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At State Bank of India

Submitted To

AES PG Institute of Business Management Gujarat University Ahmedabad

Submitted By

Kazumi Parikh.



Wisdom and Education are two different words altogether. Education is gaining of knowledge imparted to us by our teachers, books or by any other means through which we can learn and imbibe their teachings. Wisdom, on the other hand, is the application of these learning to the places where it actually needs to be applied. College semesters provide us through Education Projects, the platform to test the Wisdom part of it. In any field of education, the projects given to the students play a significant role in testing how much the students have been able to imbibe from the learning, training given to them and how much have they been able to apply those learning practically. In fact, the projects are equally important for the students since they provide them with a practical exposure to the industry and help them in analyzing their strengths, their weaknesses, where they are good and where they need to improve? The fundamental purpose behind preparing project reports is, to put into words, the work we have done during our summer internship period, our learning and our experiences. This report is an attempt towards the same. It also helps in getting a better understanding of applicability of various financial theories.


Study of business management is all about gaining knowledge from the experience one gets from the corporate world. When a student gets into the corporate world to gain the knowledge, he is a novice. They need an opportunity and of-course help of his/her senior to explore the aspects of business management. I was given this opportunity by one of the largest bank of India: THE STATE BANK OF INDIA. I am obliged to THE STATE BANK OF INDIA for providing me an opportunity to undergo training in their esteemed organization. I wish to express my heartfelt gratitude to Mr.Rajesh Suthar and Mr. Ravi shankar (Branch managers of dhrangadhra and Wadhvan branch respectively) for their immense help in making my training and project fruitful. I would also like to thank all the employees of the bank who helped me during my training. I would also like to thank Miss Falguni Pandya and Mr Mayur Shah of AESPGIBM for their guidance throughout the preparation of the project and for their valued suggestion. I am also heartily thankful to all the faculty members without whose guidance and support this work would have been an impossible task to complete. Their inspiration and encouragement has led me to get through the task successfully. Finally, not to miss anyone, I thank all the people who have directly or indirectly helped me a lot throughout the training period and in completion of my project successfully.

Sr.No Project 1: Particulars Pg.NO


Banking Sector 1.1) Introduction 1.2) History of banking in India 1.3) The structure of banking in India 1.4) Current Scenario 2 3 4 5


State Bank Of India 2.1) History 2.2) State Bank of India Today 2.3) Mission & Vision Statement 2.4) Values 2.5) Associates 2.6) Foreign Offices 2.7) Subsidiaries & Joint Ventures 2.8) Growth 2.9) State Bank Group 2.10) Financial performance 211) SBI Modernization Programme 7 9 11 12 13 14 15 16 17 18 19


Cotton Industry

3.1) History of Cotton 3.2) Characteristic of cotton 3.3) The Manufacturing Procedure 3.4) Industrial Scenario 3.5) Major cotton producing States 3.6) Growth of Indian cotton industry 3.7) Cotton Corporation of India 3.8) Overview of cotton industry 3.9) Industrial scenario of surendranagar 3.10) Financial needs of Cotton Industry 3.11) Services provided by the SBI 3.12) Products offered by SBI 3.13) Procedure of financing at SBI 3.14) Documents to be submitted 3.15) Application Form 3.16) Credit Rating Analysis 3.17) Evaluation criteria 3.18) Issues related to cotton industry 3.19) SWOT Analysis 3.20) Research Methodology 3.21) Survey Analysis 3.22) Findings

23 24 25 27 29 30 32 35 36 37 38 42 51 52 53 56 58 70 71 74 76 85

Project 2: NPA

Non Performing Assets

4.1) Introduction 4.2) Definition of NPA 4.3) Assets Classification 4.4) Management of NPA 4.5) Factors contributing to NPA 4.6) Impact of NPA 4.7) Reasons for NPA 4.8) Symptoms reorganization of NPA 4.9) Preventive measures of NPA 4.10) Tools for recovery of NPA 4.11) Survey Analysis 4.12) Bibliography 4.13) Annexure

88 89 91 93 94 95 96 98 100 103 104 111 113


A bank is a financial institution that receives, collects, transfers, pays, exchanges, lends, invests, or safeguards money for its customers..The basic services a bank provides are checking accounts, which can be used like money to make payments and purchase goods and services; savings accounts and time deposits that can be used to save money for future use; loans that consumers and businesses can use to purchase goods and services; and basic cash management services such as check cashing and foreign currency exchange. Banking services serve two primary purposes. First, by supplying customers with the basic mediums-of-exchange (cash, checking accounts, and credit cards), banks play a key role in the way goods and services are purchased. Without these familiar methods of payment, goods could only be exchanged by barter (trading one good for another), which is extremely time-consuming and inefficient. Second, by accepting money deposits from savers and then lending the money to borrowers, banks encourage the flow of money to productive use and investments. This in turn allows the economy to grow. Without this flow, savings would sit idle in someones safe or pocket, money would not be available to borrow, people would not be able to purchase cars or houses, and businesses would not be able to build the new factories the economy needs to produce more goods and grow. Enabling the flow of money from savers to investors is called financial intermediation, and it is extremely important to a free market economy.


Without a sound and effective banking system in India it cannot have a healthy economy. 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. For the past three decades India's banking system has several outstanding achievements to its credit. The most striking is its extensive reach. It is no longer confined to only metropolitans or cosmopolitans in India. In fact, Indian banking system has reached even to the remote corners of the country. This is one of the main reasons of India's growth process. The government's regular policy for Indian bank since 1969 has paid rich dividends with the nationalization of 14 major private banks of India. Not long ago, an account holder had to wait for hours at the bank counters for getting a draft or for withdrawing his own money. Today, he has a choice. Gone are days when the most efficient bank transferred money from one branch to other in two days. Now it is as simple as instant messaging or dial a pizza. Money has become the order of the day. The first bank in India, though conservative, was established in 1786. From 1786 till today, the journey of Indian Banking System can be segregated into three distinct phases. They are as mentioned below: Early phase of Indian Banks (1786 to 1969) Establishment of First Bank in India in 1786 to Nationalization of Indian Banks in 1969 Middle phase of Indian Banks (1969 to 1991) Nationalization of Indian Banks in 1969 and up to 1991 prior to Indian banking sector Reforms. New phase of Indian Banks (1991 onwards) New phase of Indian Banking System with the advent of Indian Financial & Banking Sector Reforms after 1991.



Currently, banking in India is generally fairly mature in terms of supply, product range and reach-even though reach in rural India still remains a challenge for the private sector and foreign banks. In terms of quality of assets and capital adequacy, Indian banks are considered to have clean, strong and transparent balance sheets relative to other banks in comparable economies in its region. The Reserve Bank of India is an autonomous body, with minimal pressure from the government. The stated policy of the Bank on the Indian Rupee is to manage volatility but without any fixed exchange rate-and this has mostly been true. With the growth in the Indian economy expected to be strong for quite some time-especially in its services sector-the demand for banking services, especially retail banking, mortgages and investment services are expected to be strong. One may also expect M&As, takeovers, and asset sales. In March 2006, the Reserve Bank of India allowed Warburg Pincus to increase its stake in Kotak Mahindra Bank (a private sector bank) to 10%. This is the first time an investor has been allowed to hold more than 5% in a private sector bank since the RBI announced norms in 2005 that any stake exceeding 5% in the private sector banks would need to be vetted by them. Currently, India has 88 scheduled commercial banks (SCBs) - 28 public sector banks (that is with the Government of India holding a stake), 29 private banks (these do not have government stake; they may be publicly listed and traded on stock exchanges) and 31 foreign banks. They have a combined network of over 53,000 branches and 17,000 ATMs. According to a report by ICRA Limited, a rating agency, the public sector banks hold over 75 percent of total assets of the banking industry, with the private and foreign banks holding 18.2% and 6.5% respectively.


The origin of the State Bank of India goes back to the first decade of the nineteenth century with the establishment of the Bank of Calcutta in Calcutta on 2 June 1806. Three years later the bank received its charter and was re-designed as the Bank of Bengal (2 January 1809). A unique institution, it was the first joint-stock bank of British India sponsored by the Government of Bengal. The Bank of Bombay (15 April 1840) and the Bank of Madras (1 July 1843) followed the Bank of Bengal. These three banks remained at the apex of modern banking in India till their amalgamation as the Imperial Bank of India on 27 January 1921. Primarily Anglo-Indian creations, the three presidency banks came into existence either as a result of the compulsions of imperial finance or by the felt needs of local European commerce and were not imposed from outside in an arbitrary manner to modernize India's economy. Their evolution was, however, shaped by ideas culled from similar developments in Europe and England, and was influenced by changes occurring in the structure of both the local trading environment and those in the relations of the Indian economy to the economy of Europe and the global economic framework.

bank of madras note

Bank of Bengal H.O.

Stamp of imperial bank

The establishment of the Bank of Bengal marked the advent of limited liability, joint-stock banking in India. So was the associated innovation in banking, viz. the decision to allow the Bank of Bengal to issue notes, which would be accepted for payment of public revenues within a restricted geographical area. This right of note issue was very valuable not only for the Bank of Bengal but also its two siblings, the Banks of Bombay and Madras. It meant an accretion to the capital of the banks, a capital on which the proprietors did not have to pay any interest. The concept of deposit banking was also an innovation because the practice of accepting money for safekeeping (and in some cases, even investment on behalf of the clients) by the indigenous bankers had not spread as a general habit in most parts of India. But, for a long time, and especially up to the time that the three presidency banks had a right of note issue, bank notes and government balances made up the bulk of the investible resources of the banks. The three banks were governed by royal charters, which were revised from time to time. Each charter provided for a share capital, four-fifth of which were privately subscribed and the rest owned by the provincial government. The members of the board of directors, which managed the affairs of each bank, were mostly proprietary directors representing the large European managing agency houses in India. The rest were government nominees, invariably civil servants, one of whom was elected as the president of the board.

Bank of Madras

old Bank of Bengal

Bank of Bombay


State Bank of India is the premier commercial bank of the country, and among its strengths, the following would merit attention. The largest commercial bank in the country with branches spread all over India, besides having presence in all the time zones of the world covering several countries. As the largest financial institution in India, SBI is well positioned to capture growth in Indias dynamic banking market and is seen as a macro economic proxy for the Indian economy. The bank along with its non-banking subsidiaries has emerged as a financial services supermarket offering the entire gamut of financial services including investment banking, housing finance, factoring, project finance, asset management primary dealership, securities trading, credit card, gold banking, insurance, etc. The subsidiaries have been built into highly focused, efficient and tech- savvy organization which works closely with the customer relationship groups in order to cross-sell products building on Group synergy. SBI is an excellent brand name that is synonymous with trust and security. SBI is the only bank in India to be ranked among the top 100 banks in the world and also among the top 20 banks in Asia in the annual survey by The Banker. The bank has long standing relationship with 80% of Indian Blue-chip corporate. Substantial part of the corporate business of the bank is handled in five Strategic Business Units (SBUs) - Corporate Accounts Group, Leasing SBU, Project Finance SBU, Mid Corporate Group (MCG) and Stressed Assets Management

Group (SAMG). The Corporate Accounts Group (CAG) is a dedicated service group catering to about 298 top corporate and offers our top clients high quality relationship banking a broad product portfolio, competitive pricing and skilled credit expertise. The bank has developed an excellent in-house staff training infrastructure including a College, an Academy, an Institute for Rural Development and an Institute for Information Management and Communication Technology. Efforts are continuously made to improve the motivation and morale of the banks employees through on-going training and on-site initiatives.



To retain the banks position as the Premier Indian Financial Services Group, with world class standards and significant global business committed to excellence in customer, shareholder and employee satisfaction and to play a leading role in the expanding and diversifying financial services sector while continuing emphasis on its development banking role.


Premier Indian Financial Services Group with global perspective, world class standards of efficiency and professionalism and core institutional values.

. Retain its position in the country as a pioneer in development banking.

Maximize shareholder value through high sustained earnings per share.

An institution with a culture of mutual care and commitment, a satisfying and exciting work environment and continuous learning opportunities.



Excellence in customer service.

Profit orientation.

Belonging and commitment to the bank.

Fairness in all dealings and relations.

Risk-taking and innovation.


Learning and renewal.


Transparency and discipline in policies & systems.


