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Micro Small & Medium Enterprises The Government of India passed in June 2006 an act regarding the Micro

, Small , and Medium Enterprises . The Micro , Small and Medium Enterprise Development Act ,2006 (MSMEDA ) The Act accomplishes many long -standing goals of the government and stakeholders in the MSME sector . Definition of MSME

The Act decisively defines the MSMEs by the level of by Plant and Machinery (P&M ) investment. The categorization also makes allowances for the inherently smaller investments of Service enterprises. The new definition has expanded the P&M limits ; now each enterprise level encompasses larger investments than before . The new categorization is as follows : Micro Manufacturing : P&M* Less than Rs 25 lacs Micro Service : Equipments* Less than Rs10 lacs

Small Manufacturing : Less than Rs 5 crore Small Service : Less than Rs 2 crore Medium Manufacturing : Less than Rs 10 crore Medium Service : Less than Rs 5 crore *Original cost excluding Land and building and furniture, fittings and such items, specifically excluded Loans not exceeding Rs. 20.00 Lacs granted to Retail Trade would henceforth be part of Small Service Enterprise under MSME. CLASSIFICATION OF MSME WITHIN THE PRIORITY SECTOR The Micro and Small Enterprises (manufacturing and service) will be Classified under Priority Sector. The Micro and Small (Service) enterprises shall include Small Road and Water Transport Operator, Small Business, Professional and Self-employed Persons and all other service enterprises. Retail Trade will not be classified under Micro and Small enterprises (service sector). Small Road and Water Transport Operator (SRWTO), Small Business, Professional and Self Employed Persons (PSEP) will be classified as per the original cost of equipments either under Micro or Small Enterprises (service) sector instead of earlier classification/ definition of 10 vehicles incase of SRWTO and working capital and /or Term loan limits incase of Small Business/Professional and Self employed persons. CLASSIFICATION OF MSME WITHIN THE PRIORITY SECTOR

If the following Storage Units, registered as SSI Unit/Micro or Small Enterprises, the loans granted to such units may be classified as Small Enterprises Sector : Loans for construction and running of storage facilities(warehouse,market yards, godowns and silos), including Cold Storage Units designed to store agriculture produce/ products, irrespective of location.

Lending to Medium Enterprises will not be included under Priority Sector.

Manufacturing Activities **

Medical Equipment and Ayurvedic Product Composite unit of Bacon Processing and Piggery Farm* Tobacco Processing Beedi/Cigarette manufacturing and other tobacco Products Extraction of Agave Spirit from Agave juice ; (imported medicinal plant ) extraction of Agave Manufacture of Bio-Fertilizer * Piggery Farm without bacon processing as this is a farming activity. ** The activity of Bee-Keeping being farming allied activity.

1. DIRECT FINANACE: i. All loans granted to Small Enterprises including Micro Enterprises (both Manufacturing and Services) will be classified under Direct Finance to Micro and Small Enterprises Sector. ii. Khadi and Village Industries Sector (KVI): All advances granted to units in the KVI sector, irrespective of Sector their size of operation, location and amount of original investment in Plant and Machinery, will be eligible for consideration under the Sub Target (60 percent) of the Small Enterprises segment within the Priority Sector. 2. INDIRECT FINANCE 1. Indirect Finance to the Small (manufacturing as well as service) Enterprises sector will include credit to:i. Persons involved in assisting the decentralized sector in the supply of inputs to and marketing of outputs of artisans, village and cottage industries. ii. Advances to cooperatives of producers in the decentralized sector viz., artisans, village and cottage industries. iii. Existing investments as on 31st March, 2007, made by banks in special bonds issued by NABARD with the objective of financing exclusively non-farm sector may be classified as Indirect fianc to Small Enterprise sector till the date of maturity of such bonds of March 31, 2010, whichever is earlier. Investment in such special bonds made subsequent to March 31, 2007 will, however, not be eligible for such classification . iv. Loans granted by banks to NBFCs for on lending to Small and Micro enterprises (manufacturing as well as service). CALCULATION OF INVESTMENT FOR PLANT & MACHINERY In case of MSME advances, if the branches are unable to assess original investment criteria, a certificate with regard to investment in plant and machinery / equipment should be obtained from a Chartered Accountant. In calculating the value of plant and machinery for the purpose of calculating investment limit, the original price thereof, irrespective of whether the plant and machinery are new or second hand shall be taken into account. In case the Branch is unable to assess the original investment criteria, a certificate with regard to investment in plant/machinery/equipment etc. would be obtained from a Chartered Accountant. The investment in establishing of wind mill/s to generate electricity for captive consumption or partly for captive consumption and remaining power to sell to Electricity Boards/others are to be included in the investment in plant and machinery.

