This action might not be possible to undo. Are you sure you want to continue?
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)
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.
PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE,HYDERABAD(2008-10)
namely – enterprises engaged in the mfg.HYDERABAD(2008-10) . Enterprise have been defined in term of investment in plant and machinery/equipment(excluding land and building) PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE. & enterprises engaged in providing of services./production of goods pertaining to any industry.DIFINIATION OF SME Under the MSME act 2006.Enterprises has been classified into two categories.
DIFINIATION Investing in plant and machinery / equipment (excluding land and building) MANUFACTURING ENTERPRISES MICRO.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.HYDERABAD(2008-10) .More than RS 5 crore More than 2 crores and upto 5 crores and upto RS 10 crores PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE.
H. He also focused on how economic reforms have changed the bank role in extending credit to SMEs. MAY 1981-the above article was prepared on the role of banks in financing the SMEs in the year 1981. because of their credit worthiness.HYDERABAD(2008-10) . They also focused on the credit facilities available to the SMEs in the wake of MSME act 2006. • PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE. N... RAI. Later due to changes in the industrial policy of India.L. At those times the Indian banking was not all interested in financing the SMEs. H. Here is a gap for more analysis about the role of the banks in the post economic reforms. DAKSHINA MURTHY. G. “Financing Small Scale Sector”. BRAHMANANDAM. has focused on role of banks in financing SMEs. N. This article was written before the economic reforms taken place. DAKSHINA MURTHY..L. RAI. G. The Role of Banks” INDIAN BANKING TODAY AND TOMORROW.REVIEW OF LITERATURE • BRAHMANANDAM.. the commercial banks come forward made immense help to the growth of SMEs.
” Growth of small scale industries in India” JOURNAL OF INDUSTRY AND TRADE.•JAILAL SAAW. This article is focusing on the one problem that is financial problems faced by the SME segment. The expected growth was not there because of lot of root causes to sickness and under development in the SME sector. April -2005.HYDERABAD(2008-10) . This article discussed about the slow growth rate of SMEs. PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE.The growth of small and medium industries in India was discussed in the above article. dues to several problems.
Ineffective monitoring and feedback mechanism. 2.Lack of knowledge about various credit schemes 11.Inadequate and Untimely Credit Flows. 4.Inefficient raw material procurement.PROBLEMS • SME is one of the growing sectors of the country even though they are facing so many problems which restrict the growth 1.Poor financial situations and low levels of R&D 6.Shortage of power 9. 8. 3.Under-utilization of Capacities.Overdependence on purchases by government etc………… PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE.HYDERABAD(2008-10) .Lack of awareness of credit facilities available 10.Inability in Technology up gradation. 5. 7.Inability to Market Finished Goods.
OF SME UNITS PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE.HYDERABAD(2008-10) .NO.
HYDERABAD(2008-10) . says that in FY 07 growth in production is by 18% against 15.PRODUCTION GROWTH The above dig.8% in the previous year PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE.
CT.COMPANY PROFILE • Chairman and Managing Director : Shri S.Bhat • Established in 1937 in Chennai by Shri M. Chidambaram Chettyar.. Shree Suvarna Sahakari Bank LTD in May 2009. • 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.HYDERABAD(2008-10) .A. • • PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE.M.
6.HYDERABAD(2008-10) .e. To study about financial problems of SMEs regarding loan. • PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE. The study about credit facilities offered to the SMEs by the banks. To examine the growth of SME industries. 7. To analyze government’s support in obtaining credit facilities.OBJECTIVE OF THIS STUDY 1. 2. RBI guide line and SEBI guide line How working capital financed to SMEs i. 5. 3. To study about working capital. 4. the main source of finance available for SMEs.
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.
• Credit facilities must be offered to an average of at least 5 micro. small and medium enterprises in every quarter • To some extent bank can grant collateral free loans to SMEs • PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE.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.HYDERABAD(2008-10) .
RESEARCH METHODOLOGY RESEARCH DESIGN: 1. PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE.HYDERABAD(2008-10) . Period of the study is limited to 45 days. 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. 5. Study will be carried out at Hyderabad. 4. Study is all about the research & analysis of credit services offered to small and medium enterprises 2. Secondary data is required for analysis of report.
