1

Chapter- 1 Introduction to MSME

2

Micro, Small and medium enterprises (MSMEs ) also known as small and medium scale

enterprises are the essential part of healthy economy. The MSME sector represents over

90 percent of enterprises in most of the developing countries and contribute 40-60 percent

of the total output or value added to the national economy.

The growth recorded by SSI in India is 2% more than any other sector; it accounts for 40% of the

country’s GDP, 35% of Direct exports, 15% of Indirect Exports (through Merchant Exporters,

Trading Houses & Export Houses) and employs more than 20 million people. The SSIs needs just

Rs. 60, 000 – 70, 000 to generate employment for one man, while for the same a whopping 5-

6lakhs is required for other sectors.

MSME sector faces a number of problems - absence of adequate and timely banking finance,

limited knowledge and non-availability of suitable technology, low production capacity, ineffective

marketing and identification of new markets, constraints on modernization and expansions, non

availability of highly skilled labour at affordable cost, follow up with various agencies in solving

regular activities and lack of interaction with government agencies on various matters.

MSMEs have strong technological base, international business outlook, competitive spirit and

willingness to restructure them shall withstand the present challenges and come out with shining

colors to make their own contribution to the Indian economy.

Brief history Of MSMEs

YEAR 1950

In the year 1950, SME was defined as a size of Gross Investment in fixed assets (incl. Plant &

machinery, land & building etc.) Not exceeding Rs.5lakhs and strength of workforce viz.

Employment less than 50 workers per day using power or less than 100 workers per day without

use of power.

YEAR 1950 TO 2004

Small scale industries (SSI) are those engaged in the manufacture, processing or preservation of

goods and whose investment in plant and machinery (original cost) does not exceed Rs.1crore.

This would include units engaged in mining or quarrying, servicing and repairing of machinery. In

this case of ancillary units, the investment in plant and machinery (original cost) should not exceed

Rs.1crore to be classified under SSI.

3

The investment limit of Rs.1crore for classification as SSI has been enhanced to Rs.5crore in

respect of certain specified items under hosiery, hand tools, drugs pharmaceuticals and stationary

items and sports goods by the Government of India.

YEAR 2006

The Government of India has enacted the Micro, Small and Medium Enterprises Development

(MSMED) Act, 2006 on June 16, 2006 which was notified on October 2, 2006. Consistent with the

notification of the Micro, Small and Medium Enterprises Development (MSMED) Act 2006, the

definition of micro, small and medium enterprises engaged in manufacturing or production and

providing or rendering of services has been modified.

1.1 Micro, Small and Medium Enterprises Development-

Introduction-

MICRO-

Micro (manufacturing) Enterprises

Enterprises engaged in the manufacturing/production or preservation of goods and whose

investment in plant and machinery (original cost excluding land and building and such items as

in 1.1.1) does not exceed Rs. 25 lakh, irrespective of the location of the unit.

Micro (service) Enterprises

Enterprises engaged in the providing/rendering of services and whose investment in

equipment (original cost excluding land and building and furniture, fitting and such items as in

1.1.2) does not exceed Rs. 10 lakh.

SMALL-

Small (manufacturing) Enterprises:

Enterprises engaged in the manufacture/production or preservation of goods & whose

investment in plant and machinery (original cost excluding land and building & the items

specified by the Ministry of Small Scale Industries vide its notification No.S.O.1722 (E)

Dated October 5, 2006 as furnished in Annexure I) does not exceed Rs. 5 crores.

4

Small (service) Enterprises

Enterprises engaged in the providing/rendering of services and whose investment in

equipment (original cost excluding land and building & furniture, fittings and other not directly

related to the service rendered or as may be under the micro, Small and Medium Enterprises

development, (MSMED), Act 2006) does not exceed Rs. 2 crore.

MEDIUM-

Medium (manufacturing) Enterprises-

Enterprises engaged in the manufacture/production or preservation of goods and whose

investment in plant and machinery (original cost excluding land and building and the items

specified by the Ministry of Small Industries vide its notification No.S.O. 1722(E) dated October 5,

2006) is more than Rs. 5 crore but does not exceed Rs. 10 crore.

Medium (service) Enterprises

Enterprises engaged in the providing/rendering of services and whose investment in equipment

(original cost excluding land and building and furniture, fittings as such items as in 1.1.2) is more

than Rs. 2 crore but does not exceed Rs. 5 crore.

1.1. MSME Classification

*

original

cost

excludin

g land

and

building

and the

items

specified by the Ministry of Small Scale

original cost excluding land & Building and Furniture, Fittings and other items not directly

related to the service rendered or as may be notified under MSMED Act, 2006

MANUFACTURING SECTOR SERVICE SECTOR

ORIGINAL INVESTMENT IN PLANT

& MACHINERY

ORIGINAL INVESTMENT IN

EQUIPMENTS

MICRO ENTERPRISES UP TO RS.25.00 LACS UP TO RS. 10.00 LACS.

SMALL ENTERPRISES FROM RS.25.00 LACS TO

RS.500.00 LACS

FROM RS.10.00 LACS TO

RS.200.00 LACS.

MEDIUM ENTERPRISES FROM RS.500.00 LACS TO

RS.1000.00 LACS

FROM RS.200.00 LACS TO

RS.500.00 LACS.

5

Eligibility criteria

(i) These guidelines would be applicable to the following entities, which are viable or potentially

viable:

a) All non-corporate SMEs irrespective of the level of dues to banks.

b) All corporate SMEs, which are enjoying banking facilities from a single bank, irrespective of the

level of dues to the bank.

c) All corporate SMEs, which have funded and non-funded outstanding up to Rs.10 crore under

multiple/ consortium banking arrangement.

(ii) Accounts involving willful default, fraud and malfeasance will not be eligible for restructuring

under these guidelines.

(iii) Accounts classified by banks as “Loss Assets” will not be eligible for restructuring. Bank’s

lending to medium enterprises will not be included for the purpose of reckoning under priority

sector.

1. TINY UNIT WOULD BE MICRO ENTERPRISES.

2. SSI WOULD BE SMALL ENTERPRISES

MSMEs have been established in almost all-major sectors in the Indian industry such

as:

1. Chemical & Pharmaceuticals

2. Electrical, Electronics

3. Bio-engineering

4. Engineering

5. Food Processing

6. Electro-medical equipment

7. Textiles and Garments

8. Sports goods

9. Plastics products

10. Meat Products

11. Computer software (IT)

12. Leather and Leather goods etc.

6

1.2 SWOT ANALYSIS OF MSMES IN INDIA

STRENGTHS

They contribute to National Economic

growth.

They generate Employment and help

in vitalizing Indian brand to the world

Helps in the Regional Development

Export Market Expansion.

Technological Innovation

WEAKNESS

Encounters problems due to lack of

Funds.

MSMEs lack Marketing skills

MSMEs are not fast in adapting the

changing trade trends

Non availability of technically trained

human resources

Poor Management skills

They lack in technological information

and consultancy services

OPPORTUNITIES

Bilateral and Multilateral trade

agreements

Credit support is enhanced

They get support for

technological up-gradation

Comprehensive support for cluster

development

Marketing assistance and export

promotion support

Growing domestic and international

markets

THREATS

Dumping from developed countries

Lot of distrust between SMEs and

Financial institutions

Slow improvements in quality to meet

the international standards

Virtual absence of Enterprise

Education

Poor incentive structures for

entrepreneurs

Non-tariff barriers from developed

countries

7

CHAPTER-2 INTRODUCTION TO -BANKING INDUSTRY

8

The development of banking is an inevitable precondition for the healthy and rapid development of

the national economic structure. Banking institutions have contributed much to the development of

the developed countries of the world. Today we cannot imagine the business world without

banking institutions. Banking is as important as blood in the human body. Due to the development

of banking advances are increased and business activities developing so it is rightly said, "The

development of banking is not only the root but also the result of the development of the business

world." After independence, the Indian government also has taken a series of steps to develop the

banking sector. Due to considerable efforts of the government, today we have a number of banks

such as Reserve Bank of India, State Bank of India, nationalized commercial banks, Industrial

Banks and cooperative banks. Indian Banks contribute a lot to the development of agriculture, and

trade and industrial sectors. Even today the banking systems of India possess certain limitations,

but one cannot doubt its important role in the development of the Indian economy.

Without a sound and effective banking system in India it cannot have a healthy economy. The

banking system of India should be able to meet new challenges posed by the technology and any

other external and internal factors

DEFINITION OF THE BANK

As per Banking Regulation Act, 1949 (section 5):

“The bank is the institutions which accept the deposits from the public, repay the same on

their demands by cheques, demand draft or by order, for the purpose of investment and lending.”

Sayers more clearly states:

“We can define bank as an institution whose debts (Bank Deposits) are widely accepted in

settlement of the other people’s debts to each other.”

HISTORY OF BANKING IN INDIA

Banking in India originated in the first decade of 18th century. The first banks were The

General Bank of India, which started in 1786, and Bank of Hindustan, both of which are

now defunct.

The oldest bank in existence in India is the State Bank of India, which originated in the "The

Bank of Bengal" in Calcutta in June 1806.

9

This was one of the three presidency banks, the other two being the Bank of Bombay and

the Bank of Madras. The presidency banks were established under charters from the British

East India Company.

They merged in 1925 to form the Imperial Bank of India, which, upon India's independence,

became the State Bank of India.

For many years the Presidency banks acted as quasi-central banks, as did their

Successors.

The Reserve Bank of India formally took on the responsibility of regulating the Indian

banking sector from 1935. After India's independence in 1947, the Reserve Bank was

nationalized and given broader powers.

EARLY HISTORY

The first fully Indian owned bank was the Allahabad Bank, established in 1865.However, at

the end of late-18th century; there were hardly any banks in India in the modern sense of

the term.

The American Civil War stopped the supply of cotton to Lancashire from the

Confederate States. Promoters opened banks banks to finance trading in Indian

cotton.

With large exposure to speculative ventures, most of the banks opened in India during that

period failed.

The depositors lost money and lost interest in keeping deposits with banks. Subsequently,

banking in India remained the exclusive domain of Europeans for next several decades until

the beginning of the 20th century.

Foreign banks too started to arrive, particularly in Calcutta, in the 1860s. The Comptoire

d'Escompte de Paris opened a branch in Calcutta in 1860, and another in Bombay in 1862;

branches in Madras and Pondichery, then a French colony, followed. Calcutta was the most

active trading port in India, mainly due to the trade of the British Empire, and so became a

banking center.

NATIONALIZED BANKS IN INDIA

Banking System in India is dominated by nationalized banks. The nationalization of banks in

India took place in 1969 by Mrs. Indira Gandhi the then prime minister.

The major objective behind nationalization was to spread banking infrastructure in rural

areas and make available cheap finance to Indian farmers.

10

Fourteen banks were nationalized in 1969. Before 1969, State Bank of India (SBI) was the

only public sector bank in India.

SBI was nationalized in 1955 under the SBI Act of 1955. The second phase of

nationalization of Indian banks took place in the year 1980. Seven more banks were

nationalized with deposits over 200 crores.

PRIVATE BANKS IN INDIA

All the banks in India were earlier private banks. They were founded in the re independence

era to cater to the banking needs of the people.

But after nationalization of banks in 1969 public sector banks came to occupy dominant

role in the banking structure. Private sector banking in India received a fillip in 1994 when

Reserve Bank of India encouraged setting up of private banks as part of its policy of

liberalization of the Indian Banking Industry.

Housing Development Finance Corporation Limited (HDFC) was amongst the first to

receive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a bank in

the private sector. Private Banks have played a major role in the development of Indian

banking industry.

They have made banking more efficient and customer friendly. In the process they have

jolted public sector banks out of complacency and forced them to become more

competitive.

For the past three decades India's banking system has several outstanding achievements

to its credit. The most striking is its extensive reach. It is no longer confined to only

metropolitans or cosmopolitans in India. In fact, Indian banking system has reached even to

the remote corners of the country. This is one of the main reasons of India's growth

process. The government's regular policy for Indian bank since 1969 has paid rich

dividends with the nationalization of 14 major private banks of India.

The first bank in India, though conservative, was established in 1786. From 1786 till today,

the journey of Indian Banking System can be segregated into three distinct phases. They

are as mentioned below:

Early phase from 1786 to 1969 of Indian Banks

Nationalization of Indian Banks and up to 1991 prior to Indian banking sector Reforms.

11

New phase of Indian Banking System with the advent of Indian Financial & Banking Sector

Reforms after 1991.

A. GLOBAL :

After the house price bubble burst in 2007, governments and monetary authorities took a broad

range of drastic measures to avoid the collapse of the global financial system. The restoration of

public confidence in the banking industry had top priority in the short term, while the need for

remodelling the global financial architecture to make the financial system more resilient against

future shocks became apparent. In 2008 and 2009, many banks were engaged in reorganizations

of their businesses. Some returned to the basics of traditional banking and others needed to

strengthen their capital position substantially. Today’s banking industry is facing the effects of a

deep economic recession and is set to suffer additional losses in credit portfolios.

Meanwhile, governments and financial authorities have announced stricter banking rules and more

stringent supervision at an international level. Capital and solvency requirements for banks will be

tightened, and improved risk management will be required. Moreover, stringent policy measures to

safeguard the stability of the financial system are underway the global turbulence shook up the

banking sector and led to new rules of the game. Banks had to rethink their strategy and adjust

their business principles and structures. The new financial system will maintain a tighter focus on

customer centricity, while integrity and ethics will play a more important role in retail banking than

in the past. International controls will be improved, and the corporate governance and

compensation schemes of banks must be adjusted to provide adequate incentives for a

responsible balance between risks and their capital position. Banks have to apply a long-term

perspective instead of a dominant focus on short-term profit.

A distinction is drawn in this study between private and co-operative banks. The fundamental

difference between them is their corporate governance: shareholder versus member ownership.

This difference entails numerous consequences in terms of their business orientation and

principles. The characteristics and achievements of co-operative banks in the past few years have

remained notably underexposed in recent publications, the press and various reports. But the

success of the co-operative business model is abundantly evident in the figures they have posted.

Average market shares of European co-operative banks as well as member-to-population ratios

have increased over the last decade. This is one of the strongest proofs of the vitality of the co-

operative business model. But one has to bear in mind that co-operative banking is not by

definition better than other banking models and after all, past performance is no guarantee of

12

future success. For instance, co-operative banks were - and are - not sheltered from extraordinary

events resulting from the crisis.

They too suffered losses and incurred write-downs directly related to the financial crisis. But they

appear to have been hit less hard than private banks and they did not need large-scale

government support. They too feel the effects of the general loss of confidence in the banking

sector and face competitors on a sharply tilted playing field. Owing to their strong position in there

tail markets, they will feel the negative impact of the deep economic recession. To sum up, co-

operative banking is not a panacea for post crisis banking in general, but should be viewed as an

interesting alternative to the other banking models that have been in the spotlight for most of the

time in recent decades. Looking further ahead, the unique features and natural core competences

of co-operative banks provide clear-cut opportunities in this new banking environment. The ‘new’

characteristics of the financial system have been part of co-operative banks’ DNA from the start

and are considered to be their main competitive advantage. As member-owned institutions, co-

operative banks now have the opportunity to leverage the new banking rules and ethics to their

advantage in a well-designed public relations campaign. In addition, their strong capital base,

balanced corporate governance structure and large yet finely-meshed branch networks enable

them to maintain a more pronounced external focus than many of their competitors, which may

translate into market share gains.

