Policy of the Bank

Policy pertaining to MSME advances 2015-16 of 10

Updated / Amended Policy Pertaining to MSME Advances

A Definition of Micro Small and Medium Enterprises (MSMEs)

Manufacturing Enterprises: Enterprises engaged in the manufacture or

production, processing, or preservation of goods.

Service Enterprises: Enterprises engaged in providing or rendering of

services.

The MSME segment in terms of MSMED Act, 2006 is broadly classified as

under:

Enterprises Original Investment in

P&M of Manufacturing

Original investment in

equipment of Service

Micro Upto ₹ 25.00 lacs Upto ₹ 10.00 lacs

Small Above ₹ 25.00 lacs and

upto ₹ 5.00 crore

Above ₹ 10.00 lacs and

upto ₹ 2.00 crore

Medium Above ₹ 5.00 crore and

upto ₹ 10 crore

Above ₹ 2.00 crore and

upto ₹ 5 crore

In case of Manufacturing enterprises the calculations of original cost of

investment in Plant and Machinery shall be as specified by the Ministry

of Small Scale Industries vide its notification No. S.O. 1722(E) dated

October 5, 2006.

Land and Building would not be included while computing the

machinery/equipments cost.

In case of Service Enterprises, the original cost of investment in

equipment exclude furniture, fittings and other items not directly related

to the services rendered.

B Priority Sector Classification of Micro, Small and Medium Enterprises

Bank Loans to Micro, Small and Medium Enterprises, both Manufacturing and

Service are eligible to be classified under Priority Sector advance as per the

following conditions:

Manufacturing Enterprises

The Micro, Small and Medium enterprises engaged in the manufacture or

production of goods to any industry specified in the first schedule to the

Industries (Development and Regulation) Act, 1951 and as notified by the

Government from time to time. The manufacturing enterprises are defined in

terms of investment in plant and machinery.

Service Enterprises

Bank loans up to ₹ 5 Crore per unit to Micro & Small Enterprises and ₹ 10


crore to Medium Enterprises engaged in providing or rendering of services

and defined in terms of investment in equipment under MSMED Act, 2006.

Khadi and Village Industries Sector (KVI)

All loans to units in the KVI sector will be eligible for classification under the

sub-target of 7 percent / 7.5 percent prescribed for Micro enterprises under

priority sector.

General Credit Cards

GCC guidelines has been revised by RBI vide their circular no.

RPCD.MSME&NFS.BC.No.61 /06.02.31/2013-14 dated 02.12.2013. As per

revised guidelines all non-farm entrepreneurial credit extended to individuals,

which is eligible for classification under the priority sector guidelines are now

covered under GCC.

Other Finance to Micro, Small and Medium Enterprises

i. Loans to entities involved in assisting the decentralized sector in the supply

of inputs to and marketing of outputs of artisans, village and cottage

industries.

ii. Loans to co-operatives of producers in the decentralized sector viz. artisans

village and cottage industries.

iii. Loans sanctioned by banks to MFIs for on-lending to MSME sector as per

the conditions specified.

iv. Outstanding deposits with SIDBI on account of priority sector shortfall.

To ensure that MSMEs do not remain small and medium units merely to

remain eligible for priority sector status, the MSME units will continue to enjoy

the priority sector lending status up to three years after they grow out of the

MSME category concerned.

C Targets and sub targets to MSME Sector

Bank loans above ₹ 5 crore per borrower / unit to Micro and Small

Enterprises and ₹ 10 crore to Medium Enterprises engaged in providing

or rendering of services and defined in terms of investment in

equipment under MSMED Act, 2006, shall not be reckoned in computing

achievement under the overall Priority Sector targets as above.

However, bank loans above ₹ 5 crore per borrower / unit to Micro and

Small Enterprises would be taken into account while assessing the

performance of the banks with regard to their achievement of targets

prescribed by the Prime Minister’s Task Force on MSMEs for lending to

MSE sector.

