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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

    • Tata capital Personal Loan
      "Good service"
      0.5 4.0/5 "Great!"
      It was a fantastic experience with TATA CAPITAL for personal loan, i received my loan amount within 10 days. I expected the loan amount for Rs 4 lacs but they approved only for Rs 2.2 lacs. Rate of interest was nominal and the customer service was good.
      Was this review helpful? 0
      , chennai
      Reviewed on Dec 13, 2018
    • Bank Bazaar Personal Loan
      "Best Service"
      0.5 4.5/5 "Excellent!"
      I came to know about bankbazaar through one of my friend, my first time experience with bankbazaar was good. Customer service is good and their response is prompt I am using the mobile app of bankbazaar, it is user friendly and easy to use.
      Was this review helpful? 0
      , thane
      Reviewed on Dec 13, 2018
    • Tata capital Personal Loan
      "Good service"
      0.5 4.5/5 "Excellent!"
      My experience was good with TATA CAPITAL for personal loan, the loan amount was for Rs 1.25 lacs with tenure period of 4 years. Rate of interest was nominal when compared to others. I received my loan amount within 5 days and the customer service was good.
      Was this review helpful? 0
      , thane
      Reviewed on Dec 13, 2018
    • ICICI Bank Personal Loan
      "Best Service"
      0.5 5.0/5 "Blown Away!"
      My experience with ICICI bank personal loan was good, the loan amount was for Rs 5 lacs with less interest rate when compared to other banks. Process was smooth and the loan amount was received on time. Tenure period for this loan is 5 years and the customer service was good.
      Was this review helpful? 0
      , bangalore
      Reviewed on Dec 13, 2018
    • Bank Bazaar Personal Loan
      "Best Service"
      0.5 5.0/5 "Blown Away!"
      My experience was good so far with bankbazaar, they provide good services when compared to others. Customer service was very good and their response was on time. I am using the website of bankbazaar from 4 years, it user friendly and easy to use.
      Was this review helpful? 0
      , bangalore
      Reviewed on Dec 13, 2018
    • Tata capital Personal Loan
      "Best Service"
      0.5 5.0/5 "Blown Away!"
      My experience was good with TATA CAPITAL for personal loan, the loan amount was for Rs 2 lacs with tenure period of 3 years. Rate of interest was nominal when compared to others. I received my loan amount within 1 week and the customer service was good.
      Was this review helpful? 0
      , bangalore
      Reviewed on Dec 13, 2018
    • Bank Bazaar Personal Loan
      "Average service"
      0.5 3.0/5 "Satisfactory"
      I came to know about bankbazaar through google, they provide good services when compared to others. Customer service was good and they responded on time. Website of bankbazaar is user friendly and easy to use.
      Was this review helpful? 0
      , gurgaon
      Reviewed on Dec 13, 2018
    • Kotak Personal Loan
      "Not satisfied"
      0.5 1.0/5 "Really Bad"
      It was not a good experience with KMB for personal loan, they said the loan amount will be disbursed within 3-4 days but it took 15 days to receive the loan amount. I expected the loan amount for Rs 9 lacs but only Rs 5 lacs was approved. Tenure period is 5 years with high interest rate and the customer support was not good.
      Was this review helpful? 0
      , gurgaon
      Reviewed on Dec 13, 2018
    • Early Salary Personal Loan
      "Good in Service"
      0.5 5.0/5 "Blown Away!"
      I was planning for a personal loan and i looked for few banks but no one came forward . Applied it with Early Salary and i got my request processed on time. There was no delay and things were taken care.Interest rates are reasonable and I am happy with Early Salary Service .
      Was this review helpful? 0
      , hyderabad
      Reviewed on Dec 12, 2018
    • Axis Bank Personal Loan
      "Average service"
      0.5 4.0/5 "Great!"
      I have taken personal loan from the axis bank . As i hold my salary account from axis . They instantly approved the loan in where the rate of interest is too high . There is average processing fees for documents and approval . Their customer representative explained the terms and conditions
      Was this review helpful? 0
      , mumbai
      Reviewed on Dec 12, 2018
    • Bank Bazaar Personal Loan
      "Excellent service"
      0.5 5.0/5 "Blown Away!"