There are seven other associate banks that fall under SBI. They all use the "State Bank of" name followed by the regional headquarters' name. These were originally banks belonging to princely states before the government nationalized them in 1959. In tune with the first Five Year Plan, emphasizing the development of rural India, the government integrated these banks with the State Bank of India to expand its rural outreach. The State Bank group refers to the seven associates and the parent bank. All the banks use the same logo of a blue keyhole. Currently, the group is merging all the associate banks into SBI, which will create a "mega bank", and one hopes, streamline operations and unlock value. State Bank of Bikaner & Jaipur State Bank of Hyderabad State Bank of Indore State Bank of Mysore State Bank of Patiala State Bank of Saurashtra State Bank of Travancore

State Bank of India is present in 32 countries, where it has 84 offices serving the international needs of the bank's foreign customers, and in some cases conducts retail operations. The focus of these offices is India-related business.


SBI has branches in these countries:

The Israeli branch Australia Bahrain Bangladesh Belgium Canada France Germany Hong Kong Israel Japan People's Republic of China Republic of Maldives Singapore South Africa Sri Lanka Sultanate of Oman The Bahamas United Arab Emirates U.K. U.S.A



In addition to the foreign branches above, SBI has these wholly owned subsidiaries and joint ventures: Nepal State Bank Limited is an Indo-Nepalese joint venture between State Bank of India, the Employees Provident Fund, and the Agricultural Development Bank of Nepal. It commenced operations on July 7, 1993, and now has 21 branches throughout Nepal. SBI Mauritius is an offshore bank, incorporated in 1990. Indian Ocean International Bank (Mauritius) has been operating in Mauritius since 1978. SBI acquired a majority stake in the bank in April 2005. The bank is a commercial bank with 11 branches in major cities/towns in Mauritius, including Rodrigues. SBI Canada has been operating for more than a decade and has a number of branches in the Toronto and Vancouver areas. State Bank of India established SBI California in 1982. The bank has six branches within the state.



Mumbai, India location. State Bank of India has often acted as guarantor to the Indian Government, most notably during Chandra Shekhar's tenure as Prime Minister of India. With 10,000 branches and a further 4000+ associate bank branches, the SBI has extensive coverage. Following its arch-rival ICICI Bank, State Bank of India has electronically networked most of its metropolitan, urban and semi-urban branches under its Core Banking System (CBS), with over 4500 branches being incorporated so far. The bank has the largest ATM network in the country having more than 10,200 ATMs. The State Bank of India has had steady growth over its history, though the Harshad Mehta scam in 1992 marred its image. In recent years, the bank has sought to expand its overseas operations by buying foreign banks. It is the only Indian bank to feature in the top 100 world banks in the Fortune Global 500 rating and various other rankings. According to the Forbes 2000 listing it tops all Indian companies


State Bank Group

A presence in every area of the Financial Sector
1992 Management Ltd
SBI Factors & Commercial Services P Ltd. SBI Funds SBI Cards & Payment Services Pvt Ltd.


SBI Life Insurance Co.Ltd



SBI Capital M arkets Ltd.

2004 **
Foreign Subsidiaries & Joint Ventures

SBI, SBICI & Associate Banks ** SBI Gilts - 1996 DFHI - 1988 Others ARCIL,RRBs



SBI Modernization Programme

SBIs Information Technology Programme aims at achieving efficiency in operations, meeting customer and market expectations and facing competition. Their achievements are summarized below:


All the branches of the Bank are now fully computerized. This strategy has contributed to improvement in customer Service.

There are 10,200 ATMs on the ATM Network in the State Bank Group spread across the length and breadth of the country, thereby creating a truly national network of ATMs with an unparalleled reach. . In January 2006, the Bank recorded 3.3 crore ATM transactions and withdrawals of around Rs 5,800 crore and the transactions are growing at the rate of 15% monthon-month. Value added services like ATM locator, payment of fees for college students, multilingual screens, voice over and withdrawal of cash advance by SBI credit card holders have been introduced. The Bank is planning to extend the BS7799 certification that it received for its data centre in Mumbai and disaster recovery centre in Chennai to its ATMs. SBI customers have access to the largest reach and convenience of Anywhere Anytime banking. State Bank ATM cum Debit cards are also acceptable at more than 1,23,000 Points of Sale / Merchant Establishments, which display Maestro logo.

This on-line channel enables customers to access their account information and initiate transactions on a 24x7, boundary less basis. 3308 branches are extending INB service to their customers. All functionalities other than Cash and Clearing have been extended to individual retail customers. A separate Internet Banking


Module for Corporate customers has been launched and available at 1070 branches. Bulk upload of data for Corporate, Inter-branch funds transfer for Retail customers, Online payment of Customs duty and Govt. tax, Electronic Bill Payment, SMS Alerts, E-Poll, IIT GATE Fee Collection, Off-line Customer Registration Process and Railway Ticket Booking are the new features deployed.

Under STEPS, the banks electronic funds transfer system; the Products offered are eTransfer (eT), eRealisation (eR), eDebit (CMP) and ATM reconciliation. STEPS handle payment messages and reconciliation simultaneously.

SBI has launched the Special Electronic Fund Transfer (SEFT) Scheme of RBI, to facilitate efficient and expeditious Inter-bank transfer of funds. Many branches of the Bank in various LHO Centers are participating in the scheme. Security of message transmission has been enhanced.

The Core Banking Solution provides the state-of-theart anywhere anytime banking for SBI customers. The facility is available at 2704 branches of SBI covering 49% of the Banks business at 612 centers and at all the 4715 branches of the Associate Banks covering 100% of their business at 2341 centers.

2844 branches of State Bank of India have been RTGS (Real Time Gross Settlement) enabled.


The SBI Card has 2.3 million card holders at present and it is targeting to cross 3 million marks by December this year. SBI Card is now available at 85 locations which is expected to go up to 100 by December 2006. SBI Card has launched three new cobranded credit cards TATA Card, SBI Railway Card and SBI Vishal Mega Mart Card in February 2006 aimed to tap the niche segments. SBI Card has 19 products targeting various segments of the society and issues over one lakh cards per month. SBI Card has the widest distribution network in the country through SBI and its associate banks with over 13,600 branches.

The solution has been implemented, providing efficiency in handling Trade Finance transactions with Internet access to customers and greatly enhances the banks services to Corporate and Commercial Network branches. This new Trade Finance solution, EXIMBILLS, will be implemented at all domestic branches as well as at Foreign offices engaged in trade finance business during the year.

The card base of State Bank Group has grown from 7.77m in September 04 to 12.43m in March 05 and 16.32m in September 05. Out of total card base State Bank of India has major share of 12.89m cards and remaining 3.43m cards of Associate Banks. State Bank Debit Card with affiliation to Master Card is the largest Maestro debit card issued by any Bank in South Asia. SBI customers have access to the largest reach and convenience of Anywhere Anytime banking at over 10,200 ATMs. State Bank ATM cum Debit cards are also acceptable at more than 1,23,000 Points of Sale / Merchant Establishments, which display Maestro logo. The Card population of International Debit Card as on March 05 was 13470. The number has increased to 16451 as on September 2005. The Bank has issued more than 6.20 lakhs Kisan Credit Cards (KCC) and sanctioned limits over Rs.2000.00 crores through KCC.




Cotton textile manufacturing is generally recognized as one of the oldest and most important industries in history. Historians trace it to the beginning of various civilizations--dating back at least 8000 years in Mexico and Peru and 5,000 years in East Africa and Southern Asia. Of the ancient civilizations in the latter region (East Africa and Southern Asia), India lead the way in the growth of cotton and development of cotton fabrics, and coincident with that, developed a flourishing trade in cotton fabrics with nearby countries including Greece, Egypt, the Roman Empire, along with others. Then continuing for centuries, India has dominated the production of cotton fabrics as it provided clothing for most of the Old World.

From the beginning and continuing for centuries, cotton was spun and woven into cloth by hand until England, in the late 1700s, developed textile machinery that was to revolutionize cotton manufacturing and provide the impetus for the Industrial Revolution. It all started in the 1760s when James Hargreaves invented the Spinning Jenny which Richard Arkwright improved with his development of the Waterwheel Spinning Frame. Requiring no special skills to operate, the new machinery quickly replaced the hand operated spinning wheel and vastly improved the quality and supply of thread. Textile mills, with cottages for imported workers, sprang up, and suddenly the factory system with the first successful system of mass-production was created.



Born Out Of Individual Initiatives and Skills:

Cotton industry establishment tends to evolve along a single entrepreneur or a small group of entrepreneurs. Greater Operational flexibility:

The direct involvement of owners, coupled with flat hierarchical structures and less number of people ensure that there is greater operational flexibility. Decision making such as changes in price mix or products mix in response to market is faster. High Propensity to Adopt Technology:

Traditionally industries have shown a propensity of being able to adopt and internalize the technology being used by them. High Capacity To Innovate Export:

In Cotton industry skill, innovation, improvisation and reverse engineering are legendry. By being able to meet niche requirements, they are also able to capture export markets where volumes are not high. High Employment Oriented:

Cotton industries are usually the prime driver of job, in the area where they are established. The industry tend to be labor intensive and are able to generate more jobs for every unit of investment, compared to their bigger counterpart. Utilization Of Locally Available Human And Material Resources:

The industry provides jobs locally and hence utilize manpower available locally. Since it is difficult for them to transport materials over long distances, they often improvise with materials which are available locally.



The manufacturing process involves removal of cotton seeds (kapasia) and pressing cotton to form cotton bales and extraction of oil from cotton seeds. Raw cotton (kapas) is the main raw material occupied in the unit activity. It is purchased from Farmers/Traders.

The raw cotton is first cleaned and conveyed over conveyor belt and distributed through buckets to gin uniformly, for the continuity of the production.

Cotton seeds are separated in the gins. Lint cotton is freed from the impurities. BT cotton is commonly used for ginning and pressing. The seeds content generally produces about 35% of lint cotton and 64% of cotton seeds. About 2 to 3% is waste.

The cotton seeds are collected separately from the gins and transported to godown for then onwards dispatch.

The separated cotton lint (Rui) in the gins is pneumatically conveyed to cleaner system, where impurities are removed. It is then passed through moisturizer machine for making up the moisture lost during processing.


The cotton is then conveyed to automatic revolving bale press, where cotton is pressed in cotton bailing press and packed in 165/170 kg bales.



Cotton is one of the oldest and principal commercial crops in India. Cotton plays an important role in the national economy providing large employment in the agro, marketing and processing sectors. Cotton textiles along with other textiles contribute almost one third of foreign exchange and is contributing to 3% of the GDP. India has always been a significant player in the textiles markets. It is the third largest producer of cotton in the world.

70% of cotton produced in the country is marketed by private trade. The remaining 30% is marketed by the Cotton Corporation of India Ltd.(CCI), a Public Sector Undertaking under the Ministry of Textiles, Government of India and other State Co-operative Cotton Growers Federations.

Gujarat is a pioneer state in the manufacturing of cotton as main crop and has sizable share in cotton ginning and manufacturing of textiles in India.

Total production of cotton during the year 2006-07 was 270 lacs bales. The Gujarat States Cotton production amounted to 93 lacs bales. 34.44% of countrys total cotton production. Compared to year 2005-06, the production has increased by 4.49% (production in the year 2005-06 was 89 lacs bales) The area under cultivation within the state has gone up by 25.39% in 2006-07.

Indias cotton output is seen higher at about 28 million bales in the crop year 2006-07 ( Oct-sept) from 27.3 million bales a year ago on a nearly five percent year on year higher acreage as per Traders and Brokers. The acreage in 2006-07 is 9.158 million hectares. The cotton crop is expected to be bumper in 2007-08 on improved seed availability, agricultural know-how and farmers willingness to cultivate on a larger area. Said Shri Kishor Jhunjhunwala, president East India Cotton Association (EICA).For the 2007-08 crop year, Bt 151, which is the most


popular variety, is estimated to be cultivated on 5.5 million hectares, compared with 3.8 million a year ago. This can result in the current yield to about 350 Kg per hectare on 1.7 million hectares that is being brought under Bt 151 sowing.

The states crop area is expected to rise by 4% to 2.5 million hectare in this cotton year. MD , Gujarat State Co-operative Cotton Federation.

Gujarat with estimated production of 9.3 million bales of 170 Kg each in 2007-08, accounts for more than a third of Indias cotton production.

In the world level, the Indian share has increased from 13.90% as on 99-01 to 18.4% as on 2006-07.



