COMPARISION OF OUR INTREST RATE AND SERVICES CHARGES WITH OTHER BANKS IN SME SUMMER TRAINING REPORT

SUMMER TRAINING REPORT SUBMITTED FOR THE PARTIAL FULFILLMENT OF THE REQUIREMENT FOR MASTER OF BUSINESS ADMINISTRATION

DEPARTMENT OF MANAGEMENT STUDIES MAULANA AZAD NATIONAL INSTITUTE OF TECHNOLOGY (DEEMED UNIVERSITY) BHOPAL

Submitted by: RASHMI KHARE 092103102

Performed at: STATE BANK OF INDIA BHOPAL 31 May to aug 2010

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ABSTRACT

In the growth and progress of any country, its small scale sector is of equal importance as of other large scale sectors because a country cannot progress in its true sense unless its small scale sectors progress. Be it a developed country like Japan and USA or a developing country like Thailand and Pakistan, they form the backbone of the economy. A dynamic and vibrant SME sector plays a key role in successful economic growth of the countries. The developmental role of SMEs has been highly recognized. They provide most of the employment opportunities for the general public of the country and as a result, they prosper in these conditions. SMEs allow a homogeneous geographic development throughout the length and breadth of a country because of the fact that the development is done at a micro level due to the initiative taken by the general public. The Government of India, realizing the potential of SMEs has very rightly turned its attention toward the uplift of this sector. The formation of SMEDA (Small and Medium Enterprises Development Authority) and SME Bank are a step in right direction. Furthermore, the State Bank of India has instructed all the commercial banks to establish a SME counter in their premises. This will have a positive effect on the sector as whole

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BONAFIDE CERTIFICATE

DECLARATION

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I, Rashmi Khare, student of MBA THIRD Semester, studying at Maulana azad national institute of technology, Bhopal, hereby declare that the summer training report on “comparison of our interest rate and service charged with other bank in SME” submitted to maulana azad national institute of technology, Bhopal in partial fulfillment of Degree of Master’s of Business Administration is the original work conducted by me. The information and data given in the report is authentic to the best of my knowledge. This summer training report is not being submitted to any other University for award of any other Degree, Diploma and Fellowship.

Rashmi Khare

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Acknowledgement

It is my proud privilege to release the feelings of my gratitude to several persons who helped me directly or indirectly to conduct this project work. I express my heart full indebtness and owe a deep sense of gratitude to my teacher and my faculty guide…………, Professor, MANIT national Institute of technology, Bhopal and to my corporate guide Mr. ……………….. AGM, SBI, Main Branch Bhopal, Mr. ……………..& Miss. SME-2, SBI, Main Branch, Bhopal, for their sincere guidance and inspiration in completing this training. I am extremely thankful to the head of department (humanities), faculties of the MANIT MBA DEPARTMENT for their coordination and cooperation and thankful to Prof. ………………. for his kind guidance and encouragement. I am also extremely thankful to all those persons who have positively helped me I also thank all my friends who have more or less contributed to the preparation of this project report. I will be always indebted to them.

Thanking You

CONTENT
Page no.

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Executive Summary…………………….............................................................07 Chapter 1……………………………………………………………………………....08 Company Profile Overview………………………………………………………………………09 History…………………………………………………………………….......10 International presence…………………………………………………………11 Chapter 2……………………………………………………………………………….12 Introduction to SME………………………………………………………….13 Comparison of SME interest rate…………………………………………….16 Need of comparison………………………………………………………….16 Introduction to interest rate…………………………………………………..17 Comparison of SME product…………………………………………………23 Research objectives…………………………………………………………..38 Significance and scope……………………………………………………….39 Chapter 3………………………………………………………………………………..40 Research methodology Chapter 4 ………………………………………………………………………............44 Analysis of data Chapter 5……………………………………………………………………….............51 Findings………………………………………………………………………52 Limitations………………………………………………………………….53 Conclusion…………………………………………………………………..57 Annexure (Questionnaire & survey)…………. ……………………………………………………………………..58 Bibliography………………………………………………………………….….....63

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Executive Summary

In the growing global competition, the productivity of any business concern depends upon the behavioral aspect of consumers. This topic deals with the customer’s perception towards SME Product from SBI. This project report contains 5 different chapters. The report begins with the introduction to company, its history, international presence structure. Second chapter deals with introduction of interest rate, base rate, and policy of different bank in term of their lending rates i.e. interest rate The third chapter, methodology adopted in preparing this report is mentioned. It covers the sample procedure, types of data used and the data collection method. The fourth chapter comprehensive coverage of forecasting concepts and techniques which shows the analysis of data through tabulation, computation and graphical representation of data collected from survey. The fifth chapter deals with the findings, suggestion & conclusion part which is very much important after analysis is made. As we know that only analysis and conclusion is not the end of a research, so in the sixth chapter the recommendation part is covered which are made after a depth study of the analysis part of thesis. In each of the five chapters as described above, every chapter has been scheduled in a manner so as to enable the reader to appreciate the contents easily. The report is supported by figures and data wherever necessary with a view to assist the reader in developing a clear cut understanding of the topic. I hope this report will be extremely useful for those it is meant.

