Lendings-6 , Banking Fundamentals to Know for Students.

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Bank loans to Micro, Small and Medium Enterprises, for both manufacturing and service sectors are eligible to be classified under the priority sector as per the following norms:   

a) Manufacturing Enterprises - The Micro, Small and Medium Enterprises engaged in the manufacture or production of goods to any industry specified in the first schedule to the Industries (Development and Regulation) Act, 1951 and as notified by the Government from time to time. Manufacturing Enterprises are defined in terms of investment in plant and machinery.

b) Service Enterprises - Bank loans up to 5 crores per unit to Micro and Small Enterprises and 10 crores to Medium ₹ ₹ Enterprises engaged in providing or rendering of services and defined in terms of investment in equipment under MSMED Act, 2006.

c) Khadi and Village Industries Sector (KVI)  - All loans to units in the KVI sector will be eligible for classification under the sub-target of 7 percent /7.5 percent prescribed for Micro Enterprises under the priority sector.

d) Other Finance to MSMEs

(i) Loans to entities involved in assisting the decentralized sector in the supply of inputs to and marketing of outputs of artisans, village and cottage industries.

(ii) Loans to co-operatives of producers in the decentralized sector viz. artisans, village and cottage industries.

(iii) Loans sanctioned by banks to MFIs for on-lending to MSME sector as per the conditions specified in paragraph IX of this circular.

(iv) Credit outstanding under General Credit Cards (including Artisan Credit Card, Laghu Udyami Card, Swarojgar Credit Card, and Weaver’s Card etc. in existence and catering to the non-farm entrepreneurial credit needs of individuals).

(v) Outstanding deposits with SIDBI and MUDRA Ltd. on account of priority sector shortfall.

e) Considering that the MSMED Act, 2006 does not provide for any sub-categorization within the definition of micro-enterprises and that the sub-target for lending to micro-enterprises has been fixed, the current sub-categorization within the definition of micro-enterprises in the existing guidelines are dispensed with.

f) To ensure that MSMEs do not remain small and medium units merely to remain eligible for priority sector status, the MSME units will continue to enjoy the priority sector lending status up to three years after they grow out of the MSME category concerned.

Loans to individuals for educational purposes including vocational courses up to 10 lakh, irrespective ₹ of the sanctioned the amount will be considered as eligible for the priority sector.