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    MSME (Micro Small and Medium Enterprises) Loan

    Government of India enacted the Micro, Small and Medium Enterprises Development Act, 2006 which defines Micro, Small and Medium Enterprises as follows:

    Enterprises that manufacture or produce or process or preserve goods

    • Micro enterprise: Where an enterprise investment in plant and machinery does not exceed Rs.25 lakhs.
    • Small enterprise: Where the investment in plant and machinery is more than Rs.25 lakh, but does not exceed Rs.5 crore.
    • Medium enterprise: Where the investment in plant and machinery is more than Rs.5 crore but does not exceed Rs.10 crore.

    Enterprises that provide service and whose investment in equipment, land or building is not directly related to the service that it renders

    • Micro enterprise: Where an enterprise investment in equipment does not exceed Rs.10 lakhs.
    • Small enterprise: Where the investment in equipment is more than Rs.10 lakh, but does not exceed Rs.2 crore.
    • Medium enterprise: Where the investment in equipment is more than Rs.2 crore but does not exceed Rs.5 crore.
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    MSME (Micro Small and Medium Enterprises) Loan Scheme

    Credit Guarantee Fund Trust for Micro and Small Enterprises was set up by Ministry of MSME, Government of India and SIDBI. The main aim was to facilitate flow of credit to MSME sector without the need for collateral or any third party guarantee. The objective of the scheme is to give importance to the project viability and secure the credit facility on the asset that is being financed.

    The Guarantee Trust will make good the loss if the borrower fails to discharge his liability. Up to 85% of the outstanding amount that is defaulted and the loss incurred by the lender will be covered by the Guarantee Trust. Credit Guarantee Fund Trust for Micro and Small Enterprises will cover for credit facilities up to Rs.1,00,00,000 that the lender has funded without any collateral or third party guarantee. To avail the guarantee cover, Credit Guarantee Fund Trust for Micro and Small Enterprises charges an annual service fee. This fee is borne by the borrower.

    The fee that is payable to the Trust is one-time guarantee fee of 1.5% and annual service fee is 0.75% on credit facilities sanctioned. For loans up to Rs.5 lakh, the one-time guarantee fee is 1% and annual service fee is 0.5%. For loans in the North-east Area, the one-time guarantee fee is set at 0.75%.

    MSME Loan Eligibility criteria

    The MSME Loan is offered to the priority sector. The priority sector impacts a large section of the population, the weaker sections and sectors that are employment intensive such as agriculture, education, housing, export credit, micro and small enterprises and others as expressed by the government.

    MSME Loan Limit and Interest rate

    Certain targets are set for banks’ lending to the Micro and Small Enterprises. The banks’ have to achieve a 20% growth in credit to micro and small enterprises and 10% annual growth in the number of micro enterprises accounts and 60% of total lending to Micro and Small Enterprises sector. The banks have to follow the following:

    • 40% of the total advances must go to micro and small enterprises involved in manufacturing having investment in plant and machinery up to Rs.10 lakh and for service enterprises having investment in equipment up to Rs.4 lakh.
    • 20% of the total advance to micro and small enterprises should go to manufacturing enterprises that have above Rs.10 lakh till Rs.25 lakh investment in the plant and machinery and for service enterprises that have investments in equipment above Rs.4 lakh up to Rs.10 lakh.
    • To simplify, 60% of the advances must go to micro enterprises.

    The banks must sanction the loan after careful appraisal of genuine working capital requirement of the borrower and considering the business cycle and short term credit requirement.

    Small Scale Industry units’ working capital requirement is minimum 20% of their estimated turnover up to Rs.5 crore.

    The rate of interest have been deregulated by the Reserve Bank of India and it is governed by the bank’s lending policy.

    Security

    Banks are instructed not to accept collateral in the case the loan amount is up to Rs.10 lakh. If the track record of the borrower is good, the limit may be increased loans up to Rs.25 lakh.

    Other services offered to MSE Entrepreneurs

    Apart from offering loans to MSE Entrepreneurs, the banks will also provide the following:

    • Rural Self-Employment Training Institutes:
    • Here short duration skill upgradation programmes are conducted to help the existing entrepreneurs to keep up with the changing global market.

    • Financial literacy and consultancy support:
    • Through Financial Literacy Centres, banks provide assistance to MSE entrepreneurs with financial, operational skills that includes accounting, finance, business planning etc.

    Restructuring of Sick Units

    A Micro or Small Enterprise is said to be sick if the any of the borrowal account of the enterprise remains NPA for 3 months or more or if there is erosion in the net worth due to accumulated losses to the extent of 50% of its net worth.

