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Credit Policy & MSMEDepartment: Central Office239, Vidhan BhavanMarg, Nariman Point, Mumbai .400021.

INSTRUCTIONCIRCULARNO:968-2017

TOALLBRANCHES/OFFICES

29th September 2017

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Management of Credit Portfolio -MSMEPolicy 2017-18 J

1. The maiden MSE Policy of the Bank was framed in the year 2009.Consequent upon Medium Enterprises included under priority sector by RBIin 2015, nomenclature of the 'MSEpolicy' was modified to .MSMEpolicy'framed by the Bankfor 2015-16.

2. The policy was reviewed from time to time, being last review for 2016-17,by the Board, in its meeting held on 28.12.2016, which was valid upto 30thSeptember 2017.

3. The MSMEPolicy 2017-18 which has been approved by the Board in itsmeeting held on 28.09.2017 is enclosed.

4. The MSME Policy 2017-18 will be valid upto 30-September-2018 andcontinuity of the policy may be extended for a further period of 3 monthswith the specific approval of MD&CEO.

5. The changes in the MSMEPolicy 2017-18 are effective from 1st October2017.

6. Branches/Offices are requested to take a careful note of the above andensure compliance.

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,Para. Subject ... .c ... Pg. No.. . .. .. .

1. INTRODUCTION 1

2. MSMEPOLICY

2.1 Background 22.2 Objectives 22.3 Scope 3

.

2.4 Ownership 32.5 Compliance 62.6 Management Information System 62.7 Modification and Review 6

3. MSMEDACT 2006 7

4. MSME- PRIORITYSECTORLENDING 10

COMMON GUIDELINES! INSTRUCTIONS FOR5.LENDINGTO MSMESECTOR

5.1 Issue of Acknowledgement of Loan Applications to12

MSMEborrowers

5.2 Credit Guarantee Schemes 135.3 Composite loan 145.4 Specialized MSME branches 155.5 Delayed Payment 15

Framework for Revival and Rehabilitation of5.6 16MSMEs

The imperative of Financial Literacy and

5.7 consultancy support to Micro and Small 17Enterprises Sector

0 Structured Mechanism for monitoring the credit 17R?':f>.~ ~ "'~~ ~~"'"

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Para Subject Pg. No.

growth to the MSEsector

5.9 General Credit Card (GCC)Scheme 175.10 State Level Inter Institutional Committee (SLlIC) 185.11 Empowered Committee on MSMEs 18

Streamlining flow of credit to Micro and Small

5.12 Enterprises (MSEs) for facilitating timely and 18adequate credit flow during their 'Life Cycle'

5.13 Debt Restructuring Mechanism for MSMEs 195.14 Cluster Approach 19

Scheme of Small Enterprises Financial Centres5.15 20

(SEFCs)

5.16 Credit Linked Capital Subsidy Scheme (CLSS) 20Banking Codes and Standards Board of India

5.17 21(BCSBI)

5.18 Reports: 22

BANK'S INITIATIVE FOR STEPPINGUP CREDITTO6.

MSMES

6.1Separate Organizational set up at Central Office 22

6.2 Business Banking Branches 22

6.3Establishment of Centralized Processing Centers- 23SARALs

6.4 Developing Credit Officers Cadre 236.5 Clusters 246.6 MSECare Centers 246.7 Pradhan Mantri MUDRAYojna (PMMY) 256.8 Standup India 256.9 Start-up India 256.10 Management & Skill Development Institute 26

,i\'" ~t}~'Iif ~ -....J~ 1 Simplified Common Loan Application Form for 26

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LIST OF ABBREVIATION

ANBC Adjusted Net Bank CreditBBB Business Banking BranchesBCSBI Banking Codes and Standards Board of India

CAC Credit Approval CommitteesCEGSSC Credit Enhancement Guarantee Scheme for the Scheduled Castes

CERSAI Central Registry of Securitization, Asset Reconstruction and SecurityInterest of India

CGFMU Credit Guarantee Fund for loan to Micro Units

CGS Credit Guarantee SchemeCGSSI Credit Guarantee scheme for Stand-up IndiaCGTMSE Credit Guarantee Fund Trust for Micro & Small Enterprises

CLSS Credit Linked Capital Subsidy SchemeCO Central OfficeCP&MSME Credit Policy & Micro, Small and Medium EnterprisesCPA Credit Process Audit .

CRILC Central Repository of Information on Large CreditsDGM Deputy General ManagerECGCSAL Export Credit Guarantee Corporation of India Limited - Specific

Approval ListFGMO Field General Manager's OfficeFLCs Financial Literacy CentresGCC General Credit CardGovt. GovernmentIBA Indian Banks' AssociationIBPC Inter Bank Participation CertificatesJLG Joint Lending GroupKRA Key Result AreasKVI Khadi & village Industries Sector

.

KYIC Khadi and Village Industries CommissionKYC Know Your CustomerLAS Lending Automation SolutionLIE Lenders Independent EngineerMCB Mid-Corporate BranchesMD&CEO Managing Director & Chief Executive Officer

MIS Management Information SystemMOF Ministry of FinanceMOU Memorandum of UnderstandingMSE Micro & Small EnterpriseMSE-CDP Micro and Small Enterprises Cluster Development Programme

MSME Micro, Small and Medium EnterprisesMSMEDAct Micro, Small and Medium Enterprises Development Act

MUDRA Micro Units Development & Refinance Agency Ltd.NABARD National Bank for Agriculture and Rural DevelopmentNPA Non-Performing AssetNSIC National Small Industries CorporationPAN Permanent Account NumberPMEGP Prime Minister Employment Generation Programme

:>;-- il ~YPradhan Mantri Jan Dhan Yojana

d,l1'1 '" Y Pradhan Mantri Mudra Yojana

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RBI Reserve Bank of IndiaRLCC Regional level Credit CommitteeRO Regional OfficeRTI Right to InformationSCiST/OBC Scheduled Caste / Scheduled Tribe / Other Backward CasteSEFC .Small tnterprises Financial CentresSFC State Financial CorporationSFURTI Scheme of Fund for Regeneration of Traditional IndustriesSHG Self Help GroupSIDBI Small Industries Development Bank of IndiaSIDC State Industrial Development CorporationSLBC State Level Bankers' CommitteeSLlIC State Level Inter Institutional CommitteeSMA Special Mention Account551 Small Scale IndustriesTAT Turn Around TimeTEV Techno - Economic ViabilityTOs Technical OfficerTPA Third Party AdministrationTUFS Technology Upgradation Fund SchemeUNIDO United Nations Industrial Development OrganisationZLCC Zonal level Credit Committee

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Para .. Subject . Pg. No,

MSEs

6.12 Online Application Facility for MSEApplicants . 26

6.13 Assessmentof Credit Limits 27

6.14 Risk Rating and Pricing 28

6.15 Rejection/Curtailment of MSEproposal 28

6.16 MSMEProducts 28

6.16 MOUwith External Credit Rating Agencies - 29

6.17 Channel Financing initiatives 29

ANNEXURE

List of items to excluded while calculating the

I investment in plant and machinery in the case of 30

the specified MSMEenterprises

II Committees on flow of Credit to MSEsector 31

III Structure of SARALsunder Project Utkarsh 35

IV List of Approved Cluster Specific Schemes 40

V Application form for MSEs 41

VI Format of Acknowledgement Letter 501\"1 it ~~ <1;i\

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1. Introduction:

1.1 Micro, Small and Medium Enterprises (MSME)sector has emerged as a highly vibrantand dynamic sector of the Indian economy over the last five decades. MSMEsnotonly play a crucial role in providing large employment opportunities atcomparatively lower capital cost than large industries but also help inindustrialization of rural & backward areas, thereby, reducing regional imbalances,assuring more equitable distribution of national income and wealth. MSMEsaresupplementary to large industries as ancillary units and this sector contributesenormously to the socio-economic development of the country.

1.2 Bank has envisioned a vibrant MSMEsector by promoting growth and developmentof the MSMEsector including Khadi, Village and Coir Industries in close co operationwith concerned Ministries/Departments, State Government and other stake holdersthrough providing support to the existing enterprises and encouraging creation ofnew enterprises.

1.3 The Micro & Small Enterprise (MSE) is a major component of MSMEsin India. Itcomprises of the erstwhile Small Scale Industries and other small enterprises fromservice sector. The MSEsare instruments of inclusive growth which touch upon thelives of the most vulnerable and most marginalized individuals. Thus it isimperative to have a policy which aims at improving the credit flow particularly toMSE segment. This sector produces about 8000 products and offers the largestemployment after agriculture. The sector therefore offers an opportunity to thecountry to harness local competitive advantages for achieving global dominance.

1.4 Though the MSMEsector's performance is commendable, it faces a number ofconstraints. The major constraints faced by the MSMEsector can be summarized asunder:

i. MSMEsin general and Micro Enterprises in particular have inadequate access tofinance due to lack of financial information and non-formal business practices.

ii. MSMEsin general, find it difficult to get timely credit.

iii. Many a time, Banks insist for collateral which MSMEslack.

iv. MSMEsface fragmented markets in respect of their inputs as well as products andare vulnerable to market fluctuations.

MSMEslack easy access to Inter-State and International Markets.

Page lofS!

MSMEPolicy 2017-18

vi. The access of MSMEsto technology and product innovations is also limited. There islack of awareness of Global Best Practices.

vii. MSMEsface considerable delays in the settlement of dues/payment of bills by theLarge Corporate/Large Scale buyers.

2. MSMEPolicy:

2.1 Background

Bank has therefore designed a separate document - MSMEPolicy - to have astandardized approach towards the MSMEsand have a reference material to oneand all dealing with MSMEmatters.

The MSMEPolicy is a formal policy document mentioning therein the Bank's role &approach for meeting the need of the MSMEclients. Lending to Medium Enterprisesbeing an integral part of MSMEDAct and priority sector lending guidelines of RBIisalso discussed in the policy, wherever applicable.

Bank has also issued operating guidelines on lending to MSMEsin sync with policyguidelines.

2.2 Objectives:-

2.2.1 The MSMEPcilicy is based on the following principles:

i.

ii.

iii.

iv.

v.

vi.

The Policy aims at enlarging the MSME client base through aggressive creditmarketing.

The Policy addresses the credit needs of the existing MSMEclients for judicious andprompt credit decision.

The Policy describes the Bank's approach towards credit appraisal skills andstrategies on the one hand and flexibility and innovation on the other hand.

The Policy document attempts to ensure that the socio-economic obligations of theBank are fully met.

The Policy endeavors to ensure continuous growth of loan assets while keepingthose assets performing and standard.

The Policy aims at a comprehensive Management Information System based on areliable data base and endeavors to mitigate and reduce risk associated with thelending by fine tuning systems and controls.

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MSMEPolicy 2017-18

vii. The Policy document ensures compliance of all the directives, guidelines issued byGovernment/Reserve Bank of India and other regulatory authorities on MSMEcreditmatters. The Bank would follow the guidelines in all aspects issued from time totime by the authorities. CP8:MSMEDepartment to communicate MSME relatedschemes/guidelines of Government Authorities issued from time to time for growthof MSMEcredit portfolio. In case of varying interpretations of these guidelines, theBank will adopt reasonable interpretation as determined by CP 8:MSMEDepartmentwithout deviating from the spirit behind the guidelines.

viii. One of the basic objective of issuing this Policy is to create awareness among theBranch level functionaries regarding needs of the sector and guidelines issuedthereof.

2.3 Scope

2.3.1 The Policy would deal with all MSMEcredit related matters such as fund based, nonfund based and other forms of credit dispensation of MSMEcredit.

2.3.2 Since other credit related areas have been dealt in detail by the Loan Policy, theseaspects are not covered in the MSMEPolicy to avoid duplication. Hence, the MSMEPolicy should be read along with the Loan Policy.

2.3.3 The Policy will cover all types of MSME customers such as Individuals,Proprietorship, Partnerships, Limited Liability Partnership, Association of persons,companies registered under Indian Companies Act, SHG, JLG, Co-operative Societyetc.

2.3.4 This policy has been made in compliance with all RBI8: extant regulatory guidelinesissued till date.

2.3.5 The guidelines enumerated in the policy are applicable for all domestic branches.

2.3.6 Any exception or deviation from the policies shall be referred to CP 8: MSMEDepartment, e.0. who shall in turn put up such matters to the Credit Approvalcommittee (CAC-IIand above) at Central Office for approval.

