Small Scale Industry India, Small Scale Industrial Loan in India from UBI

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Small Scale Industries 1.1. Small Scale and Ancillary Industries

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Small scale industrial units are those engaged in the manufacture, processing or preservation of goods and whose investment in plant and machinery (original cost) does not exceed Rs.1 crore. These would, inter alia, include units engaged in mining or quarrying, servicing and repairing of machinery. In the case of ancillary units, the investment in plant and machinery (original cost) should also not exceed Rs. 1 crore to be classified under small-scale industry. The investment limit of Rs. 1 crore for classification as SSI has been enhanced to Rs.5 crore in respect of certain specified items under hosiery, hand tools, drugs & pharmaceuticals, stationery items and sports goods by the Government of India.
1.2. Tiny Enterprises

The status of ‘Tiny Enterprises’ may be given to all small scale units whose investment in plant & machinery is up to Rs. 25 lac, irrespective of the location of the unit.
1.3 Small Scale Service & Business Enterprises (SSSBEs)

1.3.1. Industry related service and business enterprises with investment up to Rs. 10 lac in fixed assets, excluding land and building will be given benefits of small scale sector. For computation of value of fixed assets, the original price paid by the original owner will be considered irrespective of the price paid by subsequent owners. 1.3.2. An illustrative list of eligible activities as SSSBEs and the illustrative list of activities that will not qualify as SSSBEs is given in Annexures A - I & A - II respectively.

1.4. Indirect finance in the small-scale industrial sector will include credit to :

1.4.1 Agencies involved in assisting the decentralized sector in the supply of inputs and marketing of outputs of artisans, village and cottage industries. 1.4.2 Government sponsored Corporation/organizations providing funds to the Weaker sections in the priority sector. 1.4.3 Advances to handloom co-operatives. 1.4.4 Term finance/loans in the form of lines of credit made available to State Industrial Development Corporation/State Financial Corporations for financing SSIs. 1.4.5 Credit provided by banks to Khadi and Village Industries Commission (KVIC) under the scheme for provision of credit to KVIC by consortium of banks for lending to viable Khadi and Village Industrial Units. 1.4.6 Funds provided by commercial banks to SIDBI/SFCs will be eligible for inclusion under the priority sector as indirect finance to SSI. 1.4.7 1. Financing of NBFCs or other intermediaries for on-lending to the tiny sector. 2. All new loans granted by banks to NBFCs and other intermediaries for on-lending to SSI sector with effect from November 11, 2003.

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2 Such term finance/loans to the extent granted for/to the Small Scale Industrial (SSI) Units.com/small-scale-Industries. protein isolate. as per Government’s revised policy the investment ceiling (up to Rs. 1 crore and engaged in ship breaking/dismantling activity may be considered as small scale industrial undertaking and bank advances to such units reckoned as priority sector advances.9 Bank loans to bought leaf factories manufacturing tea are to be reckoned as priority Sector lending to small scale industry. high protein food. meals (edible). 5 crore) has been altogether withdrawn. 5 crore were included under priority sector lending. fresh investments that may be made by Bank on or after July 1. 2. 1. proposals received from State Industrial Development Corporations (SIDCs) and State Financial Corporations (SFCs) for sanction of term Finance/loans in the form of lines of credit. irrespective of their size of operations. shall not be eligible for classification under priority sector lending with effect from April 1. Food and Agro-based Processing Sector The following items within the food and agro-based processing sector would be eligible for classification as priority sector for lending by banks : Fruit and vegetable processing industry Food grain milling industry Dairy products Processing of poultry and eggs.8 Units engaged in ship breaking/dismantling are composite ones which also undertake the processing of scrap thus obtained and hence the entire activity can be covered under processing. malt extract. 2005. 2. breakfast foods.1 Banks may consider on merit. 1.1 Software Industry Loans to software industry with credit limit upto Rs. 1 crore from the banking industry to be included under this item.10 Water mills (Gharat) has been recognized as an industrial activity and shall be eligible for registration as small scale industry. will be treated as priority sector lending. subject to the observation of following Conditions: 2 of 9 11/18/2010 8:27 AM . 1. which has already been made by Bank up to June 30. oilseeds. meat products Fish processing Bread.6 KVI Sector All advances to KVI sector.7 Manufacture of common salt through any process including manual operation (involving Solar evaporation) may be considered as an industrial activity and credit provided by banks to units engaged in the manufacture of common salt which satisfy the norms of SSI Unit may be classified under advances to SSI. However. Subsequently.2 Venture Capital Investment in Venture Capital will be eligible for inclusion in priority sector.Small Scale Industry India. 1. provided the investment in plant and machinery (original cost) does not exceed the prescribed limits. it may be mentioned that so long the food and agro-based processing units of small and medium size with investment in plant and machinery up to Rs. location and investment in plant and machinery. Therefore. Small Scale Industrial Loan in India from UBI http://www.unitedbankofindia. 3. 2005 shall not be eligible for classification under priority sector lending and the investments.asp 1. 1. all small scale industrial units with original cost of plant and machinery not exceeding Rs. biscuits.5 Industrial Estates Loans for setting up industrial estates. subject to the condition that the venture capital funds/companies are registered with SEBI. 3. Lines of Credit 3. 2. confectionery (including cocoa processing and chocolate). will be covered under priority sector advances and will also be eligible for consideration under the sub-target (60 percent) of the SSI Segment within the priority sector. 2006. weaning food and extruded/other ready to eat food products Aerated water/soft drinks and other processed foods Special packaging for food processing industries Technical assistance and advice to food processing industries With regard to the size of the units within this sector.

