MSME Very important MCQs

MSME Very important MCQs

1. Which sector TUF applies to? a)Textile* b)Shoe manufacture, c)Food processing,

d)Glass manufacture

2. Which one of the following institution has initiated Project uptech scheme?

a)SIDBI, b)SBI*, c) IDBI, d)TIFAC

3. Market failure refers to : a) Imperfect markets, b)Perfect markets*, c)Traditional

markets

d)Both (a) and (b) above

4. Which one of the following factors is not included in the Market Gap?

a)Innovations, b)Lack of capital, c)Lack of premises, d)Technology*

5. BDS Supervisor is known as : a) Facilitator, b)Team Leader, *c) Correspondent ,

d)Group leader

6.Under the Revised RBI Guidelines on Priority Sector Lending, loans to food and agro

processing units are classified under a) Agriculture *b) MSME c) Others d) None

7. Under the Revised RBI Guidel ines on Priority Sector Lending, loans to

medium enterprises are not included for the purpose of reckoning of advances

under the priority sector. a) True b) False*

8. Bank loans up to per unit to Micro and Small Enterprises and to Medium

Enterprises under services sector are classified under priority sector. a) Rs 5 and 10
crore* b) Rs 10 and 15 crore c) Rs 10 and 5 crore d) Rs 15 and 10 crore

9. The quantum of loan limit under the revised General Credit Card (GCC) Scheme is

a) 1 lakh b) 2 lakh c) 5 lakh d) no ceiling on the loan amount*

10.The maximum claim settlement under Credit Guarantee Trust Scheme for Micro and

Small Enterprises (CGTMSE) is at Rs lakhs. a) 50 b) 62.5 c) 75 d) 200*

11. MSME loans covered under Guarantee Fund Trust for Micro and Small Enterprises

(CGTMSE) attracts risk weight for capital adequacy purpose: a) Five b) Fifty c)

Hundred d) Zero*

12. Provisioning requirements in respect of Standard Assets under Direct Advances to

agriculture and SME Sectors : a) A general provision of 0.1% of total outstanding

b) A general provision of 0.25% of total outstanding,* c) A general provision of

0.4% of total outstanding d) No provision is required to be made

13. The rate of subsidy under PMEGP scheme ranges from ___% to ___% : a) 10&

15 b) 15 & 20 c) 15 & 35* d) 20& 40

14. Advances to MSMEs up to Rs crore may be done on the basis of credit scoring

model.

a) 1 b) 2* c) 3 d) 4

15. The Chairman of Committee on Financial Architecture for Micro, Small and

Medium Enterprises (MSME) sector set up by Government of India is

a) M V Nair b) K C Chakrabarty c) UshaThorat d) K V Kamath*

16. The small finance bank shall primarily undertake finance to the following entities

a) unserved and underserved sections ,b)small business units, c) unorganized

sector ,d) micro and small industries, e) all the above*

17. MUDRA stands for : a)Metropolitan and Urban Development Regulatory Authority

b)A scheme under Ministry of AYUSH

c)Micro Units Development and Refinance Agency* ,d)None of the above

18. As per RBI guidelines, a MSME unit is treated as sick when

a) any of the borrowal account of the enterprise remains NPA for three months or

more

b) There is erosion in the net worth due to accumulated losses to the extent of 50% of its net

worth, c) Any of the borrowal account of the enterprise remains NPA for 6 months or more. d) a
and b*

19. Micro (manufacturing) enterprises are defined as those whose original investment in Plant
and

machinery do not exceed Rs. ... a) 5 lakhs b) 10 lakhs c) 25 lakhs *d) 50 lakhs

20. Under the proposed MSMED Amendment Bill, 2014, the revised investment limit in plant
and

machinery for micro (manufacturing) enterprises is at Rs

a) 25 lakhs b) 50 lakhs *c)75 lakhs d)100 lakhs

21. Under the Debt Restructuring Mechanism for MSMEs, the following entities will be
considered.

a) All non-corporate MSMEs irrespective of the level of dues to banks.

