PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE,HYDERABAD(2008-10

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PROJECT REPORT ON “STUDY OF LENDING PROCESS AND CREDIT SERVICES OFFERED TO SMALL AND MEDIUM ENTERPRISES” WITH IOB

BY - PANKAJ KUMAR R.NO:36

PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE,HYDERABAD(2008-10)

INTRODUCTION
q SMEs a part of PRIORITY sector

q GOVT. support has been started from 1967 -68 but attention given from 1971.

q RBI issued guide line modified

q All advances has been increasing year by year and contributes 40% of gross mfg. to the Indian economy. q q Employment generates by SMEs in A.P is 7.5% (approx) of total employments.

q
• •
PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE,HYDERABAD(2008-10)

& enterprises engaged in providing of services.    Enterprise have been defined in term of investment in plant and machinery/equipment(excluding land and building) PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE.DIFINIATION OF SME  Under the MSME act 2006.HYDERABAD(2008-10) .Enterprises has been classified into two categories./production of goods pertaining to any industry. namely – enterprises engaged in the mfg.

More than RS 5 crore More than 2 crores and upto 5 crores and upto RS 10 crores PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE.HYDERABAD(2008-10) .Upto RS 25 lakhs SERVICES ENTERPRISES Upto RS10lakhs SMALL-More than RS 25L and More than 10 lakhs and upto RS upto RS 5 2 crores crores MEDIUM.DIFINIATION Investing in plant and machinery / equipment (excluding land and building) MANUFACTURING ENTERPRISES MICRO.

. RAI. H. Here is a gap for more analysis about the role of the banks in the post economic reforms. He also focused on how economic reforms have changed the bank role in extending credit to SMEs.REVIEW OF LITERATURE • BRAHMANANDAM. because of their credit worthiness..L. DAKSHINA MURTHY. They also focused on the credit facilities available to the SMEs in the wake of MSME act 2006. DAKSHINA MURTHY. “Financing Small Scale Sector”. MAY 1981-the above article was prepared on the role of banks in financing the SMEs in the year 1981. • PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE. has focused on role of banks in financing SMEs. BRAHMANANDAM. N. Later due to changes in the industrial policy of India. RAI. the commercial banks come forward made immense help to the growth of SMEs. The Role of Banks” INDIAN BANKING TODAY AND TOMORROW.HYDERABAD(2008-10) .L.. At those times the Indian banking was not all interested in financing the SMEs. N. G. This article was written before the economic reforms taken place.. H. G.

” Growth of small scale industries in India” JOURNAL OF INDUSTRY AND TRADE. dues to several problems.HYDERABAD(2008-10) . This article is focusing on the one problem that is financial problems faced by the SME segment.•JAILAL SAAW. The expected growth was not there because of lot of root causes to sickness and under development in the SME sector.The growth of small and medium industries in India was discussed in the above article. This article discussed about the slow growth rate of SMEs.  PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE. April -2005.

Inability to Market Finished Goods.Inadequate and Untimely Credit Flows. 5.Lack of knowledge about various credit schemes 11. 8.Shortage of power 9.Under-utilization of Capacities.Inefficient raw material procurement.Inability in Technology up gradation.Poor financial situations and low levels of R&D 6. 3. 7.Ineffective monitoring and feedback mechanism. 4.PROBLEMS •  SME is one of the growing sectors of the country even though they are facing so many problems which restrict the growth 1.Overdependence on purchases by government etc…………    PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE.HYDERABAD(2008-10) .Lack of awareness of credit facilities available 10. 2.

NO. OF SME UNITS PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE.HYDERABAD(2008-10) .

8% in the previous year PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE.PRODUCTION GROWTH The above dig.HYDERABAD(2008-10) . says that in FY 07 growth in production is by 18% against 15.

.CT.HYDERABAD(2008-10) .  • 1847 branches in INDIA and 6 branches overseas and 500 ATMs all over  • AN ISO certified  • Rating for IOB – AA+/ stable (Based on the services offered and market performance) • • Recent happening-Take over.Bhat  • Established in 1937 in Chennai by Shri M.A. Shree Suvarna Sahakari Bank LTD in May 2009.M. Chidambaram Chettyar.COMPANY PROFILE • Chairman and Managing Director : Shri S. • • PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE.

