Project Report On

1.
PROJECT REPORT ON “STUDY OF LENDING PROCESS AND CREDIT SERVICES

OFFERED TO SMALL AND MEDIUM ENTERPRISES”WITHIOB
BY - PANKAJ KUMAR
R.NO:36
PANKAJ KUMAR(PGDM-FINANCE) ICBM-SBE,HYDERABAD(2008-10)
2. INTRODUCTION
o SMEs a part of PRIORITY sector
o GOVT. support has been started from 1967 -68 but attention given
from 1971.
o RBI issued guide line modified
o All advances has been increasing year by year and contributes 40%
of gross mfg. to the Indian economy.
o Employment generates by SMEs in A.P is 7.5% (approx) of total

employments.

3. DIFINIATION OF SME
Under the MSME act 2006,Enterprises has been classified into two categories,
namely – enterprises engaged in the mfg./production of goods pertaining to
any industry, & enterprises engaged in providing of services.
Enterprise have been defined in term of investment in plant and
machinery/equipment(excluding land and building)
4. DIFINIATIONInvesting in plant and machinery / equipment (excluding land and
building)
5. REVIEW OF LITERATURE
BRAHMANANDAM, G, N., RAI, H.L., DAKSHINA MURTHY, “Financing Small
Scale Sector”. The Role of Banks” INDIAN BANKING TODAY AND TOMORROW,
MAY 1981-the above article was prepared on the role of banks in financing
the SMEs in the year 1981. At those times the Indian banking was not all
interested in financing the SMEs, because of their credit worthiness. Later
due to changes in the industrial policy of India, the commercial banks come
forward made immense help to the growth of SMEs. This article was written
before the economic reforms taken place. Here is a gap for more analysis
about the role of the banks in the post economic reforms. BRAHMANANDAM,
G, N., RAI, H.L., DAKSHINA MURTHY, has focused on role of banks in financing
SMEs. He also focused on how economic reforms have changed the bank role
in extending credit to SMEs. They also focused on the credit facilities
available to the SMEs in the wake of MSME act 2006.
6. JAILAL SAAW,” Growth of small scale industries in India” JOURNAL OF
INDUSTRY AND TRADE, April -2005- The growth of small and medium
industries in India was discussed in the above article. The expected growth
was not there because of lot of root causes to sickness and under
development in the SME sector. This article discussed about the slow growth
rate of SMEs, dues to several problems. This article is focusing on the one
problem that is financial problems faced by the SME segment.
7. PROBLEMS
SME is one of the growing sectors of the country even though they are facing
so many problems which restrict the growth
1.Under-utilization of Capacities.
2.Inadequate and Untimely Credit Flows.
3.Inability in Technology up gradation.
4.Inefficient raw material procurement.
5.Poor financial situations and low levels of R&D
6.Inability to Market Finished Goods.
7.Ineffective monitoring and feedback mechanism.
8.Shortage of power
9.Lack of awareness of credit facilities available
10.Lack of knowledge about various credit schemes
11.Overdependence on purchases by government etc…………

8. NO. OF SME UNITS
9. PRODUCTION GROWTH
The above dig. says that in FY 07 growth in production is by 18%
against 15.8% in the previous year
10.COMPANY PROFILE
Chairman and Managing Director : Shri S.A.Bhat
Established in 1937 in Chennai by Shri M..CT.M. Chidambaram Chettyar.
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, Shree Suvarna Sahakari Bank LTD in May 2009.
11.OBJECTIVE OF THIS STUDY
To examine the growth of SME industries.
The study about credit facilities offered to the SMEs by the banks.
To analyze government’s support in obtaining credit facilities.
To study about financial problems of SMEs regarding loan.
RBI guide line and SEBI guide line
How working capital financed to SMEs i.e. the main source of finance
available for SMEs.
To study about working capital.
12.GUIDE LINES FOR BANKS REGARDING SME FINANCING
Financial decisions are taken at various levels from the branch to
Management Committee of the Board.
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
13.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.
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
14.RESEARCH METHODOLOGY
RESEARCH DESIGN:
Study is all about the research & analysis of credit services offered to small
and medium enterprises
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
Study will be carried out at Hyderabad.
Secondary data is required for analysis of report.
Period of the study is limited to 45 days.
15.METHOD OF DATA COLLECTION
PRIMARY DATA - Information has also been gathered through discussions with
the employees of IOB and visiting the IOB branches (R.P. ROAD branch,
HIMAYATNAGER branch and REGIONAL OFFICE.)
SECONDARY DATA
The secondary data collected from the already sanctioned loan files.
Collection of secondary data from Management journals.
Bank and Borrower’s Annual Report.
Project proposal.
Respective Banks Web Sites other sites
Reference from Management Books.
Newspapers and Articles
Already researched data (Which turned into information based on analysis)

