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PROJECT REPORT ON CREDIT APPRAISAL UNDER SME SEGMENT

SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE AWARD OF THE DEGREE OF MASTERS IN MANAGEMENT STUDIES MUMBAI UNIVERSITY BY OMKAR VEDPATHAK ROLL NO: 118 SPECIALIZATION: FINANCE UNDER THE GUIDANCE OF DR. KAUSTUBH SONTAKKE

MMS 2012-14 PILLAIS INSTITUTE OF MANAGEMENT STUDIES AND RESEARCH, NEW PANVEL

DECLARATION I hereby declare that the project work entitled CREDIT APPRAISAL UNDER SME SEGMENT submitted to the Pillais Institute of Management Studies and Research, is a record of an original work done by me under the guidance of Dr Kaustubh Sontakke, and this project work is submitted in the partial fulfillment of the requirements for the award of the degree of Masters in Management Studies. The results embodied in this thesis have not been submitted to any other University or Institute for the award of any degree or diploma.

Place:

OMKAR VEDPATHAK ROLL NO. 118

Date:

CERTIFICATE
Pillai`s Institute of Management Studies and Research

This is to certify that the Project Report entitled CREDIT APPRAISAL

UNDER SME SEGMENT submitted in partial fulfillment of the


requirements for the award of the degree of Master of Management Studies to Pillai`s Institute of Management Studies and Research, Panvel is a record of research work carried out by Mr. Omkar Vedpathak under my supervision and Guidance.

. Dr. Kaustubh Sontakke (Project Guide)

.. Dr. Vijayraghavan (Director)

Index & Page No.


1. Introduction 2.1 2.2 2.3 2.4 2.6 Overview of Dena Bank 7 Milestones - 9 Vision and Mission Statement 10 Growth & Development of the Organization 12 Workflow model of R.O. 14

2. Research Methodology 2.1 2.2 2.3 2.4 2.5 2.6 Introduction Of Research - 15 Statement of the research problem 16 Objective of the research study 18 Research Design & Methodology 22 Rationale for the study 25 Limitation of the study 26

3. Introduction & Emergence of SMEs 27 4. Theoretical Analysis 33 5. Case Study 50 6. Findings and Recommendations 58 7. Conclusions 59 8. Bibliography 60

ACKNOWLEDGEMENT It has been an immense pleasure and truly enriching experience doing my Summer Project, at the branch office of Thane

This project report is dedicated to all the people, whom I met, took guidance, talked and gained knowledge from them. I have no words to express my gratitude towards those who were constantly involved with me throughout my project on CREDIT APPRAISAL UNDER SME SEGMENT

With an overwhelming sense of obligations, I avail this opportunity to express my deep sense of gratitude to my guide Mr. Ananth Satam, Senior Manager who has been instrumental and a guiding force behind the completion of this project. He has been constantly eliciting insights and viewpoints on the subject matter. I emphatically express my profound thanks and heartfelt gratitude to Dr. Kaustubh Sontakke for his valuable guidance, timely suggestions and constant encouragement during the entire course of my training.

Finally, I would like to thank the staff at Dena Bank who provided easy access material for reference and all those people who have helped in no single measure through their suggestions and comments.

Executive Summary The objective of this project is to study the working of DENA BANK for providing loans & advances, credit transaction and credit appraisal to Small and Medium Enterprises. SME sector is critical to Indias economy and potentially a key driver of growth, job creation, innovation and economic prosperity. After undertaking in the depth of theoretical study such as type of advances, SME policy of DENA BANK, credit rating, CMA, Working Capital and various financial under SMEs, It was found that the several industries are growing under banking finance and SMEs is a one of the fast growing Industries from all the sectors. As per the 3rd census report, total output of the registered units in the year 2001-02 was estimated to be Rs. 70,861.73 crores. The SSI sector employed 2,49,32,763 persons during that period. Thus SME plays a very significant role in the socio-economic development of the country. The project was an attempt to understand and perform the work in credit transaction and credit appraisal proposal which I have included is just an example of it. I have worked on many such proposals, which are beyond the scope of this project. Hence the whole experience of working in such a renowned public sector unit was very good & made me learn a lot out of it.

1.1 Overview of Dena Bank

Dena Bank is one of the earliest nationalized banks in India. Since its inception, the bank has become a renowned name in the field of banking and financial solutions. It is trusted all over the country by thousands of consumers. By being a customer of Dena Bank, one can easily enjoy financial stability and also get good returns on the services and the financial solutions.

Dena Bank was founded on 26th May, 1938 by the family of Devkaran Nanjee under the name Devkaran Nanjee Banking Company Ltd. It became a Public Ltd. Company in December 1939 and later the name was changed to Dena Bank Ltd.

In July 1969 Dena Bank Ltd. along with 13 other major banks was nationalized and is now a Public Sector Bank constituted under the Banking Companies (Acquisition & Transfer of Undertakings) Act, 1970. Under the provisions of the Banking Regulations

Act 1949, in addition to the business of banking, the Bank can undertake other business as specified in Section 6 of the Banking Regulations Act, 1949.

Competitors: Top three competitors of Dena Bank. Bank of Baroda Bank of India

ICICI Bank Limited

Dena Bank has been the first Bank to introduce: Minor Savings Scheme. Credit card in rural India known as "DENA KRISHI SAKH PATRA" (DKSP). Drive-in ATM counter of Juhu, Mumbai. Smart card at selected branches in Mumbai. Customer rating system for rating the Bank Services

1.2

MILESTONES

One among six Public Sector Banks selected by the World Bank for sanctioning a loan of Rs.72.3 crores for augmentation of Tier-II Capital under Financial Sector Developmental project in the year 1995. One among the few Banks to receive the World Bank loan for technological up gradation and training. launched a Bond Issue of Rs.92.13 crores in November 1996. Maiden Public Issue of Rs.180 Crores in November 1996. Introduced Tele banking facility of selected metropolitan centers. Dena Bank has been the first bank to introduceo Minor Savings Scheme.

o Credit card in rural India known as "DENA KRISHI SAKH PATRA" (DKSP). o Drive-in ATM counters of Juhu, Mumbai. o Smart card at selected branches in Mumbai.

Customer rating system for rating the Bank Services.

1.3

VISION & MISSION

Mission and Vision Statement of Dena Bank Mission StatementDENA BANK will provide its Customers - premier financial services of great value, Staff - positive work environment and opportunity for growth and achievement, Shareholders - superior financial returns, Community - economic growth.

Vision Statement DENA BANK will emerge as the most preferred Bank of customer choice in its area of operations, by its reputation and performance.

