concern or any other

establishment, by whatever name called, engaged in the manufacture or production of
goods, in any manner pertaining to any industry specified in the First Schedule to the
Industries (Development and Regulation) Act, 1951 or engaged in providing or
employing plant and machinery in the process of value addition to the final product
having a distinct name or character or use, and rendering of any service or services.
2.‘ In calculating the investment in plant and machinery, the cost of pollution control,
research and development, industrial safety devices and such other items as may be
specified, by notification, shall be excluded.
3.‘ The word equipment is defined as ³All instruments, office machines and such other
electro mechanical or electronic appliances that are directly related to the service
rendered but excluding furniture, fittings and other items not so related.´

3  
  
" 
 

Loan applications from units under SME sector will be disposed off within a reasonable time as
mentioned below , provided such applications are complete in all respects.

1.‘ Loans up to Rs.25000/- within 2 weeks

cJ
 2.‘ Loans beyond Rs.25000/- and up to Rs.5 lakhs, within 4 weeks
3.‘ Loans over Rs.5 lakhs, and up to Rs.25 lakhs, within a maximum period of 6 weeks
4.‘ Loans over Rs.25 lakhs, within a maximum period of 8 weeks

Token of Service on receipt of each application for credit facilities shall be issued.




 


Rate of interest is linked to ‰PLR of the ‰ank and is as under› (‰PLR is 12% WEF 01.04.2009).
The rate of interest is subject to changes from time to time.

Micro Enterprises Small & Medium Enterprises

Mfg. Services Mfg. Services

 

  

Upto ‰PLR-3% ‰PLR-3% ‰PLR-2.50% ‰PLR-3%

Rs.50000/-

Above ‰PLR-1% ‰PLR-1% ‰PLR-0.50% ‰PLR-1%

Rs.50000/-
upto Rs.2 lacs

Above Rs.2 Graded rate of ‰PLR to Graded rate of ‰PLR+0.25%

lacs interest based on ‰PLR+1.50% interest based to
scoring norms & on scoring ‰PLR+2.50%
parameters norms &
parameters

3   

Upto ‰PLR-3% ‰PLR-2.50% ‰PLR-2.50% ‰PLR-2.50%

Rs.50000/-

Above ‰PLR-1% ‰PLR-1% ‰PLR-0.50% ‰PLR-1%

Rs.50000/-

c¦
 upto Rs.2 lacs

Above Rs.2 Graded rate of ‰PLR to Graded rate of ‰PLR to

lacs interest based on ‰PLR+1.50% interest based ‰PLR+2.50%
scoring norms & on scoring
parameters norms &
parameters

Rate of interest on loans above Rs.50000/- & upto Rs.5 lacs sanctioned/renewed on or after
01.04.2010 till 31.03.2011 to Women Entrepreneurs in Micro & Small Enterprises sector is 10%
pa.

 


d‘ Assets created out of ‰ank loan.

d‘ Charge on the machinery/equipment & other fixed assets directly associated with the
activity of the enterprise.
d‘ NO collateral security/third party guarantee for loans›
M‘ Up to Rs.10 lacs to Micro & Small Enterprises
M‘ Upto Rs.25 lacs in respect of MSMEs whose track record and financial position
are good as per ‰ank records
M‘ Upto Rs.100 lacs (aggregate) in respect of Micro and Small Enterprises whose
borrowal accounts are covered under Credit Guarantee fund for Micro & Small
Enterprises (CGMSE).
[Note› Presently CGMSE cover is not available to credit facilities extended to
retail traders, educational institutions, training institutes, training cum incubator
centres and to Medium Enterprises].
d‘ Collateral security/third party guarantee for loans beyond the above limits is insisted on
merits of each case, as determined by ‰ank, subject to R‰I/GOI guidelines.

cÿ


 

Depending upon the quantum of loan requirement under Small Enterprises (including Micro
Enterprises) and Medium Enterprises, loan application forms are available at your nearest
branch.

All applications are to be accompanied with project report, Audited/unaudited financial

statements for the preceding 3 years, copies of licences, permits, sales tax assessment orders¶
income tax/wealth tax assessment orders, projected financial statements, cash/fund flow
statements, wherever required/insisted.

Financial statements of the immediately preceding year should not be 6 months old. In such
cases, provisional financial statement as on the latest date also to be submitted.

G ‰#$ G3 !

