Finance Project on Various Credit Schemes of SBI & Other Banks .......

INTRODUCTION TO BANKING

Banking regulation Act, 1949, defines banking as accepting for the

purpose of lending or investment, of deposits of money from the public,

repayable on demands or otherwise and with drawable on demand by

cheques, draft or order otherwise.

Functions of Commercial Banks :

 To change cash for bank deposits and bank deposits for cash.

 To transfer bank deposits between individuals and or companies.

 To exchange deposits for bills of exchange, govt. bonds, the secured

and unsecured promises of trade and industrial units.

 To underwrite capital issues. They are also allowed to invest 5% of

their incremental deposit liabilities in shares and debentures in the

primary and secondary markets.

 The lending or advancing of money either upon securities or without

securities.

 The borrowing, raising or taking of money.

 The collecting and transmitting of money and securities.

 The buying and selling of foreign exchange including foreign bank

notes.

Banking scence in India

The banking sector in India is passing through a period of structural

change under the combined impact of financial sector reforms, internal

competition, changes in regulations, new technology, global

competitive pressure and fast evolving strategic objectives of banks and

their existing and potential competitors. Until the last decade, banks

were regarded largely as institutions rather akin to public utilities. The

market for banking services were oligopolies and Centralized while the

market place was regulated and banks were expected to receive assured

spreads over their cost of funds. This phenomenon, which was

caricatured as 3-6-3 banking in the united states, meaning that banks

accepted deposits at 3%, lent at 6%, and went home at 3 p.m. to play

golf, was the result of the sheltered markets and administrated prices

for banking products. Existence of entry barriers for new banks meant

that competition was restricted to existing players, who often operated

as a cartel, even in areas where the freedom to price their products

existed.

The market place began to change for banks in India as a result of

reforms of the financial sectors initiated in the current decade. On

account of policy measures introduce to infuse greater competitive

vitality in the system, the banking has entered in to a competitive

phase. Competition has emerged not only from within the banking

system but also from non-banking institutions. Lowering of entry

barriers, deregulation of interest rates and growing sophistication of

customers have made banking far less oligopolistic today. Introduction

of capital adequacy and other prudential norms, freedom granted to

enter into new turf’s and greater overlap of functions between banks
and non-banks have forced banks to get out of their cozy little world

and think of the future of the banking.

Emerging environment in India

 Full convertibility of rupee leading to free mobility of capital, which

will mean virtual collapse of the national borders for trade and

capital flows.

 Greater coordination between monetary, fiscal and exchanged rate

policies for achieving the goals of faster and sustainable economic

growth, macro-economic stability and export promotion.

 Close integration of various financial markets such as money

market, capital market and forex market.

 Removal of lowering of existing barriers of competitiveness, which

are present today in the form of quantitative instructions on certain

imports protective custom duties, reservation of certain utilities for

the public sector.

 Growing privatization and commercialization infrastructure sector.

Today, Banks customers are better informed, more sophisticated and

discerning. They also have a wide choice to choose from various

banks and non-bank intermediaries. Their expectations are soaring.

This is particularly true for banks corporate clientele but also

applies to customers from personal segment.

This is changing profile of customer’s call for a shift from product-based

approach to customers-based approach. A bank aiming at

maximizing customer value must, of necessity, plan for customized

products. A combination of marketing skills and state-of-the-art

technology should enable to bank in maximizing its profits through

customer satisfaction.

In the next millenium banks will have to be more and more cautions about

customer service, profitability, increased productivity, to keep face

with changing banking scenario. As banks in India prepare

themselves for the millenium these are the shifts in the paradigm

they are likely to experience. The 21st century may see the dawn of

“DARWINIAN BANKING”. Only the banks could fulfill the

demands of markets and changing items would survive and

prosper.
 A word about SBI card

SBI Segment :

Small business credit card (SBI credit card)

Preamble :

Small business units, retail traders, artisans, village industries, small-

scale industrial units and tiny units, professionals and self employed

persons etc., contribute significantly to the growth of our economy. The

entrepreneur himself manages many of the units. Very often, these

entrepreneurs complain of procedural delay in sanctions and renewal of

limits. They also find it difficult to cope with the demands for audited

balance sheet and other statements sought by the bank from time to

time for availing credit facilities. With a view to providing hassle free

financial supports to the above categories of entrepreneurs who have

shown commitment to run the unit successfully and who are dealing

with the banks for last two years satisfactorily, new and friendly credit

product namely small business credit card scheme is designed. Under

the scheme, cumbersome procedural aspects relating to reviews and

renewals, submission of balance sheet, stock statements and other

statements are done with credit delivery made simple and easy.

