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A Study On Role of KSFC In Financing SSIs and MSIs

PART-A
CHAPTER-1
INDUSTRY PROFILE

FINANCIAL SYSTEM: Financial system may be defined as set of institutions, instruments and markets, which foster savings and channels them to their most efficient use. The primary function of the financial market is to facilitate the transfer of funds from surplus sector to deficit sector i.e., from lenders to barrowers. Indian financial system includes developmental banks (IDBI, IFCI, ICICI and other state level SFCs), investment institutions (LIC, GIC, UTI), mutual funds (UTI, SBI and others) in public and private sectors and non banking financial corporations. Developmental banks finance the projects based on their viability to generate cash flows to meet the interest and repayment obligations. They have an in-built promotional aspect because projects have to fall within the overall national industrial priorities located preferably in backward areas and promoted by first generation entrepreneurs. Developmental banks provide financial assistance on medium and long term basis from 5 to 7 years or even 10years. Development financial institutions (DFIs) or developmental banks starting with industrial finance corporation of India (IFCI) and SFC to assist the promotion and financing of fixed assets of industrial units have been in existence since 1948. Now at all India level, there is the industrial development bank of India, small industries development bank of India. At the state level, there is state financial corporation (SFCs) and state industrial development corporation.

MAJOR PLAYERS: Industrial Development Bank of India (IDBI) : The IDBI, which was established in 1964 under the act of parliament, is the principal financial institution for providing credit and other facilities for development of industry, co-ordinate working of institutions engaged in financing, promoting or developing industrial units and assisting development of such institutions. IDBI has been providing

Department Of Management Studies and Research, NCET, Bangalore

A Study On Role of KSFC In Financing SSIs and MSIs direct financial assistance to large and medium industrial units and helping small and medium industrial concerns through banks and state level financial corporations.

Industrial Finance Corporation of India (IFCI) : The government of India has set up the IFCI in 1948 under the special act. IFCI provides project finance, financial services, and promotional services to industrial units. Under its project finance, financial assistance is available to units in the corporate and co-operative sectors, for new units, expansion, diversification and modernization programmes in the form of rupee loans, underwriting and direct subscription of shares and debentures, guarantees for deferred payment and foreign currency loans.

Small Industries Development Bank of India (SIDBI): SIDBI has been established in 1989 to function as an apex bank for tiny and small scale industries. It functions as the principal financial institutions for promotion, financing and development of industrial concerns in the small scale sector and will also co-ordinate the functions of institutions engaged in promotion, financing and developing industrial concerns in the small scale sector.

Industrial Credit and Investment Corporation of India (ICICI): The Industrial Credit and Investment Corporation of India were sponsored by a mission from the World Bank for the purpose of developing small and medium industries in the private sector. It was registered in january1995 under the Indian companies act. Its issued capital has been subscribed by Indian banks, insurance companies and individuals and corporations of the Indian banks, insurance companies and individuals and corporations of the United States, the British eastern exchange banks and general public India. State Financial Corporations (SFCs): SFCs from a unique set of institutions established to assist and develop industrialization in the state of India. For the purpose of assisting the financial help to small and medium sized industries the government of India desired to set up state financial corporations.

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A Study On Role of KSFC In Financing SSIs and MSIs

Evolution of State Financial Corporation: The Indian Financial sector today comprises an impressive network of financial institutions and wide range of financial instruments. Functionally there are two types of financial institutions in the Indian market, namely developmental institutions and investment institutions. Developmental institutions include industrial finance corporation of India (IFCI), Industrial Reconstruction Bank of India (IRBI), State Finance and Development Corporation. In the category of investment institutions comes the Unit Trust of India (UTI), Life Insurance Corporation (LIC), State Level bodies like State Industrial Investment Corporation. The Idea of developmental banks has its origin in the urge in the backward and under developed countries to achieve quick economic growth. Under this urge, a developmental bank was conceived as an instrument for promoting all round development, since they undertake both banking function as well as developmental functions. The establishment of Industrial Finance Corporation of India (IFCI) though bridged serious gap in institutional finance for large-scale industrial units, the problem of term finance for medium and small-scale units was left unsolved. The need for stabling a similar institution at the state level was left unsolved. The need for establishing a similar institution at the state level was initially felt as device to bridge the nexus. Hence the SFCs came into existence to look into this problem as regional development banks over a period of years. SFCs form a unique set of institutions established to assist and develop industrialization in the state of India. The activities of IFCI were statutorily restricted to large scale-sector. The Indian socio-economic environment with certain under-developed feature constantly stressed the urgent need for the development of medium and small-scale industries. Establishment of regional development banks has been important means to meet this end. On noting the shortcoming of IFCI, the central government thought of establishment of SFCs. The proposal was referred to the state governments, IFCI and RBI for their views. After obtaining the views of the state Governments and RBI, the SFCs Bill was introduced in the parliament in December 1952. Since the enactment, the act was amended on many occasions, the latest being in 2002. Department Of Management Studies and Research, NCET, Bangalore 3

A Study On Role of KSFC In Financing SSIs and MSIs Their sources of funds are issue of bonds and debentures in the market, fixed deposits from the public, borrowing from RBI, IDBI, state governments etc. These funds are deployed mostly as loans and advances to the various medium and small enterprises, investment in government securities, corporate share, debentures etc. These bodies are to assist in particular small-scale industries, units in backward areas.

Objectives of SFCs: The SFCs have been authorized under section 25 of the SFCs Act to carry on the following following kinds of business. Granting of loans or advances to or the subscribing to debentures of industrial concern repayable within a period not exceeding 20 years from the date on which they are granted or subscribed as the case may be. Under writing of the issues of stocks, shares, bonds or debentures by industrial concerns. Guaranteeing on such terms and conditions as may be agreed upon raised by industrial concerns that are repayable within a period not exceeding 20 years capital are floated in the public market. Generally doing of all such acts and things as may be incidental to or consequential upon the exercises of their powers or the discharge of their duties under the act.

Introduction Small scale industries play a key role in the industrial of a developing country; this is because they provide immediate large scale employment &have comparatively higher, they need a shorter gestation period & relatively smaller markets to be economic, they need lower investment, offer a method of ensuring a more equitable distribution of national income &facilitate an effective mobilization of resources of capital &skill which might otherwise remain unutilized, &to stimulate the growth of industrial entrepreneurship &promote a more diffused pattern of ownership &location.

The small scale industries have been experiencing a major turnaround in the post liberalization period with the growth rate hovering around 15percent much higher than the large industries in past 5 yr, despite constraints like infrastructure, finance, market management &technology. Department Of Management Studies and Research, NCET, Bangalore 4

A Study On Role of KSFC In Financing SSIs and MSIs With further improvements in these basic areas, SSI will definitely show better result in this century. Small scale contributes 40percent of the export &above 88percent of manufacturing employment of the country .nearly 14.5lakhs registered small business units are functioning .at present it accounts for 55 percent of industrial production.

Meaning of small scale industries use of small has a designation in industry differentiates one set of industry from others comparatively small in operation ,employment, products ,capital ,technology ,etc. thus, this smaller sector share unique problems compared to others .In case of manufacturing units small industries are to be expected to have a unique set of problems in relation to their smallness that differentiate them from other manufacturing units .At the same time, the sector has unique advantages.&, as such small is beautiful, but also beneficial, efficient &reliable

Definition of small scale industries(SSI) An industrial undertaking is one in which the investment in fixed assets in plant & machinery, whether held on ownership or on lease hire purchase does not exceed Rupee one crore. In other words the definition of SSI varies from one country to another .In most of the countries of the world criterion for defining a small enterprise is related to the size of employment for instance, in U S A it is less than 20 skilled workers ,in Germany less than 500 people ,in U K it is less than 50 people respectively, in some countries , both employment & investment are taken into account. In Japan the investment in industrial undertaking should not exceed 100m, employing not more than 300 employees. In south Korea, investment limit is 2lakh$ &development limit being 200 people.

Major objective of small scale industries *Elimination of economic background of rural & underdeveloped region of the country. *Attainment of region reliance. *Reduction of regional imbalance.

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A Study On Role of KSFC In Financing SSIs and MSIs *Mobilization of resources of capital &skills & their optimum utilization Creation of greater employment opportunities, increased output, income & standard of living. *Meeting substantial part of the economies requirement for economic goods. *Provides employment &steady source of income to the lower income groups living in rural& urban areas of the country. *Provides substitutes for a various industrial products, now being to the country. *Improves the quality of industrial products, now being to the country. *Improves the quality of industrial products manufactured in cottage industry sector & enhance both production &export.

Industrial Development In India The planners in India were benefited from the experience in the us that lopsided development of large scale industries had only led to imbalance in the distribution of wealth .India was rural & their was a wide disparity in income between rural rustic &urban population

While the economy was pre- dominantly agricultural there

were also industries producing

conventional products like cement ,cotton ,jute ,textiles ,etc. located in small pockets owned & run by family groups .The change in India was gradual &came as a whimper while the change in a industrial advance in the US &UK came about with a bang so has to metamorphosis of the economy in India from agricultural to industrial, the planners could prognosticate the danger of small scale & cottage &village sector going into oblivion & the work force migrating from the villages to the metropolitan cities. The planning commission formulated the concept of intermediate technology .

In India accordingly large scale key industries which required a huge capital outlay, advanced technical know-how &had a long gestation lag were started by the government itself as the owner subsequently, the big business houses who had acquired experience &had capital to invest, capital the MRTP companies,were allowed to invest in hi- tech industries ,similarly foreign investment was welcome freely. The planners stressed the development of small scale &village &cottage industries alongside large &medium scale industries with a view to achieve local self sufficiency .the small scale sector contributed to the growth of local economy by crating access to local market.