2.4 Ownership

2.4.1 CP a MSME Department shall frame, design/review/fine tune/modify allpolicies/procedures in relation to MSMEcredit in the Bank, with the approval ofBoard of Directors.

2.4.2 MSME Vertical -Role and Objectives

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MSMEPolicy 2017.18

established at Credit Department, Central Office. Subsequently it was decided toestablish an exclusive MSMEdepartment to have a focused attention to the MSMEbusiness. Accordingly, at the beginning of the Financial Year 2008,09, MSMEverticai was established at Central Office headed by General Manager which hasbeen renamed as Central Credit & MSME(now renamed as Credit Policy and MSMEDepartment) with focused attention on MSME. Following are the Roles andObjectives of the vertical:-

2.4.2.1 To keep a track of Government Guidelines/RBI Guidelines, marketrequirements and accordingly to formulate Bank's Policy on MSMEin linewith laid down guidelines and to modify the policy from time to time.

2.4.2.2 To design lending schemes for segment specific/cluster-specific MSMEsfrom time to time to drive businessgrowth.

2.4.2.3 To put in place marketing strategies and marketing teams at RegionalOffices/ Branches for aggressivemarketing to tap the market potentialsfor lending to MSMEs.

2.4.2.4 To identify broad inputs for the training courses to be conducted for skilldevelopment of the field functionaries for quality appraisal and marketingof credit proposals.

2.4.2.5 Identification of MSME clusters with a view to market Bank'sproducts/schemes, in consultation with SIDBI/ Govt. of India, whereverapplicable.

2.4.2.6 To fix businessgrowth targets for MSMElending for respective RegionalOffices in consultation with ROs/FGMOsand periodical review of actualachievement vis.a-vis targets.

2.4.2.7 Identification of credit thrust branches having the maximum MSMEfinance/ potential for MSME business and monitoring these branchesdirectly to have a focused and enhancedMSMEbusinessgrowth.

2.4.2.8 To extend support to the field functionaries for achieving businesstargetsunder MSMEby giving marketing strategies and visit of executives fromCentral Office to the Controlling Offices for liasioning with other FinancialInstitutions, Industry and Trade Associations.

2.4.2.9 CP&MSMEVertical to also oversee the growth of MSMEbusinessof theBankasa whole apart from the credit thrust BusinessBankingBranches.

2.4.2.10 Apart from this, CP& MSMEVertical will be responsible for the followingfinancial and non.financials KRAs:

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MSMEPolicy 2017-18

(i) Financial KRAs

1) Growth in MSMECredit

2) Yield on MSMECredit Portfolio

3) Growth in non-interest income from MSMEadvances

4) Growth in number of MSMEaccounts

5) Delinquency rate

(ii) Non Financial KRAs

1) Establishment of SARALswhere business opportunities exist. A completeBusiness Model having adequate Manpower with assured Turn Around Timefor quick disposal of MSMEproposals.

2) Ongoing identification and review of "Business Banking Branches" & ;;Mid-Corporate Branches".

3) Holding of monthly MSMEcamps at various potential Centers/Clusters.

4) Launch of Cluster Specific Schemes.

5) Aggressive MSMEPublicity Campaign and Brand Building Initiatives.

6) Building of MSME cadre, a silo of specialized officers who will haveexpertise in Credit Appraisal! Processing of MSMEproposals, Marketing andMonitoring.

7) Comprehensiveness, accuracy and timeliness of policy documents/database.

8) Submission of Returns to RBI and Ministries9) Business planning & periodic reviews.10) Timely rectification of credit related grievances.11) Timely empanelment of Valuer/Stock auditor/L1E/TEV Consultants12) Proper monitoring of reversal of expi red Bank Guarantee13) Effective management of following Cells at Central Office

o CERSAICello Credit Guarantee Cells

• CGTMSE.CGFMU• CGSSI• CEGSSC

o CRILCCello E-confirmation Cell for BG confirmationo TUFSCello Willful Defaulters/Non-Cooperative Borrowers/RBI Caution Advice Cell

14) Credit related correspondence with MFI/RBI/IBA15) MSMECredit related RTls

Page 5 of 51

MSMEPolicy 2017-18

2.4.3 Credit Portfolio Monitoring, Restructuring and Recovery

A Credit Monitoring and Restructuring Department as well as Credit Recovery andLegal Service Department covering all credit verticals have been set up at CentralOffice. The guidelines issued by the respective department will be equallyapplicable to MSMEsunless otherwise specified by them. The details of roles ftresponsibilities and functioning of these departments are brought out throughseparate policy guidelines byrespective verticals.

2.5

2.5.1

2.6

2.6.1

2.7

2.7.1

2.7.2

2.7.3

Compliance

All the functional divisions are expected to comply with the policy guidelines laiddown in this Policy document. In case of any doubt about the applicability of anyaspect of the policy contents, clarification/approval shall be sought from CPftMSMEDepartment, Central Office.

Management Information System (Submission of Weekly Flash data and MonthlyMSMEStatement)

To reduce the burden of submission of the statements at Branch/ RO level, suitableMIS package is to be utilized and updated thereof from time to time .. Properfeeding of data/ particulars relating to the accounts in the Finacle is theprerequisite for the generation of correct report/ return through MIS. Hence,Branches/ROs should ensure that the data/particulars like classification etcrelating to the accounts are properly fed / updated in the Finacle for stabilizationof the MIS.

Modification and Review

The policy shall be valid upto 30-September-2018 from the date of issue and it .should be renewed by the end of September every year. The continuity of thepolicy may be extended for a further period of 3 months with the specific approvalof Managing Director ft CEO.

The Policy shall also be modified to give effect, in case of any changes in theexisting guidelines/ directiveslinstructions based on the directives/ advice ofReserve Bank of India/Government of India/other regulatory authorities, issuedfrom time to time, subject to reporting and approval of the Board of Directors.

The Policy will be reviewed / revised from time to time, at least once in a year toadapt to the changing economy/environmental demands and to incorporate/ .implement any changes in the credit strategy of the Bank related to the MSMEcustomers.

Page 6 of 51

MSMEPolicy 2017-18

3 MICRO, SMALL & MEDIUM ENTERPRISES DEVELOPMENT (MSMED) ACT(Along With Reserve Bank of India Guidelines & internal guidelinesthereof)

3.1 The Government of India has enacted the Micro, Small and Medium EnterprisesDevelopment (MSMED)Act, 2006 which was notified on June 16, 2006. With theenactment of MSMEDAct, 2006, Services Sector is included in the definition ofMSMEapart from extending the scope to Medium Enterprises. The MSMEDAct, 2006has modified the definition of Micro, Small 8: Medium Enterprises engaged inmanufacturing or production and providing or rendering services. Reserve Bank ofIndia has notified the aforesaid changeswhich along with the definition of MSME,as per the Act have been adopted by the Bankfor the purpose of credit.

3.1.1 Following significant changeshave been introduced through MSMEDAct, 2006.

i. The word "Industry" hasbeen replaced by "Enterprises".ii. The word "Tiny hasbeen replaced by "Micro".iii. The Servicessector hasbeen brought under the purview of MSMEDAct, 2006.

3.1.2 Definition of Micro, Small 8:Medium Enterprises

Segment Enterprises engaged in the Enterprises engaged inmanufacture or production, providing or rendering ofprocessing or preservation of services

goodsMicro Is an enterprise where original Is an enterprise where originalEnterprise investment in plant 8: machinery investment in equipment does

doesnot exceed Rs.25 Lacs. not exceed Rs.10Lacs.Small Is an enterprise where original Is an enterprise where originalEnterprise investment in plant 8: machinery investment in equipment is

is more than RS.25lacs but does more than RS.10lacs but doesnot exceed Rs. 5 Crores. not exceed RS.2Crores.

Medium Is an enterprise where original Is an enterprise where originalEnterprise investment in plant 8: machinery investment in equipment. is

is more than Rs. 5 crores but more than Rs2 crores but doesdoesnot exceed RS.10crores. not exceed Rs.5 crores.

3.1.2.1 In case of manufacturing enterprises, investment in plant 8: machinery is theoriginal cost excluding land 8: building and the items specified by the Ministry ofSmall Scale Industries vide its notification NO.S.O.1722(E) dated October 5, 2006 isenclosed asAnnexure I.

3.1.2.2 In case of service enterprises, investment in equipment is the original costexcluding land 8: building and furniture, fittings 8: other items not directly relatedto the service rendered or asmay be notified under MSMEDAct, 2006.

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MSMEPolicy 2017-18

. 3.1.2.3 In terms of Ministry of MSMEoffice memorandum, RBI has clarified that forascertaining the investment in plant and machinery for classification of anenterprise as Micro, Small and Medium, the following documents could be reliedupon:

(i) A copy of the invoice of the purchase of plant and machinery; or

(ii) Gross block for investment in plant and machinery as shown in the auditedaccounts; or

(iii) A certificate issued by a Chartered Accountant regarding purchase price ofplant and machinery.

Further, the Ministry has clarified that for the investment in plant and machineryfor the purpose of classification of an enterprise as Micro, Small or Medium, thepurchase value of the plant and machinery is to be reckoned and not the bookvalue (purchase value minus depreciation).

The effective date for the above provision would be from the date MSMEDAct,2006 came into force i.e. 16th June 2006 and not prospectively. The aboveprovisions would be applicable to section 7 (1) (a) and section 7 (1) (b) of theMSMEDAct, 2006 i.e. enterprises engaged in manufacturing of goods and renderingof services as well.

3.1.3 Certain activities have also been included under Micro, Small IiMedium (Service)Enterprises, provided such enterprises satisfy the definition of MSMEs(Service) inrespect of investment in equipment (i.e., not exceeding RS.10 lacs for MicroEnterprises, RS.2 crores for Small Enterprises and RS.5.00crore for MediumEnterprises). Updated list of activities included in the Micro, Small Ii MediumService enterprises by Ministry of MSMEis given below:

i. Small Road IiWater Transport Operatorsii. Small Businessiii. Professional Ii self-employed personsiv. All other Service Enterprises.v. Publishingvi. Sanitation service (hiring of septic tank cleaner)vii. Clinical/pathological laboratory and scanning, MRItest.viii. Hospitalsix. Agri-clinic and agri-businessx. Restaurant with barxi. Hotelsxii. Motel industryxiii. Consultancy services including management servicesxiv.. Renting of agricultural machinery (harvesting)

Composite broker services in risk and insurance management

Page 8 of 51

xvi.

xvii.xviii.xix.xx.xxi.xxii.xxiii.xxiv.xxv.xxvi.xxvii.xxviii.xxix.

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MSMEPolicy 2017.18

Third Party Administration (TPA) services for Medical Insurance Claims of PolicyHolders.Seed Grading ServicesTraining-cum-Incubator CentresEducational InstitutionsTraining InstitutesPractice of Law i.e. legal servicesTrading in Medical Instruments (brand new)Placement and Management Consultancy ServicesAdvertising Agency and Training CentersDevelopment of software and providing software servicesCanteensMedical Transcription ServiceProduction of T.V serial and other T.V programmesRipening of raw fruits under controlled conditions, [subject to norms prescribed byFood Safety and Standards Authority of India, (Ministry of Health and FamilyWelfare, Government of India)]Service Rating Agency (rating and grading services across sectors based on setmethodology and standards)Retreading of TyreInfrastructure and Real Estate activityPower (Electrical) Distribution ServiceWarehouse, Godown and Cold Storage Services

Specific activities which can be considered as manufacturing:

i. Printingii. "Printing a Publishing" as integrated unit.iii. Medical Equipment and Ayurvedic Productsiv. Composite unit of Bacon Processing and Piggery Farm (Piggery Farm without

Bacon Processing shall not be classified either as manufacturing or serviceenterprise because this is a farming activity)

v. Tobacco Processingvi. Beedi/Cigarette manufacturing and other tobacco productsvii. Extraction of Agave Spirit from Agave Juice (imported medicinal plant) extraction

of Agaveviii. Manufacture of Bio-fertilizerix. Separation of iron scraps from slag pots.x. Generation of electricity through windmill.xi. Seed Processing (for genetic enhancement) (Involving collection of germplasm,

cleaning, gravity separation, chemical treatment etc.)xii. Composite unit of Poultry with Chicken (Meat) Processing [Poultry farm without

chicken (meat) processing shall not be classified either as manufacturing or serviceenterprise because this is a farming activity]

Xlll. Power Generation by conventional as well as by non-conventional processes~ ~.~~. . Cotton ginning..t~C3??0

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(As per RBI guidelines on Priority Sector Lending, Bank loan to Food ft Agroprocessingunits will form part of agriculture).

