A

REPORT
ON

"STUDY ON ABILITY OF BANKS TO FULFILL PRESENT

AND FUTURE REQUIREMENTS IN TRADE FINANCE OF

SMALL AND MEDIUM SCALE INDUSTRIES."

PREPARED BY:
STUTI VASAVADA
MBA-1, ALPHA
R.No.3105

As a part of partial fulfillment of MBA course

At N.R. Institute of Business Management
SUBMITTED TO:
Mr. Neeraj Amarnani

ACKNOWLEDGEMENTS
At the outset, I would like to express my deep gratitude to Mr. Kishore Bhatt for allowing
me to work under his guidance, thereby, giving me an opportunity to gain tremendous
knowledge and skills from his vast experience of 16 years in banking sector.
I am also grateful to Mr. K. Subramanian without whose help, guidance, valuable inputs
and constant monitoring, my learning would have been incomplete. Although I received
regular inputs from Mr. Bhatt, it was Mr. K. Subramanian with whom I interacted on a
day-to-day basis and have spent major tenure of my training and have gained a lot from
his experience.
I am also sincerely thankful to my faculty guides, Mr. Satish Nair and Mr. Neeraj
Amarnani for their guidance and valuable suggestions prior to and during the entire
course of training.
My acknowledgement would be incomplete if I do not extend my sincere thanks to all the
executives & staff of IDBI bank, especially, Mrs. Mini and Mr. Paras Shah for their help
and guidance.

TABLE OF CONTENTS
Executive Summary. 4
Introduction 5
About The Organization6
About The Project. 9
Cash Management System 16
Survey 20
Survey Of Industry (Questionnaire).. 21
Field Work. 23
Ankleshwar Region:. 23
Findings And Recommendations.. 27
Bharuch Region 29
Findings And Recommendations.. 32
Baroda Region:. 34
Findings And Recommendations.. 37
Conclusion. 39
Learning from the project 40
Bibliography.. 41

EXECUTIVE SUMMARY
The project was aimed at understanding the various trade finance instruments offered by
banks to the small and medium scale industries. An attempt was also made to get
information about the present banking services availed by the industries, their further
requirements and the ability of the banks to provide those services.
The survey was undertaken for idbi bank, Baroda branch. Hence, the region surrounding
it i.e. Baroda, Bharuch and Ankleshwar was considered. The outcome of the survey
showed that the banking requirements of the small and medium scale industries are very
limited due to which majority of the industries were not aware of the various services
offered by the banks. This had been observed mainly in the Bharuch and Ankleshwar
region. But it is also a fact that the industries showed great interest in the additional
services provided by banks when they were explained the functions of the services.
The training was a great learning experience resulting in a better understanding of the
banking sector. We found that in spite of so many private sector banks coming in, there
are still a large number of companies who still prefer to carry out their transactions with
the public sector banks. The security aspect is perhaps playing its part in this case.
The findings of the project suggest that idbi bank should pitch into the SMEs sector as
fast as possible in order to cope up with the competition from other private sector banks
such as ICICI and HDFC who have started penetrating aggressively.
The report, which follows, is an outcome of my sole efforts which is prepared in partial
fulfillment of the MBA course. The facts and figures mentioned in the report are
absolutely true to my knowledge. Reader of this report is hence requested to keep the
information confidential and not use it for any other purpose.
STUTI VASAVADA

INTRODUCTION
Banking has been the right hand of any business since a long time. Every time a company
enters into a monetary transaction with a customer, the transaction takes place through a
bank. May it be payment or collection of money, it is the bank, which makes the payment
and receipt easier through the system of collection and payment by cheque, demand draft,
bill discounting etc. Thus, various banking instruments like those mentioned above have
been a part and parcel of industry operations.
The Banking sector has gained more importance in the recent years. This is perhaps
because of the fact that various industries are coming up on a wide scale and also because
the industries are expanding in different parts of the world as a part of globalization.
Moreover, with the entering of the private sector banks into the traditional banking sector,
survival of the fittest has become the rule. The main advantage of the private sector banks
are that they have large amount of funds and they believe in providing services by
keeping the needs of their customers in mind. Hence, their main aim is to provide
maximum satisfaction to customers by offering different trade finance instruments at
competitive rates to streamline the financial functions of the industries.
Keeping this objective in mind, an attempt has been made with the guidance of idbi bank
to study the banking requirements of the small and medium scale industries in terms of
what trade finance services they are presently availing, what are their additional
requirements and what does idbi bank offer.
Here follows a detailed report on the above-mentioned study. The research was conducted
in three regions:

Baroda

Bharuch

Ankleshwar

ABOUT THE ORANIZATION

IDBI, the tenth largest development bank in the world has promoted
world-class institutions in India. A few of such institutions built by IDBI
are The National Stock Exchange (NSE), The National Securities
Depository Services Ltd. (NSDL), Stock Holding Corporation of India
(SHCIL) etc. IDBI is a strategic investor in a plethora of institutions,
which have revolutionized the Indian Financial Markets. IDBI promoted
idbi bank to mark the formal foray of the IDBI Group into commercial
Banking. This initiative has blossomed into a major success story. idbi
bank, which began with an equity capital base of Rs.1000 million
(Rs.800 million contributed by IDBI and Rs.200 million by SIDBI),
commenced its first branch at Indore in November 1995. Thereafter in
less than seven years the bank has attained a front ranking position in
the Indian Banking Industry.
idbi bank successfully completed its public issue in February 99, which
led to its paid-up capital expanding to Rs.1400 million. The promoters
holding consequent to this public issue stood reduced to 71% with IDBI
holding 57% and SIDBI 14% of the paid up capital of IDBI Bank. This is
in line with the requirement of RBI, which stipulates that eventually the
promoters holding should be brought down to 40%.
The Bank
The birth of idbi bank took place after RBI issued guidelines for entry of
new private sector banks in January 93. Subsequently, IDBI as
promoters sought permission to establish a commercial bank and
retained KPMG a management consultant of international repute to
prepare the groundwork for establishing a commercial Bank. The
Reserve Bank of India conveyed it's in principle approval to establish
idbi

bank

on

February

11th,

1994.

