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					           BANK’S POLICY ON FINANCING TO MICRO, SMALL AND MEDIUM ENTERPRISES(MSME)


1. DEFINITION:

  1.1. Enterprises: An “enterprises” means an Industrial undertaking or a business concern or any other establishment,
        by whatever name called, engaged in the manufacture or production of goods pertaining to any industry specified
        in the First Schedule to the Industries (Development and Regulation) Act 1951 or employing plant and machinery
        in the process of value addition to the final product having a distinct name or character or use or engaged in
        providing or rendering of any service or services.

  1.2.   The following enterprises whether Proprietorship ,Hindu Undivided Family, Association                 of   Persons,
         Cooperative Society, Partnership or undertaking or any other legal entity, by whatever name called:

  SL.              Category                      Definition Of Micro, Small And Medium Enterprises (MSME)
  No.
  1.2.1     MICRO                    Enterprises engaged in the manufacture/ production, processing or preservation of
            ENTERPRISES              goods and whose investment in Plant and Machinery (Original cost excluding Land
            (MANUFACTURING)          and Building and the items specified by the Ministry of Small Scale Industries (vide
                                     its notification no. S.O.1722 (E) dated October 5, 2006) does not exceed
                                     Rs.25Lacs.
  1.2.2     MICRO                    i. Enterprises engaged in the providing / rendering of services and whose
            ENTERPRISES                  investment in Equipment        (Original cost excluding Land and building and
            (SERVICE)                    furniture, fittings and other not directly related to the service rendered or as
                                         may be under the Micro, Small and Medium Enterprises Development, Act 2006)
                                         does not exceed Rs.10 Lacs.

                                     ii. The Micro Enterprises (Service) shall include Small Road & Water Transport
                                         Operator (SRWTO), Professional and Self Employed (PSEP), Small Business,
                                         Retail Trade and all other service enterprises whose investment in
                                         equipment does not exceed Rs.10Lacs.
  1.2.3     SMALL                    Enterprises engaged in the manufacture/ production, processing or preservation of
            ENTERPRISES              goods and whose investment in Plant and Machinery (Original cost excluding Land
            (MANUFACTURING)          and building and the items specified by the Ministry of Small Scale Industries vide
                                     its notification no. S.O.1722 (E) dated October 5, 2006) is above Rs.25 Lacs to
                                     Rs.5Crore.
  1.2.4     SMALL                    i. Enterprises engaged in the providing / rendering of services and whose
            ENTERPRISES                  investment in Equipment (Original cost excluding Land and building and
            (SERVICE)                    furniture, fittings and such items as per 1.2.2.) is above Rs.10Lacs to
                                         Rs.2Crore.

                                     ii. The Small Enterprises (Service) shall include Small Road & Water Transport
                                         Operator (SRWTO), Professional and Self Employed (PSEP), Small Business,
                                         Retail Trade and all other service enterprises, whose investment in
                                         equipment is above Rs.10Lacs to Rs.2Crore.

  1.2.5     MEDIUM                   Enterprises engaged in the manufacture/ production, processing or preservation of
            ENTERPRISES              goods and whose investment in Plant and Machinery Original cost excluding Land
            (MANUFACTURING)          and building and the items specified by the Ministry of Small Scale Industries vide
                                     its notification no. S.O.1722 (E) dated October 5, 2006) is more than Rs.5Crore
                                     but does not exceed Rs.10Crore.
  1.2.6      MEDIUM                   i. Enterprises engaged in the providing/rendering of services and whose
             ENTERPRISES                  investment in Equipment (Original cost excluding Land and building and
             (SERVICE)                    furniture, fittings and such items as per 1.2.2.) is more than Rs.2 Crore but
                                          does not exceed Rs.5 Crore.
                                      ii. The Medium Enterprises (Service) shall include Small Road and Water
                                          Transport Operator (SRWTO), Professional and Self Employed (PSEP), Business
                                          and all other service enterprises, whose investment in equipment is above
                                          Rs.2Crore to Rs.5Crore.

  1.2.7      The Ministry of MSME has now made amendment in the notification in terms of their order dated 15 th April
             2009 rescinding the notifications of Govt. of India dated 10.12.1997, regarding specified classification of
             Small Scale Industrial undertaking or ancillary Industrial undertaking as a subsidiary of or owned or
             controlled by any other Industrial Undertaking for the purpose of equity participation.




2. STIPULATED GROWTH TARGET :

  2.1.       As per policy package announced by the Government of India for stepping up Credit to MSME Sector,Banks
             may fix self set target for growth in advances to SME Sector in order to achieve a minimum 20% year on
             year growth in credit to MSMEs with the objective to double the flow of credit to the MSMEs sector
             within in a period of 5 years i.e., from 2005-06 to 2009-10.
  2.2.       To achieve 10% annual growth in number of Micro Enterprises accounts.
  2.3        Also, all Banks to provide credit to at least 5 new Micro, Small and Medium enterprises at each of
             their semi urban/urban branches per year.




