IMPACT OF INDUSTRIAL SLOWDOWN ON CREDIT FLOW AND QUALITY OF SMEs Aman Mehra Presented By
d Mr. U.K Ghosh (Chief Manager, Credit department) Brig. S.K.Gaur, (Director- FMS-IRM) Prof. P.S. Sali (Officiating Director FMS-IRM) Prof . Dr.Susmit Jain Prof. Asha Sharma (FACULTY-FMS-IRM ) And all those who have directly or indirectly helped me in the successful completion of the project.
Research Type Research Design Research Objective Research Limitations Data Collection
LIMITATIONS OF RESEARCH The results in the analysis are approximate percentages and might vary to some extent. My research was totally based on secondary data so it is assumed that information published is verified. Cost and time constraints. Due to lack of information available it is assumed that – Reluctance on the part of SBBJ employees to share information
The increase in the number of account symbolizes increment in the proposals from MSMEs for development or growth purpose.
The increase in the amount of loan disbursed to this sector is assumed to be for the expansions and development
Bank of Bikaner and Jaipur was established in 1963 after amalgamation of erstwhile State Bank of Jaipur (established in 1943) with State Bank of Bikaner (established in 1944) as a subsidiary of State Bank of India.
The Bank's main area of operation is in the State of Rajasthan, with a presence at all important centers in the country.
The Bank has set up branches in Industrial Areas / Estates to provide finance to small and medium enterprises
The Bank also finances Small Business activities which are of special significance to a large number of people
Laghu Udhyami Credit Card Scheme (LUCC). Tatkal Vyapar Suvidha” Scheme General Purpose Term Loan. SME Smart Card” Scheme Artisans Credit Card. SBBJ Tourism Plus. SBBJ Shoppe. Car Loan To SME Unit Schemes offered by SBBJ
Mortgage Advances. Working Capital Requirements Of SMEs Medium Term Loan Requirement of SMEs. 1 Term Loan Requirement of SMEs. 2 SBBJ Transport Operators Scheme. SBBJ Professional plus SME CARE. 15 SME HELP Contd…………..
Enactment of the Micro, Small and Medium Enterprises Development Act, 2006,
Amendments to the Khadi and Village Industries Commission Act,
Announcement of a Package for Promotion of Micro and Small Enterprises (MSEs),
Launching of new/innovative schemes under National Manufacturing Competitiveness Programme (NMCP),
Launching of Prime Minister’s Employment Generation Programme (PMEGP) to generate employment opportunities, etc.
The government of India has taken a major initiative on 26th of august 2009 when Prime Minister has announced the setting up of a task force to reflect on the issues raised by the association having representative of 19 prominent MSME association
GOVERNMENT I N I T I A T I V E A P P R O A C H
What Is Recession ? Recession is a contraction phase of the business cycle……..
Hospitality and airlines are hit by poor demand.
Banking sector! IMPACT OF SLOW DOWN ON INDIAN BANK
Indian banks are facing through a tough time of liquidity crunch. Lehman Brothers had invested a great amount in the stocks of Indian banks that have invested in derivatives
Falling down of Lehman had a great impact on the leading international bank, ICICI Bank, a bank that had invested in Lehman’s bonds. This meltdown even have covered the Axis Bank but not to a great extent
Central banks have worked to improve liquidity but are charging higher credits. The interest rates have drastically increased from 11.5% to nearly about 16%.
There is a consistent increase in the flow of credit to MSME sector. In March 2005 the total credit to MSME was 2740.87 crores and it increased to 13870.04 crores in September 09 and between this period it increased very sharply from March 2007 to 2008. The number of accounts also increased from 62574 lakhs in March 2005 to 398795 lakhs in September 2009.
Growth of 80.49% as on March 2008 appears to be phenomenal. However, the same is due to wider coverage of different enterprise under MSME sector (on account of enactment of the Micro, Small and Medium Enterprises Development Act 2006 and consequent revision in definition).
It is also noteworthy that despite global meltdown, the number of MSME beneficiaries has increased from 143228 as on December 08 to 148815 as on march 09.i.e, net income of 5587 within three months period involving additional finance of Rs 1439.90 crores
During 2008-09 the flow of credit of public bank has increased from Rs 7522.07 crores to Rs 9759.61 crores i.e., net increase of Rs 2237.54 crores. Out of this credit flow during January - march 2009 alone was Rs 1439.90 crores i.e. 64.35% during three months time against growth of Rs 797.64 crore during 9 months which indicates about the active role played by the PSU bank in the state towards increasing flow of credit to MSME Sector to support and help it in present difficult time owing to global meltdown.
In the last quarter of 2008 RBI decided to improve the delivery system and simplification of procedure for credit to the MSME sector, due to that procedure the credit flow again increased.
The outstanding credit to MSME sector increased by 46.8% from Rs.4,015 crore as at end- March 2009 to Rs.5,896 crore as at end- March 2010. This includes retail trade advances amounting to Rs.803 crore, which were included in the definition of MSME sector by Government of India during the year 2009-10.
As against the target of doubling the credit flow to SME sector between 2005-06 and 2009-10 in terms of the policy package of Government of India, the Bank has tripled the credit flow to this sector during the five year period.
As at end-March 2010 the outstanding assistance to micro and small enterprises increased by 50.5% to reach a level of Rs.4,652 crore, as against Rs.3,092 crore as at end-March 2009.
As against the target of financing 2805 new SME accounts (5 new accounts per urban/ semi-urban branch), the Bank has assisted 25,730 new MSME units during the year 2009-10.
Since August 2008, after the onset of slowdown the bank in order to protect these MSMEs has continued providing relief and concessions, including relaxation in the lending rates, so as to enable to remain at the growing trend. The benefit of SME Help Scheme was extended to the new customers during the year. Besides, in order to benefit the small borrowers, the maximum eligible loan under Laghu Udyami Credit Card (LUCC) scheme was increased from Rs. 10 lakh to Rs.20 lakh during the year.
The Bank attaches high importance to providing collateral free loans to Micro and Small Enterprises (MSEs) under the Credit Guarantee Scheme of Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE).
During the year, the Bank provided new collateral free loans under the Credit Guarantee scheme to 5,080 MSEs amounting to Rs.70.34 crore, taking the level of these loans to Rs.105.56 crore to 8,403 units as at end-March 2010.
With its agility and dynamism, the sector has shown admirable innovativeness and adaptability to survive the recent economic downturn and recession.
Due to lack of dependency on export as compared to China and other Asian economies the SMEs in Indian economy did not get affected to the same extent as compared to other export oriented economy.
Thus, to conclude the finding of the project it could be said that that timely measures announced by RBI and Government of India have been proved successful in preventing any major negative impact on the credit flow to SME sector and as regards the impact of industrial slowdown on quality (health) of SMEs the data of NPAs of SBBJ indicates that it is insignificant.