Objective Type Questions & Answers

Micro, Small & Medium Enterprises

(MSME)
The Banking Tutor

2022
A book from The Banking Tutor
48 Sekhar Pariti

\\
+91 9440641014
 Introduction
With a view to help the young Bankers in preparation for Promotion
Tests or professional examinations conducted by various Institutes like
IIBF, I have shared Notes related to Micro, Small, Medium Enterprises
(MSME‘s) from 29-08-2022 to 05-09-2022 in 8 Units in the Telegram
Groups ―TBT Exam Corner‖ ―The Banking Tutor‖ and also in WhatsApp
Groups of The Banking Tutor. The Notes is prepared on the basis of
available syllabus for Certificate Examination in MSME.. On 5th
September,2022 I have released a Book No 47. MSME – Notes, wherein I
have furnished all the 8 units shared by me earlier.
After completion of 8 Units of Notes on MSME, I have shared objective
type questions prepared based on the Notes that was already shared in
my Telegram Groups and WhatsApp Groups in 6 Units (from 06-09-
2022 to 11-09-2022) to enable the Bankers to test themselves, where
they stand. After some time (either the same day or next day) I have
shared Key related to all 6 Units to enable the Bankers to verify with their
answers. Apart from the above I have shared 3 Units of MSME Multiple
Choice Questions and related Key from 25th August 2022 to 27th August
2022.
Now I have consolidated all the 9 Units and sharing by way of this Book.
This Book contains two Parts - Part 1 consists only Questions and 3
Units of MCQ (In case of MCQ, the Key is furnished at the end of the
Unit) .Part 2 consists related Key in respect of first 6 Units.
I hope this Book may be useful to those Bankers who are appearing for
Promotion Tests, Certificate/Diploma Examinations conducted by various
Institutes.
I sincerely Thank my Friend Mr Lalit Verma, Chief Manager, Canara Bank,
New Delhi who has helped me in many ways in bringing out this Book in
this way.

20-09-2022
Sekhar Pariti
+91 94406 41014

Page 2 of 62
Micro, Small & Medium Enterprises

(MSME)

Part 1
Questions

Page 3 of 62
 Unit 01 - Quest
Answer the following briefly.

01. What is a Micro Enterprise ?

02. What is a Small Enterprise ?

03. What is a Medium Enterprise ?

04. What is the Target for MSME Lending by Banks ?

05. What are the functions of Champions Control Rooms ?

06. Can an Entity file more than one Udyam Registration ?

07. Whether Retail Trade and Whole Sale Trade can be classified as
MSME ?

08. Who are Certified Credit Counsellors (CCC) ?

09. What is Trade Receivables Discounting System (TReDS) ?

10. What are Financial Literacy Centres (FLCs) ?

11. What are Rural Self Employment Training Institutes (RSETIs) ?

12. What is the MSME SAMADHAAN ?

13. What is MSME Sambandh ?

14. What is Udyami Mitra Portal ?

15. Which Institution is responsible for MSME Development in India ?

XXX

Page 4 of 62
Fill up the Blanks

01. New (present) definition of MSME effective from …………………

02. As per new definition, …………………..criterion of …………………..shall

apply for classification of an enterprise as micro, small or medium.
03. Full form of URC is ………………….

04. Full form of GSTN is ……………………

05. The calculation of investment in plant and machinery or equipment

will be linked to the ………………………..
06. In case of a new enterprise, where no prior ITR is available, the
investment will be based on …………………………….
07. As per Norms related MSME classification The expression ‗‘plant and
machinery or equipment‘‘ of the enterprise, shall include………………..
08. ………………………shall be excluded while calculating the turnover of any
enterprise whether micro, small or medium, for the purposes of
classification.

09. As per …………………Report, working capital limits to SSI units is

computed on the basis of minimum 20% of their estimated turnover up
to credit limit of ₹5 crore.

10. A composite loan limit of ₹1 crore can be sanctioned by banks to

enable the MSME entrepreneurs to avail of their working capital and
term loan requirement through …………………

11. ……………………approach may be more beneficial (a) in dealing with

well-defined and recognized groups (b) availability of appropriate
information for risk assessment (c) monitoring by the lending institutions
and (d) reduction in costs.

12. Banks are mandated not to accept collateral security in the case of
loans upto Rs ……………..extended to units in the MSE sector.

Page 5 of 62
13. The CGTMSE would provide cover for credit facility up to
……………which have been extended by lending institutions without any
collateral security and /or third-party guarantees.

14. The credit rating by external rating agencies is not compulsory from
regulatory capital perspective, if the maximum aggregate exposure to
one counterparty does not exceed the threshold limit of …………..subject
to meeting certain other conditions.

15. Full form of RSETIs is ……………………

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Page 6 of 62
 Unit 02 - Quest
Answer the following briefly.

01. Who is a Trainee Borrower ?

02. Who is a Ready Borrower ?

03. What is the Implementing Agency for Digital MSME Scheme ?

04. What are the Interventions covered by SFURTI Scheme ?

05. Give 3 examples for Soft Interventions .

06. Give 3 examples for Hard Interventions.

07. Give 3 examples for Thematic Interventions.
08. Which is the Nodal Agency for Khadi and Village Industry clusters
under SFURTI Scheme ?

09. Which is the Nodal Agency for Coir based clusters under SFURTI
Scheme ?
10. What is a Cluster in connection with MSMEs ?

11. What is the Aim of Micro and Small Enterprises-Cluster Programme

(MSE-CDP) scheme ?

12. What is a Special Purpose Vehicle ?

13. Give 3 examples for Common Facility Centre (CFC).
14. What is the Objective of ASPIRE ?

15. What is the Objective of INSPIRE ?

XXX

Page 7 of 62
Fill up the Blanks

01. ………………… is a Matchmaking platform, provides a unique match

making platform to MSME loan seekers, lenders as also handholding
agencies.
02. The terms Trainee Borrower & Ready Borrower are related to
………………… and also …………………………….Scheme.

03. The……………………………portal has a Market Place where bankers would

be able to compete themselves in their loan delivery mechanism.

04. Digital MSME Scheme involves usage of ……………………where MSMEs

use the internet to access common as well as tailor-made IT
infrastructure.

05. …………………………… Number is mandatorily requirement for

registration on Digital MSME ICT Scheme.

06. Full form of UAM is ………………………………

07. Under Digital MSME Scheme, additional 10% Subsidy will be
provided for ………; …………………….. and ………………….

08. Full form of INSPIRE is………………………………………….

09. Full form of SFURTI is…………………………….

10. Full form of MSECDP is ……………………..

11. Full form of MSE-CDP is …………………………

12. Full form of SPV is ………………………..

13. Full form of ASPIRE is ………………………………..

14. Full form of NSIC is ………………………………..

15. Full form of NIDHI EIR is ……………………………..

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Page 8 of 62
 Unit 03 - Quest
Answer the following briefly.
01. What is NDS-OM?

02. What is the objective of LBI ?

03. What is the aim of NMCP ?

04. What is the objective of TEQUP Scheme ?

05. What is the Implementing Agency of PMEGP at National Level. ?

06. As per PMEGP, what is a Rural Area ?

07. To be eligible for support under PMEGP, what is the cap to project
cost ?

08. What is the Turn Around Time (TAT) in case of Loan Applications
under PMEGP?
09. Can a Bank accept physical application for loan under PMEGP ?

10. What are the Subsidy Norms under PMEGP ?

11. What are the Margin Norms under PMEGP ?

12. Who are considered as Special Category under PMEGP ?

13. What is the Repayment period for loans under PMEGP ?

14. What is the Area Target for loans under PMEGP ?

15. What is the Social Target for loans under PMEGP ?

XXX

Page 9 of 62
Fill up the Blanks
01. Full form of GAH is ……………………………..

