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2009

A Report on Comparative Study of SME Financing Services Provided By Nationalised


and Private Sector Bank.
Submitted By
Shekhani Mohamed Vasim W. Opulence Business Solutions Pvt. Ltd.
43, World Business House, Above IndusInd Bank, Nr. Parimal Garden, C. G. Road, A
hmedabad 380 009 E-Mail: opportunities.opulence@gmail.com Website: www.opulenceb
iz.com
08BS0001577 Date of Submission: 16/05/2009
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A REPORT ON COMPARATIVE STUDY OF SME FINANCING SERVICES PROVIDED BY NATIONALISED


AND PRIVATE SECTOR BANK. By Shekhani Mohamed Vasim Md. Wahid
Opulence Business Solutions Pvt. Ltd.
43, World Business House, Above IndusInd Bank, Nr. Parimal Garden, C. G. Road, A
hmedabad 380 009 E-Mail: info@opulencebiz.com Website: www.opulencebiz.com
Submitted to: Dr. Himani Joshi IBS, Ahmedabad
Date of Submission: 16/05/2009
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Preface
As a part of my course curriculum of MBA in summer Internship program, we are as
signed some practical studies as well as the theoretical knowledge in the relate
d areas for completing the project. I am preparing comprehensive report on COMPA
RATIVE STUDY OF SME FINANCING SERVICES PROVIDED BY NATIONALISED AND PRIVATE SECT
OR BANK.
The basic idea of assignment of this project is to augment the knowledge of stud
ents about the SME finance and its various sources. It is concerned with finding
the appropriate source of finance that can be used as per the requirement of th
e SME belonging to a particular sector. This will not only help students, but to
a large extent it will help the company it taking the decision to as to which s
ource of finance should be used for a particular SME. This makes the students en
hance their analytical capability.
So far as decision of the industry or this sector is concerned, I have chosen th
e financial consulting firm. This project will also give me firm understanding a
bout the various aspect of SME finance and the various means of raising the fina
nce. I have gained lots of knowledge from this project. And I believe that this
will help me in the near future.
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Acknowledgement
I would like to express our immense gratitude to mentor guide Mr. BHAVESH PATEL
(CMD, Opulence Business Solution Pvt. Ltd), Mr. EDWARD MACWAN (Vice President, O
pulence Business Solution Pvt. Ltd) and Mr. SANKET JOSHI (Associate Vice Preside
nt, Opulence Business Solution Pvt. Ltd) for imparting valuable support, encoura
gement, guidance and immense knowledge throughout the project.
I am also very thankful to all the staff members of Opulence Business Solution P
vt. Ltd Ahmedabad, Mr. Pratik Pandya, Ms. Harni, and Mr. Vikash Mehta who guided
me and provided their support whenever needed.
I am thankful to my faculty members Dr. HIMANI JOSHI for guiding my way througho
ut this project and clarifying all my confusions. Apart from that he helped me i
n finding my path and how to go about the project and provided me right input wh
enever needed.
Last not the least I would like to thank my parents without whose kind, support
and love I could not have undergone the project smoothly. I am thankful to my fr
iends and our seniors without whose cooperation and guidance would not have been
completely successfully.
I think all those who knowingly and unknowingly who have helped me in the fulfil
lment of this project.
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Company Profile
A brief Introduction We and our business partner are pleased to present our cred
entials as a full service Merchant Bank, Investment Bank, Brokerage House & Fina
ncial Services Company with presence in Mumbai as well. Our Partner (RBI registe
red) and its subsidiary (SEBI registered) are together a full service Investment
Bank, Merchant Bank and Institutional Stock Broking company with membership in NS
E & BSE and Depository services, providing a wide range of Financial Services to
over 500 large and mid-cap companies and thousands of retail clients all over I
ndia since 1994. Our Board consists of eminent legal and finance professionals w
ho have gained their experience by working with leading Banks and Financial Advi
sory Institutions of India and abroad expertise in Financial Services, Capital M
arket, and Investment Banking. The range of SERVICES provided by us includes:
Corporate Finance

Secured/Unsecured Term Loans Working Capital Finance Secured/Unsecured Term


s Working Capital Finance ECB/FCNR(B) Facilities Placement of Debentures & Bonds
Project Funding Equity & Loans Financial structuring Trade Finance
Investment Banking
Corporate Advisory Services Mergers and Acquisitions Private Equity Placement Jo
int Venture Partner Search Equity share and business valuations
Shekhani Vasim 08BS0001577
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Merchant Banking
Initial Public Offers and Follow on shares Right Issues Buybacks Open Offers
ferential allotments ESOP certification BSE listing of companies listed on Regio
nal Stock Exchanges Delisting of Securities
Corporate Restructuring
To unlock value in the businesses
To comply with Regulatory requirements
To hive off n
oncore businesses To streamline operations of the Group in similar activities
Family
Settlement / Re-arrangement
Due Diligence
Finance & Accounting
Direct Taxes

Indirect Taxes

Legal Service

Valuation
Business/Division Valuation
Brand Valuation
Valuation of Equity Shares
Employee Share based compensation Valuation
Impairment of Assets (Technical Valuation)
Valuation of Financial Instruments
Purchas
e Price Allocation Fairness Opinion Other Intangibles License / Copyrights / tradema
rks / technology
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Contents
Preface ........................................................................
................................................................................
.. 3 Acknowledgement ...........................................................
............................................................................. 4
Company Profile ................................................................
........................................................................... 5 1.
Introduction ..................................................................
......................................................................... 9 1.1.
1.2. 1.3. 2. Purpose & Scope ..................................................
......................................................................... 9 Meth
odology & Sources ..............................................................
................................................. 9 Limitation..................
................................................................................
.................................. 10
A Brief profile of SMEs in India ...............................................
......................................................... 11 2.1 Importance of S
MEs ............................................................................
............................................. 11 2.2 Definition of SME..........
................................................................................
................................... 12 2.3 What Constitutes the SME Sector .....
................................................................................
................ 12 2.4 SMEs in India ..........................................
................................................................................
......... 14 2.4.1 Micro, Small and Medium Enterprise Sector: Profile ..........
...................................................... 14 2.5 Challenges Faced b
y the SME Sector ...............................................................
................................ 16 2.6 Various ways of Financing SMEs..........
................................................................................
........... 17
3.
SME Services Provided by State Bank of India....................................
.............................................. 23 3.1 Steps for SME loans by Sta
te Bank of India (SBI) .........................................................
.................. 24 3.2 Credit Appraisal By banks ............................
................................................................................
.... 26 3.3 SME Financing Schemes by SBI .......................................
............................................................... 27 3.3.1 Open te
rm Loan ........................................................................
................................................. 27 3.3.2 School Plus..........
................................................................................
....................................... 28 3.3.3 Paryatan Plus .................
................................................................................
............................. 29 3.3.4 Transport Plus ..........................
................................................................................
.................. 31 3.3.5 Doctor Plus.........................................
................................................................................
........ 32 3.3.6 SBI Shoppe ...................................................
............................................................................. 34
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3.3.7 Dental Doctor Plus .......................................................


