Sme Research

To Check The Satisfaction level of Small and Medium Enterprises Regarding SME Financing Schemes of the Public Sector
Banks & Problem faced by SMEs.
(20102011)
CHAPTER - 1 INTRODUCTION INTRODUCTION TO SMEs

Small and Medium Enterprises (SMEs) have played a significant role world over in the economic development of various countries. Over a period of time, it has been proved that SMEs are dynamic, innovative and most importantly, the employer of first resort to millions of people in the country. The sector is a breeding ground for entrepreneurship. The importance of SME sector is well-recognized world over owing to its significant contribution in achieving various socio-economic objectives, such as employment generation, contribution to national output and exports, fostering new entrepreneurship and to provide depth to the industrial base of the economy. Small and medium-sized enterprises (SMEs) are the backbone of all economies and are a key source of economic growth, dynamism and flexibility in advanced industrialized countries, as well as in emerging and developing economies. SMEs constitute the dominant form of business organization, accounting for over 95% and up to 99% of enterprises depending on the country. They are responsible for between 60-70% net job creations in Developing countries. Small businesses are particularly important for bringing innovative products or techniques to the market. Microsoft may be a software giant today, but it started off in typical SME fashion, as a dream developed by a young student with the help of family and friends. Only when Bill Gates and his colleagues had a saleable product were they able to take it to the marketplace and look for investment from more traditional sources. SMEs are vital for economic growth and development in both industrialized and developing countries, by playing a key role in creating new jobs. Financing is necessary to help them set up and expand their operations, develop new products, and invest in new staff or production facilities. Many small businesses start out as an idea from one or two people, who invest their own money and probably turn to family and friends for financial help in return for a share in the business. But if they are successful, there comes a time for all developing SMEs when they need new investment to expand 1
To Check The Satisfaction level of Small and Medium Enterprises Regarding SME Financing Schemes of the Public Sector Banks & Problem faced by SMEs.
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or innovate further. That is where they often run into problems, because they find it much harder than larger businesses to obtain financing from banks, capital markets or other suppliers of credit.
DEFINING SMEs
In India, the enterprises have been classified broadly into two categories: (i) Manufacturing; and (ii) Those engaged in providing/rendering of services. Both categories of enterprises have been further classified into micro, small and medium enterprises based on their investment in plant and machinery (for manufacturing enterprises) or on equipments (in case of enterprises providing or rendering services). The classification on basis of investment is as under: TABLE: Classification of Micro, Small and Medium Enterprises before 2nd October, 2006 Classification Micro Small Medium Investment Ceiling For Plant, Machinery Or Equipments*@ Manufacturing Enterprises Upto Rs.25 lakh Above Rs.25 lakh & upto Rs.1 crore Not defined Not defined Service Enterprises Upto Rs.10 lakh Not defined
(http://www.dcmsme.gov.in/ssiindia/MSME_OVERVIEW09.pdf )
ROLE OF PUBLIC SECTOR BANKS IN SME FINANCING

Banks are playing a major role in financing SMEs in India. Nearly 82% of the total SME financing in year 2006-07 is through banks. And among them the major share is of public sector banks i.e. 57%. Thus it is clear that the most common source of finance for SMEs is Bank Financing. There is no. of banks that help in assisting the SMEs for financing. The main channel used by the SMEs via Banks is Specialized loans by various Banks. 2
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The Main reason for choosing bank loans by SMEs compared to other sources of financing like venture capital, PE funding etc is that is only interest to be paid no stake is to be diluted thus the whole command of the SME is with the owner only. There are a number of Private as well as Public sector banks who assist SME in Financing. Sources of SME Finance (2006-07)
Others 18%
Private sector abnks 25%
Public sector banks 57%
(http://www.businessworld.in/bw/2009_11_19_Reforms_To_Improve_Credit_Access_To_ SMEs.html
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STEPS FOR SME LOANS BY PUBLIC SECTOR BANKS Application for loan by SME to local branch of a particular bank in that area
. Inspection/Survey of SME by the Executives of that Local branch.
Sending the Documents of survey by Local branch to SMECC branch Preparing credentials of Promoters and firm by SMECC branch and investigating the same Estimating the amount of loan to be sanctioned and forwarding the documents for sanctioning. If the loan is been sanctioned by the central authority then disbursement of the loan amount into account of the SME.
VARIOUS BANKS AND THEIR SCHEMES

Following Public Banks are considered for the purpose of the study:
STATE BANK OF INDIA

State Bank of India has been playing a vital role in the development of small scale industries since 1956. The following are the SME products offered by State Bank of India and are considered:
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OPEN TERM LOAN
Purpose
Expansion and Modernization Upgradation of Technology/machinery, acquisition of hardware, software etc. Acquisition of ISO and other certificates. Visits abroad for business development etc.
Maximum for service sector: Rs. 100 Lacs. Maximum for manufacturing sector: Rs. 250 Lacs.
Quantum
Amount of loan Nature of facility Eligibility
90% of cost
Term Loan
Existing or new corporate/Non-corporate customers of SME segment with good rating.
Security
Personal Guarantee of Promoters in all cases Pledge of Promoters equity in case of corporate.
Repayment
Maximum 3 years, extendable upto 5 years.
PARYATAN PLUS LOAN

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Purpose
Construction/Renovation/ Modernization/Expansion of hotels, rest houses, Yatri Niwas Construction of office premises, purchase of office equipment and computers by travel agents/ tour operators. Purchase of vehicles (Luxury buses, Coaches, Cars, Vans)at tourist sites Purchase of house boats and luxury boats Setting up of restaurants/ coffee houses/ icecream parlours/ fast food centres, amusement parks/rope ways, health clubs/ spas, etc.
Tenure of loan
Cash Credit repayable on demand Term Loan 3 to 7 years including start up period of not exceeding 18 months Cash Credit (Hypothecation) for Working Capital Term Loan Letter of Credit/ Guarantee firms,
Nature of facility Eligibility
Individuals (proprietorships), partnership Corporates and trusts Primary security Hypothecation of Assets financed by the bank Security
Collateral security Tangible collateral in the form of immovable property, TDRs, NSCs, KVPs, LIC policies etc equivalent to 50% of the total loan amount may be obtained.
SME CREDIT PLUS
Purpose
For meeting bulk orders Repairs to machinery 6
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Margin NIL
Tax payments Any other contingency The idea behind the product designed is to meet the unforeseen and sudden expenditure of SMEs.
Tenure of loan
Each amount with drawn should be repaid within 2 months There should be a gap of 15 days between the last date of repayment of outstanding and for the next withdrawal Clean Cash credit The unit should be enjoying a good track record (standard assets for at least two years) Units with CRA rating of SB4 and above
Nature of facility Eligibility
Primary security NIL Security Collateral security Existing collateral to be extended to cover this limit and additional collateral to be obtained only if considered necessary by the sanctioning authority.
IDBI Bank
IDBI Bank has been actively engaged in providing a major thrust to financing of SMEs. IDBI Bank provides following SME products:
SULABH VYAPAR LOAN

