A SYSTEMATIC REVIEW ON PUBLIC AND PRIVATE FINANCIAL

RESOURCES TO ESTABLISH SMALL SCALE PHARMA INDUSTRIES

Dudekula Mustafa*,Annem Mahesh Babu, Dr.Challa Madhusudhana Chetty ,Alavakonda Manohar

Santhiram college of Pharmacy,NH-18, Nandyal, Kurnool(Dt.), Andhra Pradesh 518501

Email Id:- mustafamahi97@gmail.com, maheshbabu7675@gmail.com

Abstract:
Small scale industries play a key role in our economy with the advantages of low
investment, high potential for employment generation and dispersal of industries to rural and
semi-urban areas. Therefore, this sector have been appropriately given a strategic position in our
economy. It has a vital role to play in the fulfillment of socio-economic objectives.This article
includes information regarding financial supporting schemes from Central, state governments and
banking sectors which are helpful to set up industries. Various schemes such as 59 Minute Loan
Scheme, Credit Guarentee Fund Scheme for Micro and Small Entrepreneurs, Credit linked capital
subsidy Scheme, Mudra Loan Scheme, NAINI Udyog Prasar Scheme, Pradhan Mantri
Employment Generation Programme, Stand Up India Loan Scheme,TREAD Scheme and SMILE
III Revolving Fund Loan Scheme are included. Financial assistance from state government can be
availed through the same schemes that are released from central government. Financial assistance
from banking sectors can be availed through loans like personal loans, StandUp India loan
scheme and Pradhan Mantri Employment Generation Programme. There are others sources of
Finance for Small Scale Industries (SSI’s) like Promoters, Institutional Finance and Non-
institutional Finance. Because of their poor financial background, the capacity of the promoters to
invest in their respective units is limited. Likewise, the non-institutional agencies are always
reluctant to invest in these small scale industries, due to their limited earning capacity as well as
poor reputation of the entrepreneurs. Hence institutional financial agencies play a greater role in
financing the development of small scale enterprises.
Keywords: Financial assistance, Institutional finance, Non-Institutional finance, Promoters etc

I. Introduction:
Small scale industries (SSI) refer to those small entrepreneurs who are engaged in
production, manufacturing or services at micro level. They are backbone to develop the national
economy with effective, efficient, flexible and innovative entrepreneurial spirit. Small scale
industries play a key role in our economy with the advantages of low investment, high potential
for employment generation and dispersal of industries to rural and semi urban areas. Therefore,
this sector have been appropriately given a strategic position in our economy. It has a vital role to
play in the fulfilment of socio-economic objectives in achieving equitable growth [Karunakar
Patra, 2002]
Finance is the pre-requisite for establishing any business/industry. The growth of any
industry/business largely depends on availability of adequate finance particularly at the right
time. In many cases, shortage of finance often leads to the failure of several units. Therefore
small scale enterprises require finance to meet investments on land, buildings, machinery and
purchase of raw materials. In this review we come across various sources and schemes that
provide financial assistance in establishment of small scale enterprises [Kulkarni, 2002)]
Financial Assistance:
It includes financial supporting schemes of Central, state governments and banks
which are helpful to set up industries.
Financial supporting schemes from various governments include:
1) 59 Minute Loan Scheme
2) Credit Guarentee Fund Scheme for Micro and Small Entrepreneurs

3) Credit linked capital susbsidy Scheme

4) Mudra Loan Scheme
5) NAINI Udyog Prasar Scheme
6) Pradhan Mantri Employment Generation Programme
7)SIDBI (SMILE)
8) Stand Up India Loan Scheme

9) TREAD Scheme
10)SMILE III Revolving Fund Loan Scheme

1) 59 Minute Loan Scheme:

