Advance against Gold and Gold ornamenrts:

1. WEF oct30,2014 the quantum of loan against gold ornaments has been fixed at Rs 2.00 lac.
2. Period of loan shall not exceed 12 months from the date of sanction
3. Interest will be charged at monthly rests,in case of bullet repayment scheme, both interest and principal shall become payable after 12 months.
4. Such loans shall be governed by Income recognition,Assrt classification and provisioning norms.

Details of the Scheme:

i)ownership of  ornaments: It is advised that the advance is made to person properly introduced to the bank.The Bank should satisfy itself about the ownershipof Gold ornaments before accepting them for pledge.The bnk shall obtain a declaration from the borrower that the ornaments are his own propertyand that he has the fullest right to pledge them.

1. II) Appraiser: Tha bank should appoint an approved Jeweller for valuation of the Gold ornaments proposed to be pledged with the bank and obtain adequate security from him in the form of cash and indemnity form.Valuation and appraisalof the ornaments in the bank’s premises itself would be ideal.

 

iii) Valuation Report

a)The valuation certificateofthe appriser should clearly indicate the description of the ornaments like their fineness,gross weight of the ornaments,net weight of the gold content exclusive of stones,lac,alloy,strings,fastenings,and the value of the gold prevailing at the market price. Two copies of certificate on valuation to be obtained while one copy should be kept with the Gold ornaments.

1. b) In order to standardize the valuation and make it more transparent to the borrower,it has been decided that Gold jewellery accepted as security/collateral security is to be valued at the average of the closing price of 22 carat gold for thepreceeding 30 daysas quoted by the Indi Bullionand Jewellers association

Ltd.. If the purety of Gold is less than 22 carat,, the bank should translate the collateral inro 22 carat and valuethe exact gramsofthe collateral. In other words jewellery of lower purety shall be valued proportionately.

(IV) Record of Security: The full name of the borrower,,his residential address,date of advance,amount and description of the ornaments in detail should be recorded in the gold ornaments register which should be checked andinitialled by Branch Head

(v)custody of Ornaments: The ornaments belongingto each borrower (orarticles of each loan) together with a list indicating the description of ornaments ,gold loan account number,name of the party,etc should be kept separately in small cloth bags. A tag indicating loan account number,and name of the partyshould be tied to the bag to facilitate identification

(VI) The priod of advance against gold ornaments should be restricted to 6 months or one year.

VII) Margin: As a prudential measure RBI has prescribed that aloan to value(LTV) ratio of not exceeding 75% for UCBs lending against Jewellery. The interest debited in the account should be realized promptly so that in no circumstances it allow to water down the margin .

VIII)Return of ornaments: On repayment of the loantogether with interest payable in the account ,the ornaments should be returned to the borrower and a  receipt obtained in token of having released the ornaments.

1. IX) Default: when the borrower fails to repay the loan on the due date,a notice calling upon him to repay loan within a specified time should be given  and if no response is received,a reminder should be sent by registered post informing the borrower that the ornaments would be auctioined and after adjusting the sale proceeds against the outstanding dues to the bank ,the balance ,if any,would be paid to the borrower against receipt.
2. X) Verification; Surprise verification of the packets containing gold/ ornaments by an officer other than the joint custodian should be undertaken and should be recorded in a separate register with necessary details.

1 Micro, Small & Medium Enterprises Development (MSMED) Act, 2006

The Government of India has enacted the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 on June 16, 2006 which was notified on October 2, 2006. With the enactment of MSMED Act 2006, the paradigm shift that has taken place is the inclusion of the services sector in the definition of Micro, Small & Medium enterprises, apart from extending the scope to medium enterprises. The MSMED Act, 2006 has modified the definition of micro, small and medium enterprises engaged in manufacturing or production and providing or rendering of services. The Reserve Bank has notified the changes to all scheduled commercial banks. Further, the definition, as per the Act, has been adopted for purposes of bank credit vide RBI circular ref. RPCD.PLNFS. BC.No.63/ 06.02.31/ 2006-07 dated April 4, 2007.