16.LIMITATIONS
The study is limited to the period of 45 days. Due to time constraints we
covered only limited no. of SMEs
Since banks have some confidential reports which cannot be handover to the
outsiders, so in-depth research and analysis is not possible.
There is lots of no. of SMEs which is unregistered; due to this proper data’s
are not covered.
The financials of the firms, were not available, as most of the firms are
worried about disclosing their financials, thus for the industry analysis and
other qualitative research, we had to rely on the secondary data sources.

17.GOVT. 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. The Micro, Small and
Medium Enterprises Act, 2006 is a legal framework for more capital
investment in the SME sector.
Under this Act -The Credit Guarantee Fund Scheme for Micro and Small
Enterprises (CGMSE) was launched by the Government of India to make
availablecollateral-free credit to the micro and small enterprise sector. Both
the existingand the new enterprises are eligible to be covered under the
scheme.
18.The scheme was formally launched on August 30, 2000 and isoperational
with effect from 1st January 2000. The corpus (principle sum) of CGTMSE
isbeing contributed by the Government and SIDBI in the ratio of 4:1
respectivelyand has contributed Rs.1346.54 crore till 2007,
After it is raised to RS2500 crores, which is provided by SIDBI and other
specialized Govt. banks.
19.GOVT.SUPPORT WITH STATE GOVT.
Small scale industries need credit support on a continuous basis forrunning
the enterprise as well as for its diversification and modernization.Recognizing
the need for a focused financial assistance to such industries,the Government
of India, together with the State Governments, hasformulated several policy
packages including schemes and funds for theirgrowth and development.
Most of these programmes of the Central Government are implemented
through two principal organizations are as followes:
20.SMALL INDUSTRIES DEVELOPMENT ORGANIZATION (SIDO) is an apex body for
promotion and development of small scale industries in the country. SIDO
promotes axillaries units to public sectors enterprise ,acts like model
agencies for coordinating, monitoring policy and programme.
2. NATIONAL SMALL INDUSTRIES CORPORATION LTD (NSIC), has been
established with the objective of promoting, aiding and fostering the growth
of small scale industries in the country. It has been assisting small
enterprises through a set of specially tailored schemes which facilitate
marketing support, credit support, (Equipment financing ,Financing for
procurement of raw material ,Financing for marketing activities , Financing
through syndication with banks ) , technology support etc.
21.SEVEN POINT ACTION PLAN ANNOUNCED BY GOVT. OF INDIA
Time bound action for setting up specialized SSI branches in 85 identified
districts of high small industry density.
Adequate delegation of powers at the branch and regional level.
Banks to conduct sample surveys of their performing SSI accounts to find out
whether they are getting adequate credit.
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.
Regular meetings by banks at Zonal and Regional levels with SSI
entrepreneurs.
6. Simplification of procedural formalities by banks for SSI entrepreneurs.
22.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
23.5.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
24.10.Any other information that would enable us to understand your business
better
11.Details about group companies (names, constitution, net worth, turnover

etc.)
12.Contact details of Bankers, key suppliers & key customers
13.Insurance details of plant & machinery
14.Rating report
15.Clear vision of the customers