Building on the work by UNICCO and the European Association of Co-operative Banks, closer

international co-operation between European co-operative banks likewise offers promising

advantages. The reason is that operational scale will become increasingly important to remain

competitive, operate efficiently and attract customers in the future. By joining forces in specific

banking areas, co-operative banks may achieve sufficient scale compared to their counterparts

and diversify the risks of cross-border activities. To that end, ways of closer co-operation on

international markets could be developed, building on the awareness that non-committal attitudes

and non-committal partnerships belong tothe past. The ultimate aim of these alliances could be to

create European co-operative institutions in certain banking areas. The feasibility of this strategic

direction requires further evaluation, but could be an enticing prospect for co-operative-minded

bankers. Another opportunity stems from the origins of most co-operative banks. They were often

established more than a century ago in rural areas where people were deprived of financial

services. The origin may have disappeared for mature co-operative banks in mature financial

markets, but this is definitely not the case in many countries all over the world.

13

B.NATIONAL:

A co-operative bank is a financial entity which belongs to its members, who are at the same time

the owners and the customers of their bank. Co-operative banks are often created by persons

belonging to the same local or professional community or sharing a common interest. Co-operative

banks generally provide their members with a wide range of banking and financial services (loans,

deposits, banking accounts etc.). Co-operative banks differ from stockholder banks by their

organization, their goals, their values and their governance. In most countries, they are supervised

and controlled by banking authorities and have to respect prudential banking regulations, which

put them at a level playing field with stockholder banks. Depending on countries, this control and

supervision can be implemented directly by state entities or delegated to a co-operative federation

or central body. Co-operative banking is retail and commercial banking organized on a co-

operative basis. Co-operative banking institutions take deposits and lend money in most parts of

the world. Co-operative banking, includes retail banking, as carried out by credit unions, mutual

savings and loan associations, building societies and co-operatives, as well as commercial

banking services provided by manual organizations (such as co-operative federations) to co-

operative businesses. The structure of commercial banking is of branch-banking type; while the

co-operative banking structure is a three tier federal one.

- A State Co-operative Bank works at the apex level (ie. works at state level).

- The Central Co-operative Bank works at the Intermediate Level.

(i.e. District Co-operative Banks ltd. works at district level)

- Primary co-operative credit societies at base level (At village level)

POSITION OF COOPERATIVES

Most of the developments taking place in the banking sector have bypassed cooperatives since

they are financially not so strong and technically ill-equipped due to aging and not so qualified

human resources. In order to remedy the situation and bring back the cooperatives to their glory a

series of measures to Increase efficiency and ability of Cooperatives to give better services to rural

clients had been initiated by Government of India and the following gives the package devised for

revitalization of cooperatives:

14

Govt. of India Revival Package for STCCS (Vaidyanathan Committee)

The Government of India (GoI) is committed to increasing the flow of credit to agriculture,

especially to small and marginal farmers. The short term rural cooperative credit structure (CCS),

which should play a central role in this respect, is unable to do so. This structure is severely

impaired financially and institutionally. Its share in total credit flow to agriculture has been

declining. Concerned at this state of affairs, the GoI had set up a special Task Force in August

2004 under the Chairmanship of Prof.A.Vaidyanathan to suggest an implementable action plan for

reviving the CCS. The Task Force submitted its report to the GoI on 04 February 2005. The

Government, after due consideration, accepted their recommendations in principle. The

recommendations are now being implemented.

The package is aimed at reviving the short-term rural cooperative credit structurec(STCCS) and

make it a well-managed and vibrant medium to serve the creditcneeds of rural India, especially the

small and marginal farmers. It seeks to (a)cprovide financial assistance to bring the system to an

acceptable level of health; (b) introduce legal and institutional reforms necessary for their

democratic, selfreliant and efficient functioning; and (c) take measures to improve the quality of

management. It is to be emphasised that all three components are equally important and should

be treated and implemented as an integrated package.

Financial assistance under the package would cover accumulated losses in the CCS. This

however, does not mean writing off of the loans which are yet to be repaid by the borrowers. The

cooperatives will have to continue to make efforts to recover these loans and thereby improve their

financial health further.

15

C.STATE:

The following table shows the clear picture of co-operative banks functioning in Gujarat state. The

list below has some of well-known and well established co0operative banks of Gujarat which are

functioning in their respective cities since a long time. The table has supporting data about the total

deposits, advances and number of branches of various banks having its operations in Gujarat

state under cooperative umbrella. For brief understanding about how much penetration do these

cooperative banks have there also some data helping to understand its strong presence in state of

Gujarat.

Table No-2.1

Name of bank Total

deposits

Total

advances

branches

Kalupur Commercial co-op Bank 2,23,729.11 1,35,691.10 32

Rajkot Nagarik Sahakari Bank 1,58,309.66 1,11,217.60 27

Surat District Co-op Bank 2,50,145.07 54,505.42 59

Mehsana Urban Co-op Bank 1,13,113.04 68,676.84 26

Co-operative Bank of Rajkot 87,172 51,420.42 20

Sutex Co-op Bank Ltd, Surat 63,573.78 41,856.46 15

Ahmadabad Mercantile Co-op

Bank

60,649.22 27,760.63 26

Nutan Nagrik Sahakari Bank 56,514.93 31,477.73 21

16

This

INTRODUCTION OF CO-OPERATIVE BANK

The Co-operative banks in India started functioning almost 100 years ago. The Cooperative bank

is an important constituent of the Indian Financial System, judging by the role assigned to co

operative, the expectations the co operative is supposed to fulfill, their number, and the number of

offices the cooperative bank operate. Though the co-operative movement originated in the West,

but the importance of such banks have assumed in India is rarely paralleled anywhere else in the

world. The co-operative banks in India play an important role even today in rural financing. The

businesses of co-operative bank in the urban areas also have increased phenomenally in recent

years due to the sharp increase in the number of primary co-operative banks.

The co-operative banks provide credit and other allied facilities to the rural and agricultural sectors.

The drawn of this century saw the evaluation of the co-operative movement in India. Co-operative

societies came into being when the Co-operative banks which are engaged in serving the

industrial and commercial sectors Societies Act, 1904, was enacted. The movement was started

with the aim of providing farmers funds with low rates of interest so that exploitation by the village

moneylenders is foiled. The Act provided for the formation of co-operative credit societies and a

number of small primary credit societies were established in various parts of the country. These

Prime Co-op Bank Ltd, Surat 50,059.26 25,514.91 27

S.B. Pardi Peoples Co-op Bank 36,228.01 18,949.56 -

*Figures in Rs lakh; Source:

Gujarat Urban Cooperative Banks

Federation, banks' websites As on

March 31,

2012

17

societies, however, could not mobilize enough resources as compared to loans demanded by its

members. This led to the enactment of a new act in 1912.

Although co-operative banks in India have shown progress since their establishment, there still

exist a number of defects in the organization. This has led qualitative improvement to suffer.

However, the Reserve Bank Of India took the initiative to revitalize, reorganized and promotes the

growth of co-operative bank in India. Under the Banking Regulation Act of 1949, Co-operative

Banks have been brought under the control of the Reserve Bank of India.

D. PESTAL ANALYSIS OF Banking Industry

1. POLITICAL AND LEGAL ENVIRONMENT ANALYSIS

The advent of liberalization and globalization had seen a lot of changes in the focus of Reserve

Bank of India as a regulator of the banking industry. Deregulation of interests rates and moving

away from issuing operational prescription have been important changes. The focus has really

shifted from micro monitoring to macro management. In a totally deregulated and globalized

banking scenario a strong regulatory framework would be needed. The role of regulator would

be critical for –

a. Ensuring soundness of the system by fixing benchmark standards for capital adequacy

and prudential norms for key performance paramateres. Adoption of this practices

especially in areas like risk management, provisioning, disclosure, credit delivery, etc.

b. Adoption of good corporate government practices.

c. Creation of an institutional framework to protect the interests of depositors. Regulating

the entry and exit of banks including cross border institutions. Further the expected

integration of various intermediaries in the financial system would add a new dimension

to the role of regulators.

18

Some of this issues are addressed in the recent amendments bill to the banking regulation act

introduced in the Parliament. The integration of various financials would need a number of

legislative changes to be brought about for the system to remain contemporary & competitive.

2. ECONOMIC ANALYSIS

The Reserve Bank of India (RBI) in its annual monetary policy for 2012-13 on March 17, 2012

slashed the policy rates by 50 basis points. The repo rate at which banks borrow money from

the RBI now stands at 8% from 8.50% earlier.

Similarly, the reverse repo rate at which RBI borrows money from banks is now at 7% from

7.50% earlier. The cash reserve ratio (CRR) was left unchanged at 4.75%.

The Reserve Bank of India reduced the Cash Reserve Ratio (CRR) by 75 basis points from

5.5% to 4.75 % with effect from March 10, 2012. This reduction will inject around Rs.48,000

crore of primary liquidity into the banking system to ensure smooth flow of credit to productive

sectors of the economy. Earlier, RBI in its third quarter review in January 2012 reduced the

CRR by 50 basis points from 6% to 5.5% injecting a liquidity of Rs.31,500 crore into the

banking system to mitigate the tight liquidity conditions, which was the first move in the CRR

since it was increased to 6% in April 2010

The Indian economy has recorded remarkable growth over the past decade. India's economic

growth is expected to robust in 2012 and 2013. The International Monetary Fund (IMF) has

pared India’s economic growth projection to 6.9% in 2012 from its January estimate of 7%, the

only emerging economy for which it has done so. Banks provide capital formation to various

sectors which directly help in the Growth of Indian economy.

3. SOCIAL ANALYSIS

Indian banking system has been progressing rapidly. There are ample opportunities for the

banks to cover untapped rural market. Yet, banking facilities are not available in many rural

areas. Many farmers are taking loan from moneylender at a very high rate of interest. Small-

scale industries would remain important for banks. Changes could be expected in near future

for unorganised sectors.

4. TECHNOLOGICAL ANALYSIS

19

Technology will bring fundamental shifts in the functioning of banks. It would not only help

them bring improvements in their internal functioning but also enable them to provide better

customer services. Technology will break all boundaries and encourage cross border banking

business. Banks would have to undertake extensive business process reengineering and

tackle issues like how best delivers products and service to the customers, designing and

appropriate organizational model to fully capture the benefit of technology and business

process changes brought about. How to exploit technology for delivering economies of scale

and how to create cost efficiencies, and how to create a customer – centric operation model.

Entry of ATMs has changed the profile of front offices in bank branches. Customers no longer

need to visit branches for their day to day banking transactions like cash deposits, withdrawals,

cheques collections, balance inquiry, etc. E – banking and internet banking have opened new

avenues in convening banking. Internet banking has also let to reduction to transaction costs

for banks to about a tenth of branch banking.

E.CURRENT INDIAN BANKING SYSTEM SCENARIO

Currently India is facing difficulty in getting deposits. There are many reasons behind following are

for what was happening in banking and investment sector in the last 5 years

1. Increased consumerism: If we look at the consumption pattern in last 5 years, people were

moving from being savers to consumers, i.e., more emphasis on benefits gained today rather

than gains received through savings in future, this changing attitude is one of the reasons for

higher growth in lending compared to deposits.

2. Alternatives and risks: People were looking for more alternatives like mutual funds, different

insurance schemes, stock market, etc. People were moving to these products with higher

return expectations. These instruments also have higher risk and increased income level

people who deposit high amounts of money into banks were ready to take these high-risk

alternatives.

3. Branch Banking: Expansion of branch network is one of the means to augment business.

The new generation private sector banks and foreign banks have started exploiting business

potential through other strategies as well. Traditionally public sector commercial banks have been

able to augment the business level by increasing their branch network.

20

4. Transparency and Disclosures:

With a view to ensuring meaningful disclosure of the true financial position of banks and to enable

the users of financial statements to study and have meaningful comparison of their positions, a

number of measures were taken by RBI. These disclosure norms covered aspects like capital

adequacy, asset quality, profitability, country risk exposure, risk exposure in derivatives segment

etc. In the context of implementation of Basel II norms, RBI has proposed enhanced disclosure

norms for implementation by banks.

5. Capital Adequacy Norms:

The main objective of capital adequacy norm is to strengthen the soundness and stability of the

banking system, Capital adequacy ensures that the financial fundamentals of the banks are strong.

6. Best Practices Code:

The Best Practices Code represents detailed procedural rules for entering into transactional

relations within the banks. The objective of BPC is to ensure that all procedures, especially in

sensitive areas are well documented, compared with national and international best practices and

improved upon in the light of the experience gained. Best practices Code involve examination of all

procedures, products, activities and systems.

F. Major Players in Indian Banking Industry

Public sector Banks are as follows:

1. State bank of India and its subsidiaries

2. Central Bank of India

3. Allahabad Bank

4. Punjab National Bank

5. Bank of Baroda

6. Indian Bank

7. Bank of India

21

8. Canara Bank

9. Punjab & Sind Bank

10. Corporation Bank India

Private Sector Banks are as follows:

11. ICICI

12. HDFC

13. AXIS

14. City Union Bank

15. ING Vysya Bank

16. Yes Bank

17. Kotak Mahindra Ltd

NBFC are as follows:

18. Housing Development Finance Corporation Limited

19. Power Finance Corporation Limited

20. National Bank of Agriculture and Rural Development

21. Infrastructure Development Finance Company Limited

Foreign Banks are as follows:

22. Citi Bank

23. HSBC Ltd

24. Standard Chartered Bank

25. Deutsche Bank AG

26. DBS Bank Ltd

Co-operative Banks of Surat City are as follows:

27. The Surat Peoples Cooperative Bank

28. The Sutex Cooperative Bank

29. The Surat District Milk Producer’s Co-op. Union Ltd. (SUMUL)

30. The Purushottam Farmers Co-op. Ginning & Pressing Society Ltd.

31. The Surat District Co-op. Spinning Mills Ltd.

32. The Surat Jilla Sahakari Sale & Purchase Union

33. The Surat Central Co-op. Stores Ltd.

34. Cotton Co-op. Societies of Olpad Taluka

22

G. Major Offerings by Banks-

Following are the Customer Service available at banks-

DEPOSITS:

1) Current Account:

The current accounts with promises you a unique banking experience through innovative features

and best services for businessmen, firms, companies, public enterprises etc. that have numerous

daily banking transact.

2) Savings Accounts:

A safe and easy way to save your money is with a bank savings account. Interest will be earned

on the money you have on deposit at the bank.

3) Fixed Deposit:

Bank fixed deposits are one of the most common savings scheme open to an average investor.

Fixed deposits also give a higher rate of interest than a savings bank account. Monthly interest

facility also available in this scheme.

4) Recurring Deposit:

Recurring Deposit Scheme is meant for investor who wants to deposit a fixed amount every

month. The scheme, a systematic way for long term savings is one of the best investment options

for the low income group.

INSURANCE

Bank enters in insurance sector and providing two types of insurance.

1. General insurance:

It offers various general insurance policies provided by own insurance agencies or acting as a

agent or joint venture with business entities.

23

2. Life insurance:

Banks offers various life insurance policies provided by Insurance Companies, Owned or Joint

Venture.