Eligible Segments Facility Traders and Service Sector
Fund Based :Overdraft, Cash Credit, Term loan, Bills Discounting Non Fund Based: Bank Guarantee and Letter of credit Loan Amount Minimum: Rs.5 lacs and Maximum: Rs 500 lacs. 7
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Tenor Pricing Security
Processing charges
TL: upto to 5 years. Max: BPLR Min: 1.25% below BPLR Hypothecation of stock & Book debts and asset financed by bank. Personal Guarantee of the borrower. Collateral security upto 110% of the loan amount Upto 1% on the loan amount.
DEALER FINANCE
Eligible Segments Facility Purpose Distribution chain partners comprising dealers, stockists, distributors, etc. Overdraft, Cash Credit, Term loan, Other working capital facilities OD/ CC: Working capital/ Meeting temporary mismatch of funds. TL: Acquisition of fixed assets, renovation of premises, retiring of high cost debt, etc. Other working capital facilities on case to case basis. Minimum: Rs.10 lacs and Maximum: Rs 500 lacs. One year to 3 years. Linked to BPLR Exclusive charge on all assets of the borrower. Personal Guarantee of the borrower. Collateral security as deemed necessary. Upto 1% on the loan amount.
Loan Amount Tenor Pricing Security
Processing charges
FUNDING UNDER CREDIT GUARANTEE FUND SCHEME FOR MICRO AND SMALL ENTERPRISES (CGFMSE)
Eligible Should be a Micro and Small Enterprise (manufacturing / services) as Segments defined under MSMED Act 2006. Purpose Working Capital & Term Finance for capex / takeover of existing loans Loan Amount Minimum: No minimum amount Maximum: Rs. 100 lakh. Tenor As per the facilities requested. Pricing Annual Service Fee and One time Guarantee Fee as specified by 8
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Security
Processing charges
Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE). Interest rate linked to BPLR. Guarantee cover from CGTMSE to the extent applicable on a case-tocase basis but not exceeding Rs.37.50 lakh. Exclusive charge on current and fixed assets purchased out of Banks finance. Personal guarantee of the borrower. No collateral/ 3rd party guarantee will be taken. Upto 1% of the loan amount.
BANK OF BARODA Bank of Baroda started its operation in the year 1908 in Baroda though its Corporate Centre is in Mumbai now. Bank of Baroda offers following products for SME financing:
BARODA VIDYASTHALI LOAN

To meet the financial requirements for setting up the institutions which includes construction of building, purchase of equipment etc. for the new set up as also renovation of the existing facilities, purchase of instruments for imparting education training to the students. Minimum Rs.15 lacs Maximum Rs.500 lacs Educational institutions, Schools, Colleges and other education bodies running education activities Note : HUF are not eligible. Equitable mortgage of Land & Building (not agricultural land). Security Hypothecation of Instruments & Equipment acquired out of the loan and other assets of the Educational Institution. Personal guarantees of the Promoters of the Institution 25% of the cost of the project. 0.50% below Banks BPLR from time to time. Maximum 84 months including moratorium period of 1 year, 9
Purpose
Quantum
Eligibility
Margin Interest Repayment
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depending upon the cash flow. Note: Scheme is operative at select centres only.
BARODA LAGHU UDHYAMI CREDIT CARD

To provide hassle free credit facilities to Small business units, retail traders, artisans, village industries, small scale industrial units and tiny units, professionals and self employed persons etc.
Purpose
Limit
Maximum upto Rs. 10/- Lakhs per borrower. All existing customers in the categories of Small Business, Retail Trade, Artisans, Village Industries, Small Scale and Tiny Units, Professional & Self Employed persons etc. having satisfactory track record / dealing with the bank for last 3 years. Hypothecation of stock in trade, receivables, machinery, office equipment etc. as specified for existing limit. 25% of the cost of the project.
Eligibility
Security
Margin The limit fixed under the scheme will be valid for a period of three years subject to internal annual review based on the conduct / operations of the account.
Period/Validity
BARODA AROGYADHAM LOAN

To meet the financial requirements for setting up of new Nursing Home/Hospital including Pathological Laboratory, Expansion/renovation/modernization of existing Nursing Home/ Hospital including Pathological Laboratory, Purchase of medical diagnostic equipments as also office equipments, viz. computers, air conditioners, office furniture, Purchase of ambulance etc and to meet working capital requirements. Rural Centres - Rs. 0.50 crores Semi-Urban Centres - Rs. 2.50 crores Urban & Metro Centres - Rs. 5.00 crores All entities other than individuals like Proprietorship, Partnership firms, Private Limited Companies and Trusts engaged in providing 10
Purpose
Limit
Eligibility
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Security
medical/pathological diagnostic services to the Society and with turnover upto Rs. 100/- crores. Equitable mortgage of Land & Building/premises of Nursing Home/Hospital Hypothecation of medical equipment/office equipment acquired out of loan amount. Personal guarantee of Promoter Directors in case of Limited Companies and Trustees in case of Trusts. Hypothecation of medicines, receivables and other chargeable current assets. Charge on unencumbered assets of Promoter Directors in case of Private Limited Companies, or any other collateral by way of FDR, mortgage of properties in the personal name of the relatives of Promoters, etc. As per credit rating of the borrower. 35 months to 84 months including moratorium depending upon the cash flow. UNION BANK OF INDIA
Rate of interest Repayment period
Union Bank is committed to extend its best services to Micro, Small and Medium enterprises and at a very competitive price.It offers following SME products and services:
UNION HIGH PRIDE
Term Loans for purchase of Machineries/equipments, construction of industrial shed/Gala for industrial units Working Capital needs of mid segment industrial firms Working Capital/Term Loans in case units/Business Enterprises/ Service units of Trading
Purpose
Quantum Nature of facility
Above Rs. 1 cr to Rs. 5 cr
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Working Capital / Term Loan
Eligibility
Companies / Trading firms / Business Enterprises/ Service units requiring credit facilities above Rs. 5.00cr up to Rs. 25.00cr OR Mid Corporate Enterprises with Investment in Plant & Machinery above Rs. 1 cr. Credit Rating of unit should be CR-4 or above
For Working Capital - based on Flexible Bank Finance method For Term Loan - as per extant guidelines for assessment of Term Loans Appraisal Ideal acceptable Financial Ratios: Current Ratio - 1.10:1 Debt Equity Ratio - 3.00:1 TOL/TNW - 4.00:1
Prime Hypothecation of current assets in case of Working Capital facilities and first charge on Plant & Machinery / equipment in case of Term Loan Security Collateral EM of factory land and building, wherever available. Advance to be covered by collaterals covering at least 20% of the exposure (FB+NFB) Personal guarantee of Promoters
Margin Repayment
20% of Working Capital and Term Loan
For Term Loans not to exceed 7 years including moratorium period 12
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UNION PROCURE
Purpose
Financing of receivables through bills discounting relating only to the products supplied by vendor to the concerned Corporate
Quantum Nature of facility
Minimum Rs. 25 lac and Maximum Rs. 5 cr Bill Discounting Scheme i.e. UBD
Eligibility
Selected vendors supplying to identified large Corporate borrowers of the bank
Prime DA bills drawn by Vendors duly pre-accepted by the corporate (with recourse to the vendor and Corporate in the event of dishonor) Security Collateral Tangible collateral security in the form of land, building, bank deposit etc. to cover at least 10% of the advance Personal guarantee of Promoters
BPLR + 0.25% Interest * As applicable with reference to the latest interest rate circular
Margin
Nil
Repayment
On maturity of the bill
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UNION SUPPLY
Purpose
Financing purchases of dealers through buyers bills discounting relating only to products supplied by the concerned corporate
Quantum
Minimum Rs. 25 lac and Maximum Rs. 5 cr
Nature of facility
Bills Discounting Scheme in the account of the dealer (Buyers UBD) drawn by the corporate
Eligibility
Selected authorized dealers of identified large Corporate borrowers of the Bank
Prime DA bills drawn by the Corporate duly accepted by the dealers OR accepted challans/invoice Security Collateral Tangible collateral security in the form of land, building, bank deposit etc. to be obtained to cover at least 30% of the advances Personal guarantee of Promoters
Interest
BPLR + 0.50% * As applicable with reference to the latest interest rate circular
Margin
Nil
Repayment
On maturity of the bill
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CANARA BANK Canara Bank was founded by Shri Ammembal Subba Rao Pai, a great visionary and philanthropist, in July 1906, at Mangalore, then a small port in Karnataka
TERM LOAN FOR ACQUISITION OF FIXED ASSETS

