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SME
SME LOAN
SME loan is a short term loan provided by Muthoot Fincorp Limited offer, against minimum collateral
requirement. This product shall be primarily for meeting
demands for stock purchase during festivals season with benefit
of repaying the loan in Equated Daily Instalments. This product
aims at helping our customers by providing a loan for meeting
their business requirements for availing discounts in stock
purchases during festival seasons. SME loan is offered against
security of hypothecation of stock in trade or business assets like
equipment. This is a short term loan meant only for individuals in
MSE sector given against hypothecation of stock in trade or fixed
assets in business.
Micro & Small Enterprises which constitute the lower rungs of broader MSME sector poses a huge
potential with unmet demands as this sector has very limited access to organized fund sources.
Many of them depend on Private Money lenders and other high interest funding sources.
It is also observed that Small businesses prefer Daily repayment system.
As a responsible, RBI regulated entity we are stepping in to meet their fund requirements at
reasonable interest rate, with daily doorstep collection.
SME can be pitched in for our existing customers to bridge their monetary requirements and
to creditworthy new customers who may not be having the means to avail loan by pledging gold/other
sources.
These products while helping MFL to attract new clients catalyses the noble cause of financial
inclusion too.
Finally, this is an opportunity for our employees to get accustomed to the unsecured loan business
An opportunity for learning and development.
SME loan is meant for individuals with Micro and Small Enterprises engaged in
Trade,
Service and
Segment
MSE Segment
Eligibility Criteria
1) Targeting individuals engaged in Micro & Small business sector of trade, service and manufacturing.
2) Age: 21- 55 yrs. Above 55 years Health Insurance is mandatory and loan can be extended up to 65
years of age.
3) Business should be owned by the Applicant.
4) Applicant to be sole proprietor of the business.
5) Applicant or Co Applicant should own a house or business premise in either of their names.
6) Co-Applicant should be either spouse or immediate blood relative.
7) Minimum 2 years of vintage in the same business in same premises.
8) Customer to be in the vicinity of 500 meter radius around the branch.
9) Minimum required Repayment Capacity to pay EDI specified
10) Minimum Scoring in overall assessment.
11) Should not have any history of default with MFL. (In case of existing customer)
12) Credit history will be checked with Equifax and should be supporting for disbursal with a clean
background.
11) Loan amount should be less than 75% of Stock in Trade/ Fixed Asset value assessed.
Description
Features
Target Segment
Trade
Service
Production
Tenor
Rate of Interest
Collection charges
Foreclosure Charges
Nil
Minimum / maximum
age of borrower or co
borrower
Security
21 yrs. 55 yrs.
stock in trade.
Credit Process
Approving Authority
Residence verification by BM
CIBIL/Equifax check by RM
Regional manager
Those are not eligible for a loan as per MFL credit policy, such as:
Default scenario
Defaulter of MFL
Repayment Mode
Documents required
Documents to be executed/ provided by Customer
1.
2.
Business proof.
3.
4.
Branches have to collect 3 Postdated Repayment Cheques with amounts filled up equal to (EDI
x 104) / 3 along with a covering letter (format attached) from the customer
a. 1st Cheque shall bear the date of 40th day from date of disbursal
b. 2nd Cheque shall bear the date of 80th day from date of disbursal
c. 3rd Cheque shall bear the date of 122nd day from date of disbursal
In case, if the customer has repaid the loan promptly the repayment Cheques should be
returned back to the customer and customers acknowledgement to be obtained in the Receipt
at the time of closure of loan.
5.
Application form
6.
7.
8.
9.
Stock statement.
1)
Application form: Application form duly filled and signed by both applicant & Co-applicant to be
obtained mandatorily. Specific purpose of availing loan to be mentioned in the space provided.
2)
Personal Discussion Form & Scoring Sheet: Client Assessment is one of the most important steps in
unsecured loans. Hence obtaining correct figures pertaining to income & expenses as required by PD
form is of utmost importance. Stock in Trade need to be taken and recorded in Stock verification
form to check whether loan amount to Stock value ratio is supporting. Then scoring to be done by
BM with an impartial attitude.
