A Project Report on

SMALL SCALE INDUSTRY FINANCING WITH REFRENCE TO J&K BANK

Submitted to
PUNJAB TECHNICAL UNIVERSITY
JALANDHAR

In partial fulfillment of the requirement for the award of the degree of Masters of Business Administration (MBA)

Submitted By: Touseef Ahmad Nath 100222243691

Project Guide: Miss Anjali Sharma Assistant Professor in Management

Session (2010-2012 CT INSTITUTE OF MANAGEMENT SHAHPUR

CERTIFICATE

This is to certify that the project report entitled Small Scale Industries Financing submitted by Touseef Ahmad Nath is a bona fide piece of work conducted under my direct supervision and guidance. No part of this work has been submitted for any other degree of any other university. The data sources have been duly acknowledged. It may be considered for evaluation in the partial fulfillment of the requirement for the award of the degree of Masters of Business Administration.

Date:

Miss Anjali Sharma Assistant Professor in Management CT Institute of Management Studies Jalandhar

PREFACE

A professional course like MBA is a launch pad for the management career. It is not just oriented at congregation of the vast spread knowledge written by many great authors from management field but this esteemed course aspires for building managerial intelligence and the innovative capability among its aspirants. Moreover it helps in realizing the welded realities of existing corporate world outside the classroom. This is the great reason that every management student requires the supplementation of their academic knowledge through practical exposure with corporate world. In todays competitive and dynamic world it has become very difficult for any organization to survive in the market. Banks are striking hard for making a place for themselves in the market & to overcome their competitors these days countless studies & researches are conducted in various fields to contract a policy, which can lead a company a head of its competitors. In the present era of due to completion a lot of financial institutions and innovative financial instruments are emerging to attain satisfaction of customers. Banks are widening their coverage by adopting various strategies like Mergers and Acquisition. It is sincerely hoped that the discrepancies noted must be viewed in the light of limitations that exist in the way of study done by student of degree course.

It is gratefully acknowledged the kindness and assistance of all those who helped in completing the project. The Management of CT Institute of Management Studies, Jalandhar is applauded with gratification for the much needed support in carrying out the project report. It is the matter of privilege to bestow deep sense of gratitude and thanks to miss Anjali Sharma Assistant Professor, CT Institute of Management Studies, Jalandhar for her constructive criticism, valuable suggestions and constant encouragement at all the stages of development of the project. I thank all the employees of J&K Bank for providing a conducive environment for the development of the project and for extending the necessary facilities for the completion of the project. Without the constant support and guidance of the above people, this project have not been a success

Date: TOUSEEF AHMAD NATH

REPORT CONTENTS: 1. Cover & Title page

2. Introductory pages: Certificate Acknowledgement Preface 3. Introduction

4. Need, Scope and Objective(s) of the study: a. Need of the study b. Scope of the study c. Objectives of the study 5. Review of Literature: Research Methodology:

6. Data Analysis & Interpretation : Findings of the study: Recommendations:

7. Conclusion: a. References 8. Annexure:

COMPANY PROFILE

Jammu & Kashmir Bank is the only Bank in the country with majority ownership vested with a state government the Government of Jammu & Kashmir. J&K Bank functions as a universal bank in Jammu & Kashmir and as a specialised bank in the rest of the country. It is also the only private sector bank designated as RBIs agent for banking business, and carries out the banking business of the Central Government, besides collecting central taxes for CBDT. J&K Bank follows a two-legged business model whereby it seeks to increase lending in its home state which results in higher margins despite modest volumes, and at the same time, seeks to capture niche lending opportunities on a pan-India basis to build volumes and improve margins. J&K Bank operates on the principle of socially empowering banking and seeks to deliver innovative financial solutions for household, small and medium enterprises. The Bank , incorporated in 1938, and is listed on the NSE and the BSE. It has a track record of uninterrupted profits and dividends for four decades. The J&K Bank is rated P1+, indicating the highest degree of safety by Standard & Poor and CRISIL.

HISTORY OF THE ORGANISATION

Till 1920-30, traditional money lenders performed entire banking in the State of Jammu and Kashmir too, at exorbitant rates. At the same time, some banks functioned but at a very limited scale, such as Punjab National Bank, Grindlays Bank, and Imperial Bank of India. The role of these banks was reduced to the acceptance of deposits, as they not grant loans and advances to the people of the State owing to the statutory limitations. Under this scenario, banks could not ameliorate the financial and social position of the State. To overcome this critical situation the then Maharaja of State conceived an idea of setting up of a State Bank in the State. After prolonged exercises and deliberations the assignment for establishment of The Jammu and Kashmir Bank Limited was given to the late Sir Sorabji N.Pochkhanwala, the then Managing Director of the Central Bank of India. Mr. Pochkhanwala formulated a scheme on 24-09-1930,suggesting establishment of a semi State bank of India with participation in capital by State and the public under the control of State Government. Thus, the bank was formally incorporated on 1st of October 1938 and commences its business from 4 th of July 1939 at its Registered Office, Residency Road, Srinagar, Kashmir.The Jammu and Kashmir Bank Limited has been the first of its nature and composition as a State owned bank in the country. The State Government besides contributing half of the issued capital also appointed it as its bankers for general banking and treasury business. In its formative years, the Bank had to encounter several serious problems, particularly around the time of independence, when out of its total of 10 branches two branches of Muzaffarabad and Mirpur fell to the other side of Line of Control (now Pakistan Administrated Kashmir) along with cash and other assets in 1947. However, the State Government came to its rescue with the assistance of Rs.6 lakhs to meet the claims. However, the Bank steadily overcame its difficulties and kept growing. Following the extension of Central laws to the State of Jammu and Kashmir the bank was defined as a Government Company as per the provisions of Indian Companies Act 1956. The bank had its first full time Chairman in 1971, following the social central measures in banks. The year 1971 was a turning point for the Bank on conferment of scheduled bank status and witnessed remarkable progress in all the vital fields of operations. Reserve Bank of India (RBI) declared the

bank as A class bank. In recognition of dominant role and exalted performance. RBI appointed the bank as its agent for performing the general banking business of the Central Government especially in maintaining currency chest and collection of taxes.

INTRODUCTION TO SMALL SCALE INDUSTRIES

Small scale industrial units are those engaged in the manufacture, processing or preservation of goods and whose investment in plant and machinery (original cost) does not exceed Rs. 1 crore. (except in respect of certain specified items under hosiery, hand tools, drugs and pharmaceuticals, stationery items and sports goods where this investment limit has been enhanced to Rs.5.00 crore. However loan to SSI sector will be categorized under priority sector.) owned, controlled or subsidiary of any other industrial undertaking) Explanation: For the purpose of this note:- the expression "controlled by any other industrial undertaking" means as under:i. where two or more industrial undertakings are set up by the same person as a proprietor, each of such industrial undertakings shall be considered to be controlled by the other industrial undetaking or undertakings, ii. where two or more industrial undertakings are set up as partnership firms under the Indian Partnership Act, 1932 (1 of 1932) and one or more partners are common partner or partners in such firms, each such undertaking shall be considered to be controlled by other undertaking or undertakings, iii. where industrial undertakings are set up by companies under the Companies Act, 1956 (1 of 1956), an industrial undertaking shall be considered to be controlled by other industrial undertaking if:-

a. the equity holding by other industrial undertaking in it exceeds twenty four percent of its total equity; or b. the management control of an undertaking is passed on to the other industrial undertaking by way of the Managing Director of the first mentioned undertaking being also the Managing Director or Director in the other industrial undertaking or the majority of Directors on the Board of the first mentioned undertaking being the equity holders in the other industrial undertaking in terms of the provisions of the following items (a) and (b) of sub-clause (iv); (iv) the extent of equity participation by other industrial undertaking or undertakings in the undertaking as per sub-clause (iii) above shall be worked out as follows:a. the equity participation by other industrial undertaking shall include both foreign and domestic equity; b. equity participation by other industrial undertaking shall mean total equity held in an industrial undertaking by other industrial undertaking or undertakings, whether small scale or otherwise, put together as well as the equity held by persons who are Directors in any other industrial undertaking or undertakings even if the person concerned is a Director in other Industrial Undertaking or Undertakings; c. equity held by a person, having special technical qualification and experience, appointed as a Director in a small scale industrial undertaking, to the extent of qualification shares, if so provided in the Articles of Association, shall not be counted in computing the equity held by other industrial undertaking or undertakings even if the person concerned is a Director in other industrial undertakings or undertakings; (v) where an industrial undertaking is a subsidiary of, or is owned or controlled by, any other industrial undertaking or undertakings in terms of sub-clauses (i); (ii); or (iii) and if the total investment in fixed assets in plant and machinery of the first mentioned industrial undertaking and the other industrial undertaking or undertakings clubbed together exceeds the limit of investment specified in paragraphs (1) or (2) of this notification as the case may be, none of

these industrial undertakings shall be considered to be a small scale or ancillary industrial undertaking. Tiny Enterprises: The status of Tiny Enterprises is given to all small scale units whose investment in plant & machinery is upto Rs. 25 lakhs, irrespective of the location of the unit. Ancillary Industrial undertaking: An industrial undertaking which is engaged or is proposed to be engageg in the manufacture or production of parts , components , sub-assemblies , tooling or intermediates , or the rendering of services is termed as Ancillary industrial undertaking. The Ancillary industrial undertaking has to supply or render or propose to supply or render not less than 50% of production or services , as the case may be , to one or more other industrial undertakings. The investment in plant and machinery , whether held on ownership terms or on lease or on hire purchase, should not exceed Rs10 million . Small Scale Service & Business Enterprises (SSSBEs): Industry related service and business enterprises with investment upto Rs. 10 lakhs in fixed assets, excluding land and building will be given benefits of small scale sector. For computation of value of fixed assets, the original price paid by the original owner will be considered irrespective of the price paid by subsequent owners. Small Scale Industries may sound small but actually plays a very important part in the overall growth of an economy. Small Scale Industries can be characterized by the unique feature of labor intensiveness. The total number of people employed in this industry has been calculated to be near about one crore and ninety lakhs in India, the main proponents of Small scale industries. The importance of this industry increases manifold due to the immense employment generating potential. The countries which are characterized by acute unemployment problem

especially put emphasis on the model of Small Scale Industries. It has been observed that India along with the countries in the Indian continent have gone long strides in this field. In calculating the value of plant and machinery, the following shall be excluded, namely:- (i) the cost of equipments such as tools, jigs, dies moulds and spare parts for maintenance and the cost of consumable stores; (ii) the cost of installation of plant and machinery; (iii) the cost of research and development equipment and pollution control equipment; (iv) the cost of generation sets and extra transformer installed by the undertaking as per the regulations of the State Electricity Board; (v) the bank charges and service charges paid to the National Small Industries Corporation or the State Small Industries Corporation; (vi) the cost involved in procurement or installation of cables, wiring ,bus bars, electrical control panels(not those mounted on individual machines), oil circuit breakers or miniature circuit breakers which are necessarily to be used for providing electrical power to the plant and machinery or for safety measures; (vii) the cost of gas producers plants' (viii) transportation charges(excluding of salestax and excise) for indigenous machinery Advantages associated with Small Scale Industries This industry is especially specialized in the production of consumer commodities. Small scale industries can be characterized with the special feature of adopting the labor intensive approach for commodity production. As these industries lack capital, so they utilize the labor power for the production of goods. The main advantage of such a process lies in the absorption of the surplus amount of labor in the economy who were not being absorbed by the large and capital intensive industries. This, in turn, helps the system in scaling down the extent of unemployment as well as poverty. It has been empirically proved all over the world that Small Scale Industries are adept in distributing national income in more efficient and equitable manner among the various participants in the process of good production than their medium or larger counterparts. Small Scale Industries help the economy in promoting balanced development of industries across all the regions of the economy.

