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
P&M of Manufacturing
in Original
investment
equipment of Service
in
Micro
Upto ₹ 25.00 lacs
Small
Above ₹ 25.00 lacs and Above ₹ 10.00 lacs and
upto ₹ 5.00 crore
upto ₹ 2.00 crore
Medium
Above ₹ 5.00 crore and Above ₹ 2.00 crore and
upto ₹ 10 crore
upto ₹ 5 crore
Upto ₹ 10.00 lacs

B
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.
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
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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
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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 OffBalance 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
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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: 201314:541 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 Within three weeks of receipt of duly completed
upto ₹ 25 Lacs
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.
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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
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sanctioned to Micro & Small Enterprises without collateral security/third party
guarantee are eligible for coverage.
The Guarantee coverage under CGTMSE is as under:
Category
Micro Enterprise
Maximum Extent of Guarantee
Up to ₹ 5.00 Above ₹ 5.00
Lacs
Lacs up to ₹
50.00 Lacs
85%
of the 75%
of
the
amount
in amount
in
default subject default subject
to
maximum to maximum ₹
₹ 4.25 Lacs
37.50 Lacs
Above ₹ 50.00 Lacs
up to ₹ 100 Lacs
₹ 37.50 lacs plus
50% of amount in
default above ₹ 50
lacs
subject
to
overall ceiling of ₹
50 lacs.
80% of the amount in default ₹ 40 lacs plus 50%
amount
in
subject to a maximum of ` 40 Lacs of
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)
All Other Category 75% of the amount in default ₹ 37.50 lacs plus
of borrowers
subject to maximum of ` 37.50 50% of amount in
default above ₹ 50
lacs
lacs
subject
to
overall ceiling of ₹
50 lacs.
For cases sanctioned on or after 01.01.2013 the Fees structure is as under:
Annual Guarantee Fee (AGF) (% p.a.)
Credit Facility
Women, Micro Enterprises and units in
Others
North East Region (incl. Sikkim)
Upto ₹ 5 lacs
0.75*
1.00*
Above ₹ 5 lacs0.85*
1.00*
₹100 lacs
*% 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 followPolicy pertaining to MSME advances 2015-16
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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 Revised rate of Interest for
Risk
Rating MSEs covered under CGS of
Grade
CGTMSE
Spread over Base Rate
Upto ₹ 50000
For all grades
Above ₹ 50000 to ₹ 2.00
For all grades
lacs
Above ₹ 2.00 lacs
25.00 lacs
to ₹
For all grades
Above ₹ 25.00 lacs to ₹
1
1.00 cr
2
3
BR
BR+1.00
BR+0.50
BR+1.00
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:
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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/
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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
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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.
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Annexdure-I
ORIENTAL BANK OF COMMERCE
Specialized MSME Branch operationalised upto 31st March 2015
S.No. Region
Name of Branch
District
State
1
AGRA
FIROZABAD SSI
Agra
Uttar Pradesh
2
AHMEDABAD
MORBI
Rajkot
Ahmedabad
3
AMRITSAR
AMRITSAR-SSI BATALA
ROAD AMRITSAR
Amritsar
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
JALANDHAR
JALANDHAR-INDUSTRIAL
Jalandhar
AREA
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
PATNA
JAMSHEDPUR-SSI
ADITYAPUR
Singbhoom
Patna
16
ROHTAK
KUNDLI DISTT SONEPAT Sonepat
Haryana
Annexure II
S.No
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
BRANCHES LOCATED IN MSME CLUSTERS
Regional Office
SOL ID
Branch Name
Agra
0667
Aligarh - Ram Ghat Road
Ghaziabad
0140
Bulandshahr
Ghaziabad
0098
Khurja, Kabari Bazar
Agra
1350
Sikohabad
Ahmedabad
0957
Baroda, Alkapuri
Ahmedabad
0490
Bhavnagar
Ahmedabad
0102
Ring Road, Surat
Ahmedabad
0120
Station Road, Ahmedabad
Ahmedabad
0556
Rajkot
Amritsar
0545
Hanuman Chowk, Gurdaspur
Amritsar
0729
Jammu, Rehari Chowk
Amritsar
0681
Jammu, Trikuta Nagar
Amritsar
1445
Anantnag
Amritsar
0127
GT Road Batala
Bangalore
0784
Kottayam
Bangalore
0851
Mysore
Bangalore
0300
MG Road Trivandrum
Bangalore
1046
MG Road Bangalore
Raipur
0536
Bhillai
Raipur
0796
Durg
Bhopal
0788
Indore, Scheme No.54
Patna
0856
Muzaffarpur
Bhubaneswar
0746
Sambalpur
Chandigarh
0800
Kullu
Chennai
0822
Anna Nagar, Chennai
Chennai
0563
Coimbatore
Chennai
0973
Sivakasi
Chennai
0558
Tirupur
Dehradun
0340
Rampur Village Roorkee
Delhi
0962
Bawana, Delhi
Delhi
0085
Gandhi Nagar
Delhi
0984
Narela
Meerut
0793
Shastri Nagar, Meert
Gurgaon
0018
NIT, Faridabad
Hyderabad
0706
Ameerpet, Hyderabad
Hyderabad
0570
Guntur
Jaipur
0103
Johri Bazar, Jaipur
Jodhpur
0153
Station Road, Ajmer
Jodhpur
0699
Kishangarh
Karnal
0196
Thanesar
Kolkatta
0998
Gangtok
Lucknow
0914
Kanpur, Sharda Nagar
Lucknow
0427
R.S.M. Nagar, Lucknow
Varanasi
0835
Varanasi, Lakhuvir
Lucknow
1398
Chinhat
New Delhi
1137
Mohan Co-op Ind. Estate
Patiala
0533
Mandi Gobindgarh
Ranchi
1311
Chas Bokaro
Pune
0861
Aundh
Pune
0184
Gandhi Bagh, Nagpur
Pune
0203
Nasik
Pune
0164
Panjim