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SIDBI Scheme to Support Liquidity Needs of MSME through Intermediaries

SIDBI Scheme to Support Liquidity Needs of MSME through Intermediaries

Considering the second wave of COVID-19 pandemic and to support COVID-19 hit businesses, RBI has provided another special liquidity facility of Rs.15000 crore to SIDBI (SLF-2) to address the liquidity and credit needs of the MSME sector. To initiate the SLF-2, special schemes are being launched for support to MSMEs through banks, NBFCs, and MFIs. The Scheme to support liquidity needs of the MSME sector through intermediaries would cover all eligible entities having investment-grade ratings irrespective of the organization to ensure wider coverage.

Special liquidity facility – SLF-1

Reserve Bank of India (RBI) had provided a special liquidity facility of Rs.15000 crore to SIDBI last year (SLF-1).  Accordingly, The SIDBI has launched special liquidity schemes for support to MSME sectors impacted by the COVID-19 outbreak.

Click here to know more about the SIDBI Schemes for Special Liquidity Support for MSME

Special liquidity facility – SLF-2

To operationalization the SLF-2, the SIDBI has launched the following special liquidity schemes under the Scheme to support liquidity needs of the MSME sector through intermediaries for support to MSME sectors impacted by the COVID-19 outbreak:

• Special Refinance Scheme 2021 – (SLS II-SRS-2021)
• Scheme for Special Liquidity Support for MSME through NBFCs (SLS II-NBFC 2021)
• Scheme for Special Liquidity Support for MSME through MFI (SLS II-MFI 2021)

Eligible Entities

The SIDBI Scheme to support liquidity needs of the MSME sector through intermediaries will cover all eligible entities having investment-grade ratings irrespective of the size of the organizations.

Special Refinance Scheme 2021 – (SLS II-SRS-2021)

The eligibility parameters and other norms of the Special Refinance Scheme 2021 for MSME to Provide Liquidity Support are as follows:

The objective of the scheme

To provide refinance assistance to eligible PLIs to support liquidity needs of their Micro and Small Enterprises (MSEs) end-borrower

Eligibility Criteria

Scheduled commercial banks (Public, Private, Foreign) and Small Finance Banks (SFBs) are eligible for this scheme. SIDBI’s assistance will be available under the scheme to those scheduled banks having sizeable outstanding portfolios to MSEs/micro-credit and sound financials with the following eligibility criteria:

For Banks (other than SFBs):

The bank must be in operation for 3 years and should have earned a profit in at least 2 out of the last three financial years. According to the audited balance sheet, the bank should comply with the following norms:

• The bank should have a Net worth of not less than Rs.50 Crore
• The Capital to risk-weighted assets of the bank should not be less than 9%
• The Capital to Risk-weighted assets (CRAR) of the banks should not be less than 9%
• The level of Net Non-performing asset (NPA)s of the bank should not be exceeding 10% to become eligible for this scheme

For Small Finance Banks

The SFB and the previous entity before conversion to SFB (taken together) should have earned profits during at least two out of the last 3 years. The Small Finance Bank has been granted a final license by RBI for carrying on Small Finance Bank business and have commenced operations of SFB

The SFB need to comply with the following Benchmarks norms:

• The SFB should have a Net worth of not less than Rs.100 Cr
• Capital to Risk (Weighted) Assets Ratio (CRAR) of the SFB should be 15% or above
• Gross non-performing assets (NPAs) need to be equal to 7% or higher than this

Eligible Activities

The eligible activities of the bank as defined in section 2(h) of the Small Industries Development Bank of India Act

Beneficiaries

Any organization satisfying the definition of micros and small enterprises as per the  Medium Enterprises Development Act, 2006 or as per the definition contained in GoI Gazette Notification are eligible for the scheme

MSE end borrower account up to SMA-1 category eligible to be covered under the refinance as applicable under the scope of ECLGS 2.0 in the healthcare and 26 other higher stress sectors

Tenure Details

• The special liquidity scheme loan needs to be repaid before 12 months or June 10, 20211 whichever is earlier.
• SIDBI will provide a tenure of 36 to repay the loan under Special Refinance Scheme 2021 and which will be augmenting with own funds from SIDBI

Security Details

The security details for this loan are based on the General Agreement. The bank shall hold in trust for SIDBI, all the Securities including movable and immovable assets, book debts, receivables, actionable claims, guarantees, assignments, bills of exchange and other securities may be directly or indirectly obtained by the bank from MSME.