4 MSME- PRIORITY SECTOR LENDING (Reserve Bank of India Guidelines fi:Internal Guidelines thereof)

4.1 Priority Sector Lending shall continue to be a chosen area of the Bank. Bank willendeavor to exceed the overall share of 40%of Adjusted Net BankCredit (ANBC)orCredit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher as atthe end of the previousyear.

4.2 Bank loans to Micro, Small and Medium Enterprises, for both manufacturing andservice sectors are eligible to be classified under the priority sector as per thefollowing norms:

4.2.1 Manufacturing Enterprises:

The Micro, Small and Medium Enterprises engaged in the manufacture orproduction of goodsto any industry specified in the first schedule to the Industries(Development and Regulation) Act, 1951 and as notified by the Government fromtime to time. The manufacturing enterprises are defined in terms of originalinvestment in Plant ft Machinery. (It is clarified that all eligible manufacturingenterprises under MSMEirrespective of credit facilities will be classified underpriority sector.)

4.2.2 Service Enterprises:

Bank loans up to Rs.5 crore per borrower / unit to Micro and Small Enterprises andRS.10erore to Medium Enterprises engaged in providing or rendering of servicesand defined in terms of original investment in equipment under MSMEDAct, 2006.(It is therefore, clarified that all such service units under MSMEenjoying creditfacilities above RS.5 crs ft above RS.10 crs will be part of MSE ft MediumEnterprises, respectively but shall not qualify for priority sector classification.)

4.2.3 Khadi ft village Industries Sector (KVI)

All loans to units in the KVIsector will be eligible for classification under the sub.target of 7.5 percent prescribed for Micro Enterprises under priority sector.

4.2.4 Other finance to MSMEs:

4.2.4.1 Loans to entities involved in assisting the decentralized sector in the supply ofinputs to and marketing of outputs of artisans, village and cottage industries.

Page 10 of 51

MSMEPolicy 2017-18

4.2.4.2Loans to co-operatives of producers in the decentralized sector viz. artisans,village and cottage industries.

4.2.4.3 Loans sanctioned to MFls for on-lending to MSMEsector as per the conditionsspecified by RBi.

4.2.4.4Credit outstanding under General Credit Cards (including Artisan Credit Card,Laghu Udyami Card, Swarojgar Credit Card, and Weaver's Card etc. in existenceand catering to the non-farm entrepreneurial credit needs of individuals).

4.2.4.50verdrafts extended after April 8, 2015 up to RS.5,0001 - under Pradhan Mantri JanDhan Yojana (PMJDY)accounts provided the borrower's household annual incomedoes not exceed RS.100,0001 - for rural areas and Rs.1 ,60,0001 - for non-rural areas.These overdrafts will qualify as achievement of the target for lending to MicroEnterprises.

4.2.4.60utstanding deposits with SIDBI and MUDRALtd. on account of priority sectorshortfall.

4.3 To ensure that MSMEsdo not remain small and medium units merely to remaineligible for priority sector status, the MSMEunits will continue to enjoy the prioritysector lending status up to three years after they grow out of the MSMEcategoryconcerned.

4.4 MSMEDAct, 2006 does not provide for clubbing of investments of differententerprises set up by same person / company for the purpose of classification ofindustrial undertakings as Micro, Small Ii Medium Enterprises.

4.5 Investments in Securitized Assets, transfer of pool of loan assets through directassignments / outright purchases and investments in Inter Bank ParticipationCertificates (IBPCs) on risk sharing basis shall be eligible for classification underrespective categories of priority sector provided the underlying assets are eligibleto be categorized under the respective categories of priority sector as per RBIguidelines.

4.6 The outstanding Priority Sector lending certificates bought by the bank will beeligible for classification under respective categories of priority sector provided theassets are originated by banks, and are eligible to be classified as priority sectoradvances and fulfill the Reserve Bank of India guidelines on priority sector lendingcertificates.

4.7 A system should be put in place at all levels for maintaining a register I electronicrecord, wherein the date of receipt, sanction/rejection/disbursement with reasonsthereof, etc., should be recorded. The register 1electronic record should be made/~J;J!;~:\available to all inspecting agencies.

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4.8 An acknowledgement is to be provided for loan applications received under prioritysector MSME loans and decision should be communicated in writing to theapplicants within prescribed time limit.

4.9 Targets / sub-targets for lending to Micro, Small and Medium Enterprises (MSME)Sector

4.9.1 Advances to Micro, Small and Medium Enterprises (MSME)sector is reckoned forcomputing achievement under the overall Priority Sector target as per pointNoo4.1.

4.9.2 Bank is required to achieve a sub-target of 7.5 percent of ANBC or CreditEquivalent Amount of Off-Balance Sheet Exposure, whichever is higher, for lendingto Micro Enterprises.

4.9.3 Loans above RS.5 crore per borrower / unit to Micro and Small Enterprises andRS.10 crore to Medium Enterprises engaged in providing or rendering of servicesand defined in terms of investment in equipment under MSMEDAct, 2006, shall notbe reckoned in computing achievement under the overall Priority Sector targets asabove. However, loans above RS.5 crore per borrower / unit to Micro and SmallEnterprises would be taken into account while assessingthe performance of thebanks with regard to achievement of targets prescribed by the Prime Minister'sTaskForceon MSMEsfor lending to MSEsector.

4.904 In terms of the recommendations of the Prime Minister's Task Force on MSMEs,Bankhas to achieve:

i. 20 per cent year-on-year growth in credit to micro and small enterprises,

ii. 10 per cent annual growth in the number of micro enterprise accounts and

iii. 60 per cent of total lending to MSE sector as on corresponding quarter of theprevious year to Micro Enterprises.

Hence, all endeavors to comply with the directives should be made in letter andspirit.

5. COMMON GUIDELINES I INSTRUCTIONS FOR LENDING TO MSME SECTOR(Reserve Bank of India Guidelines &: internal guidelines thereof)

5.1 Issueof Acknowledgement of Loan Applications to MSMEborrowers

Acknowledgement of all loan applications, submitted manually or online, by MSMEborrowers is mandatory.

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It should be ensured that a running serial number is recorded on the applicationform aswell as on the acknowledgement receipt.

Bank will encourage Central Registration of loan applications and technology willbe used for online submissionof loan applications as also for online tracking of MSEloan applications.

The above guidelines should be read along with Priority Sector guidelines of RBIenumerated under Point No.4.7 & 4.8.

5.2 Credit Guarantee Schemes

5.2.1 Credit Guarantee Scheme of Credit Guarantee Fund Trust for Micro & SmallEnterprises (CGTMSE)was established in August, 2000 and promoted byGovernment of India and SIDBIwith an objective of providing the guarantee coverto the collateral free loans extended to Micro & Small Enterprises under its schemeknown as Credit Guarantee Scheme.

5.2.2 Further, Government of India through Ministry of Finance, Department of FinancialServices hasnotified (a) Credit Guarantee Fund for loan to Micro Units (CGFMU)forthe purpose of .providing guarantees to loans extended under PradhanMantri MudraYojana (PMMY)and (b) Credit Guarantee scheme for Stand-up India (CGSSI)for thepurpose of providing guarantees to loans extended under Stand-up India Scheme.Also, Government of India through Ministry of Social Justice and Empowerment haslaunched Credit Enhancement Guarantee Scheme for the Scheduled Castes(CEGSSC)for SC entrepreneurs engaged in Small and Medium Enterprises. Theaforesaid schemes are adopted by the Bank. The existing. features of the CreditGuarantee Schemes of CGTMSEand other approved Institutions along with themodifications are to be communicated by CP&MSMEDepartment from time to time.

5.2.3 Credit Guarantee Schemeis a tool for:

i.ii.iii.iv.

Widening of credit portfolioBetter management of riskFaster recovery of duesEnhancement of profitability

5.2.4 No collateral should be accepted in case of loans upto RS.10lacs extended to unitsin the MSEsectors (whether eligible under Credit Guarantee Schemeor not). Also,Collateral-free loans up to Rs. 10 lakh should be extended to all units financedunder the Prime Minister Employment Generation Programme (PMEGP)administered by KYle. Further, Branches/Offices should cover all loans uptb Rs. 25lacs extended to Micro & Small Enterprises and are eligible for coverage underguarantee scheme of CGTMSEor other approved institutions without any exception.If at all there is any exception, the same should be only with the prior permissionof their RegionalHead.

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5.2.5 Branches/Offices can provide collateral free credit limits upto RS.200 lacs underCredit Guarantee Scheme for MSEs subject to availability of Credit Guaranteecover, satisfaction of borrower's track record and good & sound financial position.

5.2.6 In order to extend the collateral free loans to number of MSEaccounts and coverthe same under the Credit Guarantee Scheme, targets are assigned to the Regionsfor covering accounts under the Credit Guarantee Scheme. The Regions aresupposed to distribute these targets among the branches in their jurisdiction.Similarly, Branch level functionaries are to be encouraged to avail the CreditGuarantee Scheme cover by Controlling Offices and the performance of the fieldfunctionaries regarding coverage of accounts under Credit Guarantee scheme is tobe considered as one of the parameters for evaluating the performance of the fieldfunctionaries.

5.2.7 Credit Guarantee Fund for Micro Units (CGFMU):In order to ease the lending under PMMY, Government of India introduced CreditGuarantee Fund for Micro Units (CGFMU). It facilitates Credit Guarantee Coverageof all eligible PMMY accounts. The guarantee coverage is available on a portfoliobasis for the loans sanctioned up to RS.10 lacs.

5.2.8 Credit Guarantee Scheme for Standup India (CGSSI):In order to increase the pace of lending under Standup India Scheme, Governmentof India introduced Credit Guarantee Scheme for Standup India (CGSSI). Itfacilitates Credit Guarantee Coverage of all eligible accounts sanctioned underStand-up India. The guarantee coverage is available for the loans sanctionedbetween Rs. 10 lacs to Rs. 100 lacs.

5.2.9 Credit Enhancement Guarantee Scheme for Scheduled Castes (CEGSSC):The scheme is envisaged for extending Term Loans or Composite Loans(combination of term loan, working capital facility and non fund based facility) toSCentrepreneurs engaged in Small and Medium enterprises. The borrower engagedin Manufacturing / Trading / Service Sector may be considered for financialassistance. Working capital and non fund based facility can be availed only alongwith term loan facility and not independently.

Detailed guidelines on CGTMSE, CGFMU, CGSSI and CEGSSCare issued vide ICnO.746-2017 dated 25.01.2017, IC nO.777-2017 dated 23.02.2017, IC nO.776-2017dated 23.02.2017 and IC nO.510 dated 13.07.2016 respectively.

5.3 Composite loan

A composite loan upto RS.1.00 crore can be sanctioned comprising both term loanand working capital to MSMEsthrough single window based on the track record andfinancials of the borrower as per delegated authority. Branches/Offices which havesanctioned Term Loan singly or jointly must also sanction working capital limitsingly (or jointly) to avoid delay in commencement of commercial production

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thereby ensuring that there are no caseswhere term loan has been sanctioned andworking capital facilities are yet to be sanctioned.

5.4 Specialized MSMEbranches

5.4.1 As per Reserve Bank of India guidelines atleast one specialised branch is to beopened in each district and categorization of general banking branches having 60%or more of advances to MSMEsector as specialized MSMEbranches for providingbetter service to this sector as a whole is permitted.

5.4.2 Specialized MSMEbranches is to be ensured in identified clusters/centres withpreponderance of small enterprises to enable the entrepreneurs to have easyaccess to the bank credit and to equip bank personnel to develop requisiteexpertise.

5.4.3 The existing specialized 551Branches are also identified as MSMEBusinessBankingBranchesby the Bank. Though their core competence will be utilized for extendingfinance and other services to MSMEsector, they will have operational flexibility toextend finance/render other services to other sectors/borrowers also.

5.4.4 Accordingly, Bankhave credit focused branches known as BusinessBankingBranches(BBBs)with special focus on extending finance and other services to MSMESectorand have the operational flexibility to extend finance/render other services toother sectors/ borrowers. Regional Head to ensure that BBBsare provided withcredit officers specially recruited for improving M5MEfinance / or specially trained. credit officers in order to provide prompt service to the MSMEclients ..

