POLICY PERSPECTIVES

MSME – FINANCIAL INSTITUTIONS

MSMED DEFINITIONS

TYPE INVESTMENT IN PLANT & MACHINERY

Manufacturing Service Enterpise

MICRO Upto Rs. 25L Upto Rs.10L

SMALL Rs.25L -upto Rs.5 crore Rs.10L – upto Rs.2 crore

MEDIUM Rs.5 crore –upto Rs.10 crore Rs.2 crore –upto.Rs.5 crore

INDIA AND MSME ADVANTAGE

Demographic dividend - 15-55 years of age population 56.9% (as per Census 2011) Consumer Credit Market growing @ 40% p.a.

Part of Statutory guidance on Priority Sector stipulated by Government

- BANKS AND MSMEs---credit policy

For Public Sector Banks- 40% of Net Bank Credit (NBC)- Min. 10% MSME

For Private Sector Banks- 32% of NBC- Min. 10% MSME

BANKS AND MSMEs-credit policy

Any short fall to be deposited in Small Enterprise Development Fund (SEDF) of SIDBI.

Min. 20% year on year growth of MSMEs by 2015Min. new 5 MSMEs to be covered by urban/semi – urban

branches.Simplified uniform application forms upto Rs.5 lakhs for all

banks in the country. Setting up of specialized MSME branches and Central

Processing Cells for other branches.

BANKS AND PROMOTIONAL SERVICES

Technical Consultancy - Techno – Economic feasibility studies - Project preparation / validation

Entrepreneurship Development Programs 1. Sector / Activity Specific

- Electronics Services/Food Processing/Handicrafts 2. Target Group - Campus Students - Women - VRS Employees - Housewives

BANK CREDIT FOR MSMEs.

Time Standards

Credit Rating and Uniform Appraisal

Proposals Sanction Period

Upto Rs. 2 lakhs 2 weeks

Upto Rs.5 lakhs 4 weeks

More than Rs.5 lakhs 6 weeks

MSME – APPRAISAL REQUIREMENTS FINANCING

Promoters Profile - Qualifications / Experience Techno Economic Viability - Potential MarketTechnology / Regulatory Standards / Product UniquenessCost of Project and FundingFinancial Appraisal Indicators - Debt Equity Ratio

- Debt Service Coverage Ratio (DSCR)

- Break Even Analysis

Special Appraisal Relaxations for MSMEs

Competitive Interest Rates – Rebate for womenInterest Subvention (Subsidy)Credit Scoring Models–Interest / Security Concessions - Simplified upto Rs.25 lakhs Collateral Free Loans upto Rs.1 crore under Credit Guarantee

Trust for Micro and Small Enterprises.L.U.Credit.Card. – Sanction valid for 3 years upto Rs.10 lakhs and

in special cases upto Rs.25 lakhs. Fair Practices Code

Schemes & Products for MSME Financing

Capital Expenditure

1. General purpose Term Loan - Upto Rs.2.50 crore - Capital expenditure including R & D / Technology up gradation of project cost

2. Deferred Payment Guarantee - Against bills raised by manufacturer

3. Letter of Credit - Import of machinery – Guarantee against

bills raised

Cont.

4. Vehicle Loans for enterprises

Car Loans for promoters 5. Construction Equipment Loan

- Loaders / Excavators / Cranes / etc.

Government Schemes through SIDBI / NABARD

- 15% credit linked capital subsidy scheme towards

cost of project.

- Max. loan is Rs.1 crore

SERVICES SECTOR

Rice Mills / Dall Mills / Cotton Ginning MillsAutomobile Dealer FinanceRestaurantsHospitalsProfessionals - Doctors / Engineers / Contractors / Commission

AgentsEducation InstitutionsRoad and Water Transport Operators

WORKING CAPITAL FINANCE FOR MSMES

Appraisal upto Rs. 5 crore

1. Operating Cycle Estimates OR

20% of Anticipated Turnover Whichever is higher2. Composite Loan Facility - Term Loan + Working Capital

3. Open Cash Credit / Overdraft

4. Mortgage Loans for Composite Purpose

CREDIT GUARANTEE SCHEME (CGT SME) / GoI

Eligibility : Banks and other Financial Institutions

Category Max. extent of Guarantee

Upto Rs. 5 lakhs Above Rs.5L – 50L Above 50L – 100L

MICROENT 85% of AID (Max. of Rs.4.25L)

75% of AID(Max. ofRs.37.50L)

Rs.37.50L + 50% of above Rs.50L loan(Max. Rs.62.50)

Women Entrepreneur Northeast Special Package

ALL OTHER SME 75% (Max. 37.50 L)

Rs.37.50L + 50% of above Rs.50L loan(Max. Rs.62.50)

SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA (SIDBI) AND MSME

Direct Finance - New / Existing units

Bills Finance - Expansion / Modernization / Technology /

Diversification

Refinance - Upto Rs.20 cr cost of project to Banks

SIDBI

International Finance (USD / Euro / Rs.) - Preshipment – 180 days, margin 10-25%

- Postshipment – Bill financing

- Foreign Currency Loans

Energy Saving Projects - 7 yrs loans

- Rs. 10L and above

Risk Capital

- Venture Capital

SIDBI

Women Enterprise Product Marketing (Marketing Fund)

- Service providers incldg. Supporting services - internet, market intelligence, advertising, market research, warehousing, common testing centres

MARKETING ASSISTANCE

Vendor Development Scheme - Under MOU with large corporates & MNCs and

Term Loans & Bill Financing

SME IT Loans - Computerization – Hardware / Software

OTHERS

Technology Up gradationAcquisition of ISO Certification

SIDBI

NSIC (National Small Industry Corporation) - Market Development Scheme

Participation in International Exhibitions - Reimbursement of 25% to 85% of air fare by economy class. - 25% to 75% rental for space. - Max. Rs.1.25L per unit

Other Schemes - Acquiring machinery & equipment upto Rs.5L - Consortium marketing and securing bulk orders - Financing 90 days raw material through bulk purchase - NSIC functioning as a leading export house providing facilities - Conducting exhibitions / trade fairs

Pre-Shipment and Post –Shipment Credit (FX & INR) - Supplier credit through Indian exporter

(with recourse to exporter) - Buyers’ credit - direct to overseas buyer without recourse to exporter

EXIM BANK

EXIM BANK

NON-FUND BASED

Line of Credit (to Importers) - Including Agricultural Commodities and Processed Foods Guarantee on behalf of ExportersFinance for Export – Oriented Companies 1. Project Finance - Modernization / Expansion 2. Overseas Investment Finance (For Joint Ventures / Wholly Owned Subsidiaries)

- Term Loans with Corporate Guarantee of Indian Companies - Equity Participation

EXIM BANK SPECIAL PROGRAMS

Export Marketing Finance (for forward linkages) - Market Research - Participation in International Fairs - Quality Certification - Prospective Buyer visits to India - Preoperative Expenditure for overseas offices

Export Product Development Term Loan for product adaptation / Pilot Plants Product / Process

Development

EXIM BANK

EXPORT VENDOR DEVELOPMENT PROGRAM

Term loans, Export trading houses, Backward linkages for production of export goods.

R & D FOR EXPORT PROMOTION