aoa are Central Office MSME LENDING & FINTECH DEPARTMENT. Instruction Circular No. ~ 2932 Date: 18.12.2021 | File No. - 105 Department Running No 156 ALL BRANCHES & OFFICES Finance to Commi CENT ARTHIYAS mn Agents/Arthivas was part of Cent Trade product. There is a need to address the working capital requirements of Commission Agents/Arthiyas etc., who are looking for a convenient loan product, in the background of repeal of farm laws by Govt. of India. “CENT ARTHIYAS sd with certain modifications to meet the expectations of the customers. Al staffs are advised to popularize the product and canvass good business under the scheme. ‘The scheme details are as under- Parameter Criteria Scheme title | CENT ARTHIYAS Eligibility All types of Commission agents/Arthiyas (Individuals, proprietorship firm, companies, and partnership firm , LLP, excluding a firm where HUF is partner engaged in commission agent activity), registered with Market Yard ‘Committees/holding Municipal License. GST Registration is mandatory wherever applicable. ‘Commission Agents/Arthiyas who are already in the business are only eligible and new entrants are not eligible for finance under this scheme. Activity Any lawful business activity acting as Commission Agents in Agricultural Market Yards or other similar Market centers. Sane KYC documents ROC certificate (in case of Ltd. Companies)’ Proprietorship declaration/partnership deed/ Registration from Registrar of Firms & Licences, GST Registration certificate/ Udyam Registration Certificate/ Registration with Market Committee/ Mandi/License with Govt. Ageney GST Returns for the previous year. Financial statements (Balance SheeVP&L) for the previous year. Audited MSME Department, Central Office, 2” Floor, MMO Building, Fort, Mumbai.aaa aries Central Office Tinancial statements may be obtained wherever applicable, Audited Balance Sheet may not be insisted for credit Limits up to Rs. 10 lakh. Quantum OF | Min, Rs.2 lakhs roars Max. Rs.5 er {Max. loan against property located in rural areas not exceeding population of . 10,000 (except industrial property/ commercial property located in Market Yards) should not exceed Rs.50 lakhs.)} Nature of | Over Draft Facility Repayment ‘On demand, subject to renewal every year. Rate of Interest Category | Loan amount/ Rating | Rate of interest MSE. Up to Rs.10 lakhs RBLR#0.95% ‘Above RS.10 lakhs ‘AS per Balance score card approach, MEDIUM | Based on intemal rating | RBLR#0.85% to RBLR + 6.45% as per rating. ‘© Powers for interest concession vested with RMs @ 2Sbps and ZMs @ SObps. ‘© In any case, final rate of interest after concession should not go below the RBLR. ‘Incase of any default in payment of interest/instalment, penal Interest is to be charged @ 2 % over sanctioned interest rate for the overdue amount and for overdue period. MSME Department, Central Office, 2” Floor, MMO Building, Fort, Mumbai.Processing Charges Steges es serous STE: a a adr arate Central Office ‘At the time of original sanction: 0.50% of the i itil sanction or max. Rs.20,000/- plus 0.10% of the limit, subject to max. of Rs.10,000/- plus GST. CM/AGM/DGM of branches and RM/SRM may allow 25% concession on applicable processing charges on merits. ZMField General Manager may allow up to 50 % concession on applicabl 1s given by CM/AGM/DGM of processing charges inclusive of conces: branches and RM/SRM on merits. Classification Loans sanctioned under this product shall be classified under Priority Sector | MSME advances, subject to met 1g the eligibility criteria in terms of investment in plant & machinery/cost of equipment as defined in MSMED Act 2006 and any} amendments thereto, Submission of Udyam Registration Certificate is mandatory. Assessment + This scheme is available to existing wi ‘only. No applications for commencement of new business shall be considered under this scheme. + Limit will be assessed based on the turnover as per GST returns/books of accounts. + In the absence of tumover as per GST Retums/books of accounts, commission earned by the agents should be multiplied by a factor to arrive at the turnover. *+ Limit will be restricted to least of the following three parameters: - 25% of actual previous year turnover as per GST returns/converted turnover as per formula - 35% of eredit summations in the account during the past year. - 80% of realizable value of collateral security. (125% collateral coverage) + Genuineness of turnover should be assessed as per GST Returns/ balance sheet/credit summations/purchase-sales registers ete... + Enhancement is allowed after one year, based on increase in turnover / commission earned, + No enhancement is allowed in 3 years based on increase in value of security. MSME Department, Central Office, 2" Floor, MMO Building, Fort, Mumbai,Books of accounts maintained by commission agents do not contain the total turnover but only commission eared by Arthiyas/Commission agents is reflected. In the absence of GST returns, such commission is to bbe multiplied by a factor to arrive at the turnover as per examples shown Central Office here under: ‘Commission | Commission ] Factor [Converted | Limit eligible earned as per | rate (100/ | actual @ 25% of books commi | tumover | converted ssion) turnover A B c E=D*25% 600,000 | Rs.2.50 per | 40 £60.00,000 100 8.00,000 | R5.2.00 per | 50 4,00,00,000 | 1,00,00.000 100 10,00,000 | R5.3.00 per [3333 [3.333333 | 83.33,333 100 10,00,000 | R8.6.00 per | 16.66 | 1,66,60,000 | 41,65.000 100 12,00,000 | Rs.10.00 per | 10 7.20,00,000 | 30,00,000 100 Assessment ‘OD limit ‘Scenario 1 | Scenario 2 ] Scenario 3 Tumover (as per GST/ Balance | 400.00 400.00 [400.00 sheet’ commission converted as per factor) ‘Credit summations 320.00 450.00 [200.00 @ 25% of turnover A 100.00 100.00 | 400.00 @ 35% credit summations-B | 112.00 137.50 [70.00 80% of property value - C 120.00 120.00 720.00 Limit eligible (least of A, B, 100.00 100.00 | Not eligible above) (credit summations are less. than 60% = of tumover) MSME Department, Central Office, 2 Floor, MMO Building, Fort, Mumbai.Steges fas ores STS pa Central Office Equitable Morigage/ Registered mortgage (under sole charge to the Bank) of self-occupied or vacant residential house / flat, commercial or industrial property, non-agricultural boundarised & well demarcated plot in the name of borrower/s and / or in the name of his/her/their relative (the list of relative is given below) who shall join as Co borrower or as guarantor for financing to individuals, proprietorship and partnership firms. Property in the name of the Company or its Director/s can be accepted as security for financing to Company with personal guarantee of the owner, Director, of the property. For Loans to commission Agents / Arthias classified under Service sector in MSE, the realizable value should be minimum 125% of loan amount. Liquid security in lieu of property, irrespective of loan amount, may be obtained in the form of — NSC with accrued value (inclusive of interest) to the extent of 125% of loan amount (i.e. margin 20%) ‘Time Deposit of Bank including accrued interest / Surrender Value of LIP-to the extent of 112% of loan amount.(margin 10%) ‘Securities viz. Bonds issued by Govt/Banks to the extent of minimum 133% of Joan amount (margin of 25%) can be accepted as per Bank's Loan Policy. iquid Security as above can be in the names as applicable for immovable property as mentioned above. The security offered can also be a combination of immovable property and/or any/more of the liquid security with margin as mentioned above. In case of property in the joint names, undivided/part share shall not be accepted as security under the scheme. If all co-owners join either as co-borrower or ‘guarantor, then such property may be considered as security. Property already mortgaged to Bank for any other retail loans may be accepted as security if the existing loan account is regular and the property has sufficient residual value to cover the new loan under this scheme as well as total exposure with required Loan to Value ratio (security margin) as mentioned above. Authority: - Approval for accepting / continuing a property already held as security for another loan under the scheme to be obtained from the next higher authority by the sanctioning authority. MSME Department, Central Office, 2 Floor, MMO Building, Fort, Mumbai.Central Office Spouse Father Mother (including Step Mother) Son (including Step Son) Son’s Wife Daughter (including Step Daughter) Daughter's husband. Brother (including Step brother) Brother's wife Sister (including Step Sister) Sister's husband. Brother (including Step Brother) of the spouse. Sister (including Step Sister) of the spouse. Realizable value should be minimum 125% of loan amount. In case of industrial property/property located in Market Yards, realizable value should be minimum 125% of loan amount. In case of vacant land / well demarcated land , realizable value should be 150%, Valuation immovable Property of Property value up to Rs. | Crore - Valuation report to be obtained Irom asingle valuer. For property value above Rs.1 Crore, Valuation Reports from two independent panel valuers are to be obtained, Valuation of property should be done in accordance with Bank's Valuation Policy The sanctioning authority should ensure that valuation is reasonable, realistic and comparable with prevailing market price of the property in the area. ‘The valuation amount arrived at by the valuer should be agreed upon’ accepted by the Branch Manager specifically in the process note. Extant valuation policy guidelines to be followed. In case of newly purchased properties offered as security, if the registration of property is less than two years old, registered value or latest Government guideline value/rates, whichever is lower may be considered. However the value so accepted should not be more than the ible value assessed by valuer. In other words, the value accepted cannot be more than the realisable value of property. In any MSME Department, Central Office, 2" Floor, MMO Building, Fort, Mumbai.ateges aus sits Sz eas aera aerator Central Office ‘ase and the sanctioning authority must satisfy about the actual present realisable value of property as well as its marketability while accepting any property under mortgage. Legal search report should be obtained from Bank’s Panel Advocate. All actions for obtaining legal search report from Panel Advocate should be carried out by the branch directly and borrower should not be advised to meet the Advocate. Fees for legal search report may be obtained in advance from the borrower preferably through cheque. Certificate confirming genuineness of the title deeds and certified copies of title deeds should be obtained from the advocate and kept with loan document. ‘SOP for ot ing of LSR and creation of mortgage by the branches as per circular no. 2048 dt. 12/4/2019 and subsequent extant guidelines, if any, should be complied with Teased Property out ‘Subsequent to the encumbrance of the property to the Bank under this scheme, it may be allowed to lease out provided that the income generated through the lease rental should be routed through the eredit facility. The sanctioning authority would accord permission only where the proposed lease is not for more than 3 years and