a report project on personal loans

8/12/2019 A Report Project On personal loans

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A REPORT PROJECT ON

MARKETING ON SMALL SCALE AND ITS COMMERCIAL LOAN PRODUCTS

With reference to

STATE BANK OF INDIA

MAIN BRANCH,VIZIANAGARAM

Aproject report submitted in partial fulfillment of the requirement for the award of

The deree of

MASTER OF BUSINESS ADMINISTRATION

Submitted by

GRANDHI BANGARU LAKSHMI

Red !"# $$%%&'('%'('

!nder the uidance ofM)* V*S*K*VARMA

DEPARTMENT OF COMMERCE AND MANAGEMENT STUDIES

MAHARA+AS POST GRADUATE COLLEGE

Appro"ed b# A$CTE NEW

%Affiliated to Andhra !ni"ersit#&'isa(hapatnam)

Phool *auh& 'i+ianaaram

%'$%-%'$(


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,-NO PART$C!.AR, PA/ENO

0 $NTRO1!CT$ON 2

3 $N1!,TR4 AN1 OR/AN$,AT$ONA. PRO5$.E 6

7 CONCEPT, O5 ,8E 36

9 PRAT$CA. ,T!14 02: ,!88AR4 7


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DECLARATION

$& /-*AN/AR! .A;,


4/104

A./!"01edme!t

$am than(ful to project uide mr-satish "arma sir %assistance professor)

deportment of manaement studies& 8rp Collee& 'i+ianaaram for uidin and helpin me in

the completion of this project

$ encerel# than( for prof- p-srinu"asa subba rao his consistent ad"ice and

encouraement durin m# project wor( period

$ also than( to owtham sir and the trainin department of ,tate ban( of $ndia

which permitted me to complete m# practical trainin at their prestiious orani+ation

$am rateful to prof- Ta"itinaidu rao aru of 8rp collee "i+ianaaram for

endower and cooperation in doin the project

Place@

1ate@

,inature

/-*AN/AR! .A;,


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,tructure of the oranised ban(in sector in $ndia- Number of ban(s are in brac(ets-

B2!/i! i! I!di2@

$n the modern sense oriinated in the last decades of the 0th centur#- The first

ban(s were *an( of


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$n ancient $ndia there is e"idence of loans from the 'edic period%beinnin 02:B *C)- .ater

durin the 8aur#a d#nast#%730 to 0: *C)& an instrument called adesha was in use& which was

an order on a ban(er desirin him to pa# the mone# of the note to a third person& which

corresponds to the definition of a bill of echane as we understand it toda#- 1urin the

*uddhist period& there was considerable use of these instruments- 8erchants in lare towns a"e

letters of credit to one another

C"1"!i21 e)2

1urin theperiod of *ritish rulemerchants established the !nion *an( of Calcuttain 03D& first

as a pri"ate joint stoc( association& then partnership- $ts proprietors were the owners of the earlier

Commercial *an( and the Calcutta *an(& who b# mutual consent created !nion *an( to replace

these two ban(s- $n 09B it established an aenc# at ,inapore& and closed the one at 8ir+apore

that it had opened in the pre"ious #ear- Also in 09B the *an( re"ealed that it had been the

subject of a fraud b# the ban(Fs accountant- !nion *an( was incorporated in 09: but failed in

09& ha"in been insol"ent for some time and ha"in used new mone# from depositors to pa#

its di"idends

The Allahabad *an(&established in 06: and still functionin toda#& is the oldest Joint ,toc(

ban(in $ndia& it was not the first thouh- That honour belons to the *an( of !pper $ndia& whichwas established in 067& and which sur"i"ed until 0D07& when it failed& with some of its assets

and liabilities bein transferred to theAlliance *an( of ,imla-

5orein ban(s too started to appear& particularl# inCalcutta& in the 06Bs- The Comptoir

dFEscompte de Parisopened a branch in Calcutta in 06B& and another in *omba#in 063G

branches in 8adrasand Pondicherr#& then a 5rench possession& followed-


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Around the turn of the 3Bth Centur#& the $ndian econom# was passin throuh a relati"e period

of stabilit#- Around fi"e decades had elapsed since the$ndian 8utin#& and the social& industrial

and other infrastructure had impro"ed- $ndians had established small ban(s& most of which

ser"ed particular ethnic and reliious communities-

The presidenc# ban(s dominated ban(in in $ndia but there were also some echane ban(s and

a number of $ndianjoint stoc(ban(s- All these ban(s operated in different sements of the

econom#- The echane ban(s& mostl# owned b# Europeans& concentrated on financin forein

trade- $ndian joint stoc( ban(s were enerall# under capitalised and lac(ed the eperience and

maturit# to compete with the presidenc# and echane ban(s- This sementation let .ord Cur+on

to obser"e& "In respect of banking it seems we are behind the times. We are like some old

fashioned sailing ship, divided by solid wooden bulkheads into separate and cumbersomecompartments."