PURPOSE For acquisition of fixed assets (viz, land/building, plant/machinery, other fixed assets) towards setting up of new units and for expansion, modernization and diversification in case of existing units Depending on the project cost.
ELIGIBILITY Individuals, Proprietorship, Partnership, Ltd. Companies etc. QUANTUM REPAYMENT 36 months and above in monthly/quarterly/half yearly/yearly instalments depending on the cash generation and Debt Servicing capacity. SECURITY RATE OF INTEREST (subject to changes from time to time) I charge on fixed assets financed by us. Collateral Security and Personal/Third Party guarantee shall be insisted wherever required. SME-Manufacturing units Upto Rs.50000/: 9.50 to 10% Above Rs.50000/- upto Rs.2 lakhs: 11 to 11.50% Above Rs.2 lac: (Graded as per scoring norms): 10% to 14% SME-Services Upto Rs.50000/: 9 to 9.50% Above Rs.50000/- upto Rs.2 lakhs: 11 to 11.50% Above Rs.2 lacs: 12 to 14.50%
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STANDBY CREDIT FOR CAPITAL EXPENDITURE

A hassle free Instant Term Credit facility to existing SME entrepreneurs to acquire fixed assets Nature of limit Purpose Term loan For meeting unforeseen/contingent requirement for acquisition of fixed assets like generator set, balancing equipments, replacement of existing machinery items, tools, moulds, jigs etc to maintain production and/or to acquire necessary equipments/machinery for modernization of the unit Existing SME borrowers of the Bank having satisfactory dealings with ASCC S1 or S2 classification Quantum of loan is 25% of the original value of the existing plant and Machinery subject to a maximum of Rs.25 lakhs, at the time of each renewal of working capital limits Prime security - Assets created out of loan Collateral security & Personal/Third party Guarantee obtained for the existing credit facility shall continue Over 36 months and up to 60 months in monthly/quarterly instalments. Interest to be repaid as and when due 15 to 25% of the cost of the fixed asset proposed to be acquired from the loan Upto Rs.2 lakhs: 11.75% to 13.25% Above Rs.2 lakhs to Rs.25 lakhs: 12.50% to 15.25% (on graded parameters)
Eligibility Maximum limit Security
Repayment Margin Rate of interest
SIMPLIFIED OPEN CASH CREDIT (SOCC)

A LIBERALISED credit facility to Small Entrepreneurs who are not in a position to maintain detailed stock books. PURPOSE MAXIMUM LIMIT SECURITY For working capital needs of Small Enterprises units. Facility available as Running Limit. Rs.5 lakhs only Prime security - Assets created out of the credit facility No collateral security for loans upto Rs.5 lakhs Facility is permitted as a Running Limit subject 16
REPAYMENT
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to review /renewal every year GURANTEE COVER Cover under Credit Guarantee for Micro and Small Enterprises (CGMSE) is available wherever collateral security and/or third party guarantee is not taken
OPEN CASH CREDIT SCHEME (OCC)

