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1.1 INTRODUCTION TO SMEs
Small and Medium Enterprises (SMEs) have played a significant role world over in the economic development of various countries. Over a period of time, it has been proved that SMEs are dynamic, innovative and most importantly, the employer of first resort to millions of people in the country. The sector is a breeding ground for entrepreneurship. The importance of SME sector is well-recognized world over owing to its significant contribution in achieving various socio-economic objectives, such as employment generation, contribution to national output and exports, fostering new entrepreneurship and to provide depth to the industrial base of the economy. Small and medium-sized enterprises (SMEs) are the backbone of all economies and are a key source of economic growth, dynamism and flexibility in advanced industrialized countries, as well as in emerging and developing economies. SMEs constitute the dominant form of business organization, accounting for over 95% and up to 99% of enterprises depending on the country. They are responsible for between 60-70% net job creations in Developing countries. Small businesses are particularly important for bringing innovative products or techniques to the market. Microsoft may be a software giant today, but it started off in typical SME fashion, as a dream developed by a young student with the help of family and friends. Only when Bill Gates and his colleagues had a saleable product were they able to take it to the marketplace and look for investment from more traditional sources. SMEs are vital for economic growth and development in both industrialized and developing countries, by playing a key role in creating new jobs. Financing is necessary to help them set up and expand their operations, develop new products, and invest in new staff or production facilities. Many small businesses start out as an idea from one or two people, who invest their own money and probably turn to family and friends for financial help in return for a share in the business. But if they are successful, there comes a time for all developing SMEs when they need new investment to expand or innovate further. That is where they often run into problems, because they find it much harder than larger businesses to obtain financing from banks, capital markets or other suppliers of credit.
Common Characteristics of SMEs (a) Born out of individual initiatives & skills SME startups tend to evolve along a single entrepreneur or a small group of entrepreneurs; in many cases; leveraging on a skill set. There are other SMEs being set up purely as a means of earning livelihood. These includes many trading and retail establishments while most countries continue SMEs to manufacturing services, others adopt a broader definition and include retailing as well. (b) Greater operational flexibility The direct involvement of owner(s), coupled with flat hierarchical structures and less number of people ensure that there is greater operational flexibility. Decision making such as changes in price mix or product mix in response to market conditions is faster. (c) Low cost of production SMEs have lower overheads. This translates to lower cost of production, least upto limited volumes. (d) High propensity to adopt technology Traditionally SMEs have shown a propensity of being able to adopt and internalize the technology being used by them. (e) High capacity to innovate export: SMEs skill in innovation, improvisation and reverse engineering are legendary. By being able to meet niche requirements, they are also able to capture export markets where volumes are not huge. (f) High employment orientation: SMEs are usually the prime drives of jobs, in some cases creating up to 80%. Jobs SMEs tend to be labour intensive per se and are able to generate more jobs for every unit of investment, compared to their bigger counterparts.
the promotion and development of SMEs 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. 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. SMEs enjoy the flexibility of location. In keeping in view its importance. generating employment and creating new entrepreneurship in India. any country. The number of SMEs in India is estimated to be around 13 million while the estimated employment provided by this sector is over 31 million. SMEs in India India has a vibrant SME sector that plays an important role in sustaining economic growth. Thus.(g) Reduction of regional imbalances Unlike large industries where divisibility of operations is more difficult. SMEs in India have recorded a sustained growth during last five decades. SMEs can be found spread virtually right across.1 SMEs In India 4 . even through some specific location s emerge as ‘clusters’. increasing trade. Figure 1.
gov.2 crore & upto Rs. Both categories of enterprises have been further classified into micro. 2009) India embarked on the path of opening up its economy and integrating it with the global economy in 1991.10 lakh Above Rs. Small And Medium Enterprises Classification Micro Small Medium Investment Ceiling for Plant. access on a global basis to modern technology.in/ssiindia/MSME_OVERVIEW09.pdf last accessed on 26 Nov.25 lakh Above Rs. the enterprises have been classified broadly into two categories: (i) Manufacturing.2 crore Above Rs.25 lakh & upto Rs.10 lakh & upto Rs. small and medium enterprises based on their investment in plant and machinery (for manufacturing enterprises) or on equipments (in case of enterprises providing or rendering services). capital resources and markets have become the most critical determinants of international competitiveness.5 crore . The classification on basis of investment is as under: Table 1.(http://www. In today’s world.5 crore Above Rs. and (ii) Those engaged in providing/rendering of services.10 crore Table 1. The very rules which provide increased access for our products in the global markets also put domestic industry under increased competition from other countries.5 crore & upto Rs. has also thrown up new challenges in terms of fierce competition.1 Classification Of Micro.dcmsme. Defining SMEs In India. The liberalization of economy. Machinery or Equipments Manufacturing Enterprises Upto Rs.2 5 Service Enterprises Upto Rs. while offering tremendous opportunities for the growth and development of Indian industry including SMEs.
electrical control panels (not mounted on individual machines) • • • • • • • • 6 .1 crore Not defined Not defined Service Enterprises Upto Rs. jigs. Small And Medium Enterprises Before 2nd October. Bank charges and Service Charges paid to the National Small Industries Corporation or the State Small Industries Corporation.25 lakh & upto Rs.in/ssiindia/MSME_OVERVIEW09.pdf last accessed on 26 Nov.25 lakh Above Rs. Research and development and pollution control equipments. the following duty/charges/costs shall be included in calculating their value: • Import Duty (not to include miscellaneous expenses such as transportation from the port to the site of the factory. Procurement or Installation of cables.Classification Of Micro. Equipments such as tools. 2006 Classification Micro Small Medium Investment Ceiling For Plant. and Sales Tax or Value-added Tax. 2009) While calculating the investment in plant and machinery/equipment referred to above. Shipping Charges. demurrage paid at the port). moulds.dcmsme. Cost of the following plant & machinery/equipments etc would be excluded:. Power generation set and extra transformer installed by the enterprises as per the Regulations of the State Electricity Board. Customs Clearance charges. the original price thereof shall be taken into account. Machinery Or Equipments*@ Manufacturing Enterprises Upto Rs. irrespective of whether the plant and machinery/equipment are new or second hand. dies.10 lakh Not defined (http://www. wiring bus bars.gov. and spare parts for maintenance and the cost of consumable stores. In case of imported machinery/equipment. Installation of plant &machinery.
Gas producer plants. Small and Medium Enterprises would be in place of the existing definitions of Small & Medium Industries and SSSBEs/Tiny Enterprises. engaged in providing/rendering of services. Thus. the original cost to exclude furniture. Small Enterprises (Manufacturing) would mean Small Scale Industries (SSIs). • • • • Micro Enterprises would include Tiny Industries also. Small Enterprises (Services) and Medium Enterprises (Services) would mean other Small & Medium Enterprises. (including advances against TDRs/Govt. SME would be meant to include Micro Small and Medium Enterprises (MSMEs). Micro. Small and Medium Enterprises in the Manufacturing sector irrespective of sanctioned limits. and Small Road/Water Transport Operators and other enterprises. and Such other items as may be specified. fittings and other items not directly related to the services rendered. Medium Enterprises (Manufacturing) would mean Medium Industries (MIs). • • In case of Service Enterprises. • • • • Charges paid for technical know-how for erection of plant machinery. SME Advances would be categorised as under: • All advances to segments viz. by notification from time to time. Fire-fighting equipment. and • Advances to Services Sectors such as Professional & Self-Employed. The above definitions of Micro. Small Business Enterprises.• Oil circuit breakers or miniature circuit breakers which are necessarily to be used for providing electrical power to the plant and machinery or for safety measures. Transportation charges (other than sales tax or value-added tax and excise duty) for indigenous machinery from the place of their manufacture to the site of the enterprise). Securities etc for business purposes to these categories of Borrowers). conforming to the above 7 . Such storage tanks which store raw materials and finished products only and are not linked with the manufacturing process. Land and Building would also not be included while computing the machinery/equipments cost.
the advent of modern large scale mechanized industry.aspx last accessed on 26 Nov. • Those enterprises exceeding the investment ceilings would be categorized as Large Enterprises and be outside the purview of SME. it has staged a grand recovery and is now well entrenched on the path of progress towards great expansion.investment criteria and enjoying borrowing/non-borrowing facilities with the Bank (including advances against TDRs/Govt.The growth in employment generation has been equally impressive from 3% to 45% during the same period. • • (http://www. Growth by itself in SME sector is impressive enough indicating a positive response to the Economic Reform process initiated in the country since 1991. 2007. just behind agriculture. However. Employment in SME touched 19 million.Assured supply of Raw Materials 8 . Share of SSI exports crosses 40% of total exports. The sanctioned limits would no longer be the criteria determining the status as micro or small or medium enterprises in these cases. As per this circular Retail Trade is excluded from the activities classified as SME. 2009) Development of SMEs In India Making the best use of the material resources by employing higher order of skill and artistic talents through traditional handicrafts. --. Reserve Bank of India has since reviewed the definition on Priority Sector and have issued revised guidelines on lending to Priority Sector vide their Master Circular dated 2nd July.Development of infrastructure --. Securities etc for business purposes to these categories of Borrowers).bankofindia. SSI sector in India has posted impressive growth in 1990's from 15% in 1991-92 to 55% in 2001-02. the imposition of restrictions on Indian trade by the British rulers and deteriorating socio-economic conditions lead to the decline of Small Scale Industry.com/smepol. SME has emerged into prominent sector in Indian economy in general and industry in particular. India has occupied a permanent place of pride in the world before industrial resolution. But with the provisions of permanent place in the nation's policy of economic development after the attainment of the Independence.
