yusuf saiyed | Small And Medium Sized Enterprises | Research Design


CHAPTER - 1 1. SME financing 1.1 Introduction about SMES 1.2 Definition 1.3 Globalisations and SMEs 1.4 Importance of SSI India 1.5 SME sector is vital to the economy 1.6 Introduction 1.7 Challenges to banks in financing SMEs 1.8 Process of SME financing History of Banking sector History of Corporation Bank Profile of Corporation Bank Schemes of Corporation Bank History of Union Bank of India Profile of Union Bank of India Schemes of Union Bank of India History of State Bank of India Profile of State Bank of India Schemes of State Bank of India CHAPTER - 2 Research Methodology 12.1 - Research Objective 12.2 - Sources of Data 12.3 - Research Design 12.4 - Sampling Plan 12.5 - Data Analysis CHAPTER - 3 Limitation of the study Findings Suggestions Conclusion Bibliography 10 3 5 6 7 8 9 10 11 12 15 16 17 21 22 23 24 25 26 33 34 35 36 37 38 42 43 44 45 46


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In India, ‘small and medium enterprises’ (SME) is a generic term used to describe small scale industrial (SSI) units and medium-scale industrial units. Any industrial unit with a total investment in its fixed assets or leased assets or hirepurchase asset up to Rs10 million is considered as a SSI unit and investment up to Rs. 100 million is considered as a medium unit. In addition, an SSI unit should neither be a subsidiary of any other industrial unit nor can it be owned or controlled by any other industrial unit.

(SMEs) play a major role in global economic growth in terms of their

contribution to industrial employment, output and exports. SMEs occupy a place of strategic importance in the Indian economy as well. However, since the early 1990s, Indian SMEs have been exposed to intense competition due to the accelerated process of globalisation. Therefore, the survival as well as growth of SMEs is under strain. However, globalisation has also brought, in its wake, never opportunities for SMEs. Small & medium enterprises (sSME) sector is the future of India. In order to sustain the economic growth and development of the country, it is essential that the SME sectors play their role without which the growth story of India will be dampened. However, one of the biggest hurdles to the growth in the SME sector is lack of access to appropriate form of capital or funding. Traditionally, projects were funded for entrepreneurs in the SME sector by essentially some bank borrowings apart from the promoter’s contributions; however the modern concepts and thinking has undergone a sea change. The SME sector produces a wide range of industrial products such as food products, beverage, tobacco and tobacco products, cotton textiles, wool, silk, synthetic products, jute, hemp & jute products, wood & wood products, furniture and fixtures, paper & paper products, printing publishing and allied industries, machinery, machines, apparatus, appliances and electrical machinery. SME sector also has a large number of service industries.

The small scale sector in India comprises of a diverse range of units from traditional crafts to high-tech industries. The number of SSI working units (registered & unregistered) in India totalled 11.4 million in 2003-04—80.5 per cent of which are proprietary concerns and 16.8 per cent are partnership firms and private limited companies.


There is no official definition of a SME in India. The Government of India has officially defined a small-scale enterprise as: SMEs will be as defined in RPCD Circular No. RPCD.PLFNS.BC. 31/ 06.02.31/ 2005-06 dated August 19, 2005, which is reproduced below: " At present, a small scale industrial unit is an undertaking in which investment in plant and machinery, does not exceed Rs.1 crore, except in

GLOBALISATION AND SMEs Globalisation is usually seen as the conversion of the world into a single economic space. A comprehensive legislation which would enable the paradigm shift from small scale industry to small and medium enterprises is under consideration of Parliament. enterprise encompasses business. In other countries. further. service and industries. What is neither small nor large is being closely defined as medium. In the broadband of ‘small’. services. In India there exists no definition of SMEs. capital and technology. However employment is an omnipresent criterion for determining the size of the unit in these countries. and as a result. Units with investment in plant and machinery in excess of SSI limit and up to Rs.respect of certain specified items under hosiery. While the movement of goods. Pending enactment of the above legislation. the discussion extends to medium as well. where this investment limit has been enhanced to Rs.1998). into a single seamless society and culture (Sutcliffe. ideas. current SSI tiny industries definition may continue. ancillary. 5 crore. SMEs are defined on the basis of quantitative and qualitative elements. and tiny industry which are related to the historic value of the investment in plant and machinery. drugs and pharmaceuticals. such as the number of workers employed and/or annual turnover or the level of fixed investment. " In the Indian content. hand tools. we have so far not defined medium enterprises clearly. 10 crore may be treated as Medium Enterprises (ME). one macro economy. stationery items and sports goods. 5 . What prevails here is only the concept of small scale. Another possible connection for the SMEs is the small manufacturing enterprises. Globalisation – the process of continuing integration of the countries in the world– is strongly underway in all parts of the globe. or perhaps mega-economy.

