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Home >> Priority & SME Banking >> SME Business Unit >> SME Policy
 
SME Policy
 

SME POLICY

The Bank has adopted a Policy for lending to SME sector, in tune with Govt. of India guidelines as per MSMED Act, 2006, which has come into force w.e.f. 2nd October, 2006. The salient features of the policy are:

Definitions :

MSME sector comprises, Micro Enterprise, Small Enterprise and Medium Enterprises – Industry & Service Segments.

  Industry Service
Micro Enterprise The investment in plant and machinery (original cost) does not exceed .25 lacs. The investment in equipment (original cost) does not exceed .10 lacs.
Small Enterprise Investment in plant and machinery (original cost) is more than .25 lacs but does not exceed .500 lacs. The investment in equipment (original cost) is more than .10 lacs but does not exceed .200 lacs.
Medium Enterprise Investment in plant and machinery (original cost) is more than .500 lacs but does not exceed .1000 lacs. The investment in equipment (original cost) is more than .200 lacs but does not exceed .500 lacs.

Note:

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

  2. In calculating the investment in plant and machinery, the cost of pollution control, research and development, industrial safety devices and such other items as may be specified, by notification, shall be excluded.

  3. The word equipment is defined as “All instruments, office machines and such other electro mechanical or electronic appliances that are directly related to the service rendered but excluding furniture, fittings and other items not so related.”

Time Norms for disposal of Loan Applications:

Loan applications from units under SME sector will be disposed off within a reasonable time as mentioned below, provided such applications are complete in all respects.

  Sanctions at Branch Sanctions at Circle Office Sanctions at Head Office
Loans upto .25000/- Within 2 weeks Not applicable Not applicable
Loans beyond .25000/- & upto .5 lakhs Within 4 weeks Within 4 weeks Within 4 weeks
Loans over .5 lakhs & upto .25 lakhs Within 30 days Within 45 days Within 45 days
Loans over .25 lakhs Within 30 days Withing 45 days Within a maximum of .8 weeks

Token of Service on receipt of each application for credit facilities shall be issued.

6. Rate of interest:

Rate of interest on loans and advances sanctioned on or after 01.07.2010 is based on BASE RATE. WEF 01.08.2011, Base Rate of the Bank is 10.75%. The rate of interest is subject to changes from time to time. (BR=Base Rate)

  Micro Enterprises Small & Medium Enterprises
  Manufacturing Services Manufacturing Services
Short term loans:
Upto .50000/- BR+0.50% BR+0.50% BR+1% BR+1%
Above .50000/- upto .2 lacs BR+2.50% BR+2.50% BR+3% BR+3%
Above .2 lacs upto .2 crore Graded rate of interest based on scoring norms & parameters
BR+1.50% to BR+4.50% BR+2.25% to BR+5%
Above .2 crore upto .10 crore Graded rate of interest based on Internal Credit Risk Rating BR+3.25 %to 5.75%
Above .10 crore Graded rate of interest based on External Credit Risk Rating BR+2.25% to 5.75%
 
Term loans:
Upto .50000/- BR+1% BR+1% BR+1.50% BR+1.50%
Above .50000/- upto.2 lacs BR+2.50% BR+2.50% BR+2% BR+3%
Above ..2 lacs upto ..2 crore Graded rate of interest based on scoring norms & parameters
BR+1.75% to BR+4.75% BR+2.25% to BR+5.75%
Above .2 crore upto .10 crore Graded rate of interest based on Internal Credit Risk Rating BR+3.25 %to 5.75% Plus applicable Term Premium
Above .10 crore Graded rate of interest based on External Credit Risk Rating BR+2.25% to 5.75% Plus applicable Term Premium

Security:

  • Assets created out of Bank loan.
  • Charge on the machinery/equipment & other fixed assets directly associated with the activity of the enterprise.
  • NO collateral security/third party guarantee for loans:
    1. Up to .10 lacs to Micro & Small Enterprises
    2. Upto .25 lacs in respect of MSMEs whose track record and financial position are good as per Bank records
    3. Upto .100 lacs (aggregate) in respect of Micro and Small Enterprises whose borrowal accounts are covered under Credit Guarantee fund for Micro & Small Enterprises (CGMSE).
      [Note: Presently CGMSE cover is not available to credit facilities extended to retail traders, educational institutions, training institutes, training cum incubator centres and to Medium Enterprises].
  • Collateral security/third party guarantee for loans beyond the above limits is insisted on merits of each case, as determined by Bank, subject to RBI/GOI guidelines.

Application forms:

Depending upon the quantum of loan requirement under Small Enterprises (including Micro Enterprises) and Medium Enterprises, loan application forms are available at your nearest branch.

The following prescribed applications are made available to the SME clients at the branches of the Bank. Format of Applications may also be downloaded from the website of the Bank.

Application To Micro & Small Enterprises To Medium Enterprises
NF 836   Up to .2 lacs
NF 837   Over .2 lacs and upto .15 lacs
NF 838   Over .15 lacs and up to .100 lacs
NF 903*   .1 crore and above
NF 998* To Micro & Small Enterprises irrespective of the loan amount  

* to be submitted along with CMA data wherever applicable

All applications are to be accompanied with project report, Audited/unaudited financial statements for the preceding 3 years, copies of licences, permits, sales tax assessment orders’ income tax/wealth tax assessment orders, projected financial statements, cash/fund flow statements, wherever required/insisted.

Financial statements of the immediately preceding year should not be 6 months old. In such cases, provisional financial statement as on the latest date also to be submitted.

Conditions apply. The information provided above is only illustrative and not exhaustive.

Contact :

For more details, please contact your nearest Canara Bank branch or E mail to : hosbu@canarabank.com

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