FAQ

Q.20. What scheme does the Ministry have for providing marketing support to MSMEs?

The Ministry implements the Marketing Assistance scheme through National Small Industries Corporation (NSIC) Limited for providing marketing support to MSMEs. The main objectives of the scheme is to enhance the marketing competitiveness of MSMEs; to provide them a platform for interaction with the individual/institutional buyers; to update them with prevalent market scenario and to provide them a form for redressing their problems. MSMEs are supported under the Scheme for capturing the new market opportunities through organising/ participating in various domestic & international exhibitions/ trade fairs, Buyer-Seller meets intensive-campaigns and other marketing events.

Q.21. Does the Ministry have any scheme for providing handholding support and assistance to potential entrepreneurs?

The Ministry implements the Rajiv Gandhi Udyami Mitra Yojana (RGUMY), objective of which is to provide handholding support and assistance to the potential first generation entrepreneurs, who have already successfully completed Entrepreneurship Development / Skill Development Training. Selected lead agencies i.e ‘Udyami Mitras’, provide information and guidance to first generation entrepreneurs regarding various promotional schemes of the Government, procedural formalities required for setting up and running of the enterprises and help them in accessing Bank credit etc. A ‘Udyami Helpline’ (a Call Centre for MSMEs) with a toll free No. 1800-180-6763 has also been set up to assist the entrepreneurs.KEY WORDSCredit Guarantee Capital Subsidy Cluster Development Skill DevelopmentTool Rooms Manufacturing Competitiveness Lean Manufacturing Design Clinics Quality Management Standards (QMS) Quality Technology Tools (QTT);Marketing Assistance on Intellectual Property Rights (IPR); Business IncubatorsBar Code Energy ConservationISO certificationCredit RatingInternational Cooperation  Marketing Marketing Assistance 

Q.22. What is the status of lending by banks to this sector?

Bank’s lending to the Micro and Small enterprises engaged in the manufacture or production of goods specified in the first schedule to the Industries (Development and regulation) Act, 1951 and notified by the Government from time to time is reckoned for priority sector advances. However, bank loans up to Rs.5 crore per borrower / unit to Micro and Small Enterprises engaged in providing or rendering of services and defined in terms of investment in equipment under MSMED Act, 2006 are eligible to be reckoned for priority sector advances. Lending to Medium enterprises is not eligible to be included for the purpose of computation of priority sector lending. Detailed guidelines on lending to the Micro, Small and Medium enterprises sector are available in our Master Circular no. RPCD.MSME & NFS.BC.No.5/06.02.31/2013-14 dated July 1, 2013 . The Master circulars are issued by RBI, to banks, on various matters are available on RBI website www.rbi.org.in and updated in July each year.

Q.23. What is meant by Priority Sector Lending?

Priority sector lending include only those sectors, as part of the priority sector that impact large sections of the population, the weaker sections and the sectors which are employment-intensive such as agriculture, and Micro and Small enterprises. Detailed guidelines on Priority sector lending are available in RBI Master Circular on Priority sector lending no. RPCD.CO.Plan.BC 9 /04.09.01/2013-14 dated July 1, 2013 . The Master circulars issued by RBI, to banks, on various matters are available on its website www.rbi.org.in and updated in July each year.

Q.24. Are there any targets prescribed for lending by banks to MSMEs?

As per extant policy, certain targets have been prescribed for banks for lending to the Micro and Small enterprise (MSE) sector. In terms of the recommendations of the Prime Minister’s Task Force on MSMEs banks have been advised to achieve a 20 per cent year-on-year growth in credit to micro and small enterprises, a 10 per cent annual growth in the number of micro enterprise accounts and 60% of total lending to MSE sector as on preceding March 31st to Micro enterprises.In order to ensure that sufficient credit is available to micro enterprises within the MSE sector, banks should ensure that:·         40 per cent of the total advances to MSE sector should go to micro (manufacturing) enterprises having investment in plant and machinery up to Rs. 10 lakh and micro (service) enterprises having investment in equipment up to Rs. 4 lakh ; ·         20 per cent of the total advances to MSE sector should go to micro (manufacturing) enterprises with investment in plant and machinery above Rs. 10 lakh and up to Rs. 25 lakh, and micro (service) enterprises with investment in equipment above Rs. 4 lakh and up to Rs. 10 lakh. Thus, 60 per cent of MSE advances should go to the micro enterprises.  For details, the RBI Master Circular RPCD.MSME & FS.BC.No.5/06.02.31/2013-14 dated July 1, 2013 on 'Lending to Micro, Small and Medium Enterprises (MSME) Sector, may please be seen.

Q.25. Are there specialized bank branches for lending to the MSMEs?

Public sector banks have been advised to open at least one specialized branch in each district. The banks have been permitted to categorize their MSME general banking branches having 60% or more of their advances to MSME sector, as specialized MSME branches for providing better service to this sector as a whole.As per the policy package announced by the Government of India for stepping up credit to MSME sector, the public sector banks will ensure specialized MSME branches in identified clusters/centres with preponderance of small enterprises to enable the entrepreneurs to have easy access to the bank credit and to equip bank personnel to develop requisite expertise. Though their core competence will be utilized for extending finance and other services to MSME sector, they will have operational flexibility to extend finance/render other services to other sectors/borrowers.

Q.26. How many such specialized branches for lending to MSMEs are there?

As on March 2013 there are 2032 specialized MSME branches.

Q.27. How do banks assess the working capital requirements of borrowers?

The banks have been advised by RBI to put in place loan policies governing extension of credit facilities for the MSE sector duly approved by their Board of Directors Vide RBI circular; RPCD.SME & FS.BC.No.102/06.04.01/2008-09 dated May 4, 2009 ).  Banks have, however, been advised to sanction limits after proper appraisal of the genuine working capital requirements of the borrowers keeping in mind their business cycle and short term credit requirement. As per Nayak Committee Report, working capital limits to SSI units is computed on the basis of minimum 20% of their estimated turnover up to credit limit of Rs.5crore. For more details paragraph 4.12.2 of the RBI Master Circular on lending to the MSME sector dated July 1, 2010 may please be seen.

Q.27. How do banks assess the working capital requirements of borrowers?

The banks have been advised by RBI to put in place loan policies governing extension of credit facilities for the MSE sector duly approved by their Board of Directors Vide RBI circular; RPCD.SME & FS.BC.No.102/06.04.01/2008-09 dated May 4, 2009 ).  Banks have, however, been advised to sanction limits after proper appraisal of the genuine working capital requirements of the borrowers keeping in mind their business cycle and short term credit requirement. As per Nayak Committee Report, working capital limits to SSI units is computed on the basis of minimum 20% of their estimated turnover up to credit limit of Rs.5crore. For more details paragraph 4.12.2 of the RBI Master Circular on lending to the MSME sector dated July 1, 2010 may please be seen.

Q.28. Is there any provision for grant of composite loans by banks?

A composite loan limit of Rs.1crore can be sanctioned by banks to enable the MSME entrepreneurs to avail of their working capital and term loan requirement through Single Window in terms of RBI Master Circular on lending to the MSME sector dated July 1, 2010. All scheduled commercial banks have been advised by our circular RPCD.SME&NFS. BC.No.102/06.04.01/2008-09 on May 4, 2009 that the banks which have sanctioned term loan singly or jointly must also sanction working capital (WC) limit singly (or jointly, in the ratio of term loan) to avoid delay in commencement of commercial production thereby ensuring that there are no cases where term loan has been sanctioned and working capital facilities are yet to be sanctioned. These instructions have been reiterated to schedule commercial banks on March 11, 2010.

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