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A Study On Role of KSFC In Financing SSIs and MSIs Scope of small scale industries The importance of SSI is a global phenomenon encompassing both the developing & developed countries. Normal McRae (1979) predict the age of mammoth corporation was over & the future lay with small, dynamic, efficient production group that could respond quickly to customer needs. Globally, the emphasis is on the small enterprises holding the key to growth with equity & proficiency. In India, small industry refers to manufacturing activity. Recently, it has also come to include servicing activities such as financial, health care, personal care, tele- communication, transport, tourism etc.

Importance of small scale industries (SSI) In a labour abundant & capital scarce country like India, SSI has come to occupy a significant position in the planned industrialization of the economy. Most SSI has a low capital intensity & high potential for employment generation. Besides, they posses location flexibility which serves as an effective instrument for achieving a wide dispersal of industries. SSI units also serve as an instrument in achieving a wide dispersal of industries. Further, SSU serves as a mean of bringing forth indigenous entrepreneurship & savings lying document, particularly in semi urban & rural areas. The following points further demonstrate the importance of SSI Small is beautiful: small is beautiful said E.F. Schumacher, he emphasized on small working units, communal ownership & regional should be on person & not on product Innovative & productive: it is the small units which are highly innovative though they dont maintain own research & development wings Individual taste , fashions & personalized service: small firms are quick in studying changes in taste & fashions of consumers & in adjusting the production accordingly. Symbols of national identity: SSI are almost always locally owned & controlled & they can strengthen rather than destroy the extended family & other social systems , & cultural traditions that are perceived as valuable in their own right as well as symbols of national identity. Dispersal over wide areas: it s only SSI which have a tendency to disperse over wide areas .According to the census of SSU, 62.19% of the units are located in backward areas. Department Of Management Studies and Research, NCET, Bangalore 7

A Study On Role of KSFC In Financing SSIs and MSIs

Visions of small scale industries The importance of maintaining high ethical standards in business & focusing on the social responsibilities of an enterprise will become important in this millennium. Companies will have to not only make good products & services, but also practice good governance Creativity, flexibility & adaptability will be the parameters that decides who wins. Strive to innovate & update technology on & on. Do set bench marks & base incentives around milestones. Intellectual capital, not physical assets, will drive the new economy You create incentive for innovation within an enterprise by rending your innovation obsolete. Sharing wealth with employees only increases your own wealth

Mission on small scale industries SSI live & work in an environment that is fiercely competitive. It is therefore crucial that we sharpen our cutting edge to stay ahead. SSI exist for the customer, customer service& quality shall be our mission and our passion. We shall also constantly innovate in product and methods and focus on costs. SSI emphasizes time and again that strength is in our people. Our people not just as individual but as team players. SSI shall therefore continue to unleash the tremendous potential our people have through one by-word:-Empowerment. SSI shall adopt organization structures which are centered on processes (rather than functions) in order to speed up communication, Decision-making and customer Services. SSI shall listen to people to feel a sense of pride in their work. SSI would like them to experience the freedom to contribute; with confidence that they belong. SSI shall actively encourage them to consistently upgrade their skills. In Sum, SSI will organize them around a process that is incessantly customer-orientated. SSI will thus strive for a natural and sustainable enhancement of their value to all it constitutes, Customers , Employees, Shareholders, Business and Society.

Excellence Does Not Mean Equal, It means being better

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A Study On Role of KSFC In Financing SSIs and MSIs To our customers, we have made and kept a promise of innovating and meeting their smallest needs. To our share holders, a healthy bottom-line and the search for new profitable horizons. To the nation, earning valuable foreign exchange, generating employment and encouraging rural development. Our zest to anticipate consumer needs ant there by creating categories and brands, empowering our people..All of which embodies our culture of character and competence will continue to keep us ahead in the years to come. Today , SSI have reminded youthful. In their energy, in our goal, and in their quest to discover. Always understandings and meeting the needs of the people and nurturing values and cultural ethos SSI will always cherish.

Providing the means for multiplying the Strength of the people who work in it. The joint family and its values are integral to the Indian ethos. SSI not only believes in nurturing people as individuals but also as team players. And as in a joint family, we have divided responsibility among individuals, where we work together for the common good. Spreading enthusiasm and becoming known for excellence and integrity. A culture of character and competence is imbibed by every member in SSIs family. No mean achievement, in these competitive times SSIs sincerely believe that people are their great of assets people with a common vision. People with a youthful energy to write success stories, each in their own special way.

Advantages of SSI

SSI has distant advantages both economic and social. Some of these are listed below:

Some SSIs dont require a high level of technology. SSIs projects can be undertaken in a short period and, hence can increase production both in the short and long run. Most developing countries are rich in certain agricultural, forest and mineral resources; small scale enterprise can be based on the processing of locally produced raw materials. Small scale Industries in developing countries help to crate economic stability in society by diffusing prosperity and by checking the expansion of monopolies.

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A Study On Role of KSFC In Financing SSIs and MSIs The development of SSIs will create jobs in rural areas of the developing countries where unemployment and underemployment are high; this will help in reducing the exodus of workers from the rural to the urban areas in search of jobs. SSIs create immediate and permanent employment at a relatively small capital cost. SSIs bring integration with rural economy on the one land and large scale enterprise on the other. SSIs offers a method of ensuring equitable distribution of national income. SSI dont require heavy and costly infrastructure as a larger enterprises, and have a favourable capital output ratio. SSIs have their own place in a countrys economy .Imperfect competition protects the small firms markets and enables them to exist even where they are not efficient in terms of cost. Policies governing SSI

Introduction
Industrial development plays a crucial role in Indias development strategy, particularly with regard to the objectives of structural diversification, modernization & self reliance .the progress of industrialization over the last forty three years has been striking feature of Indian economic development policies constitute the frame work for appropriate decision at varied levels.

New policy for SSI Although the industrial policy resolution of 1948 laid stress on the importance of SSI , especially cottage & village industries , the industrial revolution of 1956 ,laid down the role to be assigned to an approach of the government towards SSI in the country. The industrial policy resolution of 1956 assigns the following task to the SSI To create one big large scale employment opportunity for people with relative low capital investment per head To make an attempt to meet a substantial part of domestic demand for consumer goods &even part of capital goods. To provide assistance to large number of entrepreneurs artisans &craftsmen in getting employment , income &reasonable standard of living. To make available foreign markets for the products of SSI by taking measures to make them export-oriented.

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A Study On Role of KSFC In Financing SSIs and MSIs To remove disparities in regional industrial development in areas where such services do not exist or are thoroughly inadequate so that SSI may develop by providing employment & income to people in that area.

SMALL AND MEDIUM ENTERPRISES IN INDIA

1. SSI Sector in India creates largest employment opportunities for the Indian populace, next only to Agriculture. It has been estimated that a lakh rupees of investment in fixed assets in the small-scale sector generates employment for four persons. 2. The small-scale industries sector plays a vital role for the growth of the country. It contributes 40% of the gross manufacture to the Indian economy. It has been estimated that a lakh rupees of investment in fixed assets in the small scale sector produces 4.62 lakhs worth of goods or services with an approximate value addition of ten percentage points. The small-scale sector has grown rapidly over the years. The growth rates during the various plan periods have been very impressive.

SSI Sector is contributing 3.50% of the Indian Exports. Direct exports from the SSI Sector account for nearly 35% of total exports. The number of small-scale units that undertake direct exports would be more than 5000.Besides direct exports, it is estimated that smallscale industrial units contribute around 15% to exports indirectly. This takes place through merchant exporters, trading houses and export houses. They may also be in the form of export orders from large units or the production of parts and components for use for finished exportable goods. It would surprise many to know that non-traditional products account for more than 95% of the SSI exports. The exports from SSI sector have been clocking excellent growth rates in this decade. It has been mostly fuelled by the performance of garment, leather and gems and jewelers units from this sector. 4. Small industry sector has performed exceedingly well and enabled our country to achieve a wide measure of industrial growth and diversification. . This sector is ideally suited to build on the strengths of our traditional skills and knowledge, by infusion of technologies, capital and innovative marketing practices. 5. The opportunities in the small scale sector are enormous due to the following factors:

- Less Capital Intensive Department Of Management Studies and Research, NCET, Bangalore 11

A Study On Role of KSFC In Financing SSIs and MSIs

- Extensive Promotion & Support by the Government

- Reservation for Exclusive Manufacture by small scale sector

- Project Profiles

- Funding

- Finance & Subsidies

- Machinery Procurement

- Raw Material Procurement

- Manpower Training

- Technical & Managerial skills

- Tools & Tools utilization support

- Reservation for Exclusive Purchase by Government

- Export Promotion

- Growth in demand in the domestic market size due to overall Economic growth

-Increasing Export Potential for Indian products

- Growth in Requirements for ancillary units due to the increase in number of Greenfield units coming up in the large scale sector.

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A Study On Role of KSFC In Financing SSIs and MSIs 6. The Small Scale Industry today constitutes a very important segment of the Indian economy. Small Scale Sector has emerged as a dynamic and vibrant sector

- In terms of value added this sector accounts for about 40% of the value added in the manufacturing sector.

- The sector's contribution to employment is next only to agriculture in India. It is therefore an excellent sector of economy for investment.