Purpose :

To meet the credit requirements of small business units, industrial unit,

retail trader, artisan, Small Scale Industry (SSI) and tiny units.

Eligibility :

A. Customers of the following segments with a satisfactory track

record for the last two years enjoying credit facilities.

 Small industrial units (SSI and tiny units including

artisans)

 Small retail traders (Under SBF)

 Professional and self employed persons

 Small business enterprise

B. Units who do not enjoy credit limit with us/other banks at

present with excellent performance and credential may be

considered.

Quantum of loan :

Loan up to Rs. 5 Lakh can be sanctioned to eligible persons.

Assessment :

The small business credit card limit can be fixed as follows :

 For small business, retail trader etc. 20% of the annual

turnover declared for tax purpose or last twelve months turnover

in the operative accounts, whichever is higher.

In respect of parties with good track record, where sales tax returns are not available, the
credit limits may be decided taking into consideration the actual turnover in the accounts
during the last two years.

 For professionals and self employed persons, 50% of their

gross annual income as per IT return shall be considered as the

limit for issuing the SBI credit card.

 For small scale industrial units, tiny sector units the

assessment norms in vogue as per the Nayak Committee

recommendations would continue.

Validity :

 Credit card limit will be valid for a period of three years, subject

to satisfactory conduct of the accounts.

 Annual review will be done based on conduct/operations of the

A/cs. A major portion of the sales turnover should have been

routed through the accounts as revealed by the credit

summations.

Repayment :

 The working capital advance may be continued subject to that

review every year provided the credit summations in the account

is not less than 50% of the projected sales turnover. If the credit

summations is less than 50% of projected sales turnover. The

outstanding as on the due date of review should be made

repayable in suitable monthly installments.

 The term loan is repayable in suitable installments with in a

maximum period of five years.

 In case of composite loans, only the term loan is repayable in

installments up to a maximum period of five years.

Interest rate :

As per extent instructions issued from time to time relating the market

segment.

Refinance :

No refinance is to be claim from SIDBI

Security :

Primary : Hypothecation of the stock in trade receivables, machinery,

office equipment.

Collateral :

Under SSI-No collateral security as per existing guidelines of RBI.

User SBF :
Up to Rs. 25000/- No collateral security.

Over Rs. 25000/- charge over movable/immovable property or third

party granted.

However, in case of the excellent track record, sanctioning authority

may waive collateral requirement.

Margins :

Up to Rs. 25000/- NIL

Rs. 25001/- to Rs. 5,00,000/- 20%

Documentation :

Documents as per extant instructions.

Methodology :

The credit card is a hassle free convenient banking product aimed at

simplifying the credit delivery mechanism. Cumbersome procedural

aspects relating to reviews and renewals, submission of stock

statement, balance sheet and other statements are done away with. The

credit limit will be worked as detail above.

Small business credit card

Card No.

Name

Account No.

Tel. No.

Limit Rs.

Date of issue

Valid upto

………….. (Branch Code)

Signature of the Brach Manager

Card holder’s Photograph with signature

The borrower would be issued a photo card indicating sanctioned limit

and validity of the limit (sample card)
Insurance :

 Fixed assets/stock pledged/hypothecated to the bank be fully

insured at least to the extent of the bank interests.

 Bank may waive insurance of assets for equipment against the fire

and other risk up to Rs.25000/-

Cover under credit guarantee scheme :

All eligible laon accounts sanctioned for small scale industries (other than

services) would qualify for cover under CGTFSI scheme (presently

the scheme has been introduce in five circles on pilot basis viz. New

Delhi, Chandigarh, Lucknow, Patna & Hydrabad).

Operation :

 Small business credit card accounts should be maintained in a

separate ledger.
 Cheque book should be issued and marked as small business

credit card account.

 Pass book should be issued for mall business credit card holders.

 Stock statement waived.

 Submission of audited balance sheet waived.

 Borrower would be issued a small business credit card with

photograph thereon. Cost of photograph to be borne by banks.

 IRAC norms would be applicable.

 Brief opinion report should be recorded. Marked inquiries should

be made and recorded in the opinion report and singed by the

field officer/cash officer or officers not below that rank.

 Units within a radius of 5 kilometers may be covered intensively

for the issue of credit card. This condition may be waived for

such of those units already in the book of the branch as on 31-2-

2002.
Inspections :

Half-yearly inspection/monitoring to ensure the end user funds.

