1. MSME Finance Converting challenges into opportunities

2. MSME Finance

7. More than 50% of the labour force Large proportion of total output Employment to semi skilled labour Seedbed of entrepreneurship Made to order/small batches/sub contract Complementary to large scale industries

8. MSME Finance 26 Million SMEs in India 45% of the manufactured output Employing 60 million people 40% of total exports from the country

9. MSME Finance Earlier definitions: Small Scale Industries Small Enterprises (traders, services) Professionals Small Road Transport organizations Now renamed as MSME Sector

10. MSME Finance Classification based on investment in Plant and machinery (manufacturing sector) and equipments (services sector) Mfg Services a. Micro up to Rs.25 lacs up to 10 lacs b. Small 25 lacs to 5 cr 10 lacs-2 cr c. Medium 5 cr – 10 cr 2 cr.- 5 cr.

11. MSME Finance MSMED Act 2006 MSME Ministry at Central Government Scheduled Commercial Banks to achieve 20% Y-o-Y growth in credit to Micro and Small enterprises 60% of the above to go to Micro sector

12. MSME Finance Present scenario: Only 10% growth in bank credit to SMEs MSMEs suffer from lack of technology Lack of research and technology Lack of adequate, timely credit Lack of financial literacy

13. MSME Finance What banks can do: Soft interventions and hard interventions Soft intervention: SME Literacy Meetings Industry interface Formation of clusters, teaching simple accounting practices

14. MSME Finance Hard interventions: Separate MSME branches Relationship officers/Managers Quick decisions Schematic lending, wherever possible Cluster financing to be encouraged Financing for warehouse Financing for exhibition-halls

15. MSME Finance IOB MSE Plus – a new credit scheme for Micro and small Enterprises Adv/521/2010-11 dt.11-02-2011 A novel scheme Both working capital and term loan, as a single loan Repayment in monthly instalments

16. MSME Finance Both manufacturing and service sectors Maximum Rs.100 lakhs Construction/purchase of work- shed/factory premises Acquisition of plant/machinery/equipments Working capital needs Margin 30% and 15% respectively Medium enterprises NOT eligible

17. MSME Finance Important circulars/instructions/tie ups of our Bank, with regard to SME financing: a) Adv/417/20 10-11 dated 17-05- 2010(Mou with Ashok Leyland Ltd for financing of commercial vehicles b) Earlier agreements with Tata Motors and Asia Motor Works Ltd

18. MSME Finance SME/459/2010-2011 dated 28-08-2010 All MSE advances up to a limit of Rs.10 lakhs must be granted without collateral security All MSE advances should also be granted without collateral security, up to Rs.100 lakhs, if CGTMSE guarantee is available

19. MSME Finance Adv/414/2010-11 dated 14-05-2010: No collateral should be obtained upto a limit of Rs.10 lakhs for finance to Micro and Small enterprises (both mfg and service sector). Such loans are to be covered under CGTMSE, wherever applicable

20. MSME Finance Adv/405/2010-2011 dated 22-04-2010: on MSME Finance, giving comprehensive guidelines Cash credit Term Loans Export credit Non fund based limits Purchase of cheques and bills for SMEs

21. MSME Finance Loans under DRI Loans under government sponsored schemes- TUFs/PMEGP/REMOT

22. MSME Finance Technology Up -gradation Fund (TUF) Administered by Ministry of Textiles, Government of India For technology up gradation, by inducting state-of-the-art machinery 15% Credit Linked Capital Subsidy scheme 5% interest subsidy scheme

23. MSME Finance The relevant circulars are: Adv/298/2003-2004 dated 26-02-2004 Adv/400/2005-2006 dated 30-06-2006 Adv/18/2011-2012 dated 04-06-2011 (restructured TUF scheme)

24. MSME Finance Indirect finance to SMEs: To NBFCs for on lending to MSMEs To cooperatives of producers- artisans/village and cottage industries Suppliers of inputs and those marketing outputs

25. MSME Finance Credit Guarantee Fund Trust for Micro and Small Enterprises: Guarantee cover up to Rs.100 lakhs Advantages of CGTMSE cover No hassles such as mortgage and documentation issues Sovereign guarantee

26. MSME Finance No Provision requirements for guaranteed portion Entrepreneurs with viable projects, but with no collateral to offer will benefit Recovery through sale of collateral Retail trade finance and finance to educational institutions not covered

27. MSME Finance CGTMSE: Cover for Micro enterprises up to Rs.5.00 lakhs, 85% cover (Rs.4.25 lakhs) Above Rs.5 lakhs, up to Rs.50 lakhs, 75% cover (Rs.37.50 lakhs) Above Rs.50 lakhs up to Rs.100 lakhs, Rs.37.50 lakhs + 50% cover for above Rs.50 lakhs