02. Full form of ICRISAT is ……………………………………..

03. Full form of ICAR is ……………………………………

04. Full form of LBI is …………………………………..

05.Full form of TBI is …………………………………….

06. Full form of NMCP is …………………………………..

07. Full form of TEQUP ( Scheme) is…………………………….

08. Full form of CLCSS ?

09. Under PMEGP, without …………………. Expenditure, Loan is not eligible.

10. Finance under PMEGP is only for …………….. projects.

11. For setting project above Rs.10 lakhs in manufacturing sector and
above Rs.5 lakhs in business/service sector, beneficiary under PMEGP
should pass at least …………………………
12. For loan under PMEGP , EDP training of ………………….compulsory
before disbursement of loan.
13. In case of PMEGP Cost of …….. should not be included in the Project
cost.

14. In case of PMEGP, Project cost will include ………………….and one cycle
of Working Capital.

15. Under PMEGP in case of Village Industry; Fixed Capital Investment

per Artisan/worker not to exceed ……….in plain areas and ……………. in Hill
Areas.

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Page 10 of 62
 Unit 04 – Quest
Answer the following briefly.
01. What is the objective of CLCSS ?
02. Who administers PMEGP Scheme ?
03. Whether the following Statement is True or False .
―PMEGP Scheme is operational both in Rural and Urban Areas‖
04. Whether the following Statement is True or False .
―Self Help Group is eligible for getting financial assistance under PMEGP‖
05. Whether the following Statement is True or False .
―Finance under PMEGP is only for existing (old) projects‖
06. How to manage Margin Money (Subsidy) received under PMEGP ?
07. What is the objective of Stand-up India Scheme ?
08. What is the Target Group under Stand-Up India Scheme ?
09. What is the minimum amount of loan under Stand-up India Scheme ?
10. What is the maximum amount of loan under Stand-up India Scheme?
11. What is the objective of Start-up India Scheme ?
12. What is the difference between Stand-up India Scheme and Start-up
India Scheme ?
13. What are the 3 Pillars of Start Up India Scheme ?
14. To whom Start Up India Team has to Report ?
15. What is PM SVANidhi ?
16. What is the CGS-PMS ?
17. What is the fee charged by CGTMSE for coverage of loans under PM
SVANidhi Scheme?
18. Whether the following statement is True or False ?
―Initiation of legal proceedings is not necessary for loans under PM
SVANidhi Scheme.‖
XXX

Page 11 of 62
Fill up the Blanks
01. PMEGP Loan Applicant will deposit his own contribution and copy of
EDP training certificate to the financing bank within …………………..days of
receiving the communication of sanction of loan.
02. Under Stand-up India Scheme loan by way of ………. between Rs 10
lakh and Rs 100 lakh will be sanctioned.
03. For loans under Stand-up India Scheme, the repayment period of the
composite loan not to exceed …………………..with a maximum moratorium
period of 18 months.
04. Stand-Up India Loans are eligible for coverage under ………. of ……….
05. Under Stand-up India Scheme, apart from linking prospective
borrowers to banks for loans , the web portal designed by SIDBI also
provides …………….. support.
06. Full form of DPIIT is ……………………………….
07. Under PM SVANidhi Scheme, beneficiary is eligible subsequent loan
on timely or early repayment of initial loan, with an enhanced limit of a
maximum of …………………………………..
08. Under PM SVANidhi Scheme tenure of the loan will be maximum of
……………
09. Credit Guarantee Scheme for PM SVANidhi (CGS-PMS) has a
provision of ………………………Guarantee Cover for the loans sanctioned
which will be operated on ………………………..basis.
10. Full form of MLI is …………………………….
11. The lending institution may invoke the guarantee / lodge claim
application in respect of credit facilities under a portfolio (CGS- PMS)
within a maximum period of ……………………….. from the …………….date.
12. In June 2019, RBI committee headed by former SEBI Chairman
………………….suggested a Rs 5,000 crore stressed asset fund for the MSME
sector to provide relief to small businesses hurt by demonetisation, GST,
and an ongoing liquidity crisis.
@@@

Page 12 of 62
 Unit 05 – Quest
Answer the following briefly.
01. To what extent the loans under PM SVANidhi loans are covered
(CGS-PMS) by CGTMSE ?

02. What are the norms related to Credit Rating of MSMEs ?

03. Who regulates CRAs (Credit Rating Agencies) in India ?

04. What are the options under Corrective Action Plan (CAP) ?
05. What is the purpose of RSETIs ?

06. What is the purpose of FLCS ?

07. Based on Which committee recommendations Cash Credit is divided
into two components and what are the components ?
08. What are the important recommendations of the Chore Committee ?

09. What are the important recommendations of the Tandon

Committee?

10. What is the basis adopted by all three methods of lending

recommended by Tandon Committee ?
11. Explain First Method of Lending of Tandon Committee.

12. Explain Second Method of Lending of Tandon Committee.

13. Explain Third Method of Lending of Tandon Committee.

XXX

Page 13 of 62
Fill up the Blanks
01. Full form of TVC is …………………………….

02. Full form of LoR is …………………………………

03. Full form of ULB is ………………………………

04. Credit Rating reflects the ………………………..

05. Credit rating is a ………………………………..

06. Full form of SMERA is ……………………………

07. Full form of BWR is ………………………..

08. Full form of ECAI is ……………………..

09. Before a loan account of an MSME turns into a Non-Performing Asset

(NPA), Banks or creditors should identify incipient stress in the account
by creating three sub-categories under ……………………………..

10. Full form of SMA is …………………..

11. Full form of CAP is …………………………
12. Full form of RSETIs is ……………………….

13. Full form of FLCS is ……………………

14. FLCS are operated by…………………………………

15. Full form of SIDBI is …………………………..

16. ……………………….is the apex institution for financing, promotion and
development of micro, small and medium enterprises in India.

17. SIDBI is under the jurisdiction of Ministry of Finance , Government of

India headquartered at Lucknow and having its offices all over the
country.

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Page 14 of 62
 Unit 06 – Quest
Answer the following briefly.

01. Who is a Business Angel in connection with Finance to MSME ?

02. What is the meaning Factoring in Banking ?

03. What is Invoice Discounting ?

04. What is the difference between Factoring and Invoice Discounting ?

05. What is meant by Leasing ?

06. What is Venture Capital ?

07. What is Listing in Banking ?
08. What is Supply Chain Financing ?

09. What is the difference between factoring and supply chain finance?
10. What is Crowdfunding ?

11. What is National Equity Fund ?

12. What is the objective of Venture Capital by SIDBI Venture Capital Ltd.
(SVLC) ?
13. What is Debt Equity Ratio ?

14. What is Debt Service Coverage Ratio (DSCR) ?

15. Why we add back depreciation while calculating DSCR ?

16. What are Current Assets ?

17. What are Current Liabilities ?

18. What is Working Capital Gap ?

19. What is Net Working Capital ?

Page 15 of 62
20. What is Current Ratio ?

21. What is Quick Ratio ?

22. Relation between NWC and Current Ratio ?

23. What is Operating Cycle ?

24. What is the difference between Monitoring and Followup ?

25. What is the difference between Margin and Promoter‘s Contribution?

26. What is meant by Liquidity ?

XXX

Page 16 of 62
Fill up the Blanks

01. First Method of Lending gives Current Ratio of …………………

02. Second Method of Lending gives Current Ratio of …………………

03. ……………………Committee has recommended Simplified Turnover

Method for working capital assessment.

04. According to the …………………….. method, the working capital

requirement of the MSME unit is calculated at 25% of annual projected
turnover.
05. The Simplified Turnover method is applicable for financing MSME
units upto …………………..Crores and for others upto …………….Crores.
06. Full form of TUFS is ……………………………….

