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ALKESH DINESH MODY INSTITUTE FOR FINANCIAL AND MANAGEMENT STUDIES
A SUMMER INTERNSHIP PROJECT REPORT ON NEW PRODUCT DEVELOPMENT FOR FINANCING SME’s UNDER REGULATORY DEFINATION
A STUDY DONE FOR
SUBMITTED BY, MR. DEEPAK G. VEER SEM-III
IN PARTIAL FULFILLMENT OF THE REQUIREMENT OF THE M.M.S. PROGRAMME FOR THE YEAR 2012-2013
SUBMITTED ON 11th JULY 2012
I am very grateful to Mr.Khajan Singh, Chief Manager, Panvel Branch Bank of Baroda. I express my sincere gratitude to Mr.B.M.Chavan,Sr.Manager Credit, Panvel Branch, Bank of Baroda, for guiding me through this project, sharing his knowledge and experience. I also am very thankful to Mr.C.V.Raghavendra, Credit officer, Panvel Branch, Bank of Baroda, for extending his support and resources for completion of this project……… Regards, Deepak Veer
Table of contents
SR. NO. 1 2 3 4 5 6 7 8 9 Name of Topic Executive Summary List of Abbreviations List of Tables Overview of Banking Industry About Bank of Baroda Overview of SME sector Baroda SME Product Conclusion Bibliography Page No. 4 6 8 9 17 19 24 55 56
The summer internship project deals with the ‘New Product Development for Financing SME’s under Regulatory definition.” SME is fast growing sector in the Indian Economy. Every Bank has given highest
importance to financing SMEs in their strategically growth plan. It has become necessary to bring policy shift and create free market environment from regulations & interventions in economic activity. Growth resulting from globalization and liberalization is visible most profoundly in the SME segment. The relationship between the banker and the customer has become most crucial and competitive. The technology has entered the scene almost as a natural corollary of liberalization. Market Liberalized policies provide ample opportunities to Indian of the
to compete with developed and developing
Micro, Small & Medium Enterprises Development (MSMED) Act, 2006 is a turning point for the development of Indian industry, as it addresses and streamlines entire framework along with key governance & operational issues being faced by the SME’s.
Investment in Plant & Machineries of Manufacturing Enterprises
Up to Rs. 25 /- lacks Above Rs. 25 /- lacks and Up to Rs. 500/- lacks Above Rs.500/- lacks and up to Rs.1000/- lacks
Investment in Equipment of Service Sector Enterprises
Up to Rs.10/- lacks
Micro Enterprise Small Enterprises Medium Enterprises
Above Rs. 10/- lacks and Up to Rs.200/-lacks Above Rs.200/- lacks and Up to Rs.500/- lacks.
The SME Loan Policy is framed with the following objectives: • To improve flow of credit to SME Sector so as to double the credit to the Sector in 5 years, i.e. by the year 2012.
• To formulate liberal norms of lending to SME sector, to ensure availability of adequate and timely credit to the sector. • To provide guidelines to the branches to dispense credit to SME Sector on liberalized terms. • To devise an organizational structure at all levels for handling SM credit portfolio in a more focused manner.
SCOPE OF POLICY This Policy will form a part of Bank’s Domestic Loan Policy and will interalia cover following:
• • •
Composition of SME Sector SME Loan Factory Model Pricing Policy Identifying Thrust Industries Broad guidelines on lending to SME Sector
List of Abbreviations
TEV TL WC NWC NFB MPBF LC LOC IRR FACR FB CASA CR DSCR DER DTL DPG DTA BD BG 6 Techno-Economic Viability Term Loan Working Capital Net Working Capital Non Fund Based Maximum Permissible Bank Finance Letter of Credit Line of Credit Internal Rate of Return Fixed Asset Coverage Ratio Fund Based Current Account/Savings Account Current Ratio Debt Service Coverage Ratio Debt-Equity Ratio Deferred Tax Liability Deferred Payment Guarantee Deferred Tax Asset Discount of Bills Bank Guarantee .
Page No. 9 . 1 7 Particulars Overview of Banking Sector.CAGR CC PC DP SME Compounded annual growth rate Cash Credit Packing Credit Drawing Power Small and Medium Enterprises LIST OF TABLES/CHARTS SR NO.
Subsidy detail 19 22 36 45 48 Overview of the Banking Industry 8 .Guarantee fees Overdraft.Rate of interest KVIC. Total employee of SME CGTMSE.2 3 4 5 6 Bank of Baroda Organization Structure.
By the 1990s the market expanded with the establishment of banks such as Punjab National bank in 1895 in Lahore and Bank of India in 1906. the Reserve Bank was nationalized and given broader powers. in Mumbai . The first Indian bank which came into existence in1786 was THE GENERAL BANK OF INDIA which is followed by BANK OF HINDUSTAN. The oldest bank in existence in India is the state bank of India being established as "The Bank of Bengal" in Calcutta in June 1806.both of which were founded under private ownership. Although both these banks do not exists today but these banks have made the foundation of banking system in India. which was established in 1865.Figure 1: Overview of Banks The banking system in India was established in 18th century.The first fully Indian owned bank was the Allahabad bank. The Reserve bank of India formally took on the responsibility of regulating the Indian banking Sector from 1935 After India's independence in 1947. Nationalization The nationalization of banks added a new chapter in the Indian banking system in 1969 when the Indira Gandhi Government nationalized the 14 largest commercial 9 .