lease rentals/monthly rents are assigned in favour of the Bank and where the borrower has at least two years satisfactory track record and the account did not slip to SMA2 during the past 24 months. In all other cases, the next higher authority would aceord permission, The sanctioning authority would accord permission only where the proposed lease is in favour of an institution of repute and lease rentals /monthly rent will be assigned in favour of the Bank. Alternatively, the limit would have to be ‘cancelled and loan amount is to be recovered prior to letting out the property. In such cases, the following conditions are to be incorporated in Registered Mortgage/Simple Mortgage or in the confirmation letter in case of Equitable Mortgage: a) VWe shall not, without the written consent of the Bank, create third party interest in any manner including lease of the property/assets and security given to the Bank in favour of any other party or person. b) WWe understand that if Bank permits for leasing/renting out the mortgaged property, Bank can stipulate certain conditions, as it deems fit, which will be binding on me/us and will be incorporated in lease deed also. MSME Department, Central Office, 2” Floor, MMO Building, Fort, Mumbai.Central Office ‘At the time of according permission for leasing the secured property, Bank can put appropriate conditions on case to case basis. The confirmation letter (in case of EM) is to be preserved along with the recital record of the said secured | property. | While according permission to give on lease, sanction authority should ensure | that the lessee/tenant is fully aware that the property is mortgaged with Central Bank of India and the lease/rent agreement is without prejudice to Bank's rights under SARFAESI Act, 2002 and other laws. | Insurance The property should be insured for fire, riot and wherever required against other appropriate hazards, such as earthquake, flood, lightning, ete. by the borrower ‘with usual bank clause for full value of the property. Stock in trade need not be insured by the Bank since we don’t have any charge on it. However, if the borrowers want to insure the stock, they can do so at their own cost directly or through Bancassurance channel and submit a copy of the insurance policy to Bank for information. CIBILICMR, ‘CIC Seore/Rank: In case of Proprietorship/partnership/ companies, CMR seore should be CMR6 or better. Reports from two CICs to be obtained for exposure exceeding Rs. 10.00lac. In the absence of CMR rank, CIC score of the borrowers (proprietoripartners/directors etc.,) should be more than 675. Proposals of applicants who do not have any credit history with a score of -lor 0 may be considered after making thorough enquiry. Credit Rating All the proposals up to Rs2 er shall be rated manually using MSME Scoring model and proposals above Rs. 2 cr shall be rated on RAM rating model. Hurdle score to be eligible for sanction is CBI VI. Takeover ‘Accounts with risk rating up to CBI-V can be taken over from other banks subject to compliance of all other takeover norms as per our bank’s policy and master circular on takeover norms. | Sanctioning Powers ‘AS per bank’s loan policy. Inspection Physical inspection of the business unit and property offered is a must. Property should be clearly demarcated. boundarised and SARFAESI compliant. A search enguiry should be made with neighbouring house / flat/property owners. Periodical (yearly) inspection of the property to be conducted subsequent to | availment of loan to ascertain the status ofthe security Due’ ‘Due diligence of the borrower: ~ Satisfactory evidence of proof of residence | = Getting information about the profession, friends/relatives ete.. of the borrower in a systematic way and it should be recorded in the file for future reference along with the contact details particularly in respect of MSME Department, Central Office, 2" Floor, MMO Building, Fort, Mumbaipan Central Office ispection of residence, business, offic surprise. Due diligence of the property to be mortgaged: ~ It should be ensured that the property is well identifiable, well demarcated and properly boundarized , marketable and conform to the area shown in the title deeds, = Property should be easily accessible and saleable. = Incase of plov/and, it must be well demarcated and boundarised - CERSAI registration report to be generated and the details the property to be verified to avoid multiple financing. Due diligence of the Repayment Capacity of the borrower: ~ Business details to be eross checked accounts, GST returns to be verified. - Borrowing history of the borrower/co-borrower to be thoroughly examined. Instructions of Credit Monitoring department on due diligence should be ‘complied with. with an element of | - Due scrutiny of financial statements, supported with bank statement of | ‘of Commission Agents / Arthiyas who are already in the business and not to the new entrants. Ls ‘complied with as per bank’s extant norms. . Valuation report, due diligence process, insurance of the property are to be [Creation of | Valid equitable Mortgage/registered mortgage of the property to be created and | charges charge with CERSAI/ROC to be created before release of limits. Variations! ‘Any variations/exceptions to the above parameters shall be put up before CAC. exceptions Otter Fresh sanctions / enhancement in existing limits may be sanctioned only in case All field functionaries are advised to popularize the scheme and mobilize maximum loans under the scheme, a ee, (S.S.RAO) GENERAL MANAGER MSME LENDING & FINTECH MSME Department, Central Office, 2" Floor, MMO Building, Fort, Mumba