2. RBI guide line and SEBI guide line How working capital financed to SMEs i.e. 3. the main source of finance available for SMEs. The study about credit facilities offered to the SMEs by the banks. • PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE. To examine the growth of SME industries. To study about working capital. 6. To study about financial problems of SMEs regarding loan.OBJECTIVE OF THIS STUDY 1. 7. 5. 4. To analyze government’s support in obtaining credit facilities.HYDERABAD(2008-10) .

• if it falls under their powers and if it is beyond their powers forward the same to the Regional Offices for their consideration and regional office will take decision • Same with regional office – than transfer to central office • • If decision not taken by the central office then RBI rules is followed by the banks is mandatory  PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE.GUIDE LINES FOR BANKS REGARDING SME FINANCING • Financial decisions are taken at various levels from the branch to Management Committee of the Board.HYDERABAD(2008-10) .

small and medium enterprises in every quarter  • To some extent bank can grant collateral free loans to SMEs • PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE.  • Credit facilities must be offered to an average of at least 5 micro.HYDERABAD(2008-10) .RBI GUIDE LINE • Every Bank is required to set up its own policies for providing monetary assistance to the SME  • Bank should adopt a transparent rating system by which eligible SME should get the credit facilities.

  PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE.HYDERABAD(2008-10) . 5.RESEARCH METHODOLOGY RESEARCH DESIGN: 1. Study is being made for the purpose of analysis of credit services and relief to the borrowers by the bank (IOB) that predicts the future growth of the bank by providing better services by bank can earns more profit 3. 4. Secondary data is required for analysis of report. Study is all about the research & analysis of credit services offered to small and medium enterprises 2. Study will be carried out at Hyderabad. Period of the study is limited to 45 days.

METHOD OF DATA COLLECTION • PRIMARY DATA . • Project proposal.HYDERABAD(2008-10) .)  SECONDARY DATA • The secondary data collected from the already sanctioned loan files.Information has also been gathered through discussions with the employees of IOB and visiting the IOB branches (R. • Newspapers and Articles • Already researched data (Which turned into information based on analysis)   PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE. • Respective Banks Web Sites other sites • Reference from Management Books. ROAD branch. • Collection of secondary data from Management journals. HIMAYATNAGER branch and REGIONAL OFFICE. • Bank and Borrower’s Annual Report.P.

we had to rely on the secondary data sources. thus for the industry analysis and other qualitative research. 3. as most of the firms are worried about disclosing their financials. so in-depth research and analysis is not possible. due to this proper data’s are not covered.  • PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE. Due to time constraints we covered only limited no. of SMEs 2.HYDERABAD(2008-10) . Since banks have some confidential reports which cannot be handover to the outsiders. of SMEs which is unregistered. were not available. The study is limited to the period of 45 days. The financials of the firms.LIMITATIONS 1. 4. There is lots of no.

2006 is a legal framework for more capital investment in the SME sector. Both the existing and the new enterprises are eligible to be covered under the scheme. PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE.   Under this Act -The Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGMSE) was launched by the Government of India to make available collateral-free credit to the micro and small enterprise sector.GOVT. The Micro.HYDERABAD(2008-10) . Small and Medium Enterprises Act. SUPPORT • The way forward would be to create an environment of risk -taking by the government for providing a start-up capital to SMEs and to facilitate technology transfers and training in skill development.

 After it is raised to RS2500 crores. 2000 and is operational with effect from 1st January 2000.• The scheme was formally launched on August 30. which is provided by SIDBI and other specialized Govt.54 crore till 2007. The corpus (principle sum) of CGTMSE is being contributed by the Government and SIDBI in the ratio of 4:1 respectively and has contributed Rs.1346. PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE.HYDERABAD(2008-10) . banks.

Recognizing the need for a focused financial assistance to such industries. together with the State Governments.GOVT. the Government of India.SUPPORT WITH STATE GOVT.HYDERABAD(2008-10) . • • Most of these programmes of the Central Government are implemented through two principal organizations are as followes:  • PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE. has formulated several policy packages including schemes and funds for their growth and development. •Small scale industries need credit support on a continuous basis for running the enterprise as well as for its diversification and modernization.

credit support. NATIONAL SMALL INDUSTRIES CORPORATION LTD (NSIC). Financing for procurement of raw material . has been established with the objective of promoting.   1.1. (Equipment financing . aiding and fostering the growth of small scale industries in the country. SIDO promotes axillaries units to public sectors enterprise . monitoring policy and programme. It has been assisting small enterprises through a set of specially tailored schemes which facilitate marketing support. Financing for marketing activities .   • PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE. Financing through syndication with banks ) .   2.acts like model agencies for coordinating. technology support etc.HYDERABAD(2008-10) . SMALL INDUSTRIES DEVELOPMENT ORGANIZATION (SIDO) is an apex body for promotion and development of small scale industries in the country.

