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Refinance scheme is introduced to facilitate the flow of funds to industrial units in  the micro and small enterprises sector through eligible Primary Lending Institutions (PLIs), comprising scheduled banks, State Financial Corporations (SFCs) State Industrail Development Corporations(SIDCs), etc.,  SIDBI grants refinance against term loans granted by the eligible PLIs to eligible industrial concerns for setting up industrial projects in the micro and small enterprise sector and for their expansion / modernisation / diversification.  

General Refinance Scheme

For setting up new micro and small enterprises and for expansion, modernisation, diversification, etc. of existing units and for all activities eligible for assistance under the scheme including professional practice/consultancy venture and for wetting up of service sector units such as tourism related activities / hospitals / nursing homes / polyclinics / hotels / restaurants / marketing and industrial infrastructural projects.  Refinance can be availed through the Automatic Refinance Scheme (ARS)and Normal Refinance Scheme (NRS) by banks and by way Line of Credit (LOC)  by SFCs and SIDCs.

General Features of the  Refinance Scheme  are :

All PLIs are required to enter into a General Agreement before availing refinance from SIDBI.  Specimen  of the General Agreement – Appendix I

Eligibility and exposure limits for PLIs are determined  by rating the PLIs on a rating scale developed by CRISIL.  The rating takes into account the financial position and working results and compliance with regulatory requirements .

The PLI shall hold in trust all the securities including fixed assets, proceeds thereof, book debts, receivables, actionable claims, assignments, bills of exchange, etc. obtained / to be obtained as security for the financial assistance made available to eligible units by the PLIs and for which the refinance has been extended by SIDBI.

In terms of SIDBI Act., 1989 and Micro Small and Medium Enterprises Act , 2006, eligible Banks would be eligible for refinance against their loans to micro and small enterprises  and eligible State Financial Corporations would be eligible  for refinance against their loans to micro, small and  medium enterprises.

Methodology

For Banks

Automatic Refinance Scheme and Normal Refinance Scheme
           
All proposals with individual ceiling of ` 200 lakh for scheduled commercial banks, `50 lakh for state co-operative banks ( including PCBs/UCBs, etc., ) and `20 lakh to regional rural banks would be covered under the Automatic Refinance Scheme.  No pre-sanction scrutiny would be carried out by SIDBI under ARS.

All cases above these ceilings would be covered under Normal Refinance Scheme (NRS).

For SFCs

Line of Credit LOC

Line of Credit is provided to eligible SFCs through which all refinance schemes of assistance can be covered.

No scrutiny or appraisal would be carried out by SIDBI far cases covered under LOC.

Micro and Small Enterprises Scheme (MSERS)

Purpose

Refinance is for loans and advances (i.e., term loans and working capital advances) of Banks to units in micro and small enterprises sector against which no financial support has been sought from any other institution or refinance from SIDBI.  The Bank is required to accept the Letter of Intent (LoI) - Appendix -II, enter into a Loan Agreement – Appendix –III and submit a list of units in the prescribed format – Appendix – IV.

Eligible Borrowers

Scheduled banks (including State Co-operative Banks, Urban Co-operative Banks, and Private Sector Banks, etc.). Refinance assistance will be available under the scheme to those banks having sound financials and fulfilling the following eligibility criteria:

     (i)should have been  in operation for a period of 3 years
     (ii)should have earned profit during the last 2 years
  (iii)should have sizeable outstanding portfolio of micro and small      enterprises (MSE) and
   (iv) should have strong fundamentals based on last audited balance      sheet viz.

          (a) net worth of not less than Rs. 50 crore
          (b)capital to risk weighted assets (CRAR) of not less than 9%; and
          (c)net NPAs not exceeding 10%.

Refinance Scheme for Micro and Small Enterprises (RMSE)

Purpose

Corpus created out of shortfall in in achievement of priority sector lending target and/or agriculture lending and/or weaker section target lending by foreign banks and domestic commercial banks,  The funds are disbursed by way of refinance to Public Sector Banks and well performing SFCs up to 50% of their  incremental lending by way of term loans, working capital term loans,  etc., to  units in the micro and small enterprise sector.  The Bank is required to submit a certificate  giving details of incremental disbursements and also submit a list of eligible units in the micro and small enterprises sector  against which refinance has been availed.

Eligible Borrowers

Public  Sector Banks and well performing SFCs