3. RBI stipulated revised growth targets:
         Target s for Domestic Commercial Banks.
          3.1 The domestic commercial banks are expected to enlarge credit to Priority Sector and ensure that Priority
          Sector advances (which include Micro and Small Enterprises [MSE] Sector) constitute 40% of ANBC of credit
          equivalent amount of off balance sheet exposure, which ever is higher.
          3.2 In terms of the recommendation of the Prime Minister’s Task Force on MSMEs banks are advised to achieve a
          20% year on year growth in credit to Micro Enterprise and a 10% annual growth in the number of Micro Enterprise
          accounts.
          3.3 In order to ensure that sufficient credit is available to Micro Enterprises within the mSE Sector bank should
          ensure that:




                                      Particulars                                     RBI Stipulated Target

  i. % of total advances of Micro Enterprises (manufacturing) having                                40%
      investment in plant and machinery (original cost) upto Rs.5.00 lakh and
      Micro Enterprises (service) having investment in equipment upto Rs.2.00
      lakh to total advances of Micro and Small Enterprises (MSE).
  ii. % of total advances of Micro Enterprises (manufacturing) having                               20%
      investment in plant and machinery (original cost) above Rs.5.00 lakh and
      upto Rs.25.00 Lacs and Micro Enterprises (service) having investment
      in equipment Above Rs.2.00Lacs and upto Rs.10.00 lacs to total
      advances of Micro and Small Enterprises (MSE).
      % of total advances of Micro Enterprises to total advances of Micro                           60%
      and Small Enterprises.
      The allocation of 60% of MSE advances to the Micro Enterprises to                  50% in the year 2010-11
      be achieved in stages:                                                             55% in the year 2011-12
                                                                                         60% in the year 2012-13
4. CLASSIFICATION NORMS OF ADVANCES TO MSMEs:

  4.1.        The Micro and Small Enterprises (manufacturing and service) will be Classified under Priority Sector
              irrespective of whether the borrowing entity is engaged in export or otherwise.

  4.2.        The Micro and Small (Service) enterprises shall include Small Road and Water Transport Operator, Small
              Business, Professional and Self-employed Persons, Retail Trade and all other service enterprises. Loans
              granted to private retail traders would be eligible for classification under MSE sector within
              priority sector, only upto a credit limit not exceeding Rs.20 lac and provided they satisfy the
              definition of Micro and Small(service) Enterprises in respect of investment in equipment .
              Loans granted to Retail Traders dealing in essential commodities (fair price shops) and
              consumer cooperative stores are also eligible for classification under MSE within Priority
              Sector, without any ceiling in credit limit, provided investment in equipment does not exceed
              Rs.10lac and Rs.2.00 crore for Micro (Service) Enterprises ans Small (Service) Enterprises
              respectively.

  4.3.        Small Road and Water Transport Operator (SRWTO), Small Business, Professional and Self Employed
              Persons (PSEP) and Retail Trade will be classified as per the original cost of equipments either under
              Micro or Small Enterprises (service) sector instead of earlier classification/definition of 10
              vehicles incase of SRWTO and working capital and /or Term loan limits incase of Small
              Business/Professional and Self employed persons/Retail Trade activities.

  4.4.        If the following Storage Units, registered as SSI Unit/Micro or Small Enterprises, the loans granted
              to such units may be classified as Small Enterprises Sector :

                        “Loans for construction and running of storage facilities(warehouse, market yards,
                   godowns and silos), including Cold Storage Units designed to store agriculture produce/ products,
                   irrespective of
                  location”.


  4.5.        Bank’s lending to Medium Enterprises will not be included under Priority Sector.




Office of the Development Commissioner (MSME), Ministry of Micro, Small and Medium Enterprises,
Government of India regarding categorization of specific activities under Manufacturing or Service under
the provisions of MSMED Act-2006 , has clarified that the following categories have been considered under
Manufacturing or Service Sector :
    A.     Manufacturing Activities:
    i.          Medical Equipment and Ayurvedic Product
    ii.         Composite unit of Bacon Processing and Piggery Farm
    iii.        Tobacco Processing
    iv.         Beedi/Cigarette manufacturing and other tobacco products
    v.          Extraction of Agave Spirit from Agave juice (imported medicinal plant ) extraction of Agave
    vi.         Manufacture of Bio-Fertilizer
    B.     Service Activities:
     i.          Sanitation Services (Hiring of Septic Tank Cleaner)
     ii.         Clinical /Pathological Laboratories and Scanning , MRI Tests
     iii.        Hospitals
     iv.         Agri-Clinic and Agri-Business
     v.          Restaurants with Bar
     vi.         Canteens
     vii.        Hotels
     viii.       Motel Industry
     ix.         Consultancy Services including Management Services.
     x.          Composite Broker Services in Risk and insurance Management.
     xi.         Third Party Administration (TPA) Services for medical insurance Claims of Policy Holders.
     xii.        Seed Grading Services.
     xiii.       Training-cum-incubator Centre.
     xiv.        Educational Institutions.
     xv.         Training Institutes.
     xvi.        Fair price shops.
     xvii.       Consumer cooperative stores.
     xviii.      Private Retail Trade (Loan upto Rs.20 lac)
     xix.        Practice of Law, i.e. legal services
     xx.         Trading in medical instruments (brand new).
     xxi.        Placement and Management Consultancy Services.
     xxii.       Advertising agency and Training centres.
     xxiii.      Any other eligible activities.
              2. The following categories will not be classified under manufacturing or as Service Enterprises:
                 2.2.1. Piggery Farm without bacon processing as this is a farming activity.
                 2.2.2. The activity of “Bee-Keeping” being farming allied activity.