Globally. ranging from low-tech items to technologicallyadvanced products. 99. technological transformation of SMEs should attract the focus of attention of policymakers. However. Indian SMEs lack technological strength to access and exploit the benefits emerging from the intensifying process of globalisation. IMPORTANCE OF SSI IN INDIA SSI is one of the significant segments of the Indian economy. accounting for about 70% of employment and contributes a significant amount for the growth of GDP.Table 2: SMEs in Indian Industry Years %share no.7 per cent of all enterprises in the world are SME’s and the balance 6 . SSIs sector is recognized as the engine of growth. contributing about 7 per cent to the Indian GDP and providing employment to over 28 million people.57 1989/90 1996/97 Table 2: SMEs in Indian Industry Globalisation has been affecting every economic activity in almost every country across the world. production and gross value added in the industrial sector. Indian SMEs are no exception.29 value production 52.00 61.19 in value employment 62.000 diverse products.31 in %share in % share in %share of gross added 0.44 34.00 92. in general. The Indian SME segment’s current production value is almost Rs 816. Therefore.of factories 93. It contributes to around 40% of industrial production & exports.000 crore. The SSI sector targets both domestic as well global markets. employment.00 43. It manufactures more than 8. The performance of SMEs has a determining significance for Indian economic growth due to their substantial share of enterprises.

162. the number of registered SSI units in India has increased from 11 million units in 2002-03 to 11. By contrast. leather products (18%). While production at current prices grew by about 10. According to the Ministry of Small Scale Industries.244 crore to Rs. About 8. 71.0%).The industry groups—with a large share in the total production of SSIs such as textile products.993 crore in 2002-03 to Rs.726 crore in 2003-04. This sector is next only to agriculture in employment. 170. food products (21.13 lakhs in 2002-03 to 271.4%) and.04 per cent from Rs.357.311.000 products are manufactured in the small-scale sector.733 crore in 2003-04. The SSI units continue to create employment. and metal products—have recorded high growth rates. The industry groups with a large share in exports are hosiery and garments (29. The number of employed in the SSI sector went up from 260. The fixed investment grew by 5. furniture.6 per cent.013 crore between 2001-02 and 2002-03.4 million units in 2003-04.53 per cent and exports rose by 20. the SSI sector in India accounts for 95 per cent of all industrial units. printing. wood.0. The production of SSI units in India increased from Rs. 86.7 per cent from Rs.533 crore in 2002-03 to Rs. 7 .3 per cent is large-scale enterprises. The exports grew at a faster rate than production in 2002-03.36 lakhs in 2003-04. paper. up 3.


e. acquired. They find that the challenges in risk management while lending to SMEs include: “lack of financial data. intrinsic weakness of the financial structures. and Asset-based finance such as factoring and invoice discounting.g. and costed/priced. Much finance is internally generated by businesses out of their own earnings and/or supplied informally as trade credit (i.: • • • • • Bank loans and overdrafts. However. Equity/corporate bond issues. it should be noted that not all business finance is external/commercially supplied through the market. Venture capital or private equity.Funding small and medium-sized enterprises is a major function of the general business finance market – in which capital for firms of types is supplied. leasing and hire-purchase arrangements. delays in paying for purchases of goods and services).. and slender resources of the promoters in terms of money and/or knowledge of markets. Capital is supplied through the business finance market in the form of e. 9 .


credit worthiness. After receiving the application the bank analyses the cibil report.The process of SME financing starts with the application of the person who wants loan. DOCUMENTS PHOTO IT RETURN FOR PAST 2-3 YEAR PERSONAL IDENTIFICATION. The bank seeks documents makes the analysis of the project value of collateral security and the required amount of the loan by the person and decides the credit rating of the firm/company to charge applicable rate of interest.NEXT YEAR.EMA AUDITED BALANCE SHEET FOR PAST 2 YEAR       11 . If it is proper then the bank proceeds further.PROOF OF ADDRESS PROJECTED BALANCE SHEET. capacity (margin) of the person.e.PAN CARD/ DRIVING LICENSE/VOTER’S ID RESIDENTIAL/ BUSINESS. and 3C’s i. capital.