2009) Small and Medium Enterprises .Financial subsidies --.36 135482 1999-00 97. --.87 93555 1991-92 70.59 178699 2005-06 123.3 Progress Of SMEs In India Year Total SME Units (Lakhs) Fixed Investment (Rs Crores) 1990-91 67.1 146845 2001-02 105.aspx last accessed on 27 Nov.49 162317 2003-04 113.51 109623 1993-94 76.84 125750 1996-97 86.71 133242 1998-99 93.smechamberofindia.--. The Government announced its second Industrial policy in 1956 which replaced the Industrial policy resolution of 1948.15 139982 2000-01 101.42 188113 (http://www.com/rol_of_sme_sector.60 123790 1995-96 82.21 130560 1997-98 89.49 115795 1994-95 79.21 154349 2002-03 109. A Small and Medium Industries Board was constituted in 1954 and a number of helping schemes such as supply of machinery on hire purchase.95 170219 2004-05 118.63 100351 1992-93 73. liberal and wider grants.Concessionary Taxes and Tariffs.Availability of Cheap Credit --.Equity contributions are all the protective measures for the sector Table 1.Industrial policy: The small and Medium industries have a specific role to play by the Industrial policy 1948 which stated that cottage and small scale industries are particularly suited for better utilization of local resources and for the achievement of local selfsufficiency in respect of certain type of essential goods.While such measures continue to be taken wherever 9 .
42 million in employment. 40% of exports and above 88% of manufacturing employment. the state followed a policy of supporting small enterprises in the country. Hence. create one million jobs every year and produces more than 8000 quality products for the Indian and international markets.35 Lakhs. Small and Medium enterprises have emerged as the leaders in the industrial sector. SMEs play a vital role for the growth of Indian economy by contributing 45% of the industrial output. Small and Medium enterprises account for 55% of industrial production. The definition of small scale unit was revised to include all manufacturing units having investment in Plant and Machinery unto Rs. In recognition of their significance and stature. the investment ceiling was Rs. The relative importance tends to vary inversely with the level of development and then government their contribution. In case of ancillary units. This was to promote and strengthen small. Besides. In the policy statements of 1991. 40% of exports. tiny and village enterprises. This is almost a U-turn in policy stimulants and structure of micro and small enterprises in the country. the announced policy measures on August 6. this sector is considered as dynamic and vibrant sector of the country. Role of SME sector in Nation Development The Small and Medium sector plays an important role in the Indian economy in terms of employment and growth has recorded a high rate of growth after independence. 1991 for the first time in the post independence period.necessary.45 Lakhs. the Government intended to strengthen the existing arrangements to finance small scale units and make changes if necessary to ease the credit problems of the sector. The Industrial policy statement of 1985 was also accorded importance to small scale sector and made some suitable policy changes. As a 10 . the aim of the state policy is to ensure that the decentralized sector acquires sufficient that of vitality large to be self supporting and its development is integrated with scale industry. The system of reservation of items for exclusive production by small scale units would continue in future.
36 97.21 109. SMEs are finding increasing opportunities to enhance their business activities in core sectors. Crore) 9664 13883 17784 25307 29068 36470 39248 44442 48979 54200 69797 71244 86013 95510 (http://www. Small and Medium industry is providing employment at an increased rate which is evident from the table above.49 113. Food Processing.49 79.09 260.16 220. employment and foreign exchange earnings. Table 1.13 271.com/rol_of_sme_sector.87 70. Textile & Garments.99 174. 11 . Pharmaceuticals.93 205.10 239.71 93.4 Data Of SMEs In India Year Total SME Units 1990-91 1991-92 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 (Lakhs) 67.51 76.result.aspx last accessed on 27 Nov.15 101. with limited financial resources and huge reservoir of human resources.40 197.21 89. For a country like ours. Agro and Service sectors.09 249. SMEs are today exposed to greater opportunities for expansion and diversification across the sectors. Small and Medium industry is the only means for solving the unemployment problem.1 105.34 165.64 191. The good performance of the small scale units is evident from their number.63 73.95 Fixed Investment (Rs Crore) 93555 100351 109623 115795 123790 125750 130560 133242 135482 139982 146845 154349 162317 170219 Production (Rs Crore) 63518 73072 85581 98804 122210 148290 168413 189178 212901 234255 261289 282270 311993 351427 Employment (lakh persons) 158.55 229.84 182.60 82. Precision Engineering. 2009) The root cause for unemployment in India is the over growing population which has outpaced the development of industry and agriculture.36 Export (Rs. The Indian market is growing rapidly and Indian industry is making remarkable progress in various Industries like Manufacturing.smechamberofindia.16 213. Retail. production.84 86. IT.
The small and medium industrialists are generally poor and there are no facilities for cheap credit. As against the share of the village and SME at 40% in the industrial output. higher prices by suppliers. Financial Institutions and Corporate Sector. who exploit them by completing them to sell their products at very low price.absence of adequate and timely banking finance. low production capacity. There discounts. The quantity. its share in total credit to the industrial sector is only about 30%.Problems of SMEs Despite its commendable contribution to the Nation's economy. 12 . or else they borrow from the dealers of their goods. b) Raw Material problem of SMEs: This difficulty is experienced in a very pronounced form. SME sector faces a number of problems . Banking Sector. 1969. limited knowledge and non-availability of suitable technology. 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. Financial weakness stands in the way of securing raw materials in bulk in a competitive market. Difficulty is also experienced in procuring semimanufactured materials. the Commercial banks were providing only a small proportion of SMEs financial requirements. follow up with various agencies in solving regular activities and lack of interaction with government agencies on various matters. They fall into the clutches of money lender who charges very high rates of interest. SME Sector does not get the required support from the concerned Government Departments. Some of the major problems are briefly as follows: a) Financial problems of SMEs: The financial problem of SMEs is the Root Cause for all the other problems faced by the SME sector. quality regularity quantity of the supply of since raw materials they are not in satisfactory. are purchased and are no small quantities and hence charged. Credit to the SME sector continues to be non-commensurate with its contribution to the total industrial output. After the nationalization of 14 major Indian Banks in July.
power. These short comings have tended to endanger the health of units are workmen and have adversely affected the rate of production. finance. accounting and marketing management. Adoption of modern techniques is either Wage rates and service conditions of small industries are not attractive to skilled labor. it becomes difficult for SMEs to cope up with changing technology. The in efficiency in management comes first among managerial problems. 13 . The SMEs have to face the competitions from large scale units in marketing their products. following primitive methods of production. Many disliked by the entrepreneurs is not feasible.c) Production problem of SMEs: SME units suffer from inadequate work space. lighting and ventilation. Internal and external factors. The potential demand for their goods remains under developed. It causes damage to the growth and stability of SMEs. the helpless artisans are completely at the mercy of middle man. From among and external causes of the various internal sickness the important ones are bud management. and safety measures etc. f) Sickness of SMEs: 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. Technology up gradation and the frequent need to renew the equipment has emerged as a big problem. The entrepreneurial ability of promoters of cottage industries and SMEs are handicapped by technical know how in the areas of production. d) Technological problem of SMEs: Today technology is changing at a very fast phase. e) Managerial problem of SMEs: 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. SMEs cannot afford to spend lavishly for advertisement to promote their sales. d) Marketing problem of SMEs: As marketing is not properly organized. Sickness is caused by two sets of factors.
financing and development of SMEs. The availability of adequate credit at affordable cost. short of raw materials. outdated plant and machinery. 2009) Figure 1.aspx last accessed on 27 Nov. SIDBI is the national level principal financial institution for promotion. quality and adopt modern management techniques to keep pace with the changes that are taking place in the global market.high rate of capital gearing. 14 . 2010) The above figure shows that finance has been the major reason for the sickness of SME units.smechamberofindia. thus. low labor productivity etc.in/k-solutions/msme-planet/sickness-rehabilitation last accessed on 25 Jan.2 Reasons For The Sickness Of SMEs (http://milagrow. Need of the hour The need of the hour for Indian SMEs is to upgrade their technology. becomes critical for Indian SMEs. (http://www. inadequacy of finance. The other major reasons are ineffective management and technology upgradation according to the latest technological changes. Investment would be a prerequisite in these areas to bring about transformation.com/challenges_to_sme_sector.