A RUNNING credit facility to Small & Medium Sector entrepreneurs against stocks and receivables. PURPOSE ASSESSMENT OF LIMIT For working capital needs of SME units. Depending on the working capital requirement of the unit assessed as per turnover method/MPBF System/Cash Budget System. Drawings from the account shall be against Drawing limit arrived based on stocks such as raw materials, work-in-process, finished goods and receivables. Whenever required, Overdraft against Book debts (ODBD) is also permitted against book debt of specific age arising out of genuine trade transactions with Govt./Public Sector Undertakings/Joint Stock Companies/firms of repute. SECURITY Prime security - Stocks, receivables. Collateral security - Land and building, plant and machinery plus personal guarantee shall be obtained whenever applicable. REPAYMENT GUARANTEE COVER Since the limit is permitted as running limit, the limit is renewable every year subject to review. Cover under Credit Guarantee Fund for Small Industries (CGFSI) is available wherever collateral security or third party guarantee is not taken
CHAPTER 2
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REVIEW OF LITERATURE
Wtterwulghe, R. and Jannsen, F (1997) conducted a research and analyzed the role of banks in financing medium enterprises in Belgium. It shows that, like small firms, mediumsized businesses have a preference for self-financing. As far as external funding is concerned, debt is generally their main source. How ever, their low debt ratios indicate that, as compared to the large firms, these enterprises take less recourse to banks and, as a result, pay little attention to their financial function. The banker does not play an important role as an adviser either, except when the firm decides to raise funds through the stock market. The article calls for greater specialisation on the part of the banks so that they can avoid conflicts of interest arising out of the mismatch between their service priorities and the needs of their clientele Kaura, M.V. and Sharma, G.L. (1999) made a research and analyzed the attitudes of the financial institutions whether belong to Central Government or state Government or the Governmental Agencies promoted for this purpose. In the wake of the MSME Act, 2006 passed in the interest of the small scale sector by the Government of India, the attitude of the financial institutions towards SME sector is totally changing. New innovations are being made for fulfilling the financial needs of SME units. The attitude of the Employees of above said financial institutions is also changing. Raju, B.Y. (2002) conducted a research by revisiting the Seoul and Bologna Charters on the SMEs and clarifies that the SME definition centers round the small scale industries in the absence of a clearly defined medium industry sector in India. A review of the policy, laws and the regulatory and institutional framework has been done in sufficient detail with a view to highlighting the fact that the SSIS in India require globally compatible facilitation in order to be competitive both domestically and internationally. The author maintains that easy and adequate institutional finance support is a necessary but not sufficient condition for the growth of this dynamic and vibrant sector. He envisages a clear role for the Small Industry Associations recognized on the basis of well-defined criteria. He argues for a quick enactment of a comprehensive enabling law for the sector and for restructuring the office of the DC-SSI, to attain the envisaged competitiveness.Murali, S. and Lakshminarasimha, A. (2003) conducted a research and and analyzed the role played by Indian banks in its development. The perception of the SME clients and the bankers about 18
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one another is not fully true and hence, it was important to bring about a change in the mindset of both. Bankers should look beyond financing or lending and aim at efficient and quick customer service in serving SME clients. It was suggested that the bankers hold clients meet regularly, in order to understand the needs and grievances of SMEs and offer tailor-made products that would help in removing the bottlenecks in their growth to a great extent. The latter part of the article explained various strategies by banks such as advisory services, KPO receivables finance etc., that can be extremely useful for providing financial support to the SMEs.Anand, C. (2005) in this article opined that the SME sector was receiving financial help with the support of the World Bank, besides explaining the characteristics unique to Indian SMEs. A loan of $120 mn recently approved by the World Bank to the SIDBI aimed at improving SME access to finance and business development services, thereby fostering SME growth. Regenerating SME financing in India was essential as the sector serves as a greenfield for nurturing entrepreneurial talent. The setting up of Small Industries Development Bank of India (SIDBI) in April 1990 as the principal financial institution for financing and developing SSIs, was a major step initiated by the GOI towards promotion of the SMEs in India. The article concluded that an increased focus by the Indian Banks and financial institutions on providing micro finance, factoring assistance, etc., at reasonable costs would go a long way in making SMEs domestically as well as globally competitive, leading to economic growth.Yifu, L.J. and Xifang, S. (2005) conducted a research and concluded that Informal finance exists extensively and had been playing an important role in small- and medium-sized enterprise (SME) financing in developing economies. This paper tried to rationalize the extensiveness of informal finance. SME financing suffers more serious information asymmetry to the extent that most SMEs were more opaque and can only provide less collateral. Informal lenders had an advantage over formal financial institutions in collecting soft information about SME borrowers. This paper establishes a model including formal and informal lenders and highand low-risk borrowers with or without sufficient collateral and shows that the credit market in which informal finance was eliminated allocated funds in some inefficient way, and the efficiency of allocating credit funds can be improved once informal finance was 19
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allowed to coexist with formal finance.Pathrose, P.P. (2005) in his article said that as the sector was characterised by information asymmetries and high processing costs, banks were reluctant to lend to SMEs. With the Government soon to put in place a rating mechanism for SMEs, however, and armed with better risk information, banks can now use technology for effective credit delivery. The Government of India recently unveiled a policy package aimed at stepping up credit flows to the small and medium sector. The Government felt that a separate category of medium enterprises (MEs) needs to be recognised and, accordingly, the new policy package clearly defines the medium enterprises as those units having investment in plant and machinery above the small-scale industry limit and up to Rs 10 crore. The biggest problem the SMEs face is the nonavailability of adequate financing facilities. Recognising the vast potential of the SME sector, banks have positively responded by providing adequate credit to the small and medium units. Bank credit to SSIs has increased from Rs 16,800 crore in March 1991, when the structural reforms began, to Rs 58,300 crore in respect of public sector banks. He concludes by saying that banks need to innovate their delivery platforms by using Internet banking, mobile banking and card-based platforms for delivery of transaction-banking as well as credit products, and enhance the service element. SMEs look for convenience and simplicity in their banking requirements and banks should deliver these through an effective use of technology. Sisodiya, A.S. (2005) conducted a study and attempted to throw light on the tremendous challenges faced by SMEs to survive and sustain, as the process of globalization and liberalization gathers momentum across the globe. Small and Medium Enterprises (SMEs) had played an important role in the growth of domestic economy for long. Some of the major challenges faced by SMEs include lack of access to finance, low R&D investment, lack of access to technology, lack of product innovation, increasing competition, etc. Earlier, banks were not showing interest in financing SMEs due to problems attendant on them. Nowadays, though bankers were willing to extend loans to SMEs, efforts were still needed to improve cooperation between SMEs and the lenders. SMEs too, on their part, were gearing up to meet the challenges arising out of the changing business environment. 20
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The article concluded on the note, that the above efforts had proved to be extremely promising for the SME sector, which aims to make it big in the realm of domestic as well as international business arena.Bergera, A.N. and Gregory, F.U. (2006) conducted a research and proposed a more complete conceptual framework for analysis of SME credit availability issues. In this framework, lending technologies were the key conduit through which government policies and national financial structures affect credit availability. They emphasized a causal chain from policy to financial structures, which affect the feasibility and profitability of different lending technologies. These technologies, in turn, have important effects on SME credit availability. Financial structures include the presence of different financial institution types and the conditions under which they operate. Lending technologies include several transactions technologies plus relationship lending. They argued that the framework implicit in most of the literature was oversimplified, neglected key elements of the chain, and often yielded misleading conclusions. Beck, T. and Kunta, A.D. (2006) conducted a research and presented recent research on access to finance by small and medium-size enterprises (SMEs). SMEs form a large part of private sector in many developed and developing countries. While cross-country research sheds doubt on a causal link between SMEs and economic development, there is substantial evidence that small firms face larger growth constraints and have less access to formal sources of external finance, potentially explaining the lack of SMEs contribution to growth. Financial and institutional development helps alleviate SMEs growth constraints and increase their access to external finance and thus levels the playing field between firms of different sizes. Specific financing tools such as leasing and factoring can be useful in facilitating greater access to finance even in the absence of well-developed institutions.Murthy, G.K. (2006) conducted a research and focused on the various policy initiatives for the development and financing of small and medium enterprises the world over. The article discussed the definitions of and approaches to SMEs in a cross section of countries in the world. The article also threw light on the various policy initiatives on the part of the Government, RBI and banks in extending financial support to the SME sector on liberalized terms and thus indirectly contributing to the robustness of the Indian economy. RBI had asked the banks to 21