In terms of the recommendations of the Prime Minister’s Task Force on


MSMEs, the targets allocated to Banks on credit to MSEs are as under:

I. 20% Y-o-Y growth in credit to Micro and Small Enterprises (MSE).

II. 10% Annual growth in the number of Micro Enterprises Accounts.

III. 60% of total lending to MSE sector as on preceding March 31st to Micro

Enterprises.

Sub-targets of 7.5 percent of ANBC or Credit Equivalent Amount of Off-

Balance sheet Exposure, whichever is higher, for lending to Micro Enterprises

to be achieve in a phased manner i.e. 7 percent by March 2016 and 7.5 percent

by March 2017.

D Common Guidelines / Instructions for Lending to MSME Sector

1. Loan Application

The IBA vide circular no. SB/Cir/MSME/7390 dated 28.06.2013 has revised loan

application for adoption by all member Banks for loan application upto ₹ 100

lacs to MSE sector. The revised MSME loan Application form for loans up to ₹

100 lacs and for the loans above ₹ 100 lacs has been circulated vide our

Circular No. HO: RD &PS:43: 2013-14:609 dated 26.09.2013.

2. Issue of Acknowledgement of Loan Applications

Each branch will issue an acknowledgement for loan applications received

from the borrowers towards financing under this sector and maintain the

record of the same.

3. Collateral free loans for Micro and Small Enterprises

Bank may extend collateral-free loans upto ₹ 10 Lac to all units of the micro

and small enterprises (both manufacturing and service enterprises) defined

under MSMED Act, 2006. Bank can also take cover for collateral free credit

facilities under Credit Guarantee Scheme (CGS) of Credit Guarantee Fund

Trust for Micro and Small Enterprises.

Bank has waived the condition of obtaining collateral security for credit limits

up to ₹.100.00 Lac sanctioned to Micro & Small Enterprises & covers the same

under CGTSME Scheme.

4. Specialised MSME Branches and Branches in MSME Cluster

The specialised MSME branches in identified cluster/ a center is established

to enable the entrepreneur to have easy access to the Bank credit and to

equip bank personnel to develop expertise.

The Bank has 16 specialised MSME branches (Annexure I) and 52 Branches in

the cluster (Annexure II) identified by Ministry of MSME.

The 60 clusters have been identified by MoMSME for focused development of

MSE sector.

As per RBI circular dated 01.07.2015 “Public sector banks have been advised

SLPS2015071_ANNEX1.PDF

SLPS2015071_ANNEX2.PDF


to open at least one specialised branch in each district. Further, banks have

been permitted to categorise their general banking branches having 60% or

more of their advances to MSME sector as specialised MSME branches in

order to encourage them to open more specialised MSME branches for

providing better service to this sector as a whole”.

5. Structured Mechanism for monitoring the credit growth to the MSE sector

To make system of monitoring, at all stages and levels, more effective & to

step up credit flow to the sector RBI has advised to implement the following

recommendations:

• Strengthen their existing systems of monitoring credit growth to the sector

and put in place a system driven comprehensive performance management

information system (MIS) at every supervisory level should be critically

evaluated on a regular basis;

• Put in place a system of e-tracking of MSE loan applications and monitor the

loan application disposal process in banks.

• Monitor timely rehabilitation of sick MSE units.

The guidelines has been circulated vide our circular no. HO: RD &PS:37: 2013-

14:541 dated 02.09.2013.

6. Disposal of Applications

The revised time frame for disposal of loan applications of MSE borrowers in

line with BCSBI-Code of Bank’s Commitment to Micro and Small Enterprises

(MSE) are as under:

Size of Limit Time norms for disposal

Loans upto ₹ 5 Lacs Within two weeks of receipt of loan application

provided it is complete in all respects and duly

accompanied by a check list.

Loans above ₹ 5 Lacs and

upto ₹ 25 Lacs

Within three weeks of receipt of duly completed

loan application provided it is complete in all

respects and duly accompanied by a check list.