Periodical statements to be obtained from SFC/ SIDC to monitor the position. 3. SECTION IV COMMON GUIDELINES/INSTRUCTIONS for LENDING TO SSI sector 1. 2.5 lac within 4 weeks and those above Rs. 5 crores from the banking system. appointed by the Government of India and the Reserve Bank of India. Small Scale Industrial Loan in India from UBI http://www. While using the existing stock of application forms till then.asp I. should be recorded. 2.be disposed of within 2 weeks and those up to Rs..1. a running serial number. provided the ultimate beneficiary satisfies the criteria laid down by RBI for treating such advances as advances to priority sector. 2. II. a set of comprehensive guidelines to be followed for advances to all categories of borrowers in the SSI sector were evolved.5 lac. IV. 2 crore have been 3 of 9 11/18/2010 8:27 AM . sanction/rejection/ disbursement with reasons therefore etc. Bills Rediscounting 4. a certificate issued by SFC/ SIDC statutory auditors certifying that the outstanding borrowings from banks were fully covered by the non-overdue loans outstanding in respect of fresh disbursements made to SSI units from out of term finance/ lines of credit granted by banks.1 Funds provided by SIDBI to Commercial banks by way of rediscounting of bills of SSIs which are originally discounted by a commercial bank and rediscounted by SIDBI will be eligible for inclusion under the priority sector as indirect finance to SSI. Annually. it may be ensured that these forms have perforated portion for acknowledgement to be completed and issued by the receiving branch. Issue of Acknowledgement of Loan Applications Bank should give acknowledgement for loan applications received from the borrowers towards this purpose. within 8 to 9 weeks provided the loan applications are complete in all respects and accompanied by a ‘check list’. Register of Rejected Applications A register should be maintained at branch wherein the date of receipt.2. Based on the recommendations made by the Working Groups and High Powered Committees. Processing of Applications 2.25. SFC/ SIDC should maintain separate and distinct accounts of fresh disbursements made to SSI units and outstanding amounts there against. the credit requirements of village industries and other SSI units having aggregate fund-based working capital limits upto Rs. 2. 4.2 Funds provided by commercial banks to State Financial Corporations (SFCs) by way of rediscounting of bills of SSIs earlier discounted by the SFCs will be eligible for inclusion under the priority sector as indirect finance to SSI. 2. 25 lac and up to Rs. Disposal of Applications All loan applications for SSI up to a credit limit of Rs. while getting fresh stocks of application forms printed. Rejection of applications for fresh limits/enhancement of existing limits should not be done without the approval of the next higher authority. will be computed on the basis of a minimum of 20 percent of their projected annual turnover for new as well as existing units. The register should be made available to all inspecting agencies. III.com/small-scale-Industries. an acknowledgement (separately prepared) should be given for each application.3 In order to ensure adequate credit to this sector. care being taken to ensure that the serial number given on the acknowledgement is also recorded on the main application. The rate of interest to be charged by banks on such term finance/ loans/ lines of credit will be in conformity with the directives on interest rates issued by the Reserve Bank from time to time. 5. Leasing and Hire Purchase Para-banking activities such as leasing and hire purchase financing undertaken departmentally by bank will be classified as priority sector advances.Small Scale Industry India. 1. Sanction of reduced limits should be reported to the next higher authority immediately with full details for review and confirmation.000/. 4.unitedbankofindia.3. Each branch may affix on the main application form as well as the corresponding portion for acknowledgement.4 Assessment of working capital Guiding formats for appraisal of SSI loan proposal up to Rs.