The period between 0DB6 and 0D00& saw the establishment of ban(s inspired b# the ,wadeshi

mo"ement- The ,wadeshi mo"ement inspired local businessmen and political fiures to found

ban(s of and for the $ndian communit#- A number of ban(s established then ha"e sur"i"ed to the

present such as *an( of $ndia& Corporation *an(& $ndian *an(& *an( of *aroda& Canara *an(

and Central *an( of $ndia-

The fer"or of ,wadeshi mo"ement lead to establishin of man# pri"ate ban(s in1a(shina

;annadaand !dupi districtwhich were unified earlier and (nown b# the name S"ut4 C2!2)2

% ,outh ;anara ) district- 5our nationali+ed ban(s started in this district and also a leadin pri"ate

sector ban(-


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Thepartition of $ndia in 0D92 ad"ersel# impacted the economies of Punjaband West *enal&

paral#+in ban(in acti"ities for months- $ndiaFs independencemar(ed the end of a reime of the

.aisse+faire for the $ndian ban(in- The /o"ernment of $ndia initiated measures to pla# an

acti"e role in the economic life of the nation& and the $ndustrial Polic# Resolution adopted b# the

o"ernment in 0D9 en"isaed amied econom#- This resulted into reater in"ol"ement of the

state in different sements of the econom# includin ban(in and finance- The major steps to

reulate ban(in included@

The Reser"e *an( of $ndia& $ndiaFs central ban(in authorit#& was established in April

0D7:& but was nationali+ed on 0 Januar# 0D9D under the terms of the Reser"e *an( of

$ndia %Transfer to Public Ownership) Act& 0D9 %R*$& 3BB:b)-

$n 0D9D& the *an(in Reulation Act was enacted which empowered the Reser"e *an( of$ndia %R*$) Hto reulate& control& and inspect the ban(s in $ndiaH-

The *an(in Reulation Act also pro"ided that no new ban( or branch of an eistin

ban( could be opened without a license from the R*$& and no two ban(s could ha"e

common directors-

ROLE OF SMALL BUSINESS IN NATIONAL

ECONOM5

,mall business has pla#ed a "er# crucial role in transformin the $ndian econom# from a

bac(ward ararian econom# to its present stature- $ts benefits rane from creatin job

opportunities for millions of people& includin man# with low le"els of formal education- $t

hasnurtured the inherent entrepreneurial spirit in far fluncorners of the nation resultin in the

rowth and de"elopment of all reions- $t has been instrumental in raisin the standard of li"in

of the multitudes- The small scale sector has contributed specificall# in the followin areas@0- Emplo#ment /eneration@ The ,,$ sector in $ndia is the second larest manpower emplo#er in

the countr# net onl# to the ariculture sector- $ndia is characteri+ed b# abundant labour suppl#

and is plaued b# unemplo#ment and underemplo#ment- !nder these circumstances the small

scale sector is a boon -5or e"er# Rs-B-0million of in"estment& the smallscale sector pro"ides jobs

to 36 people as compared to 9 jobs created in the larescale sector-
http://en.wikipedia.org/wiki/Partition_of_Indiahttp://en.wikipedia.org/wiki/Partition_of_Indiahttp://en.wikipedia.org/wiki/Punjab,_Indiahttp://en.wikipedia.org/wiki/West_Bengalhttp://en.wikipedia.org/wiki/Indian_independencehttp://en.wikipedia.org/wiki/Laissez-fairehttp://en.wikipedia.org/wiki/Government_of_Indiahttp://en.wikipedia.org/wiki/Mixed_economyhttp://en.wikipedia.org/wiki/Mixed_economyhttp://en.wikipedia.org/wiki/Reserve_Bank_of_Indiahttp://en.wikipedia.org/wiki/Partition_of_Indiahttp://en.wikipedia.org/wiki/Punjab,_Indiahttp://en.wikipedia.org/wiki/West_Bengalhttp://en.wikipedia.org/wiki/Indian_independencehttp://en.wikipedia.org/wiki/Laissez-fairehttp://en.wikipedia.org/wiki/Government_of_Indiahttp://en.wikipedia.org/wiki/Mixed_economyhttp://en.wikipedia.org/wiki/Reserve_Bank_of_India


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3- .ow $nitial Capital $n"estment@ Another feature of the $ndian econom# and most of the

de"elopin economies is the scarcit# of capital- The modern lare scale sector requires colossal

in"estments whereas the small sector is just the opposite- Not onl# is the emplo#ment capital

ratio hih for the ,,$ but the output capital ratio is also hih-

7- *alanced Reional 1e"elopment@ 1ispersion of small business in all parts of the countr# helps

in remo"in reional imbalances b# promotin decentrali+ed de"elopment of industries- $t helps

in industriali+ation of rural

and bac(ward areas- $t also helps to reduce problems of conestion& pollution& housin& sanitation

etc-37

9- Equitable 1istribution of $ncome@ This is a natural corollar# of the abo"e- When

entrepreneurial talent is tapped in different reions and areas the income is also distributed

instead of bein concentrated in the hands of a few indi"iduals or business families-

:- Promotes $nter,ectoral .in(aes@ ,,$ units are supplementar# and complementar# to lare

and medium scale units as ancillar# units- 8an# small units produce subparts& assemblies&

components and accessories for the larescale sector especiall# in the electronic and automoti"e

sectors-

6- Eports@ The most sinificant contribution of the ,,$ has been in the field of eports- There

has been a sinificant increase in the eports from this sector of both traditional and non

traditional oods includin jeweller#& Ornaments &leather& hand tools& enineerin oods& soft

ware etc-

2- 1e"elopment of Entrepreneurship@ ,mall business taps the latent potential a"ailable locall#-

This wa# the# facilitate the spirit of enterprise& which results in o"erall rowth& and de"elopment

of all the reions ?sectors of the nation-

NEED AND SIGNIFICANCE OF THE STUD5


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O*JECT$'E, A,,$/NE1 *4 T


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project mentor in branch -the eternal sources include information adobted from boo(s& internet

etcK

LIMITATIONS#-

Time is major constraint

This stud# is limited to maimum business

The sample si+e is limited to 2:

The respondents repla# is based on their interest and mood

An# bias in the information ma# lead to limitation

The period of 0B wee(s is not enouh to co"er all the aspects

PERIOD OF STUD5#-

The period of stud# is 0B wee(s startin from 3ndma# to 0:thJul#


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C


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09B) and the *an( of 8adras%incorporated on 0 Jul# 097)- All three Presidenc# ban(s were

incorporated asjoint stoc( companiesand were the result of the ro#al charters-These three ban(s

recei"ed the eclusi"e riht to issue paper currenc# till 060 when with the Paper Currenc# Act&

the riht was ta(en o"er b# the /o"ernment of $ndia- The Presidenc# ban(s amalamated on 32