The unorganized sector.). c) Regional rural banks. ICICI Bank and HDFC Bank. is largely made up of money lenders and indigenous bankers. The organized sector consists of Reserve Bank of India. Liberalizations In the early 1990s the Narasimha Rao government embarked on a policy of liberalization and gave license to a small number of private banks. private banks and foreign banks.banks. which came to be known as NEW GENERATION TECH-SAVVY BANK which included banks such as UTI Bank. The stated reason for the nationalization was to give the government more control of credit delivery. This move. IFC etc. which is not homogeneous. Commercial Banks and Co-operative Banks. which has seen rapid growth with strong contribution from all the three sectors of banks. • An outline of the Indian Banking structure may be presented as follows:1) Reserve banks of India. government banks. ICICI. organized and unorganized sectors. namely. A second phase of nationalization of banks took place in 1980 by the nationalization of 6 more commercial banks. and Specialized Financial Institutions (IDBI. • Classification of Banking Industry in India. a) State Bank of India and its associate banks. 2) Indian Scheduled Commercial Banks. b) Twenty nationalized banks. kick started the banking sector in India. along with the rapid growth in the economy of India. Indian banking industry has been divided into two parts. 10 .
5) Co-operative banks.d) Other scheduled commercial banks. 11 . 3) Foreign Banks 4) Non-scheduled banks.
Private Banks also have a much higher share of the more profitable mass affluent segment. Indians have a conservative outlook towards credit except for housing and other necessities. New channel – Mobile banking is expected to become the second largest channel for banking after ATMs: New channels used to offer banking services will drive the growth of banking industry exponentially in the future by increasing productivity and acquiring new customers. Rising per capita income: The rising per capita income will drive the growth of retail credit. industry. particularly. A study of the customer profiles of different types of banks reveals that foreign and private banks share of younger customers is over 60% whereas public banks have only 32% customers under the age of 40. 12 . After ATMs. services and agriculture. India is one of the fastest growing economies in the world and is set to remain on that path for many years to come. with an increase in disposable income and increased exposure to a range of products. During the last decade. consumers have shown a higher willingness to take credit. However. This is expected to boost the corporate credit growth in the economy and provide opportunities to banks to lend to fulfill these requirements in the future. This will be backed by the stellar growth in infrastructure. young customers. which is still in the growth phase. banking through ATMs and internet has shown a tremendous growth.Current Trends in the Sector The growth drivers of the Indian Banking Industry High growth of Indian Economy: The growth of the banking industry is closely linked with the growth of the overall economy.
This will help in acquiring new customers. This can be looked at as branchless banking and so will also reduce costs as there is no need for physical infrastructure and human resources. The RBI has also taken many initiatives such as Financial Literacy Program. Opportunities:- 13 . which indicates a large untapped market for banking players. All these initiatives of promoting rural banking are taken with the help of mobile banking. 41% of the adult population doesn’t have bank accounts. on the one side.mobile banking is expected to give another push to this industry growth in a big way. Financial inclusion is the delivery of banking services at an affordable cost to the vast sections of disadvantaged and low income groups. Financial Inclusion Program: Currently. mainly who live in rural areas (though this will take time due to technology and infrastructure issues). self-help groups. The IBA-FICCI-BCG report predicts that mobile banking would become the second largest channel of banking after ATMs. Under the Financial Inclusion Program. etc. RBI is trying to tap this untapped market and the growth potential in rural markets by volume growth for banks. promoting effective use of development communication and using Information and Communication Technology (ICT) to spread general banking concepts to people in the under-banked areas. Financial Inclusion. in India. with the help of new 3G and smart phone technology (mobile usage has grown tremendously over the years). microfinance institutions. helps corporate in fulfilling their social responsibilities and on the other side it is fueling growth in other industries and so as a whole economy.
video banking etc. share trading. to increase the banking business. While increasing competition customer services has become the backbone for judging the performance of banks. So.Where there are challenges. That the banks must reach in remaining all villages because majority of Indian still living in rural areas. Following are the opportunities for the Nationalized and commercial banks. based on the data warehousing and data mining technologies. Every engagement with customer is an opportunity to develop a customer faith in the bank. 2) Offering various Channels:Banks can offer so many channels to access their banking and other services such as ATM. 3) Good Customer Services:Good customer services are the best brand ambassador for any bank for growing its business. 1) Rural area customers:Contributing to 70% of the total population in India is a largely untapped market for banking sector. such 14 . 4) Internet Banking:It is clear that online finance will pickup and there will be increasing convergence in terms of product offerings banking services. In all urban areas banking services entered but only few big villages have the banks entered. Anytime anywhere banking will become common and will have to upscale. loans. there must be opportunities. insurance. Telephone/mobile banking. Local branches.
a credit card for ongoing purchases.up-scaling could include banks launching separate internet banking services apart from traditional banking services. a long term investment plan to his child’s higher education. towns and villages i. automobiles etc. housing. Retail lending’s has also helped in risks dispersal and in enhancing the earnings of banks with better recovery rates. 6) Indian Customers:The growing Indian banking sector with its strong home country linkages. Demographic shifts in terms of income level and cultural shifts in terms of life style aspirations are changing the profile of the Indian customer. The consumer represents a market for a wise range of products and services he need a mortgage to finance his house. a life insurance policy the possibilities are endless and this consumer does not live just in India’s top ten cities. He represents across cities. The biggest opportunity for the Indian banking sector today is the Indian costumers. seek a unique combination of Indian ethnicity and global standards that offers a valuable nice opportunities for Indian banks. 5) Retail Lending’s:Recently banks have adopted customer segmentation which has helped in customizing their product folios well. Thus retail lending’s has become a focus area particularly in respect of financing of consumer durables. This is and will be a key driver of economic growth going forward. The Indian customers now seek to fulfill his lifestyle aspirations at a younger age with an optimal combination of equity and debt to finance consumption and asset creation. pension plans for his retirement. in rural 15 . an auto loan for his car.. a bank account.e.
