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Comparison of SME financing services provided by SBI and ICICI

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  • Very Nice Information on the SBI part. I am a huge fan of SBI.

    Jessica
    http://www.sbiloans.com/
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  • 1. 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. 08BS0001577 43, World Business House, Above IndusInd Bank, Nr. Parimal Garden, Date of Submission: 16/05/2009 C. G. Road, Ahmedabad – 380 009 E-Mail: opportunities.opulence@gmail.com Website: www.opulencebiz.com 1|Page Shekhani Vasim 08BS0001577
  • 2. 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, Ahmedabad – 380 009 E-Mail: info@opulencebiz.com Website: www.opulencebiz.com Submitted to: Dr. Himani Joshi IBS, Ahmedabad Date of Submission: 16/05/2009 2|Page Shekhani Vasim 08BS0001577
  • 3. Preface As a part of my course curriculum of MBA in summer Internship program, we are assigned some practical studies as well as the theoretical knowledge in the related areas for completing the project. I am preparing comprehensive report on COMPARATIVE STUDY OF SME FINANCING SERVICES PROVIDED BY NATIONALISED AND PRIVATE SECTOR BANK. The basic idea of assignment of this project is to augment the knowledge of students 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 the 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 source of finance should be used for a particular SME. This makes the students enhance their analytical capability. So far as decision of the industry or this sector is concerned, I have chosen the financial consulting firm. This project will also give me firm understanding about the various aspect of SME finance and the various means of raising the finance. I have gained lots of knowledge from this project. And I believe that this will help me in the near future. 3|Page Shekhani Vasim 08BS0001577
  • 4. 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, Opulence Business Solution Pvt. Ltd) and Mr. SANKET JOSHI (Associate Vice President, Opulence Business Solution Pvt. Ltd) for imparting valuable support, encouragement, guidance and immense knowledge throughout the project. I am also very thankful to all the staff members of Opulence Business Solution Pvt. 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 throughout this project and clarifying all my confusions. Apart from that he helped me in finding my path and how to go about the project and provided me right input whenever 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 friends 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 fulfillment of this project. 4|Page Shekhani Vasim 08BS0001577
  • 5. Company Profile A brief Introduction We and our business partner are pleased to present our credentials as a full service Merchant Bank, Investment Bank, Brokerage House & Financial Services Company with presence in Mumbai as well. Our Partner (RBI registered) and its subsidiary (SEBI registered) are together a full service Investment Bank, Merchant Bank and “Institutional” Stock Broking company with membership in NSE & 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 India since 1994. Our Board consists of eminent legal and finance professionals who have gained their experience by working with leading Banks and Financial Advisory Institutions of India and abroad expertise in Financial Services, Capital Market, and Investment Banking. The range of SERVICES provided by us includes: Corporate Finance  Secured/Unsecured Term Loans  Working Capital Finance  Secured/Unsecured Term Loans  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  Joint Venture Partner Search  Equity share and business valuations 5|Page Shekhani Vasim 08BS0001577
  • 6. Merchant Banking  Initial Public Offers and Follow on shares  Right Issues  Buybacks  Open Offers  Preferential allotments  ESOP certification  BSE listing of companies listed on Regional Stock Exchanges  Delisting of Securities Corporate Restructuring To unlock value in the businesses To comply with Regulatory requirements To hive off noncore 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 Purchase Price Allocation Fairness Opinion Other Intangibles – License / Copyrights / trademarks / technology 6|Page Shekhani Vasim 08BS0001577
