NSIC Bill Discounting Scheme

National Small Industries Corporation (NSIC) provides bill discounting facilities for SSI or MSME undertakings in India. The NSIC bill discounting scheme covers purchase or discounting of bills for trade transactions to reputed Public Limited Companies or State and Central Government Departments and Undertakings. In this article, we look at the bill discounting scheme in detail and procedure for availing the facilities.

Bill Discounting

Bill discounting refers to a practice wherein a bank or financial institution would purchase a bill before it is due for an amount after discounting bill discounting charges. Bill discounting facilities help businesses immediately realise the amount due without having to wait until the due date for payment by the customer. The following illustration provides an example of a bill discounting transaction:

Bill Discounting Process

NSIC Bill Discounting Scheme

The NSIC bill discounting scheme covers discounting of bills raised by SSI or MSME undertakings for trade transactions made with reputed Public Limited Companies, State Government Departments, Central Government Departments and Central Government Undertakings.

To be eligible for the scheme the bill raised by the SSI or MSME business must be on a reputed Public Limited Company or Government Department or Government Undertaking. Further, the maximum usance period of such bills should not exceed 90 days. The period of unexpired usance of the bill should also not exceed 90 days while the tenure of the statements must not exceed 120 days.

Security for Bill Discounting Facility

To avail the Bill discounting facility, the SSI or MSME must provide a bank guarantee equivalent to the value of assistance (including discounting charges & service charges for 90 days) in favour of NSIC. In such cases, the small business may also request NSIC for sanction of annual limits.

Bill of Exchange duly is accepted by large corporate units of sound financial standing with a turnover exceeding Rs 200 Crores and net-worth exceeding Rs 50 crores and which are profit making for the last three years are also accepted by the NSIC without any other security.

In addition to the above, personal guarantee of the Proprietor, Partners of Firm and Directors of the Company will also be requested by NSIC for providing the bill discounting facility.

Interest on Bill Discounting Facility

The following interest charges levy for bill discounting assistance against the security of Bank Guarantee or Savings Deposit Receipts or Fixed Deposit Receipts:

NSIC Bill Discounting Facility Interest Rates In case of delay in payment beyond 90 days, interest on delayed payment will be applicable at 3% over and above the standard rate of interest (i.e. 13.40%).

Service Charge for Bill Discounting Facility

In addition to the interest charges, minimum service charges will be 0.25% for the first 30 days and 0.08% per week for a period after 30 days subject to a maximum of 3% of the principal amount (i.e. the amount of invoice to be discounted). In case of businesses having an NSIC sanctioned Bill Discounting facility, commitment charge at 2% per annum on the limit authorised is collected in advance instead of service charge in every transaction.

Units placed in the northeastern region enjoy discounts on service charges. For units in North Eastern Region, the minimum service charges will be 0.13% for first 30 days and after that 0.04% per week subject to a maximum of 1.50% of the principal amount. i.e. amount of invoice to be discounted). In case of businesses placed in the northeastern region having an NSIC sanctioned Bill Discounting facility, commitment charge at 1% per annum on the limit authorised is collected in advance instead of service charge in every transaction.

Also, non-refundable processing fee at 0.2% of application amount will be collected in advance on receipt of the application for NSIC Bill discounting facility. In case of renewal of an existing NSIC bill discounting facility, processing charges will be 0.1% of the renewal amount.

Procedure for Obtaining NSIC Bill Discounting Facility

To obtain NSIC Bill Discounting facility, SSI or MSME businesses can apply to the concerned NSIC office by submitting the NSIC Bill Discounting Scheme Application Form along with the relevant documents. For more information or assistance you can also visit IndiaFilings.com or get in touch with an IndiaFilings Business Advisor.

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Frequently Asked Questions

Common questions about NSIC Bill Discounting Scheme for MSMEs in India.

The NSIC bill discounting scheme is available for Small Scale Industrial (SSI) or Micro, Small and Medium Enterprises (MSME) undertakings in India. The bills eligible for discounting under this scheme must be raised for trade transactions with reputed Public Limited Companies, State Government Departments, Central Government Departments, or Central Government Undertakings.

Under the NSIC bill discounting scheme, the maximum usance period (the time allowed for the payment of the bill) for the bills should not exceed 90 days. Additionally, the period of unexpired usance of the bill should also not exceed 90 days while the tenure of the statements must not exceed 120 days.

To avail the NSIC bill discounting facility, the SSI or MSME business must provide a bank guarantee equivalent to the value of assistance (including discounting charges & service charges for 90 days) in favor of NSIC. Alternatively, NSIC may also accept bills of exchange duly accepted by large corporate units of sound financial standing with a turnover exceeding Rs 200 Crores and net-worth exceeding Rs 50 crores, which are profit-making for the last three years, without any other security.

The interest charges for the NSIC bill discounting facility against the security of a bank guarantee or fixed/savings deposit receipts range from 11.90% to 13.40% per annum, depending on the credit rating of the borrower. In case of delay in payment beyond 90 days, an additional interest of 3% over and above the standard rate of interest (i.e., 13.40%) will be applicable.

Apart from interest charges, the NSIC bill discounting scheme also involves service charges. The minimum service charge is 0.25% for the first 30 days and 0.08% per week for the period after 30 days, subject to a maximum of 3% of the principal amount (the amount of the invoice to be discounted). However, for businesses in the northeastern region, the service charges are lower, with a maximum of 1.50% of the principal amount.

To obtain the NSIC bill discounting facility, SSI or MSME businesses can apply to the concerned NSIC office by submitting the NSIC Bill Discounting Scheme Application Form along with the relevant documents. A non-refundable processing fee of 0.2% of the application amount will also be collected in advance upon receipt of the application.

For businesses having an NSIC sanctioned bill discounting facility, instead of service charges for each transaction, a commitment charge of 2% per annum (or 1% per annum for businesses in the northeastern region) on the authorized limit is collected in advance. Additionally, a processing fee of 0.1% of the renewal amount is charged for the renewal of an existing NSIC bill discounting facility.

Yes, in addition to the security requirements, NSIC may also request personal guarantees from the Proprietor, Partners of the Firm, or Directors of the Company for providing the bill discounting facility to the SSI or MSME business.

The NSIC bill discounting scheme aims to provide bill discounting facilities to SSI or MSME undertakings in India. Bill discounting helps businesses immediately realize the amount due from their customers without having to wait until the due date for payment, thereby improving their cash flow and working capital management.

Yes, the NSIC bill discounting scheme offers special considerations for businesses located in the northeastern region. These businesses enjoy discounted service charges, with a maximum of 1.50% of the principal amount (instead of 3% for other regions). Additionally, the commitment charge for businesses with an NSIC sanctioned bill discounting facility is lower at 1% per annum (instead of 2% for other regions).