       4.6.      Direct Finance :

                 4.6.1. All loans granted to Small Enterprises including Micro Enterprises (both Manufacturing and Services)
                        will be classified under Direct Finance to Micro and Small Enterprises Sector.
                 4.6.2. Khadi and Village Industries Sector (KVI):
                         All advances granted to units in the KVI sector, irrespective of their size of operation, location and
                         amount of original investment in Plant and Machinery, will be eligible for consideration under the
                        Sub Target (60 percent) of the Small Enterprises segment within the Priority Sector.


       4.7.      Indirect Finance :

                 4.7.1    Persons involved in assisting the decentralized sector in the supply of inputs to and marketing of
                          outputs of artisans, village and cottage industries.
                 4.7.2.   Advances to cooperatives of producers in the decentralized sector viz., artisans, village and cottage
                          industries.
                 4.7.3.   Loans granted by banks to NBFCs for on lending to Small and Micro enterprises (manufacturing as
                          well as service).




  5.          CALCULATION OF INVESTMENT FOR PLANT AND MACHINERY :

       5.1.         The List of Plant and Machinery to be Excluded or Included is provided in Appendix – ‘A’.

       5.2.         In calculating the value of plant and machinery for the purpose of calculating investment limit, the
                    original price thereof, irrespective of whether the plant and machinery are new or second hand shall be
                    taken into account.
       5.3.         In case the Branch is unable to assess the original investment criteria, a certificate with regard to
                    investment in plant/machinery/equipment etc. would be obtained from a Chartered Accountant.
       5.4.         It is further clarified that cost of Pollution Control, research and development, industrial safety
                    devices and such other items as may be specified by notification, shall be excluded.
       5.5          Inclusion of Wind Mill activity may be considered as a Service Enterprise wherein all such equipments
                    (conventional and non-conventional) which are essential for generation of power through wind mills will
                    be taken into account while computing the value of equipments for determining the status of the said
                    enterprises.
       5.6          The finance for purchase of Gensets will also be considered on merit of each case.




  6. COMMON GUIDELINES/INSTRUCTIONS FOR LENDING TO MSME SECTOR:
Sl.                Parameter                                                 Banks’ Policy
No.
6.1.             Loan
                 Applications        6.1.1.   Revised Simplified Loan Application Form prescribed by IBA alongwih check
                                              list and undertaking of the applicant, will be applicable for Micro and Small
                                              Enterprises (MSEs) as provided in Appendix ‘B’.
                                     6.1.2.   For loan beyond Rs.25Lacs, branches may obtain additional information from the
                                              borrower, as deemed necessary, as incorporated in the checklist enclosed to the
                                              loan application form.

                                     6.1.3.   Loan Application Form (ADV-Comm) and Checklist enclosed will be applicable
                                              for Medium Enterprises only (HOIC No.8898 dated 28.09.2005).

                                     6.1.4.   Before handing over the Application Forms to applicant, the modification / addition
                                              as applicable under guidelines on Fair Practice Code for Lender’s Liabilities will be
                                              complied as under:

                                               (a) Information regarding Processing Fee, Service Charges, and Refund etc. will
                                                    be annexed as a part of application form.
                                               (b) An undertaking to be obtained from the prospective borrower while accepting
                                                    application that he has been briefed about and convinced about the charges,
                                                    bank will levy on pre/post sanction of the loan.
                                     6.1.5.    Appraisal Format enclosed with Adv-Comm applicable to all loans irrespective
                                               of limit will be applicable for financing to MSME sector (HOIC No.8898 dated
                                               28.09.2005).
                          6.1.6.   Each branch will issue an acknowledgement for loan applications
                                   received from the borrowers towards financing under this sector and
                                   maintain the record of the same.
                          6.1.7.   Disposal of Applications:
                                        In case of Loans up to Rs.25000/-                     : Within 2 weeks
                                        In case of Loans above Rs.25000/-                    : Within 4 Weeks
                                         (Provided the loan applications are complete in all respect and
                                          accompanied by a ‘check list’ enclosed to the application form) .




