Laghu Udhyami Credit Card (LUCC)

The Laghu Udhyami Credit Card (LUCC) is a credit card scheme of the Government of India to provide credit to small businesses, traders, village industries, handloom industries, small scale industries, tiny industries, self-employed individuals, and professionals.

1. Eligibility

1. All the existing borrowers belonging to the MSME sector (Micro, Small and Medium Enterprises) are eligible to apply under the LUCC scheme.
2. The borrowers seeking the LUCC facility must be existing customers of the lending bank. They should have a satisfactory record of dealing with the lending banks for at least the last three years. It is not necessary that the applicants dealing with the lending banks must be existing customers of the bank.
3. The maximum working capital loan amount allowed is Rs 10 lakh.

2. Documents To Submit When You Apply for LUCC

A customer seeking a LUCC loan has to submit a duly completed loan application to the lending bank. The customer should provide:

1. Proof of Identity which can be a PAN Card or a passport or Voter ID or driving license;
2. Proof of Address which can be a passport or Voter ID or recent electricity bills;
3. Proof of income, if required, which can be Form 16 or salary slip or income tax return.

3. What are the Features of LUCC?

1. The loan sanctioned is valid for a period of three years. The loan may be sanctioned in any of the forms by way of cash credit or overdraft limit or term loan. The bank may carry out annual reviews of customer’s business operations, turnover of the previous 12 months and the loan will be carried forward only if the customer’s account is satisfactory.
2. In the case of customers with a proven track record, the lending bank may not ask for any collateral security. Otherwise, in case of existing borrowers, the bank may retain the existing securities. The bank may also ask for hypothecation of stock in trade, receivables, and machinery and office equipment.
3. The loan does not require any third-party guarantee. In the case of MSME units, a CGTMSE cover will be available. CGTMSE is Credit Guarantee Funds Trust for Micro and Small Enterprises which guarantees credit given to the MSME sector.
4. The margin requirement is NIL for a loan up to Rs 50,000, and 25% for a loan from Rs 50,001 to Rs 10 lakh.
5. The interest rate is the base lending rate plus 1%.

4. Credit Limits Under LUCC

The credit limits under LUCC are assessed as below:

1. In the case of small businesses and retail traders, the higher of the below limits:
   – 20% of the annual turnover declared for income tax purposes, or
   – 20% of turnover in the last 12 months turnover in the operative account held with the bank.
   In a case where GST returns are not available, the credit limits may be decided by considering the actual turnover in the operative account during the last two years.
2. In the case of self-employed and professionals, 50% gross annual income as per their income tax return.
3. In the case of tiny industries and small scale industrial units, an amount decided as per the recommendation of Nayak Committee at 20% of projected annual turnover but subject to a maximum limit of Rs 10 lakh.