7) Other Opportunities:a) To enter new business and new markets b) To develop new ways of working c) To improve efficiency d) To deliver high level of customer services.areas. Consumer goods companies are already tapping this potential it is for the banks to make the most of the opportunity to deliver solutions to this market. 16 .
commerce and trade for the people. During the 17 . by the Maharaja with a paid up capital of Rs. transmission and encouraging the development of arts. There were heroes to sustain the development of this bank to its present glory. a princely state of British India. as also commencing new commercial banking establishments. a Gujarathi population in particular. Bank of India survived the turbulence with its clear vision. had the same vision in establishing a bank for servicing the public at large and the citizens of Baroda State. Even during the worst financial disaster caused by the First World War. during the period 1913 to 1917. saving.About Bank of Baroda The Maharaja of Baroda. The guidelines set by the Maharaja for the bank was to serve the people of the State of Baroda as well as the neighboring regions with money lending. The success story of the Bank of Baroda is studded with many a leaps and strides it made in the International presence.10 lacks. from ordinary people as customers and the heirs of the Royal family of Baroda. On 20th July 1908. when as many as 87 banks closed their shutters. Bank of Baroda was established under the rules of Companies Act 1897. ethical standards and financial prudence to grow from strength to strength. by name Sir Sayyajirao Gaekwad III. science. by acquisition of already popular banking entities. in a small building at Baroda. in the unique Gujarathi style. apart from establishing branches all over the Indian nation.
years of 1908 to 2007 (and the century year being round the corner) Bank of Baroda’s growth owes to the excellence in rendering financial products and services to the national and international population. Countries beginning from America to Zambia. • Mission statement To be a top ranking National Bank of International Standards committed to augmenting stake holders' value through concern. care and compete. in the alphabetical order have been enjoying the services of Bank of Baroda as of today. 18 .
this sector contributes 8% of National GDP. The definitions are based on total investment in plant and machinery for manufacturing units and investment in equipments for service units. In recognition of these difficulties and succumbing to a long sustained lobbying. In this section we will highlight the definition. November 2008. has been changing over time. Electricals . the MSME sector has for long faced various obstacles to growth. The basic achievement was a clear and decisive definition of units that fall under micro. composition and performance of this sector. mostly through changes in government policy. the SMEs have made a significant contribution towards technological development and exports. They are established in almost all‐ major sectors in the Indian industry such as: • Food Processing • Agricultural Inputs • Chemicals & Pharmaceuticals • Engineering . Despite its relevance. There are also allowances for smaller investments in service enterprises. Based on official figures from the Ministry of MSME. etc 21 . 45% of India’s total industrial employment and 95% of all industrial units. small and medium category.Overview of the SME Sector The MSME sector is a significant contributor to the Indian economy. Major Industries In spite of their limitations. Electronics • Electro‐medical equipment • Textiles and Garments • Leather and leather goods • Bio‐engineering • Sports goods • Plastics products • Computer Software. size. The SME sector in India. profile. however. the Government of India passed the MSME Development Act of 2006 which brought about major changes in this sector. The new definitions have expanded the plant and machinery limits and now each enterprise level includes larger investments than before. comprises 50% of India’s total manufactured exports.
Exports : USD 27 billion • SSIs account for 45% of industrial production. 40% of exports. • Share in Industrial Value Added: 39% • Total No. around 17% share in GDP • Ownership pattern : 78% proprietorships.000) 13 million plus SME units.000 ) MSI : above INR 1mn and up to INR 10 million (USD 220. of items Produced: Over 8000. of Reserved items: 675 • Production : USD 100 billion .Current Scenario: SMEs In India Small & Medium industries definition laid down by Govt. 1% ancillary units 22 . 3% service enterprises. 16% partnerships. 6% Corporate & others • 96% industrial units. Employment generation in SSI: 42 Million people. in terms of investment in Plant & Machinery: • • • • SSI : Up to INR 1 million (USD 22. No.
Total employment of SME’s.(2).Fig. 23 .
Virtual absence of Enterprise Education. Poor adaptability to changing trade trends.SWOT Analysis: Strengths: Contribution to National Economic Growth. • Growing domestic and international markets. Lack of access to technological information and consultant service Opportunity • WTO regime • Bilateral & Multilateral trade agreements. Generating Employment and Vitalizing Indian brand to the world. • Slow improvement in quality to meet the international standards. Distrust between SMEs and Financial Institutions. • Comprehensive support for cluster development. Technological Innovation. • Enhanced credit support. • Support for technological up‐gradation. 24 . Lack of management skills. Threats • • • • Dumping from developed countries. • Non‐tariff barriers from developed countries. Poor incentive structures for entrepreneurs. • Marketing assistance and export promotion support. Non‐availability of technically trained human resources. • • • • Weakness • • • • • Lack of Funds Lack of Marketing Skill Lack of Information. Regional Development. • Export Market Expansion.
PURPOSE • To provide hassle free credit for working capital (fund based and non-fund based) as also long term requirements. MARGIN: 25%. taking into account nature of business. ELIGIBILITY • All Enterprises. and other entities with annual sales turnover of Rs. SECURITY: 1. cyclical trends. i. as defined under MSMED Act.e. Micro. 2006.5 times of borrower’s tangible net worth as per last audited Balance Sheet. 150/. or. COMPOSITE LIMIT: • 4. 5. Rs.00 Crores. cash flow projections. Small & Medium Enterprises. Exclusive charge on the assets of the enterprise.BARODA’S SME’s POLICIE’S - Baroda SME Loan Pack Baroda SME Loan Pack provides single line of credit for meeting SME borrowers’ working capital as well as long term requirements within the overall limit approved by the bank. peak time requirements and any eventuality of unforeseen spurt in the business.crores exclusively banking with our bank/new borrowers desirous of having sole banking arrangement with our bank. 25 . 1/crore to Rs. RATE OF INTEREST: • As per credit rating of the borrower. whichever is lower.