Others 7% Punjab 10% Madhya Pradesh 7% Haryana 6% Andhra Pradesh 13% Gujarat 38%

Gujarat Maharashtra Andhra Pradesh Haryana Madhya Pradesh Punjab Others

Maharashtra 19%



Over the years, country has achieved significant quantitative increase in cotton production. Till 1970s, country used to import massive quantities of cotton in the range of 8.00 to 9.00 lakh bales per annum. However, after Government launched special schemes like intensive cotton production programmes through successive five-year plans, that cotton production received the necessary impetus through increase in area and sowing of Hybrid varieties around mid 70s. Since then country has become self-sufficient in cotton production barring few years in the late 90s and early 20s when large quantities of cotton had to be imported due to lower crop production and increasing cotton requirements of the domestic textile industry. Since launch of "Technology Mission on Cotton" by Government of India in February 2000 significant achievements have been made in increasing yield and production through development of high yielding varieties, appropriate transfer of technology, better farm management practices, increased area under cultivation of Bt cotton hybrids etc. All these developments have resulted into a turn around in cotton production in the country since last 2/3 years. The yield per hectare which has remained stagnant at about 300 kg/ha for more than 10 years, increased to 470 kg/ha in cotton season 2004-05 and to 553 kg/ha in cotton season 2007-08. The fundamental changes that taking place in the realm of cotton cultivation in the country, are having the potential to take the current productivity level near to the world average cotton production per hectare in the near future. Apart from meeting the increased cotton consumption by domestic textile industry, country may have sufficient surplus cotton to meet the cotton requirements of importing countries.


Progress with regard to area, production and yield in the country over the last ten years is enumerated as under: Area, Production and Yield for last Ten years: Area in lakh hectare/Production in lakh bales/Yield kgs per hectare Year 97-98 98-99 99-00 00-01 01-02 02-03 03-04 04-05 05-06 06-07 07-08 Area 89.04 92.87 87.91 85.76 87.30 76.67 76.30 87.86 86.77 91.42 95.30 Production 158.00 165.00 156.00 140.00 158.00 136.00 179.00 243.00 241.00 280.00 310.00 Yield 302 302 302 278 308 302 399 470 472 521 553


CCI was established on 31st July 1970 as a Government Company registered under the Companies Act 1956. In the initial period of setting up, as an Agency in Public Sector, Corporation was charged with the responsibility of equitable distribution of cotton among the different constituents of the industry and to serve as a vehicle for the canalization of imports of cotton. With the changing cotton scenario, the role and functions of the Corporation were also reviewed and revised from time to time. As per the Policy directives from the Ministry of Textiles, Government of India in 1985, the Corporation is nominated as the Nodal Agency of Government of India, for undertaking Price Support Operations, whenever the prices of kapas (seed cotton) touch the support level. As per this Textile Policy of 1985, the specific role assigned to the Corporation, in brief, is as under: To undertake price support operations, whenever the market prices of cotton touch the support prices announced by the Government of India, without any quantitative limit; To undertake commercial operations only at CCI's own risk; To purchase cotton to fulfill the export commitments; & To act as implementing agency for Mini Missions III & IV of TMC.

CCI Operations cover all the cotton growing states in the country comprising of Punjab, Haryana and Rajasthan in Northern Zone Gujarat Maharashtra and Madhya Pradesh in Central Zone Andhra Pradesh ,Karnataka & Tamil Nadu in Southern Zone


As a Nodal Agency of Government of India to undertake price support operations, Corporation keeps itself in preparedness to meet the eventualities of price support operations. As and when cotton prices touch the level of Minimum Support Price (MSP), cotton purchases are made under MSP operations without any quantitative limits. Under these MSP operations, cotton farmers are free to offer their cotton produce to CCI and Corporation continues purchases of such cotton till the prices rule at MSP level. CCI buys raw cotton directly from the cotton farmers through the aegis of Agricultural Produce Market Committees (APMCs) conducted auctions in the APMC yards. CCI officials are present in such markets from the day one of the arrivals till the same continues. All such purchases by CCI are in open competition with other traders and State agencies participating in the auctions and the main objectives remain to ensure remunerative prices to the cotton farmers on one hand and procure standard quality raw cotton on the other hand. At present, CCI is operating in all cotton growing States over 262 procurement centres under the control of respective Branch Office in each State. Apart from 15 Branch Offices, there are 4 Sales Branches to cater to the needs of the textile mills for sale and supply of quality cotton as also for rendering the necessary after sales services.


The Cotton Advisory Board, in its meeting held on 17th May 2008 has placed cotton production during 2007-08 cotton season at 315 lakh bales of 170 kgs each, as per State-wise details given below: Area in lakh hectare/Production in lakh bales/Yield kgs per hectar Cotton Production and Balance sheet State Punjab Haryana Rajasthan North Total Gujarat Maharashtra Madhya Pradesh Andhra Pradesh Karnataka Tamil Nadu Others Total Loose Lint Grand Total *as per CAB dated 17th May 2008 2007200608* 07 Area Production Yield Area Production Yield 6.41 22 583 6.07 24 672 4.83 16 563 5.3 15 481 3.68 9 416 3.5 9 437 14.92 47 536 14.87 48 549 25.16 112 757 23.9 103 733 31.91 62 330 31.07 50 274 6.62 21 539 6.39 19 505 10.96 46 714 9.72 36 630 3.88 8 351 3.78 6 270 1.3 5 654 1 5 850 0.8 2 425 0.71 1 239 303 268 12 12 95.55 315 560 91.44 280 521



Cotton is known as the King of Fibers (belongs to the Plant Order: Malvales, family: Malvaceae) Sowing of cotton mainly done in June - July, Harvesting time of cotton is: September December and arrivals of cotton extends till April More than 25 varieties are cultivated in India Provides employment to 4-5 million people Largest Gross and Net foreign exchange earner 31% of the total Export earnings with practically no import contend (cotton yarn contributing 13%) 21 % of the industrial production 4% of GDP Direct employment to nearly 3 crore (30 million) people 10% of excise revenue USDA estimated output in India at 314 lakh bales in 2007-08 Production increased by 35 lakh bales from last year Area increased by 4.13 lakh hectares to 90.45 lakh hectares in 2007-08 Gujarat - 110-120 lakh bales and Maharashtra - 70 lakh bales Annual output growth rate 10.76% between 1999-00 & 2007-08 Bt Cotton occupies about 40% total cotton area



Surendranagar is an administrative district in the state of Gujarat in India. The district headquarters are located at Surendranagar. The district occupies an area of 10,489 km and has a population of 1,515,148 of which 26.56% is urban (as of 2005). Along with the district headquarter: Surendranagar, other cities in the district include Dhrangadhra, Halvad, Wadhwan, Limbdi, Tarnetar, Lakhtar, Muli, Sayla, and Thangadh. Surendranagar is a hub of cotton and ginning actitives of India. One of the largest producers of quality "Shankar" cotton in world. In fact Surendranagar houses first Cotton Trading Exchange in India. Nearly 25% of India's salt supply comes from mining in the area. There are miles of "Agar" (Salt pans) specially in Kharaghoda area. SMEs in various segments like confectionery, textile bearings, ceramics, sanitary ware, pharmaceuticals, soda ash, bromine, chemicals and plastics have developed to a great extent. Surendranagar being a cotton hub of the country is also home to large number of ginning and pressing units.



Except some portion, most of the industry need finance from outside to run their business. Finance is the life blood of business. The same applies here also. Cotton industry require fund not only at the time of inception but also at some other point of time. Cotton industry requires finance mainly for the following reasons: At the time of commencement of the business At the time of expansion or modernization of business For acquiring new unit For acquiring new machinery, equipment etc. For day to day requirements For Purchasing raw materials For Repairs and maintenance of machinery, Transportation, etc. For meeting bulk orders To meet genuine contingency needs arising out of bunching of orders Delay in shipment / realization of receivables Sudden increase in raw material costs, mis -match in cash flows Substitution of high cost debt of other banks / FIs Up gradation of technology Acquisition of software, hardware, consumables, tools, jigs, fixtures, etc. ISO and other such certifications Visits abroad for acquiring technology, finalizing deals, participation in fairs, market promotion, etc. Tax payments



Banks provide variety of services to match with their needs and to increase the ease of operation with a view to provide services which are beneficial mutually. Varieties of services provided by bank mainly involve the following: 1) Cash credit 2) Term loan 3) Current account 4) Letter of credit discounting 5) Bill Discounting 6) Overdraft 7) Export Packing Credit (EPC) 8) At par cheques and drafts 9) Outstation clearing 10) RTGS 11) NEFT 12) Internet banking Brief descriptions of each service provided to cotton industries are as follows:

1) Cash credit: Cash credit is the amount allowed to the customer for use for a stipulated time period at a specified rate. This amount is given by the bank mainly for the purpose of purchasing goods from suppliers. The rate of CC is decided based on the size of the CC limit. The interest is charged only on the unpaid amount. Generally the CC is used to fulfill working capital requirements. CC is given to the customers who have good credit in the market. 2) Term loan: Term Loan is normally given to the borrowers for acquiring long term assets i.e. assets which will benefit the


borrower over a long period. Purchases of plant and machinery, constructing building for factory, setting up new projects fall in this category. Financing for purchase of automobiles, consumer durables, real estate and creation of infra structure also falls in this category. The interest rate for the term loan is decided over and above the SBAR (State Bank Advance Rate) or PLR (Prime Lending Rate) based on the category of the SME. Current SABR/PLR is 12.75%. 3) Current account: Current account refers to the account from which any number of withdrawals can be made by the account holder. This facility is generally availed by a merchant or a businessman, who has to withdraw money frequently. No interest is given on the current account deposit. 4) Letter of Credit: L/C is a short form of letter of credit. Banks provide L/C discounting for purchasing of goods, in case the person wants to purchase on credit. The bank takes the responsibility of paying the amount of purchase in case the customer defaults. This is exercised through issuing letter of credit to the customer by bank. The bank charges the commission for providing this service. 5) Bill Discounting: Bill discounting is a major activity with some of the smaller Banks. Under this type of lending, Bank takes the bill drawn by borrower on his(borrower's) customer and pay him immediately deducting some amount as discount/commission. The Bank then presents the Bill to the borrower's customer on the due date of the Bill and collect the total amount. If the bill is delayed, the borrower or his customer pays the Bank a pre-determined interest depending upon the terms of transaction 6) Overdraft: The word overdraft means the act of overdrawing from a Bank account. In other words, the account holder withdraws more money from a Bank Account than has been deposited in it.


7) Export Packing Credit (EPC): Export Packing Credit (EPC) is same as Cash Credit but the only difference is that it is provided for an export purpose. The rates of EPC are less than Cash Credit as a part of promoting exports 8) At par cheques and drafts: This is a facility whereby the cheques are transferable and drafts are both issuable and transferable without any commission. These facilities were chargeable earlier by banks. 9) Outstation clearing: In this service, outstation cheques are accepted and cleared in the bank. This service is chargeable. 10) RTGS: Real Time Gross Settlement (RTGS) system is a funds transfer mechanism where transfer of money takes place from one bank to another on a real time and on gross basis. This is the fastest possible money transfer system through the banking channel. The RTGS system is primarily for large value transactions. The minimum amount to be remitted through RTGS is Rs.1 lakh. There is no upper ceiling for RTGS transactions. 11) NEFT: The NEFT (National Electronic Fund Transfer) Service helps in the seamless transfer of funds from one branch to another without any delays or procedural hassles. It is same as RTGS but in NEFT the maximum amount you can transfer is RS 1 lakh.


12) Internet banking: Internet Banking is the facility which allows the bank's customer to do banking transactions through Inter net. Internet Banking offers a convenience to the customers and his banking needs can be sourced without physically visiting any of the branches, some times right at his business place, residence, and market or even while traveling. Internet Banking Service is available to the customers of Core banking branches of the Bank.




