Margin Money Loan (MML) for Cluster Development Activities

Cluster Development involves the creation of Common Corporate entities, which serve the needs of cluster and are owned by them. Such entities can take up activities like sourcing of raw material, mutual credit guarantee for sourcing loans, common brand creation, marketing, setting of common Facility Service Centres, Quality testing facilities etc. For these activities fixed assets and working capital is required. Margin money loan @ 20% as applicable under this scheme for cluster development activities subject to a maximum of Rs. 5 lakhs

Rules and conditions for providing Margin Money Loan 

Margin Money Loan for Cluster Development Activities will be given for both term loan and working capital loan. MML for term loan shall be computed as the difference between the cost of project approved by the Financing Agency and the term loan extended by them to the Cluster Development.

1. Common Corporate entity shall form a consortium registered as a private Ltd. company under the Companies Act and approved by the Director of Industries & Commerce. Such entities will take up activities like bulksourcing of raw material, credit guarantee for sourcing loans, common brand creation marketing, setting up of Common Facility Service Centre, quality testing facilities etc.

1 (a) Margin Money Loan under the scheme will also be available to existing individual SSI units who are members of a Cluster Group/Common Corporate Entity/ Consortium/ Company organised under the Industrial Cluster Development Programme being implemented as per G.O(Rt)NO.652/2003/ID dated 4.7.2003. Such existing industrial units will be eligible for margin money loan assistance under this scheme for raising their equity/share investment/margin insisted by the Bank or Financial institution from the Common Cluster Entity or Cluster Company or the participating individual member unit for the purpose of' creating or establishing Common Facility Centres, Quality Testing Facilities or other industry related activities including marketing facilities deemed fit and essential to the development of the cluster. However, the applicant should not be a defaulter of any pervious loan availed under any margin money loan scheme of the Industries Department as on the date of application.

2. Cost of the project will include

i) Cost of land and its development including documentation charges.

ii) Building.

iii) Plant and Machinery including all accessories / tools / jigs / fixtures / essential office equipments and furniture / lab equipments / effluent treatment plants or equipments.

iv) Electrification both industrial and building

v) Preliminary and pre-operatives expenses which shall include Registration charges of the firm, engineering drawings, cost of. the project report, Technical know-how, cost of technical supervisors during the implementation period. However this preliminary and post operative expenses shall not exceed 10% of the cost of project.

In the case of working capital the margin will be treated as the difference between the total working capital requirement as assessed by the Financing Agency and the loan made available to the entity .In case any margin money loan is sanctioned by any term loan lending institution towards working capital it shall be deducted from the total margin stipulated by the institution lending the working capital loan before computing the eligibility for margin money loans for working capital.

3. Rs 5 lakhs will be the maximum limit of this scheme for MML under term loan and working capital put together. MML shall be limited to 20% of the cost of the project in the case of MML for term loan and 20% of the total for working capital requirement in the case of MML for working capital loan.

3(a) Rs.2.5 lakhs (Rupees Two lakhs and fifty thousand only) will be the maximum limit of margin money Loan to each individual member units of the Common Cluster Entity for participating in cluster activities herein above described under rule l (a). This margin money loan assistance shall be limited to 50% of the equity/share contribution insisted by the Common Cluster Entity and as endorsed by the Bank/Financial Institution for the purpose for which loan has been sanctioned by the said Bank/Financial Institution. The General Manager, District Industries Centre concerned shall be the loan sanctioning authority under the scheme.

4. The consortium/Entity however will have to take a minimum of 10% of the cost of project and working capital put together. MML shall not exceed 50% of the margin stipulated by the Financing Institution either for term loan or working capital loan.

5.1 The application along with the prescribed remittance chalan (in original)shall be given to the General Manager, District Industries Centre concerned duly completed with all enclosures in Appendix 1. Recommendation of the Financial institution / bank shall however be obtained before sanction of the loan. No application preferred after availing all the installments of term loan/or working capital from financial institutions, if the loan is disbursed in two or more installments or after one month form the date of availing the loan if disbursed in one installment by the financial institution, shall be accepted or entertained.

5.2 The General Manager, District Industries Centre shall forward completed application with due recommendation to the DI&.C within 7 days of the receipt of the application.

5.3 Director of Industries shall have sanctioning powers for margin money loans to any entity including MML for both working capital and term Ioan put together.

5.4 Sanction of the MML shall be in the proforma in Appendix. 11. An agreement in the prescribed form (Appendix-iv) shall be got executed on stamp paper worth Rs. 50/- or fixed by Government from time to time by the competent authority representing the entity before the bill is drawn and payment effected in favour of the entity.