To empower the SME Sector to take its rightful place as the growth engine of Indian economy. educate and empower them to make optimum utilization of the resources. following items are reserved for exclusive manufacture by micro and small enterprise sector: • Food and Allied Industries: Pickles & Chutneys. Steel chairs – all types. Excluding Transport Equipment: Steel almirah.aspx last accessed on 27 Nov. Rolling solvent extracted). Large/Medium units can. Ground nut oil (except solvent extracted). Mustard Oil (except Wood and Wood Products: Wooden furniture and fixtures Paper Products: Exercise books and registers Injection Moulding Thermo Plastic Product: PVC Pipes. SME Chamber of India has decided to start various activities to empower and educate the SME Sector by organising various trade promotional activities in India and abroad. both human and economic. however. manufacture such reserved items provided they undertake to export 50% or more of their production.smechamberofindia. including conduits Other Chemicals & Chemical Products: Wax candles. (http://www. Safety Glass & Ceramics: Glass Bangles Mechanical Engg. Bread. Also provide assistance and support for the promotion of domestic business as well as export promotion of the SME sector. to achieve success. Domestic utensils – Aluminium 15 . As on 10 October 2008. Fittings for PVC pipes • matches. Steel tables – all other types. it is necessary to support the SMEs.com/need_of_hour. 2009) To encourage the growth of small scale industries in India. Steel furniture – all other types. Laundry soap. Fire works. Agarbatties • • shutters. The SMEs need to be educated and informed of the latest developments taking place globally and helped to acquire skills necessary to keep pace with the global developments. • • • upto 110 mm dia. Padlocks. Government has reserved certain products for manufacture in the small scale sector in areas where there is technoeconomic justification for such an approach. Stainless steel utensils.
iloveindia. (iii)Support for Entrepreneurial and Managerial Development of MSMEs.61 lakh trainees during 200809. (ii) Building awareness on Intellectual Property Rights.1. Several of the schemes started by the Ministry of Micro. 91. small and medium enterprises in the country saw success this year. Skill Development on priority: Various measures like enhancing the training capabilities of the Tool Rooms. Improving Competitiveness: Six out of the ten components under the National Manufacturing Competitiveness Programme (NMCP) for MSMEs are now operational.2 lakh persons. the Ministry of MSME and other government departments are still working hard to pull the sector out of the recession and overcome some inherent problems. However. Better Credit Flow: The ‘Policy Package for Stepping up Credit to Small and Medium Enterprises (SME)’ was set up by the government in August 2005 for doubling the credit flow to the MSME sector within a period of five years.67. 634 crore at the end of March 2005 to Rs. The target set for 2009-10 is to train 3.307 crore at the end of March 2009. MSME Development Institutes and other organizations under the Ministry of MSME have helped to train nearly 2. Following are some progress areas in 2009 that have made a positive impact on SMEs. and (iv)Marketing support/assistance to MSMEs (v)Lean Manufacturing Competitiveness Scheme and (vi) Mini Tool Room Scheme. Credit flow from Public Sector Banks (PSBs) to this sector has increased from Rs.(http://www. with several programs organised free of cost for the weaker sections of society. 16 . 2010) SME Policy Initiatives in 2009 A continuous attention to ongoing schemes to assist MSME has demonstrated success in several areas.com/finance/doing-business-in-india/small-scaleindustries. These are (i) Quality Management Systems and Quality Technology Tools.html last accessed on 8 feb. especially during the painful process of recovering from an economic recession. Small and Medium Enterprises (MSME) to promote the development of micro.
with about 690 units amounting to Rs. Until October 2009. Decentralised in 2007. For instance. the loan limit was enhanced from Rs.000/. 2.1000 crore) at the end of March 2004. Around 38 lakh additional employment opportunities in the terminal four years (2008-09 to 2011-12) of XI Plan are expected. now 179 new technologies machines for pharma sectors have been added to this list. the scheme saw growing popularity in 2009. 17 . The government’s credit guarantee scheme has been rather successful because of timely interventions to make the scheme more attractive to lenders and borrowers. 15 per cent capital subsidy is provided on loan amounts upto Rs. more than 2.88 crore being reimbursed uptil November 2009 during 2009-10.68 crore was released to the MSEs under the scheme.8200 crore) at the end of November 2009. 4735 crore including Rs.The program provides financial assistance to set up microenterprises costing upto Rs. 25 lakh in manufacturing sector in the form of subsidy upto 25 per cent of the project cost in rural areas and 15 per cent for urban areas. From about 40.25 lakh to Rs. 75. From the 47 products/sub-sectors with nearly 1400 well-approved technologies/machines for subsidy under the scheme. Quality improvement on priority : The ISO-9000/ISO-14001/HACCP Certification Reimbursement Scheme is an incentive scheme to upgrade technology and improve quality that provides for one time reimbursement of charges for acquiring ISO9000/14001/HACCP (or its equivalent) certification to the extent of 75% of the cost subject to a maximum of Rs.10 lakh in service sector and Rs. 100 lakh for technology upgradation.5% to 1. Success can be gauged from the data on increased coverage.5%. Capital subsidy spreads coverage: Under the Credit Linked Capital Subsidy Scheme for Micro and Small Enterprises (CLCSS). Employment Generation: The Prime Minister’s Employment Generation Programme (PMEGP) was launched in August 2008 with a total plan outlay of Rs.in total. 7810 proposals of subsidy were approved and Rs.Success of Credit Guarantee Scheme: MSMEs are often unable to provide collateral as security to procure loans. 338.27 lakh proposals (for loans of over Rs.100 lakh. etc. the one-time guarantee fee was reduced from 2.000 proposals received (for loans of Rs. 250 crore for backward and forward linkages.
55 lakh persons until 31st August 2009. venture capital or private equity.in/bw/2010_01_04_SME_policy_initiatives_in_2009. This has led to significant debate on the best methods to serve this sector. and relationship lending.762 applications were received under PMEGP. equity/corporate bond issues. It is also recognized that these actors in the economy may be underserved. (http://www.454 candidates were selected. especially in terms of finance.html last accessed on 9 feb. acquired. About 4. credit Viability based financing is especially associated with venture capital. there are a number of distinctive recurring approaches to SME finance.64 lakh additional employment. However. using reliable debtors or contracts.444 projects were sanctioned financial assistance by banks for generating an estimated 3. of which 83. 2. 18 .507 cases by banks giving employment opportunities to about 2. Capital is supplied through the business finance market in the form of bank loans and overdrafts. contribution based finance.Until March 2009.17. and factoring based finance. About 36. Information based lending usually incorporates financial statement lending.businessworld. Loans were disbursed in 25. 2010) SME Financing SME Finance is the funding of small and medium sized enterprises and represents a major function of the general business finance market – in which capital for firms of types is supplied. scoring. and costed/priced. Collateral based lending offered by traditional banks and finance companies is usually made up of a combination of asset-based finance.5 lakh additional employment will be generated in2009-10. There have been numerous schemes and programmes in markedly different economic environments. leasing and hire-purchase arrangements. and assetbased finance such as factoring and invoice discounting Importance The economic and social importance of the small and medium enterprise (SME) sector is well recognized in academic and policy literature.
The SMEs that fall into this category have been defined as Small Growing Businesses (SGBs) at a workshop in Geneva in July 2008. Since the viability based approach is 19 . Entrepreneurship & Development (GE&D) There have been at least two distinctive approaches to try to overcome the so-called SME finance gap.200 crore by 2009-10 i. markets may be characterized by deficient information (limiting the effectiveness of financial statement-based lending and credit scoring). This might be done through an external party providing the collateral or guarantees required. The SME clientele base could also be utilized by the Branches to step-up “cross selling” of various other products including technology-enabled products. the general ability of the banks to service the credit requirements of the SME sector depends on the underlying transaction costs. the second approach has been to broaden the viability based approach.1. the Government’s objective is to double the flow of credit to the SME sector from Rs. This has led to claims of an "SME finance gap”. skill set development/entrepreneurship development. within a period of 5 years. In addition. Although the banks are allowed to fix their own targets for funding SMEs in order to achieve a minimum 20% year-on-year growth.67. to the extent that the schemes concerned run counter to basic free market principles they tend to be unsustainable. With the deregulation of the financial sector. committed to give fillip to this sector through infrastructure development.600 crore in 2004-05 to Rs. SME Financing Gap A substantial portion of the SME sector may not have the security required for conventional collateral based bank lending. There is an immediate need for the banks generally to focus on credit and finance requirements of SMEs. technology up gradation etc. Also. efficient recovery processes and available security. Credit risk in the SME sector is widely dispersed and Banks get better yield from SME advances as against the traditional advances where the spread is getting gradually reduced.There is also a more favorable environment now with the Govt. nor high enough returns to attract formal venture capitalists and other risk investors.35. hosted by The Network for Governance. Thus. The first has been to broaden the collateral based approach by encouraging bank lenders to finance SMEs with insufficient collateral.e. Unfortunately.
the aim has been to provide better general business development assistance to reduce risk and increase returns.wikipedia.3 Various ways of Financing SMEs Problems of SMEs Financing The main problem faced by SME’s when trying to obtain funding is that of uncertainty: • SME’s rarely have a long history or successful track record that potential investors can rely on in making an investment. (http://en. 20 .org/wiki/SME_finance last accessed on 27 nov. 2009) Sources of SME Finance: The most common sources of SME finance are as follows Figure 1.concerned with the business itself. • Larger companies (particularly those quoted on a stock exchange) are required to prepare and publish much more detailed financial information – which can actually assist the finance-raising process.
• Banks are particularly nervous of smaller businesses due to a perception that they represent a greater credit risk. term. 57%. When an SME is not growing significantly. They will therefore need to consider raising finance from other external sources. They will need to raise finance to achieve their objectives (http://tutor2u. financing may not be a major problem. details of the experience of directors and managers and demonstrate how they can give providers of finance some security for amounts provided. Because the information is not available in other ways. the financing problem becomes very important when a company is growing rapidly. The terms of the loan (interest rate. And among them the major share is of public sector banks i. of banks that help in assisting the SMEs for financing. Thus it is clear that the most common source of finance for SMEs is Bank Financing. 21 . SME’s will have to provide it when they seek finance. In addition.net/business/finance/finance_sources_smes. However.e. Prospective lenders – usually banks – will then make a decision based on the information provided. 2009) 1. managers who are looking to buy-in to a business ("management buy-in" or "MBI") or buy-out (management buy-out" or "MBO") a business from its owners may not have the resources to acquire the company. A common problem is often that the banks will be unwilling to increase loan funding without an increase in the security given (which the SME owners may be unable or unwilling to provide). These are companies without substantial tangible assets which can be use to provide security for lenders. Nearly 82% of the total SME financing in year 2006-07 is through banks.htm last accessed on 27 Nov. They will need to give a business plan. and repayment details) will depend on the risk involved and the lender will also want to monitor their investment. There is no.2 ROLE OF PUBLIC SECTOR BANKS IN SME FINANCING Banks are playing a major role in financing SMEs in India. security. list of the company assets.A particular problem of uncertainty relates to businesses with a low asset base. for example when contemplating investment in capital equipment or an acquisition. Few growing companies are able to finance their expansion plans from cash flow alone.