Sanction :

Required loan may be sanctioned with in a week after receipt of

detailed information.

Control return after sanction may be sent to next higher authority for

approval .

Scoring Model :

Loan would be sanctioned up to Rs. 5,00,000/- based on the simplified

scoring model as given in annexure- II. Those who are scoring less than

60% would not qualify for the loan.

Rationale :

New schemes for hassle free credit facilities to small borrower.

Automatic Teller Machine (ATM)

 An ATM (Automatic Teller Machine) card is useful to a card holder

as it helps him to withdraw cash from banks even when they are

closed. This can be done by inserting the card in the ATM installed

at various banks locations.

State Bank Cash Plus CARD

 Signature Panel.

 Magnetic Stripe

Features of State Bank Cash Plus Card

 State Bank Cash Plus Card having the 19 digit.

 Name of the card holders mention there on it.

 In case of State Bank Cash Plus Card, there is no expiry period

but for the old card, the date after which your card needs to be

renewed is the last day of the month indicated on your card.

 Signature panel on which you must sign as soon as you’re your

card. It identifies the card as your State Bank Card Plus Card.

 The magnetic stripe, which contains encoded information.

 ATM card possess pincode which having the 4 digit.

Use of State Bank Cash Plus Card

 We uses our State Bank Cash Plus Card for cash withdrawal

from ATMs.

We uses it for making the payments for purchase made at the

merchant establishments.
 Significance of the Study

This study entitled “comparative study of various credit schemes of

SBI V/s other banks” will be helpful for bankers to maintain customers

service policy, for customers while deciding their financing needs and

also helpful for other researchers for further research in the future.

SBI card provides customers with an option, in addition to the existing

banking credit facilities available. With an SBI card customers can

enjoy hassle-free credit facilities.

This study would help us to know about the problems that are faced by

the consumers during transactions. It would also reveal the problems

that are being faced by the bank employees while dealing with

customers and would also highlight the future prospect of SBI card.

Review of existing literature

It is very essential to know whether the study has already been

conducted before. If so, how and to what extent ? And because of this

scholar has to go through all the existing literature related to the study.
SBI Card is a new concept introduced in Bhiwani by State Bank of

India only a few months back, very limited studies have been

conducted on the subject. Due to the time restrictions scholar could

seek advice from only the limited literature, which is available with the

bank.

As the concept is completely under the control of various banks and

RBI. So the information is directly taken from these sources.

Conceptualization

As the concept includes two terms i.e. cash credit or working capital loans

and terms loans. Therefore both the terms are taken into

consideration in the proposed study. Due to the privatization of

banking sector many big private players entered in this sector giving

a tough competition to the existing players. So, to face this stiff

competition all the public sector banks have to review their

functioning. These aspects will be given importance in this study.

The concept of SBI card is quite new to the people of Bhiwani. Question

crops in mind what is a SBI card, What is its shape and size, what is

its function. A SBI card is nothing but a identity card containing

 card holder’s photographs with signature, card no. Name, A/c No.

limit, validity period, branch code with signature of Branch

Manager.

Focus of the problem

The study has been conducted at SBI Bhiwani. The main focus of the study

is to know about customer’s perceptions about various credit

schemes. As SBI card is an integral part of SBF (small business

financing). So the due

weightage is given to SBI card. This study has been conducted by

classifying customers into two categories.

 SBI Card holders

 Non SBI Card holders

Objective of the Study

 To find out the market potential of SBI card in Bhiwani.

 To know customer’s perceptions about various credit schemes of

different banks.
 To compare the credit schemes of different banks.

 To find out main obstacles while getting finance under various

credit schemes.

Limitations of the study

 The time was very limited as for requirement of study.

 Taking Sample has carried out the study. Therefore, all the

limitations associated with sampling.

 Sometimes the respondent does not want to disclose some

relevant information.

 The information provided by the respondent may not be

authentic.

 The sample size was restricted to Bhiwani only.

 CHAPTERISATION

The Chapterisation of the project report is as following :

Chapter –1 :

 I have discussed about the relevance and importance about the

project. I have explained the topic with ATM facilities. Why this

study is required? What are the limitations? What are the

objectives and what are the steps I have adopted for doing this

project.

Chapter –2 :

 This study consists of the whole research methodology about the

project. It means what are the steps have been taken for doing

this study. How much the sample size and what are the variables?