1.1 Definition of Micro, Small and Medium Enterprises

(a) Manufacturing Enterprises i.e. Enterprises engaged in the manufacture or production, processing or preservation of goods as specified below:

(i) A micro enterprise is an enterprise where investment in plant and machinery does not exceed Rs. 25 lakh;

(ii) A small enterprise is an enterprise where the investment in plant and machinery is more than Rs. 25 lakh but does not exceed Rs. 5 crore; and

(iii) A medium enterprise is an enterprise where the investment in plant and machinery is more than Rs.5 crore but does not exceed Rs.10 crore.

In case of the above enterprises, investment in plant and machinery is the original cost excluding land and building and the items specified by the Ministry of Small Scale Industries vide its notification No.S.O. 1722(E) dated October 5, 2006 (Annex I).

(b) Service Enterprises i.e. Enterprises engaged in providing or rendering of services and whose investment in equipment (original cost excluding land and building and furniture, fittings and other items not directly related to the service rendered or as may be notified under the MSMED Act, 2006) are specified below.

(i) A micro enterprise is an enterprise where the investment in equipment does not exceed Rs. 10 lakh;

(ii) A small enterprise is an enterprise where the investment in equipment is more than Rs.10 lakh but does not exceed Rs. 2 crore; and

(iii) A medium enterprise is an enterprise where the investment in equipment is more than Rs. 2 crore but does not exceed Rs. 5 crore.

1.2 Bank Loans to Micro and Small enterprises, both Manufacturing and Service are eligible to be classified under Priority Sector advance as per the following:

1.2.1 Direct Finance

1.2.1.1 Manufacturing Enterprises

The Micro and Small 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 notified by the Government from time to time. The manufacturing enterprises are defined in terms of investment in plant and machinery.

1.2.1.2. Loans for food and agro processing

Loans for food and agro processing will be classified under Micro and Small Enterprises, provided the units satisfy investments criteria prescribed for Micro and Small Enterprises, as provided in MSMED Act, 2006.

1.2.1.3 Service Enterprises

Bank loans up to Rs.5 crore per borrower / unit to Micro and Small Enterprises engaged in providing or rendering of services and defined in terms of investment in equipment under MSMED Act, 2006.

1.2.1.4 Export Credit

Export credit to MSE units (both manufacturing and services) for export of goods/services produced / rendered by them.

1.2.1.5 Khadi and Village Industries Sector (KVI)

All loans sanctioned to units in the KVI sector, irrespective of their size of operations and location and amount of original investment in plant and machinery. Such loans will be eligible for classification under the sub-target of 60 percent prescribed for micro enterprises within the micro and small enterprises segment under priority sector.

1.2.1.6. If the loans under General credit Card (GCC) are sanctioned to Micro and Small Enterprises, such loans should be classified under respective categories of Micro and Small Enterprises.

1.2.2 Indirect Finance

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

(ii) Loans to cooperatives of producers in the decentralised sector viz. artisans village and cottage industries.

(iii) Loans sanctioned by banks to MFIs for on-lending to MSE sector as per the conditions specified in extant Master Circular on Priority Sector Lending.

1.3 Lending by banks to medium enterprises will not be included for the purpose of reckoning of advances under the priority sector.

1.4 Since the MSMED Act, 2006 does not provide for clubbing of investments of different enterprises set up by same person / company for the purpose of classification as Micro, Small and Medium enterprises, the Gazette Notification No. S.O.2 (E) dated January 1, 1993 on clubbing of investments of two or more enterprises under the same ownership for the purpose of classification of industrial undertakings as SSI has been rescinded vide GOI Notification No. S.O. 563 (E) dated February 27, 2009.

SECTION – II

2 Scheme of Small Enterprises Financial Centres (SEFCs):

As per announcement made by the Governor in the Annual Policy Statement 2005-06, a scheme for strategic alliance between branches of banks and SIDBI located in clusters, named as “Small Enterprises Financial Centres” has been formulated in consultation with the Ministry of SSI and Banking Division, Ministry of Finance, Government of India, SIDBI, IBA and select banks and circulated to all scheduled commercial banks on May 20, 2005 for implementation. SIDBI has so far executed MoU with 15 banks (Bank of India, UCO Bank, YES Bank, Bank of Baroda, Oriental Bank of Commerce, Punjab National Bank, Dena Bank, Andhra Bank, Indian Bank, Corporation Bank, IDBI Bank, Indian Overseas Bank, Union Bank of India, State Bank of India and Federal Bank). List of MSME clusters covered by existing SIDBI branches is furnished in Annex II.

