Useful for JAIIB students inPPB

1. A R Mankodi
Faculty- NIIT IFBI
Guest Faculty- JAIIB-CAIIB
GLS University
AHD University
URICM(PGDBM-HDCM)
Director- Karnavati Coop Bank
Ex CEO- Guj State Coop Union
Ex DGM- A D C Bank
AMCO Bank
Secretary-Ahmedabad Bankers Club
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Micro, Small and Medium Enterprises

2. Understand MSME
• Low capital
• Functioning on one or two persons
• Exposure to international environment low
• Less competitive in WTO
• Low research and development capability
• Low on professionalism
This require Government support

3. Need
• In five year plan economy from 51 special attention is given
on small and medium scale industries
• In 1991 policy for small, tiny village enterprise was focused
• In 1991 focus was also on sector development
• In 2000 focus was on improvement in infrastructure,
technology and marketing
• In 2006 MSME Act was passed
• 2007 a special package was announced for MSME
• This is socio-economic model emphasis on domestic
production, more export, high technology and employment
oriented policies followed by planner and GOI

4. OBJECTS
• Encourage domestic production by contribution
• Export earning
• Low investment requirement
• Operational flexibility
• Indigenous technology
• Import substitute
• Technology oriented industries
• Competitiveness with domestic and export
market

5. MSMED Act 2006 (Effective 2 oct.06)
• “Industries” of previous act was replaced with
“Enterprise” and classified in M,S & M
• Enterprise further classified as manufacturing and
Service
• Enterprise defined as industrial undertaking, or
business concern or establishment or industry
specified in schedule industrial Act 51
• OR engaged in providing or rendering of any
service or services.
• Now MSME include both manufacturing and
service sector

6. MSMED ACT 2006
• Provide following support
(1) Consultative mechanism at national level
(2) Establishes fund for development of MSME
(3) Progressive credit policy
(4) Resolution of payment services to MSME
(5) Easy closure of business by such enterprise
(6) Removal of 24% ceiling on prescription of capital
holding by domestic and foreign
(7) Coupled with Limited Liability Partnership

7. Enterprise Manufacturing Service
Micro
Plant and Machinery
investment >25 Lakh
Equipment Less than 10
Lakh
Small
More than 25 Lakh
Less than 1 Cr (Sel.)
or 5 CR
More than 10 Lakh
Less than 2 Cr
Medium
More than 5 Cr
Less than 10 Cr
More than 2 Cr
Less than 5 Cr

8. Credit Policy
• Credit to MSME by public and private sector bank
,40% of NBC and 32 % of NBC by foreign banks
should go to priority sector
• Out of above 40% to small and micro Ent.
• 40% of above to manufacturing for P & M up to
10 Lakh and in Service micro up to 4 Lakh
• 20% of above to above 10 Lakh up to 25 Lakh P &
M for manufacturing and above 4 Lakh up to 10
Lakh
• For foreign banks less than 20 branches no such
specification

9. Credit Policy
• SIDBI will be principle financial institute for direct credit,
development and support,
and refinance
• Commercial banks will finance WC and TL both
• States can have such institutes
• Double credit growth to MSME in five years and banks to
achieve 20% growth yearly
• Banks to support minimum five new cases in rural and
semi urban area by each such branch.
• Alternative source like factoring ECB, both Equity,
Venture capital, securities market will be available to
MSME

10. Limited Liability Partnership
(9-1-2009)
• Mixture of partnership act and corporate act
• Provide limited liability to some a or all partners
• In LLP one partner is not liable for another
partners misconduct or negligence like share
holder of a corporate
• Provisions of Indian Partnership Act 32 not
applicable but regulated by contractual
agreement between partners. If no LLP
agreement than governed by provisions of
schedule I of LLP Act
• Word “LLP” to be used in name

11. Credit Guarantee Scheme
• To overcome obligation of providing collateral
and third party guarantee a Credit Guarantee
Fund Trust by GOI with SIDBI(CGFTMSE) on 4:1
sharing.
• By end of 11 th plan cover will be from 2500 Cr
corpus.
• Guarantee fee is prescribed.
• Lender should evaluate project on viability basis
and take assets financed as security.
• Trust would make good the losses of lender up to
50% of credit facility.

12. Credit Guarantee Scheme
• From 17-12-13 lender ,if lends for more than
4% ROI over base rate will not get cover.
Category Cover of credit guarantee for credit issue of
Micro
Up to 5 Lakh <5 and <50 Lakh <50 and >1 Cr
85% maximum 4.25
Lakh
75% maximum 37.5
Lakh
50% maximum 50
Lakh
Women/North-East 80% to maximum 40 Lakh
50% maximum 50
Lakh
All other
75 % maximum 37.50 Lakh 50% maximum 50
Lakh

13. Credit Linked Capital Subsidy Scheme
• Those who are granted credit are eligible.
• First launched in oct. 2000 revised 29-9-2005
• Revised scheme provide for technology up
gradation by 15% or maximum 15 Lakh
subsidy to micro and small enterprises
purchase of P & M for credit up to 1 Cr.
• Presently 48 such sectors are approved
• For this 11 nodal banks/agencies like SIDBI
NABARD and some others are covered.