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adopt the new definition of SME as contained the SME Bill-2005. The enactment of the SME Bill in 2005 by the Government of India, besides providing a thrust for intensifying the financing of SME Sector by banks and financial institutions, had also spelt out other measures to empower the SME sector which was the progressive contributor to the economy. In a competititive environment, with better management attributes being displayed by the entrepreneurs, banks, of late, had started responding more positively to the financial needs of the SME sector, which was a redeeming feature.Anon. (2006) conducted a study and postulated a "financing gap" for small and medium-sized enterprises (SMEs), meaning that there were significant numbers of SMEs that could use funds productively if they were available, but cannot obtain finance from the formal financial system. This article summarises an OECD report (OECD, 2006) on this topic which seeks to determine how prevalent such a gap may be - both in OECD countries and non-member economies and recommends measures to foster an improved flow of financing to SMEs.Nambiar, P.C.D. (2007) conducted a research on financing for the priority sectors that paved the way for thinking strategy for financing of small scale and medium scale industries by the bank officers. The government of India through its industrial policy clearly stated that the commercial banks should give priority treatment to the SMEs. The nature of the banking officials was also discussed in the article. But that is not sufficient to promote the SME sector because the sector was totally neglected for the last several decades due to invention of the MNCs. By enacting the MSME act, 2006, the government of India clearly indicated the signal to the banking people to provide the credit facilities to the SMEs.Raju, K.D. (2008) conducted a study and analyzed that SMEs form the backbone of the Indian manufacturing sector and have become engine of economic growth in India. It is estimated that SMEs account for almost 90% of industrial units in India and 40% of value addition in the manufacturing sector. This paper closely analyses the growth and development of the Indian mall scale sector from opening of the economy in 1991. Third part looks into the present scenario of SMEs and the problems they phases like lending, marketing, license raj issues in detail. The Micro, Small and Medium Enterprises Act, 2006 is intended to boost the sector. The provisions of the Act are examined closely. The final 22
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part provides some future policy framework for the sustainability of the sector.Rani, B.S. and Rao, K.D. (2008) conducted a research that Small and Medium Enterprise sector is a vibrant and dynamic one, and an engine of growth for the present millennium. Financing of Micro and Small Enterprises (MSEs), which is part of the SME sector, has been given special attention by banks and financial institutions, and is included in priority sector lending. In spite of the special efforts, only 14.3% of registered small enterprises have availed institutional credit, as per the 3rd All India Census of Small Scale Industries of 2001-02. From 2000 to 2004, institutional credit for MSEs has shown disturbing trends, despite the high level of liquidity in the banking system and the initiatives taken by the Union Government and Reserve Bank of India (RBI). This paper examines the recent trends in credit flow to MSEs, in particular, and medium enterprises, in a limited way, from commercial banks and the Small Industries Development Bank of India (SIDBI), and outlines the recommendations of A S Ganguly Working Group and Internal Group chaired by C S Murthy. The Union Finance Ministry's directive to public sector banks is to double the credit flow to SMEs during the five-year period 2005-10. The year, 2005-06 has shown good progress in this direction. The task is to be pursued vigorously in the next four years, of which 2006-07 has been completed with encouraging performance. Innovative approaches and directions for the future are presented in the paper. SMEs need special treatment through devising special instruments of credit for strengthening their competitiveness.Torre et al (2008) made a research and investigated the conventional wisdom in academic and policy circles argues that, while large and foreign banks are generally not interested in serving SMEs , small and niche banks have an advantage in doing so because they can overcome SME opaqueness through relationship lending. This paper shows that there is a gap between this view and what banks actually do. Banks perceive SMEs as a core and strategic business and seem well positioned to expand their links with SMEs. The recent intensification of bank involvement with SMEs in various emerging markets documented in this paper is neither led by small or niche banks nor highly dependent on relationship lending. Rather, all types of banks are catering to SMEs and larger, multiple-service banks have in fact a comparative advantage in offering a 23
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wide range of products and services on a large scale, through the use of new technologies, business models, and risk management systems.Mercieca et al (2009) conducted a research and analyzed that how the concentration and competition in the European banking sector affects lending relationships between small and medium sized enterprises (SMEs) and their banks. Recent empirical evidence suggests that concentration and competition capture different characteristics of banking systems. Using a unique dataset on SMEs for selected European regions, we empirically investigate the impact of increasing concentration and competition on the number of lending relationships maintained by SMEs. They find that competition has a positive effect on the number of lending relationships, weak evidence that concentration reduces the number of banking relationships and weak persistent evidence that they tend to offset each other.Popli, G.S. and Rao, D.N. (2009) made a research that in banking sector, the quality of customer service plays an important role, particularly in the context of growing competition and sustained business growth. The study is an attempt to ascertain the service quality provided by Public Sector Banks to Small & Medium Enterprises which play a key role in Indias economy. The major findings of the study have been that 1. Modernization and Communication affect the services to a large extent and there is a need of training to the staff for improvement of service to the SMEs customers; 2. The service quality of private banks is superior to that of Public sector banks; 3. Majority of the respondents revealed that the credit flow to SMEs sector is not sufficient and the Government will have to initiate necessary steps for making the required funds available easily on convenient terms; 4. Majority of the respondents feel that the policies for SME Sector of other countries are far better from the policies of India; 5. Delay in loan application processing due to unhelpful nature of the staff members, as claimed by the majority of the respondents. The banks usually provide finance against security and as high as 86% of the respondents are of the view that the banks ask for collateral security/guarantee from a third party even where the project has been assessed as viable and primary security is adequate.Popli, G.S. and Rao, D.N. (2009) conducted a study and analyzed that Small and Medium Enterprises have been globally recognized as vital components of a domestic economy and major contributors to 24
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employment generation in a country, regardless of global barriers. SMEs form the lifeblood of any vibrant economy. In an emerging economy like India, SMEs have a significant socio-economic role to ensure overall development of the nation. Electronic Sector is an upcoming sector in India. The Indian Electronic Industry is undergoing transformation due to the new economic policy and business environment in the post WTO regime. This paper examines the problems, strategies for investments, competences development, technological up gradation, quality improvement, Govt. Policies, Equity participation by MNCs and overall improvement of this sector in the post WTO regime. The study has been done by using data acquired from an extensive survey of Indian SMEs in the Textile Sector and from the experienced Bankers/ Officials/Policy makers of Govt. of India. The key findings of the study are that lack of quality consciousness, growth conducive environment, inadequate government support and difficulties in raising funds from market. Further, the study highlights the need to upgrade technology in the Indian Electronic SME Sector and also develop a strong and supportive Financial System.Agrebi, M. (2009) conducted a research and concluded that Small and medium-sized enterprises need adequate financing to meet needs at each stage of their life cycle, from creation through operation, development, restructuring, recovery and beyond. If the financial structure is skewed, dominated by short-term credit to the detriment of medium and long-term debt, then an SME's life is likely to be cut short. Tunisia has introduced some very effective instruments to strengthen the equity position of SMEs. There are tax breaks for parties who subscribe to and participate in the capital of SMEs. This translates into a reduction of the tax base at variable rates and consequently a lower income tax burden at the end of the year. There is flexible and light taxation for venture capital investment companies and venture capital mutual funds, which hold shares in the capital of SMEs, notably those run by highlyeducated people, SMEs established in Regional Development Zones, SMEs specialized in new technologies, and so on.The perusal of literature reveals that Small and Medium enterprises face a lot of problems, and inadequate financing is the major one. A rich literature house has been developed over time, mostly in foreign countries, with regard to SME funding. A very few studies has been conducted in India regarding the effectiveness 25
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of SME financing schemes of the public sector banks. That is why a need was felt to conduct a study in Indian context and that too in case of SME financing schemes of public sector banks and their usage that has not been extensively researched.
CHAPTER-3 NEED, SCOPE AND OBJECTIVES OF THE STUDY