    The symptoms of sickness are as follows:

    • Lack of healthy movement of stocks and rising level on inventory.
    • Inability of the party to promptly honour the cheques.
    • Delayed submission of stock statements.
    • Unhealthy fluctuations in CC account.
    • Default in paying the interest charged on the borrower’s account.
    • Frequent request to grant excess limit without corresponding increase in sale.
    • Capacity utilization is low.
    • Current ratio is poor.

    If the units are deemed sick, then they must be restructured with proactive approach to avoid further deterioration. Service enterprises are rehabilitated through debt restructuring mechanism. Service enterprises that need concessions are restructures and relief measures are offered.

    MSME Loan Branches

    Public sectors banks have been directed to open at least one specialized MSME branch in each district. The banks can categorise the general branch that has 60% or more advances to MSME sector as a specialized MSME branch.

    The branch must be easily accessible by the entrepreneurs and it must equip personnel having requisite expertise. Those branches must focus on rendering service to the MSME sector and it can occasionally render other services to other sectors and borrowers.

    There are 2032 specialised MSME branches as on March, 2013. List of Banks that have MSME care centres:

    1. Allahabad Bank
    2. Bank of Baroda
    3. Oriental Bank of Commerce
    4. Andhra Bank
    5. State Bank of Bikaner and Jaipur
    6. State Bank of Hyderabad
    7. Bank of India
    8. Bank of Maharashtra
    9. State Bank of Travancore
    10. Canara Bank
    11. Dena Bank
    12. Indian Bank
    13. Indian Overseas Bank
    14. Punjab and Sind Bank
    15. Punjab National Bank
    16. Syndicate Bank
    17. UCO Bank
    18. Union Bank of India
    19. United Bank of India
    20. Vijaya Bank
    21. State Bank of Mysore
    22. Corporation Bank
    23. IDBI Bank
    24. State Bank of Patiala
    25. State Bank of India
    26. Central Bank of India
    27. State Bank of Indore

    MSME Loan Application

    The MSME Loan application requires you to fill in the following details:

    • Application date.
    • Name of the enterprise.
    • Registered office address.
    • Address of the factory or shop.
    • If the enterprise belongs to SC/ ST/ OBC/ Minority community
    • Telephone number.
    • E-mail address.
    • Mobile number.
    • PAN Card number.
    • Constitution (proprietorship, partnership firm, private limited company, limited company, cooperative society).
    • Date of establishment
    • State where the business is located.
    • Branch where the business is located.
    • Name of proprietors or partners or directors along with their age, academic qualification, address, telephone number and experience.
    • Existing activity.
    • Name of associate concerns and nature of association.
    • Mention the existing credit facilities, if any.
    • List out the proposed credit facilities.
    • If it is a Term Loan requirement, then the details of the machinery must be given. It should contain the details of type of machine, purpose of the machine, whether it is imported, name of supplier, cost of the machine, contribution made by the promoter and the loan required.
    • Project cost detail that includes the land development, construction of building, purchase of plant and machinery, purchase of vehicles, purchase of other assets, contingencies, interest during holiday period and working capital margin.
    • Project means of finance, that must include owner’s contribution, unsecured loan, subsidy and term loan.
    • Details of the collateral offered if any and detail of third party guarantee, if any.
    • Statutory obligations status must be mentioned. Statutory obligations are registration under Shops and Establishment Act, registration under SSI (Provisional and final), Drug license, latest Sales Tax Return filed, latest Income Tax Return files and any other statutory dues remaining outstanding.

    Effects of 2018-19 Union Budget on the MSME Sector

    Indian Finance Minister - Mr. Arun Jaitley - introduced a number of proposals targeting the Micro, Small, and Medium Enterprise (MSME) sector during the 2018-19 Union Budget held on 1 February 2018. Being one of the major sectors for growth and employment in the country, the Government plans to improve the financing for the capital requirement of the industry. In addition to MSME, the Union Budget also focused on the agriculture, health, finance, infrastructure, social protection, education, employment, and other sectors. During the meeting, the minister also voiced his proposals regarding health and educational cess, tax, and initiatives to improve the cash economy of India.

