Reserve Bank of India (RBI) Master Directions on Commercial Lending / Section 180 of Companies Act, 2013 / SARFAESI Act, 2002 / Credit Guarantee Scheme for Micro & Small Enterprises (CGTMSE)

Bank Loan Documentation & Project Finance Advisory

Preparation of project reports, CMA data and financial projections for bank loan applications, advice on working capital assessment and the CGTMSE scheme, and post-sanction compliance support.

CA Due Diligence

Official Portal Filing

State Stamp Advisory

Bank Loan Documentation & Project Finance Advisory Statutory Advisory

Statutory Filing

MCA & Tax Practice

Relevant RegulatorMinistry of Finance, Reserve Bank of India (RBI), Ministry of MSME & Commercial Banks

rbi.org.in

External link to the official website of the relevant authority. H A V N & COMPANY is not affiliated with any government authority.

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STATUTORY OVERVIEW

Project Reports, CMA Data & Working Capital Assessment

Securing institutional commercial debt, whether for working capital (Cash Credit/Overdraft), machinery term loans, or greenfield project expansion, requires far more than approaching a local bank branch. Commercial lenders operating under Reserve Bank of India (RBI) guidelines enforce strict risk scoring models based on CIBIL Commercial rank (CMR), audited financial track records, Debt Service Coverage Ratios (DSCR), and collateral security cover. Incomplete or inconsistent financial information is a common cause of appraisal delays. We prepare project reports, CMA data and financial projections that present the borrower's position clearly for the lender's own appraisal. The lending decision rests entirely with the bank.

Statutory & Practice Summary • At-A-Glance

ICAI UDIN Authentication Mandate

Governing Framework

Reserve Bank of India (RBI) Master Directions on Commercial Lending / Section 180 of Companies Act, 2013 / SARFAESI Act, 2002 / Credit Guarantee Scheme for Micro & Small Enterprises (CGTMSE)

Regulatory Authority

Ministry of Finance, Reserve Bank of India (RBI), Ministry of MSME & Commercial Banks

Professional Assurance

Chartered Accountants Attestation under ICAI Standards & Code of Ethics

DOCUMENTATION MATRIX

Mandatory Documents Checklist

Self-attested scanned copies required

1. Promoters / Partners / Directors KYC

✓Promoter / Director KYC (PAN, Aadhaar, Passport) & CA Certified Net Worth Statements
✓Last 3 Years Audited Financial Statements, Tax Audit Reports (Form 3CD) & Balance Sheets
✓Sanction Letters of All Existing Secured and Unsecured Credit Facilities
✓Bank Account Statements for Past 12 Months for All Active Operational Accounts

2. Registered Office & Premises Proof

✓Detailed 7-Form Credit Monitoring Arrangement (CMA) Data & Projections
✓GST Returns (GSTR-1 & GSTR-3B) for Last 12 Months with 2B Reconciliation Summaries
✓Property Title Deeds, Non-Encumbrance Certificates & Approved Sanction Plans (if collateralized)
✓Udyam MSME Registration Certificate & DPIIT Recognition Certificate (if applicable)

PROCEDURAL ROADMAP

Step-by-Step Filing & Approval Process

Structured execution roadmap managed by our Chartered Accountants from pre-filing due diligence to certificate allotment.

01Standard

Financial Review

Reviewing audited financials, existing borrowings and repayment record to assess working capital requirements.

02Standard

CMA & Bankable Proposal Formulation

Preparing CMA data, DSCR computations and the project report.

03Standard

Clarifications on Financial Data

Explaining the financial statements and projections when the client or lender raises questions on them.

04Standard

Post-Sanction Compliance

Advising on financial covenants in the sanction letter and filing the charge (Form CHG-1) for companies.

Working Capital Optimization (Cash Credit & Overdraft)

Practice Scope & Statutory Guidance

We structure working capital proposals that align with your operating cash conversion cycle. By analyzing inventory turnover velocity and debtor collection lag, we compute Maximum Permissible Bank Finance (MPBF) under Nayak Turnover and Tandon Method II norms, and explain drawing power computations and sub-limits for Letters of Credit (LC) and Bank Guarantees (BG).

CGTMSE Scheme Advisory

Practice Scope & Statutory Guidance

For micro and small enterprises without real estate collateral, we explain eligibility under the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE on cgtmse.in) and prepare the project feasibility reports that Member Lending Institutions (MLIs) review. Guarantee cover is decided by the lender and CGTMSE.