Cluster-based Schemes are also on the list of the Bank’s initiatives. Quick decision with least Turnaround Time through specially constituted SME Cells. Better service.businessworld.in/bw/2009_11_19_Reforms_To_Improve_Credit_Access_T o_SMEs. has become very important in the above context The SME sector’s demands were comprehensively taken care of by the Public sector Banks through several initiatives such as: • • Single Window dispensation. and above all. There are a number of Private as well as Public sector banks who assist SME in Financing Figure 1. PE funding etc is that is only interest to be paid no stake is to be diluted thus the whole command of the SME is with the owner only. The Bank prioritized the following more particularly:- • • Provision of timely and adequate credit to the SMEs. 22 .The main channel used by the SMEs via Banks is Specialized loans by various Banks. 2010) The role of Banks. The Main reason for choosing bank loans by SMEs compared to other sources of financing like venture capital. in general.4 Sources Of SME Finance (2006-07) Others 18% Private sector abnks 25% Public sector banks 57% (http://www.html last accessed on 5 Jan.
aspx?id=11993 last accessed on 11 Jan.in/scripts/PublicationsView.5 Steps For SME Loans By Public Sector Banks 23 . 2010) Figure 1.5 2003 477899 52988 11.0 (http://www. and Proactively detecting sick and viable units in time so as to nurse them back to health through appropriate re-structuring.2 2002 396954 49743 12.• Encouraging Technology Up gradation.org.1 2007 1317705 104703 8.5 Credit to SME sector from Public Sector Banks Year Net Bank Credit Credit to SMEs % of NBC 2000 316427 46045 14.rbi. for better quality and competitiveness of their product(s).6% 2001 341291 48400 14.4 2005 718772 67634 9.1 2004 558849 58278 10.4 2006 1017614 82492 8. which would result in reducing transaction cost and greater economies of scale. Financing of Clusters with adequate and concessional Bank finance on liberal terms in several pockets for specified activities concentrated in these pockets. • • Credit to SME sector from Public Sector Banks The table below gives the status of credit flow to the micro and small enterprises (SME) sector from the public sector banks since 2000: Table 1.
Here is the brief description of the above shown procedure: • First of all the SME who wants to avail loan has to visit the local branch office of the bank of their area.Application for loan by SME to local branch of a particular bank in that area . understanding various means of finance used. which is a special branch for SME loans. profitability estimate. • After they are satisfied they send the file of necessary documents to the SMECC branch. cash flow projections . If the loan is been sanctioned by the central authority then disbursement of the loan amount into account of the SME. marketing appraisal 24 . The above figure shows the steps for availing finance through Public sector Banks using loans. Sending the Documents of survey by Local branch to SMECC branch Preparing credentials of Promoters and firm by SMECC branch and investigating the same Estimating the amount of loan to be sanctioned and forwarding the documents for sanctioning. Inspection/Survey of SME by the Executives of that Local branch. where by the loan application is been filled by the SME. which consist of credit appraisal of promoter. • After that the executives of that branch check whether all the necessary documents are provided by the SME or not. Where by the credit appraisal takes place. then if all necessary documents are submitted the next step comes whereby the officials of that local branch go to the premises of that SME and just have a brief survey of promoter as well as the premises. determining cost of project. financial appraisal.
This step brings out the clear picture whether the loan should be given to the SME or not? • If the SMECC branch is satisfied with the details then it forward the request of granting loan to the sanctioning authority. which is explained in next section. • And finally after the verification by sanctioning authority. if all this procedure would have taken place at single place then it would take only 10-12 days for disbursement. 99 branches in industrial estates and more than 400 branches with SIB divisions.. Some Public sector Banks offering SME financing schemes are as follows: 1) State bank of India and its subsidiaries 2) Allahabad Bank 3) Oriental Bank of Commerce 4) Bank of Baroda 5) Bank of India 6) Punjab & Sind Bank 7) Central Bank of India 8) Punjab National Bank 9) IDBI Bank 10) Indian Bank 11) Canada Bank 12) Corporation Bank State Bank of India State Bank of India has been playing a vital role in the development of small scale industries since 1956. The Bank finances for Small Business activities which are of special significance to a large number of people as many of these activities can be started with 25 .The Bank has financed over 8 lakhs SSI units in the country. It has 55 specialized SSI branches.etc. the disbursement of loan amount takes place in the account of that SME • This whole procedure right from application to disbursement of loan amount takes approximately 20-25 days as the procedure involves analysis of documents by various branches and thus the movement of documents amongst them.
relatively lower investment and with no special skills on the part of the entrepreneurs. The following are the SME products offered by State Bank Of India: • • • • • • • • • • • • • • • • • • • Commodity Packed Warehouse Receipt Financing Surabhi Deposit Scheme Traders Easy Loan Scheme SSI Loans Business Current Accounts Open Term Loan Retail Trade Doctor Plus SBI Shoppe Cyber Plus SME Credit Plus Small Business Credit Card SME Petro Credit Dal Mill Plus Paryatan Plus Auto Loans Transport Operators Rice Mills Plus School Plus
(http://www.sbi.co.in/user.htm last accessed on 27 Nov, 2009)
IDBI Bank has been actively engaged in providing a major thrust to financing of SMEs. With a view to improving the credit delivery mechanism and shorten the Turn around Time (TAT), IDBI Bank has developed a special business model to serve the SMEs in India. The Bank has set up 24 City SME Centres (CSCs) across India in Mumbai, Delhi,
Kolkata, Chennai, Bangalore, Hyderabad, Pune to name a few. These CSCs are the Bank's hubs while dedicated SME desks have been set up in several branches across these cities. These branches serve as front offices for sales delivery and customer service. IDBI Bank has a wide variety of products and services catering to the needs of different segments within small business. Long years of experience in being the trusted partner of large and mid corporates has translated into deeper understanding of needs of business and industries. The Bank has parameterised products for transporters, dealers, traders, and vendors. In addition, it has a separate Transaction Banking Group that has expertise in products like cash management services, letter of credit, bank guarantees and treasury products” IDBI Bank provides following SME products: • • • • • • • • • • • Sulabh Vyapar Loan Dealer Finance Funding Under CGFMSE Direct Credit Scheme-SIDBI Preferred Customer Scheme Vendor Financing Programme Lending against the security of future Credit Card Receivables Working Capital Financing Finance to Medical Practitioners Loans to SRWOTs SME Hosiery Special Current Account
(http://www.idbi.com/sme/ last accessed on 27 Nov, 2009)
Bank of Baroda
Bank of Baroda started its operation in the year 1908 in Baroda though its Corporate Centre is in Mumbai now. Its mission is "to be a top ranking National Bank of International Standards committed to augment stake holders' value through concern, care and competence”. Bank of Baroda offers following SME products and services: 27
• • • • • • • •
Baroda Vidyasthali Loan Baroda Arogyadham Loan Baroda Laghu Udhyami Credit Card Baroda Artisans Credit Card Technology Upgradation scheme SME short term loans SME medium term loans Composite Loans
(http://www.bankofbaroda.com/bbs/sme.asp last accessed on 26 Nov, 2009)
Union Bank of India
Union Bank is committed to extend its best services to Micro, Small and Medium enterprises and at a very competitive price. Union Bank of India has adopted a policy package for stepping up credit to Small & Medium Enterprises. Union Bank of India has adopted a policy package for stepping up credit to Small & Medium Enterprises [SME] with the approval of the Board in its meeting held on 30th September 2005 and subsequently following steps have been initiated in this direction. • • • • • • • Union High Pride Union Procure Union Supply Union Cyber Union SME Plus Union Transport Financing SMALL HOSIERY UNITS in Kolkata
(http://www.unionbankofindia.co.in/cb_sme.aspx last accessed on 27 Nov, 2009)
Canara Bank was founded by Shri Ammembal Subba Rao Pai, a great visionary and philanthropist, in July 1906, at Mangalore, then a small port in Karnataka
LOAN PRODUCTS Schemes for Capital Investment • • • • • • • • • Term loan for acquisition of fixed assets Standby credit for capital expenditure Standby term loan scheme for Apparel Exporters Loan scheme for reimbursement of investment made in fixed assets by SMEs Soft loan scheme for Solar Water Heaters Scheme for Energy Savings for SMEs Technology Upgradation Fund scheme (TUFS) for textile & jute industries in SME sector Credit linked capital subsidy scheme (CLCSS) Loans under Interest Subsidy Eligibility Certificate (ISEC) Scheme of Khadi & Village Industries Commission (KVIC) to eligible institutions Schemes for Working Capital • • • • • Simplified Open Cash Credit (SOCC) Open Cash Credit (OCC) Micro financing joint liability groups (Handloom weaver & Agarbathi manufacturer groups) Laghu Udhyami Credit Card (LUCC) Bill of Exchange discounting facility to Small Enterpreneurs at concessional rate of interest (BE-SE) (http://www.canarabank.aspx last accessed on 27 Nov.f. of India guidelines as per MSMED Act. in tune with Govt. 2006. 2009) 29 .e.com/English/scripts/LoanProToMSMEnterprises. 2nd October. which has come into force w. 2006.The Bank has adopted a Policy for lending to SME sector.
