Scheme Of Assistance To Good Borrowers: 'A' Category

What is the Scheme of Assistance to Good Borrowers 'A' Category?

Scheme of Assistance to Good Borrowers is a special scheme of the Pondicherry Industrial Promotion Development and Investment Corporation Limited (PIPDIC), the Government of Puducherry undertaking set up in 1974 to promote the union territory's industrial development and to finance its entrepreneurs. The scheme rewards repayment discipline: a unit that has paid PIPDIC on time gets its next loan cheaper and faster.

PIPDIC classifies good borrowers into two categories, and the difference between them is precise.

'A' Category covers existing assisted units, which are in operation for more than 3 years and regular in repayment without availing re-schedulement.

'B' Category covers two situations: existing assisted units satisfying the good borrower criteria which have not obtained reschedulement more than once and are regular in repayment after reschedulement; and units assisted by other institutions or banks satisfying the criteria and whose fixed assets in the existing unit are free from encumbrance.

The distinction matters because it fixes the concession. According to PIPDIC's published schemes of assistance, the interest concession is 1 per cent less for 'A' category and half a per cent less for 'B' category. Over a Rs 1 crore loan repaid across five years, a full percentage point of interest is a substantial saving, and it is earned entirely by never having asked for a rescheduling.

Who is eligible for the 'A' category good borrower loan?

You can apply as an 'A' category good borrower if:

• Your unit is an existing PIPDIC-assisted unit in the small scale or medium scale sector.
• The unit has been in operation for more than three years.
• The unit has been regular in repayment.
• The unit has never availed reschedulement of its PIPDIC dues. This is the single condition that separates 'A' from 'B'.

PIPDIC's scheme text also identifies the broader pool of eligible borrowers under the good borrowers scheme as: existing assisted units of MSI and SSI classified as A and B category; existing units assisted by other institutions or banks which satisfy the criteria and whose fixed assets are free from encumbrance; and existing transport loanees who have settled loans promptly.

You cannot apply under 'A' category, or are not eligible, if:

• Your unit has been in operation for three years or less. The condition is "more than 3 years", and a new unit simply has not yet built the record this scheme rewards. Apply under PIPDIC's general Scheme for SSI / MSI Sector instead, which lends up to Rs 1,000 lakh.
• Your unit has taken a reschedulement. One reschedulement, followed by regular repayment, moves the unit to 'B' category with a half per cent concession rather than one per cent. It does not disqualify the unit from assistance, but it does cost half the benefit.
• Your repayment has been irregular. Regularity is the whole basis of the scheme.
• Your fixed assets are encumbered, particularly where you are assisted by another institution or bank rather than by PIPDIC. The scheme text names unencumbered fixed assets expressly for that route.
• You are a new entrant with no borrowing history. There is nothing to classify.
• You want working capital or a short term facility. Use PIPDIC's Short Term Financial Assistance to Good Borrowers, which runs from Rs 5 lakh to Rs 50 lakh against 150 per cent collateral, with repayment of 12 months up to Rs 10 lakh, 18 months above Rs 10 lakh and up to Rs 25 lakh, and 24 months above Rs 25 lakh and up to Rs 50 lakh.
• You seek finance for a non-industrial purpose. The loan is for fixed assets in an industrial unit.

What are the terms of the loan?

PIPDIC publishes the following for the Scheme of Assistance to Good Borrowers:

• Minimum loan: Rs 5,00,000
• Maximum loan: Rs 1,50,00,000 (Rs 150 lakh)
• Repayment: 3 to 5 years, excluding the moratorium period
• Interest concession: 1 per cent less for 'A' category, half a per cent less for 'B' category
• Purpose: to acquire fixed assets for setting up new units, and for expansion, modernisation, purchase of balancing equipment and replacement of machinery or equipment in existing units

Note carefully that the repayment period of 3 to 5 years is stated excluding the moratorium. That is a materially different formulation from PIPDIC's Mahalir Udavi scheme for women entrepreneurs, where repayment of 5 to 10 years is stated as including a moratorium of 1 to 2 years. Read the sanction letter for the actual schedule rather than assuming.

The 3-to-5-year repayment is comparatively short for a term loan of up to Rs 150 lakh, which means instalments are large. A unit borrowing at the upper end should model the cash flow carefully. The interest concession does not compensate for a repayment schedule the unit cannot meet, and a resulting reschedulement would cost the 'A' category status that earned the concession in the first place.

Where this scheme sits among PIPDIC's products

The last row is instructive. Where the good borrowers scheme takes a percentage point off the rate, the existing-assets scheme adds a percentage point on. PIPDIC prices risk visibly, and a clean record is worth two full percentage points of spread between those two products.