SEVEN POINT ACTION PLAN ANNOUNCED BY GOVT. OF INDIA

1. Time bound action for setting up specialized SSI branches in 85 identified districts of high small industry density. 2. Adequate delegation of powers at the branch and regional level. 3. Banks to conduct sample surveys of their performing SSI accounts to find out whether they are getting adequate credit. 4. Steps to be taken to see that as far as possible composite loans (covering both term loans and working capital) are sanctioned to SSI entrepreneurs. 5. Regular meetings by banks at Zonal and Regional levels with SSI entrepreneurs.

6. Simplification of procedural formalities by banks for SSI entrepreneurs.


PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE,HYDERABAD(2008-10)

IOB CREDIT FACILITIES FOR ELIGIBLE SMEs • In this regard they need to submit some documents are as follows:

1.SSI Registration Certificate

2.Partnership Deed / Memorandum & Article of Association

3.Authority letter to sign the application

4.List of all partners / directors with their age, address, certified Net Worth / Income Tax returns, qualifications and experience

PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE,HYDERABAD(2008-10)

5.Copy of the audited accounts for the last three years (where accounts for the last year have not been audited, provisional accounts duly certified by a Chartered Accountant, along with two years audited accounts, are to be submitted) 6.In case of new project/expansion, copy of the project report containing a brief project profile, cost of project, source/means of finance 7.Brief write-up about the products manufactured, end users, marketing tie-up and orders in hand 8.Details of subsidy, tax concession available to the applicant 9.Quality certificates, export awards won, membership of any associations

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PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE,HYDERABAD(2008-10)

Project proposal report  PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE. key suppliers & key customers   13.Insurance details of plant & machinery   14. constitution.Contact details of Bankers.)   12. turnover etc.Rating report     15.HYDERABAD(2008-10) . net worth.Clear vision of the customers 16.Details about group companies (names.Any other information that would enable us to understand your business better   11. 10.

Current assets are essential to use fixed assets profitably. also known as short-term financial management involves the management and control o f the Gross current assets so that a satisfactory level of Working Capital (Net Working Capital requirement).e. For example.BASIC NEED OF SMEs • WORKING CAPITAL-Working capital refers to the funds invested in current assets. •  PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE. cash and other current assets. is maintained and the current liabilities are discharged as and when they fall due. a machine cannot be used without raw material capital. •Working Capital Management. The investment on the purchase of raw material is identified as working capital. Working Capital Management involves cash flows within the Operating Cycle of the Company. investment in stocks.HYDERABAD(2008-10) . usually not exceeding the period of one year. sundry debtors. i. unlike long -term financial management where cash flows extend for more than one year. needed to carry out day -to-day activities.

there are two concepts of Working Capital (1) Gross working capital: The gross working capital refers to investment in all the current assets taken together. It may be noted that the current liabilities refers to these liabilities which are payable with in a period of 1 year.•Theoretically. (2) Net working capital: The term net working capital refers to excess of total current assets over total current liabilities. The total of investments in all the current assets is known as gross working.HYDERABAD(2008-10) .   And also there are two types of working capital are as follows : • PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE.

However.   PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE. to carry on business.PERMANENT & TEMPORARY WORKING CAPITAL:   •The overall Working Capital requirement does not stay constant and keeps fluctuating.HYDERABAD(2008-10) . a certain minimum level of Working Capital is required on a regular basis which is referred to as “Permanent or Fixed Working Capital”  •Any amount over and above the permanent Working Capital is known as the “Temporary or seasonal Working Capital” requirement. It is also known as variable working capital.