LOANS AND ADVANCES

Bank provides different types of loan at less interest rate. The different type of loans as specified

below-

Business Banking-

Loans Against Government Securities

Composite Loan

Loan for small Scale Industrial (S.S.I.) unit

Technology Up gradation Fund Scheme

Business Loan

Project Finance

Term Loan

Cash Management Services (Lock box, Remote deposits capture, Merchant Processing)

Risk Management (FX, interest rates, commodities, derivatives)

Capital Raising (Equity/Debt/Hybrids)

Retail Banking-

Checking Account

Savings Account

Money Market Account

Certificate of Deposits

Credit Card

Debit Card

Mortgage

Home Equity Loan

Personal Loan

ATM Card

Current Accounts

NRI Banking-

24

Accounts and deposits-

Savings account

Current account

Fixed deposits

Foreign currency deposits

Accounts for returning india

Offshore accounts and deposits

Loans-

Home loan

Loan against securities

Loan against fixed deposits

25

CHAPTER-3 INTRODUCTION TO THE

COMPANY

26

A.BRIEF HISTORY AND PROFILE

The year 1909 on 17th June, with the strenuous efforts of Late Shri B.A.Modi and Late Shri

K.G.Desai, Society viz. “The Surat Dist Co. Operative (Urban) Union Limited” was registered. In

the year 1921, this society had undertaken banking activities in absolute terms and in 1923, The

Surat District Co. Operative (Urban) Union Limited was converted into The Surat District Co-

operative Bank Ltd., The work extended to the entire Surat District, which had 21 talukas and a

vast working area with geographical variations. The coastal area which included city of Surat and

towns like Navasari, Bulsar, Bilimora, sizeable tribal areas with hills and dense forests.

The Vast Surat District was bifurcated in1965 district of Bulsar was separated. At present, there

are 15 talukas in the Surat district, of which 9 are in the tribal area. However the Surat District is

again bifurcated from 2nd of October-2007 and Tapi District comprising of five blocks viz. Nizar,

Uchhal, Songadh, Vyara and Valod was created. But for administrative convenience there is only

one District Bank viz. The Surat District Co-operative Bank has been functioning for both the

Districts i.e., Surat District and Tapi District. Bank had separate department for agriculture advance

from the year 1944, and became an effective central agency for co-ordination and smooth flow of

finance to co-operative sector in the district.

Co-operative organizations like,

The Surat District Milk Producer’s Co-op. Union Ltd. (SUMUL),

The Purushottam Farmers Co-op. Ginning & Pressing Society Ltd.,

The Surat District Co-op. Spinning Mills Ltd.,

The Surat Jilla Sahakari Sale & Purchase Union,

The Surat Central Co-op. Stores Ltd.,

Cotton Co-op. Societies of Olpad Taluka,

Have since been developed and Bank had provided timely assistance to them. During this period,

Forest Labourers Co-op. Societies were also very active in tribal

area and were engaged in coop cutting activity for which substantial finance was provided to

them. In1960, when Shree Khedut Sahakari Khand Udyog Mandali Ltd., Bardoli Came into

existence, the entire Surat District gradually became a sugar belt. All existing Sugar factories had

teething financial troubles in the beginning. However, Bank had provided them enough finance as

also assisted even for meeting share capital also. The sugarcane crop has now become principal

crop in the district, and out of total cultivable area of 4,90,000 hectares, 83,191 hectares is under

27

sugarcane cultivation. This revolution in agriculture was amply supported by the Surat District Co-

operative Bank. These factories have become main strength of the economic structure of the

district, particularly for farmers.

Bank has been enjoying privilege of having prominent citizens in fields like Social, Co-operation

and Agriculture, on its Board. The present and former members of the Board included outstanding

Lawyers, Members of Parliament, District Panchayat Presidents, Mayor of Surat City and Leaders

from various walks of life including Ministers.

Immediate past Chairman of the Board Shree Pramodbhai K. Desai was awarded “Kaka Saheb

Award” for his outstanding services to the society and was also awarded by the Gujarat State Co-

operative Union “Sahakari Award”. Shree Popatbhai Vyas, the then Director on the Board,

remained as Home Minister of the State. Shree Dilipbhai Bhakta, the present Chairman is also the

Chairman of Madhi Vibhag Khand Udyog Sahakari Mandli Ltd. He has been doing excellent job for

upliftment of Co-operative movement in the Districts. M/s. Kribhco has awarded him with “Sahakari

Shiramani Award” in the year 2008.

Board has formed Committees for Loans, Staff matters, legal matters and computer etc. Bank has

been committed for overall upliftment of the society and for the purpose special corpus amounting

to Rs.6.41 crores has been created so far and from the interest income of the corpus donations

are being given to the Hospitals, Schools, Colleges and Social Charitable Institutions. In the year

2002 Bank had donated Rs.50/- lakhs for the ultimate benefit of people affected with natural

calamities in addition to Rs.26/- lakhs or so to the different organizations setup, for betterment of

medical education etc. Further during the cenetary year Bank had donated sizeable amount for

upliftment of education, medical assistance and economic growth…. of the Adivasi community.

Also donations were given to the institutions working for physically handicapped children.

Computerization

Out of 60 branches of the Bank, all branches have been fully computerized. They have

successfully implemented Central Data Base System and by the end of the current half year they

will start RTGS facility.

Management/Staff relations

Relations with the staff are quite cordial. No strike, Pen Down, Lay-off or otherwise, have

ever occurred so far. Better Pay scales and other perquisite like reimbursement of Medical

Bills, Leave Fare Concession, Leave Encashment etc. are being given to the employees to

their utmost satisfaction.

28

Management has always remained progressive, be a challenge after Bank Nationalization

introduction of non- farm advances, introduction of New banking concepts in liberalized economy.

Board has formed committees for loans, staff matters, Legal matters etc..

Deposits:

Growth of deposit was steady and in harmony with Advances. At the esnd of March 2011 deposit

of bank was Rs. 2501.45 crores.

Advances:

It is obvious true as the major crop of the district is sugar cane. There are 8 sugar factories in Co-

operative sector, which have a turnover exceeding Rs.600/- crores and as such, bank’s major

share goes to this sector. Major chunk of advances goes to sugar sector earlier.

In the last decade, bank has gradually paid more attention to non agriculture and Individual

advances. New schemes, to finance for consumer durables, vehicles, House construction, and

professional loans also have been introduced. More attention is paid to develop banking routine

business also. Bank has actively taken up the steps for diversification of Loan portfolio. Powers are

delegated to the branch Managers to sanction loans up to Rs.5, 00,000/- for “A1-Grade branch

and Rs.3, 00,000/- for ‘B’ Grade branch under individual nonfarm sector loans. Also powers are

delegated to the branch Managers to sanction loans up to Rs.1, 00,000/- of all branches under

individual farm sector loans which is also increased up to Rs. 2 lacs.

Branches

There are 60 branches of Surat district co-operative bank and all are fully computerized.

One director from each Taluka 14

Two individual directors 2

One director from Surat city 1

Three nominated director from state government 3

One director from The Gujarat State CO-OP. Bank Ltd. ***

District Registrar (Co.op.Societies), Surat 1

TOTAL MEMBERS 21

29

Awards and Achievements:

The bank was judged as best bank, and also the best performer award for the year 1996-97 by

NABARD. Reserve Bank of India has granted license to the bank to carry out banking business in

entire India especially when very few DCCB'S are having such type of license. Bank has always

been securing audit classification under category "A" and has been paying highest permissible

dividend to members, under state co-operative Act.

30

B.ORGANISATION STRUCTURE OF SURAT DIS. CO-OPERATIVE BANK LTD.

Assistant General Manager

(Manager)

Assistant General Manager

(Loan & Adv)

Assistant General Manager

(A/C)

Assistant General Manager

(Development) and )

Assistant General Manager (ADM)

Manager (Super vision&

Recovery)

Manager (Industry)

Assistant Manager (Housing)

Assistant Manager

(Supervision)

Assistant Manager

(Recovery)

(Recovery)

Assistant Manager (Industry)

Managing Director

Manager

(Loan)

31

BOARD OF DIRECTORS OF SURAT DIS. CO-OPERATIVE BANK LTD.

Sr. no Board of directors

1 Shri Dilipbhai B Bhakt

2 Shri Amarshinh J Chaudhari

3 Shri Bhagabhai P Patel

4 Shri Maganbhai R Patel

5 Shri Narayanbhai H Donvala

6 Shri Ramanbhai A Patel

7 Shri Shradbhai S Patel

8 Shri Narendrabhai D Solanki

9 Shri Maganbhai B Vasava

10 Shri Jayansinghbhai D Vasava

11 Shri Kiritbhai R Desai

12 Shri Prabhubhai N Vasava

13 Dr. Vikasben K Desai

14 Shri Dhansukhbhai N Patel

15 Shri Balubhai K Patel

16 Shri Chotubhai L Patel

17 Shri Nayanbhai N Bhartiya

18 Shri Lalchandbhai V Patel

19 Shri Ajaybhai J Shah

20 Shri Pradipshigh G Atodaria

21 Shri District Registrar Association

22 Shri Pravinchand C Parekh

23 Shri Sureshbhai J Patel

C.Division and Department of SUDICO Bank-

1. Assistant general manager (ADM)

2. Assistant general manager (Banking)

3. Assistant general manager (Supervision)

4. Assistant general manager (Development and Recovery)

5. Assistant general manager (Industry)

32

6. Assistant general manager (Housing)

VISION-

To finance co-operative societies in the district of Surat affiliated to the bank and generally to

carry on banking business of all types.

To draw accept enclose, negotiate, buy and sell, negotiable instruments and dividend warrants

in accordance with the rules framed by the board of directors from time to time.

To organize and develop co-operative societies within the district.

To arrange for supervision and inspection of affiliated co-operative societies and to assess their

credit.

To advances loans and\or overdrafts to agriculturists admitted as ordinary or nominal members

upon personal security of movable property including crops and marketing of agricultural

produce.

MISSION AND VALUES

Customer Service and Product Innovation tuned to diverse needs of individual and

corporate clientele.

Continuous technology up gradation while maintaining human values.

Progressive globalization and achieving international standards.

Efficiency and effectiveness built on ethical practices.

Customer Satisfaction through

providing quality service effectively and efficiently

"Smile, it enhances your face value" is a service quality stressed on

Periodic Customer Service Audits

Maximization of Stakeholder value

Success through Teamwork, Integrity and People

Future Plan-

The Surat District Co-operative Bank completed a century of its existence on Wednesday.

Founded on June 17, 1909, the bank entered its 103rd year on Thursday and has set ambitious

growth plans for the coming years.

"Our current business is around Rs2,600 crore, which includes deposits of Rs 2501.45

crore and advances of Rs 545 crore. We are aiming to achieve business of more than Rs5,

000 crore”

33

Growth Table of Surat Dis. Co-operative Bank Ltd.

Table No.3.1

(Rs. In Lacs)

Year

Share capital

& funds

Deposits

Advances

Profits

Dividends

1997-98 5641.49 70787.16 29301.44 375.00 15%

1998-99 6113.07 86035.83 23666.51 161.76 15%

1999-00 6528.11 91513.49 25889.64 210.09 15%

2000-01 6934.59 99824.76 35388.69 386.38 15%

2001-02 7654.09 110574.59 46008.14 425.54 15%

2002-03 8233.94 113999.72 39434.34 451.39 15%

2003-04 9616.36 120979.51 36868.87 471.15 15%

2004-05 10084.04 111604.22 24592.07 305.00 15%

2005-06 10434.40 129343.18 22346.28 246.00 15%

2006-07 10940.52 120340.60 35005.31 293.00 15%

2007-08 12257.00 151929.97 73007.29 555.00 15%

2008-09 14984.00 174318.79 56689.93 700.00 15%

2009-10 15640.11 237854.43 50282.66 775.00 15%

2010-11 17114.55 213704.05 51002.38 825.00 15%

2011-12 19776.06 250145.07 54505.42 875.00 15%

Customer Service Available in Surat Dis. Co-operative Bank

DEPOSITS-

1)Current Account-

The current accounts with The Surat Dist. Co-op. bank Ltd., promises you a unique banking

experience through innovative features and best services for businessmen, firms, companies,

public enterprises etc. that have numerous daily banking transact.

2) Savings Accounts-

A safe and easy way to save your money is with a bank savings account. Interest will be earned

on the money you have on deposit at the bank.

34

3) Fixed Deposit-

Bank fixed deposits are one of the most common savings scheme open to an average investor.

Fixed deposits also give a higher rate of interest than a savings bank account. Monthly interest

facility also available in this scheme.

4) Recurring Deposit:

Recurring Deposit Scheme is meant for investor who wants to deposit a fixed amount every

month. The scheme, a systematic way for long term savings is one of the best investment options

for the low income group.

INSURANCE

Bank enters in insurance sector and providing two types of insurance.

3. General insurance:

The Surat District Co-Op Bank Ltd. offers various general insurance policies provided by United

India Insurance Company.

4. Life insurance:

The Surat District Co-Op Bank Ltd. offers various life insurance policies provided by AVIVA Life

Insurance.

LOANS AND ADVANCES

The Surat Dist. Co-operative Bank provides different types of loan at less interest rate. The

different type of loans as specified below and we will see each in detail in next chapter.

Loans Against Government Securities

Individual Home consumable Loan

Individual Vehicle Loan

Loan for higher education studies

Loan Base on Government Scheme

Individual Housing Loan

Loan against Fixed Deposit

Business Loan

Composite Loan

35

Loan for small Scale Industrial (S.S.I.) unit

Technology Up gradation Fund Scheme & doctor plus loan

E.SWOT Analysis of SUDICO Bank

The banking sector is also taken as a proxy for the economy as a whole. The performance of bank

should therefore, reflect “Trends in the Indian Economy”. Due to the reforms in the financial sector,

banking industry has changed drastically with the opportunities to the work with, new accounting

standards new entrants and information technology. The deregulation of the interest rate,

participation of banks in project financing has changed in the environment of banks.

The performance of banking industry is done through SWOT Analysis. It mainly helps to know the

strengths and Weakness of the industry and to improve will be known through converting the

opportunities into strengths. It also helps for the competitive environment among the banks.

STRENGTH

Dedicated and well trained staff.

Long standing clients.

Excellent customer relationship.

Effective front-end services.

Trendsetters in high tech banking.

WEAKNESS

Lack of funds

High Non Performing Assets

Functioning at District Level only

Sanction Loan & Advances only to

citizen of surat.

Unavailability of Net Banking Service

and FOREX.

OPPORTUNITY

Differential in interest rate

Working on Core Banking Solution.

Support for technological up

gradation

Growing domestic and export market

Ready to become “Techno Bank” by

starting up ATM & Internet Banking in

near future.

Threat

Bank has threat from-

Increasing number of Multistate Co-

operative Bank in Surat City.

Scheduled Co-operative Banks.

Private and Public Sector Banks

Inflation and Change in RBI Policy

36

CHAPTER-4 MSME

37

4.1 MSMEs in India

India has a vibrant MSME sector that plays an important role in sustaining economic growth,

increasing trade, generating employment and creating new entrepreneurship in India. In keeping in

view its importance, the promotion and development of MSMEs has been an important plank in our

policy for industrial development and a well-structured programme of support has been pursued in

successive five-year plans for. MSMEs in India have recorded a sustained growth during last five

decades. The number of MSMEs in India is estimated to be around 13 million while the estimated

employment provided by this sector is over 31 million. The SME sector accounts for about 45 per

cent of the manufacturing output and over 40 per cent of the national exports of the country.

(http://www.dcmsme.gov.in/ssiindia/MSME_OVERVIEW09.pdf last accessed on 26 Nov, 2009)

India embarked on the path of opening up its economy and integrating it with the global economy

in 1991. The liberalization of economy, while offering tremendous opportunities for the growth and

development of Indian industry including SMEs, has also thrown up new challenges in terms of

fierce competition. The very rules which provide increased access for our products in the global

markets also put domestic industry under increased competition from other countries. In today’s

world, access on a global basis to modern technology, capital resources and markets have

become the most critical determinants of international competitiveness.