Application Procedure

Scanned copies of the duly signed application form, certificates, and documents need to be sent to email id [email protected] for availing the financial aid from SIDBI. The application form for the Special Refinance Scheme 2021 for MSE to Provide Liquidity Support is as follows:

Annexure_II_SRS-2-Application_Form_Banks-SFBs_Vetted-by-LV

Scheme for Special Liquidity Support for MSME through NBFCs (SLS II-NBFC 2021)

The eligibility parameters and other norms of the Scheme for Special Liquidity Support for MSME through NBFCs (SLS II-NBFC 2021) are as follows:

The objective of the Scheme

The objective of the scheme is to provide liquidity support to MSMEs impacted due to the second wave of Covid-19 through Non-Banking Financial Companies, including fintech NBFCs. The special scheme would provide financial support to NBFC by way of term loans to ensure operational continuity and advance onward lending to MSME (Micro, Small, and Medium Enterprises).

Eligibility Parameters

The NBFC needs to be registered with RBI as Investment and Credit Company (ICC) to become eligible for this scheme

• If an NBFC is in business for three years and has 3 years of audited accounts, such a firm can provide term loans through a special liquidity scheme.
• The Non-Banking Financial Companies should have Minimum Net Owned Funds of Rs.50 Crore and Minimum Asset Size of Rs.200 Crore to become eligible for the scheme
• The financial company need to have an external rating of BBB or superior (as of March 31, 2020)
• NBFC should comply with applicable regulatory requirements
• The NBFC should clear Go/No Go Criteria as per the Bank’s internal guideline

Beneficiaries

Any organization satisfying the definition of micros and small enterprises as per the  Medium Enterprises Development Act, 2006 or as per the definition contained in GoI Gazette Notification are eligible for the scheme

Tenor Details

The special liquidity scheme loan needs to be repaid in bullet installment after 1 year from the date of drawl or June 10, 2022, whichever is earlier.

Security

The scheme provides need-based security as per the bank’s extant norms

Processing Fee

The MSME is required to pay 0.10% of the sanctioned amount subject to a maximum of Rs.5 Lakh along with applicable GST.

Other Details

NBFCs financing two-wheeler loans, unable to furnish certification of MSE status, and NBFCs having a majority portfolio of gold loans shall not be eligible under the scheme

Documents Required

The following documents are mandatory for the Special Liquidity Support scheme:

• Details of promoters/directors of the company
• Details of Parent or holding/Subsidiary/Associate concerns
• Details of Shareholding Pattern of the Borrower and Parent /holding Company as of March 31, 2021
• Declaration of Beneficial owner
• Certified copy of the passport, and PAN Card of the Promoters / Directors and other authorized signatories of the company.
• Certified copy of Latest Memorandum and Articles of Association along with incorporation certificate.
• Certified copy of Certificate of Registration with RBI.
• Annual Reports for the last 3 years.
• Declaration regarding banking facilities
• Latest Asset Liability Maturity Profile filed with RBI
• Latest certified returns filed with RBI
• Latest Rating rationale
• In case personal guarantees are offered, the latest CA certified net worth statements of the guarantors.
• Undertaking duly signed by each director providing his/her consent concerning accessing the CIBIL’s database, for accessing the credit reports as per Annexure-V