So this study consist the complete research methodology. In this

chapter the profile of organisation has been also covered.

Chapter –3 :
 It consists the detail descriptions about the raw data. Here the

complete analysis of the data, which is collected from the

primary sources. For tabulation the data is converted into the

percentage and after that it is tabulated. On the basis of this data

the graph are inserted. At last the conclusion is drawn on the

basis of this data.

Chapter –4 :

 It consists the appendices part of the project report in this part I

have mentioned the names of all those books, magazines,

journals and web-sites from where I have collected the material

comes under the head of bibliography. It also consists the

questionnaire, which is used for collecting the data.

Universe or survey population

All the customers availing credit schemes in Bhiwani is our universe while

the sample size is 50. The sample unit is individuals.

Criteria of selecting sample :

We are taking the sample on our convenience.

Sampling techniques :

Sampling techniques may be divided into two categories :

(1) Probability sampling :

Probability samples are characterized by the fact hat each

element of the population has known, non-zero chance of being

included in the sample.

(2) Non-probability sampling :

Non-probability sampling involves personal judgement

somewhere in the process. For the present study, convenient

technique of sampling (non-probability) was used.

Research Design
A research design is simply a plan for study in collection and analyzing

the data. It helps the researcher to conduct the study and ensure

that economical procedures are employed and probing is

relevant to the problem. Depending upon the objective of the

study there is three-research design available : .

 Exploratory Research

 Descriptive Research

 Casual or Experimental Research

Data Collection :

There are two sorts of data available :

1. Primary Data :

Primary Data are those data which are collected to solve a problem or

take advantage of any opportunity on which a decision is

depending. These data are basically observe and recorded by the

researcher for the first time used primary data for my project

work.

2. Secondary Data :
Secondary data are those data which are primarily collected by other

person for his own purpose.

Methods of Data Collection :

 Observation Method

 Questionnaire Method

Identified Independent and Dependent variables :

Independent variables :

All the external factors are independent variables :

 Govt. policy of RBI

 Environmental factors

 War

 Technology

 Natural Calamities

Dependent variables :

All the internal factors of organization are dependent variables :

  Company policy

 Infrastructure

Table No. 1

Awareness level about various credit facilities

YES NO

46 04

Most of the respondent are well awared about the credit facilities of
different Banks

Table No. 2
 No. of respondents availing the credit facilities

YES NO

44 06

Most of the respondent are availing credit facilities from Banks.

Table No. 3

Distribution of Respondents availing the credit facilities from banks.

SBI PNB UCO IOB Others

18 14 04 06 02
 Nearly 40% of the Respondents are availing credit facilities from SBI
followed by PNB.

Table No. 4

Time since customers are availing credit facilities

More than 3 2 to 3 1 to 2 Less than One

10 16 14 04

Most of the respondents are availing the credit facilities ranging from 1
to 3 years.
 Table No. 5

No. of satisfied customers

Yes No

32 12

Customers are highly satisfied with their banks.

Table No. 6
 Awareness level about various credit facilities of different banks

SBI PNB IOB UCO CANARA OBC

42 40 22 14 12 08

The credit facilities of SBI and PNB are well known to every
respondent.
 Table No. 7 (a)

Ranking of banks on the basis of interest rate

SBI PNB IOB UCO CANARA OBC

30 27 08 13 08 14

SBI and PNB are the most preferred banks in regard of interest rates.
 Table No. 7 (b)

Ranking of banks on the basis of collateral security requirement

SBI PNB IOB UCO CANARA OBC

26 30 16 10 06 12

Respondents are very much satisfied with SBI and PNB in respect of
collateral security requirement.
 Table No. 7 (c)

Ranking of banks on the basis of attitude of the employees

SBI PNB IOB UCO CANARA OBC

28 27 20 8 10 07

Respondents appreciate the attitude of employees of the SBI, PNB and

IOB.
Table No. 7 (d)

Ranking of banks on the basis of services

SBI PNB IOB UCO CANARA OBC

26 32 26 06 06 04
Respondents appreciate the level of services provided by SBI, PNB and IOB.

