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Financing options and modes
What is the primary regulatory framework governing MSME lending by banks in India?
Banks extend credit to MSMEs under the Priority Sector Lending (PSL) guidelines issued by the Reserve Bank of India, which mandate specific targets for MSME advances as a percentage of Adjusted Net Bank Credit.
What is the Turnover Method used for assessing working capital needs of MSMEs?
Working capital assessed at 25% of projected annual turnover.
What is the difference between fund-based and non-fund-based credit facilities for MSMEs?
Fund-based facilities involve actual disbursement of funds (e.g., term loans, working capital loans), while non-fund-based facilities like letters of credit and bank guarantees represent contingent liabilities where funds are released only upon invocation.
What is a packing credit facility and which MSMEs typically use it?
Pre-shipment export finance for manufacturers fulfilling export orders.
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