This scheme enables principle approval for MSME loans upto Rs.1 Cr within 59 minutes from
SIDBI and 5 Public sector banks.
The portal www.psbloansin59minutes.com sets a new benchmark in loan processing and reduces
the turnaround time from 20-25 days to 59 minutes.
The loans are undertaken without human intervention till sanction stage. A user friendly platform
has been created where MSME borrower is not required to submit any physical document for-in
principle approval.
The solution uses sophisticated algorithms to read and analyse data points from various sources
such as IT returns, GST data, bank statements etc in less than an hour.
2) Credit Guarentee Fund Scheme for Micro and Small enterprises:
The board of trustees of Credit Guarentee Fund Trust for Micro and Small Enterprises
(CGTMSE), had framed this Scheme for the purpose of providing guarentees in respect of credit
facilities extended by lending institutions to the borrowers in Micro and Small Enterprises
(MSEs).
3) Special Credit Linked Capital Subsidy Scheme:
The scheme aims at facilitating purchase of plant and machinery by providing 25
percent upfront capital subsidy to the existing as well as new SC/ST owned MSEs on institutional
finance availed by them.
The objective of this scheme is to promote new enterprises and support the existing
enterprises in their expansion for enhanced participation in the public procurement.
4) Mudra Loan Scheme:
‘Pradhan Mantri Mudra Yojana (PMMY) was launched to ‘fund the unfunded’ by
brining such enterprises to the formal financial system, and extending affordable credit to them.
Under PMMY banks provide financial assistance upto Rs.10 lakh to non-farm
enterprises for manufacturing,trading and services activities for income generation purpose.
Following are the three variants of the MUDRA loans:

1. Shishu (upto Rs. 50,000)

2. Kishore (above Rs.50,000 to Rs. 5 lakh)
3. Tarun (above Rs. 5 lakh to Rs. 10 lakh)

5) NAINI UDYOG PRASAR Scheme:

Nainital Bank has formulated this scheme- ‘NAINI UDYOG PRASAR’ for
financing to MSME enterprises.
The scheme is available to cover credit facilities up to Rs. 100 lakhs to all the
eligible MSMEs as defined under MSMED Act,2006.
The scheme offers relaxation in margin, interest rate, rating and other charges for
MSME entrepreneurs.

6) Prime Minister’s Employment Generation Programme (PMEGP):

The Programme was launched on 15 th August 2008 to empower the first

generation entrepreneurs to set up micro enterprises.
The objective of this programme is to generate employment opportunities in rural
as well as urban areas through setting up of new self-employment ventures/projects/micro
enterprises.

7) SIDBI Make in India Loan for Micro and Small Enterprises (SMILE):
This Scheme was launched by Government of India to take forward the Make in India
Campaign of Government of India and help MSMEs.
The objective of the SIDBI Make in India Loan for Enterprises (SMILE) scheme is to
Support new and existing MSMEs by providing timely and adequate financial resources .
8) Stand Up India Loan Scheme:
This scheme facilitates bank loans between Rs. 10 lakh and Rs. 1 Crore to atleast one
Scheduled Caste (SC) or Scheduled Tribe (ST) borrower and atleast one women entrepreneur for
setting up an enterprise.
This enterprise may be in manufacturing, services or the trading sector. In case of non-
individual enterprises atleast 51% of the shareholding and controlling stake should be held by
either an SC/ST or Women entrepreneur.

9) Trade Related Entrepreneurship Assistance and Development (TREAD) Scheme:

This Scheme envisaged economic empowerment exclusively of women through trade
training , information and conselling extension activities related to trades, products, services etc.
This Scheme provides financial loans through NGO’s who were also provided GoI Grant
for capacity building.
This Assistance is provided for self-employment opportunities to women for pursuing any
kind of non-farm activity.

10) SMILE III Revolving Fund Loan Scheme:

This is a general loan scheme designed to support the manufacturing industries and other
Industry related service sectors.
This scheme provides loans with a annual interest rate of 8% and loan repayment period
of 10 years (including 2 year grace period).
Financial supporting schemes from state government and central government:
Financial assistance from state government can be availed through the same schemes
that are released from central government.
Financial support from Banking sectors:
Financial assistance from banking sectors can be availed through loans like
personal loans, StandUp India loan scheme and Pradhan Mantri Employment Generation
Programme.

II. Other Sources of Finance for Small Scale Industries (SSI’s):

1) Promoters
2) Institutional Finance
3) Non-Institutional Finance
Because of their poor financial background, the capacity of the promoters to invest in
their respective units is limited. Likewise, the non-institutional agencies are always reluctant to
invest in these small scale industries, due to their limited earning capacity as well as poor
reputation of the entrepreneurs. Hence institutional financial agencies have to play a greater role
in financing the development of small scale enterprises. There are different financial institutions
to cater the financial needs of the small-scale industries. Institutional finance for small scale
industries is provided by commercial banks, the State Bank of India group, nationalised banks,
private sector banks and development corporations. Mostly working capital financial needs are
met by the commercial banks, regional rural banks and co-operative banks. Long-term financial
needs are met by State Financial Corporations(SFC’s) and Small Industries Development
Corporations (SIDC’s).National level development banks provide refinance facilities to banks
and other grassroot level agencies for financing small scale industries [Khanka, 1990].