Seven banks forming subsidiary of State Bank of India was nationalised in 1960 on 19th July.Without a sound and effective banking system in India it cannot have a healthy economy. Bank of Bombay (1840) and Bank of Madras (1843) as independent units and called it Presidency Banks. During the first phase the growth was very slow and banks also experienced periodic failures between 1913 and 1948. Next come Bank of Hindustan and Bengal Bank. It was the 13 . The banking system of India should not only be hassle free but it should be able to meet new challenges posed by the technology and any other external and internal factors. Reserve Bank of India was vested with extensive powers for the supervision of banking in India as the Central Banking Authority. 1969. major process of nationalisation was carried out. To streamline the functioning and activities of commercial banks. Phase II Government took major steps in this Indian Banking Sector Reform after independence. From 1786 till today. These three banks were amalgamated in 1920 and Imperial Bank of India was established which started as private shareholders banks. In 1955. The government's regular policy for Indian bank since 1969 has paid rich dividends with the nationalisation of 14 major private banks of India. the journey of Indian Banking System can be segregated into three distinct phases. The East India Company established Bank of Bengal (1809). mostly small. 1949 which was later changed to Banking Regulation Act 1949 as per amending Act of 1965 (Act No. mostly Europeans shareholders. There were approximately 1100 banks. the Government of India came up with The Banking Companies Act. was established in 1786. They are as mentioned below: Phase I The General Bank of India was set up in the year 1786. it nationalised Imperial Bank of India with extensive banking facilities on a large scale especially in rural and semi-urban areas. The first bank in India. 23 of 1965). though conservative.

Efforts are being put to give a satisfactory service to customers.effort of the then Prime Minister of India. Indira Gandhi. 14 major commercial banks in the country was nationalised. under the chairmanship of M Narasimham. Phone banking and net banking is introduced. The country is flooded with foreign banks and their ATM stations. This step brought 80% of the banking segment in India under Government ownership. The entire system became more convenient and swift. Phase III This phase has introduced many more products and facilities in the banking sector in its reforms measure. Time is given more importance than money. In 1991. a committee was set up by his name which worked for the liberalisation of banking practices. Mrs. Second phase of nationalisation Indian Banking Sector Reform was carried out in 1980 with seven more banks. 14 .


which are designed to cater exclusively to the bank needs of different segment like personal segment. The bank came out with its public offer (IPO) in Oct. It has a specialised branch. large and medium industrial units. housing sector.17% of its share capital held by the government of India. trade and commercial segment. with an initial capital just Rs. Presently bank has a network of 1001 branches. corporation bank is all set to cross Rs. Corporation bank is corporate agent of LIC since 10 years.5000. Corporation bank set up its head office at Manglore. corporation bank is reputed as one of the well-run banks in the country. varied and versatile services to the nation with a comfort and zeal stealing the common say in the banking sector. The bank has 1000 online interconnected ATM spread across the country. Corporation bank was established in the year 1906 at the temple town of Udupi . Corporation bank has regularly tried to keep a personal touch with customer.000 plus crop bankers. small scale industry. The bank is having tied up with LIC between these periods of time. It is dedicated to give vast. 1997 16 . It is a bank based on the traditional Indian values of service to the community. Corporation bank is a bank with 57. Proof of which is seen in its enviable track record in financial performance. segment. 15 extension counters and 19 currency chests covering 24 states and 2 union territories of the countries of the country.Karnataka one of the leading public sector bank of India. “The bank of pride” closes to hit the mark ‘100 years at your service’. the journey of corporation bank truly epitomizes this. small scale industry and export and import segment. The bank has presence in 98 centres out of 100 top centres in the country. with over 2000 service outlets across the nation served by committed and dedicated 12.1 lakhs crore make in business and far more. Corporation bank is dividend paying bank. non residential Indians.HISTORY AND INTRODUCTION Every institution has its start in modest initiatives but what makes it great is the passion of the people behind it carrying the legacy forward with its vision.

and 37. Corporation bank is rapidly growing confidence among its clients. Even in this era of technology and staff competition. Recently the bank has introduced the CAMPUS cards (non chip basis) this CAMPUS cards are an improved verson of VISA debit cards designed to meet various in-campus functionalities. 1980. It’s having more than 12000 customers. The Bhavnagar branch was established 6 February.presently the branch shown a turn over of 40 crores.87% of its share capital is presently held by the public and financial institutions. In 2004. The students can use the card for a number of application variant from it use as a simple identity card to its use for making instant payment of the all types towards the organisation from any where in the CAMPUS. The key factor of the success of corporation bank India is its young and dynamic manpower which gives service with efficiency and dedication. PROFILE 17 . the bank crop becomes the member of cash net and shared ATM network managed by EURONET. The corporation bank merged with the bank of citizens in 1961 and in 1980 the bank crop was nationalised.


