MSME Loan: Check MSME Loan offered by popular banks, MSME Loan Schemes, Eligibility

MSME Loan: The Micro, Small, and Medium Enterprise Loan are often provided to small business owners and start-ups. The repayment period of the MSME loan varies from lender to lender and the interest rates offered are mainly based on the volume of the loan, the profile of the borrower, and the background of the company. This article provides the entire information about the MSME Loan, MSME Loan Schemes, Eligibility, and more. Also, check the MSME loans provided by popular bank banks. 

 

Updated: May 24, 2020 10:31 IST

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Niranjani Jesentha Kumari P

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MSME Loan:

MSME loans are unsecured loans that banks and NBFCs provide only if the borrower fulfills other eligibility requirements. The Indian government and RBI describe MSME loans, as loans for business enterprises need financial, infrastructure, and other support. In having the investment amount and annual turnover identical for enterprises engaged in both sectors, the distinction between manufacturing and service businesses has been eliminated.

Key Takeaways of New MSME Definition introduced by the Government of India in 'Atmanirbhar Bharat Abhiyan' or Self-reliant India Scheme 2020 is listed below.

  • Collateral Free Loans to MSMEs

  • MSME Loans worth of Rs. 3 lakh crore

  • Moratorium period offered is 12 months

  • Manufacturing and Service MSMEs shall be considered as same entities

  • Repayment Tenure of 48 months

  • 100% Credit Guarantee

  • To benefit approx. 45 lakh units

Sector/Enterprise Type Micro Enterprise Small Enterprise Medium Enterprise
Manufacturing and Services Sector, Both Investment less than Rs. 1 crore

Turnover less than Rs. 5 crore

Investment less than Rs. 10 crore

Turnover- up to Rs. 50 crore

Investment is less than Rs. 20 crore

Turnover- up to Rs. 100 crore

What are the Popular Banks and NBFCs that offer MSME Loans?

Apart from the government-sponsored schemes, there are also a number of private sector banks providing MSME loans at reasonable interest rates. Some main banks and NBFCs which offer MSME loans with added benefits are listed below:

MSME Loans from Lendingkart Finance 2020

Interest Rate: 18% onwards

Maximum Loan Amount: Up to 2 cr

Minimum Loan Amount: Rs. 50,000

Processing Fee: Up to 2% of the loan amount

Repayment Tenure: Up to 36 months

Loan Sanctioning Time: Within 3 working days

Collateral / Security: Not required

Pre-payment Charges: Nil

SBI Bank:

SBI is a statutory body for Indian multinational banking, public sector banking and financial services, fostering 2.6 trillion economy and meeting the aspirations of its large population. Headquartered in Mumbai, SBI offers a wide range of goods and services through its various branches and outlets, joint ventures, subsidiaries, and related companies to individuals, commercial enterprises, large corporations, public bodies, and institutional customers.

MUDRA Loan from SBI 2020

  • Interest Rate: 10.15% onwards

  • Loan Amount: Max. up to 20 crores, can exceed as per requirements.

  • Processing Fee: Up to 2% of the loan amount

  • Business Existence: Min. 5 years in the same locality/area

  • Bank Account History: Current account holder for at least two years

  • Repayment Period: Up to 120 months

HDFC Bank:

The Housing Development Finance Corporation Limited (HDFC) was among the first to obtain, as part of RBI's 1994 liberalisation of the Indian Banking Industry, an 'in principle' approval from Reserve Bank of India (RBI) to create a private sector bank. The bank, with its registered office in Mumbai, India, was incorporated in August 1994 in the name of HDFC Bank Limited.

Business Loans from HDFC Bank 2020

  • Rack Interest Rate: 15% onwards*

  • Loan amount: Up to Rs. 50 lakh

  • Processing Fee: Up to 2.50% of the loan amount, Min. of Rs. 2359 & Max. of Rs. 88500

  • Overdue EMI Interest: 2% per month on EMI / Principal Overdue

  • Pre-payment Charges: Nil, until repayment of 6 EMIs

  • Collateral / Security: Not required

Bajaj Finserv:

Bajaj Finserv was founded in April 2007 to further the Group's interests in financial services. This demerger allowed Bajaj Finserv to operate its core lending, security and savings businesses independently. Bajaj Finserv Limited is the holding company for the Bajaj Group's financial services businesses. This supports millions of financial services customers by financing, wealth security by general insurance, family security and income protection in the form of life and health insurance, and retirement and savings solutions.