07. Full form of RR-TUFS is……………………………….

08. Full form of CETP is………………………….

09. If Bank extend credit to enable the borrower to procure current

assets – such type of Credit is known as ……………………………..
10. If Bank extend credit to enable the borrower to procure fixed assets –
such facility is known as ………………………………

11. Quick Ratio is also known as ………………..

12. ……………..is the most liquid asset.

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Page 17 of 62
 Unit 07 – MCQ

01. Revised Definition on MSME effective from

a. 01.06.2020 b. 02.10.2006

c. 01.07.2020 d. 01.08.2020

02. The investment in plant and machinery for priority sector

classification in case of small enterprise does not exceed ------- and
turnover does not exceed ------
a. Rs.100 Lacs , Rs.500 lacs b. Rs.10 Cr. and Rs.50 Cr.

c. Rs.50Cr, Rs.250 Cr. d. Rs.10 Cr, and Rs.500 lacs

03. The investment in plant and machinery for priority sector

classification in case of Micro enterprise does not exceed ------- and
turnover does not exceed ------
a. Rs.1Cr., Rs.500 lacs b. Rs.10 Cr. and Rs.50 Cr.
c. Rs.50 Cr, Rs.250 Cr. d. Rs.10 Cr, and Rs.500 lacs.

04. The investment in plant and machinery for priority sector

classification in case of Medium enterprise does not exceed ------- and
turnover does not exceed -----

a. Rs.100 Lacs , Rs.500 lacs b. Rs.10 Cr. and Rs.50 Cr.

c. Rs.50 Cr, Rs.250 Cr. d. Rs.10 Cr, and Rs.500 lacs

Page 18 of 62
05. The investment in Equipment for priority sector classification in case
of small enterprise does not exceed ------- and turnover does not exceed
------
a. Rs.100 Lacs , Rs.500 lacs b. Rs.10 Cr. and Rs.50 Cr.

c. Rs.50 Cr, Rs.250 Cr. d.Rs.10 Cr, and Rs.500 lacs

06. What is the classification criterion for MSME as per latest Central
Govt Notification?
a. Investment P&M b. Investment equipment
c. Annual Turnover d. Investment P&M and Equipment

e. Investment P&M/Equipment and Annual Turnover

07. For existing enterprise, calculation of investment in plant and

machinery or equipment will be linked to

a. Self – Declaration of promoter b. ITR of previous year

c. Certificate from CA d. any of above.

08. In case of a new enterprise, where no prior ITR is available, the

investment will be based

a. Self – Declaration of promoter b. ITR of previous year

c. Certificate from CA d. any of above.

09. The purchase (invoice) value of a plant and machinery or equipment,

whether purchased first hand or second hand, shall be taken into
account

a. Including GST b. excluding (GST),

c. Certificate from CA. d. any of above.

Page 19 of 62
10. The value of Plant and Machinery or Equipment for all purposes and
for all the enterprises shall mean
a. Written Down Value (WDV) b. Original Invoice value
c. Original invoice excluding GST d. Any of above

11. Calculation of investment in plant and machinery, cost of pollution

control, research and development, industrial safety devices, and such
other items as may be
a. Included b. Excluded
c. Specified by Govt. of India every year d. As per choice of customer

12. While calculating turnover of any enterprise for the purposes of

classification, we exclude
a. Export of goods b. Services
c. Export of goods or services both d. None of above.

13. Information as regards turnover and exports turnover for an

enterprise shall be linked to
a. Income Tax Act b. Central Goods and Services Act (CGST Act)
c. GSTIN. d. All the above.

14. In case of reverse-graduation of an enterprise, whether as a result of

reclassification or due to actual changes in investment in plant and
machinery or equipment or turnover or both, and whether the enterprise
is registered under the Act or not, the enterprise will continue in its
present category till
a. 31/03/2020 b. 31/03/2021
c. Closure of the financial year d. any of above.

Page 20 of 62
15. If there is shortfall in Priority sector-MSME advances target, banks
have to invest the funds maintained by

a. RBI b. NABARD

c. SIDBI d. SEBI

16. Which committee has recommended for Turn Over Method for
Working Capital Finance

a. P R Nayak b. Tandon

c .Ghosh d. Kalyana Sundaram

17. The Maximum loan may be sanctioned in case of Laghu Udayami

Credit Card scheme

a. Maximum loan limit is Rs.5 lakhs b. Maximum loan limit is Rs.10 lakhs
c. Maximum loan limit is Rs.2 lakhs d. Maximum loan limit Rs. 1 lakhs

18. As per BCSBI code for MSEs, when loan is adjusted by the borrower,
the security documents are to be returned within
a. 10 days b. 15 days.

c. 20 days d. 30 days

19. What is a Mudra Loan

a. A loan granted in Indian rupees b. A loan granted to MSE borrowers

c. A loan granted to non-farm enterprises engaged in trading, services,

or manufacturing not exceeding Rs.10 lacs

d. A loan granted to dairy industry

Page 21 of 62
20. Repayment in case of Mudra scheme for Term Loans
a. 3-5 years b. 5-8 years
c. 5-7 years d. 7-10 years

21. Under Stand Up India Scheme, Loan quantum is

a. Above 10 lacs to up-to 100 lacs b. up-to 10 lacs
c. 10 lacs d. up-to 100 lacs

22. No Collateral security should be insisted for MSE loans up-to Rs.
a. Rs. 10 lacs b. Rs. 5 lacs
c. Rs. 25 lacs d. Rs.200 lacs

23. Due diligence to be done in case of MSME units (eligible if the party
approaching the bank for the first time for above Rs. ------------ which
are eligible to be covered under CGTMSE.
a. Rs. 100 lacs and Rs.200 lacs b. above Rs 10 lacs
c. Rs25 lacs and upto Rs. 500 lacs d. Rs. 100 lacs and uptoRs. 500 lacs

24. Margin In case of Stand Up India scheme

a. 20% b.25%
c.15% d. 10%

25. In case of Start Ups and Early Stage Units, promoters should be
graduated from which of the following institutions
a. IITs b. IIMs
c. IISc d. Any of the above.

Page 22 of 62
26. In case of Start Ups and Early Stage Units, the age criteria is
a. 18 to 50 b. 20 to 50

c. 18 to 60 d. 18 to 65

27. Which types of loans can be considered under Start-ups and Early
Stage Units scheme

a. Working Capital b. Term Loans

c. Non Fund Based limits d. all the above

28. In case of Start Ups and Early Stage units, the Margin stipulated in
case of Term loan is

a. 20% b.25%

c. 30% d.15%

29. Maximum amount of loan in case Early stage units scheme is

a. Rs. 200 lacs b. Rs. 500 lacs

c. Rs. 100 lacs d. Rs. 50 lacs

30. In case of Start Ups and Early Stage Units, repayment of term loan is

a. Project cost up-to Rs. 100 lacs is 5 years

b. Project cost up-to Rs. 100 lacs is 7 years not exceeding 10 years
c. Project cost of above Rs. 100 lacs is 7 years up-to 10 years in
exceptional cases not exceeding 12 years

d. both b & c

Page 23 of 62
 Unit 08 – MCQ
01. The maximum loan can be granted under Weaver Mudra scheme

a. Rs. 5 lacs b. Rs.3 lacs

c. Rs. 1 lac d. Rs. 2 lac

02. Viability Parameters for CGTSME coverage loans of above Rs. 50

lakhs, the promoters contribution with a minimum of project cost

a. 25% b. 20% c. 50% d. 30%

03. Banks are not to insist up on collateral security on mandatory basis,

when amount of loan is to Micro and Small Enterprises

a. Upto 10 lacs b. Upto Rs. 50 lacs

c. Upto Rs. 100 lacs d. Upto Rs. 25 lacs

04. The Maximum amount of Coverage under CGTSME scheme is

a. Upto 10 lacs b. Upto Rs. 50 lacs

c. Upto Rs. 100 lacs d. Upto Rs. 200 lacs

05. Viability Parameters for CGTSME coverage loans of above Rs. 50

lakhs, the promoters contribution with a minimum of project cost

a. 25% b. 20% c. 50% d. 30%

Page 24 of 62
06. In case of recovery after receipt of claim from CGTMSE (Other than
Hybrid Security), the recovered amount is to be used for?

a. Not to be remitted to CGTMSE b. Remit entire amount to CGTMSE

c. Sharing on a prorate basis d. none of the above.