.............................................................. 35 3.3.8 Cyber Pl
us .............................................................................
..................................................... 37 3.3.9 Rice Mill Plus ..
................................................................................
.......................................... 38 3.3.10 Rice Mill Plus ............
................................................................................
.............................. 40 4. SME Services Provided by ICICI Bank .......
................................................................................
....... 41 4.1 Steps for SME loans by ICICI bank................................
.................................................................. 42 4.2 SME Fi
nancing schemes by ICICI bank for various sectors ..............................
.............................. 44 4.2.1. Automotive Sector .....................
................................................................................
............... 44 4.2.2. Construction Sector ..................................
................................................................................
. 45 4.2.3. Pharmaceutical Sector ..............................................
................................................................. 46 4.2.4. Appa
rel Sector .....................................................................
..................................................... 47 4.2.5. Transport Sector
...............................................................................
......................................... 48 4.2.6. Gems & Jewelry Sector.......
................................................................................
...................... 49 4.2.7. Travel and Tourism Sector .....................
................................................................................
... 50 4.2.8. Education Sector .................................................
...................................................................... 52 4.2.9.
Medical Sector ................................................................
.......................................................... 53 4.2.10. Climate Ch
ange Initiative ................................................................
....................................... 54 5. Sector wise comparison of SME fina
ncing services .................................................................
.......... 55
Conclusion .....................................................................
............................................................................. 69
References ....................................................................
...............................................................................
70
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1. Introduction
1.1. Purpose & Scope
The Purpose of carrying out this project is to identify the best source of SME f
inancing schemes provided by Nationalized and Private Banks in different sectors
. Every Financial consultancy firm like us (Opulence) wants that its client gets
the best deal so this survey will be an important tool for financing needs of e
very SME client. More specifically I will concentrate mainly on SME financing sc
hemes provided by State Bank of India (SBI) and ICICI bank. As we know that SME
form the backbone of any economy and SME are vital for growth of developing coun
tries like India so financing of SME is considered to be very important issue fo
r any economy. Because of this reason most of the banks, may it be nationalized
banks likes SBI or Private sector banks like ICICI, all are bringing different s
chemes for SME finance, but out of these various schemes which scheme is more pr
ofitable and suitable for a SME is the main question of concern for every SME.
1.2. Methodology & Sources
Following are the series of steps which will be followed during execution of the
project.
In the early phase of the project I will try to know about the various
schemes of SME financing which are introduced by various banks. After having th
e knowledge about various schemes prevailing in the market by various banks, I w
ill focus more on schemes provided by SBI and ICICI for SMEs.
I will then collec
t details about these schemes provided by each bank one by one by visiting the c
orresponding banks and having interaction with the representative of that bank.
I will collect details like amount of loan available, Interest rate, Disbursemen
t period, Repayment period, Eligibility criteria, Security required etc. Now aft
er collecting information regarding different schemes of SME finance by various
banks, I will focus on sectors one by one. Like I will take one sector for e.g.
medical , then I will compare schemes for SME provided by various banks and conc
lude that if a SME belonging to a medical sector wants finance
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then financing scheme of which bank is better for it. Similarly I will cover dif
ferent sectors like Tourism, Transport, Medical, Agriculture etc. The comparison
will be on the basis of the following factors:
Rate of Interest Disbursement Pe
riod Repayment Period
Eligibility criteria Security/collateral etc.
Basically my
aim will be to compare SME financing schemes provided by SBI and ICICI more spe
cifically, but for some sector it happens that in a particular sector SBI provid
es financing but ICICI has introduced any scheme in such case I will try to comp
are it with some other banks SME service. For collection of data I will go to the
banks and ask them mu queries to their representative out there. I will explore
the website of the banks to collect the data.
1.3. Limitation
Some of the limitations of the project can be:
Generally the data on the website
s of the banks are not fully disclosed i.e. other than the charges mentioned on
the website there are many hidden charges which increases the cost like service
charge etc.
In case of interaction with the representative of a particular bank
it happens many a time that the representative cannot disclose all the data beca
use of certain reasons like banks privacy policy etc. thus getting clear picture
about the service provided is not possible. I will try to overcome the above me
ntioned limitations as far as possible.
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2. A Brief profile of SMEs in India


2.1 Importance of SMEs
Small and medium-sized enterprises (SMEs) are the backbone of all economies and
are a key source of economic growth, dynamism and flexibility in advanced indust
rialized countries, as well as in emerging and developing economies. SMEs consti
tute the dominant form of business organization, accounting for over 95% and up
to 99% of enterprises depending on the country. They are responsible for between
60-70% net job creations in Developing countries. Small businesses are particul
arly important for bringing innovative products or techniques to the market. Mic
rosoft may be a software giant today, but it started off in typical SME fashion,
as a dream developed by a young student with the help of family and friends. On
ly when Bill Gates and his colleagues had a saleable product were they able to t
ake it to the marketplace and look for investment from more traditional sources
SMEs are vital for economic growth and development in both industrialized and de
veloping countries, by playing a key role in creating new jobs. Financing is nec
essary to help them set up and expand their operations, develop new products, an
d invest in new staff or production facilities. Many small businesses start out
as an idea from one or two people, who invest their own money and probably turn
to family and friends for financial help in return for a share in the business.
But if they are successful, there comes a time for all developing SMEs when they
need new investment to expand or innovate further. That is where they often run
into problems, because they find it much harder than larger businesses to obtai
n financing from banks, capital markets or other suppliers of credit.
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2.2 Definition of SME


Units in Small and Medium Enterprises (SME) Sector will include all units in tin
y and Small Scale industrial (SSI) sector and also those industrial units whose
investment in plant and machinery is up to INR 100 million. Accordingly, only th
ose units in the SME sector as per definition of RBI (defined in RPCD Circular N
o. RPCD.PLFNS.BC. 31/ 06.02.31/ 2005-06 dated August 19, 2005)
2.3 What Constitutes the SME Sector
It is rather difficult to define precisely as to what constitutes the SME sector
, as a. It covers a wide spectrum of activities ranging from manufacturing to tr
ade to services. b. It involves different types of organizations with varying co
nstitutions like proprietary concerns, partnership firms, private limited compan
ies, public limited companies. c. Regulations/ Govt. Policy guidelines varies fr
om activity to activity. d. It overlaps with the presently defined Priority Sect
or.
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In the given scenario, it can be broadly said that the SME segment would include
the following
Traders (Wholesale & Retail)
Manufacturers
Services
Retail Merchants
Small Owners Examples Mom & Pop Stores Small Producers Cash n Carry Wholesale
Manufacturers Service Providers Traders Examples ExportImporters Wholesalers Exa
mples Light Industries Processing Companies Examples Agencies Consulting Service
s Personal Services Restaurants Travel & Tourism
Examples Convenience Stores
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2.4 SMEs in India


2.4.1 Micro, Small and Medium Enterprise Sector: Profile
SMEs by Geographical Regions (in %)
SMEs by Geographical Regions
East 11% South 43% West 23%
North 23%
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SMEs by size
Medium 5% Micro 43% Small 52%
Of the 1150 micro, small and medium enterprises evaluated by SMERA 43% are locat
ed in South India and 52% are Micro in size Source: SMERA Newsletter
Performance of Micro and Small Enterprises Year Production Employmen Export (Rs
Crs.) t s (in Lakhs) (Rs. At At Crs.) Current Constant Prices Prices 17.53 101.0
6 118.59 418263 251511 282.57 124417 18.71 104.71 123.42 476201 277668 294.91 N.
A. 497840 587200 No. of Units (in Lakhs) Regd Unreg Total
2004-05 2005-06 2006-07 2007-08
Source: Development Commissioner (SSI)
Annual flow of Credit 2006-07
Indicators MSEs( former SSIs) MSME sector $5.4 Billion $9.5 Billion Public Secto
r Banks Other banks (private $2.4 Billion $3.5 Billion /foreign banks, SIDBI etc
.) $3.0 Billion* Emerging Sources (PV, VC, ECBs, etc.) $7.8 Billion $ 12 Billion
Total *Estimates based on certain broad assumptions, Exchange rate 40 INR = 1$
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2.5 Challenges Faced by the SME Sector


Mentoring & Advocacy Credit/Financing Technology
Information about Technology
Ac
tual procurement of technology Finance for Technology up gradation Market Access
Infrastructure Procedures Exit Mechanism Strategy Interventions for Revitalizat
ion and Growth
Reasons attributed to sickness of SMEs
80 70 60 50 40 30 20 10 0
el ay s l In fra st Pr ru om ct ur ot e er s Di sa gr ee m en t ar ke t in g og
y na nc e an ag er ia Co m pe tit Te ch no l io n
en tD
Fi
M
Source: Sickness and Rehabilitation of MSMEs in India, Milagrow Business and kno
wledge Solutions
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2.6 Various ways of Financing SMEs