2.5% to 3% below the prevailing fixed/prime lending rate. however. 5 lac..asp shown in Appendix. Following are broad parameters for grant of relief and concessions for revival of potentially viable sick SSI units. 5.50.O.to artisans. Delayed payment Under the Amendment Act. In respect of composite loan up to Rs.1 crore can be sanctioned by banks to enable the SSI entrepreneurs to avail of their working capital and term loan requirement through Single Window. Revised guidelines on rehabilitation of sick SSI units (based on Kohli Working Group recommendation) As per the revised definition. The revised criteria will enable Bank to detect sickness at an early stage and facilitate corrective action for revival of the unit. 4. 1998 of interest on Delayed Payment to Small Scale and Ancillary Industrial Undertakings. b) payment of interest by the buyers at the rate of one and a half times the prime lending rate (PLR) of SBI for any delay beyond the agreed period not exceeding 120 days.1 Repayment programme should be fixed taking into account the sustenance requirements.8. 4.unitedbankofindia. Term Loan Concessions in the interest to be given not more than 2% (not more than 3% in the case of tiny/decentralized sector units) below the document rate. 25 lac if CGTSI Scheme is applied to get insurance coverage. if the principal or interest remain overdue for a period exceeding one year.e.Mode of Disbursement of Loan As far as possible.000/. the life of the asset. guidelines and prevailing schemes of the bank. village and cottage industries.5% below the prevailing fixed/prime lending rate. 2. increase the limit of dispensation of collateral requirement for loans up to Rs.2 In the case of other borrowers affected by natural calamities. banks may convert drawings in excess of the value of security into a term loan repayable over a reasonable period of time and provide further working capital and extend/re-phase the instalements due under term loans. etc. or. As per the revised guidelines the rehabilitation package should be fully implemented within six months from the date the unit is declared as potentially viable/ viable.15 lac and even further increase limit upto Rs. repayment schedule may be fixed for term loan component only (subject to SIDBI’s requirements being fulfilled). 5. 2. 4. a unit is considered as sick when any of the borrowal account of the unit remains substandard for more than 6 months i. Interest on Working Capital Interest 1. Bank has been advised to fix sub-limits within the overall working capital limits to the large borrowers specifically for meeting the payment obligation in respect of purchases from SSI. wherever applicable 2. etc.5 Margin 15% to 25% as per H. disbursement of loan amounts sanctioned should be made directly to the suppliers of inputs such as raw materials implements. During this six months period of identifying and implementing rehabilitation package Bank/Fls are required to do "holding operation" which will allow the sick unit to draw funds from the cash credit account at least to the extent of deposit of sale proceeds. Funded Interest Term Loan Interest Free 3.7.6 Collaterals No collateral security is required for SSI borrowal accounts having overall limit upto Rs.Rate of Interest Interest shall be charged at a rate as prescribed by Head Office from time to time. Bank may continue the practice of obtaining receipts from borrowers. Further. Composite loan A composite loan limit of Rs. 2. The requirement of overdue period exceeding one year will remain unchanged even if the period for classification of account as substandard is reduced in due course.9. Working Capital Term Loan Interest to be charged 1.com/small-scale-Industries. wherever applicable.Repayment Schedule 4. Contingency Loan Assistance The Concessional rate allowed for Working Capital Assistance. Small Scale Industrial Loan in India from UBI http://www. on the basis of good track record and financial position of the SSI units. and not in an "ad hoc" manner. 2.Small Scale Industry India. machinery. However. Interest shall be 4 of 9 11/18/2010 8:27 AM . the break-even point. surplus generating capacity. there is erosion in the net worth due to accumulated cash losses to the extent of 50% of its net worth during the previous accounting year and the unit has been in commercial production for at least two years. 1. 3. penal provisions have been incorporated to take care of delayed payments to SSI units which inter-alia stipulates a) agreement between seller and buyer shall not exceed more than 120 days. Bank may.