Loans above ₹ 25 Lacs Within six weeks of receipt of duly completed

loan application provided it is complete in all

respects and duly accompanied by a check list.

7. Processing fee and Upfront Fee for MSE borrower

The processing fee (including upfront fee and processing fee for review of

term loan) is not to be charged in case of fresh /enhancement /renewal

/adhoc/short review for credit limits (including Fund Based and Non Fund

based) upto ₹ 5 Lacs to MSE borrowers.

The schedule of service charges for credit facility above ₹ 5.00 lacs has been

circulated vide Circular No. HO/RMD/17/2014-15/ 177 dated 06.06.2014.


8. MSME Credit Proposal Tracking System

The guidelines on online submission and online tracking of MSME application

has been circulated vide our circular no. HO: RD &PS:37: 2013-14:541 dated

02.09.2013.

Branches to ensure that all MSME applications received physically with

required documents are entered in online MSME loan at OBC website

(www.obcindia.co.in).

The online application shall generate an acknowledgement of the application,

having a unique application serial number which can be used for tracking of

application.

The Branch user shall regularly update the status of the application online, so

that applicant can track the current status of its application online and

application should be disposed within the stipulated time as per Bank norms.

9. Rejection of Loan Proposals

The loan applications pertaining to MSME cannot be rejected by the

sanctioning authority under whose powers the same fall. Only the next higher

sanctioning authority can reject the same. Branch Managers may reject

applications in such cases provided these are verified subsequently by the

Regional Heads.

Proposal Receipt and disposal register be maintained and Rejection of

proposals be duly recorded in the said register with reasons thereof and the

reasons for rejection be assigned /communicated to the applicants. The

information on rejection of loan proposals shall be put up on home page of

OBC Web through a link “Rejected Loan Proposals” along with reason

thereof, which will ensure that such cases do not erroneously get sanctioned

at some other Branches/Regional Offices or at Head Office.

10. CGTMSE Coverage

Credit Guarantee Fund Trust for Micro & Small Enterprises (CGTMSE) set up

by Govt. of India and SIDBI with the objective of motivating banks to provide

collateral free loans to Micro Small Enterprises units. Under the Credit

Guarantee Scheme of CGTMSE, credit limits aggregating upto ₹ 100.00 Lacs


sanctioned to Micro & Small Enterprises without collateral security/third party

guarantee are eligible for coverage.

The Guarantee coverage under CGTMSE is as under:

Category Maximum Extent of Guarantee

Up to ₹ 5.00

Lacs

Above ₹ 5.00

Lacs up to ₹

50.00 Lacs

Above ₹ 50.00 Lacs

up to ₹ 100 Lacs

Micro Enterprise 85% of the

amount in

default subject

to maximum

₹ 4.25 Lacs

75% of the

amount in

default subject

to maximum ₹

37.50 Lacs

₹ 37.50 lacs plus

50% of amount in

default above ₹ 50

lacs subject to

overall ceiling of ₹

50 lacs.

Women Ent/ Units

located in N-E

Region (incl.

Sikkim) (Other

than credit facility

up to Rs 5 Lacs to

Micro Ent)

80% of the amount in default

subject to a maximum of ` 40 Lacs

₹ 40 lacs plus 50%

of amount in


lacs subject to


50 lacs.

All Other Category

of borrowers

75% of the amount in default

subject to maximum of ` 37.50

lacs

₹ 37.50 lacs plus

50% of amount in


lacs subject to


50 lacs.

For cases sanctioned on or after 01.01.2013 the Fees structure is as under:

Credit Facility

Annual Guarantee Fee (AGF) (% p.a.)

Women, Micro Enterprises and units in

North East Region (incl. Sikkim) Others

Upto ₹ 5 lacs 0.75* 1.00*

Above ₹ 5 lacs-

₹100 lacs 0.85* 1.00*

*% of credit Facility Sanctioned to be paid upfront to the trust within period as

specified by the trust.