Processing of Loan Application Application Format: Revised Simplified Loan Application Form prescribed by IBA alongwih check list and undertaking of the applicant, will be applicable for Micro and Small Enterprises (MSEs) For loan beyond Rs.25Lacs, branches may obtain additional information from the borrower, as deemed necessary, as incorporated in the checklist enclosed to the loan application form. Loan Application Form (ADV-Comm) and Checklist enclosed will be applicable for Medium Enterprises only.

Fair Practice Code for Lenders Liabilities

Before handing over the Application Forms to applicant, the modification / addition as applicable under guidelines on Fair Practice Code for Lenders Liabilities will be complied as under: (a) Information regarding Processing Fee, Service Charges, and Refund etc. will be annexed as a part of application form. (b) An undertaking to be obtained from the prospective borrower while accepting application that he has been briefed about and convinced about the charges, bank will levy on pre/post sanction of the loan. 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.

Disposal of Applications: In case of Loans up to Rs.25000/: Within 2 weeks In case of Loans above Rs.25000/: Within 4 Weeks (Provided the loan applications are complete in all respects and accompanied by a 'check list' enclosed to the application form) Register of Receipt/Sanction/Rejection of Applications: a. A register should be maintained at branch wherein the date of receipt, sanction / disbursement ,rejection with reasons , should be recorded. The register should be made available to facilitate verification by the Banks officials including Zonal Manager during visit to the branch. b.Branch Manager may reject application (except in respect of SC/ST). In the case of proposals from SC/ST, rejection should be done at a level higher than Branch Manager. c.The reason for rejection will be communicated to the borrower in line with stipulation mentioned in the Fair Practice Lenders Code. Processing of Loan Application Photographs of Borrowers While there is no objection to take photographs of the borrowers, for the purpose of identification, branches themselves should make arrangements for the photographs and also bear the cost of photographs of borrowers falling in the category of Weaker Sections. It should also be ensured that the procedure does not involve any delay in loan disbursement. TYPES OF CREDIT FACILITIES The Bank may provide all types of funded and non funded facilities to the borrower under this sector viz, Term Loan, Cash Credit, Letter of Credit, Bank guarantee, etc. A Composite Loan with maximum limit upto Rs.1.00 crore may be considered by bank to enable the Micro and Small Enterprises {both for manufacturing and service sector} to avail of their working capital and Term loan requirement through Single Window.

(A) FUNDED 1. Upto Rs.25000 2. Above Rs.25000 3.

Margin on Book Debts Exports Bills backed by L/C confirmed by First Class Bank (B) NON-FUNDED Letter of Credit (DP) 5% Letter of Credit (DA) 10% Bank Guarantee 20% Margin in case of Non Funded facility can be reduced upto 5% by the GM(PSC) at HO and below 5% by the Chairman and Managing Director or Executive Director(in absence of C&MD).