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A Study On Role of KSFC In Financing SSIs and MSIs

CHAPTER-2 COMPANY PROFILE

a. BACKGROUND AND INCEPTION OF THE COMPANY: KARNATAKA STATE FINANCIAL CORPORATION (KSFC) is a state level financial corporation established by the state government in the year of 1959 under the SFC Act 1951 to meet mainly the long term financial need of small and medium enterprises in state of Karnataka. The KSFC, prior to November 1st 1973 were known as MYSORE STATE FINANCIAL CORPORATION. Then the Government of Mysore established the KSFC by notification NO. FD 28 BIS dated 30th March 1959. The authorized share capital fixed by Mysore government was Rs. 2crores. Todays authorised share capital is Rs.500 crores. As a pioneering and responsive financial institution, KSFC is fine-tuned to fulfil the plans and aspirations of entrepreneurs by extending all possible assistance Amendments to the SFCs Act provide for extending wide range scope of assistance and operational flexibility. Keeping this in view, KSFC re-engineered itself to ensure utmost customer satisfaction with new energy, thrust and speed. In the 52 years of existence, KSFC has contributed most significantly for the growth of SMEs, backward area development and promotion of first generation entrepreneurs. Its achievement in these areas is unparalleled. Since inception KSFC has assisted more than 1.60 lakh units with cumulative sanction of more than Rs.9102 crore out of which about than 50% towards SMEs. KSFC an ISO 9001:2008 certified organisation & it is played a major role in the industrial development of the state. KSFC has touched the lives of almost all MSMEs, in the state of Karnataka in some way or other, which was responsible in giving start up assistance to industries such as Infosys, Biocon & MTR, which are today India brand ambassadors. KSFC has decentralized system of working. Term loan up to Rs 75.00 lakhs are sanctioned at the branch offices and loan over Rs 75.00 Lakhs are processed and sanctioned at the head office. KSFC has branches all over the state. Each district has a branch office and few districts have more than one branch. In KSFC as seven zonal offices, 29 branch offices spread all over the state besides the head office located at Bangalore. Department Of Management Studies and Research, NCET, Bangalore 14

A Study On Role of KSFC In Financing SSIs and MSIs

B.NATURE OF BUSINESS CARRIED: The business carried by this institution is generally related with the providing loans. It only provides the lending facilities but it does not deposit the funds. This financial institutions works mainly over long term financial loans to small and medium enterprises. KSFC extends lease financial assistance and hire purchase assistance for acquisition of machinery/equipments/transport vehicles. KSFC has a merchant banking department and is approved as a category 1 merchant banker by the security exchange board of India (SEBI). And this department takes up the management of the public issues, under writing of shares, project report preparation, deferred payment guarantee, syndication of loan, bill discounting etc.

C. VISION: Vision of KSFC is to be premier financial in the country, by providing effective and efficient service to all sectors of people under one roof. Its vision is all for one and one for all.

MISSION: Mission of the company is KSFC is committed to continually nurture, develop and service the SME sector through need based products and services.

QUALITY POLICY: Quality Policy is Customer satisfaction through professional management and team work.

d. PRODUCTS /SERVICE PROFILE: Following are the various product and services of the KSFC: National Equity Fund Scheme:The objective of the scheme is o provide equity type of support to entrepreneurs. Assistance from NEF helps the small scale units in strengthening their equity base and thereby improving their acceptability for term financing.

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A Study On Role of KSFC In Financing SSIs and MSIs Revised Technology Development And Modernisation:The objective of the scheme is to encourage the existing SSI to modernize their production facilities in order to improve productivity, quality etc. and complete successfully in domestic and international market. Acquisition Of ISO 9000 Series Certification:The purpose of assistance will be towards meeting the expenses on consultancy, documentation, audit, certification fee etc. Only small-scale industries are eligible under the scheme. Technology up gradation for textile industries: To provide encouragement for textile industries in the small scale industrial sector for technology up gradation and to modernize their production facilities. Assistance for marketing related activities: To provide financial assistance to small and medium scale unites to undertake various activities necessary to increase their scale in domestic and foreign markets and/or to create physical marketing infrastructure. Rental Discounting Scheme: To provide financial assistance on the strength of the rent earned by non-residential properties located within the city and municipal limits of Bangalore, Mangalore, Hubli, Dharwad, Gulbarga, Shimoga, Bhadravathi, Mysore and Belgaum subject to gross rent earned of not less than Rs. 25000 per month. financing Existing Assets And Enterprises: To extend financial assistance for taking over of existing assets/enterprises. Interest subsidy scheme of Government of Karnataka (GOK): To encourage small and medium scale entrepreneurs and to upgrade the technology and modernize their existing production facilities the Government of Karnataka has come up with an interest subsidy scheme. This scheme is applicable to the units financed by KSFC and KSSIIDC only. Credit linked capital subsidy scheme (CLCSS): The objective of the scheme is to facilitate technology up gradation of SSI units in specified products/sectors by providing 12% capital subsidy for induction of proven technologies approved under the scheme.

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A Study On Role of KSFC In Financing SSIs and MSIs Corporate loan scheme: The objective of the scheme is to extend short term loans to existing successful units who require urgent working capital funds either to meet the gap in the working capital requirements or funds required for executing the rush of orders. This loan is also to consider for developing/expanding new markets and opening letter of credit for purchase of new equipments till a term loan is sanctioned and released by the financial institutions. General scheme: To extend financial assistance for new enterprises to establish SSIs/MSIs/Service units and for expansion, modernization, diversification etc., by the existing units. Assistance to entertainment industry: The objective of the scheme is to provide financial assistance for the construction / purchase of cinema house multiplexes, production of starting TV serials and feature films as well as software for vision media publicity to be set up/produced/film within Karnataka. Assistance to construction activity: To provide financial assistance for construction group Housing, Commercial complex, Software Parks, Roads, Flyovers, Bridges etc. Hire purchase: KSFC introduced Hire purchase scheme which provides a fast easy alternative to ready cash. Under this scheme finance is available for producing vehicles, machinery and equipments. Non-convertible debenture: The scheme was introduced to subscribe the private placement of the debenture issued by the corporate entities. The proceeds of this debenture issue should be utilized by the companies to meet their long term working capital and capital expenditure. Foreign letter of credit (FLC): KSFC has been operating this scheme for opening foreign letter of credit for importing the capital goods through commercial bank exclusively for our borrowers since 1995.

E.AREA OF OPERATION-GLOBAL/NATIONAL/REGIONAL: The area of operation covers the entire State Karnataka; KSFC has branches in all the district head quarters. In Bangalore it has three branches in Jayanagar, Rajajinagar, and M.G. Road. These units all over the Karnataka re categorized into 2 types i.e., A Group and B Group.

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A Study On Role of KSFC In Financing SSIs and MSIs A grade branches are Bangalore, Belgaum, Bellary, Hubli, Gulbarga, Hassan, Kolar, Mysore, Mandya, Mangalore, Tumkur, Upupi. B grade branches are Bagalkot, Bidar, Bijpur, Chamarajnagar, Chickmaagalur, Chitradurga, Davanagere, Gadag, Haveri, Karwar, Koppal, Madikeri, Raichur, and Shimoga. The industrial units/ service sectors established or to be established within the State re only eligible for assistance. The branch offices of the corporation are adequately delegated with powers of sanction and disbursement. Generally, requirements of financial assistance up to Rs. 500 lakhs are handles by the concerned Branch Office itself. If the requirements of loan are more than Rs. 500 lakhs, the entrepreneurs will have to approach Head Office

F.OWNERSHIP PATTERN: Since this is the financial institution of the Government, the ownership is generally with Government. The majority of shares of KSFC are held by government of Karnataka and Small Industrial Development Bank of India. Government of Karnataka hold 76.05% of shares and SIDBI hold 23.73% shares. Remaining shares in the hands of Insurance Companies, Public Sector banks, Co-operative societies and banks and other parties i.e. .21% shares.

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A Study On Role of KSFC In Financing SSIs and MSIs DISBURSEMENT MODEL OF KSFC

Acceptance of Terms and Conditions of Sanctions by the promoter / Entrepreneur -ADM

Promoters contribution First investment clause creation of part asset

Inspection of created asset and valuation

Issues of commitment letter to supplier of machine

Supply of money to the supplier

Release of money to the supplier

Completion of the project full release of finance

Transfer of file of recovery

Department of recovery

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A Study On Role of KSFC In Financing SSIs and MSIs Share Holdings Composition of the Shareholdings of the Corporation Sl. No. 01 Government of Karnataka Under section 4(3) (a) Under section 4(5) Total 02 SIDBI under section 4(3)(b) Special capital issued U/S 4A Total 03 04 05 Insurance Company U/S 4(3)(c) Public sector Bank U/S 4(3)(c) Co-operative Societies and Banks U/S 4(3)(d) 06 Other parties U/S 4(3)(d) Total 935 1,23,05,060 0.94 12,305.06 0.01% 100% Particulars No. Of Shares 76,93,515 5,37,388 11,27,500 93,58,403 22,92,692 6,27,500 29,20,192 16,100 7,900 1,530 Paid up Equity 7,693.52 537.39 1,127.50 9,358.40 2,292.69 627.50 2,920.19 16.10 7.90 1.53 0.13% 0.06% 0.01% 23.73% 76.05% Percentage Holding

G.COMPETITORS INFORMATION KSFC is basically a developmental bank catering to the needs of SMEs. Due to changing economic scenario the corporation is facing stiff competition. As far as interest rates are concerned, which are governed by RBI & SIDBI? An aggressive approach adopted by ICICI, HDFC and their attractive interest rates, is leading to reduction of customers for KSFC. 1. Mall industrial developmental bank of India 2. Commercial banks -ICICI -SBI -PNB

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A Study On Role of KSFC In Financing SSIs and MSIs 3. Co-operative banks.


Foreign Lending Institutions (FLIs). Karnataka State Industrial Development Corporation (KSIIDC). Industrial Finance Corporation of India (IFCI). State Industrial Development Corporation (SIDC).

h. INFRASTRUCTURE FACILITIES KSFC has a very pleasant ambience in all its branch offices and in its head office. The KSFCs offices are being redesigned according to the modern requirement with cabinets, office furnitures, systems, fans, air conditions, stationeries, etc.

It maintains a very good communication system internally and externally as it is facilitated or equipped with telephones, computers and the internet services.

Due to its communication system KSFC has formed a good network all over Karnataka among its 7 zonal offices, 3 super A Grade Branch offices, 13 A Grade branch offices and 14 B Grade Branch offices which are empowered and has decentralized administrative system. In all, KSFC has 7 zonal offices, 29 branch offices spread all over the state, besides the head office located at Bangalore.

The most important and a special feature of KSFC is that they own their own vehicles, which cannot be seen in any other financial institutions.