Government
Specialized Banks for SMEs
Loans and Equity
Investment & Assistance
Leasing Companies
Loans
SMEs
Lease
Private Financial Institutions
e.g. Banks Finance Companies
Equity
Venture Capitalists
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This graph shows the various ways of financing for SMEs in various stages of the
ir life cycle. The valley of death spreads its shadows to other stages of the li
fe cycle also. Growing companies, especially ones that invest in capital need no
t only term loans but also more working capital.
Most common sources for Finance for MSMEs
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Thus it is clear that the most common source of finance for SMEs is Bank Financi
ng. There are a no. of banks who help in assisting the SMEs for financing. The m
ain channel used by the SMEs via Banks is Specialized loans by various Banks. Th
e Main reason for chosing bank loans by SMEs compared to other sources of financ
ing like venture capital, PE funding etc is ther is only interest to be paid no
stake is to be diluted thus the whole command oof the SME is with the owner only
. There are a number of Private as well as Public sector banks who assist SME in
Financing
Some Banks Offering Financial Assistance to SMEs
Allahabad Bank Andhra Bank Bank of India Bank of Baroda Bank of Maharashtra Cana
ra Bank Central Bank of India Corporation Bank Dena bank ICICI Bank Indian Bank
Indian Overseas Bank IndusInd Bank Ltd. The Jammu & Kashmir Bank Ltd. Punjab Nat
ional Bank Syndicate Bank State Bank of Travancore State Bank of India Group Sma
ll Industry Development Bank of India (SIDBI) Union Bank of India United Bank of
India UCO Bank Vijaya Bank
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www.allahabadbank.com www.andhrabank-india.com www.bankofindia.com www.bankofbar
oda.com www.maharashtrabank.com www.canbankindia.com www.centralbankofindia.co.i
n www.corpbank.com www.denabank.com www.icicibank.com www.indian-bank.com www.io
b.com www.indusind.com www.jkbank.net www.pnbindia.com www.syndicatebank.com www
.statebankoftravancore.com www.sbi.co.in www.sidbi.com www.unionbankofindia.co.i
n www.unitedbankofindia.com www.ucobank.com www.vijayabank.com
08BS0001577

Investment in SMEs
Sr. No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Year 1990-91 1991-92 1992-93 1993
-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003
-04 2004-05 2005-06 Total SME Units (Lakhs) 67.87 70.63 73.51 76.49 79.60 82.84
86.21 89.71 93.36 97.15 101.1 105.21 109.49 113.95 118.59 123.42 Fixed Investmen
t (Rs. Crores) 93555 100351 109623 115795 123790 125750 130560 133242 135482 139
982 146845 154349 162317 170219 178699 188113
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Credit to MSE sector from Public Sector Banks The table below gives the status o
f credit flow to the micro and small enterprises (MSE) sector from the public se
ctor banks since 2000: Year 2000 2001 2002 2003 2004 2005 2006 2007 Net Bank Cre
dit (NBC) 316427 341291 396954 477899 558849 718722 1017614 1317705 Credit to SM
Es 46045 48400 49743 52988 58278 67634 82492 104703 % of NBC 14.6 14.2 12.5 11.1
10.4 9.4 8.1 8.0
Source: RBI Provisional
Amount Invested in SMEs by ministry of Small scale industry via Credit Linked Ca
pital Subsidy Scheme (CLCSS) Year No. of Units Assisted 9 47 150 526 699 1189 26
20 Amount sanctioned (Rs. Lakhs) 21.36 93.97 368.79 1351.89 1801.17 3795.47 7432
.65
2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 Total
Source: Development Commissioner, Ministry of SMEs
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Amount Invested in SMEs by ministry of Small scale industry via ISO 9000 Incenti
ve Scheme
Year No. of Amount sanctioned Units (Rs. Crores) Assisted 3 0.016 1993-94 10 0.0
43 1994-95 48 0.25 1995-96 54 0.39 1996-97 85 0.49 1997-98 174 0.96 1998-99 361
2.25 1999-00 649 4.05 2000-01 992 6 2001-02 1182 6.99 2002-03 917 4.77 2003-04 3
314 17.33 2004-05 4101 19.44 2005-06 1543 7.37 2006-07 Total 13433 70.88 Average
assistance/unit= Rs. 52,765
Source: Development Commissioner, Ministry of SMEs
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3. SME Services Provided by State Bank of India


State Bank of India (SBI) is the forerunner in the field of SME financing. Major
ity of the loans to SMEs are been provided by SBI. SBI has introduced various sc
hemes for SMEs. The various schemes are according to the sector in which a parti
cular SME belongs. SBI has introduced SME financing for SME belonging to sectors
like: Agriculture Medical Transport Tourism Art Education and many more. SME Bu
siness Unit is implementing multiple strategies to maintain Banks premier positi
on in SME financing.
The Advances given By SBI to SME sector increased to Rs. 76
,329 Crores as on 31.03.2008 from Rs. 58,674 Crores of the previous year registe
ring a growth of 30%.
The Deposits of SBI under SME sector increased to Rs. 1,65
,168 Crores as at the end of March 2008 from Rs. 1,23,054 Crores of previous yea
r, recording a growth of 34% during the year.
The SME architecture has been firm
ly established and with a focus on companies with a turnover of less than Rs. 50
Crores, SBIs advances to SME rose by 26% in FY08.
Currently, SBI has 12-lakh SME
customers.
Credit Given by SBI to SMEs
Q4FY08 Q4FY07 Q3FY08 % OF TOTAL 19 % OF Y-O-Y GROWTH 26 % OF Q-O-Q GROWTH 13.1
RS IN BN
782
621
691
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3.1 Steps for SME loans by State Bank of India (SBI)


1. Application for loan by SME to local branch of a particular area.
2. Inspection/Survey of SME by the Executives of that Local branch.
3. Sending the Documents of survey by Local branch to SMECC branch
4. Preparing credentials of Promoters and firm by SMECC branch and investigating
the same
5. Estimating the amount of loan to be sanctioned and forwarding the documents f
or sanctioning.
6. If the loan is been sanctioned by the central authority then disbursement of
the loan amount into account of the SME.
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The above figure shows the steps for availing finance through State Bank of Indi
a (SBI) using loans. Here is the brief description of the above shown procedure:
First of all the SME who wants to avail loan has to visit the local branch offi
ce of their area, where by the loan application is been filled by the SME. After
that the executives of that branch check whether all the necessary documents ar
e provided by the SME or not, then if all necessary documents are submitted the
next step comes whereby the officials of that local branch go to the premises of
that SME and just have a brief survey of promoter as well as the premises. Afte
r they are satisfied they send the file of necessary documents to the SMECC bran
ch, which is a special branch for SME loans. Where by the credit appraisal takes
place, which consist of credit appraisal of promoter, financial appraisal, dete
rmining cost of project, understanding various means of finance used, profitabil
ity estimate, cash flow projections , marketing appraisal etc. , which is explai
ned in next section. This step brings out the clear picture whether the loan sho
uld be given to the SME or not? If the SMECC branch is satisfied with the detail
s then it forward the request of granting loan to the sanctioning authority. And
finally after the verification by sanctioning authority, the disbursement of lo
an amount takes place in the account of that SME This whole procedure right from
application to disbursement of loan amount takes approximately 20-25 days as th
e procedure involves analysis of documents by various branches and thus the move
ment of documents amongst them, if all this procedure would have taken place at
single place then it would take only 10-12 days for disbursement.
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3.2 Credit Appraisal By banks


1. Credit Worthiness of Borrower/ KYC form 2. Technical Appraisal 3. Financial A
ppraisal 4. Determination of Cost of Project 5. Determining means of finance 6.
Profitability Estimate 7. Break Even Analysis 8. Analyzing Cash flows projection
s 9. Analyzing Balance Sheet 10. Economic Appraisal 11. Marketing Appraisal
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3.3 SME Financing Schemes by SBI 3.3.1 Open term Loan