RASHMI

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Chapter 1

 Company Profile
OVERVIEW State Bank of India (SBI) is the largest nationalized commercial bank in India in terms of assets, number of branches, deposits, profits and workforce. With the liberalization of the Indian banking industry in the mid-1990s, SBI faced stiff competition from the private sector and foreign banks which resulted in significant loss of its market share. The case describes the efforts of SBI to regain its lost market share by undergoing a major restructuring exercise which involved redesigning its branch network, providing alternate banking channels, emphasis on lean structure and technology up gradation. The case also discusses how SBI is building its image as a customer friendly bank by launching innovative products & services and promoting its brand. Founded: Kolkata, 1806 (as Bank of Calcutta) Headquarters: Corporate Centre, Madam Cama Road, Mumbai 400 021 India Key people: Om Prakash Bhatt, Chairman Industry: Banking Insurance Capital Markets and allied Industries Products: Loans Credit Cards, Savings Investment vehicles SBI Life (Insurance) etc. Revenue: ▲ US$ 24.577 billion (2008) Net income ▲ US$ 2.25 Billion (2008) Total assets: 9

▲ US$ 257.183 billion (as of 31st March2009) Employees: 205,896

History

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The roots of the State Bank of India rest in the first decade of 19th century, when the Bank of Calcutta, later renamed the Bank of Bengal, was established on 2 June 1806. The Bank of Bengal and two other Presidency banks, namely, the Bank of Bombay (incorporated on 15 April 1840) and the Bank of Madras (incorporated on 1 July 1843). All three Presidency banks were incorporated as joint stock companies, and were the result of the royal charters. These three banks received the exclusive right to issue paper currency in 1861 with the Paper Currency Act, a right they retained until the formation of the Reserve Bank of India. The Presidency banks amalgamated on 27 January 1921, and the reorganized banking entity took as its name Imperial Bank of India. Pursuant to the provisions of the State Bank of India Act (1955), the Reserve Bank of India, which is India's central bank, acquired a controlling interest in the Imperial Bank of India. On 30 April 1955 the Imperial Bank of India became the State Bank of India. The Govt. of India recently acquired the Reserve Bank of India's stake in SBI so as to remove any conflict of interest because the RBI is the country's banking regulatory authority. In 1959 the Government passed the State Bank of India(Subsidiary Banks) Act, enabling the State Bank of India to take over eight former State-associated banks as its subsidiaries. On Sept 13, 2008, State Bank of Saurashtra, one of its Associate Banks, merged with State Bank of India. The evolution of State Bank of India can be traced back to the first decade of the 19th century. It began with the establishment of the Bank of Calcutta in Calcutta, on 2 June 1806. The bank was redesigned as the Bank of Bengal, three years later, on 2 January 1809. It was the first ever jointstock bank of the British India, established under the sponsorship of the Government of Bengal. Subsequently, the Bank of Bombay (established on 15 April 1840) and the Bank of Madras (established on 1 July 1843) followed the Bank of Bengal. These three banks dominated the modern banking scenario in India, until when they were amalgamated to form the Imperial Bank of India, on 27 January 1921. An important turning point in the history of State Bank of India is the launch of the first Five Year Plan of independent India, in 1951. The Plan aimed at serving the Indian economy in general and the rural sector of the country, in particular. In order to serve the economy as a whole and rural sector in particular, the All India Rural Credit Survey Committee recommended the formation of a statepartnered and state-sponsored bank. The All India Rural Credit Survey Committee proposed the take over of the Imperial Bank of India, and integrating with it, the former state-owned or state-associate banks. Subsequently, an Act was passed in the Parliament of India in May 1955. As a result, the State Bank of India (SBI) was established on 1 July 1955. This resulted in making the State Bank of India more powerful, because 11

as much as a quarter of the resources of the Indian banking system were controlled directly by the State. Later on, the State Bank of India (Subsidiary Banks) Act was passed in 1959. The Act enabled the State Bank of India to make the eight former State-associated banks as its subsidiaries. INTERNATIONL PRESENCE State Bank of India (SBI) is the largest Indian .The bank traces its ancestry back through the to imperial bank of India the founding in 1806 of the Bank of Calcutta, making it the oldest commercial bank in the Indian Subcontinent. The Government of India nationalised the Imperial Bank of India in 1955, with the Reserve Bank of India taking a 60% stake, and renamed it the State Bank of India. In 2008, the Government took over the stake held by the Reserve Bank of India. SBI provides a range of banking products through its vast network in India and overseas, including products aimed at NRIs. The State Bank Group, with over 16000 branches, has the largest branch network in India. With asset base of $250 billion and $195 billion in deposits, it is a regional banking behemoth. It has market share among Indian commercial banks of about 20% in deposits and advance

CHAPTER 2

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 Introduction to sme
 Comparison of sme interest rate

 introduction to interest rate  Statement the Problem  Research objectives  Significance and scope

SMALL AND MEDIUM ENTERPRISES (SMEs) IN INDIA
INTRODUCTION

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Small and medium enterprises (SMEs) are one of the principal driving forces in economic development. They stimulate private ownership and entrepreneurial skills, they are flexible and can adapt quickly to changing market demand and supply situations, they generate employment, help diversify economic activity and make a significant contribution to exports and trade. Small and medium enterprises (SMEs) have played an important role in boosting up economies of the developing countries and particularly in recent times the success of the South East Asian countries is indebted to this very sector. 8 SMEs account for almost 90 percent of privately-owned businesses and bulk of employment all over the globe. Experience has shown that neglect of this sector is bound to keep that country below its potential growth level. The SME sector covers all types of businesses, but it is the common profile of service and manufacturing business concerns. Reason being the largescale manufacturing sector is unable to cater to all demands of goods and services and depends largely on subcontracting arrangements with smaller business units. If viewed in global scenario, SMEs are found to generate 80 per cent of total industrial employment, contributing 30 per cent to GDP and adding to export earnings to the extent of 1/4th of total industrial sector contribution. The globalization and trade liberalization, which is a favored move on the part of the developed countries has increased the competition for SME sector in all the developing countries, particularly in Asian countries, and is bound to further widen the gap between rich and poor nations. Thus it is imperative for economic survival of Asian countries that they review their national economic policies.