The Working Capital need of a Company does not come to an end once an Operating Cycle is completed. • PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE.•The Operating Cycle creates the need for Current Assets or Working Capital. As it is a cyclical process. there should be continuous supply of Working Capital for the Company to carry on its business activity.HYDERABAD(2008-10) . the need continues to exist even after the Company has realised cash against its credit sales. Thus.

and Forfeited shares. Bad debts  PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE. Development rebate reserve. Preference share.SOURCE OF FINANCE FOR SMEs   SMES are basically depends on the 2 types of source of finance (1) Internal and (2) external  •INTERNAL:a) Paid up capital: Ordinary share. Other sources c) Provisions: Taxation (Net on advances on income tax). b) Reserve surplus: Capital reserve. Depreciation. deferred shares.HYDERABAD(2008-10) .

  b)Trade dues and current liabilities: Sundry creditors.HYDERABAD(2008-10) . Other sources •  PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE. from term lending institutions like IDBI. ICICI. IFCI.•EXTERNAL:a) Borrowings: From Banks. etc. b) SIDBI. INDUSTRIAL DEVELOPMENT CORPORATION.

Among them are:(1) Indian overseas bank (IOB) (2) State bank of India (SBI) (3) Bank of Baroda (BOB) (4) HDFC bank (5) ICICI bank (6) Small industries development organization (SIDO) (7) National small industries corporation (NSIC) (8) SIDBI (9) NABARD (10) IDBI   PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE. private and financial institutions.HYDERABAD(2008-10) .OTHER INSTITUTIONS IN MARKET FOR SME’S LOAN •As the small and medium enterprises (SME) sector is one of the fastest growing industrial sectors all over the world. initiatives are being taken by national.

PROBLEMS OF SMEs-FINANCIAL PROBLEMS OF SMEs REGARDING LOAN PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE.HYDERABAD(2008-10) .

This is happening mostly with the new clients.HYDERABAD(2008-10) . 4. COLLATERAL REQUIREMENTS OF BANK/ FINANCIAL INSTITUTIONS: Because of the collateral requirements of bank nearly 54% SMEs are not getting the loan facilities. Due to this nearly 27% SMEs are not getting the finance facilities. So considering these banks are not providing the loan to the new clients. RELUCTANCE TO LEND BY BANK: Sometimes banks are hesitating in giving the loan. They are not able to show the collateral money or assets. HIGH INTEREST RATES: Due to high competition with the big firms small firms are not able to make a sufficient profits and they are not able to pay the interest rate properly. 2. Due to this nearly 55% SMEs are not able to get the loan from the banks. ANALYSIS 1. 3.FROM THE BAR DIG.  • PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE. BANK/ PAPERWORK BUREAUCRACY: Due to huge demand of documentations 43% SMEs are not getting loan facilities.

HYDERABAD(2008-10) . DELAYED PAYMENT: 38% growth is less because of delayed payment from the market which affect the whole process of the SMEs like production to interest and till loan payment. This time constraints are big obstacles for them in production parts which restrict the 42% SMEs growth. TIME TAKEN BY BANKS TO CLEAR LOAN APPLICATION: Due to some verifications banks are taking time in clearing the loan. 6.    PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE. 5.

small expansion replacement. SHORT TERM: Less than 1 year to meet variable.  3. LONG TERM FINANCE: Period more than 5 years. seasonal or temporary capital requirement.HYDERABAD(2008-10) . MEDDIUM TERM: 1 to 5 year for permanent working capital. modification etc. 2. It is required for procuring Fixed Assets for establishing new branches or new business for substantial expansion of existing business modernization PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE.TYPES OF INDUSTRIAL FINANCE PROVIDED BY IOB 1.

Liquidity Ratios: Current Ratio=(current Assets / current liabilities)     Acid Test Ratio (quick ratio) = (Current Assets.Inventory / Current Liabilities) According to this ratio bank is testing the liquidity position of the client by the liquidity ratio because that they are able to pay or not their short term liabilities. It is helpful for the bank that they can estimate the paying capacity of the borrowers. These ratios usually indicate the frequency of sales. Activity ratios: Average Collection Period= (A/c Receivable/ Daily Average Sales) Capital turnover ratio= (Sales/ Capital Employed) Fixed Assets turnover Ratio= (Sales/ Capital Assets) Activity ratios are also called Turnover ratios or performance ratios.HYDERABAD(2008-10) .   • PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE. These ratios are to evaluate the efficiency with which firm manages and utilizes its assets.AT THE OF LENDING SOME RELEVANT RATIOS ARE COVERED BY THE BANK 1.       2.