16.Project proposal report
25.BASIC NEED OF SMEs
WORKING CAPITAL-Working capital refers to the funds invested in current
assets, i.e. investment in stocks, sundry debtors, cash and other current
assets. Current assets are essential to use fixed assets profitably. For
example, a machine cannot be used without raw material capital. The
investment on the purchase of raw material is identified as working capital.
Working Capital Management, 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), needed to carry out day -to-day activities, is maintained and
the current liabilities are discharged as and when they fall due. Working
Capital Management involves cash flows within the Operating Cycle of the
Company, usually not exceeding the period of one year, unlike long -term
financial management where cash flows extend for more than one year.
26.Theoretically, there are two concepts of Working Capital
Gross working capital: The gross working capital refers to investment in all
the current assets taken together. The total of investments in all the current
assets is known as gross working.
Net working capital: The term net working capital refers to excess of total
current assets over total current liabilities. It may be noted that the current
liabilities refers to these liabilities which are payable with in a period of 1
year.
And also there are two types of working capital are as follows :
27.PERMANENT & TEMPORARY WORKING CAPITAL:
The overall Working Capital requirement does not stay constant and keeps
fluctuating. However, to carry on business, a certain minimum level of
Working Capital is required on a regular basis which is referred to as
“Permanent or Fixed Working Capital”
Any amount over and above the permanent Working Capital is known as the
“Temporary or seasonal Working Capital” requirement. It is also known as
variable working capital.

28.The Operating Cycle creates the need for Current Assets or Working Capital.
The Working Capital need of a Company does not come to an end once an
Operating Cycle is completed. As it is a cyclical process, the need continues
to exist even after the Company has realised cash against its credit sales.
Thus, there should be continuous supply of Working Capital for the Company
to carry on its business activity.
29.SOURCE OF FINANCE FOR SMEs
SMES are basically depends on the 2 types of source of finance
Internal and (2) external
INTERNAL:-
Paid up capital: Ordinary share, Preference share, deferred shares, and
Forfeited shares.
Reserve surplus: Capital reserve, Development rebate reserve, Other
sources
Provisions: Taxation (Net on advances on income tax), Depreciation, Bad
debts
30.EXTERNAL:-
Borrowings: From Banks, from term lending institutions like IDBI, IFCI,
SIDBI, ICICI, INDUSTRIAL DEVELOPMENT CORPORATION, etc.
b)Trade dues and current liabilities: Sundry creditors, Other sources
31.OTHER INSTITUTIONS IN MARKET FOR SME’S LOAN
As the small and medium enterprises (SME) sector is one of the fastest
growing industrial sectors all over the world, initiatives are being taken by
national, private and financial institutions. Among them are:-
Indian overseas bank (IOB)
State bank of India (SBI)
Bank of Baroda (BOB)
HDFC bank
ICICI bank
Small industries development organization (SIDO)
National small industries corporation (NSIC)
SIDBI
NABARD
(10) IDBI
32.PROBLEMS OF SMEs-FINANCIAL PROBLEMS OF SMEs REGARDING LOAN
33.FROM THE BAR DIG. ANALYSIS
RELUCTANCE TO LEND BY BANK: Sometimes banks are hesitating in giving
the loan. Due to this nearly 27% SMEs are not getting the finance facilities.
This is happening mostly with the new clients.
COLLATERAL REQUIREMENTS OF BANK/ FINANCIAL INSTITUTIONS: Because of
the collateral requirements of bank nearly 54% SMEs are not getting the loan
facilities. They are not able to show the collateral money or assets.
BANK/ PAPERWORK BUREAUCRACY: Due to huge demand of documentations
43% SMEs are not getting loan facilities.
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. So considering these banks are not providing the loan
to the new clients. Due to this nearly 55% SMEs are not able to get the loan
from the banks.
34.5. TIME TAKEN BY BANKS TO CLEAR LOAN APPLICATION: Due to some
verifications banks are taking time in clearing the loan. This time constraints
are big obstacles for them in production parts which restrict the 42% SMEs
growth.
6. 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.
35.TYPES OF INDUSTRIAL FINANCE PROVIDED BY IOB
SHORT TERM: Less than 1 year to meet variable, seasonal or temporary
capital requirement.
MEDDIUM TERM: 1 to 5 year for permanent working capital, small expansion
replacement, modification etc.
3. LONG TERM FINANCE: Period more than 5 years. It is required for procuring
Fixed Assets for establishing new branches or new business for substantial
expansion of existing business modernization
36.AT THE OF LENDING SOME RELEVANT RATIOS ARE COVERED BY THE BANK
Liquidity Ratios: Current Ratio=(current Assets / current liabilities)
Acid Test Ratio (quick ratio) = (Current Assets- Inventory / Current Liabilities)
According to this ratio bank is testing the liquidity position of the client by the
liquidity ratio because that they are able to pay or not their short term
liabilities.
2. 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. These
ratios are to evaluate the efficiency with which firm manages and utilizes its
assets. These ratios usually indicate the frequency of sales. It is helpful for
the bank that they can estimate the paying capacity of the borrowers.