100. 25. 100/. 4. 26 . OTHER FEATURES: • Loans up to Rs.lacks to Micro & Small Enterprises will be covered under Credit Guarantee Fund Trust Scheme. Any other collateral for the credit line above Rs. 5. 3. Charge on the unencumbered personal properties of the partners.00 lacks in case of other Enterprises.2. i. Personal Guarantees of all promoter Directors / Partners. Third party guarantee in case of credit line above Rs. Medium Enterprises and Enterprises based on the turnover criteria to maintain asset coverage ratio above 1. wherever applicable.00 lacks to Micro & Small Enterprises as per Regulatory definition.e. promoter Directors.25.
ELIGIBILITY • • Educational institutions. Hypothecation of Instruments & Equipment acquired out of the loan and other assets of the Educational Institution. RATE OF INTEREST Base rate plus 3. LIMIT • • Minimum Rs.Baroda Vidyasthali Loan • Baroda Vidyasthali Loan is a special scheme for financing Educational Institutions. for the new set up as also renovation of the existing facilities. Personal guarantees of the Promoters of the Institution. PURPOSE • To meet the financial requirements for setting up the institutions which includes construction of building. MARGIN • • • 25% of the cost of the project. Colleges and other education bodies running education activities Note: HUF are not eligible.25 lacks Maximum Rs. purchase of instruments for imparting education training to the students.a REPAYMENT PERIOD 27 . purchase of equipment etc.10 crores SECURITY • • • Equitable mortgage of Land & Building (not agricultural land).50% p. Schools.
Rs. Private Limited Companies and Trusts engaged in providing medical/pathological diagnostic services to the Society and with turnover up to Rs.crores. SECURITY • Equitable mortgage of Land & Building/premises of Nursing Home/Hospital 28 . ELIGIBILITY All entities.00 crores Urban & Metro Centers . Purchase of medical diagnostic equipments as also office equipments. depending upon the projected cash flow. Expansion/renovation/modernization of existing Nursing Home/ Hospital including Pathological Laboratory. In case of borrowers requiring only working capital limit. office furniture. subject to 20% of the above ceiling limit in case of borrowers requiring both Term Loan and working capital facilities. 6. i.50 crores Semi-Urban Centers . LIMIT • • • Rural Centers . air conditioners. Baroda Arogyadham Loan PURPOSE To meet the financial requirements for setting up of new Nursing Home/Hospital including Pathological Laboratory.00 crores Note: • • Working Capital limits up to 10% of the annual sale or gross income.e. Partnership firms. 0. Enterprises other than individuals like Proprietorship.Rs.Rs. Purchase of ambulance etc and to meet working capital requirements. 12. Note: The Promoters should have requisite qualification in any branch of medical science from a recognized University and should have minimum 2 years of work experience.• Maximum 84 months including moratorium period of 1 year. MSMEs. 20% of the above ceiling limit. 150/. computers. viz.
mortgage of properties in the personal name of the relatives of Promoters. Personal guarantee of Promoter Directors in case of Limited Companies and Trustees in case of Trusts. etc. receivables and other chargeable current assets. MARGIN: 25%. 29 . REPAYMENT PERIOD: 35 months to 84 months including moratorium depending upon the projected cash flow. Charge on unencumbered assets of Promoter Directors in case of Private Limited Companies.• • • • Hypothecation of medical equipment/office equipment acquired out of loan amount. Higher margin if collaterals are inadequate RATE OF INTEREST: As per credit rating of the borrower. or any other collateral by way of FDR. Hypothecation of medicines.
ELIGIBILE BORROWERS: • All existing customers in the categories of Small Business. as specified for existing limit. PERIOD / VALIDITY: • The limit fixed under the scheme will be valid for a period of three years subject to internal annual review based on the conduct / operations of the account. Village Industries. office equipment etc.Lacks per borrower.Baroda Laghu Udhyami Credit Card PURPOSE • To provide hassle free credit facilities to Small business units. Professional & Self Employed persons etc. machinery. village industries. artisans. receivables. retail traders. MARGIN: • 25%. professionals and self employed persons etc. LIMIT: • Maximum up to Rs. 30 . having satisfactory track record / dealing with the bank for last 3 years. 10/. small scale industrial units and tiny units. Small Scale and Tiny Units. Artisans. SECURITY: • Hypothecation of stock in trade. Retail Trade.
2/. Preference given to artisans registered with Development Commissioner (Handicrafts).but up to Rs. MARGIN: • • • For limits up to Rs. 25.000/. Margin is subject to change as per RBI guidelines from time to time or the bank's policy in this regard. 31 . ELIGIBILE BORROWERS: • • • All artisans involved in production / manufacturing process.. LIMIT: • Maximum Rs.both investment needs as well as working capital . 2 Lacks 15% to 25% margin. Beneficiaries of other Government Sponsored loan schemes will NOT be eligible for coverage under BACC scheme. 25.Baroda Artisans Credit Card (BACC) PURPOSE To provide adequate and timely assistance to the artisans to meet their credit requirements .000/.in a flexible and cost effective manner.No margin For limits above Rs. SECURITY: • Hypothecation of assets financed under the scheme.Lacks per borrower. The scheme is implemented in rural and urban areas.