  • 7. Contents Preface .......................................................................................................................................................... 3 Acknowledgement ........................................................................................................................................ 4 Company Profile ........................................................................................................................................... 5 1. Introduction ........................................................................................................................................... 9 1.1. Purpose & Scope ........................................................................................................................... 9 1.2. Methodology & Sources ............................................................................................................... 9 1.3. Limitation.................................................................................................................................... 10 2. A Brief profile of SMEs in India ........................................................................................................ 11 2.1 Importance of SMEs ......................................................................................................................... 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 by 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 State Bank of India (SBI) ........................................................................... 24 3.2 Credit Appraisal By banks ................................................................................................................ 26 3.3 SME Financing Schemes by SBI ...................................................................................................... 27 3.3.1 Open term 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 7|Page Shekhani Vasim 08BS0001577
  • 8. 3.3.7 Dental Doctor Plus ..................................................................................................................... 35 3.3.8 Cyber Plus .................................................................................................................................. 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 Financing 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. Apparel 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 Change Initiative ....................................................................................................... 54 5. Sector wise comparison of SME financing services ........................................................................... 55 Conclusion .................................................................................................................................................. 69 References ................................................................................................................................................... 70 8|Page Shekhani Vasim 08BS0001577
  • 9. 1. Introduction 1.1. Purpose & Scope The Purpose of carrying out this project is to identify the best source of SME financing 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 every SME client. More specifically I will concentrate mainly on SME financing schemes 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 countries like India so financing of SME is considered to be very important issue for 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 schemes for SME finance, but out of these various schemes which scheme is more profitable 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 the knowledge about various schemes prevailing in the market by various banks, I will focus more on schemes provided by SBI and ICICI for SMEs.  I will then collect details about these schemes provided by each bank one by one by visiting the corresponding banks and having interaction with the representative of that bank. I will collect details like amount of loan available, Interest rate, Disbursement period, Repayment period, Eligibility criteria, Security required etc.  Now after 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 conclude that if a SME belonging to a medical sector wants finance 9|Page Shekhani Vasim 08BS0001577
  • 10. then financing scheme of which bank is better for it. Similarly I will cover different sectors like Tourism, Transport, Medical, Agriculture etc. The comparison will be on the basis of the following factors:  Rate of Interest  Disbursement Period  Repayment Period  Eligibility criteria  Security/collateral etc.  Basically my aim will be to compare SME financing schemes provided by SBI and ICICI more specifically, but for some sector it happens that in a particular sector SBI provides financing but ICICI has introduced any scheme in such case I will try to compare it with some other bank’s 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 websites 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 because 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 mentioned limitations as far as possible. 10 | P a g e Shekhani Vasim 08BS0001577