It covers share holders fund (equity) and long term borrowed fund (debt). These ratios indicate the proportion of debt fund in relation to equity.    4.Leverage Ratios: Debt Ratio= (Total liabilities/ Total Assets) Debt Equity = (Total liabilities/ Share Holders Equity)  Banks are very keen to know about this ratio because it shows relative weights of debt and equity. Banks are also keen interested to know the profits of the borrowers that they are able to pay their interest and dues on time.Net Profit Margin: (Net Profit/ Net Sales) This ratio measures the profitability of the firm in terms of assets employed in the firm. 3.HYDERABAD(2008-10) .   PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE.

Return On Investment: (ROi)= (Net Profit/ Total Assets) It measures the profitability or the operational efficiency of the firm. The speed with which credit receivables are collected affects the liquidity position of the firm. This is very essential for the banks.   5.Dividend Per Share =(Total profits available to Equity Share Holders/No.HYDERABAD(2008-10) .    7. of Equity Shares) This ratio indicates the amount of profit distributed to shareholders per share.Debtors’ Turnover Ratio: Credit Sales Average Accounts receivable For the cash cycling banks wants to know about the collection and credit policies of the firm.    6.    PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE.

9.50% •Above RS2 lakhs and up.50% • Other then mfg.HYDERABAD(2008-10) .50% •Above RS 25 lakhs and below RS 1 crore-11.to RS 25 lakhs -10.50%  PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE.(depending on ratings)-12.25% to 15.to RS 2 lakhs .00%   1 crore and above up-to RS 10 crore: • For mfg.RATE OF INTEREST CHARGED ON AMOUNT SANCTIONED BY IOB FOR SMEs FOR MICRO AND SMALL ENTERPRISES: •For credit limits up.00% to 13. units (depending on ratings)-11.

000/.75% to 15% •Above Rs25lakhs and below Rs1crore(based on ratings)-12.25% to 14.25% to 15.25% to 15. units(depending on ratings)--12.HYDERABAD(2008-10) .50%  PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE.75% • Other than mfg. units(depending on ratings)--12.50% •Above RS 25.--9.50%   1 crore and above upto Rs 10crores • For mfg.000/.00% •Above Rs2 lakhs and upto Rs25 lakhs(based on ratings)--11.MEDIUM ENTERPRISES •For credit limits up-to RS 25.and up-to RS 2 lakhs--11.

 PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE.FINANCING OF WORKING CAPITAL BY IOB IN THE FOLLOWING FORM:  1. CASH CREDIT: This type of credit is provided mainly to individuals or enterprises engaged in manufacturing & trading activities to enable them to carry on their activities. The amount of cash credit facility to be sanctioned to a units need based and is worked out as per well defined parameters in each bank. LETTER OF CREDIT: A letter of credit is the guarantee provided by the buyer’s banker to the seller that in the case of default or failure of the buyer. the bank shall make the payment to the seller.HYDERABAD(2008-10) .   2. bills/ book debts representing sales. The guide line of RBI may also affect the quantum of facility in some cases. This facility is generally granted against the security of stocks of goods.

WORKING CAPITAL DEMAND LOAN: In compliance of RBI directions . 4.   BILLS FINANCE: The bank extend assistance to the borrowers against the bills. The finance against bills can take three forms. The working capital demand loan is granted for a fixed term on the carrying of which it has to be liquidated. renewed of rolled over. Discounting of bills by bank if these are usance bills (or time) bills.operable account keep on changing. Advance against bills under collection from the drawees. 10crores or above. This arrangement is presently applicable to borrowers having working capital facilities of RS. banks presently grant only a small part of the fund. a major portion is in the form of working capital demand loan. 3. • PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE. whether sent for realization through the bank or sent directly by the drawer to the drawees.based working capital facilities to a borrower by the way of running case credit account . The finance against bills is meant to finance. The minimum period of working capital demand loan which is basically non.HYDERABAD(2008-10) . the actual sale transactions. Purchase of bills by the bank if these are payable on demand.