5.5 Delayed Payment

5.5.1 Under the Amendment Act, 1998of Interest on Delayed Payment to Small ScaleandAncillary Industrial Undertakings, penal provisions have been incorporated to takecare of delayed payments to MSMEunits. After the enactment of the Micro, Smalland Medium Enterprises Development (MSMED),Act 2006, the existing provisions ofthe Interest on Delayed Payment Act, 1998 to Small Scale and Ancillary IndustrialUndertakings, have been strengthened as under:

i. The buyer has to make payment to the supplier on or before the date agreed uponbetween him and the supplier in writing or, in case of no agreement, before theappointed day. The period agreed upon between the supplier and the buyer shallnot exceed forty five days from the date of acceptance or the day of deemedacceptance.

ii. In casethe buyer fails to make payment of the amount to the supplier, he shall beliable to pay compound interest with monthly rests to the supplier on the amountfrom the appointed day or, on the date agreed on, at three times of the BankRate

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MSMEPolicy 2017-18

iii. For any goods supplied or services rendered by the supplier, the buyer shall beliable Jo pay the interest as advised at (ii) above.

iv. In case of dispute with regard to any amount due, a reference shall be made to theMicro and Small Enterprises Facilitation Council, constituted by the respectiveState Government.

5.5.2 Branches/Offices to explore fixing of sub-limit within the overall working capitallimits sanctioned to the large borrowers specifically for meeting the paymentobligation in respect of purchases from MSMEs.

5.6 Framework for Revival and Rehabilitation of MSMEs

5.6.1 The Ministry of Micro, Small and Medium Enterprises, Government of India, videtheir Gazette Notification dated May 29, 2015 has notified a •Framework forRevival and Rehabilitation of Micro, Small and Medium Enterprises' to provide asimpler and faster mechanism to address the stress in the accounts of MSMEsand tofacilitate the promotion and development of MSMEs.The Reserve Bank has issuedthe guidelines on the captioned Framework along with operating instructions onMarch 17. 2016 for revival and rehabilitation of MSMEunits having loan limits up toRS.25 crare. The revised Framework supersedes the earlier guidelines of RBI onRehabilitation of Sick Micro and Small Enterprises issued vide RBI circular RPCD.CO. MSME8: NFS.BC.40/06.02.31/2012.2013 dated November 1, 2012, except thoserelating to Reliefs and Concessions for Rehabilitation of Potentially Viable Unitsand One Time Settlement mentioned in 'Policy on Debt Restructuring Mechanismfor SMEs'.

The salient features of the Framework are as under:

i. Before a loan account of an MSMEturns into a Non-Performing Asset (NPA), banks.or creditors should identify incipient stress in the account by creating three sub-categories under the Special Mention Account (SMA) category as given in theFramework

ii. Any MSMEborrower may also voluntari ly initiate proceedings under this Frameworkiii. Committee approach to be adopted for deciding corrective action planiv. Time lines have been fixed for taking various decisions under the Framework

Bank has put in place a separate Policy on Framework for revival and rehabilitationof MSMEsin consonance with the latest RBIguidelines.

5.6.2 MSERehabilitation Cells at Regional Offices for sick Micro and Small Enterprises tomonitor / identify sick units / incipient sickness, conduct viability study, follow-upaction etc. for timely rehabilitation of viable /potentially viable sick MSEunits.

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5.7 The imperative of Financial literacy and consultancy support to Micro and SmallEnterprises Sector

5.7.1 Keeping in view the high extent of financial exclusion in the MSMEsector, it isimperative that the excluded units are brought within the fold of the formalbanking sector.

5.7.2 The lack of financial literacy, operational skills, including accounting and finance,business planning etc. represent formidable challenge for MSE borrowersunderscoring the need for facilitation in these critical financial areas.

5.7.3 Moreover, MSE enterprises are further handicapped in this regard by absence ofscale and size.

5.7.4 To effectively and decisively address these handicaps, a special cell at branches, orvertical integration of this function in the Financial Literacy Centres (FLCs) is to beset up as per the comparative advantage.

5.7.5 The bank staff is to be trained through customised training programs to meet thespecific needs of the sector.

5.8 Structured Mechanism for monitoring the credit growth to the MSEsector

5.8.1 The existing systems for monitoring credit growth to. the sector is to bestrengthened by system-driven comprehensive performance managementinformation system (MIS)at every supervisory level (Branch, Region, Zone, Centraloffice}, which is to be critically evaluated on a regular basis.

5.8.2 System of e-tracking of MSEloan applications and monitoring the loan applicationdisposal process, giving branch-wise, region-wise, zone-wise and State-wisepositions is to be put in place. The position in this regard is to be displayed inBank's websites.

5.8.3 Timely rehabilitation of sick MSE units as discussed under Point 5.6 is to bemonitored. The progress in rehabilitation of sick MSEunits is to be made availableon the Bank's website.

5.9 General Credit Card (GCC)Scheme

In order to enhance the coverage of GCCScheme to ensure greater credit linkagefor all productive activities within the overall Priority Sector guidelines and tocapture all credit extended to individuals for non-farm entrepreneurial activity,the GCCguidelines have been revised by Reserve Bank of India and same is adoptedby the bank through "Union General Credit Card Scheme".

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5.10 State Level Inter Institutional Committee (SLlIC)

5.10.1 In order to deal with the problems of co-ordination for rehabilitation of sick microand small units, State Levellnter.lnstitutional Committees are set up in the States.

5.10.2 However, the matter of continuation or otherwise, of the SLlICForum has been leftto the individual States / Union Territory. The meetings of these Committees areconvened by Regional Offices of RBIand presided over by the Secretary, Industry ofthe concerned State Government.

5.10.3 It provides a useful forum for adequate interfacing between the State GovernmentOfficials and State Level Institutions on the one side and the term lendinginstitutions and banks on the other.

5.10.4 It closely monitors timely sanction of working capital to units which have beenprovided term loans by SFCs, implementation of special schemes such as MarginMoney Scheme of State Government and reviews general problems faced byindustries and sickness in MSEsector based on the data furnished by banks.

5.10.5 Among others, the representatives of the local state level MSE associations areinvited to the meetings of SLlICwhich are held quarterly.

5: 11 Empowered Committee on MSMEs

5.11.1 Empowered Committees on MSMEshave been constituted under the Chairmanshipof the Regional Directors of RBIwith the representatives of SLBCConvenor, seniorlevel officers from two banks having predominant share in MSMEfinancing in thestate, representative of SIDBIRegional Office, the Director of Industries of theState Government, one or two senior level representatives from the MSMEAssociations in the state, and a senior level officer from SFC/SIDCas members.

5.11.2 The Committee will meet periodically and review the progress in MSMEfinancing asalso rehabilitation of sick Micro, Small and Medium units.

5.11.3 It will also coordinate with other Banks/Financial Institutions and the StateGovernment in removing bottlenecks, if any, to ensure smooth flow of credit to thesector.

5.11.4 The committees may decide the need to have similar committees atcluster / district levels.

5.12 Streamlining flow of credit to Micro and Small Enterprises (MSEs)for facilitatingtimely and adequate credit flow during their 'Ufe Cycle':

In order to provide timely financial support to MSEs facing financial difficultiesduring their 'Ufe Cycle', RBIhas issued the guidelines so as to facilitate timely and

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adequate availability of credit to viable MSEborrowers especially during the needof funds in unforeseen circumstances. The RBIguidelines are detailed as under:

i. To extend standby credit facility in case of term loansii. Additional Working Capital to meet with emergent needs of MSEunitsiii. Mid-term review of regular working capital limits, where banks are convinced

that changes in the demand pattern of MSE borrowers require increasing theexisting credit limits of the MSMEs,every year based on the actual sales of theprevious year.

iv. Timelines for Credit Decisions

Bank has in place a scheme called "SME Plus" for financing Micro, Small andMedium Enterprises for their urgent temporary and short term working capitalrequirements and also a pre-approved standby Tem Loan to fund periodic capitalexpenditure for existing business. Further, Time limits for disposal of proposal onbest efforts basis are specified in the Loan Policy of the Bank.

5.13 Debt Restructuring Mechanism for MSMEs

5.13.1 Bank has put in place a separate Policy on Debt Restructuring Mechanism for SMEs,which is to be reviewed from time to time in consonance with latest RBIguidelineson Prudential Norms on Income Recognition, Asset Classification and Provisioningpertaining to Advances.

5.14 Cluster Approach

5.14.1 The credit requirement in the clusters identified by the Ministry of Micro, Smalland Medium Enterprises, Government of India, where our Bank is a SLBCConvenoris to be incorporated in Annual Credit Plan.

5.14.2 A full-service approach to cater to the diverse needs of MSE sector may beachieved through extending banking services to recognized MSE clusters byadopting a 4-C approach namely, Customer focus, Cost control, Cross sell andContain risk.

A cluster based approach to lending may be more beneficial:

i. In dealing with well-defined and recognized groupsii. Availability of appropriate information for risk assessment andiii. Monitoring by the lending institutions.

Clusters may be identified based on factors such as trade record, competitivenessand growth prospects and/ or other cluster specific data.

5.14.3 Institutional arrangements for delivering credit to the MSMEsector, where our Bank

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MsMEPolicy 2017-18

Nations Industrial Development Organisation (UNIDO) spread over 29 states invarious parts of the country.

5.14.4 The Ministry of Micro, Small and Medium Enterprises hasapproved a list of clustersunder the Scheme of Fund for Regeneration of Traditional Industries (sFURTI)andMicro and Small Enterprises Cluster Development Programme (MsE-CDP)located in121Minority Concentration Districts.

5.14.5 In terms of recommendation of Prime Minister's Task Force more MsE focusedBranches at different MsE clusters are to be opened, which could also act asCounsellingCentres for MsEs.Further, at least one MsEcluster may be adopted in adistrict where our bank is a lead bank asper comparative advantage.

5.14.6 The initiatives taken by the Bank in development of MsEclusters is discussed inPoint No,6.5 of the policy.

5.15 Scheme of Small Enterprises Financial Centres (SEFCs)

. 5.15.1 A scheme for strategic alliance between branches of banks and slDBI located inclusters, named as "Small Enterprises Financial Centres" has .been formulated inconsultation with the then Ministry of sSIand Banking Division, Ministry of Finance,Government of India, SIDBI,iBAand select banks.

5.15.2 slDBI is the premier term lending institution established for extending the financialassistance to MSEs. It has developed expertise and gained vast experience inproject financing.

5.15.3 The Bank has entered into an MOU with SIDBIfor aggressivemarketing and co-financing of MSEs. The salient features of the MOUare as under:i. Joint identification of viable projectsii. Co-financing of the projectsiii. In caseswhere term loan is considered by SiDBI,working capital facilities would

be sanctioned by the Bankand vice-versa.

5.15.4 The details of the schemeare communicated through separate guidelines.

5.16

5.16.1

i.

Credit Linked Capital Subsidy Scheme (CLSS)

Government of India,' Ministry of Micro, Small and Medium Enterprises hasintroduced Credit linked Capital Subsidy Scheme (CLSS) for TechnologyUpgradation of Micro and Small Enterprises subject to the following terms andconditions:

Ceiling on the loan under the schemeis RS.1crore.The rate of subsidy is 15%for all units of micro and small enterprises up to loanceiling at Sr. No. (i) above.

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iii. Calculation of admissible subsidywill be done with reference to the purchase priceof plant and machinery instead of term loan disbursed to the beneficiary unit.

iv. SIDBIand NABARDwill continue to be implementing agenciesof the scheme.

5.i6.2 Bank is implementing the scheme with Lucknow Main Branch as a nodal branch.The details of the scheme are circulated through separate guidelines from time totime.

5.17 Banking Codesand Standards Board of India (BCSBI)

5.17.1 The BankingCodesand Standards Board of India (BCSBI)has formulated a Code ofBank's Commitment to Micro and Small Enterprises (MSEcode). This Code setsminimum standards of banking practices for banks to follow when they are dealingwith Micro and Small Enterprises (MSEs).It provides protection to MSEand explainshow banks are expected to deal with MSEfor their day to-day operations and intimes of financial difficulty.