Logo

The logo of Dena Bank represents Lakshmi, the Goddess of wealth, according to Hindu mythology. It was the desire of the founding fathers of the Bank that the Bank should be a symbol of prosperity for all its clients, and the logo represents this promise. The contemporary 'D' in the logo reflects the dynamism, dedication and the drive towards customer satisfaction.

1.4

Growth and Development of the Organization

To evolve and position the bank as a world class, progressive, cost-effective and customer friendly institution providing comprehensive financial and related services: integrating frontiers of technology and serving various segment of society especially the weaker section of the society: committed to excellence in serving the public and also excelling in the corporate values. Corporate excellence emanate from good corporate governance exercised by adopting standard of transparency, accountability,

professionalism, social responsiveness, and ethical business practices with this in view, the has been making efforts for adopting the best practices. The bank commitment towards corporate governance is to bestow greater transparency and openness in the management and to ensure best performance by staff at all the levels to maximize the operational efficiency. Adopting the corporate governance as a work ethos, the bank is committed to enhancing the stakeholders value.

1.5

DENA BANKS BUSINESS STRUCTURE

Personal Banking

Services

Deposit Scheme

Loan Scheme

Premium Savings Account Scheme Premium Current Account Scheme Dena Jeevan SB Account Dena Maha Tax Bachat Yojana Dena Super Premium Current Account Dena Laxmi Gold Deposit Scheme Dena Savifix Deposit Scheme Dena Freedom Deposit Scheme Dena Samruddhi Deposit Scheme Dena Fixed Deposit Scheme Dena Senior Citizen Scheme Dena Recurring Deposit Scheme Dena Loan Linked Recurring Deposit Scheme Dena Minor Savings Scheme Dena Alpa Bachat Khata

Dena Niwas Housing Finance Scheme Dena Vidya Laxmi Educational Loan Scheme Dena Suvidha (Personal Loan) Scheme Dena Auto Finance Scheme Dena Consumer Durable Loan Dena Trade Finance Scheme Dena Mortgage Loan Scheme Dena Senior Citizen Pensioners Loan Scheme Dena Rent Scheme (Finance

Core Banking Solution Dena Connect Dena India Remit Value Added Services Dena ATM Services Dena Bill Pay Dena m-Banking Telebanking Electronic Fund Transfer Inbound Remittances Direct tax collection Bank assurance Indirect Tax Distribution of Mutual Funds RTGS / NEFT Dena e-Tax Pay

1.8

WORKFLOW MODEL

Here is the workflow model of Dena Banks regional office-

Credit Department Manager

Chief Manager (Credit)

Retail Department Manager

SME Department Manager

Senior Manager (Credit)

Junior Manager (Credit)

Clerical (in every Dpmt)

Deputy General Manager

Assistance General Manger Recovery Officer

Planning Officer

Deputy Regional Manager

Inspection Officer

Personnel Officer

Administrative Officer

Clerical (in every Dpmt)

2.1 RESEARCH METHODOLOGY


Research is the search for and retrieval of existing, discovery or creation of new information or knowledge for a specific purpose. METHODOLOGYMethodology means body of method used in a particular activity. To proceed with study in the right direction, it is essential to select an appropriate method. Selection of method is again a very cautious work and has to be done with proper understanding.

RESEARCH METHODOLOGYResearch methodology is a way to systematically solve the research problem. It may be understood as a science of study how research is done scientifically. In it, various steps are studied that are used for studying the research probl em along with the logic behind them. Research methodology, therefore has many dimensions. It has a wider scope. The purpose of the methodology section is to describe the research procedures. Therefore research methodology not only includes the research methods but also considers the logic behind the methods in the context of research study .It helps in explaining why a particular method or technique is being used and why not others ,so the research results are capable of being evaluated himself or by others .

2.2

STATEMENT OF THE RESEARCH PROBLEM

The factors beyond Credit Appraisal in financial Institute have widely investigated at the aggregate level and at the Government level. The main reason is Credit appraisal under SMEs is new field of research.

Due to the limitations of knowledge about problems and challenges faced by the Credit Appraisal SMEs and the factors responsible for their sickness are summarized as under:

Increased competition from cheap imports Infrastructural constraints/bottlenecks Delayed realization of receivables Delayed/inadequate credit High cost of funds Insistence on collateral/margin Complication and cumbersome procedures of banks Limited financial resources Non availability of adequate promoters contribution / equity Obsolete technology. Low R & D and technology up gradation effort Inadequate managerial competence Lack of marketing skills / Poor marketing Inadequacy of inputs and skills Government policies

Financial problems Low quality image (Low ability perceived) Difficulty in dealing with Govt. buying system

The choice of this subject was based on many reasons; there has not been much research about credit appraisal under SMEs and also, it is a highly actual subject availability of data and also personal interest that influenced our choice of topic.

2.3

OBJECTIVE OF THE RESEARCH STUDY

The objective of this project report is to study the working of DENA BANK for providing loans and advances to Small and Medium Enterprises. SME sector is critical to Indias economy and potentially a key driver of growth, job creation, innovation and economic prosperity. SMEs contribute about 40% of Indias value addition manufacturing, almost 50% of Indias total exports and 45% of Industrial units. They produce different products, ranging from simple items to high-tech products using sophisticated state-of-art-technology for both domestic and international market.

SCOPE OF THE STUDY Get an insight of the banking industry. Understand the interface of the banks with their clients, customer
service expenses in banks.

Using the theoretical knowledge in application and understanding


thing practically.

Serve the organization.

2.4 Research Design

Research Design and Methodology

Research design is a conceptual structure within which research is conducted the blueprint for the collection and measurement and analysis of data .

Research design can be categorized as exploratory and conclusive design. Exploratory seeks to discover new relationships while conclusive research is design to take decisions. In exploratory the main aim is to come to hypothesis. It means tentative answers to questions that serve as guide for most research projects. This type of research defines hypotheses which are then tested by conclusive research .Conclusive research design can be of two types viz. the case method and the statistical method. In my case I have opted for conclusive research design by opting case study method.

In my case I have opted for conclusive research design by opting case study method.

This research contains secondary data. A little bit primary source of data collection is also used to get an insight of case study.

All analysis and conclusion is derived on the basis of the case study data. To select this case study random sample technique is used.

Sampling technique:
As it is a conclusive research , therefore this research contains secondary data. A little bit primary source of data collection is also used to get an insight of case study. All analysis and conclusion is derived on the basis of the case study data. To select this case study random sample technique is used.