Need of the study The Study relating to SMEs, their problems and customer satisfaction level of public sector banks & to get information from smes(through Questionnaire) so that this study aware entrepreneur (sme) to know which schemes benefit them or give 26
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them good return .and motivate those smes who are not yet invest in any of these public sector banks. Scope of the study The study is conducting in Punjab i.e in 3 cities of Punjab i.e. Jalandhar , Phagwara and ludhiana. In Punjab we are taking public sector banksSBI, Canara bank, IDBI, Union bank of india ,bank of baroda.
Objectives of the study Primary objective To know SME satisfaction towards sme financing schemes of public sector banks. Secondary objective To know the problems faced by SMEs in getting credit from public sector banks
CHAPTER 4 RESEARCH METHODOLOGY

RESEARCH DESIGN Descriptive Research Descriptive research, also known as statistical research, describes data and characteristics about the population or phenomenon being studied. SAMPLING DESIGN 27
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It includes the SMEs in Ludhiana, Phagwara and Jalandhar. Structure of research Investment of SME from 1 lacs to 5 crore. Sample Frame-Sample frame is Small and Medium enterprises all over punjab. Sample Unit- The sampling unit of the present study was SMEs located in Ludhiana, Phagwara and Jalandhar in Punjab. Sample Size- Keeping in mind all the constraints 75 respondents were selected. Sampling Techniques- The sampling techniques use will be Quota Sampling.In quota sampling, the population is first segmented into mutually exclusive sub-groups, just as in stratified sampling. Then judgment is used to select the subjects or units from each segment based on a specified proportion.we use 25 respondents from each city i.e phagwara, jalandhar &Ludhiana. To select the individual and the element we used the convenience sampling which is a non probability sampling. We have used the simple random sampling in choosing the city out of various city of Punjab and in choosing the different public sector banks of various cities of Punjab. DATA COLLECTION AND ANALYSIS Data Collection: Information has been collected from both Primary and Secondary sources of data collection.
Primary sources- Primary data will collected through questionnaire.
Secondary sources- Secondary data will collected through websites and journals, Magazines etc
METHOD OF DATA ANALYSIS The scientific method is used for the data analysis of the collected data.SPSS ,the graphical presentation, tools such as pie-charts are applied to analyse the data.
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CHAPTER-5 ANALYSIS & INTERPRETATION OF QUESTIONNAIRE

Q1. Have you ever raised finance from public sector banks? ANALYSIS: FIGURE
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7%
Yes No
93%
INTERPRETATION: From the above chart it is evident that 93%(70 respondents) of the SMEs have taken loan from the public sector bank and 7%(5 respondents) is not taken. This shows that public sector banks are the most popular source of SME financing. Q.no.2 In which bank you have SME financing account ? Banks No. of Respondents SBI 16 IDBI 18 Bank of Baroda 10 Union bank of india 14 Canara bank 7 Any other 5 total 70 % of no. of Respondents 22.7 25.5 14.3 20 10 7.14 100
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Interpretation This chart shows enterpreneurs having account in IDBI bank as 25.5% enterpreneur having account in this bank and after that some enterpreneur having account in SBI 22.7% ,Union bank of india 20%,bank of baroda 14.3%,Canara bank 10% ,& just 10% Enterpreneur is refer any other banks. Q.no.3 Which banks SME scheme are you using? Schemes SBI-Open term loan SBI-prayatan plus loan SBI-SME credit plus IDBI-Sulabh vyapar loan IDBI-Dealer finance IDBI-Funding under credit scheme BOB-Baroda vidyasthali BOB-Baroda laghuudhymi UBI-Union high pride UBI-Union Procure UBI-Union supply CB-Term loan of acquisition of fixed asset CB-Stand by credit for No.of respondents 3 6 6 16 6 4 5 3 1 2 1 4 1 31 % of respondents 4.3 8.57 8.57 22.86 8.57 5.71 7.14 4.28 1.43 2.85 1.43 5.71 1.43
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capital expenditure CB-Simplified open cc CB- Open cash credit any other TOTAL
3 5 4 70
4.28 7.15 5.72 100
INTERPRETATION : This interpretation shows that is SMEs prefer mainly IDBI-sulabh vyapar loan, than prefer SBI-Prayatan plus loan,SBI-SME credit plus and IDBI-dealer finance and then prefer CB32
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open cash credit and 5.72% prefer any other banks this shows customer satisfaction is more for is IDBI-sulabh vyapar loan.
Q4. For what purpose, your enterprise has taken loan? ANALYSIS: TABLE: 1.23 Purpose Of Taking Loan Real estate acquisition to house the business To increase the production Construction, renovation or leasehold improvements For the flooring of inventory and for working capital For modernization and upgradation of technology Others Total No. Of Respondents 8 20 9 19 9 5 70 %Age Of Respondents 11.42 28.58 12.86 27.14 12.86 7.14 100
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FIGURE:
INTERPRETATION: From the above data we come to know that majority of the SMEs take the loan for increase production and next for inventory and working capital. Most of the firms are taking loans for fulfilling their frequent needs for the capital. For technological upgradation and modernization, 7.14% for others. Q.5 Please indicate your level of satisfaction with various aspects of obtaining finance from your choosen scheme of public sector banks.Kindly rate them on 5-point scale basis; 5 being strongly satisfied and 1 being strongly dissatisfied:
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Total Variance Explained Extraction Sums of Squared Initial Eigenvalues Compo nent 1 2 3 4 5 6 7 8 9 10 Total 3.497 2.919 1.072 .821 .714 .400 .350 .169 .057 % of Variance 34.975 29.191 10.719 8.211 7.137 4.002 3.501 1.690 .574 Cumulativ e% 34.975 64.166 74.885 83.095 90.233 94.235 97.736 99.426 100.000 100.000 Total 3.497 2.919 1.072 Loadings % of Variance 34.975 29.191 10.719 Cumulativ e% 34.975 64.166 74.885 Total 3.272 2.357 1.859 % of Variance 32.722 23.574 18.589 Rotation Sums of Squared Loadings Cumulativ e% 32.722 56.296 74.885
1.050E-15 1.050E-14
Extraction Method: Principal Component Analysis.
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Rotated Component Matrixa Component 1 amountguranted applicationform interestrate servicefee timeobtainforapproval guranterequired behaviorofstaff easysecurity onlineaccountbenefits otherinformationdetails -.118 -.329 -.045 .612 .273 .560 -.030 .786 .940 .940 2 .723 .631 .912 .293 .618 .151 .170 -.184 -.161 -.161 3 .235 .388 -.101 -.090 .447 .742 .913 .201 .073 .073
Extraction Method: Principal Component Analysis. Rotation Method: Varimax with Kaiser Normalization. a. Rotation converged in 5 iterations.
INTERPRETATION :In this factor analysis through our Null hypothesis(HO) is All the Factors have same importance for SME for financing. And the Alternate hypothesis(H1) is All the Factors have different importance for SME Financing. So after applying the test we came to know that our null hypothesis is rejected because three component contribute more and our seven factor are contributing less . Out of these 10 factors(1) first factor include easy security, online account benefits & other information and we named this is technology used by banks. (2) the second factor include amounte guaranteed and interest rate and we named this factor is monetary benefits provided by banks. (3)And the last factor include guarantee required and behavior of staff and we named this factor as customer service provided by banks.
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Q.6 How many days it take to get finance after applying? Time taken Less than one month Less than two month Less than three month More than three month total No. of respondents 26 32 7 5 70 % of respondents 37.14 45.71 10 7.14 100
INTERPRETATION : Time taken to get finance after applying is 45.71% less than two month and 37.14 is less than one month and 10% SMEs rply time taken is 10% Less than three month and 7.14% is more than three month .it shows enterpeneur are getting loan mostly in less than 2 months and least are facing problem of getting finance in more than 3 months.
Q7. What were the problems faced by your enterprise in raising finance from public sector banks? ANALYSIS: 37
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TABLE: Problems Faced Insufficient collateral Poor documentation Delay in the sanction of loan Cost involved is high Biasness High rate of interest We were turned down before Procedure to obtain this type of financing is too complicated The process is lengthy Too much of documentation is required Total No. Of Respondents 5 10 12 4 3 4 5 9 13 5 70 %Age Of Respondents 7.14 14.28 17.14 5.71 4.28 5.71 7.14 12.87 18.59 7.14 100
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INTERPRETATION: The most common problem faced by SMEs in raising finance is the process is lengthy with 18.59% delay made in sanctioning the loan with 17.14%.The public sector bank employees work very slowly and usually an application takes a lot of time for 39
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approval.14.28% respondents say poor documentation was one another problem faced by them.12.87% procedure to obtain this finance is complicated.. Q.8 Will you prefer these schemes to other SMEs? ANALYSIS: TABLE Public Sector Bank Schemes Yes No Total 44 26 70 62.86 37.14 100 No. Of Respondents %Age Of Respondents
INTERPRETATION:. From 70 repondents 62.86% want these SME schemes to refer it to others and 37.14% do not want to refer it to other reason. So we can say that 70 respondent are satisfied so they refer it to other and 5 respondents are may facing problems or may with other reason they donot want to refer it to other.
CHAPTER-6
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FINDINGS,CONCLUSION & RECOMMENDATIONS OF THE STUDY FINDINGS