1. 2 Target Group Eligibility : : Existing SSI borrowers with CRA rating of SB3 and above Should have earned profits in each of the preceding 3 years The unit should not have a history of default The unit should be CRA rated unit with a minimum limit of Rs.25 lacs (as far as possible). Any general commercial purpose such as shoring up NWC, substitution of high cost debt, R&D, quality up gradation for ISO certification, etc. Term Loan Maximum of Rs.50lacs Minimum of 25% for acquisition of assets, i.e., quantum of loan should be restricted to 75% of project cost. As per CRA rating


4 5 6

Type of facilities Quantum of Finance Margin

: : :

7 8

Rate of Interest Security: - Primary - Collateral

: :

Extension of Hypothecation charge over current and fixed assets Extension of charge over existing collateral Obtention of additional collateral by way of tangible security to be explored Personal guarantees of proprietor/ partners / promoters to be invariably obtained As applicable to SSI units In monthly /quarterly installments normally in 3 years, extendable up to 5 years in deserving cases. : Specially designed document on the lines of the Composite Loan Agreement

Processing fees

10 Repayment

11 Documentation


12 Special features

Term Loan to be disbursed in line with the approved purpose Loans, deposits, from friends and relatives can be treated as quasi-equity to arrive at TNW subject to undertaking from them that the amounts will not be withdrawn during the currency of the loan.

Product Highlights: This product is similar to the Corporate Loan which has recently been extended for non- corporate borrowers. SBIs existing SB3 rated units which require funds for any purpose connected with the running of the unit can be offered this product provided the unit has been making profits for the last 3 years and is brought under CRA rating exercise. The maximum amount of loan which can be sanctioned is Rs.50lacs.repayable in 3 to 5 years.


1. 2 3 Target Group Eligibility Purpose : : : Existing SSI and C&I units and exporting units. Rated SB3 and above. Selectively for SB4 rated units To meet genuine contingency needs arising out of bunching of orders, delay in shipment / realization of receivables, sudden increase in raw material costs, mis -match in cash flows. Working capital limit by way of cash credit, EPC, bills discounting, against stocks, receivables, etc., as required. Fund based limits and Non-fund based limits 15% of working capital facilities subject to a maximum of Rs.5 crs. The facility may be made available as fund based and/or non fund based limits subject to the overall exposure being within the

Type of facilities

Quantum of Finance


SLC.(WC) In the case of consortium advances, only our share in the consortium should be reckoned for arriving at the quantum. 6 7 Margin Rate of Interest : : As per the terms of the original limits One per cent higher than that applicable to the Cash Credit limit. Discretion to waive the additional cost rests with the controller.

Security: - Primary

: Drawing power should be available to cover the SLC (WC) limit Available collateral should be extended to cover SLC limit also.

- Collateral

9 Processing fees 10 Repayment NIL Generally, within 2 months at any one instance and can be availed any number of times in a calendar year. : Documents should be obtained for the aggregate limits including the SLC (WC) In the case of consortium advances, the SLC(WC) should be covered by a separate document and charge registered with the ROC wherever applicable. The SLC(WC) should not be used for special type of facilities such as EPCG,DPG, etc.. The sanction should be by the authority having financial powers for sanction of the aggregate limits including those under SLC(WC) SLC(WC) should be calculated separately for peak and non peak limits SLC(WC) limits, being contingent in nature will be out of the consortium arrangement Sanction for the SLC(WC) should be obtained at the time of sanction of regular limits for all regular borrowers and who are likely to avail this facility during the year. SLC(WC) cannot be extended to units who have utilized SME Credit Plus facility The release of the facility after due sanction should be approved by the branch head on each occasion

11 Documentation

12 Special features


Products Highlights: This product has been introduced at the instance of RBI for enabling the exporters to avail additional WC funds at short notice in times of urgent need. The maximum amount which can be given is 15% of FB limits and NFB limits subject to a maximum of Rs.5crs While a similar product namely, SME Credit plus is available for a contingent limit of Rs.25lacs only, this Stand by Line of Credit can be given up to Rs.5crores.

SME CREDIT CARD 1. 2. Target Group Eligibility : : SSI units, tiny units, village industries, Retail traders, professionals, self- employed, etc.. Customers of the following segments with a satisfactory track record for the last two years :Small industrial units Small retail traders Professionals self employed persons Small business enterprises Transport operators To meet any kind of credit requirements including purchase of shop Cash Credit and/or Term Loan Maximum - Rs. 10lacs 20% As applicable to the market segment Hypothecation of stock in trade, receivables, machinery, office equipment SSI No collateral is to be insisted upon SBFFor loans more than Rs.25000/- charge over movable /immovable property/third party guarantee As applicable to SSI/SBF units a) The working capital component should be reviewed every year provided the credit summation is not less than 50% of the projected turnover. If the credit summation is less than 50%, then a

3. 4. 5. 6. 7. 8.

Purpose Type of facilities Quantum of Finance Margin Rate of Interest Security: - Primary - Collateral

: : : : : :

9. Processing fees 10. Repayment


11. Documentation 12. Special features

: :

13. Methodology Operation of account

and : the

repayment schedule should be fixed for the outstanding in suitable monthly installments. b) The Term Loan component should be repayable in a maximum of 5years in suitable installments. As per the nature of the facility Assessment A scoring model has been designed and those units which score a minimum of 60% qualify under the Scheme for which the working capital assessment will be made as under :i) For small business, retail traders, etc., - 20% of their annual turnover OR - 20% of turnover of the last 12 months in their accounts, whichever is higher. ii) For self- employed and professionals - 100% of gross annual income as declared in their income tax return iii) For SSI units - As per Nayak Committee norms ie.20% of annual turnover Validity The limit will be valid for 3 years but is subject to annual review - The borrower will be issued a photo identity card indicating sanctioned limit and validity of the limit. - Cheque book to be marked as SME Credit Card - Pass Book to be issued - Submission of stock statements is waived but should be obtained once in the last quarter to meet RBI stipulations - Brief opinion report should be recorded.

Product Highlights: Small business units, small industries in the tiny sector, retail traders, professionals and self employed persons, requiring working capital needs are very often unable to provide the elaborate financial data sought by banks from time to time for assessing their credit needs. To obviate this difficulty faced by the small units in SSI & SBF sectors, the Bank has designed this product which comprises of a photo identify card and a passbook which gives details of the limit and validity of the facility. The assessment is based on a simple scoring model and units which score 60% or more are eligible for this working capital cum term loan facility up to Rs.10 lacs valid for a period of 3 years.




Target Group

Individually managed proprietary/partnership firm or closely held public/private limited companies in the Small and medium industrial and trading sector under C&I and SIB segments. The chief promoter /chief executive should be below 66 years of age The applicant must obtain a minimum score of 60% with a minimum of 50% under each sub-head of Business and Personal details and a minimum of 10% under collateral details. Working Capital needs Acquisition of fixed assets Cash Credit / Term Loan SSI UNITS Rs.5lacs to below Rs.50lacs 20% of annual turnover for WC loan and 67% of project cost for TL TRADE & SERVICES Rs.5lacs to Rs.25lacs 15% of annual turnover for WC and 67% of project cost for TL. 25% for working capital component and 33% for TL component. Size of limit Repayable on demand or upto 1 year(%p.a. ) 1.75% below SBAR 0.75%belo w SBAR Repayable beyond 1 Repayable in 3 year but before 3 years and above years(%p.a.) (%p.a.)



3. 4. 5.

Purpose Type of facilities Quantum of Finance

6. 7.

Margin Rate of Interest

Upto Rs.50,000/-



>Rs.50000/0.75%belowSBAR uptoRs.2lac >Rs.2 lacs but below Rs.5lacs SBAR SBAR >Rs. 5 lacs but 0.25% 0.25% below Rs. 25 aboveSBA aboveSBAR lacs* R Rs.25lacs and 0.75% 0.75% above but upto aboveSBA aboveSBAR Rs.50lacs R 11.25% 11.25% *For loans covered under CGTSI Interest @ 0.50%

0.25%belowSBAR 0.50% above SBAR 0.75% Above SBAR 1.25% aboveSBAR 12.00% in addition


to applicable rate of interest should be recovered and addl. Interest @0.30%p.a. on loans sanctioned after 31.03.2006 should be recovered 8. Security: - Primary - Collateral 9. Processing fees Hypothecation of stocks and assets financed by Bank As per Bank's extant norms for WC and TLs As applicable to SSI /SBF / C&I units WC loan to be reviewed annually. TL not more than 5years excluding moratorium not exceeding 6months As per simplified SME documentation A simplified appraisal model (enclosed) has been developed to standardize the appraisal process. A special application form has been designed to capture all the required information at one instance

10. Repayment

11. Documentation 12. Special features

Product Highlights: This product is designed to avoid delays in credit delivery due to cumbersome assessment processes. A simple scoring model has been designed for which all the data required has to be furnished at one go by way of an application form which has also been specially designed for this product. Units which score a minimum of 60% are eligible for this product. This product can be given to units in C&I, SSI and SBF segments for credit requirements between Rs.5 lacs to Rs.50 lacs( Rs.25lacs for T&S) based on the projected turnover and / or project cost. The loan quantum should be a minimum of 20% of turnover and/or, 67% of project cost. If a proposal does not fit into this model, it can also be considered on usual Bank's terms on merits.


SME CREDIT PLUS 1. Target Group : Existing SSI borrowers with excellent track record and have been standard assets for the past two consecutive years and also new borrowers. Units with CRA Rating of SB4 & above and / or standard assets for the past two years For meeting bulk orders repairs to machinery Tax payments Any other contingency Clean Cash Credit 20% of aggregate working capital limit subject to a maximum of Rs.25lacs Not applicable At the rates applicable for working capital limits

2. 3.

Eligibility Purpose

: :

4. 5. 6. 7. 8.

Type of facilities Quantum of Finance Margin Rate of Interest Security: - Primary - Collateral

: : : : :

Nil Existing collateral to be extended to cover this limit and additional collateral to be obtained only if considered necessary by the sanctioning authority


Processing fees

: :

As applicable to SSI units Each amount of withdrawal should be repaid within 2 months. There should be a gap of 15 days between the last date of repayment of out standings and the next withdrawal. As applicable to clean cash credit. No cheque book to be issued

10. Repayment

11. Documentation 12. Special features

: :


Product Highlights: SME Credit Plus is a product designed to meet sudden and unforeseen expenditure of SSI units with excellent track record. Eligible units can be sanctioned an additional working capital limit of upto 20% of the aggregate fund based working capital limit by way of clean cash credit. Additionally, the product can be extended to new borrowers as a marketing tool to attract good borrower units of other banks to SBI books.



The procedure followed by SBI to finance involve following steps: (1) First of all the proposal comprising of all the details regarding the project from the industry is sought. The proposal should be prepared in the Performa prescribed by RBI. (2) If the project is of below Rs. 5 crores, it is handled by Central Processing Cell (CPC). For projects above Rs. 5 Crores, Retail Asset Centre for Small Enterprise (RACSE) works on it. (3)Then the background of the promoter is examined by the concerned authority of the bank. (4) If the project is of expansion, the financial statements of the unit are asked for and the analysis is performed. But if the project is for establishment of new unit, the economic and technical viability of the project is checked through experts. (5) For existing units, various ratios are calculated to use them as performance parameters. Commonly used ratios are Return on Capital Employed (ROCE), Inventory holding ratio, Current ratio; Debt- equity ratio etc. asset- liability check is also exercised. (6) After that firm is given the State Bank Ranking (SBR) from SB 1 to SB 7 but SBI does not consider the SMEs with ranking above SB 4. This ranking helps in deciding the rates over and above the SBAR or PLR. (7) Then, the project including all the results is prepared by the Chief Manager of the processing cell of the respective branch. (8) The presentation is made by the processing cell in front of the Credit Circle Committee (CCC). (9) If it is found satisfactory and as per the standards set, the proposal is accepted and the fund is dispersed to the party.