Definition of micro, small and medium enterprises
• micro enterprise is an enterprise where investment in plant and machinery does not exceed Rs. 25 lakh.

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small enterprise is an enterprise where investment in plant and machinery is more than Rs. 25 lakh but does not exceed Rs. 5 crore medium enterprise is an enterprise where investment in plant and machinery is Rs. 5 crore but does not exceed Rs. 25 crore more than

CHARACTERSTIC OF SME
1. Growth recorded by SSI in India 2% more than any other sector 2. The sector accounts for 9% of the country GDP. 3. The sector employs more then 20 million people( employee contribution by SME in Madhya Pradesh is 4.5%) 4 .It has been estimated that a lakh rupees of investment in fixed assets in smaller sector generates employment for four persons. 5. Among the large PSBs, state bank of India SMEs exposure grew by 28% in 2009. 6. Public sector bank’s overall credit to SME grew by 28% in 2008-2009 accounted to Rs.2, 10,000 crores. 7 .Reserve bank of India advices all commercial banks to achieve 20% annual growth in SME lending till 2010 8. SME on traditional products constitute a massive of 95% of the SSI exports.

Advantage of sme
• • • • • More job per unit capital. Integrated into domestic corporation. Increased the employment Flexibility Rapid growth of small scale industries in long run. 15

OBJECTIVE -COMPARISION OF INTEREST RATE FOR SME PRODUCT

NEED OF THE COMPARISION 16

We need to examine of two or more than two banks in terms of their interest rate for SME product with a view of discovering the resemblances or differences in their policies ,advancement ,ease to the customer.

Product is:

 Traders easy loans  Doctor plus  School plus  Rent Plus  Shoppe Plus

INTRODUCTION TO INTEREST RATE

INTEREST RATE

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Interest can be said to be the price paid by the borrower for the use of funds saved by the lender and the compensation to the lender for his deferring expenditures. This compensation comprises two elements, namely a payment equal to the loss of purchasing power of the principal during the term of the loan and a balance that represents the real interest accruing to the lender. However this simplicity does not extend into the area of rate determination since rates vary not only because of inflation, as implied above, but also because of a number of other influences, including: - The amount, purpose and period of the transaction; - The credit-worthiness of the borrower; - The collateral offered and/or other guarantees/guarantors available; - The competition for the transaction; - Government policy. As a consequence, there will be numerous rates applying to the large number of transactions that are in effect at any one time in any one country. While efforts have been made in the rate selection to ensure as much international comparability as possible, the fact remains that the institutional features of each member’s financial markets are distinct and often markedly different from those of other members. However, the intent is to present for each country a range of rates, from ‘overnight’ through ‘short-term’ to ‘long-term’. In general, ‘overnight’ and ‘short term’ rates relate to money market instruments, while ‘long term’ rates are secondary market yields of long term (usually 10 year) bonds

How the rate is determined?

The simplest theory is the loan able funds one, that it is the rate that equilibrates the supply of loan able funds in an economy with the demand for such funds. Then there is the classical theory, which defines the interest rate as the point of intersection of the savings and investment curves. Investment represents the demand for investable resources and saving represents the supply, whilst the rate of interest is the “price” at which the two are equated

There is just more than one interest rate in an economy?

No. The rate at which the government (sovereign) borrows—or the rate that equilibrates government’s demand for funds with the supply—is called the risk-free rate of interest (the logic being, there is no risk in lending to government, as it can always print money). All other interest rates will be at a premium over the risk-free rate for the period in question, the amount of premium determined by the credit-risk of the borrower. Someone with a good record of returning loans will be able to borrow at a cheaper rate compared to someone with a credit history as a defaulter. • How do central banks influence interest rates? 18

The main function of central banks is to preserve the value of money i.e. to keep inflation in check. They do so in a number of ways — by targeting a particular rate of inflation or by targeting a certain level of money supply in the economy. Typically, a central bank assesses the amount of funds required to oil the economy’s wheels, commensurate with the desirable level of economic activity. It raises rates whenever it feels the economy is over-heating and lowers these when it wishes to spur investment and growth.

• How does RBI influence the rates? In a number of ways. Directly, through the reverse repo : repo rates (at which it sucks out and pumps in liquidity into the system). And indirectly through the cash reserve ratio (CRR), which is the ratio of their demand and time deposits that banks must keep with the RBI, by open market operations wherein it buys and sells government securities, the liquidity adjustment facility, etc. The bank rate, the traditional route, is largely unused.

• Why is the interest rate important? The rates are an important determinant of the level of investment in an economy. Broadly, if rates increase across the board, then, other things remaining the same, investment will decrease (as it will no longer be as profitable as before to invest) and so will the growth rate. If interest rates fall, investment will pick up and so will growth. • So should economies like India keep interest rates low?

No, while high rates may dampen ‘animal spirits,’ keeping interest rates artificially low can have far worse consequences over the long-term. This is because any investment decision is a tradeoff between the cost of capital (whether borrowed or own funds) and the rate of expected return from the investment. So, if interest rates are kept artificially low, many investment decisions that are otherwise unviable may be taken. The result could well be the creation of excess capacity—companies producing more cars, scooters, fridges, TVs and so on, relative to demand— bringing in its wake the inevitable painful adjustment later, when companies downsize and lay off workers. • What is real interest rate? How is it different from the nominal one?

The real interest rate is the nominal one minus the expected rate of inflation. People often err in their calculation by using the actual rather than expected rate of inflation. Of course, to the extent there is seldom any unanimity on the expected rate of inflation, different real rates can safely be bandied about! • Are interest rates in India market-determined?