  • 11. 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 industrialized countries, as well as in emerging and developing economies. SMEs constitute 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 particularly important for bringing innovative products or techniques to the market. Microsoft 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. Only when Bill Gates and his colleagues had a saleable product were they able to take it to the marketplace and look for investment from more traditional sources SMEs are vital for economic growth and development in both industrialized and developing countries, by playing a key role in creating new jobs. Financing is necessary to help them set up and expand their operations, develop new products, and 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 obtain financing from banks, capital markets or other suppliers of credit. 11 | P a g e Shekhani Vasim 08BS0001577
  • 12. 2.2 Definition of SME Units in Small and Medium Enterprises (SME) Sector will include all units in tiny 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 those units in the SME sector as per definition of RBI (defined in RPCD Circular No. 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 trade to services. b. It involves different types of organizations with varying constitutions like proprietary concerns, partnership firms, private limited companies, public limited companies. c. Regulations/ Govt. Policy guidelines varies from activity to activity. d. It overlaps with the presently defined Priority Sector. 12 | P a g e Shekhani Vasim 08BS0001577
  • 13. In the given scenario, it can be broadly said that the SME segment would include the following Traders (Wholesale & Retail) Manufacturers Services Small Owners Examples Mom & Pop Stores Small Producers Cash 'n' Carry Retail Merchants Wholesale Manufacturers Service Providers Traders Examples Examples Examples Examples Convenience Export- Light Industries Agencies Stores Importers Processing Consulting Wholesalers Companies Services Personal Services Restaurants Travel & Tourism 13 | P a g e Shekhani Vasim 08BS0001577
  • 14. 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 West 43% 23% North 23% 14 | P a g e Shekhani Vasim 08BS0001577
  • 15. SMEs by size Medium 5% Micro 43% Small 52% Of the 1150 micro, small and medium enterprises evaluated by SMERA 43% are located in South India and 52% are Micro in size Source: SMERA Newsletter Performance of Micro and Small Enterprises Year No. of Units Production Employmen Export (in Lakhs) (Rs Crs.) t s Regd Unreg Total At At (in Lakhs) (Rs. Current Constant Crs.) Prices Prices 2004-05 17.53 101.06 118.59 418263 251511 282.57 124417 2005-06 18.71 104.71 123.42 476201 277668 294.91 N.A. 2006-07 497840 2007-08 587200 Source: Development Commissioner (SSI) Annual flow of Credit 2006-07 Indicators MSEs( former SSIs) MSME sector Public Sector Banks $5.4 Billion $9.5 Billion Other banks (private /foreign banks, SIDBI etc.) $2.4 Billion $3.5 Billion Emerging Sources (PV, - $3.0 Billion* VC, ECBs, etc.) Total $7.8 Billion $ 12 Billion *Estimates based on certain broad assumptions, Exchange rate 40 INR = 1$ 15 | P a g e Shekhani Vasim 08BS0001577
  • 16. 2.5 Challenges Faced by the SME Sector Mentoring & Advocacy Credit/Financing Technology  Information about Technology  Actual procurement of technology  Finance for Technology up gradation Market Access Infrastructure Procedures Exit Mechanism Strategy Interventions for Revitalization and Growth Reasons attributed to sickness of SMEs 80 70 60 50 40 30 20 10 0 s l e y g t n e ia en ay og ur t in nc io er ct m tit el ke l na no ag ru pe tD ee ar Fi ch an st m gr en M fra Te M Co sa nm In Di er s ov er ot G om Pr Source: Sickness and Rehabilitation of MSMEs in India, Milagrow Business and knowledge Solutions 16 | P a g e Shekhani Vasim 08BS0001577
  • 17. 2.6 Various ways of Financing SMEs Government Specialized Investment Banks for SMEs & Assistance Loans and Equity Leasing Companies Loans SMEs Private Financial Lease Institutions e.g. Banks Finance Companies Equity Venture Capitalists 17 | P a g e Shekhani Vasim 08BS0001577
  • 18. This graph shows the various ways of financing for SMEs in various stages of their life cycle. The valley of death spreads its shadows to other stages of the life cycle also. Growing companies, especially ones that invest in capital need not only term loans but also more working capital. Most common sources for Finance for MSMEs 18 | P a g e Shekhani Vasim 08BS0001577