Mortgage of immovable property and/or pledge of specified financial assets. Nature of facility: Running accounts in the form of overdraft.10 lakhs to Rs. Co-operative society. Private/Public limited company. hassle-free and adequate credit delivery to SME clients. Eligible Amount: From Rs. Proprietor. Marketing & Branding. The existing SME’s with good track record as well as new SMEs having satisfactory Due Diligence Report. Product Development. Purpose: To meet the liquidity mis-matches and expenses incurred on account of Research & Development. subject to a maximum of 65% of the value of immovable property or the value of financial assets such as NSCs/FDs/LIC policies etc. Proposals for less than Rs. Eligibility: All SME’s in the manufacturing & service sector.10 lakhs may also be considered with the prior approval of the Zonal Head. Margin: 19 . Executing unexpected bulk orders.The various SME services provided by the bank is as under: Objective: Timely. Primary Security: Nil Collateral Security: Mortgage of immovable and/or financial assets held in the name of business/ in the personal name of the proprietor/ Director or any third party.1 crore. Stocking the seasonally available raw materials etc. The SME may be an Individual. Partnership firm.

Immovable property: 35% of assessed market value [10% in case of financial assets] Rate of interest: 12% per annum [COBAR-1. However. Operative period: One year. it should be ensured that there is no double finance. Guarantor: Third party guarantee.  Accounts should be classified under Secured advances. renewable every year. CARE. ICRA. Processing Charges: At prescribed rate. to be obtained.. SMERA. crop bullet [RTGS based remittance] facilities available.  Property mortgaged for loan shall not be taken as continuing security for any other limits. multi-city cheques.50%] Relaxation/ Concessions in rate of interest: SMEs rated by Rating Agency viz. personal guarantee of partners/directors may be accepted in the case of partnership firm/ private/public limited companies. Other terms:  Satisfactory Due Diligence Report to be obtained from approved Due Diligence Agencies. Additional facilities: Value addition to the Scheme by way of supplementary services like internet banking.  In case the party enjoying the credit facility with other bank/s. are extended 50 bps concessions in the rate of interest. D&B. & FITCH and assigned with ratings of Satisfactory and above. CRISIL.  Confidential opinion from the existing banker if any. 20 .

21 . Loan against the property already mortgaged to the Bank for any other credit limits is not permitted.  Delegated Lending Powers shall be as per Schemes of Delegation of Lending Powers as applicable to Industrial/Commercial credit.  The nomenclature for SME Liquid Plus Scheme shall be CSLPS.

.. 22 .was flagged off by the Father of the Nation.. with a proactive approach to the changing needs of the society. living up to its image of... Mahatma Gandhi in 1928. a journey that spans 88 years.HISTORY OF THE UNION BANK UNION BANK OF INDIA. innovative commercial Bank... Union Bank has ensured complete customer delight. Union Bank of India is. Since that the golden moment. “GOOD PEOPLE TO BANK WITH”. Union Bank of India has this far unflinchingly travelled the arduous road to successful banking.

Regular banking services apart.COM 2423126 KRISHANAGAR SHAKHA ‘PANCHAVATI” FLAT NO-1488 23 . It is one of the pioneer public sector banks. PROFILE NAME OF BANK TYPE OF BANK ESTABLISHMENT OF BANK HEAD OFFICE ADDRESS UNION BANK PUBLIC SECTOR BANK 22 AUGEST 1956 UNION BANK BHAVAN 239. the Bank has earned the reputation of being a techno-savvy and is a front runner among public sector banks in modern-day banking trends. Under this solution umbrella. Over the years. BRANCH ADDRESS BOMBAI-400021 WWW. the customer can also avail of a variety of other value-added services like Cash Management Service. Insurance. WEBSITE FAX NO. The Bank came out with its Initial Public Offer (IPO) in August 20. the versatile Internet Banking provides extensive information pertaining to accounts and facets of banking. Union Bank is a Public Sector Unit with 55. Individuals and Others.000 qualified / skilled employees is and ever will be dedicated and delighted to serve the discerning customer with professionalism and whole heartedness.57 % of Share Capital is presently held by Institutions.43% Share Capital held by the Government of India. Mutual Funds and Demat.UNIONBANK. 2002 and Follow on Public Offer in February 2006. which launched Core Banking Solution in 2002.Union Bank's unique family of about 26.individual as well as corporate. All Branches of the Bank have been 1135 networked ATMs. with online Tele banking facility made available to all its Core Banking Customers . Presently 44. In addition to this.VIDHAN BHAVAN MARG.