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In its endeavor to promote the growth of SMEs, the ‰ank has adopted the following Charter for
lending to
   
 
 ›

1.‘ Making available the simplified & bilingual/trilingual applications for credit facilities to
MSME units at all our branches.
2.‘ Issuing acknowledgments to MSME units immediately by branches on receipt of loan
application.
3.‘ Disposing off MSME loan applications/credit proposals within the following Time
Norms from the date of receipt of applications completed in all respects›
d‘ Loans up to Rs.25000/- within 2 weeks
d‘ Loans beyond Rs.25000/- and up to Rs.5 lakhs, within 4 weeks
d‘ Loans over Rs.5 lakhs, and up to Rs.25 lakhs, within a maximum period of 6
weeks

c*
 d‘ Loans over Rs.25 lakhs, within a maximum period of 8 weeks
4.‘ Margin
d‘ Up to Rs.25000/- Nil
d‘ Over Rs.25000/- and over Rs.50000/- 15% to 25% as determined by ‰ank
d‘ Specific relaxed margins under special schemes/packages

 Ê"  - in respect of loans up to Rs.50000/- to Women
Entrepreneurs in Micro & Small Enterprises sanctioned/renewed on or after
01.04.2010 to 31.03.2011
5.‘ Security
M‘ Assets created out of ‰ank loan.
M‘ Charge on the machinery/equipment & other fixed assets directly associated with
the activity of the enterprise.
M‘ NO collateral security/third party guarantee for loans›
i.‘ Up to Rs.10 lakhs to Micro & Small Enterprises
ii.‘ Upto Rs.25 lakhs in respect of MSMEs whose track record and financial
position are good as per ‰ank records
iii.‘ Upto Rs.100 lacs (aggregate) in respect of Micro and Small Enterprises
whose borrowal accounts are covered under Credit Guarantee fund for
Micro & Small Enterprises (CGMSE).
[Note› Presently CGMSE cover is not available to credit facilities
extended to retail traders, educational institutions, training institutes,
training cum incubator centres and to Medium Enterprises].
M‘ Collateral security/third party guarantee for loans beyond the above limits is
insisted on merits of each case, as determined by ‰ank, subject to R‰I/GOI
guidelines.




 


Rate of interest is linked to ‰PLR of the ‰ank and is as under› (‰PLR is 12% WEF
01.04.2009). The rate of interest is subject to changes from time to time.

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 Micro Enterprises Small & Medium Enterprises

Mfg. Services Mfg. Services

Short term loans›

Upto ‰PLR-3% ‰PLR-3% ‰PLR-2.50% ‰PLR-3%

Rs.50000/-

Above ‰PLR-1% ‰PLR-1% ‰PLR-0.50% ‰PLR-1%

Rs.50000/-
upto Rs.2 lacs

Above Rs.2 Graded rate of interest ‰PLR to Graded rate of ‰PLR+0.25%

lacs based on scoring ‰PLR+1.50% interest based to
norms & parameters on scoring ‰PLR+2.50%
norms &
parameters

Term loans›

Upto ‰PLR-3% ‰PLR-2.50% ‰PLR-2.50% ‰PLR-2.50%

Rs.50000/-

Above ‰PLR-1% ‰PLR-1% ‰PLR-0.50% ‰PLR-1%

Rs.50000/-
upto Rs.2 lacs

Above Rs.2 Graded rate of interest ‰PLR to Graded rate of ‰PLR to

lacs based on scoring ‰PLR+1.50% interest based ‰PLR+2.50%
norms & parameters on scoring
norms &
parameters

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 Rate of interest on loans above Rs.50000/- & upto Rs.5 lacs sanctioned/renewed
on or after 01.04.2010 till 31.03.2011 to Women Entrepreneurs in Micro & Small
Enterprises sector is 10% pa.

‘ Processing charges/Upfront fee/other service charges as per prevailing guidelines

of the ‰ank subject to changes from time to time.
NIL processing charges/upfront fee for loans upto Rs.5 lacs sanctioned/ renewed
on or after 01.04.2010 to 31.03.2011 to Women Entrepreneurs in Micro & Small
Enterprises sector
‘ Insurance cover shall be obtained for the assets created out of credit facility
availed.

 

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'  Over 36 months and upto 60 months Facility is allowed as a Running
  (upto 84 months in deserving cases) in Limit subject to renewal every
monthly/quarterly/half yearly/yearly year.
instalments depending on the cash
Incase of Artisans Credit Card &
generation and Debt Servicing
Laghu Udyami Credit Card, the
capacity.
limit is valid for 3 years subject
 
 Depending upon to annual review
the implementation/gestation period as
per project parameters.