Januar# 0D30& and the reoranised ban(in entit# too( as its name $mperial *an( of $ndia- The

$mperial *an( of $ndia remained a joint stoc( compan# but without /o"ernment participation-

Pursuant to the pro"isions of the ,tate *an( of $ndia Act of 0D::& the Reser"e *an( of $ndia&

which is $ndiaFs central ban(& acquired a controllin interest in the $mperial *an( of $ndia- On 7B

April 0D::& the $mperial *an( of $ndia became the ,tate *an( of $ndia- The o"ernment of $ndia

recentl# acquired the Reser"e *an( of $ndiaFs sta(e in ,*$ so as to remo"e an# conflict of

interest because the R*$ is the countr#Fs ban(in reulator# authorit#-

$n 0D:D& the o"ernment passed the ,tate *an( of $ndia %,ubsidiar# *an(s) Act& which made

eiht state ban(s associates of ,*$- A process of consolidation bean on 07 ,eptember 3BB&

when the ,tate *an( of ,aurashtramered with ,*$-

,*$ has acquired local ban(s in rescues- The first was the *an( of *ehar %est- 0D00)& which ,*$

acquired in 0D6D& toether with its 3 branches- The net #ear ,*$ acquired National *an( of

.ahore %est- 0D93)& which had 39 branches- 5i"e #ears later& in 0D2:& ,*$ acquired ;rishnaram*aldeo *an(& which had been established in 0D06 in /walior ,tate& under the patronae of

8aharaja 8adho Rao ,cindia- The ban( had been the Dukan ichadi& a small mone#lender&

owned b# the 8aharaja- The new ban(s first manaer was Jall N- *roacha& a Parsi- $n 0D:& ,*$

acquired the *an( of Cochin in ;erala& which had 03B branches- ,*$ was the acquirer as its

affiliate& the ,tate *an( of Tra"ancore& alread# had an etensi"e networ( in ;erala-

The ,tate *an( of $ndia and all its associate ban(s are identified b# the same blue keyholeloo-

The ,tate *an( of $ndia wordmar(usuall# has one standard t#peface& but also utilises other

t#pefaces-

St)u.tu)e

Cu))e!t B"2)d "6 Di)e.t")3
http://in.ask.com/wiki/Bank_of_Madras?qsrc=3044&lang=enhttp://in.ask.com/wiki/Bank_of_Madras?qsrc=3044&lang=enhttp://in.ask.com/wiki/Joint_stock_company?qsrc=3044&lang=enhttp://in.ask.com/wiki/Royal_charter?qsrc=3044&lang=enhttp://in.ask.com/wiki/Royal_charter?qsrc=3044&lang=enhttp://in.ask.com/wiki/Imperial_Bank_of_India?qsrc=3044&lang=enhttp://in.ask.com/wiki/Reserve_Bank_of_India?qsrc=3044&lang=enhttp://in.ask.com/wiki/Central_Bank?qsrc=3044&lang=enhttp://in.ask.com/wiki/Government_of_India?qsrc=3044&lang=enhttp://in.ask.com/wiki/State_Bank_of_Saurashtra?qsrc=3044&lang=enhttp://in.ask.com/wiki/Gwalior_State?qsrc=3044&lang=enhttp://in.ask.com/wiki/Gwalior_State?qsrc=3044&lang=enhttp://in.ask.com/wiki/Madho_Rao_Scindia?qsrc=3044&lang=enhttp://in.ask.com/wiki/Kerala?qsrc=3044&lang=enhttp://in.ask.com/wiki/State_Bank_of_Travancore?qsrc=3044&lang=enhttp://in.ask.com/wiki/Wordmark?qsrc=3044&lang=enhttp://in.ask.com/wiki/Bank_of_Madras?qsrc=3044&lang=enhttp://in.ask.com/wiki/Joint_stock_company?qsrc=3044&lang=enhttp://in.ask.com/wiki/Royal_charter?qsrc=3044&lang=enhttp://in.ask.com/wiki/Imperial_Bank_of_India?qsrc=3044&lang=enhttp://in.ask.com/wiki/Reserve_Bank_of_India?qsrc=3044&lang=enhttp://in.ask.com/wiki/Central_Bank?qsrc=3044&lang=enhttp://in.ask.com/wiki/Government_of_India?qsrc=3044&lang=enhttp://in.ask.com/wiki/State_Bank_of_Saurashtra?qsrc=3044&lang=enhttp://in.ask.com/wiki/Gwalior_State?qsrc=3044&lang=enhttp://in.ask.com/wiki/Madho_Rao_Scindia?qsrc=3044&lang=enhttp://in.ask.com/wiki/Kerala?qsrc=3044&lang=enhttp://in.ask.com/wiki/State_Bank_of_Travancore?qsrc=3044&lang=enhttp://in.ask.com/wiki/Wordmark?qsrc=3044&lang=en


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As on 09 Januar# 3B07& there are fifteen members in the ,*$ board of directors@

Pratip Chaudhuri %Chairman)


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,tate *an( of $ndia %,-*-$-) *ranch at Tsim ,ha Tsui&


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4ear Plan& which prioriti+ed the de"elopment of rural $ndia& the o"ernment interated these

ban(s into ,tate *an( of $ndia s#stem to epand its rural outreach- There has been a proposal to

mere all the associate ban(s into ,*$ to create a Hmea ban(H and streamline the roupFs

operations

The first step towards unification occurred on 07 Auust 3BB when ,tate *an( of ,aurashtra

mered with ,*$& reducin the number of associate state ban(s from se"en to si- Then on 0D