Thereafter

the

Bank

was
6

incorporated at Gwalior under Companies Act on 15th of September

1994 with its Registered Office at Indore.

The future
idbi bank looks confidently into the future to face and thrive in the
intense competitive environment that is emerging. The bank has now
gained experience and has in place the strategies required for gaining
a

leadership

position.

With

cutting

edge

relevant

technology,

aggressive marketing, innovation, tight control over costs and with its
motivated workforce, the bank is all set to emerge as a model global
corporate citizen in the days ahead.
Promoters
The promoters are Industrial Development Bank of India (IDBI) and
Small Industries Development Bank of India (SIDBI). The Government
of India under an Act of Parliament, the IDBI Act 1964, established IDBI
in 1964. IDBI's role as a catalyst to industrial development has
encompassed a broad spectrum of activities. SIDBI, their second
promoter, was established as a wholly owned subsidiary of IDBI in 1990
when IDBI's portfolio relating to the small industrial sector was
transferred to them.
Government business
The Central Board of Direct Taxes (CBDT) are responsible for
administering various direct taxes through the Commissioners of
Income-tax

located

in

different

parts

of

the

country.

The

Commissioners of Income-tax are entrusted with the task of collection

as well as refund of Income tax and Corporation Tax, etc. under the
Income-tax Act, 1961.
The bank has received the mandate from the Central Board of Direct
Taxes to Collect the Direct Taxes through IDBI bank branches.
Information Technology
Modern banking demands banks to be more and more tech-savvy in
order to provide value added services to their clients with cutting edge
technologies.
They serve in various aspects such as:
Software development and implementation - more and more
business processes now rely upon softwares systems
Network maintenance and expansion - to keep the customers
Online
Risk Management
Risk management is a key element of the Bank's business strategy.
Identification, awareness, measurement, monitoring and controlling
risk, efficiently and effectively, in a manner geared towards yielding
sustained economic value, is one of the highest priorities of the Bank.
Mission of the Risk Group is to move the Bank up the value chain by
ensuring sustained quality growth in and off the balance sheet along
with optimizing bottom-line compensation to adequately cover the
various risks embraced by the Bank and provide accretion to its
capital. In the process, Risk Group creates value - tangible and
intangible - for its stakeholders (investors, customers, employees,
regulators) - value in the form of a superior balance sheet, adequate
liquidity, healthy return on capital, trust and confidence, knowledgebacked decision guidance systems, etc.

Significant means have been invested in adapting the bank's risk

management practices to the rapid development and diversification of
its activities. The Risk Group is actively pursuing its objective of
establishing a high quality of risk measurement and management
system.

These

are

employed

not

only

to

satisfy

regulatory

requirements, but also to position the Bank ahead of competition in

adopting cutting-edge practices followed internationally in the field of
risk management. By doing so, the Bank improves its ability to detect
early warning signals, allowing it to respond speedily and flexibly to
prevent any adverse variations in the Bank's equity value and
earnings.
The Risk Group believes that risk management is all about wanting to
do business and more so about wanting to remain in business. And in
pursuit of this enterprise-wide objective, it considers every employee
of the Bank a Risk Manager.

ABOUT THE PROJECT

This project aims at studying various trade finance requirements of the
small and medium scale industries. Through this project an attempt
has been made to get an idea whether the present banking sector is
able to fulfill these requirements or not. Before going to the
technicalities of the project, a brief description of the various trade
finance instruments is given below:

PRODUCT FEATURES:
INLAND BILLS (SIGHT / USANCE) DISCOUNTED
Bill of exchange is an instrument in writing containing an unconditional
order, signed by the maker directing a certain person to pay a certain
sum of money only to or the order of a certain person or to the bearer
of the instrument
INLAND BILLS SENT ON COLLECTION
An inland bill sent outward for collection is a bill of exchange / draft
drawn payable on demand or a certain number of days after sight at
an outstation place and lodged for collection with the bank. The
proceeds of such instruments are credited / remitted to the drawer
after realization of the same.
INLAND BILLS (SIGHT/USANCE) NEGOTIATED UNDER LFTTERS OF
CREDIT
Banks, representing the beneficiary, can associate with the letters of
credit in various capacities such as Advising Bank, Confirming Bank,
bank nominated for effecting settlement under LC, transferring bank or
reimbursing bank.

10

FOREIGN CURRENCY BILLS (SIGHT / USANCE) NEGOTIATED UNDER

LETTERS OF CREDIT
UCP defines a documentary letter of credit as any arrangement
whereby a bank (Issuing Bank) acting at the request and in accordance
with the instructions of a customer (applicant) is to make payment to
or to the order of a third party (beneficiary) or is to pay, accept or
negotiate bills of exchange drawn by the beneficiary or authorizes such
payments to be made or such drafts to be paid, accepted or negotiated
by another bank against stipulated documents, provided that the terms
and conditions of the LC are complied with.