38

4.2 Problems of MSMEs

Despite its commendable contribution to the Nation's economy, MSME Sector does not get the

required support from the concerned Government Departments, Banking Sector, Financial

Institutions and Corporate Sector, which is a handicap in becoming more competitive in the

National and International Markets and which needs to be taken up for immediate and proper

redressal. MSME sector faces a number of problems - absence of adequate and timely banking

finance, limited knowledge and non-availability of suitable technology, low production capacity,

follow up with various agencies in solving regular activities and lack of interaction with government

agencies on various matters.

Some of the major problems are briefly as follows:

a) Financial problems of MSMEs:

The financial problem of MSMEs is the Root Cause for all the other problems faced by the MSME

sector. The small and medium industrialists are generally poor and there are no facilities for cheap

credit. They fall into the clutches of money lender who charges very high rates of interest, or else

they borrow from the dealers of their goods, who exploit them by completing them to sell their

products at very low price. After the nationalization of 14 major Indian Banks in July, 1969, the

Commercial banks were providing only a small proportion of MSMEs financial requirements. Credit

to the SME sector continues to be non-commensurate with its contribution to the total industrial

output. As against the share of the village and MSME at 40% in the industrial output, its share in

total credit to the industrial sector is only about 30%.

b) Raw Material problem of MSMEs:

This difficulty is experienced in a very pronounced form. The quantity, quality and regularity of

the supply of raw materials are not satisfactory. There are no quantity discounts, since

they are purchased in small quantities and hence charged, higher prices by suppliers.

Difficulty is also experienced in procuring semi-manufactured materials. Financial weakness

stands in the way of securing raw materials in bulk in a competitive market.

c) Production problem of MSMEs:

MSME units suffer from inadequate work space, power, lighting and ventilation, and safety

measures etc. These short comings have tended to endanger the health of workmen and have

adversely affected the rate of production. Many units are following primitive methods of

39

production. Adoption of modern techniques is either disliked by the entrepreneurs is not feasible.

Wage rates and service conditions of small industries are not attractive to skilled labor.

d) Technological problem of MSMEs:

Today technology is changing at a very fast phase; it becomes difficult for SMEs to cope up with

changing technology. Technology up gradation and the frequent need to renew the equipment has

emerged as a big problem.

e) Marketing problem of MSMEs: As marketing is not properly organized, the helpless

artisans are completely at the mercy of middle man. The potential demand for their goods

remains under developed. The MSMEs have to face the competitions from large scale units in

marketing their products. It causes damage to the growth and stability of MSMEs. MSMEs

cannot afford to spend lavishly for advertisement to promote their sales.

f) Managerial problem of MSMEs:

Small scale industries in our country have suffered from the lack of entrepreneurial ability to

develop initiative and undertake risks in the unexplored industrial fields. The in

efficiency in management comes first among managerial problems. The entrepreneurial

ability of promoters of cottage industries and SMEs are handicapped by technical know how in

the areas of production, finance, accounting and marketing management.

g) Sickness of MSMEs:

A serious problem which is hampering small and medium sector has been sickness. Many small

units have fallen sick due to one problem or the other. Sickness is caused by two sets of factors,

Internal and external factors. From among the various internal and external causes of

sickness the important ones are bud management, high rate of capital gearing,

inadequacy of finance, short of raw materials, outdated plant and machinery, low labor productivity

etc.

(http://www.smechamberofindia.com/challenges_to_sme_sector.aspx last accessed on 27 Nov,

2009)

40

Figure 1.2.a

Reasons For The Sickness Of SMEs

(http://milagrow.in/k-solutions/msme-planet/sickness-rehabilitation last accessed on 25 Jan, 2010)

The above figure shows that finance has been the major reason for the sickness of SME units. The

other major reasons are ineffective management and technology up gradation according to the

latest technological changes.

4.3 Role of Micro, Small and Medium Enterprises (MSMEs)

MSMEs have been playing a pivotal role in country’s overall economic growth, and have achieved

steady progress over the last couple of years. From the perspective of industrial development in

India, and hence the growth of the overall economy, SMEs have to play a prominent role, given

that their labour intensiveness generates employment. The MSME segment also plays a major role

in developing countries such as India in an effort to alleviate poverty and propel sustainable

growth. They also lead to an equitable distribution of income due to the nature of business.

Moreover, MSMEs in countries such as India help in efficient allocation of resources by

implementing labour intensive production processes, given the abundant supply of labour in these

countries, wherein capital is scarce.

The enactment of the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006

was a landmark initiative taken by the Government of India to enable the MSMEs’ competitive

strength, address the issues and challenges and reap the benefits of the global market. MSME

policy initiatives at the national and state level are aimed at strengthening the role of MSMEs at the

base as well as at the higher level.

41

With globalization, all forms of production of goods and services are getting increasingly

fragmented across countries and enterprises. With large players adopting different models of

business that include involvement of the traditional partners, suppliers or distributors at a different

level, MSMEs now are experiencing a new model of functioning in the value chain. The past few

years has seen the role of the MSME segment evolve from a traditional manufacturer in the

domestic market to that of an international partner. The restructuring of production at the

international level through increased outsourcing is having significant effects on small and medium

entrepreneurs in a positive as well as negative manner. Demand in terms of new niche products

and services are providing more opportunities for MSMEs that are in a better position to take

advantage of their flexible nature of operations. However, at the same time they have realized their

drawback in terms of inadequate availability of managerial and financial resources, lack of working

capital, personnel training and inability to innovate on a faster pace.

The combined effect of market liberalization and deregulation has forced the MSME segment to

change their business strategies for survival and growth. Some of the changes that MSMEs are

focusing on include acquiring quality certifications, increasing use of ICT, creating e-business

models and diversification to meet the increasing competition. Globalization, economic

liberalization and the WTO regime would undoubtedly open up a unique opportunity for the largest

business community, i.e. MSMEs through effective involvement in international trade by

streamlining certain factors, such as, access to markets, access to technology, access to skills,

finance, development of necessary infrastructure, MSME-tax friendly environment, exchanges of

best practices to name a few.

The MSME sector has also registered a consistently higher growth rate than the overall

manufacturing sector. In fact, it plays a dual role since the output produced by MSMEs is not only

about final consumption but also a source of capital goods in the form of inputs to heavy industries.

4.4Financing the MSMEs

In Feb 2008, the Ministry of Micro, Small and Medium Enterprises (MSME), continued with its

dereservation policy by removing 79 items from the list of 114 items reserved specifically for SSI

(small scale industries) manufacturing. Only 35 items remain in the reserved category from the

total 836 selected in 1994 denoting the declining monopoly of the SSI segment on the reserved

products. However, the government has set up various schemes in place such as the Credit

Linked Capital Subsidy Scheme, MSME Cluster Development Scheme and ISO 9000

Reimbursement Scheme to help SMEs for procuring timely funds. Also the government has put in

place the Credit Guarantee Scheme to encourage banks to lend up to Rs 0.50 million without

42

collateral. There has also been a recent budget announcement of setting up of a Risk Capital

Fund.

Though SMEs are being touted as the priority sector within the economy, they continue to face

problems pertaining to finance. When it comes to banks, they have a very traditional way of

lending to this segment against collateral and SMEs end up being under financed. Evidently, the

biggest challenge before the SMEs today is to have access to non debt based and non-traditional

financial products such as external commercial borrowings, private equity, factoring etc.

Lately this segment has been witnessing winds of change in the new sources of capital- in the form

of private equity (PE) and foreign direct investments (FDI). In Jan 2008, The Soros Economic

Development Fund (SEDF), Omidyar Network and Google.org announced a Small to Medium

Enterprise Investment Company with an initial corpus of $17 million for providing capital to SMEs

in underserved markets. Mauritius-based Frontline Strategy launched a $200 million India

Industrial Growth Fund (IIGF) for investment in SMEs targeting companies, primarily in the

industrial space with revenues between Rs 200 – 1,000 million. In 2007, Mauritius-based Horizon

advisors launched Ambit Pragma Fund I, an India dedicated PE fund, with a corpus of $100 million

for providing equity capital and professional management advice to SMEs.

Investments in the SME sector are not only by PE funds but this sector is also attracting FDI. In

this respect the government has removed the 24 per cent cap on FDI in the SME sector. Foreign

entities are also keen on promoting trade and cooperation between SMEs of different countries.

Genesis Initiative, an UK-based organization consisting of entrepreneurs, policy makers and

SMEs, is trying to forge mutual cooperation between SMEs in India and UK for in terms of JVs and

partnerships in sectors such as textiles, IT, infrastructure etc.

43

INITIATIVES TAKEN BY THE GOVERNMENT OF INDIA TO SUPPORT MSME’S

The concept of MSME’s is not new, nor is the problem faced by them. Since they are the real

backbone of an economy the GOI has taken various measures to promote this category of

industries, although not many have been benefited with the following measures listed below:

INFRASTRUCTURAL FACILITIES

The GOI in consultation with various state governments took many steps to industrialize various

states with a good number of units engaged in different trades spread throughout the state. The

important measures that were taken in this regard are as follows:

Provision of outlays for the development of roads and Transportation facilities.

Establishment of Industrial Estates.

Establishment of several Industrial Promotion Corporations and Agencies.

Promotion of subsidies and incentives for the promotion of industries in the specified

backward areas of the states.

Development of Primary sector and thereby to improve the resource Base to the agro based

units.

Provision of consultancy in the production, marketing, financial and Managerial areas

through different state agencies.

The approach to develop MSME industries by govt. will depend on:

Building skills and promoting technological development.

Providing infrastructure and credit.

Reforming policy and simplifying procedure.

Providing assistance with marketing.

Encouraging the development of special categories of entrepreneurs (women, scheduled

castes and tribes, backward classes, etc).

44

THE VARIOUS CREDIT SCHEMES AVAILABLE TO MSMEs

Credit Guarantee Fund Scheme for Micro, Small and Medium Industries:-

There are an estimated 128.44 lakh registered and unregistered micro and small enterprises

(MSEs) in the country at the end of March 2007, providing employment to an estimated 309.11

lakh persons. The MSE sector contributes about 39% of the manufacturing sector output and 33%

of the nation’s exports. Of all the problems faced by the MSEs, non-availability of timely and

adequate credit at reasonable interest rate is one of the most important. One of the major causes

for low availability of bank finance to this sector is the high risk perception of the banks in lending

to MSEs and consequent insistence on collaterals which are not easily available with these

enterprises. The problem is more serious for micro enterprises requiring small loans and the first

generation entrepreneurs.

The Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGMSE) was launched by

the Government of India to make available collateral-free credit to the micro and small enterprise

sector. Both the existing and the new enterprises are eligible to be covered under the scheme. The

Ministry of Micro, Small and Medium Enterprises and Small Industries Development Bank of India

(SIDBI), established a Trust named Credit

Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) to implement the Credit

Guarantee Fund Scheme for Micro and Small Enterprises. The scheme was formally launched on

August 30, 2000 and is operational with effect from 1st January 2000. The corpus of CGTMSE is

being contributed by the Government and SIDBI in the ratio of 4:1 respectively and has contributed

Rs.1346.54 crore to the corpus of the Trust up to September 30, 2007. Based on the future

requirement, the corpus is likely to be raised to Rs.2500 crore.

ELIGIBLE LENDING INSTITUTIONS

The institutions, which are eligible under the scheme, are scheduled commercial banks (Public

Sector Banks/Private Sector Banks/Foreign Banks) and select Regional Rural Banks (which have

been classified under ‘Sustainable Viable’ category by NABARD). National Small Industries

Corporation Ltd. (NSIC), North Eastern Development Finance Corporation Ltd. (NEDFi) and SIDBI

have also been made eligible institutions. As on September 30, 2007, there are 62 Member

45

Lending Institutions (MLIs) of the Trust, comprising 28 Public Sector Banks, 13 Private Sector

Banks, 18 Regional Rural Banks and 3 other Institutions viz., NSIC, NEDFI and SIDBI.

ELIGIBLE CREDIT FACILITY

The credit facilities which are eligible to be covered under the scheme are both term loans and

working capital facility up to Rs.50 lakh per borrowing unit, extended without any collateral security

or third party guarantee, to a new or existing micro and small enterprise. For those units covered

under the guarantee scheme, which may become sick owing to factors beyond the control of

management, rehabilitation assistance extended by the lender could also be covered under the

guarantee scheme. It is noteworthy that if the credit facility exceeds Rs.50 lakh, it may still be

covered under the scheme but the guarantee cover will be extended for credit assistance of Rs.50

lakh only.

Another important requirement under the scheme is that the credit facility should be availed by the

borrowing unit from a single lending institution. However, the unit already assisted by the State

Level Institution/NSIC/NEDFi can be covered under the scheme for the credit facility availed from

member bank, subject to fulfillment of other eligibility criteria. Any credit facility in respect of which

risks are additionally covered under a scheme, operated by Government or other agencies, will not

be eligible for coverage under the scheme.

SMALL SCALE SERVICE & BUSINESS ENTERPRISES (SSSBE’S):

SSSBE’s industry related service/ business enterprises with investment upto Rs 500,000 in fixed

assets, excluding land and building, are called Small Scale Service/ Business Enterprises

(SSSBE’s). This limit has been raised to Rs.1 million w.e.f. September 2000

Credit - the Lifeline of MSMEs of all the elements that go into a business, credit is perhaps the

most crucial. The best of plans can come to naught if adequate finance is not available at the right

time. MSEs need credit support not only for running the enterprise & operational requirements but

also for diversification, modernization/ up gradation of facilities, capacity, expansion etc. In respect

of MSEs, the problem of credit becomes all the more critical when ever any episodic event occurs

such as a large order, rejection of consignment, inordinate delay in payment etc. In general, MSEs

operate on tight budgets, often financed through owner's own contribution, loans from friends and

relatives and some bank credit. Government of India recognized the need for a focused credit

46

policy for MSEs in the early days of promotion of MSEs. This in turn led to a credit policy with the

following components:-

PRIORITY SECTOR LENDING:

Credit to the small scale sector is ensured as part of the priority sector lending by banks. Banks

are required to compulsory ensure that defined percentage (currently 40%) of their overall lending

is made to priority sectors as classified by Government. These sectors include agriculture, small

industries, export etc. The inclusion of small industries in this list makes them eligible for this

earmarked credit.

IMPROVING THE CREDIT FLOW:

1.8.2.1 NAYAK COMMITTEE (1991-92)

Nayak Committee set up by the Reserve Bank of India in December 1991 (Report came in

September 1992) dealt with aspects of adequacy and timeliness of credit to SMEs. Nayak

Committee found that SMEs was getting working capital to the extent of 8.1% of its annual output

which was less than the normative requirement of 20%. Accordingly, Nayak Committee

recommended that the SSI sector should obtain 20% of its annual projected turnover by way of

working capital. Based on these, as well as other recommendations of the Nayak Committee, RBI

issued a number of guidelines advising the banks to grant working capital to the extent of 20% of

the projected annual turnover, timely disposal of loan applications and setting up of specialized

bank branches for SME loaning in areas of higher SME concentration. This norm is applicable to

units with annual turnover up to Rs.5 crores.

.

KAPUR COMMITTEE (1997-98)

Reserve Bank of India (RBI) had in December 1997 appointed a One Man Committee headed by

Shri S.L. Kapur, the then Member, Board for Industrial & Financial Reconstruction (BIFR), to

review inter-alia: the working of credit delivery system of SME industries with a view to making the

system more effective, simple and efficient to administer; and to make suggestions for

simplification and improvement in system and procedures. The Committee submitted its Report to

RBI on 30th June 1998, which contains recommendations. Out of 126 recommendations, 103 have

47

been examined by RBI and decision taken thereon. Banks/ Financial Institutions and other

agencies have already implemented 86 recommendations. Some of the important measures taken

pursuant to the Recommendations of the

Committee include:-

Delinking of SIDBI from IDBI.

Opening of more specialized branches.