SECTION – III

3 Targets for lending to Micro and Small enterprises (MSE) sector by Domestic Commercial Banks and Foreign Banks operating in India

3.1 Advances to micro and small enterprises (MSE) sector shall be reckoned in computing achievement under the overall Priority Sector target of 40 percent (32 percent for Foreign Banks operating in India with less than 20 branches) of Adjusted Net Bank Credit (ANBC) or credit equivalent amount of Off-Balance Sheet Exposure, whichever is higher.

3.2 Bank loans above Rs.5 crore per borrower / unit to Micro and Small Enterprises engaged in providing or rendering of services and defined in terms of investment in equipment under MSMED Act, 2006, shall not be reckoned in computing achievement under the overall above Priority Sector targets. However, such loans would be taken into account while assessing the performance of the banks with regard to their achievement of targets prescribed by the Prime Minister’s Task Force on MSMEs for lending to MSE sector.

3.3 In terms of the recommendations of the Prime Minister’s Task Force on MSMEs, banks are advised to achieve a 20 per cent year-on-year growth in credit to micro and small enterprises and a 10 per cent annual growth in the number of micro enterprise accounts.

3.4 In order to ensure that sufficient credit is available to micro enterprises within the MSE sector, banks should ensure that:

(a) 40 per cent of the total advances to MSE sector should go to micro (manufacturing) enterprises having investment in plant and machinery up to Rs. 10 lakh and micro (service) enterprises having investment in equipment up to Rs. 4 lakh;

(b) 20 per cent of the total advances to MSE sector should go to micro (manufacturing) enterprises with investment in plant and machinery above Rs. 10 lakh and up to Rs. 25 lakh, and micro (service) enterprises with investment in equipment above Rs. 4 lakh and up to Rs. 10 lakh. Thus, 60 per cent of MSE advances should go to the micro enterprises.

(c) While banks are advised to achieve the 60% target as above, in terms of the recommendations of the Prime Minister’s Task Force, the allocation of 60% of the MSE advances to the micro enterprises is to be achieved in stages viz. 50% in the year 2010-11, 55% in the year 2011-12 and 60% in the year 2012-13.

3.5 The target for lending to Micro Enterprises within the MSE sector (i.e. 60% of total lending to MSE sector should go to Micro enterprises) will be computed with reference to the outstanding credit to MSE sector as on preceding March 31st.

SECTION – IV

4 Common Guidelines / Instructions for Lending to MSME Sector

4.1 Issue of Acknowledgement of Loan Applications to MSME borrowers

Banks have been advised to mandatorily acknowledge all loan applications, submitted manually or online, by their MSME borrowers and ensure that a running serial number is recorded on the application form as well as on the acknowledgement receipt. Banks are further encouraged to start Central Registration of loan applications. The same technology may be used for online submission of loan applications as also for online tracking of loan applications.

4.2 Collateral

Banks are mandated not to accept collateral security in the case of loans upto Rs.10 lakh extended to units in the MSE sector. Banks are also advised to extend collateral-free loans upto Rs. 10 lakh to all units financed under the Prime Minister Employment Generation Programme of KVIC.

Banks may, on the basis of good track record and financial position of the MSE units, increase the limit of dispensation of collateral requirement for loans up to Rs.25 lakh (with the approval of the appropriate authority).

Banks are advised to strongly encourage their branch level functionaries to avail of the Credit Guarantee Scheme cover, including making performance in this regard a criterion in the evaluation of their field staff.

4.3 Composite loan

A composite loan limit of Rs.1 crore can be sanctioned by banks to enable the MSE entrepreneurs to avail of their working capital and term loan requirement through Single Window.

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