MSME Loans from Bajaj Finserv 2020

  • Interest Rate: 18% onwards

  • Processing Fee: Up to 3% of the loan amount

  • Loan Tenor: Max. up to 60 months

  • Loan Amount: Max. up to Rs. 30 lakh

  • Loan Sanctioning Time: Within 24 hours

  • Collateral / Security: Not required

ICIC1 Bank:

This scheme is designed to help micro-enterprises grow. With the aid of this scheme technologically advanced equipment can be purchased by finance. It can help organizations increase their production and extend their rentability and sustainability horizons.

MSME Loans from ICICI Bank 2020

Interest Rate: 15% onwards

Loan offered to: Public Limited Companies, Partnership Firms, Sole Proprietorship Firms, Private Limited Companies

Loan Amount: Up to 2 crore

Cash Credit Feature: Available

Collateral / Security: Not required

Eligible Business Segment: Micro Small Enterprise, excluding traders

MSME Loan Schemes:

Financial institutions, which include banks and NBFCs, provide MSME loans to Micro, Small, and Medium Enterprises ( MSMEs). The government also offer MSME loans with the aid of various schemes, which are discussed further. Government schemes covered by MSME loans include Mudra Loan, CGTMSE, PMEGP, and so on. Such schemes ensure the country's new and established entrepreneurs get the financial support and financing they need for their businesses.

What is MUDRA Loan?

The loan from the Micro-Units Development and Refinance Agency (MUDRA) is one of the main initiatives initiated by the Government of India to encourage micro, small and medium-sized enterprises (MSMEs) across the country. MUDRA is a subsidiary of the SIDBI, which is responsible for the growth and refinancing of all SME units by assisting them with the necessary finance and related support. Under Pradhan Mantri Mudra Yojana (PMMY), Mudra Loan Scheme is an initiative of the Government of India providing loan schemes in three major categories called Shishu, Kishor, and Tarun. The loan sum offered under this scheme begins at Rs. 50,000 and applies to start-ups, small business units, and MSMEs, up to Rs. 10 lakh limit.

Mudra Loan Interest Rate:

The interest rate provided under the Mudra loan depends on the profile of the borrower and the company's business requirements. It differs, however, from bank to bank, as they follow their established guidelines to finance the interest rate to be provided to different applicants.

About Credit Guarantee Funds Trust for Micro and Small Enterprises:

CGTMSE (Cash Guarantee Funds Trust for Micro and Small Enterprises) was implemented to establish a strong cash relief program and to encourage a better credit flow for the MSME market. The loan is guaranteed/provided under the CGTMSE scheme without any external collateral or third party guarantee. Here, the Member Lending Institution's (MLI) approved MSME loan is backed by the scheme that provides the guarantee cover for a large portion of the loan sum. Under the CGTMSE scheme, new and established medium-, small- and micro-enterprises, including service enterprises, are eligible for a maximum Rs . 2 crore credit limit.

CGTMSE also provides rehabilitation assistance to units. Any MSME unit that is in bad shape due to factors outside management control is covered by rehabilitation assistance from CGTMSE. The dilapidated MSME units are given the full Rs . 1 Crore credit limit.

Eligibility of CGTMSE Scheme

  • Scheduled Commercial Banks

  • Regional Rural Banks (RRBs)

  • National Small Industries Corporation (NSIC)

  • North Eastern Development Finance Corporation (NEDFi)

  • Small Industries Development Bank of India (SIDBI)

The CGTMSE scheme funds both new and current medium-, small- and micro-enterprise borrowers who meet the following conditions:

  1. To listed lenders, the confidence provides up to 75 percent of the default principal amount for all groups and up to 85 percent of the default principal amount. Of credit facilities up to Rs. 50 lakh, the overall guarantee limit is set at Rs. 62.50 lakh / Rs. 65 lakh

  2. The scheme does not cover related costs such as punitive interest, commitment fees, service fees, or other levies / expenses.

  3. Small and micro-enterprises owned and/or run by women are also eligible for an 80 percent guarantee cover and all credit/loans in the North East Region (NER) for credit facilities are eligible for an Rs. 40 lakh guarantee. Other factors such as retail trade, educational institutions, forestry, institutes of training, and self-help groups (SHGs) are not liable for guarantee cover under the scheme.

About Prime Minister's Employment Generation Programme:

PMEGP is a credit-related subsidy system that has been combined with two other programs, the Rojgar Yojana (PMRY) Prime Minister and the Rural Employment Generation System (REGP), to create jobs among the country's trained young people. Under the PMEGP scheme, the beneficiary will spend approximately 5-10 percent of the project cost, while the government provides a 15-35 per percent project subsidy. The participating banks offer business owners the rest of the funds as term loans.