Most are, now. Those which aren’t include the rate of interest on savings bank deposits and small savings (provident funds, national savings certificates, RBI bonds, etc).... 19

 SOME OTHER TERMINOLOGY Interest Coverage Ratio A ratio used to determine how easily a company can pay interest on outstanding debt. The interest coverage ratio is calculated by dividing a company's earnings before interest and taxes (EBIT) of one period by the company's interest expenses of the same period:

The lower the ratio, the more the company is burdened by debt expense. When a company's interest coverage ratio is 1.5 or lower, its ability to meet interest expenses may be questionable. An interest coverage ratio below 1 indicates the company is not generating sufficient revenues to satisfy interest expenses. under 1.5.. The history and consistency of earnings is tremendously important. The more consistent a company’s earnings, the lower the interest coverage ratio can Interest Rate Swap An agreement between two parties (known as counterparties) where one stream of future interest payments is exchanged for another based on a specified principal amount. Interest rate swaps often exchange a fixed payment for a floating payment that is linked to an interest rate (most often the LIBOR). A company will typically use interest rate swaps to limit or manage exposure to fluctuations in interest rates, or to obtain a marginally lower interest rate than it would have been able to get without the swap. Interest Rate Risk Interest rate risk affects the value of bonds more directly than stocks, and it is a major risk to all bondholders. As interest rates rise, bond prices fall and vice versa. The rationale is that as interest rates increase, the opportunity cost of holding a bond decreases since investors are able to realize greater yields by switching to other investments that reflect the higher interest rate. For example, a 5% bond is worth more if interest rates decrease since the bondholder receives a fixed rate of return relative to the market, which is offering a lower rate of return as a result of the decrease in rates.

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INEREST DERIVATIVE a derivative which has an underlie activity to pay or receive a given amount of money at a given interest rate. Interest rate derivative are most popular derivative and include interest rate swap INTEREST RATE FUTURE an interest rate future is a financial derivative (a futures contract) with an interest-bearing instrument as the underlying asset. Examples include Treasury-bill futures, Treasury-bond futures and Eurodollars futures. The global market for exchange-traded interest rate futures is notionally valued by the Bank for International Settlement at $5,794,200 million in 2005. • INTEREST RATE OPTIONS An investment tool whose payoff depends on the future level of interest rates. Interest rate options are both exchange traded and over-the-counter instruments.

• ZERO INTEREST POLICY The (ZIRP) is a concept in macroeconomics where economies exhibit slow growth with a very low interest rate, such as contemporary Japan and since December 16, 2008, the United States.

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• Where

INTEREST RATE = BASE RATE+ BORROWER SPECIFIC CHARGE

BORROWER SPECIFIC CHARGE=
• • PRODUCT SPECIFIC OPERATING COST CREDIT RISK PREMIUM, AND TENOR PREMIUM

BASE RATE Unlike the BPLR that was set somewhat arbitrarily by banks, the base rate will follow an explicit formula that factors in a bank's cost of deposits, operating costs (expenses of running its branches, for instance), the cost of statutory drafts on bank funds imposed by the Reserve Bank of India (the Cash Reserve Ratio and Statutory Liquidity Ratio) and the profit margin.

BENIFITS OF BASE RATE

The base rate will help borrowers to compare interest rates offered by various banks and make the process of how banks arrive at interest rates for loans more transparent. In the existing system, banks are free to fix their PLRs. Most of the variable rate loans, like home loan and some of the term loans are pegged against PLR. This means, if the PLR is not changed, the loan rates remain the same Banks have taken advantage of existing PLR system at the cost of their borrowers. When interest rates increase, banks hike their PLRs immediately, leading to rise in the home loan rates. But, when interest rates fall, they don't reduce PLRs. Because of this, the existing customers are not benefited by the lowering of the interest rates. However, banks pass on the benefit to new customers by increasing the discount against PLRs. Under the new system, home loans and other variable loans will be pegged against a base rate. As the new base rate is fixed on the basis of cost of funds, any change in the interest rate will reflect in the base rate. And therefore, it will be automatically passed on to the existing customers also. At the same time, RBI has clearly said that the base rate will be minimum rate for all commercial loans and banks will not be permitted to resort to any rate below it.

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BASE RATE OF DIFFERENT BANK

NAME OF THE BANK SBI PNB IDBI BANK OF BARODA CANNARA BANK ALLAHABAD BANK UNION BANK OF INDIA CENTRAL BANK OF INDIA INDIAN BANK UCO BANK CORPORATION BANK HDFC

BASE RATE (11/07/10) IN % 7.50 8 8 8 8 8 8 8 8 8 7.75 7.25

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Sme Product
 FOR TRADERS PURPOSE- this is a hassle product for traders to acquire fixed asset fot the business or to build up of inventory /current assets. CHARACTE- SBI RSTIC ELIGIBILIT Y Existing customer UNITED BANK OF INDIA existing trader/ business person/ service provider operating and earning profit for at least two year Overdraft, term loan IDBI Distribution chain partners comprising dealers, stockiest, distributors, etc. OD, Cash Credit, Term loan. , Bill Discounting. UCO BANK enterprises engaged in business for at least 2 years /New trading unit started by existing UCO Trader Term loan, Cash credit,

FACILITIES

Cash credit, OD ,term loan

ASSSEMEN T OF BANK FINANCE

Loan not exceeds 90% of total worked out requirements, or 65% of collteral, whichever is less. On demand Max of 60

REPAYMENT

(months) CC TL(based on cash flow) OD

Maximum 50 Min: Rs.10 lack subject lakh to 20% of the Max Rs 500 annual lakh sales/turnove r Up to 60 years with interest reset Max 60 clause Limit valid,12

Minimum Rs. 1 Lac and Max Rs 200 Lac Max 60

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INTEREST RATE OFFERED • SBI BANK
Upto Rs. 50,000 Above Rs. 50,000 to Rs. 2 lakh Above Rs. 2 lakh to Rs. 5 lakh Above Rs. 5 lakh to Rs. 25 lakh Above Rs. 25 lakh based on credit assessment 8.50% 9.50% 10.25% 11.00% -

UNITED BANK RATE Revised wrf 01.07.2010 BR + 4.50% i.e. 12.75% p. a.