b) All corporate MSMEs, which are enjoying banking facilities from a single bank, irrespective of
the

level of dues to the bank.

c) All corporate MSMEs, which have funded and non-funded outstanding up to Rs.10 crore under

multiple/ consortium banking arrangement, d)All the above*

22. The Code of Bank's Commitment to MSE's which set minimum standards of banking and
practices

for banks to follow when they are dealing with MSEs has been formulated by a)BCSBI* b) SIDBI
c)
RBI d) GOI

23. Which agency provides subsidy for credit rating of SMEs

(a) SIDBI (b) DIC (c) NSIC *d) SMERA

24. Banks are mandated not to accept collateral security in the case of loans upto Rs. extended
to units

in the MSE sector. a) 25 lakh b) 10 lakh* c) 5 lakh d) 1 lakh

25. The quantum of loan limit under the revised General Credit Card (GCC) Scheme is

a) 1 lakh b) 2 lakh c) 5 lakh d)no ceiling on the loan amount*

26. The concept of teaching adults is called : a) Anagogy, b) Andragogy*, c) Pedagogy, d)

Mystagogy

27. An individual needs the following to perform a task (i)

Knowledge (ii) Skill (iii) Attitude iv) All of these*

28. The first step in training design is the identification of a) Trainee b) Training Needs*

c) Training Institution d) Training Materials

29. Active Methods of Training are, a)Lecture, b)Group Discussion, c) Demonstration, d)Case
Study

i) a,b,c ii) b,c,d iii) b,d* iv) a,b,c,d

30. Training can solve all performance problems : a) True b)False*

31. Make in India programme aims : a) To increase GDP growth b) To increase tax revenue.

c) Aims at high quality standards, d) Minimizethe impact on the environment, e) All of these*

32. Governing Council of Skill India Mission is Chaired by a) MSME Minister b) Finance Minister

c) Prime Minister* d) Deputy Chairman of NITI Ayog

33. What is eBiz?

a) A single window IT platform for services of all Central GovtDepts and Ministries**
b) A single window IT platform for services of all State GovtDepts and Ministries

c) A single window IT platform for services of all International Agencies ,d) None of these

34. What is NICDA?

a) National Institute for Coal Development Authority

b) National Industrial Corridor Development Authority**

c) National Information Centre for Data Administration , d) None of these

35. TReDS stands for

a) Treasury Rupee Dealing System

b) Trade Remittance and Discounting System

c) Trade Receivables Discounting System, **d) None of these

36.The total loans and advances extended by commercial banks to Micro

and Small Enterprises for 2014-15 is:a) Rs.8,461 bn, b)Rs.6,872 bn, c) Rs.25,229bn,
d)Rs.9,645bn**

37.Small Finance Banks can lend to :

a)Small business units b) MSEs c)Unorganized Sector d)All of these**

38.Ministries/ Govt departments/PSUs to source % of their requirements from MSE units.

a) 10 b)15 c)20** d)5

39.The implementing agencies of CLCSS are : a)SIDBI, b)NABARD c)SIDBI & NABARD d)RBI &**

SIDBI

40.UNIDO has identified industrial clusters for development

a)450 b)288 c)388 **d)121

41.As per MSMED Act, time limit for buyer to make payment to MSMEs is,

a) 60 days b)180 days c)90 days d)45 days**

42.Maximum claim amount settled for micro enterprises with loan upto

Rs.5.00 lakh under CGTMSE is: a)85% *b)80% c)75% d)50%

43.Application for guarantee cover should be lodged with CGTMSE within of loan sanctioned.
A )Next months b) next quarter** c) within six months d) no time limit

44.Pre-requisites for lodging claims with CGTMSE are,

a) Guarantee Cover is in force , b) Account classified as NPA ,c) Recall Notice issued

d) Lock-in period expired**, e) Recovery proceedings initiated : i) a&b, ii)a,b,c iii) a,b,c,d iv)All