  • 19. Thus it is clear that the most common source of finance for SMEs is Bank Financing. There are a no. of banks who help in assisting the SMEs for financing. The main channel used by the SMEs via Banks is Specialized loans by various Banks. The Main reason for chosing bank loans by SMEs compared to other sources of financing 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 www.allahabadbank.com Andhra Bank www.andhrabank-india.com Bank of India www.bankofindia.com Bank of Baroda www.bankofbaroda.com Bank of Maharashtra www.maharashtrabank.com Canara Bank www.canbankindia.com Central Bank of India www.centralbankofindia.co.in Corporation Bank www.corpbank.com Dena bank www.denabank.com ICICI Bank www.icicibank.com Indian Bank www.indian-bank.com Indian Overseas Bank www.iob.com IndusInd Bank Ltd. www.indusind.com The Jammu & Kashmir Bank Ltd. www.jkbank.net Punjab National Bank www.pnbindia.com Syndicate Bank www.syndicatebank.com State Bank of Travancore www.statebankoftravancore.com State Bank of India Group www.sbi.co.in Small Industry Development Bank of www.sidbi.com India (SIDBI) Union Bank of India www.unionbankofindia.co.in United Bank of India www.unitedbankofindia.com UCO Bank www.ucobank.com Vijaya Bank www.vijayabank.com 19 | P a g e Shekhani Vasim 08BS0001577
  • 20. Investment in SMEs Total SME Units Fixed Investment Sr. No. Year (Lakhs) (Rs. Crores) 1 1990-91 67.87 93555 2 1991-92 70.63 100351 3 1992-93 73.51 109623 4 1993-94 76.49 115795 5 1994-95 79.60 123790 6 1995-96 82.84 125750 7 1996-97 86.21 130560 8 1997-98 89.71 133242 9 1998-99 93.36 135482 10 1999-00 97.15 139982 11 2000-01 101.1 146845 12 2001-02 105.21 154349 13 2002-03 109.49 162317 14 2003-04 113.95 170219 15 2004-05 118.59 178699 16 2005-06 123.42 188113 20 | P a g e Shekhani Vasim 08BS0001577
  • 21. Credit to MSE sector from Public Sector Banks The table below gives the status of credit flow to the micro and small enterprises (MSE) sector from the public sector banks since 2000: Year Net Bank Credit (NBC) Credit to SMEs % of NBC 2000 316427 46045 14.6 2001 341291 48400 14.2 2002 396954 49743 12.5 2003 477899 52988 11.1 2004 558849 58278 10.4 2005 718722 67634 9.4 2006 1017614 82492 8.1 2007 1317705 104703 8.0 Source: RBI Provisional Amount Invested in SMEs by ministry of Small scale industry via Credit Linked Capital Subsidy Scheme (CLCSS) Year No. of Amount Units sanctioned Assisted (Rs. Lakhs) 2001-02 9 21.36 2002-03 47 93.97 2003-04 150 368.79 2004-05 526 1351.89 2005-06 699 1801.17 2006-07 1189 3795.47 Total 2620 7432.65 Source: Development Commissioner, Ministry of SMEs 21 | P a g e Shekhani Vasim 08BS0001577
  • 22. Amount Invested in SMEs by ministry of Small scale industry via ISO 9000 Incentive Scheme Year No. of Amount sanctioned Units (Rs. Crores) Assisted 1993-94 3 0.016 1994-95 10 0.043 1995-96 48 0.25 1996-97 54 0.39 1997-98 85 0.49 1998-99 174 0.96 1999-00 361 2.25 2000-01 649 4.05 2001-02 992 6 2002-03 1182 6.99 2003-04 917 4.77 2004-05 3314 17.33 2005-06 4101 19.44 2006-07 1543 7.37 Total 13433 70.88 Average assistance/unit= Rs. 52,765 Source: Development Commissioner, Ministry of SMEs 22 | P a g e Shekhani Vasim 08BS0001577
  • 23. 3. SME Services Provided by State Bank of India State Bank of India (SBI) is the forerunner in the field of SME financing. Majority of the loans to SMEs are been provided by SBI. SBI has introduced various schemes for SMEs. The various schemes are according to the sector in which a particular SME belongs. SBI has introduced SME financing for SME belonging to sectors like: Agriculture Medical Transport Tourism Art Education and many more. SME Business Unit is implementing multiple strategies to maintain Banks premier position 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 registering 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 year, recording a growth of 34% during the year.  The SME architecture has been firmly established and with a focus on companies with a turnover of less than Rs. 50 Crores, SBI’s 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 % OF % OF TOTAL Y-O-Y Q-O-Q GROWTH GROWTH RS IN 782 621 691 19 26 13.1 BN 23 | P a g e Shekhani Vasim 08BS0001577
  • 24. 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 for sanctioning. 6. If the loan is been sanctioned by the central authority then disbursement of the loan amount into account of the SME. 24 | P a g e Shekhani Vasim 08BS0001577
