Financing options and modes
Chapter notes, video classes, MCQ practice tests and quick-revision one-liners for Small and Medium Enterprises in India — Certificate Course on MSME.
One-liners from this chapter
Free sample — 8 of 66 rapid-fire Q&A cards.
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.
What is a Cash Credit (CC) account and why is it commonly used by MSMEs?
A Cash Credit account is a revolving credit facility where the borrower can withdraw funds up to a sanctioned limit against hypothecation of stock and debtors, making it ideal for MSMEs to manage day-to-day working capital needs.
What is the difference between secured and unsecured loans for MSMEs?
Secured loans require collateral; unsecured loans need no asset backing.
What is the purpose of the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE)?
CGTMSE provides collateral-free credit guarantee cover to banks and NBFCs lending to micro and small enterprises, enabling MSMEs without adequate assets to access formal credit up to specified limits.
What is the purpose of the National Credit Guarantee Trustee Company (NCGTC)?
Provides credit guarantees for MUDRA, CGTMSE, and other government loan schemes.
Video classes for this chapter
Financing options and modes Part 1
Financing options and modes Part 2
Financing options and modes Part 3
Financing options and modes Part 4
Financing options and modes Part 5
Financing options and modes Part 6
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