Banks, representing the

beneficiary, can associate with the letters of credit in various

capacities such as Advising Bank. Confirming Bank, bank nominated for
effecting settlement under LC, transferring bank or reimbursing bank.
RUPEE EXPORT BILLS (SIGHT / USAGE) NEGOTIATED UNDER LETTERS
OF CREDIT
UCP defines a documentary letter of credit as any arrangement
whereby a bank (Issuing Bank) acting at the request and in accordance
with the instructions of a customer (applicant) is to make payment to
or to the order of a third party (beneficiary) or is to pay, accept or
negotiate bills of exchange drawn by the beneficiary or authorizes such
payments to be made or such drafts to be paid, accepted or negotiated
by another bank against stipulated documents, provided that the terms
and conditions of the LC are complied with.
Banks, representing the beneficiary, can associate with the letters of
credit in various capacities such as Advising Bank, Confirming Bank.
Bank nominated for effecting settlement under LC, transferring bank or
reimbursing bank.

11

EXPORT BILLS SENT ON COLLECTION

An export bill sent outward for collection is a bill of exchange / draft
drawn payable on demand or a certain number of days after sight at
an outstation place and lodged for collection with the bank. The
proceeds of such instruments are credited / remitted to the drawer
after realization of the same.

IMPORT LETTERS OF CREDIT

UCP defines a documentary letter of credit as any arrangement
whereby a bank (Issuing Bank) acting at the request and in accordance
with the instructions of a customer (applicant) is to make payment to
or to the order of a third party (beneficiary) or is to pay. Accept or
negotiate bills of exchange drawn by the beneficiary or authorizes such
payments to be made or such drafts to be paid, accepted or negotiated
by another bank against stipulated documents, provided that the terms
and conditions of the LC are complied with.
FOREIGN CURRENCY IMPORT BILLS RECEIVED ON COLLECTION
An inward / import collection is a sight / usance instrument which may
be a promissory note or a bill of exchange along with transport
documents (unless in case of clean collection) drawn on an Indian
importer and received for collection by the bank. When an authorized
dealer (AD) receives foreign bills for collection from a correspondent
abroad, the AD acts as an agent for its foreign correspondent bank. AD
should be very careful to ensure that the instructions of the principal
(foreign correspondent bank) are adhered to in all respects. The
12

principal should at all stages be kept informed of all developments

relating to the particular bill.
RUPEE IMPORT BILL RECEIVED ON COLLECTION
An inward / import collection is a sight / usance instrument which may
be a promissory note or a bill of exchange drawn on an Indian importer
and received for collection by the bank.

When an authorized dealer

(AD) receives foreign bills for collection from a correspondent abroad.

The AD acts as an agent for its foreign correspondent bank. AD should
be very careful to ensure that the instructions of the principal (foreign
correspondent bank) are adhered to in all respects. The principal
should at all stages be kept informed of all developments relating to
the particular bill.

INLAND BILLS RECEIVD ON COLLECTION

An inward inland collection is a sight / usance instrument which may be
a promissory note or a bill of exchange drawn on a buyer (the drawee)
and received for collection by the bank. When the bank receives inland
bills for collection from a correspondent bank / other branches, the
bank acts as an agent for its correspondent bank. Bank should be very
careful to ensure that the instructions of the principal (correspondent
bank) are adhered to in all respects. The principal should at all stages
be kept informed of all developments relating to the Particular bill.
PRE - SHIPMENT CREDIT IN RUPEES
Pre-shipment finance is a working capital finance extended to an
exporter in anticipation of his exporting the underlying goods. Basic
13

purpose of extending pre-shipment finance is to enable the eligible

exporters to procure raw materials / process / manufacture /
warehouse / ship the goods meant for exports.
PCL is defined as a loan or advance granted or any other credit
provided by an institution to an exporter for financing purchase of raw
materials, processing and packing of the goods, on the basis of letters
of credit (LC) opened, in favour of the exporter. By an importer of
goods outside India or a confirmed and irrevocable order for the export
of goods from India or any other evidence of an order for export from
India having been placed on the exporters.
PRESHIPMENT CREDIT IN FOREIGN CURRENCY
Pre-shipment finance is a, working capital finance extended to an
exporter in anticipation of his exporting the underlying goods. Basic
purpose of extending pre-shipment finance is to enable the eligible
exporters to procure raw materials / process / manufacture warehouse
1 ship the goods meant for exports.
PCFC is defined as a loan or advance granted or any other credit
provided by an institution to an exporter which is self-liquidating in
nature and accordingly export bill will have to be discounted to
liquidate PCFC for financing purchase of raw materials, processing and
packing of the goods. On tile basis of letters of credit (LC) opened. in
favour of the exporter, by an importer of goods outside India or a
confirmed and irrevocable order for the export of goods from India or
any other evidence of an order for export from India having been
placed on the exporters. PCFC has been permitted by, RBI in order to
help the exporters to avail of exports credit, at internationally
competitive rate.

14

BANK GUARANTEES
(Both Inland and Overseas Guarantees)
Bank guarantee is an undertaking given by the bank (the guarantor) at
the request of a third party usually a customer (the principal) or a bank
or other party so requested by the principal (the instructing party) to
another party (the beneficiary) whereby the guarantor undertakes - in
the event of default by the principal in the fulfillment of his obligations
to make the payment to the beneficiary within the limits of a stated
sum of money.
As per the Indian Contract Act, Guarantee is a contract to perform the
promise or discharge the liability of a third person in case of his
default. Guarantee is a collateral contract to answer for the default of
another person and thus is ancillary or subsidiary to another contract.