07. For invoking Guarantee claim, filing of suit is mandatory in respect of

CGTMSE guaranteed loans with aggregate liability of -------------------

a. Rs. 50,000/- & above b. Rs.1,00,000/-

c. Rs.5,00,000/- d. Rs.10,00,000/-

08. The unit eligible under interest subvention scheme for incremental
credit to MSME must have.

a. Valid Udyog Adhar Number (UAN) b. Valid GSTN number

c. a & b both d. none of a & b

09. A Laghu Udyami Credit Card is Valid for

a. 3 yrs. b. 5 yrs c. 2 years d. 18 months

10. CGFMU Stands for

a. Credit Guarantee fund for Mutual Understanding

b. Credit Guarantee fund for Memorandum of understanding

c. Credit Guarantee fund for Micro Units

d. None of these

Page 25 of 62
11. Under PMEGP, educational qualification is min. 8thstd pass for
setting up projects above Rs. lakh under business service sector.
a. Rs.25 lacs b. Rs. 15 lacs
c. Rs.10 lakhs d. Above Rs. 5 lacs

12. Full form of NCGTC

a. National Credit Guarantee Trust Company
b. National Cooperative Guarantee Trust Company
c. National Credit Guarantee Trustee company Ltd
d. National Common Guarantee Trust Company

13. The International MSME day is observed on

a. 27 June b. 27 July
c. 27 May d. none of above

14. As per CGTMSE guidelines: Coverage of Eligible accounts in CGTMSE

Portal and payment of Guarantee Fees to be completed
a. Within last day of subsequent Quarter to the Quarter of sanction.
b. within the last day of the Financial Year in which the loan is granted
c. Within last day of subsequent Month to the Month of sanction.
d. within two days of sanction of loan.

15. What is the full form of MSME?

(a) Micro, Small and Medium Enterprises. (b) Micro ,Small and Middle
Enterprises
(c) Micro and Small Enterprises. (d) Micro, Small or Medium Enterprises.

Page 26 of 62
16. The maximum loan can be granted under Weaver Mudra scheme
a. Rs. 5 lacs b. Rs.3 lacs

c. Rs. 1 lac d. Rs.2 lac

17. Which of the following does not match?

(a) Micro Enterprise- Turnover not more than Rs. 5 Crore

(b) Small Enterprise- Turnover not more than Rs. 50 Crore

(c) Small Enterprise- Turnover not more than Rs.250 crore

(d) Micro Enterprise – Turnover not more than Rs.10 crore.

(e) c & d

18. What is the full form of LUCC?

(a) Laghu Udyog Credit Card (b) Laghu Udyami Customer Card
(c) Laghu Udyami Credit Card (d) Laghu Udyami Customer Credit.

19. Maximum loan under Prime Minister Mudra Yojana Scheme is

(a) Rs. 2 lakhs. (b) Rs 10 lakhs

(c) Rs 5 lakhs (d) Rs 50000/-

20. CGTMSE is applicable for
(a) Retail Trade

(b) Medium Enterprises

(c) Micro and Small enterprises

(d) Agriculture Loans

(e) both a & c

Page 27 of 62
21. Which are the variants of PMMY?
(a) Sishu, Kishore and Tarun. (b) RuPay , VISA , Master
(c) Gold, Silver, Platinum (d) None of the above

22. What card is issued to the borrowers who are financed under PMMY
Scheme?
(a) RuPay Debit Cards. (b) Kisan Credit Cards.
(c) Artisan Credit Card (d) LaghuUdyami Credit card

23. Upto what amount of loan CGTMSE cover is available under MSE?
(a) Rs. 200 lakhs. (b) Rs. 150 lakhs.
(c) Rs. 100 lakhs (d) None of the above

24. CGTMSE cover for Retail Trade Segment is

(a) Up to Rs 100 lakhs per borrower (b)Rs 50 Lakh
(c) Rs 150 lakhs (d)No such restrictions

25. Which of the following is correct in case of ―PSB loan in 59 Minutes‖?

(a) it is a digital platform to get in principle sanction in 59 minutes.
(b) MSME loans can be sanctioned.
(c) Housing Loan, Personal Loans and vehicle loans can be sanctioned
(d) All the above

26. The portal created to resolve issue regarding delayed payment to

Micro and Small Enterprise is known as?
(a) MSME Court. (b) MSME Samadhan
(c) MSME Mitra (d) MSME Udyam
Page 28 of 62
27. MSME units are to be mandatorily registered under which portal?

(a) MSME Udyam (b) DIC

(c) Register of Societies (d) MSME Samadhan.

28. Full form of ―PM SVANidhi‖ is

(a)PM Road Vendor‘s AtmanirbharNidhi

(b)PM Small Vendor‘s AtmanirbharNidhi

(c)PM Site Vendor‘s AtmanirbharNidhi

(d)PM Street Vendor‘s AtmanirbharNidhi

29. Which of the following is not true in case of PM SVANidhi scheme for
street vendor?
(a)The scheme is lunched with an objective to help street vendors
affected by COVID 19 pandemic.

(b)Working Capital Demand loan Rs. 10000/- for first cycle.

(c)Loan tenure is 1 year with monthly instalment.

(d)Eligible for 7% interest subvention.

(e)The ceiling for subsequent cycle of loan is Rs.20000/-

30. What is the lock in period for claim under CGTMSE?

(a)12 months (b)18 Months (c)24 months

(d)36 moths (e) 6 moths

XXX

Page 29 of 62
 Unit 09 – MCQ
01. Banks are not to insist up on collateral security on mandatory basis,
when amount of loan is to Micro and Small Enterprises
a. Up to 10 lacs b. Up to Rs. 50 lacs
c. Up to Rs. 100 lacs d. Up to Rs. 25 lacs

02. The Maximum amount of Coverage under CGTSME scheme is

a. Up to 10 lacs b. Up to Rs. 50 lacs
c. Up to Rs. 100 lacs d. Up to Rs. 200 lacs

03. The MSME unit eligible for interest subvention scheme for
incremental credit availed incremental funded assistance
a. before 02.11.2018 b. on or after 02.11.2018
c. on or after 01.04.2019 d. none of above.

04. In case of recovery after receipt of claim from CGTMSE (Other than
Hybrid Security), the recovered amount is to be used for?
a. Not to be remitted to CGTMSE b. Remit entire amount to CGTMSE
c. Sharing on a prorate basis d. none of the above.