                          6.1.8.   Register of Receipt/Sanction/Rejection of Applications:
                                   (a) A register should be maintained at branch level containing information on the
                                        date of receipt, sanction, disbursement, rejection with reasons, should be
                                        recorded. The register should be made available to facilitate verification by
                                        the Bank’s officials including Zonal Heads during visit to the branch.

                                   (b)   Branch Manager may reject application (except in respect of SC/ST). In the
                                         case of proposals of SC/ST, rejection should be done at a level higher than
                                         Branch Manager.

                                   (c) The reason for rejection will be communicated to the borrower in line with the
                                        stipulation mentioned in the Fair Practices Code for Lenders.

                          6.1.9. Photographs of Borrowers:
                                 While there is no objection to take photographs of the borrowers, for the purpose of
                                 identification, branches themselves should make arrangements for the photographs
                                 and also bear the cost of photographs of borrowers falling in the category of
                                 Weaker Sections. It should also be ensured that the procedure does not involve any
                                 delay in loan disbursement.
6.2.     Nature/          6.2.1. The Bank may provide all types of funded and non funded facilities to the borrower
         Type of Credit          under this sector viz, Term Loan, Cash Credit, Letter of Credit, Bank
         Facilities              Guarantee, etc.
                          6.2.2. A Composite Loan with maximum limit upto Rs.1.00 crore may be considered by
                                 bank to enable the Micro and Small Enterprises {both for manufacturing and service
                                 sector} to avail of their working capital and Term loan requirement through Single
                                 Window.




6.3.   Margin     6.3.1. Funded Limit                          Minimum Margin
                         (a) Up to Rs.25000.00                 Nil
                         (b)Above Rs.25000.00                  20%

                  6.3.2. Margin on Book debts                  20-25% on the merits of the case.
                  6.3.3. Export Bills backed by LC/            Nil
                         confirmed by First Class Bank
                  6.3.4. Non Funded Limit
                           (a) Letter of Credit(DP)            5% Cash Margin
                           (b) Letter of Credit(DA)            10% Cash Margin
                           (c) Bank Guarantee                  20% Cash Margin
                  Margin in case of Non Funded facility can be reduced upto 5% by the GM(PSC) at HO and
                  below 5% by the Chairman and Managing Director or Executive Director(in absence of C&MD).
 6.4.   Security   6.4.1. No collateral or third party guarantee for advances (both manufacturing and
                          service sector) up to Rs.10.00 Lacs irrespective of coverage under CGTMSE.
                   6.4.2. In case of good track record of the borrower collaterals and/or third party guarantee may be
                          waived beyond Rs. 50.00 Lac but up to Rs.100.00Lacs, where guarantee cover of
                          62.50% (max amount of Rs.62.50Lacs for Rs.100Lacs) of the amount of default is
                          available from CGTMSE, in respect of term loan and /or working capital facilities
                          extended to new and existing entrepreneur. Regarding coverage and fee etc, guidelines
                          on CGTMSE Scheme would be applicable. The subsequent changes from time to time if any will
                          be applicable.

                   6.4.3. In case of Loan up to Rs.25000.00, minimum Asset Coverage Ratio (Primary Security/
                         Loan amount) would be 1:1. However, in case of schematic lending/specified scheme,
                         the guidelines as applicable will be complied with.



                   6.4.4. In case of Loan above Rs.25000/-, a minimum Asset Coverage Ratio (Primary Security / Loan
                          Amount) must be 1.1. excluding margin stipulated.



                   6.4.5. In case of loan accounts not covered under CGTMSE scheme i.e. above Rs.100 lac, it may
                          be explored as far as practicable that the credit facilities/loans extended, are supported by
                          collaterals in the form of liquid securities or fixed assets, immovable properties, based on the
                          credit risks perception of the borrower. However, availability of collateral security shall not
                          be the mere criterion for arriving at credit decision.

                   6.4.6. Collateral security shall not be insisted upon in those cases where the RBI directives specifically
                          advised the banks not to insist on obtaining collateral security /third party guarantee.
                    The other guidelines as per Lending Policy of the Bank and subsequent amendments, if any, should
                    be closely observed.




6.5.    Risk       6.5.1. All the MSME accounts (new/existing) are to be rated as per rating modulus (In- House
        Rating            Module of Rating) prescribed under Bank’s Credit Risk Management Policy.



                   6.5.2. As stipulated by CGTMSE all proposals of sanction of Guarantee approvals for credit facilities
                          above Rs.50.00 Lacs and up to Rs. 100.00 Lacs will have to be rated internally by
                          Member Lending Institutions(MLIs) and should be of investment grade. Accordingly, all
                          proposals above Rs. 50 Lacs are to be rated on Credit Risk Grading as per applicable internal
                          rating modules as above prescribed under Bank’s Credit Risk Management Policy and
                          proposals rated as AB-1 to AB-7 would only be considered as investment grade
                          subjected to other stipulated norms in relevant policies/ guidelines.