Table No. 7 (e)

Ranking of banks on the basis of documents required

SBI PNB IOB UCO CANARA OBC

28 24 18 12 08 10

Customers are happy with the document requirement of SBI and PNB.
 Table No. 7 (f)

Ranking of banks on the basis of renewal process

SBI PNB IOB UCO CANARA OBC

38 22 16 08 08 08

Customers are very much satisfied with the renewal process of SBI and tanks to SBI card.
 Table No. 8

Main obstacle while getting finance

(a) (b) (c) (d) (e)

Security Document Red Guarantee

Attidute of

Requirements Tapisam requirement Bank

Employees

24 08 04 08 06

Security requirements are the main obstacle while availing any credit facility.
 Table No. 9

Preference order of different parameters

(a) (b) (c) (d) (e) (f)

Interest Collateral Attitude of Services Document

Validity

Rate Security Bank Emp. requirement

42 12 08 16

14 08

Customer prefer low interest rates followed by services.

 Table No. 10

Preference level of banks

SBI PNB IOB UCO CANARA OBC

56 24 10 04 04 02

More than half of the respondents prefer SBI followed by PNB.

Table No. 11

Awareness level of SBI Card

Yes No

38 12
A good awareness level is exist about SBI cards.

Table No. 12

Sources of information about SBI card

Friends Bank Employees Advertisement Publicity

06 22 04

06
Most of the respondents gets information about SBI card from bank employees.

Objective No. 1 : To find out the market potential of SBI card in Bhiwani.

Ø Most of the respondents covered in the survey know about the SBI card

and feel that this facility is beneficial to them as they can fix the limit for

three years.

Ø Respondents even require further guidance related to few things.

Ø Customers feel very enthusiastic about the launch of SBI card in

Bhiwani and very sure about its success.

Ø Most of the respondents want an increase in existing limit i.e. 5.00 lacs.

Objective No. 2 : To know customer’s perceptions about various credit

schemes of different banks.

Ø Most of the respondents like the credit facilities provided by SBI and

PNB.

Ø According to most of respondents, PNB is the fastest service provider. It

takes only 15 days to disburse the sanctioned loans whereas other banks

including SBI takes 40 to 45 days.

Ø PNB is offering the lowest PLR i.e. 11.25% whereas other banks are

offering 11.5%.

Objective No. 3 : To find out main obstacle while getting finance under

various credit schemes.

According to most of respondents, security and document requirement

are the main obstacles while getting finance under various credit schemes.

Suggestions

On the basis of data analysis and interpretations, the following suggestions can

be made.

Ø RBI Should reduce the SLR and CRR to increase the credit creation

capacity of the banks.

Ø All the nationalized banks should try to improve their service level to

face the stiff competition given by private banks..

Ø Banks should reduce the time length between sanction and disbursement

of loan.

Ø SBI should increase the limit under SBI card to fulfill the growing

requirement of the customers.

Ø Bank employees should bring more professionalism in their attitude

while dealing with customers to retain and attract more customers.

Ø Banks should narrow down the spread between PLR and deposit rates.

Ø Banks should advertise and conduct special awareness programs to

make SBI cards more popular among customers.

Questionnaire
Name ………………………… Age ………………………….
 Income………………………... Occupation…………………...

Q1. Are you aware of various credit facilities of banks ?

Yes No

Q2. Are you availing credit facility from any bank ?

Yes No

Q3. If yes, from which bank you are availing credit facility ?

…………………………………………………………

Q4. Since when you are availing this facility.

a) More than 3 year b) 2-3 years

c) 1-2 years d) Less than 1 year

Q5. Are you satisfied with your existing bank ?

Yes No

Q6. If no, then why ………………………………………….

…………………………………………………………..

Q.7 Tick the name of banks whose credit facilities are known to you ?

a) SBI b) PNB c) IOB

d) CANARA e) UCO f) OBC

Q8. Rate the banks on the basis of following parameters :

Factors Interest Collatarel Attitude Services Document Renewal

 Rate Security of Field required process

Banks officer
SBI
PNB
UCO
OBC
CANARA
IOB
Q9. According to you what is the main obstacle while getting finance under various

credit facilities?

a) Security b) Document Requirement

c) Red Tapism d) Guarantee requirement

e) Attitude of bank employees

Q10. According to you arrange the parameters in the descending order of their

preference?

a) Interest Rate b) Collateral Security

c) Services d) Attitude of field Officer

e) Document required f) Validity period

Q11. Which banks name comes to your mind first while availing credit facility and why?

………………………………………………………………………..

………………………………………………………………………..

Q12. Have you heard about SBI card?

 Yes No

Q13. If yes, from where?

a) Friends b) Bank Employees

c) Advertisement d) Publicity

Q14. Do you want to give any suggestions to banks?

……………………………………………………………………….

……………………………………………………………………….