15

BOOKING A FORWARD CONTRACT

Forward contract is a contract for purchase from or sale to a customer
of a foreign currency amount at a specific rate of exchange to he
delivered at a mutually agreed date or during a mutually agreed
period.
ACU BILLS PURCHASED UNDER LETTER OF CREDIT
UCP defines a documentary letter of credit as any arrangement
whereby a bank (Issuing Bank) acting at the request and in accordance
with the instructions of a customer (applicant) is to make payment to
or to the order of a third party (beneficiary) or is to pay. accept or
negotiate bills of exchange drawn by the beneficiary, or authorizes
such payments to he made or such drafts to be paid, accepted or
negotiated by another bank against stipulated documents, provided
that the terms and conditions of the LC are complied with.
Banks, representing the beneficiary can associate with the letters of
credit in various capacities such as Advising Bank. Confirming Bank,
bank nominated for effecting settlement under L.C. transferring bank
or reimbursing bank.
FOREIGN CURRENCY AND RUPEE BILLS SENT FOR COLLECTION
UNDER LETTERS OF CREDIT
UCP defines a documentary letter of credit as any arrangement
whereby a bank (Issuing Bank) acting at the request and in accordance
with the instructions of a customer (applicant) is to make payment to
or to the order of a third party (beneficiary) or is to pay, accept or
negotiate bills of exchange drawn by the beneficiary or authorizes such
payments to be made or such drafts to be paid, accepted or negotiated
by another bank against stipulated documents provided that the terms
and conditions of the LC are complied with.
16

Banks, representing the beneficiary, can associate with the letters of

credit in various capacities such as Advising Bank, Confirming Bank.
Bank nominated for effecting settlement under LC. Transferring bank or
reimbursing bank.
INLAND BILLS SENT FOR COLLECTION UNDER LETTRS OF CREDIT
Banks, representing the beneficiary, can associate with the letters of
credit in various capacities such as Advising Bank. Confirming Bank.
Bank nominated for effecting settlement under LC, transferring bank or
reimbursing bank.

FOREIGN CURRENCY BILLS, ACU BILLS AND & RUPEE EXPORT BILLS
PURCHASED NOT UNDER LC
This product comprises of two distinct stages.
In the first stage, the bank receives the export documents. The bank
reviews the export documents and the availability of credit limit to the
drawer to purchase the export documents. Once the adequacy of credit
limit is established, the bank purchases the documents from the
drawer and credits the drawer's account with the appropriate amount.
The second stage pertains to forwarding the documents for collection
to the collecting bank abroad. On realization of export bill proceeds the
17

transaction is closed forever. If the purchased bill is returned then the

amount is recovered from the drawer.

18

CASH MANAGEMENT SYSTEM

Cash management system refers to the ways and means of conserving cash. For this
purpose it is important to understand what float means.
The cash balance shown by a firm on its books is called the book balance whereas the
balance shown in its bank account is called the collected balance. The difference between
the two above-mentioned balances is called float. Again there are two types of floats:
Disbursement float and collection float. Cheques issued by a firm create disbursement
float. On the other hand cheques received by a firm lead to collection float. The net float
is the sum of disbursement float and collection float. It is simply the difference between
the firm's available balance and its book balance. Since, what matters is the available
balance, an attempt is made to maximize net float. This means a firm should strive to
speed up collections and delay disbursements.
SPEEDING UP COLLECTIONS:
The collection time comprises mailing time, cheque processing delay, and the bank's
availability delay. When a company receives payments through cheques that arrive by
mail, all the three components of collection time are relevant. To speed up collection,
companies often use lockboxes and concentration banking which are essentially systems
for expeditious decentralized collection.
LOCK BOXES:
Under a lock box system, customers are advised to mail their payments to special post
office boxes called lockboxes, which are attended to by local collecting banks, instead of
sending them to corporate headquarters. The local bank collects the cheques from the
lock box once or more a day, deposits the cheques directly into the local bank account of
the firm, and furnishes details to the firm.
Thus the lock box system cuts down the mailing time, reduces processing time and
shortens the availability delay because the cheques are typically drawn on local banks.

19

CONCENTRATION BANKING:
In this system, the company asks its customers in a particular area to send payments to a
local branch office rather than to the corporate headquarters. The cheques received by
local branch office are deposited for collection into a local bank account. With the vast
network of branches set up by banks, regional /local collection centers can be easily
established. Concentration banking can be combined with the lock box arrangement to
ensure that the funds are pooled centrally as quickly as possible.
DELAYING DISBURSEMENTS:
Just as a firm can increase its net float by speeding up collections, it can do so by slowing
down disbursements. A common temptation is to increase the mail time, which generally
provides only short-term benefits. While maximizing disbursement float is a questionable
practice, a firm can still conserve its cash resources by properly controlling its payments.
The following may be done in this respect:

Ensure that payments are made only when they fall due and not early

Centralize disbursements. This helps in consolidating funds at the head office,

scheduling payments more effectively, reducing unproductive cash balances at
regional/local offices, and investing funds more productively.

Arrange with suppliers to set the due dates of their bills to match with company's
receipts. Synchronization of cash outflows with cash inflows helps a company to get
greater mileage from its cash resources.

OPTIONS FOR INVESTING SURPLUS FUNDS

Companies often have surplus funds for short periods of time before they are required for
capital expenditures, loan repayments, or some other purpose. These funds may be
deployed in a variety of ways. At one end of the spectrum is the term deposit (to be made
fro a minimum period of 15 days) in a bank, at the other end of the spectrum is the
investment in equity shares, which can produce highly volatile returns. In between lie
several avenues like units, public sector bonds, treasury bills, inter-corporate deposits,
and bill discounting.
20

Following are some options through which firms generally deploy surplus funds.
Term deposits with banks:
Banks accept term deposits for periods ranging from 15 days to 5 years. The interest rate
on term deposits varies currently from 5 percent to8.5 percent per annum. The interest
rate rises sharply as the period of deposit increases from 30 days to 1-year deposit.
Mutual Fund Schemes:
A variety of schemes are offered by mutual funds. Based on the investment policy, the
mutual fund schemes may be broadly classified as follows:
Equity schemes the corpus of an equity scheme is invested substantially (80-95%) in
equity or equity related instruments. The balance may be in debt instruments.
Balanced schemes A balanced scheme, as its name suggests, invests its corpus across
two broad asset classes, i.e. equity and debt in a more or less balanced manner.
Debt schemes A debt scheme invests its corpus primarily in debt instruments. Some debt
schemes may have a small exposure to equities.
For investing short term surpluses perhaps the most popular schemes are debt schemes
because of their low or nil exposure to equities.
Ready forwards:
A commercial bank or some other organization may do a ready forward deal with a
company interested in deploying surplus funds on a short-term basis. Under this
arrangement, the bank sells and repurchases the same securities at prices determined
before hand. Hence, the name ready forward. Ready forwards are permitted only in
certain securities. The company earns a return in the form of a price difference and not in
the form of an interest income.