6. MML will be disbursed to the entity on1y through the financing institution concerned. The bank/financing institution shall disburse the amount to the Common Corporate Entity on pro-rata basis along with the disbursement of term loan and /or working capital. The CCE shall be bond to pay the interest from the date of drawal of DD. 

7. In case of any reduction and refixation of the loan, proportionate reduction shall be made on the MML and balance unspent amount, if any shall be returned to the DI&C forthwith by the bank/financing institution. However, the loanee shall be liable to pay the interest for the amount so returned till it reaches the Director of Industries and Commerce In any case the Bank / financing institution shall complete disbursement of the MML amount released to them by the DJ&C in 3 months .from the date of its receipt.

8. The Financing agency shall advise the Director along with its recommendation, the schedule of repayment of the loan so as to enable the Director to prepare the repayment schedule for the MML.

9. The Margin Money loan sanctioned under this revised scheme shall carry an interest of 6% per annum. Penal interest on defaulted payment will be charged as provided in Rule 11. All payments made by the loanee will first be adjusted against penal interest on defaulted principal and/or interest, if any, and then against principal charged as provided in Rule 11.

10. Margin Money loan granted under this scheme is to be repa1d by the loanee in 16 equal quarterly installments. The .first installment shall fall due 3 months after the date on which the last installment of term loan falls due as scheduled by the Bank/financing institution originally or on completion of the 51st month of the disbursement of MML whichever is earlier.

11. In the Case of MML for working capital the principal shall be paid back in 16 Quarterly installments on completion of the 51st month from the date of disbursement.

12. Interest in both the above case will be paid on a quarterly basis from 90th day of disbursement of MML by the Director of Industries & Commerce.

13. There will be a penal interest of 3% p.a. for any defaulted payment of either principal or interest. Any payment not made within 7 days from the date it fell due will attract the penal interest of 3% p.a. for the entire arrears.

13(a) No-collateral security or charge on assets of the CCE or Cluster Group/Company or Consortium or of the applicant unit during the pendency of loan to the financial institutions or bank. is required for the Margin Money loan. But the Government shall have a charge on the assets of the "Common Cluster Entity or Cluster Group/Company/Consortium created out of the loan once the term loan liabilities are serviced. The Financing institution will advise the Director of Industries & Commerce in writing of their intention of releasing the charges created in their favour in case of full repayment or of taking over the assets of the CCE or Consortium or Company or the loanee in case of default so as to ensure that the assets are not disposed of with out the knowledge of the Department. In cases where margin money loan assistance is only for working capital requirements of the CCE/Cluster Consortium/Company, the Government shall have all the charges over all those assets and securities, primal-y or collateral, hypothecated or pledged by the loanees or CCE/Cluster Consortium/Company to the Financing Institution for availing the working capital loan, once the loans of the Financing Institution are serviced. In case of default by the loanees of the dues under Margin Money loan the entire amount outstanding shall be liable to be recovered as if it were arrears of land Revenue under the provisions of the Kerala Revenue Recovery Act 1968 from the loanees or their legal heirs and in such other manner as Government may deem fit. (This will be incorporated as an additional clause in the agreement executed by the loanees ).

14. The Director will advice the loanee in writing while sanctioning the Margin Money Loan on the payment schedule for the MML and this will also form part of the agreement.

15. No-collateral security or charge on assets of the CCE during the pendency of loan by the CCE to the financial institutions or banks is required for the MML. But the Government shall have a charge on the assets of the CCE once the term loan liabilities are serviced. The Financing institution will advice the Director of Industries & Commerce in writing of their intention of releasing the charges created in their favour in case of full repayment or of taking over the CCE in case of default so as to ensure that the assets are not disposed of without the knowledge of the Department. Government will hold pari-pasu charge in the assets along with financing institutions towards security for Margin Money Loan.

16. In case of default by CCE of the dues under MML, the entire amount outstanding shall be liable to be recovered as if it were arrears of land revenue under the provisions of the Kerala Revenue Recovery Act 1968 from the assets of the CCE and its promoters and in such other manner as Government may deem fit.

II. Grant Assistance to Cluster Development Activity

The grant shall be utilised for giving training to cluster members, awareness creation to stake-holders, participation in national and international Trade Fairs and Exhibitions, study tours field visits etc. The grant assistance will be limited to 50% of the actual expenditure subject to a maximum of 50,000/- per cluster per year for the activities like:-awareness creation to stake-holders, participation in national and international Trade Fairs and Exhibitions, study tours field visits etc. Training programme on effective business counselling in Industrial clusters will be entrusted with professional agencies with repute in this field; like Entrepreneurship Development Institute of India Ahmedabad or such Institutions which have international reputation. Total grant eligible for all activities will be limited to 2.00 Lakhs per cluster.

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