3)
Loan agreement has to be printed on Rs. 100 stamp paper. The cost for the same will be borne by
the customer
a) Loan agreement needs to be taken in fresh papers.
b) All relevant information to be filled properly without corrections.
c) All pages of agreement should be duly signed by the borrower, co borrower and the lender.
d) Branches (BMs) to sign of the agreement as signatory for Muthoot Fincorp Ltd.
2) Demand promissory note DPN should be properly signed- borrower & co borrower to sign on it.
Revenue stamp should be affixed and customer and co borrower has to sign over the stamp and also in
the space provided outside the stamp.
3) Receipt of Loan Amount Receipt should be obtained and duly filed. Revenue stamp should be affixed
and customer and co borrower has to sign over the stamp and also in the space provided outside the
stamp.
3)
Customer Copy - It should be duly filled and handed over to the customer. Branch seal with BM
name and signature should be affixed.
4)
All repayments received from the customer to be recorded in the Collection register in specified
format (Attached) and also in the system. A separate Register (SPCR) for daily collection need to be
maintained.
5)
Checklist should be duly filled and should be filed along with other documents.
6)
Document Name
Executed by
Requirement
Application form
Applicant
Field verification
Branch staff
Personal discussion
form
Branch Staff
Stock verification
Branch staff
Scoring sheet
Branch Staff
Proprietor
declaration form
Applicant
Covering letter
applicant
Loan agreement
applicant
DPN
Applicant
10
receipt
Applicant
11
checklist
Branch Staff
12
Branch declaration
form
Branch staff
13
Customer copy
applicant
14
Monthly stock
statement
applicant
15
Receipt (PDC)
customer
16
Customer profile
BM
17
End use
verification
certificate
Collection tracker
BM
18
Branch Staff,
Applicant
LOAN AMOUNT
EDI
Rs. 10,000
Rs. 100
Rs. 25,000
Rs. 250
Rs. 50,000
Rs. 501
(Please note that EDI calculation does not include collection charges)
Customer will be charged an processing fee of Rs. 300 irrespective of the loan amount
Service Tax as applicable will be charged extra on the processing fee.
Customer will have to pay Rs. 150 or 1% of the loan amount, whichever is higher as collection
charges.
Branch manager (BM) to scrutinize the application form as submitted by the Customer.
Field verification by BM
Filling up of personal discussion form
Stock verification report
Filling up of scoring sheet
Proprietor declaration form
RM approval(Equifax)pp
Other documents and 3 Cheques
Covering letter for the Cheques
Loan cum hypothecation agreement to be filled
DPN
Receipt confirmation of the loan
Checklist
Disbursal through A/C payee cheque/NEFT
Customer receipt has to be taken
Branch declaration has to be furnished
SPCR (fill the daily collection in the SPCR)
Monthly stock verification and declaration
The documents should be kept safely for further verification
AM/RM can visit branches for post disbursal verification
Receipt (PDC cheque by customer)
End use verification
Customer profile register by BM
Notes:
Cash Sales: Total amount received though sale of goods and services in a normal month, preferably
previous month if there was no festivals.
Credit Sales Recovered: Total amount received through sale of goods and services on credit,
preferably previous month if there were no festivals.
Other Business Expenses: Includes Transportation / fuel, Taxes/ licenses, Insurance, Advertisement,
Maintenance, and any other costs involved in the business.
Other Sources of Income: Includes interest from banks/ remittances from abroad etc.
Monthly Payout Liabilities: Monthly payment towards loans/debts like interest/ installments on
chits/saving schemes etc.
Disposable Income: The remaining income after all the expenses excluding the SME repayment
amount available as surplus.
Available Surplus: The remaining income after all the expenses including the SME repayment amount
available as surplus.
Daily Surplus: Available surplus
30
30 is the No. of days in a month
Daily Repayment Capacity should be below 60%. Lesser the % better the repayment capacity.