37.3.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. These ratios indicate the proportion of debt fund
in relation to equity. It covers share holders fund (equity) and long term
borrowed fund (debt).
4.Net Profit Margin: (Net Profit/ Net Sales)
This ratio measures the profitability of the firm in terms of assets employed in
the firm. Banks are also keen interested to know the profits of the borrowers
that they are able to pay their interest and dues on time.
38.5.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. The speed with which credit receivables are collected
affects the liquidity position of the firm.
6.Return On Investment: (ROi)= (Net Profit/ Total Assets)

It measures the profitability or the operational efficiency of the firm. This is
very essential for the banks.
7.Dividend Per Share =(Total profits available to Equity Share Holders/ No. of
Equity Shares)
This ratio indicates the amount of profit distributed to shareholders per
share.

39.RATE OF INTEREST CHARGED ON AMOUNT SANCTIONED BY IOB FOR SMEs
FOR MICRO AND SMALL ENTERPRISES:
For credit limits up- to RS 2 lakhs - 9.50%
Above RS2 lakhs and up- to RS 25 lakhs -10.50%
Above RS 25 lakhs and below RS 1 crore-11.00%
1 crore and above up-to RS 10 crore:
For mfg. units (depending on ratings)-11.00% to 13.50%
Other then mfg.(depending on ratings)-12.25% to 15.50%
40.MEDIUM ENTERPRISES
For credit limits up-to RS 25,000/- --9.50%
Above RS 25,000/- and up-to RS 2 lakhs--11.00%
Above Rs2 lakhs and upto Rs25 lakhs(based on ratings)--11.75% to 15%
Above Rs25lakhs and below Rs1crore(based on ratings)-12.25% to 15.50%
1 crore and above upto Rs 10crores
For mfg. units(depending on ratings)--12.25% to 14.75%
Other than mfg. units(depending on ratings)--12.25% to 15.50%
41.FINANCING OF WORKING CAPITAL BY IOB IN THE FOLLOWING FORM:
1. CASH CREDIT: This type of credit is provided mainly to individuals or
enterprises engaged in manufacturing & trading activities to enable them to
carry on their activities. The amount of cash credit facility to be sanctioned to
a units need based and is worked out as per well defined parameters in each
bank. The guide line of RBI may also affect the quantum of facility in some
cases. This facility is generally granted against the security of stocks of
goods, bills/ book debts representing sales.
2.LETTER OF CREDIT: A letter of credit is the guarantee provided by the

buyer’s banker to the seller that in the case of default or failure of the buyer,
the bank shall make the payment to the seller.
42.3. BILLS FINANCE: The bank extend assistance to the borrowers against the
bills. The finance against bills is meant to finance, the actual sale
transactions. The finance against bills can take three forms.
o Purchase of bills by the bank if these are payable on demand.
o Discounting of bills by bank if these are usance bills (or time) bills.
o Advance against bills under collection from the drawees, whether

sent for realization through the bank or sent directly by the drawer to the
drawees.
4. WORKING CAPITAL DEMAND LOAN: In compliance of RBI directions , banks

presently grant only a small part of the fund- based working capital facilities to a
borrower by the way of running case credit account ; a major portion is in the form
of working capital demand loan. This arrangement is presently applicable to
borrowers having working capital facilities of RS. 10crores or above. The minimum
period of working capital demand loan which is basically non- operable account
keep on changing. The working capital demand loan is granted for a fixed term on
the carrying of which it has to be liquidated, renewed of rolled over.
43.5. 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.
44.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, which also covers the
advances to
Agriculture, SHG, Education, housing and SSI. The basis of 40% is based on
the bank
credit capacity.
And the other 60% is invested in many other areas.