Various studies on a number of issues concerning small and medium 30 .CHAPTER 2 REVIEW OF LITERATURE REVIEW OF LITERATURE A review of literature is a critical analysis of a segment of a published body of knowledge.
like small firms. their low debt ratios indicate that. How ever. Raju (2002) conducted a research by revisiting the Seoul and Bologna Charters on the SMEs and clarifies that the SME definition centers round the small scale industries in the absence of a clearly defined medium industry sector in India. It shows that. Due to shortage of time and inability to cover all these past studies. The author 31 . the attitude of the financial institutions towards SME sector is totally changing. Wtterwulghe and Jannsen (1997) conducted a research and analyzed the role of banks in financing medium enterprises in Belgium. as compared to the large firms. in Indian context. As far as external funding is concerned. as a result. these enterprises take less recourse to banks and. However. The banker does not play an important role as an adviser either. New innovations are being made for fulfilling the financial needs of SME units. debt is generally their main source. mediumsized businesses have a preference for self-financing. A number of studies had been conducted related to SME Financing schemes of Public sector banks. some of these studies have been considered in this section that has provided a base for this research. A review of the policy. The article calls for greater specialisation on the part of the banks so that they can avoid conflicts of interest arising out of the mismatch between their service priorities and the needs of their clientele Kaura and Sharma (1999) made a research and analyzed the attitudes of the financial institutions whether belong to Central Government or Governmental Agencies promoted for state Government or the this purpose. 2006 passed in the interest of the small scale sector by the Government of India. except when the firm decides to raise funds through the stock market. pay little attention to their financial function. In the wake of the MSME Act. the number is quite few. The attitude of the Employees of above said financial institutions is also changing.enterprises had been conducted in foreign countries. laws and the regulatory and institutional framework has been done in sufficient detail with a view to highlighting the fact that the SSIS in India require globally compatible facilitation in order to be competitive both domestically and internationally.
But that is not sufficient to because the sector was totally neglected for the last promote the SME sector several decades due to invention of the MNCs. Raju (2008) conducted a study and analyzed that SMEs form the backbone of the Indian manufacturing sector and have become engine of economic growth in India. Small and Medium Enterprises Act. marketing. Financing of Micro and Small Enterprises (MSEs). Rani and Rao (2008) conducted a research that Small and Medium Enterprise sector is a vibrant and dynamic one. He envisages a clear role for the Small Industry Associations recognized on the basis of well-defined criteria. The Micro. license raj issues in detail. only 14. 2006. and is included in priority sector lending. which is part of the SME sector. He argues for a quick enactment of a comprehensive enabling law for the sector and for restructuring the office of the DC-SSI. Third part looks into the present scenario of SMEs and the problems they phases like lending. The government of India through its industrial policy clearly stated that the commercial banks should give priority treatment to the SMEs. The final part provides some future policy framework for the sustainability of the sector. to attain the envisaged competitiveness Nambiar (2007) conducted a research on financing for the priority sectors that paved the way for thinking strategy for financing of small scale and medium scale industries by the bank officers.maintains that easy and adequate institutional finance support is a necessary but not sufficient condition for the growth of this dynamic and vibrant sector. The nature of the banking officials was also discussed in the article. By enacting the MSME act. This paper closely analyses the growth and development of the Indian mall scale sector from opening of the economy in 1991. In spite of the special efforts. the government of India clearly indicated the signal to the banking people to provide the credit facilities to the SMEs. It is estimated that SMEs account for almost 90% of industrial units in India and 40% of value addition in the manufacturing sector. has been given special attention by banks and financial institutions. 2006 is intended to boost the sector. and an engine of growth for the present millennium. The provisions of the Act are examined closely.3% of registered small enterprises have 32 .
availed institutional credit. SMEs need special treatment through devising special instruments of credit for strengthening their competitiveness. This paper examines the recent trends in credit flow to MSEs. From 2000 to 2004. in a limited way. The recent intensification of bank involvement with SMEs in various emerging markets documented in this paper is neither led by small or niche banks nor highly dependent on relationship lending. Mercieca et al (2009) conducted a research and analyzed that how the concentration and competition in the European banking sector affects lending relationships between small and medium sized enterprises (SMEs) and their banks. and outlines the recommendations of A S Ganguly Working Group and Internal Group chaired by C S Murthy. all types of banks are catering to SMEs and larger. multiple-service banks have in fact a comparative advantage in offering a wide range of products and services on a large scale. in particular. from commercial banks and the Small Industries Development Bank of India (SIDBI). The Union Finance Ministry's directive to public sector banks is to double the credit flow to SMEs during the five-year period 2005-10. The year. Banks perceive SMEs as a core and strategic business and seem well positioned to expand their links with SMEs. 2005-06 has shown good progress in this direction. Torre et al (2008) made a research and investigated the conventional wisdom in academic and policy circles argues that. while large and foreign banks are generally not interested in serving SMEs . business models. small and niche banks have an advantage in doing so because they can overcome SME opaqueness through relationship lending. Innovative approaches and directions for the future are presented in the paper. and risk management systems. of which 2006-07 has been completed with encouraging performance. despite the high level of liquidity in the banking system and the initiatives taken by the Union Government and Reserve Bank of India (RBI). through the use of new technologies. and medium enterprises. as per the 3rd All India Census of Small Scale Industries of 2001-02. institutional credit for MSEs has shown disturbing trends. This paper shows that there is a gap between this view and what banks actually do. The task is to be pursued vigorously in the next four years. Recent empirical evidence 33 . Rather.
SMEs have a significant socio-economic role to ensure overall development of 34 . Majority of the respondents revealed that the credit flow to SMEs sector is not sufficient and the Government will have to initiate necessary steps for making the required funds available easily on convenient terms. 3. SMEs form the lifeblood of any vibrant economy. The banks usually provide finance against security and as high as 86% of the respondents are of the view that the banks ask for collateral security/guarantee from a third party even where the project has been assessed as viable and primary security is adequate. Popli and Rao (2009) made a research that in banking sector. we empirically investigate the impact of increasing concentration and competition on the number of lending relationships maintained by SMEs.suggests that concentration and competition capture different characteristics of banking systems. The study is an attempt to ascertain the service quality provided by Public Sector Banks to Small & Medium Enterprises which play a key role in India’s economy. They find that competition has a positive effect on the number of lending relationships. particularly in the context of growing competition and sustained business growth. regardless of global barriers. In an emerging economy like India. The major findings of the study have been that 1. 4. Majority of the respondents feel that the policies for SME Sector of other countries are far better from the policies of India. 5. Modernization and Communication affect the services to a large extent and there is a need of training to the staff for improvement of service to the SMEs customers. as claimed by the majority of the respondents. Using a unique dataset on SMEs for selected European regions. the quality of customer service plays an important role. weak evidence that concentration reduces the number of banking relationships and weak persistent evidence that they tend to offset each other. Delay in loan application processing due to unhelpful nature of the staff members. 2. The service quality of private banks is superior to that of Public sector banks. Popli and Rao (2009) conducted a study and analyzed that Small and Medium Enterprises have been globally recognized as vital components of a domestic economy and major contributors to employment generation in a country.
competences development. Govt. The perusal of literature reveals that Small and Medium enterprises face a lot of problems. of India. 35 . A very few studies has been conducted in India regarding the effectiveness of SME financing schemes of the public sector banks. The study has been done by using data acquired from an extensive survey of Indian SMEs in the Textile Sector and from the experienced Bankers/ Officials/Policy makers of Govt. technological up gradation. That is why a need was felt to conduct a study in Indian context and that too in case of SME financing schemes of public sector banks and their usage that has not been extensively researched. Policies. Electronic Sector is an upcoming sector in India. The key findings of the study are that lack of quality consciousness. mostly in foreign countries. growth conducive environment. A rich literature house has been developed over time. and inadequate financing is the major one. quality improvement. Equity participation by MNCs and overall improvement of this sector in the post WTO regime. the study highlights the need to upgrade technology in the Indian Electronic SME Sector and also develop a strong and supportive Financial System. inadequate government support and difficulties in raising funds from market. with regard to SME funding. Further.the nation. The Indian Electronic Industry is undergoing transformation due to the new economic policy and business environment in the post WTO regime. This paper examines the problems. strategies for investments.
CHAPTER-3 NEED. SCOPE AND OBJECTIVES OF THE STUDY 3.1 Need of the study 36 . SCOPE AND OBJECTIVES OF THE STUDY NEED.
3. their problems and source of financing has been done but regarding the SME financing schemes of public sector banks has not been done.3 Objectives of the study Objectives are the guiding lights of a study. To check the satisfaction level of Small and Medium enterprises regarding SME financing schemes of the public sector banks. Study relating to SMEs. To know the problems faced by SMEs in getting credit from public sector banks. the need was felt to cover the areas neglected. To know about the various SME financing schemes of public sector banks and their usage. To know the benefits of SME financing schemes of the public sector banks. To know the effectiveness of various SME financing schemes of public sector banks. So. 37 . 3. Thus. This gap has been identified and it has led to the present research to be undertaken.The researches that were conducted in past by the various professionals are in foreign context and not in Indian context. here a study on SME financing schemes of public sector banks was taken care of. The present study was undertaken to achieve the following objectives: • • • • • .2 Scope of the study The scope of this study was limited to Ludhiana city only.