I.ACHIEVEMENT / AWARD KSFC has completed 50 years of operation. It has contributed significantly for the growth of small scale industry and development of backward areas in the state. It has extended financial assistance to rural, cottage industry, artisans, SC/ST entrepreneurs and other economically weaker section of the society under special loan scheme. KSFC has introduced equipment lease financing in the year 2001, hire purchase assistance, merchant banking facilities and corporate loans for meeting all requirements of entrepreneurs. The head office and other branch offices have been computerized for providing better customer services.

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A Study On Role of KSFC In Financing SSIs and MSIs KSFC has obtained premier position all the SFC of the country with regard to sanctions, disbursements and recovery. Further KSFC has received a commendation from IDBI as one of the best SFCs of the country.
Institution is able to lend 75% of the Pennya Industrial Enterprises. INFOSYS, BIOCON, ACE DESIGNERS, BPL were one time customers of KSFC. It is an ISO-9001 Certified institute It is also entered into Infrastructure Development

K.FUTURE GROWTH AND PROSPECTUS The corporation is making assiduous efforts in generating fee based income. Marketing of mutual fund products in association with UTI, life insurance products with LIC and providing several customer centric services with IL&FS are among them. The corporation has set up a special purpose vehicle (SPV) by name Karnataka Enterprise Solution Ltd for effectively handling the services such as project evaluation, loan syndication, issue management, egovernance and related activities. The corporation is recognized by the SEBI for monitoring of public issues of Rs.500 crore and above. Currently, KSFC is monitoring of public issues of sun tv, sobha developers, BEML, IVR prime urban developers pvt.ltd and air deccan. As this is a fee based activity this area will be given impetus and many more issues will be taken up for monitoring in the days to come. A separate department is therefore is created to give focused attention for the promotion and monitoring of the fee based financial services. Another mile stone in this direction is setting up of a separate department for infrastructure development through public/private participation. The corporation has already made headway in this direction and the process of negotiation with several agencies has already begun. The joint venture projects would be of world class standard be it the IT park, the shopping mall, commercial complex or SEZ. The new activities would ensure sustained cash flow not only to the owner of the property but also to the corporation by way of rentals and other earnings.

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CHAPTER-3 MCKINSEYS 7S MODULE

The seven s frame works first appeared in the art of Japanese management by Richard Pascal and Anthony Athos in 1981. The 7-s model is the tool for management analysis and action that provides a structure with which to consider a company as a whole, so that the organisation problems may be diagnosed and strategy may be developed and implemented. The 7-s model can be divided into two parts such as hard Ss and soft Ss. The 3s across the top of the model are described as hard S (i.e. Strategy, structure, systems) Strategy: The direction and the scope of the company over the long term. Structure: The basic organization of the company, its department, reporting lines, areas of expertise, and responsibility. Systems: Formal and informal procedure that govern every day activity, covering everything from management information system. The 4ss across the bottom of the model are less tangible, more cultural in nature and were termed soft Ss by McKinseys. Skills: The capabilities and competence that exists within the company. Department Of Management Studies and Research, NCET, Bangalore 23

A Study On Role of KSFC In Financing SSIs and MSIs Shared values: The value and beliefs the company. Ultimately they guide employees towards valued behaviour. Staff: The companys people resources and how they are developed, trained and motivated. Style: The leadership approach of top management and the companys overall operating approach.

STRUCTURE: Its the skeleton of the whole organization edifice. It prescribed the formal relationships among various positions and activities. Arrangements about reporting relationships, how an organization member is to communicate with other members, what roles he is to perform and what rules and procedures exists to guide the various activities performed by members are all the part of the organizational structure.

Entrepreneur guidance cell: Entrepreneur guidance cell provides the prospective entrepreneurs in setting up the new projects, of loan and conducting screening committee meeting

Business development and credit research department: The main function of this is to conduct a series of business development progress at every district level and to bring new client to the organization.

Treasury/Debenture Trustee Department: Its main responsibility is for the procurement of funds from the various sources as and when the need arises.

Finance and accounting department: This department is responsible for the maintaining various account, ledgers, cash book and other books of account as well as income tax filling of statutory returns and statements.

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A Study On Role of KSFC In Financing SSIs and MSIs Internal audit department: Auditing book of accounts, loan fills etc to check whether the norms and guidelines of the corporation are followed up while sectioning loan considering disbursement and is recovery of the loan. MIS department: This department is solely responsible for providing up to information of the all branches departments etc required by the management. Legal advisor department: This department attends to all legal matters affecting the interest of the corporation. The legal documents are kept as record for the purpose of suiting in the required case. Recovery department: Recovery of the loans sanction by the corporation and all other related functions rescheduling of loans, effecting changes of companys assisted, effective takeover of defeating units and instituting recovery proceedings.

Sick unit monitoring department (SUMD): This formed for rehabilitant of potentially viable sick units monitoring all whose task, is to assess the eligibility for rehabilitation assistance.

STRATEGY: KSFC is one of the pioneers in this industry of providing loan short term loan to small and medium scale industries. As a part of its marketing strategy its makes its advertising through newspaper, leading channels and focus over the quality certificate (ISO 9001-2000) KSFC follows different strategies to provide services to the satisfaction of its customers. The main and one of the powerful strategy followed by KSFC is by its personnel department.

Personnel Department: The human resource management department is called as personnel department, which is headed by deputy general manager under general manager of administration. Recruitment and Incentives: There is a separate cadre recruitment rule, which governs the appointment of both direct recruitment and promotions. Department Of Management Studies and Research, NCET, Bangalore 25

A Study On Role of KSFC In Financing SSIs and MSIs There is also staff regulation and rules, which governs the conduct of the employees. in KSFC there are number of incentives given to the employees in the form of reimbursement of convenience and medical expenses and advances at concessional rates to employees such as house building advance, children education advance, motor car advance, consumer durable advance, etc. KSFC has introduced various schemes for the employees like voluntary retirement scheme (VRS) where employees can opt for retirement voluntarily. The performance of the employee is to be assessed yearly. And separate confidential report of a particular employee will be obtained from the section head/department head. In appraisal, the employees overall performance is assessed for the fitness of his / her promotion. There is a reservation to SC / ST category for recruitment and promotion.

SYSTEM: Systems apply to many aspects of the firm, but system is most often used with reference to management information system and marketing information system. This is an interlocking frame work of hardware of people and of procedures. The strategic day to day running of the business repairs the speedy collection and flexible interval of information. The company has a specified department for its MIS. This department is solely responsible for providing up to date information of all branches, all departments etc required by the management from time to time on continuous basis as & when required. SKILLS: Skills are considered as one of the most crucial attributes or capabilities of an organization. The term skills includes those characteristics which most people use to describe a company. Organization has strengths in number of areas but their key strengths or dominant skills are few. These are developed over a period of time and are a result of the interaction of people in the organization, top management systems, the external environment influences, etc hence, when organization make a strategic shift it becomes necessary consciously build new skills. The company staffs have different skills for their own works. Highly qualified professionals in the company have major skills like technical, finance, economical, marketing, and public skill.

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A Study On Role of KSFC In Financing SSIs and MSIs The company also looks for the development of their staffs skills. There are various training programs organized by KSFC, in house and outside. The Corporation has 12 in-house need based training programmers, which were conducted covering 324 employees. 31 employees are deputed to external training programmers during the year, which shows that the corporation wants to make each and every employee highly skilled and talented so that they can compete with other competitors. The training is given in following areas:

Communication skill. Computers skill. Project concepts. Secretarial skills. NPA management.

SHARED VALUES: It refer to the core or fundamental values that are widely shared in the organization and serve as guiding principles that are important. These values have great meaning because they focus attention and provide a border sense of purpose. They also give a strong basis of stability to an organization in a rapidly changing environment by providing a basic meaning to people working in organization. Shared values are satisfying entrepreneurs first. Mission of the company is KSFC is committed to continually nurture, develop and service the small sector through need based products and services. The value that the company upholds most is Customers Satisfaction The company looks for the satisfactions of the customers who are generally the entrepreneurs. This institution focus over their demands and wants. They also come up with the various schemes like national equity finance, technological developments and modernization funds, single window and tourist related activities. These schemes are there for the purpose of attracting the entrepreneurs and to feel satisfactions by the institutions.

STYLE: This basically explains the cultural style of the organization and how key employees behave in achieving the organization goals. Top down and bottom up usually whenever a customer makes a request for certain services the request will be received at the bottom most level and after examining the type of services the facts are collected, analysed and then put up before the next higher level. Value Department Of Management Studies and Research, NCET, Bangalore 27

A Study On Role of KSFC In Financing SSIs and MSIs addition in the intermediate levels and finally sent to the top most level (competent authority). The top management seeing the fact and recommendations made by the intermediate officers, decision will be taken and decisions are again flown back to bottom level for implementation with proper modalities. Thus, the organization has both top and bottom up type of working styles. Participative style Company follows a participative style of management. It believes in teamwork. For each tasks terms are being constituted to attain specific goals. KSFC believes that quality can be achieved by providing quality financial and related services on the continuous basis and it also believes that to motivate and involve employee to achieve

the set organization growth targets. By this type of participative style of management, the corporation can compete their rivals like ICICI, UTI and other financial institutions.

STAFF: Staffing is the process of acquiring human resource for the organization and assuring that they have the potential to contribute to the achievement of the organizations goals. Various positions in the company require different contributions and thus have the implication that different people are needed to fit various roles. There are about 38 branches in which altogether there are 1281 employees in the corporation, out of them 408 are class A-Officers, 703 Class B- Assistance and clerical staff and 170 are Class C-other subordinate staff. Class A-Officers: They are in to guide over the fellow officers. These officers are the head of departments. The managing directors, Executive directors, are at higher level. Class B- Assistant and Clerical Staff: The class B officers are there for performing various functions of the organizations. The officers look for the functions like treasury functions, legal functions and internal audits etc. Class C-Other subordinate Staff: These officers are responsible to implement the functions with is given by the bosses. The lower level officers have to perform the commanded task of their departments. The corporation as a unique combination of professionals on its pay rolls, chartered accountants, MBAs, M.com, lawyers, engineers and graduates etc. Thus the diversity of its human resources is one of the important assets of the corporation.