 This industry helps the various sections of the society to hone their skills required for entrepreneurship. Small Scale Industries act as an essential medium for the efficient utilization of the skills as well as resources available locally. Small Scale Industries enjoy a lot of help and encouragement from the government through protecting these industries from the direct competition of the large scale ones, provision of subsidies in the form of capital,lenient tax structure for this industry and many more

Need and Scope of Small-Scale Industries

All industrial units with a capital investment of not more than Rs. one crore are, at present, treated as small-scale units. For ancillary units i.e., those supplying components etc., to largescale industries and the export-oriented units, the limit of capital investment is also Rs. one crore. Industrial units with an investment of up to Rs. 25 lakhs belong to the tiny sector. It may be noted that capital investment covers only investment in plant and machinery, land and factory buildings are excluded. As per this classification all industries with capital investment higher than specified for small-scale units are large-scale industries. The small-scale industries contribute a lot to the progress of the Indian economy. They have also a great potential for the future development of the economy. Let us discuss their role in detail. Large Scope for Employment: The small-scale industries provide large scope for employment on a massive scale. In 2001 the employment generated in this sector was 19.2 million. This is of great significance for a country like India which is a labour-surplus economy, and where labourforce is increasing at a very rapid rate. Moreover, the small-scale industries being labourintensive they employ more labour per unit of capital for a given output compared to the largescale industries. This is evident from the fact that the small-scale sector accounts for as much as 80% of the total employment in the industrial sector. The small-scale industries are also specially suited for overcoming various types of unemployment in the rural and semi-urban areas. With little capital and other resources, mostly available locally, these industries can be set-up everywhere in the country, even at the very door-step of the workers. For this reason the small farmer and agricultural worker can

combine their work in agriculture with that in these industries. Further, these industries provide part-time as well as full time work to rural artisans, women, and poor of the backward classes. Large Production: The small-scale industries also contribute a sizeable amount to the industrial output of the country. Out of the total output of the manufacturing sector, as much as 40% comes from these industries. And out of the total supplies of industrial consumer goods a major part originates in the small-scale sector. Almost all the products of this sector are in the nature of consumer goods, with a significant part consisting of luxury goods. The adequate availability of consumer goods plays an important role in stabilizing and developing the economy. Large Exports: Many products of the small-scale industries like handloom cotton fabrics, silk fabrics, handicrafts, carpets, jewellery, etc. are exported to foreign countries. Their share in the total exports is as much as 40%. In this way the small-scale sector makes a very valuable contribution to the accumulation of foreign exchange resource of the country. Use of Latent (domestic) resources: The small-scale industries used resources which are available locally which would otherwise have remained unused. These resources are, the hoarded wealth, family-labour, artisans skills, native entrepreneurship, etc. Being thinly spread throughout the country, these resources cannot be used by large-scale industries which need them in big amounts and at a few specified places. Besides using these resources, the small-scale industries provide an environment for the development of forces of economic growth. Using the hoarded wealth, these industries put into circulation savings which propel investments in the economy. These industries also provide opportunities to the small entrepreneurs to learn, to take risks, to experiment, to innovate and to compete with others. Promoting Welfare: The small-scale industries are also very important for welfare reasons. People of small means can organize these industries. This in turn increases their income-levels and quality of life. As such these industries help in reducing poverty in the country. Further, these industries tend to promote equitable distribution of income. Since income gets distributed among vast number of persons throughout the country, this help in the reduction of regional economic disparities. Another advantage of great significance of these industries is the upgrading of the lives of the people in general. The freedom to work, self-reliance, self-confidence, enthusiasm to achieve and all such traits of a healthy nation can be built around the activities performed in these industries. It also becomes possible to preserve the inherited skill of our artisans which would otherwise disappear. Moreover, many ills of urbanization and concentration inherent in largescale industries can be avoided by setting up of small industries. All these benefits flow from the fact that these industries are highly labour-intensive, and that these can be set up anywhere in the country with small resources.

Problems Faced by Small-Scale Industries

The small-scale industries, despite their importance for the economy, are not contributing to their full towards the development of the country. It is because these industries are beset with a number of problems in regard to their operations. These problems are discussed below. Inadequate Finance: A serious problem of these industries is in respect of credit, both for longterm and short-term purposes. This is evident from the fact that the supply of credit has not been commensurate with their needs associated with fixed and working capital. Very often the credit has not been timely. Its delayed availability has been a major factor in causing much of industrial sickness in this sector. The credit situation is particularly hard for the very small or tiny units. Difficulties of Marketing: The small-scale industries also faced the acute problem of marketing their products. The problems arises from such factors as small scale of production, lack of standardization of products, inadequate market knowledge, competition from technically more efficient units, deficient demand, etc. Apart from the inadequacy of marketing facilities, the cost of promoting and selling their products too is high. The result is large and increasing subsidies which impose heavy burden on the government budgets. Shortage of Raw Materials: Then there is the problem of raw materials which continues to plague these industries. Raw materials are available neither in sufficient quantity, nor of requisite quality, nor at reasonable prices. Being small purchasers, the producers are not able to undertake bulk buying as the large industries can do. The result is taking whatever is available, of whatever quality and at high prices. This adversely affects their production, products, quality and costs. Low-Level Technology: The methods of production which the small and tiny enterprises use are old and inefficient. The result is low productivity, poor quality of products and high costs. The producers for lack of imformation, know very little about modern technologies and training opportunities which concerns them. There is little of research and development in this field in the country. Competition from Large-Scale Industries: Another serious problem which these industries face is that of competition from large-scale industries. Large-scale industries which uses the latest technologies with access to many facilities in the country can easily out-priced and out-sell the small producers. With the liberalization of the economy in recent years, this problem has become all the more serious. For all these reasons, the small producers in the small-scale industries find themselves in a very precarious position

Objectives of the Research

. 1 To study the Marketing needs of the J & K Bank Ltd to finance SMALL SCALE INDUSTRIES in KASHMIR. 2. To know about the RBI guidelines to banks regarding financing SSIs. 3 . To identify the awareness of people & employees of SSIs regarding finance schemes/products of J & K Bank for SSIs. 4 To study the level of satisfaction of SSIs employees towards J and K Bank

REVIEW OF LITERATURE
A thorough review and survey of related literature forms an important part of research. It deals with the critical examination of various published and unpublished works related to the present study. Knowledge of related research enables the researcher to define the frontiers of his fields; it helps in comparing the efficiency of various procedures and instruments used. Further review of literature avoids unintentional replication of previous studies and also places the researcher in a better position to interpret the significance of his own results. In the early literature on economic growth and development, industrialization as a source of employment and capital accumulation has been recognized by various economists. Here I highlight the review of works by various authors as well as different committee reports related to the small scale and cottage industries at international, national and local levels. For the first time, J.M. Keynes (1936) has focused his attention on the forces that determine employment policy followed in industrialization. He propounded the theory that entrepreneurs will offer the amount of employment which maximizes their output and profit. Here he stressed the productivity of labour as the determining factor of the level of employment. There is a positive relationship among productivity of labour, output and employment. According to Keynes employment can only increase pari-pasu with an increase in investment. W.A. Lewis (1954) has strongly advocated the application of labour intensive techniques of production to have a steady and smooth economic growth. He opined that many important works can be done by human labour with very little capital. Efficient labour could be used to make even capital goods without using any scarce factors. In this sense, small scale and cottage industry should be developed and promoted especially in an economy where capital is

scarce. He recommends the use of capital intensive techniques only when they are necessary. Leibenstein and Galenson (1955) took an opposite stand and tried to show that labour intensive techniques might generate immediate output but little surplus since the wage bill would be large. Economic development preceded investment but the use of labour intensive techniques leaves little surplus for investment. Hence, according to them, use of capital intensive techniques in the process of production will increase the re-investible surplus by minimizing the wage bill. Dhar and Lydall (1961) made their study on the data collected from Census of Indian Manufactures, 1956 and the study prepared by the Perspective Planning Division of the Planning Commission in respect of capital, labour and output relations in various industries. They concluded that the issue of choice between large and small industries for the purpose of an employment-oriented industrialization strategy is largely irrelevant, and it should aim at making the best use of scarce resources, instead of aiming at creating employment for the sake of employment. Professor Gunnar Myrdal (1968) the recommends the adoption of a strategy based on predominantly labour-intensive techniques in less developed countries on the ground that the large volume of unutilized labour possessed by these countries has a productive potential, capable of creating capital and increasing production. The National Committee on Science and Technology report on Khadi and Village Industries (1975) gave a gloomy picture of these industries as a source of employment in industrialization. The report shows that the compounded rates of growth of employment in these industries, as compared to growth of output, are very meager. A World Bank Study (1978) has shown that all important requirements of more jobs and higher incomes are met by rural non-farm activities. The study suggests that these activities, which have capital- labour ratio of less than $50 at 1969 prices, deserve a high place in any employment oriented industrial strategy. Ruddar Datt and Sundaram (1979) strongly advocated the small scale and house hold enterprises as an important component of an employment-oriented strategy of industrialization. They found that employment-output ratio is the lowest in the small scale sector while that employment generation capacity is eight times higher than that of large sectors. Ruddar Datt and Sundaram (1979) strongly advocated the small scale and house hold enterprises as an important component of an employment-oriented strategy

of

industrialization. They found that employment-output ratio is the lowest in the small scale sector while that employment generation capacity is eight times higher than that of large sectors. K.M. Rastogi (1980) has made a case study of Madhya Pradesh, which he calls a unique case of growing unemployment and poverty amidst plenty. He is in favour of only small scale and village industries, which made optimum use of indigenous techniques and local resources. According to him, there are hundreds of items which can be produced in cottage and small scale industries more economically than in large industrial sector. Prasad (1983) in his study found that the small scale industrial sector is an integral part of not only the industrial sector, but also of the countrys economic structure as a whole. If small scale industries are properly developed, they can provide a large volume of employment, can raise income and standard of living of the people in lower income group and can bring about more prosperity and balanced economic development. Small scale industrial sector has vast potential in terms of creating employment and output, promotion of export, expansion of base for indigenous entrepreneurship and dispersal of industries and entrepreneurship skills in both rural as well as backward areas. Desai (1983) also stated that rapid industrialization in India depends on the growth of small scale industries. Most of the small scale industries are operating under certain handicaps like shortage of raw materials, low levels of technical knowledge and counseling, poor infrastructure, inadequate capital and credit facilities, improper distribution system, lack of facilities for market analysis, research and development. They are also weak in marketing their products beyond their localities especially in international markets. B.K. Sharma (1985) suggested that the programme of rural industries would require constant support.The training and marketing infrastructures would therefore, have to be developed suitably for the sustenance and healthy growth of the rural industries programme. Nayak Committee (1992) set up by the Reserve Bank of India to examine the adequacy of institutional credit to the Small Scale Industrial sector and the related aspects. The Committee found that banks has insufficiently serviced the working capital needs of the sector particularly that of cottage and tiny enterprises. Moreover, there is a need for the setting up of specialized bank branches for small scale industries, the absence of which has led to serious bottlenecks. Further, the system of providing term loan and working capital by two kinds of institutions, viz. Banks and State Financial Corporations (SFCs) has given rise to a host of problems of coordination among them.

