TN Mercantile Bank to double SME lending

Tamilnad Mercantile Bank plans to double its lending to small and medium enterprises (SME) to Rs 1,190 crore during the current financial year, from the current Rs 594.22 crore, by introducing a new loan product called SME Credit for catering to the needs of this sector.

According a bank release, a person can get a maximum loan of Rs 2 crore and group borrowers can get up to Rs 10 crore under the new scheme. The form of advance will be fund-based or non-fund based limits.

Quantum of working capital limits will be fixed on the basis of a minimum of 20 per cent of the unit's projected annual turnover for new as well as existing units.

Meanwhile, increase in projected turnover should normally not exceed 25 per cent of the actual turnover in the preceding year. A prudent decision will be taken based on capacity expansion, increased capacity utilisation, pricing of inventory, among others.

Repayment of the term loans will be on the basis of profitability projection for the entire payback period and the average debt service coverage ratios (DSCR) of the project.

The period of working capital limit will be one year and the term loan will be for a maximum of 7 years, exclusive of instalment holiday.

The bank provides credit up to Rs 2 lakh at the rate of 10 per cent, and Rs 2 lakh to below Rs 20 lakh at 11 per cent. For credit worth Rs 20 lakh and more, the bank will charge as per its credit rating exercise. The bank charges 10.50 per cent as minimum interest for Rs 20 lakh to Rs 1 crore, and 10 per cent for Rs 1 crore and above.

Apart from this, additional concession of 0.50 per cent will be given to those SME units which are rated by SMERA (SME Rating Agency of India Ltd) for advances above Rs 1 crore.