Institutional Finance:-
1. Apex (National Level):
 SIDBI (Small Industries Development Bank Of India)
 IDBI (Industrial Development Bank Of India)
2. Banks:
 Commercial banks

 Cooperative banks
3. State Level:
 State Financial Corporations
 SIDC’s (State Industrial Development Corporations)
 SSIDC’s (State Small Industries Development Corporations)

4. Others:
 NSIC (National Small Industries Corporation)

1. Apex (National Level):

SIDBI (Small Industries Development Bank of India)
To ensure larger flow of both financial and non-financial assistance to the small scale
industries, it was decided to set up small industries development bank of India (SIDBI) as a
subsidiary of Industrial Development Bank of India. The idea of starting the SIDBI was to
establish a principle financial institution for financing and developing small scale industries in the
country. The SIDBI is also expected to co-ordinate the activities of existing institutions engaged
in promotion and development of small scale industries. The SIDBI commenced its operations on
April 2, 1990 and has taken over from IDBI the responsibility of administering the small
industries development fund and the National equity fund.
 The financial assistance of SIDBI to the small scale units is provided through SFC’s,
SIDC’s, commercial banks, cooperative banks and regional rural banks.

Industrial Development Bank of India (IDBI)

The Industrial Development Bank of India was established in July 1964 under the
Industrial Development Bank of India Act, 1964. In India, the IDBI coordinates the activities of
the institutions engaged in financing and promoting industrial development.
IDBI’s assistance to small industries sector is channelised through the network of primary
lending institutions under its refinance scheme, bills rediscounting scheme and seed capital
assistance scheme [Nirmal Gupta, 1992]

Refinance scheme
As it is not possible for the IDBI to reach directly a large number of small industrial units
scattered all over the country it provides assistance to small scale industries through grassroot
level institutions.

Bills rediscounting scheme

IDBI rediscounts bills arised through the sale of indigenous machinery on the basis of deferred
payment. These bills are drawn in favour of machinery manufacturers are discounted by the latter
in the first instance with their banks which inturn, rediscount them with IDBI.

Seed Capital assistance scheme

The main aim of seed capital assistance scheme is to assist those entrepreneurs who possess the
technical and managerial skills but lack the required finance to put in the requisite promoters
equity.
Assistance under both the schemes is interest-free and service charge of 1% per annum.

2. Banks:
Commercial Banks
These banks accept deposits, make business loans and offers basic investment products
which makes profit.
The main aim of nationalization of commercial banks was to ensure that no viable
productive endeavour should falter for lack of credit support irrespective of the borrower. Hence
the ‘priority sector’ concept was evolved to ensure that the assistance from banking system
flowed on an increasing scale to all neglected sectors of the economy. Thus the concept of
priority sector lending is mainly focused to ensure assistance to those sectors which have been
neglected by the banking systems of the economy [Somu Giriappa, 2001]
Commercial banks grant both long term and short-term loans. Majority of the assistance is
rendered by them through short-term credit.
Commercial bank-special schemes
Under small scale sector, the commercial banks have drawn up special schemes for
financing target groups. Though different banks have schemes, only the schemes of State Bank of
India are highlighted because the State Bank of India is pioneer in the area of financing small
scale industries. The ‘pilot scheme’ was introduced by the State Bank of India a way back in 1956
to meet all credit requirements of small scale industries.

Entrepreneur Scheme
This scheme was introduces by the State Bank of India to provide financial assistance to
technically qualified entrepreneurs. Under this scheme 100% finance is provided to all the
entrepreneurs. This scheme came into effect in 1967.

Equity Fund Scheme

This scheme was introduced by the State Bank of India in 1978 with aim of providing equity
assistance to new entrepreneurs who are eligible for financial assistance. Here assistance is
provided in the form of interest-free loans ranging from Rs.5,000 to Rs.50,000. This scheme
gives preference to the units in backward areas, tiny sector units in rural areas and export oriented
units in small scale sector.