KRUSHNA NAGAR BHAVNAGAR-364201 Union Bank of India has adopted a policy package for stepping up credit to Small & Medium Enterprises [SME] with the approval of the Board in its meeting held on 30th September 2005 and subsequently following steps have been initiated in this direction. 24 . SCHEMES OF THE BANK Following are the special schemes for SMEs.GHOGHA CIRCLE.

Pricing: Based on Credit Rating with floor rate of 175 bps below BPLR.17:1. TOL/TNW not exceeding 4. Other additional benefits • • • Multicity Cheque Book Cash Management Services Quicker disposal with reduced time frame for sanction within 15 days. DER at 3. Quantum: Above Rs 25 lakhs to Rs 25 crores.e.10:1.00:1 and DSCR at 1. UNION PROCURE • • • • • • Purpose: Financing the purchases of dealers supplying products to Corporates.e. Further interest concession up to 0. Margin: Nil Collateral: Minimum coverage of 30% of advance value. Collateral coverage of not less than 20% of total exposure. Appraisal/Assessment: Based on Turnover/FBF with relaxed terms i.00:1.00:1. Quantum: Above Rs 25 lakhs to Rs 25 crores. Current Ratio not less than 1. Pricing: Based on Credit Rating with floor rate of 300 bps below BPLR.e. Facility: Bills drawn by Corporates on Vendors duly accepted by the latter.1:1.  UNION HIGH PRIDE • • • • • Quantum: Above Rs 5 crores to Rs 25 crores.50% in case of SME rated by SMERA or CRISIL. Appraisal/Assessment: Based on Turnover/FBF with relaxed terms i. Current Ratio at 1. Appraisal/Assessment: Based on FBF with relaxed terms i.  UNION SUPPLY • • • • • • • Purpose: Financing against Receivables of the Vendor of goods supplied to the Corporates. Current Ratio not less than 1. TOL/TNW not exceeding 4. Interest rate ranging from 125 bps below BPLR to maximum BPLR for Working Capital based on credit rating. 25 . Margin: Nil Collateral: Minimum coverage of 10% of advance value.50:1. Facility: Bills drawn by Vendors on Corporates duly accepted by the latter.

Channel Financing The Bank has two schemes for financing the suppliers and wholesale dealers of selected Corporate under Channel Financing.• The scheme being implemented through 50 designated branches. 26 .

primary dealership in government securities. credit cards and insurance. fund management.STATE BANK OF INDIA State Bank of India (SBI) is India's largest commercial bank. factoring services. The State Bank Group includes a network of eight banking subsidiaries and several non-banking subsidiaries offering merchant banking services. SBI has a vast domestic network of over 9000 branches (approximately 14% of all bank branches) and commands one-fifth of deposits and loans of all scheduled commercial banks in India. 27 .

the Bank of Bengal and two other Presidency banks (Bank of Madras and Bank of Bombay) were amalgamated to form the Imperial Bank of India. Today. In 1955. BHAVNAGAR. PROFILE OF THE BANK NAME OF BANK TYPE OF BANK YEAR OF ESTABLISHMENT PHONE NO. State Bank of India (SBI) has spread its arms around the world and has a network of branches spanning all time zones. the Foreign Department and the International Services division.in SARDARNAGAR BRANCH. 28 .statebankofindia. SARDARNAGAR.The eight banking subsidiaries are: 1-State Bank of Bikaner and Jaipur (SBBJ) 2-State Bank of Hyderabad (SBH) 3-State Bank of India (SBI) 4-State Bank of Indore (SBIR) 5-State Bank of Mysore (SBM) 6-State Bank of Patiala (SBP) 7-State Bank of Saurashtra (SBS) 8-State Bank of Travancore (SBT) The origins of State Bank of India date back to 1806 when the Bank of Calcutta (later called the Bank of Bengal) was established. the controlling interest in the Imperial Bank of India was acquired by the Reserve Bank of India and the State Bank of India (SBI) came into existence by an act of Parliament as successor to the Imperial Bank of India.in Sbi.co. SBI's International Banking Group delivers the full range of cross-border finance solutions through its four wings the Domestic division. NEAR SINDHUNAGAR BUS STOP. In 1921.co. WEBSITE ADDRESS E MAIL ID BRANCH ADDRESS STATE BANK OF INDIA PUBLIC SECTOR BANK 1955 (0278) 2565167 2562360 www. PLOT NO: 1923/ C-1. FAX NO.60288@sbi. the Foreign Offices division.