June 3BBD the ,*$ board appro"ed the absorption of ,tate *an( of $ndore-,*$ holds D-7 in

,tate *an( of $ndore- %$ndi"iduals who held the shares prior to its ta(eo"er b# the o"ernment

hold the balance of 0-22-)

The acquisition of ,tate *an( of $ndore added 92B branches to ,*$Fs eistin networ( of

branches- Also& followin the acquisition& ,*$Fs total assets will inch "er# close to the 0B trillion

mar( %0B billion lon scale)- The total assets of ,*$ and the ,tate *an( of $ndore stood at

D&D0&0DB million as of 8arch 3BBD- The process of merin of ,tate *an( of $ndore was

completed b# April 3B0B& and the ,*$ $ndore branches started functionin as ,*$ branches on 36

Auust 3B00

N"!-b2!/i! 3ub3idi2)ie3

Apart from its fi"e associate ban(s& ,*$ also has the followin nonban(in subsidiaries@

,*$ Capital 8ar(ets .td

,*$ 5unds 8anaement P"t .td

,*$ 5actors Commercial ,er"ices P"t .td

,*$ Cards Pa#ments ,er"ices P"t- .td- %,*$CP,.)

,*$ 15


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compan# .td- $n 3BB9& ,*$ 15


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C


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5eeder industries

M2)/eti! "6 3m211 3.21e 2!d medium I!du3t)ie3 2!d ."mme).i21 1"2! 8)"du.t3

The 5iscal commission /o"ernment of $ndia& new 1elhi 0D:B& for the first time defined

a

,mall I scale industr# as& one which is operated mainl# with hired labor usuall# 0B to :B

hands

The small scale industries board in 0D:: defined&> small scale industr# as a unit

emplo#in less than :B emplo#ees if usin power and less than 0BB emplo#ees if not

usin power and with a capital asset not eceedin Rs : la(hs

The new polic# initiati"e in 0DDD3BBB defined small scale industr# as a unit enaed inmanufacturin &repairin& processin and preser"ation of oods ha"in in"estin in plant

and machiner# at an oriinal cost not eceedin Rs 0BB la(hs

5or small scale industries &the plannin commission of $ndia uses term ="illae an small

scale industr# and the traditional cottae and house hold industries

Sm211 S.21e Se.t")

0- The ,mall ,cale ,ector is the natural habitat of entrepreneurs- 8ost entrepreneurs start small

and then nurture their units into lare industries- The ,,$ ,ector pro"ides an opportunit# for

them to hone their s(ills and talents& to eperiment& to inno"ate and transform their ideas into

oods and ser"ices needed b# the societ#- O"er the last si decades the ,mall ,cale $ndustr#

sector has emered as a hihl# "ibrant and d#namic sector- $t has acquired a prominent place in

the socioeconomic de"elopment of the countr#- 8ostl# this sector ehibited positi"e rowth

trends e"en durin periods when other sectors of the econom# eperienced either neati"e or

nominal rowth- Toda# this sector accounts for D: percent of the industrial units& pro"ides nearl#

B percent of manufacturin emplo#ment and contributes around 7: percent of eports- $t

produces 2:BB items and pro"ides emplo#ment to more than 0D: la(h 02


22/104

persons- $t is a wellreconi+ed fact that a "ibrant smallscale sector holds the (e# to economic

prosperit# in an econom# li(e $ndia-

Profile of ,,$ ,ector in $ndia

D: of $ndustrial !nits in the Countr#

7D-D3 of 'alue Added in the 8anufacturin ,ector

79-3D of National Eports

6-6 of /ross 1omestic Product

Emplo#ment To 0D7 .a(h Persons

Production of O"er 2:BB $tems in the $ndustrial ,ector

3D $tems Reser"ed for Eclusi"e 8anufacture

7: $tems for Eclusi"e Purchase from This ,ector

OB+ECTIVES

After oin throuh this lesson #ou should be able

U To define a ,mall ,cale $ndustr#& Ancillar# $ndustr#& Tin# !nit& ,mall

,cale ,er"ice And *usiness Enterprises ,,,*EsQ& Women Enterprise and

Eport Oriented !nit-

U 1ifferentiate *etween The Traditional and 8odern ,mall ,cale ,ector

U Eplain the Nature and Characteristics of ,,$s

U Eamine the Role of ,mall *usiness in National Econom#

U 1escribe how ,mall $ndustries act as ,eedbed of Entrepreneurship

-CONCEPTS AND DEFINITIONS

$n most parts of the world the nomenclature used is ,mall and 8edium Enterprises %,8Es) and

the criteria for definin include the number of emplo#ees and ?or the turno"er- $n $ndia the ,mall

,cale $ndustr# e"o(es different meanins for different aencies and the financial institutions- 5or

eample for the purpose of Ecise and ,ales Ta Eemption& the turno"er alone is the

determinin criterion-


23/104

UNDERTAKING

An industrial underta(in in which the in"estment in plant and machiner#& whether held on

ownership terms or on lease?hirepurchase basis& does not eceed Rs- 0B million %Rs- 0 crore) is

rearded as a smallscale underta(in- These include manufacturin and ser"ice units-