BANK OF BARODA

Traders Loan (irrespective of loan limit/OD/TL)  4.00 % above Base Rate i.e.12.00%

ORIENTAL BANK OF COMMERCE Upto 0.50 lacs Base Rate + 2.00 % i.e. 10.00% 25

Above 0.50 lacs and Upto Rs 2 lacs Above Rs 2 lacs and Upto Rs. 20.0 lacs Above Rs 20.0 lacs to Rs. 25.0 lacs

Base Rate + 2.50 % i.e. 10.50 % Base Rate + 3.00 % i.e. 11.00 % Base Rate + 4.00 % i.e. 12.00 %

ALLHABAD BANK For credit limits up to Rs.20.00 Lac for Trade

Loan upto Rs.50000/Loan above Rs.50000/- to Rs.2.00 Lac Loan above Rs.2.00 Lac to Rs.10.00 Lac Rs.10.00 Lac & above (Linked to Rating of the account)

8.75% (Fixed) BR+1.00% BR+1.50% AB -1 : BR+1.50% AB -2 : BR+1.50% AB -3 : BR+2.50% AB -4 : BR+3.50% AB -5 : BR+5.00%

9.25% (Fixed) BR+1.50% BR+2.00% AB -1 : BR+2.00% AB -2 : BR+2.50% AB -3 : BR+3.00% AB-4 : BR+4.00% AB-5 : BR+5.50%

CANARA BANK Up to Rs.2 lakh Above Rs.2 lacs including loans under priority sector 12.50% p.a. 13.75% p.a.

 DOCTOR PLUS PURPOSE- product for qualified Doctors,Medical practioners, for purchase of equipment,for setting up clinic,nursing home,Lab,Drug store,Ambulance,expansion or renovation of exixting premises. 26

characteristic ELIGIBILITY

SBI Registered practitioner, possess minimum qualification

BANK OF BARODA individuals, Proprietorship / Partnership firms, Private Limited companies Term loan/OD

IDBI All medical practitioners/ doctors/ clinics·

CANARA BANK registered medical practitioners, Min exp of 3 years.

FACILITIES

Medium term loan

Term loan & Overdraft/ Cash Credit  Minimum: Rs.50, 000/ Maximum: Rs. 2 crores

Term loan

ASSSEMENT OF BANK FINANCE

Max of 5 crore Min 50,000 ,with sub ceiling for working capital limits at 10%of amt of loan Max upto 84 Max, 50 lakh

Maximum of Rs.10 lacs

REPAYMENT (months) CC TL(based on cash flow)

35 TO 84

84

Term Loan – 60-84 /24-36 months in installments / EMI

SBI INTEREST RATE Rate Repayable in 3 years and above

Loan amount

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Upto Rs. 50,000 Above Rs. 50,000 to Rs. 2 lakh Above Rs. 2 lakh to Rs. 5 lakh Above Rs. 5 lakh to Rs. 25 lakh

8.50 9.00 9.25 10.25

1.25% below SBAR 0.75% below SBAR 0.50% below SBAR 0.50% above SBAR

9.00 9.50 9.75 10.75

UNITED BANK INTEREST RATE
a b c d e f g

Limit up to Rs 25000/Limit > Rs 25000/- and up to Rs50000/Limit > Rs 50000/- and up to Rs 2,00,000/Limit > Rs 200,000/- and up to Rs500,000/Limit > Rs 500,000/- and up to Rs 10,00,000/Limit > Rs 10, 00,000 and up to Rs 25,00,000/Limit > Rs 25,00,000/- upto Rs10.00 crores

BR, 8.25% BR+0.50%, i.e. 8.75% BR+1.50%, i.e. 9.75% BR+2.50%, i.e. 10.75% BR+3.00%, i.e. 11.25% BR+3.00%, i.e. 11.25% As per Credit Risk Rating

BANK OF BARODA INTEREST RATE 3.00% above the base rate i.e. 11.0% upto Rs 2 lacks Above Rs 2 lacks 2.50% above base rate i.e10.50%

ORIENTAL BANK OF COMMERCE Rate of Interest: wrf to 01.07.2010 For .Micro enterprises Up to Rs 50,000 Above Rs. 50,000 and upto Rs. 2.00 lac Above Rs. 2.00 lacs and upto Rs. 25.00 lac BR + 0.75% = 08.75% BR + 1.50% = 9.50% BR + 1.75% = 9.75%

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Limit Above Rs. 25 Lac and upto Rs. 1.00 Crore If credit rating is A++ : BR + 1.50% = 9.50% If credit rating is A+ - : BR + 2.00% = 10.00% If credit rating is A - : BR + 3.00% = 11.00% If credit rating is below A : BR + 4.00% = 12.00%

For Small Enterprises Upto Rs. 50,000/Above Rs. 50,000/ - and upto Rs. 2.00 lakh Above Rs. 2.00 lacs and upto Rs. 25.00 Lakh BR + 1.25% = 9.25% BR + 2.00% = 10.00% BR + 2.25% = 10.25%