 5. OVERDRAFT FACILITY: Under this arrangement the borrower is allowed to withdraw the amount upto a certain limit from this current account over and above his actual credit balance. Within the stipulated limits any numbers of withdrawals are permitted by the bank.HYDERABAD(2008-10) .  PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE.

h o u si g a n d S S I. T h e b a si o f 4 0 % i b a se d o n cu tu o n s s PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE.HYDERABAD(2008-10) th e b a n k . S H G . E d u ca ti n .DATA ANALYSIS THROUGH BAR DIAGRAMES (All data taken from discussion with employees and customers)  PERCENTAGE OF BANK CREDIT INVESTED IN PRIORITY SECTORS   I T E R PR E TA T I N : N O Fro m th e a b o ve g ra p h w e o b se rve th a t I B ra te o f i ve stm e n t i to Pri ri O n n o ty se cto rs i 4 0 % s a cco rd i g to th e g u i e l n e s p ro vi e d b y th e R B I w h i a l co ve rs th e n d i d . ch so a d va n ce s to A g ri l re .

n ci g a n d th e y a re n o t a b l to m a i ta i p ro p e r d o cu m e n ta ti n . M a xi u m n o . o f S M E s a re re g i re d a t y l ste . T h e re a so n fo r n o n e n n o stra ti n o f S M E ’ s i th e n o ti n th a t th e co sts w o u l b e i cre a se d . o s o d n PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE.HYDERABAD(2008-10) .N O . o f u n i a re sti l u n re g i re d i e . b e ca u se th e y h a ve p ro m ts l ste . 1 0 . 8 0 m n . O F SM Es TH AT A R E R E G IS T E R E D R P R E TA T I N : O e a b o ve d i g ra m i ca n b e o b se rve d th a t o n l a sm a l n o .

3 5 % . w h i b n o b n ch a l h e l s i g e so p n re i n re ve n u e g PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE. Fro m th e a b o ve f a o e n n as n o w a b o u t th e co n tri u ti n p a rt o f S M E s i th e to ta l exp o rt ie .HYDERABAD(2008-10) . W h o l se cto b o n . e i u ti g 6 5 % a n d S M E se cto rs a l n e a re co n tri u ti g 3 5 % .C O N T R IB U T IO N O F S M E ’ s IN T O T A L E X P O R T P R E TA T I N : O e cto r p l ys a m a j r ro l i I d i ' p re se n t exp o rt p e rfo rm a n ce .

E R C E N TA G E O F S M E s P R E F E R R E D T O T A K E L O A N F R O M V A R IO U S B A N K S I T E R PR E TA T I N : N O Fro m th e a b o ve a n a l s w e kn o w th a t S M E s g i 1 st preference to the Govt .HYDERABAD(2008-10) . ysi ve fo r ta ki g th e l a n b e ca u se o f e a sy p ro ce ss ra th e r th a n th e p ri te se cto r b a n o va S M E s l ss p re fe rs th e p ri te se cto r b a n ks b e ca u se o f th e h e a vy d o cu m e n ta t e va i needed. s   PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE.

T h i sh o w th a t th ysi o o se s cu si g m o re o n u rb a n a re a i e . t s e a re a . n s PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE. La ck o f a w a re n e ss a m o n g ru ra l S M E ’ s i th e re a so n fo r n o n s n th s n s i th i a re a .P E R C E N T A G E O F L O A N S A N C T IO N B A SED O N A R EA PR E TA T I N : O b o ve a n a l s sh o w s th e l a n sa n cti n e d p e rce n ta g e a re a w i . I i b e ca u se th a t m o st o f th e S M E s a re i u rb a n a re a a n d i i e a sy fo r th e t s n t s i to u ch w i th e m . T h e y h a ve n e g l ct n .HYDERABAD(2008-10) . 6 0 % a n d se m i u rb a n i i 3 9 % .

T h e y a re n o t i te re ste d to m a i ta i th e m a xi u m n o .HYDERABAD(2008-10) . a n d ca n n o t a ffo rd b e ca u se i i t g n l t n p ro d u ct p ri s. o f p a p e r w o rk w h d n n n m u l fo r th e m a n d h i h i te re st ra te w i l co st th e m . o f S M E s a re a w a re a b o u t th e fa ci i e s p ro vi e d b y th e b a n k b u t n o .A W A R E N E S S A B O U T T H E L E N D IN G FA C IL IT IE S P R E TA T I N : O u m n o . o f S l ti d a re ta ki g l a n fro m th e b a n k i q u i ve ry l ss o n l b e ca u se o f h u g e p a p e r w o rk n o s te e y a n k si e . ce PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE.