29 .SCHEMES OF THE BANK State Bank of India has been playing a vital role in the development of small scale industries since 1956. 99 branches in industrial estates and more than 400 branches with SIB divisons. It has 55 specialised SSI branches. The unit should have a strong performance record and a respectable credit rating as per the bank’s own credit assessment scales (In case of loan above Rs. 25 lakhs).The Bank has financed over 8 lakhs SSI units in the country.  TERM LOAN FOR SSI Eligibility The SSI unit that takes the loan should not have any history of defaults in payment of interest or installments of the principal.

research and development. the quantum of the loan will be restricted to 75 per cent of the total expenditure. of Rs. In other words. purchase of equipment. godowns. 30 . Further. WC limit subject to a max. Margin A minimum margin of 25 per cent is applicable for acquisition of land and building. Repayment The repayment is structured in monthly or quarterly installments. Tenor for loan The tenor of loan is generally of 3 years.Purpose For meeting general commercial purposes like substitution of high cost debt. 20% of agg. 25 lakhs. showrooms. according to the cash generation cycle. shoring up net worth and funding business expansion.  SME CREDIT PLUS Purpose • • • For meeting bulk orders repair to machineries Tax payments and other contingency Features Clean Cash Credit. building construction. vehicles etc. renovation of offices. Utilization Existing SSI borrowers with good track record and new units can avail the additional WC limit facility to meet sudden unforeseen expenditure. Collateral security Extension of hypothecation charge over the current assets and fixed assets is required as primary security. the borrower whose aggregate loans with the Bank exceed Rs 5 lakhs may explore the possibility of collateralizing tangible security such as immovable property and third party guarantee.

50% 9. Margin: Nill Tenure of loan Each amount with drawn should be repaid within 2 months. 25 lakhs Above Rs. There should be a gap of 15 days between the last date of repayment of outstanding and for the next withdrawal. 25 lakhs based on credit assessment  ENTREPRENEUR SCHEM State Bank of India grants financial assistance to technically qualified. 5 lakhs to Rs.00% - .000 to Rs. trained and experienced entrepreneurs for setting up new viable industrial projects.50% 10. 50.Eligibility The unit should be enjoying a good track record (standard assets for at least two years) Units with CRA rating of SB4 and above.000 Above Rs. Eligibility Criteria The borrower has to be a technically qualified person (a degree/diploma holder in engineering or technology). 50. 5 lakhs Above Rs. 2 lakhs Above Rs.25% 11. 31 8. Loans are extended to technocrats who are unable to meet the normal margin requirements under the liberalized schemes. Collateral security Existing collateral to be extended to cover this limit and additional collateral to be obtained only if considered necessary by the sanctioning authority. Rate of interest Up to Rs. a craftsman with adequate experience or training or a person possessing a degree in business or industrial management. a chartered accountant or a cost accountant with relevant experience. 2 lakhs to Rs.

the SBI grants financial assistance to entrepreneurs who are not able to meet their share of equity fully. This type of assistance fills in the gap between the margin requirements in the project and the capital contributed by the promoter. 32 . Under the Equity Fund scheme. For needs ranging from Rs 5 lakhs to Rs 20 lakhs. by way of interest-free loans repayable over a long period. no margins are involved. working capital and equity fund finance Margins For requirements up to Rs 5 lakhs.Types of Financial Assistance The bank provides: • • • term loans. the margin is set at 10 percent. The Equity Fund assistance can be normally repaid over 5 to 7 years after the moratorium period.