                   6.5.3. Rating from Outside Rating Agencies:

                             Bank has entered into MOU with CRISIL, ONICRA and SMERA, for rating of SME
                              borrowers and the same will be taken into consideration for appropriate lending decision
                              apart from internal rating.

                             To promote more external rating which provides the broader comparability of rating
                                at all levels , the Bank may allow incentive in rate of interest of 0.50% below the
                                applicable rate in case of Highest and High rated accounts, for rating done by
                                outside rating Agencies.

                             Zonal Heads may allow such incentive on the interest rate.

                             Zonal Heads while reviewing the existing loan accounts and considering           sanction of
                              new connection may exercise the authority.
6.6           Pricing/              6.6.1 The rate of interest to the borrower classified under Micro, Small and Medium Enterprises will
              Rate of               be guided by bank’s policy on interest rate issued from time to time.
              Interest




                                    6.6.2. Concessions on Rate of Interest :
                                              As per policy of the bank issued from time to time.
                                    Interest rate fixation in case of schematic lending like PMEGP / PMRY/ SGSRY/ other Government
                                               Sponsored Schemes etc will be fixed as per the scheme and no concession will be further allowed to
                                               them.


6.7.          Other                  The charges will be levied in terms of guidelines of the Bank.
              Charges
              (Service /
              Inspection
              Charges).
6.8.          Repayment /               6.8.1. Repayment schedule should be fixed taking into account the sustenance requirements, surplus
              Moratorium                        generating capacity, the break-even point, the life of the asset, etc., and not in an “ad hoc” manner.

                                        6.8.2. Moratorium period depending on requirement of the project will be considered.

                                        6.8.3. Moratorium period may be extended by further six months where project implementation has been
                                               delayed for reasons whatsoever beyond control of the borrower.
                                        6.8.4 Interest accrued during moratorium period may be capitalized and accordingly loan instalment may be
                                               fixed.

6.9.          Mode of                   The disbursement of the loan will be made in phases depending on the progress on implementation of the
              Disbursement              project and payment towards cost ofr Plant and Machinery, Equipment and other fixed assets will be made in
              of Loan                   favour of the supplier through Demand Draft/Banker Cheque. Branches will continue to ensure the end use
                                        verification on monthly/quarterly basis.
 6.10         Methodology               6.10.1. Working Capital :
              for                                  i) Working capital credit limits to Micro, Small and Medium Enterprises in individual cases up to
              Calculation of                            Rs.5.00 Crore (Manufacturing sector) and upto Rs.2.00 Crore (Service sector) will be
              Bank Finance                              computed as per existing guidelines on the basis of minimum 20% of projected annual
                                                        turnover (turnover method). However in case of borrower applying for working capital limit
                                                        higher or lower than the working capital computed on the basis of turnover method shall be
                                                        assessed as per actual requirement.

                                                  ii) For assessment of the working capital requirement for borrowers falling within the band of above
                                                       Rs.5.00 crores and below Rs.10.00Crore (Manufacturing Sector) and above Rs.2.00
                                                       Crore and below Rs.10.00 Crore (Service Sector) the traditional method of
                                                       computing MPBF as per second method of lending will continue. If any of the borrower
                                                       falling in this band intends to shift to cash budget system, the same may be accepted.

                                                  iii) For borrowers having working capital limit of Rs.10.00 crores and above, Cash Budget
                                                       System will be applicable.. However, if a borrower is desirous to continue with the existing
                                                       MPBF system the Bank may accept the request. If any of the borrowers falling in this band
                                                       intends to shift to cash budget system, the same may be accepted.

                                                  iv) The Book Debts upto 90 days may be treated as Current Asset, for the purpose of computation
                                                       of permissible bank finance and drawing power calculation. All Book Debts more than 90 days
                                                       are to be treated as Non-Current Assets.

                                                  v)   In regard to age of the book debts, a certificate preferably from Auditors/ Chartered Accountant
                                                       to be obtained.

                                        6.10.2. Term Loan and Other Facilities :
                                                 i) The technical feasibility and economic/ financial/ commercial viability, managerial competence,
                                                      environment viability and bank-ability of the proposal with reference to risk and legal aspect will
                                                      be assessed.

                                                  ii) The finance for purchasing of Genset will also be considered on merit of the case.

                                        6.10.3.    All the benchmark financial ratios, tenure etc. will be in line with the Bank’s Domestic Lending Policy.




       Revision/Review of Bank’s MSME Policy
  6.11.       Adhoc Credit               6.11.1. The Scale wise authority to allow the Ad hoc Facility to the MSME
              Facilities/Excess                  Borrowers is as under :
              Drawing                                                                              (Amt.: Rs. in Lacs)
                                           Sl.  Facility/ Authority                         I         II        III     IV       V          VI      VII        ED   CMD    MC
                                           No   Adhoc limits based on facility
                                                enjoyed
                                           a    AB1 to AB2 rated accounts – 20% of sanctioned limits or the prescribed amount under each scale which ever is lower.
                                                i. Secured                                 NIL           6       20      40      100       300       500       *FP    FP   FP
                                                Ii Unsecured:                              NIL        NIL       NIL      10       50       100       200        FP    FP   FP
                                           b    Others (AB-3 to AB-7) – 10% of sanctioned limit or the prescribed amount under each scale, whichever is lower.
                                                Ii Secured:                                NIL           3       10      15       50       100       200        FP    FP   FP
                                         *FP(Full Power):Aggregate of Sanctioned Limit + Adhoc/Temporary limit should not exceed prescribed per
                                         borrower maximum ceiling of Discretionary Authority.

