Raw Material Assistance Scheme

If you are a new MSME owner, managing working capital and ensuring a steady supply of raw materials can be challenging. The Raw Material Assistance Scheme is designed to ease this burden by offering credit-based support for purchasing raw materials. By availing this scheme, you can benefit from bulk purchase discounts, improve your production planning, and avoid disruptions due to cash flow issues.

What is the Raw Material Assistance Scheme?

Launched by NSIC, a Government of India enterprise under the Ministry of MSME, the Raw Material Assistance Scheme aims to help MSMEs like yours by financing the purchase of raw materials, both from domestic and international sources. This scheme was established to empower MSMEs to focus on manufacturing and scaling up without worrying about immediate raw material payments.

Objectives of the RMA Scheme

• To provide you with financial assistance for purchasing raw materials.
• To enable you to secure raw materials on credit, thus improving your cash flow.
• To help you benefit from bulk purchase discounts and cash discounts.
• To support your business in maintaining uninterrupted production and quality standards.

Key Features of the RMA Scheme

• You can avail credit support for raw material procurement for up to 180 days.
• The scheme provides financial assistance for up to 90 days specifically to ease your working capital pressures.
• The interest rate depends on your MSME rating as mentioned below in the financial assistance section.
• If repayment is delayed beyond 180 days, an additional interest of 1.25% per quarter applies.
• Processing fee is 1.0% per annum for new sanctions, and 0.5% (Micro) or 1.0% (Small & Medium) per annum for renewals.
• You must provide a bank guarantee from an approved bank as security.
• The scheme helps you buy in bulk, saving money through discounts from suppliers.
• National Small Industries Corporation (NSIC) manages the procurement process, including documentation and issuing Letters of Credit for imports, making it hassle-free for you.
• The scheme helps you improve your operational efficiency and cost-effectiveness by ensuring a steady supply of raw materials.
• You can focus on producing high-quality goods without worrying about immediate raw material procurement costs.

Financial Assistance Offered Under the RMA Scheme

• An additional 1.25% per quarter is charged on overdue amounts beyond 180 days.
• Financial assistance is provided against a bank guarantee.
• The scheme covers both indigenous and imported raw materials.

Eligibility Criteria for Raw Material Assistance Scheme

Eligibility

You can apply if:

• You own a manufacturing MSME registered with Udyam Aadhaar
• Your business falls under the Micro, Small, or Medium category as per MSME definitions.
• You have a valid GST registration and other statutory registrations as required.

Non-eligibility

You are not eligible if:

• You are engaged only in trading activities (not manufacturing).
• You cannot provide a valid bank guarantee from an approved or nationalised bank.

Documents Required for Raw Material Assistance Scheme

• Passport-size photograph of each Proprietor/Director/Partner/Society office bearer
• Identity proof (PAN Card, Aadhaar Card, etc.)
• Residence proof (any one of the following):
• Latest utility bill (Telephone/Postpaid Mobile/Electricity)
• Property or Municipal Tax receipt
• Bank Account or Post Office Savings Bank statement
• Passport
• Driving Licence
• Voter’s Identity Card
• Self-attested photocopy of Udyam Registration Certificate/UAM
• Self-attested photocopy of GST Registration Certificate
• Self-attested statement of personal assets and liabilities with the residential address
• Board Resolution/Power of Attorney/Governing Body Resolution authorizing signatory
• Specimen signatures of authorised signatory attested by the bank
• Copy of sanction letter for credit limit from Financial Institutions/Banks
• Financial statements: last year’s audited, current year’s provisional, or estimated (for startups, certified by CA)
• Bank statement of the unit for the last six months
• Latest electricity bill copy
• Certificate/undertaking confirming no CIBIL/RBI default or legal case
• Copy of orders in hand (only if applying for limit enhancement beyond ₹5 crore)

Documents Required for Renewal:

• Request letter for renewal and declaration of no change in constitution, promoters, or address
• Supporting documents for any change in constitution, promoters, or address (if applicable)
• Copy of the latest valid Bank Sanction letter
• Copy of audited annual accounts for the last financial year (if renewal is after the income tax return filing date)
• Self-attested declaration of financial parameters of the last financial year (if audited accounts are not finalised), along with the latest available audited accounts
• Projected/Estimated annual accounts of the current financial year or self-attested financial parameters as per the appraisal note.

How to Apply for the Raw Material Assistance Scheme

Step 1: Visit the official National Small Industries Corporation (NSIC) website or the nearest NSIC branch office to obtain the application form.

Step 2: Fill out the application form with all required details.

Step 3: Attach all necessary documents as listed above.

Step 4: Submit the completed application and documents to your nearest NSIC branch office.

Step 5: NSIC will conduct a preliminary appraisal and visit your unit.

Step 6: Upon approval, NSIC will sanction a credit limit and sign an agreement with you.

Step 7: After signing the agreement and submitting the bank guarantee, NSIC will disburse the assistance for raw material procurement.

Benefits of the Raw Material Assistance Scheme

• Improved Cash Flow
  You get up to 180 days of credit, allowing you to manage your working capital better and focus on production.
• Bulk Purchase Discounts
  You can avail bulk purchase or cash discounts, reducing your raw material costs.
• Simplified Imports
  NSIC handles import documentation and the issuance of Letters of Credit, making it easier for you to procure imported raw materials.
• No Immediate Payment Pressure
  You can secure raw materials without upfront payment, reducing the risk of production stoppages due to cash shortages.

Real-World Examples of Raw Material Assistance Scheme

• Textile MSME using the scheme to import quality yarns.
• Engineering unit availing credit for bulk steel procurement.
• Food processing MSME securing packaging materials on credit.

Related Government Support Plans with RMA Scheme

Final Words

If you are a new MSME owner, the Raw Material Assistance Scheme can be a game-changer for your business. It provides you with the financial flexibility to procure raw materials, manage cash flow, and focus on scaling your production efficiently. Make sure you meet the eligibility criteria and prepare all necessary documents to take full advantage of this scheme.