Duly filled in Application form Comments on Associate concern/sister concern Pre sanction visit and observation sales data up to latest month Financial parameters as per format enclosed along with the comments on financial parameter Comments on activity and experience of promoters Comments on take over norms Specific recommendation of branch manager Opinion report signed by the branch manager along with supportive papers Valuation report of the proprietor offered as security not enclosed Statement of account for the last 3 months from present banker Confirmation of branch that they agree with the valuation of prospects


The Application form includes the following things:

GENERAL 1. Amount of assistance required. 2. Name of Industrial concern. 3. Constitution. 4. Date of incorporation/ registration & commercial production. Details (date, period, reasons, etc) of information, if any. 5. Location (along with phone numbers) of registered office, factory & whether the factory is located in notified backward area. 6. Nature of Industry & products. 7. Name of business house/group to which the concern belongs (whether MRTP) MANAGEMENT 1. Name of present directors. 2. Details of shareholding of promoters, directors and other major shareholders (Annex.III). 3. Particulars of present collaboration, if any (name and address, nature of collaboration periods, terms of collaboration,etc.) 4. Name of Chief Executive Officer and senior most executive. 5. Brief history of the company/concerns (indicating various developments, prospects in chronological order (Annex I). 6. Other ventures of the promoter group. FINANCIAL 1. Working results (enclose balance sheet for the last three years). In case the last audited balance sheet and profit loss is more than six months old, provisional balance sheet and profit & loss account as on date. Comments on the operation of the unit since the last audited balance sheet should be furnished (Annex.IV). 2. Debt. Equity ratio& current ratio. 3. Details of term loan, working capital, deferred credit, lease, etc. availed from institution/bank (Annex.II). Disbursed Outstanding Sanctioned Amt. Date Amt. Date. Note : Please enclose no overdues certificate from financial institution/bank. Institution 4. Name of bankers of company and associate concerns from where the promoter group has obtained term loan/CC in past three years.



A note on the requirement and utilisation of proposed loan alongwith benefits expected.

6. Projected profitability, cash flow and balance sheet for the next five years. 7. Capacity utilisation (product-wise) during the last three years. Particulars Licensed /regd. Installed Capacity Utilised capacity Paid up Capital Reserve & Surplus Net Worth Gross Block Net Block Sales Gross Profit Interest Depreciation Operating profit Net profit Dividend (Rate %) Cash Generation % of recoverable to sales % of finished goods to sales %of net profit to paid up capital % of operating profit to sales I II III

GENERAL Security proposed, with computation of value of security as per guidelines given in the scheme. Wherever the loan is proposed to be secured by collateral security, please furnish valuation of property from approved valuer.

DECLARATION We hereby declare that the information given here in before and the statements and other papers enclosed are to the best of or knowledge and belief true and correct in all respect. We further, declare that we are not in arrears to the term lenders and are up to date in payment of fues to the Government and local bodies as also other statutory


dues. We also declare that we have not availed of any benefit under one time settlement and proposed loan shall not be used to prepay the existing loan of the corporation carring higher interest rate. In any eventuality of use of this loan for prepayent of loan of corporation of higher interest rate, we agree to pay prepayment premium on the same. Signature of Director

Place: Date:



The CRA models adopted by the bank take into account all possible factors which go into appraising the risks associated with the loan. These have been categorized broadly into financial, business, industrial and management risks and are rated separately. To arrive at the overall risk rating the factors duly weighted are aggregated and calibrated to arrive at a single point indicator of risk associated with the credit decision.

Financial Parameters:
The assessment of financial risk involves appraisal of the financial strength of the borrower based on performance and financial indicators. The overall financial risk is assessed in terms of security/financial standing).

Industry Parameters:
The following characteristic of an industry which pose varying degrees of risk are built into the banks CRA model. Competition Industry outlook Regulatory risk Contemporary issues like WTO etc.

Management Parameters:
The management of an enterprise / group is rated on the following parameters: Integrity(corporate governance) Track record Managerial competence/ Commitment Expertise


Structure & System Experience in the industry Credibility: ability to meet sales projections Credibility: ability to meet profit(PAT) projection Payment record Strategic initiatives Length of relationship with the bank The risk parameters as mentioned above are individually scored to arrive at an aggregate score of 100(Subject to qualitative factors-negative parameters). The overall score thus obtained (out of maximum of 100) is rated on a 8 point scale from SB1/SBTL1 to SB8/SBTL8. CRA model also stipulates a minimum score under financial, business, industry and management risk parameters for a proposal to be considered acceptable in a given from. The details of such minimum scores are as under:

Minimum scores: Risk segments Working capital for existing units

20/47 11/20 4/8 15/25 50/100

WC & TL for new a/cs/new companies

11/25 10/25 5/10 24/40 50/100

Financial Business Industry Management TOTAL

An applicant unit will required to score minimum 2 marks each (out of 3) in above three parameters of Management Risk to qualify for Banks assistance. In case of existing accounts if the company scores less than this stipulated minimum marks (02), the Bank would explore all possibilities to exercise exit option.



In evaluating a proposal, the bank studies following details regarding the firm

Company Profile Credit limits-Existing and Proposed Performance and Financial Indicator(Actual & Projected) Brief background of company, Group Promoters and Management Performance and Financials Whether overall financial condition is considered satisfactory including trends in sales profitability, tangible net worth, TOL/TNW and current ratio) Industrial scenario Fund Flow Analysis and Comments Working Capital Assessment Other details such as rating by other banks. Market price of securities (if listed, comments on associate concern and other details as many be required by the bank.


A proposal of Vishal Trading Co. has been attached to give a comprehensive idea of all the above mentioned aspects.






Sanction for : 1. FBWC limit of Rs. 100.00 lac Approval for : 1. Credit Risk Assessment Rating of SB-3 TR based on audited financials as on 31.03.2007. Credit Limits (Existing and proposed) : EXISTING SBI % CONS FUND BASED Cash Credit Total FBWC Term Loans TOTAL FB LCs BGs Total NFB Total(FB+NFB) (Rs. in lac) PROPOSED SBI % CONS 100.00 100 100.00 100.00 100 100.00 100 CHANGE SBI CONS +100.00 +100.00 +100.00 +100.00 -

The Proposal falls within the powers of ZCC as: (i) FB indebtedness is Rs.100.00 lac and the borrower is a proprietorship concern. 1. Company profile: 1.1 Address of the Registered Office: Rajendra Road, Manavadar, Junagadh, Gujarat 59



: Proprietorship.

1.3 ACTIVITY COTTON TRADING Date of incorporation Banking with us since Date of last sanction

Trading Cotton


GROUP/ Promoters CEO


1982 New Connection

GROUP EXPOSURE (Rs. in Lac) 100.00 FB 0.00 NFB TOTAL 100.00


Corporate/ Branch office at

: 110, Arjun Avenue, Opp. Samarteshwar Mahadev, Law Garden Roads, Ahmedabad. :


CRA (WC/TL)/Pricing

CRA Pricing

Existing N.A. N.A.

Working Capital Term Loan Proposed Existing Proposed SB-3 TR N.A N.A. SB-3 TR i.e. 2.00% above N.A. N.A. SBAR, current effective 14.75%. Nil

Other ratings, if available :


Additional information on term loan

: N.A.

Nature of TL A/c

Tenor inclusive of moratorium period -

Residual tenor as on date -

Average Gross DSCR -

Minimum Gross DSCR -

Security Margin Minimum in the year -



IRAC Status

(i) Advances (ii) Investments

- New Connection. - N.A.

2.1 Financial Arrangement: Sloe banking proposed. However, unit maintains current accounts with six different banks. 2.2 If consortium/MBA Name of the Bank : N.A. Share(if consortium)/ Rate of Interest Multiple Banking ---------------------------------------------


SBI & Associates (i) (ii) (b) Other Banks (having major share) --------



Indebtedness / Exposure Existing 0.00 0.00 0.00 0.00 0.00 0.00 (Rs. in lac) Proposed 100.00 0.00 100.00 0.00 0.00 100.00

Indebtedness Fund Based Non fund based TOTAL(Indebtedness) Investment Leasing TOTAL(Exposure) 2.4

Position regarding prudential exposure limits of RBI (If applicable) : Within limits.


Performance & Financial Indicators Audited Audited 2006-07 2230.95 0.06 0.68 15.23 16.77

(Rs. in Lac) Estimates 2007-08 2404.74 13.99 0.70 16.74 18.14 Projected 2008-09 2597.12 15.56 0.71 18.31 19.61

Particulars Net Sales Exports Operating Profit PBT/Sales (%) PAT

2005-06 3447.54 4.65 0.20 7.02

Cash Accruals 8.47


PBDIT 15.51 PUC 27.15 TNW 27.15 Adjusted TNW 22.66 TOL/TNW 14.14 TOL/ adjusted TNW 16.95 Current Ratio 1.13 1.36 1.55 1.63 6.38 4.10 3.38 6.38 4.10 3.38 36.21 46.45 57.26 36.21 46.45 57.26 36.21 46.45 57.26 25.35 26.89 28.61


Synopsis of balance Sheet

( Rs. in lac.) 31.03.2006 27.15 5.41 46.60 79.16 27.96 3.27 24.69 2.29 7.40 8.57 363.62 2.91 1.66 331.98 44.78 79.16 31.03.2007 36.21 56.14 92.35 31.26 4.80 26.46 1.32 1.57 226.96 6.25 4.55 174.76 63.00 92.35

Source of funds Share Capital Reserve & Surplus Secured loans : Short term Long Term Unsecured Loans Deferred Tax Liability Other Liabilities Total Application of funds Fixed Assets ( Gross Block) Less Depreciation Net Block Capital Work in progress Investments Other Non-current Asset Inventories Sundry debtors Cash & bank Balances Loan & advances to subsidiaries and group companies Loans and advances to others Less : current liabilities) (Less : Provisions) Net Current Assets Misc. Expenditure (To the extent not written off or adjusted) Total



Movement in TNW (Past three years) 2005 2006 18.93 5.96 3.37 4.85 23.41 23.41 7.02 3.51 6.79 27.15 2007 27.15 15.23 0.18 6.35 36.21

Opening TNW Add PAT Add Increase in equity/premium Add/Subtract change in intangible assets Adjust prior year expenses Deduct Dividend Payment Closing TNW


Brief background (Company/Group/Promoters/Management) Vishal Trading Co. is an established name among cotton merchants and Cotton Ginning & Pressing unit in and around Dhrangadhra and in the Saurashtra region of Gujarat. The unit was established in the year 1982 by Shri Dineshkumar Karsandas Gandecha. The company has more than 25 years of experience in trading of cotton and specialises in Shankar- 6 variety. The Shankar-6 variety is grown from highly popular BT-seeds. It is famous for its superior lint strength and better spinning quality and thus commands a good demand and better price. Shri Gandecha has also been associated with ginning activity as a partner in Jalaram Ginning at Manavadar in the past. Shri Gandechas two sons Shri Vishal D. Gandecha and Shri Gautam D. Gandecha, have started a ginning and pressing unit styled Jalaram Ginning Factory at Dhrangadhra. The factory has 20 jumbo ginning machines (54) and a fully automatic pressing unit. The above facility at Dhrangadhra is likely to enhance the quantity and quality of procurement for Vishal Trading co. Shri D. K. Gandecha personally looks after day to day activities of the unit and is assist by his son Shri VIshal D. Gandecha, who is the propeitor of Shital Enterprise (engaged in Cotton Export). The proposal of SHital Enterprise for working capital finance aggregating Rs.3.50 crore is also being proposed by us.

The over all management of the unit is considered satisfactory. 5.1 Performance and financials: lac The sales of the unit has decreased substantially from Rs.34.47 core to Rs.22.30 crore as one of the major buyers Gujarat Heavy Chemicals Sales 3447.54 Limited (GHCL), having spinning facility at Maduari and Vapi have drastically reduced their demand (Rs.1.63 core in the year 2006-2007 in 63

Net Sales Year 2006 (A)

2007 (A) 2008 (E) 2009 (P)

2230.95 2404.74 2597.12

place of Rs.13.87 crore during 2005-06). The unit has advised that GHCL are at present procuring their raw material mainly from Maharastra. Further, with more and more ginning mills coming up in new areas, farmers are directly supplying the cotton to their nearby ginning units. Keeping the above facts in view, sales has been estimated/ projected only with a modest increase of 8% at Rs.24.04 core and Rs.25.97 crore for the year ending 31.03.2008 and 31.03.2009. The same is considered achievable in the current scenario.

Profit / Profitability Yea PAT PAT r /NS 2006 7.02 0.20 (A) 2007 15.2 0.68 (A) 3 2008 16.7 0.70 (E) 4 2009 18.3 0.71 (P) 1

The PAT and profitability has shown an increasing trend during the past years. The same trend is estimated/ Projected to continue in the coming year. PAT for the year ending 31.03.2008 is estimated at Rs.16.74 lac, which is higher than Rs.15.23 lac achieved as on 31.03.2007 based on higher estimated sales for the year 2008. The PAT projection for the year 2009 is pegged at Rs.18.31 lac based on higher sales volume for the year. The same may be considered acceptable.

