Supporting SMEs

Andhra Bank has been focused on generating innovative and customer-centric services and products. Nilamani Patel, General manager, MSME Department, Andhra Bank tells us about their financing mechanism and the various products offered for SMEs. 

Bhuvnesh Talwar (BT): What is your definition of Small & Medium Entrepreneurs (SMEs)?

Nilamani Patel (NP): According to the MSMED Act, 2006, a micro enterprise is one where investment in plant and machinery does not exceed Rs. 25 lakh. A small enterprise is where the investment in plant and machinery is more than Rs. 25 lakh but does not exceed Rs. 5 crore. A medium enterprise is where the investment in plant and machinery is more than Rs.5 crore but does not exceed Rs.10 crore.

Enterprises engaged in providing or rendering of services and whose investment in equipment. A micro enterprise has investment in equipment not exceeding Rs. 10 lakh. A small enterprise is where the investment is more than Rs.10 lakh but does not exceed Rs. 2 crore. A medium enterprise has investment more than Rs. 2 crore but does not exceed Rs. 5 crore. 

BT: What is the eligibility criterion for SMEs to avail loan?

NP: There is no specific eligibility criterion for SMEs to avail loan. However, for projects under MSME, a detailed project report inter alias covering managerial, technical, commercial and financial areas,  is required. 

BT: What is the procedure for obtaining a loan?

NP: The applicant has to approach a branch of the Bank and present his case for discussion and acceptance of his proposal. The proposal should be technically feasible and commercially viable. Further, it is preferable if the borrower has a satisfactory track record and good banking history. 

BT: Which are the main industries within SME space having a major share?

NP: Major share of MSME advances under Manufacturing/Processing category mainly comprises of Agro based industries such as Rice mills, Oil mills, Cotton ginning mills, Tobacco processing units etc., and General Engineering works. 

Under Service activity, the major share is from educational institutions, retail trade, business enterprises, professional & self employed, hotels, and transport operators. 

BT: What is the interest rate charge on different credit limits?  

NP: The rate of interest for MSME accounts varies from 9.50% to 13.50% depending on Amount, Tenor, Activity and Credit Rating. 

BT: What has been the default rate?

NP: The default rate under MSME is 0.02% 

BT: What are the challenges faced by you in the SME space?

NP: SMEs are a big challenge for the banking industry. India has about 13 million SME units and out of these, hardly 20% have banking relationship. Apart from the reach, SMEs are seen by banks as big opportunity so, the competition is becoming very stringent. 

BT: What is the upper and low limit of loans to SMEs?

NP: There are no credit ceilings under MSME.  

BT: Any new strategies or schemes for SMEs in the pipeline?

NP: We are conducting meeting of prospective SME borrowers at various centers in India and making them aware of Credit Guarantee Fund Trust for Micro & Small Enterprises (CGTMSE) scheme.   

BT: How far have you helped women entrepreneurs?

NP: The Bank lays great emphasis on increasing the flow of credit to women entrepreneurs. Accordingly, many of the products and schemes are launched and we have a 0.50% of concession in interest rates charged to them.