The Board of Directors vide Board Resolution No.PS-9 dated 23.06.2009

approved that Bank shall bear entire cost of fees upto ₹ 5.00 lacs by debiting

Charges General – Commission Paid.

The guidelines for timely lodging of claim has been circulated vide our

circular no. HO:RD &PS:63:2013-14:952 dated 16.01.2014 and regular follow-


up shall be done for early settlement of claim with Trust.

11. Differential Rate of Interest for Micro and Small Enterprises (MSEs) under

Credit Guarantee Scheme of CGTMSE

RBI vide circular no. vide circular no. RBI/2013-14/ 564 / DBOD .Dir .BC .No

.106/13.03.00/2013-14 dated 15.04.2014 has advised that while pricing the

loans to MSE borrowers, banks should take into account the incentives

available in form of the credit guarantee cover of CGTMSE.

Accordingly the CRMC, in its 99th meeting vide agenda item no. 10 dated

10.05.2014 has approved the differential rate of interest for MSEs covered

under CGS of CGTMSE. The revised rate of interest is as under subject to

change from time to time:

Parameters Internal credit

Risk Rating

Grade

Revised rate of Interest for

MSEs covered under CGS of

CGTMSE

Spread over Base Rate

Upto ₹ 50000 For all grades

BR Above ₹ 50000 to ₹ 2.00

lacs For all grades

Above ₹ 2.00 lacs to ₹

25.00 lacs For all grades BR+1.00

Above ₹ 25.00 lacs to ₹

1.00 cr 1 BR+0.50

2 BR+1.00

3 BR+1.50

4 BR+2.00

5 BR+2.50

6& Below BR+3.00

12. Code of Bank's Commitment to Micro and Small Enterprises (MSE Code)

The Banking Codes and Standards Board of India (BCSBI) has released the

Code of Bank's Commitment to Micro and Small Enterprises (MSE Code). This

is a code reflecting the bank’s positive commitment to its MSE customers to

provide easy, speedy and transparent access to banking services in their day

to day operations and in times of financial difficulties. The code is not only a

charter of Rights of the MSEs, but also enshrines their obligations vis-à-vis

their banks.

Some of the important commitments are:


A. Making available, free of cost, a copy of the Code to all MSE customers and

a standardized Loan Application Form with a check list indicating all that is

required to be submitted with the application.

B. Setting categorical time frames for disposal of credit application, disbursal

of loan sanctioned, effecting pledges/deliveries, increasing drawing power,

assessing viability and working out a rehabilitation package, etc.

C. Providing information about interest rates, fees and charges upfront so that

the MSE can make a meaningful comparison with those of other banks and

take an informed decision.

D. Placing the Bank’s policy relating to MSEs in public domain and

E. Endeavoring to provide facilities to a Single Window Mechanism and Credit

counseling services.

As per directions of the BCSBI, the MSE Code has been placed on Bank's

website and copy of the MSE Code is also available at Branches for Micro and

Small Enterprises customer.

13. Rehabilitation of Sick Micro and Small Enterprises

Based on the recommendation of the Committee set up by MoMSME, revised

guidelines for rehabilitation of sick units in the MSE sector have been

circulated vide our circular no. HO: RD &PS:57: 2012-13:652 dated 29.11.2012.

As per the new guidelines, MSE unit (as defined in the MSMED Act 2006) said

to have become Sick, if (a) any of the borrowal account of the enterprise

remains NPA for three months or more OR (b) there is erosion in the net worth

due to accumulated losses to the extent of 50% of its net worth during the

previous accounting year.

The revised guidelines also provide the procedures to be adopted by the

banks before declaring any unit as unviable. Bank has been advised that the

decision on viability of the unit should be taken at the earliest but not later

than 3 months of becoming sick under any circumstances and the

rehabilitation package should be fully implemented within six months from the

date the unit is declared as 'potentially viable' / 'viable'.

