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Introduction

The MSME sector in India serves as the backbone of the Indian economy. This sector has more than 6.33 crore business units, out of which, 90% of them are Micro Enterprises. The MSME sector provides employment to more than 12 crore Indians across the country. The Government of India has a number of schemes to boost the credit, marketing, and infrastructure support to this unorganized sector.

NSIC, National Small Industries Corporation, is an ISO 9001-2015 certified Government of India Enterprise under the Ministry of Micro, Small and Medium Enterprises (MSME). The primary objective of NSIC is to promote, aid, and foster the growth of micro, small, and medium enterprises in the country. NSIC is set up with the objective of promoting and supporting Micro, Small & Medium Enterprises (MSMEs) Sector by providing cohesive support services encompassing Marketing, Technology, Finance, and other services. It supports deserving MSMEs with various services like credit support, technological assistance, marketing strategies, and providing enhanced Government connectivity services.

Credit Support through NSIC is available through the following schemes: 

  • RMA against Bank Guarantee
  • Credit Facilitation through Banks
  • Bill Discounting

Credit Facilitation through Banks

The primary objective of the scheme is to assist MSMEs in accessing credit support, both fund based and non-fund based limits, from the banks. For this, the NSIC has entered into a Memorandum of Understanding with various Nationalized and Private Sector Banks. Along with arranging for credit support, NSIC also offers handholding support relating to the submission of the loan application and follow up with the banks.

Objectives of the Credit Facilitation through Banks Scheme

  • The scheme facilitates credit to MSMEs through syndication of various public and private sector banks.
  • Offers an option for MSMEs to apply to a new bank or transfer their existing account to a different bank.
  • Handholding support to MSMEs in completing the loan application, preparing the documentation and thereafter submitting it to the bank.
  • Assistance to the MSMEs in getting a competitive rate of interests from the banks after a favourable rating is awarded to units under the Performance and Credit rating scheme of the Ministry.
  • To make this scheme accessible to a larger number of MSMEs who are desirous of availing credit.
  • To provide handholding support to MSMEs.

Key features of the Credit Facilitation through Banks Scheme

  • Facilitates both fund-bases and non-fund based support from the banks
  • Fund-based support includes Term Loans & Working Capital Loans
  • Term loans can be availed for acquisition of fixed assets (viz, land/building, plant/machinery, other fixed assets) towards setting up of new units and for expansion, modernization and diversification in case of existing units.
  • Working Capital requirement facility to meet the working capital needs of the MSME units in the form of open cash credit, overdraft against book debts and bill discounting facility.
  • Non-fund based support includes facilities such as guarantees, letter of credit, foreign bank guarantees, foreign letter of credit etc.
  • The interest rate and the security requirement differs from bank to bank.

How are MSME loans disbursed under the Bank Credit Facilitation Scheme?

NSIC has tie-up arrangements with various public sector and private sector banks for the Credit Facilitation Scheme. The MSME Unit can approach any of the bank branches that have a tie-up with NSIC, and submit their loan application directly. An NSIC official will be available at the branch to provide hand-holding support to the applicant. They will assist them in completing all documentation as required for further submission to the bank. The application form can also be downloaded from the NSIC portal.

Who are eligible to apply for an MSME Loan under the Credit Facilitation Scheme?

All existing MSME units as well as units applying for fresh loans are eligible to apply for an MSME Loan through the Credit Facilitation Scheme.

Classification of Micro, Small and Medium Enterprises

Micro Enterprise

Any manufacturing enterprise in which the original value of investment in plant and machinery is up to Rs. 25 lakhs

Any service enterprises in which the original value of investment in equipment is up to Rs. 10 lakhs

Small Enterprise

Any manufacturing enterprise in which the original value of investment in plant & machinery is above Rs. 25 lakhs and up to Rs. 500 lakhs

Any service enterprise in which the original value of investment in equipment is above

Rs. 10 lakhs and up to Rs. 200 lakhs 

Medium Enterprise

Any manufacturing enterprise in which the original value of investment in plant & machinery is above Rs. 500 lakhs and up to Rs.  1000 lakh

Any service enterprise in which the original value of investment in equipment is above

Rs. 200 lakhs and up to Rs. 500 lakhs

What are the documents to be submitted for availing MSME loans under the Credit Facilitation Scheme?

