The Raw Material Assistance Scheme, initiated by the National Small Industries Corporation (NSIC) under the Ministry of Micro, Small and Medium Enterprises, aims to support MSMEs in procuring raw materials—both indigenous and imported—on credit. This scheme is designed to enable MSMEs to secure their raw material requirements without hampering cash flow, thereby allowing them to concentrate on manufacturing quality products. The scheme facilitates financing for raw material purchase with a credit period of up to 180 days and helps MSMEs benefit from bulk purchase economics and cash discounts.
Benefits
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Credit Support:
Facilitates procurement of raw materials on credit for up to 180 days. -
Economies of Scale:
Helps MSMEs avail bulk purchase discounts and other favorable purchasing terms. -
Concessional Interest Rates:
The interest rate varies based on the unit’s rating:- For Micro units with a valid SME 1 rating: 9.00% per annum (compounded monthly)
- For Small & Medium units with a valid SME 1 rating: 9.50% per annum
- For units with a valid SME 2 rating: 9.50% (Micro) and 10.00% (Small & Medium)
- Other units: 10.00% (Micro) and 10.50% (Small & Medium)
Note: Concessional rates for good-rated units are applicable only if timely repayments are made; defaults beyond 180 days lead to higher rates.
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Processing Fees:
- On new sanctions: 1.0% per annum for both Micro and Small & Medium units.
- On Renewal: 0.5% per annum for Micro and 1.0% per annum for Small & Medium units.
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Security Requirement:
A Bank Guarantee from approved banks is required as security.
Eligibility
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Business Type:
Any manufacturing or service MSME holding a valid Udyam Registration Certificate can apply. -
Exclusions:
Trading activities are not allowed under this scheme. -
Additional Details:
Applicants should meet other internal criteria as set by NSIC and the participating banks.
Application Process
Offline
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Download/Collect Application Form:
Entrepreneurs can download the prescribed application forms from the official NSIC website or collect a blank form free of charge from NSIC branch offices. -
Complete the Form:
Fill out the application form completely and attach all required documents. -
Declaration and Submission:
Fill out the declaration and nomination details and submit the application form with the initial deposit. -
Preliminary Appraisal:
NSIC conducts a preliminary appraisal and unit inspection. -
Sanction and Agreement:
After appraisal, a credit limit is sanctioned. The applicant then signs an agreement with NSIC. -
Disbursement:
The financial assistance is disbursed to the unit after final approval.
Documents Required
- Photograph:
A recent passport-size photograph of each proprietor/director/partner/office bearer. - Identity and Address Proof:
Aadhaar Card, PAN Card, or other government-issued identity documents; plus, a valid address proof (e.g., Utility Bill, Passport, Driving License, etc.). - Udyam Registration Certificate/UAM, GST Registration Certificate:
Self-attested photocopies. - Financial Statement:
Self-attested statement of personal assets and liabilities along with the residential address of the proprietors/partners. - Corporate Documents:
Board Resolution (for companies), Power of Attorney (for partnerships), or Governing Body Resolution (for societies) authorizing the signatory to deal with NSIC. - Bank Documents:
Specimen signatures of the authorized signatory attested by the bank and a copy of the credit limit sanction letter from financial institutions/banks. - Financial Statements:
Audited or provisional financial statements for the last financial year (or current-year estimates for startups). - Bank Statement:
A copy of the bank statement for the last six months. - Additional Proofs:
Latest electricity bill, report of accounts with banks (if applicable), and a certificate/undertaking confirming no default in loans.
Frequently Asked Questions
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What is the Raw Material Assistance Scheme?
It is a scheme to provide credit support for MSMEs to procure raw materials on credit, ensuring they can focus on manufacturing quality products. -
Who can avail assistance under the scheme?
Any manufacturing or service MSME with a valid Udyam Registration Certificate, excluding trading activities, can apply. -
Does NSIC facilitate procurement of raw materials for trading activities?
No, the scheme is strictly for procurement of raw materials for manufacturing or processing purposes. -
Does NSIC facilitate MSMEs for raw material procurement on credit?
Yes, MSMEs can avail raw material procurement on credit through this scheme. -
How do I apply for raw material assistance on credit?
Applicants must fill out and submit the prescribed application form (available online or at branch offices) along with the required documents. -
Where do I submit the application for raw material assistance?
The application should be submitted to the nearest NSIC branch office. -
How is the credit limit sanctioned?
The limit is determined based on a preliminary appraisal and unit inspection conducted by NSIC. -
Is there a ceiling on the limit sanctioned?
The sanctioned limit is subject to the project’s cost and NSIC’s evaluation, with specific caps mentioned in the guidelines. -
What is the validity of the sanctioned limits?
The sanctioned limit remains valid as per the terms specified in the scheme guidelines. -
How does NSIC provide credit support to MSMEs?
NSIC provides credit support through direct financing of raw material procurement, which includes interest rate concessions and processing fee guidelines. -
Is the payment released to the MSME?
Yes, once the application is approved, the funds are disbursed directly to the MSME. -
What is the credit period of the assistance provided?
MSMEs can avail raw material assistance on credit for up to 180 days. -
What are the benefits to MSMEs under the scheme?
Benefits include enhanced purchasing power, bulk purchase discounts, and favorable financial terms that aid in maintaining smooth operations. -
What is the rate of interest charged if repayment is not made within 180 days?
An additional rate of 1.25% per quarter is charged on outstanding amounts beyond 180 days. -
What are the processing fees?
Processing fees are 1.0% per annum for new sanctions and 0.5% per annum on renewals for Micro units, and 1.0% per annum on both new sanctions and renewals for Small & Medium units.