5.17.2 This code has been adopted by the Bank in its Board Meeting dated 30th August2008 and updated from time to time. The Code of Bank's Commitment to Microand Small Enterpriseshas been hoisted on the Bank's website for the knowledge ofcustomers and the staff. Bank has issued operational guidelines for the fieldfunctionaries for compliance of the MSEcode. All the field functionaries andconcerned are required to implement/follow the same in letter and spirit.

5.17,3 However, the Code does not replace or supersede regulatory or supervisoryinstructions issued by the Reserve Bank of India (RBI) and Bank will comply withsuch instructions /directions issued by the RBI from time to time. Similarly, theCode does not replace or supersede guidelines issued by the Bank from time totime. Unlessit saysotherwise, all parts of the Code apply to all the products andservices, provided by branches across the counter, over the phone, by post,through interactive electronic devices, on the internet or by any other mode.

5.17.4 As and when any modification in the Code is made by the BCSBI,the same can beadopted by the Bank with the permission of Managing Director & CEOunlessotherwise falling with the delegation of any specified Committee.

5.17.5 Objectives of the BCSBICode: The Code hasbeen developed to:

i.

ii.

iii.

Give a positive thrust to the MSEsector by providing easy access 'to efficientbanking services.Promote good and fair banking practices by setting minimum standards in dealingwith MSE.Increase transparency so that a better understanding of what can be reasonablyexpected of the services.Improve understandingof businessthrough effective communication.

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v. Encourage market forces, through competition, to achieve higher operatingstandards.

vi. Promote a fair and cordial relationship between MSE and banks and also ensuretimely and quick response to banking needs.

vii. Foster confidence in the banking system.

5.17.6 Acknowledgement to be given to MSEcustomers in line with BCSBIcode is enclosedas Annexure-VI.

5.17.7 MSE code copies should be circulated amongst all the branches for distribution tothe MSEcustomers free of charge.

5.17.8 The complete text of the Code is available at the bank's website.(http://www.unionbankofindia.co.in/code bank msme.aspx)

5.18 Reports:

Brief details of the reports of various committees on flow of credit to MSEsector asper Master Circular of Reserve Bank of India is enclosed for information asAnnexure-II.

6. BANK'S INITIATIVES FOR STEPPING UP CREDIT TO MSMEs:

Bank has taken various initiatives for the growth of credit to MSMEswhich are asunder:

6.1 Separate Organizational set up at Central Office

MSMEvertical headed by General Manager has been established at Corporate Officeto focus attention on growth of MSME sector through selected Business BankingBranches and branches having MSMEbusiness.

6.2 Business Banking Branches:

At present, 320 Business Banking Branches (Credit thrust branches) have beenidentified for focused growth in MSME credit. These branches are directlymonitored by the Corporate Office apart from their controlling Offices for thegrowth of business. Modification in the number of business banking branches can beundertaken by MSMEVertical after obtaining permission from the Managing Director& CEO. Besides above, Bank has set up specialized Mid-Corporate Branches (MCBs)which also caters to large value MSME credit and aforesaid guidelines for BBBswill~e equally applicable for MCBs.

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6.3 Establishment of Centralized Processing Centers- SARALs

6.3.1 The SARALsi.e. Central Processing Centers were established with the followingobjectives:

i. To accelerate the credit flows to MSMEsthrough focused sales and marketing.ii. To enhance Customer service through improved TAT.iii. Better credit appraisal and developing expertise required for examining and

processi ng SMEproposals.iv. To reduce NPAsthrough efficient monitoring system.

In order to achieve the above-mentioned goals, the roles and responsibilities of theSARALsare reviewed & redefined by Credit Department from time to time, as andwhen required.

6.3_2 SARALsare functioning at 21 centers and their number may be increased dependingupon potential of centers. The endeavor is to have SARALsat all ROs over a period.

6.3.3 The delegated loaning powers at SARALis governed by policy on delegation ofloaning powers.

6.3.4 As per extant guidelines, the Managing Director & CEO is the competent authorityto modify the operational guidelines for effective functioning of SARALs(Includingthe sectors with types of proposals to be handled at SARALs)except delegatedloaning powers. Such modifications are to be placed to the Board for information.(Latest operational guidelines on SARALsare enclosed as Annexure-III.)

6.4 Developing Credit Officers Cadre

6.4.1 Skill development of the credit officers is advantageous in terms of quick disposalof loan proposal and prompt credit delivery.

,6.4.2 Bank to continuously develop a cadre of skilled credit officers in order to meet thechallenges at the branch level as well as better credit marketing and appraisal ofthe proposals. Staff College, Bangalore has designed the'training programmes forimparting credit skills as well as updating the skills of the existing credit officers.Credit Officers are identified and are given intensive in-house, on the job andexternal training, etc. These credit officers to be deployed at the Business BankingBranches/ MSMEBranches / SARALs involving the job of credit marketing andprocessing of the proposals.

6.4.3 Further, experienced MSMEcredit officers to be recruited by the Bank in a regular,~,c way to further strengthen the cadre of credit officers.

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6.4.4 In addition to above, Bank to nominate credit officers to the external creditprogrammes/workshops such as workshop on Credit Guarantee Scheme of CGTMSE,credit appraisal courses conducted by NIBMand other reputed institutes.

6.4.5 Incentive scheme is available for the officers who are successfully completing thecertificate examination on SMEfinancing conducted by Indian Institute of Banking& Finance.

6.4.6 Transfer/ postings of Technical Officers to be done only with the concurrence ofGM, CP & MSMEby Department of Personnel, Central Office.

6.5 Clusters

6.5.1 Bank to take initiatives for financing the units in clusters across the countrythrough its branches and design different cluster specific schemes to boost creditgrowth taking into account the market environment, customers' requirements etc.

6.5.2 Cluster Specific Schemes are designed to attract more bankable units/enterprisesinto Bank's fold by offering certain concessions in interest rates, margin, collateralsecurities etc. so as to be competitive in the market.

6.5.3 The Bank has already put in place various cluster specific schemes as detailed inAnnexure IV at various centers to address the business specific requirement ofhomogeneous borrowers.

6.5.4 The bank shall continue to review performance of each cluster on an ongoing basis.Accordingly, existing cluster specific products to be suitably modified from time totime to make them more attractive and competitive taking into account,customers' requirement and feedback from the field functionaries. New clustersshall also be identified so as to deepen the credit delivery system and harness theuntapped potential of this sector

6.5.5 The delegation for approval/renewal of Cluster specific schemes is per the policyon delegation of loaning powers.

6.6 MSECare Centers

6.6.1 Bank has designated all its Regional Offices as MSEcare centers. Their Details suchas name & address of the office, contact person, phone numbers etc. have beenmade available on the Bank's Web site.

6.6.2 Further, the list of Business Banking Branches is made available on Bank's websiteunder "MSMEContact Points".

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6.7 Pradhan Mantri MUDRAYojna (PMMY)

6.7.1 Micro Units Development and Refinance Agency (MUDRA) is a Public SectorFinancial Institution which was launched by the Prime Minister on 08-04-2015. Theprime objective behind setting up of this Agency is for "Funding the unfunded" and"Formalizing the informal". MUDRAaims at providing refinance /finante to the'Last mile Financial Institutions' which are in the business of financing microenterprises in manufacturing, trading and services sector in rural and urban areas.Accordingly, MUDRAwould be extending refinance to the Banksfor their lending toMicro Enterprises in the country.

6.7.2 MUDRAhas categorized exposure to Micro Units into different buckets based onamount of Loan. The details of classification are as under:

i. Shishu: Loanamount upto RS.50,000/-ii. Kishore: Loanamount exceeding RS.50000/- and upto RS.5.00Lacsiii. Tarun: Loanamount exceeding RS.5.00Lacsupto Rs.10.00Lacs

6.7.3 All the credit facilities extended to Micro Enterprises with overall credit limit uptoRS.10.00lacs extended on or 'after 08-04-2015 are to be reported under PMMY.Aseparate MUDRAloan application is formulated by IBA, which is adopted by theBank.

6.7.4 MUDRALtd. has also conceived a product called "MUDRACard". The co-brandedcard will be issued by the Bank which will help the eligible borrower to accesscredit on a flexible manner to meet working capital needs,

6.7.5 The operating guidelines under Prime Minister MUDRAYojana including instructionsof the Ministry will be communicated by CP&MSMEDepartment from time to time.

6.8 Standup IndiaSTANDUP INDIA is an initiative taken by the Honourable Prime Minister of Indiawhich basically aims to promote entrepreneurship among SUSTs and Womenentrepreneurs. Standup India scheme facilitates Bank loans between Rs. 10 lacs toRs. 100 lacs for SC / ST / Women beneficiaries for starting green field projects.This enterprise may in manufacturing, services or trading sector.

Page 25 of 51

6.9 Start-up IndiaA new MSMEScheme "Union Start Up" has been started to provide a bankableplatform for economically viable business units to meet their need based businessrequirement. Unit must be eligible and certified as "Start-up" by the concernedGovernment Authority as per Start-up India scheme launched by Government ofIndia (Gol).

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MSMEPolicy 2017-18

6.10 Management & Skill Development Institute

6.10.1 Bank, in partnership with SIDBI, has set up a Management Et Skill DevelopmentInstitute at Jangipur, Dist. Murshidabad,West Bengal on 31-01-2010.

6.10.2 This Institute is aimed at providing training to the rural unemployed youth toenable them to take up suitable economic activities.

6.10.3 The successful participants of the training course are also being provided withfinandal assistancethrough the Bank's branches as per norms.

6.10.4 Regional Office, Durgapur is identified as a nodal office on behalf of the bank formatters related to the Institute.

6.11 Simplified Common Loan Application Form for MSMEs

6.11.1 Indian Banks' Association (IBA) Managing Committee has approved a SimplifiedCommon Loan Application Form for MSMEsto be used by the Bank for loans uptoRS.2.00crore.

6.11.2 Bank has adopted the same and circulated among all the branches for use. (Copyenclosed asAnnexure-V).

6.11.3 A copy of the sameis also available on Bank'swebsite.

6.11.4 All branches to use invariably simplified common loan application forms for MSMEs.However, MSMEsmay also utilize the loan application form as per SARALguidelines,wherever applicable as per their convenience.

6.12 Online Application Facility

6.12..1 For MSEApplicants:Bankhas introduced the online application module for MSEentrepreneurs. Now theMSEapplicants have facility to apply online for a loan and can track online thestatus of his application at any point of time.

Under the module, the entire application for MSE is available online to theapplicant. Applicant may choose his preferred branch and shall fill up the entireapplication form. A unique reference number will be generated by the systemthrough which applicant can track the status of his application. Onlineacknowledgement will also be generated.

This facility was extended for MSEloans applications having credit requirement upto Rs.100.00 Lacs only. However, making this facility applicable for MSMEloansupto Rs.200.00lacs is under process.

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MSMEPolicy 2017-18

6.12.2 Standupmitra:Government of India has unveiled standupmitra portal, a virtual market place,where MSME entrepreneurs can apply for loans online throughhttps://www.standupmitra.in/, which can be accessed by Bankers andStandupmitra team. As per the preference given by the entrepreneurs, concernedBank / branch has to pick up the proposal for processing, sanctioning anddisbursement. The same is to be updated on the portal simultaneously. Allbranches have to log in to the portal for verification of proposals submitted by thecustomers on daily basis.

6.12.3 Udyamimitra:Udyamimitra is a portal developed by SIDBI for submitting the online loanapplications by the MSMEentrepreneurs with various Banks which can be accessedthrough https://udyamimitra.in/.

6.13 Assessment of Credit Limits

6.13.1 The applicable lending methods and other related matters for assessment of creditlimits have been discussed in detail in the Bank's Loan Policy. Hence, they are notbeing reiterated and can be referred from Loan Policy.

6..13.2 In line with Nayak Committee Report, working capital limits to MSEunits is to becomputed on the basis of minimum 20% of their estimated turnover up to creditlimit of RS.5 crores. The turnover method shall be applied for sanction of fundbased working capital limits to the non MSE borrowers requiring working capitalfacilities upto RS.100 Lacs from the banking system. Otherwise, .the applicablelending methods such as Flexible Bank Finance, Cash Budget Method etc are to befollowed.

6.13.3 In order to mitigate the constraints faced by MSEsand to support Digital Push asdesired by Government of India, Bank has introduced a new scheme "UnionTurnover Plus" to fund the need based requirement of MSEshaving working capitalcycle of above 3 months based on projected / accepted sales turnover and which areadopting digital cashless channels for their business transactions. Under theschemes, Bank finance upto 30% if Digital portion and 25% of the balance portionof the projected sales will be considered.