28. MSME Finance One time guarantee fee: 1.50% Annual Service Fee: 0.75%

29. MSME Finance Adv/308/2009-2010 dated 25-07-2009 Policy on nursing and rehabilitation of sick MSME units

30. MSME Finance Adv/342/2009-2010 dated 26-10-2009 of SME department Comprehensive Loan policy of our Bank for SME financing

31. MSME Finance Our Bank’s MoU with SME Rating Agency of India (SMERA) Concessional charges for rating Enhances the reputation of the SMEs with their buyers-domestic and foreign SMERA- Independent third party organisation

32. IOB Advance Term Loan Scheme IOB SME Advance Term Loan Scheme Adv/445/2010-11 dated 05-08-2010 One year validity Only for existing MSME customers Maximum limit Rs.25 lakhs CGTMSE cover is available Cash generation/repayment capacity

33. PMEGP Prime Minister’s Employment Generation Scheme (PMEGP) Merger of PMRY and REGP Ministry of Micro, Small and Medium Enterprises KVIC implementing agency KVIC directorates, KVIBs and DICs

34. MSME Finance Objectives: To generate employment in rural and urban areas, through Self Employment ventures Give opportunities to artisans Prevent migration of artisans/rural youth to urban areas

35. MSME Finance Beneficiary’s contribution: 10% (special category : 5 % Subsidy rate(of project cost) 15% (urban) 25% (rural) For special category : 25 % and 35 %

36. MSME Finance Maximum project cost: Rs.25 lakhs (for manufacturing sector) and Rs.10 lakhs (for service/business sector) Eligibility: 18 years and above No income ceiling 8 th standard pass certificate (Rs.10 lacs and Rs.5 lacs respectively)

37. MSME Finance SHGs are also eligible Capital expenditure is a must Project cost to include capital cost plus one cycle of working capital All viable micro enterprises KVIC Mumbai is the implementing agency Identification by a Task Force

38. MSME Finance District Collector/Deputy Commissioner Banks’ active involvement EDP training Score card to be the basis Bank finance to the extent of 90% (95%) of the project cost Normal rate of interest Repayment 3 years to 7 years

39. MSME Finance Up to Rs.10 lakhs no collateral security EDP training (at least 2 weeks) After training, beneficiary should deposit own contribution After release of bank finance, margin money claim will be submitted 3 years FD/no int. One time assistance

40. MSME Finance Rs.2500/- to Rs.4000/- training cost reimbursible by KVIC A shelf of projects

41. IOB Artisan Credit card IOB Artisan Credit Card scheme (ACC) Adv/317/2009-2010 dated 29-08-2009 For working capital needs or investment needs to artisans Preference to artisans registered with Development Commissioner (Handicrafts) Cash credit, with a passbook Maximum limit Rs.2.00 lakhs

42. TREAD Trade Related Entrepreneurship Assistance and Development (TREAD) Adv/237/2008-2009 dated 12-01-2009 Economic empowerment of Women Scheme sponsored by MSME ministry Implemented through NGOs and training institutions

43. MSME Finance Women SHGs or women entrepreneurs Government subsidy- 30% of project cost Applications to be forwarded by applicaants to Development Commissioner, Ministry of MSME RK Puram branch (New Delhi) is the nodal branch

44. IOB Tools Scheme IOB Tools scheme: Carpenters/plumbers/el ectricians/ auto mechanics/packagin g technicians/fabricato rs/water service providers etc.,

45. MSME Finance Our Bank’s tie up with MICO Bosch Rs.50000/- (maximum) Hypothecation of assets Maximum repayment: 36 months Priority sector classification

46. IOB SME Insta fund Adv/64/2011-12 dt. 12-09-2011 To meet bulk orders-exceptional cases For existing SME units enjoying regular limits (over & above limits) In the form of CC/non Valid till next renewalfund-based limits Valid till renewal of limits

47. Laghu Udayami Credit card scheme Laghu Udhyami Credit Card Scheme: Small Business, Retail Traders, Professionals, Self-employed etc., Maximum Rs.2 lakhs/Hyp of stocks No collateral security Separate ledger / cheque leaves LUCC (Adv/76/02-02-2002)

48. CLCSS Credit Linked Capital Subsidy Scheme (CLCSS) for Technology up-gradation for Small and Medium Enterprises (Adv/424/2005-2006) Validity up to year 2012 Maximum limit Rs.100 lakhs Subsidy : 15%

49. MSME Finance SIDBI and NABARD – implementing agencies Adv/424/2005-2006 dated 13-10-2005 Adv/298/2003-2004 dated 26-02-2004 Adv/285/2003-2004 dated 14-01-2004