45. Debt equity ratio is:

a) Total outside liability/ Tangible Net Worth**

b) Long Term Liabilities/Tangible Net Worth ,c) Both the above , d) None of the above

46. A very high debt equity ratio means the unit is :

a) Having more own funds than outside liabilities**

b) Having more outside liabilities than own funds

c) Having funds surplus ,d) Having no equity at all

47. The debt-equity ratio of a firm has increased (increase in long term sources) along with its
current

ratio. Which of the following is certainly true?

a) Sources of funds have been utilised for purchase of fixed assets

b) Sources of funds have been used for payment of current liabilities

c) Sources of funds have been used for payment of current assets ,d) (b) & (c) both**

48. Debt service coverage ratio is (DSCR) :

a) Profit after tax + depreciation - interest on term loan/annual term loan instalment + interest
on

term loan

b) Profit before depreciation and Interest / Interest and annual instalment of Term Loan***

c) Profit/debt, d) None of the above

49.Desirable current ratio for a borrower is: a) 1:1 b) 1.33:1 **c) 2:1 d) None of the above

50. If current ratio is above 2:1, it generally means that the firm :

a) Has very high investment in current assets

b) Does not require working capital from the Bank

c) Liquidity is very high , d) All the above**

51. Quick Ratio is:

a) Other name of acid test ratio**

b) Equal to quick assets: quick liabilities

c) Both the above ,d) None of the above

52. Assets turnover ratio of a company is increasing, which indicates:

a) Low capacity utilisation

b) Better capacity utilisation**

c) Increase in liquidity d) None of the above

53. The term Quasi Equity refers toa)

unsecured loans from friends and relatives**

b) unpaid share capital c) capital reserve, d) all of the above

54. An overdraft/cash credit account is considered as NPA if t remains

a) Out of order for more than 90 days **, b)Out of order for more than 180 days

c) Out of order for more than 270 days, d) Out of order for more than 360 days

55. The Standard Provision for MSME loans prescribed by RBI is: a)0.40% b)0.25%**, c)1.00%

d)0.75%

56. SMEs are important for the nation's economy because they significantly contribute to:-

industrial production ,b )exports, c) employment, d) innovation, e) all above**

57. The minimum and maximum members that can exist in a partnership firm are

___________ & _________ : a)2 & 10, b) 2 & 100,** c)2 & 30, d) 2 & 50, e)No restriction
58. Public Ltd Company has minimum shareholders :a)50, b)20, c)100, d)7**

59. MSMED Act was enacted in ________ :a) 2005, b)2008, c)2006**, d)2010

60.Which one of the following activities is not included in Micro & Small (Service)

Enterprises? : a)Professional persons, b)Small business, c)Dairy***, d) Self employed persons

61.PPP denotes ________ :a) Private Public Participation, b) Promoter Partner Participation

c) Public Private Participation,*** d) Partner Private Public

62. Which one of the following stages of development of SMEs regulations are not required?

a)Entry stage, b) Operational stage, c) Manufacturing stage,*** d)Implementation stage

63. LLP stands for _________: a)Long term Liability Participation, b) Limited Liability
Partnership**

c) Legitimate Liability Partnership, d)Liability Limited Partnership

64. Composite Loan limit for SSI that can be sanctioned without security is Rs.__: a)1 Mn. , b)2.5
**Mn.

c) 50,000/-, d) Any limit

65. What is the minimum and maximum number of participants in LLP? :a)2, 50, b) 2, 20

c) 2, 100, d)2, unspecified*

66. The organizational set up of SSI came into being in : a)1950 **, b)1954, c) 1969 , d)1975

67. Which one of the following support services are not provided by MSME DO?

a)Training for entrepreneurship development, b)Financial assistance,** c)Tool making

d) Preparation of project and product profiles

68. EDIs stands for ________: a)Export Development Institute, b)Entrepreneurship

Development Institute, **c)Entrepreneurship Development of India, d)Entrepreneurship Design