                                         6.11.2. Other Operational Guidelines would be applicable as provided in Appendix
                                                 -‘C’.

                                         6.11.3. Adhoc Working Capital Demand Loan :
                                                 (a) Under stimulus package, the need based Adhoc Working Capital Demand
                                                     Loans maximum up to 20% of the existing fund based limits in respect
                                                     of units having overall fund based credit facility up to Rs.10.00 Crore
                                                     may be given, which will be repayable in one year with a provision of
                                                     maximum period of six months during which interest will have to be
                                                     serviced.

                                                 (b) In this regard borrower may avail only one of the under noted facilities
                                                     at a time:
                                                       i) Adhoc Facility (Paragraph 6.11.1)
                                                       ii) Adhoc Working Capital Demand Loan (Paragraph 6.11.3)
                                         6.11.4. Besides Adhoc Facility / Adhoc Working Capital Demand Loan, excess
                                                 drawing may be allowed in terms of provisions contained in the Bank’s
                                                 Discretionary Authority (Lending Power) / Lending Policy.

  6.12.       Financing                  6.12.1. The cluster based approach should be given thrust for financing as
              under Cluster                      the cluster financing approach reduces the cost of transaction to the
              Based Approach                     Entrepreneurs.
                                         6.12.2. The Zonal Offices/ Branches will give due importance for financing of MSME
                                                 sector through Specialised SME Financing Branches and the identified
                                                 Thrust branches and Branches situated near to clusters.

  6.13.       Discretionary              As per Discretionary Authority circularized by the Bank.
              authority
  6.14.       Review of                  At the Zonal Office level, Chief Manager (Credit)/ Senior Manager identified as nodal
              Portfolio                  officers will act as coordinating officer to monitor the functioning, review and the
                                         progress in SME financing and to coordinate with other banks/financial institutions and
                                         the State Government in removing bottlenecks, if any, to ensure smooth flow of credit
                                         to the sector.
  6.15.         Machinery To             Each Zonal office will form a Committee headed by the Zonal Head at the Z.O. level to
                Look Into                look into the complaints and their time bound redressal. The Zonal Head will be the
                Complaints               “Nodal Officer” at Z.O. level for redressal of complaints. The Committee will verify
                                         periodically that the guidelines under Priority Sector in general and MSME sector in
                                         particular are complied by the branches and complaints are redressed promptly. The
                                         names and addresses with telephone number of the Nodal Officer with whom
                                         complaints can be lodged should be displayed on the notice board of every branch.
  6.16.         Debt                    6.16.1. The Bank’s Policy of Debt Re-structuring for SMEs as introduced in
                Restructuring                       December 2008 will be applicable.
                                        6.16.2. The Bank’s Policy of One Time Settlement for MSMEs as provided in
                                                    Recovery Management Policy will be applicable.

  6.17.         Other Aspects            The other aspects of the Bank’s lending policy/other policy guidelines
                                         including discretionary authority will be applicable and the changes made
                                         by RBI/Banks guidelines in the matter.

Revision/Review of Bank’s MSME Policy
6.18.   Banking Codes    6.18.1. The Banking Codes and Standard Board of India (BCSBI) formulated a Code of
        and Standard              Bank's Commitment to Micro and Small Enterprises and have been
        Board of India            adopted by the Bank for MSEs. The printed booklet of the Code in
        (BCSBI)                   English/Hindi/Other vernacular languages have been provided to Zonal
                                  Offices, to make available for use of new/existing customers at all the
                                  Branches.

                         6.18.2. This is a Voluntary Code, which sets minimum standards of banking practices
                                  for banks to follow when they are dealing with Micro and Small Enterprises
                                  (MSEs) as defined in the MSMED Act, 2006. It provides protection to MSE and
                                  explains how banks are expected to deal with MSE for their day to-day
                                  operations and in times of financial difficulty.

                         6.18.3. The Code does not replace or supersede regulatory or supervisory
                                 instructions issued by the Reserve Bank of India (RBI) and will comply with
                                 such instructions / directions issued by the RBI from time to time.

                         6.18.4. Objectives Of The Code:

                                 (a) Give a positive thrust to the MSE sector by providing easy access to
                                     efficient banking services.

                                 (b) Promote good and fair banking practices by setting minimum standards
                                     in dealing with MSE.

                                 (c) Increase transparency so that a better understanding of what can
                                     reasonably expected of the services.