    Highlights of the 2018-19 Union Budget on the MSME Sector

    • The Union Budget of the upcoming fiscal year aims to improve the financing for MSMEs by offering prompt loans, incorporating policies for non-performing assets, and reducing tax burden.
    • The meeting also indicated a review of refinancing policies and eligibility criteria for Non-Bank Finance Companies (NBFCs).
    • The Finance Minister also mentioned that the policies and institutional development measures for Fintech companies might also be revamped to promote their growth.
    • Apart from launching the ‘‘Start-Up India’’ program, the Government intends to encourage the Venture Capital Funds (VCF) and the angel investors by introducing policies and an exclusive taxation system directed towards alternative investment funds.
    • For the forthcoming 3 years, the Government proposes to contribute 12% of the earnings of new employees of all sectors towards Employees' Provident Fund (EPF).
    • The Employees Provident Fund and Miscellaneous Provisions Act, 1952 will be amended to reduce the employee contribution for female workers to 8% for the first 3 years of employment. However, the employers’ contribution towards the EPF will remain unchanged at 12% or 10% in this case.
    • Under the existing Pradhan Mantri Kaushal Kendra Programme, the Government aims to set up model aspirational skill centers in all the districts of the country.
    • For the upcoming fiscal year, the Finance Minister proposes to allow a corpus of Rs.7,158 crore for the textile sector.

    In addition to the above mentioned points, the Union Budget 2018-19 saw a number of modifications to improve the economy of the country.