The Research Methodology includes the various methods and techniques for conducting a Research.CHAPTER . analysis and 38 .4 RESEARCH METHODOLOGY RESEARCH METHODOLOGY Research Methodology is a way to systematically solve the research problem. “Marketing Research is the systematic design. collection.
2 SAMPLING DESIGN Sampling can be defined as the section of some part of an aggregate or totality on the basis of which judgment or an inference about aggregate or totality is made. Research is. which has as its major objective the description of something-usually market characteristics or functions. The research process followed by us consists of following steps: 4. Slesinger and M. 4. • Conclusion Oriented Research: -Research designed to assist the decision maker in the situation. Such framework is called “Research Design”.reporting of data and finding relevant solution to a specific marketing situation or problem”. In other words it is a research when we give our own views about the research.1 Universe of the study-The universe comprises of two parts as theoretical universe and accessible universe • Theoretical universe. 39 . The sampling design helps in decision making in the following areas: 4. whether that knowledge aids in construction of theory or in the practice of an art”. an original contribution to the existing stock of knowledge making for its advancement.2. which has already studied. concepts or symbols for the purpose of generalizing to extend. D. thus. Our project has a specified framework for collecting data in an effective manner. • Descriptive Research: -A type of conclusive research. correct or verify knowledge. The purpose of Research is to discover answers to the Questions through the application of scientific procedures.Stephenson in the encyclopedia of Social Sciences define Research as “the manipulation of things.It includes all the SMEs throughout the universe. It just presents the picture. In other words descriptive research is a research where in researcher has no control over variable.1 RESEARCH DESIGN This research was descriptive and conclusion oriented research.
The sampling unit of the present study was SMEs located in Ludhiana city in Punjab. which have already been collected by someone else.2. following tools were used: Tools of Analysis: • Summated Score: This tool was used for the analysis of questions based on Likert scale.4 Sample Size. 4.It includes the SMEs in Ludhiana city.• Accessible universe.Sampling unit is the basic unit containing the elements of the universe to be sampled.2.1 Data Collection: Information has been collected from both Primary and Secondary sources of data collection.3 Sample Unit.3 DATA COLLECTION AND ANALYSIS 4. • Secondary sources.Secondary data are those. Primary data had been collected by conducting surveys through questionnaire. Secondary data had been collected through websites.2.3. which are collected are fresh and for the first time and thus happen to be original in character. 4. newspapers and journals. 40 . 4.2.Primary data are those. • Primary sources.5 Sampling Techniques. 4. 4. b) Tools of Analysis and Presentation: To analyze the data obtained with the help of questionnaire.Sample size is the number of elements to be included in a study.2 Sample Frame-Sample frame was Small and Medium enterprises all over India.The sampling techniques used were convenience technique and simple random sampling technique. Keeping in mind all the constraints 100 respondents were selected. which include several questions and personal and telephonic interview. which already had been passed through the statistical process.
The limitations of the study are: • The research was carried out in a short period. 41 . 4. • • • The information given by the respondents might be biased as some of them might not be interested to give correct information. Bar Graphs and Pie Charts: These tools were used for analysis of data. Some of the respondents of the survey were unwilling to share information. Tools of Presentation: • • Tables: This tool was used to present the data in tabular form. Some of the respondents could not answer the questions due to lack of knowledge.• Weighted Average Score: This tool was used to calculate highest and lowest rank. Therefore the sample size and the parameters were selected accordingly so as to finish the work within the given time frame. Some of these are mentioned here under so that the findings of the study may be understood in a proper perspective. the study is likely to suffer from certain limitations.4 LIMITATIONS OF THE STUDY Due to constraints of time and resources.
CHAPTER-V DATA ANALYSIS AND INTERPRETATION DATA ANALYSIS AND INTERPETATION 42 .
What are the sources of finance used by your enterprise? 43 .100% of the respondents were from the Ludhiana city. No. Table 5. 19% were co-partners and 6% were at some other designation. owner of the business and from Ludhiana city. Of Respondents 73 19 6 100 100 0 100 95 5 100 100 0 100 %Age Of Respondents 73 19 6 100 100 0 100 95 5 100 100 0 100 2. All the respondents i.e. 100% were from the hosiery business.1 Demographic Features Demographics Designation Owner Partner Other Total Location Ludhiana Other Total Gender Male Female Total Business Hosiery Other Total Analysis and Interpretation: It had been analyzed from the table that 73% of the respondents were the owner. 95% of the respondents were male and only 5% were female. All the respondents were from hosiery business. Demographic Profile of Respondents. So it had been interpreted that maximum of the respondents were male.1.
2 To Know The Sources Of Finance Used By SMEs Sources of Finance Owners Financing Private financial institutions Equity finance Bank financing Venture capital Hire purchase and leasing Business angel financing Total No.Table 5. From the survey it was found that respondents use multiple sources for 44 .1 To Know The Sources Of Finance Used By SMEs No. Of Respondents Owners Financing Private financial institutions %Age Of Respondents 29 16 4 27 5 9 10 100 10% 9% 5% 29% Equity finance Bank financing Venture capital Hire purchase and leasing Business angel financing 27% 4% 16% Analysis and Interpretation:The number of respondents had increased from 100 to 280. as this is a multiple-choice question. Of Respondents 80 46 12 75 14 24 29 280 Figure 5.
1 being the biggest obstacle. Table 5.financing their enterprises. Equity finance and venture capital are the least used.28% respondents use bank financing and 16% take credit from private financial institutions. Rank the obstacles that are faced by your enterprise in its growth from 1 to 5. 3. The figure shows that 29% respondents rely on their own funds for financing SMEs.3 45 .
Have you ever raised finance from public sector banks? Table 5. From the above table it can be concluded that obtaining adequate finance is the biggest obstacle faced by SMEs in their growth followed by burden of heavy taxes on them. Easy financing schemes should be provided. it will help in the growth of SMEs in India.Obstacles In The Growth Of Enterprise Obstacles The frequent need to renew the equipment Instability of demand for product or service Obtaining adequate financing Low profitability of the sector Taxation levels Rank1 Rank2 Rank3 Rank4 Rank5 12 7 40 11 30 19 16 27 12 26 28 16 17 21 18 24 28 8 29 11 17 33 8 27 15 Weighted Average Score 315 364 217 349 255 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 enterprises in their growth are being ranked. 4.4 To Know Whether SMEs Raise Finance From Public sector Banks 46 . The obstacle of obtaining adequate finance is ranked first with summated score of 217. Rates of taxes should also be decreased. Second rank is given to the taxation levels charged by the government and third 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.
2 %Age Of Respondents 100 0 100 To Know Whether SMEs Raise Finance From Public sector Banks No. The service fees and bank charges are also less which results in low cost of financing than the other sources. Of Respondents 100 0 100 Figure 5.This shows that public sector banks are the most popular source of SME financing. What type of loan is taken by you? Table 5.Raised Finance Yes No Total No.5 Type Of Loan 47 . The reason is low rates of interest which gives them capital at low cost. Of Respondents 0% Yes No 100% Analysis and Interpretation:The above figure shows that 100% of the respondents have raised finance from the public sector banks . 5.
Of Respondents %Age Of Respondents 28 10 23 16 23 100 23% 28% Sulabh Vyapar loan Transport loan Paryatan plus loan Open term loan 10% 23% Working capital loan 16% Analysis and Interpretation: The number of respondents has increased from 100 to 280. 6.6 Purpose Of Taking Loan 48 . Of Respondents 67 25 56 38 54 240 Figure 5.23% of the respondents have taken Paryatan plus and working capital loan. as this is a multiple-choice question The above graph shows that 28% of the respondents have taken Sulabh Vyapar loan. your enterprise has taken loan? Table 5. For what purpose.3 Type Of Loan No. So Sulabh Vyapar loan is the most popular scheme of public sector banks for financing SMEs.Type of Loan Sulabh Vyapar loan Transport loan Paryatan plus loan Open term loan Working capital loan Total No.
22% of the respondents have taken loan showing that SMEs require capital to upgrade their technologies which is changing at a very fast phase. Table 5. Of Respondents 40 63 33 71 58 265 Figure 5. 1 being the most important and 5 being the least important. renovation or leasehold improvements For the flooring of inventory and for working capital For modernization and upgradation of technology Total No.4 Purpose Of Taking Loan N OR o. renov ation or leasehold im prov ements For the flooring of inv entory and for w orking capital 24% 27% 12% For modernization and upgradation of technology Analysis and Interpretation:The number of respondents has increased from 100 to 265. Most of the firms are taking loans for fulfilling their frequent needs for the capital. For technological upgradation and modernization. as this is a multiple-choice question.7 49 . Rank the benefits of these schemes on the scale of 1-5.27% of respondents have taken loan for the flooring of inventory and working capital and 24% to increase the size of production. f espondents %Age Of Respondents 15 24 12 27 22 100 22% 15% R estate eal acquisition to house the business T increase the o production C onstruction.Purpose Of Taking Loan Real estate acquisition to house the business To increase the production Construction. 7.