SCORING SHEET
SCORING ASSESSMENT
Parameters
Weightage*
Repayment Capacity
30
Character assessment
30
Business vintage
Residence verification
10
Tele verification
Liabilities
Savings habit
Total
100
*Weightages: Weightages refer to importance you give to particular aspect in a quantitative manner. In our
case, repayment capacity and Character of the customer are critical and hence higher weight ages have been
assigned.
Scoring
1. EDI to surplus ratio (Repayment Capacity) (WEIGHTAGE 30)
Repayment capacity
Score
Below 30%
30%-40%
41%-50%
51%-60%
Above 60%
2.
CHARACTER ASSESSEMENT
Parameter
Co - operating in providing information (PD)
Knowledge of business (PD)
Repayment history with MFL(MFL)
Hose hold appearance (RVR)
Reference (TVR)
TOTAL /5
Score
Each of the points under the Character assessment has to be measured in the scale of 1 to 5. 1 being
the lowest and 5 if good.
For e.g.: first point refers to Co-operation in providing information. If the customer is very cooperative and open to questions, then a score of 5 may be provided.
If you find that the customer is not co-operative and hiding information and not cordial then a lower
score of 1 or 2 may be provided.
Similarly you have fill details for all six points under Character Assessment.
5 = EXCELLENT
4 = V.GOOD
3 = GOOD
2 = SATISFACTORY
1 = VERY POOR
THIS IS DIRECT SCORING DONE BY THE BM ACCORDING TO HIS UNDERSTANDING
MINIMUM SCORE REQUIRED = 2
3. BUSINESS VINTAGE(WEIGHTAGE 5)
BUSINESS VINTAGE
Parameter
Score
10-15 years
5-10 years
2-5 years
Score
Below 25%
25%-40%
41%-59%
60%-75%
Above 75%
5 = EXCELLENT
4 = V.GOOD
3 = GOOD
2 = SATISFACTORY
1 = POOR
MINIMUM REQUIRED SCORE = 2
5.
OTHER PARAMETERS
Sl. No
4
5
6
7
8
Parameter
Resi verification
House hold assets
Tele verification
Liabilities
Savings habit
5
4
3
2
1
Scoring
Direct scoring out of 5
Direct scoring out of 5
Direct scoring out of 5
Direct scoring out of 5
Direct scoring out of 5
Weight ages
10
5
5
5
5
CALCULATION EXPLAINED
Parameters
Repayment Capacity
Character assessment
Business vintage
Stock value assessment
Residence verification
House hold assets
Tele verification
Liabilities
Savings habit
Total
Min Score
Required
Weight age
30
30
5
5
10
5
5
5
5
100
Weighted
score*
2
2
2
2
3
3
3
2
1
0.6
0.6
0.1
0.1
0.3
0.15
0.15
0.1
0.05
2.15
2.15
CHARACTER ASSESSMENT
Particulars
Maximum
Points
KNOWLEDGE OF BUSINESS
REPAYMENT
HOUSEHOLD APPERARANCE
REFFERENCE
Total
25
16
Score= Total/ 5 = 16/ 5= 3.2 THE SCORE IS 3 (if the score is up to 3.4 give 3 and if the score is
between 3.5 to 3.9 then give 4)
BUSINESS VINTAGE
BUSINESS VINTAGE
Parameter
Score
10-15 years
5-10 years
2-5 years
Less than 2
Hari is in the textiles business for 8 years in the same premise. So his score is 3.
Score
Below 25%
25%-40%
41%-59%
60%-75%
Above 75%
OTHER PARTICULARS
Particulars
Resident verification
Household assets
Tele verification
Liability
Saving habit
Maximum
Point
5
5
5
5
5
Point
earned as
per branch
assessment
2
2
4
2
3
Assessment of Hari
Weighted Score= (Weight age X Score obtained)/ 100
Minimum Score required is 2.15, Hari has a score of 3.25 hence He IS ELIGIBLE FOR AVAILING SME LOAN of
Rs.50000/-, provided he is qualifies other eligibility norms for the loan.