05. For invoking Guarantee claim, filing of suit is mandatory in respect of

CGTMSE guaranteed loans with aggregate liability of -------------------
a. Rs. 50,000/- & above b. Rs.1,00,000/-
c. Rs.5,00,000/- d. Rs.10,00,000/-

Page 30 of 62
06. The unit eligible under interest subvention scheme for incremental
credit to MSME must have.
a. Valid Udyog Adhar Number (UAN) b. Valid GSTN number
c. a & b both d. none of a & b

07. A Laghu Udyami Credit Card is Valid for

a. 3 yrs. b. 5 yrs
c. 2 years d. 18 months

08. Under PMEGP, educational qualification is min. 8th std pass for
setting up projects above Rs………. lakh under business service sector.
a. Rs.25 lacs b. Rs. 15 lacs
c. Rs.10 lakhs d. Above Rs. 5 lacs

09. What is the score under MSME credit scoring model to become
eligible for loan from our bank for the first time?
(a) 80% (b) 70% (c) 60%
(d) 50% (e) 40%

10. What is the fee payable for registration of MSME units under Udyam
portal?
(a) Rs.1000/- (b) Rs.5000/-
(c) No fee is payable for filing Udyam Registration. (d) Rs.2000/-

11. GECL stands for?

(a) Guaranteed Emergency Credit Loan (b) Guaranteed Emergency
Credit Limit
(c) Guaranteed Emergency Credit Line (d) Govt. Emergency Credit Line
Page 31 of 62
12. Guarantee Coverage is provided on NCGTC‘s B2B online portal called
a) SURGE b) SURE c) SONIA d) SUMO

13. What is the guarantee fee charged by NCGTC for GECL?

(a) 1% of loan amount (b) 2% of loan amount
(c) 0.5 % of loan amount (d) No guarantee fee

14. What is the full form of ZED?

(a) Zero Defect Zero Effect (b) Zero Effect Zero Defect
(c) Zero Defect (d) Zero Effect

15. CGTMSE extends Guarantee cover for Retail Traders for Credit facility
upto Rs.
(a) Rs 25.00 Lakh (b) Rs.50.00 Lakh
(c) Rs 75.00 Lakh (d) Rs 100.00 Lakh

16. Working Capital Loan is Sanction by bank for the Purpose of

(a) For Purchase of Machinery (b) For Purchase of Land for Business
(c) For Purchase of Fixed Assets for Business (d) Recurring Expenses in
the Business.

17. The Full Form of PMEGP Scheme is

(a) Prime Minister Employment Guarantee Program
(b) Prime Minister Employment Generation Program
(c) Prime Minister Employment Generation Process
(d) Prime Minister Employment Giving Program
Page 32 of 62
18. Mudra Loan is available in three Variant, Shishu, Kishor and Tarun.
What is the range of Shishu Loan?

(a) Upto Rs 50,000/- (b) Above Rs 5 Lakh up to 10.00 Lakh

(c) Above 2.00 Lakh up to 5.00 Lakh (d) >0.50 Lakh up to 5.00Lakh

19. CGFMU Provide Coverage of Guarantee Up-to

(a) Rs.5.00 Lakhs (b) Rs 7.50 Lakhs

(c) Rs 10.00 Lakhs (d) Rs 20.00 Lakhs

20. Mudra Loan is available in three Variant, Shishu, Kishor and Tarun.
What is the range of Tarun Loan?

(a) >1.00 Lakh up to 5.00 Lakh (b) >5 Lakh up to 10.00 Lakh
(c) >2.00 Lakh up to 5.00 Lakh (d) >0.50 Lakh up to 4.00Lakh

21. How Much Subsidy available in PMEGP Scheme for SC/ST Applicant
in Rural Areas

(a) 25% (b) 30%

(c) 35% (d) 40%

22. The Full Form of MUDRA

(a) Micro Unit Development & Refinance Agency

(b) Micro Unit Development in Rural Areas

(c) Micro Unit Development for Rural Areas

(d) None of the Above

Page 33 of 62
23. Under Stand up India Scheme, the Maximum Quantum of Loan is
(a) Rs.5.00 Lakh (b) Rs.7.50 Lakh
(c) Rs.10.00 Lakh (d) Rs.100.00 Lakh

24. How Much Subsidy available in PMEGP Scheme for SC/ST Applicant
in Urban Areas
(a) 25% (b) 30%
(c) 35% (d) 40%

25. In Small Enterprises, the Upper limit of Turn-over is

(a) Rs 5.00 Crore (b) Rs 10.00 Crore
(c) Rs 15.00 Crore (d) Rs 50.00 Crore

26. Under Stand up India Scheme, the Minimum Quantum of Loan is

(a) Rs.5.00 Lakh (b) Rs.7.50 Lakh
(c) Rs.10.00 Lakh (d) Rs.20.00 Lakh

27. Clay pot making industry is the best example for…… Enterprises
(a) Micro (b) Small
(c) Medium (d) Large

28. Full Form of SIDBI

(a) Small Industries Development Bank of India
(b) Small Indian Bank for Industrial Development
(c) Small Industries Development Board of India
(d) Small Industries Development Bureau of India

Page 34 of 62
29. Bank Sanction loans for the Purpose of
(a) Purchase of Machinery

(b) Purchase of Land for Business

(c) Purchase of Fixed Assets

(d) All of the Above

30. Difference between Stand Up India and Start Up India

a. Stand-Up India support existing borrowers, whereas Startup India is

only for borrowers who are in food procurement.
b. Stand-Up is applicable to South India, whereas Startup is applicable
for entire India.

c. Stand-Up India focuses on individuals who belong to the minority

groups of SC/ST and women categories. On the other hand, Startup
India focuses on companies that qualify as a startup and do not generate
a large turnover.

d. Stand-Up is applicable to Southern India, whereas Startup is

applicable for North India.
XXX

Page 35 of 62
Micro, Small & Medium Enterprises

(MSME)

Part II

KEY

Page 36 of 62
 Unit 01 – Key
Short Answers

01. Micro enterprise is an enterprise where the investment in plant and

machinery or equipment does not exceed ₹1 crore and turnover does
not exceed ₹5 crore.
02. A small enterprise is an enterprise where the investment in plant and
machinery or equipment does not exceed ₹10 crore and turnover does
not exceed ₹50 crore.

03. A medium enterprise is an enterprise where the investment in plant

and machinery or equipment does not exceed ₹50 crore and turnover
does not exceed ₹250 crore.

04. Though there is no specific target for MSME as such, target for Micro
Enterprises 7.5 % of ANBC or CEOBE, whichever is higher is fixed.

05. The Champions Control Rooms shall act as Single Window Systems
for facilitating the registration process and further handholding the
micro, small and medium enterprises in all possible manner.

06. No enterprise shall file more than one Udyam Registration. Any
number of activities including manufacturing or service or both may be
specified or added in one Udyam Registration.
07. Vide Notification dated 7th July 2021, RBI included Retail Trade and
Wholesale Trade as MSME for Priority Sector Classification (except
Vehicles and Motor Cycles) and they would be allowed to be registered
on Udyam Registration Portal.

08. Certified Credit Counsellors are institutions or individuals registered

with SIDBI who shall assist MSMEs in preparing project reports in a
professional manner which would, in turn, help banks make more
informed credit decisions.

Page 37 of 62
09. The objective of TReDS (Trade Receivables Discounting System) is to
create Electronic Bill Factoring Exchanges which could electronically
accept and settle bills so that MSMEs could encash their receivables
without delay. This will not only give them greater access to finance but
will also put greater discipline on corporates to pay their dues on time.

10. Financial Literacy Centres (FLCs) are set up by Banks to provide

assistance to the MSE entrepreneurs in regard to financial literacy,
operational skills, including accounting and finance, business planning
etc.

11. Rural Self Employment Training Institutes (RSETIs) have been set up
by various banks all over the country to conduct various short duration
(ranging preferably from 1 to 6 weeks) skill upgradation programmes to
help the existing entrepreneurs compete in this ever-changing global
market.

12. MSME Samadhaan is an online portal where MSMEs can file their
applications online regarding delayed payments.
13. MSME Sambandh is a Public Procurement Policy Monitoring Portal,
sharing factsheets about public procurement by Central Public Sector
Enterprises (CPSEs), and facilitating officer login to publish such
factsheets.

14. Udyami Mitra Portal is an enabling platform, aims to provide 'End to

End' solutions not only for credit delivery but also for the host of credit
plus services by way of handholding support, application tracking,
multiple interface with stakeholders (i.e. lenders, service providers,
applicants).
15. Small Industries Development Bank of India (SIDBI) which is the
Principal Financial Institution for Promotion, Financing and Development
of the Micro, Small and Medium Enterprise (MSME) sector as well as for
co-ordination of functions of institutions engaged in similar activities in
the country.