Financial Statement Review Before Application

Practice Scope & Statutory Guidance

We review audited financial statements, existing sanction terms and repayment records so that the figures in the loan application are complete and consistent with the books of account.

STATUTORY MATRIX

Statutory Provisions & Regulatory Comparative Matrix

Comparative analysis of governing sections under the new framework alongside legacy statutory references.

Credit Facility Type	Statutory Assessment Formula	Key Sanction Benchmark / Security	Governing Authority / Portal
Cash Credit / Overdraft (CC/OD)	Tandon Method II / Nayak Committee Turnover Method	Hypothecation of stocks & debtors (<90 days); Current Ratio > 1.33	RBI Master Directions / https://www.rbi.org.in/
CGTMSE Collateral-Free Loan	Credit Guarantee Scheme for Micro & Small Enterprises	Up to Rs. 5 Crores; Zero third-party collateral; guarantee fee applied	Ministry of MSME / https://www.cgtmse.in/
Machinery / Equipment Term Loan	Detailed Project Cost & Vendor Invoices	Minimum 20% to 25% promoter margin; DSCR minimum 1.50x	SIDBI & Commercial Banks / https://www.sidbi.in/
Loan Against Property (LAP)	Real Estate Market Valuation by Registered Valuer	50% to 65% Loan to Value (LTV); registered mortgage / SARFAESI	Commercial Banks & HFCs
Letter of Credit & Bank Guarantee	Trade Financing Assessment based on annual turnover	10% to 25% cash margin or collateral security cover	Foreign Exchange Dealers' Association of India (FEDAI)

ONGOING GOVERNANCE

Mandatory Post-Registration Compliances

Failing to complete statutory post-incorporation actions carries steep daily penalties. Our CA firm manages continuous compliance:

CompliancePeriodic

ROC Charge Registration (Form CHG-1)

Mandatory electronic filing of hypothecation/mortgage charges on mca.gov.in within 30 days of loan agreement execution.

CompliancePeriodic

Monthly Stock & Drawing Power Compliance

Submitting monthly CA-certified stock and debtor statements to the bank to ensure unhindered operation of Cash Credit drawing power.

CompliancePeriodic

Quarterly Information System (QIS) Filings

Submitting QIS statements monitoring operating profits and working capital variances as mandated by bank credit policies.

CompliancePeriodic

Annual Credit Facility Renewal Submission

Resubmitting updated CMA data and audited financial statements 2 months prior to the annual renewal date to prevent penalty interest.

FREQUENTLY ASKED QUESTIONS

Statutory FAQs & Practical Guidance

Frequently asked questions and procedural guidance regarding Bank Loan Documentation & Project Finance Advisory.

What is the CGTMSE scheme and can a business get a loan without collateral?

The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE, https://www.cgtmse.in/) was set up by the Ministry of MSME and SIDBI. It enables qualifying micro and small enterprises to secure bank credit facilities (term loans and working capital) up to Rs. 5 Crores without providing any third-party collateral or personal property mortgages. The trust provides guarantee coverage up to 85% to the lending bank.

What is a CIBIL Commercial Rank (CMR) and how does it affect bank loans?

CIBIL Commercial Rank (CMR) is a credit score ranging from CMR-1 (lowest risk) to CMR-10 (highest risk) assigned to commercial enterprises by TransUnion CIBIL based on repayment history, credit utilization, and borrowing behavior. Most public and private banks mandate a CMR between 1 and 3 for sanctioning prime corporate interest rates; a rank worse than CMR-6 often triggers high risk premiums or outright rejection.

What is the difference between Cash Credit (CC) and a Term Loan?

A Cash Credit (CC) limit is a revolving working capital facility used to finance day-to-day operations against hypothecation of current assets (stock and debtors), with interest charged only on the utilized balance. A Term Loan is a fixed-tenure loan disbursed for capital expenditure (buying machinery, land, building) and repaid in fixed monthly installments (EMIs) over 5 to 10 years.

Why do banks require monthly stock statements for Cash Credit limits?

Commercial banks compute a borrower's Drawing Power (DP) every month based on paid inventory and debtors under 90 days after subtracting prescribed margin cushions (typically 25% for stock and 30% for debtors). The monthly stock statement proves that current realizable assets exceed the bank's utilized credit limit.

STATUTORY ADVISORY DESK • PRACTICE INQUIRIES

Statutory Inquiries & Practice Advisory

Information on Bank Loan Documentation & Project Finance Advisory is provided for general reference. Office addresses and contact details are listed on the Contact page.

Contact Practice Office +91 99140-14949