*For computing investment for the
purpose of categorization under MSME Sector i.e Micro,Small,
Medium Enterprise , investment made in Land & Building has to be
excluded and investment in Plant & Machinery should be at Original Cost.
This shall exclude items such as the
cost of pollution control, research and development, industrial safety
devices and such other items as may be specified, by
notification by Ministry of Small
Scale Industries.The word Equipment is defined as “All
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.
advances granted to units in the KVI (KHADI AND VILLAGE INDUSTRIES)
sector, irrespective of their size of
operations, location and amount of original investment in plant and
machinery will be considered as advances to Small Enterprises & shall
be eligible under the small enterprises segment within the priority
sector.Credits under KVI sector are made available to individuals,
artisans, institutions, co-operative societies etc.,for production of
khadi products, cottage industries/village industries
* INDIRECT FINANCE
TO MSE SECTOR - Loans granted by banks to NBFCs for onward lending
to small and micro enterprises (manufacturing as well as service),
advances to cooperatives of producers in the decentralised sector i.e
. village and cottage industries, artisans & to those assisting the
decentralized sector in the supply of inputs and marketing of outputs
of artisans, village and cottage industries.
Micro and Small Enterprises whose borrowal accounts are covered under
Credit Guarantee fund for Micro & Small Enterprises (CGTMSE), no
collateral securities are required for loans upto Rs 100 Lac. At
present CGMSE cover is not available to credit facilities extended to
retail traders, educational institutions, training institutes,
training cum incubator centres and to Medium Enterprises.Review.To
view Report of Working Group on CGTMSE Scheme, click
RBI Guideline for lending
Disposal of Applications
All loan applications for SSI up to a credit limit of Rs.. 25,000/-
should be disposed of within 2 weeks and those up to Rs.. 5 lakh
within 4 weeks, provided the loan applications are complete in all
respects and accompanied by a 'check list'.
The limit for all SSI borrowal accounts for obtaining collateral
security is Rs. 5 lakh. Banks, on the basis of good track record and
financial position of the SSI units, may increase the limit of
dispensation of collateral requirement for loans up to Rs..25 lakh
(with the approval of the appropriate authority).
A composite loan limit of Rs..1 crore can be sanctioned by banks to
enable the SSI entrepreneurs to avail of their working capital and
term loan requirement through Single Window.
Specialised SSI/SME branches
Public sector banks have been advised to open at least one specialised
branch in each district. Further, banks have been permitted to
categorise their SSI general banking branches having 60 per cent or
more of their advances to SSI sector as Public sector banks have been
advised to open at least one specialised SSI branch, in order to
encourage them to open more specialised SSI 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 SME sector, the public sector banks will ensure
specialized SME 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
The existing specialised SSI branches may be also be redesignated as
SME branches. Though their core competence will be utilized for
extending finance and other services to SME sector, they will have
operational flexibility to extend finance /render other services to
Under the Amendment Act, 1998 of Interest on Delayed Payment to Small
Scale and Ancillary Industrial Undertakings, penal provisions have
been incorporated to take care of delayed payments to SSI units which
inter-alia stipulates a) agreement between seller and buyer shall not
exceed more than 120 days, b) payment of interest by the buyers at the
rate of one and a half times the prime lending rate (PLR ) of SBI for
any delay beyond the agreed period not exceeding 120 days.
Further, banks have been advised to fix sub-limits within the overall
working capital limits to the large borrowers specifically for meeting
the payment obligation in respect of purchases from SSI.
After the enactment of the Micro, Small and Medium Enterprises
Development (MSMED), Act 2006, the existing provisions of the Interest
on Delayed Payment Act, 1998 to Small Scale and Ancillary Industrial
Undertakings, have been strengthened as under:
(i) The buyer to make payment on or before the date agreed on between
him and the supplier in writing or, in case of no agreement before the
appointed day. The agreement between seller and buyer shall not exceed
more than 45 days.
(ii) The buyer fails to make payment of the amount to the supplier, he
shall be liable to pay compound interest with monthly rests to the
supplier on the amount from the appointed day or, on the date agreed
on, at three times of the Bank Rate notified by Reserve Bank.
(iii) For any goods supplied or services rendered by the supplier, the
buyer shall be liable to pay the interest as advised at (ii) above. (iv)In
case of dispute with regard to any amount due, a reference shall be
made to the Micro and Small Enterprises Facilitation Council,
constituted by the respective State Government.