Enhancement in the limits of Composite Loan from Rs. 2 lakhs to Rs. 5 lakhs.

Setting of DRTs.

Introduction of Credit Guarantee Scheme.

THE CREDIT FACILITIES FROM NABARD

NABARD is set up as an apex Development Bank with a mandate for facilitating credit flow for

promotion and development of agriculture, smallscale industries, cottage and village industries,

handicrafts and other rural crafts. It also has the mandate to support all other allied economic

activities in rural areas, promote integrated and sustainable rural development and secure

prosperity of rural areas. In discharging its role as a facilitator for rural prosperity NABARD is

entrusted with:

Providing refinance to lending institutions in rural areas

Bringing about or promoting institutional development and

Evaluating, monitoring and inspecting the client banks

Besides this pivotal role, NABARD also:

Acts as a coordinator in the operations of rural credit institutions

Extends assistance to the government, the Reserve Bank of India and other organizations

in matters relating to rural development

Offers training and research facilities for banks, cooperatives and organizations working in

the field of rural development

Helps the state governments in reaching their targets of providing assistance to eligible

institutions in agriculture and rural development Acts as regulator for cooperative banks and

RRBs

SOME OF THE MILESTONES IN NABARD'S ACTIVITIES ARE:

48

District Rural Industries Project (DRIP) has generated employment for 23.34 lakh persons

with 10.95 lakh units in 105 districts.

Credit functions, involving preparation of potential-linked credit plans annually for all districts

of the country for identification of credit potential, monitoring the flow of ground level rural

credit, issuing policy and operational guidelines to rural financing institutions and providing

credit facilities to eligible institutions under various programmes

Development functions, concerning reinforcement of the credit functions and making credit

more productive

Supervisory functions, ensuring the proper functioning of cooperative banks and regional

rural banks

FINANCIAL INCLUSION

Indian economy in general and banking services in particular have made rapid strides in the recent

past. However, a sizeable section of the population, particularly the vulnerable groups, such as

weaker sections and low income groups, continue to remain excluded from even the most basic

opportunities and services provided by the financial sector. To address the issue of such financial

exclusion in a holistic manner, it is essential to ensure that a range of financial services is available

to every individual. These services are:

A no-frills banking account for making and receiving payments,

A savings product suited to the pattern of cash flows of a poor household,

Money transfer facilities,

Small loans and overdrafts for productive, personal and other purposes, &

Micro-insurance (life and non-life)

In order to address the issues of financial inclusion, the Government of India constituted a

“Committee on Financial Inclusion” under the Chairmanship of Dr. C. Rangarajan. The Committee

submitted its final report to Hon'ble Union Finance Minister on 04 January 2008.

NATIONAL EQUITY FUND SCHEME (NEF)

DIRECT CREDIT SCHEMES

TECHNOLOGY UP GRADATION FUND SCHEME FOR TEXTILE INDUSTRIES (TUFS)

DIRECT DISCOUNTING SCHEME - EQUIPMENT (DDS-E)

49

LIST OF KEY FINANCIAL INSTITUTIONS

INDUSTRIAL FINANCE CORPORATION OF INDIA (IFCI)

INDUSTRIAL CREDIT AND INVESTMENT CORPORATION OF INDIA (ICICI)

INDUSTRIAL DEVELOPMENT BANK OF INDIA (IDBI)

EXPORT-IMPORT BANK OF INDIA (EXIM BANK)

INDUSTRIAL RECONSTRUCTION BANK OF INDIA (IRBI)

SHIPPING CREDIT AND INVESTMENT CORPORATION OF INDIA (SCICI)

INFRASTRUCTURE LEASING AND FINANCIAL SERVICES LTD. (IL&FS)

TECHNOLOGY DEVELOPMENT AND INFORMATION CORPORATION OF INDIA LTD.

(TDICI)

RISK CAPITAL AND TECHNOLOGY FINANCE CORPORATION LTD. (RCTFC)

TOURISM FINANCE CORPORATION OF INDIA (TFCI)

NATIONAL BANK FOR AGRICULTURAL AND RURAL DEVELOPMENT (NABARD)

NATIONAL SMALL INDUSTRIES CORPRATION (NSIC)

STATE FINANCIAL CORPORATIONS (SFCs)

STATE INDUSTRIAL DEVELOPMENT CORPORATIONS

STATE INDUSTRIAL INVESTMENT CORPORATIONS (SIICs)

STATE SMALL INDUSTRIES DEVELOPMENT CORPORATIONS (SSIDCs)

SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA (SIDBI)

50

Government of Gujarat initiatives to support MSMEs

Small and Medium Enterprises engaged in manufacturing sector produce more than 8000 different

products, providing employment to large number of skilled and unskilled workers. There are

around 30 million Micro, Small and Medium Enterprises in India who train the unskilled workers

and transform them into skilled personnel thereby increasing the skilled workforce of India. While

services sector is the biggest contributor to India's GDP, manufacturing sector is seen as the driver

for boosting the exports.

Gujarat is one of the leading States in India with high industrial growth and enterprising business

community. The State has carved a niche in the areas of textiles, diamond processing, chemicals,

pharmaceuticals, petrochemicals, refineries, power, dairy and other major industries. Gujarat has

also attracted huge investments from Indian and Overseas companies.

Every year Govt. of Gujarat supports summit called “GUJARAT SME MANUFACTURING

SUMMIT”, organized by SME CHAMBER OF INDIA, to provide guidance on various challenges

SME units face. Its main moto is to encourage the enterprises owners, and providing platform to

explore. Govt. of Gujarat also provide support on strengthen marketing support to their products

and financial assistance and subsidies. Under Vibrant Gujarat, SME Units are invited from all over

the world to do business with domestic units.

Incentives for Small and Medium Enterprises-

The following incentives are provided for the benefits of Small and Medium Enterprises-

1. Interest subsidy

2. Support for technology up gradation

3. Sponsored research subsidy

4. Quality Certification and Marketing support

51

Investment in Micro, Small and Medium Enterprises in Gujarat in Last 3 Years-

Table No-4.1

(Rs. In Lacs)

Enterprises 2009-10 2010-11 2011-12

Micro 67513.55 84343.28 169076.86

Small 94122.09 89203.68 125449.38

Medium 25362.35 43426.34 45955.67

Chart No-1

4.9 Major Small and Medium Enterprises Sectors in Gujarat-

Sector Units in %

Textiles 21.39

Machinery and Parts 7.61

Metal Products 7.49

Chemicals and Products 4.97

Wood Products 4.32

Rubber & Plastics Products 3.77

0

20000

40000

60000

80000

100000

120000

140000

160000

180000

Micro Small Medium

Inestment in Units 2009-10

Inestment in Units 2010-11

Inestment in Units 2011-12

52

4.9.1 Cluster Development-

The development of Small and Medium has taken place in the form of different industrial cluster.

There are, all 83 industrial cluster in state for different industrial goups have been identified in

state, developed at number of different location in state. The approch of cluster based

development has helped in improving cost competiveness of industries, by way of creating

common facilities, developing marketing centres, brand name and promotion of skills.

The following are type of cluster in Surat city-

1. Textiles-Powerlooms

2. Textile stores

3. Textile-synthetic

4. Diamond processing

5. Data processing

Surat City Detail Information

Industries

Key industry sectors in the district include Petrochemicals, Textiles, Diamond processing,

Engineering and Logistics

Surat is emerging as a potential hub for IT/ITeS and Biotechnology industry

There are over 600 medium and large scale industries and over 41,300 small scale Industries

based in Surat district

Hazira LNG Terminal project is one of the largest Greenfield projects in India

Some of the key industrial players having large investments in the district are Essar Power, Indian

Oil Corp. Ltd., Indian Oil Corp. Ltd., KRIBHCO, Larsen & Toubro, NTPC, ONGC, Reliance

Industries, HPCLJndo Burma Petroleum Ltd., etc.

Investment Opportunities

Gems & Jewellery

Diamond processing centre

Gold refinery units

Studded Jewellery

53

Artisan training centre and design institutes

IT/ITeS

Software Development Centres

Business Process Outsourcing (BPO)

Knowledge Process Outsourcing (KPO)

Training & Educational centres

Agriculture

Sugar farms

Cattle feed manufacturing

Wax-related units

Textiles

Modern spinning with captive power generation

Manufacturing of fabrics

Modern energy efficient textile processing

Technical textiles

Minerals

Lignite-based thermal power stations

Roofing tiles factory

Stone ware pipes & drainage pipe industry & Glass factory

Credit ratings and MSME

With focus of growth now being on inclusive growth, the role of MSME sector in India's socio

economic development also needs to be ascertained appropriately. With a view to address the

impediments for the sector's growth, GoI has initiated various steps and schemes. Adequate credit

flow being one of the bottlenecks, credit rating assists in rationalized lending decisions through

proper analysis of the credit risk. Gradually, the coverage of MSMEs for credit rating is expected to

increase.

54

Increased funding options as credit ratings are widely recognized by banks, financial

institutions and other investors

Faster processing of loan applications by banks/FIs

Assists in capability assessment by existing/prospective clients

Credibility and favorable trade terms with suppliers & customers

Meet regulatory requirements

Assists in self-assessment

Recognition (as ratings are made public)

SSI ratings through NSIC; and

Bank facility ratings.

SMERA –

SME Rating Agency of India Limited (SMERA) is a third party rating agency exclusively set up

for micro, small and medium enterprises (MSME) in India for ratings on creditworthiness. It

provides ratings which enable MSME units to raise bank loans at competitive rates of

interest. However, its registration with Securities Exchange Board of India SEBI as a Credit Rating

Agency and accreditation by Reserve Bank of India RBI in September 2012 as an external credit

assessment institution (ECAI) to rate bank loan ratings under Basel II guidelines has paved way

for SMERA to rate/grade various instruments such as: IPO, Bonds, Security Receipts, Bank Loan

Instruments etc. In addition to this, RBI has told that Banks may use ratings of SME Rating Agency

of India (SMERA), in addition to grades provided by other agencies, to assign risks to loans for the

purpose of computing capital adequacy requirements

55

CHAPTER-5 LITERATURE REVIEW

56

BRAHMANANDAM, G, N., RAI, H.L., DAKSHINA MURTHY, D (MAY 1981)

“Financing Small Scale Sector”. The Role of Banks” INDIAN BANKING TODAY AND

TOMORROW, the above article was prepared on the role of banks in financing the SMEs in

the year 1981. At those times the Indian banking was not all interested in financing the

SMEs, because of their credit worthiness. Later due to changes in the industrial policy of

India, the commercial banks come forward made immense help to the growth of SMEs. This

article was written before the economic reforms taken place. Here is a gap for more

analysis about the role of the banks in the post economic reforms. Study on this topic totally

focused on the credit facilities available to the SMEs in the wake of MSME act 2006. Due to

the presence of the gap about the present to day activities are different to those of 1980’s. I

made in depth study of the bankers role in providing the credit to promote the SMEs.

CHOPRA, K.C (MAY 1981)

“Financing for the Decentralized sector –small and medium industries” THE BANKER, The

above article prepared on the thesis, reveals the financing for the SMEs in the decentralized

sector. This article helped me in selecting the path for my study on credit facilities for SMEs.

The article vividly discussed about the possible ways to finance the SMEs in the

decentralized sector like agricultural based and artisan based SMEs. Really there is a gap

between the centralized and decentralized sectors in getting the finance from the banks.

The banks are very much lenient in providing lone facilities to the centralized sector.

Through my study I made an attempt to study the intricacies faced by the decentralized

sector SMEs in Guntur District, well known for its agricultural based industries.

JAILAL SAAW (April -2005)

“Growth of small scale industries in India” JOURNAL OF INDUSTRY AND TRADE, The

growth of small and medium industries in India was discussed in the above article. The

expected growth was not there because of lot of root causes to sickness and under

development in the SME sector. This article discussed about the slow growth rate of SMEs,

dues to several problems.

57

JAYA PRAKASH REDDY, R., BRAHANANDAM G.N. (JAN, 1987)

“Small Scale Sector: problems and prospects” YOJANA 1-15, the above article deals with

the various problems like marketing, raw material, labour, technical and financial problems.

The focus on the finance related issue is very limited. They gave more importance to the

procurement of raw material and marketing and labour problems in SME segment. But not

discussed about the credit facilities for the SMEs.

KAURA, M.V., SHARMA G.L. (MARCH, 1999)

“Financing Small Industries – institution should Change Their Attitudes, Procedures”

“JOURNAL OF INDUSTRY AND TRADE, the above article discussed very vividly the

attitudes of the financial institutions where belong to Central Government or State

Government or the Governmental Agencies promoted for these propose. In the wake of the

MSME act 2006 passed in the interest of the small scale sector by the Government of India,

the attitude of the financial institutions towards SME sector was totally changing The

employees of above said financial institutions are very much helpful and friendly with the

promoters of the SMEs.

NAMBIAR P.C.D. (Dec. 16, 2007)

“FINANCING FOR PRIORITY SECTORS” S.B.I MONYHLY REVIEW. The article on the

above topic paved the way for the thinking strategy for the financing the small scale and

medium scale industries by the bank offers. The Government of India through its industrial

policy clearly stated that the commercial banks should give priority treatment to the SMEs.

The nature of the banking officials also discussed in the article. But that is not sufficient to

promote the SME sector because the sector was totally neglected for the last several

decades due to invasion of the MNCs. By enacting the MSME act, 2006 the government of

India clearly indicated the signal to the banking people to provide the credit facilities to the

SMEs. This article is very much helpful in preparing the script for my thesis.

RAMACHANDRA, K.S., REVIVING SICK UNITS, (2001)

“FINANCIAL EXPRESS” ACT 9, the above article discussed the reviving the sick SSIs in

various aspects, like providing technology, management training, skilled labour, export

58

promotion and giving finance. The root cause for all the above problems is the financial

problem. The financial institution should provide sufficient amount at the easy disbursal

system to promote the SSIs.

SAHNEY, M. (12 DEC 2005)

“BANKS ASKED TO STEM INDUSTRIAL SICKNESS” INDUSTRIAL INDIA VOL 36.

Through this the author tires to express the need for banks intervention in the promotion of

the SSIs. The officials of the banks in India are belong to middle class families and unaware

of the industrial promotion and its need. Mere advice to the bankers is not helpful. So for

that reason SRIMATY INDIRA GANDI nationalized all private banks for the development of

agricultural sector in 1971. The MSME act 2006 instigates the banks to provide the credit

facilities without any hesitation to the SSIs.

SOUNDARRAJA (1980)

INANCING SMALL SCALE INDUSTRIES, A REPORT, “RESERVEBANK OF INDIA

BULLETIN” PAPER –the reserve bank as a central bank and bankers bank and the prime

lending bank to the government should take initiatives to promote the SSI sector. The

author is very interested in financing the small and medium scale industries in India,

because it is providing more employment than any other sector. It arrests the migration to

the cities from the villages in search of better jobs and better facilities. This topic has given

me the encouragement to think in this way for the betterment of village and cottage industry

development.

EIM (2005) in his study on technology up gradation observed that growing enthusiasm for

internationalization by new technology based firms has led to a general perception that all

Small and Medium Enterprises, irrespective of industrial activity, can enter foreign market

through Foreign Direct Investment.

59

CHAPTER-6 RESEARCH

METHODOLOGY

60

Need of the study

The researches that were conducted in past by the various professionals are in foreign context and

not in Indian context. Study relating to MSMEs, their problems and source of financing has been

done but regarding the MSME financing schemes of Cooperative sector banks has not been much

done. This gap has been identified and it has led to the present research to be undertaken. So, the

need was felt to cover the areas neglected. Thus, here a study on problems faced by MSME to

avail finance from Cooperative banks. Government initiatives to support their growth, was taken

care of.