ANCILLAR5 INDUSTRIAL UNDERTAKING

An industrial underta(in which is enaed or is proposed to be enaed in the manufacture or

producin of parts& components& subassemblies& toolin or intermediatesG or the renderin of

ser"ices is termed as an ancillar# underta(in -The ancillar# underta(in is required to suppl# or

render or propose to suppl# not less than :B percent of its production or ser"ices& as the case ma#

be& to one or more other industrial underta(ins as the case ma# be- The in"estment in plant

and machiner#& whether held on ownership basis or on lease or on hire purchase& should not

eceed Rs- 0B million- O"er the #ears the followin subsectors ha"e been identified within the

o"erall smallscale sector@

TIN5 ENTERPRISE

A unit is treated as a tin# enterprise where the in"estment in plant and machiner# does not

eceed Rs- 3-: million %Rs- 3: .a(hs) irrespecti"e of the location of the unit- 8an# shops&

schools& parlous& Photostat and ,T1 booths in #our "icinit# are all eamples of tin# units-

SMALL SCALE SERVICE AND BUSINESS

ENTERPRISE =SSSBES>

An industr# related ser"ice?business enterprise with in"estment up to Re-B-: million %: .a(hs) in

fied assets& ecludin land and buildin& is treated as an ,,,*E- E-- ad"ertisin aencies&

8ar(etin consultanc#& Auto repair& ser"ices and araes& Tailorin& 1es(top printin etc- The

ser"ice sector has emered as the major sement of the econom#-

?OMENS ENTERPRISES

0D

A Women Entrepreneurs Enterprise is termed as an ,,$ unit?industr#related ser"ice or business

enterprise& manaed b# one or more women entrepreneurs in proprietar# concerns& or in which


24/104

she?the# indi"iduall# or jointl# ha"e a share capital of not less than :0 percent as

partners?shareholders?directors of a pri"ate limited compan#?members of a cooperati"e societ#-

E@PORT ORIENTED UNIT =EOU>

A unit with an obliation to eport at least 7B percent of its annual production b# the end of the

third #ear of commencement of production and ha"in an in"estment ceilin up to Rs- 0B million

%Rs- 0 crore) in plant and machiner# is termed as an eport oriented ,,$ unit-

;e# Words

,,$& Ancillar# $ndustr#& Tin# Enterprise& ,,,*Es& Womens Enterprise& EO!

$n"estment Ceilins for ,mall ,cale $ndustries %3BB6)

T#pe of ,,$ unit

$n"estment limit

%0 millionV 0B .a(hs)

Remar(s

,mall ,cale $ndustr#

Ancillar#

Tin# Enterprise

,er"ice *usiness Enterprise

Women Enterprise

Eport Oriented

Rs 0B million

Rs 0B million

Rs 3-: million

Rs B-: million

Rs- 0B million

Rs- 0B million


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No location limit

:0 equit# holdin b# women

Obliation to eport 7B of

production

$n $ndia no separate definition of medium enterprises eists and as such there is no specific

definition of ,mall and 8edium Enterprises ,8Es-Q Administrati"el#& in the $ndian contet& the

industr# uni"erse is di"ided into three major sements

5actor# ,ector .are ,cale units %Non ,,$s)G 3B

5actor# ,ector,mall ,cale units 'illae and ,mall $ndustries sector ',$-Q

The ',$ sector has further been di"ided into two broad subsectors "i+@ The

8odern ,,$ ,ector and the Traditional ,,$ ,ector-

8odern ,mall ,cale $ndustries

These co"er ,,$ units both in the 5actor# and Non?5actor# sectorsQ and power loom units- ,uch

units mostl# use power dri"en machiner# and possess superior production techniques- !nits in

this subsector are enerall# located in close proimit# to lare industrial centers or urban areas-

These industries are mo"in awa# from the traditional products to (nowledebased products-

Traditional ,mall ,cale $ndustries This sector comprises tin# and cottae industr# sements li(e

handlooms& (hadi and "illae industries& handicrafts& sericulture and sil(& rubber and coir- These

units are labor intensi"e& are enerall# located in rural and semiurban areas and are artisan

based- !suall# the capital in"ested is also nominal -Chec( #our proress@

8atch the followin@

8odern ,,$ ;hurja Potter#

.are ,cale $ndustr# ,ona ,teerin suppl#in to 8aruti !d#o

,,$ .aundr# ,er"ices

Tin# Paper 8anufacturin !nit with Rs- 0B million in"estment

Ancillar# Photostattin !nit with Rs- B-: million in"estment

,,,*Es TE.CO

Traditional ,,$ Call Centre


26/104

NATURE AND CHARACTERISTICS

,mallscale industries ha"e certain unique features& which distinuish it from the .arescale

sector- ,ome of the salient characteristics of smallscale businesses are i"en below-

0- Personal Character@ $n most small businesses the owners themsel"es are manaers and so the#

can operate independentl#- The# can i"e customi+ed ser"ice to their clients& which in man#

cases is their !,P-

3- 5leibilit#@ ,ince most small businesses are a oneman show the# do not ha"e to o throuh a

hierarch# to et permissions to ma(e chanes- ,mall business can respond quic(l# to

en"ironmental trends- Nimbleness and ailit# are 30 characteristics that allow small

entrepreneurs to understand mar(et conditions and rapidl# respond to chanes-

7- .abour $ntensi"e@ ,mall businesses ha"e tremendous capacit# for emplo#ment eneration

throuh their labour intensi"e techniques- ,mall businesses actuall# create more jobs than bi

businesses- This feature of a smallscale unit is of reat sinificance in a countr# li(e $ndia where

the number of unemplo#ed people is phenomenal-

9- .ocal Area of Operation@ ,mall businesses are larel# local in operationG howe"er the mar(et

for its products ma# be local& reional or e"en international-

:- ,hort /estation Period@ The capital in"estment in the small sector is enerall# low and the

time ta(en for production to commence is also less- As a result of short estation period the units

i"e quic( returns and consequentl# the pace of economic de"elopment quic(ens-

PROBLEMS OF SMALL BUSINESS

While the small entrepreneurs can set up a unit e"en with less capital& enjo# quic( returns and

ha"e the fleibilit# to handle the "aaries of the mar(et& the# ha"e to face man# problems li(e

the followin@

0- Paucit# of 5inance@ The small entrepreneurs possess a wea( financial structure and find it

etremel# difficult to obtain credit because of lac( of collateral securit#- This acts as a bi

handicap& especiall# in the initial staes& in most of their operations li(e their abilit# to hire the

best wor(ers or to purchase the latest machiner# and equipment or to acquire sophisticated

technolo#-


27/104

3- Poor a"ailabilit# of power and other infrastructure@ Thouh infrastructural bottlenec(s are

problems for bi businesses too& #et the# can o"ercome these problems to some etent because

of their financial strenth e-- eneratin their own power& or e"en influencin the o"ernment in

framin its policies sometimes- The small entrepreneur on the other hand has to battle with them-