21

Treasury bills:
Treasury bills represent short-term obligations of the government, which have maturities
like 91 days, 182 days and 364 days. They do not carry an explicit interest rate. They are
instead sold at a discount and redeemed at par value. Hence the implicit interest rate is a
function of the size of the discount and the period of maturity.
Commercial paper:
Commercial paper represents short term unsecured promissory notes issued by firms that
are generally considered financially strong. Commercial paper usually has a maturity
period of 90 or 180 days. It is sold at a discount and redeemed at par. Hence the implicit
rate is a function of the size of discount and the period of maturity. Commercial paper is
either directly placed with investors or sold through dealers. Commercial paper does not
presently have a well-developed secondary market in India.
Inter-Corporate Deposits:
A deposit made by one company with another; normally fro a period of up to six months
is referred to as inter-corporate deposit. Such deposits are usually of three types:

Call Deposits

In theory, a call deposit is withdrawable by the lender on giving a

days notice. In practice, however, the lender has to wait for at least three days.

Three month Deposits More popular in practice, these deposits are taken by
borrowers to tide over a short-term cash inadequacy.

Six month Deposits Normally, lending companies do not extend deposits beyond
this time frame. Such deposits are usually made with first class borrowers.

22

SURVEY
PURPOSE:

To study the banking requirements (especially trade finance instruments and

additional services) of the small and medium scale industries.

To know the services availed by the companies from their present banks.

To assess their further requirements from the banks.

To find out the level of satisfaction from their present bank.

METHODOLOGY:

Preparation of questionnaire: After having a healthy discussion with our project

guide Mr. K. subramanian and Mr. Paras Shah we prepared the questionnaire. The
copy of the same is attached on the next page.

Database collection: The industries involved in export and import formed the
database of industries to be surveyed. It is worth mentioning here that though the
industries involved in export and import were considered, many companies were
discovered during the survey which had their export and import license but were
not conducting export or import.

Selection of area: The region for conducting the survey was selected on the basis
of proximity of the idbi bank branch Baroda. Thus, three regions were selected:
1. GIDC Makarpura
2. GIDC Bharuch
3. GIDC Ankleshwar

23

QUESTIONNAIRE FORMAT
1.Name of the Company: ......................................................................................................
2.Name of the concern person/designation: .........................................................................
3.Address:..............................................................................................................................
Ph. No. ....................... Fax No. .................... E-mail ID: .........................................
4. Nature of Business: ...........................................................................................................
5.Type of Organization
Flat ( )

Traditional ( )

6.Turnover of Company: ............................

7.Type Of Business
Credit ( )

Non-Credit ( )

8.If on the credit basis, type of credit: ........................................................................

Segmentation
Inland

( )

If Yes

LCBD ( )

CBD

( )

Other: ....................

Foreign ( )

If Yes

LC

Non LC ( )

Other: ....................

( )

9.Is the company is in Export/Import Business:

Yes( )

No ( )

If Yes,
a) Volume of Export/Import
Export: ..........................
Import: ..........................
Currencies:
USD ( )

EUR ( )

GBP ( )

JPY ( )

AUD ( ) CAD ( ) CHF ( )

b) Which of the following Hedging tool Company uses to hedge the risk arising out
Of foreign currency exposure.
Forward Contract ( )

Options ( )

None ( )

24

10.Present Banker of Company/Group:

Public Sector Banks

( )

Private Sector Banks

( )

1)....................................................

1)................................................

2)....................................................

2)................................................

3)....................................................

3)................................................

4)....................................................

4)................................................

11.Are you satisfied with the services of your present banker

Yes ( )

No ( )

12.What are the additional services you expect from your present banker
1)......................................................
2)......................................................
3)......................................................
4)......................................................
13.Handling Of Finance
Local Level ( )

Mumbai ( )

Other: ..................................

14. Yearly outgo on account of

Direct Taxes: Rs. ........................ Lac.

Gujarat Sales Tax: Rs. ........................ Lac.

15. Are you aware of the IDBI Bank Services, which includes:
Current Account & Deposits.
Collections & disbursement Solutions:
Outstation Cheque collection.
Dividend/Interest payment Solutions.
Corporate Payroll Account
Bulk Cheque printing.
Debt servicing

Yes ( )

No ( )

Yes ( )

No ( )

Yes ( )

No ( )

e-banking Solutions:
Online account status Information
Account statements through e-mail.
Government Business:
Direct Taxes (CBDT)
25

Gujarat State Taxes.

Yes ( )

No ( )

FIELD WORK
ANKLESHWAR REGION:
Ankleshwar region has a belt of wide variety and varied sizes of industries. For the
market survey purpose we restricted to the survey of industries in which the handling of
finance was done at the local level. In the specified time we could survey 93 industries,
which mainly included those manufacturing chemicals, colour, chemical pulp, machinery
etc. The over all market analysis of Ankleshwar region on the basis of the questionnaire is
given below:
In Ankleshwar majority of the companies

TURNOVER OF THE COMPANIES

are small and medium scale. Many

10%

companies are having turnover between 1-2

2%

1-2Crore

crore. The companies having turnover

1%

2-4Crore

above 10 crore are Lupin, Sun Pharma,

4-6Crore
68%

51%

6-8Crore
8-10Crore

Amal Ltd, Elam Pharma etc.

