One Time Settlement Scheme for NPA Accounts under MSE Sector
The Government of India has since enacted the Micro, Small and Medium Enterprise Development (MSMED) Act, 2006 on June 16, 2006, which was notified on 2nd October, 2006. Consequent to enactment of MSMED Act, 2006, Micro, Small and Medium Enterprises (MSME) have been clearly defined and broadly classified under Manufacturing and Service Enterprises.
The Micro Enterprise (Manufacturing) is defined as -- Enterprises engaged in the manufacture / production, processing or preservation of goods and where investment in Plant and Machinery (Original cost excluding Land and Building and the items specified by the Ministry of Small Scale Industries vide its notification no. S.O. 1722 (E) dated October 5, 2006) does not exceed Rs.25.00 lac.
The Micro Enterprises (Service) is defined as -- Enterprises engaged in providing / rendering of services and whose investment in equipment (Original cost excluding Land & Building and furniture, fittings and other items not directly related to the service rendered or as may be notified under the MSMED Act, 2006) does not exceed Rs.10.00 lac.
The Micro Enterprises (Service) shall include Small Road and Water Transport Operators, Small Business, Professional and Self-employed Persons, and all other service enterprises whose investment in equipment does not exceed Rs.10.00 lac.
The Small Enterprises (Manufacturing) is defined as – Enterprises engaged in the manufacture / production, processing or preservation of goods and whose investment in Plant & Machinery (Original cost excluding Land and Building and the items specified by the Ministry of Small Scale Industries vide its notification no. S.O. 1722 (E) dated October 5, 2006) is above Rs.25.00 lac to Rs.5.00 crore.
The Small Enterprises (Service) is defined as -- Enterprises engaged in providing / rendering of services and whose investment in equipment (Original cost excluding Land & Building and furniture, fittings and other items not directly related to the service rendered or as may be notified under the MSMED Act, 2006) is above Rs.10.00 lac to Rs.2.00 crore.
The Small Enterprises (Service) shall include Small Road and Water Transport Operators, Small Business, Professional and Self-employed Persons, and all other service enterprises whose investment in equipment is above Rs.10.00 lac to Rs.2.00 crore.
Coverage of the OTS Scheme:
All NPA & Shadow Register Accounts under MSE Sector.
Branch while accepting the One Time Settlement Proposal, should consider RBI guideline, i.e., the net present value of the settlement amount should be calculated and this amount should generally not be less than the net present value of realizable value of securities. Realizable value of security should be ascertained on the basis of Valuation Report not older than 3 years. Any liquid securities held in the account should immediately be adjusted in the account.
Terms of Payment:
If the settled amount is paid within a period of three months from the date of communication of sanction, no interest on the settled amount is payable. Where the borrower is unable to pay the settled amount in one stroke, sanctioning authority may allow payment in instalments. In such cases, 25% of the settled amount should be obtained as down payment ( but in any case not less than 10%-- to be decided by sanctioning authorities on case to case basis) within 30 days of communication of the sanction and the balance should be paid in suitable instalments within a maximum period of 24 months from the date of communication of sanction, with interest @ 6% (simple) on reducing balance on compromise amount from the date of communication of sanction till the date of final payment.
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