Instruments

69. Which one of the following organizations is not under the control of the State Government?

a) Directorate of Industries, b)District Industries Centre, c) Technical Consultancy Organization

d)EDII*

70. What is the maximum amount of guarantee available for Micro Enterprise upto credit limit of

Rs. 5.00 Lakh? : a) Rs. 5.00 Lakh**, b)Rs. 3.75 Lakh, c)Rs. 2.50 Lakh, d) Rs. 4.25 Lakh

71. What is 'hurt money'? :a) Equity (***b)Loan, c) Debt d) Venture Capital

72. Hybrid Capital means: a) Equity+ debt,** b)Debt+ loan,

c)Equity+ Venture capital, d)Insurance+ credit card

73. Venture Capital means: a)High Risk Fund, b)Private equity,

c) Dedicated pools of capital privately held,*** d)Share capital

74. Pre-shipment credit refers to : a)Financing ships for export ,b)Payment to supplier before
shipment

of goods, c)Working capital finance to enable the exporter to procure material for export,***

d)Financing for repairs to ships

75. Post Shipment Credit refers to: a) Financing the shipping companies, b)Credit posted after
shipping

the goods, c)Working capital finance from the time of export to the time of actual***

realization of dues , d) Loans and Advances against documents covering shipment of goods.

76.The objective of Make in India programme is,

a) to encourage companies to manufacture their products in India**

b) to encourage foreign companies to manufacture their products in India

c) to encourage companies to manufacture their products in India and export abroad

d) to encourage companies to manufacture their products in India for domestic markets

77. The Make in India Programme is focusing on sectors of the economy for job creation and skill

enhancement : a) 10 sectors b) 17 sectors c) 22 sectors d) 25 sectors**

78. MSE credit by scheduled commercial banks as per cent of ANBC as at the end of March 2014
stood

approximately at a) 15.0 **b) 30.5 c) 50.5d) 75.5

79. As per 4th NSSO survey, extent of financial exclusion in MSME sector is around

a) 25% b) 50% c)75% d) 93%**

80. Under the Revised RBI Guidelines on Priority Sector Lending,the sub-target for lending to
micro

enterprises is fixed at a) 8% b) 9% c)7.5%** d) 7.0%

81. Which one of the following is not a characteristic of a successful cluster? : a) Inter-firm
cooperation

b)Cooperation blended with competition , c) Sectoral specialization d)Sharing of capital

resources*

82. Which one of the following approaches is not applicable in respect of MSMEs? a) Work
together

b)Produce together goods and services, c) Share benefits individually **d)Come together

83. Which one of the following steps is not involved for launching a Cluster Development
project?

a) Identification of cluster, b)Capacity building,** c) Creation of cluster, d)Formulation of final

selection

84. UNIDO Projects evolve following various steps for promoting networking and development.

i) Mapping the competitiveness, ii)Assisting the cluster's actors for efficient supply chain
management

Capacity building , iii) Providing advisory services, iv) Setting special financial institutions for
SMEs

a) (i), (iii), (iv), (v) is correct, b)(ii), (iii), (iv), (i) is correct**

c) (iii), (v), (iv), (ii) is correct, d) (v), (i), (ii), (iv) is correct
85. UNIDO stands for : a)United Nations Institution Development Organisation

b)United Nations Innovative Design Organisation

c) United Nations Industrial Development Organisation,** d) None of the above

86. Rehabilitation of a sick unit can be taken up if it : a)creates employment, b) is a profitable

unit

c) proves viable after rehabilitation,** d)repays all outstanding dues immediately.

87. Viability should be examined and approved by: a)State level Inter-institutional Committee, b)
The

concerned Bank, **Commissioner of Industries of the State Government, d)Association of Sick

Industries

88. OTS scheme refers to : a)Sanctioning of ad hoc limits to the Sick Units, b) Settlement of all

outstanding dues as on a specified date as agreed to between the Bank and the Borrower,***

c) Sanction of rehabilitation package, d)Consortium lending of banks to the sick unit.