                                 (d) Improve our understanding of business through effective
                                     communication.

                                 (e) Encourage market forces, through competition, to achieve higher
                                     operating standards.

                                 (f) Promote a fair and cordial relationship between MSE and banks and also
                                     to ensure timely and quick response to banking needs.

                                 (g) Foster confidence in the banking system.

7. LIQUIDITY SUPPORT TO MICRO AND SMALL ENTERPRISES:
To facilitate smooth functioning of MSME units and to ensure that Micro and Small Enterprise Units do not
face liquidity crisis because of delayed realisation of sale proceeds from Corporate Houses, the following
guidelines would be complied with.

7.1.     While sanctioning/renewing credit limits to large corporate borrowers (i.e. borrowers enjoying
         working capital limits of Rs.10.00 crore and above from the banking system), separate sub-
         limits are to be fixed within the overall limits, specifically for meeting payment obligations
         in respect of purchases from MSEs either on cash basis or on bill basis.

7.2.     The size of such sub-limits to be decided taking into account the projected purchases by corporate
         borrowers from the MSE Units during a year in relation to their total purchases and other relevant
         factors.

7.3.     Towards ensuring availability of adequate balance in the account for meeting the payment
         obligations to MSE Units, Banks are to ensure that sale proceeds/other receipts of the borrower
         are credited to this account on pro-rata basis.

7.4.     The operations in the sub-limit are to be closely monitored, particularly with reference to the
         corporate borrowers’ dues to MSE units by ascertaining periodically from such corporate
         borrowers, the extent of their dues to MSE suppliers and ensuring that corporate pay off such
         dues before the Appointed Day/ Agreed Date by using the balance available in the sub-limit so
         created. Further, if at any time, the sub-limit is exhausted there is no bar on such payments being
         made from the other segment of the working capital limit. Similarly if no payments are due to MSE
         suppliers, and the sub-limit remains unutilised / partly utilised, the sub-limit (full or part) may be
         freely used by the corporate borrowers for meeting other working capital expenses.

7.5.     As defined in Sec. 2(b) of MSMED Act 2006, ‘Appointed Day’ will mean as under:
         ‘The day following immediately after the expiry of the period of fifteen days from the
         day of acceptance or the day of deemed acceptance of any goods or any services by a
         buyer from a supplier’.

        7.5.1.     For the purpose, the day of acceptance means:

                   (a) The day of the actual delivery of goods or the rendering of services.

                   (b)   Where any objection in made in writing by the buyer regarding acceptance of
                         goods or services within 15 days from the day of the delivery of delivery of goods
                         or the rendering of services, the day on which such objection is rendered by the
                         supplier.

          7.5.2.   The day of deemed acceptance means:
                   Where no objection is made in writing by the buyer regarding acceptance of goods or
                   services within 15 days of delivery of goods or the rendering of services , the day of the
                   actual delivery of goods or the rendering of services




                                                                                             APPENDIX – ‘A’




                    CALCULATION OF INVESTMENT FOR PLANT AND MACHINERY
1.         In calculating the value of plant and machinery for the purpose of calculating investment limit,
           the original price thereof, irrespective of whether the plant and machinery are new or second hand
           shall be taken into account.

2.         The List of Plant and Machinery to be Excluded provided in the box below.

3.         Inclusion of Wind Mill activity may be considered as a Service Enterprise wherein all such equipments
           (conventional and non-conventional) which are essential for generation of power through wind mills
            will be taken into account while computing the value of equipments for determining the status of the
            said enterprises.

4.         In the case of imported machinery, the following shall be included in calculating the value :-

           (a)   Import duty (Excluding miscellaneous expenses as transportation from the port to the site of
                 the factory, demurrage pad at the port).
           (b)   The shipping charges.
           (c)   Customs clearance charges.
           (d)   Sales Tax or Value Added Tax.




                        EXCLUDED ITEMS OF PLANT AND MACHINERY/OTHER ITEMS

     In calculating the value of plant and machinery, the following shall be excluded namely: -
      1.    The cost of equipments such as tools, jigs, dies, moulds and spare parts for maintenance and cost of
            consumable stores.
      2.    The cost of installation of plant and machinery.
      3.    The cost of research and development (R&D) equipment and pollution control equipment.
      4.    The cost of power generation sets, extra transformer, etc. installed by the undertaking as per the
            regulations of the State Electricity Board.
      5.    The Bank charges and services charges paid to the National Small Industries Corporation or the State
            Small Industries Corporation.
      6.    The cost involved in procurement or installation of cables, wiring, bus bars, electrical control
            panels (not those mounted on individual machines), oil circuit breakers/miniature circuit breakers
            etc. which are necessarily to be used for providing electrical power to the plant and machinery/safety
            measures.
      7.    The cost of gas producer plant.
      8.    Transportation charges (excluding of taxes e.g. Sales Tax, Excise etc.) for indigenous machinery
            from the place of manufacturing to the site of the factory.
      9.    Charges paid for technical know-how for erection of plant and machinery.
      10. Cost of such storage tanks which store raw-material, finished goods only and are not linked with the
            manufacturing process.
      11. Cost of fire fighting equipment.


