SUMMER INTERNSHIP REPORT Bank Of Baroda

Credit Flow To SME Sector Is it Adequate ?

Submitted by Swapnil N Madgulwar BIMHRD, Pune MBA (Finance) 2011 – 2013 HRD1108254

foster entrepreneurship. it is necessary to expeditiously consider issues relating to . The third census also revealed that about 44.21. followed by 40.0 per cent of the units were in the services sector.INTRODUCTION Small and Medium Enterprises (SMEs) are the growth engines of the Indian economy due to their ability to create jobs. this vital sector of the economy is facing huge challenges and competition from of the domestic as well as multi-national corporations.26 per cent) were SSIs and the remaining 61 lakh (57.05. Thus.73 crore. 70. There were 50.32 lakh constituted 2. total output of the registered units in the year 2001-02 was estimated to be Rs.0 per cent of the units in manufacturing and allied activities sector and 16.25 lakh numbering 44. the total SSI sector (registered and unregistered units) in India comprised 1. As per findings of the third census on SSI. About 10.74 per cent) were SSSBEs. About 55. In view of the above.190 units. out of which over 44 lakh (42. The SSI sector employed 2.606 exporting units accounting for exports to the tune of Rs.5 per cent of the total number of SSIs. services sector emerged as the dominant component in the total SSI Sector.98 per cent of the total number of SSIs. and to provide depth to the industrial base of the economy.49.0 per cent of total SSI units were located in rural India.0 per cent of units in repairing and maintenance sector.32.763 persons during the reference period. As per the third census report.26 lakh formed a dominating 99.956 lakh. Tiny units with original investment in plant & machinery up to Rs. With the opening up of the Indian economy due to liberalization and globalization.14.Thenumber of ancillary units among SSIs at1.11% of the SSI units were women enterprises.861.19.

Apart from reviewing all circulars and guidelines issued by Reserve Bank in the past regarding financing of SSI and MEs. Small & Medium Enterprises Development (MSMED) Act. The Group was also requested to examine the guidelines issued by Reserve Bank for nursing sick SSIs and suggest suitable relaxation and liberalization of these norms. an ‘Internal Group’ was constituted on February 2. restructuring of borrowal accounts of SSI and Medium Enterprises. Accordingly. Rural Planning & Credit Department. The technology has entered the scene almost as a natural corollary of liberalization. 2005 under the Chairmanship of Shri C. .flow of credit to the sector. SME is fast growing sector in the Indian Economy. Liberalized policies provide ample opportunities to Indian Market to compete with developed and developing countries. It has become necessary to bring policy shift and create free market environment from regulations & interventions in economic activity. as it addresses and streamlines entire framework along with key governance & operational issues being faced by the SMEs. The relationship between the banker and the customer has become most crucial and competitive. etc. Chief General Manager-in-Charge.Murthy. Central Office. Every Bank has given highest importance to financing SMEs in their strategical growth plan. Reserve Bank of India. 2006 is a turning point for the development of Indian industry. Growth resulting from globalization and liberalization is visible most profoundly in the SME segment.S. Mumbai. The clearance of the Micro. the Group was requested to suggest appropriate terms for restructuring of the borrowal accounts of SSI/Medium Enterprises.

lacs and upto Rs.200/.1000/.10/.lacs Manufacturing Industries
 1. Micro Enterprise is an enterprise where investment in plant and machinery (original cost excluding land and building and the items specified . SMALL & MEDIUM ENTERPRISES SECTOR The SME segment is broadly classified as under: Particulars Investment in Plant & Machineries of Manufacturing Enterprises Investment in Equipments of Service Sector Enterprises Micro Enterprises Upto Rs.lacs Upto Rs.500/.lacs Small Enterprises Above Rs.10/.lacs and upto Rs.lacs Medium Enterprises Above Rs.200/.lacs and upto Rs.lacs Above Rs.500/.lacs and up to Rs. 25/.500/.lacs Above Rs. 25/.