Purpose:
Expansion and Modernization
Upgradation of Technology/machinery, acquis
ition of hardware, software etc. Acquisition of ISO and other certificates.
Visi
ts abroad for business development etc. Loan Amount: Maximum for service sector:
Rs. 100 Lacs. Maximum for manufacturing sector: Rs. 250 Lacs. Amount of loan av
ailable: 90% of cost Repayment Period:
Maximum 3 years, extendable upto 5 years.
Collateral: Personal Guarantee of Promoters in all cases
Pledge of Promoters equ
ity in case of corporate. Eligibility: Existing or new corporate/Non-corporate c
ustomers of SME segment with good rating.
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3.3.2 School Plus


Purpose:
Construction of new building/repairing.
Purchase of equipments, softwar
e, and furniture.
Additional land for expansion or play ground, bus etc. Loan am
ount: Need Based- No upper limit Amount of loan available:
85% of project cost Repayment:
Minimum-3 years, Maximum -7 years. Collateral:
Fo
r loan < Rs. 2 Lacs Personal Guarantee of promoters/others. For loans > 2lacs Pe
rsonal Guarantee + Equitable mortgage of land & building of the school. Eligibil
ity: Government schools/ Private schools/ Colleges having necessary approval fro
m the government (Excluding professional colleges & coaching institutes)
Interest Rate:
Loan < Rs. 2 Lacs 9.25%
Loan amount between Rs. 2 Lacs & 5 Lacs.10.25%
Loan amount between Rs. 5 Lacs & 25 Lacs.- 11.00%
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3.3.3 Paryatan Plus


Purpose:
Construction, renovation, modernization, addition to hotels, Yatri niwas, Dharms
ala, Restaurants, Travel Agency etc.
Construction of office premises.
Purchase o
f computer & equipments; purchase of luxury buses, cars, vans, house boats etc.
Fast food centers, coffee houses, ice cream parlours, amusement park, ropeway, h
ealth club etc. are also eligible.
Loan amount: Need Based- No upper limit Amount of loan available:
80% of project cost
60% for purchase of old vehicles ,not more than 5 years old
Repayment: Minimum-3 years , Maximum -7 years
Maximum moratorium period 1.5 year
s Collateral: Tangible security for at least 50% of loan amount.
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Eligibility:
Individual, Partnership firm, Ltd. Company, Trust.
Interest Rate: Loan < Rs. 50,000 8.5%
Loan amount between Rs. 50,000 & 2 Lacs.9.5% Loan amount between Rs. 2 Lacs & 5 Lacs.- 10.25%
Loan amount between Rs. 5
Lacs & 25 Lacs.- 11.00% Loan above Rs. 25 Lacs 11.00 to 12.75%
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3.3.4 Transport Plus


Purpose:
Finance for new four wheelers i.e. trucks, tankers, trailers, luxury buses and c
ars.
Loan amount:
Minimum- Rs. 10 Lacs, Maximum- Rs. 10 Crores. Amount of loan availa
ble:
80% of project cost Repayment:
Maximum 5 years including Maximum moratorium peri
od of 3 months. Collateral:
Tangible security for at least 50% of loan amount. E
ligibility: Transport operators owning more than 10 vehicles including the propo
sed ones. Chief promoter should be IT assessee and having National/State permits
Interest Rate: Loan amount between Rs. 15 Lacs & 7.5 Crores- 11.00%
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3.3.5 Doctor Plus


Purpose:

Equipments, setting up of clinic. X-ray lab, nursing homes, and Pathological cli
nics. Computers/ ambulance. Expansion or renovation of existing premises. Any ot
her activities related to medical profession.
Loan amount:
Maximum- Rs. 5 Crores of which upper limit for working capital is:
(a) 10% of amount upto Rs. 1 Crore. (b) 5% of amount above Rs. 1 Crore and minim
um Rs. 10 Lacs. Amount of loan available:
Upto Rs. 5 Lacs - 90% of loan amount.
Above Rs. 5 Lacs- 85% of loan amount Repay
ment: Maximum -7 years Maximum moratorium period 1 year. Collateral:
Allopathic/
other doctors upto Rs. 15 Lacs/10 Lacs No security Loans over Rs. 15 Lacs/ 10 La
cs. For Allopathic/other doctors 25% of loan amount plus personal guarantee.
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Eligibility:
Assessment based on simplified scoring model. Min. score-60%
Interest Rate: Loan < Rs. 50,000 8.5%
Loan amount between Rs. 50,000 & 2 Lacs.9.0% Loan amount between Rs. 2 Lacs & 5 Lacs.- 9.25%
Loan amount between Rs. 5 L
acs & 25 Lacs.- 10.25%
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3.3.6 SBI Shoppe


Purpose:

Purchase of new/old shops/offices. Modernization/renovation Expansion/addition/a


lteration of shops. Building of Training /Service centers/ garage etc. Furniture
/ fixtures, electrical fittings.
Loan amount:

Maximum- Rs. 20 Lacs. Amount of loan available:

75% for new shop & 60% for old shop. Repayment:
Minimum-3 years , Maximum -7 yea
rs Maximum moratorium period 6 months Collateral:
Hypothecation/Pledge / Mortgag
e of property. Eligibility: Individual, Partnership firm, Ltd. Company, Trust/Fr
anchisees.
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3.3.7 Dental Doctor Plus


Purpose:
To boost the financing to Dental equipment under tie-up arrangement. To
finance qualified dentists For buying equipment Any other activities related to
Dental profession
Loan amount: Maximum- Rs. 10 Lacs. Amount of loan available:
Up to Rs. 25,000 10
0% Over Rs. 25,000 and up to Rs. 5 Lacs 90%
Over Rs. 5 Lacs and up to Rs. 10 Lac
s 80%
Repayment: Minimum-3 years , Maximum -5-10 years
Maximum moratorium period 6 mon
ths, for construction purpose it is 12 months Collateral:
Hypothecation/Pledge /
Mortgage of property.
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Eligibility:
Individual, Partnership firm, Ltd. Company, Trust/Franchisees.
Promoters should
have minimum BDS and should be registered practitioners. Interest Rate:
Loan < R
s. 50,000 8.5% Loan amount between Rs. 50,000 & 2 Lacs.- 9.0%
Loan amount betwee
n Rs. 2 Lacs & 5 Lacs.- 9.25% Loan amount between Rs. 5 Lacs & 25 Lacs.- 10.25%
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3.3.8 Cyber Plus


Purpose:
To set up internet/cyber cafes especially at rural and semi-urban cente
rs with potential for such a facility. Amount of loan margin:
Rs. 9000
Repayment:
36 to 40 monthly installments

Moratorium period- 3 months

Collateral: Security for assets purchased from bank finance. Eligibility:


Individual entrepreneurs The kiosk operator should be a local person Educational
qualification - Minimum Plus two Age between 20 and 45 years Should possess bas
ic computer knowledge.
Interest Rate:
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Loan 9.5%

3.3.9 Rice Mill Plus Purpose:


Acquisition of machinery/factory building for mode
rnization or expansion. Working capital needs. Loan amount:
Based on Project cos
t. Amount of loan available: 85-75% of project cost.
Working capital: (a) Paddy
& rice- 80-75% (b) Brokens -80% (c) Gunny bags- 60% (d) Bran- 70%
Repayment: Minimum-5 years , Maximum -7 years
Maximum moratorium period 12 month
s For working capital-12 months can be extended to other 12 months under certain
conditions. Collateral:
Loans >5 Lacs - Equitable mortgage of property/ tangibl
e security.
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Eligibility:
Profit making existing units and new units of good credit rating. Interest Rate:
Loan < Rs. 50,000 8.5%
Loan amount between Rs. 50,000 & 2 Lacs.- 9.5% Loan amou
nt between Rs. 2 Lacs & 5 Lacs.- 10.25%
Loan amount between Rs. 5 Lacs & 25 Lacs
.- 11% Loan amount above 25 Lacs.- 11 to 12.75%
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3.3.10 Rice Mill Plus