Lianzelas (1994) work is based on the economic development of Mizoram as a whole. He focused on various sectors of the economy and their development purely from the economic point of view. Although he put valuable suggestions and policy recommendations for the future development of the state, he did not give any specific strategy for the development of small scale and cottage industries in the state. According to Aruna Devi (1995)Industrial development is a pre condition for the economic development of an underdeveloped region. She is of the opinion that industrial development in general and development of small scale and cottage industries in particular is bound to play an active role in connection with the economic development of an underdeveloped state, like Manipur. Rualkhuma (1997)focused on the industrial development of Mizoram, which is indeed a geographical interpretation of the existing bottlenecks and problems rather than economic analysis. He laid stress on the development of small scale and village industries to boost the over all economic development of the region. His work did not give any concrete solutions on the existing problems and drawbacks of industrial development from economic perspective. Abid Hussain Committee (1997) Report on small enterprises has examined and suggested institutional arrangements, policies and programmes for meeting long term and short term requirements of the small scale industries. The Committee found that the reservation policy of specific products for exclusive manufacture by small scale industries had not served much purpose as most industrialization had occurred in items not reserved for small scale industries. Moreover, it had resulted in low efficiency and productivity and restricted the expansion and export potential of important industries like light engineering, food processing, textiles and others. Credit to small scale industrial sector had become more and more expensive especially after interest rate deregulation. Institutions and regulatory policies responsible for technical assistance, human resources development, industrial standardization etc. expected to play a provocative role in halting technological obsolescence particularly among tiny units did not proved so effective. Mali (1998) in his study has observed that small and medium enterprises (SMEs) and micro enterprises have to face increasing competition in the present scenario of globalization, they have to specifically improve themselves in the fields of management, marketing, product diversification, infrastructural development, technological up gradation. Moreover, new small and medium enterprises may have to move from slow growth area to the high growth area and they have to form strategic alliance with entrepreneurs of neighbouring countries. Data bank on industries to guide the prospective entrepreneurs including investors from abroad is also needed.

Professor A.M. Khusro (1999) holds that if you attempt to create only employment without regard to efficiency, output and surplus, you will soon end up with neither employment nor output or surplus. Accordingly, Khusro suggests formulation of a strategy that depends on self-financing surplus generating schemes. Agarwal (1999) mentioned that the entrepreneurs of small scale industries are generally lacking in knowledge of various aspects as how to set up an industry. Owing to the predominance of agricultural background of the region, the infrastructure for industrial development has not developed properly. Apart from lack of industrial tradition and managerial class, the state is handicapped by difficult terrain and disturbed socio-political conditions are also adversely affecting industrialization in the state. Rajendran (1999) made a study to examine the various kinds of assistance given to small scale industries with the prime objective of identifying institutional assistance for the development of small scale industries and the problems faced by these industries in Tiruchirapalli district of Kerala. He concluded that the greatest problem faced by the small entrepreneurs was non availability of adequate financial assistance. Moreover, the small enterprises also face problems relating to the acquisition of raw material, marketing of products and technological and administrative problems. There were complicated procedures in availing loans from financial institutions and there is no coordination between the promotional institutions and government agencies. Indian Institute of Entrepreneurship, Guwahati (2001) conducted a study on the performance of small scale industries in Greater Guwahati area. The study revealed that large number of SSI units (30 percent) in the study area did not avail any financial assistance from banks or any other financial institutions. State Bank of India (SBI) is the major money lender to the small scale industrial sector followed by the United Bank of India (UBI), Assam Financial Corporation (AFC) etc. All other financial institutions played more or less the same role i.e. providing loan to only 1 percent to 3 percent of units by each bank. So far as the case studies are concerned, they are seldom wholesome studies and that they provide information, in general of one aspect or the other of the sector. Many studies have been undertaken by various scholars relating to the small scale industrial sector at international, national, regional and even district level, but a few studies have been found relating this sector in backward and hilly regions like Mizoram and highlighting the problems and prospects of these industries in such areas.Due to the non-existence of medium and large scale industries in the present study area of Mizoram, the Government of India has declared this region as No Industry Area. As such no fruitful research work has been done here in the field of industrial development. It is only since Mizoram got statehood status in 1987; it attracted the attention of few scholars which is revealed in their writings on various issues

concerning the socio-economic aspects of the state.Though the available literature on the present topics Small Scale and Cottage Industries in Mizoram in the state is scanty, the works of Professor A. K. Agarwal, Professor Lianzela, Professor R. N. Prasad, Dr. R. Colney, Thangmawizuala etc. are worth mentioning.

RESEARCH METHODOLOGY
The Financing Small Scale Industries will be an exploratory research ,because the area of survey is new and various variables which affect the survey are also not known to us, Exploratory research provides insights into and comprehension of an issue or situation. It should draw definitive conclusions only with extreme caution. Exploratory research is a type of research conducted because a problem has not been clearly defined. Exploratory research helps determine the best research design, data collection method and selection of subjects. Given its fundamental nature, exploratory research often concludes that a perceived problem does not actually exist.

Exploratory research often relies on secondary research such as reviewing available literature and/or data, or qualitative approaches such as informal discussions with consumers, employees, management or competitors, and more formal approaches through in-depth interviews, focus groups, projective methods, case studies or pilot studies. The Internet allows for research methods that are more interactive in nature: E.g., RSS feeds efficiently supply researchers with up-to-date information; major search engine search results may be sent by email to researchers by services such as Google Alerts; comprehensive search results are tracked over lengthy periods of time by services such as Google Trends; and Web sites may be created to attract worldwide feedback on any subject.

The results of exploratory research are not usually useful for decision-making by themselves, but they can provide significant insight into a given situation. Although the results of qualitative research can give some indication as to the "why", "how" and "when" something occurs, it cannot tell us "how often" or "how many."

Exploratory research is not typically generalizable to the population at large.

A defining characteristic of causal research is the random assignment of participants to the conditions of the experiment; e.g., an Experimental and a Control Condition.. Such assignment results in the groups

being comparable at the beginning of the experiment. Any difference between the groups at the end of the experiment is attributable to the manipulated variable. Observational research typically looks for difference among "in-tact" defined groups. A common example compares smokers and non-smokers with regard to health problems. Causal conclusions can't be drawn from such a study because of other possible differences between the groups

TOOLS FOR CONDUCTING STUDY

1. Primary Data Questionnaires Direct interaction with SSI unit employees Structural observation Projective Techniques 2. Secondary data Company broachers Pamphlets Internet

RBI Guidelines To Banks For Financing SSIs

Brief introduction on Priority Sector Lending: At a meeting of the National Credit Council held in July 1968, it was emphasised that commercial banks should increase their involvement in the financing of priority sectors, viz., agriculture and small scale industries. The description of the priority sectors was later formalised in 1972 on the basis of the report submitted by the Informal Study Group on Statistics relating to advances to the Priority Sectors constituted by the Reserve Bank in May 1971. On the basis of this report, the Reserve Bank prescribed a modified return for reporting

priority sector advances and certain guidelines were issued in this connection indicating the scope of the items to be included under the various categories of priority sector. Although initially there was no specific target fixed in respect of priority sector lending, in November 1974 the banks were advised to raise the share of these sectors in their aggregate advances to the level of 33 1/3 per cent by March 1979.The need for primary (urban) co-operative bank (UCBs) for providing credit to priority sectors had been examined by the Standing Advisory Committee for UCBs constituted by Reserve Bank in May 1983. The recommendations of the committee were accepted by Reserve Bank and accordingly the targets for lending to priority sector and weaker sections by the UCBs were stipulated. 2. On the basis of the

recommendations made in September 2005 by the Internal Working Group (Chairman: Shri C. S. Murthy), set up in Reserve Bank to examine, review and recommend changes, if any, in the existing policy on priority sector lending including the segments constituting the priority sector, targets and sub-targets, etc. and the comments/suggestions received thereon from banks, financial institutions, public and the Indian Banks Association (IBA), it has been decided to include only those sectors as part of the priority sector, that impact large sections of the population, the weaker sections and the sectors which are employment-intensive such as agriculture, and tiny and small enterprises. Accordingly, the broad categories of priority sector for UCBs will be as under: Under a scheme to be drawn up by the RBI, banks will be encouraged to establish mechanisms for better co-ordination between their branches and branches of SIDBI which are located in 50 clusters that have been identified by the Ministry of Small Scale Industries, Government of India. Under the scheme of strategic alliance (i) the existing branches of SIDBI redesignated as 'Small Enterprises Financial Centres' (SEFC) will take up co-financing of term loan requirements of SSI units along with the bank branches and the working capital requirements of these units will be met by the banks; (ii) the expertise of the SIDBI in appraisal of credit requirements of SSI units will be leveraged by the branches of commercial banks, by payment of a nominal fee; (iii) SIDBI will provide other expert services to help the banks in simplifying the application forms, documentation and disbursement procedures, etc.; and (iv) the working of the scheme may be monitored and modified to suit the local conditions by the State Level Bankers Committee

(SLBC) and, depending on the experience, the coverage of the scheme may be extended to more clusters. The services of SEFCs will be available for tiny industrial units also.

I. CATEGORIES OF PRIORITY SECTOR

(I) Agriculture (Direct and Indirect finance): Direct finance to agriculture shall include short, medium and long term loans given for agriculture and allied activities (dairy, fishery, piggery, poultry, bee-keeping, etc.)directly to individual farmers without limit for taking up agriculture/allied activities. Direct finance may be limited to regular members and not to nominal members or to agencies like primary agriculture credit societies (PACS), primary land development banks etc. Indirect finance to agriculture shall include loans given for

agriculture and allied activities as specified in Section I appended.