89. What is NICDA?

a) National Institute for Coal Development Authority

b) National Industrial Corridor Development Authority**

c) National Information Centre for Data Administration , d) None of these

90.. Securitization means: (Tick appropriately) : a) Pooling of financial assets for forming into a

scrip for sale in a financial market, *b) Pooling of loans of a single borrower, c) Converting loans
to

capital of banks, d)Arranging for repayment of dues

91. Which one of the following features of Microfinance is incorrect? : a) Borrowers are from low

income group, b)Long duration loans, ***c)Loans without collaterals, d) High frequency of
repayment

92. Relationship banking allows several special contractual features as under:- i) Discretion

,ii)Flexibility
iii) Inclusion of collateral requirements, iv) Decision, v) Use of covenants

a) (i), (ii), (iii) (iv) is correct , b)(ii), (iii), (iv), (v) is correct

c) (v), (iii), (i), (ii) is correct, ***d) (iv), (v), (iii), (i) is correct

93. Which one of the following grey areas of concern for growth is not related to Microfinance
sector?

a) Regulation, b)Pricing, c) Cluster formation, d) Technology**

94. Which one of the following factors is not related to pricing?

a) Character of the customer,** b)Elasticity of demand, c) Cost structures, d)Economic conditions

95. SMEs are facing various challenges under WTO regime as under:- i) Technology, ii) Removal of

Quantitative Restrictions, iii) Funding through FDI/JVs, iv) Infrastructure, v)Quality of goods

a) (ii), (i), (v), (iv) is correct,** b) (i), (iii), (v), (ii) is correct, c)(iii), (v), (iv), (i) is correct

d) (iv), (v),(ii), (i) is correct

96 National Bank is maintaining a current account of a Public Trust with 4 trustees. Bank receives
an

information that two of them have died in a road accident while going for a pilgrimage. The
remaining

trustees now want to operate the account.

a bank would permit them to operate the account as they are now the surviving trustees

b bank will refuse the operations as the power was vested with all of them

c bank will examine the trust deed to determine the future course of action

d if the trust deed allows the surviving trustees to operate the

account they will be allowed. Otherwise the bank would insist on a direction from a competent
court

e c and d both***
97. The Secretary of Seth Chanan Mal Public Trust, a reputed trust having 3 Trustees, has
approached

you to open a saving bank account in favour of the Trust. While going through the Trust Deed

submitted alongwith the application you find that there is no provision for operation of the bank

account. What would you do under such circumstances ?

a the account would be allowed to be opened by the Secretary

b operation in the account will be allowed jointly with the Chairman of the Trust

c operation can be allowed against the joint signatures of all the Trustees***

d account will be opened only when the trust deed is modified.

e account cannot be operated in the absence of any provision

98. Ramesh and Ashok are trustees of a trust and execute a power of attorney in favour of Tarun.

Trust deed is silent regarding the delegation of power. Tarun comes to operate the account:

a Tarun can be permitted to operate the account

b Tarun can be permitted after obtaining consent of beneficiaries.

c Tarun cannot be permitted to operate.*

d Tarun can be allowed if credit balance is there. e b and d

99. Universal Bank is having a current account of Dhara Charitable Trust which is operated by
their

two trustees. In road accidents, both the trustees expire and this fact comes to the notice of the
bank.

What precautions should be taken by the bank for future operations in the account?

a the beneficiaries will have to appoint another trustee and on the basis of their resolution the

next trustee would be allowed to operate the account.

b the beneficiaries will be allowed to operate the account themselves.

c the operations in the account will be stopped

d the beneficiaries will be told to approach a court for appointment of new trustee in case the

trust deed is silent about this** e b and c

100. Your branch receives from the trustees of a trust, a resolution passed by the trustees
resolving that the

current account would be operated by two out the three trustees, as the Td trustee is
proceeding abroad. The

account is presently operated by all the three in terms of the trust deed.

a the bank will accept the resolution and the request and permit the remaining trustee to
operate the

account, strictly as per the resolution.

b the bank will not accept the resolution since the Trust Deed provides for operation of

the account by all the three***

c the bank will not accept the resolution and will suggest for power of attorney to be given by
the third

trustee.