A. Problem Statement

To study the problem faced by Micro, Small and Medium Enterprises (MSMEs) to avail finance

from SUDICO Bank.

B. Research Objective

1. To study the Micro, Small and Medium Enterprises Sector (MSMEs), its contribution to

GDP, in employment generation and strategic importance for growth of economy.

2. The study about credit facilities provided to MSMEs and problem faced by them to get loans

and advances from bank.

3. To understand the credit assessment criteria of loans and advances to MSMEs and reasons

for rejection of loans and advances.

4. To study factors create obstacles in growth of MSMEs.

5. To analyze government’s support in obtaining credit facilities. .

6. RBI Guideline and Committees.

7. To study growing importance of credit ratings in MSME Financing.

Scope Of the study

This study attempts to study the problems faced by MSMEs located in Surat city only. The study

can be extended in future by enhancing the geographical coverage.

61

C. Research Design

Type of design

The research design adopted for this study is Descriptive research. A descriptive research

study tries to discover answers the questions who, what, when and sometimes, how. The

researcher attempts to describe or define a subject often by creating a profile of group of

problems, peoples or events.

D. Data collection

1. Primary data collection

Approach: Primary data collection will be done by communication approach.

Communication method: Survey via personal interview.

A structured interview method is intended to be used by recording respondents’ answers on a

questionnaire form having pre-specified response format.

Instrument: Questionnaires

2. Secondary data collection:

Secondary data is intended to be collected through websites, newspapers and journals.

Sampling plan

Target Population

Micro, Small and Medium Enterprises from Surat city and which have availed finance from

SUDICO bank.

Sample size: 100 respondents (borrowers/Loan applicants)

Sampling area: Surat

Sampling Method:

Non probability - Convenience Sampling Method.

62

In non probability sampling, members are selected from the population in some nonrandom

manner. Population elements are selected on the basis of their availability (e.g., because they

volunteered) or because of the researcher's personal judgment that they are representative.

Among the various non probability sampling methods the chosen method is Convenience

sampling.

Convenience sampling is used in research when the researcher is interested in getting an

inexpensive approximation of the truth. As the name implies, the sample is selected because they

are convenient. This non probability method is often used during preliminary research efforts to get

a gross estimate of the results, without incurring the cost or time required to select a random

sample.

Tools of Data Analysis and Presentation:

To analyze the data obtained with the help of questionnaire, following tools were used:

Tools of Analysis: -

Chi Square Test

Summated Score

Weighted Average Score

As this research deals with nominal and ordinal type of data, nonparametric measures of

association (Chi- square test and contingency coefficient) are appropriate choice for this study

Tools of Presentation: -

Tables

Charts

Limitation of the Study-

The followings are problems faced during the research work-

1. The study is limited to time period.

2. Banks have some confidential reports which can’t be handover to outsider, so in

depth research is not possible.

63

3. There is lot of MSMEs unregistered; due to this full details aren’t available for

evaluating the importance and problems of MSMEs.

4. There are lots of difficulties in getting the data of MSMEs

5. This research study is limited to Surat city only so it doesn’t represent the whole

universe of MSMEs

64

CHAPTER-7 DATA ANALYSIS

AND INTERPRETATION

65

Q-1 what is the nature of your business?

Table no. - 7.1 Particulars Frequency Percentage Cumulative %

Processing Manufacturing

65 65% 65%

Ancillary Services 34 34% 99%

Mining 1 1% 100%

Total 100 100%

Chart No. -7.1

Interpretation-

Out of sample size 100 MSME Units, 65 firms are in processing manufacturing business, while 20

firms are in Ancillary and 34 services and 1 firm is in Mining Business. Surat as textile hub,

processing Manufacturing units are more.

65%

34%

1%

Nature of Firm

Processing MFG Ancillary Services Mining

66

Q-2 what is the constitution of your firm/business?

Table no. - 7.2

Particulars Frequency Percentage Cumulative %

Sole Owner

43 43% 43%

Partnership

55 55% 98%

Joint Stock Company

2 2% 100%

Total 100 100%

Chart No. -7.2

Interpretation- From the chart, it can be seen that 43% firm is owned by sole owners while 55% are in

partnership. It shows 43% firms are run by sole owner.

43, 43%

55, 55%

2, 2%

constitution of business

sole owner

partnership

join stock company

67

Q-3 how many years of experience firm/business have?

Table no. - 7.3

Particulars Frequency Percentage Cumulative %

0-3 years 47 47% 47%

4-7 years 41 41% 88%

8-11 years 8 8% 96%

12-15 years 3 3% 99%

15 and above years

1 1% 100%

Total 100 100

Chart No. -7.3

Interpretation- In terms of number of years of experience the firm have, most firms (47%) are startup or at the

growth stage. Maximum number (47%) of firms has 0-3 years experience.

0

5

10

15

20

25

30

35

40

45

50

0-3 years 4-7 years 8-11 years 12-15 years 15 and More

No. of years of experience firm have

68

Q-4 is your firm/business registered?

Table no. - 7.4

Particulars Frequency Percentage Cumulative %

YES 97 97% 97%

NO 3 3% 100%

Total 100 100%

Chart No. -7.4

Interpretation- From the above chart it can be seen that, 99% firms are registered while only 1% firm is

unregistered. By registration firms can get status of MSME and its benefits.

0

20

40

60

80

100

120

Yes No

No. of firms registered

69

Q-5 which type of loan you have taken or applied?

Table no. - 7.5

Particulars Frequency Percentage Cumulative %

Term Loan

29 29% 29%

Working Capital loan

21 21% 50%

Composite Loan

4 4% 54%

TUF Loan

40 40% 94%

Doctor Plus Loan

4 4% 98%

Project Finance

1 1% 99%

Export Finance

1

1% 100%

Chart No. -7.5

Interpretation- From the above chart, it can be interpreted that maximum firms (40%) had applied for TUF Loan

while least number of firm (1%) had applied for the export finance at the SUDICO Bank.

0

5

10

15

20

25

30

35

40

45

Term Loan Working Capital

Requirement

Composite Loan

TUF Loan Doctor Plus Loan

Project Finance

Export Finance

type of loan applied

70

Q-6 what is the amount of loan taken by your firm?

Table no. - 7.6

Particulars Frequency Percentage Cumulative %

Below Rs. 5,00,000

8 8% 8%

Rs. 5,00,001-25,00,000

20 20% 28%

Rs. 25,00,001-50,00,000

23 23% 51%

Rs. 50,00,001-1,00,00,000

42 42% 94%

Rs. 1,00,00,001-5,00,00,000

5 5% 99%

Rs. 5,00,00,000 AND MORE

1 1% 100%

Total 100 100%

Chart No. -7.6

Interpretation- From the above chart, Maximum firms (42%) have applied for loan ranging between 50 lacs to 1

crore. While the least amount applied was less than 5 crore.

8% Firms amount less than 5 lacs applied for the purpose of Working Capital Finance.

0

5

10

15

20

25 30

35

40

45

Amount of loan applied

71

Q-7 what is the term of Loan?

Table no. - 7.7

Particulars Frequency Percentage Cumulative %

0-2 years 15 15% 15%

2-4 years 20 20% 35%

4-6 years 60 60% 95%

6-8 years 4 4% 99%

8 & more 1 1% 100%

Total 100 100%

Chart No. -7.7

Interpretation- Maximum numbers firms term loan was for the period of 4-6 years with 60% while least was more

than 8 years with 1% firm.

0

10

20

30

40

50

60

70

0-2 years 2-4 years 4-6 years 6-8 years 8 & more

Term of Loan

72

Q-8 (a) what is the purpose of taking loan?

Table no. - 7.8.a

Particulars Frequency Percentage Cumulative %

Start up business

40

40%

40%

Working capital

Requirement

15 15% 55%

Expansion

4 4% 59%

Technology Up gradation

40 40% 99%

Others 1 1% 100%

Total 100 100%

Chart No. -7.8.a

Interpretation

From the above chart, maximum number of firms (40%) purpose of availing the loan was to start

the business while the TUF Loan was also. Only 4% firms had applied for expansion.

0

5

10

15

20

25

30

35

40

45

Start Up Bussiness Working Capital Requirement

Expansion Technology Upgradation

Others

Purpose of taking loan

73

Q-8 (b) how was your experience related loan procedure?

Table no. - 7.8.b

Particulars Frequency Percentage Cumulative %

Lengthy 65 65% 65%

Adequate 35 35% 100%

Total 100 100%

Chart No. -7.8.b

Interpretation- From the chart it can be interpreted that 65% firms feel that the loan procedure to avail the loan is

lengthy.

0

10

20

30

40

50

60

70

Lengthy Adequate

Experience related loan procedure

74

Q-9 in how many days did you get the amount of loan?

Table no. - 7.9

Particulars Frequency Percentage Cumulative %

LESS THAN 30

DAYS

56 56% 56%

31-45 DAYS 36 36% 92%

46-60 DAYS 8 8% 100%

61-75 DAYS 0 0 100%

MORETHAN 75

DAYS

0 0 100%

Total 100 100%

Chart No. -7.9

Interpretation- SUDICO Bank has disbursed maximum number of loan in less than 30 days. 36% loan’s

assessment was completed in 30-45 days while only 8% loan has taken 46-60 days, it may be

loan amount was bigger and required detail procedures. 0% firm was at 60+ days as bank itself

not want to take more time of firms, if there are eligible provide loan or reject it.

0

10

20

30

40

50

60

Less Than 30 days

31-45 days 46-60 days 61-75 days More Than 75 days

No. of days taken to sanctioning the loan

75

Q-10 Rank the obstacles that are faced by your enterprise in its growth from 1 to 5; 1 being the biggest

Table no. - 7.10

Obstacles Rank1 Rank2 Rank3 Rank4 Rank5

The frequent need to renew the equipment

12 19 28 24 17

Instability of demand for product or service

7 16 16 28 33

Obtaining adequate financing

40 27 17 8 8

Low profitability of the sector 11 12 21 29 27

Taxation levels 16 14 19 29 22

Interpretation- From the above table, it can be seen that obtaining adequate finance was biggest obstacle in the

growth while the low profitability of MSME Sector was smallest.

76

Q-11 What are the most common reasons given to your enterprise by the

SUDICO bank for rejecting an application for Loan?

Table no. - 7.11

Particulars Frequency Percentage Cumulative %

The management team of

borrower firm is too

inexperienced

10 10% 10%

The application did not

meet the criteria

37 37% 47%

The application was not correctly completed

1 1% 48%

Poor credit history 25 25% 73%

The enterprise could not

provide enough

guarantees

17 17% 90%

Not a profitable venture

10 10% 100%

Total 100 100%

Interpretation- From the above table, the reason of rejecting the loan is researched. It was found that 37% loans

were rejected because it doesn’t fulfill the required criteria. While only 1% loan was rejected

because applicant has not filled it completely.

77

Q-12 Are you aware about Govt. providing subsidy?

Table no. - 7.12

Particulars Frequency Percentage Cumulative %

YES 94 94% 94%

NO 6 100% 100%

Total 100

Chart No. -7.10

Interpretation- From the above chart, 94% knows about that government provide subsidy to firms while 6% firms

are not aware about it.

0

10

20

30

40

50

60

70

80

90

100

yes no

Awarness about government provide subsidy

78

Q-13 (a) Have you ever got subsidy?

Table no. - 7.13.a

Particulars Frequency Percentage Cumulative %

YES 64 64% 64%

NO 36 36% 100%

Total 100 100%

Chart No. -7.11

Interpretation- From the above chart, it can be concluded that 94% firms know about the government subsidy but

64% firms gets the benefits of subsidies.

0

10

20

30

40

50

60

70

Yes No

Firms got subsidy

79

Q-13 (b) If yes, then what is the rate of subsidy?

Table no. - 7.13.b

Particulars Frequency Percentage Cumulative %

Below 5% 29 45.31% 45.31%

5-10% 22 34.38% 79.69%

10-15% 11 17.19% 96.85%

15-25% 2 3.12% 100%

Total 64 100%

Chart No. -7.12

Interpretation- From the above chart, it can be concluded that maximum firm gets less than 5% subsidy on paid

interest. While very less number of firms get 15-25% subsidy on the paid interest.

0

5

10

15

20

25

30

35

BELOW 5% 5-10% 10-15% 15-25%

Government Interest Subsidy

80

Q-14 (a) Do you get rebate on the interest amount at SUDICO?

Table no. - 7.14.a

Particulars Frequency Percentage Cumulative %

YES 67 67% 67%

NO 33 33% 100%

Total 100 100%

Chart No. -7.13

Interpretation- From the above chart, 67% firms got rebate on interest amount while 33% was not provided rebate

benefits.

0

10

20

30

40

50

60

70

80

Yes No

Rebate from SUDICO Bank on loan Interest

81

Q-14 (b) if yes, at what rate?

Table no. - 7.14.b

Particulars Frequency Percentage Cumulative %

1% 40 59.70% 59.70%

2% 27 40.30% 100%

Total 67 100%

Chart No. -7.14

Interpretation- From the above chart, it can be seen that maximum firms, 59.70% firms got 1% interest rebate

while 40.30% got 2% interest rebate.

0

20

40

60

Interest rebate @ 1% Interest rebate @ 2%

Interest Rebate given by SUDICO Bank

82

Q-15 Please indicate your level of satisfaction with various aspects of obtaining finance from SUDICO bank. Kindly rate them on 5-point scale basis; 5 being strongly satisfied and 1 being strongly dissatisfied:

Table no. - 7.15

Various

Aspects

Strongly

dissatisfied

Dissatisfied Neutral satisfied Strongly

satisfied

11.1) The

amount

granted by

the bank

relative to

the amount

requested

12 15 18 31 26

11.2) The

simplicity of

the

application

form

1 4 15 52 28

11.3)

Interest

rate

3 5 12 56 24

11.4)

Service

fees

1 12 24 39 24

11.5) Time

to obtain

approval

6 8 10 34 42

11.6)

Guarantees

required by

the

institution

0 16 21 36 27

83

11.7)

Behavior of

the bank

staff

0 5 19 30 46

Interpretation- From the above table, it can be seen that the behavior of bank staff is ranging very satisfied to

neutral while least was for the sanctioned of loan against actual amount applied for

84

Q-16 Are you export oriented unit?

Table no. - 7.16

Particulars Frequency Percentage Cumulative %

YES 1 1% 1%

NO 99 99% 100%

Total 100 100%

Chart No. -7.15

Interpretation- Only 1% firms is export oriented applied for finance at SUDICO Bank.

0

50

100

150

Yes No

Export oriented Unit

Export oriented Unit

85

Q-17 Will you recommend SUDICO Bank finance for business loan to your friends or relatives?

Table No. 7.16.a

Particulars Frequency Percentage Cumulative %

YES 75 75% 75%

NO 25 25% 100%

Total 100 100%

Chart No. 7.16

Interpretation- We can analyze from the chart that 75 % of customers are ready to recommend the SUDICO bank to others and 25 % of customers refuse to recommend the bank to others.

0

10

20

30

40

50

60

70

80

Yes No

Recommending bank to others

86

Test Application

Chi –Square Test:

Pearson's chi-squared test (χ2) is the best-known of several (Yates, likelihood ratio, portmanteau

test in time series) chi-squared tests – statistical procedures whose results are evaluated by

reference to the chi-squared distribution. Its properties were first investigated by Karl Pearson in

1900. In contexts where it is important to make a distinction between the test statistic and its

distribution, names similar to Pearson X-squared test or statistic are used.