Limit Above Rs. 25 Lac and upto Rs. 1.00 crores If credit rating is A++: BR + 2.00% = 10.00% If credit rating is A+ - : BR + 2.50% = 10.50% If credit rating is A - : BR + 3.50% = 11.50% If credit rating is below A: BR + 4.50% = 12.50%

AXIS BANK Rate of Interest 14.00% to 21.00%

ALLAHABAD BANK Bank’s Base Rate (BR) wrf. 01.07.2010 IS 8.00% Loan up to Rs.50000/ Above Rs.50000/- to Rs.2.00 lacs. Above Rs.2.00 lakh to Rs.10.00 lakh Rs.10.00 lacs & above (Linked to Rating of the account) 8.75% (fixed) BR+1.00% BR+1.50% AB-1 : BR+1.50% AB-2 : BR+1.50% 29

AB-3 : BR+2.50% AB-4 : BR+3.50% AB-5 : BR+5.00% AB-6 : BR+6.00% AB-7 : BR+7.00%

• •

CANARA BANK

CANARA BANK

Aggregate limit

Micro Enterprises

Small & Medium Enterprises Term Loans 9.75 10.25 10.50 11.50

Working capital Term Loans Working Capital

Upto Rs. 50000 >Rs. 50000 upto Rs. 2.00 lacs > Rs. 2 lacs upto Rs.5 lacs > Rs. 5 lacs upto Rs.10 lacs

8.75 9.25 9.50 10.50

9.25 9.75 10.00 11.00

9.25 9.75 10.00 11.00

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SCHOOL PLUS PURPOSE-product for educational institution CHARACTERSTIC SBI eligibility Government aided/private/run by trust of good standing/ AICTE facility Finance assessment Repayment period institute Term loan Max 25 lakh 3 year and above BANK OF BARODA Government aided/private/run by trust of good standing/ AICTE institute Term loan Max 25 3 years

STATE BANK OF INDIA 31

Size of Credit limit Upto Rs. 2 lakh Above Rs. 2 lakh to Rs. 5 lakh Above Rs. 5 lakh to Rs. 25 lakh

Rate 9.25 10.25 11.00 1.00% below SBAR 0.50% above SBAR 1.50% above SBAR

Repayable in 3 years and above 9.25 10.75 11.75

THE VISHWESHWAR SAHAKARI BANK

Educational Institutions Loan Scheme

14.00

BANK OF BARODA

Loan Limit Upto Rs. 50,000 Above Rs. 50,000 upto Rs. 2.00 lacs

For Micro Enterprises At Base Rate 0.50% above Base Rate 2.75% above Base Rate

For Small Enterprises 0.50% above Base Rate 1.00% above Base Rate

Above Rs.2 lacs but less than Rs.25 lacs

3.25% above Base Rate

SBI SHOPPE 32

Purpose

Purchase of new/old shops/establishments/offices .Modernization /expansion Of establishments/shops, etc. All furniture/fixtures, electrical fittings and other accessories required for shops/showrooms/offices.

characteristic Eligibility

SBI Individuals , Firms ,Partnership Firms Trusts Term loan Max Rs 25 lakh. Hypothecation/ pledge/ mortgage/ assignment of property

BANK OF BARODA Individuals , Firms ,Partnership Firms Trusts Term loan Max 25 lakh Hypothecation/ pledge/ mortgage/ assignment of property

IDBI All existing customers having a satisfactory dealing with the Bank for the last 3 years. OD, Open Cash Credit Max of Rs. 10 lakh Term Loan: Exclusive Charge on assets financed. Working Capital: Exclusive charge on all the current assets. Collateral: Up to 50% of the loan amount 36

facility Loan amount security

Repayment period(month)

36 to 84

36

.

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STATE BANK OF INDIA Upto Rs. 50,000 Above Rs. 50,000 to Rs. 2 lakh Above Rs. 2 lakh to Rs. 5 lakh Above Rs. 5 lakh to Rs. 25 lakh Above Rs. 25 lakh based on credit assessment 9.00%

10.00% 10.75% 11.75%

UCO BANK UCO Shopper BPLR +1% = 13.25% p.a.

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BANK OFBARODA

Repayment Period Upto 5 years

Upto Rs 30 lacks 0.50% above Base Rate i.e. 8.50%

Above Rs 30 lacks 1.25% above Base Rate i.e. 9.25% 1.50% above Base Rate i.e. 9.50% 1.75% above Base Rate i.e.9.75%

Over 5 years & up to 15 years 0.75% above Base Rate i.e. 8.75% Over 15 years & up to 25 yrs 1.00% above Base Rate i.e9.00%

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RENT PLUS PURPOSE- product provides finance against assignment of future rental for meeting the liquidity requirement to the owner of the building and commercial properties.

characteristic ELIGIBILITY

SBI Individual/\partnership Firms/ corporate

UCO Owners i.e. lassoers of houses/flats/ go downs/warehouses etc

CANNARA Existing customers, Satisfactory dealings

FACILITY ASSSEMENT OF BANK FINANCE

Term loan Min 50,000 Max 10 crore

Term loan Maximum 80% of the total rent receivable, Minimum Rs. 1 Lac

Term loan Upto 75% of the gross monthly rent receivables

REPAYMENT (months) CC TL(based on cash flow)

Max 84

max 84 max 84

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ALLAHABAD BANK Scheme ALLRENT Rate of Interest BR+5.00%

SBI Interest Rates
10.75%

UNITED BANK OF INDIA Revised i.e. 01.07.2010 Other than Landlord of UBI Landlords of UBI BR + 4.50% i.e. 12.75% p.a. BR + 3.50% i.e. 11.75% p.a.

UCO BANK UCO Rent BPLR+1.00% = 13.25% p.a.