Check-list for Branch Managers--. Annexures A.000/. 10.II B.The guiding formats for Appraisal of SSI Loan Proposal up to Rs. Government of India ) 1. branch should make arrangements for the photographs and also bear the cost of photographs of borrowers falling in the category of Weaker Sections. Small Scale Industrial Loan in India from UBI http://www.as per H. 25 lac to Rs. Advertising Agencies. Industrial Consultancy 5 of 9 11/18/2010 8:27 AM .I GENERAL GUIDELINES ON SSI SECTOR LENDING Illustrative List of Small Scale Service and Business (Industry Related) Enterprises (SSSBEs) ( As per circular issued by the Ministry of SSI.25.Penal Interest No penal interest should be charged by banks for loans under priority sector up to Rs. Service Charges/ Inspection Charges 1. 2. Otherwise it will be borne by the borrower.O. the issue of charging penal interests that should be levied for reasons such as default in repayment. non-submission of financial statements etc.000/.asp charged on this outstanding debit balance on working capital and on reducing balance in case of term loan.25. However. village and cottage industries All term loans Working capital where these are against non-hazardous goods Fire Fire Equipment Fire Current Aeests Equipment and current assets 9.I and A . Risk and the assets is given below: No.000/-. It should also be ensured that the procedure does not involve any delay in loan disbursement.unitedbankofindia. Photographs of borrowers For the purpose of identification.000/7. 25 lac and also above Rs.25. 8. (a) (b) Category Type of Risk Type of Assets All categories of priority sector advances upto Fire & Other risks Equipment and current and inclusive of Rs.10.---.Small Scale Industry India. 11.General Guidelines on SSI Sector Landing—A . Insurance against Fire and Other Risks Table showing insurance exemption for the Category. Annexure—A .com/small-scale-Industries. 2 crore have been given in Appendix. 6. Amendments These guidelines are subject to any instructions that may be issued by the RBI from time to time. No service charges/inspection charges should be levied on priority sector loans up to Rs. have been incorporated in the Lending Policy of the Bank for loans above Rs.25. Guidelines. For loans above Rs.by way of – Composite loans to artisans. Marketing Consultancy 3.SSI Proposals D.000/2.25.000/assets Advances to SSI sector upto and inclusive of Rs.Check-list for SSI Entrepreneurs C.