Purpose:
Acquisition of machinery/factory building for modernization or expansio
n. Working capital needs. Loan amount:
Based on Project cost. Amount of loan ava
ilable:
85-75% of project cost.
Working capital- 85-75%
Repayment: Minimum-5 years , Maximum -7 years
Maximum moratorium period 12 month
s Collateral: Loans < 5 Lacs No security Loans >5 Lacs - Equitable mortgage of p
roperty/ tangible security. Eligibility:
Profit making existing units and new units of good credit rating. Interest Rate:
Loan < Rs. 50,000 8.5%
Loan amount between Rs. 50,000 & 2 Lacs.- 9.5% Loan amou
nt between Rs. 2 Lacs & 5 Lacs.- 10.25%
Loan amount between Rs. 5 Lacs & 25 Lacs
.- 11% Loan amount above 25 Lacs.- 11 to 12.75%
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4. SME Services Provided by ICICI Bank


ICICI is amongst the leading private sectors bank in India. ICICI is the second
largest bank of the country. ICICI bank has introduced various schemes for SMEs.
The various schemes are according to the sector in which a particular SME belon
gs as seen in case of SBI. ICICI bank has introduced SME financing for SME belon
ging to sectors like: Automotive Transport Tourism Education Construction Appare
ls Gems and jewelry and many more. Few Facts about ICICI bank:
The total loans g
iven by the ICICI bank has decreased by 1.4% from 2007 to 2008. The total loans
given by the bank was Rs. 2155.17 billion on Dec 31, 2007; it increased to Rs. 2
256.16 billion in Mar 2008 and again decreased to Rs. 2125.21 billion in Dec2008
. The breakup of the total loan amount given by ICICI bank for the year 2008 is
as follow: Retail (Personal, home, vehicle etc.) : 54% Overseas: 26% Domestic co
rporate: 12% Rural: 4% SME: 4%
Thus out of the total loans given by the ICICI ba
nk in year 2008 i.e. Rs.2125 billion, the SME loans come out to be 4% of 2125 bi
llion = Rs. 85 billion
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4.1 Steps for SME loans by ICICI bank


1. Application for loan by SME to local branch of a particular area.
2. Sending the Documents collected by Local branch to SME branch
3. Preparing credentials of Promoters and firm by SME cell in SME branch and inv
estigating the same
4. Estimating the amount of loan to be sanctioned and if all credentials are pos
itive then sanctioning of loan by SME cell.
5. Disbursement of loan in the account of the SME.
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The above figure shows the steps for availing finance through ICICI banks using
loans. Here is the brief description of the above shown procedure: First of all
the SME who wants to avail loan has to visit the local branch office of their ar
ea, where by the loan application is been filled by the SME. The local area bran
ch sends the file of necessary documents to the SME branch, which is a special b
ranch for SME loans. Where by the credit appraisal takes place by SME cell which
is in SME branch, which consist of credit appraisal of promoter, financial appr
aisal, determining cost of project, understanding various means of finance used,
profitability estimate, cash flow projections , marketing appraisal etc. This s
tep brings out the clear picture whether the loan should be given to the SME or
not? If the SME cell is satisfied with the details then it forward the request o
f granting loan to the sanctioning authority within the SME branch. And finally
after the verification by sanctioning authority, the disbursement of loan amount
takes place in the account of that SME This whole procedure right from applicat
ion to disbursement of loan amount takes approximately 15-20 days as the procedu
re involves analysis of documents by only 2 branches i.e. the local area branch
and the SME branch and thus the disbursement period is less as compared to SBI a
s there is to and fro movement of documents between several branches in SBI..
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4.2 SME Financing schemes by ICICI bank for various sectors 4.2.1. Automotive Se
ctor
Purpose:
To set up an automobile manufacturing unit, expansion, Upgradation of t
echnology. Loan amount:
Minimum- Rs. 10 Lacs.
No upper limit Amount of loan avai
lable:
75-90% Repayment:
On demand but maximum 5 years but in some cases can be extende
d to 7years. Collateral: Immovable property, Assets financed or Tangible securit
y of about 30-40% of loan amount. Eligibility:
Networth should be minimum Rs. 40 Lacs Interest Rate:
Loan : 16%
Service Charges:
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0.50-2.50%

4.2.2. Construction Sector


Purpose:
To set up a construction company, purchase of equipments, Upgradation o
f technology. Loan amount:
Minimum- Rs. 10 Lacs.
No upper limit Amount of loan a
vailable:
75-90% Repayment:
On demand but maximum 5 years but in some cases can be extende
d to 7years. Collateral: Immovable property, Assets financed or Tangible securit
y of about 30-40% of loan amount. Eligibility:
Networth should be minimum Rs. 40 Lacs Interest Rate:
Loan : 16%
Service Charges:
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0.50-2.50%

4.2.3. Pharmaceutical Sector


Purpose:
To set up a Pharmaceutical unit, Upgradation, innovation. Loan amount:
Minimum- Rs. 10 Lacs. No upper limit Amount of loan available:
75-90% Repayment:
On demand but maximum 5 years but in some cases can be extende
d to 7years. Collateral: Immovable property, Assets financed or Tangible securit
y of about 30-40% of loan amount. Eligibility:
Networth should be minimum Rs. 40 Lacs Interest Rate:
Loan : 16%
Service Charges:
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0.50-2.50%

4.2.4. Apparel Sector


Purpose:
To set up an apparel manufacturing unit, retail stores, expansion, Upgr
adation. Loan amount:
Minimum- Rs. 10 Lacs.
No upper limit Amount of loan availa
ble:
75-90% Repayment:
On demand but maximum 5 years but in some cases can be extende
d to 7years. Collateral: Immovable property, Assets financed or Tangible securit
y of about 30-40% of loan amount. Eligibility:
Networth should be minimum Rs. 40 Lacs. Interest Rate:
Loan : 16%
Service Charges:
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0.50-2.50%

4.2.5. Transport Sector


Purpose:
Finance for new four wheelers i.e. trucks, tankers, trailers, luxury buses and c
ars.
Loan amount:
Minimum- Rs. 10 Lacs.
No upper limit Amount of loan available:
75-90% Repayment:
On demand but maximum 5 years but in some cases can be extende
d to 7years. Collateral: Immovable property, Assets financed or Tangible securit
y of about 30-40% of loan amount. Eligibility:
Networth should be minimum Rs. 40 Lacs.
SMEs should have National/state permits.
Interest Rate: Loan : 16%
Service Charges:
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0.50-2.50%

4.2.6. Gems & Jewelry Sector


Purpose:
To set up a gems and jewelry unit, expansion of the old unit, Upgradati
on. Loan amount:
Minimum- Rs. 10 Lacs.
No upper limit Amount of loan available:
75-90% Repayment:
On demand but maximum 5 years but in some cases can be extende
d to 7years. Collateral: Immovable property, Assets financed or Tangible securit
y of about 30-40% of loan amount. Eligibility:
Networth should be minimum Rs. 40 Lacs Interest Rate:
Loan : 16%
Service Charges:
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0.50-2.50%

4.2.7. Travel and Tourism Sector


Purpose:
Construction, renovation, modernization, addition to hotels, Yatri niwas, Dharms
ala, Restaurants, Travel Agency etc.
Construction of office premises.
Purchase o
f computer & equipments; purchase of luxury buses, cars, vans, house boats etc.
Fast food centers, coffee houses, ice cream parlours, amusement park, ropeway, h
ealth club etc. are also eligible.
Loan amount: Minimum- Rs. 10 Lacs.
No upper limit Amount of loan available:
75-90% Repayment:
On demand but maximum 5 years but in some cases can be extende
d to 7years. Collateral: Immovable property, Assets financed or Tangible securit
y of about 30-40% of loan amount. Eligibility:
Networth should be minimum Rs. 40 Lacs
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Interest Rate:
Service Charges:
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Loan : 16%
0.50-2.50%