Above 10
14%

Majority of the firms in Ankleshwar area

TYPE OF BUSINESS

are sole proprietor and partnership. Out of

the 93 Companies visited, 81 companies

12

have a policy of giving credit to their

CREDIT

customers. This is mainly because most of

NON-CREDIT

the firms are quite old and have developed

such relations with their customers.

81

26

Majority of the credit is extended to the

TYPE OF CREDIT

customers on the basis of relation. This is

Advance
Relation
30 Days
60 Days
90 Days
120 Days
LC

because of the above-mentioned fact. It has

been observed that apart from relation,
priority is also given to 30 days, 60 days
and credit through LC. Co. mfg. heavy

11.11%
1.23%
2.17%

3.70%

12.35%

machines and tools take adv. payment

generally; this is to avoid rejection of order
at a later stage and to have enough money

55.56%

13.58%

for purchasing inventories.

Majority of the companies in Ankleshwar

are involved in merchant export. This is
because

there

are

many

Type of Business

companies

manufacturing similar products, due to

11.83%

5.38%

which the companies prefer to sell their

products

in

bulk

through

are

manufacturers

30.10%

merchant

exporters. The companies involved in export

business

Only Export
Only Import
Merchant export
Export-Import
Only Domestic

of

colour

3.24%
49.46%

pigments and chemicals.

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Majority of the companies are having

Present Bank

Public sector banks as their banker. The

Only Public
Only Private
Both Sectors

reason behind this is they have developed

long-term
and

relations

proximity

of

with
the

the

banks

banks.

The

32%

companies using private sector banks are

56%

generally those companies who have their

head office in Mumbai or any other metro
city.

87% of the companies are satisfied with

their present banker, as it is clear from the
chart.

The

dissatisfaction

major
are

reasons

behind

slow

cheque

12%

SATISFACTION WITH THE PRESENT

BANK
13.00%

Satisf ied

processing, hidden charges, and no special

preference for regular customer.

Ankleshwar belt is full of medium and

large-scale companies having their head
office in Mumbai and other cities. For the

Dissatisfied

87.00%

HANDLING OF FINANCE

6.00%
10.00%
Local Level

purpose of our survey, we have short-

Mumbai

listed the companies, which handle their

Other

finance from local level.

82.00%

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As we can see from the chart there is

PREFERENCE FOR ADDITIONAL

SERVICES

almost 50% of the industries, which prefer

the additional services. These additional
facilities

Prefer
Do not prefer

mainly include out station

cheque collection, e-banking solution, and

tax payment options. It has been observed

51%

49%

that companies, which do not prefer

additional

services,

are

small

scale

involving simple transaction.

29

FINDINGS AND RECOMMENDATIONS

As far as Ankleshwar industrial belt is concerned, it is far more prospective than Bharuch.
Initially, the companies were selected on the basis of their export and import activities but
in Ankleshwar, there are a large number of companies who have their head offices in
Mumbai and other metros so it was decided to make a list of those companies who have
their head office at the local level.
Out of the 93 industries visited, majority of the companies are small and medium
scale industries.
In Ankleshwar, the co-operative banks are more popular than the private sector
banks. Though the public sector banks play a vital role, the companies also prefer
the co-operative banks such as Navsarjan co-operative bank, Ankleshwar
udyognagar bank etc. There are a few private sector banks like ICICI and HDFC
bank but they are less popular as compared to the co-operative banks. This is
because the co-operative banks carry out their operations mainly on the basis of
relations as well as provide many services free of charge.
In Ankleshwar, there are varieties of industries such as chemicals, colour
pigments, heavy machines and tools, Engineering, cookware etc. These wide
varieties of industries induce number of banking transactions. The main advantage
of the Ankleshwar area is that there are industries of many kinds; hence, it is very
much possible to pitch into some or the other area of functioning of a particular
industry.
It can be observed from the above charts that majority of the companies are
satisfied with the regular services such as credit limits, current account etc. but
they showed keen interest in getting additional services.
It has been observed during the survey that many company owners are not even
aware about these services. Moreover they are very rigid and want to restrict
themselves to the traditional services from the banks.

30

 So our first step should be to make the companies aware of the various services,
which they can avail from the bank. This can be done by holding meetings with
various company owners and explain them the different services, whether they are
free of cost or involve certain charge. We can also create their interest by
explaining how these services are beneficial to them in saving time and money.
Many company owners are interested in the different schemes of the banks and
they are interested in exploring something new.
In short the scenario is more prospective than Bharuch. This can be proved by the
observation that companies in Ankleshwar are interested in various services like
outstation cheque collection, e-banking solutions and tax payment options.

31

BHARUCH REGION
Bharuch has a very limited set of Industries, which have potential for development.
Moreover, there are very few industries, which are developed. In the past, there were a
few industries which had developed but due to the anti pollution movement, many of
them have been closed. Because of this, we could visit only a few companies, which we
found lucrative. The analysis of the same is as follows:

The companies in Bharuch are small scale

TURNOVER OF THE COMPANIES

9%

i.e. having turnover of 1-2 crore. In

addition to that few companies are having

14%

turnover of 8-10 crore and above 10 crore.

0%

The company having turnover above 10

5%

crore

are

Blue

star

and

Patson

1-2Crore
2-4Crore
4-6Crore
6-8Crore
67%

5%

8-10Crore
Above 10

Transformers.