d the bank will allow operations, since they are working as agents. e none of the above

101 A partnership firm with three partners, named M/s Durani Brothers opened a current
account with

Corporate Bank with the operational instruction that 151 two partners will operate the account.
The firm

received a cheque in its favour and in order to meet the urgent payment requirement, on behalf
of M/s

Durani Brothers, the 3Ni partner endorsed the same in favour of another firm M/s Shivani
Cables, from

whom the raw material was purchased:- a Shivani Cables will become holder in due course if it

is not known to them that the 3rd partners has no authority to endorse, b Shivani Cables will not

become holder in due course if they know that only 1st and 2nd partner have authority to
operate the

bank account, c Shivani Cables's title will remain doubtful in all circumstances, d a and b,

e a to c***

102 Universal Bank has granted cash credit limit of Rs:10 lac to M/s Kale Traders, a partnership
firm. The account is showing a debit balance of Rs.9.50 lac when the notice is received about the

insolvency of one of the partners. Which among the following steps should be initiated by the
bank to

safeguard its interest? a account should be recalled and party be asked to adjust the

account, b operations in the account to be stopped and balance confirmation letter to be

obtained from all the partners, c operations in the account to be stopped and notice of

demand to be issued on the remaining partners, d notice about the outstanding dues

to be sent to the official assignee in whom the estate of the insolvent partner has been vested,

e c and d above**

103 Your branch maintains a current account in the name of M/s Site Ram Gita Ram & Sons. A
new

partner, the younger son of Mr. Gita Ram joins the firm and bank gets information about this

development. Which among the following actions would be more appropriate to deal with this

account:- A operations in the account should be stopped failing which the rule in Clayton case
can

apply, B account should be closed and new account should be opened observing all formalities

C new partner can be admitted with the approval of the bank only. Hence the firm should be
advised

to obtained permission from the bank, d bank can obtain new partnership declaration

letter and allow operations as per new mandate, **e bank can insist on for new partnership

deed duly registered with Registrar of firms

104 Two partners of a partnership firm M/s Hyderabad Trading Company with three partners,

approaches you to open a current account with initial deposit of Rs.10 lac and promise that the

signatures on the account opening, form shall be obtained on the return of 3rd partner from
abroad,

although the said partner is not to actively engage himself in the business and he will function as
a

dormant partner. They also do not have any partnership deed in writing.
A the bank will open the account as the 3rd partner is not to operate the account

B the bank will open the account and will not permit any withdrawaltill the 3rd partner signs the
account

opening form C the account will be opened but cheque book will be given when the 3rd partner
returns,

D the account will not be opened unless all the partners have signed, E none of the above**

105 Capital Bank maintains a current account of M/s Bihari Lal Sham Lai with the same name

partners having operating instructions as 'any one can operate'. Mr. Sham Lai informs the bank
that

due to some dispute amongst the partners, the cheques signed by Mr. Bihari Lal should not be
paid

as he has acquired the whole share from Mr. Bihari Lal and is shortly introducing another
partner.

Meanwhile a cheque signed by Mr. Sham Lal is presented for payment. What should the bank
do?

A The operations in the account will be stopped and the mandate for operation of the

account by any one, shall become inoperative, ***B The operations in the account will be
stopped

only after receipt of the notice from both of them. C The cheque signed by Mr. Sham Lal shall be

passed since he has acquired the whole share now, D The partners will be advised to sort out the
issue

IIBF MSME RECOLLECTED QUESTIONS

1. Micro, small & medium sector

2. Priority sector classification (esp foreign banks less than 20 branches etc)

3. One sum on calculation of NWC

4. CLUSTER development features

5. TIFAC full form, CODISSIA located at?

6. Mahila schemes implemented by SIDBI

7. Which are NOT included under plant & machinery

8. HUF, LLP questions on minor admissibility

9. Common seal compulsory for companies/LLP

10. GRAY sick area

11. Ots implemented by? - individual banks

12. Highest investment by overseas investors is under which sectors

13. Study report Of DIC recommendations

14. Federation of msme for West Bengal state? ITCOT located in which state? MSME council
located? Msme as per constitution is state/central/concurrent subject