(ii) Small Enterprises (Direct and Indirect Finance): Direct finance to small enterprises shall include all loans given to micro and small (manufacturing) enterprises engaged in manufacture/ production, processing or preservation of goods, and micro and small (service) enterprises engaged in providing or rendering of services,and whose investment in plant and machinery and equipment (original cost excluding land and building and such items as mentioned therein) respectively, does not exceed the amounts specified in Section I, appended. The micro and small (service) enterprises shall include small road & water transport operators, small business, professional & self-employed persons, and all other service enterprises, as per the definition given in Section I appended. Indirect finance to small enterprises shall include finance to any person providing inputs to or marketing the output of artisans, village and cottage industries, handlooms and to cooperatives of producers in this sector. (iii) Retail Trade shall include retail traders/private retail traders dealing in essential commodities (fair price shops) as per the definition given in Section I appended.

(iv) Micro Credit: Provision of credit and other financial services and products of amounts not exceeding Rs. 50,000 per borrower or the maximum permissible limit on unsecured advances whichever is lower. (v) Education loans: Education loans include loans and advances granted to only individuals for educational purposes up to Rs. 10 lakh for studies in India and Rs. 20 lakh for studies abroad, and do not include those granted to institutions; (vi) Housing loans: Loans up to Rs. 20 lakh to individuals for purchase/construction of dwelling unit per family, (excluding loans granted by banks to their own employees)and loans given for repairs to the damaged dwelling units of families up to Rs. 1 lakh in rural and semi-urban areas and up to Rs. 2 lakh in urban and metropolitan areas .

* Family for this purpose means and includes the spouse of the member and the children, parents, brothers and sisters of the member who are dependent on such member, but shall not include legally separated spouse. .

II OTHER IMPORTANT FEATURES OF GUIDELINES

The targets under priority sector lending would be linked to Adjusted Bank Credit (ABC) (total loans and advance plus investments made by UCBs in non-SLR bonds) or Credit Equivalent amount of Off-Balance Sheet Exposures (OBE), whichever is higher, as on March 31 of the previous year. Existing investments, as on the date of this circular, made by banks in non SLR bonds held in HTM category will not be taken into account for calculation of ABC. However, fresh investments by banks in non-SLR bonds will be taken into account for the purpose. For the purpose of calculation of credit equivalent of off-balance sheet exposures, banks may use current exposure method. Inter-bank exposures will not be taken into account for the purpose of priority sector lending targets/sub-targets.

III.TARGETS/SUB-TARGETS

(i)

The targets and sub-targets set under priority sector lending for UCBs are furnished below:

(ii)

Targets and sub-targets set

under priority sector lending Total Priority Sector advances 60 per cent of Adjusted Bank Credit (ABC) or credit equivalent amount of Off-Balance Sheet Exposure, whichever is higher. Agriculture Advances No target. Small Enterprise advances Advances to small enterprises sector will be reckoned in

computing performance under the overall priority sector target of 60 per cent of ABC or credit equivalent amount of Off-Balance Sheet Exposure, whichever is higher. Micro enterprises within Small Enterprises sector (i) 40 per cent of total advances to small

enterprises sector should go to micro (manufacturing) enterprises having investment in plant and machinery up to Rs 5 lakh and micro (service) enterprises having investment in equipment up to Rs.2lakh; ii) 20 per cent of total advances to small enterprises sector should go to micro (manufacturing) enterprises with investment in plant and machinery above Rs 5 lakh and up to Rs. 25 lakh, and micro (service) enterprises with investment in equipment above Rs. 2 lakh and up to Rs. 10 lakh. (Thus, 60 per cent of small enterprises advances should go to the micro enterprises). Advances to weaker sections Of the stipulated target for priority sector advances, at least 25% (or 15% of the ABC or credit equivalent amount of Off-Balance Sheet Exposure, whichever is higher) should be given to weaker sections.

Advances to Minorities. Within the overall target for priority sector lending and the sub- target of 25 per cent for the weaker sections, sufficient care may be taken to ensure that the minority communities also receive an equitable portion of the credit. Salary Earners' Banks: The stipulation regarding priority sector lending is not applicable to the Salary Earners' Banks. Credit Flow to Minorities: UCBs should initiate steps to enhance/ augment flow of credit under priority sector to artisans and craftsmen as also to vegetable vendors, cart pullers, cobblers, etc. belonging to minority communities. The minority communities notified in this regard are Sikhs, Muslims, Christians, Zoroastrians and Buddhists. Within the overall target for priority

sector lending and the sub- target of 25 per cent for the weaker sections, sufficient care may be taken to ensure that the minority communities also receive an equitable portion of the credit.

IV.

REPORTING /MONITORING UNDER PRIORITY SECTOR:

UCBs should take effective steps to achieve the above recommended targets and monitor the priority sector lending, keeping in view the quantitative as well as qualitative aspects. In order to ensure that due emphasis is given to lending under priority sector, it is considered desirable that the performance is reviewed periodically. For this purpose, apart from the usual reviews, which the banks are periodically undertaking, specific reviews by the Board of Directors of the respective banks may be made on half-yearly basis. Accordingly, a memorandum may be submitted to the Board of Directors at half-yearly intervals i.e. as on September 30 and March 31 of each year giving a detailed critical account of the performance of the bank during the period showing increase/decrease over the previous half-year (Statement I). Further, annual review of the performance under priority sector advances as on March 31 may also be placed before the Board. A copy of the annual review as on March 31 may be forwarded to the concerned Regional Office of the Reserve Bank with the Board's observations, indicating the steps taken/proposed to be taken for improving the bank's performance. The report should reach the Regional Office within a month from the end of the period to which it relates.

The banks should submit a half yearly statement as on March 31/ September 30 within 15 days of the close of the relevant half year, showing the progress made in deployment of credit to Minority communities, to the concerned Regional Office of this department under whose jurisdiction they function, in the given format. In order to facilitate compilation of the relative figures, banks may maintain a register to indicate all the items of priority sector advances and also another register for weaker section advances showing particulars, with separate folios to each activity so that the total of advances to priority sector and weaker sections under each activity and to each type of beneficiary may be available at any given point of time. The proforma of these registers may be on the lines of the annual return to be submitted to RBI.

THE DETAILED GUIDELINES IN THIS REGARD ARE GIVEN AS UNDER.

Small ENTERPRISES DIRECT FINANCE

1 Direct Finance in the small enterprises sector will include credit to: 1.1 Manufacturing Enterprises (a) Small(manufacturing) Enterprises Enterprises engaged in the manufacture/production, processing or preservation of goods and whose investment in plant and machinery [original cost excluding land and building and the items specified by the Ministry of Small Scale Industries vide its notification no. S.O. 1722 (E) dated October 5, 2006]does not exceed Rs. 5 crore. (b) Micro (manufacturing) Enterprises

Enterprises engaged in the manufacture/production, processing or preservation of goods and whose investment in plant and machinery [original cost excluding land and building and such items as in 2.1.1 (a)]does not exceed Rs. 25 lakh, irrespective of the location of the unit.

1.2 Service Enterprises

(a) Small (service) Enterprises Enterprises engaged in providing/rendering of services and whose investment in equipment (original cost excluding land and building and furniture, fittings and other items not directly related to the service rendered or as may be notified under the MSMED Act, 2006) does not exceed Rs. 2 crore. (b) Micro (service) Enterprises Enterprises engaged in providing/rendering of services and whose investment in equipment [original cost excluding land and building and furniture, fittings and such items as in 2.1.2 (a)] does not exceed Rs. 10 lakh. (c) The small and micro (service) enterprises shall include small road & water transport operators, small business, professional & self-employed persons, and all other service enterprises.

1.3 Khadi and Village Industries Sector (KVI)

All advances granted to units in the KVI sector, irrespective of their size of operations, location and amount of original investment in plant and machinery. Such advances will be eligible for consideration under the sub-target (60 per cent) of the small enterprises segment within the priority sector.

INDIRECT FINANCE

2 Indirect finance to the small (manufacturing as well as service) enterprises sector will include credit to: 2.1 Persons involved in assisting the decentralized sector in the supply of inputs to and marketing of outputs of artisans, village and cottage industries. 2.2 Existing investments as on March 31, 2007, made by banks in special bonds issued by NABARD with the objective of financing exclusively non-farm sector may be classified as indirect finance to Small Enterprises sector till the date of maturity of such bonds or March 31, 2010, whichever is earlier. Investments in such special bonds made subsequent to March 31, 2007 will, however, not be eligible for such classification. 2.3 Loans granted by scheduled UCBs to NBFCs for on-lending to small and micro

enterprises (manufacturing as well as service).

Indirect finance in the small-scale industrial sector include:

Indirect finance to SSI includes the following important items: i. Financing of agencies involved in assisting the decentralised sector in the supply of

inputs and marketing of outputs of artisans, village and cottage industries. ii. Finance extended to Government sponsored Corporation/organisations providing funds

to the weaker sections in the priority sector. iii. iv. Advances to handloom co-operatives. Term finance/loans in the form of lines of credit made available to State Industrial

Development Corporation/State Financial Corporations for financing SSIs. v. vi. units. Funds provided by banks to SIDBI/SFCs by way of rediscounting of bills Subscription to bonds floated by SIDBI, SFCS, SIDCS and NSIC exclusively for financing SSI

vii.

Subscription to bonds issued by NABARD with the objective of financing exclusively non-

farm sector. viii. ix. Financing of NBFCS or other intermediaries for on-lending to the tiny sector. Deposits placed with SIDBI by Foreign Banks in fulfilment of shortfall in attaining priority

sector targets. x. Bank finance to HUDCO either as a line of credit or by way of investment in special

bonds issued by HUDCO for on-lending to artisans, handloom weavers, etc. under tiny sector may be treated as indirect lending to SSI (Tiny) Sector.

Type of investments made by banks are reckoned under priority sector:

Investments made by the banks in special bonds issued by the specified institutions could be reckoned as part of priority sector advances, subject to the following conditions: i. State Financial Corporations (SFCs)/State Industrial Development Corporations (SIDCs) Subscription to bonds exclusively floated by SFCs & SIDCs for financing SSI units will be eligible for inclusion under priority sector as indirect finance to SSI. ii. Rural Electrification Corporation (REC)

Subscription to special bonds issued by REC exclusively for financing pump-set energisation programme in rural and semi-urban areas and the System Improvement Programme under its Special Projects Agriculture (SI-SPA) will be eligible for inclusion under priority sector lending as indirect finance to agriculture. iii))NABARD : Subscription to bonds issued by NABARD with the objective of financing

exclusively agriculture/allied activities and the non-farm sector will be eligible for inclusion under the priority sector as indirect finance to agriculture/ SSI, as the case may be. iii. Small Industries Development Bank of India (SIDBI)

Subscriptions to bonds exclusively floated by SIDBI for financing of SSI units will be eligible for inclusion under priority sector as indirect finance to SSIs. iv. The National Small Industries Corporation Ltd. (NSIC) Subscription to bonds issued by

NSIC exclusively for financing of SSI units will be eligible for inclusion under priority sector as indirect finance to SSIs.