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A Study On Role of KSFC In Financing SSIs and MSIs Company follows a typical selection procedure. As a first step advertisement is given as when it is required. The test is conducted and the candidates are made to go through interview, which is being conducted by top management board it consists of subject expert from different department. Company gives on jobs and off job training for its employees as per requirements.

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A Study On Role of KSFC In Financing SSIs and MSIs

SWOT ANALYSIS OF KSFC:

STRENGTHS: It is the resources or capacity of the organization that can be used effectively to achieve its objectives. The KSFCs strength is: 1. Variety of new scheme in the product line. 2. Repayment period is very flexible. 3. One of the major strength is the presence of highly expertise people. 4. Public sector: since the KSFC is a government undertaking it can rely on government for its funds in case of shortage. 5. Network: KSFC has its branch in all districts of Karnataka gives it strength to access to reach every nook and corner. 6. KSFC has got well diversified activities, which not only deals with the lending function but also with functions like leasing, hire purchase, insurance and financial assistance to small and medium scale industries.

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A Study On Role of KSFC In Financing SSIs and MSIs WEAKNESSES: These are the companys negative aspects which stand as a obstacles during achievement of the future goals. These aspects are carefully handled by every company to be in safe mode. 1. Comparatively higher interest rates. 2. Though the interest rate is decrease, when it compared to other banks it is relatively higher. 3. It is of the long procedure in case of certain schemes. 4. Support of other financial institution is being reduced these days i.e., IDBI as these institution are working directly and providing services. 5. As globalisation coming in, the system followed in KSFC is becoming out dated.

OPPORTUNITIES: It is any favourable situation in the organizations environment. It is usually a trend or change of some kind or an overlooked need that its position by supplying it KSFC can focus on: 1. Development of infrastructure. 2. Techno-preneurs: serve the most deserting techno-preneurs through venture capital. 3. Indian economy is growing at a faster rate owing to the faster development of small scale and the medium scale industry i.e. the secondary sector. This service as an opportunity for KSFC. 4. The organisation can improve its marketing activities to create demand by undertaking creative and attractive advertisement activities in the following modes: online, television, newspapers, and magazines. 5. Since the concern is enforced with a credit research department, in the future the corporation has an opportunity to come up with, new credit schemes with attractive norms 6. In order to generate funds for investing on different avenues, it can also accept a large extent of fixed deposits from pubic.

THREATS: It is an unfavourable situation in the organizations environment that is potentially damaging to its strategy. The threats may be a barrier, a constraint or anything external that might cause problems, damage or injury. Department Of Management Studies and Research, NCET, Bangalore 31

A Study On Role of KSFC In Financing SSIs and MSIs 1. Commercial banks: which have set their branches in SSI areas making it easier access to the MSIs and SSIs 2. There are too many commercial banks co-operative banks private banks which provide funds at lower interest rate which can be a big threat for KSFC. 3. Multinational banks are coming up with new innovative ideas for increasing the loan amount like that of pre draft loan for the prompt customers. 4. IDBI, SIDBI, co-operative banks are gearing up for term loan financing to SMEs. 5. Unless some amendments of SFCs act with respect to the expansion of limit of financial assistances are made, the corporation is at the verge of losing its customers in a very short span of period. Due to which it loses corporate leaders of tomorrow. 6. Private banks like ICICI, HDFC are aggressive in financing loans by reducing their processing time in their corporate financing.

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ANALYSIS OF FINANCIAL STATEMENT


Karnataka State Financial Corporation Balance Sheet As At 31st March, 2010 (Amt in Lakhs) Particulars 31-03-2010 31-03-2009

CAPITAL AND LIABILITIES: Share Capital Loan Pending Conversion to Share Capital Reserve Fund and Other Reserves Term Borrowings Current Liabilities & Provisions Total PROPERTY AND ASSETS: Cash & Bank Balances Investments Loans & Advances Fixed Assets Current Assets Profit and Loss Account Balance 6,979.35 52,879.37 1,11,629.19 6,011.58 11,710.90 57,562.44 6,498.37 35,275.56 1,07,268.86 6,094.41 17,214.15 57,858.59 65,240.09 0.00 5,492.73 1,66,586.60 9,453.41 2,46,772.83 52,488.06 917.69 5,566.71 1,61,945.34 9,292.14 2,30,209.94

Total

2,46,772.83

2,30,209.94

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A Study On Role of KSFC In Financing SSIs and MSIs Profit And Loss Account for the Year Ended 31st March, 2010 Particulars INCOME Interest Income Other Income 18,214.48 2,685.55 16,923.76 5,560.90 31-03-2010 Rs. In Lakhs 31-03-2009

Total

20,900.03

22,484.66

EXPENDITURE Interest and Other Financial Expenses Personnel Expenses Administrative Expenses Bad Debt Written Off Provision towards Contingencies/ Expenses Depreciation Provision for NPAs

13,706.49 4,152.50 880.53 1050.96 621.00 186.94 0.00

16,384.22 4,027.95 889.29 219.34 356.04 148.33 4374.88

20,598.42 Total 301.61 Profit Before Tax Add:Dividend Payable withdrawn Less: Provisions for Fringe Benefit Tax Less: Provision for Wealth Tax Less: Provision for Income Tax Prior Years Profit after Tax 4.96 0.00 8.50 1.92 296.15

26,402.05 3,917.39 0.00 58.00 8.70 0.00 -3,984.09

Add/Less: Loss Brought forward

-57,858.59

-53,874.50

Deficit carried to Balance Sheet

- 57,562.44

- 57,858.59

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Karnataka State Financial Corporation Balance Sheet As At 31st March, 2011 (amt in Lakhs) Particulars 31-03-2011 31-03-2010

CAPITAL AND LIABILITIES: Share Capital Reserve Fund and Other Reserves Term Borrowings Current Liabilities & Provisions 67820.89 4767.79 185670.44 10345.30 65240.09 5492.73 166586.60 9453.41

Total

2,68,604.42

2,46,772.83

PROPERTY AND ASSETS: Cash & Bank Balances Investments Loans & Advances Fixed Assets Current Assets Profit and Loss Account Balance 3651.58 46611.47 132140.38 5280.52 25545.17 55375.30 6975.23 52879.37 111629.19 6011.58 11715.02 57562.44

Total

2,46,772.83

2,30,209.94

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A Study On Role of KSFC In Financing SSIs and MSIs Profit And Loss Account for the Year Ended 31st March, 2011 Rs. In Lakhs

Particulars

31-03-2011

31-03-2010

24697.52

20900.03

14391.03 4304.50 912.99 310.76 1750.82 834.26

13706.49 4152.5 880.53 1050.96 621.00 186.94

22504.36 2193.16 0.00 2.28 8.30

20598.42 301.61 4.96 1.92 8.50

2187.14

296.15

-57562.44

-57858.59

-55375.30

-57562.44

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A Study On Role of KSFC In Financing SSIs and MSIs

LEARNING EXPERIENCE
According to Peter Drucker, the Management Guru, management theories are not merely pen paper concepts but a blend of both theory and practices. It is very essential for a management student to gain more practical knowledge along with the theoretical understanding. Before getting exposed to the real corporate world as a professional, students may not get a chance to know how an organization works practically. As a part of curriculum if students get an opportunity to enter into different organizations, they can learn more about the various practices, work culture, management style, etc. and its relation to the management theories that they have learnt in class. The in-plant training program at KSFC was very helpful to know the corporate culture that exists in company. By analyzing the whole structure of the company it is possible to know how theoretical concepts explained in the management books have a lively practical existence. The staff of KSFC is open minded especially those who are in higher level. I found each and every staff to be cooperative and encouraging in helping me to get hands on experience about their work culture.

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A Study On Role of KSFC In Financing SSIs and MSIs

PART-B
CHAPTER-4 GENERAL INTRODUCTION
INTRODUCTION :The role played by the small scale industry in the economic activity of advanced industrialized countries like Japan, Germany, Great Britain and the United States of America is significant. Many Nations, both developed and developing exteriorized that the small industry sector is a useful vehicle for growth, in the later for the creation of new employment opportunities on a wide scale in the shortest possible time. Small and Medium enterprises account for approximately 80 percent of the private sector industrial workers and hence occupy an important position in the industrial structure of Japan. The employment creating capacity of the small and medium enterprises in Japan has been seen to be larger than that in Germany or United States.1 Small and Medium enterprises play in extraordinarily important role as muscles for regional economic development. In the development of sparsely populated areas such as Hokkaido Island in the North they have been a valuable tool for development. In the first half of the sixties the small and medium enterprises accounted for more than 50 percent of Japanese exports. Such business was mostly labour intensive and not dependent on imports or raw materials and hence, its net contribution to foreign exchange was very high.2 Indian economy is an under developed economy. Its vast resources are either unutilized or underutilized. A major section of man power is lying idle. The per capita income is low. Capital is shy and scarce and investment is lean. Production is traditional and the technique is outdated. The out put is insufficient and the basic needs of the people remain unfulfilled.3 Industrialization is the only answer to this present state of disrupted economy. The problem is of the approach which should be direct, utilitarian and pragmatic. Such industries do not require huge capital and hence suitable for a country like India. The small scale industries have a talent of dispersal. They can be accessible to the remote rural areas of the country and do not lead to regional imbalances and concentration of industries at one place, which is responsible for many economic resources such as entrepreneurship and capital.4 The planners Department Of Management Studies and Research, NCET, Bangalore 38

A Study On Role of KSFC In Financing SSIs and MSIs and the economists in India took recourse to small scale industry because most of these industries existed in the traditional form, which symbolize our heritage and past glory. These still serve as the back bone of our economy, which is mostly rural. It is with this view that an assessment of growth, development and working of small scale industries in the specific region is attempted in this research study. However, before entering into an analytical study of this project, it is necessary to examine the concept of Small scale industry as it has come to be, today, in India. The concept of small scale industries, as it has developed in years, is one of the confusion and lacks clarity. Neither the Government, nor the planners could provide a clear and graphic definition. Obviously Small scale industries were not given such importance during the British rule as is given today. We now have a pragmatic approach to the concept in view of the prevailing economic conditions, gradual industrial development and the difficulties that arise in the implementation of planned programs. Hence, the concept has undergone changes from time to time. Before Independence, the present small scale industry was meant to denote the village and the urban cottage industry. This group included a variety of industries ranging from manufacturing of Iron safes, locks, carpets, marble jigs, baskets, hand-loom cloth and the like. In fact, at that time the term cottage and Small scale industries was used in juxtaposition to large scale industries, which were established under the British patronage. Small scale industries were indigenous with a historical background of ages. They received encouragement and support during the freedom movement. The nationalists considered it to be their patriotic duty to develop them.