4.2.8. Education Sector


Purpose:
Construction of new building/repairing.
Purchase of equipments, softwar
e, and furniture.
Additional land for expansion or play ground, bus etc. Loan am
ount: Minimum- Rs. 10 Lacs.
No upper limit Amount of loan available:
75-90% Repayment:
On demand but maximum 5 years but in some cases can be extende
d to 7years. Collateral: Immovable property, Assets financed or Tangible securit
y of about 30-40% of loan amount. Eligibility:
Networth should be minimum Rs. 40 Lacs.
Government schools/ Private schools/ Colleges having necessary approval from the
government (Excluding professional colleges & coaching institutes)
Interest Rate:
Loan : 16%
Service Charges: 0.50-2.50%
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4.2.9. Medical Sector


Purpose:

Equipments, setting up of clinic, Labs etc. Computers/ ambulance. Expansion or r


enovation of existing premises. Any other activities related to medical professi
on.
Loan amount:

Minimum- Rs. 10 Lacs.

No upper limit Amount of loan available:

75-90% Repayment:
On demand but maximum 5 years but in some cases can be extende
d to 7years. Collateral: Immovable property, Assets financed or Tangible securit
y of about 30-40% of loan amount. Eligibility:
Networth should be minimum Rs. 40 Lacs
Promoter must be a Qualified Doctor. Inte
rest Rate: Loan : 16%
Service Charges:
0.50-2.50%
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4.2.10. Climate Change Initiative


Purpose:
To help climate change initiative programs, which help to preserve envi
ronment like developing non-renewable energy dependent projects etc. Loan amount
: Minimum- Rs. 10 Lacs.
No upper limit Amount of loan available:
75-90% Repayment:
On demand but maximum 5 years but in some cases can be extende
d to 7years. Collateral: Immovable property, Assets financed or Tangible securit
y of about 30-40% of loan amount. Eligibility:
Networth should be minimum Rs. 40 Lacs Interest Rate:
Loan : 16%
Service Charges:
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0.50-2.50%

5. Sector wise comparison of SME financing services


Medical Sector
Bank Interest rate SBI ICICI bank
Loan : 16%
< Rs. 50,000 8.5%
Rs. 50,000 - 2 Lacs.- 9.0% Rs. 2 Lacs - 5 Lacs.- 9.25%
acs - 25 Lacs.- 10.25% Service charge
Nil Loan amount

Rs. 5 L

0.50 2.50% of loan amount


Maximum Rs. 5 Crores
Minimum Rs. 10 Lacs
No upper limit For working Capital:
of amount upto Rs. 1 Crore. 5% of amount above Rs. 1 Crore and minimum Rs. 10 L
acs.

10%

Margin/ Amount of loan sanctioned Repayment Period Security/ collateral


< Rs. 5 Lacs - 90%

> Rs. 5 Lacs- 85%

75-90%
Maximum 7 years
On demand
Maximum 5 years but in cases upto 7 years
Allopathic/other doctors upt
o Rs. Immovable property 15 Lacs/10 Lacs No security Assets Financed
Tangible se
curity of 30 Loans over Rs. 15 Lacs/ 10 Lacs. 40% of loan amount
Eligibility
For Allopathic/other doctors 25% of loan amount plus personal guarantee.
n simplified scoring Networth should be minimum Rs. 40 Lacs model.
Qualified Doctor.
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Based o

Interpretation: Following inference can be made from table above:


In case of SBI
the interest rate is different for different loan amount but for all slabs the
interest rate is less compared to the interest rate of ICICI bank. In case SBI t
here is no service charge to be paid while in case of ICICI bank there is about
0.5-2.50% service charge so in this case SBI is better than ICICI bank.
In case
of SBI there is no minimum limit for loan amount while for ICICI bank it is Rs.
10 lacs. While there is maximum limit for SBI is Rs. 5crores and Rs. 1 crore for
working capital while for ICICI there is no upper limit. So we can say in case
of minimum loan amount SBI is better and I case of upper limit of loan amount IC
ICI is better. In case of SBI the amount of loan available is 90% for loan amoun
t below Rs. 5 lacs and above Rs. 5 lacs it is 85% while in case of ICICI bank it
varies between 75-90% so for loan below Rs. 5 lacs SBI is a better option while
for loan amount above Rs. 5 lacs if amount of loan sanctioned is above 85% then
ICICI bank will be right choice otherwise SBI will be a better option.
The repa
yment period of SBI is maximum 7 years while for ICICI bank it is maximum 5 year
s but only for certain cases it can be extended to 7 years in ICICI bank. So loo
king at this figures it is clear that in this case SBI is better option than ICI
CI bank In case of SBI the security for Allopathic doctors for loan above Rs. 15
lacs is 25% and below that it is Nil while in case of other doctors for loan am
ount above Rs. 10 lacs the security is 25% and below that it is Nil but in ICICI
bank the security is 30-40% for all loan amount and for everyone thus it is cle
ar that SBI is better compared to ICICI bank in case of security.
For eligibilit
y criteria, In SBI there is credit scoring model and based on the score obtain i
n that loan is given to only those SMEs who score above 60% i.e. if they fail to
qualify for one criteria of a model but qualify for rest other criteria then th
ey are eligible but in case of ICICI the SME should have a Networth of minimum R
s. 40 lacs otherwise they fail to qualify for loan. Thus SBI seems to be a bette
r option here. Looking at the above interpretations it is clear that for SME bel
onging to Medical sector SME loan from SBI will be better option as compared to
ICICI bank.
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Education Sector
Bank Interest rate SBI ICICI bank

Loan : 16%

< 2 Lacs.- 9.25%


Rs. 2 Lacs - 5 Lacs.- 10.25%
Rs. 5 Lacs - 25 Lacs.- 11% Service
charge Nil Loan amount Margin/ Amount of loan sanctioned Repayment Period Secur
ity/ collateral
Need based No upper limit
0.50 2.50% of loan amount

Minimum Rs. 10 Lacs

No upper limit

75-90%

85%
Minimum-3 years

Maximum 7 years

On demand
Maximum 5 years but in cases upto 7 years
< Rs. 2 Lacs Personal
Immova
ble property Guarantee of promoters/others. Assets Financed
Tangible security of
30 > 2lacs Personal Guarantee + 40% of loan amount
Eligibility
Equitable mortgage of
Networth should be
y approval from the
ernment. professional
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land & building of the school.