7- Obsolete Technolo#@ 8ost small businesses use old technoloies because the# cannot afford

better- As a result the qualit# of their oods is inferior and the cost of production is hiher than in

case of other bi "entures- This has acted as a serious handicap especiall# after openin up of the

econom# when the# ha"e had to compete with imported oods-

9- 8ar(etin Problems@ The small entrepreneur cannot suppl# standardi+ed oods of hih qualit#

and as a result cannot compete with products of lare companies or 8NCs- The# usuall# do not

ha"e a brand name or lo#alt#& as there are hardl# an# funds for ad"ertisin or sales promotion-

All these increase their mar(etin woes- 33

:- Poor 8anaerial and Orani+ational ,(ills@ usuall# the entrepreneur has to perform a

multitude of di"erse functions in"ariabl# with out ha"in an# eposure to professional education

or formal trainin- The lare sector on the other hand can hire the best qualified and trained

people-

6-


28/104

rowth and de"elopment of all reions- $t has been instrumental in raisin the standard of li"in

of the multitudes- The small scale sector has contributed specificall# in the followin areas@

0- Emplo#ment /eneration@ The ,,$ sector in $ndia is the second larest manpower emplo#er in

the countr# net onl# to the ariculture sector- $ndia is characteri+ed b# abundant labour suppl#

and is plaued b# unemplo#ment and underemplo#ment- !nder these circumstances the small

scale sector is a boon -5or e"er# Rs-B-0million of in"estment& the smallscale sector pro"ides jobs

to 36 people as compared to 9 jobs created in the larescale sector-

3- .ow $nitial Capital $n"estment@ Another feature of the $ndian econom# and most of the

de"elopin economies is the scarcit# of capital- The modern lare scale sector requires colossal

in"estments whereas the small sector is just the opposite- Not onl# is the emplo#ment capital

ratio hih for the ,,$ but the output capital ratio is also hih-

7- *alanced Reional 1e"elopment@ 1ispersion of small business in all parts of the countr# helps

in remo"in reional imbalances b# promotin decentrali+ed de"elopment of industries- $t helps

in industriali+ation of rural and bac(ward areas- $t also helps to reduce problems of conestion&

pollution& housin& sanitation etc- 37

9- Equitable 1istribution of $ncome@ This is a natural corollar# of the abo"e- When

entrepreneurial talent is tapped in different reions and areas the income is also distributed

instead of bein concentrated in the hands of a few indi"iduals or business families-

:- Promotes $nter,ectoral .in(aes@ ,,$ units are supplementar# and complementar# to lare

and medium scale units as ancillar# units- 8an# small units produce subparts& assemblies&

components and accessories for the lare scale sector especiall# in the electronic and

automoti"e sectors-

6- Eports@ The most sinificant contribution of the ,,$ has been in the field of eports- There

has been a sinificant increase in the eports from this sector of both traditional and non

traditional oods includin jeweller#& arments &leather& hand tools& enineerin oods& soft ware

etc-

2- 1e"elopment of Entrepreneurship@ ,mall business taps the latent potential a"ailable locall#-

This wa# the# facilitate the spirit of enterprise& which results in o"erall rowth& and de"elopment

of all the reions ?sectors of the nation-


29/104

T5PES OF LOANS FOR S*M*E

CORPORATE LOAN#-

Det2i13

T2)et G)"u8

Eistin and new companies?partnership?proprietor firms enaed in manufacturin

acti"it#-

Pu)8"3e

On oin capital ependiture? technolo# upradation? reno"ation& Repa#ment of

hih cost debt& 'R, scheme& acquisition of trademar(s& patents& shorin up NWC-

F2.i1ity

Clean Term .oan

u2!tum "6 Fi!2!.e

U 8inimum Rs 3: .acs

U 8aimum Rs 0B Crores for non corporate borrowers

U No cap for corporate borrowers

I!te)e3t R2te

At least one step hiher than the applicable rate as per internal ratin-

Se.u)ity

Primar# ,ecurit#@ Chare on the assets created from financial assistance-

[email protected]& buildin etc- Personal /uarantee of Promoters? Partners? Proprietor-

M2)i!