Second rank is with summated score of 212 was given to the attractive financing conditions of these schemes. Attractive financing conditions and easy access were next in the preference order. 8. The schemes are designed in such a way that makes financing easier for SMEs. This shows that public sector banks financing schemes provide finance at cheap rates. What were the problems faced by your enterprise in raising finance from public sector banks? Table 5. As in the above table various benefits of SME financing schemes were being ranked. This shows that respondents were not satisfied by the service provided by these banks. The fourth rank was given to Single window dispensation and fifth to Better service. From the above table it can be concluded that Low rates of interest was most preferred of all other benefits. The third rank was given to easy access. The benefit ranked first with summated score of 198 was low rates of interest. Single window dispensation was the next preferred benefit. being least preferred by the respondents.8 50 .Benefits Of SME Financing Schemes Benefits Better Service Single Window Dispensation Attractive financing conditions Easy access Low rates of Interest Rank1 Rank2 Rank3 Rank4 Rank5 8 8 40 4 40 12 12 28 12 36 12 22 20 32 14 30 30 4 30 6 38 28 8 22 4 Weighted Average Score 378 358 212 354 198 Analysis and Interpretation: In this above table weighted average score method was used where 1 rank is the most important rank and 5 is the least important rank. Better service was the least preferred benefit by the respondents.
What are the most common reasons given to your enterprise by the public sector bank for rejecting an application for Loan? Table 5. Of Respondents 68 39 80 25 76 20 308 Figure 5.The public sector bank employees work very slowly and usually an application takes a lot of time for approval.25% respondents say biasness was one another problem faced by them. as this is a multiple-choice question. 9.22% respondents find the inability to provide sufficient collateral as a problem.5 Problems Faced By SMEs In Raising Finance No.9 51 . Of Respondents Insufficient collateral 6% Poor documentation Delay in the sanction of loan 13% 8% 26% Cost involved is high Biasness High rate of interest %Age Of Respondents 22 13 26 8 25 6 100 22% 25% Analysis and Interpretation:The number of respondents has increased from 100 to 308.Problems Faced By SMEs In Raising Finance Problems Faced Insufficient collateral Poor documentation Delay in the sanction of loan Cost involved is high Biasness High rate of interest Total No. The most common problem faced by SMEs in raising finance is the delay made in sanctioning the loan with 26%.
19% says an application got rejected because of poor credit history as banks lie on the past performance of enterprises before granting any loan. What factors demotivate you in applying for finance from these schemes of public sector banks? Table 5. The above figure shows that 23% respondents says that the most common reason given by the banks for rejecting an application is that they could not provide enough guarantees.Reasons For Rejecting An Application For Loan Reasons The management team is too inexperienced The application did not meet the criteria The application was not correctly completed Poor credit history The enterprise could not provide enough guarantees Not a profitable venture Total Figure 5.10 52 .Of Respondents The management team is too inexperienced The application did not meet the criteria The application was not correctly completed Poor credit history The enterprise could not prov enough ide guarantees Not a profitable v enture No.Of Respondents 28 43 24 48 60 54 257 %Age Of Respondents 11 17 9 19 23 21 100 21% 11% 17% 23% 9% 19% Analysis and Interpretation:The number of respondents has increased from 100 to 308. as this is a multiple-choice question.6 Reasons For Rejecting An Application For Loan No. 10.21 % says that banks reject an application because they believe that it is not a profitable venture.
Are the Private sector banks SME financing schemes are better than SME financing schemes of public sector banks? Table 5. as this is a multiple-choice question. The above figure shows that 38% respondents says that the factor that demotivates them for applying for finance from these schemes is the lengthy process involved.Factors that Demotivate In Applying for Finance Factors that Demotivate We were turned down before Procedure to obtain this type of financing is too complicated The process is lengthy Too much of documentation is required Total Figure 5.7 Factors that Demotivate In Applying for Finance No. Of Respondents We were turned down before Procedure to obtain this type of financing is too complicated The process is lengthy 15% 38% Too much of documentation is required No. 11.11 53 .24% respondents says that they were turned down before. Of Respondents 40 25 62 38 165 %Age Of Respondents 24 15 38 23 100 23% 24% Analysis and Interpretation:The number of respondents has increased from 100 to 165.23% respondents says that they do not apply for loan from these schemes as too much of documentation is required.
Of Respondents %Age Of Respondents 64 36 100 36% Yes No 64% Analysis and Interpretation:The above figure shows that 64% of respondents think that private sector banks schemes of financing are better than that of public sector banks financing schemes and only 34% think that public sector banks schemes of financing are better than that of private sector banks.Whether Private Sector Banks Schemes Are Better Than Public Sector Banks Schemes Private Sector Bank Schemes Are Better Yes No Total No. But private banks charge heavy rates of interest and charge heavy service fees. Of Respondents 64 36 100 Figure5. The private sector banks use latest technology and provide better service. Moreover. 54 .8 Whether Private Sector Banks Schemes Are Better Than Public Sector Banks Schemes No. the time involved for obtaining loan is also comparatively less.
12 Satisfaction Regarding Various Aspects Of Obtaining Finance From Public sector Bank Schemes Various Aspects Strongly Satisfie d Satisfie d Neutral Dissatisfie d Strongly Dissatisfie d Summated Score 11. So.4) Service fees 11. Maximum score is the score.100 Analysis and Interpretation: As from the above table no.500 Minimum Score .3) Interest rate 11. which represents the dissatisfaction level among the respondents.11 comparison was done between maximum score and Summated score. 5. information related to the level of satisfaction or least satisfaction to various factors influencing the satisfaction level of respondents was interpreted in following manner-: 55 .2) The simplicity of the application form 11. Please indicate your level of satisfaction with various aspects of obtaining finance from these public sector banks.1) The amount granted by the bank relative to the amount requested 11.6) Guarantees required by the institution 11. Kindly rate them on 5-point scale basis. 5 being strongly satisfied and 1 being strongly dissatisfied Table 5.5) Time to obtain approval 11.7) Behavior of the bank staff 15 48 24 12 1 212 12 24 15 6 0 10 52 71 48 8 16 22 31 2 24 10 21 12 3 3 12 34 36 30 2 0 1 42 27 26 231 184 236 398 374 340 Number of respondents -100 Maximum Score .12.
Respondents were not very satisfied with these aspects. The other three factors ‘behavior of the bank staff’. So the respondents were satisfied with this aspect.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 184. So. So the respondents were satisfied with these aspects. 13. The factor “amount granted by the bank relative to the amount requested lies between agree and neutral with summated score of 212 but was more close to satisfied. what initiatives government can take for improving SME business in India? 56 . respondents are satisfied with the interest rate and the amount sanctioned. About other 2 factors ‘Simplicity of the application form’ and ‘Service fees’ were with summated score of 231 and 236 were between agreed and neutral but are more close to agreed level. Apart from such schemes. guarantees required by the institution and the time to obtain the approval are between the neutral and dissatisfied.
13 Initiatives For Improvement Various Initiatives Decrease the amount of taxes Support innovative technological companies Guidance for upgrading skills & knowledge of entrepreneurs Assistance and support for revival of sick units Introduce a Single Window concept for helping SMEs Total No.23% respondents believe that assistance and support should be provided for the revival of sick units as 57 .9 Initiatives For Improvement No. The above graph shows that the 28% of respondents believe that there is need for guidance for upgrading skills and knowledge of entrepreneurs. Of Respondents Decrease the amount of taxes 16% 28% Support innovative technological companies Guidance for upgrading skills & knowledge of entrepreneurs 23% Assistance and support for revival of sick units 21% 12% Introduce a Single Window concept for helping SMEs Analysis and Interpretation:The number of respondents has increased from 100 to 125. Of Respondents 35 26 15 29 20 125 %Age Of Respondents 28 21 12 23 16 100 Figure 5. as this is a multiple-choice question.Table 5.
.number of sick SME units are increasing at a rapid ratew.21% of the respondents believe government should support innovative technological companies. Moreover government can introduce a single window concept for helping SMEs and can provide guidance for upgrading skills and knowledge of entrepreneurs. 58 .
CHAPTER-VI FINDINGS OF THE STUDY FINDINGS OF THE STUDY 59 .
the following findings were made about the usage of SME financing schemes of the public sector banks: • The respondents had used multiple sources for financing their enterprises. Private financial institutions came third in the preference. • Sulabh Vyapar loan was the most popular scheme of public sector banks for financing SMEs followed by working capital loan. The service fees and bank charges were also less which results in low cost of financing than the other sources. Rates of taxes should also be decreased.After undertaking the study. • The most common problem faced by SMEs in raising finance was the delay made in sanctioning the loan. • Public sector banks were the most popular source of SME financing. Most of the respondents had relied on their own funds for financing SMEs and bank financing. • Most of the firms were taking loans for fulfilling their frequent needs for the capital. The public sector bank employee’s work very slowly and 60 . • The most preferred benefit of these schemes was low rates of interest as government is charging very less rates in comparison to other sources. • Obtaining adequate finance was the biggest obstacle faced by SMEs in their growth followed by burden of heavy taxes on them. it will help in the growth of SMEs in India. These schemes offer attractive financing conditions and easy access also. Easy financing schemes should be provided. They had taken loans for technological upgradation also as SMEs require capital to upgrade their technologies which is changing at a very fast phase. The reason was low rates of interest which gives them capital at low cost. They took credit for the flooring of inventory and working capital and to increase the size of production.
• Most of the respondents were satisfied with the interest rate charged.The private sector banks use latest technology and provide better service. amount of loan sanctioned and service fees . that assistance and support should be provided for the revival of sick units as the number of sick SME units is increasing at a rapid rate. • The most common reason given by the banks for rejecting an application was that the enterprises could not provide enough guarantees. The time to obtain the approval for loan and documentation involved demotivates the SMEs. Some of the respondents were of the view that government should support innovative technological companies. Banks reject an application because they believed that it was not a profitable venture. Some of the respondents did not apply for loan from these schemes as too much of documentation was required. the time involved for obtaining loan was also comparatively less.Respondents showed their dissatisfaction regarding time to obtain the approval. • Most of respondents were of the opinion that there is need for guidance for upgrading skills and knowledge of entrepreneurs. 61 . Moreover. behaviour of the bank staff.usually an application takes a lot of time for approval. • Most of the respondents think that private sector banks schemes of financing were better than that of public sector banks financing schemes . Moreover government can introduce a single window concept for helping SMEs and can provide guidance for upgrading skills and knowledge of entrepreneurs. • Most of the respondents get demotivated for applying for finance from these schemes because of the lengthy process involved and because they were turned down before. Biasness and insufficient collateral were another problems faced by them. But private banks charge heavy rates of interest and charge heavy service fees. An application also got rejected because of poor credit history as banks lie on the past performance of enterprises before granting any loan.