TNW & TOL / TNW TN W TO L/T NW 14.1 4 06.3 8 04.1 0 03.3 8

Year 2006(A)

27.1 5 36.2 2007(A) 1 46.4 2008(P) 5 57.2 2009(P) 6 Current Ratio & Cash Accruals Year C.R. 2006(A) 1.13 2007(A) 1.36 2008(P) 1.55 2009(P) 1.63

There has been continuous improvement of TNW with plough back of profit. The TOL/TNW has improved from 14.14 as on 31.03.2006 to 6.38 as on 31.03.2007. which is above the benchmark level of 5.00. However, considering the unsecured loans from relatives aggregating to Rs.36.11 lac as on 31.03.2007, as quasi equity, the ratio of TOL/Quasi TNW would be 3.19. The position may, therefore, be considered acceptable.

The current ratio of the unit has been above the benchmark level. The estimates and projection have also been made to be above the benchmark levels. The same may be considered acceptable.


The overall performance of the unit is considered satisfactory.


Comments on performance of major segments identified in the balance sheet : Not applicable


Comments on consolidated financial statements: Not applicable.

6. 1

Industrial Scenario Cotton is one of the oldest and principal commercial crops in India. Cotton plays an important role in the national economy providing large employment in the farm, marketing and processing sectors. Cotton textiles along with other textiles contribute almost one third of foreign exchange and is contributing to 3% of the GDP. India has always been a significant player in the textiles markets. It is the third largest producer of cotton in the world. 70% of cotton produced in the country is marketed by private trade. The remaining 30% is marketed by the Cotton Corporation of India Ltd.(CCI), a Public Sector Undertaking under the Ministry of Textiles, Government of India and other State Co-operative Cotton Growers Federations. Gujarat is a pioneer state in the manufacturing of cotton as main crop and has sizable share in cotton ginning and manufacturing of textiles in India. (Source: Bharat

As the cotton production is poised for healthy growth in the coming years, the trading activity is also considered to show a positive trend.

6.1.1 6.1.2 7.1

Inter Company Comparison: Not Available. Industry average/benchmark: Not available. Fund Flow Analysis: (Rs. in Lac)

Year ending Long Term Sources Long Term Uses Net Surplus/ Deficit

31.03.2006 08.47 12.66 (4.18)

31.03.07 27.71 09.47 18.23

31.03.08 18.14 06.51 11.63

31.03.09 19.61 07.50 12.11


Long term sources during 2005-06 comprise cash accruals. Uses include decrease in term liability (Rs.0.80 lac), increase in fixed asset (Rs.0.72 lac), increase in non-current asset (Rs. 7.86 lac, includes investment of Rs.4.49 lac in White Gold Cotton Testing Laboratory where, Shri Gandecha is a partner) and withdrawal of Rs.3.28 lac. Therefore, there is a deficit of Rs.4.15 lac as on 31.03.2006. However, despite the deficit, the current ratio is 1.13, well above the benchmark of 1.00. During the year 2006-07 the long term sources comprise cash accruals and increase in term liability. The long term uses comprise increase in fixed asset and withdrawal of Rs.6.17 lac. There is a surplus of Rs.18.23 lac as on 31.03.2007. During 2007-08 and 2008-09 the projected long term sources are cash accruals while long term use is withdrawal. Overall the position is considered satisfactory and acceptable. 7.2 8. 9. Activity-wise Cash flow analysis : N. A. (Unit engaged in Trading Only) Term Loan/DPG : Not applicable. Working Capital Assessment : The proposed working capital facilities are considered acceptable in terms of the detailed appraisal as per Annexure-II. Other details : As mentioned below: Pricing by other banks/justification for the proposed pricing : Pricing proposed is based on the CRA rating of SB-3 TR. 10.2 Capital Market perception(price) : High / Low (52 weeks) Not applicable. (Unit is a proprietorship concern) Value of account: Not applicable Details of Retail Banking/any other business generated through the account: The branch expects miscellaneous business from the connection. Comments on associate concerns/related parties: Not applicable Use of provisional/un-audited data : Not applicable.

10 10.1

10.3 10.4

10.5 10.6


10.7 RMD exposure norms : No RMD exposure norms set for cotton trading/ ginning activity 10.8 Loan Policy Guidelines :

The following quantitative parameters as set out in the Loan Policy Document have been examined: Parameters Indicative Min/Max level Min. 1.10 Max.5.00 Min. 20% Min. 1.75 Max. 2:1 Companys level as on 31.03.2007 1. Liquidity 2. TOL/TNW 3. Promoters contribution to the project(TL) 4. Average gross DSCR(TL) 5. Debt/equity 1.13 6.38* N.A. N.A. N.A.

* The ratio has improved from 14.14 to 6.38. However, it is still above the bench mark of 5.00. Considering the unsecured loans from relatives/friends aggregating to Rs.36.11 lac as on 31.03.2007 as quasi equity the ratio of TOL/Quasi TNW would be 3.19. The position may, therefore, be considered acceptable. 10.9 Deviations from Loan Policy :

Deviation (i) Maturity of TLs (ii) Exposure norms (individual, noncorporate and corporate) (iii) Minimum CRA Scores (iv) Hurdle rates (Other than industry specific hurdle rates) (v) Industry specific hurdle rates (vi) Take over norms (vii) Any other deviations

Major/Minor N.A. No deviation Minor No deviation Since withdrawn No deviation (detailed below) None

Mitigating factors Nil Nil Nil Nil Nil Nil Nil


10.10 Whether a) the name of the firm / directors' appear in RBI's list of Non-suit filed defaulters / CIBILs list of wilful defaulters : The name of the firm / its partners do not figure in the RBIs defaulter list (non-suit filed accounts) of Rs. 25 lakhs and above for the half year ended 31.03.2006 and RBIs defaulter list ( non-suit filed accounts) of Rs. 25 lakhs and above for the quarter ended 31.03.2006. The name of the firm / its partners do not figure in the CIBIL list of willful default ( suit filed accounts) of Rs. 25 lakhs and above & CIBIL list of suit filed accounts of Rs. 1 lac and above. (b) The companys name figure in ECGCs caution list, if so details and comments. The name of the company does not figure in Specific Approval List as on as on 30.11.2006. 10.11 Status of Auditors remarks which have an impact on credit risk on the unit : Not Applicable 10.12 Corporate Governance practices followed: Not applicable as the unit is a proprietorship concern. 10.13 Conduct of account: New Connection.

10.14 Details of other borrowing arrangements and defaults, if any (excluding information given under credit limits on page 1) : The unit has been availed Cash Credit limit of Rs.29.00 lac from Laxmi Vilas Bank against hypothecation of Current Assets. However, the facility has since been liquidated. Branch to obtain no due certificate before disbursement of the proposed facility. 11 Status of compliance with terms and conditions of sanction/observations of COCC/ECCB: Not applicable (new connection). Critical risk factors and their mitigation: Risk factors The unit is operating in high volume, low margins. Industry can drop to very low levels in times of low turnover. It is basically dependent on the production of cotton in the state/country. Mitigation VIshal Trading Co. is ideally located in the oldest cotton growing belt of Gujarat. The unit has long standing contacts with dealers, agents, cotton merchants which helps it in purchases and sales.




Comment on the level of Statutory Dues and contingent liabilities and their impact on the financial position of the borrowing concern: i. Statutory Tax dues : ii. Guarantees : iii. Letter of Credit : There are no overdues. Nil. Nil.


Justification and recommendations for facilities with enhancement: The proprietor is enjoying a good reputation in the market having over two decades of experience. The unit is rated SB-3 TR indicating low risk. The total exposure from family is proposed at Rs. 4.50 crore indicating valuable connection. Collateral security coverage at 66.40%, in terms of realizable value of security offered, is considered adequate. Long term industry outlook is considered stable. Recommendations: In view of the foregoing, the proposal is considered as fair banking risk and the proposed credit facilities are recommended for sanction to Vishal Trading Co., on the usual terms and conditions, standard and specific covenants (as per Annexure III). We request the Zonal Office Credit Committee to accord:

Sanction for: 1. FBWC limit of Rs. 100.00 lac Approval for : 1. Credit Risk Assessment Rating of SB-3 TR based on audited financials as on 31.03.2007.

15 Submitted for Sanction/approval.

Appraised by

Assessed by

Credit Analyst State Bank of India Centralised Processing Cell Zonal Office, Gandhinagar. Date :05.11.2007

Team Leader



The following are the current issues relating to this sector on-availability of bank credit to the SSI sector are a major issue. This relates to: (a) Inadequate credit sanction, and Inadequate sanction takes place due to (i) lack of understanding of business and requirements of genuine needs (ii) lack of transparency on the part of borrowers, (iii) lack of information made available by borrowers to banks for credit appraisal (iv) lack of appreciation on the part of the borrower regarding bank formalities (v) diversion of funds by borrowers which prevents bankers from being liberal in credit sanction (vi) lack of coordination between banks and financial institutions in carrying out a joint appraisal (vii) lack of skills in appraising hi-tech projects (viii) Inadequate support from controlling office and legal / technical cells in banks. (b) Delays in credit sanction. Similarly, delays in credit sanction include (i) asking information from borrowers in piecemeal, (ii) appraisal being done in parts, (iii) ineffective arrangements of loan consortium, (iv) inadequate organizational arrangements to carry out speedy appraisal, and Lack of cooperation on the part of the borrower to comply with banker's requirements. Along with bank credit, lack of coordination between SFCs and banks, which has resulted in the lack of flow of working capital to the industries leading to industrial sickness and lack of finance for marketing, is another major issue.



STRENGTHS Second largest producer in the world. Long and deep rooted cotton tradition and highest net forex earner for the country Integrated industry across the entire chain from fiber to garments/home textiles i.e. concept to consumer Abundant skilled and technical labor force, which are especially suited for apparels / Made Ups manufacturing. Large and growing domestic market to impart stability to export thrust Strong Cotton base Strong entrepreneurial class Flexibility in production of small order lots.

WEAKNESSES Small size and technological outdated plants result in lack of economics of scale, low productivity and weak quality control Poor work practices resulting in higher labor cost component in many staple garment, in spite of low labor costs With the exception of spinning, other sectors are fragmented


Poor quality in weaving and processing mainly due to domination of unorganized sector Rigid government labor laws and policies lack reforms High transaction & power cost

OPPORTUNITIES Cotton industry identified as a thrust area by government for development and promotion of exports. Phasing out of cotton manufacturing by western countries due to high cost of production. Production facilities are likely to move to developing economies and thus and are expected to be major beneficiaries. Consolidation in the global retail industry facilitating global sourcing. Shift in domestic market towards readymade garments. Per capita domestic textile consumption offers room for growth, with increasing disposable incomes.

THREATS Survival of the fittest in terms of quality, size, delivery and cost. Competition from other textile exporting countries would need to be faced in the domestic market also. Threat of dumping with lower tariff barriers. However, so far, lowered tariffs have not increased apparel imports into the country.


Developed countries adopting non-tariff barriers in the form of antidumping duties and Regional trade agreements.


Primary Objective The study of the cotton ginning industries at surendranagar district was conducted with the primary objective to know their banking needs and their views regarding to the services provided by the SBI to the cotton industries. Secondary Objective Along with the primary objective the secondary objective for the research is: To find out the awareness of various product offered by SBI. To know their opinion about SBI service. To analyze the reasons for not dealing with SBI. To know who are their current bankers. Action points for leveraging business in future for SBI

Data Sources:
It refers to the ways of collecting the information or data. There are mainly two types of data sources available like:Primary Data Secondary Data Primary data: Primary data means the data generated for the first time for a particular purpose. The data about cotton industry has been collected through survey. 18 industries have been personally visited and the questionnaires are filled up.

Secondary data: Secondary data refers to the data which has already been generated and is available for use.


Research Approach:
Research approach refers to the way of conducting the study. In this study, analytical approach has been used.

Research instrument:
Research instrument refers to the tools available with the surveyor for the survey. The mainly used research instruments are: Questionnaires Interviews Observation etc.

The instrument used for conducting the survey is questionnaire. The questionnaire is made up of open-ended questions.

Sampling unit:
The cotton industries that I have visited are of mainly three industrial areas, namely; Dhrangadhra, Limbdi, Muli, are used as a sampling unit.

Sampling size:
In total, 18 industries were visited and surveyed. Out of which 7 units were of Muli, 4 were of Limbdi and 7 units were of Dhrangadhra.