Application Procedure

Scanned copies of the duly signed application form, certificates, and documents need to be sent to email id [email protected]. The Scheme for Special Liquidity Support for MSME through NBFCs (SLS II-NBFC 2021) application form format is as follows:

Annexure_II_Application-format_NBFCs_SLS-2

Scheme for Special Liquidity Support for MSME through MFI (SLS II-MFI 2021)

The eligibility parameters and other norms of the Scheme for Special Liquidity Support for MSME through MFI (SLS II-MFI 2021) are as follows:

The objective of the Scheme

The objective of the scheme is to provide liquidity support to MSMEs impacted due to Covid-19 through Microfinance Institutions (MFI). The special scheme would provide financial support to MFI by way of term loans to ensure operational continuity and promote onward lending to Micro, Small, and Medium Enterprises.

Eligibility Parameters

• If an MFI is in business for three years, such a bank can provide term loans through a special liquidity scheme.
• The MFI Registered as Society, Trust, Section 8 Company, NBFC-MFls, Co-operative Society and MACS are eligible for the scheme
• The financial institution needs to have an external rating of BBB or superior (as of March 31, 2020) and a minimum MFI grading of MFRS
• Capital Adequacy Ratio (CRAR) to be above that prescribed under RBI requirements (as per last audited balance sheet / last return filed with RBI
• PAR > 90 days (AUM) should be <7% (relax able up to 9%) as on March 31, 2021.
• MFIs should have raised fresh borrowings from lenders other than SIDBI during FY 2021.
• MFI Should clear ‘Go / No Go Criteria’ as per Bank’s internal guideline. Should also meet other policy/ scheme guidelines.

Beneficiaries

The beneficiaries of this scheme are microfinance borrowers and clients by the Microfinance Institutions

Tenor Details

• SIDBI is providing Short term tenure of up to 1 year or June 10, 2022, whichever is earlier.
• In addition to short term tenure of 1 year, a longer tenure up to 3 years can also be considered on a case-to-case basis, depending on the merits of the proposal which will be provided by augmenting with own funds from SIDBI.

Security

In the case of liquidity funding only

• Exclusive first charge by way of hypothecation of unencumbered book debts/receivables of minimum 1.1 times of the assistance, in favor of SIDBI.
• Demand Promissory Note (DPN) of equivalent amount
• Post Dated Cheques (PDCs)
• Personal Guarantee of Promoters / Corporate Guarantee
• In the case of the existing customer of SIDBI, the extension of charge on the FDRs shall be applicable.

In case of funding for On-ward lending

• Exclusive first charge by way of hypothecation of book debts/receivables created out of the assistance availed from SIDBI.
• Demand Promissory Note (DPN) of equivalent amount
• Post Dated Cheques (PDCs)
• Personal Guarantee of Promoters / Corporate Guarantee
• In the case of the existing customer of SIDBI, the extension of charge on the FDRs shall be applicable.

Processing Fee

The MSME is required to pay 0.10% of the sanctioned loan amount subject to a maximum of Rs.10 Lakh along with applicable GST.

Documents Required

• Registration Certificates / Renewals / Certificate of Incorporation / Certificate of commencement of business
• Memorandum & Articles of Association/ Bye-laws.
• Brief Profile of Board of Directors and chief functionary Shareholding Pattern
• Name, address and contact numbers of present and past funding agencies
• Audited/provisional accounts and balance-sheet of the organization for the last three years
• KYC document of Company & Directors
• Credit facilities availed from the other lenders
• Operational Highlights
• Details of Portfolio at Risk
• Details of Geographical spread
• Details of Associate concerns and its financial performance
• Expected outreach and impact of proposed liquidity support

Application Procedure

Scanned copies of the duly signed application form, certificates, and documents need to be sent to [email protected] to avail the financial assistance. The application form for Scheme for Special Liquidity Support for MSME through MFI is as follows:

Annexure_II_Application_Format_MFIs_SLF2 (1)