Fro m th e a b o ve s n n n ta o b se rve d th a t ca sh cre d i i ve ry p o p u l r so u rce fo r ta ki g w o rki g ca p i ll a n t s a n n ta o a u se i ca sh cre d i fa ci i e s th e re i i te re st ch a rg e d b y th e b a n k o n l o n th e w i n t l ti s n y o u n t b y th e p e rso n o r b o rro w e r. ti r n PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE.D IT S E R V IC E S O F F E R E D T O S M E s IN T E R M S O F W O R K IN G C A P ITA L R E Q U E R P R E TA T I N : O k i o ffe ri g 5 typ e s o f fi a n ce s to S M E s w o rki g ca p i l n e e d s. T h e a m o u n ts a re w i d ra w n o n l w h e n i i re q u th y t s th e i te re st i p a i o n l o n e n j yi g p a rt o f th e a m o u n t. n s d y o n e r fa ci i e s a re o n l u ti i d b y th e m a l n g w i th e ca sh cre d i w h e n th e y re q u i l ti y l se o th t i o n a lm o n e y fo r th e i b u si e ss.HYDERABAD(2008-10) .

o PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE. th a t th e fi w i l ru n fo r a n i d e fi i p e ri d o f ti e a n d a l th e fi n . T h i a m o u n t i u se d b y th e m fo r w o rki g ca p i lre q u i m e n ts. I ca n b e re n e w e d b y th ch o s s o t ti e to ti e .T E R M O F LO A N E R P R E TA T I N : O d i sse d e a rl e r th a t m o stl l ss th e n 5 cro re s o r 5 cro re s a m o u n t l a n i ta ke n b scu i y e o s h e S M E s . A n d th e s s n ta re w h i th e l a n a m o u n t i ta ke n b y th e m i fo r l n g te rm .HYDERABAD(2008-10) . m m ks a re p ro vi i g th e l a n o n l n g te rm cre d i b a se d o n th e g o i g co n ce rn co n ce p d n o o t n o u n ti g ie . rm l n n te o m so rm se n t a n d fu tu re p ro j cti n o f th e i a cco u n ti g p ro ce d u re s a re ta ke n i to co n si e r e o r n n d te rm o f l a n .

R C E N TA G E O F C R E D IT FA C IL IT IE S S A N C T IO N E D T O S M E ’ s T E R PR E TA T I N : O o m th e a b o ve a n a l s w e o b se rve th a t 8 2 % o f S M E s a re sa n cti n e d th e cre d i fr ysi o t B a n d re st 1 8 % a re n o t a va i i g th e se fa ci i e s o n l b e ca u se o f n o t fu l l i g th e ln l ti y fi l n n d th e cri ri o f th e b a n k a s d i sse d e a rl e r i l st o f d o cu m e n ts re q u i d b y th te a scu i n i re n d o th e r q u a l ta ti p a rt w h i m u st b e fu l l e d b y th e b o rro w e rs. i ve ch fi l PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE.HYDERABAD(2008-10) .

fi l n l re n m a re d e l ye d d u e to fa i u re i co m p l n g w i th e d o cu m e n ta ti n .IM E TA K E N B Y T H E B A N K F O R S A N C T IO N IN G O F T H E L O A N R P R E TA T I N : O th e a b o ve a n a l s i ca n b e o b se rve d th a t 4 9 % o f S M E s a re sa n cti n e d th e l a n ysi t o o m o n th b e ca u se o f fu l l i g a l th e re q u i m e n ts a n d n o rm s o f th e b a n k i ti e . w PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE.HYDERABAD(2008-10) . re th o se w h o a p p l e d fo r th e b i a m o u n t fo r w h i so m e ti e s i ta ke s m o re th a n i g ch m t n th s b u t n o t a l a ys. fo r w h i th e sa a l n yi th o ch d ta ke s m o re th a n o n e m o n th .

P E R C E N TA G E O F IN V E S T M E N T IN V A R IO U S S E C T O R S R P R E TA T I N : O i sa n cti n i g l a n s m o re to th e m a n u fa ctu ri g se cto rs fo r th e i ve stm e n t a s s o n o n n u fa ctu re rs a p p ro a ch th e b a n k fo r th e i cre d i re q u i m e n ts ie . ce e n PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE. y l a n i sa n cti n e d to se rvi se cto rs a s p e r th e re q u i m e n ts. o s o ce re e r th e R B I g u i e l n e b a n ks h a ve ta ke n ca re o f th e m a n u fa ctu ri g u n i b e ca u se d i n ts ti te th e 3 5 % o f to ta l exp o rt a n d a l p ro vi i g th e m a xi u m n o . o f e m p l ym e tu so d n m o try. 8 5 % a n d o n l 1 5 % r t re .HYDERABAD(2008-10) . S e rvi se cto rs a re ve ry l ss i n u m b e r.