Provision / books and stationary/ fancy/ hardware stores/ Mobile etc. - Goods or products sold in the
respective stores.
Furniture shops-Furnitures
Parameters
Repayment Capacity
Character assessment
Business vintage
Stock value assessment
Resident verification
House hold assets
Tele verification
Liabilities
Savings habit
Total
Score
Weight age
Obtained
30
30
5
5
10
5
5
5
5
100
4
3
3
5
2
2
4
2
3
Weighted
score*
1.2
0.9
0.15
0.25
0.2
0.1
0.2
0.1
0.15
3.25
Bakery. - Loan can be given to this segment based on the risk being assessed and on the discretion of
the Branch Manager. Applicable stock should have sufficient shelf life which do not get spoiled very
soon.
Fruit & Vegetable Vendors: Loan can be given to this segment based on the risk being assessed and
on the discretion of the Branch Manager; but fruits & vegetables cannot be considered for
hypothecation; here only valuable Fixed Assets in business may be considered.
N.B. Pls. note in the valuation of Fixed Assets in business, depreciation may be applied suitably to arrive at
present value. Here, very conservative approach may be adopted to get the present value. For Capital
goods, electronic & electrical items etc under consideration, Make/Model, Year of Mfg, Purchase invoice
Value, etc may be notified in the Stock/Asset verification format.
COLLECTION PROCESS
Collection is one of the critical activities the branch staff has to undertake in the SME Loan portfolio.
Considering the nature of the Product, it is necessary that collection has to be done on a daily basis.
Collection should not been seen only as a way to get the daily installments, but this process may be seen as
a tool to connect to the potential customers. The benefits to customer and branch by this activity is given
below:
The customer need not visit branch for remitting the instalment and hence he need not take time
out of his business hour for repayment
Regular meeting with customers helps in building strong customer relationship and bonding.
Regular interaction outside the branch helps branch in acquiring new customers
Process
Inform the customer about the EDI payment while disbursing the loan.
While going for daily collection, branch staff should carry the SME Payment Control Register
(SPCR). Annexure 1
Collected amount should be recorded accordingly in the register (SPCR) against the respective
account.
Take full signature (no initials) of the customer in the customer signature column.
In the absence of the customer take the signature of the representative who is paying on behalf of
the customer & record his name.
Subsequently after receiving the payment the branch staff should also sign in the Branch staff
signature column.
Post collection the staff should hand-over the register along with cash to the cashier for system
updation.
The cashier will thereafter verify the collected amount, the signature and if convinced will affix his
signature in the Cashier Signature column.
After the verification by the cashier all the details have to be entered into the system.
The entries in the system and the register should be tallied and the same should be reviewed from
the Daily SME report which is available in the system.
Branch Manager should take a print out of daily collection from the system and should tally the same
with SPCR with his full signature in the printout.
A receipt will be generated from the system and the same can be delivered to the customer next day.
Control
SPCR and Daily collection report (system printout signed by the BM) should be reviewed by the AM
Ops, RM & audit team during their visit. Any anomaly noted should be documented.
Back-calling of delinquent customers should be carried out from RO, ZO & from HO. Disconnect
observed during such calls should be escalated.
12. In whose name customer should get the stamp paper, customer name or MFL name?
Customers name
13. Shall we collect the advance EDI for 2 or 3 days if customer pays?
We can collect advance payment
14. If customer does not have any business proof, like in Vyapar Mitra can we take the shop photo and
FIR (Field Investigation Report)?
No, as per current policy norms- This is not considered as a business proof for SME/Suvidha Loans.
15. When should the branch collect EDI?
EDI should be collected 2 days after the disbursement.
16. My customer has monthly cash turn-over? Can I collect on monthly basis?
No
17. Customer X is having an existing SME Loan, can he avail another loan?
No, customer can have only one loan outstanding against his name
18. Explain the default scenario?
In the event of any default in payment of daily instalment, a default charge of 3% per month will be
charged on the defaulted EDI, for the delayed days.