National Housing Bank (NHB)

Subscription to bonds issued by NHB exclusively for financing of housing, irrespective of the loan size per dwelling unit, will be eligible for inclusion under priority sector advances as indirect housing finance. v. Housing & Urban Development Corporation (HUDCO) a. Subscription to bonds issued by HUDCO exclusively for financing of housing, irrespective of the loan size per dwelling unit, will be eligible for inclusion under priority sector advances as indirect housing finance. b. Investment in special bonds issued by HUDCO for on-lending to artisans, handloom weavers, etc. under tiny sector will be classified as indirect lending to SSI (Tiny) sector. Actions taken in the case of non-achievement of priority sector lending target by a bank : i. Domestic scheduled commercial banks having shortfall in lending to priority sector / agriculture are allocated amounts for contribution to the Rural Infrastructure Development Fund (RIDF) established in NABARD. Details regarding operationalisation of the RIDF such as the amounts to be deposited by banks, interest rates on deposits, period of deposits etc., are decided every year after announcement in the Union Budget about setting up of RIDF. ii. In the case of foreign banks operating in India which fail to achieve the priority sector lending target or sub-targets, an amount equivalent to the shortfall is required to be deposited with SIDBI for one year at the interest rate of 8 percent per annum. Rate of interest for loans under priority sector :

As per the current interest rate policy, in the case of loans upto Rs 2 lakh, the interest rate should not exceed the prime lending rate (PLR) of the bank, while in the case of loans above Rs 2 lakh, banks are free to determine the interest rate

J&K Bank Financing For SSI

Guidelines for financing of Small & Medium Enterprises (SMEs) The small-scale industries produce about 8000 products, contribute 40% of the industrial output and offer the largest employment after agriculture. The sector presents an opportunity to the nation to harness local competitive advantages for achieving global dominance. In recognition of these aspects Govt. of India has decided to give greater technological, investment and marketing support to smallscale industry. A comprehensive legislation, which would enable the paradigm shift from smallscale industry to small and medium enterprises is under consideration of Parliament. The Honble Finance Minister Government of India has announced certain measures in the Parliament on August 10, 2005 for stepping up of credit to small and medium enterprises. Accordingly the Reserve Bank of India has issued detailed guidelines to the banks for increasing finance, debt restructuring mechanism and one time settlement (OTS) for the SME sector. Up till now there was no definition of Medium Enterprises. In order to segregate the small and medium enterprises the Reserve Bank of India has come out with a definition of Medium Enterprises till enactment of Small and Medium Enterprises Development bill. As per the definition given by RBI, the units with investment in plant and machinery in excess of SSI limit and upto Rs.10.00 crore shall be treated as Medium Enterprises (ME). Till out come of parliamentary bill definition of SSI will remain unchanged. At present, a small-scale industrial unit is an industrial undertaking in which investment in plant and machinery does not exceed Rs.1.00 crore except in respect of certain specified items under hosiery, hand tools, drugs and pharmaceuticals, stationery items and sports goods where this investment limit has been enhanced to Rs.5.00 crore. However loan to SSI sector will be categorized under priority sector.

In order to increase the outreach of formal credit to SME sector, RBI has issued policy package for financing, debt restructuring and one time settlement in respect of SMEs. RBI has advised the Banks as under: 1 To initiate necessary steps to rationalize the cost of loans to SME sector by adopting a transparent rating system with cost of credit being linked to the credit rating of enterprise. SIDBI has developed a Credit Appraisal and Rating Tool as well as a Risk Assessment Model and a comprehensive rating model for risk assessment of proposals for SMEs. The banks have been advised to consider to take advantage of these models as appropriate and reduce their transaction costs. National Small Industries Corporation has recently introduced credit rating scheme for encouraging SME units to get themselves credit rated by reputed agencies. Banks may consider these rating models for rating the SME borrowers. 2 To make concerted efforts to provide credit cover on an average to at least 5 new small/medium enterprises at each of their semi urban/ urban branches per year. 3. To formulate a comprehensive and more liberal policy with the approval of their Board of Directors in respect of loans to SME sector. 4.To consider cluster based approach for financing SMEs as it offers possibilities of reduction in transaction cost, mitigation of risks and also provide an appropriate scale for improvement in infrastructure.

J&K Bank Financing For SSI Guidelines for financing of Small & Medium Enterprises (SMEs)

The small-scale industries produce about 8000 products, contribute 40% of the industrial output and offer the largest employment after agriculture. The sector presents an opportunity to the nation to harness local competitive advantages for achieving global dominance. In recognition of these aspects Govt. of India has decided to give greater technological, investment and marketing support to small-scale industry. A comprehensive legislation, which would enable the paradigm shift from small-scale industry to small and medium enterprises is under consideration of Parliament. The Honble Finance Minister Government of India has announced certain measures in the Parliament on August 10, 2005 for stepping up of credit to small and medium enterprises. Accordingly the Reserve Bank of India has issued detailed guidelines to the banks for increasing finance, debt restructuring mechanism and one time settlement (OTS) for the SME sector. Up till now there was no definition of Medium Enterprises. In order to segregate the small and medium enterprises the Reserve Bank of India has come out with a definition of Medium Enterprises till enactment of Small and Medium Enterprises Development bill. As per the definition given by RBI, the units with investment in plant and machinery in excess of SSI limit and upto Rs.10.00 crore shall be treated as Medium Enterprises (ME). Till out come of parliamentary bill definition of SSI will remain unchanged. At present, a small-scale industrial unit is an industrial undertaking in which investment in plant and machinery does not exceed Rs.1.00 crore except in respect of certain specified items under hosiery, hand tools, drugs and pharmaceuticals, stationery items and sports goods where this investment limit has been enhanced to Rs.5.00 crore. However loan to SSI sector will be categorized under priority sector. In order to increase the outreach of formal credit to SME sector, RBI has issued policy package for financing, debt restructuring and one time settlement in respect of SMEs. RBI has advised the Banks as under: 1.To initiate necessary steps to rationalize the cost of loans to SME sector by adopting a transparent rating system with cost of credit being linked to the credit rating of enterprise. SIDBI has developed a Credit Appraisal and Rating Tool as well as a Risk Assessment Model and a comprehensive rating model for risk assessment of proposals for SMEs. The banks have been advised to consider to take advantage of these models as appropriate and reduce their transaction costs. National Small Industries Corporation has recently introduced credit rating scheme for encouraging SME units to get themselves credit rated by reputed agencies. Banks may consider these rating models for rating the SME borrowers. 2. To make concerted efforts to provide credit cover on an average to at least 5 new small/medium enterprises at each of their semi urban/ urban branches per year.

3. To formulate a comprehensive and more liberal policy with the approval of their Board of Directors in respect of loans to SME sector. 4. To consider cluster based approach for financing SMEs as it offers possibilities of reduction in transaction cost, mitigation of risks and also provide an appropriate scale for improvement in infrastructure. PROCESSING OF APPLICATIONS: Viability: The borrowers should invariably provide a detailed project report prepared by a reputed project Consultant covering all aspects of its viability. The borrower should provide all the necessary details and required information regarding the proposal.

Issue of Acknowledgement of Loan Applications: Branches should give acknowledgement for loan applications received from the Borrowers. Disposal of Applications: All loan applications received under SME Sector shall be disposed Off by the branches within a maximum period of 4 weeks provided the loan applications are complete in all respects. In case the proposal of the borrower does not fall within the competence of branch, the branch should send one advance copy of the proposal to the sanctioning authority followed by final copy with recommendations from the branch. Proposal received register: A register should be maintained at branch wherein the date of receipt, sanction/rejection/disbursement with reasons therefore etc., should be recorded. The register should be made available to all inspecting agencies. i) Rejection of applications for fresh limits/enhancement of existing limits should not be done without the approval of the next higher authority. ii) Sanction of reduced limits should be reported to the next higher authority immediately with full details for review and confirmation.

Security: Branches should not insist for any tangible collateral security for limits upto Rs 5.00 lacs. For limits beyond Rs 5.00 lacs branches may obtain adequate tangible collateral security. Debt Equity ratio:

Debt equity ratio of 2:1 is desirable. However in well-managed SME units ratio of 3:1 can be considered on merits. Rate of Interest: Sector Rate of Interest Agriculture & 1% below the rate prescribed for each Rating Allied activities Grade SMEs 0.50% below the rate prescribed for each Rating Grade B. Interest rate structure for loans and advances with aggregate Rate of Interest (% limits up to Rs.20.00 lacs and those under Special Schemes. p. a.) w. e. f. 01.05.2009

1. Micro & Small Enterprises (Manufacturing) a) Up to Rs.0.50 lacs b) Above Rs.0.50 lacs & upto Rs.2.00 lacs c) Up to Rs.2.00 lacs d) Above Rs.2.00 lacs & up to Rs.5.00 lacs e) Above Rs.5.00 lacs & uptoRs.20.00 lacs Loans under Craft Development Scheme a) Up to Rs.0.25 lacs b) Above Rs.0.25 lacs & up to Rs.0.50 lacs c) Up to Rs.0.50 lacs d) Above Rs.0.50 lacs & up to Rs.1.00 lacs 2 Other Micro and Small Services Sector a) Up to Rs.0.50 lacs b) Above Rs.0.50 lacs & up to Rs.2.00 lacs c) Up to Rs.2.00 lacs d) Above Rs.2.00 lacs & up to Rs.5.00 lacs e) Above Rs.5.00 lacs & uptoRs.20.00 lacs

XXX XXX PLR- 2.00 PLR- 1.50 PLR- 1.00

XXX XXX 10.00 11.00 XXX XXX PLR- 2.00 PLR-1.50 PLR-1.00

Loans and Advances W.E.F. 01.08.2008 PRIME LENDING RATE (PLR) 13. S.No Sector Rate of Interest (% per annum) w.e.f. 01.05.2010 Interest rate structure for loans and advances with aggregate limits exceeding Rs. 20.00 lacs and other than those under Special Schemes Rating Grade 1 (SME Sector) PLR- 1.00 Rating Grade 1 (Small Business & Trade ) Rating Grade 2 (SME Sector) Rating Grade 2 (Small Business & Trade ) Rating Grade 3 (SME Sector) Rating Grade 3 (Small Business & Trade ) Rating Grade 4 (SME Sector) Rating Grade 4 (Small Business & Trade ) Rating Grade 5 (SME Sector) Rating Grade 5 (Small Business & Trade ) Rating Grade 6 (SME Sector) PLR- 1.00 PLR - 0.50 PLR - 0.50 PLR PLR PLR + 0.50 PLR + 0.50 PLR+ 1.25 PLR+ 1.25 12.75% W.E.F. 01.05.2010

A.