Data collection method:


As far as the study is concerned, sound information base is needed in order to classify the problem quickly .Basically data is collected from two sources viz. primary source and secondary source.

Sources of data:

Primary data
It consists of original information collected for specific purpose .Data is collected through a direct source like survey to obtain the first hand information. Others resources are written below: Discussion with my project guide Discussion with other members of the credit department.

Secondary data:
It consists of information that already exists somewhere and has been collected for specific purpose in the study. The secondary data for this study is collected from various sources like Websites Books Newspaper Financial magazine(weekly , business world, etc)

The reasons for using these sources for collecting data are: It provides more reliable results. It is easier to tabulate and interpret data gathered in this way.

2.5

RATIONALE FOR THE STUDY

Offering credit is an operation fraught with risk. Before offering credit to an organization, its financial health must be analyzed. Credit should be disbursed only after ascertaining satisfactory financial performance. Based on the financial health of an organization, banks assign credit ratings. These credit ratings are used to fix the interest rate and quantum of installment.

This study aims to analyze the credit health of organizations that approach Dena Bank for foreign exchange credit facilities. After analyzing credit health, the credit rating is determined. On the basis of credit rating, the interest rate guidelines circular is consulted to fix a price for the credit facilities i.e. determine the interest rate.

2.6

LIMITATION OF THE STUDY

Limitations of this Study are as follows: Time: The short time duration of one & half months is very inadequate. Vast topic: The subject credit appraisal under SME is too vast to study. Data gathering: Gathering of data relating to various products of Dena bank was a little difficult task. Scrutinizing of information: Data mining was a time consuming task. Useful information had to be extracted after careful scrutinizing from the large data gathered.

3.1

INTRODUCTION TO SME

YEAR 1950

In the year 1950, SME was defined as a size of Gross Investment in fixed assets (incl. Plant & machinery, land & building etc.) Not exceeding Rs.5lakhs and strength of workforce viz. Employment less than 50 workers per day using power or less than 100 workers per day without use of power.

YEAR 1950 TO 2004

Small scale industries (SSI) are those engaged in the manufacture, processing or preservation of goods and whose investment in plant and machinery (original cost) does not exceed Rs.1crore. This would include units engaged in mining or quarrying, servicing and repairing of machinery. In this case of ancillary units, the investment in plant and machinery (original cost) should not exceed Rs.1crore to be classified under SSI.

The investment limit of Rs.1crore for classification as SSI has been enhanced to Rs.5crore in respect of certain specified items under hosiery, hand tools, drugs pharmaceuticals and stationary items and sports goods by the Government of India.

YEAR 2006 The Government of India has enacted the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 on June 16, 2006 which was notified on October 2, 2006. Consistent with the notification of the Micro, Small and Medium Enterprises Development (MSMED) Act 2006, the definition of micro, small and medium enterprises engaged in manufacturing or production and providing or rendering of services has been modified.

3.3
Introduction: MICRO:Micro (manufacturing) Enterprises

MSMED

Enterprises engaged in the manufacturing/production or preservation of goods and whose investment in plant and machinery (original cost excluding land and building and such items as in 1.1.1) does not exceed Rs. 25 lakh, irrespective of the location of the unit. Micro (service) Enterprises Enterprises engaged in the providing/rendering of services and whose investment in equipment (original cost excluding land and building and furniture, fitting and such items as in 1.1.2) does not exceed Rs. 10 lakh. SMALL:Small (manufacturing) Enterprises: Enterprises engaged in the manufacture/production or preservation of goods & whose investment in plant and machinery (original cost excluding land and building & the items specified by the Ministry of Small Scale Industries vide its notification No.S.O.1722 (E) Dated October 5, 2006 as furnished in Annexure I) does not exceed Rs. 5 crores. Small (service) Enterprises Enterprises engaged in the providing/rendering of services and whose investment in equipment (original cost excluding land and building & furniture, fittings and other not directly related to the service rendered or as may be under the micro, Small and Medium Enterprises development, (MSMED), Act 2006) does not exceed Rs. 2 crore.

MEDIUM:Medium (manufacturing) Enterprises Enterprises engaged in the manufacture/production or preservation of goods and whose investment in plant and machinery (original cost excluding land and building and the items specified by the Ministry of Small Industries vide its notification No.S.O. 1722(E) dated October 5, 2006) is more than Rs. 5 crore but does not exceed Rs. 10 crore. Medium (service) Enterprises Enterprises engaged in the providing/rendering of services and whose investment in equipment (original cost excluding land and building and furniture, fittings as such items as in 1.1.2) is more than Rs. 2 crore but does not exceed Rs. 5 crore. Banks lending to medium enterprises will not be included for the purpose of reckoning under priority sector.

MANUFACTURING SECTOR ORIGINAL INVESTMENT IN PLANT & MACHINERY MICRO ENTERPRISES SMALL ENTERPRISES UP TO RS .25.00 LACS FROM RS.25.00 LACS TO RS.500.00 LACS MEDIUM ENTERPRISES FROM RS.500.00 LACS TO RS.1000.00 LACS

SERVICE SECTOR ORIGINAL INVESTMENT IN EQUIPMENTS UP TO RS . 10.00 LACS. FROM RS.10.00 LACS TO RS.200.00 LACS . FROM RS.200.00 LACS TO RS.500.00 LACS .

TINY UNIT WOULD BE MICRO ENTERPRISES. SSI WOULD BE SMALL ENTERPRISES.

SMEs have been established in almost all-major sectors in the Indian industry such as:

1. Agriculture inputs 2. Chemical & Pharmaceuticals 3. Electrical, Electronics 4. Bio-engineering 5. Engineering 6. Food Processing 7. Electro-medical equipment 8. Textiles and Garments 9. Sports goods 10. Plastics products 11. Meat Products 12. Computer software 13. Leather and Leather goods etc.

As a result of globalization and liberalization, coupled with WTO regime, Indian SMEs have been passing through a transitional period. Those SMEs who have international business outlook, competitive spirit, strong technological base, and willingness to restructure themselves they withstand the present challenges and comes out with shining colures by adding up to contribution to the Indian economy.