45.NO. OF SMEs THAT ARE REGISTERED
INTERPRETATION:
In the above diagram it can be observed that only a small no. of SMEs are
registered i.e.
2mn.Maximum no. of units are still unregistered i.e.10.80mn, because they
have problem of
financing and they are not able to maintain proper documentation. The
reason for non
registration of SME’s is the notion that the costs would be increased.
46.CONTRIBUTIONOF SME’s IN TOTAL EXPORT
INTERPRETATION:
SME Sector plays a major role in India's present export performance.
From the above fig. we
can know about the contribution part of SMEs in the total export i.e.
35%.Whole sectors are
contributing 65% and SME sectors alone are contributing 35%, which also
helps in generating
the foreign revenue
47.PERCENTAGE OF SMEs PREFERRED TO TAKE LOAN FROM VARIOUS BANKS
INTERPRETATION:
From the above analysis we know that SMEs give 1st preference to the Govt.
specialized bank
for taking the loan because of easy process rather than the private sector
banks.
SMEs less prefers the private sector banks because of the heavy
documentation work which
is needed.

48.PERCENTAGE OF LOAN SANCTION BASED ON AREA
INTERPRETATION:
The above analysis shows the loan sanctioned percentage area wise. This
show that the banks
are focusing more on urban area i.e. 60% and semi urban it is 39% .They
have neglected the
rural area .It is because that most of the SMEs are in urban area and it is easy
for the bank to
keep in touch with them. Lack of awareness among rural SME’s is the reason
for non sanction
of loans in this area.
49.AWARENESS ABOUT THE LENDING FACILITIES
INTERPRETATION:
Maximum no. of SMEs are aware about the facilities provided by the bank but
no. of SMEs
who are taking loan from the bank is quite very less only because of huge
paper work from
the bank side. They are not interested to maintain the maximum no. of paper
work which is
difficult for them and high interest rate will cost them, and cannot afford
because it increases
their product prices.
50.CREDIT SERVICES OFFERED TO SMEs IN TERMS OF WORKING CAPITAL
REQUIREMENTS
INTERPRETATION:
Bank is offering 5 types of finances to SMEs working capital needs. From the
above analysis
it is observed that cash credit is very popular source for taking working
capital loan. It is
because in cash credit facilities there is interest charged by the bank only on
the withdrawn
amount by the person or borrower. The amounts are withdrawn only when it
is required
and the interest is paid only on enjoying part of the amount.
Other facilities are only utilised by them along with the cash credit when they
require the
additional money for their business.
51.TERM OF LOAN
INTERPRETATION:
As discussed earlier that mostly less then5 crores or 5 crores amount loan is
taken by most
of the SMEs .This amount is used by them for working capital requirements.
And the term
for which the loan amount is taken by them is for long term. It can be
renewed by them
from time to time.
Banks are providing the loan on long term credit based on the going concern
concept of
accounting i.e. that the firm will run for an indefinite period of time and also
the firms past,
present and future projection of their accounting procedures are taken into
consideration
for term of loan.
52.PERCENTAGE OF CREDIT FACILITIES SANCTIONED TO SME’s
INTERPRETATION:
From the above analysis we observe that 82% of SMEs are sanctioned the
credit from
IOB and rest 18% are not availing these facilities only because of not fulfilling
the norms
and the criteria of the bank as discussed earlier in list of documents required
by the bank
and other qualitative part which must be fulfilled by the borrowers.