TYPES OF LOANS: 1)Term loans : The bank loan to the industry , with a fixed maturity and often featuring amortization of principal. 2) Working capital loans: operations of a company. The bank provides loan whose purpose is to finance everyday

Cash Credit : This account is the primary method in which Banks lend money against the security of commodities and debt. It runs like a current account except that the money that can be withdrawn from this account is not restricted to the amount deposited in the account. Instead, the account holder is permitted to withdraw a certain sum called "limit" or "credit facility" in excess of the amount deposited in the account.Cash Credits are, in theory,payable on demand. These are, therefore, counter part of demand deposits of the Bank Letter of Credit: Letter of Credit, document issued by a bank authorizing the bearer to receive money from one of its foreign branches or from another bank abroad. The order is nonnegotiable, and it specifies a maximum sum of money not to be exceeded. Widely used by importers and exporters, the letter of credit is also made available to tourists by their home banks so that they may draw foreign currency while traveling abroad. When the instrument is directed to more than one agent, it is called a circular letter of credit. Similarly bank is alo providing facilities like BANK OF WARRANTEE, BILL PURCHASE LIMIT Working capital term loans etc to the industry. Disbursement: The borrower shall provide an implementation schedule before hand and all the disbursement of term loans shall be made as per the progress of implementation. As far as possible the payments shall be made directly to the suppliers/contractors. In respect of working capital loans, the branches shall first ensure completion/commissioning of unit. \ TYPES OF LOANS: 1)Term loans : The bank loan to the industry , with a fixed maturity and often featuring amortization of principal. .

2) Working capital loans: The bank provides loan whose purpose is to finance everyday operations of a company. Cash Credit : This account is the primary method in which Banks lend money against the security of commodities and debt. It runs like a current account except that the money that can be withdrawn from this account is not restricted to the amount deposited in the account. Instead, the account holder is permitted to withdraw a certain sum called "limit" or "credit facility" in excess of the amount deposited in the account.Cash Credits are, in theory,payable on demand. These are, therefore, counter part of demand deposits of the Bank .

Letter of Credit: Letter of Credit, document issued by a bank authorizing the bearer to receive money from one of its foreign branches or from another bank abroad. The order is nonnegotiable, and it specifies a maximum sum of money not to be exceeded. Widely used by importers and exporters, the letter of credit is also made available to tourists by their home banks so that they may draw foreign currency while traveling abroad. When the instrument is directed to more than one agent, it is called a circular letter of credit. Similarly bank is alo providing facilities like BANK OF WARRANTEE, BILL PURCHASE LIMIT Working capital term loans etc to the industry.

Code of Banks Commitment to Micro and Small Enterprises TABLE OF CONTENTS

1.1

Objectives Of The Code

2 2.1 3 3.1 3.2 3.4 4 5 5.1 5.2 5.3 5.4 6 11 12

Key Commitments Our Key Commitments To You Information If You Want To Become Our Customer Interest Rates Terms And Conditions Privacy And Confidentiality Lending Application Credit Assessment Post Disbursement Nursing Sick MSEs And Debt Restructuring Collection of Dues Advertising, Marketing And Sales Monitoring

Our _____________ Banks ,We______________Bank ,You ____________SMEs

1.1 Objectives Of The Code The Code has been developed to a.Give a positive thrust to the MSE sector by providing easy access to efficient banking services. b. Promote good and fair banking practices by setting minimum standards in dealing with you. c. Increase transparency so that you can have a better understanding of what you can reasonably expect of the services. d. Improve our understanding of your business through effective communication. e. Encourage market forces, through competition, to achieve higher operating standards. f. Promote a fair and cordial relationship between you and us and also ensure timely and quick response to your banking needs. g. Foster confidence in the banking system. 2. KEY COMMITMENTS 2.1 Our Key Commitments To You 2.1.1 To Act Fairly And Reasonably In All Our Dealings With You By a. Providing minimum banking facilities of receipt and payment of cash/cheques at the banks counter. b. Providing speedy and efficient credit and service delivery. c. Meeting the commitments and standards in this Code, for the products and services we offer, and in the procedures and practices our staff follow. d. Making sure our products and services meet relevant laws and regulations in letter and spirit. e. Ensuring that our dealings with you rest on ethical principles of integrity and transparency. f. Operating secure and reliable banking and payment and settlement systems. g. Considering cases of financial difficulty sympathetically 2.1.2 To Help You Understand How Our Financial Products And Services Work By

a. Giving you information about them in any one or more of the following languages: Hindi, English or the appropriate local language. b. Ensuring that our advertising and promotional literature is clear. c. Ensuring that you are given clear information about our products and services, the terms and conditions and the interest rates/service charges, which apply to them. d. Ensuring that there is no mis-selling of our products. e. Giving you information on what are the facilities provided to you and how you can avail of these.what are their financial implications and whom you can contact for addressing your queries. 2.1.3 To Help You Use Your Account Or Service By a. Providing you regular appropriate updates. b. Keeping you informed about changes in the interest rates, charges or terms and conditions. 2.1.4 To Deal Quickly And Sympathetically When Things Go Wrong By a. Correcting mistakes promptly and cancelling any bank charges that we apply due to our mistake. b. Handling your complaints promptly. c. Telling you how to take your complaint forward if you are still not satisfied (see paragraph No. 10 below). d. Providing suitable alternative avenues to alleviate problems arising out of technological failures in the bank. 2.1.5 To Publicise The Code We Will a. b. c. d. Provide you (existing customer) with a copy of the Code on request free of cost. Provide you (new customer) with a copy of the Code when you open your account. Make available this Code for perusal at every branch and on our website. Ensure that our staff are trained to provide relevant information about the Code and to put the Code into practice.

3. INFORMATION You can get information on interest rates, common fees and charges through any of the following : a. Phoning our branches or help-line. b. Looking at our website. c. Asking our designated staff/help desk.

3.1 If You Want To Become Our Customer We Will a. Give you information on all schemes offered by us specifically for MSEs. b. Give you information to explain the key features of our loan and products viz. cash credit, term loans, guarantees, bill discounting/purchase, off balance sheet items including applicable interest rate, methodology of calculation of interest and fees and charges. c. Endeavour to customize the product and service that you choose, to suit your needs. d. Tell you if we offer products and services in more than one way [for example, through ATMs, on the Internet, over the phone, in branches and so on] and tell you how to find out more about them. e. Tell you what information we need from you to prove your identity and address, for us to comply with legal, regulatory and internal policy requirements. 3.2 Interest Rates We will inform you of the change in interest rates on our products within seven days of the decision by a. Writing to you. b. Notice at the branch. c. Placing on website. 3.3 Terms And Conditions a. When you become a customer or avail of a product/ service for the first time, we will advise you the relevant terms and conditions for the service you have asked us to provide. b. All terms and conditions will be fair and will set out respective rights especially with regard to nomination facility, wherever applicable and liabilities and obligations clearly and as far as possible in plain and simple language. Changes to Terms and Conditions a. When you become a customer, you can get information of changes to terms and conditions through any of the following channels i) ii) iii) iv) Account statements ATMs Written communication Notice Board at each branch

v) Email/ website/ SMS b. If we have made any change without notice we will notify the change within 30 days. If such change is to your disadvantage, you may within 60 days and without notice close your account or switch it without having to pay any extra charges or interest. c. If we have made a major change or a lot of minor changes in any one year, we will, on request give you a copy of the new terms and conditions or a summary of the changes. 4. PRIVACY AND CONFIDENTIALITY We will treat all your personal and business information as private and confidential [even when you are no longer a customer], and shall be guided by the following principles and policies. We will not reveal information or data relating to your accounts, whether provided by you or otherwise, to anyone, including other companies/entities in our group, other than in the following exceptional cases : a. If we have to give the information by law. b. If there is a duty towards the public to reveal the information. c. If our interests require us to give the information (for example, to prevent fraud) but we will not use this as a reason for giving information about you or your accounts [including your name and address] to anyone else, including other companies in our group, for marketing purposes. d. If you ask us to reveal the information, or if we have your permission. e. If we are asked to give a bankers reference about you, we will need your written permission before we give it. We will explain to you the extent of your rights under the existing legal framework for accessing the personal records that we hold about you. We will not use your personal and business information for marketing purposes by anyone including ourselves unless you specifically authorize us to do so.

5.LENDING Our loan policy dealing with your application for loan or any financial assistance will be reflective of the objectives and spirit of the national policy and the regulatory prescription. We shall place the policy relating to Micro and Small Enterprises on our website and also make it available to you at the branch for perusal. On request we will make available a copy at a nominal charge. We will endeavour to provide facilities through a Single Window Mechanism.

5.1 Application We will a. Make available, free of cost, simple standardized, easy to understand, application form for loans. b. Provide you with a checklist (compliant with legal and regulatory requirements) along with the loan application form to enable you to submit the application complete in all respects. If required, we will assist you in filling up your loan application form. c. At the time of making available application form also provide you information about the interest rates applicable, and the fees/charges, if any, payable for processing, pre-payment options and charges, if any, and any other matter which affects your interest, so that a meaningful comparison with those of other banks can be made and informed decision can be taken by you. d. Acknowledge in writing the receipt of your loan application. e. Normally collect all particulars required for processing the application for credit facility at the time of application. In case we need any additional information, we will contact you within seven working days from receipt of application. f. Endeavour to enable you to know online the status of your application. g. Not charge any processing fee for loans up to Rs.5 lakh if the loan is not sanctioned. h. Dispose of your application for a credit limit or enhancement in existing credit limit up to Rs 2 lakh within two weeks; and for credit limit up to Rs 5 lakh within 4 weeks from the date of receipt provided your application is complete in all respects and is accompanied by documents as per check list provided and dispose of loan applications for amounts exceeding Rs 5 lakh, within a reasonable time frame. 5.2 Credit Assessment

a. We will i) Verify the details mentioned by you in your application by contacting you through our staff / agencies appointed by us for this purpose at your business address/ residence. ii) Before lending you any money, or increasing your overdraft or borrowing limit/s,assess whether you will be able to repay it. We shall carry out proper assessment of your loan application by carrying out detailed due diligence and appraisal. iii) Satisfy ourselves about the reasonableness of the projections made by you. b. This assessment may include looking at the following : i) Information you give us, including the purpose of borrowing. ii) Your business plan.

iii) Your businesss cash flow, profitability and existing financial commitments supplemented, if necessary, by account statements. iv) Your personal financial commitments. v) How you have handled your finances in the past. vi) Information we get from credit reference agencies. vii) Ratings assigned by reputed credit rating agencies, if any. viii) Information from others, such as other lenders /creditors. ix) Market reports. x) Any security provided. c. We will i) Not insist on collateral for credit limits upto Rs 5 lakh. ii) Consider providing collateral free credit limits upto Rs 25 lakh if we are satisfied about your track record and financial position being good and sound. iii) Provide micro and small enterprises (manufacturing) working capital limits computed on the basis of a minimum of 20 per cent of your projected annual turnover. iv) Consider your request for suitable enhancement in the working capital limits in cases where the output exceeds the projections or where the initial assessment of working capital is found inadequate and you have provided necessary evidence. d. Guarantees If you want us to accept a guarantee or other security from someone else for your liabilities, we will ask you for your permission to give confidential information about your finances to them or to their legal adviser. We will also i) Encourage them to take independent legal advice to make sure that they understand their commitment and the possible consequences of their decision (where appropriate, the documents we ask them to sign will contain this recommendation as a clear and obvious notice). ii) Tell them that by giving the guarantee or other security they may become liable as well as you. 5.3 Post Disbursement We will a. Assure that we refrain from interference into your business affairs except on what is in terms of sanction of loan, loan agreement or when new information comes to banks knowledge. b. Endeavour to be constructive in our monitoring process and sympathetically deal with genuine difficulties that you may face in your dealings with us.

c. Obtain following information from you on an ongoing basis i) A comparison of the forecasts in your business plan with the actual results. ii) Progress on important aspects of your business plan. iii) Annual accounts such as Balance Sheet and Profit and Loss Account and other supporting documents. iv) Age-wise break up of your creditors and debtors and the amounts involved. d. Allow drawals against your limits as per usual safeguards. e. If your circumstances change, talk to you about any new information we will need from you. f. Convey our consent or otherwise within two weeks of receipt of a request for transfer of the borrowal account, either from you or from the bank / financial institution that proposes to take over the account. g. Release all securities on receiving repayment of loan immediately and in any case not later than one week subject to any legitimate right or lien for any other claim we may have against you. h. Give notice in case we exercise such right of set off, with full particulars of our remaining claims against you as also of the documents under which we are entitled to retain the securities till the relevant claim is settled/ paid by you. i. Effect pledges/deliveries on the same day of receiving your request. j. Grant you increase in the drawing power within 24 hours of lodgment of security. k. Inform you of debits to your account arising out of interest application, fees and charges. l. Monitor the progress made by you through any or more of the following modes i) Scrutinising periodic statements of stocks you hold. ii) Watching the transactions in your account with us. iii) Visits by either our staff or authorised representative to your premises for verification of the stocks and/or assets financed. iv) Obtain wherever necessary market reports on how your business is going on.