Majority of the firms in Bharuch are sole

proprietorship. It has been observed that

TYPE OF BUSINESS
3
CREDIT

majority of the owners had multiple

NON-CREDIT

businesses so they give credit to excel in all

lines of business.
20

32

It is an observed fact that due to

TYPE OF CREDIT

multiplicity of business line, a supplier for

Advance
Relation
30 Days
60 Days
90 Days
120 Days
LC

05% 0

one business is customer of another

business. Because of this, they have to give

30%

credit on the basis of their relations with

the parties.

65%

Majority of the companies in Bharuch are

TYPE OF BUSINESS

involved in domestic business. The main

reason behind this is the majority of

4.34%

13.04%

companies are small scale and they are

involved in multiple businesses so they

Only Export
Only Import
Export-Import
Only Domestic

find enough customers in the local market.

Hence 82.61% companies are doing only
domestic business. Companies involve in

82.61%

import are manufacturer of transformers,

equipment and chemicals.

Almost all companies in Bharuch are

satisfied with their present bank. The

SATISFACTION WITH THE PRESENT

BANK
9%

reason behind this is that companies are

small scale and require less facility from

Satisf ied
Dissatisfied

the banks. These services they are getting

from their present bank due to their longterm relation. Apart from that developing

91%

companies requiring additional facilities

avail it from private sector banks.

33

Majority of the companies in Bharuch are

PRESENT BANK

availing the services of Public sector banks.

The reason behind this is they have

Only Public

developed a rapport with the public sector

banks. Moreover over there are very few

Only Private
Both Sectors

40%

private sector banks which have their

52%

branch in Bharuch. So the companies are

reluctant to rely only on private sector

8%

banks hence the composition of both the

sectors is 40%.

In Bharuch, 87% of the companies operate

HANDLING OF FINANCE

at local level due to their small size. 13% of

9%

4%

the companies have their head office in

Local Level

Mumbai and other cities.

Mumbai
Other

87%

As

mentioned

earlier,

many

of

the

PREFERENCE FOR ADDITIONAL

SERVICES

companies in Bharuch are sick units, some

of them have been shut down and some of
them are involved in the operations which

40%
Prefer

are very simple and do not require

additional services. The 60% no preference

60%

Do not prefer

is due to the indifference on the part of the

company owners.

34

FINDINGS AND RECOMMENDATIONS

During the survey, it has been observed that Bharuch has a very small belt of
industries. Moreover, many small and medium scale units have become sick. We also
came to know that many units had to be shut down due to the anti pollution
movement few years back.

Companies in Bharuch are not very well developed and the working is done
on small scale and through traditional way. Thus, their requirement of various
services from banks is very less.
Majority of the companies prefer to carry out their transactions with the public
sector banks. The main reasons behind this are (1) their long-term relations
with these banks (2) they find charges of some facilities comparatively less (3)
since the company person goes to the bank everyday, they do not prefer to get
different works done through different banks rather they believe in getting all
work done through single bank.
A major observation is that industrial houses in Bharuch are very resistant to
change to private sector banks because of the feeling of insecurity.
Majority of the companies are satisfied with the present bank because their
work is done on the basis of their relations with the banks, which they claim
are very good hence they get their work done anyhow.
A negligible portion of companies, which is dissatisfied with their present
banks, is found to be those companies, which deal with private banks. This
itself shows that Industrial houses in Bharuch are not comfortable with the
private banks.
It is thus recommended, on the basis of the above facts and findings, to try to
first change the attitude of the industries in Bharuch and then pitch into the
Bharuch industrial zone.

35

 The attitude is although not very easy to change but it can be changed by
explaining them the services offered by the banks through holding
presentations or meetings with the company officials. Because many of the
company owners are not aware of the various facilities availed by the banks
and how it can save their time and money.
The services can also be offered by aggressively marketing the different
financial services suitable for the companies in Bharuch.

36

BARODA REGION:
The Makarpura GIDC was selected for survey purpose, the base for selection was
company having export import license. Over all 79 companies were visited. Majority
companies are in the field of manufacturing heavy machinery, engineering goods,
fabrication, chemicals. It has been observed that there are many companies are
manufacturing goods or parts mainly for major players like ABB or FAG etc. the
companies situated in Baroda city were also selected but these companies were not
ready to cooperate because of the inconvenience caused as a result man banks
approaching for the same purpose
In Baroda majority of the companies are
small and medium scale. The 3 or 4
companies are having turnover above 10
crore they are Jayant oil mills (300crore),

TURNOVER OF THE COMPANIES

1-2Crore

3% 9%
3%

2-4Crore
4-6Crore

6%

6-8Crore

Bombardier Transportation (100 crore),

Almonard (50 crore) etc.

8-10Crore
Above 10

16%

63%

.
Majority of the firms in Baroda are
TYPE OF BUSINESS

involved in the business of manufacturing

chemicals, machinery, equipment and bulk
drugs. Their main business is on Credit

CREDIT

16

NON-CREDIT

basis. Because of this we can make out

from the chart that 63 out of 79 companies
prefer credit business. The firm involve in
non-credit business are well-established
firms and in bulk drug business.

63

37

The companies generally extend credit on

the basis of relation with the clients,

TYPE OF CREDIT
13%

20%

Advance
Relation
30 Days
60 Days
90 Days
120 Days
LC

however 20.63% of the companies also

prefer LC. These companies are the
companies involved in major exports and
those dealing with new customers.

2%
8%
36%
10%
11%

Majority of the companies in the Baroda

TYPE OF BUSINESS
Only Export

are involved in domestic business, doing

very less export i.e. once in a year or so.