Detailed guidelines for assessment of working capital are given in Loan Policy.

6.13.4 Term Loan can be considered to the MSMEborrowers as per the existing guidelinesof the Bank.

6.13.5 Off-Balance Sheet facilities like Letters of Credit, Bank Guarantee etc. can also be~ considered to the MSMEborrowers as per the existing guidelines of the bank .

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MSMEPolicy 2017-18

6.13.6 The scheme for the textiles and jute industries under TUFS (RestructuredTechnology Upgradation FundSchemeof Ministry of Textiles, Govt. of India) was inoperation with effect from 28.04.2011 to 31.03.2012.The Government hasapproved extension of TUFSscheme for the 12'h Plan period under the name -Revised Restructured - TUFS (RR-TUFS). Now A-TUFS (Amended TechnologyUpgradation Fund scheme) had been notified by Ministry of Textile on13.01.2016.The guidelines of A-TUFSon financial and operational parameters andimplementation mechanism for A-TUFS during its implementation period from13.01.2016 to 31.03.2022were laid down. The salient features of the scheme arecirculated by the Bank from time to time and the detailed guidelines can beaccessedthrough http://www.txcindia.gov.in/html/Guidelines of ATUFS.pdf.

6.14 Risk Rating and Pricing

The applicable guidelines on risk rating and pricing is enumerated in Loan Policyand Credit Risk Management Policy of the Bank. Hence, they are not beingreiterated and can be referred from the subject policies.

6.15 Rejection/Curtailment of MSEproposal

There should not be any delay in sanctioning and disbursal of credit. The timeschedule for disposal of application should be adhered to. In case ofrejection/curtailment of credit limit of the MSE/Priority Sector loan proposal areference to next higher authority should be made.

6.16 MSMEProducts:

The credit requirements of MSMEsvary according to place, cluster, activity etc. Inthis age of fast changing technology and competition, MSMEsrequire hassle freecredit facilities for updation of technologies, acquisition of machineries, tide overthe liquidity crunch etc. Bank has, therefore, designed various MSMEproductslooking into the requirements of the borrowers asdetailed below:

1. Union High Pride 9. Union Trade2. Union Procure 10. Union General Credit Card3. Union Supply 11. Union Start Up4. Union SMEplus 12. Union Turnover Plus5. Union Transport 13. Union Trade Plus6. Union Progress

(W/w Union LaghuUdhyami Credit Card)

7. ,Union Nari Shakti8. Union Liqui propertyNote: Besidesabove, Union Rent product also falls in the domamof MSMEvertlcal.

All new credit products are introduced and changes in MSMECredit product! s are,made after it is vetted by Credit Risk Management Cell at RMDand risk concerns ' .

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MSMEPolicy 2017-18

with recommendation on risk mitigation mechanism are placed before Credit RiskManagementCommittee for approval.

Businessprocess changes, if any, in any MSMEcredit products administration areintroduced after vetting by Operational Risk Management Cell at RMD andrecommendation are to be placed before Operational RiskManagement Committeefor approval.

6.17 MOUwith External Credit Rating Agencies -

The external credit rating enables the MSMEsto compete with the market playerson global level. Similarly, it also helps banks to evaluate MSME'scredit proposalsin a better way. However, MSMEsin general are not very keen to get theirunits/accounts rated from the external credit rating agencies. In order to motivatethe MSMEs,National Small Industries Corporation (NSIC) is providing subsidytowards the payment of fees of the external credit rating agencies.

With a view to motivate MSE customers, Bank provides incentive by way ofconcessionin interest rate in case the unit is rated by an approved rating agency.

Rating ConcessionHighest Rating 0.50%pa2na Highest Rating 0.25%pa

Bank has approved and executed MOUs with SME rating Agency SMERA,CRISIL,CARE,'lcRAand ONICRAfor external creqit rating of the SMEs.

6.18 Channel Financing initiatives

Under channel financing Scheme, finance is extended to select suppliers andwholesale dealers of Bank's identified large corporate borrowers. Under theChannel FinanceScheme,Bankhas two Schemes:

6.18.1 Union Procure - Financing Pre-Production i.e. financing against receivables ofvendors for goodssupplied to reputed corporate.

6.18.2 Union Supply - Financing Post-Production i.e. Dealer Financing- Suppliesmade bycorporate to its authorized dealers.

The delegation for entering into a Memorandum of Understanding/Tie-up with areputed corporate for Channel finance will be same as enumerated in the Policy onDelegation of Loaning Powers. In case a special channel finance scheme for thevendors/dealers of any corporate is to be introduced, the same delegation as

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Annexure -I

MINISTRY OF SMALL SCALE INDUSTRIESNOTIFICATION

New Delhi, the 5th October, 2006

5.0. 1722(E) - In exercise of the powers conferred by sub-section (1) of 2006) hereinreferred to as the said Act, the Central Government specifies the following items, the costof which shall be excluded while calculating the investment in plant and machinery in thecase of the enterprises mentioned in Section 7(1)(a) of the said Act, namely:

i. Equipment such as tools, jigs, dyes, moulds and spare parts for maintenance andthe cost of consumables stores;

ii. Installation of plant and machinery;iii. Research and development equipment and pollution controlled equipmentiv. Power generation set and extra transformer installed by the enterprise as per

regulations of the State Electricity Board;v. Bank charges and service charges paid to the National Small Industries

Corporation or the State Small Industries Corporation;vi. Procurement or installation of cables, wiring, bus bars, electrical control panels

(not mounded on individual machines), oil circuit breakers or miniature circuitbreakers which are necessarily to be used for providing electrical power to theplant and machinery or for safety measures;

vii. Gas producers plants;viii. Transportation charges ( excluding sales-tax or value added tax and excise duty)

for indigenous machinery from the place of the manufacture to the site of theenterprise;

ix. Charges paid for technical know-how for erection of plant and machinery;x. Such storage tanks which store raw material and finished produces and are not

linked with the manufacturing process; andxi. Firefighting equipment.

2. While calculating the investment in plant and machinery refer to paragraph 1, theoriginal price thereof, irrespective of whether the plant and machinery are new or second.handed, shall be taken into account provided that in the case of imported machinery, thefollowing shall be included in calculating the value, namely;

i. Import duty (excluding miscellaneous expenses such as transportation from theport to the site of the factory, demurrage paid at the port);

ii. Shipping charges;iii. Customs clearance charges; andiv. Sales tax or value added tax.

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MSMEPolicy 2017-18

Annexure-II

Committees on flow of Credit to MSE sector (As per RBI Master Direction onlending to Micro Small & Medium Enterprises)

1.

1.1

1.2

1.3

i.ii.iii.

iv.v.vi.vii.viii.

1.4

2.

2.1

Report of the High Level Committee on Credit to SSI (now MSE) (KapurCommittee)

ReserveBank of India had appointed a one.man High Level Committee (June 30,1998) headed by Shri 5 L Kapur, (lAS, Retd.), Former Secretary, Government ofIndia, Ministry of Industry to suggestmeasures for improving the delivery systemand simplification of procedures for credit to 551sector.

The Committee made 126 recommendations covering wide range of areaspertaining to financing of 551sector.

These recommendations were examined by the RBI and accepted 88recommendations which include the following important recommendations:

Delegation of more powers to branch managersto grant ad-hoc limits;Simplification of application forms;Freedom to banks to decide their own norms for assessment of creditrequirements;Openingof more specialised 551branches;Enhancement in the limit for composite loans to Rs. 5 lakh. (since enhanced toRS.1crore);Banksto pay more attention to the backward states;Special programmesfor training branch managersfor appraising small projects;Banksto make customers grievance machinery more transparent and simplify theprocedures for handling complaints and monitoring thereof.

A circular was issued by RBIvide RPCD.No.PLNFS.BC.22106.02.31/98-99datedAugust 28, 1998 thereby advising implementation of the Kapur CommitteeRecommendations.

Report of the Committee to Examine the Adequacy of Institutional Credit to551Sector (now MSE)and Related Aspects (Nayak Committee)

The Committee was constituted by ReserveBankof India in December 1991underthe Chairmanship of Shri P. R. Nayak, the then Deputy Governor to examine theissues confronting S51s(now MSE) in the matter of obtaining finance. TheCommittee submitted its report in 1992. All the major recommendations of theCommittee have been accepted and the bankshave been inter-alia advised to:

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MSMEPolicy 2017-18

i. Give preference to village industries, tiny industries and other small scale units inthat order, while meeting the credit requirements of the small scale sector;

ii. Grant working capital credit limits to 551(now MSE)units computed on the basisof minimum 20% of their estimated annual turnover whose credit limit inindividual casesis upto RS.2crore [ since raised to RS.5crore 1;

iii. Ensurethat there should not be any delay in sanctioning and disbursal of credit.In case of rejection/curtailment of credit limit of the loan proposal, a referenceto higher authorities should be made;

iv. Not to insist on compulsory deposit as a .quid pro.quo' for sanctioning the credit;v. Open specialised 551(now MSE)bank branches or convert those branches which

have a fairly large number of 551(now MSE)borrowal accounts, into specialised551(nowMSE)branches;

vi. Standardiseloan application forms for 551(now MSE)borrowers; andvii. Impart training to staff working at specialised branches to bring about attitudinal

change in them.

2.2 A circular was issued by RBI vide RPCD.PLNFS/ Be. No. 61/06.0262/ 2000-01dated March 2, 2001 thereby advising implementation of the Nayak CommitteeRecommendations.

3. Report of the Working Group on Flow of Credit to SSI (Now MSE) Sector(Ganguly Committee)

3.1 A "Working Group on Flow of Credit to 551sector" was constituted under theChairmanship of Dr. A 5 Ganguly. The Committee made 31 recommendationscovering wide range of areas pertaining to financing of 551 sector. Therecommendations pertaining to RBI and banks have been examined and RBI hasaccepted 8 recommendations so far and communicated the following to banks forimplementation which are asunder:

i. Adoption of cluster basedapproach for financing MSMEsector;ii. Sponsoring specific projects as well as widely publicising successful working

models of NGOs by Lead Banks which service small and tiny industries andindividual entrepreneurs;

iii. Sanctioning of higher working capital limits by banks operating in the North Eastregion to SSls-(now MSE) , based on their commercial judgment dUe to thepeculiar situation of hilly terrain and frequent floods causing hindrance in thetransportation system;

iv. Exploring new instruments by banks for promoting rural industry and to improvethe flow of credit to rural artisans, rural industries and rural entrepreneurs.

4. Working Group on Rehabilitation of Sick SMEs (Chairman: Dr. K.C.Chakrabarty)

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4.1

ii.

4.2

5.

5.1

5.2

5.3

6.

6.1

6.2

- -------~

MSMEPolicy 2017-18

In the light of the recommendations of the Working Group on Rehabilitation ofSick MSEs(Chairman: Dr. K.C. Chakrabarty, the then CMDof Punjab NationalBank), following wasadvised by RBI:

To put in place loan policies governing extension of credit facilities,Restructuring/Rehabilitation policy for revival of potentially viable sickunits/ enterprises and non- discretionary One Time Settlement scheme forrecovery of non-performing loans for the MSEsector, with the approval of theBoardof Directors and

To implement the recommendations with regard to timely and adequate flow ofcredit to the MSEsector.

To consider implementation of the recommendations, inter alia, that lending incase of all advancesupto Rs2 crores may be done on the basis of scoring model.To undertake a review of the loan policy governing extension of credit facilitiesto the MSEsector, with a view to using Board approved credit scoring models inevaluation of the loan proposalsof MSEborrowers.Prime Minister's Task Force on Micro, Small and Medium Enterprises

A High Level Task Force was constituted by the Government of India (Chairman:Shri T KA Nain, in January 2010, to consider various issuesraised by Micro, Smalland Medium Enterprises (MSMEs).

The Task Force recommended several measures having a bearing on thefunctioning of MSMEs, viz., credit, marketing, labour, exit policy,infrastructure/technology/skill development and taxation. The comprehensivereqlmmendations cover measuresthat need immediate action as well asmediumterm institutional measures along with legal and regulatory structures andrecommendations for North-Eastern States and Jammu 8:Kashmir.

It was urged to keep in view the recommendations made by the Task Force andtake effective steps to increase the flow of credit to the MSEsector, particularlyto the micro enterprises.