    MSME (Micro Small and Medium Enterprises) Loan Reviews

    • Bajaj Finserv Personal Loan
      "Best Financial Service"
      0.5 5.0/5 "Blown Away!"
      I have take personal loan from the Bajaj finance which they approved in 2-3 day and the amount is reflected in next day ,its instant approve process. As am satisfied with the rate of interest which is quiet nominal one They provided the tenure period of 1-5 year and i make the payment monthly though ECS There is nominal processing fees also,
      Was this review helpful? 1
      , chennai
      Reviewed on Oct 17, 2018
    • HDFC Bank Personal Loan
      "Best Financial Service"
      0.5 5.0/5 "Blown Away!"
      I have taken personal loan from Hdfc bank . Am satisfied with the rate of interest which they have provided Is high . There is nominal processing fees for the loan which is nominal one. I make the payments through Ecs every month. They did quick documentation and received the loan.
      Was this review helpful? 0
      , chennai
      Reviewed on Oct 17, 2018
    • Bank Bazaar Personal Loan
      "Experience is good"
      0.5 5.0/5 "Blown Away!"
      There were no issues or delay at Bankbazaar.com, the customer support was on time to contact me and inform me the details. The website is also good and it is informative too. It was a hassle free experience and in all a smooth process. There were follow up calls too.
      Was this review helpful? 0
      , mumbai
      Reviewed on Oct 17, 2018
    • Incred Personal Loan
      "High on ROI and charges"
      0.5 5.0/5 "Blown Away!"
      InCred experience is good when it comes to the personal loan. They were on time and the documents were also collected on time. I got the loan amount as they needed. The rate of interest is too high. It is of 21% and the processing fee is also high. It is recommendable for an emergency.
      Was this review helpful? 0
      , mumbai
      Reviewed on Oct 17, 2018
    • review Personal Loan
      "Excellent"
      0.5 5.0/5 "Blown Away!"
      I have taken a personal loan from Ujjivan small finance bank. There was no processing charges and the rate of interest is around 12.5%. The process is good, but the only thing is the loan amount is maximum of 50K. Overall it has been a good experience.
      Was this review helpful? 0
      , pune
      Reviewed on Oct 17, 2018
    • Bank Bazaar Personal Loan
      "Overall good"
      0.5 4.0/5 "Great!"
      Bankbazaar.com is very good in my point of view. They have contacted me immediately and there was no delay and there were follow up calls too in the process. The website is easy to use and check the banks. One thing is, it would be better if I am provided with the customer care number of the bank. So if the bank is delaying in the process, the customer can contact the bank directly and check.
      Was this review helpful? 0
      , pune
      Reviewed on Oct 17, 2018
    • Incred Personal Loan
      "ROI is very high"
      0.5 1.5/5 "Bad"
      I have taken a personal loan from InCred and it is good but not as expected. I was expecting the loan within two to three days, but it took 15 days. I had applied for a medical issue. The rate of interest is very high, it is of 28%. The processing charges is also, it is 3%. The loan amount was as per my request.
      Was this review helpful? 0
      , pune
      Reviewed on Oct 17, 2018
    • review Personal Loan
      "Best service"
      0.5 5.0/5 "Blown Away!"
      My personal loan was taken with BAJAJ FIN INSTITUTION , The process was very smooth i got my loan within few days . There is no charge for foreclosure but rate of interest is too high with this bank . Overall it has been very good experience with BAJAJ ALLIANCE
      Was this review helpful? 0
      , navi mumbai
      Reviewed on Oct 17, 2018
    • HDFC Bank Personal Loan
      "Good service"
      0.5 4.0/5 "Great!"
      It has been a good experience in getting a personal loan from them where the process in getting the loan had been smooth and easy. The loan amount which they had provided had been sufficient and fulfilled the requirements. The interest rate with them was also not too high compared with the market rate.
      Was this review helpful? 1
      , kolkata
      Reviewed on Oct 17, 2018
    • HDFC Bank Personal Loan
      "Best service"
      0.5 5.0/5 "Blown Away!"
      My personal loan was taken with HDFC BANK , they charged 10.99% rate of interest and they have not Charge processing fee with this bank . I got best service through this bank the process was very smooth and easy . They provide me sufficient tenure period .
      Was this review helpful? 0
      , navi mumbai
      Reviewed on Oct 17, 2018
    • Bajaj Finserv Personal Loan
      "Good service"
      0.5 3.0/5 "Satisfactory"
      The experience i had with this loan has been good and they had given me a loan amount of 5,00,000 which has been satisfactory. The interest rate with them has been okay but there has been charges made by them which was not even intimated. They had promised something and had taken something.
      Was this review helpful? 0
      , hyderabad
      Reviewed on Oct 17, 2018
    • ICICI Bank Personal Loan
      "Excellent service"
      0.5 5.0/5 "Blown Away!"
      I have taken my personal loan from ICICI bank, i am satisfied with my loan amount which they have provided to me and even they charge nominal rate of interest and even processing fee which they charge was normal, i did not found any difficulty in getting my loan approval it run very smoothly.
      Was this review helpful? 1
      , bangalore
      Reviewed on Oct 16, 2018
    • SBI Personal Loan
      "GOOD"
      0.5 5.0/5 "Blown Away!"
      My personal loan was taken from the STATE BANK OF INDIA and it got approved very quick also the process of getting the loan is is easy and good. I have got the sufficient amount of personal loan. The service is good and responsive also added on that it is good to use.
      Was this review helpful? 3
      , chennai
      Reviewed on Oct 15, 2018
    • Bank Bazaar Personal Loan
      "Good service"
      0.5 4.0/5 "Great!"
      I know bankbazaar.com from last 6 months but i am using the service from last 5-6 months. Customer service is good with bankbazaar and their response was on time.Both mobile app and the website of bankbazaar is easy to use and is user friendly.
      Was this review helpful? 4
      , noida
      Reviewed on Oct 15, 2018
    • IndusInd Bank Personal Loan
      "Good service"
      0.5 4.0/5 "Great!"
      My personal loan application was approved with IndusInd bank and the experience was good, the process was quick and i received my credit card within 2-3 days. The loan amount was for Rs 2 lacs with nominal interest rate when compared to others. Customer service was good and they responded on time.
      Was this review helpful? 2
      , noida
      Reviewed on Oct 15, 2018
    • Bajaj Finserv Personal Loan
      "Very Good Service"
      0.5 4.0/5 "Great!"
      The process in getting this loan has been smooth and easy and the loan amount which they had provided had been satisfactory. They had been charged me with some processing fee but there has not been any sort of additional charges. The interest rate which they offered also had been good where it was comparatively less.
      Was this review helpful? 2
      , bangalore
      Reviewed on Oct 15, 2018
    • Capital First Personal Loan
      "Very Good Service"
      0.5 4.0/5 "Great!"
      It has been a good experience in getting this loan from them. The loan amount which they had provided had been satisfactory and the interest rate with them has also been good when compared with the market rate, there has been some processing fee which has been charged by them but it has been nominal. Overall it was a good experience.
      Was this review helpful? 2
      , bangalore
      Reviewed on Oct 15, 2018
    • ICICI Bank Personal Loan
      "Best Financial Service"
      0.5 5.0/5 "Blown Away!"
      I have taken personal loan from Icici bank , Am satisfied with the rate of interest of 10.99% which is low where no other bank will give for such low interest with nominal processing fees. They instantly approved .Their customer executive used to call for the offers if any offers goes around.
      Was this review helpful? 2
      , coimbatore
      Reviewed on Oct 15, 2018
    • Axis Bank Personal Loan
      "Good Service"
      0.5 4.0/5 "Great!"
      Applied a personal loan with AXIS bank, i was in a urgent need and my application was processed in a week time. I find the interest rates very high here The sales person didn't gave me any idea on interest rates, as i was needed money for a medical urgency i didn't inquired for interest rate. But now its been 3 months and i feel like its very high.Have taken amount of 3 laks, would wish if the rates come down, it will be a great relief.
      Was this review helpful? 2
      , hyderabad
      Reviewed on Oct 15, 2018
    • Fullerton Personal Loan
      "Excellent service"
      0.5 5.0/5 "Blown Away!"
      I had taken my personal loan fom Fullerton India and it has a good experience i had with them . i am satisfied with loan amount which they have given to m and even i am happy with tenure period as well,they rate of interest and the processing fee is nominal they have charge me.
      Was this review helpful? 2
      , kolkata
      Reviewed on Oct 15, 2018
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