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I. Lending Policy for MSME:

 

i) Bank shall plan to achieve a minimum credit growth of 20% under MSME sector during 2009-2010.

 

ii) The genuine credit needs of the MSME sector shall be met with.

 

iii) As far as possible the requirements of MSME client for term loan as well as working capital limits shall be taken care so as to avoid inconvenience to such borrowers.

 

iv) The working capital assessment to MSME clients shall be made under Turnover Method up to a limit of Rs 5.00 crores wherein 20% of the projected turnover will be the eligibility for Bank finance and 5% of the turnover be the margin of the borrower.

 

v) While considering term loans up to Rs 2.00 crores to such entities debt equity ratio up to 5:1 may be considered as against the normal debt equity ratio of 3:1 suggested in the case of others. Similarly the acceptable level of TOL to TNW will be 7:1 in such cases as against the ratio of 5:1 suggested in other cases.

 

vi As far as possible drawing be allowed by margin on stock and book debts with out insisting for separate sub limit to debtors.

 

vii) As far as possible the temporary short term requirements of MSME borrowers shall be met expeditiously.

 

 

viii) Bank will not insist for collateral security for loans up to Rs 5.00 lakhs for this sector.

 

ix) All eligible loans to MSME sector shall be covered under the credit guarantee scheme of Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE)

 

 

II. Restructuring/rehabilitation policy for MSME:

 

 

A. OBJECTIVES

 

A.1 The objective of the DRS for MSMEs is to ensure timely and transparent mechanism for restructuring the debts of potentially viable entities facing problems for the benefit of all concerned. In particular, the framework will aim at preserving viable MSMEs that are affected by certain internal and external factors and minimize the losses to the creditors and other stakeholders through an orderly and coordinated restructuring programme.

 

B. ELIGIBILITY CRITERIA OF CASES UNDER MSME-DEBT RESTRUCTURING SCHEME (DRS)

 

B.1 Eligibility criteria: The Debt Restructuring guidelines shall be applicable for MSMEs to the following entities, which are viable or potentially viable:

 

B.1.1 All non-corporate MSMEs irrespective of the total exposure to the banking sector.

 

B.1.2 All corporate MSMEs solely banking with us.

 

B.1.3 All corporate MSMEs, which have funded and non-funded outstanding up to Rs.10 crore under multiple/ consortium banking arrangement.

 

 

C. CASES, WHICH CANNOT BE CONSIDERED UNDER MSME-DRS

 

C.1 Accounts classified as "Loss Assets".

 

C.2 Accounts involving fraud or where diversion of funds with malafide intension has been observed.

 

C.3 In the case of accounts referred to BIFR, the proposal of restructuring shall be approved by BIFR and any condition stipulated by BIFR should be complied with before implementation of the package.

 

C.4 Accounts identified as wilful defaulters will not generally be considered for restructuring. However, in exceptional cases such restructuring may be done by the Board of Directors only.

 

 

D. TIME FRAME FOR APPROVAL OF PROPOSALS UNDER MSME-DRS

 

As per the Code of Banks Commitment To Micro and Small Enterprises restructuring package is to be implemented within 60 days from the date of receipt of request, the following time frame has been stipulated for this purpose.

 

Steps to be taken

Time to be taken

        Forwarding of the Restructuring package By Branch to the sanctioning authority (RO) with branch views / recommendations (in cases falling under RO powers.

        By RO to HO with RO views / recommendations (in cases falling under HO powers.

 

20 days

 

(i) Viability study,

(ii) Joint meeting with other banks (in case of multiple banking / consortium accounts

(iii) Sanction of the restructuring package

 

25 days

Implementation of the restructuring package

15 days

 

E. REJECTION OF CASES UNDER MSME-DRS

 

E.1 If the restructuring is not found viable recovery steps should be pursued.

 

F. STAGES AT WHICH PROPOSALS UNDER MSME-DRS CAN BE CONSIDERED

 

Any account irrespective of present status of irregularity can be considered for restructuring provided it meets the viability criteria as set under para G below. However, if a NPA account is restructured it shall be upgraded only after completion of satisfactory performance for one year.

 

G. VIABILITY CRITERIA FOR MSME-DRS

 

The following viability criteria are prescribed.

 

PARTICULARS

VIABILITY NORMS FOR MSME-DRS

Minimum Average DSCR

1.25

Maximum Period within which the unit should become viable

7 years

Maximum Repayment period of the restructured debt

12 years

Minimum Promoters' Contribution

(of which at least 50% must come upfront and balance within 6 months)

 

Micro sector -10%

All other sectors - 20%

 

 

 

It shall also be ensured that the ceiling of 30% of term loans for loans with residual maturity of more than 7 years prescribed in the Loan Policy is complied with.

 

The relief and concessions may be decided as per the cash flow anticipated in the techno-economic viability report.

 

 

H. PROCEDURE

 

The borrowers intending to avail the benefits of restructuring under DRM for MSMEs shall approach the branch with the following papers:

 

a) Request for restructuring of debts.

 

b) Copies of the audited balance sheet and profit and loss account of the borrower for the last three years.

 

c) Unaudited data for the current year.

 

d) For projects under implementation, details of sources and uses of funds since inception.

 

e) Projected Profitability statement covering the period of repayment proposed for the restructured debt along with the calculation of DSCR.

 

f) Projected Balance sheet and Profit and Loss account covering the period of repayment proposed for the restructured debt.

 

g) Techno-economic viability study report to be obtained for exposure of Rs.10.00 crore and above.

 

h) Statement showing identification of the sources of margin money

 

i) Statement showing the annual working capital requirement.

 

I. LEGAL BASIS:

 

While considering restructuring of accounts under MSME sector exchange letters duly signed by borrower/s, co-obligant/s, surety/ies shall be obtained in the cases where there is only simple change in repayment schedule. If the restructuring involves modification of terms of original loan documents beyond simple change in repayment schedule, then revised documents shall be obtained in addition to exchange letters.

 

J. AUTHORITY FOR CONSIDERING DRS:

 

J.1 All restructuring of wilful default cases shall be considered by the Board of Directors only.

 

J.2 If no sacrifice and additional funding required and if the residual maturity of loan after restructuring does not exceeds 7 years: Authority under whose sanctioning power the limit falls.

J.3 Where sacrifice and /or additional funding required/ residual maturity of loan after restructuring exceeds 7 years: One level higher than the Authority under whose delegated power the limit falls up to the level of Chairman. Chairman can consider restructuring of the credit limits granted under his delegated power. He is also authorized to consider restructuring of accounts sanctioned by EC/Board. In such cases he is also empowered to grant additional limits required if any. Such sanctions shall be reported to EC/Board.

 

J.4 Any restructuring /rephasing of loans of Rs 20.00 crores and above for residual maturity period after restructuring of above 7 years shall be referred to ALCO for clearance from ALM angle.

 

 

 



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