Preference would be given to weavers identified under the Third Census of Handloom Weavers as well as to weavers identified by the State Governments Primary Weavers Co-operative Societies/ Self Help Groups (SHGs)/ Consortia/ Producer Companies/ Joint Liabilities Group (JLGs) would be preferred All existing weaver borrowers of the Bank enjoying credit facilities and having satisfactory dealings with the bank will also are eligible. No collateral security is required. • • • • All weavers and ancillary workers involved in weaving activities would be eligible.Lacs The Credit Card would normally be valid for 3 years The limits sanctioned will be secured by way of primary charge over the assets financed. in case of loan availed for purchase of tools and equipments Undertaking that the borrower would maintain a minimum required margin Any other relevant documents as per extant guidelines 32 .Baroda Weavers Credit Card (BWCC) “Baroda Weavers Credit Card” is promoted by Ministry of Textiles which aims at providing adequate and timely assistance to weavers to meet their credit requirements. All amounts would preferably be covered CGTMSE DOCUMENTATION • • • • • D P Note Hypothecation of assets financed out of the loan under the Scheme Letter of installment. The beneficiaries under the scheme will be issued with a Photo Weaver Credit Card (WCC) indicating sanctioned limit and validity period of credit facility. FIXATION OF CREDIT LIMIT • • The maximum limit to individual weavers will be up to Rs 2/.
The interest rate is fixed on the credit rating system at reasonable terms.Akshaya Mahila Arthik Sahay Yojna The new age woman seeks opportunities and challenges to be able to support herself and her family. Avail of loans at all branches of Bank of Baroda. To get a detailed list of all the Bank of Baroda branches. Allied agricultural activities. Key Benefits • Enables financial assistance to women in setting up/engaged in: o o o Retail Trade. Village or Cottage/Small Scale Industries. • • • • Focus on women business entrepreneurs and their credit requirements. Simple application procedures. • 33 . All complaints and grievances can be reported to the regional zone offices or directly to the Central office.
etc. Bank of Baroda is a nodal agency for determining eligibility and releasing of subsidy for the cases financed by the bank under the scheme. PROMOTERS’ CONTRIBUTION • Minimum 20% of the project cost. or.3. Design Studio.Technology Upgradation Fund Scheme (TUFS) For Textile and Jute Industries Bank of Baroda grants loans under Technology Up-gradation Fund Scheme launched by Government of India as per guidelines received from time to time from Ministry of Textiles. OBJECTIVE To provide encouragement to textile industrial units for taking up technology up gradation and to modernize their production facilities. technical textiles machinery. 5% interest reimbursement plus 10% capital subsidy for specified processing machinery. AMOUNT OF LOAN • Need based. garmenting machinery and for CAD. or. 34 . handlooms/up-gradations of handlooms and testing and quality control equipments for handloom production units.2012. 15% Credit Linked Capital Subsidy for Small Scale Sector and 20% for Power-loom Sector. CAM. The scheme envisages 5% interest reimbursement (4 percentage for spinning industry) of the normal interest charged by the bank on the loans availed by the units from the bank for undertaking technology up-gradation/modernization. New units set up with technology as per guidelines of the scheme would also be eligible for the above benefit. PROGRAMME PERIOD • The scheme is in operation for a period upto 31. The scheme also provides 25% capital subsidy on purchase of new machinery and equipments for the pre-loom and post-loom operations.
within the next quarter of last loan disbursement (Reference date).Credit Linked Capital Subsidy Scheme (CLCSS) OBJECTIVE To facilitate Technology Upgradation of Tiny and SSI units in the specified products/sub-sectors as notified by Govt. Term Loans sactioned under the CLCSS scheme are only eligible for subsidy.Lacks. • • • Eligible units must apply for subsidy support at the time of loan application itself. whichever is higher (Subsidy is calculated with reference to the purchase price of eligible Plant and Machinery approved under the scheme) The Scheme is in operation for the period up to 31. That is. RATE OF SUBSIDY • 15% or Rs. 1/.3. of India by providing 15% capital subsidy for induction of proven technologies approved under the scheme. 35 .crore. 15/.2012. LIMIT • Maximum eligible loan under the scheme is Rs. Claims are to be reached in the Ministry as per the time-frame stipulated by them.
SECURITY: • Charge on assets created out of loan amount and other collateral securities as determined on the merits of each case. 100/Lacks. TYPE OF FACILITY: Composite loans. and Micro/Small (Service Sector) Enterprises engaged in industrial activities only. village and cottage industrial units and Micro Enterprises in Small Enterprises Sector.25% in case of composite loans above Rs. 15% .000/-. MARGIN: • • Nil in case of composite loan up to Rs.and up to Rs.Composite Loans ELIGIBILITY: • Small Enterprises (Manufacturing Sector) including artisans. 25000/. PERIOD OF REPAYMENT: • Minimum 3 years and maximum of 10 years (which can be extended). 25. AMOUNT OF LOAN: Up to Rs. with initial holiday of 12 months to 18 months. • PURPOSE: • Fixed capital investment and / or working capital requirement. 100/.Lacks. 36 .
can be covered under CGTMSE scheme.lacks to Micro & Small Enterprises. SECURITY: • "Primary security" in respect of a credit facility shall mean the assets created out of the credit facility so extended and/or existing unencumbered assets which are directly associated with the project or business for which the credit facility has been extended. 2006.lacks and up to a 37 . 37. This means if a borrower is sanctioned working capital facility only. charge taken on current assets will not be treated as collateral security. as defined under MSMED Act.100 lacks. ELIGIBILITY: • The coverage of the Scheme is extended to all new and existing Micro and Small Enterprises (both in the Manufacturing Sector as well as in the Service Sector) as defined under MSMED Act. 50/. 100/. 2006. MARGIN: • The credit guarantee cover is available up to 75% of the amount in default in respect of credit facilities up to Rs. 50/. who has availed certain credit facilities secured by collaterals and/or third party guarantees and is sanctioned distinct/separate credit facility without collateral security/third party guarantee.50 lacks and 50% for the facilities over Rs. Similarly in case of sanction of Term/Demand loan on standalone basis. a charge can be created on the fixed assets of the unit even though the same are not financed by the Bank and the same will not be treated as collateral security. A borrower.Coverage of Collateral Free Loans under Credit Guarantee Fund Trust Scheme for Micro & Small Enterprises (CGTMSE): PURPOSE: • To provide collateral free loans up to Rs. LIMIT: • The eligible loan limit under the Scheme is Rs.lacks extended by the Lending Institution to an eligible borrower subject to maximum guarantee cover of Rs.