Beneficiary Categories

Beneficiary’s Share

(of Total Project)

Subsidy Rate

(from Govt.) – Urban

Subsidy Rate

(from Govt.) – Rural

General

10%

15%

25%

Special

5%

25%

35%

What is the criteria to avail PMEGP loan

  • Minimum of 18 years and 8th class passed for individuals

  • Must be a part of Self-Help Group 

  • Societies that are registered under the Societies Registration Act, 1860

  • Production Co-operative Societies

  • Charitable Trusts

Sub-Schemes offered under Mudra Loan Yojana:

The Sub-Schemes offered under Mudra Loan Yojana are 

  • Credit for Micro Enterprises

  • Mahila Uddyami Scheme

  • Refinance Scheme for Banks

  • Micro-Credit Scheme

  • Mudra Card

  • Credit Guarantee Fund

  • Equipment Finance Scheme

Credit for Micro Enterprises: The goal of this sub-scheme is to optimize micro-enterprises' involvement in economic growth. The extra benefits cover a large number of microenterprises-run beneficiaries. The broad segments of the population involved in land transport, food processing, textile and community services will benefit from the scheme and set up their own small business unit.

Mahila Uddyami Scheme: The scheme is specifically tailored for women entrepreneurs. It seeks to empower women, women's organisations, shared responsibility organisations and women's self-help groups to set up micro-enterprise entities. Special interest provisions are also accorded in this system.

Refinance Scheme for Banks: Mudra Yojana also refinances MSME loan amounts up to Rs. 10 lakh, which are lent to borrowers by banks. Nevertheless, only MSME unit owners in the manufacturing and service sector can get the benefits of this refinancing scheme.

Micro-Credit Scheme: Micro-credit schemes concentrate on micro-finance institutions (MFIs) and offer them financial support to make their lending operations accessible to individuals, groups of individuals or micro-enterprises

Mudra Card: It is an excellent product that makes the MSME loan funds easily available to the cardholder and provides tremendous versatility. Mudra Card can be used as a credit card for the allotted overdraft cap and as a debit card for ATM withdrawals.

Credit Guarantee Fund: For that, the risk of lending institutions, the credit guarantee fund is established. The fund offers more than Rs . 1 lakh crore loans to handle the risk of lending institutions.

Equipment Finance Scheme: This Equipment Finance Scheme is designed to help micro-enterprises grow. With the aid of this scheme, technologically advanced equipment can be purchased by finance. It can help organizations increase their productivity and extend their rentability and sustainability horizons.

What are the documents required for MSME Loan?

  • Application form

  • Passport, driving license, PAN card Voter's identity card

  • Passport, lease agreement, trade license telephone and electricity bills, ration card and sales tax certificate

  • Passport, Voter's identity card, PAN card

Financial Documents:

  • Last 12 months' bank statement

  • Business registration proof

  • Proprietor(s) PAN Card Copy

  • Partnership deed copy

  • Organisation PAN card copy

  • P&L and balance sheet copy of last 2 years

  • Sales tax documents

  • Municipal tax document

MSME Loan- FAQ

1. What is MSME Loan?

MSME loans are unsecured loans that banks and NBFCs provide only if the borrower fulfills other eligibility requirements. The Indian government and RBI describe MSME loans, as loans for business enterprises need financial, infrastructure, and other support. In having the investment amount and annual turnover identical for enterprises engaged in both sectors, the distinction between manufacturing and service businesses has been eliminated.

2. What are the Popular Banks and NBFCs that offer MSME Loans?

Apart from the government-sponsored schemes, there are also a number of private sector banks providing MSME loans at reasonable interest rates. Some main banks and NBFCs which offer MSME loans with added benefits are Lendingkart Finance, SBI, HDFC, ICICI, etc.

3. What is MSME Loan Schemes?

The interest rate provided under the Mudra loan depends on the profile of the borrower and the company's business requirements. It differs, however, from bank to bank, as they follow their established guidelines to finance the interest rate to be provided to different applicants.

4. What is all about the sub scheme Credit for Micro Enterprises?

The goal of this sub-scheme is to optimize micro-enterprises' involvement in economic growth. The extra benefits cover a large number of microenterprises-run beneficiaries. The broad segments of the population involved in land transport, food processing, textile and community services will benefit from the scheme and set up their own small business unit.

5. What is Prime Minister's Employment Generation Programme?

PMEGP is a credit-related subsidy system that has been combined with two other programs, the Rojgar Yojana (PMRY) Prime Minister and the Rural Employment Generation System (REGP), to create jobs among the country's trained young people.

6. What is Credit Guarantee Funds Trust for Micro and Small Enterprises?

CGTMSE (Cash Guarantee Funds Trust for Micro and Small Enterprises) was implemented to establish a strong cash relief program and to encourage a better credit flow for the MSME market. The loan is guaranteed/provided under the CGTMSE scheme without any external collateral or third-party guarantee.