33 .RESEARCH METHODOLOGY The meaning of research is. The systematic approach concerning generalization and the formulation of a theory is also research.” The manipulation of things. concepts or symbol for the purpose of generalizing to extend. “a careful investigation or inquiry especially through search for new fact in any branch of knowledge. whether that knowledge adds in construction to theory or practice of an art. the search for knowledge through objective and systematic method of finding solution to a problem is research. In short. correct or verify knowledge.

In it we study the various steps that are generally adopted by a researcher in studying his problem along the logic behind them.  To know which type of benefits are provided to SMEs.  To know what is the procedure of financing to SMEs.Research Methodology is a way to systematically solve the research problem. It may be understood as a science of studying how research is done scientifically.  To know the different terms and other related areas of SME financing. The main aim of research is to find out the truth which is hidden & which has not been discovered as yet. 34 . RESEARCH OBJECTIVES The purpose of research is to discover answers to questions through application of scientific procedures. The objectives of this research are as follows:  To know how bank is helpful to small and middle sized enterprises.

Data are collected as per the requirement of the research project.SOURCE OF DATA Data has to be collected from the right source the purpose of the research. 35 . There are two main sources of data. Source of data • • Primary data Secondary data Primary Data: Primary source means the data are collected for the first time directly from the sample or population as per the requirement.

where. book or periodical reports. In other words decisions regarding what. websites. magazines. how much. The secondary source are those which have all ready been collected by some one else and which have already passed through statistical process like information available from newspaper. by what means. when. concerning an inquiry or research study constitute a research design. data services and computer data based. TYPES OF RESEARCH DESIGN  Research design in case of exploratory research studies: 36 . journals.Secondary Data: For this project report I have used secondary data because this is secondary research. MEANING OF RESEARCH DESIGN A research design is the arrangement of conditions for collection & analysis of data in a manner that aims to combine relevance to the research purpose with economy in procedure.

A complete enumeration of all the items in the population is known as a census inquiry. In this project the research design is based on descriptive research studies. schemes of SME loan in different public sector banks etc. with narration of facts and characteristics concerning individual. Besides.  Research design in case of descriptive research studies: Descriptive research studies are those studies which are concerned with describing the characteristics of a particular individual. The data is collected from the news paper. It includes concerned with specific prediction. or of a group. census inquiry is not possible in practice under many circumstances. As the topic of the project is “SME financing by the public sector bank”. Most of the social research comes under this category.The main purpose of such study is that of formulating a problem for more precise investigation or of developing the working hypotheses from an operational point of view. Even the slightest element of bias in such an inquiry will get larger & larger as the number of observation increases. In fact. It can be presumed that in such an inquiry when all the items are covered no element of chance is left & highest accuracy is obtained. brochure of banks and their websites. 37 . But in practice this may not be true. money & energy.  Research design in case of hypothesis-testing research studies: These studies are those where the researcher tests the hypotheses of casual relationship between variables. For that 3 private sector banks are studied. this type of inquiry involves a great deal of time. SAMPLING PLAN All the items under consideration in any field of inquiry constitute a ‘universe’ or ‘population’. group or situations. the points covered in the project are concept of SME financing importance.

Corporation Bank & Union Bank of India.Hence. Hence. 38 . The type of sampling is convenience sampling. Coding operation is usually done at this stage through which the categories of the data are transformed in to symbols that may be tabulated & counted. Thus. I have selected 3 public sector banks as the sample of the project: State Bank of India. the application of these categories to raw data through coding. As this project is about SME financing in Public Sector Banks. the researcher turns to the task of analyzing them. quite often we select only a few items from the universe for our study purposes. it is not possible to study all the public sector banks. tabulation & then drawing statistical inferences. The analysis of data requires a number of closely related operations such as establishment of categories. In which the population elements are selected for inclusion in the sample based on the ease of access. DATA ANALYSIS After the data have been collected. In other words. a sample design is a definite plan determined before any data are actually collected for obtaining a sample form given population. Editing is the procedure that improves the quality of the data for coding. researcher should classify the raw data in to some purposeful & usable categories. The items so selected constitute what is technically called a Sample.

