Micro, Small & Medium Enterprises (MSME)
Following the enactment of Micro, Small and Medium Enterprises Development (MSMED) Act, 2006, enterprises in India are being broadly classified into micro units, small units, medium units and large units. Within the manufacturing sector micro enterprises are classified as those with investment in plant and machinery not exceeding Rs. 25 lakh while the amount of such investment for small and medium enterprises is pegged Rs. 25 lakh – Rs. 5 crore Rs. 5-10 crore, respectively. In the services sector, similar investment classifications are: upto Rs. 10 lakh, Rs. 10 lakh – Rs. 2 crore and Rs. 2-5crore.
Banks extend loans & advances in the form of medium and long term loans and deferred payment guarantees to acquire fixed assets, working capital facilities in the form of cash credits, over drafts and bank guarantees etc to meet the working capital requirement.
When the loan is passed, one will get a MUDRA card, similar to a credit card with limit up to 10% of loan amount to purchase working capital.
All artisans involved in production/ manufacturing process are eligible to apply for MUDRA LOANS.
- Thrust in financing Self Help Groups (SHGs) after the bank linkage and grading.
- No Collateral security.
- Beneficiaries will be issued with a photo card indicating sanctioned limit and validity period of credit facility.
- Credit limit would be fixed based on assessment of working capital requirements.
- A maximum credit limit of Rs. 3 lakhs with 7% interest and even higher amount under SHG-2 (OD facility to SHGs with good track record ) linked to base rate of banks.
- The limit could normally be valid for a period of three years subject to annual review by the bank.
- Loans are granted to income generating activities. Poorest among the poor in villages and in Urban areas are selected. As per the present norms SHG groups should have women members only.
- All artisans involved in production/manufacturing process (and otherwise eligible for credit facilities, for carrying out the proposed activities under any of the existing bank scheme)would be eligible. Preference would be given to artisans registered with Development Commissioner (Handicrafts).
- Thrust in financing would be on Clusters of artisans and artisans who have joined to form Self Help Groups (SHGs).
Beneficiaries will be issued Sanction Letter and Validity Period of credit facility. They will also be issued a passbook or a credit cum passbook incorporating name, address, borrowing limit, validity period, etc.
- Fixation of Credit Limit
- Credit limit would be fixed based on assessment of working capital requirements as well as cost of tools and equipment required for carrying out small business, services, manufacturing process.etc
- The maximum credit limit to be sanctioned under the scheme would, however, be Rs.5 to 10 lacs.
As per guidelines of NABARD / RBI issued from time to time or the Banks’ policy in this regard. All the loans are covered under CGTMSE (Credit Guarantee Trust Fund for Micro Small Enterprises) cover.
(Depending upon rating for loans above Rs 2.00 lac) ?
For Shishu Loans under Mudra: Base Rate + 0.50%
For Kishore Loans: Base Rate +1.00%
For Tarun Loans: Base Rate +1.00%.
Micro and Small Enterprises:
- Up to Rs 2.00 lac – Base Rate + Interest Rates as per Bank norms).
- Above Rs 2.00 lac – Base Rate + Interest Rates as per Bank norms).
Base Rate + Interest Rates as per Bank norms
Other Schemes/ Facilities for MSME Sector
Credit linked Capital Subsidy Scheme (CLCSS) for Technology Upgradation of Small Scale Industries.
Technology Upgradation Fund Scheme (TUFS) for Textile and Jute Industries.
Prime Minister’s Employment Generation Scheme (PMEGP) for establishment of Micro enterprises.
MSME Units can submit the request for credit online through the website of Banks.
- Banks offer concession in rate of interest for such of those MSME Units, getting themselves rated through external rating agencies like SMERA, CRISIL, ICRA, CARE and FITCH.
- For loans sanctioned to Micro and Small units up to Rs 100 Lac, guarantee is available under Credit Guarantee Trust Fund for Micro Small Enterprises (CGTMSE).
General Credit Card
The Commercial Banks have introduced General Credit Card (GCC) scheme for their constituents to provide loans for general credit needs in rural and semi urban areas in a hassle free manner based on the assessment of income and cash flow of the entire house hold without insistence on security, purpose or end use of the credit. This is in the nature of overdraft or cash credit with no end use stipulations, not exceeding Rs 25,000/-.
The scheme would be implemented by both public sector and private sector scheduled Commercial Banks. The individual Banks have autonomy to determine the rate of interest to be charged on the loan. The 50% of credit component will be eligible for being treated as indirect finance to agriculture under priority sector status. It is not necessary or compulsory that GCC should be linked to purchase of consumer goods.
GCC can be issued in the form of passbook only when the card holder intends to withdraw cash. The
individual Banks can incorporate suitable modifications if any with the prior permission of RBI without altering the original characters of the scheme.