Small and medium enterprises are critical for the country’s economic and social development. SME is the biggest employment provider next to agriculture. The SME plays a major role in creating jobs and generating income for the low income group. SME fosters economic growth, social stability and contributes to the development of the private sector.
Access to financial services is vital for the SME sector to survive in any economy. SME Loan is offered to fund small and medium sized enterprises. There are various banks in India that work hard to provide SME finance to the small and medium enterprises.
The SME loan policy has been framed keeping in mind the following objectives:
The policy will cover the following:
SME Segment consists of the following:
If it is a manufacturing enterprise, it will have up to Rs.25 lakh invested in plants and machineries. If it is a service sector enterprise, then up to Rs.10 lakh will be invested in equipment.
If it is a manufacturing enterprise, it will have above Rs.25 lakh and up to Rs.500 lakh invested in plants and machineries. If it is a service sector enterprise, then above Rs.10 lakh and up to Rs.200 lakh will be invested in equipment.
If it is a manufacturing enterprise, it will have above Rs.500 lakh and up to Rs.1,000 lakh invested in plants and machineries. If it is a service sector enterprise, then above Rs.200 lakh and up to Rs.500 lakh will be invested in equipment.
Banks are advised to fix their own targets to achieve the 20% yearly growth in credit to the SME sector. Banks are advised to ensure that 60% of the total advances to small enterprises must go to micro enterprises.
40% must got to micro manufacturing enterprises who have up to Rs.5 lakh invested in plant and machinery and micro service enterprises that have up to Rs.2 lakh invested in equipment.
20% must got to micro manufacturing enterprises who have above Rs.5 lakh and up to Rs.25 lakh invested in plant and machinery and micro service enterprises that have above Rs.2 lakh and up to Rs.10 lakh invested in equipment.
SME loan is offered to finance a new business as well. The main reason why most small and medium enterprises shut down is that they don’t receive financial assistance at the need of hour and they won’t have working capital or any funds to buy plants and machinery to function.
The following entities are eligible to avail SME loan:
The following procedure must be followed by the borrower:
The documents required are as follows:
The bank must comply by the following focal points while lending to the SME Sector:
Following are the facilities offered to the SME units:
Most of the women entrepreneurs are found in the small scale units. These units are managed by one or more women who have stake not less than 51% in the equity. The banks have realised that there are many such units that need help, hence specific products are offered to the women entrepreneurs to meet their working capital requirement, to expand their business, alteration and renovation of hotels, restaurants or lodges or to acquire plant and machinery, etc.
Loan are also provided for establishing catering units for selling tiffin or food or lunch packs. Other loans offered are:
If the loan is provided to the SME category, the rates applicable to Micro, Small and Medium enterprises are to be applied.
The SME loan interest rate starts at 12% per annum. Please check with the bank, the rate they are offering before applying for the loan.
Following are the applicable charges:
| Processing fee | Up to 1% of the loan amount plus taxes. |
| Renewal fee | Up to 0.50% of the loan amount plus taxes. |
| Commitment charges | Average utilisation of the loan is more than 40% - Nil Average utilisation of the loan is less than 40% - 0.50% per annum on the difference in the actual amount utilised and average quarterly utilisation of 40%. This charge is applicable for cash credit and overdraft facility. |
| Stamp duty charges | As per the applicable laws |
| Prepayment charges | 2% if loan is prepaid after 6 months from the date the loan was sanctioned. 4% if loan is prepaid within 6 months from the date the loan was sanctioned. |
| Penal interest | 2% additional on existing rate of interest for not submitting insurance or stock statement. |
| ROC filling charges | Rs.3,000 per filing. |
| Issuance of solvency certificate | Rs.10,000 per solvency certificate. |
| Cheque swap charges | Rs.500 |
| Repayment schedule charges | Rs.200 |
| Rebooking charges | Rs.1,000 |
The borrower will have to fill up the following sections in the SME loan application:
General Details:
Financial Details:
Other Details:
Additional Details:
This section includes the statutory obligations status, such as:
Finally, the application form must be duly signed and the bank will give you the acknowledgement receipt of the loan application.
Following facilities are offered by ICICI Bank:
SBI offers SME Collateral Free Loan to meet working capital requirements and term loans for construction.
IDBI Bank offers SME Smart Line of Credit and the following facilities are provides:
The following facilities are offered:
SME Fast Track loan offers the following facilities:
The schemes offered are as follows:
The following facilities are offered by Bank of India:
Following products are offered to the SME Sector:
Various schemes are offered for:
Indian Bank participates in the following schemes:
Union SME Plus is offered to meet:
MSME Credit scheme is offered to:
The following are the schemes offered by SIDBI:
A GST rate of 18% will be applicable on banking services and products from 01 July, 2017.
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Aditya Birla Finance Limited (ABFL) is gearing up to expand its presence to 50 cities - including Tier I, II, and III cities - in India by the end of July 2018. While the non-banking financing company (NBFC) currently caters to 70% of the credit demand of the small and medium enterprises (SME) sector, it is looking to increase it to 85% during this time. This step had been taken since the company foresees the SME segment to become the primary engine for growth during the upcoming years. After witnessing a 25% growth to Rs.43,240 crore in FY 2017-18, ABFL is selling 27% of its credit products to SMEs.
Aditya Birla Finance Limited offers 33% of its total loans to large corporates while the loans account to 17% in case of medium-size corporates. On the other hand, the loan offered by ABFL to retail customers stands at 11% of the total amount of loans offered. The company believes that the ability of an organisation to grow depends on its capability to manage risks. To this end, ABFL employs a top-down approach to build strong risk management and sales processes.
4 July 2018
Aditya Birla Capital is looking to invest Rs.1,000 crore every year to better its corporate, small & medium enterprises (SME), and retail loan book. Managed by a housing finance company (HFC) and a non-banking financing company (NBFC), the loan book has witnessed a rise by 41% from Rs.33,047 crore in December to Rs.46,522 crore in December 2017. 51% of the book consists of large and medium corporate loans while 36% of the loan book is covered by the retail and SME segment. Since Aditya Birla Group expects the retail and SME sectors to grow by 40% within the next 2 to 3 years, the conglomerate is planning to add 33 branches while expanding its presence to tier-2 and tier-3 cities.
15 February 2018
Industrial Associations of Nagpur have opined that the small and medium scale enterprises should be getting loans at a reduced rate. They also expect a Union Budget announcement on rate cut off for loans offered by banks to SMEs. According to the associations, companies in India get loans at interest rates from 13% to 16%, which is much higher when compared to the global standards. However, large corporations are able to negotiate the amount to acceptable terms. Such a negotiation is not possible for SMEs and they have to settle for the terms and conditions put forward by the banks.
3 February 2017
Indian Bank has been conducting a loan mela from 1st September, which will run until 31st December at Peenya Industries Association premises. The zonal manager of the bank, Sudhir Ghaie, said that Rs.100 crore will be disbursed at the mega loan mela being held on 25th September, through retail and SME loans in the Bengaluru zone. The bank has already disbursed Rs.37 crore until now and has sent another Rs.70 crore for approval to its headquarters.
20 September 2016