14. Debt Restructuring Mechanism for MSME

As per directives/ guidelines from Reserve Bank of India and Govt. of India,

the Debt Restructuring Scheme (DRS) for Small and Medium Enterprises has

been revised and approved by the Board vide B.R. No. PS-48 dated 30.01.2012.

The revised guidelines for debt restructuring scheme for small and medium

enterprises (SMES) has been circulated vide our circular No. HO: RD &PS:68 :

2011-12:775 dated 31.01.2012.

The prudential guidelines on Debt Restructuring Mechanism for MSME have

been revised vide RBI circular no. RBI/2012-13/514/DBOD. BP. BC. No. 99/


21.04.132/2012-13 dated May 30, 2013.

15. Streamlining flow of credit to Micro and Small Enterprises (MSEs) for

facilitating timely and Adequate credit flow during their ‘Life Cycle’

RBI vide Circular No. RBI/2015-16/160/FIDD.MSME & NFS.BC.No.60/ 06.02.31

/2015-16 dated 27.08.2015 has advised that bank ensure timely and adequate

availability of credit to viable MSE borrowers especially during the need of

funds in unforeseen circumstances. Therefore, following guidelines shall be

followed while granting credit to Micro & Small Enterprises:-

A. Standby Credit Facility to MSEs

A standby credit facility to be sanctioned at the time of sanction of project

loans to fund unforeseen project cost overruns, unforeseen increases in

capital expenditure and periodic capital expenditure.

Such standby credit facilities to be sanctioned at the time of initial financial

closure; but disbursed only when there is a need.

The objective of such Standby credit facility would be, among others, to

extend credit speedily so that the capital asset creation is not delayed and

commercial production can commence at the earliest.

B. Separate additional Temporary/ Ad-hoc Working Capital Limits to MSEs

A separate additional temporary working capital limit to be fixed at the time of

sanction / renewal of regular working capital limits, specifically for meeting

the temporary rise in working capital requirements arising mainly due to

unforeseen / seasonal increase in demand for products produced by MSEs.

Such limits shall be released primarily, where there is a sufficient evidence of

increase in the demand for products produced by MSEs.

Ad-hoc working capital limits shall be sanctioned subject to the extant

prudential norms, to be regularized not later than three months from the date

of sanction.

C. Review of Regular Working Capital Limits

Presently, working capital limits are renewed at least once in a year based on

audited financial statements. However, audited financial statements of MSE

units would ordinarily be available with a time lag, post-closing of the financial

year. In such cases and where bank are convinced that changes in the

demand pattern of MSE borrowers require a mid-term review, bank shall do

so.

Such mid-term reviews shall be based on an assessment of sales

performance of the MSEs since last review without waiting for audited

financial statements.

However, such mid-term reviews shall be revalidated during the subsequent

regular review based on audited financial statements.

In view of the RBI guidelines we have already taken initiative by way of giving

additional credit facility to the borrowers who have achieved 85% of the


estimated turn over and financially disciplined by maintaining Current Ratio,

Debt Equity Ratio and Leverage Ratio etc. This is basically required to take

review of their performance. Similarly for additional temporary/ adhoc facility

and contingency requirement to take care of unforeseen increase in capital

expenditure, schemes have been launched for MSME clients. The approved

schemes for MSME contingency demand loan is incorporated in the sanction.

These schemes were approved by Board of Directors in their meeting held on

20.06.2015 vide item no. A-24. Also branches can consider additional request/

adhoc on the basis of submission of justified/ need based requirement by the

borrower as per general policy of giving adhoc/ additional limit.