b) Loans to Micro and Small enterprises operated and/ or owned by women. i. GUARANTEE FEE: • Guarantee fee has been reduced as under. In case of following categories of borrowers. Particulars One time Guarantee fee 1. SME Short Term Loans PURPOSE: 38 . depending on the size of the limit as against the original fee structure of 2. 5/. maximum of Rs.lacks.75% Applicable as per the borrowing limit as stated above.50% 0. guarantee cover is available up to 80% of the amount in default. Credit facility up to Rs. 5 lacks(85%).75% Annual Service fee 0. 100/-.50 lacs. 62.e.limit of Rs.lacks Credit facility above Rs. a) Loans to Micro enterprises up to Rs.00% 1.50% 0. c) All loans in North East Region including the State of Sikkim. Loans in North East Region including the State of Sikkim. 5/.5% (one time fee) and 1% Annual Service Fee.
should not be more than 10%.• To meet temporary shortfall / mismatch in liquidity. Extension of all existing guarantees of Directors / Third party guarantees to cover the additional facility. should be available. ensuring that there is a minimum asset cover of 1. 1/. • • RATE OF INTEREST: 39 . PERIOD: • Not exceeding 180 days – minimum 90 days SECURITY • First charge / Equitable mortgage of fixed assets of the company / firm or extension of existing first charge / equitable mortgage of fixed assets.25. 10 Lacks and maximum of Rs. 150/. • LOAN AMOUNT: • Up to 25% of the existing Fund based Working capital limits (depending on the Credit Rating). ENTERPRISES GROUP: • Micro. ELIGIBILITY CRITERIA • • • Satisfactory credit rating for the last three years Latest Balance Sheet etc.crores. if any. Negative variance. Extension of Charge on current assets for the additional facility ensuring that adequate drawing power is available. subject to a minimum of Rs. 250 Lacks. Small & Medium Enterprises as per Regulatory definition and all other entities with annual sales turnover of Rs. for meeting genuine business requirements only.crore to Rs. Satisfactory dealings with the Bank for at least three years. Satisfactory financial performance in terms of sales / turnover and profits.
• As applicable to existing working capital facilities. PROCESSING CHARGES: • 25% concession in applicable charges. SME Medium Term Loans PURPOSE: • To augment enterprise’s working capital gap and to help in improvement of current ratio and also for meeting genuine business requirements. The facility will also be available for repayment of secured and unsecured Loans 40 .
Total Debt-equity ratio should not be higher than 4.25 RATE OF INTEREST: 41 . Small & Medium Enterprises as per Regulatory definition and all other entities with annual sales turnover of Rs. • • • LOAN AMOUNT: • Up to 25% of the existing fund based Working capital limits (depending on the Credit Rating). ELIGIBILITY CRITERIA • • • Satisfactory credit rating for the last three years Latest Balance Sheet etc.of other banks or institutions.months.75:1 Satisfactory dealings with the Bank for at least Three years. to be repaid in equal quarterly or half-yearly installments. Negative variance.crore to Rs. 150/. should be available. Satisfactory financial performance in terms of Sales/turnover and profits. should not be more than 10%. ensuring that there is a minimum asset cover of 1.crores.5:1 and total Term Liability and equity ratio should not be more than 3:1. PERIOD: • Not exceeding –36. Average DSCR should not be less than 1. which is not related to the enterprises activity. 500 Lacks. but not for any purpose. if any. 1/. subject to a minimum of Rs. ENTERPRISES GROUP: • Micro. 25 Lacks and maximum of Rs. SECURITY • First charge / Equitable mortgage of fixed assets of the Company / firm or extension of existing first charge/ equitable mortgage of fixed assets.
42 . Small & Medium Enterprises as per Regulatory definition and all other enterprises with annual sales turnover of Rs.crore to Rs. Baroda SME Gold Card Baroda SME Gold Card envisages provision of additional limit of 10% of the assessed eligible bank finance for Working Capital to Micro. 1/.months of drawdown PROCESSING CHARGES / UPFRONT FEE: • 25% concession in applicable charges. 150/.• • As per credit rating for the additional loan Prepayment penalty of 1%. if loan is prepaid within -24.crores. on request along with regular application for Working Capital limits to meet emergent requirements.
Lacks and above. RATE OF INTEREST • As per Credit Rating and as applicable for regular Cash Credit facility. services and adopting measures for enhancement of energy efficiency/conservation of energy.PURPOSE: • To provide hassle free on the spot assistance to take care of borrowers’ emergent requirements and tie up temporary mismatch in liquidity arising out of delayed payment by buyers. Accounts having sole banking arrangement with our bank/proposed to be financed under Sole Banking arrangement. with credit rating of BOB-4 and above and enjoying working capital limits of Rs. execution of bulk orders. DOCUMENTATION • No additional documentation/formalities required at the time of availing facility every time as the 10% additional limit will be a part of the regular sanction. 25/. Scheme for Financing Energy Efficiency Projects PURPOSE: • Financing SMEs for acquisition of equipments. 43 . etc. PERIOD • 12 months to be allowed on 4 occasions during the year for a maximum period of 2 months on each occasion with a minimum gap of 15 days between two drawls. ELIGIBILITY • • Accounts in Standard Category for last 2 years. SECURITY • As applicable to regular Cash Credit facility. tax payment.