Contact Methods:
It refers to the method used for contacting the sampling units. There are various contact methods available namely: Personal contact, Telephonic contact, Contact through mail, E-mail, etc.

Here, personal contact method is used to conduct a study. Each and every Cotton industry has been visited personally and the data has been gathered.


The present analysis is based on interactions with the different industries:

(1) The cotton industries according to their constitution.

80% 60% 40% 20% 0%

Series1 Partnership 68% Proprietorship 32%

The above graph shows that most of the cotton industries are in a form of partnership firm. Mostly the Ginning and spinning mills are made of partnership firm and the trading companies are made of proprietorship. Mostly the industries with partnership constitution need less finance while the establishment of the unit. They mostly need finance for purchasing raw material, repairs of machines, meeting up bulk orders etc. And the industry with proprietorship needs mainly finance for establishment of unit, purchasing equipment, to manage their day to day activities.


(2) The cotton industries according to Export.

50 40 30 20 10 0

Direct 22

Indirect 50

No 28


The survey indicates that most of the cotton industries are not directly involved in the export. But they sell their product to the traders and these traders do the activity of export. The above graph clearly shows that only 22% of industries are directly involved in the export. But about half of the industries are involved in indirect export. Those industries which are direct involved in the export mostly use Bill discounting and Letter of Credit. But most of the industries are having these facilities from Axis bank. Their response was that for these facilities Axis banks service is better. So SBI should try to upgrade their service regarding to these facilities.


(3) Classification of industries according to the financial assistance they used.

80% 60% 40% 20% 0% Series1 Cash Credit 77% Term Loans 23%

Mostly the cotton industries need finance to manage their day to day activity such as purchasing raw materials, for Repairs and maintenance of machinery, Transportation, for meeting bulk orders and to meet genuine contingency needs arising out of bunching of orders. So most of the industries are using cash credit facilities to meet their above needs and that we can clearly see from the above graph that 77% industries are using cash credit facilities and only 23% are using term loans.


(4) The mainly requirement of the finance for the cotton industry are:




Loan Against recievables Working Capital



Purchase & maintanance of equipment

As most of the industries are made up of the partnership firm financial requirements at the time of establishment were less but after starting up a firm at the time of purchasing raw materials, repairs of machines, meeting up bulk orders they required financial assistance. From the above graph we can see that only 5% of the industries have taken finance for the establishment and only 10% of have taken finance for purchase and maintenance of equipments. Most of the industries have taken finance for purchasing raw material that is 52% and 33% to manage day to day requirement


(5) Classification of industries according to their satisfaction level with SBI


Partialy satisfied
28% 55%

Highly satisfied

The survey analysis indicates that most of the industries are satisfied with the services provided by the SBI that is 55%. But the highly satisfied customers are very less which are only 17% and 28% are partially satisfied with the service. So SBI should initiate a study to find out their problems regarding to services provided to them and try to make them the highly satisfied and loyal customers to the bank. Because TODAYS ERA IS OF THE ERA OF CUSTOMERS SATISFACTION AND NO ORGANIZATION CAN AFFORD TO IGNORE THEM


(6) The cotton industries according to their bankers:

Bank of Baroda
20% 26%

SBI Mercantile Bank

16% 38%

People's co-op. Bank

Among the industries I have visited maximum percentage of industries were involved with the SBI that is 38%. However Bank of Baroda is having the largest amount of loan borrower that is 15 crore and 10 crore respectively. So SBI should try to attract these type of large amount borrowers to their part by giving them some extra facility regarding to interest rate or margin.. It was also found that some industries are dealing with a less popular bank just because of absence of any other banks in their neighborhood (i.e. Dholka village). So SBI should think on the expansion of their branches in rural areas also.


(7) The cotton industries which are not dealing with SBI their preference about switch over to SBI

22% Yes

No 78%

From the above graph we can see that 78% of the industries are ready to switch over to SBI. Only thing required is better services and some competitive advantage to the cotton industry and a lot more business can be harnessed.


(8) Rank Method

I have asked the people to rank the following according to their preference while they are thinking of taking a finance from any bank:

The table for calculating the top 3 preferences while selecting finance from any bank is as follow. (The ranks are given according to the preference given by the respondents.)

Preferences Interest Rate Mortgage Margin Process Charge Service

1 14 0 0 0

2 4 1 2 0

3 0 5 8 2

4 0 6 7 5

5 0 6 1 11


14 12 10 8 6 4 2 0 1 2 3 4 5 Interest Rate Mortgage Margin Process Charge Service


The industry people which I visited were to asked to rate the above given attributes like interest rate, Mortgage, service, process charges etc on a scale of 1-5 while they are looking forward for a finance from the bank. From the above chart we can see that most of them have given preference to the Interest Rate (ranked first). Then they have given preference to the services. Those who have given preference to the service as a first rank believe that even if rate of interest is slight more and services are much better than other banks, they would still go for that bank believing in the fact that in this cut throat competition business depends much upon catching the opportunities at the right time. So they need best services at the right time ignoring the cost factor. They also believe that for attribute like services provided by the bank, private banks scale much better than nationalized banks.


SBI should expand their branch to small villages also in order to capture the huge market share. Because not only the cotton industry. But also many other types of industries are established around there.

Others bank like Bank of Baroda and Bank of India are also providing finance to the industries which are having loss in one of the past three years, if the unit is now in position to create profit and other all requirements are fulfilling. So SBI should also alter some of its loan evaluation criteria regarding to this matter to attract more industries.

SBI need to market its products and services aggressively because most of the people do not know even about RTGS and NEFT services.

In this cut throat competition SBI need to start factoring services as some other banks are providing this service to its customer.

The skill of the bank staff should be up grated continuously through training. In this regard the bank may have to re look at the existing training modules and should make necessary changes wherever it required.

Bank should set up research and market intelligence units within the organization to remain innovative and to ensure customer satisfaction and to keep abreast of market developments.


Banks should constantly interact with the industry bodies, trade associations, farming community and initiate studies, pilot projects etc for evolving better financial models.

Main problem with SBI is frequent transfers of the authorities and subordinate staff. That result in customer has to start from the scratch. So SBI should ensure their customers that they would not have to face problem because of the transfers. The new authorities should be given knowledge about the customers at that branch.

If it is possible documentation process should be minimized so that easy disbursement can be made.




A strong banking sector is important for flourishing economy. The failure of the banking sector may have an adverse impact on other sectors. Nonperforming assets are one of the major concerns for banks in India. NPAs reflect the performance of banks. A high level of NPAs suggests high probability of a large number of credit defaults that affect the profitability and net-worth of banks and also erodes the value of the asset. The NPA growth involves the necessity of provisions, which reduces the over all profits and shareholders value. The issue of Non Performing Assets has been discussed at length for financial system all over the world. The problem of NPAs is not only affecting the banks but also the whole economy. In fact high level of NPAs in Indian banks is nothing but a reflection of the state of health of the industry and trade.



Action for enforcement of security interest can be initiated only if the secured asset is classified as Non Performing Asset. Non Performing Asset means an asset or account of borrower, which has been classified by a bank or financial institution as sub-standard, doubtful or loss asset, in accordance with the directions or guidelines relating to asset classification issued by RBI. An amount due under any credit facility is treated as "past due" when it has not been paid within 30 days from the due date. Due to the improvement in the payment and settlement systems, recovery climate, up gradation of technology in the banking system, etc., it was decided to dispense with 'past due' concept, with effect from March 31, 2001. Accordingly, as from that date, a Non performing asset (NPA) shell be an advance where Interest and /or installment of principal remain overdue for a period of more than 180 days in respect of a Term Loan, The account remains 'out of order' for a period of more than 180 days, in respect of an overdraft/ cash Credit(OD/CC), The bill remains overdue for a period of more than 180 days in the case of bills purchased and discounted, Interest and/ or installment of principal remains overdue for two harvest seasons but for a period not exceeding two half years in the case of an advance granted for agricultural purpose, and Any amount to be received remains overdue for a period of more than 180 days in respect of other accounts. With a view to moving towards international best practices and to ensure greater transparency, it has been decided to adopt the '90 days overdue' norm for identification of NPAs, form the year ending March 31, 2004. Accordingly, with effect form March 31, 2004, a non-performing asset (NPA) shell be a loan or an advance where; Interest and /or installment of principal remain overdue for a period of more than 90 days in respect of a Term Loan,


The account remains 'out of order' for a period of more than 90 days, inrespect of an overdraft/ cash Credit(OD/CC), The bill remains overdue for a period of more than 90 days in the case of bills purchased and discounted, Interest and/ or installment of principal remains overdue for two harvest seasons but for a period not exceeding two half years in the case of an advance granted for agricultural purpose, and Any amount to be received remains overdue for a period of more than 90 days in respect of other accounts. 'Out of order' An account should be treated as 'out of order' if the outstanding balance remains continuously in excess of the sanctioned limit/ drawing power. In case where the outstanding balance in the principal operating account is less than the sanctioned limit/ drawing power, but there are no credits continuously for six months as on the date of balance sheet or credits are not enough to cover the interest debited during the same period, these account should be treated as 'out of order'. Overdue Any amount due to the bank under any credit facility is 'overdue' if it is not paid on the due date fixed by the bank


The RBI has issued guidelines to banks for classification of assets into four categories.

A) STANDARD: Any loan or advance part due 30 (thirty) days or more, but less than 90 (ninety) days shall be classified Special Mention.

B) SUB-STANDARD: i) Non-performing loans or advances past due 90(ninety) days or more but less than 180(one-hundred- eighty days) days shall, at a minimum, is classified sub standard. Without prejudice to the classification criteria used for the sub standard category set out above, the following non-performing loans and advances shall be categorized as substandard;

ii) Renegotiated non-performing overdraft facilities unless equivalent of all past due interest is paid by the borrower in cash at the time of renegotiation and the account shows at a minimum. A nil balance at least once; or A turnover rate of once the approved limit

iii) Renegotiated non-performing merchandise loans unless physical inventory of the merchandise taken by the bank at the time of renegotiation shows that the outstanding principal loan and interest thereof are fully covered and the safety margin determined, following the inventory is at least not lower than the margin stated in the loan contract entered into by the bank and the borrower at the time of initial extension of the loan.


C) DOUBTFUL ASSESTS: Non-performing loans or advances past due 180 days or more, but less than 360 days shall be classified, at a minimum, as doubtful.

D) LOSS: Non-performing loans or advances past due 360 days or more shall be classified as Loss.


Various steps have been taken by the government to recover and reduce NPAs. Some of them are.

1. One time settlement / compromise scheme 2. Lok Adalats 3. Debt Recovery Tribunals 4. Securitization and reconstruction of financial assets and enforcement of Security Interest Act 2002. 5. Corporate Reconstruction Companies 6. Credit information on defaulters and role of credit information bureaus



The RBI has summarized the finer factors contributing to higher level of NPAs in the Indian banking sector as:

a.) Diversion of funds, which is for expansion, diversification, modernization,

undertaking new projects and for helping associate concerns. This is also coupled with recessionary trends and failures to tap funds in capital and debt markets.

b.) Business failures (such as product, marketing etc.), which are due to
inefficient management system, strained labour relations, inappropriate technology/ technical problems, product obsolescence etc.

c.) Recession, which is due to input/ power shortage, price variation, accidents,
natural calamities etc. The externalization problems in other countries also lead to growth of NPAs in Indian banking sector.

d.) Time/ cost over run during project implementation stage.

e.) Governmental policies such as changes in excise duties, pollution control

orders etc.

f.) Wilful defaults, which are because of siphoning-off funds, fraud/

misappropriation, promoters/ directors disputes etc.

g.) Deficiency on the part of banks, viz, delays in release of limits and
payments/ subsidies by the Government of India.


NPA means booking of money in terms of bad asset, which occurred due to wrong choice of client. Because of the money getting blocked the prodigality of bank decreases not only by the amount of NPA but NPA lead to opportunity cost also as that much of profit invested in some return earning project/asset. So NPA doesnt affect current profit but also future stream of profit, which may lead to loss of some long-term beneficial opportunity.

Money is getting blocked, decreased profit lead to lack of enough cash at hand which lead to borrowing money for shot\rtes period of time which lead to additional cost to the company. Difficulty in operating the functions of bank is another cause of NPA due to lack of money.