Only Import

42%

46%

Export-Import
Only Domestic

9% 3%

Majority of the companies in Baroda have

PRESENT BANK

put their trust in Public sector banks. These

banks include Makarpura co-operative

12%

bank, Bank of Baroda and State bank of

India. The main reasons behind this fact are
proximity to the companies and long-term

Only Public
Only Private
Both Sectors

18%

relations with the banks. Another major

reason for this is that many firms carry out

70%

very less transactions with the banks. The

companies using only private sector banks
generally prefer ICICI and ABN Amro
banks. The companies using both the
sectors are the most satisfied ones because
they get their work done through either of
the banks

38

93% of the companies are satisfied with

SATISFACTION WITH THE PRESENT

BANK
7%

their present banker. It has been observed

that the companies dissatisfied with the

Satisfied

present bank are those companies, which

Dissatisfied

are using the services of public sector

banks.

The

main

dissatisfaction are

reason

behind

slow processing and

93%

stringent credit norms

In Baroda the handling of finance of 88%

HANDLING OF FINANCE

companies is done at local level because

10%

2%

Local Level

most of the companies are small scale and

Mumbai

do not have any other unit.10% of the

Other

companies have their head offices in

Mumbai.
88%

As it can be seen from the chart many

PREFERENCE FOR ADDITIONAL

SERVICES

companies prefer additional services. They

are specially interested in services like
outstation

cheque

collection

and

tax

payment solutions. Some companies dont

53%

47%

Prefer
Do not prefer

prefer additional services because they find

it convenient to personally go to the bank,
as the bank is not too far.

39

FINDINGS AND RECOMMENDATIONS

In Baroda, out of many industrial areas the Makarpura GIDC was selected for
survey purpose. The companies were selected on the basis of import-export
license they have. Majority of the companies in Makarpura are small and medium
scale. Most of them are in the range of 50lacs to 4 or 5 crore. Few companies like
Jayant oil mills, Bombardier transportation and Almonard ltd., which have turn
over above 50crores.
Majority of the companies in Baroda are involve in the business of manufacturing
Engineering parts, heavy machinery, chemicals etc. generally the companies find
their business at local level so they dont export but there are still companies
depend mainly on export business.

There are many units, which manufacture goods for supplying to the big
companies like ABB, FAG etc. majority companies depend on their relation for
credit business, very few of them are using LC or they use LC when customer is
new.

As there are many public as well as private sector banks in Baroda there is tough
competition among them to grab and sustain its position in the market. The
companies are mainly approaching to the banks, which are in that area like
Makarpura Co-Op. bank, Bank of Baroda and State Bank of India. This is to save
the time and get their transaction done faster.
Many companies have established long term relations with the banks right from
the incorporation of the company. So it is easier for them to get their work done.
In addition to this many companies in spite of having CC limit, do not use it
because mainly their transactions are simple and generally involve cash. The
companies which are taking facilities from private sector banks now days they are
dealing with ICICI and ABN Amro.

40

 In spite of all these facts there is a bright picture for the bank to approach these
companies. They can provide them various facilities like out station cheque
collection, e-banking solutions and mainly tax payment solutions. Many
companies showed interest in these facilities.

We can approach few companies for LC and bill discounting; these are the
companies, which are suppliers to the big players.

41

LEARNING FROM THE PROJECT

This 8 weeks training period has certainly added lot of depth to my shallow
knowledge of the banking sector as well as the working of the small and medium
scale industries. The research work undertaken by me at three different regions gave
me a clear picture of the mentality and attitude of the industry owners in each region.
I became aware of the fact that the attitude of the people to a great extent depends on
the environment they work in. For example, the attitude of the industries in Baroda
was somewhat positive towards our survey whereas the attitude towards the same
survey in Bharuch was totally opposite. Thus, the outcome of the survey can be very
well judged by the attitude of the people working in a particular work environment.

Another major value addition to my knowledge lies in the fact that proper selection of
criteria is a must for any survey to be worthwhile. Keeping this in mind, for our
survey in Ankleshwar we selected the companies, which handled their finance at the
local level because Ankleshwar has a large number of companies whose finance is
handled from head offices in Mumbai and other metros. Similarly, in Baroda,
companies were selected on the basis of companies involved in export and import so
that it is possible for the bank to pitch into the LC segment as quickly as possible.

Finally, this project has given me tremendous level of self-confidence, the spirit to
work in teams and the ability to manage things independently. Moreover, it has
helped me groom myself in to a professional, which is a pre-requisite in this
competitive world.

It is good to learn from experience as long as it is others. The experience of the

highly qualified staff of IDBI has taught me the art of dealing with people and the
organization of the goal to be achieved. All this has certainly been useful to me during
the project and will always be useful in achieving many more endeavors in future.

CONCLUSION
42

idbi bank is a renowned bank all over India and Abroad also. The bank has taken a very
wise step to survey the three areas and study the banking requirements of the companies
and their satisfaction with the present bank.
There are so many private sector banks coming up but very few are able to provide
services that are up to the expectations of the industries. If this will continue, a time will
come when the banking sector will saturate and there would be no scope for further
development.
The findings and recommendations of the survey clearly reveal that there is a need of
proper understanding of the services on the part of the industries in all the three areas.
This effort on the part of idbi bank to keep customers at the centre and understand their
needs will surely prove as a bulls-eye in the progress of the bank as well the banking
sector as a whole.
With proper referencing, monitoring and examination of the weak areas of each zone, the
bank can pitch into the prospective sectors of each region and slowly and gradually
capture the market as a whole. idbi bank already has the policy of providing quality
service and maintain only as many clients as it can manage. If it works on this policy for
these three regions also, it is bound to achieve new heights.
This positive note concludes the report. May this prove to be useful to the bank for
achieving new heights. Wishing all the very best to the bank and its extremely dedicated
staff.

43

BIBLIOGRAPHY
Financial Management, By: Prassanna Chandra
Financial Management, By: I. M. Pandey
Company Database
www.google.com
www.tradeindia.com
www.indiabusinessdirectory.com
www.idbi.com

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