MSME :: ( Most imp Exam point of view)

1. A Small Manufacturing Enterprise unit is considered as Sick Industrial Unit: when account
remains sub

standard for more than six months or there is erosion in the net worth due to accumulated cash
losses to

the extent of 50% or more of its net worth during the previous accounting year and the unit has
been in

commercial production for at least two years

2. A small scale unit (manufacturing) can be treated as micro unit if the original investment in
plant and

machinery does not exceed : Rs.25 lac

3. A unit in service enterprise is considered as medium if the investment in equipment is: more
than Rs 2

crore but up to Rs 5 crore.

4. A Unit will be called as Small Service Enterprise if investment in equipments is up to: Rs 2

crore.
5. Amount of maximum loan given to micro and small enterprises that is covered under-
CGFTMSEscheme

: Rs.200 lac

6. As per Micro, small and medium enterprise development Act 2006, a small manufacturing
enterprise is

one in which original investment in plant and machinery is: more than Rs 25 lakh and up to Rs 5
crore.

7. As per RBI guidelines, banks are required to provide__% of advance to small enterprises to
units in

which original investment in plant & machinery does not exceed Rs 10 lac in the case of
manufacturing

units and does not exceed Rs 4 lac in equipment in the case of service enterprises: 40%

8. As per RBI guidelines, Loans to Agro and food processing Units are eligible to be classified
under

Agriculture Ancillary Activity under Agril. Finance Priority Per borrower Rs. 100.00 crores.

9. Bank limit for working capital based on turn over method: 20% of the projected sales turnover

10. Banks are required to make 40% of advance to Micro and Small enterprises to manufacturing
units

with investment up to Rs 10 lakhs and/or service enterprises with investment in equipment up

to: No

criteria (earlier Rs 4 lakh) and now Micro has to reach 7.00% by March 2016 & 7.5% by March

2017 of ANBC/ceobe which ever is higher.

11. Banks will not obtain collateral security in respect of loans to micro and small enterprises
which are

covered by Credit Guarantee Scheme for Micro and Small enterprises?: Rs 1 crore

12. CGTMSE fee: For North East & women; Loan up to Rs 5 lakh – 0.75% p.a.; Loan more than

Rs 5 lakh – 0.85% p.a.

13. Composite loan limit for Small Manufacturing enterprises: Rs.1.00 crore

14. For being defined as Medium enterprise, the original investment in plant & machinery
should be: More

than Rs 5 crore and up to Rs 10 crore.

15. For being eligible to be classified as small (service) enterprise, the original investment in
equipment

should not exceed: Rs 2 crore.

16. Full form of CGTSME: Credit Guarantee Fund Trust for Micro & Small Enterprises.

17. If a small enterprise in manufacturing has a good track record, collateral security can be
waived up

to: 25.00 lacs

18. If an MSME units holds a margin of Rs.20 lac and its projected sales are Rs.400 lac, its
working

capital limit will be : Rs.80 lacs

19. In case of advance granted to Micro and small enterprises, banks will not obtain collateral
security up

to: Rs 10 lakh

20. In case of advance to Micro and Small manufacturing enterprises, working capital limit by a
bank as

per turnover method is calculated as: 20% of projected annual turnover.

21. In case of loan guaranteed under CGTMSE, what is the extent of cover for loan upto 50 lac
granted to

a women?: 80% of amount in default.

22. In case of loan to micro and small enterprises guaranteed by CGTMSE, no collateral security
is

required for loans up to: Rs 100 lac.

23. Khadi Village Industry part of MSE; irrespective of investment in P&M.

24. Maximum Guarantee coverage for loans guaranteed by CGTMSE if loan up to Rs 5 lakh: 85%
of the

amount in default with a maximum of Rs 425000.