Involvement of management:
Time and efforts of management is another indirect cost which bank has to bear due to NPA. Time and efforts of management in handling and managing NPA would have diverted to some fruitful activities, which would have given good returns. Now days banks have special employees to deal and handle NPAs, which is additional cost to the bank.

Credit loss:
Bank is facing problem of NPA then it adversely affect the value of bank in terms of market credit. It will lose its goodwill and brand image and credit which have negative impact to the people who are putting their money in the banks.



Reasons can be divided in to two broad categories: A] Internal Factor B] External Factor

Internal Factors:
Internal Factors are those, which are internal to the bank and are controllable by banks Poor lending decision: Non-Compliance to lending norms: Lack of post credit supervision: Failure to appreciate good payers: Excessive overdraft lending: Non Transparent accounting policy:

External Factors:
External factors are those, which are external to banks they are not controllable by banks. Socio political pressure Change in industry environment


Endangers macroeconomic disturbances Natural calamities Industrial sickness Diversion of funds and willful defaults Time/ cost overrun in project implementation Labor problems of borrowed firm Business failure Inefficient management Obsolete technology Product obsolete


Early symptoms by which one can recognize a performing asset turning in to Non-performing asset

Four categories of early symptoms:

Non-payment of the very first installment in case of term loan. Bouncing of cheque due to insufficient balance in the accounts. Irregularity in installment Irregularity of operations in the accounts. Unpaid over due bills. Declining Current Ratio Payment which does not cover the interest and principal amount of that installment While monitoring the accounts it is found that partial amount is diverted to sister concern or parent company.

Operational and Physical:

If information is received that the borrower has either initiated the process of winding up or are not doing the business. Overdue receivables Stock statement not submitted on time External non-controllable factor like natural calamities in the city where borrower conduct his business. Frequent changes in plan Non payment of wages

Attitudinal Changes:
Use for personal comfort, stocks and shares by borrower Avoidance of contact with bank Problem between partners


Changes in Government policies Death of borrower Tough Competition in the market



Early Recognition of the Problem:

Invariably, by the time banks start their efforts to get involved in a revival process, its too late to retrieve the situation- both in terms of rehabilitation of the project and recovery of banks dues. Identification of weakness in the very beginning that is : When the account starts showing first signs of weakness regardless of the fact that it may not have become NPA, is imperative. Assessment of the potential of revival may be done on the basis of a techno-economic viability study. Restructuring should be attempted where, after an objective assessment of the promoters intention, banks are convinced of a turnaround within a scheduled timeframe. In respect of totally unviable units as decided by the bank, it is better to facilitate winding up/ selling of the unit earlier, so as to recover whatever is possible through legal means before the security position becomes worse.

Identifying Borrowers with Genuine Intent:

Identifying borrowers with genuine intent from those who are non-serious with no commitment or stake in revival is a challenge confronting bankers. Here the role of frontline officials at the branch level is paramount as they are the ones who have intelligent inputs with regard to promoters sincerity, and capability to achieve turnaround. Based on this objective assessment, banks should decide as quickly as possible whether it would be worthwhile to commit additional finance. In this regard banks may consider having Special Investigation of all financial transaction or business transaction, books of account in order to ascertain real factors that contributed to sickness of the borrower. Banks may have penal of technical experts with proven expertise and track record of preparing technoeconomic study of the project of the borrowers. Borrowers having genuine problems due to temporary mismatch in fund flow or sudden requirement of additional fund may be entertained at branch level, and for this purpose a special limit to such type of cases should be decided. This will obviate


the need to route the additional funding through the controlling offices in deserving cases, and help avert many accounts slipping into NPA category.

Timeliness and Adequacy of response:

Longer the delay in response, greater the injury to the account and the asset. Time is a crucial element in any restructuring or rehabilitation activity. The response decided on the basis of techno-economic study and promoters commitment, has to be adequate in terms of extend of additional funding and relaxations etc. under the restructuring exercise. the package of assistance may be flexible and bank may look at the exit option.

Focus on Cash Flows:

While financing, at the time of restructuring the banks may not be guided by the conventional fund flow analysis only, which could yield a potentially misleading picture. Appraisal for fresh credit requirements may be done by analyzing funds flow in conjunction with the Cash Flow rather than only on the basis of Funds Flow.

Management Effectiveness:
The general perception among borrower is that it is lack of finance that leads to sickness and NPAs. But this may not be the case all the time. Management effectiveness in tackling adverse business conditions is a very important aspect that affects a borrowing units fortunes. A bank may commit additional finance to an align unit only after basic viability of the enterprise also in the context of quality of management is examined and confirmed. Where the default is due to deeper malady, viability study or investigative audit should be done it will be useful to have consultant appointed as early as possible to examine this aspect. A proper technoeconomic viability study must thus become the basis on which any future action can be considered.


Multiple Financing: A.
During the exercise for assessment of viability and restructuring, a Pragmatic and unified approach by all the lending banks/ FIs as also sharing of all relevant information on the borrower would go a long way toward overall success of rehabilitation exercise, given the probability of success/failure.


In some default cases, where the unit is still working, the bank should make sure that it captures the cash flows (there is a tendency on part of the borrowers to switch bankers once they default, for fear of getting their cash flows forfeited), and ensure that such cash flows are used for working capital purposes. Toward this end, there should be regular flow of information among consortium members. A bank, which is not part of the consortium, may not be allowed to offer credit facilities to such defaulting clients. Current account facilities may also be denied at nonconsortium banks to such clients and violation may attract penal action. The Credit Information Bureau of India Ltd.(CIBIL) may be very useful for meaningful information exchange on defaulting borrowers once the setup becomes fully operational.


In a forum of lenders, the priority of each lender will be different. While one set of lenders may be willing to wait for a longer time to recover its dues, another lender may have a much shorter timeframe in mind. So it is possible that the letter categories of lenders may be willing to exit, even a t a cost by a discounted settlement of the exposure. Therefore, any plan for restructuring/rehabilitation may take this aspect into account.


Corporate Debt Restructuring mechanism has been institutionalized in 2001 to provide a timely and transparent system for restructuring of the corporate debt of Rs. 20 crore and above with the banks and FIs on a voluntary basis and outside the legal framework. Under this system, banks may greatly benefit in terms of restructuring of large standard accounts (potential NPAs) and viable sub-standard accounts with consortium/multiple banking arrangements.



Credit Default

Inability to Pay

Willful default



Rehabilitation Compromise

Lok Adalat
Debt Recovery Tribunals Securitisation Act

Consortium Finance

Sole Banker

Asset Reconstructi on

Corporate Debt Restructuring

Fresh Issue of Term Loan

Conversion into W C TL

Fresh WC Limit

Rephasement of Repayment Period



The present analysis is based on interactions with the different defaulter at the area dhrangadhra and wadvan. The number of defaulter at this two branch was around 350. The sample size of the defaulter I had visited is 60:

(1) Classification of borrowers according to the type of loans they availed

80% 60% 40% 20% 0%

Agriculture Loan 62%

Personal Loan 15%

small business finance 23%


From the above graph we can see that most of defaulters are from the agriculture which stands for 62% of the total NPA of the dhrangadhra and wadhvan branch.. Small business finance stands for 23% and Personal loans stand for only15%.


(2)Most common reasons for non payment of Installment are as follow:

0.5 0.4 0.3 0.2 0.1 0

Sickness Series1 Series2 46% 34% 7% 13% Financial problem Death in Family Business Failure

The defaulter I have surveyed from them the common reason I have came to know for defaulting the payment of installment is Sickness that is 46%, then 34% given reason of financial problem, 13% as business failure and 7% as the death of the earning person of the family. Among them half of the defaulters response was positive. Some were ready to repay outstanding amount according to their capacity. While some of them were not in position to pay in short term.


(3)The percentage of the awareness about the installment amount to be paid per month and when the repayment commences

80% 60% 40% 20% 0% knowing 68% not knowing 32%

The defaulters which I have visited amongst them 68% where knowing about the installment amount but 32% of the defaulters where even not knowing about the exact installment they have to paid per month. Main reason for not knowing about the installment amount is that many of the defaulters are uneducated. Even some of them do not know even reading and writing. They pay installments as much as bank employee tells them to pay.


(4) Did you approach the lending branch when you default the first installment and discussed?

80% 60% 40% 20% 0% Series1 Yes 28% No 72%

From the defaulter I have surveyed 72% of them have not contacted the branch. Only 28% have contacted the branch and discussed with them for the reason of non payment. The response of the defaulters who had not approached the bank was that they were not in position to visit bank and pay installment. So they have ignored to approach the bank.


(5) Did the lending branch approach you for the recovery or notice?

80% 60% 40% 20% 0%

Yes 76%

No 24%

From the defaulter I have visited among them not all where contacted by the branch to find the reason behind their non payment. Only 76% where send the notice of non payment and to 24% the bank has not even send the notice.

Those who have been approached by the bank, among them some have contacted the manager and explained their problem to them and others have ignored the notice. Those who have not been approached by the bank, this shows the carelessness of the bank.


(6) Do you know that penalty interest will be charged for NonPayment on due dates?

80% 60% 40% 20% 0% Series1 Yes 34% No 66%

Most of the people I have approached where uneducated, so among them 66% where even not knowing that penalty interest is charged for due installments. Among them only 66% where knowing about the penalty charge.

Those who knew their response was that right now they are not in position to pay the amount. So they will pay afterwards with interest. Those who did not know their response was that they would try to pay as soon as possible to avoid the penalty interest charge. Some of them were also asking for settlement of their outstanding amount.


(7) Do you know bank can initiate recovery by sale of mortgaged property and can publish your name as defaulter?

60% 40% 20% 0% Series1

Yes 56%

NO 44%

Among the defaulter I have surveyed only 56% where knowing that their name can be publish as defaulter. 44% where not knowing about that. Those who knew about this question their response was that they know about that but really they are not in a position to repay the loan. Otherwise they are well aware about their responsibility and they also care for their position in the society. Those who did not know about that were asking us that really it could happen. And if it is like that then they will think about that.




The Name of the industries that I have visited:

Laxmi Cotton Industry M/S Maruti Ginning Factory Doshi Cotton Industry M/S Patel Kalyanbhai Chaturbhai M/S Milan Ginning & Pressing Shrinathji Cotton Industry Patel Cotton Industry M/S Jethalal Heerji Jay Ginning Industry D M Cotton M/s Uma cotton Industry Vishal trading Co. Sheetal Enterprise Jalaram ginning Hriom Trading Company Satnarayan Cotton Ginning Factory Amit Cotton Industry Nilkanth Ginning Industry


ANNEXURE The questionnaire used for conducting the study is as under: For cotton Industry:

1. Name of the unit: ______________________________________________

2. Address:______________________________________________________ ______________________________________________________

3. Contact no.: (M)_______________ (R)________________

4. E-mail: ___________________________________

5. Name of the promoters: _________________________________________ _________________________________________

6. Constitution: Proprietorship Partnership Public Limited co. Private Limited co. Other( please specify) _____________________

7. Line of activity: ________________________________________ _______________________________________

8. Do you export? Yes



9. Approximate Sales (p.a.): _____________________

10. Total Net worth: _______________________

11. Do you have account in SBI? _____________________

12. Banking with SBI since ________________

13. If not SBI why not :____________________________________________ __________________________________________

14. Present Bankers:_______________________________________________

15. Which type of Account do you operate: Current Saving Cash Credit Others

16. Have you taken any financial assistance: Yes


17. which type of financial assistance: Cash Credit Term Loan Export packing Credit Other (please specify) ____________________________________________

18. For what purpose: Establishment Expansion / Modernization


Working Capital needs Loan against receivables Substitution of high cost debt of other banks / FIs Up gradation of technology ISO and other such certifications If other Please specify ____________________________________

19. Which type of other services you are using: Current Account Term Loan Letter of credit Bill Discounting Current Account Over Draft At per Cheques and Drafts Outstation Clearing RTGS NEFT Internet Banking

20. Rank the following factors according to your preference while taking any finance: (1 having the highest priority and 5 the lowest) Interest rate _______ Mortgage ________ Margin ________

Processing Charges ______ Service ______


21. Are you satisfied With SBI Service: Highly satisfied Satisfied Not satisfied

22. Would you prefer to switch over to SBI: Yes


23. Your valuable suggestion for the improvement:_________________________ _______________________________________________________________

For NPA:

SL NO. 1. 2. 3. 4. 5. 6. 7. 8.



9. 10.


11. 12. 13. 14.