Minimum Margin NIL 25% 20% (Under Turnover Method) 20-25% NIL

Security Aspects 1. No collateral or third party Guarantee for advances up to Rs.5.00 Lacs. 2. In case of good track record of the borrower, Collateral Security and or third party guarantee may be waived beyond Rs. 5.00 Lacs but up to Rs.100.00 Lacs, where guarantee cover of 75% upto Rs.50.00 lacs and 50% thereafter, of the amount of default is available from CGTMSE. The Guarantee Coverage has increased to 85% of credit facility upto Rs.5 Lacs sanctioned to Micro Enterprises w.e.f. 02.01.2009. Women Entrepreneurs/ units located in North East Region, including Sikkim (Other than Micro enterprises) will be eligible for coverage of 80% upto Rs.50.00 lacs instead of 75% in other cases. The CGTMSE Commission/ Annual fee will be borne by the Borrower. Security Aspects In case of Loan up to Rs.25000.00, minimum asset coverage ratio would be 1:1. However, in case of schematic lending/specified scheme, the guidelines as applicable will be complied with. In case of Loan above 25000, a minimum asset coverage ratio must be 1.1:1 (excluding Margin stipulated). In case of loan accounts not covered under CGTMSE scheme i.e. above Rs.100 lac, it may be explored as far as practicable that the credit facilities/loans extended, are supported by collaterals in the form of liquid securities or fixed assets, immovable properties, based on the credit risks perception of the borrower. However, availability of collateral security shall not be the mere criterion for arriving at credit decision. Collateral security shall not be insisted upon in those cases where the RBI directives specifically advised the banks not to insist on obtaining collateral security /third party guarantee. Exposure-wise rating modules for SMEs are as follows Credit Exposure Up to Rs.10.00 Lacs (Existing & New Units ) Above Rs.10.00 Lacs up to Rs.1.00 Cr :Existing Unit New Unit Above Rs.1.00 Cr to less than Rs.5.00 Cr :Existing Unit New Unit
Rs.5.00 Cr & above (Existing & New Units)

Rating Module CRG-1

CRG-2 CRG-4

CRG-7A CRG-7B
Risk Assessment Module (RAM CRISIL)

In case RAM module is not operationalised :Existing Unit New Unit Methodology for calculation of Bank Finance Working Capital Finance: Working capital credit limits to Micro, Small and Medium Enterprises in individual cases up to Rs.5.00 Crore (Manufacturing sector) and upto Rs.2.00 Crore (Service sector) will be computed as per existing guidelines on the basis of minimum 20% of projected annual turnover. However in case of borrower applying for working capital limit higher or lower than the working capital computed on the basis of turnover method shall be assessed as per actual requirement.

CRG-7A CRG-7B

ii) For assessment of the working capital requirement for borrowers falling within the band of above Rs.5.00 crores and below Rs.10.00Crore (Manufacturing Sector) and above Rs.2.00 Crore and below Rs.10.00 Crore (Service Sector) the traditional method of computing MPBF as per second method of lending will continue. If any of the borrower falling in this band intends to shift to cash budget system, the same may be accepted. Methodology for calculation of Bank Finance

For borrowers having working capital limit of Rs.10.00 crores and above, Cash Budget System will be applicable.. However, if a borrower is desirous to continue with the existing MPBF system the Bank may accept the request. If any of the borrowers falling in this band intends to shift to cash budget system, the same may be accepted. Methodology for calculation of Bank Finance Drawing Power : Book Debts upto Six Months may be treated as Current Asset, for the purpose of computation of permissible bank finance and drawing power calculation. All Book Debts more than 180 days are to be treated as Non-Current Assets. As regards age of the book debts, a certificate preferably from a Chartered Accountant to be obtained. Methodology for calculation of Bank Finance Term Loan Finance: The technical feasibility and economic, financial, commercial viability, managerial competence, environment viability and bank-ability of the proposal with reference to risk will be assessed. Debt Equity Ratio In case of term loan, Debt Equity Ratio (DER) should not normally be above 3:1.However, in case of capital intensive industries, the same may be considered upto 5.00:1. Methodology for calculation of Bank Finance

DSCR/Average DSCR In case of Term Loan, minimum Average DSCR of 1.30:1 will be considered as reasonable requirement for any new project/expansion project. Other Benchmarks Other benchmark financial ratios like Current Ratios, Tenure etc. will be in line with the Banks domestic lending policy. Mode of Disbursement of Loan The disbursement of the loan amount for Plant and Machinery, Equipment and other fixed assets will be made in favour of the supplier through Demand Draft/Banker Cheque. Branches will continue to ensure the end use verification on monthly/quarterly basis. Repayment Schedule Repayment schedule should be fixed taking into account the sustenance requirements, surplus generating capacity, the break-even point, the life of the asset, etc., and not in an ad hoc manner. Moratorium period depending on requirement of the project will be considered. Moratorium period may be extended by further six months where project implementation has been delayed for reasons whatsoever beyond control of the borrower.