e. Servicing of Agricultural Farm equipment. VCRs. 20. have since been deleted from the list as Computer Software Development and Software Services (including computer graphics. Desk Top Publishing 11. Ropeways in hilly areas 29.e. Rig. 17. Creation of Databases suitable for foreign/Indian markets and Computer Software Development which were hitherto being registered as SSSBE. Laundry & Dry-cleaning. testing or servicing of all types of vehicles & machinery of any description including electronic/electrical equipment/instruments. Auto Repair. motors. Typing Centres 6. etc. Industrial Photography 8. ‘Servicing Industry’ undertakings engaged in maintenance. Installation and operation of Cable TV Network 30. televisions. Internet Browsing/Setting up of Cyber Cafes 12. Industrial Testing Labs 10. finished products. Photocopying centres (Xeroxing) 7. e. ISD/STD Booths 24. radios. Laboratories engaged in testing of raw materials..unitedbankofindia. Beauty Parlours and Creches (Computerized Design and Drafting. Services and Garages 13.g. Annexure—A . SSSBE’s 6 of 9 11/18/2010 8:27 AM . Blue printing and enlargement of drawing/designs facilities 23. energy conservation and commercial advertising 14. i. EDP Institutes established by Voluntary Associations/Non-Government Organisations 27. Small Scale Industrial Loan in India from UBI http://www. engineering design.Small Scale Industry India. 15. Pump. Coloured. and Black & White Studios equipped with processing laboratory 28. Sub-contracting Exchanges (SCXs) established by Industry Associations 26.asp 4. tape recorders. Industrial R & D Labs 9. Documentary Films on themes like family planning. social forestry. Teleprinter/FAX services 25.. repair. Photographic Lab 22. watches etc. Operating EPABX under franchises 31. Equipment Rental & Leasing 5. Tailoring 19. measuring/control instruments.com/small-scale-Industries. 16. Tractor. Weigh Bridge 21. Boring Machines. X-Ray Clinic 18. computerized design and drafting) have since been recognized as industrial activity eligible for registration as Small Scale industries).II GENERAL GUIDELINES ON SSI SECTOR LENDING Illustrative List of Activities which are not Recognised as SSSBE’s Illustrative List of Activities which are not recognized as Small Scale Industry/ Business (Industry Related) Enterprises i. transformers.

8.Small Scale Industry India. please furnish audited Balance Sheet) and Projected Balance Sheet and Profit & Loss Statement alongwith your application. If an existing firm/company. Small Scale Industrial Loan in India from UBI http://www. Have you made any assessment for working capital requirement and corresponding requirements of bank borrowing for your projected plan/ programme? Please furnish a copy of the same alongwith your application. please furnish a photocopy of the same alongwith your application. projections for consecutive two years should be submitted alongwith the application. address of the Factory/ Establishment/ Unit/ Centre and Home address of Proprietor or of all the Partners or of all the Promoters Directors alongwith telephone. then photocopy of the same) and a photocopy of partnership firm Registration Certificate alongwith your application. original price. is it up-to-date? Please furnish a photocopy of the same alongwith your application. In case of new Firm/Company. Have you made/prepared any Project Report? If so. Transportation 2. 13. Hotels Annexure—B CHECK-LIST FOR SSI ENTERPRENEURS Please check whether you have covered all the following points (which are applicable) in your Application 1. year of purchase.asp 1. present book value). specification. Health Services including pathological laboratories 7. make. 3. Please mention the names and addresses of Firms/Units/Shops from whom you purchase major part/most of your materials/components/stores & spares etc. Educational Services 9. mobile number and brief bio-data. 5. Do you have Sale Tax Registration? If so. Do you have Trade Licence? If so. 2. is it up-to-date? Please furnish a photocopy of the Current Licence alongwith your application. Are you Income Tax Assessee? If so. Please mention in your application separately address of your Head Office.com/small-scale-Industries. Storage (except cold storage which is recognized as SSI) 3. Legal Services 8. has it been vetted by SISI or DIC ? Please furnish a photocopy of the same alongwith your application. 12. Please mention the names and addresses of the buyers of your major products or who obtain your services or who place upon you orders for execution in your application. 4. Are you registered with Directorate of Cottage & Small Scale Industries? If so. please furnish photocopy of last three years’ balance Sheets and Profit & Loss Statements (if these are audited. 6. please furnish a photocopy of Partnership Deed (if it is a registered one. Social Services 10. 11. 9. address of Registered Office. 7 of 9 11/18/2010 8:27 AM . 7. Sales Outlets for Industrial Components 6. If it is a Company. 10. fax. please furnish a photocopy of the last Income Tax Return and a photocopy of the last Income Tax Clearance Certificate alongwith your application. please furnish details of machinery (portable or embedded) and plants alongwith your application (name. in your application. If it is a Partnership Firm. please furnish a list of major shareholders of the company alongwith your application.unitedbankofindia. General Merchandise Stores 5. If there is any Factory/Servicing Unit. Retail/Wholesale Trade Establishments 4.

