The scheme is headed by National Small Industries Corporation (NSIC) and aims to meet the credit requirements of MSME units. NSIC has entered into a Memorandum of Understanding with various nationalized and private sector banks. The scheme offers credit underfund- and non-fund-based limits from banks at many convenient rates to the MSMEs which helps them survive and grow in the competitive market.
Bank Credit Facilitation Objectives & Features
- This scheme facilitates credits and funding to MSMEs through various private and public sector banks.
- Under this scheme, MSME can also transfer their existing loan account or create a new one in a different bank.
- This scheme helps MSMEs to get a competitive interest rate on their loan from banks and also favourable rating which is awarded on the Performance and Credit rating from the Ministry.
- The scheme is created to help more MSMEs to get benefited so that they can contribute to the country’s GDP growth.
Under the Bank Credit Facilitation Scheme, there are different types of loans with different offerings and different interest rates charges, so let’s know them one by one:
Term loans under bank credit facility scheme are generally offered for acquisition of fixed assets which includes land/building, plant/machinery, other fixed assets for setting up of new business, expansion, modernization/up-gradation of existing ones.
Term loans generally have a repayment period of 1 to 7 years.
Different types of term loans: Short term loans, Medium-term loans, Long term loans.
Non-Fund Based Limits
Non-fund based limit facilitates businesses to acquire monetary support from banks.
This type of loan includes guarantees like a letter of credits, foreign letter of credit, and foreign bank guarantees etc.
However, the interest rate charged and the terms vary from bank to bank.
The scheme also offers a hand holding facility to the entrepreneurs and facilitates documentation.
This is a kind of revolving cash credit limit facility. It works the same as a line of credit as a borrower can withdraw a loan amount that is under the cash credit limit at any point during the tenure as per their requirement. The scheme is perfect to meet the working capital needs of the MSME units in the form of open cash credit, overdraft against book debts, and bill discount facility.
The documents required to avail of this scheme vary based on the purpose of the loan. However, the general documents as required are:
- Identity proof
- Address proof
- Business address proof
- Asset documents which are being given as guarantors.
- Latest income tax return documents.
- Rent Agreement / Lease Deed if business premises is rented/leased.
- SSI registration certificate
- Profile of the Unit including name and address of promoters, experience, nature of the activity, address of all offices/plants, shareholding pattern.
- Last three year’s Balance Sheet with IT/ST returns
- Projected Balance Sheet for the last two years
- Business bank accounts details along with the statement.
- Estimates/Quotations/Sanctioned building plan etc.
- Partnership Deed/Trust Deed/Rules & Bye-laws/Memorandum and Articles of Association /Certificate of Incorporation etc.
- Clearance from Pollution Control Board/Sanction from the Electricity Board and other statutory authorities.
- Month-wise production and sales data for the current financial year.
How to Apply for a Bank Credit facility?
- Visit the official NSIC website.
- Download the application form present on the website.
- Fill out the application form by providing correct details and information.
- Submit the completely filled application form along with the necessary documents.
Application website: https://www.nsic.co.in/Schemes/Credit-Facilitation-Through-Bank.aspx
Eligibility: MSME registered by the Indian Government
Repayment: 5 to 7 years (11 years in exceptional cases)
The scheme’s main objective is to boost the Indian economy by supporting MSMEs as they are the major contributors to GDP growth. The scheme provides monetary support to the MSMEs at many affordable rates which helps them to grow and survive even under tough conditions. The scheme is beneficial to those MSMEs who fail to qualify for conventional business loans by the banks in lack of documents or eligibility.