Pollution NOC for bank loans: An overview legal requirements for business loans

Shalin Verma

10 Nov, 2022

Different banks put forward many standard requirements for industrial establishments before they give out loans to them. However, there is one such requirement that the banks often ask that the applicant may not be aware of. Banks today require the Pollution No Objection Certificate issued by the concerned State Pollution Control Boards or the Pollution Control Committee as a Pollution NOC for bank loans. Documents required in the case of factory building may vary depending upon the type of loans sought by the unit. For instance, the basic documents required to process the loan application for working capital limits for For Term Loans in the case of MSME are: 

• Audited Balance Sheets for the previous three years along with the audit reports.
• CMA data for the next two years
• Sales Tax/ IT returns
• Credit Information on the company and its Directors

• Project Report
• TEV report
• Various clearances/approvals are required & obtained for the project (Pollution NOC, Environment Clearance etc.)_[1]
• Profitability projections and the assumptions for the same

Eligibility Criteria for Pollution NOC for bank loans

General Criteria Required for Business Loans from Banks

If someone is considering opting for bank loans to start or expand their business, they must be aware of the categories in which the loans are given to businesses. The following are some of the general criteria for business entities to apply for a business loan.

• Self-employed individuals, Proprietors, Private Ltd. Co. and Partnership Firms involved in Manufacturing, Trading or Services business.
• The business should have a minimum turnover of Rs. 40 lakhs
• Individuals who have been in the current business for a minimum of 3 years, with five years of total business experience.
• Those whose business has been profit-making for the previous two years
• The business must show a Minimal Annual Income (ITR) of Rs. 1.5 lakhs per annum
• The applicant must not be less than 21 years at the time of applying for the loan and should be no older than 65 years at the time of loan maturity

Criteria related to Pollution NOC for bank loans

Consent to Establish: Before starting the construction, it is mandatory to acquire Pollution NOC in the form of Consent to Establish (CTE) from the State Pollution Control Board or the Pollution Control Committee. Only after acquiring CTEthe project proponent should initiate the construction stage or set up the business. If the business loan is required to set up the facility, this NOC will be asked as proof by the banks to establish the legality of the business.

Consent to Operate: Once this construction phase is completed and the building is ready to operate, the individual must acquire a second Pollution NOC, i.e. the consent to operate or CTO from the State Pollution Control Board. This consent NOC allows the individual to start the operations and is subject to the fulfilment of the SOP concerning pollution control and safety measures in the facility. The banks may ask for CTO if the applicant approaches the bank for approval of the loan for the business. The documents required for Pollution NOC for bank loans are as follows

• Online filled application form
• Site or layout plan with a roadmap
• Detailed project report
• Details of the manufacturing process of the unit and sources of effluent industrial waste discharge (air/water emission)
• Details of finished products
• The capital cost of the unit and the list of machinery
• , source of water, Water balance and required quantity of water
• Land documents such as rent/lease agreement
• Industry registration documents
• Balanced sheet certified by a CA
• Lab report of effluents and trade emissions.
• Copy of any other permission required from the state, such as environmental clearance
• Any other document mentioned in the application form

Procedure for acquiring Pollution NOC for Bank Loans

The method for acquiring a Consent Certificate or the NOC for bank loans is explained below

Stage 1: Application and fee submission

Applicants must submit the application for Consent NOC before applying for any bank loan. The application and the prescribed fee must be submitted through the Online Consent Management and Monitoring facility of the respective state/ union territory, along with the required documents.

Stage 2: Reviewing the application and issuance of CTE

After submitting the application, the concerned SPCB/PCC will process the application, scrutinise all documents as per the stipulated guidelines, and notify the applicant of corrections, if any, in the application. After successful scrutiny, the CTE will be granted, and the applicant can approach the bank.

Stage 3: Site Inspection and Issuance of NOC

After construction is completed, the application for CTO as a subsequent step towards completing the remaining formalities or Pollution NOC for bank loans must be made. Here, a site inspection is scheduled and carried out by an inspecting officer of the pollution Board. If the inspection report is satisfactory, the appropriate authority will issue CTO. The whole process can take up to 120 days.

Stage 4: Submission of NOC in Bank

At the time of document submission to the bank for Pollution NOC for bank loans, the Pollution NOC and other clearance must be acquired beforehand by the applicant for establishing the unit. The bank only processes the loan application after scrutinising the NOC document and sanctions the loan to the business.

Conclusion

The various checks and balances developed by the Pollution Control Board are a means to preserve the environment that we all live in. Demanding the Pollution NOC for bank Loans is a way of ensuring that whatever money the bank loans to a business doesn’t turn out as a non-performing asset, apart from other reasons. Pollution NOC, therefore, becomes a must-have document for the applicant before he/she reaches the bank in need of a business loan.

Read our Article: Consent to Operate vs Consent to Establish from Pollution Control Board