It tests a null hypothesis stating that the frequency distribution of certain events observed in a

sample is consistent with a particular theoretical distribution. The events considered must be

mutually exclusive and have total probability 1. A common case for this is where the events each

cover an outcome of a categorical svariable. A simple example is the hypothesis that an ordinary

six-sided die is “fair”, i e., all six outcomes are equally likely to occur.

Weightage Average Method:

The term weight stands for relative importance of different items. Weights have been

assigned to various ranks. The weighted score is calculated by multiplying the number of

respondents in a cell with their relative weights and the whole number is summed up to give the

weighted score for that factor. In this method weights are assigned to the items.

The formula for computing weighted average is

X= ∑WX/ ∑W

Where X is weighted arithmetic mean X = the variable value i.e. x, x1, x2…..x n W= weight

attached to the variable value i.e. w1, w2 …wn

87

Q-1 Rank the obstacles that are faced by your enterprise in its growth from 1

to 5; 1 being the biggest obstacle.

Table no. - 7.17

Obstacles Rank

1

Rank

2

Rank

3

Rank

4

Rank

5

Weighted

-Average

Score

1. The frequent

need to renew

the equipment

12 19 28 24 17 315

2. Instability of

demand for

product or

service

7 16 16 28 33 364

3. Obtaining adeq

uate financing

40 27 17 8 8 217

4. Low profitability

of the sector

11 12 21 29 27 349

5. Taxation levels 16 14 19 29 22 327

Analysis and Interpretation- In this above table weighted average score method is used where 1 rank is given to the biggest

obstacle in the growth and 5 is the least important rank.

As in the above table various obstacles faced by the MSME enterprises in their growth are being

ranked. The obstacle of obtaining adequate finance is ranked first with summated score of 217.

Third rank is given to the taxation levels; tax charged by the government and second rank to the

frequent need to renew the equipment. The Fourth rank is given to the low profitability of the sector

and fifth to the instability of demand of product or service.

From the above table it can be concluded that obtaining adequate finance is the biggest obstacle

faced by MSMEs in their growth, need to upgrade the equipment followed by burden of heavy

taxes on them. Easy financing schemes should be provided. Rates of taxes should also be

decreased; it will help in the growth of MSMEs in India.

88

Q-2 Is there any key relation between type of loan applied for and customer

experience with loan procedure?

H0: There is no significant relation between type of loan applied for and customer experience with loan procedure H1: There is significant relation between type of loan applied for and customer experience with loan procedure

Table No. 18

Lengthy Adequate Total

Term loan 19 10 29

Working capital finance

9 12 21

Composite loan 3 1 4

TUF loan 32 8 40

Doctor plus loan 2 2 4

Other 1 1 2

Total 65 35 100

0.001194 0.002217

1.584066 2.941837

0.061538 0.114286

1.384615 2.571429

0.138462 0.257143

0.069231 0.128571

Solution -

Chi-square value (calculated) = 9.2546

Chi-square value df (Table) = (R-1) (C-1) = 11.070 (At 5% level of significance)

p value is 0.09933

11.070 > 9.2546 (0.09933>0.05)

So, H0 is accepted and H1 is rejected.

89

It can be concluded that there is no significant relationship type of loan applied for and customer experience with loan procedure. Bank has different policies and procedure for appraising the loan. TUF loan procedure more lengthy than term or other financial products.

Q-3 Please indicate your level of satisfaction with various aspects of obtaining

finance from these SUDICO bank. Kindly rate them on 5-point scale basis; 5

being strongly satisfied and 1 being strongly dissatisfied

Table no. - 7.19

Various

Aspects

Strongly

dissatisfied

Dissatisfied Neutral satisfied Strongly

satisfied

Summated

Score

11.1) The

amount

granted by

the bank

relative to

the amount

requested

12 15 18 31 26 350

11.2) The

simplicity of

the

application

form

1 4 15 52 28 402

11.3)

Interest

rate

3 5 12 56 24 393

11.4)

Service

fees

1 12 24 39 24 373

11.5) Time

to obtain

approval

6 8 10 34 42 398

11.6) 0 16 21 36 27 374

90

Guarantees

required by

the

institution

11.7)

Behavior of

the bank

staff

0 5 19 30 46

417

Interpretation:

Number of respondents -100

Maximum Score - 500

Minimum Score – 100

Analysis and Interpretation-

As from the above table comparison was done between maximum score and Summated score.

Maximum score is the score, which represents the dissatisfaction level among the respondents.

So, information related to the level of satisfaction or least satisfaction to various factors influencing

the satisfaction level of respondents was interpreted in following manner-:

It was clear that respondents were satisfied with the ‘Rate of Interest’ as this aspect lies between

strongly agreed and agreed with summated score of 393. So the respondents were satisfied with

this aspect. The factor “amount granted by the bank relative to the amount requested lies between

agree and neutral with summated score of 350 but was more close to satisfied. So, respondents

are satisfied with the interest rate and the amount sanctioned.

The behavior of bank staff is rated satisfied as maximum rate ranging from very satisfied to neutral

with summated score of 417. In this least rank is given to sanction of loan against the amount of

loan applied for with the summated score of 350.

91

Q-4 Is there any significant relation between customer satisfaction level and their recommendation about bank to others? H0: There is no significant relationship between customer satisfaction level and their recommendation about bank to others H1: There is significant relationship between customer satisfaction level and their recommendation about bank to others

Table No. 20

Recommendations to others Total

Customer Satisfaction Level

Yes No

Highly Dissatisfied

2 1 3

Dissatisfied 7 2 9

Natural 11 6 17

Satisfied 29 11 40

Highly satisfied

26 5 31

Total 75 25 100

Solution-

Chi-square value (calculated) = 2.5433

Chi-square value df (Table) = (R-1) (C-1) = 9.488 (At 5% level of significance)

p value is 0.6369

9.488 > 2.5433 (0.6369>0.05)

So, H0 is accepted and H1 is rejected.

It can be concluded that there is no significant relationship between customer

experience and their recommendations to others. Customer were provided the best

0.027778 0.083333

0.009259 0.027778

0.240196 0.720588

0.033333 0.1

0.325269 0.975806

92

services from bank and also providing complete solution of customer problems at

their best efforts.

Q-5 Is there any key relation between type of loan applied for and rebate

received on interest of the loan?

H0: There is no significant relation between types of loan applied for and rebate will be received on interest of the loan H1: There is significant relation between types of loan applied for and rebate will be received on interest of the loan

Table No. 21

YES NO Total

Term loan 20 9 29

Working capital finance

8 13 21

Composite loan 3 1 4

TUF loan 33 7 40

Doctor plus loan 2 2 4

Other 1 1 2

Total 67 33 100

0.016722 0.03395

2.618685 5.316724

0.038209 0.077576

1.434328 2.912121

0.172537 0.350303

0.086269 0.175152

Chi-square value (calculated) = 13.2526

Chi-square value df (Table) = (R-1) (C-1) = 11.070 (At 5% level of significance)

p value is 0.02112

11.070 < 13.2526 (0.02112<0.05)

93

So, H1 is accepted and H0 is rejected.

It can be concluded that there is significant relationship between types of loan applied for and rebate received on interest of the loan.

94

CHAPTER-8 FINDINGS

95

Results & Findings

Following are the data gathered through primary research carried out on the project “Problems of

Micro, Small and Medium Enterprises (MSME) borrowers, Government initiatives to support their

growth and steps taken by SUDICO bank to mitigate it”

SUDICO Bank is offering finance to priority sector inform of Term Loan, TUF Loan, and

Working Capital Loan etc.

In Research, it was found that 65% of SUDICO Customers are in processing Manufacturing

Business, while only 1% firm is in Mining business. High number of manufacturing units is

because of Surat is Textile Hub.

There are 55% firms constitution is Partnership while second highest is Sole Owned Firms

are 43%. It shows that MSMEs are mostly one man show, so the business growth is

depend up on the owner and its knowledge.

In term of experience of business, 47% firms are new ventures and have little experience. It

shows SUDICO Bank promoting new firms to start their businesses.

In research, it was found that 40% of firms have applied for TUF Loan. As more number of

manufacturing units are there, that needs frequent technology up gradation.

Purpose of taking loan from SUDICO bank was start up of business and Technology up

gradation.

SUDICO Bank has good record of disbursement of loan application within 30 days of time

with 56%.

Appraisal of loan application require longer time to check, verify reports, valuation of assets

(if given as collateral), ratio analysis, financial analysis, market and management analysis

etc.

Detail analysis is to be made because of insufficient data and difficulty in projection which

requires expertise skills. Because of this 65% customer felt that loan disbursement process

is lengthy.

Biggest reason for rejecting the loan was that it doesn’t match the criteria and standard

required to have. That is 37% of firms. Second biggest reason was poor credit history.

Most firms know about the government subsidy. But 64% firms get subsidy.

SUDICO Bank also providing rebate on interest to firms who have maintained the

continuous payment of loan installments and bank feel they need help and growth oriented.

By whole study it is clearly state that finance is the vital component of the business

operating cycle. If finance is timely available in the firm it will be beneficial for the firm.

96

It is found out from this research study that Micro, Small and Medium Enterprises (MSMEs)

are suffering from many problems that become obstacles in their growth.

At the time of peak season MSME have to keep their investment at the optimum level for

making good profit by maintaining the demand level, which also need more amount of

working capital.

Bank is taking minimum number of days to sanctioning the loan.

SUDICO Bank is strictly following the rules and regulation for sanctioning the loan.

Bank mostly providing the loan to their well known customers or through there references.

Only 1% firm is export oriented units who applied for finance at SUDICO Bank. It may be

reason that bank may not provide higher amount of loan that out of limit of banks finance.

The entrepreneurs have lack of knowledge regarding the credit facilities, different mode of

finance, schemes.

The capital base of MSME is very poor.

SUDICO Bank is encouraging the MSME Finance because they feel that they are growth

oriented sector with also provides employment to local peoples.

At last the inadequate and timely availability of finance is considered to be the biggest

problem responsible for obstacle in a growth business.

97

CHAPTER-9 CONCLUSION

98

If India has to have a growth rate of 8-10 percent for the next couple of decades, it needs a

strong MSME sector, without which it cannot be achieved. There are approximately 3 crore

MSMEs in the country. The MSMEs have shown an average growth of 18 percent over the

last five years (2006-2011). Around 98 percent of the production units are in the MSME

sector. Only 4 to 5 per cent MSMEs are covered by institutional funding given that approx

95 per cent of villages are not covered by banks. There is, therefore, a need to bridge this

gap through enabling policies. While these can address some impending issues of MSMEs,

there is still a lot that needs to be done to develop the sector as a whole.

It can be concluded that MSMEs are growing and profitable sector for banks in terms of

money instrument. SUDICO Bank’s system of loan disbursement is very good, but felt quite

lengthy as requires all norms and documentation is to be followed which is acceptable.

MSMEs have the under utilization of capacity because of problems pertaining to finance,

raw material etc. It reduces its production of goods and also increases the cost. MSMEs

may have competition with big firms or established firm, to compete with them optimum

utilization of resources is required.

In the recent years some initiatives have been taken by both Government and Reserve

Bank of India to make more acceptable for funding the banks.

In regard to rate of interest, industrial owner feel that the rate of interest for working capital

finance to high. It is manageable in the time of peak season but not all time.

Nowadays credit guaranty and credit rating institution have floated to support the MSME by

providing services to them and assume risk in financing the MSMEs. MSME units are facing

other problems like lack of market knowledge, weak marketing and supply chain channels,

lack of technology up gradation, unable to afford skill full workers and employees, increased

cost of product because of low capacity utilization and less profit margins etc.

Bank customer are satisfied the product and services rendered to them. Bank staff behavior

also very positive to customers and provide effective solution of their problem. Based on the

chi square test its results are positive for banks and their services.

99

CHAPTER-10 RECOMMENDATIONS

100

Government providing the finance under the various schemes to MSMEs which is good but

it is not useful as getting finance or rebate involves cumbersome procedures which require

more time that available opportunity will be missed because of delays. MSME needs

finance; Government is providing it but need on time.

Product innovations in banks have set the rule of the game “Innovate or perish”. The same

rule applies to MSME segment. At present, there is a vast gap between requirements of the

MSME customer and availability of suitable/matching products and services in the Co-

operative sector bank. New credit products may be developed to take care of the diverse,

unexpected and short-term requirements of the MSME customers in a hassle free manner

and in a short time.

As far as credit appraisal is of loan application is concerned, Bank provide loan on the basis

of only re-payment capacity of the borrower and it considers only DSCR to appraise the

loan to the business which is not enough to check the feasibility of the project and

appraising such high amount of loan. Therefore the bank should also consider various

capital techniques like payback period, NPV, IRR, PI etc. along with DSCR and debt equity

ratio.

As There are different tools in financial analysis, different budgeting tools are also need to

be analysis instead of only some ratios, BEP analysis, because they are also important

criteria’s which may be give good result from the different point of view.

The conventional credit appraisal systems are heavily dependent on financial statements

and miss the softer strengths inherent in the business. Banks may adopt a balanced score

card model for credit assessment under which risk weights may be assigned to (i)

managerial, technical and commercial competence of the entrepreneur (ii) quality of trade

references from suppliers/buyers (need not be in writing) (iii) potential of the industry, unit

and person

Timely working capital finance should be made available to the small units keeping in view

their needs.

The re-orientation program, workshops and seminars should be organized at district level to

provide latest information about various schemes to the small entrepreneurs.

101

Small entrepreneurs should make feasibility studies before they finalize their projects.

They should undertake only such projects which are technically, operationally and

economically and financially viable.

SUDICO Bank should develop flexible systems and procedures for dealing with SME

customers and modify their role to be a facilitator. It may either provide software to these

customers to prepare stock and financial statements or help and guide them in preparation

of renewal proposal / statements.

As 95.8% of MSME (all over India) customers are proprietorship type of customers, it is

essential for the banks to closely focus on the non-financial parameters also during

appraisal (i.e. ability of person behind the show)

Banks may publish periodicals/magazines to disseminate information pertaining to various

schemes of bank, various ministries, RBI, SIDBI, CBDT, CBEC and other tax related policy

matters. It may also provide the same information through its website and e-mails.

Bank should have to create risk management model exclusively for MSMEs for risk

reduction and bring down NPA of company.

102

ANNEXURE

103

Questionnaire

We, Mehta Kiran and Patel Denish, MBA Student of S R Luthra Institute of Management are

conducting a research on ‘Problems of Micro, Small and Medium Enterprises borrowers,

Government initiatives to support their growth and steps taken by SUDICO Bank to mitigate

it’. So, we request you to spare a few minutes from your busy schedule and fill this form. We

assure you that the information provided by you will be kept confidential.

Q-1 what is the nature of your business? A. Processing Manufacturing

B. Ancillary Service

C. Mining

Q-2 what is the constitution of your firm/business? A. Sole Owner

B. Partnership

C. Joint Stock Company

Q-3 how many years of experience firm/business have? A. 0-3

B. 4-7

C. 8-11

D. 12-15

E. 15 and More

Q-4 is your firm/business registered? A. YES

B. NO

Q-5 which type of loan you have taken or applied? A. Term Loan

B. Working Capital loan

C. Composite Loan

D. TUF Loan

E. Doctor Plus Loan

F. Project Finance

G. Export Finance

Q-6 what is the amount of loan taken by your firm?