Page 38 of 62
Fil up the Blank

01. 01-07-2020.

02. Composite ; Investment and Turnover

03. Udyam Registration Certificate

04. Goods and Services Tax Identification Number

05. Income Tax Return (ITR) of the previous years.

06. Self-declaration of the Promoter of the Enterprise

07. All tangible assets, other than land and building, furniture and
fittings.

08. Exports of goods or services or both.

09. Nayak Committee

10. Single Window

11. A Cluster-based Approach

12. Rs 10 lakh
13. ₹200 lakh
14. Rs 7.5 crore

15. Rural Self Employment Training Institutes

@@@

Page 39 of 62
 Unit 02 – Key
Short Answers

01. If the borrower requires handholding support, that borrower will be

considered as Trainee Borrower.

02. If the borrower does not require any handholding support then that
borrower will be considered as Ready Borrower.

03. Telecommunications Consultants India Limited (TCIL) is acting as

Implementing Agency (IA) and the core component of the Digital MSME
Scheme i.e. Cloud Computing will be implemented by TCIL, under the
overall directions of O/o Development Commissioner MSME.

04. The SFURTI Scheme would cover three types of interventions namely
‗soft interventions‘, ‗hard interventions‘ and ‗thematic interventions‘.

05. Soft Interventions under the project would consist of activities such
as General awareness, counselling, motivation and trust building; Skill
development and capacity building for the entire value chain different
skills need to be imparted;

06. Hard Interventions will include creation of following facilities -

Multiple facilities for multiple products and packaging wherever needed;
Common facility centres (CFCs); Raw material banks (RMBs)

07. Thematic interventions primarily include - Brand building and

promotion campaign; New media marketing; e-Commerce initiatives;
Innovation; Research & development initiatives; and Developing
institutional linkages with clusters.
08. Under SFURTI Scheme, Khadi & Village Industries Commission (KVIC)
shall be the Nodal Agencies (NAs) for Khadi and Village Industry clusters.

09. Under SFURTI Scheme, Coir Board (CB) shall be the Nodal Agencies
(NAs) for Coir based clusters.

Page 40 of 62
10. A cluster is a group of enterprises located within a contiguous area or
a value chain producing same/similar products/complementary
products/services, linked together by common physical infrastructure
facilities.

11. Micro and Small Enterprises-Cluster Development Programme (MSE-

CDP) scheme aims at addressing the needs of the industries, through
well defined clusters and geographical areas.

12. A special purpose vehicle (SPV) is a subsidiary company that is

formed to undertake a specific business purpose or activity. SPVs are
commonly utilized in certain structured finance applications, such as
asset securitization, joint ventures, property deals, or to isolate parent
company assets, operations, or risks.
13. Examples for Common Facility Centre (CFC) are Design Centres,
Testing Facilities, Training Centre, Marketing Display/Selling Centre,
Common Logistics Centre, Common Raw Material Bank/Sales Depot, etc.
14. ASPIRE aims to impart the necessary skill set required for setting up a
business enterprise and assist during their critical period to ensure self-
sustainability. This scheme also facilitates the available market linkages
to the entrepreneurs. ASPIRE was launched to set up a network of
technology centres and to set up incubation centres to accelerate
entrepreneur-ship and also to promote start-ups for innovation in agro-
industry.

15. INSPIRE program aims to attract talent to the excitement and study
of science at an early age, and to help the country build the required
critical resource pool for strengthening and expanding the S&T system
and R&D base. It is a program with long term foresight. (S&T – Science
& Technology ; R&D – Research & Development)

Page 41 of 62
Fil up the Blank

01. Udyami Mitra Portal

02. Udyami Mitra Portal ; Stand Up India Loan Scheme

03. Udyami Mitra Portal

04. Cloud Computing

05. Udyog Aadhaar Memorandum (UAM) Number

06. Udyog Aadhaar Memorandum

07. Women, Divyang, SC/ST.

08. Infrastructure Support and Promotion of Industries and Rural

Enterprises
09. Scheme of Funds for Regeneration of Traditional Industries

10. Micro and Small Enterprises-Cluster Development Programme

11. Micro & Small Enterprises Cluster Development Programme

12. Special Purpose Vehicles

13. A Scheme for Promotion of Innovation, Rural Industries and
Entrepreneurship

14. National Small Industries Corporation

15. National Initiative for Developing and Harnessing Innovations -
Entrepreneurs-in- Residence (EIR) Program

@@@

Page 42 of 62
 Unit 03 – Key
Short Answers
01. NDS-OM (Negotiated Dealing System-Order Matching system) is a
screen based electronic anonymous order matching system for
secondary market trading in Government securities owned by RBI.

02. The main objective of Livelihood Business Incubation is setting up

business incubators to incubate, provide skill development training to
youth, impart entrepreneurship and facilitate funding for empowering
the entrepreneurs to set up their business enterprises.

03. The objective of NMCP is to develop global competitiveness among

Indian MSMEs.

04. The main objective of the TEQUP Scheme is to sensitise the Indian
MSMEs to upgrade their manufacturing processes towards the usage of
Energy Efficient Technologies (EET).

05. Khadi & Village Industry Commission (KVIC) is the Implementing

Agency of PMEGP at National Level.

06. Any area with population not exceeding exceeds 20000 persons is
called as Rural area.

07. Maximum Project cost Rs.25 lakhs for manufacturing sector and Rs.10
lakhs for service activities.

08. Turn Around Time (TAT) under PMEGP is within 30 days for loan
quantum above Rs. 5 lakhs and within 15 days for loan quantum
uptoRs.5 Lacs.

09. For loans under PMEGP, Online applications will be mandatory and
no manual applications will be allowed.

10. Subsidy (as a percentage of project cost) under PMEGP Scheme for
General Category: Urban 15%, Rural 25%. For Special category
beneficiary ) Urban: 25%, Rural 35% .
Page 43 of 62
11. Margin Norms for loans under PMEGP are - General Category
minimum 10% of project cost and Special category beneficiary: 5%of
project cost.

12. In case of PMEGP, Special category means persons belonging to

SC/ST/OBC/ Minorities /Women, Ex SM, OPH, NER, Hill & Border areas.

13. Repayment Period of loan under PMEGP is 3 to 7 years, with

repayment holiday up to 6 months.

14. Area Target under PMEGP is 50% should be Rural Area Projects.

15. Social Target for loans under PMEGP - SC-15%, ST-7.5 %,Women-30
% Minority -5 %

XXX

Page 44 of 62
Fill up the Blank
01. Gilt Account Holders

02. International Crops Research Institute for the Semi-Arid Tropics

03.The Indian Council of Agricultural Research

04. Livelihood Business Incubation

05. Technology Business Incubation

06. National Manufacturing Competitiveness Programme

07. Technology and Quality Upgradation Scheme

08. Credit Linked Capital Subsidy Scheme for Technology Upgradation
Scheme

09. Capital expenditure

10. New Projects.

11. 8th standard.

12. 2 to 3 weeks

13. Cost of land

14. Capital Expenditure
15. Not to exceed Rs.1 lakh in plain areas ; Rs.1.5 lakhs in Hill Areas.

@@@

Page 45 of 62
 Unit 04 – Key
Short Answers

01. The objective of the CLCSS Scheme is to facilitate technology up-

gradation in MSEs by providing an upfront capital subsidy of 15 per cent
(on institutional finance of up-to Rs 1 crore availed by them) for
induction of well-established and improved technology.

02. PMEGP is a Central Sector Scheme administered by the Ministry of

Micro, Small and Medium Enterprises (MoMSME).
03. It is True - PMEGP Scheme is operational both in Rural and Urban
Areas.
04. It is true. Self Help Group is eligible for getting financial assistance
under PMEGP.