Working Group to Review the Credit Guarantee Scheme for Micro and SmallEnterprises

A Working Group was constituted - by the Reserve Bank of India under theChairmanship of Shri V.K. Sharma, Executive Director, to review the working ofthe Credit Guarantee Scheme(CGS)of CGTMSEand suggestmeasures to enhanceits usageand facilitate increased flow of collateral free loans to MSEs.

The recommendations of the Working Group included, inter alia, mandatorydoubling of the limit for collateral free loans to micro and small enterprises(MSEs)sector from RS.5lakh to RS.10 lakh and enjoining upon the Chief Executive

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Officers of banks to strongly encourage the branch level functionaries to avail ofthe CGScover and making performance in this regard a criterion in the evaluationof their field staff, etc.

6.3 RBIhas advised not to accept collateral security in the case of loans upto Rs 10lakh extended to units in the MSE sector and strongly encourage branch levelfunctionaries to avail of the CGS cover, including making performance in thisregard a criterion in the evaluation of their field staff.

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MSMEPolicy 2017-18

Annexure III

STRUCTURE OF SARALs UNDER PROJECT UTKARSH - BROAD TERMS

SARAL

Details

Central Processing Cell (SARAL) to work independentlycompletely delinked from Credit Department of RO as acredit processing center for the Region. However, SARALwill remain an integral part of RO for administrativepurpose and reporting to the respective Regional Head. (Incase Regional Head is also AGM, the next higher authorityfor reporting by SARALwill be FGM.)

s. I ParticularsNo1 Name of the

CPC2 Structure of i.

CPC

ii. It shall be headed by AssistantGeneral Manager

3 Scopeof CPC i. All proposals (New/ enhancement/review/renewal) includingrestructuring/ modifications/ad-hoc thereof beyond BranchManagerDelegation in the Region.

ii. However, following proposals in isolation will be outside thescopeof SARAL:• Retail• Staff• SOD-FOR• All proposalsof above RS.100.00crs.(To be handled by RO)• Agriculture sector (Other than manufacture or productionor processingor preservation of goodsin following areas:- Food ft agro processingindustry- Construction and running of storage facilities

(Warehouse, Market Yards, Godowns and silos),including cold storage units.

- MFls- Seed Production, production of bio-pesticides, bio-

fertilizer and vermi-composting industry.)

4 BasicFunctions ofBranch

(processing of proposals emanating from IFBs and Mid'Corporate Branches will be as per Loan Policy of the Bank.)i. Generation of Leads/Canvassingof proposalsby branch.

ii. Compliance of KYCguidelines.

iii. Collection/Compilation of documents as per checklist.

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MSMEPolicy 2017-18

s.No

Particulars

BasicFunctions ofBranch

Details

iv. Branch to mandatorily provide acknowledgement to thecustomers on receipt of loan application Et list of documentsas per checklist.

v. Pre-sanction inspection as per Banks guidelines.

vi. Compilation of credit report/s as per Bank's guidelines bybranch.

vii. Due diligence other than financial diligence is to be done bythe branch.

viii. Branch to continue to initiate legal, valuation and otherthird party reports as per Bank's guidelines.

ix. Forwarding the proposals falling within the scope of SARALas per Point NO.3.

x. Documentation, creation of mortgages/charges, complianceof sanction terms, CPA, disbursement Et other creditadministration functions for all sanctions shall be done atBranch level.

xi. Collecting stock statements, updation of Drawing power andinsurance reminders shall be done at branch.

xii. Quarterly security inspection shall be done at branch.

xiii. All post - disbursement monitoring of proposals shall bedone at branch as per procedure laid by the extant Credit.Monitoring Policy.

xiv. In case of proposals within the scope of Branch/RO:

• Exercise of delegation of Branch head. as per Bank'sguidelines on delegated loaning power. (Proposals upto thedelegated authority of Branch Head not to be routedthrough SARAL.)

• The extant guidelines on Credit Evaluation Grid for sanctionwithin branch delegation to be complied.

• All proposals beyond Branch head delegation outside the

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MSMEPolicy 2017-18

S.No

5

Particu lars

BasicFunctions ofindependentCPC/SARAL

BasicFunctions ofindependentCPC/SARAL

Details

scope of SARALas defined in point No3 above will be routedthrough Credit Department at Regional Office

• Processing shall be done at branch level and sanction &modification thereof shall be accorded by branch head orhigher offices i.e. RLCCand above as per delegation vestedwith such delegatee.

i. Processing and sanction of all proposals as per scope ofSARALdefined under Point NO.3.

ii. If the proposal falls beyond SARALdelegation, the proposalshall be processed by SARALand thereafter submitted to therespective delegated authority (RLCC/ZLCClCO)for sanction;

iii. If the proposal falls wtthin the delegation of ZLCC, the sameshall be forwarded directly to FGMOfor decision with a copyto Regional Office for recommendation.

iv. If the piOposal falls within the delegation of CO, the sameshall be forwarded directly to CO for decision with a copy toFGMO& ROfor recommendation.

v. In such cases, RO/FGMO is required to submit theirrecommendations with qualitative comments without re-processing the proposal within 7 days of receipt from SARALto the respective sanctioning authority. If therecommendation/qualitative comments are not receivedwithin 7 days, it will be deemed that they concur withrecommendation of SARAL and non-submission ofrecommendation by them will not absolve them of theirresponsibility of forwarding their recommendation toFGMO/CO, as the case may be.

vi. Collection of documents:• Ensure collection of additional documents, if any.• Timeline may be mentioned by the branch for mlssmg

documents (Other than "Not applicable") as per theprescribed checklist.

• SARAL to commence the processing/ appraisal with theavailable documents in case timeline is upto 7 working days.Otherwise also, Chief Manager (Credit) may permitcommencement of processing with the documents madeavailable by the branch to ensure timely disposal ofproposal.

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MSMEPolicy 2017-18

S.No

67

Particulars

I

DelegationMarketingaspects

Details

• Duly filled checklist authenticated by Chief Manager (Credit)ft coordinator shall be kept in record. I

vii. Queries: SARAL should raise queries directly to thecustomer with a copy to the branch. Similarly, queries to beraised directly to the SARAL by the Higher Authority.Further, Chief Manager (Credit) has to vet the queries raisedon the proposal at SARAL.

viii. Financial Diligence: Financial diligence (Analysis offinancial/non-financial/ contingent liability aspects as perbalance sheet/CMA) is to be ensured by SARAL.

ix. Defaulter List: CIBIL report/Defaulter lists /CRILC /ECGCSAL List/Caution Advice /CERSAI verification will be anintegral part of processing at SARALalong with branch leveldue diligence.

x. Sanction Advice: Sanction letter is to be prepared by SARALand issued to the customer. A copy of the sanction letteralso to be sent to the branch. Soft copy of set of documentsto be executed by the customer shall be provided to thebranch by SARAL.However, branch will be responsible forcompleting the process of documentation. (Indudingvetting of documents) as per norms as well as receivingacknowledgement from the customer.

xi. In SARAL,Coordinator will be posted as a facilitator for theBranches.

As per Policy on Delegation of loaning powers of the Bank.Initially, SARALshall primarily act as a processing center andonce the same is stabilized, it will progress towards becomingthe center for acquisition as well in future.

Page 38 of 51

MSMEPolicy 2017-18

"

s.No8

Particulars

Otheraspects

,

Details

iii. Acknowledgement:, Computer generated acknowledgementand reference number to be provided to customers by branchafter receipt of minimum documents required from theapplicant.

iv. Rejection: The rejection of proposalls submitted at SARALshall be done in consultation with the Regional Head uptoRLCCslevel delegation and FGM for delegation of ZLCC &above.

v. Term sheet is to be prepared at SARALeven if the lead isgenerated by branch. (Otherwise falling within the scope ofSARAL)

vi. Performance Management: Weekly review to be done byRegional Head (In case of DGM Headed, Regions) andfortnightly review to be done by Field General Manager.

vii. Morning huddles: Morning huddles to be institutionalizedwherein performance of the previous day, action plan for theday for Chief Manager (Credit) / processing officer/coordinator/technical officer, debottlenecking issuesthroughrequisite escalation etc to be discussed.

The ownership of the sanctioned/disbursed accounts will continue to be with the Branchesand SARALwill work as an extended arm of Regional Office and facilitator for thebra,nchesin improving quality of advance aswell asTAT.

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Page 39 of 51

MSME Policy 2017-18

Annexure-IV

Approved Cluster Specific Schemes

Sr. No NAME OF THE CLUSTER SCHEME Applicability

1 Auto Ancillary 8: fasteners units in Rohtak RO, KARNAL

2 Auto Ancillary Units in Jamshedpur RO, RANCHI

3 Bayrite Pulverizing Units in Kaddapa RO, NELLORE

4 Fin. agst. paddy in open ware house managed by CMA RO, KARNAL

5 Fin. Auto Parts/Cycle Industry RO, LUDHIANA

6 Fin. For traders. CCHYP RO, INDORE

7 Fin. For traders. CCWHR RO, INDORE

8 Fin. to ArahatiyasfCommission agent agst. T /Deed. PAN INDIA

9 Fin. to Auto Ancillary Units RO, PUNE

Fin. to Auto Ancillary Units RO, NASIK

Fin. to Sugar Mills agst Pledge of Sugar with CMA RO, KOLHAPUR

10 Fin. to Sugar Mills agst Pledge of Sugar with CMA RO, NAGPUR

Fin. to Sugar Mills agst Pledge of Sugar with CMA RO, NASIK

Fin. to Sugar Mills agst Pledge of Sugar with CMA RO, PUNE

11 Fin. to Traders against WHR. PAN INDIA

12 Finandng Ceramic Vitrified Tiles in Rajkot RO, RAJKOT

13 Financing Footwear Manufacturer in Kozhikode RO, KOZHIKODE

14 Financing Granite units RO, HYDERABAD

15 Financing Leather units RO, CHENNAI

15 Financing Textile units. RO, COIMBATORE

16 Financing Timber Traders in Delhi RO, DELHI NORTH

Financing Timber Traders in Delhi RO, DELHI SOUTH

17 Financing to Autorickshaws RO, MUMBAI (SOUTH)

18 Financing to Iron 8: Steel traders RO, DELHI NORTH

Financing to Iron 8: Steel traders RO, DELHI SOUTH

19 Finandng to textile units RO, NASIK

20 Financing to textile units RO, SURAT

21 Financing to Textile Weaving units(Kancheepuram Sarees) RO, CHENNAI

Foot wear Units in UdyogNagar, DSIDC, Delhi RO, DELHI NORTH--r

22 Foot wear Units in UdyogNagar, DSIDC, Delhi RO, DELHI SOUTH

23 Foot wear Units in UdyogNagar, DSIDC, Delhi RO,KARNAL

24 Hosiery Units RO, LUDHIANA

25 Mining Activity 8: marble Units RO, JAIPUR

Mining Activity 8: marble Units RO, UDAIPUR

26 Plywood Cluster Units RO, ERNAKULAM

27 Printing 8: packaging units RO, CHANDIGARH

28 Scheme for Financing Powerlooms RO, KOLHAPUR

29 Scheme of Fin. Construction of Godown in Jaora RO, INDORE

30 Textile units in Bhilwara RO, UDAIPUR

31 Textile weaving, embroidery 8: preparatory units RO, BELGAUM

0.1 ' "'" 32 Textiles Units in Panipat RO, KARNAL

4-.>.I;~\I" .~~ 33 Timber traders RO, HYDERABAD>(:;1 t-~,\ I ~ \\ 34 Varanasi - Weaver Scheme PAN INDIA

;( ~.~~~&I ~g~ ~_tfll. %-~o ~""rvBA,N\\ Q /

Page 40 of 51

MSME Policy 2017-18

Annexure-V

Union Bankof India

APPLICATION FORM FOR MSMEs

To be submitted along with documents as 'per the checklist

(For Office Use)

1 NAME OF THEENTERPRISE

2 REGD. OFFICE ADDRESS:

3 ADDRESSOF FACTORY!SHOP:

4 PREMISESOWNED/RENTED!LEASED

Telephone No.(Office)Mobile No.