3.5

SWOT ANALYSIS OF SMES IN INDIA

STRENGTHS

WEAKNESS

THEY CONTRIBUTE TO NATIONAL ECONOMIC GROWTH. THEY GENERATE EMPLOYMENT AND HELP IN
VITALIZING INDIAN BRAND TO THE WORLD

ENCOUNTERS PROBLEMS DUE TO LACK OF FUNDS. SMES LACK MARKETING SKILLS SMES ARE NOT FAST IN ADAPTING THE
CHANGING TRADE TRENDS

HELPS IN THE REGIONAL DEVELOPMENT EXPORT MARKET EXPANSION. TECHNOLOGICAL INNOVATION

NON AVAILABILITY OF TECHNICALLY


TRAINED HUMAN RESOURCES

POOR MANAGEMENT SKILLS THEY LACK IN TECHNOLOGICAL INFORMATION


AND CONSULTANCY SERVICES

OPPORTUNITIES

THREATS

BILATERAL AND MULTILATERAL TRADE


AGREEMENTS

DUMPING FROM DEVELOPED COUNTRIES LOT OF DISTRUST BETWEEN SMES AND FINANCIAL INSTITUTIONS SLOW IMPROVEMENTS IN QUALITY TO MEET
THE INTERNATIONAL STANDARDS

CREDIT SUPPORT IS ENHANCED THEY GET SUPPORT FOR TECHNOLOGICAL UP GRADATION

COMPREHENSIVE SUPPORT FOR CLUSTER


DEVELOPMENT

VIRTUAL ABSENCE OF ENTERPRISE EDUCATION POOR INCENTIVE STRUCTURES FOR


ENTREPRENEURS

MARKETING ASSISTANCE AND EXPORT


PROMOTION SUPPORT

GROWING DOMESTIC AND INTERNATIONAL


MARKETS

NON-TARIFF BARRIERS FROM DEVELOPED


COUNTRIES

4.1
My Work Profile:-

DISCUSSIONS ON TRAINING

The summer training was held in the Branch office of Dena Bank. The work profile at the office was based on the loans and advances given to small and median enterprises (SME). Hence the whole work was based on the Pre-sanction formalities of credit given to a particular enterprise. The responsibilities handled at the office were started from reading the companys project file (sent by the company to whom the loan is to be sanctioned) and continued till the loan is sanctioned by the responsible authority according to the limit to be sanctioned.

4.2

GENERAL INSTRUCTION ON LOANS AND ADVANCES

The loan is sanctioned by keeping in mind the various instructions and conditions:1. Efficient management of loans and advances portfolio has assumed greater significance as it is the largest asset of the bank having direct impact on its profitability. In the wake of the continued tightening of norms of income recognition, asset classification and provisioning, increased competition and emergence of new types of risks in the financial sector, it has become imperative that the credit functions are strengthened. RBI has also been emphasizing banks to evolve suitable guidelines for effective management and control of risk credits. 2. With a view to ensure a healthy loan portfolio, our bank has taken various steps to bring its policies and procedures in line with the changing scenario which also aim at effective management & dispersal of credit risks, strengthening of pre-sanction appraisals and post- sanction monitoring systems. Further, bank has been continuously endeavoring to strengthen the organizational set up by opening Specialized Branches to meet the credit requirements of specific types of borrowers, imparting intensive credit management training to staff and deployment of the trained staff at branches/offices having potential for credit growth. Bank has laid down detailed guidelines to be followed while considering credit proposals, some of the important ones are listed as under: -

All loan facilities be considered after obtaining loan applications from the borrower and compilation of Confidential Report on him and guarantors. The borrowers should have the desired background, experience to run their business successfully. Project for which the finance has been granted should be technically feasible and economically viable i.e. it should be able to generate enough surplus as to service the debts within a reasonable period of time. Cost of the project and means of financing the same should be properly assessed and tied up. Both under-financing and over- financing can have an adverse impact on the successful implementation of the project. Borrowers should be financially sound, enjoy good market reputation and must have their stake in the business i.e. they should possess adequate liquid resources to contribute to the margin requirement. Loan should be sanctioned by the competent sanctioning authority as per the delegating loaning powers and should be disbursed only after execution of all the required documents. Projects financed must be closely monitored during implementation stage to avoid time and cost overruns and thereafter till the adjustments of the banks loan. 3. Bank extends loan facilities by way of fund based facilities and/or non fund based facilities. The fund based facilities are usually allowed by way of term loans, cash credit, bills discounted/purchased, demand loans, overdrafts etc. Further, the bank also provides

non fund facilities by way of issuance of guarantees, deferred payment guarantees, bills acceptance facility under various schemes. 4. The foregoing list contains the usual types of facilities undertaken by the bank. In case loan application is received for any particular facility which is not specifically mentioned above, the same should be forward to controlling offices for considerations, provided the same can be transacted within the overall policy of the bank. 5. The usual types of facilities sanctioned by the bank to the borrowers, as also other aspects like Project appraisal, Post-sanction follow up, Management of NPAs, Documentation, and Limitation etc. are discussed later. These are the briefly explanations hereunder:

1.0

WORKING CAPITAL FINANCE AND TERM FINANCE:

All advantages are granted basically to provide working capital or for term finance. Working capital means the funds required for carrying on normal trading and/or manufacturing activities. Term finance covers funds required for acquiring means of production such as land and building and plant and machinery. Working capital limits are granted for short periods of say, one year and have to be renewed at the end of that period. Proposal for term finance do not require renewal but only a periodical review. WCDL is payable on demand on specific date, one year from the date of debit to WCDL account in lump sum bullet payment.

2.0

PRODUCTION & SALES FINANCE:

Working capital finance may be for the purpose of production i.e. for acquiring inventory (or against inventory) or for sales i.e. for financing receivables. Limits such as cash credit, loans/overdrafts are for production whereas bill limits against hypothecation of book debts are part of sales finance provided by banks. 3.0 FUND & NON FUND:

Fund limits are those in which the banks funds are directly utilized, as for instance, in the case of limits against stocks or purchasing/discounting of bills. Non-fund limits are those in which the banks funds are not directly involved but where the banks funds would be involved in certain contingencies, as for example, in guarantees and letter of credit limits.

4.0

SECURDED & UNSECURED LOANS: Advances may be granted against security or without security. Thus, an overdraft limit

may be given against shares or securities or as a clean limits. Similarly, bills limits could be secured or unsecured and so also packing credit limits. Temporary overdrafts are also clean advances. Limits which are granted against security, are secured by creating a charge over the security. This charge could be by way of pledge, hypothecation, mortgage (on immovable property) or assignment.

5.0 OVERDRAFTS: All overdraft accounts are treated as current accounts. Normally overdrafts are allowed against the banks own deposits, govt securities, approved share or debentures of companies,

life insurance policies, govt supply bills, cash incentive, duty drawbacks, personal securities etc. 6.0 TERM LOANS:

Tern loans are sanctioned for acquisition of fixed assets like land, building, plant & machinery, office equipments, furniture & fixture, etc for purchase of transport vehicles, for purchase of agriculture equipments, machinery & other movable assets like tractors, pumps sets, cattle, etc. The term loan would be a loan, which is not a demand loan and is repayable in terms i.e. installments irrespective of period or the security cover. Term loans are normally granted for the period varying from 3 to 7 years and in exceptional cases beyond 7 yrs.