Co-operative banks:
These banks provide services such as savings and loans to members as well as to non-
members and some members who participate in the wholesale markets for bonds, money and
even equities.
In Small scale industries, these banks provide both term as well as working capital finance. In
every state, there is a state level co-operative bank and district level central banks. The state co-
operative bank will be agreeable for financing the entrepreneur, when a borrower is situated
nearer to state co-operative bank or prefers to obtain his finances from that bank or incase the co-
operative central bank is unable to finance the entrepreneur. Procedure for appraisal, all norms of
discipline relevant to the borrower are same as in that of commercial banks [Vasant Desai, 1982]

3. State level:
State Financial Corporations (SFC’s):
The main aim of SFC’s is to provide medium and long term loans for setting up new
industrial units, expansion of existing units and thus speed up industrial development. The State
Financial Corporations Bill was passed in September 1951. The first State Financial Corporation
was set up in 1953 by the Government of Punjab. SFC’s obtain funds from Industrial
Development Bank of India under the refinance scheme.
Special Schemes Operated by the State Financial Corporations
Single Window Scheme
This scheme was recently introduced by SFC’s which is meant for new tiny and small
scale industries whose project cost does not exceed Rs.20 lakhs and whose working capital
requirement does not exceed Rs.10 lakhs [Sujata Das, 2002].

National equity Fund Scheme

Under this scheme, the SFC’s provide assistance upto 15% of the project cost. In the tiny
or the small scale sector the project should have been floated by new entrepreneurs with its cost
not exceeding RS.10 lakhs. A nominal service charge of 1% per annum is charged on the
assistance by this scheme.

State Industrial Development Corporations (SIDCs)

Under the Companies Act, 1956 State Industrial Development Corporations were started.
The financial assistance is extended in the form of rupee loans, direct subscriptions to shares and
debentures, guarantees and inter-corporate deposits. SIDC’s undertake conducting industrial
potential surveys, entrepreneuship training and development programmes. SIDC’s are also
involved in the setting up of industrial growth centres with a view of providing infrastructural
facilities for establishment of industrial units [Subhamoy Banik, 2017]

State Small Industries Development Corporations (SSIDC’s)

They were established under the Companies Act,1956 as State Government undertakings
with the objectives of promoting and developing small, tiny industries in state and union
territorites. They distribute raw materials and also provide marketing promotion assistance to SSI
units for the purchase of raw materials required for execution of orders discounting of bills and
prompt payments are arranged in domestic and international markets. Several measures were
initiated to promote the development of tiny and small units by SSIDC’s in order to keep pace
with prevailing competitive environment [Krishna Reddy, 1993]

4. Others:
National Small Industries Corporation (NSIC):
It was established in 1955 by the Government of India, as per the recommendations of the
International Planning Team of Ford Foundation with a view of providing finance and promoting
industries in the country. The NSIC assists small scale industries through various schemes such as
hire purchase, marketing, export, raw material assistance and single point registration scheme
(Khanka, 1999)
III. Acknowledgement:
The authors would like to thank the management of Santhiram College of Pharmacy for
supporting this work.

IV.Conclusion:
Finance is the most essential requirement for any enterprise irrespective of its size. Here we have
discussed about various sources of finance available for the establishment of small scale
industries, various schemes through which finance is made available for entrepreneurs and
various financial institutions which meet all the financial requirements of small scale units and
their need.
Sources of finance used by entrepreneurs in establishing small scale units is largely confined to
moneylenders and the banking sectors which comprise of public, private and cooperative banks.
V. References:
Patra Karunakar “Financing Small Scale Industries- a note”, SEDME, (2002), Vol.29, No1, page
no.92-118
SS Khanka,“Financing of Entrepreneurship in a Notified Backward Economy”, Finance India,
(1990), Vol.4, No.1, page no.17
S.S Khanka, “Entrepreneurial Development”, Sultan Chand and Co.Ltd., (1999) , page no.114-
117
P.K Kulkarni, “Institutional Finance in the development and growth of small scale industry”,
SEDME, (2002) Vol.29, No.1, page no.21-25
Krishna Reddy, “Financial Management- An Analytical and Conceptual Approach”, Chaitanya
Publishing House, 1993.
K.Nirmal Gupta, “Small Industry- Challenges and Perspectives”, Anmol publications, (1992),
page no.126

Somu Giriappa , “Financing Development of Small Scale Enterprises”, Mohit Publications,

(2001), page no.9
Subhamoy Banik, “Small scale industries in India: Opportunities and Challenges”, Research gate,
2017. 6(1), page no.337-341
Sujata Das, “Financial Problems of Small Scale Industries in Assam”, SEDME, (2002), Vol.29,
No.1, page no.58
Vasant Desai, “Management of a Small Scale Industry”, Himalaya Publishing House, (1982),
page no.305-313