After undertaking the study, the following findings were made about the usage of SME financing schemes of the public sector banks: SMEs raise financ through Public sector banks The reason was low rates of interest which gives them capital at low cost. The service fees and bank charges were also less which results in low cost of financing than the other sources. IDBI-Sulabh vyapar loan was the most popular scheme of public sector banks for financing SMEs . Most of the firms were taking loans for increasing their production. They took credit for the flooring of inventory and working capital. They had taken loans for technological upgradation also as SMEs require capital to upgrade their technologies which is changing at a very fast phase.
The most common problem faced by SMEs in raising finance was the delay made in sanctioning the loan. Poor documentation was another common reason. The public sector bank employees work very slowly and usually an application takes a lot of time for approval. Biasness and insufficient collateral were another problems faced by them.
Most of the respondents face two months to get finance for applying because of the lengthy process involved and because they were turned down before. Some of the respondents did not apply for loan from these schemes as too much of documentation was required. The time to obtain the approval for loan and documentation involved demotivates the SMEs.
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Most of the respondents were satisfied with the interest rate charged, amount of loan sanctioned and service fees .Respondents showed their dissatisfaction regarding time to obtain the approval, behaviour of the bank staff.
From overall view of these five banks is that,Most of respondents were of the opinion that there is need for support to innovative technological companies. Government should also provide guidance for upgrading skills and knowledge of entrepreneurs, that assistance and support should be provided for the revival of sick units as the number of sick SME units is increasing at a rapid rate.
Out of these 10 factors, the main problems faced by smes in raising finance online account benefits & other information details,easy security,interest rate & amount guaranted ,guarantee required are 3 more important components compared to others.
CONCLUSION
Over a period of time, it has been proved that SMEs are dynamic, innovative and most importantly, the employer of first resort to millions of people in the country India has a vibrant SME sector that plays an important role in sustaining economic growth, increasing trade, generating employment and creating new entrepreneurship in India. But the SME sector faces a lot of obstacles in obtaining adequate finance. Government of India has started a number of SME financing schemes in its public sector banks .These public sector banks are playing a major role in the development of SME sector in India. But due to few obstacles, these schemes are not as effective as they should be. The review of researches has showed that SME sector plays an important role in the economic development of a country but obtaining adequate finance has emerged as a major problem faced by SMEs. The need, scope and objectives of the study provided the framework for further research. The basic purpose of conducting the study was to study the usage of SME financing schemes of the public sector banks. The data was collected from SME units. Various tools of data analysis and interpretation were used for carrying out the research. The major 42
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findings of the study were that bank financing is the most popular source for financing SMEs in India. The SME financing schemes provide credit to this sector at low rates of interest and at attractive conditions but the procedure involved is lengthy. Moreover, too much of documentation is required .Insufficient collateral and biasness are also the major problems. The re-orientation program, workshops and seminars should be organized at district level to provide latest information to the SMEs about the various SME financing schemes of the public sector banks. New credit products may be developed to take care of the diverse, unexpected and short-term requirements of the SME customers in a hassle free manner and in a short time the easier. process followed in sanctioning the loan and documentation required is cumbersome; hence it is suggested to make the process
RECOMMENDATIONS
After carrying on the study, the following recommendations have been made: The re-orientation program, workshops and seminars should be organized at district level to provide latest information to the SMEs about the various SME The process followed in sanctioning the loan and documentation required is cumbersome; hence it is suggested to make the process easier. As SME customers are proprietorship type of customers, it is essential for the banks to closely focus on the non-financial parameters also during appraisal (i.e. ability of person behind the show).financing schemes of the public sector banks. At present, there is a vast gap between requirements of the SME customer and availability of suitable/matching products and services in the public sector banks. New credit products may be developed to take care of the diverse, unexpected and short-term requirements of the SME customers in a hassle free manner and in a short time.
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The appraisal system is to be made more realistic and transparent. The applicant and if required, his consultant, should be briefed on the objective procedures which bank applies to arrive at decisions so as to educate them to understand the requirements of bank and to prepare credit proposals in a scientific manner .
As SME customers are proprietorship type of customers, it is essential for the banks to closely focus on the non-financial parameters also during appraisal (i.e. ability of person behind the show).
Small entrepreneurs should make feasibility studies before they finalize their projects. They should undertake only such projects which are technically, operationally and economically and financially viable.
The problem that the SMEs face while acquiring funds from Public sector Banks is that their financial systems lack transparency. Credit Ratings can benefit both the parties. The credit ratings will give Public sector Banks ratings an easy access to the financial information of SMEs that highlight the unit's strength and weaknesses, making it easy for them to take a decision while lending.
Most SME customers have to make several small payments through cash, bankers cheques or drafts. Banks may capitalize on emerging electronic payment and settlement systems such as ECS, EFT, RTGS, etc., to offer customized and cost effective retail payment/remittance solutions or cash management services to the SME customers.
Public Sector Banks should develop flexible systems and procedures for dealing with SME customers and modify their role to be a facilitator. It may either provide software to these customers to prepare stock and financial statements or help and guide them in preparation of renewal proposal / statements.
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Banks may publish periodicals/magazines to disseminate information pertaining to various schemes of bank & RBI and other tax related policy matters. It may also provide the same information through e-mails.
REFERENCES
Anand, C. (2005), SME Financing: The Indian Scenario,. Business Line.vol.5 45
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Anon. (2006) The SME Financing Gap: Theory and Evidence,.Financial Market Trends, vol no. 91, pp. 87-95 Agrebi, M. (2009), Financing SMEs,. Organisation for Economic Cooperation and Development. The OECD Observer, vol no. 275, pp. 22-24. B.Y Raju,. (2002), Small Scale Industries In The Liberalized Era Beg For Attention. Global Business Review, Vol. 3, Issue no. 2, pp. 351-367. Bergera, A.N. and Gregory, F.U. (2006), A more complete conceptual framework for SME finance Journal of Banking & Finance, Vol. 30, Issue no. 11, pp. 2945-2966. Beck, T. and Kunta, A.D. (2006). Small and medium-size enterprises: Access to finance as a growth constraint; Journal of Banking & Finance, Vol. 30, Issue no. 11, pp. 29312943. et al Torre (2008), Bank Involvement With Smes: Beyond Relationship Lending.World Bank Policy Research Working Paper Series, Vol.1, Issue no. 7. Kaura, M.V. and Sharma, G.L. (1999). Financing Small Issue no. 3. Kothari, C.R. (2002), Research Methodology. Edition 2005. New Delhi: Tata McGraw Hill. K.D Raju,. (2008), .Small And Medium Enterprises (Smes) In India: Past, Present And Future. PHDCCI Working Paper, Vol. 10. Murali, S. and Lakshminarasimha, A. (2003), Role of Banks in the Development of SMEs, Journal of Banking and Finance, Vol. 22, Issue no. 3, pp. 65-72. Murthy, G.K. (2006), Policy Initiatives for Financing Small and Medium Enterprises, Journal of Banking & Finance, Vol. 30, Issue no. 10, pp. 1168-1178. Mercieca, S. and Scheack, C. (2009), Bank Market Structure, Competition And SME Financing Relationships In European Regions Journal of Financial Services Research, Vol. 36, Issue no. 3, pp. 137-155. Industries Institution Should Change Their Attitudes, Procedures, Journal of Industry and Trade, Vol. 34,
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Popli, G.S. and Rao, K.D. (2009), An Empirical Study Of Smes In Electronics Industry In India Retrospect & Prospects In Post WTO Era. Global Business Review, Vol. 3, Issue no. 2. Popli, G.S.and Rao, D.N. (2009), Service Quality Provided By Public Sector Banks To SME Customers: An Empirical Study In The Indian Context Journal of Financial Services Research, Vol. 4 Rao, D.N Rani, B.S. and. (2008), Financing Small enterprises: Recent Trends. ICFAI Journal of Entrepreneurship Development, Vol. 5, Issue no. 1, pp. 6-22. Sisodiya, A.S. (2005), SMEs in India: Future Perfect PHDCCI Working Paper, Vol. 6. Wtterwulghe, R and Janssen, F (2005), .The Role Of The Banker In Financing Medium Sized Firms In Belgium: Lender Or Advisor Journal of Entreneurship, Vol. 6, Issue no. 1, pp. 75-85. Yifu, L.J. and Xifang, S. (2005), Information, Informal Finance and SME Financin. Economic Research Journal, Vol. 7.
Annexure
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QUESTIONNAIRE
Objective To check the satisfaction level of Small and Medium enterprises regarding SME financing schemes of the public sector banks &problem faced by SMEs. Q.1 . Have you ever raised finance from public sector banks? a) Yes If no than go to question no.10 Q.2 In Which bank you have SME financing account ? a) SBI b) IDBI c) Bank of Baroda e) Canara Bank d) Union Bank of India f) Any other.. b) No
Q.3 Which Bank s sme schemes are you using? a)SBI-Open term loan c)SBI-SME credit plus e)IDBI-Dealer finance g)BOB-Baroda vidyasthali i) UBI-Union high pride k)UBI-Union supply b) SBI-prayatan plus loan d)IDBI-Sulabh vyapar loan f)IDBI-Funding under credit scheme h)BOB-Baroda laghuudhymi j)UBI-Union Procure l)CB-Term loan of acquisition of fixed asset n)CB-Simplified open cc
m)CB-Stand by credit for capital expenditure O)CB- Open cash credit
p) Any other
Q4. For what purpose, your enterprise has taken loan? a) Real estate acquisition to house the business b) Increase the production c) Construction, renovation or leasehold improvements d) For flooring of inventory and working capital 48
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e)For modernization and upgradation of technology f)Others Q.5 Please indicate your level of satisfaction with various aspects of obtaining finance from schemes of your public sector banks.Kindly rate them on 5-point scale basis; 5 being strongly satisfied and 1 being strongly dissatisfied: Strongly Satisfied Neutral Dissatisfied Satisfied Strongly Dissatisfied
1) The amount granted by the bank relative to the amount requested 2) The simplicity of the application form 3) Interest rate 4) Service fees 5) Time to obtain approval 6) Guarantees required by the institution 7) Behavior of the bank staff 8)Easy security taken by banks 9) Online accounts 10)Detail Information about other schemes Q.6 How many days it take to get finance after applying? a) less than one month b) less than two month c)less than three month d)more than three month Q.7 What were the problems faced by your enterprise in raising finance from public sector banks? a) Insufficient collateral b) Cost involved is high 49
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c) Excessive documentation e) Delay in the sanction of loan g)We were turned down before complicated i)The process is lengthy required.
d) Biasness f) High rate of interest h) Procedure to obtain finance is j) Too much of documentation is
Q.8 Will you prefer SMEs schemes to any entrepreneur ? a) Yes Q.9 Any Comments? ..
b) No
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To Check The Satisfaction level of Small and Medium Enterprises Regarding SME Financing Schemes of the Public Sector