7.0

CASH CREDIT ADVANCES: Cash credit account is a drawing account against credit granted by the Bank and is

operated in exactly the same way as a current account on which an overdraft has been sanctioned. The various types of securities against which CC is allowed are pledge, hypothecation of goods or produce, pledge of documents of title to goods, mortgage of immovable property, book debts, trust securities, etc. In CC accounts borrower is allowed to draw on account within the prescribed limit, and when required.

8.0

LETTER OF CREDIT: Letter of credit (LC) is issued by the bank at the request of its customer in favor of third

party informing him that the bank undertakes to accept the bills drawn on its customers up to the amount stated in the LC subject to fulfillment of the conditions stipulated therein. Therefore, when bank issues LC, it assumes responsibility to pay its beneficiary on production of bills drawn in accordance with the terms and conditions of the LC. Whenever the bills drawn under LC are not paid by the party from its own resources or out of available DP in the CC account on its due date, the LC is said to have devolved. 9.0 GUARANTEE: Issuing of guarantees on the behalf of their customers to third parties is one of the services rendered by commercial banks. Such guarantees are contracts to perform the promise or discharge the liability of the constituent on whose behalf they are given, in case of his default or failure to perform the contracts undertaken by him. The party in whose favor the guarantee is given is called the beneficiary, whereas the issuing bank is called the guarantor and the third party on whose behalf of guarantee is given is called the principal debtor. Every guarantee must specify the amount and period of the liability to be undertaken by the bank.

10.0

DEMAND LOAN:

A Demand loan account is an advance for a fixed amount and no debits to the accounts are made subsequent to initial advance except for interest, insurance premium and other sundry charges.

Demand loan would be loan, which is repayable on demand in one shot i.e. bullet repayment. Normally, demand loans are allowed against the Banks own deposits, govt. securities, approved shares or debentures of companies, life insurance policies, pledge of gold/silver ornaments, and mortgage of immovable property. A separate account for each demand loan should be kept in the appropriate demand loan ledger.

4.6

CREDIT RATING SCHEME

A credit rating scheme has been introduced to encourage the SSI units to get their credit rating done by the reputed credit rating agencies, with a view to facilitate credit flow to them and enhancing the comfort-level of lending banks. The scheme, being implemented by the NSIC, envisages that 75 percent of the cost of the credit rating exercise, with a maximum limit of Rs.40,000 per SSI unit, would be reimbursed to the SSI units availing of this onetime facility. Six credit rating agencies namely, CRISIL, ICRA, Dun and Bradstreet, Onicra, Care and Fitch, which have agreed to credit, rate SSI units through NSIC.

Existing Interest rate for Micro & Small Enterprises:Rating AAA AA A BBB BB B C D E Grade High Prime Medium Prime Low Prime Excellent Best Better Very Good Good Satisfactory Interest Slabs(S.E.) *BPLR BPLR + 0.25% BPLR + 0.50% BPLR + 0.75% BPLR + 1.00% BPLR + 1.25% BPLR + 1.50% BPLR + 1.75% BPLR + 2.00% Interest Slabs(M.E.) BPLR BPLR + 0.25% BPLR + 0.50% BPLR + 0.75% BPLR + 1.00% BPLR + 1.50% BPLR + 2.00% BPLR + 2.50% BPLR + 3.00%

TIME PREMIUM

0.50% [FOR TERM LOAN FOR MORE THAN 36 MONTHS.]

4.7

CIBIL (CREDIT INFORMATION BUREAU (I) LTD)

In terms of RBI guidelines, all banks have been advised to submit credit information in respect of their borrowings accounts to cibil, to create a database to be used by the member banks for extraction of credit information reports (CIRS) on prospective of submission of credit information to CIBIL, RBI had advised banks that till such time the appropriate legislation is passed by the Govt, consents of borrowers are to be obtained.

4.8

CREDIT MONITORING ARRANGEMENT (CMA)

Effective from October 10,1988, RBI replaced the CAS by new scheme known as Credit Monitoring Arrangement (CMA).

Under the scheme RBI would carry post sanction scrutiny of proposals relating to sanction of term loans as well as working capital limits beyond stipulated level. When CMA was introduced banks were required to report to RBI for post sanction scrutiny all sanctions of working capital limits Beyond Rs. 5 crores and term loan exceeding RS. 2 crores from the banking system.

Since December1992, the stipulated level for post sanction scrutiny by RBI for working capital facilities (fund based) has been raised to Rs.10 crores and above. Any sanction of term credit including deferred payment guarantees in which the share of the banking system is Rs. 5 crores is required to be reported.

RATIO ANALYSIS

The performance of a unit is judged in the following parameters:a) Growth in sales b) Margin of profit c) Utilization (i.e. turnover) of assets d) Financial strength/health e) Return on investment Financial ratios in respect of these parameters should be calculated and used as a measure of evaluation of performance. However, ratio by themselves cannot be good or bad but must be judged against ratio of previous years or against those of similar units in the same industry or of an entire industry. Reasons for an upward or downward trend in ratios have to be found and the ratios interpreted accordingly.

1. Growth in Sales: Growth in sales is an important indicator of progress of a unit. The growth may be either in terms of value or in terms of number of unit sold. Thus, although the figures may show an increase in sales, the increase may be due to an increase in the price per unit.

The ratio for evaluating growth in sales is Percentage increase = (Current years sales-previous years sales) *100 Previous years sales This ratios can be calculated in terms of amount or in terms of number of unit sold.

2. Margin of profit: Every concern would like to make a profit. However, the margin of profit and the quantum have to be compared over the years. There are four ratios through which this can be done.

a)

Gross margin ratio = Gross Profit * 100 Net Sales

b)

Operating profit margin ratio =

Operating profit * 100 Net Sales

c)

PBIT ratio = Profit before interest & tax * 100 Net Sales

d)

Net profit margin ratio =

Net profit * 100 Net Sales

The higher the ratio, the higher is the operating efficiency of the unit.