COMPOSITE TERM LOANS A composite loan with maximum limit upto Rs.1.00 crore may be considered by bank to enable the Micro and Small Enterprises (both for manufacturing and service sector) to avail of their working capital and Term loan requirement through Single Window. NON-FUNDED LIMIT : The non-fund limit may be sanctioned as per need based requirements of the borrower within the ambit of the banks guidelines in this regard. The proposals for non-fund facilities should be dealt with same diligence as in case of funded limits. REVIEW OF SME PORTFOLIO: At the Zonal office level, Chief Manager (Credit)/ Senior Manager identified as nodal officers will act as coordinating officer to monitor the functioning, review and the progress in SME financing and to coordinate with other banks/financial institutions and the State Government removing bottlenecks, if any, to ensure smooth flow of credit to the sector. SME financing branches (erstwhile SSIFBs) have be permitted to finance Medium Enterprises also. Further, bank may explore the possibility of opening more branches to cater the specialized requirement to this segment.

The Zonal office will give due importance for financing in the identified special credit delivery branches and branches situated near to clusters.

Review of progress on MSME lending will be placed before the Board on quarterly basis. DEBT RESTRUCTURING

The Banks policy of Debt Structuring Policy will be applicable for SME as per Instruction Circular No.10285 /CPRMD/2008-09 dated 19.12.2008 will be applicable , in respect of debt restructuring of SMEs. ADHOC WORKING CAPITAL DEMAND LOAN : (a) Under stimulus package, the need based Adhoc Working Capital Demand Loans maximum up to 20% of the existing fund based limits in respect of units having overall fund based credit facility up to Rs.10.00 Crore may be given, which will be repayable in one year with a provision of maximum period of six months during which interest will have to be serviced.

(b) In this regard borrower may avail only one of the under noted facilities at a time: i) Adhoc Facility ii) Adhoc Working Capital Demand Loan

EXCESS DRAWING

Besides Adhoc Facility / Adhoc Working Capital Demand Loan, excess drawing may be allowed in terms of provisions contained in the Banks Discretionary Authority (Lending Power)/ Lending Policy, on merits , considering exigencies of the case. OPERATIONAL GUIDELINES FOR ADHOC FACILITIES FOR MSME BORROWERS As per extant MSME Policy, Discretionary Authority for Adhoc sanction to MSME Borrowers have been provided from Scale-II onwards, which has to be extended within 20% of 20% of sanctioned limits or the prescribed amount under Discretionary Authority in case of AB-1 and AB-2 rated Accounts and 10% of sanctioned limit or the prescribed amount under each scale, whichever is less in case of accounts with Risk Grading with AB-3 to AB-7 .