Definition Small and medium scale enterprises are the largest employer segment in most economies. In the United States, the Size Standards Office of a government department called the Small Business Administration defines the criteria by which a business may be considered a small and medium scale enterprise.

Overview Since the time of independence, the small-scale sector in India has been a major contributor to countrys Gross Domestic Product (GDP). This traditional sector in India is considered to have huge growth prospect with its wide range of products. With 40 percent share in total industrial output and 35 percent share in exports, the small-scale industrial sector in India is acting as Engine of Growth in the new millennium. Department Of Management Studies and Research, NCET, Bangalore 39

A Study On Role of KSFC In Financing SSIs and MSIs The definition for small-scale industrial undertakings has changed over time. Initially they were classified into two categories- those using power with less than 50 employees and those not using power with the employee strength being more than 50 but less than 100. However the capital resources invested on plant and machinery buildings have been the primary criteria to differentiate the small-scale industries from the large and medium scale industries. An industrial unit can be categorized as a small- scale unit if it fulfils the capital investment limit fixed by the Government of India for the small-scale sector. The traditional small-scale industries clearly differ from their modern counterparts in many respects. The traditional units are highly labour consuming with their age-old machineries and conventional techniques of production resulting in poor productivity rate whereas the modern small-scale units are much more productive with less manpower and more sophisticated equipments. Khaki and handloom, sericulture, handicrafts, village industries, coir, Bell metal are some of the traditional small-scale industries in India. The modern small industries offer a wide range of products starting from simple items like hosiery products, garments, leather products, fishing hook etc to more sophisticated items like television sets, electronics control system, various engineering products especially as ancillaries to large industrial undertakings. Nowadays Indian small-scale industries (SSIs) are mostly modern small-scale industries. Modernization has widened the list of products offered by this industry. The items manufactured in modern Small-scale service & Business enterprises in India now include rubber products, plastic products, chemical products, glass and ceramics, mechanical engineering items, hardware, electrical items, transport equipment, electronic components and equipments, automobile parts, bicycle parts, instruments, sports goods, stationery items and clocks and watches. Since independence the Government of India has nurtured this sector with special care with the following aims: To develop this sector as a major source of employment To encourage decentralized industrial expansion To ensure equitable distribution of income. To mobilize capital investment and entrepreneurship skills

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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 labour intensive approach for commodity production. As these industries lack capital, so they utilize the labour power for the production of goods. The main advantage of such a process lies in the absorption of the surplus amount of labour 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.

An Overview of SMEs and Small Scale Industries


1. 2.

SME's, MSME's and Small Scale Industries An Overview Table of Contents How Is SME Sector Growing in India: An Analysis Factors Responsible for Growth of Small and Medium Businesses How To Set Up Small Scale Industry

3. 4.

How Is SME Sector Growing in India: An Analysis Small and Medium Enterprises (SMEs) are rightly tagged as the engine of the modern Indian economy. As per the experts, the small and medium enterprises in India must

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A Study On Role of KSFC In Financing SSIs and MSIs be encouraged to achieve the stable Gross Domestic Project growth trajectory. The SME sector in India is definitely growing at an exceptional rate. Still, there are some important things that need to be focused upon so that best out of these enterprises can be obtained. Here is a brief analysis of the Indian SME sector.
5.

Some Figures of Interest the Indian SME market is worth $5 billion. There are over 11 million SME units in India that produce more than 8,000 products. Nearly 90 percent of the Indian industrial units belong to the sector of small and medium enterprises. The SMEs contribute 40 percent to the overall industrial output of the country.

6.

These enterprises contribute almost 35 percent to the Indian industrial export. Finally, these enterprises are estimated to grow at the rate of 20 percent per year for upcoming years.

7.

Main Reasons for SME Growth Foreign and local fund providers are taking huge interest in the small and medium enterprises of India. Banking sector has also shown a keen interest in lending credit to these enterprises. Many recent mergers have taken place in the sector.

8.

The sector has significantly contributed towards the domestic production as well as the export earnings. Low investment is required to start and maintain these enterprises. The sector has contributed impressively towards job creation and increase in individual incomes. Technological growth is also a factor for growth of SME's in India as there are several trade portals and business directories available online with huge database of buyers, sellers, manufacturers who are basically back bone of SME's.

9.

Challenges Ahead Infrastructure needs to be developed for setting up the SMEs in the rural sector of the country. Transportation, electricity and communication are the main parts of the infrastructure required. Technology need to be evolved so that quality products are manufactured by the sector. Lack of information about the inputs, including raw material, machinery and skills, is one critical challenge in front of the owners of these enterprises. High level of research and development is required.

10. 11.

Factors Responsible for Growth of Small and Medium Businesses Planning is not only the first step of starting a business, but it should be done every month without taking any break. You must know how to plan about your business marketing, making business budgets, setting up monthly targets and so on. Accounting is another activity that you need to practice for small business growth.

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A Study On Role of KSFC In Financing SSIs and MSIs You must know the monthly profits and expenses. Budget should be prepared without failing to ensure that your funds are strategically spent.
12.

One important practice for rapid small business growth is extensive marketing and promotion. You must eye at global buyers and not only the local buyers. Growth is possible in the local market, but rapid growth requires you to extend your reach at the global level. For this, internet marketing is the best medium one can think of. You can choose b2c and b2b environments to take your business to more and more buyers.

13.

Fast small business growth is possible by regularly updating your products and services. Retaining old customers and building new relations should be done simultaneously by giving good quality products and services to them. Most importantly, you should have a strong communication medium to spread your latest business updated to your prospects.

14.

Offering discounts and special offers too help in rapid small business growth. Your availability and on-time delivery are other good approaches to win loyal customers for your business that will help your business to grow faster and further. Give all these best shots to expect the business success to keep on rising.

15. 16.

How To Set Up Small Scale Industry Small scale industries have a large contribution in the growth of an economy. If we take example of India, the fastest growing economy in the world, the small scale ventures have gained a huge success quotient. Not only these enterprises produce export quality goods, they have also created thousands of job opportunities as well. Another advantage of small scale enterprises is that they are easy to set up and can fulfill ones dream to become an entrepreneur. However, there are some important steps that you must follow to set up a small scale industrial unit. Learn about them from the following discussion.

17.

First of all, you need to prepare the description for the small scale industry you want to set up. You have to decide whether you wish to have a corporation, proprietorship or partnership. Next, you need to describe the product you wish to manufacture or the service you wish to offer. While choosing the product or service you want to offer, you must conduct a good market research and learn about the prevailing competition in the market.

18.

The next step is to choose a location to set up your small scale industry. Make sure you consider things like availability of raw materials, labour, transportation services and other such things while choosing the location. The next big step is to arrange for

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A Study On Role of KSFC In Financing SSIs and MSIs finance. If you dont have enough finance, the best way is to borrow a loan. You may learn about financial aid offered by the government of your state or country. However, you must simultaneously plan on how you would repay the loan in future.
19.

Production management is the next step, once you are able to start your small scale industry. This includes allocating space for different operations and choosing your production methods. Make sure that you follow the practices for quality testing and keep on improving. You have to purchase required machinery and hire employees and workers for different departments.

20.

Marketing and business advertising form the next big step of setting up a small scale industry. Online business directories and various traditional forms of advertising can be used to gain exposure for your business. You have to decide prices for your products or services, keeping in mind the profit margin. Planning in advance is a useful aspect of setting up a small scale venture. Keep on assessing and improving your plan at every stage. All these steps are the integral parts of the process to start up a small scale unit.

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DATA ANALYSIS & INTERPRETATION 1. Introduction to data analysis and interpretation


The process of interpretation enables the research for a careful, logical & critical analysis of the results obtained after analysis keeping in view the limitation of the sample chosen, the tools selected & used in the study. The science of statistics involves for major stages; collection of data, presentation of data & interpretation of data .the presentation of general conclusion to the common people on the basis of scientific analysis of data is greatest work which a statistician is known as statistical interpretation. The interpretation of data is a very difficult task which requires a high degree of skill, care, judgment & objectively .in the absence of all this, there is very likelihood of the data being misused to prove things that are not at all true.

2. Meaning of data analysis & interpretation


The term analysis means computation of certain measures along with searching for patterns of relationship that exist among data groups. It is the technique of interpretation of financial statements with the help of accounting ratio derived from the financial statement. The drawing of validity authentic inferences from the scientifically analyzed data &presenting these interferences uneasily is known as interpretation of data. As per the guidance given by my external guide he suggested to collect information with my own efforts and encouraged me to visit various departments to get an exposure about their process, workflow and culture in KSFC. This experience made me to gain practical knowledge regarding their lending operation. The institution recognizes the need for the employees to have a satisfied customer .Effectiveness of any organization mainly depends on the decision making skill of top management. KSFC top management, a team of dynamic managers, is responsible for taking the decision up to greater extent. KSFC honour every commitment made and provides prompt, proactive customer service. It has also adopted an effective way of departmentation for the smooth and effective functioning of the organization. Overall this in-plant training has given a new corporate exposure which is very useful in future. I am really thankful to all the people without whom the project would not have been a success Department Of Management Studies and Research, NCET, Bangalore 45

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Research design
Research design
The formidable problem that follows the task of defining the research problem is the preparation of the design of the research answer the following question. What is the study about? Statement of the problem. Why is the being made? i.e., objectives. How the study is being carried out? What type of data is required &how it is collected?