05. It is False. Finance under PMEGP is only for new projects.

06. On receipt of Margin Money (subsidy) in favour of the loanee on the

same day, branch should keep it in Zero Interest Term Deposit for a
period of three years (Lock-in period) in the name of the
beneficiary/Institution, duly noting Bank‘s lien on the deposit to the loan
account in the CBS system.

07. The objective of the Stand-Up India scheme is to facilitate bank loans
between Rs 10 lakh and Rs 1 Crore to at least one Scheduled Caste (SC)
or Scheduled Tribe (ST) borrower and at least one woman borrower per
bank branch for setting up a greenfield enterprise.

08. The Target Group under Stand-Up India Scheme is SC/ST and/or
Women entrepreneurs setting up new enterprises are eligible for availing
loans under Stand-Up India Scheme.

09. Minimum amount of loan under Stand-up India Scheme is Rs 10

lakhs.

Page 46 of 62
10. Maximum amount of loan under Stand-up India Scheme is Rs 100
lakhs.

11. Main objective of Start-up India Campaign is to support

entrepreneurs, and transforming India into a country of job creators
instead of job seekers.

12. Stand-Up India Scheme is intended to support SC/ST/Women

entrepreneurs to set up a green field projects through bank branches in
India, while Start Up India Scheme aims to boost innovative and
technology led enterprises for new/existing enterprises.
13. The Start-up India scheme is based majorly on three pillars which are
mentioned below:
a) Providing funding support and incentives to the various start-ups of
the country.

b) To provide Industry-Academia Partnership and Incubation.

c) Simplification and Handholding.

14. Start-up India Team, reports to the Department for Industrial Policy
and Promotion (DPIIT).
15. PM SVANidhi is a Scheme of Ministry of Housing & Urban Affairs
(MoHUA) for sanction of working capital loan upto Rs. 10,000 to street
vendors through the Lending Institutions.

16. The CGS-PMS is a portfolio guarantee provided by CGTMSE to

Member Lending Institutions (MLIs) for facilitating sanction of Working
Capital (WC) loan of upto Rs.10,000/- to individual street vendors.

17. CGTMSE will not charge any guarantee fee under the PM SVANidhi
Scheme.

18. It is True. Initiation of legal proceedings is not necessary for loans

under PM SVANidhi Scheme.

XXX

Page 47 of 62
Fil up the Blank

01. 10 Working Days

02. Composite loan (combination of term loan and working capital)

03. 7 years

04. CGFSIL of NCGTC.

05. Handholding Support.

06. Department for Industrial Policy and Promotion

07. 200% of the earlier loan, subject to a ceiling of Rs 20,000/- (Rs
Twenty Thousands only).

08. 1 year.
09. Graded Guarantee Cover ; Portfolio Basis.

10. Member Lending Institute

11. 1 year from the NPA date.

12. UK Sinha
@@@

Page 48 of 62
 Unit 05 – Key
Short Answers

01. CGTMSE Scheme for loans under PM SVANidhi (CGS-PMS) has a

provision of Graded Guarantee Cover for the loans sanctioned, as
indicated below, which will be operated on portfolio basis:

a) First Loss Default (Up to 5%): 100%

b) Second Loss (beyond 5% up to 15%): 75% of default portfolio

c) Maximum guarantee coverage will be 15% of the year portfolio

02. The credit rating by external rating agencies is not compulsory from
regulatory capital perspective, if the maximum aggregate exposure to
one counterparty does not exceed the threshold limit of ₹7.5 crore,
subject to meeting certain other conditions.

03. In India, CRAs are regulated by The Securities and Exchange Board of
India (SEBI).
04. The options under CAP by the Committee may include:
a) Rectification;
b) Restructuring;

c) Recovery
05. RSETIs conduct various short duration (ranging preferably from 1 to 6
weeks) skill upgradation programmes to help the existing entrepreneurs
compete in this ever-changing global market.

06. Through FLCs, banks provide assistance to the MSE entrepreneurs in

regard to financial literacy, operational skills, including accounting and
finance, business planning etc. Also, they conduct target specific financial
literacy camps wherein one of the target groups identified is MSEs.

Page 49 of 62
07. Based on Daheja Committee (Chairmanship of V.T. Dehejia, 1968 )
the total cash credit requirement is divided into two parts namely (i)
Hard core components representing the minimum level of raw materials,
finished goods and stores which the industry requires for maintaining a
given level of production and which is made on a formal term loan basis
and (ii) Short-term components representing the fluctuating part of
current assets.
08. The important recommendations of the Chore Committee
(chairmanship of Shri K.B. Chore, 1979) are
a) The banks should obtain quarterly statements in the prescribed format
from all borrowers having working capital credit limits of Rs. 50 lacs and
above.
b) The banks should fix separate credit limits for peak level and non-
peak level, wherever possible.
c) Banks should take steps to convert cash credit limits into bill limits for
financing sales.
09. Main recommendations of Tandon Committee (Chairmanship of Mr.
P. L. Tandon , 1974) related to norms for inventory and receivables, 3
Methods of Lending, follow ups & information system.
10. For the purpose of calculating MPBF of a borrowing unit, all the three
methods (recommended by Tandon Committee) adopted equation:
Working Capital Gap = Gross Current Assets — Accounts Payable ---….
as a basis which is translated arithmetically as follows:
11. As per Tandon's 'first method' of lending, the borrower must arrange
25% of Working Capital Gap (WCG) as a margin.
12. As per Tandon‘s Second Method of Lending, the borrower has to
arrange 25% of Total Current Assets (TCA) as margin.
13. As per Tandon‘s Third Method of Lending the borrower should
contribute from long-term sources to the extent of core current assets
(Fixed Current assets) and 25% of the balance of the current assets. The
remaining of the working capital gap can be met from bank borrowings.

Page 50 of 62
Fill up the Blank

01. Town Vending Committee

02. Letter of Recommendation

03. Urban Local Bodies

04. Payback abilities of individuals or companies.

05. Numerical representation of the creditworthiness of an individual or a

business.

06. Small and Medium Enterprises Rating Agency

07. Brickwork Ratings

08. External Credit Assessment Agency

09. Special Mention Account category

10. Special Mention Account

11. Corrective Action Plan

12. Rural Self Employment Training Institutes

13. Financial Literacy and Consultancy Support
14. Scheduled commercial Banks including RRBs

15. Small Industries Development Bank of India

16. Small Industries Development Bank of India (SIDBI)

17. SIDBI is under the jurisdiction of Ministry of Finance , Government of

India headquartered at Lucknow and having its offices all over the
country.
@@@

Page 51 of 62
 Unit 06 – Key
Short Answers
01. A business angel is a wealthy individual willing to take the risk of
investing in SMEs.

02. Factoring is a type of finance in which a business would sell its

accounts receivable (invoices) to a third party to meet its short-term
liquidity needs. Under the transaction between both parties, the factor
would pay the amount due on the invoices minus its commission or fees.

03. Invoice discounting enables businesses to gain instant access to cash

tied up in unpaid invoices and tap into the value of their sales ledger. It's
simple: when you invoice a customer or client, you receive a percentage
of the total from the lender, providing your business with a cash flow
boost.

04. Whereas invoice discounting is a loan secured against your

outstanding invoices, invoice factoring companies actually purchase the
unpaid invoices outright. This is an important difference because it
provides factoring companies with credit control, which enables them to
deal with customers directly.
05. A lease is a contract outlining the terms under which one party
agrees to rent an asset—in this case, property—owned by another party.
It guarantees the lessee, also known as the tenant, use of the property
and guarantees the lessor (the property owner or landlord) regular
payments for a specified period in exchange.