Bees for Poverty Reduction Pilot - UTMT -- Case Studies


Thursday, 14 October 2010 02:56 MCS From India User Rating: Poor /4 Best
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Chennai, October 14, 2010: Under the Mango Tree (UTMT), registered as a society, was set up by Ms. Vijaya Pastala and has in 2009 established 'The Hive', an endeavor to promote community-based beekeeping - "Bees for Poverty Reduction" (BPR), as a solution to India's natural resource problem, specifically decline in agriculture production with a view to increasing incomes and improving livelihoods. This unique BPR pilot project brings together under one umbrella the concepts of (1) creation and diversification of livelihoods in rural areas by adding beekeeping to the basket of activities, (2) increased and sustainable market access for primary producers by facilitating a buyback arrangement for honey and beeswax at premium prices through certification (organic, fair trade), and (3) harnessing the inherent potential of honey bees to add to agricultural productivity due to their role as pollinators. Its main objective is to support, train and partner with beekeepers across the country in the production and marketing of high quality single flora gourmet honey that is available seasonally across India. Ms. Sujana Krishnamoorthy, an economist by training and the programme leader, helps in the implementation of the project. The beekeeping expertise and field support is provided by Mr. Atar Singh Kaintura, Technical Expert, who has vast and long experience in Apis cerana beekeeping. Funding for the project was provided by the National Bank for Agriculture and Rural Development (NABARD). In order to run the BPR Pilot in Bharatiya Agro-Industries Foundation (BAIF) supported wadis in Gujarat and Maharashtra, UTMT partnered with BAIF, which pioneered the wadi programme in seven states in the country. The main aims of the Pilot project are: (1) to add beekeeping to wadis where the Adivasi Development Programme is being implemented through training, coupled with hand holding support for six months to tribal farmers, and (2) at the same time an intensive capacity building programme to develop a cadre of master trainers who will take the programme forward and scale it up in these clusters in the coming years, (3) focus exclusively on the indigenous bee, Apis cerana indica, and (4) all inputs like bee boxes, and bee veils will be locally manufactured in the clusters leading to further employment generation. Implementation of the Pilot began during 2009. That the programme is being implemented in the right direction is evident from the progress made in the wadis where the Pilot was taken up. Following are three case studies of farmers in the Nashik and Thane districts of Maharashtra and Valsad district in Gujarat. The report is by the UTMT. Somajibhai Magi Somajibhaai Devjibhai Magi, 26, Village Dandwal, Dharampur Taluka, District Valsad, Gujarat Somajibhaai Devjibhai Magi, 26, Village Dandwal, Dharampur Taluka, District Valsad, Gujarat Somajibhai Devjibhai Magi, 26, belongs to the village Dandwal in the interiors of Pindwal area, Dharampur Taluk, District Valsad in Gujarat. He has one acre wadi on which he has planted mango and cashew. In other patches close by he cultivates rice, niger (Guizotia abyssinica), and nagli (finger millet, Elusine corocana) for his family's annual consumption. Somajibhai earns around Rs 10,000 - 15,000 per annum through sale of produce from his land and manual labour. As a young boy, Somajibhai used to spot natural bee hives in the forest and extract honey from them, as a hobby and for fun. But he never ever imagined that bees could be kept in boxes - "pehle kabhi baksa dekha hi nahi tha" (had not seen a box before), he said. He attended a two-day training at Samgahan where Atar Singh, our Technical Expert, and Mahendrabhai, BAIF staff, explained the benefits of beekeeping for a wadi and the additional income that could be earned through sale of honey.