5.4 Nursing Sick MSEs And Debt Restructuring We will consider a nursing/ debt restructuring programme in case your borrowal account remains substandard for over six months, or your unit is considered to be sick. For examining your request for rehabilitation /debt restructuring we will a. First see whether you are viable/potentially viable. b. If you are found to be viable/potentially viable initiate corrective action for your revival. c. In case your unit is potentially viable and is under consortium / multiple banking arrangement, and if we have maximum share of outstanding, work out the restructuring package.

6. COLLECTION OF DUES: Whenever we give loans, we will explain to you the repayment process by way of amount, tenure and periodicity of repayment. However if you do not adhere to repayment schedule, a defined process in accordance with the laws of the land will be followed for recovery of dues which will be given to you at the time of sanction of loan. The process will involve reminding you by sending you notice or by making personal visits and/or repossession of security, if any. In case of default, we may refer the case to the recovery agent. We will inform you that recovery proceedings have been initiated. On initiating recovery proceedings we will also tell you that in case you have a complaint to make in this regard you may contact our helpline number. We will investigate your complaints about unfair practices by our recovery agents. Our collection policy is built on courtesy, fair treatment and persuasion. We believe in fostering customer confidence and long-term relationship. We will provide you with all the information regarding dues and will endeavor to give sufficient notice for payment of dues. Our staff deputed for collection of dues or/and security repossession will identify himself/herself. Any person authorised to represent us for these purposes will dentify himself/herself and also display the authority letter issued by us. All the members of the staff or any person authorised to represent our bank in collection or/and security repossession would be subjected to due diligence and they would follow the guidelines set out below : a. You would be contacted ordinarily at the place of business/occupation and if unavailable at the place of your business/ occupation at the place of your residence or in the absence of any specified place at the place of your authorised representatives choice. b. Identity and authority to represent would be made known to you at the first instance. c. Your privacy and dignity would be respected. d. Interaction with you would be in a civil manner. e. Normally our representatives will contact you between 0700 hrs and 1900 hrs, unless the special circumstances of your business or occupation require otherwise. f. Your requests to avoid calls at a particular time or at a particular place would be honored as far as possible. g. Time and number of calls and contents of conversation would be documented. h. All assistance would be given to resolve disputes or differences regarding dues in a mutually acceptable and in an orderly manner. i. During visits to your place for dues collection, decency and decorum would be maintained. j. Inappropriate occasions such as bereavement in the family or such other calamitous occasions would be avoided for making calls/visits to collect dues.

7. ADVERTISING, MARKETING AND SALES

a. We will make sure that all advertising and promotional material is clear. b. In any advertising in any media and promotional literature that draws attention to a banking service or product and includes a reference to an interest rate, we will also indicate whether other fees and charges will apply and that full details of the relevant terms and conditions are available on request. c. If we avail of the services of third parties for providing support services, we will require that such third parties handle your personal and business information (if any available to such third parties) with the same degree of confidentiality and security as we would. d. We may, from time to time, communicate to you new features of our products availed by you. Information about our other products or promotional offers in respect of our products/services, will be conveyed to you only if you have given your consent to receive such information/ service either by mail or by registering for the same on our website or on our phone banking/customer service number. e. We have prescribed a code of conduct for our Direct Selling Agencies (DSAs) whose services we may avail to market our products/ services which amongst other matters requires them to identify themselves when they approach you for selling our products personally or through phone. f. In the event of receipt of any complaint from you that our representative/courier or DSA has engaged in any improper conduct or acted in violation of this Code, we shall take appropriate steps to investigate and to handle the complaint and to make good the loss.

Data Analysis & Interpretation

Q1: Age of the industry?

0-10yrs 15

10-20yrs 6

20-30yrs 29

30-40yrs 7

Above 40yrs 3

Age of the Industries

Above 40yrs 5.00% 30-40yrs 12% 0-10yrs 25%

0-10 yrs 10-20 yrs

10-20yrs 10.00% 20-30yrs 48.33%

20-30 yrs 30-40 yrs Above 40 yrs

Q2: Investment of the industry? 0-15 lacs 15 15-30 lacs 25 30-45 lacs 10 45-60 Lacs 6 60-75 lacs 3 75 lacs-1 cr 1

Investment
100 80 60 41.66% 40 20 0 0-15 lacs 15-30 lacs 30-45 lacs 45-60 lacs 60-75 lacs 75lacs-1cr 25% Banking Relations 16.66% 10% 5% 1.66%

Q3: Banking relationship with ?.

JK BANK

HDFC

PNB

SBI

None

50

% age of SSI's

Banking Relations
83.33%

100 80 60 40 20 0

Banking Relations 6.66% JK bank HDFC

3.33% PNB

3.33% SBI

3.33% None

Q4: Amount of loan taken from the JK bank: 0-5 Rs lacs For Term loan 12 For Working 24 Capital loan
100 95 90 85 80 75 70 65 60 55 50 45 40 35 30 25 20 15 10 5 0

5-10 lacs 17 20

10-15 lacs 20 9

15-20 lacs 8 4

20-25 lacs 2 2

25 -30 lacs 1 1

30-35 lacs 0 0

Above 35 lacs 0 0

Loan Taken

% age of SSI's

40%

33.33%

W.C Loan 15% Term Loan

28.33% 20% 33.33% 6.66% 13.33% 3.33% 3.33% 0-5 lacs 5-10 lacs 10-15 lacs 15-20 lacs 20-25 lacs

Working Capital Loan

1.66 1.66% 25-30 lacs

Q5: Satisfaction with the JK bank?

Fully satisfied 5 Somewhat Neutral Somewhat Satisfied 19 20 Fully

unsatisfied unsatisfied 13 3

Satisfaction
100 90 80 70 60 50 40 30 20 10 0

% age of SSI's

31.66% 8.33% Fully satisfied Somewhat satisfied

33.33% 21.66% 5% Neutral Somewhat unsatisfied Fully unsatisfied

Satisfaction

Q6: Awareness about the RBI guidelines to banks for financing SSIs?

Fully aware 6

Somewhat Neutral Somewhat aware 10 21 unaware 19

Fully unaware 4

100 90 80 70 60 50 40 30 20 10 0

Awareness

% age of

SSI's

35% 10% Fully aware 16.66%

31.66% 6.66%

Awareness

Somewhat aware

Neutral

Somewhat unaware

Fully unaware

Q7: Satisfaction with the security demanded by the JKbank for loans?
Fully satisfied 0 Somewhat Neutral Somewhat satisfied 4 8 Fully

unsatisfied unsatisfied 12 38

Somewhat stisfied 6.66% Fully satisfied 0%

Satisfication
Neutral 13.33%

Fully satisfied Somewhat satisfied Neutral

Fully unsatisfied 63.33%

Somewhat unsatisfied 20%

Somewhat unsatisfied Fully unsatisfied

Q8: JKbank keeps privacy & confidentiality of your business & personal information?
Strongly disagreed 14 29 11 5 Disagreed Neutral Agreed Strongly agreed 1

A 8.33% N 18.33%

S.A 1.66%

.
S.D.A 23.33% Strongly disagreed(S.D.A) Disagreed(D.A) Neutral(N) Agreed(A)

D.A 48.33%

Strongly agreed(S.A)

Q9:How much of your profitability has been increased by getting loan?

0-5% 29 5-10% 15 10-15% 10 15-20% 5 Above 20% 1

100 90 80 70 60 50 40 30 20 10 0 0

Profitability

% age of SSI's

48.33% 25% 16.66% 8.33% 5 10 15 20 1.66% 25

Q10: Which measure will be more effective to improve SSIs? % age of Profit
Implementation Decreasing of schemes Interest rate Introduction new schemes Advertisement Decreasing Demand for securities

26

13

100 90 80 70 60 50 40 30 20 10 0

Effectiveness

% age of SSI's

43.33% 13.33% 21.66% 8.33% Decreasing int.rate Itroduction of new schemes 10% Advertisement Decreasing Demand for security .

Implementation of schemes

Q11: JK bank is transparent to you?

Strongly disagreed 13 28 15 3 Disagreed Neutral Agreed Strongly agreed 1

S.A 1.66% A 5%

Transparency
Strongly disagreed(S.D.A) Disagreed(D.A) Neutral(N) Agreed(A) D.A 46.66% Strongly agreed(S.A)

Neutral 25%

S.D.A 21.66%

Q12: Most effective type of Working capital loan?

Cash Credit Letter of Bank Credit 40 10 of Bill of

warrantee Purchase 7 3

100 80 60 40 20 0 Cash Credit 66.66%

Effective working capital

% age of SSI's

16.66%

11.66%

5% Bill of Purchase

Letter of Credit

Bank of Warrantee

Q13: Is the bank advertising their schemes regarding financing of SSIs to make you aware about these schemes?
Yes No

15

45

100

Advertising

% age of SSI's

80 60 40 20 0 Yes No .