• Respective Banks Web Sites other sites • Reference from Management Books. • Newspapers and Articles • Already researched data (Which turned into information based on analysis) PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE.HYDERABAD(2008-10) . ROAD branch. • Collection of secondary data from Management journals.) SECONDARY DATA • The secondary data collected from the already sanctioned loan files.METHOD OF DATA COLLECTION • PRIMARY DATA . • Bank and Borrower’s Annual Report.Information has also been gathered through discussions with the employees of IOB and visiting the IOB branches (R. HIMAYATNAGER branch and REGIONAL OFFICE.P. • Project proposal.
There is lots of no.LIMITATIONS 1. The study is limited to the period of 45 days. so in-depth research and analysis is not possible. 3. • PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE. were not available. of SMEs which is unregistered. we had to rely on the secondary data sources. as most of the firms are worried about disclosing their financials. thus for the industry analysis and other qualitative research. Due to time constraints we covered only limited no.HYDERABAD(2008-10) . 4. due to this proper data’s are not covered. of SMEs 2. Since banks have some confidential reports which cannot be handover to the outsiders. The financials of the firms.
The Micro. Both the existing and the new enterprises are eligible to be covered under the scheme.GOVT. 2006 is a legal framework for more capital investment in the SME sector. 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. PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE. Small and Medium Enterprises Act. 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.HYDERABAD(2008-10) .
HYDERABAD(2008-10) .• The scheme was formally launched on August 30. 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. banks. which is provided by SIDBI and other specialized Govt. PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE. 2000 and is operational with effect from 1st January 2000. After it is raised to RS2500 crores.1346.54 crore till 2007.
• • Most of these programmes of the Central Government are implemented through two principal organizations are as followes: • PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE.HYDERABAD(2008-10) . 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. together with the State Governments. the Government of India. Recognizing the need for a focused financial assistance to such industries.GOVT.SUPPORT WITH STATE GOVT.
2. (Equipment financing .HYDERABAD(2008-10) . credit support. 1. Financing through syndication with banks ) . SIDO promotes axillaries units to public sectors enterprise . Financing for marketing activities . has been established with the objective of promoting. SMALL INDUSTRIES DEVELOPMENT ORGANIZATION (SIDO) is an apex body for promotion and development of small scale industries in the country. Financing for procurement of raw material . • PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE. It has been assisting small enterprises through a set of specially tailored schemes which facilitate marketing support. monitoring policy and programme.1.acts like model agencies for coordinating. aiding and fostering the growth of small scale industries in the country. technology support etc. NATIONAL SMALL INDUSTRIES CORPORATION LTD (NSIC).
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
PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE,HYDERABAD(2008-10)
Details about group companies (names. 10.Clear vision of the customers 16. key suppliers & key customers 13.Rating report 15. turnover etc.Contact details of Bankers.Project proposal report PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE.HYDERABAD(2008-10) .) 12.Any other information that would enable us to understand your business better 11. net worth. constitution.Insurance details of plant & machinery 14.
is maintained and the current liabilities are discharged as and when they fall due.HYDERABAD(2008-10) . i. cash and other current assets. Current assets are essential to use fixed assets profitably. For example. sundry debtors. •Working Capital Management. investment in stocks. unlike long -term financial management where cash flows extend for more than one year. Working Capital Management involves cash flows within the Operating Cycle of the Company. usually not exceeding the period of one year. a machine cannot be used without raw material capital. 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. needed to carry out day -to-day activities. The investment on the purchase of raw material is identified as working capital.BASIC NEED OF SMEs • WORKING CAPITAL-Working capital refers to the funds invested in current assets. • PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE.
HYDERABAD(2008-10) .•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. It may be noted that the current liabilities refers to these liabilities which are payable with in a period of 1 year. 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. And also there are two types of working capital are as follows : • PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE.
It is also known as variable working capital. to carry on business.PERMANENT & TEMPORARY WORKING CAPITAL: •The overall Working Capital requirement does not stay constant and keeps fluctuating. PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE.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. However.
As it is a cyclical process. The Working Capital need of a Company does not come to an end once an Operating Cycle is completed.HYDERABAD(2008-10) . the need continues to exist even after the Company has realised cash against its credit sales. there should be continuous supply of Working Capital for the Company to carry on its business activity. • PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE. Thus.•The Operating Cycle creates the need for Current Assets or Working Capital.
HYDERABAD(2008-10) . and Forfeited shares.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. b) Reserve surplus: Capital reserve. Preference share. Other sources c) Provisions: Taxation (Net on advances on income tax). deferred shares. Bad debts PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE. Depreciation. Development rebate reserve.