06. Venture capital (VC) is a form of private equity and a type of

financing that investors provide to startup companies and small
businesses that are believed to have long-term growth potential.
Venture capital generally comes from well-off investors, investment
banks, and any other financial institutions.

Page 52 of 62
07. In corporate finance, listing refers to a particular company's shares
listed on a stock exchange. A listed security is a stock, bond, derivative,
exchange-traded fund, mutual fund or other security that trades on a
national exchange.

08. Supply chain finance is a set of tech-based business and financing

processes that lower costs and improve efficiency for the parties involved
in a transaction. Supply chain finance works best when the buyer has a
better credit rating than the seller and can thus access capital at a lower
cost.

09. Whereas invoice factoring requires a supplier to sell its receivables to

a third-party for a discounted rate, supply chain finance is a financing
solution that's initiated by the buyer, giving suppliers the opportunity to
receive early payment for their goods/services.
10. Crowdfunding is a financing method that involves funding a project
with relatively modest contributions from a large group of individuals,
rather than seeking substantial sums from a small number of investors.

11. SIDBI has set up the national equity fund scheme which provides the
equity type assistance to entrepreneurs for setting up new projects
which can be classified as MSME (SSI) units.
12. The objective of the scheme is to work for best returns by investing
in deserving entrepreneurial teams using a combination of capital,
strategic mentoring, skills and our vast network of relationships. Under
this scheme Investment is made by way of equity and equity type
instruments.
13. Debt Equity Ratio (DER) is the ratio between debt and equity. i.e.,
debt / equity. It indicates the relation-ship between the loan capital and
capital raised by way of equity. In the numerator we take only Long Term
Outside Liabilities as Debt.

Page 53 of 62
14. Debt Service Coverage Ratio (DSCR) is a ratio of cash available to
cash required for debt servicing. In other words, it is the ratio of the
sufficiency of cash to repay the debt. It measures a company‗s ability to
service its current debts by comparing its net operating income with its
total debt service obligations.

15. Depreciation is a non-cash charge and it does not reflect any actual
out go of funds. Since depreciation does not reflect any actual outgo of
funds it is added back to the operating profit in order to arrive at the real
funds from operation.

16. Current assets are short-term assets, such as cash or cash

equivalents, that can be liquidated within a year or during an accounting
period.
17. Current liabilities are a company's short-term liabilities that are
expected to be settled within a year or during an accounting period.
18. The working capital gap in simple words is the difference between
total current assets and total current liabilities other than bank.

19. Net working capital (NWC) is the difference between a business'

short-term assets and its short-term debts and liabilities.
20. The current ratio is a liquidity ratio that measures a company's ability
to pay short-term obligations or those due within one year.

Formula ---Current Ratio = Current Assets / Curent Liabilities.

21. The quick ratio measures a company's capacity to pay its current
liabilities without needing to sell its inventory or obtain additional
financing. The quick ratio is considered a more conservative measure
than the current ratio, which includes all current assets as coverage for
current liabilities.

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22. Relation between NWC and Current Ratio ……………..>

If NWC is positive (Current Assets are more than Current Liabilities), then
Current Ratio will be more than 1.
If NWC is Negative (Current Assets are less than Current Liabilities), then
Current Ratio will be less than 1.

If NWC is Zero (Current Assets are equal to Current Liabilities), then

Current Ratio will be 1
23. Operating Cycle (OC) refers to the days required for a business to
receive inventory, sell the inventory, and collect cash from the sale of the
inventory. This cycle plays a major role in determining the efficiency of a
business.

24. We use both the words ―Monitoring and ―Followup‖ as synonyms.

Though they give similar meaning, there is subtle difference between the
two words. Monitoring gives more emphasis on ensuring proper end-use
and follow-up gives more emphasis on timely recovery of advances.

25. Margin is different from the promoter's contribution. While the

promoter's contribution is calculated with reference to project as a
whole, margin is in respect of each asset acquired out of each loan.
26. Liquidity refers to the efficiency or ease with which an asset or
security can be converted into ready cash without affecting its market
price.

XXX

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Fill up the Blank

01. First method of lending gives a current ratio of only 1:1.

02. Second method of lending gives a minimum current ratio of 1.33:1.

03. Nayak Committee has recommended Simplified Turnover Method for

working capital assessment.

04. According to the Simplified Turnover method, the working capital

requirement of the MSME unit is calculated at 25% of annual projected
turnover.
05. The Simplified Turnover method is applicable for financing MSME
units upto Rs.5 crores and for others upto Rs.2 crores.
06. Technology Upgradation Fund Scheme

07. Revised Restructure Technology Upgradation Fund Scheme

08. Common Effluent Treatment Plant

09. Working Capital Loan.

10. Term Loan.
11. Acid Test Ratio
12. Cash

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 Unit 07 – MCQ Key

01 02 03 04 05 06 07 08 09 10
c b a c b e b a b a

11 12 13 14 15 16 17 18 19 20
b c d c c a b b c c

21 22 23 24 25 26 27 28 29 30
a a b b d b d a b d

@@@

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 Unit 08 – MCQ Key

01 02 03 04 05 06 07 08 09 10
d d a d d b a c a c

11 12 13 14 15 16 17 18 19 20
d c a a a d e c b e

21 22 23 24 25 26 27 28 29 30
a a a a d b a d e b

@@@

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 Unit 09 – Key

01 02 03 04 05 06 07 08 09 10
a d b b a c a d c c

11 12 13 14 15 16 17 18 19 20
c a d a d d b a c b

21 22 23 24 25 26 27 28 29 30
c a d a d c a a d c

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 Daily material on Banking, Finance & Insurance

Sharing knowledge for CAIIB, JAIIB and CCP

Exams

where I am sharing
information related to Banking, Finance &
Insurance daily.
BLOG LINK

where I am sharing one fancy word

in English daily and Jokes in English once in 10 days (on
5th, 15th and 25th of every month)
BLOG LINK

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 List of Books compiled by The Banking Tutor
So far the following Books are compiled by me which can be shared by any one free
of cost, without any permission from me or without any intimation to me.
01 Banking Jargon - Vol 01 18 Bankers and Court Verdicts-Vol 01

02 Alerts - Vol 01 19 Inland Bank Guarantees

03 Forex Vol-1 20 The Dirty Dozen

04 Banker and Awareness of Legal 21 SPA (Not related to Banking)

Enactments Vol 1
05 Banker and Fin Statements 22 Banks - Supporting Agencies - Vol 1

06 Confusables Vol. 1 23 Banking Jargon volume 4

07 Banking Jargon Vol 2 24 Banks - Supporting Agencies - Vol 2

08 ABC 25 Banks-supporting Agencies - Vol 3

09 The Can Support_2020 26 JAIIB Notes - PPB

10 The Core Support_2020 27 JAIIB Notes – LRB

11 The Sundries_2020 28 JAIIB Notes – AFB

12 The Soft Support 29 CAIIB Notes – ABM

13 Management of WCC Limits 30 CAIIB Notes BFM

14 The Notes_2021 31 Confusables Vol 3

15 Confusables _Vol 2 32 Banking Jargon Vol 5

16 Banking Information 33 The banking regulations & business laws

17 Banking Jargon Volume 3 34 Accounting & finance for Bankers

35 Bank Financial Management 36 Retail Banking & Wealth Management

37 Concepts for Credit Professional 38 Advance Business Management

39 Principles & Practice of Banking 40 Indian Economy & Indian Financial System

41 Concepts for Credit Professional 42 Less Known Forex Terminology

43 KYC & AML Notes 44 Treasury Management Objective Type
45 Treasury Management Notes 46 Indian Economy & Indian Financial System

47 MSME -Notes 48 MSME – Objective Type

Page 61 of 62
 The Banking Tutor

By Sekhar Pariti , Ex Banker

+91 94406 41014

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