Banks & Problem faced by SMEs.

CHAPTER - 1 INTRODUCTION INTRODUCTION TO SMEs

ROLE OF PUBLIC SECTOR BANKS IN SME FINANCING

Private sector abnks 25%

Public sector banks 57%

. Inspection/Survey of SME by the Executives of that Local branch.

VARIOUS BANKS AND THEIR SCHEMES

STATE BANK OF INDIA

OPEN TERM LOAN

Amount of loan Nature of facility Eligibility

Existing or new corporate/Non-corporate customers of SME segment with good rating.

Maximum 3 years, extendable upto 5 years.

PARYATAN PLUS LOAN

Nature of facility Eligibility

SME CREDIT PLUS

For meeting bulk orders Repairs to machinery 6

Nature of facility Eligibility

SULABH VYAPAR LOAN

Tenor Pricing Security

Loan Amount Tenor Pricing Security

BARODA VIDYASTHALI LOAN

Margin Interest Repayment

BARODA LAGHU UDHYAMI CREDIT CARD

BARODA AROGYADHAM LOAN

Rate of interest Repayment period

UNION HIGH PRIDE

Quantum Nature of facility

Above Rs. 1 cr to Rs. 5 cr

Working Capital / Term Loan

20% of Working Capital and Term Loan

For Term Loans not to exceed 7 years including moratorium period 12

Quantum Nature of facility

Selected vendors supplying to identified large Corporate borrowers of the bank

On maturity of the bill

Minimum Rs. 25 lac and Maximum Rs. 5 cr

Selected authorized dealers of identified large Corporate borrowers of the Bank

On maturity of the bill

TERM LOAN FOR ACQUISITION OF FIXED ASSETS

STANDBY CREDIT FOR CAPITAL EXPENDITURE

Eligibility Maximum limit Security

Repayment Margin Rate of interest

SIMPLIFIED OPEN CASH CREDIT (SOCC)

OPEN CASH CREDIT SCHEME (OCC)

CHAPTER-3 NEED, SCOPE AND OBJECTIVES OF THE STUDY

CHAPTER 4 RESEARCH METHODOLOGY

Primary sources- Primary data will collected through questionnaire.

CHAPTER-5 ANALYSIS & INTERPRETATION OF QUESTIONNAIRE

4.28 7.15 5.72 100

Extraction Method: Principal Component Analysis.

FINDINGS,CONCLUSION & RECOMMENDATIONS OF THE STUDY FINDINGS

m)CB-Stand by credit for capital expenditure O)CB- Open cash credit

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