00 crores and 3. Medium Enterprise is an enterprise where the investment in equipment is more than Rs. 25. Small Enterprise is an enterprise where the investment in plant and machinery (original cost excluding land and building and the items specified by the erstwhile Ministry of Small Scale Industries) is more than Rs.00 crores but does not exceed Rs. . 2. 2.00 crores in case of manufacturing units and in excess of Rs 2. Fittings and other items not directly related to the service rendered or as may be notified under MSMED Act.by the erstwhile Ministry of Small Scale Industries) does not exceed Rs. Small Enterprise is an enterprise where the investment in equipment is more than Rs.10. 2006) are as detailed here under: 1.00 crores. 2.00 crores. 5.10. Medium Enterprise is an enterprise where the investment in plant and machinery (original cost excluding land and building and the specified items) is more than Rs.00 Lacs 2. 10. Service Sector Enterprises engaged in providing or rendering services whose investments in equipment (original cost excluding land & Building and Furniture. Financing to Micro & Small Enterprises will only be treated as part of Priority Sector advance.5.00 lacs but does not exceed Rs.00 crores in respect of Service Sector will be treated as Medium Enterprises (ME) and will not form the part of Priority Sector advance.00 crores & upto Rs 5. Micro Enterprise is an enterprise where the investment in equipment does not exceed Rs.00 crores but does not exceed Rs. 5. Units with investment in plant and machinery in excess of Rs 5. 25.00 lacs.00 crores and 3.00 crores & upto Rs 10.00 lacs but does not exceed Rs.

agro service units whose investment in Plant and Machineries does not exceed Rs.00 lacs irrespective of location of the unit in respect of manufacturing units and investment in equipments not exceeding Rs 10. servicing & repairing of specified type of machinery & equipment. Small Enterprises. preservation of goods.00 lacs in respect of Service Sector units. Medium Enterprises: 
 A Unit which is engaged in the manufacture. mining. 1.00 crores .00 crores in respect of Service Sector unit. processing or preservation of goods or is a servicing and repair workshop undertaking repairs of machinery used for production. having investment in Plant and Machineries (original cost) above Rs 25. Medium Enterprises.sector units. 5. mining or quarrying or custom service unit (except water service units). 2. Artisans & Village Industries. Micro Enterprises : 
 Micro Enterprises are those engaged in manufacturing.00 lacs but not exceeding Rs. COMPOSITION OF SME SECTOR The SME Sector includes Micro Enterprises. 3. Service Sector units & individual sub. quarrying.00 lacs but not exceeding Rs 2.00 crores in respect of manufacturing unit and above Ra 10. mining or quarrying or custom service unit (except water service units). processing or preservation of goods or is a servicing and repair workshop undertaking repairs of machinery used for production. with investment in Plant & Machinery in excess of Rs 5. processing. Small Enterprises: 
 A Small Enterprise industrial undertaking / unit is one which is engaged in the manufacture. 25.

Preservation of goods. Working Capital by way of Cash Credit. Manufacturing. spares and maintenance of stock of these items at minimum level and stock in process and finished goods. fixed assets. servicing Repairing of specified type of machinery & equipment.Small. purchase of land. II. Overdraft etc for: i. Term Loan / Demand loan / Deferred Payment Guarantee: For acquisition of capital goods (including second hand). Mining.00 crores and upto Rs 5. ii.00 crores in respect of Service Sector units will be treated as Medium Enterprises (MEs). quarrying. Finance against receivables including receipted challans / . plant & machinery.10.Medium Enterprises Agro service units Types of Facilities Provided To SME Sector: SME Units may be granted a variety of credit facilities for their different needs which will include the following: I.and upto Rs. vehicles. Purchase of raw material.00 crores in respect of manufacturing units and investment in equipments in excess of Rs 2. construction of buildings etc. Micro. stores. components. Processing.

Meeting marketing expenses where the units have to incur large-scale 
 expenditure towards marketing of their products. Advance Payment. Bank Guarantees for Performance. for procurement of raw materials etc. VI. Bills Purchase / Discounting under L/C or outside L/c. IV.invoices. FBP / UFBP. V. Export Credit facilities like Packing Credit. List of Items Reserved for micro and small enterprises: - . III. Tender Money Security Deposit. iii. Guarantees for getting orders. Letter of Credit on sight/usance basis for purchase of raw material/capital goods.

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