3. Utilization of Assets: The efficiency of a concern is judged from the extent to which it utilizes its assets. If assets are not fully utilized, it would mean that the money invested in these assets is lying idle and this is a cost to the firm. The assets could be land and building, plant and machinery or inventory or debtors; each of these should be utilized in such a way that they contribute the maximum towards the profits of the firm. For a manufacturing concern, the use of assets is for achieving sales and hence ratios based on sales and assets are used to evaluate performance. The following ratios are useful:-

a) Total assets turnover ratio = Gross Sales Excise duty Total Tangible Assets Gross Sales Excise duty Current Assets c) Fixed assets turnover ratio = Gross Sales Excise duty Fixed Assets

b) Current assets turnover =

Normally, a higher ratio means better utilization of assets. However, too high a ratio (especially Current Assets Turnover ratio) could mean inadequate investment for that levels of activity-in other words, over trading. Another set of ratio is the number of months ratios. There are:-

a) Number of months of raw material =

Raw material stock Monthly consumption of raw material

(where monthly consumption = annual consumption 12

b) Number of months finished goods = Stock of semi-finished goods Monthly cost of production

c) Number of months finished goods = Stock of finished goods Monthly cost of sales

d) Number of months debtors =

Debtors Monthly gross sales

(i.e. period of credit allowed by the concern) Or Turnover of receivables The higher the number of months ratio, the greater is the investment needed for a given level of production and sales. Usually, lower ratios indicate better utilization of current assets.

4. Financial Strength: There are two aspects of financial strength-liquidity and solvency. Liquidity is the ability of the firm to pay off current liabilities (normally) by the conversion of assets into cast through sales.

Current Ratio =

Current Assets

Current Liabilities

According to the guidelines given to DENA BANK the ideal level is at 1.33:1 however the acceptable level is at 1.17:1. Liquidity can also be measured through, Net Working Capital = Current assets Current liabilities The higher these ratios, the higher the liquidity.

Solvency is the ability of the firm to repay all its borrowings (i.e. current) as well as term liabilities. This question will of course arise only when the firm will be liquidated and all its assets disposed off. The solvency is therefore measured thus:

Quick Ratio = total tangible assets total outside liabilities Where, Tangible assets = total assets intangible assets (like goodwill, patents, preliminary and formation expenses etc.)

Outside Liabilities = all liabilities except owners capital, reserves and surplus/deficit in Profit and Loss account.

Solvency (which also means tangible assets minus total tangible net worth) can also be determined by the formula, total tangible assets total outside liabilities.

The higher the proportion of tangible assets to outside liabilities, the better is the solvency.

There are two other measures of solvency, both based on debt/equity ratios. They are:

a. Outside liabilities Tangible net worth

b. Term liabilities Tangible net worth

The second measure is used by term lending institutions. The lower these ratios are, the better is the financial strength of the concern. In order to judge whether the borrower will able to pay loan installments and interest periodically, the Debt Service Coverage (D.S.C.) ratio is used. It is calculated thus:

D.S.C. Ratio = Net profit (after tax) and interest on long term debts & depreciation Installment of long term debt & deferred payments & interest

It is also important for the lender bank to assess the firms debt paying capacity over a period. Such capacity is derived by calculating ratio like Debt Service Coverage Ratio minimum acceptable level is 1.50.

Debt Equity Ratio = It is a financial ratio indicating the relative proportion of equity and debt used to finance a company's assets. This ratio is also known as Risk, Gearing or Leverage. A high debt equity ratio is not preferable by an investor as the company already has acquired high amount of funds from market thereby reducing the investor share over the securities available, increasing the risk.

Interest coverage ratio:Interest Coverage Ratio is an indicator as to the number of times the profit covers the interest liability of the company. This is a risk parameter and an indicator to the extent to which the interest liability will be serviced on the time. Interest for this purpose would mean gross interest payable by the borrower and profit would mean the gross profit before interest.

Interest Coverage Ratio = Net profit + depreciation + interest Gross interest payable

The more the number of times of coverage of interest the better it would be for the financial strength of the company. Interest coverage should be minimum of 2.25 times.

5. Return On Investment: Return on any amount invested in a business have to be taken into account when we talk of profitability. The following are the ratios:

a) Return on total assets = Profit before interest & tax * 100 Total tangible assets

b) Return on net worth = Net Profit * 100 Tangible net worth

Case Study
DENA BANK, SME CELL, REGIONAL OFFICE, THANE
PROPOSAL No:-Shree/ADV/10721300100 Proposal received at Proposal received at RO Branch Date: 04-10-2012 Date : Date:05/10/2012 Complete Proposal received at HO Date

FOR APPROVAL

SANCTIONING AUTHORITY

SENIOR MANAGER

1. GIST OF THE PROPOSAL Fresh 2. PROFILE Name of borrower M/s. Unique Engineering Address (Regd. Office)

Branch: Shree Nagar, Thane Established on Dealing with us since Group: 2000 Unit 1996

Region: Thane Whether appearing in Standard B List No

Willful Defaulter List

No

Line of Activity Manufacturing.


Key Person/Promote r Multiple Consortium Leader Bank /

Defaulter / CIBIL List

No

Key Person Promoter Sole

Mr. Shyam V Kurup

EXISTING Asset Classification Asset Category

PROPOSED

N.A.

Standard

Standard

Our share:

(Rs. In Lakhs)

as

per

CMC

N.A.

N.A

Guidelines FB NFB- % STLTLPriority BSR Code: Risk Weightage Credit Rating Risk 100% BB 115.00 0.00 0.00 0.00 Yes/No D2K Codes & Description Activity Sector Special Category
Manufacturing

Priority

SME N.A

Date

of

last

Sanction Basel II Code:


Provisioning: 0.25%

Risk Grade as per ABS Dt 31/03/2012

3. NAMES OF DIRECTORS/ PARTNERS / PROPRIETOR & NET WORTH (Rs. in Lacs) Sr. 1 Name Mr. Kurup Shyam Net Worth V. 132.68 As on Basis

30/09/2012

As mentioned in Branch Note Process

Whether Proprietor / Partner/ Director / Guarantor has any No relationship with any Director or Senior Official (Scale IV &

above) of the Bank. If so give details (Refer to Guidelines)

* CA certificate confirming Net Worth of the Proprietor to be obtained by the Branch before release of enhanced limit and Branch to ensure that the same is in accordance with Net Worth as mentioned in the Process Note.