Title of the study


Role of Karnataka State Financial Corporation (KSFC) financing to SSIs and MSIs

STATEMENT OF PROBLEM Capital is scarce resource; hence it should be optimally utilized and there of rational allocation of the resource is utmost important. The available capital should be in a manner is consistent with the overall socio economic objective. Credit is the life of the business. Many business lack access to capital and money market and approach DFIs for the finance. Hence, it is necessary for any financial institute to know the feasibility of the project before lending the money. The main objective of establishing KSFC was to provide loans assistance to small and medium enterprises mainly for purpose of acquisition of fixed assets. As the commercial mainly for the purpose of acquisition of fixed assets. As the commercial banks were selective in providing working capital facilities to newly set up units, the corporation took active role to provide working capital. Hence, project should be appraised using different appraisal techniques. Technique to know the project worth before providing assistance.

NEED FOR STUDY Industrial project are appraisal by different institutions for a variety of reasons. KSFCs and other financial institutions appraise project to determine whether it is worthwhile to make investment in then and or to extend the loan. Government and allied agencies may analyse project with a view to find out whether they should be given tax exemption, subsidies guarantees or other incentives. The purpose of appraisal thus varies from one appraising Department Of Management Studies and Research, NCET, Bangalore 46

A Study On Role of KSFC In Financing SSIs and MSIs agency to another. While the object of appraisal may differ, the general principles of appraisal are almost same. Basically, the project is technically feasible and financially viable. Appraisal plays a vital role in any financial institution so it is necessary to understand the appraisal procedure or appraisal system in KSFC.

Objectives of the study


To study the role of KSFC in financing SSI and MSI. To analyze the various schemes, policies offered by KSFC to the SSI. To analyze the hurdles in lending polices &find out the solutions.. To offer suggestions, recommendation to the organization for further improvement, better Performance.

Scope of the Study


The scope of the Study covers the system and operation at KSFC. The study aims to cover the spectrum of how the Loans are sanctioned by KSFC for new business venture as well as existing enterprises and the way they asses the viability of the project by studying the project. The area of the study of SSIs and MSIs in KSFC covers several areas of importance. They are Different loan schemes of KSFC Customer awareness about loan scheme Project eligible for assistance from KSFC KSFC service towards customer. Respondents suggestion towards modification. Procedures followed to sanction loan.

Period of Study
The study has been done for a period of 5 years.

Methodology followed
Type of Research: Empirical desk research The data was collected through personal interview with the proprietors of some small-scale industries. It is a special type of social research by collecting data from theoretical as well as primary sources.

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Sources of Data Primary Data


Primary data are the data which are collected from some primary sources. It means the sources of origin from where the data generate. Primary data are the original sources from which the researchers directly collect data. This includes direct Personal Interview with the company personnel, observations, discussions with various concerned officials.

Secondary Data
Secondary data are the data which has been available readily .These data may be in the published from or unpublished form &these are the data which have been collected by some person &the researcher just makes use of it. It includes literature survey, journals published by KSFC, books of various authors, &KSFC web site &also internet.

Limitation of the Study


The project was restricted only to the financial assistance provided by KSFC, that is the scheme offered by KSFC Most of the influences were drawn from the information collected from KSFC literature scheme details &annual reports of KSFC. The project was limited to a period of 6 weeks &is done purely for academics purpose only. Sample size was restricted because of time constraints.

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A Study On Role of KSFC In Financing SSIs and MSIs

CHAPTER-5 ANALYSIS AND INTERPRETATION

Table No. 01 Table showing Technology Up gradation Fund Sanctioned during 2006-11 Year 2006-07 2007-08 2008-09 2009-10 2010-11 Amount(in Crores) 190.00 0 274.50 246.70 191.30

Chart No. 01 Chart showing Technology Up gradation Fund Sanctioned during 2006-11

` ANALYSIS & INTERPRETATION: The amount sanctioned in 2006-07 was 190 lakhs. In the following year 2007-08 no amount of loan was sanctioned under this scheme. There was gradual increase in the 2008-09 to Rs.274.50 lakhs and in the following two years i.e., 2009-10 and 2010-11 considerably declined to 246.70 to 191.30 lakhs.

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A Study On Role of KSFC In Financing SSIs and MSIs Table No.02 Table showing the Loan Sanctioned under single window scheme

Year 2006-07 2007-08 2008-09 2009-10 2010-11

Amount(in crores) 2530.45 2407.51 4193.33 4890.67 4952.60

Chart No.02 Chart showing Loan Sanctioned under Single Window Scheme

ANALYSIS & INTERPRETATION: In the year 2006-07 the amount sanctioned was Rs.2530.45 lakhs. And in the year 2007-08 it was decreased to Rs.2407.41 lakhs and in the following three years there is considerable increase in the loan amount sanctioned i.e., 2008-09,2009-10,2010-11. From the above it can be inferred that under Single Window Scheme both Term loan(loan sanctioned for certain period and repayment should be done in that particular period) as well as Working Capital( the capital required for the day to day activities) is provided to the enterprises.

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Table No.03 Table showing Credit Linked Capital Subsidy granted.

Year 2006-07 2007-08 2008-09 2009-10 2010-11

Amount(in crores) 5080.26 125.00 1701.20 1188.25 1860.75

Chart No.03 Chart showing performance of Credit Linked Capital Subsidy

ANALYSIS & INTERPRETATION: The amount of loan sanctioned in the year 2006-07 was 5080.26 lakhs and in the year 200708 and 2008-09 there was gradual decrease to Rs.1188.25, in the following years 2009-10 and 2010-11 it was increased to Rs.1860.75 lakhs. And this scheme did well in the initial year and fluctuating from year to year.

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Table No. 04 Table showing Loan Sanctioned to Privileged Entrepreneurs Year 2006-07 2007-08 2008-09 2009-10 2010-11 Amount(in crores) 0 1236.50 2141.50 4331.75 11944.40

Chart No. 04 Chart showing Loan Sanctioned to Privileged Entrepreneurs

ANALYSIS & INTERPRETATION: In the first year loan was not sanctioned under this scheme. In the second year onwards the loan sanctioned was goes on increasing year after year. From the above it can be inferred that loan assistance Privileged Entrepreneurs Scheme has shown considerable increase in the second year onwards but it was totally nil in the year 2006-07. So, from this we can conclude that this scheme is meant for providing financial assistance to Privileged Entrepreneurs; this was very beneficial to entrepreneurs those who are in growth line.

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A Study On Role of KSFC In Financing SSIs and MSIs Table No. 05 Table showing Loan Sanctioned to Nursing Homes/Hospitals

Year 2006-07 2007-08 2008-09 2009-10 2010-11

Amount( in crores) 907.30 583.80 993.90 1756.75 1562.95

Chart No. 05 Chart showing loan sanctioned to Nursing Homes/Hospitals

ANALYSIS & INTERPRETATION: Under this scheme amounts vary every alternate year. It keeps fluctuating constantly. From the above it can be inferred that the loan assistance to Nursing Homes and Hospitals keeps fluctuating every alternate year. During last five years there is a growth in this industry. Though there is gradual increase and decrease of loan assistance there has been a considerable development in this industry.

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A Study On Role of KSFC In Financing SSIs and MSIs Table no. 06 Table showing Loan Sanctioned for purchase of Electro Medical Equipment Year 2006-07 2007-08 2008-09 2009-10 2010-11 Amount(in crores) 20.20 76 40.5 38.55 60

Chart no. 06 Chart showing Loan Sanctioned for purchase of Electro Medical Equipment

ANALYSIS & INTERPRETATION: The total loan assistance for all five years from 2006-07 to 2010-11 amounts to Rs.235.25 lakhs. In the year 2006-07 the loan sanctioned was amounts to Rs.20.20 lakhs and in the 2007-08 it was gradually increased to 76.00 lakhs but in the following years it was totally decreased to 38.55 from 2008-09 and 2009-10 and in the last year it was again increased to Rs.60.00 lakhs. So there seems to be a great decline in sanctioning loan for this scheme by this institution.

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A Study On Role of KSFC In Financing SSIs and MSIs Table No. 07 Table showing Loan Sanctioned For Development, Maintain & Const. Of Roads

Year 2006-07 2007-08 2008-09 2009-10 2010-11 Chart No. 07

Amount 63.55 13.50 40 296.25 25

Chart showing Loan Sanctioned For Development, Maintain & Const. Of Roads

ANALYSIS & INTERPRETATION: In the first year 2006-07 the total amount of loan sanctioned amounts to Rs. 63.55 lakhs and in the following two years it was declined to Rs.40.00 lakhs and in the 2009-10 it was increased to Rs.296.25 lakhs and again it was decreased to Rs.25 lakhs. From the above it can be inferred that the loan sanctioned under this scheme fluctuates considerably from year to year. It can be concluded that this is meant for providing loan assistance to infrastructural projects. In the recent years there is a wider scope for these projects. However, the major portion of the funds required for these projects are raised from bonds called infrastructural bonds, under mutual fund schemes from the public. The growth rate of the mutual fund in respect of infrastructural bonds by the institution under this scheme is very less compared to other schemes.