25. Micro, Small and Medium Enterprises is under which Ministry: Ministry of Micro Small &
Medium

Enterprises.

26. SMERA stands for: Small & Medium Enterprises Rating Agency.

27. The definition of Micro and Small enterprise in the manufacturing Sector is based on
investment in :

Plant and Machinery.

28. Under CGFT scheme for MSE, for loans up to Rs 50 lac, 80% coverage is not available for:
SC/ST

29. What is the maximum amount of loan covered guarantee scheme of CGTMSE for loans made
to micro

and small enterprise: Rs.00.00 Lac

30. What is the rate of guarantee fees charged under CGSMSE for loan of more than Rs 5 lac to a

women?: 0.85% p.a. of limit sanctioned.

31. Advantages of Cluster based finance to MSMEs: Risk mitigation.

MSME::

What are Debt Recovery Tribunals (DRTs)?

Debt Recovery Tribunals were established to facilitate the debt recovery involving banks and
other financial institutions with their customers. DRTs were set up after the passing of Recovery
of Debts due to Banks and Financial Institutions Act (RDBBFI), 1993. Appeals against orders
passed by DRTs lie before Debts Recovery Appellate Tribunal (DRAT). DRTs can take cases from
banks for disputed loans above Rs 10 Lakhs. At present, there are 33 DRTs and 5 DRATs
functioning at various parts of the country. In 2014, the government has created six new DRTs to
speed up loan related dispute settlement.
Compared to the ordinary court procedures, DRTs were able to handle large number of cases
with low delay during the initial phases. Though the DRTs have made impact on recovery front,
several issues related to their performance in the background of rising volume of NPAs have
appeared in later period. Inadequate infrastructure coupled with insufficient number of DRTs has
made them incompetent to handle the rising volume of disputes.

Recent issues related with DRTs

The leading issue related with debt recovery through DRTs is the slow process of resolution
(settling debts and finding end to defaults). Like several other debt recovery mechanisms, the
DRTs are slow to work out on pending disputes. Nearly 93000 cases are pending in front of all
the DRTs in the country at the end of 2016. The World Bank estimated that it took 4.3 years on
average in India to resolve insolvency under the old laws, more than twice as long as in China.
Similarly, the average recoveries were just 25.7 cents on the dollar in India. This is one of the
worst among the similar economies.

The number of DRTs are small given the increasing number of cases. –

Delay in settling the cases is long.

The DRTs were not able to handle cases related to large borrowers.

Timely appointment of officials for DRT has not been made.

Recent efforts to rejuvenate DRTs: the RDBBFI amendment 2016

To correct the situation, government has made several efforts. Major one is the amendment to
the RDBBFI Act 1993 in 2016. Similarly, the new Insolvency and Bankruptcy Code give powers to
DRTs to consider cases of Bankruptcy from individuals and unlimited liability partnerships.
Following are the main changes made to the RDBBFI Act in 2016 though the amendments are
yet to be enforced.

The amendment gives timelines for various steps in the adjudication process before the debt
recovery tribunals. Time limit for filing of written statements, passing of orders, appeals, etc.
have been reduced. The Act Empowers the Central Government to provide for uniform
procedural rules for the proceedings in the Debts Recovery Tribunals and Appellate Tribunals.

The amendment increases the retirement age of Presiding Officers of Debt Recovery Tribunals
from 62 years to 65 years and that of the Chairpersons of Appellate Tribunals from 65 years to 67
years. It also makes Presiding Officers and Chairpersons eligible for reappointment to their
positions.

The amendment allows banks to file cases in DRTs having jurisdiction over the area of bank
branch where the debt is pending, instead in the DRT which have jurisdiction over the
defendant’s area of residence or business.

Similarly, to reduce delays, the he cost on a borrower to delay recovery timelines through
protracted appeals and proceedings has been increased.

Borrowers will have to deposit at least 25% of the outstanding amounts with the debt recovery
appellate tribunal (DRAT) under the DRT Act to avail an appeal. Previously, this provision was
required only under the SARFAESI Act.