Not applicable

S8e.i21 Fe2tu)e3

U !nits facin liquidit# crunch can a"ail this product for shorin up of wor(in capital

funds

U !nits plannin to launch new products and require to spend on ad"ertisement&

promotion can a"ail this product-


30/104

DAL MILL PLUS#-

Det2i13

E1iibi1ity

U !nits enaed in the acti"it# of 1al 8illin and ha"in credit ratin of ,*D and

abo"e as per the ban(Fs ris( assessment-

U !nits must be profit ma(in-

U New established units are also eliible

Pu)8"3e

U Acquisition of machiner#& moderni+in the factor# or settin up of additional

facilities-

U Wor(in capital needs

F2.i1ity

U Term loan

U Wor(in capital%5und *ased Non fund based facilities)

U ,8E credit plus

u2!tum "6 Fi!2!.e

U Term loan is based on project cost

U Wor(in capital@ Need based limit without an# upper ceilin-

M2)i!U Term loan 0: to 3:

U Wor(in capital 0: to 3:

I!te)e3t R2te

$nterest is floatin and lin(ed to *ase Rate& dependin upon the si+e of the limit and

"alue of collateral securit#-

Re82yme!t Pe)i"d

U Term loan between : to 2 #ears ecludin the moratorium period of 03 months-

U Wor(in capital loan for 03 months subject to satisfactor# conduct of account- The

limit is renewable after 03 months-

Se.u)ity

UPrimar# @


31/104

D".t") P1u3#-

T2)et G)"u8

8edical practitioners of an# discipline& promoters of hospitals& nursin homes&

patholoical clinics& pol#clinics& Xra# labs& etc-Pu)8"3e

To finance qualified medical practitioners

5or bu#in equipments %5or dentists& the loan also co"ers dental implants

besides equipmentsG for orthopaedists& the loan also co"ers "arious

replacements? implants for hip? (nee? shoulder? spine etc-)

,ettin up clinic& nursin home& patholo# labs& dru store& ambulance&

computers& "ehicles& etc-

Epansion? reno"ation? moderni+ation of eistin premises

Ty8e "6 62.i1ity

Term .oan

Cash Credit

u2!tum "6 6i!2!.e

8aimum Rs 0B Crores subject to certain conditions- 5or indi"iduals and

proprietors maimum is Rs-: Crores-

,ub ceilin for wor(in capital at

0B of total loan amount for upto Rs-0 crore-

: of total loan amount for abo"e Rs-0 crore

5or Non Allopathic doctors %!nani& A#ur"edic&


32/104

Re82yme!t

8aimum period is : to 2 #ears dependin upon the purpose-

P)".e33i! C42)e3 U86)"!t 6ee

:B of normal rate

Se.u)ity

Primar# ,ecurit#


33/104

RENT PLUS#-

T2)et G)"u8

Owners of lare commercial? office spaces rented out to lare corporate&

8NCs& ban(s& P,!s etc-

E1iibi1ity

$ndi"iduals? partnership firms? corporates

Pu)8"3e

To meet liquidit# mismatches

Ty8e "6 62.i1itie3

Term .oan

u2!tum "6 Fi!2!.e @

8inimum .oan amount is Rs :B&BBB?

8aimum .oan amount is Rs 0B-BBCr

M2)i!

9B

R2te "6 I!te)e3t $nterest is floatin and lin(ed to *ase Rate

Se.u)ity

Primar# Assinment of rent recei"ables- Power of attorne# with the

lessee to be obtained

Collateral Equitable 8ortae on buildin aainst the rentals of which

the loan would be sanctioned or an# other acceptable propert# of similar

"alue-

I!3u)2!.e

The propert# to be insured for the full "alue-


34/104

SBI SHOPPE#-

T2)et G)"u8

Present and prospecti"e owners of shops? offices? showrooms? trainin

centres? ser"ice centres? araes? offices for Chartered Accountants ?

Consultants

E1iibi1ity

$ndi"iduals ?firms ? partnerships ? trusts ? franchisees

Pu)8"3e

Purchase of new?old shops?establishments?offices-

8oderni+ation?epansion of establishments?shops& etc-

All furniture?fitures& electrical fittins and other accessories required for

shops?showrooms?offices-

Ty8e "6 62.i1itie3

Term .oan

u2!tum "6 Fi!2!.e @

8aimum of Rs-3B .acs

M2)i!

3: for purchase of new propert#-

9B in respect of purchase of old propert#-

R2te "6 I!te)e3t

$nterest is floatin and lin(ed to *ase RateY-

Re82yme!t Pe)i"d

8aimum 2 #ears includin moratorium period of 6 months-

Se.u)ity

Primar#


35/104

The assets created out of *an(s finance are to be insured for the full "alue-

SCHOOL PLUS#-

T2)et G)"u8

Primar# and


36/104

.oan amount abo"e Rs-: lacs I Repa#able in 9 equated monthl#

installments-

Se.u)ity

Primar#


37/104

SME COLLATERAL FREE LOAN#-

Det2i13

E1iibi1ity

New and eistin 8icro and ,mall Enterprises enaed in 8anufacturin and

,er"ice sector- 5or 8anufacturin sector& oriinal in"estment in plant machiner#

should be upto Rs : crore and for ,er"ice sector& oriinal in"estment in equipment

upto Rs 3 crore-

Pu)8"3e

U Wor(in capital needs %5und *asedS Non 5und *ased)-

U Term loan for construction of *uildin& office& acquisition of machines ? equipments

includin epansion and moderni+ation of the unit-

F2.i1ity

U Cash Credit

U Term .oanU .etter of Credit

U *an( /uarantee

u2!tum "6 Fi!2!.e

Total Eposure to the unit @ !pto Rs- 0-BB crore %All facilities WC& T. N5* facilities)

I!te)e3t R2te

Attracti"e rates of interestY

Se);i.e C42)e3

U concession in processin and ser"ice chares-

U Other chares as applicable-

Se.u)ity

U Primar# ,ecurit#@ U Assets created out of ban( finance

U Eistin assets of the borrower as per definition of C/T8,E


38/104

U No collateral

U No third part# uarantee

Re82yme!t Pe)i"d

U Wor(in Capital %WC)@ One #ear& repa#able on demand- Wor(in capital limits will

be renewed e"er# two #ear-


39/104

Se.u)ity

Primar#@


40/104

SME OPEN TERM LOAN#-

Det2i13

F2.i1ity

U The product is a preappro"ed term loan facilit# which can be disbursed o"er a period of 03

months

dependin upon requirement of the unit-

U The units et comfort of preappro"ed sanction to plan their capital ependiture and neotiate

with suppliers

of machiner# to finali+e the best possible terms and then et the loan disbursed-

T2)et G)"u8

U All units under manufacturin sector-

U !nder ,er"ice sector@ Educational $nstitution&


41/104

U Acquisitions of $,O other similar certifications-

U 'isits abroad for acquirin technolo#& finali+in business deals& participatin in ehibitions?

fairs for mar(et

promotion etc-

U R1 acti"ities of the units in o"erall business de"elopment objecti"e

u2!tum "6 Fi!2!.e

8aimum Rs 3-:B crore for both manufacturin and ser"ices enterprises& subject to credit ratin

and purpose

of the loan-

M2)i!