Q14: what type of Promotional mix will be effective to make you aware about the schemes regarding financing of SSIs?
Sales promotion 2 18 0 Advertisement Publicity Personal selling 40

Effectivness
100 80 60 66.66%

% age of SSI's

40 20 3.33% 0 Sales promotion

30%

0% Advertisement Publicity Personal selling

FINDINGS
JKbank is the bank providing loans to SMEs at very low interest rate. The study reveals that about 90% of Small and Medium industries in Srinagar Kashmir have maintained their relationship with JKbank and only 10% of SMEs have maintained their relationship with other (i.e. SBI,PNBetc) banks. The study reveals that most of the SMEs have investment not greater than 20 lacks i.e these industries are at the bottom of given value of investment given by RBI for an industry for being an SSI (i.e. 1 crore). The study reveals that most of the SMEs are satisfied with the overall contribution of JKbank towards SMEs. The study reveals that most of the SMEs are not fully aware from the guidelines given by RBI to the banks for financing SMEs. About 70% of SMEs are not satisfied with securities demanded by the bank for getting loans . According to them bank is demanding collateral securities which is about two times greater than the actual loan to be taken,While as other banks are demanding less collateral securities in comparison to JKbank. The study reveals that 70-75% of SMEs in Srinagar are not satisfied with the Privacy & confidentiality of their information(both of business & personal) kept by the bank. About 85% of SMEs are saying that they are making a reasonable increase (from 5-15%) in the profit by getting loan from the bank. Most of the SMEs are more interested in getting working capital loan rather than Term loans .Only about 25% of SMEs are interested in taking Term loans for purchasing the new technological machineries.

 Most of the SMEs want decrease in the Interest rate

also are unsatisfied with

commitments of the bank to implement new schemes & also are unsatisfied with the Advertisement strategy of the bank for the new schemes. Most of the SMEs are more interested in the Cash credit type of working capital loan. About all SMEs are complaining about the low consideration by the government. Bank is continuously taking steps to improve SMEs. SMEs managers are also complaining about the slow service & overall behavior of the bank staff . This time bank is continuously organizing meetings with the entrepreneurs of SMEs in order to discuss the new steps that should be taken to improve SMEs . The SMEs managers are appraising the present chairman of the bank because of his more consideration towards the management of the bank. The managers of SMEs are also complaining about the non-implementation of the scheme i.e lower down rate and also rescheduling the installment schedule. X Chaireman,JKbank ,Dr Haseeb Drabu , in the 76TH meeting of State Level Bankers Committee (SLBC) held at SKICC on 30TH July 2009 , said that there is a desired need to focus more on Kashmir in terms of priority sector because of underachievement of targets in Priority Sector Lending in Kashmir in comparison with Jammu & Ladakh The managers of SMEs are also complaining about the winding up of Business Development Promotion Cell (BDPC) and are not satisfied with Cluster making strategy by the bank. The SMEs located in Baghi Ali Mardan Khan industrial estate Srinagar are also complaining that they have no JKbank branch in their area like in Rangreth industrial estate Srinagar having an internal JKbank branch for their ease. SMEs but they are not satisfied with the middle and lower

 Most of the Sick industries are winded up in the valley because of 30% margin kept by bank to sick industries . Most of the %age of the managers of SMEs are not satisfied with the monthly Stock statement demanded by the bank. Most of the %age of the managers of SMEs are complaining that the bank insists them to undergo an Insurance policy while getting loans, not taking into account their already taken insurance policies on their industries . Most of the %age of the managers of SMEs are complaining about the editing of Project plan ( deposited by SMEs to the bank for which the have applied for loan)by the bank.. Most of the %age of the managers of SMEs say the bank is demanding that there should be 4 crore turnover on 50 lacs loan & if i will go towards the achievement of this 4 cr goal I will loose my profit. Most of the %age of the managers of SMEs are not satisfied with the Marketing strategies of the bank.

Suggestions and Recommendations

RBI should make new strategies to make Industries (in general) and SMEs ( in particular) aware about their guidelines to the banks for financing Industries (in general) and SMEs ( in particular) The formalities for SMEs in particular for getting loans should be reduced . The Securities especially Collateral securities demanded for getting loans ,which are about twice the actual amount of loan , should be decreased.

 Although the bank is providing loan to SMEs at low rate of interest in comparison with the other banks , but SMEs have more expectations on bank ,so the bank should decrease in the interest rate. which is PLR-1.50 for 2-5 lacs should be decreased to PLR-2. Bank should keep Privacy & confidentiality of information (both of business & personal) of SMEs. Bank should not do any kind of editing in SMEs Project plan for which they have applied for loan because it can make failure of that plan. All loan applications received under SME Sector should be disposed Off by the branches within in minimum period of time . The bank should follow sharply all the RBI guidelines in financing SMEs . The bank should make available, free of cost, simple standardized, easy to understand, application form for loans. Bank should increase in the Cash Credit limit to their loyal customers (SMEs) Bank should take more efforts to rehabilitate the Sick industries And should decrease in the margin kept by bank for sick industries. The bank should focus more on improvement of SMEs and should achieve targets in Priority Sector Lending. The bank should restore Business Development Promotion Cell (BDPC).If BDPC is restored their focal point should be industries. The bank should locate branches in every industrial area for the convenience of SMEs. The bank should extend the period for the deposition of Stock statement from 1 month to 3 months . Every SME should be given rights to present their grievances and suggestions to the bank.

 Government should help SMEs through providing Subsidy,good Infrastructure and also should help them in the marketing of their products. The new schemes/policies should be implemented which needs sharp supervision on middle and lower management . Bank should do proper recruitment ,and train the staff about the proper and quick service . Bank should not insist SMEs to undergo an Insurance policy while taking loan which they (SMEs) do not want. Bank should make regular advertisement of their new schemes for SMEs in order to make them (SMEs) familiar with the new schemes introduced by the bank. There should be more than 20 lacs sanctioning competence to the branch placed in the industrial area. There should be no objection if the industry is ready to pay interest on margin if it will also be provided by the bank. margin if it will also be provided by the bank. Bank should not set much bigger turnover boundaries for SMEs on getting smaller loans because it will decrease the profitability of SMEs. The bank should introduce new schemes for SMEs in order to improve them. Bank should focus on advertisement of their Schemes in order to make SMEs aware about the new Schemes & in order to market their product.

LIMITATIONS OF THE STUDY

However, every care has been taken to make this report authentic in every sense. Yet, there were a few uncomfortable factors, which might have had their influence on the final report. It is said, nothing is perfect and if this quote is true I am sure there would be few shortcomings in this project also. Sincere efforts have been made to eliminate due to the limitations of the study. These are: the study was to be completed in a short time; the time factor put a considerable limit on the scope and the extensiveness of the study. Because of the diversity of nature of respondents the findings of the survey could not be generalized. Some of the respondents gave ambiguous replies for certain questions or omitted the responses to some of them. The interpretation of some responses become difficult and could generate wrong results the survey was conducted only in Srinagar; the respondents belonged only to this region of the country. This could have brought biasness into the study

Conclusion
Due to their location and availability of ICT infrastructure, CSCs are best poised to deliver financial services in rural India, helping various banks meet their financing small scale industries. While, SCAs around the country have started partnering with banks to become BCs and BFs, progress has been slow and requires proactive intervention by the CSC SPV. SBI has been leading the process of leveraging CSCs to meet its financing.

mandates. MP and Jharkand are showing clear leadership in project implementation. Online kiosk banking is the preferred solution that requires biometric authentication for the customer. SCAs prefer to partner with banks, instead of technology solution providers, since the BC model revenue margins are small. Initial implementations indicate that when banking is linked with disbursement of ruralGovernment scheme benefits and wages, a BC can earn a minimum of Rs. 3000 per month, per CSP. The success of SSI depends on the availability of internet connectivity, VLE training and motivation, linkages with Government Schemes disbursement, community awareness and sensitization and VLE selection.

BIBLIOGRAPHY

The various sources from where I collected datas are as follows: Internet sites : 1) jkbank.net 2) google.com 3) rbi.org News papers:

1) The Economic Times 2) Greater Kashmir Books:

1) Marketing Management (Philip Kotler) 2) Business Environment (Francis cherunilam) 3) Research methodology (C.R Kothari)

Questionnaire
A study related Financing For SSIs By JKBank is being carried out for the fulfillment of MBA degree. Your kind co-operation in answering this Questionnaire will add value to my project. INTRODUCTION OF THE INDUSTRY: Name of the industry: . Address of the industry: .. Industry for: .......................................................................................................... Name of Proprietor: Address:.. Mobile no.:. INTRODUCTION OF THE RESPONDANT: Name:..

Address: .......................................................................................................... Status in the Industry: . Q1: Since how long the industry is functioning? Q2: Your bank: Main:.. Secondary:.. Q3: What is the investment of industry? Debt:. Equity: Q4: What is your requirement of funds for: Working Capital loan:.. Term loan:. Q5: To what extend you are satisfied with the bank? Fully satisfied Satisfied Neutral Unsatisfied Fully unsatisfied If not what is the reason? ( ( ( ( ( ) ) ) ) )

Q6: Are you satisfied with the securities demanded by the bank for the loans? Fully satisfied Satisfied Neutral Unsatisfied Fully Unsatisfied If not what is the reason Q7: Are you aware of all the RBI guidelines to banks for financing SMEs? Fully aware ( ) ( To some extend ) ( ) ( ) Neutral Not to some extend ( ) Fully unaware ( ( ( ( ( ) ) ) ) )

If not what is the reason? Q8: Are you satisfied with the procedure for taking loans from the bank? Fully satisfied ( ) ( Satisfied somewhat ) ( ) ( ) Neutral Unsatisfied somewhat ( ) Fully unsatisfied

If not what is the reason?

Q9: To what extend the bank keeps privacy & confidentiality of your personal & business information?

Fully

To some extend

Neutral

Not to some extend

No

Q10: To what extend your profitability has been effecting by taking loans froam the bank? 0-5% ( ) 5-10% ( ) 10-15% ( ) 15-20% ( ) >20% ( )

Q11: To what extend the bank is transparent to you? Fully To some extend ( ) ( ) ( ) ( Neutral Not to some extend ) ( ) No

Q12: Are you satisfied with the service of bank staff ? If not then what are your expected services? Fully satisfied ( ) Satisfied somewhat ( ) ( ) ( ) Neutral Unsatisfied somewhat ( ) Fully unsatisfied

Q13: Is the bank advertising their schemes regarding financing of SSIs to make you aware about these schemes? Yes ( ) No ( )

Q14: what type of Promotional mix will be effective to make you aware about the schemes regarding financing of SSIs? Sales promotion ( ) Advertisement ( ) ( Publicity ) Personal selling ( )

Q15: Which of the following type of working capital loan you think is more effective: Cash Credit ( ) Letter of credit ( ) Bank of warrantee ( ) Bill of purchase ( )

Q16: Do you think that the bank is taking steps for the improvement of SMEs? Yes ( ) No ( )

Q17: What is the effectiveness of the following measures in improving the SMEs:

Highly effective No Constant int.rate: Decreasing int rate: Introducing new schemes: Advertisement:

Effective

Cant say

No

Definitely

Q18: Are you getting subsidy from the govt.?if yes then at what %age?

0-2% ( )

2-4% ( )

4-6% ( )

6-8% ( ) (

>8% )

Q19: What is your ranking for the following banks ( keeping in view the quality of financing SMEs) i) JKbank ii) SBI iii) PNB iv) Some other bank