HYDERABAD(2008-10) . b)Trade dues and current liabilities: Sundry creditors. etc. b) SIDBI.•EXTERNAL:a) Borrowings: From Banks. Other sources • PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE. INDUSTRIAL DEVELOPMENT CORPORATION. IFCI. ICICI. from term lending institutions like IDBI.
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.HYDERABAD(2008-10) . private and financial institutions. 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. initiatives are being taken by national.
HYDERABAD(2008-10) .PROBLEMS OF SMEs-FINANCIAL PROBLEMS OF SMEs REGARDING LOAN PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE.
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. 3. So considering these banks are not providing the loan to the new clients. This is happening mostly with the new clients. BANK/ PAPERWORK BUREAUCRACY: Due to huge demand of documentations 43% SMEs are not getting loan facilities. RELUCTANCE TO LEND BY BANK: Sometimes banks are hesitating in giving the loan. Due to this nearly 55% SMEs are not able to get the loan from the banks.FROM THE BAR DIG. ANALYSIS 1. • PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE.HYDERABAD(2008-10) . They are not able to show the collateral money or assets. 4. Due to this nearly 27% SMEs are not getting the finance facilities. COLLATERAL REQUIREMENTS OF BANK/ FINANCIAL INSTITUTIONS: Because of the collateral requirements of bank nearly 54% SMEs are not getting the loan facilities.
TIME TAKEN BY BANKS TO CLEAR LOAN APPLICATION: Due to some verifications banks are taking time in clearing the loan. 5.HYDERABAD(2008-10) . This time constraints are big obstacles for them in production parts which restrict the 42% SMEs growth. 6. PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE. 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.
HYDERABAD(2008-10) . 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. SHORT TERM: Less than 1 year to meet variable. LONG TERM FINANCE: Period more than 5 years. seasonal or temporary capital requirement. 2. modification etc.TYPES OF INDUSTRIAL FINANCE PROVIDED BY IOB 1. 3. small expansion replacement. MEDDIUM TERM: 1 to 5 year for permanent working capital.
2. Liquidity Ratios: Current Ratio=(current Assets / current liabilities) Acid Test Ratio (quick ratio) = (Current Assets.AT THE OF LENDING SOME RELEVANT RATIOS ARE COVERED BY THE BANK 1.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. These ratios are to evaluate the efficiency with which firm manages and utilizes its assets. It is helpful for the bank that they can estimate the paying capacity of the borrowers.HYDERABAD(2008-10) . • PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE. 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.
Net Profit Margin: (Net Profit/ Net Sales) This ratio measures the profitability of the firm in terms of assets employed in the firm.HYDERABAD(2008-10) . PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE. These ratios indicate the proportion of debt fund in relation to equity. It covers share holders fund (equity) and long term borrowed fund (debt).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. 4. Banks are also keen interested to know the profits of the borrowers that they are able to pay their interest and dues on time. 3.
7. of Equity Shares) This ratio indicates the amount of profit distributed to shareholders per share. 5.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. 6.Dividend Per Share =(Total profits available to Equity Share Holders/No. This is very essential for the banks.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.
HYDERABAD(2008-10) .00% to 13.9.25% to 15.RATE OF INTEREST CHARGED ON AMOUNT SANCTIONED BY IOB FOR SMEs FOR MICRO AND SMALL ENTERPRISES: •For credit limits up.50% PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE. units (depending on ratings)-11.00% 1 crore and above up-to RS 10 crore: • For mfg.to RS 25 lakhs -10.to RS 2 lakhs .50% •Above RS 25 lakhs and below RS 1 crore-11.(depending on ratings)-12.50% • Other then mfg.50% •Above RS2 lakhs and up.
50% 1 crore and above upto Rs 10crores • For mfg.00% •Above Rs2 lakhs and upto Rs25 lakhs(based on ratings)--11.000/.000/.75% to 15% •Above Rs25lakhs and below Rs1crore(based on ratings)-12.50% •Above RS 25.50% PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE.25% to 15.HYDERABAD(2008-10) .--9. units(depending on ratings)--12. units(depending on ratings)--12.25% to 15.25% to 14.MEDIUM ENTERPRISES •For credit limits up-to RS 25.75% • Other than mfg.and up-to RS 2 lakhs--11.
FINANCING OF WORKING CAPITAL BY IOB IN THE FOLLOWING FORM: 1. 2. This facility is generally granted against the security of stocks of goods. 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 guide line of RBI may also affect the quantum of facility in some cases. bills/ book debts representing sales.HYDERABAD(2008-10) . 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. PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE. the bank shall make the payment to the seller. 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.