      I have been using bank bazaar service for first time, and they have given me good opportunity in getting loan or any other financial products easily , and i came to know about bank bazaar service through on line and i have been using there website , it is easy to access.
      Was this review helpful? 0
      , chennai
      Reviewed on Dec 12, 2018
    • HDFC Bank Personal Loan
      "Good service"
      0.5 5.0/5 "Blown Away!"
      I have been applied my personal loan with HDFC bank recently, the loan amount they have given me was sufficient they have given me up to 91,000,and the rate of interest they have charged me was higher, they have me up to 20%, and the processing fee is nominal, the process went smoothly.
      Was this review helpful? 0
      , chennai
      Reviewed on Dec 12, 2018
    • Tata capital Personal Loan
      "Excellent service"
      0.5 5.0/5 "Blown Away!"
      I have applied for my personal loan with Tata capital recently, and the loan amount they have charged me was sufficient, they have charged me nominal rate of interest up to 11.3% and even processing fee they have charged me was nominal, the process went smoothly without any issue.
      Was this review helpful? 0
      , bhubaneshwar
      Reviewed on Dec 12, 2018
    • Bank Bazaar Personal Loan
      "Good service"
      0.5 5.0/5 "Blown Away!"
      I have been using bank bazaar service for first time, i came to know bank bazaar service through on line, and i have applied a loan through bank bazaar , there service is too good, they have suggested me and help me out in getting loan easily and i have been using website it is easy to access.
      Was this review helpful? 0
      , bangalore
      Reviewed on Dec 12, 2018
    • HDFC Bank Personal Loan
      "Good service"
      0.5 5.0/5 "Blown Away!"
      I have been applied my personal loan with HDFC bank recently, the loan amount they have given me was sufficient, and the rate of interest while applying they said it would be charging 10.5% but after getting loan they have charge me up to 16% which was too high , the processing fee they have charged me was nominal,apart of that process went smoothly.
      Was this review helpful? 0
      , bangalore
      Reviewed on Dec 12, 2018
    • Bank Bazaar Personal Loan
      "Best service"
      0.5 5.0/5 "Blown Away!"
      I have been using bank bazaar service past six months or one years, and there service is perfect, i have applied for loan recently, there service was too good they have explain me about the loan and which is best bank for me and they have help me out in getting my loan amount easily, i have been using website it is easy to access.
      Was this review helpful? 0
      , pune
      Reviewed on Dec 12, 2018
    • Kotak Personal Loan
      "Excellent service"
      0.5 4.0/5 "Great!"
      I have applied for KOTAK MAHINDRA BANK recently, the loan amount they have given me was sufficient, and the rate of interest they have charged me was nominal, and even processing fee they have given me was nominal, and there was bit delay in loan amount as due to some internal issue , apart from that there service till now was good.
      Was this review helpful? 1
      , pune
      Reviewed on Dec 12, 2018
    • Bank Bazaar Personal Loan
      "A Place where Action Speaks more than words"
      0.5 5.0/5 "Blown Away!"
      Pretty Smooth Service and a place with Fair Deals is what you get in Bank Bazaar. I am very much happy with the services which i have received from Bank Bazaar. There are not many hiccups and this was probably my first time with Bank Bazaar. Well Bank Bazaar is a place where executives speaks less and the action speaks more.
      Was this review helpful? 0
      , mumbai
      Reviewed on Dec 12, 2018
    • Tata capital Personal Loan
      "Good in service"
      0.5 4.0/5 "Great!"
      This is my first loan with Tata Capital. The reason to go with Tata capital was their low interest rates. Also there was no processing fee charges at the beginning. Overall i am happy with the fees and charges and the rate of interest too seems reasonable.
      Was this review helpful? 0
      , mumbai
      Reviewed on Dec 12, 2018
    • Bank Bazaar Personal Loan
      "Good service"
      0.5 4.0/5 "Great!"
      I use Bank bazaar service a month ago only the service is excellent they provide i have 1st time applied for credit card and the documentation part went smoothly even i got my card soon i have used website of bank bazaar its easy to access,as i was surfing my net for some credit card i got to know about this service.
      Was this review helpful? 0
      , bangalore
      Reviewed on Dec 12, 2018
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