By whole study it is clearly state that cash is vital component for the firms operating cycle. IOB is offering loan to priority sectors like housing. 3.  PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE. etc. education. At the same time of sanctioning loans bank need huge no.HYDERABAD(2008-10) . If cash is not generating properly in the firm it will be harmful for the firm i. working capital loan. they should maintain the appropriate liquidity. It is observed that SMEs are suffering from many other problems which hamper their growth. 4.e. Time of peak season small industry have to keep their inventory at the optimum level for making good profit by maintaining the demand level. 2. Which also need more working capital 5. of documents for safety of their bank.FINDINGS 1.

The capital base of SMEs is very poor. 13. of days for sanctioning the loan.IOB is strictly followed the rules and regulations for sanctioning. 9.Bank is taking maximum no.The growth of SMEs in A. 16.6. 7. of SME units are still unregistered Which is showing loss of Indian economy. 14.The entrepreneurs are lack of knowledge regarding the credit facilities.P.Bank employees are using their exceptional powers regarding loan sanctioning. has been significant.HYDERABAD(2008-10) . also supporting them by providing schemes. 8.Bank mostly providing the loan to their well known customers. But on the other part SMEs are big source of employments. 15. 10.   PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE. 11.For promoting SMEs govt. 12.IOB is encouraging the SME finance because they feel that they are able to repay their loan.A big no.At last shortage of finance is considered to be most important problem responsible for a host (maximum) of problems in SMEs.

HYDERABAD(2008-10) . 4.SUGGESTIONS 1. The bank should take care of the well being of SMEs and they should initiate such measures which would result in further promotion of SMEs. Bank has to increase their credit limit and also decrease the installment amount. Timely finance should be provided to units keeping in view their needs. 5. which help the SMEs for coping with the high risk and costs to compete with their competitors. 2. The borrowing should be made cheaper by lowering the rate of interest on lending of banks. Bank should also provide consultancy services and professional guidance at the time of setting up for considering the long term and short term financial requirements of a small unit for lending purpose.  PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE. 3.

The best way to encourage lending to SMEs is to improve the ability of existing institution to construct profitable and efficient lending programmes.   PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE.  10. so bank should encourage also the unregistered units by providing more facilities like less paper work. 8.SMEs are big source of revenue for banks.Building awareness among small business people about the financial sources offering by bank.While granting the loans the bank does not adhere with the margin. 7. The process followed by the bank in sanctioning the loan is cumbersome (unmanageable). So there is mutual benefits are possible. hence it is suggested to make the process easier in sanctioning the credit facilities to the SMEs. Especially in the case of SMEs is must. 9.6.HYDERABAD(2008-10) .

CONCLUSION In recent years some initiatives have been taken by both govt. It is manageable at the time of pick season but not at all time. and banks of India to make more acceptable for funding by banks.  My project report mainly involved the problems. It is also found that after sanctioning the credit facilities bank has maximum no.  In regard to rate of interest industrial owners feel that the rate of interest for working capital is high. opportunity.HYDERABAD(2008-10) . credit facilities to SMEs by the bank. of paper works. in terms of the paper work that most of the SMEs are enable to submit proper documents for approval of loan. And IOB system of loan sanctioning is quite good.   PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE. But it is very true. which is creating problems for SMEs to maintain all of them.  We know that today SMEs are growing and profitable sectors for banks in terms of money investment. The main purpose of the analysis is to know that how bank is providing loan to SMEs.

HYDERABAD(2008-10) . The reason for less market share is competition with the big firms in the market which also cuts their profit margin. so they are not aware about the benefits of the registration.  SMEs have other problems like underutilization of capacity which is happening of improper training and also less market share of their products. and lack of finance they cannot grow. And also more appropriate credit instruments have been developed to help SMEs to have easy credit with less cost and collaterals.  Nower days credit guaranty and rating institutions have floated to support banks to assume risk unhesitatingly in financing SMEs.It also found that some SME owners are not educated. Due to this they are not eligible for the financing.    PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE.

   THANK YOU PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE.HYDERABAD(2008-10) .

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