  Repayment is permitted up to 10 years For SME accounts (both

  Manufacturing and Services)
which are categorized under LR1
and LR2 or rated as Low Risk by
SMERA etc, Working Capital

½

 limits are permitted for a period
of 2 years, subject to annual
review.

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3 to 10 years with initial moratorium of 12 to 18 months (common to both

"  TL & WC)

Focused attention to Micro Small & Medium Enterprises at our 37 Specialized

SME branches located in different parts of the country.

Services of SME Sulabhs at 15 centres (Agra, Ahmedabad, ‰angalore Metro,

Chandigarh, Chennai, Coimbatore, Delhi, ·ubli, ·yderabad, Kolkata, Lucknow,
Madurai, Mumbai, Pune and Trivandrum) are available for centralized processing of
credit proposals of MSMEs aimed at faster credit delivery and lesser turn around time.

‘ Services to MSME units located in UNIDO identified industrial clusters across

the country under the cluster-based approach.
.‘
a.‘ ATM facility
b.‘ Any Where ‰anking facility
c.‘ RTGS facility
d.‘ Internet banking
e.‘ Collection of cheques
f.‘ Online tax collection
g.‘ Electronic fund transfer
h.‘ Corporate Cash Management Services

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[‘ Prime Minister's Employment Generation Programme (PMEGP)

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 [‘ Scheme for Rejuvenation, Modernization & Technology Upgradation of the Coir
Industry (REMOT)
 
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[‘ Term loan for acquisition of fixed assets
[‘ Standby credit for capital expenditure
[‘ Standby term loan scheme for Apparel Exporters
[‘ Loan scheme for reimbursement of investment made in fixed assets by SMEs
[‘ Soft loan scheme for Solar Water ·eaters
[‘ Scheme for Energy Savings for SMEs
[‘ Technology Upgradation Fund scheme (TUFS) for textile & jute industries in SME sector
[‘ Credit linked capital subsidy scheme (CLCSS)
[‘ Co-financing arrangement with Small Industries Development ‰ank of India (SID‰I) for
projects under Small Enterprises (SE), Service Sector and related infrastructure projects
[‘ Loan scheme for acquisition of ISO 9000 series certification
[‘ Loans under Interest Subsidy Eligibility Certificate (ISEC) Scheme of Khadi & Village
Industries Commission (KVIC) to eligible institutions
[‘ Canara Guide
[‘ Non fund based facility ± Deferred payment guarantees

 
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[‘ Simplified Open Cash Credit (SOCC)
[‘ Open Cash Credit (OCC)
[‘ Micro financing joint liability groups (·andloom weaver & Agarbathi manufacturer
groups)
[‘ Laghu Udhyami Credit Card (LUCC) \
[‘ ‰ill of Exchange discounting facility to Small Enterpreneurs at concessional rate of
interest (‰E-SE)

 
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[‘ Composite loan scheme (CLS)

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 [‘ Artisan Credit Card (ACC)
[‘ Doctor¶s Choice
!

[‘ Export Finance schemes
[‘ Foreign currency loan for residents (FCLR)
[‘ Non fund based limits
[‘ Rehabilitation/Nursing of Sick Small Enterprises (Manufacturing) units
[‘ Debt Restructuring Mechanism for Small & Medium Enterprises (Manufacturing) units
[‘ Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGMSE)
Rating of SMEs by External Agencies

½
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As SME is very much essential for the development of India in large. So we cannot
neglect the SME in India. This means we need to finance SME¶s in India it might be Financial
Institution, banks, government. It is said that NPA¶s have increased by giving loans to SME. ‰ut
it gives the caution that extra care to should be taking before lending loans, and also they have to
keep track of all the operations of SME. The evaluation of the projects before implementing
should be carried out very systematically and scientifically. So that execution of the project will
be smooth thereby contribute to India economy.

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‰ 

[‘ www.canarabank.com
[‘ www.rbi.com
[‘ www.msme.gov.in
[‘ Annual Report, 2008-09. Ministry of Micro, Small and Medium Enterprises
[‘ ‰an quest-SME Finanacing,Jan-2010
[‘ ·andbook of Statistics on Indian Economy (2009), Reserve ‰ank of India

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