The list of documents to be submitted varies based on the purpose of the loan. However, given below is a general list of documents to be submitted:

  • Proof of Identity 
  • Proof of Residence
  • Proof of Business address 
  • Asset and Liability Statement of promoters, guarantors, directors etc. with latest income tax returns.
  • Rent Agreement / Lease Deed if business premises rented/leased. 
  • Copy of SSI registration certificate/Entrepreneurs Memorandum 
  • Profile of the Unit (Name and address of promoters, experience, nature of activity, address of all offices/plants, share holding pattern etc.)
  • Last three year’s Balance Sheet with IT/ST returns 
  • Projected Balance Sheet for next two years
  • Application in the prescribed format
  • CMA data in the prescribed format if the limit required is Rs. 100 lakhs and above.
  • Position of accounts with existing bankers
  • Project Report for term loan requirements
  • Estimates/Quotations/Sanctioned building plan etc.
  • Partnership Deed/Trust Deed/Rules & Bye laws/Memorandum and Articles of Association /Certificate of Incorporation etc.
  • Clearance from Pollution Control Board/Sanction from Electricity Board and other statutory authorities.
  • Month-wise production and sales data for the current financial year, value of stock in process, finished goods, debtors, creditors etc.

How much credit support can I receive under this scheme?

The credit support is need based. Term Loan limits are fixed by the bank. For units requiring working capital limits up to Rs. 5 crores, requirement is assessed as 25% of the projected turnover for the next year. The working capital limit shall then be 20% of the projected turnover and the balance shall be arranged by promoters through equity / loans. For limits above Rs. 5 crores, the Maximum Permissible Bank Finance Method is used to determine the working capital requirement.

What is the repayment tenure on these credit facilities?

The repayment tenure varies from 5 to 7 years and depends on the income generation from the unit. Some exceptional cases are given up to 11 years’ repayment tenure.

For Working capital finance limits, they are valid for one year and repayable on demand. Self-liquidating loans like bill finance, export credit etc. are linked to the natural period of the transaction.

What is the interest rate on the credit facilities under the scheme?

The interest rate depends on the bank.

Bank Credit Facilitation Scheme FAQs:

1. Who are the target clients who can avail loan under NSIC’s Credit Facilitation Scheme?

All existing MSME units as well as units applying for fresh loans are eligible to apply for an MSME Loan through the Credit Facilitation Scheme.

2. Is there any cost for applying for a loan under this scheme?

No, there is no fee charged from the MSMEs for applying a loan under this scheme.

3. Which are the lending institutions approved to lend loans under the Credit Facilitation Scheme?

The Banks (both public sector and private sector) and Financial Institutions which have entered into Memorandum of Understanding (MOU) with NSIC are approved to lend loans under the Credit Facilitation Scheme.

4. What are the types of loan facilities available for MSMEs under the Credit Facilitation Scheme?

This scheme offers both fund-bases and non-fund based support from the banks:

  • Term loans can be availed for acquisition of fixed assets (viz, land/building, plant/machinery, other fixed assets) towards setting up of new units and for expansion, modernization and diversification in case of existing units.
  • Working Capital requirement facility to meet the working capital needs of the MSME units in the form of open cash credit, overdraft against book debts and bill discounting facility.
  • Non-fund based support includes facilities such as guarantees, letter of credit, foreign bank guarantees, foreign letter of credit etc.

5. Is KYC compliance mandatory for availing loans under this scheme?

Yes, the loan applicants should be KYC compliant. They should open an operative account (Savings /Current Bank Account) with proper introduction, address proof, ID proof and photo etc. as stipulated by the bank.

6. Do I have to submit any security or collateral for the loan?

The security and collateral policy depends on the lending bank and varies from bank to bank. Customers should check with the bank on these aspects before submitting the application.

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