8inimum 0B

Re82yme!t Pe)i"d

7 : #ears-

I!te)e3t R2te

5loatin rate lin(ed to *ase Rate-

Se.u)ity

U Primar# ,ecurit#@


42/104

SME SMART SCORE#-

Det2i13

E1iibi1ity

,cheme is a"ailable to small and medium enterprise units enaed in manufacturin& trade or

ser"ices-

Pu)8"3e

Wor(in Capital requirements Purchase of fied assets li(e land& buildin& plant machiner#-

F2.i1ity

Wor(in capital Term loan

u2!tum "6 Fi!2!.e

U 5or manufacturin units total limits upto Rs :B lacs

U 5or trade ser"ices units total limits upto Rs 3: la(hs-

M2)i!3: for wor(in capital and 77 for Term .oan

I!te)e3t R2te

5loatin Rate and lin(ed to *ase Rate

Re82yme!t Pe)i"d

U Term loan to be repaid in : #ears ecludin moratorium not eceedin 6 months

U Wor(in Capital loan to be renewed e"er# two #ears and re"iewed annuall# subject to

satisfactor# conduct of account-

Se.u)ity

U Primar#@


43/104

The assets created out of *an(Zs finance are to be insured for the full "alue-

S8e.i21 Fe2tu)e3

U A simplified loan application format

U Concessionar# rate of interest

U [uic( and hasslefree loan sanction process

STREE SHAKTI SCHEME

Det2i13

E1iibi1ity

0- Women Entrepreneurs in

U Retail trade

U *usiness enterprises

U Professionals and self emplo#ed li(e 1octors& *eaut# Parlour operators etc-

U ,mallscale units or tin# units-

3- The units run b# women entrepreneur should undero E1P %Entrepreneurial

de"elopment proramme) trainin conducted b# state le"el aencies-

F2.i1ity

Term loan and wor(in capital loan

u2!tum "6 Fi!2!.eU Retail Traders@ Rs- :BBBB to Rs-3 .acs

U *usiness enterprises@ Rs- :BBBB to Rs-3 .acs

U Professionals@ Rs- :BBBB to Rs-3: .acs

U ,,$@ Rs- :BBBB to Rs-3: .acs

M2)i!

Reduced marin

I!te)e3t R2te

5loatin rate and lin(ed to base rate-

Se.u)ity

U Primar#@ ,toc(s ? 8achiner# purchased out of ban(s finance

U Collateral@No collaterals for ,,$ .oans up to Rs-0B .ac- Eliible units ma# be

co"ered under C/T8,E %Credit /uarantee 5und rust for 8icro and ,mall


44/104

Enterprises)& for others& collaterals should be pro"ided-

TRADERS EAS5 LOAN 9TEL:#-

T2)et G)"u8

\ .oan to traders and persons enaed in ser"ice sector aainst

mortae of propert#-

E1iibi1ity

\ Eistin customers with a satisfactor# trac( record-

\ New connections includin ta(eo"er-

\ 5irst eneration entrepreneurs as well as promoters of eistin units

Pu)8"3e

\ .oan can be a"ailed for normal da# to da# business requirements or

for purchase of equipments? fied assets-

Ty8e "6 62.i1itie3

\ Cash Credit? Term .oan? 1emand .oanu2!tum "6 Fi!2!.e @

\ !pto Rs :-BB Cr

M2)i!

\ 7: of the propert# "alue

R2te "6 I!te)e3t

\ Attracti"e rate of interest- $nterest rate is lin(ed to *ase Rate

Se.u)ity

\ Primar#


45/104

\ The assets created out of *an(s finance are to be insured for the full

"alue-

S8e.i21 6e2tu)e3

\ ,implified Assessment

\ !ser friendl#

?EAVERS CREDIT CARD#-

T2)et G)"u8

Wea"ers and ancillar# wor(ers in"ol"ed in wea"in acti"ities in the handloom sector

E1iibi1ity

U All wea"ers and ancillar# wor(ers in"ol"ed in wea"in acti"ities

U Preference will be i"en to wea"ers identified under Third Census of


46/104

I!te)e3t R2te

.in(ed to *ase Rate-

Re82yme!t Pe)i"d

U Term loan repa#able in 7 #ears-

U Cash credit limit to be renewed in 7 #ears with annual re"iew subject to satisfactor# conduct of

account-

Se.u)ity

U Primar#@


47/104

CHAPTER-(

PRATCIAL STUD5 ABOUT SME LOANS

C1233i6i.2ti"! "6 ."3tume)3@

Table4.1

T

y

p

e

o

f

c

us

t

o

m

e

r

s

N

o

.

o

f

c

u

st

o

m

e

r

s

Percentage of customers

$

n

d

i

"

D03


48/104

i

d

u

a

l

s

*

u

s

i

n

e

s

s

3

:

77-77

w

h

o

l

e

s

a

l

e

r

s

0

B

07-77

,

m

a

l

l

0

B

07-77


49/104

s

c

a

l

e

i

n

d

u

s

t

r

i

e

s

a report project on personal loans

Documents