What documents are required?

How to apply for the good borrowers 'A' category loan

1. Verify your classification before you apply. Ask PIPDIC's loan section, or read your own loan account statement, to confirm the unit has run more than three years, repaid regularly, and never taken a reschedulement. Applying as 'A' when the record shows a reschedulement wastes time and gets you re-classified as 'B'.
2. Prepare the proposal for the new asset. Because the loan is for acquiring fixed assets, a new unit, expansion, modernisation, balancing equipment or replacement machinery, the file must say precisely what is being bought and why, with supplier quotations.
3. Assemble the financial record. Audited balance sheets and profit and loss accounts, ordinarily for three years, plus the loan account statement establishing the repayment history.
4. Clear the security position. Obtain the encumbrance certificate for the assets offered. This matters most where the unit is assisted by another institution or bank, since unencumbered fixed assets are a stated condition on that route.
5. Register on pipdic.in and file the application through the customer login, choosing the up-to-Rs-25-lakh or above-Rs-25-lakh form according to the amount sought. Applicants who prefer to file physically can submit at 60 Romain Rolland Street, Puducherry 605 001.
6. Attend the appraisal and site inspection, and answer queries on the purchase proposal and the projections.
7. Confirm the concession in the sanction letter. When the sanction issues, check that the 1 per cent 'A' category concession has been applied to the rate and that the repayment period and moratorium are as expected. Raise any discrepancy before executing documents.
8. Complete documentation, create the security and draw the loan, then keep repayment regular — the classification is not permanent and is re-examined on each fresh application.

PIPDIC's regional offices can be used by units outside Puducherry city: Karaikal on 04368-292317, Thattanchavady on 0413-2271206, an office on 0413-2678105, Mahe on 0490-2332560 and 2332720, and Yanam on 08863-2321243.

How do I check my application status?

1. Log in to your customer account on pipdic.in, from which the application was filed.
2. Call the PIPDIC registered office on 0413-2335116 or email info@pipdic.com with your application and existing loan account references.
3. Use the enquiry form on pipdic.in for pre-sanction questions and the separate grievance form for complaints.
4. Ask your existing loan officer. Because you are already a PIPDIC borrower, the officer handling your live account is usually the fastest source on where a fresh proposal has reached.

Why applications get rejected or downgraded, and how to fix them

• An overlooked reschedulement. The commonest cause of a downgrade from 'A' to 'B'. Check the loan history before claiming 'A'. If there was one reschedulement and repayment has been regular since, apply as 'B' and take the half per cent.
• Fewer than three years in operation. Wait, or apply under the general SSI/MSI scheme.
• Delayed instalments. Even without a formal reschedulement, an irregular payment pattern undermines the claim. Regularise before applying.
• Encumbered fixed assets. Get the charge released or produce a no-objection from the existing charge holder. This is the standard blocker for units assisted by another bank.
• Accounts not audited or out of date. Complete the audit for the latest financial year before filing.
• A vague asset proposal. "Expansion" without a machinery list and quotations cannot be appraised. Specify the balancing equipment or replacement machinery item by item.
• Repayment capacity not demonstrated for a 3-to-5-year schedule. Model the instalments against actual cash flows. A proposal at the Rs 150 lakh ceiling repaid over three years needs a strong operating surplus.

What are the key dates?

PIPDIC accepts loan applications on a rolling basis and publishes no last date for this scheme. The corporation and the Government of Puducherry both run a financial year from 1 April to 31 March, which is when interest rates and scheme parameters are ordinarily reviewed.

The dates that matter to a borrower under this scheme are the record dates: the date the unit commenced operations, which fixes the "more than 3 years" test; the dates of every instalment paid, which establish regularity; and the sanction and documentation dates, from which the moratorium and the 3-to-5-year repayment schedule run.

How do I raise a grievance?

1. Use the grievance form on pipdic.in, kept separate from the corporation's general enquiry form.
2. Contact the PIPDIC registered office, 60 Romain Rolland Street, Puducherry 605 001, on 0413-2335116, fax 0413-2336842, or email info@pipdic.com.
3. Escalate to the Director of Industries and Commerce, Industrial Estate, Thattanchavady, Puducherry 605 009, on +91-413-2248476, +91-413-2248168 or +91-413-2248320.
4. The departmental head is the Secretary to Government (Industries and Commerce), Chief Secretariat, Puducherry 605 001, on +91-413-2336115.

A dispute about category classification is worth raising formally and in writing, because it is worth half a percentage point of interest across the life of the loan, and the underlying facts, dates of repayment and whether a reschedulement was granted; are matters of record that PIPDIC can verify from its own books.