CANARA BANK SCHEME Canara rent ROI 12.50%

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Statement of problem
 To know about the customer perception about
the SME product provide by them to the people  To find out what kind of service provide by the competitors in SME.  To find out the need of the customer and hence formulate the strategy to level the economy in the society.

 How the SME products are helping the
customer.

 To know the utility of the SME product.

Research objectives

Summer Internship Project gives a practical exposure and helps in acquiring the on road skills.

1. Why customer do banking with SBI 2. To find out different banks interest policy, and compare it with our bank policy. 3. To find out the services that other bank given to their customer

4. To study the improvements in SME schemes. 5. To find out the customer awareness on booming SME market and to find out the using patterns of the people 6. To find out which bank provides best SME scheme and what are the interest rates they provide.

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Significance and scope

The geographical scope of the study is restricted to only with sample size of 50, ALL medical shop owners, at chola road, BHOPAL. All the analysis and suggestions are based on the analysis of the both primary and secondary data. There fore the scope of the study revolves around the following aspects:• • Consumer perception towards SME Product Consumer awareness about SME scheme and its benefit. 39

Aware the Bank about the customer problems.

CHAPTER-3

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Research methodology

Research methodology is a methodology for collecting all sorts of information & data pertaining to the subject in question. The objective is to examine all the issues involved & conduct situational analysis. The methodology includes the overall research design, sampling procedure & fieldwork done & finally the analysis procedure. The methodology used in the study consistent of sample survey using both primary & secondary data. The primary data has been collected with the help of questionnaire as well as personal observation book, magazine; journals have been referred for secondary data. The questionnaire has been drafted & presented by the researcher himself.

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Research Design

Research Design is the basic framework, which provides guidelines for the rest of research process. It is a map or blueprint for the collection, measurement and analysis of the data. As such the design includes an outline of what the researcher will do from writing the hypothesis and its operational implication to the final analysis of data. The foundation of research design is to ensure that the required data is accurate and economical. In this project exploratory research design has been used.

 Sample Size: Sample of 50 SHOP OWNER was taken into study, and their data was collected  Sampling Technique: To study the Project, a Simple Random Sampling technique is done. Data Collection:

 Primary data Questionnaires Survey

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 Secondary data Executive Manager of SBI -: Mr.Maniesh Agnihotri Staff members of respective bank Internet Financial Magazines

 Data Analysis: After data collection, I’m able to analyze customer’s views, ideas and opinions related to SME and about SBI SME Product and from this, SBI will come to know the customer requirements.

Data Interpretation:  Interpretation of data is done by using statistical tools like Pie diagrams, Bar graphs, and also using quantitative techniques (by using these techniques) accurate information is obtained.

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 Classification & tabulation of data:  The data thus collected were classified according to the categories, counting sheets & the summary tables were prepared. The resultant tables were one dimensional, two dimensional.

 Statistical tools used for analysis:  Out of the total respondents, the respondents who responded logically were taken into account while going into statistical details & analysis of data. The tools that have been used for analyzing data & inference drawing are mainly statistical tools like percentage, ranking, averages, etc. As per questionnaire and market surveys I have find out different responses from different people. According to their responses I analyze the findings and draw certain remarks.

CHAPTER-4

Analysis of data

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GRAPHICAL REPRESENTATION OF DATA

Q1. How many customers prefer sme loan for their Enterprise? And from which bank? ( ) No. of People
PERSONAL FUNDING SBI PNB BANK OF INDIA BANK OF BARODA 40% (20) 14 % (7) 12% (6) 10% (5) 8%(4)

45

JHARNESHRAN OTHER

4%(2) 12%(6)

Q3. Awareness of the of SBI SME product?

YES NO TOTAL NO. OF PEOPLE

95%(47) 5% (3)) 50

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From the above data it is clear that most of the customers (around 85%) have the idea about the SME product & services of SBI, the rest 15% have the idea about the product they are using.

Q4. Which bank satisfied you more for taking SME loans?

70%(14) SBI PNB BANK OF BARODA TOTAL NO. OF PEOPLE 20% (4) 10%(2) 20

47

S ales
10% 20% S BI 70% P NB BOB

According to my sample size 70% of people prefer SBI for loan product, but some people prefer BOI, PNB Bank for loan because they are customer of these bank and using other services.

Q5. If you prefer SBI for taking loan than what influence you to take Loan from SBI?
Most of the people said that they prefer SBI for taking loan because of the transparency and the lowest interest rate for any kind of loan product. And it is easy to get loan from SBI as compare to other bank because less paper work is require and as it is the largest govt. bank in India and having partnership with RBI (Reserve Bank of India) and other association, it is easier for SBI to give loan to people with a longer repayment period.

Q7. Services providing by SBI in sme product?

Bad Satisfactory Good Excellent TOTAL NO. OF PEOPLE

0% (0) 2% (1) 55% (27) 43% (22) 50

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Q8. Which features you like most in SME segments of SBI?

ATTRACTIVE INTEREST RATE TRANSPARENCY SIMPLE AND FAST PROCESSING LONGER REPAYMENT PERIOD

35% (7) 20% (4) 5% (1) 40% (8)

TOTAL NO. OF PEOPLE

20

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Most of the people like the attractive interest rate & longer repayment period. It’s easier for people to repay the whole loan amount with its interest with low interest rate and with longer repayment period.

CHAPTER-5

 Findings  Suggestion & Recommendation
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 Conclusion

PROJECT Findings:
 From this project it is found that SBI SME product having the 1st place in the MEDICINE market
at, there is a great opportunity to compete with PNB Bank & to retain its customer by fulfilling the requirement of customer in SBI advance product.  All of SBI customers are satisfied with the services provided by the bank.