Email Address

5 CONSTITUTION:

6 UDYOG AADHAR NO!REGISTRATION NO

PAN Card No

Individual! Joint/Prop. Concern! Partnership firm! Pvt. Ltd! ltd.Company! Trust/ Other.;

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MSMEPolicy 2017-18

8 STATE

9 CITY I DISTRICT WHEREloAN IS REQUIRED

10 BRANCH WHERE lOAN ISREQUIRED, If Any

11 NAME OF THE PROPRIETORI PARTNERSI DIRECTORSOF COMPANY AND THEIR ADDRESSES:S. Name Date of Father I Academic Category SCIST 10BCI Mobile No.No Birth Spouse Qualifications MinoritylWomen

S. PAN No. Residential Aadhar No. I Telephone No. Experience inNo Address DIN No. (Residence) the line of

activity(Years)

I

12.ACTIVITY

13.

Existing since IProposed (#): ==========================================# If a different activity other than existing activity is proposed/New Unit

i. Whether the MSMEunit is ZED rated (YeslNo) ..................................•.............ii. If Yes,the gradation obtained by the MSMEunit (Tick appropriate one)

Bronze Silver Gold Diamond Platinum

14

Names of the Associate concerns and Nature of Association

Name of Addresses of Presently Nature of Extent of interest as a Prop.!Associate Associate Banking Association Partnerl Director or just investorConcerns Concerns with in Associate Concern

15. Relationship of Proprietorl Partnerl Director withthe officials of the Bank! Director of the Bank (YeslNo):

16. BANKINGI CREDIT FACILITIES (EXISTING):

Page 42 of 51

MSMEPolicy 2017-18

Type of Facilities Limit Outstanding Presently Securities Rate of Repayment(in lacs) as on •••••• banking with Interest terms

Current AccountCash CreditTerm LoanLCI BGOthersTotal I

If Banking with our Bank, Customer No. to be given here

It is certified that our unit hasnot availed any loan from any other Bankl Financial Institution in the past and I amnot indebted to any other Bankl Financial Institution other than those mentioned in column No. 16above.

17. CREDIT FACILITIES (PROPOSED):"

Type of Amount Purpose for SecurityFacilities (in lacs) which required Primary Security Whether Collateral Security

(Details with offered (Please mention yesapprox. Value to be or no) (If Yes, then providementioned) details in column 16 & 19)

Cash Credit"Term LoanLC/ BGOthersTotal, Mandatory Fields

•• Basis of Cash Credit Limit appliedCash Projectedcredit Sales Working Inventory Debtors Creditors Other . Promoters

cycle in current Contributionmonths assets

18. In case of term loan requirements, the details of machinery may be given as under:

Type of Purpose Whether Name Total cost of machine (in Contribution LoanMachine I for which imported of case of imported being made requiredEquipment required or supplier machine, the breakup of by the

indigenous basic cost, freight, promotersinsurance and customsduty may be given)

MSME Policy 2017-18

('As per RBI guidelines banks are not to take collateral security for loans upto RS.10 lakhs to MSEUnits)

a) Third party Guarantee:

S. Name of Father/Spouse Residential Telephone Mobile Net Aadhar PANNo Guarantor Name Address No. (Residence) No. Worth No. No.

(inlacs)

123

b) Other collateral Security:

S. Name of owner of Collateral SecurityNo Collateral Nature Details Value (Rs. In lacs)1.2.3.

20. PAST PERFORMANCE/ FUTURE ESTIMATES

(Actual performance for previous years, estimates for current year and projections for next year tobe provided for working capital facilities. However for term loan facilities projections to beprovided till the proposed year of repayment of loan):

past Year-II Past Year-I Present Year Next Year(Rs. in lacs) (Actual) (Actual) (Estimate) (Projection)Net SalesNet Profit .

Capital (Net worth in case of 1.,companies)

21. Status regarding Statutory Obligations:

Statutory Obligation: Remarks (Any details in Connection with the relevant obligation to be given)

Statutory Obligation

1. Registration under Shops andEstablishment Act

2. Registration under MSME(Provisional! Final)

3. Drug License

Whether Complied with (write Yes/ No). If Not Applicablethen write N.A.

Latest Sales tax return filed

Page 44 of 51

MSMEPolicy 2017-18

5. latest Income tax returns filed

6. Any other statutory dues

Iremaining outstanding

22. a) 10 Proof (Any of the following)

Passport/Voter Identity Card/Pan Card/Driving License/ Job Card/ Aadhaar Card/Identity Card(subject to the satisfaction of the bank)

ID Proof No .

b) Address Proof (Any of the following)

Electricity Bill/Telephone Bill/Bank Account statement of any other bank/letter from reputedemployer/ letter from recogQi;>:edpublic authority verifying the address of the customer tothe satisfaction of the Bank/Ration Card.

Page 45 of 51

MSME Policy 2017-18

Declaration

1/ We hereby certify that all information furnished by mel us is true, correct and complete that 1/We have no borrowing arrangements for the unit except as indicated in the application; that thereis no overdue/ statutory dues against me/us/promoters except as indicated in the application; thatno legal action has been/ is being taken/ initiated against me/us/promoters by any Bank/Fls. I/Weshall furnish all other information that may be required in connection with my/ our application thatthis may also be exchanged by you with any agency you may deemed fit and you, yourrepresentatives or Reserve Bank of India or any other agency as authorized by you, may, at anytime, inspect/verify my/our assets, books of accounts etc in our factory/ business premises asgiven above. You may take appropriate safeguards/action for recovery of Bank's dues includingpublication of defaulters name in website/submission to RBI; further agree that my/our loan shallbe governed by the rules of your Bank which may be in force from time to time.

SPACEFORPHOTO SPACEFORPHOTO SPACEFOR PHOTO SPACEFOR PHOTO

Space for Signature Space for Signature Space for Signature Space for Signature

SIGNATURESOf PROPRIETOR! PARTNER! DIRECTOR WHOSE PHOTO ISAFfiXED ABOVEOnly one photo of proprietor/ each partner/each working Director is required to be affixed.Each photo will be certified/ attested by the Branch Team with name and signatures on thephotograph with Branch stamp. The concerned staff will put his name below the signatures.To l>e sIgned at the designated l>ranch only

Documents attached:

l!We have attached the copies of the following supporting documents (put a ./ whereverapplicable)

oo

Proof of identity- Voter's 10 cardl Passport I driving licence/ PAN card I signatureidentification from present bankers of proprietor, partner or Director (if a company)

Proof of residence - Recent telephone bills, electricity bill, property tax receipt! passport/voter's 10 card of proprietor, partner or Director (if a company)

Proof of business adresss

Proof of Minority

MSMEregistration if applicable

Last three years' Balance Sheets of the units along with income taxI sales tax returns etc

Page 46 of 51

D

DDDD

Date:

Place:

MSMEPolicy 2017-18

(applicable for all cases from Rs. 2 lacs and above). However, for cases below fund basedlimit of Rs. 25 lacs if audited balance sheets are not available, then unaudited balancesheets are also acceptable as per extant instructions of the bank. For cases of Rs. 25 lacs andabove, the audited balance sheets are necessary.

Projected balance sheets for the next two years in case of working capital limits and for theperiod of the loan in case of term loan (for all cases of Rs. 2 lacs and above)

Passport size photograph/s of the applicantls

Application form

Credit information Form of concern/ promoter / guarantors, as applicable

Any other document as per checklist(Please specify)

Applicant's Signature

Page 47 of 51

MSMEPolicy 2017-18

CHECKLIST(For Loan upto RS.2.00 crore)

1. Proof of Identity- Voter's 10 card! Passport! Driving License! PAN card! signatureidentification from present bankers of proprietor, partner or Director (if a company)

2. Proof of residence' Recent telephone bills, electricity bill, property tax receipt! passport!voter's 10 card of proprietor, partner or Director (if a company)

3. Proof of business address4. Applicant should not be defaulter in any Bank! FI.5. Last three years balance sheets of the units along with income tax! sales tax returns etc.

(Applicable for all cases from Rs. 2 lacs and above). However, for cases below fund basedlimit of Rs. 25 lacs, if audited balance sheets are not available, then unaudited balancesheets are also acceptable as per extant instructions of the bank.

6. Memorandum and articles of association of the Company! Partnership Deed of partners etc7. Assets and liabilities statement of promoters and guarantors along with latest income tax

returns.8. Rent Agreement (if business premises on rent) and clearance from pollution control board, if

applicable.9. SSI!MSMEregistration, if applicable.10. Projected balance sheets for the next two years in case of working capital limits and for the

period of the loan in case of term loan (for all cases of Rs. 2 lacs and above).11. In case of takeover of advances, sanction letters of facilities being availed from existing

bankers! Financial Institutions along with detailed ~erms and conditions.12. Photocopies of lease deeds! title deeds of all properties being offered as primary and

collateral securities.13. Position of accounts from the existing bankers and confirmation about the asset being

Standard with them (in case of takeover).14. Copy of VATreturn, if applicable

For cases with Exposure above RS.25.00Lacs

15. The Audited Balance Sheets are necessary for limit of RS.25Lacs and above.16. Profile of the unit (includes name of promoters, other directors in the company, the activity

being undertaken, addresses of all offices and plants, shareholding pattern etc.17. Last three years balance sheets of the Associate! Group Companies (if any)18. Project Report (for the proposed project if term funding is required) containing details of

the machinery to be acquired, from whom to be acquired, price, names of suppliers,financial details like capacity of machines, capacity utilization assumed, production, sales,projected profit and loss and balance sheets for the next 7 to 8 years till the proposed loanis to be paid, the details of labour, staff to be hired, basis of assumption of such financialdetails etc.

19. Review of account containing month'wise sales (quantity and value both), production(quantity and value), imported raw material (quantity and value), indigenous raw material(quantity and value), value of stocks in progress, finished goods (quantity and value),debtors, creditors, bank's outstanding for working capital limits, term loan limits, billsdiscounted.

20. Manufacturing process, if applicable, major profile of executives in the company, any tie.ups, details about raw material used and their suppliers, details about the buyers, details

~-~~~~" about major-competitors and the company's strength and weaknesses as compared to theirs>:;:l '" 9';), ~ competitors etc.,~ 1- ?~ \\

~ :%~""-~'co <!< A '8' 01~ '1> -~ '!"I'1" ,r... jij'

0", '$rINDiA ~ Page 48 of 51

MSMEPolicy 2017-18

(The check list is only indicative and not exhaustive and depending upon the localrequirements at different places addition could be made as per (necessity).

Data f information at Point NO.17, 18, 19 may be sought from unit requesting limit of RS.50.00Lacs~,above.~~o/'~\::;> *' <;. "

.~ ~ '" ~c\\

~~ !%"'''' ~ ~ 01.11~ '" '" <N I'~ .~ '?"" i;JJ/,i't:.. .;!t I

~~~

Page 49 of 51

MSMEPolicy 2017-18

Annexure-VI

UNION BANK OF INDIA_____ Branch

Applicant Inward No. _

ACKNOWLEDGEMENT

Received from Mr. / Ms. application dated forRs. under Financing to Micro & Small Enterprises (MSEs).

_____ * provided yourby the documen~s as per

The application will be disposed off on or beforeapplication is complete in all respects and is accompanied'check list' provided.

Additional details/ requirements to be submitted:

1)

2)

3)

Date: Signature of Branch Managerwith seal

Place:

Page 50 of 51

MSMEPolicy 2017-18

REFERENCES:

1. MSMEPolicy 2016-17 (IC No.739-2017 dated 19.01.2017)

2. Modification in Delegation of Loaning Powers (Ie no. 927-2017 dated 02.08.2017)

3. RBIMaster Direction - Lending to Micro, Small ft Medium Enterprises vide RBI 1 FIDD 12017-2018/56 Master Direction FIDD.MSMEft NFS.12106.02.3112017-18 dated 24.07.2017(www.rbi-org.in)

4. IC nO.746-2017 dated 25.01.2017

5. IC no.776-2017 dated 23.02.2017

6. IC nO.777-2017 dated 23.02.2017

7. IC nO.510 dated 13.07.2016

8. IC nO.612-2016 dated 20.02.2016

9. IC nO.646-2016 dated 11.11.2016

10.IC nO.846-2017 dated 08.05.2017

11.IC nO.774-2017 dated 22.02.2017

12.Government Resolution nO.6/5/2015-TUFS dated 13.01.2016~. .~(,Qttp:1 Iwww.txcindia.gov.in/html/GuidelinesofATUFS.pdf)t:.:~-q<1q,- ~~Ii; "(>q1}:~t )c ~ ;;;r'S fi),~(», " £j I

.:J ;;}. -'/1J V. I

~~-1~--:::',,"~ .~~ .

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