       Under MSMED Act-2006, it is clarified that cost of Pollution Control, research and
       development, industrial safety devices and such other items as may be specified by
       notification, shall be excluded.
                                                                                               APPENDIX -“C”


         OPERATIONAL GUIDELINES FOR ADHOC FACILITIES FOR MSME BORROWING



1.    If the sum total of Ad-hoc limit and the existing regular limit falls within the discretionary authority of
      the Branch Heads, they will sanction Ad-hoc limit within the aforesaid delegated authority and will
      include the same in “Monthly Statements of Limit sanctioned” under the respective discretionary
      authority and submit the same to next higher authority.
2.     If the sum total of Ad-hoc limit and the existing regular limit does not fall within the discretionary
      authority of the Branch Head but it falls within the discretionary authority of Zonal Head, the branches
      will refer such proposal to the Zonal Head, who may sanction Ad-hoc limit within the aforesaid
      delegated authority and will include the same in “Monthly Statements of Limit sanctioned” under the
      respective discretionary authority.
3.    The Ad hoc facility will be granted to the Borrowers who are rated between AB-1 and AB-4, by the
      authority up to Scale-V within their respective discretionary authority. In case of those facilities rated
      between AB-5 and AB-7, such proposals may only be considered after taking specific approval from
      next higher authority of the sanctioning authority.
4.    No unsecured Ad-hoc Facility will be granted to MSME borrowers rated AB-3 to AB-7.
5.    The Ad-hoc Facility will be allowed only to our existing customers who have been dealing with us for at
      least one year.
6.    The maximum period for Ad-hoc Facility will be for 90 days. (in case of export credit maximum tenure
      of Packing Credit and Post Shipment Credit together should not exceed 180 days ) The outstanding
      under such account should be brought down within the regular limit by this period but it should
      not be regularised by enhancing limit (as enhancement of limit in such cases, if required, will be
      considered only after regularisation of account or obtaining permission from next higher authority).
7.    All the accounts enjoying credit facility should be internally rated and validated based on latest audited
      balance sheet and in no case the rating should be older than 6 months.
8.    The Ad-hoc limit will not be sanctioned in case of borrowal accounts having irregularity in its operation
      or un-rectified irregularities reported during Branch Inspection, RBI inspection, Legal Audit, Credit
      Audit, Stock Audit etc.
9.    No Ad-hoc facility will be extended to the accounts where conduct of the account is unsatisfactory,
      stipulations of earlier sanctions not complied with, irregularities pointed by RBI / internal /concurrent
      auditors are pending for rectification and NPA borrowal accounts.
10.   The facility will only be extended to the borrowers who are enjoying regular credit facilities with the
      bank. The Ad-hoc credit limit will normally remain secured by stock/ book-debts and the drawings
      against Ad-hoc limit will be regulated strictly as per availability of drawing power.
11.   The facility will only be granted after proper documentation, creation of charge and creation of security
      etc.
12.   No facility should be granted to the accounts which are due for review OR validity of Ad-hoc facility
      should not be extended beyond the validity of the regular credit facility.
13.   Any change in terms and conditions be intimated to ECGC in case of export credit, wherever applicable.
14.   No two such facility can be enjoyed by the borrower simultaneously with Ad-hoc Working Capital
      Demand Loan.
15.   Rate of Interest to be applied for Ad-hoc limit will be 1% more than that applicable to regular credit
      limit of the borrower concerned. Other service charges will be levied as per Bank’s guidelines on Service
      charges.
      16.           Ad-hoc credit facility should not be accommodative in nature and will be sanctioned only for genuine
                    business requirement, judiciously and with due circumspection. In case of unsatisfactory track record of
                    the borrower, Ad-hoc limit should not be sanctioned.
      17.           Ad-hoc credit facility should not be considered as a matter of routine or in anticipation of
                    sanction/enhancement of credit facilities.
      18.           Ad-hoc limit should not be allowed frequently. It should not generally be rolled over by successive Ad-
                    hoc sanction. It should also be ensured that Ad-hoc limit is not extended for regularization of the
                    account.
      19.           The respective account in which Ad-hoc limit is sanctioned should be reviewed in time and regular need
                    based limit may be considered with justification.
      20.           In cases where the accounts are already overdue for review, no Ad-hoc facility should be allowed.
      21.           Branches /Offices should judiciously permit /allow adhoc facilities in various accounts, strictly adhering
                    to the bank’s policy in this regard. The adhoc facility shall not be permitted as a matter of right, but in
                    extreme circumstances for bonafide needs of the borrowers.
      22.           The next authority is empowered to permit conversion of adhoc limit into regular limit in respect of
                    sanctions made by the Branches/Offices.

Revision/Review of Bank’s MSME Policy

				
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