 Many of these customers satisfied with the low interest rate and longer repayment period of the
SME product.

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 Most of the customers prefer to take SME loan from SBI.  Approximately 43% of users said that the service of SBI in SME product is GOOD.  Many customers have no time to call customer care so that they are not able to know about the
service & features of SBI SME product.  Most customers are shifted from other bank’s advance product to SBI because of hidden charges, high interest rate, less repayment period.

 Government Enterprises are more concern than private enterprises for sme product.

LIMITATIONS

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The study is limited to the period of 45 days. Due to time constraints we covered only limited no. of SMEs Since banks have some confidential reports which cannot be handover to the outsiders, so in-depth research and analysis is not possible. There is lots of no. of SMEs which is unregistered; due to this proper data’s are not covered. The financials of the firms, were not available, as most of the firms are worried about disclosing their financials, thus for the industry analysis and other qualitative research, we had to rely on the secondary data sources.

REASONS FOR HIGHLY USE OF SBI ADVANCE PRODUCT:
 LESS PAPER WORK  ATTRACTIVE INTEREST RATES  TRANSPARENCY  SIMPLE & FAST PROCESSING  LONGER REPAYMENT PERIOD

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 QUICK PROCESSING

Suggestion & Recommendation Recommendation:
 Customer awareness programme is required so that more people should attract towards SME
product.  If there are any kind of hidden charges than that must disclose to customer before giving loan to them.

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 SBI must take some steps so that customers can get their loan in time. Like phone verification by customer care that one customer is got their loan on time or not .It must be before a certain date so necessary steps can be taken.  SBI should more concern about physical verification rather than phone verification so it will avoid fraud or cheating.

 SME product selling agents must not give any type of wrong information regarding advance
product.  For the better service new offers would be require.  SBI customer care should more concern about the fastest settlement of customer problems.  Before deducting or charging any monetary charge SBI must consult with customer.  Agents should be trained, well educated & proper trained to convince the people about different advance product.  It is the duty of the bank to disclose all the material facts regarding advance product, like interest charged, repayment period, other types of charges, etc.  Special scheme should be implemented to encourage both customer and agents.  The bank should increase the period for repayment of loan.

 SBI should more focus on Retaining existing customers.
 SBI must focus on Segmentation based on customer knowledge Product offering based on customer demand.

 SBI must take feedbacks of customers regarding features & services.

Suggestions given by the consumers at the time of survey:

o There is more time period for repayment of education loan.

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o SBI should take steps to solve customer problems immediately. o Agents should be trained, well educated & proper trained to convince the people about different advance product. o Loan sanction date should be according to customer convenience. o A customer awareness programme should be taking place in rural area.

Conclusion
From the analysis part it can be conclude that customers have a good respond towards SBI SME

products in medicine market. SBI is in 1st position having large number of customers & providing

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good services to them. The bank has a wide customer base, so the bank should concentrate on this to retain these customers. In present scenario SBI is the largest SME product issuer in India. Within a very short period of time the achievement made by SBI is excellent, what a normal bank cannot expect, but it is being done by SBI. It happens due to employee dedication towards the organization, fastest growing Indian economy, & brand image. To be the largest advance product issuer, SBI should focus on• • • • • Launch Innovative SME product Better customer services Fastest customers problem solving techniques Customer retention Key ratios affecting the lending rates of bank.

Apart from all the above, SBI believe in providing good customer services to their customers which is a key factor for success in future.

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ANNEXURE

SURVEY

58

59

Questionnaire

Name - _____________________________________ Occupation-__________________________________ Contact Detail -_______________________________
Q. On which bank you depend for your enterprise? a) SBI b) PNB c) BANK OF BARODA d) Other Bank, Specify (_____________)

Q. Are you aware of SME products & services provided by SBI? a) YES b) NO

Q. Which bank you prefer for taking SME loans? a) SBI b) PNB c) BANK OF BARODA d) Other Bank, Specify (_____________)

Q. If you prefer SBI for taking SME loan than what influence you to take Loan from SBI? _________________________________________________________________________________ _________________________________________________________________________________ _________________________________________________________________________________ __________________________________________________.

Q. What do you feel about the services providing by SBI in SME product? 60

a) b) c) d)

Bad Satisfactory Good Excellent

Q. Which features you like most in SME Loan segments of SBI? a) Less paper work b) Attractive interest rate c) Transparency d) Simple & fast processing e) Flexibility to choose an EMI base loan or an overdraft f) Longer tenure lone for ease of repayment g) Specially design product for self employed h) Any other feature, specify ( _____________ )

Q. Any suggestion you want to give for the betterment of SBI SME product. _________________________________________________________________________________ _________________________________________________________________________________ _________________________________________________________________________________ ________________________________________________________.

Bibliography:
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Text Books:
Solomon, Michael R. (2002), Consumer Behavior: Buying, Having, Being. 5th Ed. New Jersey: Prentice Hall Wilson A. (2003), Marketing Research: An Integrated Approach Naresh Ku. Malhotra, Marketing Research: An Applied Orientation, Fifth Edition

Internet:
http://www.bankofbaroda.com/bbs/arogyadhamloan.asp http://www.hdfcbank.com/personal/loans/health_care_finance/health_care_finance_faqs.htm https://www.obcindia.co.in/obcnew/site/inner.aspx?status=R1&menu_id=23 http://www.allahabadbank.com/creditschemes.asp#doctors http://www.canarabank.com/english/Scripts/LoansAccounts.aspx http://www.statebankofindia.com/user.htm?action=viewsection&id=0,16,456 http://www.idbi.com/sme_finance.asp

Magazines’ Business today Economic times Material provided by company

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