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IIBF MSME study materials
IIBF MSME study resources

IIBF MSME cheat sheet

IIBF MSME · Keep the key ideas within reach.

Quick reference

MSME Financing: Appraisal, Monitoring & Recovery

  • Appraisal sequence: (1) promoter/character and KYC, (2) technical/economic feasibility, (3) financial viability, (4) credit structure and security, (5) sanction, (6) disbursement, (7) post-disbursement monitoring.

  • Micro & Small Enterprises (MSE) classification under MSMED Act: Micro if investment in plant & machinery ≤ ₹1 crore and turnover ≤ ₹5 crore; Small if investment ≤ ₹10 crore and turnover ≤ ₹50 crore; Medium if investment ≤ ₹50 crore and turnover ≤ ₹250 crore (revised limits effective 01.04.2025).

  • MSME classification is now composite: both investment and turnover thresholds must be satisfied; earlier benefit-based classifications (manufacturing vs services) are subsumed.

  • Udyam Registration is the single window for MSME recognition; Udyam number is required for priority sector status, subsidy, and most government schemes. Udyam Assist Platform (UAP) covers informal micro enterprises for registration.

  • Priority sector lending: banks must lend 40% of ANBC to priority sector; within this, micro enterprises get 7.5% and weaker sections 12%. Shortfall must be parked in RIDF or equivalent.

  • Project cost components: land & building, plant & machinery, miscellaneous fixed assets, preliminary/pre-operative expenses, margin money for working capital, and contingency. Term loan excludes margin money for working capital.

  • Debt-equity ratio norms: typically 2:1 for term loans; promoters' margin of 25-33% depending on scheme; for MSMEs under CGTMSE, promoter contribution as low as 10-15% may be acceptable.

  • Working capital assessment: under Nayak Committee (1993) for MSEs with turnover up to ₹5 crore, MPBF = 20% of projected annual turnover; banks may use turnover method or MPBF method (Tandon Committee) for larger units.

  • CGTMSE guarantees collateral-free credit up to ₹5 crore per borrower (revised from ₹2 crore); guarantee coverage up to 75% for micro/small enterprises and 50% for medium; annual guarantee fee and service charge apply.