Purchase of bills by the bank if these are payable on demand. 3. Advance against bills under collection from the drawees.HYDERABAD(2008-10) . renewed of rolled over.based working capital facilities to a borrower by the way of running case credit account . whether sent for realization through the bank or sent directly by the drawer to the drawees. The working capital demand loan is granted for a fixed term on the carrying of which it has to be liquidated. • PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE. 4. a major portion is in the form of working capital demand loan. banks presently grant only a small part of the fund.operable account keep on changing. 10crores or above. The finance against bills can take three forms. the actual sale transactions. The minimum period of working capital demand loan which is basically non. The finance against bills is meant to finance. BILLS FINANCE: The bank extend assistance to the borrowers against the bills. Discounting of bills by bank if these are usance bills (or time) bills. This arrangement is presently applicable to borrowers having working capital facilities of RS. WORKING CAPITAL DEMAND LOAN: In compliance of RBI directions .
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.
Education.HYDERABAD(2008-10) credit capacity. which also covers the advances to Agriculture. The basis of 40% is based on the bank PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE. SHG.DATA ANALYSIS THROUGH BAR DIAGRAMES (All data taken from discussion with employees and customers) PERCENTAGE OF BANK CREDIT INVESTED IN PRIORITY SECTORS INTERPRETATION: From the above graph we observe that IOB rate of investment into Priority sectors is 40% according to the guide lines provided by the RBI. . housing and SSI.
of units are still unregistered i. because they have problem nancing and they are not able to maintain proper documentation.10.Maximum no.e. PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE. The reason for no gistration of SME’s is the notion that the costs would be increased. O F SM Es TH AT A R E R E G IS T E R E D TERPRETATION: the above diagram it can be observed that only a small no.80mn.HYDERABAD(2008-10) .N O . of SMEs are registere n.
Whole sector ributing 65% and SME sectors alone are contributing 35%.HYDERABAD(2008-10) .e.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 RPRETATION: Sector plays a major role in India's present export performance. which also helps in gen foreign revenue PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE. 35%. From the above fi know about the contribution part of SMEs in the total export i.
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 INTERPRETATION: From the above analysis we know that SMEs give 1st preference to the Govt. spec for taking the loan because of easy process rather than the private sector ban SMEs less prefers the private sector banks because of the heavy documentation is needed.HYDERABAD(2008-10) . PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE.
They have neglected area . Lack of awareness among rural SME’s is the reason for non sanct ns in this area. 60% and semi urban it is 39% .e. This show that the b cusing more on urban area i.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 RETATION: ove analysis shows the loan sanctioned percentage area wise.It is because that most of the SMEs are in urban area and it is easy for th n touch with them. PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE.HYDERABAD(2008-10) .
HYDERABAD(2008-10) . of paper work which i ult for them and high interest rate will cost them. of SMEs are aware about the facilities provided by the bank but no. of SMEs e taking loan from the bank is quite very less only because of huge paper work fr nk side. PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE. They are not interested to maintain the maximum no.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 RETATION: m no. and cannot afford because it product prices.
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 RPRETATION: is offering 5 types of finances to SMEs working capital needs. PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE. The amounts are withdrawn only when it is required the interest is paid only on enjoying part of the amount. From the above an s observed that cash credit is very popular source for taking working capital loa use in cash credit facilities there is interest charged by the bank only on the w nt by the person or borrower.HYDERABAD(2008-10) . r facilities are only utilised by them along with the cash credit when they requi tional money for their business.
that the firm will run for an indefinite period of time and also the fi nt and future projection of their accounting procedures are taken into considerat erm of loan. And the term hich the loan amount is taken by them is for long term. It can be renewed by them time to time.T E R M O F LO A N PRETATION: scussed earlier that mostly less then5 crores or 5 crores amount loan is taken by e SMEs . are providing the loan on long term credit based on the going concern concept of nting i.This amount is used by them for working capital requirements.HYDERABAD(2008-10) .e. PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE.
PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE.HYDERABAD(2008-10) .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 TERPRETATION: om the above analysis we observe that 82% of SMEs are sanctioned the credit from B and rest 18% are not availing these facilities only because of not fulfilling t d the criteria of the bank as discussed earlier in list of documents required by d other qualitative part which must be fulfilled by the borrowers.
are delayed due to failure in complying with the documentation.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 RPRETATION: the above analysis it can be observed that 49% of SMEs are sanctioned the loan month because of fulfilling all the requirements and norms of the bank in time. PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE.HYDERABAD(2008-10) . are those who applied for the big amount for which sometimes it takes more than nths but not always. for which the sa od takes more than one month.