5/. This grant is available for the first 100 projects (SME Sectors only) approved by them. Cost of alterations to existing machinery. with the total security coverage being not less than 1. at present. LIMIT: • Up to 75% of the total project cost. For Consortium/Multiple Banking accounts: first charge on equipments acquired out of loan and collateral.ELIGIBILITY • SME units financed by bank as also other units desirous of shifting their account to Bank of Baroda. Project cost may include the following: • • • • • Cost of acquisition/modification/renovation of equipment/software. gives a grant of Rs. 25.000/.25.for projects costing Rs.Lacks).a REPAYMENT: • Maximum 5 years. RATE OF INTEREST: • Base rate plus 4. b. 44 . 1/. subject to maximum of Rs. Cost of structural / layout changes. (Minimum amount of loan Rs.crore. Preparation of Detailed Project Report (DPR). For Sole Banking accounts: Extension of first charge on all fixed assets. 1/crore or below to meet partial cost of Energy Audit. SECURITY: a. including moratorium. if any.00% p. if any. Grant from IREDA: • IRDEA. Cost of energy audit/consultancy.
PURPOSE: 45 . or. close relatives of the promoters.Baroda Overdraft Against Land and Building Baroda Overdraft against land and building is a unique product for financing working capital requirements/long term margin requirements of SME borrowers against the security of unencumbered land and building belonging to the unit or Promoters of the unit.
Third party guarantee. Small & Medium Enterprises. if available.00 lacks(for Rural/Semi-Urban/Urban/Metro branches) Maximum: Rs. MARGIN: 40% of the market value of property mortgaged (valuation of the property will be carried out by the value on bank’s approved panel/Government approved value) RATE OF INTEREST: For Micro & Small Enterprises in Manufacturing & Base rate plus 46 . 2006.crores exclusively banking with our bank/new borrowers desirous of having sole banking arrangement with our bank. 5. as defined under MSMED Act. promoters of the unit. if available. 1/crore to Rs. i.• To provide hassle free credit to SME borrowers to meet working capital requirements/augment long term margin requirements.e. Mortgage of factory land and building and/or any other property (Land & Building) belonging to the unit. ELIGIBILITY • All Enterprises.00 lacks(for Urban & Metro branches) SECURITY: 1. 200. Personal guarantees of all Promoter Directors/owners of property. father. 3. age of property should not be more than 25 years at the time of sanction). 2. 4. 50. 25. mother. (viz. or close relatives of the promoters. LIMIT: • • Minimum :Rs. 150/. wife. Note: In case of residential/commercial building. Micro. Charge on unencumbered personal properties of the Promoter Directors. son and daughter only provided they stand as guarantors).00 lacks(for Semi-urban branches) Rs. and other entities with annual sales turnover of Rs. 500.00 lacks(for Rural branches) Rs. Hypothecation of stocks/book debts.
PERIOD: 12 months.a.crores. Simplified assessment methods.a.00% p. allowed by earmarking Overdraft facility.a. At 47 . is the nodal agency at national level for implementation of the scheme. Submission of stock/book debts statements on half yearly basis. Base rate plus 4. Base rate plus 4. Non-fund based facilities like LCs. 1/. i.Service Sector (As per Regulatory definition) For Medium Enterprises in Manufacturing & Service Sector (As per Regulatory definition) For other Enterprises.e. Guarantees. Government of India. Valuation of properties once in 3 years. Annual inspection of securities.25% p.50% p. Small and Medium Enterprises. Prime Minister's Employment Generation Programme (PMEGP) Prime Minister’s Employment Generation Programme (PMEGP) is a credit linked subsidy programme administered by the Ministry of Micro. with annual sales turnover of Rs.150/. Khadi & Village Industries Commission (KVIC). OTHER FEATURES: • • • • • 3.crore to Rs.
for setting up of project costing above Rs. KVIB and District Industries center.10 lakhs. Scope: • • • • • The scheme is applicable to all viable (technically as well as economically) projects in rural as well as urban areas. Objective: • • To generate employment opportunities in rural as well as urban areas through setting up of self employment ventures. REGP or any other scheme of Government of India or State Government) and the units that have already availed Government Subsidy under any other scheme of Government of India or State Government are not eligible.25 lacks and business/services sector is RS. above 18 years of age The beneficiaries should have passed at least VIII standard. The maximum cost of the project admissible under manufacturing sector is Rs. 48 .state level the scheme is implemented through KVIC.10 lacks in the Manufacturing Sector and above Rs. Eligible Entrepreneurs / Borrowers: • • • • • • Any individual. 5 lacks in the business /Service Sector. Note: Existing units (Under PMRY. Self Help Groups (including those belonging to BPL provided that they have not availed benefits under any other Scheme). so as to help arrest migration of rural youth to urban areas. Assistance under the Scheme is available only for new projects The assistance under the scheme will not be available to activities indicated in the negative list under the scheme. Only one person from family is eligible for obtaining financial assistance under the scheme. under Micro enterprises sector.1860 Production Co-operative Societies Charitable Trusts. To provide continuous and sustainable employment to a large segment of traditional and prospective artisans and unemployed youth. Institutions registered under Societies Registration Act.
(excluding Margin Money / subsidy component Loans under Interest Subsidy Eligibility Certificate Scheme of Khadi & Village Industries Commission (KVIC-ISEC) 49 . Subsidy Entitlement & Bank Finance: Subsidy from KVIC and the bank finance depends on the cost of project as per details given below: Bank finance Subsidy from KVIC Urban area General Category beneficiary / institution Special category beneficiary/institution 90% 95% 15% 25% Rural area 25% 35% Promoter's contribution 10% 5% Rate of Interest: As applicable to MSE Sector. Assets created out of the bank's finance. Eligible units will be covered under Credit Guarantee Fund scheme for Micro & small Enterprises – CGMSE. 4. No collateral security up to Rs. Security: 1. 2. 5 lacks. 3. Repayment: 3 to 7 years with an initial moratorium not exceeding 6 (six) months. Personal guarantee of the proprietor / promoter.Selection of beneficiaries: The beneficiaries will be identified & selected at the district level by a Task Force consisting of representatives from KVIC/State KVIB/ State DICs and Banks and headed by the District Magistrate / Deputy Commissioner / Collector concerned.