"Initially I used to get afraid of being stung by bees, but when I saw Atarji handling the bees in the training programme with a lot of ease, I overcame the fear and now I can handle the box and bees easily," says Somajibhai. He stictly follows the dos and donts taught to them during the training, when handling bees and makes sure that his hands are clean when he opens the bee box, as he knows now that bees detest strong odours. He rarely gets stung these days though he opens his box once a week to check on his bees. His family has also quite taken to the idea of beekeeping and helps to maintain the bee boxes, especially when Somajibhai goes to work in other villages. "They clean the bee box, keep ants away, place a damp cloth inside the box during hot days", he says proudly. Somajibhai says that though it has been only 4 months that he has had 2 bee hives, in these months he has been collecting cucumbers almost every third day from his small cucumber patch. He sells the vegetable at the neighbouring village bazaar. He attributes this increase to the bees, as earlier the same patch used to give cucumbers every sixth or seventh day only. For the last two months, he has earned Rs 150 - Rs 200 more per month due to this. He says, "now I would like to keep more boxes, not so much for the honey, but for the increase in the crop yield." He is very hopeful about increased yields for cashew in his wadi this year, thanks to the bees with him, and hopes to increase the number of bee boxes he has to at least 8 - 10! Manik - Honey hunter turned Master Trainer Manik with his bee colony. His friend Vasan Pawar look on Manik with his bee colony. His friend Vasan Pawar look on Manik, 35, from the village Bhavandagad in Surgana Taluk of Nashik district, Maharashtra was a passionate honey hunter. His honey hunting skills honed over probably several generations, ensured that during the Holi and Diwali seasons, when hives with honey were found in profusion in the hillsides, he could spot and extract honey from at least 4 - 5 hives in a day - his all time record was 10 hives in a single day! His peers on the other hand, would spot may be one hive a day. In March 2009, local BAIF staff informed him about some beekeeping training. As he was unlettered, he was unsure how this training would help him, but his curiosity was piqued and so he attended the training. To his amazement, he was told and shown through pictures, how a hive could be gently transferred into a box and how bees once hived in a box, could yield honey in his wadi. Armed with this information, he was quite eager to put the knowledge to practice. The very next morning he located 2 - 3 natural colonies and waited impatiently for the bee boxes to arrive in his cluster. He waited for 3 days in vain. He then decided to visit the BAIF cluster office to inquire. Two weeks later when the boxes did finally arrive, he got only 2 and quickly transferred the colonies into them. The bees stayed for a week and then a month in the boxes. However, he could not resist the temptation to show off his boxes to visitors and neighbours and once when he was doing this, he was a bit careless and the bees absconded from one box. When the Technical Expert came on his monthly follow up visit, besides narrating this he also told him the reason why. He had been eating his meal and when the visitor came and demanded to see the bees, without washing his hands he opened the box. This resulted in the absconding. He had since refilled the box with another colony. Excitedly watching this 'bee development', were his neighbours and childhood friends, Vasant Pawar and Sanjay Ahir. Now they too wanted to keep bee boxes. Manik guided them how to capture natural bee colonies and fill the boxes, and by September 2009 all the three of them had 2 boxes each. By Diwali,all of them were able to extract small amounts of honey literally at their door steps. Sanjay Ahir also had a bountiful harvest of amla (Emblica officinalis) in his wadi in March. The size of the amla fruit was bigger than what it had ever been before and Ahir was convinced that the yield and size increase was due to the bees in his wadi. All the three farmers are now trying to increase the number of bee boxes they have. Manik simultaneously guides other farmers and trains them in colony capture and transfer. He has become a Master Trainer and is proud of the fact that from September this year he will begin training in beekeeping to new farmers in the neighbouring villages. He never hesitates to tell anyone now, how much better it is to transfer natural colonies into boxes, rather than just smoke and extract honey from the hives in the wild, leaving the bees to die.

Bhikare - a farmer who sees the potential in beekeeping Bhikare, farmer-beekeeper with Atarji at Patilpada, District Thane Bhikare, farmer-beekeeper with Atarji at Patilpada, District Thane Bhikare, 55, of Patilpada village in Talasari cluster, district Thane in Maharashtra has been collecting honey from wild honey nests in the surrounding hills from the time he was a teenager as and when he came across a hive. he is a progressive small farmer, always willing to try something new. He cultivates everything from rice, ragi (finger millet) to cucumber to vegetables and fruits. Given his aptitude to absorb new information quickly, he was selected by BAIF staff for beekeeping training. He saw a bee box for the first time during the training and absorbed like a sponge all that was said during the training programme. Post training in September, 2009 he waited for t Bhikareji can make his own bee boxes when needed Bhikareji can make his own bee boxes when needed he boxes to arrive. He had already spotted 5 - 6 natural bee colonies which he was eager to transfer into the bee boxes. By the end of October when there was no sign of the boxes arriving, he decided to make his own box, based on what he had seen during the training. He even transferred a colony into this box, so that at the time of the first follow up visit by the Technical Expert in October, he had something to show to Atarji. The Technical Expert praised his effort and explained to Bhikare that his first attempt was a good one, but dimensions could have been better. This was because he did not have a sample box with him while attempting to make the box. When the boxes finally arrived, he fil Beekeeper farmers in District Thane, Maharashtra Beekeeper farmers in District Thane, Maharashtra led his own and also assisted others in filling theirs. As of May 2010 he had 7 bee boxes. When the bee boxes supplied by the BAIF system fell short, he made his own boxes; 3 of his colonies are now in these boxes. Bhikareji says: "beekeeping gives me good returns by way of honey and increases productivity with less work." He says there has been a greater yield of cucumber in the wadi, while his neighbours have normal yields this year. In all he has extracted about 6 kg of honey (till June 2010), which he sold in the local markets and consumed at home. Bhikareji also helps other farmers as and when they need assistance. He has also gotten his family involved, with his son supporting him during colony transfers. Through regular practices of natural colony transfers he has learnt the art of what is to be done and what not.

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