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Module: General Practice

Q34: Scenario: A bank is assessing a loan for a Micro Enterprise. The branch manager decides to use the "MPBF Method II" (Tandon Norms) instead of the "Turnover Method" for a loan requirement of ₹15 Lakh.

Question: Is this approach consistent with current RBI guidelines for Micro Enterprises?
A
Yes, the bank has absolute discretion to use any method.
B
Yes, MPBF is the safest method for all loans.
C
No, RBI mandates the Turnover Method for limits up to ₹5 Crore to ensure simplicity.
D
No, but MPBF is permitted if the borrower requests it.
✅ Correct Answer: C
For Micro and Small Enterprises (MSEs) with fund-based working capital limits of up to ₹5 crore, banks are mandated to use the simplified Turnover Method (Nayak Committee norms). Using the complex MPBF method (which requires detailed balance sheet analysis) for a small ₹15 Lakh loan creates unnecessary hurdles and delays.
The Turnover method is designed to be "minimum hassle."
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