Government schools/ Private
minimum Rs. 40 Lacs schools/ Colleges having having necessar
Institutes necessary approval government (Excluding from Gov
colleges & coaching institutes)

Interpretation: Following inference can be made from table above:


In case of SBI
the interest rate is different for different loan amount but for all slabs the
interest rate is less compared to the interest rate of ICICI bank. In case SBI t
here is no service charge to be paid while in case of ICICI bank there is about
0.5-2.50% service charge so in this case SBI is better than ICICI bank.
In case
of SBI there is no minimum limit for loan amount while for ICICI bank it is Rs.
10 lacs. While there is no upper limit in both the cases. So we can say SBI is b
etter than ICICI bank as there is no minimum loan limit, it is need based. In ca
se of SBI the amount of loan available is 85% while in case of ICICI bank it var
ies between 75-90% so if amount of loan sanctioned is above 85% then ICICI bank
will be right choice otherwise SBI will be a better option.
The repayment period
of SBI is minimum 3 years and maximum 7 years while for ICICI bank it is maximu
m 5 years but only for certain cases it can be extended to 7 years in ICICI bank
. So looking at these figures it is clear that in this case SBI is better option
than ICICI bank as maximum limit in all cases for SBI is 7 years. In case of SB
I the security for loan amount below Rs. 2 lacs is only personal guarantee of Pr
omoter and for loan amount above Rs. 2 lacs the security is personal guarantee o
f Promoter as well as equitable amount of mortgage but in ICICI bank the securit
y is 30-40% for all loan amount and for everyone thus it is clear that for loan
amount below Rs. 2 Lacs SBI is better compared to ICICI bank and for loan amount
above Rs. 2 lacs ICICI bank is a better option in case of security. For eligibi
lity criteria, In SBI all institutions with necessary government approval except
professional colleges and coaching classes are eligible there is no criteria of
Networth while in case of ICICI the SME should have a Networth of minimum Rs. 4
0 lacs otherwise they fail to qualify for loan. Thus SBI seems to be a better op
tion here. Looking at the above interpretations it is clear that for SME belongi
ng to Education sector SME loan from SBI will be better option as compared to IC
ICI bank.
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Transport Sector
Bank Interest rate SBI ICICI bank
Loan : 16%
s. 10 Lacs No upper limit
75-90%

0.50 2.50% of loan amount

Minimum R

Rs. 15 Lacs 7.5 Crores - 11%


Service charge
Nil Loan amount Margin/ Amount of loan sanctioned Repayment Perio
d Security/ collateral Eligibility
Minimum- Rs. 10 Lacs
Maximum- Rs. 10 Crores
80%
Maximum 5 years including Maximum moratorium period of 3 months.
ty for at least 50% of loan amount.
On demand

Tangible securi

Maximum 5 years but in cases upto 7 years

Immovable property
Assets Financed
Tangible security of 3040% of loan amount
nsport operators owning
Networth should be minimum Rs. 40 Lacs more than 10 vehi
cles including SMEs having the proposed ones. National/state permits.
Chief promoter should be IT assessee and having National/State permits
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Tra

Interpretation: Following inference can be made from table above:


For SBI the in
terest rate is 11% while for ICICI bank it is 16% thus it can be seen in case of
interest rate SBI is better than ICICI bank. In SBI there is no service charge
while in case of ICICI bank about 0.5-2.50% service charge is taken thus SBI is
better than ICICI bank in this case. As can be seen the amount of loan available
by SBI is 80% of project cost while for ICICI bank it varies between 75-90% so
if amount of loan sanctioned is above 85% then ICICI bank will be right choice o
therwise SBI will be a better option.
The repayment period in case of SBI is Max
imum 5 year including moratorium period of 3 months while in case of ICICI bank
it is also maximum 5 years but in certain case it can be extended to 7 years thu
s in this case ICICI bank is a better option.
In case of SBI the security is tan
gible security for at least 50 % of loan amount but in ICICI bank the security i
s tangible security for at least 30-40% of loan amount or assets financed or imm
ovable property thus it is clear that if the SME has tangible security for loan
than ICICI bank is a better option otherwise SBI is a better option. For eligibi
lity criteria, In SBI only those SMEs are eligible who own more than 10 vehicles
(including the proposed ones) and the firm should have National/State permits w
hile in case of ICICI the SME should have a Networth of minimum Rs. 40 lacs as w
ell as the firm should have National/State permit otherwise they fail to qualify
for loan. Thus SBI seems to be a better option here. Looking at the above inter
pretations it is clear that for SME belonging to Transport sector SME loan from
SBI will be better option as compared to ICICI bank.
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Travel &Tourism Sector


Bank Interest rate SBI < Rs. 50,000 8.5% Rs. 50,000 - 2 Lacs.- 9.5% Rs. 2 Lacs 5 Lacs.- 10.25% Rs. 5 Lacs - 25 Lacs.- 11.00% > Rs. 25 Lacs 11.00 to 12.75% Nil
ICICI bank
Loan : 16%
Service charge

Loan amount Margin/ Amount of loan sanctioned Repayment Period

0.50 2.50% of loan amount


Need Based
75-90%

Minimum Rs. 10 Lacs

No upper limit

No upper limit

80% of project cost

60% for purchase of old vehicles

Security/ collateral Eligibility


Minimum-3 years
Maximum -7 years Excluding Maximum moratorium period 1.5 years
angible security for at least 50% of loan amount.
On demand

Maximum 5 years but in cases upto 7 years

Immovable property
Assets Financed
Tangible security of 3040% of loan amount
ividual, Partnership firm, Ltd.
Networth should be minimum Rs. 40 Lacs. Company,
Trust.
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Ind

Interpretation: Following inference can be made from table above:


In case of SBI
the interest rate is different for different loan amount but for all slabs the
interest rate is less compared to the interest rate of ICICI bank. In case SBI t
here is no service charge to be paid while in case of ICICI bank there is about
0.5-2.50% service charge so in this case SBI is better than ICICI bank.
In case
of SBI there is no minimum limit for loan amount while for ICICI bank it is Rs.
10 lacs. While there is no upper limit in both the cases. So we can say SBI is b
etter than ICICI bank as there is no minimum loan limit, it is need based. In ca
se of SBI the amount of loan available is 80% of project cost and 60% for purcha
se of old vehicles while in case of ICICI bank it varies between 75-90% so in th
is case ICICI bank is better option than SBI.
The repayment period of SBI is min
imum 3 years and maximum 7 years (excluding moratorium period of maximum 1.5 yea
rs) while for ICICI bank it is maximum 5 years but only for certain cases it can
be extended to 7 years in ICICI bank. So looking at these figures it is clear t
hat in this case SBI is better option than ICICI bank as maximum limit in all ca
ses for SBI is 7 years. In case of SBI the security is tangible security for at
least 50 % of loan amount but in ICICI bank the security is tangible security fo
r at least 30-40% of loan amount or assets financed or immovable property thus i
t is clear that if the SME has tangible security for loan than ICICI bank is a b
etter option otherwise SBI is a better option. In SBI there are no specific elig
ibility criteria for a SME and also there are no criteria of Networth while in c
ase of ICICI the SME should have a Networth of minimum Rs. 40 lacs otherwise the
y fail to qualify for loan. Thus SBI seems to be a better option here. Looking a
t the above interpretations it is clear that for SME belonging to Travel & Touri
sm sector SME loan from SBI will be better option as compared to ICICI bank.
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Apparel Sector
Bank Interest rate SBI (Open Term Loan )
n amount
Service charge

12.25% ICICI bank

16%

0.50 2.50% of loa

Nil Loan amount

Margin/ Amount of loan sanctioned Repayment Period Security/ collateral Eligibil


ity
Service sector: Max. Rs. 1Crores
Minimum Rs. 10 Lacs
s. 2.5 No upper limit Crores.
75-90% 90%

Manufacturing sector: Max R

Maximum 3 years, extendable upto


On demand
Maximum 5 years but 5 years. in cases
upto 7 years
Personal Guarantee of Promoters. Immovable property
Assets Finance
d Tangible security of 3040% of loan amount
Individual, Partnership firm, Ltd. N
etworth should be minimum Rs. 40 Lacs. Company, Trust.
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Interpretation: Following inference can be made from table above:


For SBI the in
terest rate is 12.25% while for ICICI bank it is 16% thus it can be seen in case
of interest rate SBI is better than ICICI bank. In SBI there is no service char
ge while in case of ICICI bank about 0.5-2.50% service charge is taken thus SBI
is better than ICICI bank in this case.
There is no upper limit for SME loan in
case of SBI as in the case of ICICI bank in which there is minimum limit of Rs.
10 lacs but there is no upper limit in case of ICICI bank where as for SBI the u
pper limit for service sector is Rs. 1 Crore and for manufacturing sector it is
Rs. 2.5 Crores thus SBI puts a limit on the SME loan so if an SME wants loan mor
e than Rs. 1 Crore in case of service industry and Rs. 2.5 Crores in case of man
ufacturing sector than ICICI is a better option. The amount of loan sanctioned b
y SBI 90% of project cost while for ICICI bank it may vary between 75-90% thus i
n this case SBI seems to be a better option than ICICI bank.
The repayment perio
d of SBI is maximum 3 years and in some cases extendable upto 5 years while for
ICICI bank it is maximum 5 years and in certain cases it can be extended to 7 ye
ars in ICICI bank. So looking at these figures it is clear that in this case ICI
CI bank is better option than SBI as maximum limit in all cases for ICICI bank i
s 5 years. In case of SBI no tangible security is required only personal guarant
ee of promoters is required while in case of ICICI bank the firm should have a N
etworth f minimum Rs. 40 lacs otherwise it will be not eligible. Thus in this ca
se SBI seems to be a better option than ICICI bank.
In SBI there are no specific
eligibility criteria for a SME and also there are no criteria of Networth while
in case of ICICI the SME should have a Networth of minimum Rs. 40 lacs otherwis
e they fail to qualify for loan. Thus SBI seems to be a better option here. Look
ing at the above interpretations it is clear that for SME belonging to Apparel s
ector SME loan from SBI as well as from ICICI bank seems to be equal as in some
criteria SBI is better while in other criteria ICICI seems to be better thus bot
h are on equal positions for Apparel sector.
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Gems & Jewelry Sector


Bank Interest rate SBI (Open Term Loan )
n amount
Service charge

12.25% ICICI bank

16%

0.50 2.50% of loa

Nil Loan amount

Margin/ Amount of loan sanctioned Repayment Period Security/ collateral Eligibil


ity
Service sector: Max. Rs. 1Crores
Minimum Rs. 10 Lacs
s. 2.5 No upper limit Crores.
75-90% 90%

Manufacturing sector: Max R

Maximum 3 years, extendable upto


On demand
Maximum 5 years but 5 years. in cases
upto 7 years
Personal Guarantee of Promoters. Immovable property
Assets Finance
d Tangible security of 3040% of loan amount
Individual, Partnership firm, Ltd. N
etworth should be minimum Rs. 40 Lacs. Company, Trust.
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Shekhani Vasim
08BS0001577

Interpretation: Following inference can be made from table above:


For SBI the in
terest rate is 12.25% while for ICICI bank it is 16% thus it can be seen in case
of interest rate SBI is better than ICICI bank. In SBI there is no service char
ge while in case of ICICI bank about 0.5-2.50% service charge is taken thus SBI
is better than ICICI bank in this case.
There is no upper limit for SME loan in
case of SBI as in the case of ICICI bank in which there is minimum limit of Rs.
10 lacs but there is no upper limit in case of ICICI bank where as for SBI the u
pper limit for service sector is Rs. 1 Crore and for manufacturing sector it is
Rs. 2.5 Crores thus SBI puts a limit on the SME loan so if an SME wants loan mor
e than Rs. 1 Crore in case of service industry and Rs. 2.5 Crores in case of man
ufacturing sector than ICICI is a better option. The amount of loan sanctioned b
y SBI 90% of project cost while for ICICI bank it may vary between 75-90% thus i
n this case SBI seems to be a better option than ICICI bank.
The repayment perio
d of SBI is maximum 3 years and in some cases extendable upto 5 years while for
ICICI bank it is maximum 5 years and in certain cases it can be extended to 7 ye
ars in ICICI bank. So looking at these figures it is clear that in this case ICI
CI bank is better option than SBI as maximum limit in all cases for ICICI bank i
s 5 years. In case of SBI no tangible security is required only personal guarant
ee of promoters is required while in case of ICICI bank the firm should have a N
etworth f minimum Rs. 40 lacs otherwise it will be not eligible. Thus in this ca
se SBI seems to be a better option than ICICI bank.
In SBI there are no specific
eligibility criteria for a SME and also there are no criteria of Networth while
in case of ICICI the SME should have a Networth of minimum Rs. 40 lacs otherwis
e they fail to qualify for loan. Thus SBI seems to be a better option here. Look
ing at the above interpretations it is clear that for SME belonging to Gems & Je
welry sector SME loan from SBI as well as from ICICI bank seems to be equal as i
n some criteria SBI is better while in other criteria ICICI seems to be better t
hus both are on equal positions for Gems & Jewelry sector.
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Other Sectors
Bank Interest rate SBI (Open Term Loan )
n amount
Service charge

12.25% ICICI bank

16%

0.50 2.50% of loa

Nil Loan amount

Margin/ Amount of loan sanctioned Repayment Period Security/ collateral Eligibil


ity
Service sector: Max. Rs. 1Crores
Minimum Rs. 10 Lacs
s. 2.5 No upper limit Crores.
75-90% 90%

Manufacturing sector: Max R

Maximum 3 years, extendable upto


On demand
Maximum 5 years but 5 years. in cases
upto 7 years
Personal Guarantee of Promoters. Immovable property
Assets Finance
d Tangible security of 3040% of loan amount
Individual, Partnership firm, Ltd. N
etworth should be minimum Rs. 40 Lacs. Company, Trust.
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Shekhani Vasim
08BS0001577

Interpretation: Following inference can be made from table above:


For SBI the in
terest rate is 12.25% while for ICICI bank it is 16% thus it can be seen in case
of interest rate SBI is better than ICICI bank. In SBI there is no service char
ge while in case of ICICI bank about 0.5-2.50% service charge is taken thus SBI
is better than ICICI bank in this case.
There is no upper limit for SME loan in
case of SBI as in the case of ICICI bank in which there is minimum limit of Rs.
10 lacs but there is no upper limit in case of ICICI bank where as for SBI the u
pper limit for service sector is Rs. 1 Crore and for manufacturing sector it is
Rs. 2.5 Crores thus SBI puts a limit on the SME loan so if an SME wants loan mor
e than Rs. 1 Crore in case of service industry and Rs. 2.5 Crores in case of man
ufacturing sector than ICICI is a better option. The amount of loan sanctioned b
y SBI 90% of project cost while for ICICI bank it may vary between 75-90% thus i
n this case SBI seems to be a better option than ICICI bank.
The repayment perio
d of SBI is maximum 3 years and in some cases extendable upto 5 years while for
ICICI bank it is maximum 5 years and in certain cases it can be extended to 7 ye
ars in ICICI bank. So looking at these figures it is clear that in this case ICI
CI bank is better option than SBI as maximum limit in all cases for ICICI bank i
s 5 years. In case of SBI no tangible security is required only personal guarant
ee of promoters is required while in case of ICICI bank the firm should have a N
etworth f minimum Rs. 40 lacs otherwise it will be not eligible. Thus in this ca
se SBI seems to be a better option than ICICI bank.
In SBI there are no specific
eligibility criteria for a SME and also there are no criteria of Networth while
in case of ICICI the SME should have a Networth of minimum Rs. 40 lacs otherwis
e they fail to qualify for loan. Thus SBI seems to be a better option here. Look
ing at the above interpretations it is clear that for SME belonging to sector ot
her than mentioned above, SME loan from SBI as well as from ICICI bank seems to
be equal as in some criteria SBI is better while in other criteria ICICI seems t
o be better thus both are on equal positions for other sectors.
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Conclusion
From the above comparison between SME plans provided by SBI and ICICI bank it ca
n be judged that for a SME belonging to a particular sector which bank is provid
ing a better SME plan. It can be tabulated as follows: Sector Medical Education
Transport Travel & Tourism Apparel Gems & Jewelry Other Sectors Public Sector Ba
nk (SBI) Private Sector Bank (ICICI Bank)
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References
BUSINESS WORLD, 2009. The SME Whitebook 2009-2010. New Delhi: ABP Pvt. Ltd. http
://www.statebankofindia.com/ http://www.icicibank.com/ http://www. smallindustry
india.com/ http://www.laghu-udyog.com/ http://www. rbi.org.in/ http://www. smeii
ft.com/ http://www.lubindia.org/
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