4. Major Shareholders: S.N Name Status No. Share N.A.( Proprietorship Firm) of Percentage

5. EXPOSURE: Borrower EXPOSURE Fund Based Non Fund Based Forward Cover* Total Credit Exposure Investments Other Commitments Total Exposure 0 Nil Nil Nil Existing 0 0

[Rs in lacs] Proposed 15.00 0 Variation(+/-) (+)15.00 0

15.00 Nil Nil Nil

(+)15.00 Nil Nil Nil

GROUP EXPOSURE Fund Based Non Fund Based Forward Cover* Total Credit Exposure Investments Other Commitments Total Exposure Nil Nil Nil Nil Nil Nil 0.00 Nil Nil Nil Nil Nil Nil 15.00 Nil Nil Nil Nil Nil Nil +15.00

I. SECURITY / DOCUMENATION a) Prime Security Nature (Rs. in lacs) Value Basis Stock & Book Debts Statement as on 30/09/2012

Hypothecation of Stocks and Book 9.71 & 18.14 Debts

b) Collateral Security Nature Security of Type of Charge Value

(Rs. in lacs) Basis / Source Whether eligible under CRM

(Basel II Norms) Proposed Equitable Mortgage 65.00 of lacs Valuation Report Yes

residential property situated at C 32 Uma Chsl, Town, Balrajeshwar road, Mulund (West), Mandakini Nr Model

Mumbai - 80

i) Percentage coverage of Collateral Security: 1 2 3 4 Total value of Fixed Assets Of which our share Total limits proposed from our Bank Collateral Coverage Rs. Rs. Rs. 65.00 Lacs 65.00 Lacs 15.00 Lacs 127.85%

ii) Reasons in case of dilution of security coverage: N.A.

c) d) e)

Date of creation of Charge: Date of subsequent modification of charge: N.A. Date of vetting of documents by legal officer /Panel Advocate:

f) Name of Guarantors & their Net Worth (Rs. in lacs)

Name Smt. Kurup Sheena

Relationship S. Wife Proprietor

Net Worth of 9.14 Lacs

As of 30.09.2012

Basis As per Annexure CC

* Net Worth of the guarantors includes their investment in the subject Company and Group Companies.(Declaration from borrower to be obtained and kept on record, that no commission or remuneration is paid to them for providing guarantee)

II. CREDIT RATING & Pricing:

Pricing Credit Rating Score Based on ABS [ March 12] Applicable interest rate as per Credit Rating Interest rate presently Charged and Proposed Concession if any Interest Rate charged by Lead Bank Commission on NFB Limits Processing Charges -

Existing

Proposed A

Credit Rating Work Sheet furnished as Annexure 1

10. COMPANY PROFILE (in brief)

Key Person Mr. Shyam V. Kurup is graduate in Engineering (Marine Engineering) is having 18 years experience in this line of activity. He worked as works design manager in M/s. Precision Gears then e started his own business in year 2000. Mr. Shyam Kurup has good contracts in various Pharmaceuticals Companies like Cipla Ltd, Dr. Reddys Laboratories, Glenmark Generics ltd, Abbott Laboratories etc, who are also his main clients. The competition in this line is very limited as very few trained engineers who are trained in manufacturing of Blister pack Machines. These machines are used by pharmaceutical companies for packing of tablet.

Proprietor Mr. Shyam Kurup is banking with us since year 2000 and maintaining current accounts with an average balance of Rs 2.00 lacs. He is also having overdraft accounts against term deposits with us but most of times accounts are remaining in credit balance. He is also having term deposits to tune of Rs. 20.00 lacs with us and also maintaining S.B accounts in his family members name. Operations in all these accounts are very much satisfactory.

Mr. Shyam Kurup is proprietor of M/s. Unique engineering Co. The firm is engaged in manufacturing of Blister Pack Machines, De-foiler machines & also undertake changing parts of any make of Blister, Alu-Alu & Strip pack machines and also after sales service. All these machines are used in pharmaceutical companies for packing purpose. Firm has reported satisfactory level of performance as the sales have increased to Rs. 73.62 lacs for year 2012 when compared to Rs 48.01 lacs in FY 2011. The firm has estimated sales turnover of Rs. 121.00 lacs for 31.03.2013 and has achieved a turnover of Rs. 64.80 lacs for the period of 6 months i.e from April to September, 2012 and have sufficient orders on hand in view of which the estimated level is considered as achievable and accepted. Firm is now expanding the business and they have purchased adjacent Gala of 520 sq ft in Bharat industrial Estate, L.B.S Marg, Bhandup where they have decided to install new automatic machines

In view of above, even the projected sales turnover can be considered as achievable and hence accepted for assessment. The increase in business volume has necessitated the firm in approaching the bank for working capital which is justified due to above stated factors

11. INDUSTRY SCENARIO

a. Industry Categorisation

Manufacturing and exports of readymade garments.

b. Demand and supply situation The firm is engaged in manufacturing of machinery of of the product present and which is exclusively used in pharmaceutical companies projected information) (source of and the same are key industries there is always demand for their product

c. Major players & their market There are very few units engaged in this field in view of share d. Banks industry e. NPA position as of Sep. N.A 2009 f. Cyclical trends g. Govt. Policies Nil Encouraging in view of the proposed expansion of pharmaceutical industries h. Whether the product is an No import substitute, if so, what is the landed cost of import and what is the production cost of the indigenous exposure in the specialised job this N.A

manufacture i. Availability of raw materials, Easily available. labour, advantages j. What are internal & external The proprietor is well experienced in this line of advantages of the business. infrastructural

borrower/technology used k. What are the weaknesses Nil

l. What

are

the

relative In view of continuous process of latest development in pharmaceutical industries and competition among them there is always demand for machinery manufactured by M/s. Unique engineering

opportunities

m. What are the threats

No threats

n. Any other information

Nil

12. PRODUCTION CAPACITY :

Production Capacity Installed Utilised % Utilisation

Existing

Proposed

13. MARKET CAP :

N.A. (not a listed Company)

14. FINANCIAL INDICATORS : Audited As on 31.03.2011 Audited 31.03.2012 Estimate 31.03.2013

(Rs in lacs) Projection 31.03.2014

i. Capital ii. Reserves & Surplus iii. Intangible Assets Tangible Net worth Net Working Capital Current Ratio Net Block Net Sales - of which exports PBDIT Gross Profit - PBDT Net Profit / Loss PAT Depreciation Cash Accruals PBDIT/ Gross Sales Gross Profit Margin Net Profit Margin TDER (TOL/TNW) Interest Coverage Ratio Current Assets to Turnover Ratio