25 lakhs based on credit assessment Table-2 39 9. 25 lakhs Above Rs.75% 8. 25 lakhs Above Rs. In the following. 5 lakhs Above Rs. 5 lakhs to Rs.50% 9.00% 10. 2 lakhs to Rs. 2 lakhs to Rs. 50. 25 lakhs based on credit assessment Table-1 Interest rates of Term Loan for SSI Up to Rs.00% - . 5 lakhs Above Rs.000 to Rs.000 to Rs. 2 lakhs Above Rs. 50. Tabulation is a part of the technical procedure wherein the classified data are put in form of tables. (Interest rates in schemes are per annum)  State Bank of India NAME OF THE SCHEME SME CREDIT PLUS 50000 to above 25 Laces Refer table-1 Nil 2 Months TERM LOAN FOR SSI Maximum 50 laces Refer table-2 Nil 3 Years AMOUNT INTEREST RATE MARGIN TENUR OF LOAN Interest rates of SME Credit plus scheme Upton Rs. table the data of the schemes of the 3 banks if presented in the table form.000 Above Rs.25% 11. 2 lakhs Above Rs. 50.50% 10.With coding the stage is ready for tabulation. 50.00% 10.75% 11. 5 lakhs to Rs.000 Above Rs.

* Repayment period of term loan depends on the income generation of unit. Corporation Bank SME LIQUID NAME OF THE SCHEME AMOUNT INTEREST RATE MARGIN TENOR OF LOAN Plus Scheme 10 Lacs-1 Crore 12 % 35 % 1 Year (Renewable) (OD: Over Draft.)  Union Bank of India NAME OF THE UNION PRIDE 5 Crore25 Crore 1. DL: Demand Loan & both should be secured. In that the 40 . On basis of number of the SME schemes for SME customer is differentiated to each other.25% BPLR - HIGH UNION PROCEDURE 25 lakhs25 Crore below 1.75% BPLR Nil UNION SUPPLY 25 lakhs25 Crore below 3 % below SCHEME AMOUNT INTEREST RATE BPLR Nil MARGIN The comparison of the three banks in various stages is as under: The public sectors bank provides so many schemes to the customers.

In all the banks there is a bench prime lending rate according to this the all other interest rate are decided.  As the survey is not undertaken we could not get the review of customers. The banks BPLR are as follows: • • • Union Bank – 12. therefore in future schemes are not make any judgement for the scheme. Union High Pride.e.  As our sample design is convenience sampling such a procedure may give very biased results particularly when the population is not homogeneous. On the basis of margin. 41 .  As the number of customer of SME loan is less so that we could not undertake the survey. LIMITATIONS OF THE STUDY The major limitation of the study is as under:  As the interest rates of the schemes are floating. for the scheme of SME margin is nil in the State Bank of India and Union Bank while in the Corporation Bank margin is 35%. Union Supply whereas Corporation bank provides SME LIQUID Plus scheme to their SME customers.e. Union Procedure. Union Bank provides three main schemes i.State Bank of India provides two schemes i. whether they are satisfied with the service of banks.50% State Bank of India – 12. SME Credit Plus and Term Loan for SSI.25% Corporation Bank – 12.50% There is a minor difference between the interest rate of the bank as it is all public sector banks. These rates are decided by various credit rating agencies.

margin. 42 .  The interest rate generally depends on the credit rating of the company or firm. etc. additional facilities.  At the time of filing the application for loan the applicant should not only consider the rate of interest and amount of loan but other terms like services charges.FINDINGS  There are special schemes/ services provide to SME sector by the public sector banks. Before deciding the bank.  There are so many terms and conditions for guarantor or third party.

SUGGESSTION  The banks need to create awareness of their schemes well.  The banks should reduce the processing time of the loan.  The banks should improve their SME service in small cities. 43 .  The public sector banks should improve the documentation procedure for approval of loan. when the customer applies for the loan.  The public sector should explain the terms of SME financing loans and their conditions to the customer.

The bank needs to create awareness of their schemes well.CONCLUSION Research is mainly based on current scenario which prevails in Indian Financial System present. The bank should improve their SME services. 44 . This research concludes that the public sector bank should improve documentation procedure and reduce processing time. Nowadays banks are introduced innovative product and services day by day to survive in the market.

Kothari. ‘RESEARCH METHODOLOGY’. Second edition.corpbank.unionbankofindia.com www. new age international private ltd. ‘ENTERPRENEURESHIP DEVELOPMENT SMALL BUSINESS ENTERPRISE’. • • • www. • Poornima M Charanatimath.co.BIBLIOGRAPHY • C.in www.R.statebankofindia.. 2008. New Delhi. 2004. Pearson education in South Asia. Third edition.com 45 .

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