53.TIME TAKEN BY THE BANK FOR SANCTIONING OF THE LOAN
INTERPRETATION:
From the above analysis it can be observed that 49% of SMEs are sanctioned
the loan within
one month because of fulfilling all the requirements and norms of the bank in
time.
26% are delayed due to failure in complying with the documentation, for
which the sanction
period takes more than one month.
7% are those who applied for the big amount for which sometimes it takes
more than
2 months but not always.
54.PERCENTAGE OF INVESTMENT IN VARIOUS SECTORS
INTERPRETATION:
IOB is sanctioning loans more to the manufacturing sectors for the
investment as
manufacturers approach the bank for their credit requirements i.e. 85% and
only 15% of
the loan is sanctioned to service sectors as per the requirements.
As per the RBI guide line banks have taken care of the manufacturing units
because it
constitute the 35% of total export and also providing the maximum no. of
employment in
country. Service sectors are very less in number.
55.FINDINGS
IOB is offering loan to priority sectors like housing, education, working capital
loan, etc.
By whole study it is clearly state that cash is vital component for the firms
operating cycle. If cash is not generating properly in the firm it will be
harmful for the firm i.e. they should maintain the appropriate liquidity.
It is observed that SMEs are suffering from many other problems which
hamper their growth.
Time of peak season small industry have to keep their inventory at the
optimum level for making good profit by maintaining the demand level.
Which also need more working capital
At the same time of sanctioning loans bank need huge no. of documents for
safety of their bank.
56.6.Bank is taking maximum no. of days for sanctioning the loan.
7.IOB is strictly followed the rules and regulations for sanctioning.
8.Bank employees are using their exceptional powers regarding loan
sanctioning.
9.Bank mostly providing the loan to their well known customers.
10.The entrepreneurs are lack of knowledge regarding the credit facilities.
11.For promoting SMEs govt. also supporting them by providing schemes.
12.The capital base of SMEs is very poor.
13.The growth of SMEs in A.P. has been significant.
14.IOB is encouraging the SME finance because they feel that they are able
to repay their loan.
15.A big no. of SME units are still unregistered Which is showing loss of Indian
economy. But on the other part SMEs are big source of employments.
16.At last shortage of finance is considered to be most important problem
responsible for a host (maximum) of problems in SMEs.
57.SUGGESTIONS
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.
Timely finance should be provided to units keeping in view their needs.
The borrowing should be made cheaper by lowering the rate of interest on
lending of banks, which help the SMEs for coping with the high risk and costs
to compete with their competitors.
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.
Bank has to increase their credit limit and also decrease the installment
amount.
58.6.SMEs are big source of revenue for banks, so bank should encourage also
the unregistered units by providing more facilities like less paper work.
7. The best way to encourage lending to SMEs is to improve the ability of
existing institution to construct profitable and efficient lending programmes.
8.Building awareness among small business people about the financial
sources offering by bank. Especially in the case of SMEs is must. So there is
mutual benefits are possible.
9.While granting the loans the bank does not adhere with the margin.
10.The process followed by the bank in sanctioning the loan is cumbersome
(unmanageable), hence it is suggested to make the process easier in
sanctioning the credit facilities to the SMEs.
59.CONCLUSION
In recent years some initiatives have been taken by both govt. and banks of
India to make more acceptable for funding by banks.
My project report mainly involved the problems, opportunity, credit facilities
to SMEs by the bank. The main purpose of the analysis is to know that how
bank is providing loan to SMEs.
We know that today SMEs are growing and profitable sectors for banks in
terms of money investment. And IOB system of loan sanctioning is quite
good. But it is very true, in terms of the paper work that most of the SMEs are
enable to submit proper documents for approval of loan. It is also found that
after sanctioning the credit facilities bank has maximum no. of paper works,
which is creating problems for SMEs to maintain all of them.
In regard to rate of interest industrial owners feel that the rate of interest for
working capital is high. It is manageable at the time of pick season but not at
all time.
60.It also found that some SME owners are not educated, so they are not aware
about the benefits of the registration. Due to this they are not eligible for the
financing, and lack of finance they cannot grow.
Nower days credit guaranty and rating institutions have floated to support
banks to assume risk unhesitatingly in financing SMEs. 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.
The reason for less market share is competition with the big firms in the
market which also cuts their profit margin.

61.THANK YOU
guestb0ace6d, 3 months ago

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PROJECT REPORT ON “STUDY OF LENDING PROCESS AND CREDIT SERVICES

o SMEs a part of PRIORITY sector

o RBI issued guide line modified

o Employment generates by SMEs in A.P is 7.5% (approx) of total

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

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

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

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

2.Partnership Deed / Memorandum & Article of Association

3.Authority letter to sign the application

6.In case of new project/expansion, copy of the project report containing a

8.Details of subsidy, tax concession available to the applicant

11.Details about group companies (names, constitution, net worth, turnover

12.Contact details of Bankers, key suppliers & key customers

13.Insurance details of plant & machinery

15.Clear vision of the customers

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

Internal and (2) external

2. Activity ratios: Average Collection Period= (A/c Receivable/ Daily Average

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

6.Return On Investment: (ROi)= (Net Profit/ Total Assets)

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

2.LETTER OF CREDIT: A letter of credit is the guarantee provided by the

o Purchase of bills by the bank if these are payable on demand.

o Advance against bills under collection from the drawees, whether

4. WORKING CAPITAL DEMAND LOAN: In compliance of RBI directions , banks

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

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

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

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

guestb0ace6d, 3 months ago

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