A. Below Rs. 5,00,000

B. Rs. 5,00,001-25,00,000

C. Rs. 25,00,001-50,00,000

D. Rs 50,00,001-1,00,00,000

E. Rs 1,00,00,001-5,00,00,000

104

F. MORE THAN 5 CR.

Q-7 what is the term of Loan? A. 0-2 YEARS

B. 2-4 YEARS

C. 4-6 YEARS

D. 6-8 YEARS

E. More than 8 years

Q-8 (a) what is the purpose of taking loan? A. Start up business

B. Working capital Requirement

C. Expansion

D. Technology Up gradation

E. Any_________

Q-8 (b) how was your experience related loan procedure? A. Lengthy

B. Adequate

Q-9 In how many days did you get the amount of loan?

A. Less than 30 days

B. 30-45 days

C. 46-60 days

D. 61-75 days

E. More than 75 days

Q-10 Rank the obstacles that are faced by your enterprise in its growth from 1 to 5; 1 being

the biggest

A. The frequent need to upgrade the equipment

B. Instability of demand for product or service

C. Obtaining adequate financing

D. Low profitability of the sector

E. Taxation levels

Q-11 what are the most common reasons given to your enterprise by the SUDICO bank for

rejecting an application for Loan?

A. The management team of borrower firm is too inexperienced

B. The application did not meet the criteria

C.The application was not correctly completed

D.Poor credit history

E.The enterprise could not provide enough guarantees

105

F.Not a profitable venture

Q-12 Are you aware about Govt. providing subsidy? A. YES

B. NO

Q-13 (a) Have you ever got subsidy? A. YES

B. NO

Q-13 (b) If yes, then what is the rate of subsidy? A. Below 5%

B. 5-10%

C. 10-15%

D. 15-25%

Q-14 (a) Do you get rebate on the interest amount at SUDICO? A. YES

B. NO

Q-14 (b) if yes, at what rate?

A. 1%

B. 2%

Q-15 Please indicate your level of satisfaction with various aspects of obtaining finance from SUDICO bank. Kindly rate them on 5-point scale basis; 5 being strongly satisfied and 1 being strongly dissatisfied:

Particulars Strongly Satisfied

Satisfied Neutral Dissatisfied Strongly Dissatisfied

15.1) The amount granted by the bank relative to the amount requested

15.2) The simplicity of the application form

15.3) Interest rate

15.4) Service fees

15.5) Time to obtain approval

15.6) Guarantees required by the institution

15.7) Behavior of the bank staff

Q-16 is your firm export oriented? A. Yes

B. No

106

Q-17 Will you recommend SUDICO Bank finance for business loan to your friends or

relatives? A. Yes

B. NO

Personal Details:-

Name of the company ……………………………….

Location ………………………………. Age: Education Qualification: Monthly Income:

A. 18-25 years A. SSC A. Below 50,000

B. 26-33 years B. HSC B. 50,000-1,00,000

C. 34-41 years C. Graduate C. 1,00,000-1,50,000

D. 42-49 years D. Post Graduate D. 1,50,000-2,00,000

E. 50 and above E. PhD E. 2,00,000-2,50,000

F. More than 2, 50,00

107

Risk Management in MSMEs Risk is omnipresent and all pervasive in any walk of life. It is more so in the business sectors,

particularly in Micro, Small and Medium Enterprises (MSMEs). The etymology of the word “Risk”

may be traced to the Latin word Rescum, which means Risk at Sea. In business, risk is always

measured against capital and therefore the Capital to Risk-weighted Assets Ratio (CRAR) is much

in vogue.

Risk is the potentiality that both expected and unexpected events may have an adverse impact on

the capital and earnings. When we use the term “Risk”, we all mean financial risk or uncertainty of

financial loss. If we consider risk in terms of occurrence frequency, we measure risk on a scale,

with certainty of occurrence at one and certainty of non-occurrence at the other end. When the

probability of occurrence or non-occurrence is equal, risk is the greatest. Risk can be broadly

defined as any issue that can impact the objectives of a business entity, be it financial service or

commercial. Risk Management is an ongoing process that can help improve operations, prioritise

resources, ensure regulatory compliance achieve performance targets, improve financial stability

and ultimately, prevent loss/damage to the entity’s.

Every enterprise, be it Micro, small or medium, has its own objectives and mission. Risk

Management plays a key role in protecting its assets and resources and ensuring that risks are

reduced to an acceptable level. The essence of risk management is to reduce the risks to a

reasonable and manageable level, on an on-going basis.

Risks Specific To MSMEs No doubt any business entity needs robust risk management systems but the SMEs need much

more than that as they may not have wherewithal to manage and control risks due to their very

size and several limitations. This is not true in the case of large corporate entities where

professional personnel take care of many aspects pertaining to risk. All risk taking units must

operate within approved procedures, limits and controls. There is no specific definition for MSMEs,

which normally cover closely held or unlisted companies, partnership firms, proprietor concerns,

etc.

There exists fundamental difference between the way they function and the way they will be

served in the financial market, as the character and integrity of the promoter/ owner are the key

and critical credit indicator and hence play a large role. In SME business, the ‘gut feeling’, which is

subjective, is more relied upon than the ‘pure analysis’ that are more objective-oriented. Hence,

both the business and professional relationships are rolled into one. Therefore credit rating or for

that matter risk rating may not make a material difference to MSME sectors. Certain

misconceptions such as MSMEs may get low rating, provide unreliable information, may not afford

108

the fees for getting them rated, etc. will have to be dispelled first. However, rating agencies with

specialised teams with analytical tools customised to MSME sector will go a long way in putting in

place proper mechanism in this regard.

The MSME sectors are exposed to some specific risks, some of which are discussed below:

(a) Constitution of business entity

(b) Leverage on financial structure

(c) Tough competition and Inadequate margin

(d) Low collection in Account Receivables

(e) Incapacity to go for technological advancement

(f) High employee turnover

(g) Micro Finance

(h) Collateral Security

(i) Bank Lending To MSMEs

By virtue of the fact that most of the entities in SME sector are small players in their field, they may

have to encounter tough competition from the bigger players

109

Chart on MSME Risk

Enterprise Wide Risk Management Enterprise Wide Risk Management is the latest trend and buzzword for an overall approach of the management of risk as a whole in the business. All business entities accumulate resources viz. men, material, money, technology, etc. and invest them in activities which are uncertain and hence fraught with various kinds of risks. As whole is always bigger than sum of its parts, enterprise wide risk management should be attempted instead of adopting silo-approach and handling risk of one issue, in isolation and exclusion of other functions. EWRM is a process through which a business entity optimises the manner in which it takes risks. It is not seeking or avoiding risk, but optimising the risk. Hence putting in place an EWRM makes good business sense. Any successful implementation of EWRM framework needs to take into consideration the integration of Enterprise Resource Planning system (ERP) so as to effectively manage the risk across the organisation facilitating the integration of the various roles to manage the same efficiently. In the light of advancement in information technology, power of computation and sophistication of risk analysis on interest rate, market fluctuations, availability of extensive database as well as information flow, the scope for putting in place an enterprise wide risk management framework has become more a necessity than a luxury for all the business enterprises. Basel II and SME Sector Under the new Capital Accord, popularly known as Basel II, the regulatory capital is more closely associated with risk implying that lending to lower risk borrowers will attract lower capital requirements.

110

Those banks which are likely to employ IRB approach should be better placed to avoid over-pricing good risks and under pricing bad risks. By deduction, it means that there may be some migration of higher risk SME loans to those banks which do not adopt IRB approach and which the banks, by implication, rely on less sophisticated and more standardised measures of risk. Any enhanced sensitivity of regulatory capital requirements to risk may be doing nothing more than aligning the regulatory environment with current practice.

111

Sr.

No.

Particulars Government Initiatives Bank Initiatives

1 Technology up

gradation

Under TUF Scheme by

Central Government, can

avail finance to upgrade the

machineries etc.

SUDICO bank

working as agent on

behalf of borrowers to

avail benefit of TUF

Scheme and transfer

the rebate & subsidy

on same.

2 Collateral

Requirement

Business Unit/Firm, who has

growth potential & good

financial strength but has

lack of collateral security,

can get loan approved

under the scheme of

CGTMSE.

Bank sanction the

loan under this

scheme

3 Working Capital

Finance

Units/Firms can get working

capital finance on the basis

of recommendations of

committees like Kannan

Committee (MBFP) &

projected balance sheet

method.

SUDICO Bank this

committee’s

recommendation to

sanction working

capital finance to the

firms.

4 For Export Units Government promote export

business, for that special

finance schemes & tax

reliefs are available to such

export oriented units.

SUDICO Bank has

financed such export

units.

5 Marking Channels To improve marketing

channels, SME Chambers

and Government promote

-------

112

their business in regular fair

and summits.

6 Quality Certification The Micro, Small & Medium

Scale Sector has emerged

as dynamic and vibrant

sector of Indian Economy

and it has been making

significant contribution to

industrial production, export

and employment generation.

The process of economic

liberalization and market

reforms has opened up the

Indian small scale sector to

the global competition. In

order to enhance the

competitive strength of the

small scale sector, the

Government introduced an

incentive scheme for their

technological up

gradation/quality

improvement and

environment management.

The scheme provides

incentive to those small

scale/ ancillary undertaking

who have acquired ISO

9000/ISO 14001/HACCP

certifications. The scheme

for ISO 9000 reimbursement

in operation since March,

1994 has now been

enlarged so as to include

reimbursement of expenses

------

113

for acquiring ISO 14001

certification also vide this

Office Administrative Order

No.41 (8)/ISO/Electx./2002

dt. 28th October, 2002. Upto

31st march 2009, 18778

Micro & Small units have

been benefited from the

scheme.

7 Credit Rating SMERA (SME Rating

Agency of India) accredited

in September 2012 for the

purpose of risk weighting,

the banks claims for capital

adequacy purposes in

addition to existing five

domestic credit rating

agencies.

SUDICO Bank

approaching to

SMERA for Rating of

Units or Firm with loan

amount more than

100 Lacs.

8 Interest Rebates Government of Gujarat is

giving rebate on paid

interest on loan.

SUDICO Bank also

providing rebate to

borrowers who repays

loan instalment

regularly and on the

growth cycle.

9 Interest on Loan On the basis of Rating of

SMERA or any reputed

rating agencies rating, can

get finance on lower interest

rate if rating is high

-------

10 SICK MSME Unit Reserve Bank has provided

setting up a rehabilitation

fund for reviving sick micro,

small and medium

enterprises (MSMEs) in the

wake of rising number of

such units. India

--------

114

Opportunities Venture Fund’

with SIDBI to enhance

availability of equity to the

SME sector’s

12 Infrastructure

development and

business growth

Cluster Development-

The development of Small

and Medium has taken

place in the form of different

industrial cluster. There are,

all 83 industrial cluster in

state for different industrial

goups have been identified

in state, developed at

number of different location

in state. The approch of

cluster based development

has helped in improving cost

competiveness of industries,

by way of creating common

facilities, developing

marketing centres, brand

name and promotion of

skills.

SURAT CITY has

following clusters-

Textiles-Powerlooms

Textile stores

Textile-synthetic

Diamond processing

Data processing

SUDICO Bank provide

finance to get

advantage of available

opportunities.

13 Marketing Support DC (MSME) has been

providing Marketing

Development Assistance

Scheme to MSMEs in order

for them to get exposure in

the international market, and

with the objective of

exploring the possible

export opportunities for their

products by exhibiting them

through participation in

International Trade Fairs

-----------

115

under MSME-India

umbrella. KVIC has been

granted the status of

‘deemed’ Export Promotion

Council (EPC) by the

Department of Commerce,

Ministry of Commerce and

Industry, Government of

India, for availing support

under Market Development

Assistance (MDA) / Market

Access Initiative (MAI) on

the pattern of an umbrella

EPC, like Federation of

Indian Export Organisations

(FIEO), for participation in

international

exhibitions/fairs,

organization of buyer-seller

meets, etc.

Vendor Development

Programmes (VDPs) are

being organized by

MSMEDIs in every nook and

corner of the country to

provide common platform

for MSEs as well as large

public sector enterprises to

interact with each other with

a view to identifying

emerging demands of the

buyer organizations, and

simultaneously providing an

opportunity for displaying

the capabilities of the

MSMEs and their industrial

116

ventures. Such programmes

have proved to be of

immense use in locating

suitable entrepreneurs by a

number of buying

organizations including the

Public Sector Enterprises,

Government departments

such as Defence, Railways,

in indigenising a number of

products which hitherto had

been imported.

14 Entrepreneurship

Development

Support

MSME-DIs are imparting

varieties of training

programmes for first

generation potential

entrepreneurs, existing

industrial workers and

managers. The ultimate aim

is to promote the MSME

sector of the country by

inculcating entrepreneurial

culture in the respective

area as well as to enhance

Productivity of the existing

industries of that State/Area.

Different types of

training programmes

conducted for

entrepreneurship

development and

promotion are: Industrial

Motivation

Campaigns (IMCs),

Entrepreneurship

Development Programmes

SUDICO Bank has

been working with

NABARD for

Entrepreneurship

programme for firms.

117

(EDPs),

Entrepreneurship Skill

Development

Programme (ESDPs),

Management

Development Programmes

(MDPs), Business Skill

Development

Programme (Tailor made

Course), and Entrepreneur-

cum-Skill Development

Programme (ESDP) on

Biotechnology.

The Ministry of MSME

initiated the Small Industry

Clusters Development

Programme (SICDP) which

is a broad based

programme for holistic and

integrated development of

micro and small enterprises

through

interventions such as

capacity building, marketing

development, export

promotion, skilldevelopment,

technology up gradation,

exposure visits, etc. and for

setting up of common

facilities.

15 Policy of reservation Reservation of items for

exclusive manufacture in

MSME sector statutorily

provided for in the Industries

(Development and

Regulation) Act, 1951, has

----------

118

been one of the important

policy measures for

promoting this sector.

The issue of

reservation/dereservation of

product is examined on a

continual basis by an

Advisory Committee on

Reservation constituted

under the I(D&R) Act 1951,

which is presently headed

by the Secretary (MSME) as

Chairman. Other Members

of the Committee are

Secretary (Commerce),

Secretary (IP&P), Advisor

(VSI) Planning Commission

with Additional Secretary &

DC(MSME) as Member

Secretary.

119

BIBLIOGRAPHY

120

Books- Kishore, Ravi. Strategic Financial Management, New Delhi: Taxmanan, 2011, page no 73-74 Bhaskar, B. and Saruvanan,I. SME Entrepreneurs challenges & opportunities, Mumbai, 2010 Cooper Donald, Schindler Pamela. Business Research Methods, ninth edition, New Delhi: Tata McGraw Hill Publishing Co. Ltd Khan, Y.M. and Jain, P.K. Financial Management, New Delhi: Tata McGraw Hill Publishing Co. Ltd. Pandey, I.M. Financial Management, Hyderabad: Vikas publishing housing ltd

Journals- Kaura, M.V. and Sharma, G.L. (1999). Financing Small Industries – Institution Should Change

Their Attitudes, Procedures. Journal of Industry and Trade, 34(3).

Mercieca, S. and Scheack, C. (2009). Bank Market Structure, Competition And SME Financing

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FIN92-93/RR 07 Finance and Development of Small Scale Industries in the North-East region- A

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Popli, G.S. and Rao, D.N. (2009). An Empirical Study Of Smes In Electronics Industry In India:

Retrospect & Prospects In Post WTO Era. Global Business Review, 3(2).

Popli, G.S.and Rao, D.N. (2009). Service Quality Provided By Public Sector Banks To SME

Customers: An Empirical Study In The Indian Context. Journal of Financial Services Research, 4.

Raju, B.Y. (2008) .Small And Medium Enterprises (SMEs) In India: Past, Present And Future.

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121

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Report (Hard Copy referred)-

1. 103rd Annual Report of The Surat District Co-operative Bank

2. NABARD Regional Training Annual Report (2010) on Financing MSMEs