In suitable cases. 13. in most of the cases.Small Scale Industry India. 5. 2. Please check the photocopies of various documents (enclosed with the application) with the original. Please interview the applicant and keep record of your conversation with the applicant. 17. All the enclosures are attached and getting checked by the Manager and then submit the application. 7. If the Factory/Servicing unit is housed in a rented shed/premises please furnish photocopy of rent agreement or lease agreement and photocopy of current rent receipt alongwith your application. You can take the help of DIC Office or SISI or NABARD or KVIC/KVIB. 12. 4. 3. If the line of business (existing or proposed one) is new to you. meet the Manager/Officer in Charge of the Branch. Please examine the application and see whether it contains all relevant information. conduct search with the officer of Registrar of Companies to ascertain whether the assets of the company are free from any encumbrance. In case of a company and if it is already running. 14. please contact them and ascertain the details from them about the scheme/project/plan/proposed borrower. Examine the market demand of the product/service and assess whether the projection made by the applicant is reasonable. 6. Please scrutinize the application properly.SSI Proposals 1. where collateral/additional securities are required to be obtained. Small Scale Industrial Loan in India from UBI http://www. Properly analyse the previous Balance Sheets and Profit & Loss account Statements (in case of existing units) and projected plan vis-à-vis projected Balance Sheet and Profit & Loss Account statement. please obtain brief particulars about the scheme or line of activity from DIC or SISI or NABARD or KVIC/KVIB and get yourself acquainted with that particular line of activity.) or proposes to enjoy any loan from them. please contact the said Bank.unitedbankofindia.asp 14. please furnish proof of the same alongwith your application. If you are unable to understand the working capital requirement assessment and corresponding bank borrowing requirement. 10. 8. Please make inspection of the Factory/Unit/Establishment (If existing one ) and in case of a proposed one. 16. 18. Do you maintain any bank account? If so. However. 11. please inspect the site.com/small-scale-Industries. Before submitting your application. Compare the date with those of other similar units. you should be able to assess these. please furnish those at the earliest and co-operate with him to enable him to dispose off your application quickly. 9. If rules/regulations of Pollution Control Board is applicable on you.If the Firm/Company is already enjoying term loan from any Financial Institution (like SFC or IDBI/SIDBI or IIBI or IDC etc. If the Factory shed or servicing station (land & building) is owned by you. Please make local enquiries to verify the personal data furnished by the proprietor or Partners or Directors. and also try to 8 of 9 11/18/2010 8:27 AM . please furnish proof whether you have received/obtained necessary clearance from them. show him the application to examine whether it is in order and properly filled up. and get detailed information relating to conduct of the a/c. 19. If Manager of the Branch asks/advises you to submit some more information and documents. 15. If the Firm/Company is already banking with any Bank. with whom? Please furnish details of banking arrangement you are enjoying at present alongwith your application. Annexure—C Check-list for Branch Managers. 13. Regional Manager or with Regional Manager/Chief Regional Manager). consult Regional Office (either with concerned Dy. please verify those collaterals thoroughly.

16.com/small-scale-Industries. Do not keep pending and try to dispose of the proposal within RBI stipulated time schedule unless delayed for specific reason. reject the proposal and after getting clearance from higher authorities. If the proposal has been forwarded by any sponsoring agency (like DIC. Sitemap : Contact Us : Disclaimer Website best viewed with Internet Explorer 6. etc. please tell the applicant forthwith and give him specific time for furnishing those papers. please also inform them about your decision. 15. KVIC/ KVIB/ NABARD. Small Scale Industrial Loan in India from UBI http://www. If you are not satisfied.).Small Scale Industry India. If you feel that (after interviewing the applicant) some more information and documents are necessary.0 at 800x600 resolution. sanction the proposal (if it is under your discretion) and make arrangement for disbursement after complying with all formalities. Maintained by 9 of 9 11/18/2010 8:27 AM . inform the applicant forthwith.unitedbankofindia. Please go through the checklist for the SSI entrepreneurs and see whether all the points have been covered in the application and whether photocopies of all relevant documents have been enclosed. Do not harass the applicant and if you are satisfied.asp gather impression of the said Bank about the proprietor or partners or directors as the case may be.

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