CHAPTER – 7 CONCLUSION AND RECOMMENDATIONS 62 .
Various tools of data analysis and interpretation were used for carrying out the research. hence it is suggested to make the process easier. generating employment and creating new entrepreneurship in India. it has been proved that SMEs are dynamic. New credit products may be developed to take care of the diverse. 63 . unexpected and short-term requirements of the SME customers in a hassle free manner and in a short time the process followed in sanctioning the loan and documentation required is cumbersome.Insufficient collateral and biasness are also the major problems. The SME financing schemes provide credit to this sector at low rates of interest and at attractive conditions but the procedure involved is lengthy. But the SME sector faces a lot of obstacles in obtaining adequate finance. The basic purpose of conducting the study was to study the usage of SME financing schemes of the public sector banks. workshops and seminars should be organized at district level to provide latest information to the SMEs about the various SME financing schemes of the public sector banks. The need. Moreover. Government of India has started a number of SME financing schemes in its public sector banks .CONCLUSION OF THE STUDY Over a period of time. The major findings of the study were that bank financing is the most popular source for financing SMEs in India.These public sector banks are playing a major role in the development of SME sector in India. increasing trade. these schemes are not as effective as they should be. scope and objectives of the study provided the framework for further research. But due to few obstacles. The re-orientation program. innovative and most importantly. the employer of first resort to millions of people in the country India has a vibrant SME sector that plays an important role in sustaining economic growth. too much of documentation is required . The review of researches has showed that SME sector plays an important role in the economic development of a country but obtaining adequate finance has emerged as a major problem faced by SMEs. The data was collected from SME units.
• The process followed in sanctioning the loan and documentation required is cumbersome.RECOMMENDATIONS After carrying on the study.8% of SME customers are proprietorship type of customers. • The conventional credit appraisal systems are heavily dependent on financial statements and miss the softer strengths inherent in the business. 64 . it is essential for the banks to closely focus on the non-financial parameters also during appraisal (i. ability of person behind the show). unit and person. • The appraisal system is to be made more realistic and transparent. should be briefed on the objective procedures which bank applies to arrive at decisions so as to educate them to understand the requirements of bank and to prepare credit proposals in a scientific manner . The applicant and if required. • As 95.e. The same rule applies to SME segment. 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. New credit products may be developed to take care of the diverse. there is a vast gap between requirements of the SME customer and availability of suitable/matching products and services in the public sector banks. hence it is suggested to make the process easier. At present. • Product innovations in banks have set the rule of the game “Innovate or perish”. unexpected and short-term requirements of the SME customers in a hassle free manner and in a short time. workshops and seminars should be organized at district level to provide latest information to the SMEs about the various SME financing schemes of the public sector banks. his consultant. the following recommendations have been made: • The re-orientation program. Banks may adopt a balanced score card model for credit assessment under which risk weights may be assigned to (i) managerial.
to offer customized and cost effective retail payment/remittance solutions or cash management services to the SME customers. SIDBI. operationally and economically and financially viable. The credit ratings will give Public sector Banks ratings an easy access to the financial information of SMEs that highlight the unit's strength and weaknesses. RTGS. Banks may capitalize on emerging electronic payment and settlement systems such as ECS. It may also provide the same information 65 . • Banks may publish periodicals/magazines to disseminate information pertaining to various schemes of bank. various ministries. They should undertake only such projects which are technically. RBI. CBEC and other tax related policy matters. EFT. CBDT.• Small entrepreneurs should make feasibility studies before they finalize their projects. through its website and e-mails. making it easy for them to take a decision while lending.. Credit Ratings can benefit both the parties. • Most SME customers have to make several small payments through cash. bankers’ cheques or drafts. serving and monitoring SME customers can be resolved by offering products which reduce frequent visit of SME customers to the branch. etc. 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. • The issue of high cost of acquiring. • The problem that the SMEs face while acquiring funds from Public sector Banks is that their financial systems lack transparency. • Public Sector Banks should develop flexible systems and procedures for dealing with SME customers and modify their role to be a facilitator. provide flexibility to the borrowers as well as to the bankers and fulfill other financial needs of the customer.
REFERENCES 66 .
67 . and Rao.V.D. 3(2). 4. Bank Market Structure. C. D. 34(3). 10.Y. D. 36(2-3). Present And Future. New Delhi: Tata McGraw Hill.and Rao. G. Small Scale Industries In The Liberalized Era Beg For Attention. B. Competition And SME Financing Relationships In European Regions. Popli. 6-22. Journal of Financial Services Research.Y.L. Bank Involvement With Smes: Beyond Relationship Lending . Financing Small Industries – Institution Should Change Their Attitudes. P. S. G.S. G. Research Methodology. 3(2). Popli. (2008) . 137-155. C. Mercieca. ICFAI Journal of Entrepreneurship Development.N. S. Edition 2005. Financing For Priority Sectors. 6(8). Procedures.B. Global Business Review. (2007). B. (2009). Nambiar. D. 351-367. An Empirical Study Of Smes In Electronics Industry In India: Retrospect & Prospects In Post WTO Era.World Bank Policy Research Working Paper Series. Raju. Journal of Financial Services Research. Financing Small enterprises: Recent Trends. Rani and Rao. Service Quality Provided By Public Sector Banks To SME Customers: An Empirical Study In The Indian Context. PHDCCI Working Paper. M. Journal of Industry and Trade. Raju. 5(1). Kothari. 1(7).C. Global Business Review.S. (2009). and Scheack.R.I Monthly Review.N. Torre et al (2008). and Sharma.N. (1995). (2009). (2002).Small And Medium Enterprises (Smes) In India: Past. (1999). (2008).REFERENCES Kaura.
75-85.The Role Of The Banker In Financing Medium Sized Firms In Belgium: Lender Or Advisor. 6(1).Wtterwulghe and Janssen (2005) . 68 . Journal of Entreneurship.
ANNEXURES 69 .
we request you to spare a few minutes from your busy schedule and fill this form.QUESTIONNAIRE I. DEMOGRAPHICS: Name Designation Name of the company Location ………………………………. We assure you that the information provided by you will be kept confidential. What are the sources of finance used by your enterprise? a) b) c) d) e) Owners financing Private financial institutions Equity finance Bank financing Venture capital f) Hire purchase and leasing g) Business angel financing Q2. Aditi Jain of MBA of Apeejay Institute of Management is conducting a research on ‘Usage of SME financing schemes of the Public sector banks’. ………………………………. ………………………………. ………………………………. Questions Q1. 1 being the biggest a) The frequent need to renew the equipment b) Instability of demand for product or service c) Obtaining adequate financing d) Low profitability of the sector e) Taxation levels Q3..Rank the obstacles that are faced by your enterprise in its growth from 1 to 5. Have you ever raised finance from public sector banks? a) Yes b) No 70 . So.
4) Attractive financing conditions 6.2) Single window dispensation 6. What were the problems faced by your enterprise in raising finance from public sector banks? a) Insufficient collateral b) Poor documentation c) Delay in the sanction of loan d) Cost involved is high e) Biasness f) High rate of interest 6.Q4. your enterprise has taken loan? a) Real estate acquisition to house the business b) Increase the production c) Construction. What are the most common reasons given to your enterprise by the public sector bank for rejecting an application for Loan? a) The management team 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 71 . renovation or leasehold improvements d) For flooring of inventory and working capital d) Open term loan e) Working capital loan e) For modernization and upgradation of technology Q6.5) Low rates of interest Q8.Rank the benefits of these schemes on the scale of 1-5.3) Easy access Q7.1) Better service 6. 1 being the most important: 6. What type of loan is taken by you? a) Sulabh Vyapar loan b) Transport Loan c) Paryatan plus Loan Q5 For what purpose.
3) Interest rate 12.1) The amount granted by the bank relative to the amount requested 12. what initiatives government can take for improving SME business in India? a) Decrease the amount of taxes b) Support innovative technological companies c) Guidance for upgrading skills & knowledge of entrepreneurs d) Assistance and support for revival of sick units e) Introduce a Single Window concept for helping SMEs Satisfied Neutral Dissatisfied Strongly Dissatisfied 72 .) d. 5 being strongly satisfied and 1 being strongly dissatisfied: Strongly Satisfied 12. Kindly rate them on 5-point scale basis. Apart from such schemes.) b. b) No Please indicate your level of satisfaction with various aspects of obtaining finance from these public sector banks.2) The simplicity of the application form 12.) c.What factors demotivate you in applying for finance from the SME financing schemes of the public sector banks? a.) We were turned down before Procedure to obtain this type of financing is too complicated The process is lengthy Too much of documentation is required Q.6) Guarantees required by the institution 12.f) Not a profitable venture Q 9.4) Service fees 12.5) Time to obtain approval 12.10 Are these private sector bank schemes are better than public sector bank schemes? a) Yes Q11.7) Behavior of the bank staff Q12.
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