Annexdure-I

S.No. Region Name of Branch District State

1 AGRA FIROZABAD SSI Agra Uttar Pradesh

2 AHMEDABAD MORBI Rajkot Ahmedabad

3 AMRITSARAMRITSAR-SSI BATALA

ROAD AMRITSARAmritsar Punjab

4 CHANDIGARH LALRU-SSI Mohali Punjab

5 CHANDIGARH BADDI SSI SOLAN Solan Himachal Pradesh

6 GHAZIABAD SAHIBABAD-SSI Ghaziabad Uttar Pradesh

7 GHAZIABAD NOIDA-SECTOR 27 G.B.Nagar Uttar Pradesh

8 GHAZIABAD NOIDA-SSI BHANGEL G.B.Nagar Uttar Pradesh

9 GURGAON MANESAR Gurgaon Haryana

10 JALANDHARJALANDHAR-INDUSTRIAL

AREAJalandhar Punjab

11 KARNAL PANIPAT-SSI Panipat Haryana

12 KOLKATA KOLKATA-SSI Kolkata West Bengal

13 LUDHIANA LUDHIANA-SSI Ludhiana Punjab

14 PATIALA RAJPURA-SSI Patiala Punjab

15 PATNAJAMSHEDPUR-SSI

ADITYAPURSingbhoom Patna

16 ROHTAK KUNDLI DISTT SONEPAT Sonepat Haryana

ORIENTAL BANK OF COMMERCE

Specialized MSME Branch operationalised upto 31st March 2015

S.No Regional Office SOL ID Branch Name

1 Agra 0667 Aligarh - Ram Ghat Road

2 Ghaziabad 0140 Bulandshahr

3 Ghaziabad 0098 Khurja, Kabari Bazar

4 Agra 1350 Sikohabad

5 Ahmedabad 0957 Baroda, Alkapuri

6 Ahmedabad 0490 Bhavnagar

7 Ahmedabad 0102 Ring Road, Surat

8 Ahmedabad 0120 Station Road, Ahmedabad

9 Ahmedabad 0556 Rajkot

10 Amritsar 0545 Hanuman Chowk, Gurdaspur

11 Amritsar 0729 Jammu, Rehari Chowk

12 Amritsar 0681 Jammu, Trikuta Nagar

13 Amritsar 1445 Anantnag

14 Amritsar 0127 GT Road Batala

15 Bangalore 0784 Kottayam

16 Bangalore 0851 Mysore

17 Bangalore 0300 MG Road Trivandrum

18 Bangalore 1046 MG Road Bangalore

19 Raipur 0536 Bhillai

20 Raipur 0796 Durg

21 Bhopal 0788 Indore, Scheme No.54

22 Patna 0856 Muzaffarpur

23 Bhubaneswar 0746 Sambalpur

24 Chandigarh 0800 Kullu

25 Chennai 0822 Anna Nagar, Chennai

26 Chennai 0563 Coimbatore

27 Chennai 0973 Sivakasi

28 Chennai 0558 Tirupur

29 Dehradun 0340 Rampur Village Roorkee

30 Delhi 0962 Bawana, Delhi

31 Delhi 0085 Gandhi Nagar

32 Delhi 0984 Narela

33 Meerut 0793 Shastri Nagar, Meert

34 Gurgaon 0018 NIT, Faridabad

35 Hyderabad 0706 Ameerpet, Hyderabad

36 Hyderabad 0570 Guntur

37 Jaipur 0103 Johri Bazar, Jaipur

38 Jodhpur 0153 Station Road, Ajmer

39 Jodhpur 0699 Kishangarh

40 Karnal 0196 Thanesar

41 Kolkatta 0998 Gangtok

42 Lucknow 0914 Kanpur, Sharda Nagar

43 Lucknow 0427 R.S.M. Nagar, Lucknow

44 Varanasi 0835 Varanasi, Lakhuvir

45 Lucknow 1398 Chinhat

46 New Delhi 1137 Mohan Co-op Ind. Estate

47 Patiala 0533 Mandi Gobindgarh

48 Ranchi 1311 Chas Bokaro

49 Pune 0861 Aundh

50 Pune 0184 Gandhi Bagh, Nagpur

51 Pune 0203 Nasik

52 Pune 0164 Panjim

Annexure II

BRANCHES LOCATED IN MSME CLUSTERS

Policy of the Bank

Documents

Transcript of Policy of the Bank