85% and only 15% loan is sanctioned to service sectors as per the requirements. PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE.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 ERPRETATION: is sanctioning loans more to the manufacturing sectors for the investment as ufacturers approach the bank for their credit requirements i.e. of employment ntry. Service sectors are very less in number.HYDERABAD(2008-10) . per the RBI guide line banks have taken care of the manufacturing units because i stitute the 35% of total export and also providing the maximum no.
If cash is not generating properly in the firm it will be harmful for the firm i. etc. 2. they should maintain the appropriate liquidity. Time of peak season small industry have to keep their inventory at the optimum level for making good profit by maintaining the demand level. PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE. Which also need more working capital 5. of documents for safety of their bank. IOB is offering loan to priority sectors like housing. working capital loan. education.e. 4. It is observed that SMEs are suffering from many other problems which hamper their growth. 3. By whole study it is clearly state that cash is vital component for the firms operating cycle.FINDINGS 1. At the same time of sanctioning loans bank need huge no.HYDERABAD(2008-10) .
Bank mostly providing the loan to their well known customers. 9.The capital base of SMEs is very poor. But on the other part SMEs are big source of employments. 12.6.Bank is taking maximum no. 10. 7.IOB is encouraging the SME finance because they feel that they are able to repay their loan. 15.P.The entrepreneurs are lack of knowledge regarding the credit facilities. of days for sanctioning the loan.IOB is strictly followed the rules and regulations for sanctioning. PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE. 16.At last shortage of finance is considered to be most important problem responsible for a host (maximum) of problems in SMEs. 8. of SME units are still unregistered Which is showing loss of Indian economy.A big no. 14. 13. also supporting them by providing schemes.Bank employees are using their exceptional powers regarding loan sanctioning.The growth of SMEs in A. has been significant. 11.HYDERABAD(2008-10) .For promoting SMEs govt.
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. 2. The borrowing should be made cheaper by lowering the rate of interest on lending of banks. PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE.HYDERABAD(2008-10) . 4.SUGGESTIONS 1. 5. 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. Timely finance should be provided to units keeping in view their needs. which help the SMEs for coping with the high risk and costs to compete with their competitors. 3. Bank has to increase their credit limit and also decrease the installment amount.
Building awareness among small business people about the financial sources offering by bank. The best way to encourage lending to SMEs is to improve the ability of existing institution to construct profitable and efficient lending programmes. 7.While granting the loans the bank does not adhere with the margin. 10. so bank should encourage also the unregistered units by providing more facilities like less paper work. PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE. The process followed by the bank in sanctioning the loan is cumbersome (unmanageable).HYDERABAD(2008-10) . 9. 8.SMEs are big source of revenue for banks. Especially in the case of SMEs is must.6. So there is mutual benefits are possible. hence it is suggested to make the process easier in sanctioning the credit facilities to the SMEs.
And IOB system of loan sanctioning is quite good. which is creating problems for SMEs to maintain all of them. opportunity. and banks of India to make more acceptable for funding by banks. But it is very true. My project report mainly involved the problems. It is also found that after sanctioning the credit facilities bank has maximum no.CONCLUSION In recent years some initiatives have been taken by both govt. in terms of the paper work that most of the SMEs are enable to submit proper documents for approval of loan. of paper works. It is manageable at the time of pick season but not at all time. In regard to rate of interest industrial owners feel that the rate of interest for working capital is high. We know that today SMEs are growing and profitable sectors for banks in terms of money investment. PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE. credit facilities to SMEs by the bank. The main purpose of the analysis is to know that how bank is providing loan to SMEs.HYDERABAD(2008-10) .
And also more appropriate credit instruments have been developed to help SMEs to have easy credit with less cost and collaterals. SMEs have other problems like underutilization of capacity which is happening of improper training and also less market share of their products. PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE.HYDERABAD(2008-10) . and lack of finance they cannot grow. The reason for less market share is competition with the big firms in the market which also cuts their profit margin.It also found that some SME owners are not educated. Nower days credit guaranty and rating institutions have floated to support banks to assume risk unhesitatingly in financing SMEs. so they are not aware about the benefits of the registration. Due to this they are not eligible for the financing.
HYDERABAD(2008-10) . THANK YOU PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE.
This action might not be possible to undo. Are you sure you want to continue?
We've moved you to where you read on your other device.
Get the full title to continue reading from where you left off, or restart the preview.