On the strength of these Certificates. State Khadi & Village Industries Boards.Purpose To finance institutional financing agencies for lending to Khadi & Village Industries Eligibility Institutional financing agencies – Khadi & Village Industries Commission. Schemes for Professionals and Self Employed Best suited for individuals conducting business independently. with or without hired labor. tools and working capital requirement. the eligible institutions may negotiate with Bank for finance assistance. the final decision to accept or reject any loan to the eligible borrower is vested with the Bank. Claims should be commuted on the loan amount indicated in the ISEC or an actual availment whichever is less based on the day to day transactions. 50 . Enables them to purchase equipment (including PC for professional use). Registered Institutions. Cooperative Societies Subsidy Interest subsidy limited to the difference between the actual rate of interest charged by the Bank and 4% borne by the borrowers Note: Bank Finance Cell of KVIC will issue Interest Subsidy Eligibility Certificate. acquiring new or repair existing business premises. However.
cycle rickshaw etc. or tools. Repair and renovation of existing equipment. like a personal computer (PC) for professional use. All complaints and grievances can be reported to the regional zone offices or directly to the Central office. To generate working capital. To get a detailed list of all the Bank of Baroda branches. Key Benefits • Assists in the purchase of any vehicle.Key Benefits • Can be used for the purchase of any necessary equipment. such as: o Human driven like handcart. Avail of loans at all branches of Bank of Baroda. Simple application procedures. All the accounts rated as A+ will be entitled for loans at a lower interest rate. Acquisition and repairs to business premises. 51 . • • • • • • • Small Roads and Water Transport Operators This product is primarily targeted at Road Transport Operators who may be individuals or an association of not more than six individuals.
Avail of loans at all branches of Bank of Baroda. auto-rickshaw. to be used as public transport carrier for transport of goods or passengers. Crèches. Key Benefits • Loans can be availed of: 52 . X-Ray Clinics. Operators of Cable TV Networks. & motor Lorries. trucks. Tonga. tempos. Photographic Labs. camel cart. taxies. To get a detailed list of all the Bank of Baroda branches. o • • Simple application procedures. and Beauty Parlors can avail of facilities under this plan. etc. Fishing boats. • Scheme for Business Enterprises This product is primarily for service providing business enterprises and not a professional services unit. All complaints and grievances can be reported to the regional zone offices or directly to the Central office.o o Animal driven like bullock cart. Power driven like mechanized cycle rickshaw. barges etc. mini buses. Software development centers.
For purchase of tools and For working capital requirements.o o o o o • • For purchase of necessary equipment. either by direct funding or by issuing letter of credit. receivables financing. Avail of loans at all branches of Bank of Baroda. 53 . Simple application procedures.e. For repairing or renovation of existing equipment. the bank provides funding and assistance to actually purchase business assets or to meet business expenses. For acquiring or repairing business premises. Key Benefits • Funded facilities. Bank of Baroda offers corporations Working Capital Finance to meet their operating expenses. • Working Capital Finance A firm's working capital is the money it has available to meet current obligations (those due in less than a year) and to acquire earning assets. All complaints and grievances can be reported to the regional zone offices or directly to the Central office. i. To get a detailed list of all the Bank of Baroda branches. purchasing inventory.
54 . i. • Term Finance Under Term Finance.• Non-Funded facilities. • SMEsʹ contribution to national GDP is projected to go up to by a minimum of 5% and touch 22% share of India’s GDP by 2012. Government Departments for the procurement of goods and services on credit. • Conclusion: SME is fast growing sector in the Indian Economy. since over 55% of SME aggressively upgrading themselves technologically to reduce their input costs and increase production and exports. Available in both Indian as well as Foreign currency.e. Every Bank has given highest importance to financing SMEs in their strategically growth plan. Non-Fund Based Finance in the form of Deferred Payment Guarantee for acquisition of fixed assets towards starting / expanding a business or industrial unit. Bank of Baroda. the bank can issue letters of credit or can give a guarantee on behalf of the customer to the suppliers. offers the following: • Fund Based Finance for capital expenditure / acquisition of fixed assets towards starting / expanding a business or industrial unit or to swap with high cost existing debt from other bank / financial institution.
which is aimed at improving access to finance for Small and Medium Enterprises (SMEs).com) 5) 6) Panvel Branch.gov. Money Works For Me Website (www. • • • BIBLIOGRAPHY 1) 2) 3) 4) Ministry of Micro. With the enactment of MSME Act.in) Reserve Bank of India Website (www. 55 . Small And Medium Enterprises(www. SIDBI as the apex institution will continue to play its key role in facilitating timely and adequate credit besides meeting the developmental needs of the sector. Bank of Baroda. • SMEs continue to be the thrust area for Government policies.com). Investment Information and Credit Rating Agency of India Limited (www.rbi.msmse.moneyworks4me.org.icra. Panacea for employment and decentralized industrial development. Bank of Baroda Website (www.bankofbaroda.• The World Bank has approved 400 million dollar additional financing loan to the Small Industries Development Bank of India (SIDBI). • The growing economy and the tremendous market potential of the country augur well for the sustained growth of SMEs in the country. the sector is all set to emerge as the most significant player in national economy.in).in).
com).7) First Post. 56 .Com (www.firstpost.
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