19. Hari has requested a loan amount of Rs.50000/- under SME loan. Haris EDI to surplus ratio
(repayment capacity) is 30%. What does this mean?
This means that Hari need only to pay 30% of his Daily Surplus as EDI to MFL for the
proposed loan amount.
Rest 70% of the daily surplus is available to him which can be utilized for his other day to day
activities or contingent expenses.
Lower the EDI to surplus ratio better the situation. Lower EDI to Surplus ratio indicates Higher
Surplus with the Customer.
This also indicates the repayment capacity ratio supports the disbursal of specified loan
provided the customer meets other criteria as well.
Points To Ponder
An applicant cannot avail multiple loans under these schemes simultaneously. Each applicant can
take loans under these schemes for a second time only after the successful closure of existing
Suvidha or SME loans if any. This further means at any given point of time, a customer cannot have
two or more active loans under Suvidha and SME schemes considering them separately or together.
Suvidha & SME loans should not be extended second time to a customer if his track record of the first
loan under either of these schemes is not satisfactory.
Branches have to further ensure that co-applicant of an active loan cannot become applicant, coapplicant or guarantor of another loan under these schemes. They can apply further only after the
closure of the first loan.
AM/RM Verification post disbursement
Any Area Manager/Regional Manager who is visiting be it AM OPS /Marketing & Sales /HR & Admin
should ensure to check all the documents of disbursed loans and certify the checklist. Further any
discrepancy if found should be mentioned in the checklist and it should be ensured that the
discrepancy is rectified by the branches immediately. Further AM/RM may visit the business
premises and ensure that the loan amount has been utilized properly in line with the purpose stated
in the application form by the borrower.
Customer Profile register and end use monitoring
Branches are supposed to maintain a Customer Profile Register which should capture the complete
profile of the customer who has availed SME loan and purpose of availing loan; one page is to be
allocated for each customer and the loan details. After the disbursal of loan BMs to certify whether
the purpose of loan has been materialized after verification of the business premise.
RM APPROVAL
Once the data has been entered by the branch, RM is supposed to perform following critical function
1) Verification of documents submitted and customer profile.
2) Repayment Capacity of Customer.
3) Loan Value to Stock Value.
4) Scoring.
5) Other Eligibility Criteria.
6) Equifax check of the borrower ( Process Attached in the mail)
7) Sanctioning of Appropriate loan amount (by editing the loan amount requested by the customer, if
required.)
The module can be accessed at http://muthootapps.com:9018/.
RM can log in using his PJMCL User ID and Password and then his HRMS user id and password
In Equifax check, once the report is obtained, following points should be considered in the report
1) Customer profile and his account status whether standard/ sub-standard/ written off etc.
2) Date of report: Date of reporting should not be more than 2 months old
3) Whether the borrower has filed any suit/ case
4) Number of past due accounts
5) Number of live accounts- should not have similar loan
6) His total exposure (loan outstanding)
Once approval is provided by the RM, then the branches can proceed with disbursing the loan
RM APPROVAL MODULE LOGIN
Log in to https://eport.equifax.co.in/
Click on member center- log in
company id:2689
User id: as communicated from HO
Password: as communicated from HO
challenge: muthoot
Kindly punch in the customer details. Please note that the field marked red are the ones which are
mandatory
1.
Select
a) Loyalty No, if the customer has loyalty number
b) New Customers, if the customer is new
Enter
Business
Details
2.
3.
4.
5.
6.
7.
8.
After entering all the details, upload the photo of the customer by clicking Capture
Upload the copy of ID and address proof, Signature proof and Business proof; Click Start Loan
Click on Start Loan
Enter the stock type.
Under CIBIL/ Equifax comment- please type To be provided by Regional Manager
Enter the loan amount requested
Click Save Details. Details will be saved and sent to RM for approval
9.
10.
11.
INSTALLMENT REPAYMENT
After collecting daily installment, go to Loan- Loan Repayment- Enter the installment amount and click
Save