20.29

27.68

38.28

56.11

20.29 7.05 1.17 18.12 48.01

27.68 15.28 1.40 17.62 73.62

38.28 7.39 1.13 52.41 121.00

56.11 30.42 1.68 46.83 181.50

8.80 2.77 7.20 0.71

8.48 4.60 7.45 0.49

18.17 6.51 12.10 3.37

29.14 8.29 19.75 5.85

18% 27% 15% 1.49 9.88

11% 18% 10% 1.09 15.70

15% 20% 10% 0.87 6.37

16% 21% 11% 0.56 7.62

1.48

3.52

3.10

3.67

15. Comments on financial indicators, in brief:

I. Positive indicators

1. Sales : The sales of the firm registered a growth around 52% from Rs 48.01 Lacs as on 31.03.2011 to Rs 73.62 Lacs for the year ended 31.03.2012. The firm has estimated sales turnover of Rs 121.00 lacs for the year ended 31.03.2013 which they are confident to achieve as they have achieved the sales of 64.80 lacs for the period from April, 2012 to September, 2012 and also they have orders on hand under execution. Hence targeted level of sales of Rs. 121.00 lacs for the year 2013 can be considered as achievable

2. Profitability: The net profit of the company has increased from 3.46 lacs as of 31.03.2011 to Rs. 10.11 lacs as of 31.03.2012 which is mainly on the account of increase of sales from Rs 48.01 lacs to Rs 73.62 Lacs. For the year ending 31.03.2012 the company has reported net profit of Rs 10.00 lacs as per provisional balance sheet 3. Current Ratio: The current ratio has improved from 1.17 as of 31.03.2011 to 1.40 as of 31.03.2012 but declined 1.13 as of 31.03.2013 due to higher level of other current liabilities. The actual level for the past years and estimated for the current year is above minimum requirement level of 1.10 as per policy guidelines of Bank and can be considered as satisfactory and acceptable. 4. Debt Equity Ratio: Capital of the firm is increasing since last 3years. On account of retention of profits in business the net worth has increased from Rs 20.29 lacs as of 31.03.2011 to Rs 27.68 lacs as of 31.03.2013 and further to Rs 38.28 lacs for 31.03.2013 and estimated net worth is 56.12 lacs as of 31.03.2012 Debt equity ratio (DER) was 1.49 as of 31.03.2011 improved to 1.09 in the year March, 2012 and further improved to 0.87 for the year 31.03.2013 on account of increased in net worth 2013. The actual level of DER for the past years and estimated & projected level is also within the Banks norms and considered as satisfactory.

5. Interest Coverage Ratio: Interest coverage ratio for past years as well as current year ending 31.03.2012 is above the minimum requirement level of 1.75 as required by the banks policy guidelines and can be considered satisfactory 6. Current Asset Turnover Ratio: The mentioned ratio for the past on actual basis and estimated/projected level of 2.00 as per our loan policy guidelines indicating satisfactory turnover of current assets

II.Negative indicators, if any, with reasons III.Auditors remarks and Management replies. Nil as reported by the Branch.

IV.Contingent Liabilities: Nil.

V.Current performance trends: Estimated Net sales turnover for the FY Achievement till Pro-rata achievement

Rs in lakhs 121.00 64.79 53%

VI.Comment on current performance trends:

The firm has estimated sales turnover of Rs 121.00 Lacs for the year 31.03.2013 and they achieved the sales of 64.80 lacs for the period from April, 2012 to September,2012 and they have sufficient orders on hand under execution. Hence targeted level of sales of Rs 121.00 lacs for the year 2013 can be considered as achievable.

VII.INTER-FIRM COMPARISON (PEER GROUP) (In case aggregate limit exceeds Rs.5000 lakhs) (Rs in lakhs) Particulars Sales Net Worth Net Profit Borrowing D/E Ratio Current Ratio N.A. Our borrower Company A Company B Company C

16.A. ASSESSMENT OF WORKING CAPITAL REQUIREMENTS : (Rs in lacs)

Audited

Estimated

Projected

1 Gross Sales Total Working capital requirement being 25% of the gross

73.62

121.00

181.50

2 estimated/projected sales Of this bank finance is to extent of 20% 3 of gross sales Minimum net working capital @ 5% of 4 gross sales 5 Actual/Projected Net WC 6 Max permissible bank finance 7 Bank Borrowing 8 Shortfall in margin

18.40

30.00

45.37

14.72

24.20

36.30

3.68 7.05 64.78 14.72 Nil

5.80 15.28 88.41 24.20 Nil

17.87 30.42 110.00 27.50 Nil

Chapter-7 Findings

After undertaking the in depth theoretical study such as types of advances, SME policy of DENA BANK, credit rating, CMA, working capital and various financial under SMEs, it was found that the several Industries are growing through credit/advances granted by banks and SMEs is a one of the fast growing Industries within all the sectors.

In India, the Micro and Small Enterprises (MSEs) sector plays a pivotal role in the overall industrial economy of the country. It is estimated that in terms of value, the sector accounts for about for 39% of the manufacturing output and around 33% of the total export of the country. Further, in recent years the MSE sector has consistently registered higher growth rate compared to the overall industrial sector. The major advantages of the sector is its employment potential at low capital cost. As per available statistics, this sector employs an estimated 31 million persons spread over 12.8 million enterprises and the labour intensity in the MSE sector is estimated to be almost 4 times higher than the large enterprises.

As per the 3rd census report, total output of the registered units in the year 2001-02 was estimated to be Rs. 70,861.73 crores. The SSI sector employed 2,49,32,763 persons during that period. There were 50606 exporting units accounting for exports to the tune of Rs. 14,199.56 crores. Thus SME plays a very significant role in the socio-economic development of the country.

Chapter- 8 Conclusion

The project entitled CREDIT APPRAISAL UNDER SME gives the detailed knowledge of the whole process of loans and advances which DENA BANK performs. Starting from the loan application from the borrower and compilation of confidential reports on him and the guarantor, the process continues till the disbursement of loan and after it the close monitoring till the adjustment of Banks loan.

The project was an attempt to understand and perform the work in credit transaction and credit appraisal proposal which I have included is just an example of it.

I have worked on many such proposals, which are beyond the scope of this project. Hence the whole experience of working in such renowned public sector unit was very good and made me a learn a lot out of it.

Chapter-9 Bibliography
Magazines
1. Business week 2. Frontline 3. Business World

News Papers
1. Business standard 2. Financial Express 3. Economics Times 4. Times of India

Websites
1. www.denabank.co.in 2. www.google.com 3. www.wikipedia.com 4. www.yahoofinance.com 5. www.indiabankassociation.org.in 6. www.smetoolkit.org 7. www.economicstimes.com

Circulars, Manuals of Dena Bank. Last but not the least, I feel indebted to all persons and organization who have helped me
directly or indirectly in the successful completion of this study.