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Table No. 08 Table showing Total Loan Sanctioned during the year 2006-07 to 2010-11 Year 2006-07 2007-08 2008-09 2009-10 2010-10 Amount(in crores) 53330.11 14258.07 67588.18 473032.52 340419.33

Chart No. 08 Chart showing Total Loan Sanctioned during the year 2006-07 to 2010-11
500000

400000
300000 200000

100000
0

2006-07

2007-08

2008-09

2009-10

2010-11

ANALYSIS & INTERPRETATION: In the year 2006-07 the total loan sanctioned was amounts to Rs.53330.11 lakhs and in the following year 2007-08 it was decreased to Rs.14258.07 lakhs and in the next year it was increased to Rs.67588.18 lakhs and in the following years there was gradual decrease in the loan sanctioned. From the above, it can be inferred that the total loan sanctioned to small scale industries under the various schemes are increasing. It is observed that amount of loan sanctioned year to year increase and decrease is occurring. Hence the total loan sanctioned by KSFC is not consistent.

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A Study On Role of KSFC In Financing SSIs and MSIs Table No.09 Table showing Loan sanctioned to SSI during the year 2006-11 Year 2006-07 2007-08 2008-09 2009-10 2010-11 Amount(in crores) 17852.60 17305.07 26250.02 28766.47 54926.80

Chart No.09 Chart showing Loan sanctioned to SSI during the year 2006-11

ANALYSIS & INTERPRETATION: The total amount of loan sanctioned in the year 2006-07 was Rs.17852.60 lakhs and in the year 2007-08 it was declined and in the following years it was gradually increased to 54926.80 in the year 2010-11. From the above, it can be inferred that the loan assistance to Small Scale Industries shows increase in last three years and decline in the initial years. So to compensate for last year KSFC has sanctioned a high amount in the year 2010-11.

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A Study On Role of KSFC In Financing SSIs and MSIs Table no. 10 Table showing Overall Scheme Wise Assistance for 2006-07 to 2010-11

SI NO. 1 2 3 4 5 6 7

Scheme Technology Up gradation (A) Single Window (B) Credit Linked Capital Subsidy (C) Privileged Entrepreneurs (D) Nursing homes/Hospitals (E) Electro Medical Equipment (F) Asst. To Develop, main. & Const. Of Roads (G) Chart no. 10

Amount 902.50 18974.56 9955.46 19654.15 5804.7 235.25 902.50

Chart showing Overall Scheme Wise Assistance for 2006-07 to 2010-11

ANALYSIS & INTERPRETATION: The above table reveals that majority of the enterprises have availed loan under Privileged Entrepreneurs followed by Single Window scheme , Credit Linked Capital Subsidy , Nursing Homes/Hospitals , Technology Up gradation Asst, to development maintenance and construction of roads and Electro Medical Equipment. From the above it can be inferred that major portion of the assistance is given under Privileged Entrepreneurs and Single Window scheme.

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CHAPTER-6

Findings & suggestions


The topic for Dissertation was Financial assistance by KSFC to Small scale

industries. The data thus collected was processed and analysed to provide certain
findings about the study.

The following are the findings with regard to the procedural aspects of financing small-scale industries by KSFC

KSFC has a special guidance cell entrepreneurial guidance (EG) section to guide the entrepreneurs in respect of various schemes operated by the corporation. They also provide information about the minimum requirements to be given, to enable the entrepreneurs to be called before project clearance committee. The project clearance committee where the amount of assistance is more than 500.00 lakhs which conducts discussions with the promoters and if they find the project support worthy. They issue them with the application forms The Credit departments of the Corporation appraise projects and disburse funds after sanctioning of the loans. These departments are responsible for monitoring the implementation of the project till the project is completed and find disbursement made. In case of default in repayment of loans, KSFC follows the following guidelines

Reminder letters are sent to the defaulting customer requesting him to make the payment. In case of failure to get response, warnings are sent to the customer stating consequences of non-payment. Then a common understanding will be arrived at between the borrower and the corporation usually for rescheduling of payment (only in genuine cases)

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A Study On Role of KSFC In Financing SSIs and MSIs If none of these methods prove to be fruitful, then the security provided by the borrower will be confiscated and the amount realized will beset off against amount due from the defaulting customer.

The following are the findings with regard to the schemes of the corporation
KSFC offers varieties of loan schemes for providing assistance to different segments of the society. A borrower can avail loan facilities under more than one scheme and can take loan before repaying the previous one, which exclusively depends upon the existing loan transactions with the Corporation. KSFC has repayment norms to decide the period for a loan. Apart from this, the cash generation capacity of the proposed project is considered to fix up the actual repayment. The need for guarantor /security for sanctioning a loan under different schemes depend on the nature of the proposed project. If the project involves high risk then the need for the security also increases. If the borrower is a regular customer, then his credit worthiness becomes vital.

The following are the findings with regard to the evaluation criteria adopted by KSFC

Prior to providing assistance to new unit, an intensive study is done on the technical feasibility and profitability of the proposed project by experts. Regular reports are furnished by promoters during the implementation stage, which provides information about placement of orders, procurement of machinery. The official of KSFC also does periodic site visits. Quarterly progress of the project is done and comparisons are drawn relating to performance with the promises made.

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The following are the findings with regard to the customers evaluation of KSFC:
Many of the respondents have come to know about KSFC; s loan schemes through personal contacts and from their associated units promoters and even from the Publicity and advertisements. Customers say KSFC is pioneer and served Karnataka by assisting indigenous manufacturing units by supporting local entrepreneurs, special segments of the society and minority communities. Customers feel KSFC is easily accessible throughout Karnataka and that is one of the factors to approach KSFC for financial assistance Customers feel satisfied with services rendered by KSFC.

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SUGGESTIONS
On the basis of analysis and interpretation of the data collected, the following suggestions are put forward for more effective financing of small scale industries

The documentation procedure must be made easier. This will help the small & medium enterprises to meet their urgent financial requirements and thus function smoothly without much loss.

The repayment period on loans should be increased so that the industry/firms can repay the loan taken without much pressure because it also reduces the chances of bad debts.

To reduce the burden of the rural entrepreneurs the fee and other charges have to be reduced and thereby encouraging the rural entrepreneurs.

The incidence of penalty should be reduced for genuine defaulters; KSFC should have judicious mix of advances to small medium enterprises to improve their reliability.

The appraisal department has to consider more parameters in credit assessment of the firms. So that prompt repayment is ensured.

There must be rigorous advertising Champaign in print and tele media popularise the schemes. It is suggested that loan applications must be properly investigated and also the end use of funds must be checked from time and again as per the KSFC Norms. Restructuring of Schemes to be initiated in all sectors of economic and social importance of the state, so as to take advantage of liberalization and to captivate entrepreneurs to involve in boosting industrial activities. In order to transform the existing units towards new innovative industrial activities, different kinds of industrial enterprises must be encouraged. Sponsor assistance to small industries to facilitate them for marketing their products on subsidized terms should be extended aggressively. Interest rate to tested customers to be normal and concession to be offered. Frequent policy reviews regarding quantum of loan should be undertaken with the change in economy and recessionary trend in the industry. Reduction in lead time for processing cases is suggested with a view to make a loan available to the customer much earlier and more cases must be examined and disposed off earlier. Department Of Management Studies and Research, NCET, Bangalore 62

A Study On Role of KSFC In Financing SSIs and MSIs

The Corporation should lower the rate of interest to attract business and evolving strategies for improving customer services.

Lack of time frame in release of term loans affects production in small medium enterprises since most of the entrepreneur find themselves behind production schedules.

The Government law try to protect the small medium enterprises because of the competition from the foreign collaboration by granting tax holidays.

The Corporation Law concentrates on improving loan appraisal by utilising the Technology.

Timely policy revives regarding quantum of loan, terms of repayment, types of loans etc, could be undertaken into the changes in the business need of small medium enterprises and reversionary trends in the economy.

Quality achievement is not the responsibility of one person it is the involvement of every executive. In order to achieve quality objectives of KSFC can also try to introduce quality circles within the organisation so that it can meet class quality service standards.

KSFC has been providing working capital under the single window scheme. This corporation can explore the possibilities of providing working capital to small units on long term and on continuing basis.

The Corporation can concentrate on attracting clients not only by the interest rate but also by good services and relationship.

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CONCLUSION
KSFC is one of the best is one of the best financial corporation in assisting the SSI and non SSIs in terms of finance. For the past 45 years, KSFC is successfully functioning. Due to the economic reforms, liberalization, globalization, there are a lot of development and changes in financial sectors this has to be effectively incorporated in the light of severe competition among the foreign banks, nationalized banks and financial institutions. 1. KSFC which gets supports from SIDBI has its financial norms with other institution where it may differ from case to case. 2. The key area of operation of KSFC is proving assistance to SSI, MSI and tiny sectors in terms of finance to set up the projects. 3. KSFC which has reviewed its interest rate structure and implement new schemes of financial assistance is starving hard to complete with other institutions, banks etc. The KSFC is acting as a vehicle for the development of industries in the Karnataka achieving the objective of balanced regional development. The following point characterizes the current appraisal at KSFC.

1. KSFC sanctions loans to projects on zonal basis. It is an interesting. It is an interesting feature. 2. The collateral security should be the one, which has good market value in the future and thus reducing the loss, KSFC should take good security before giving the financial assistance.

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BIBLOGRAPHY
I. BOOKS: 1. Kalchetry Eresi, Management of finance in small scale industries, Vinod Law Publishing House, New Delhi 2010, 2nd edition. 2. Krishna Murthy, Small scale industries, Himalaya Publications, Chennai 2009, 4th edition. 3. Reddy & Appnaiah , The entrepreneurial development, Himalaya publishing house, New Delhi 2010, 2nd edition. 4. Prathap Keshari, An introduction to business research methods, khatoi kalyani publishers, Bangalore 2011, 3rd edition.

II.ARTICLES /REPORTS 1. Operational statistics of KSFC 2. Annual reports of KSFC 3. Journals published by KSFC

III.WEBSITE ADDRESS
http:/ksfc.kar.in

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