  • 25. The above figure shows the steps for availing finance through State Bank of India (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 office 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 are 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. After they are satisfied they send the file of necessary documents to the SMECC branch, which is a special branch for SME loans. Where by the credit appraisal takes place, which consist of credit appraisal of promoter, financial appraisal, determining cost of project, understanding various means of finance used, profitability estimate, cash flow projections , marketing appraisal etc. , which is explained in next section. This step brings out the clear picture whether the loan should be given to the SME or not? If the SMECC branch is satisfied with the details then it forward the request of granting loan to the sanctioning authority. 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 application to disbursement of loan amount takes approximately 20-25 days as the procedure involves analysis of documents by various branches and thus the movement 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. 25 | P a g e Shekhani Vasim 08BS0001577
  • 26. 3.2 Credit Appraisal By banks 1. Credit Worthiness of Borrower/ KYC form 2. Technical Appraisal 3. Financial Appraisal 4. Determination of Cost of Project 5. Determining means of finance 6. Profitability Estimate 7. Break Even Analysis 8. Analyzing Cash flows projections 9. Analyzing Balance Sheet 10. Economic Appraisal 11. Marketing Appraisal 26 | P a g e Shekhani Vasim 08BS0001577
  • 27. 3.3 SME Financing Schemes by SBI 3.3.1 Open term Loan Purpose:  Expansion and Modernization  Upgradation of Technology/machinery, acquisition of hardware, software etc.  Acquisition of ISO and other certificates.  Visits abroad for business development etc. Loan Amount:  Maximum for service sector: Rs. 100 Lacs.  Maximum for manufacturing sector: Rs. 250 Lacs. Amount of loan available:  90% of cost Repayment Period:  Maximum 3 years, extendable upto 5 years. Collateral:  Personal Guarantee of Promoters in all cases  Pledge of Promoter’s equity in case of corporate. Eligibility:  Existing or new corporate/Non-corporate customers of SME segment with good rating. 27 | P a g e Shekhani Vasim 08BS0001577
  • 28. 3.3.2 School Plus Purpose:  Construction of new building/repairing.  Purchase of equipments, software, and furniture.  Additional land for expansion or play ground, bus etc. Loan amount:  Need Based- No upper limit Amount of loan available:  85% of project cost Repayment:  Minimum-3 years, Maximum -7 years. Collateral:  For loan < Rs. 2 Lacs – Personal Guarantee of promoters/others.  For loans > 2lacs – Personal Guarantee + Equitable mortgage of land & building of the school. Eligibility:  Government schools/ Private schools/ Colleges having necessary approval from 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% 28 | P a g e Shekhani Vasim 08BS0001577
  • 29. 3.3.3 Paryatan Plus Purpose:  Construction, renovation, modernization, addition to hotels, Yatri niwas, Dharmsala, Restaurants, Travel Agency etc.  Construction of office premises.  Purchase of computer & equipments; purchase of luxury buses, cars, vans, house boats etc.  Fast food centers, coffee houses, ice cream parlours, amusement park, ropeway, health 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 years Collateral:  Tangible security for at least 50% of loan amount. 29 | P a g e Shekhani Vasim 08BS0001577
  • 30. 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% 30 | P a g e Shekhani Vasim 08BS0001577
  • 31. 3.3.4 Transport Plus Purpose:  Finance for new four wheelers i.e. trucks, tankers, trailers, luxury buses and cars. Loan amount:  Minimum- Rs. 10 Lacs, Maximum- Rs. 10 Crores. Amount of loan available:  80% of project cost Repayment:  Maximum – 5 years including Maximum moratorium period of 3 months. Collateral:  Tangible security for at least 50% of loan amount. Eligibility:  Transport operators owning more than 10 vehicles including the proposed 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% 31 | P a g e Shekhani Vasim 08BS0001577
  • 32. 3.3.5 Doctor Plus Purpose:  Equipments, setting up of clinic.  X-ray lab, nursing homes, and Pathological clinics.  Computers/ ambulance.  Expansion or renovation of existing premises.  Any other 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 minimum Rs. 10 Lacs. Amount of loan available:  Upto Rs. 5 Lacs - 90% of loan amount.  Above Rs. 5 Lacs- 85% of loan amount Repayment:  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 Lacs. For Allopathic/other doctors – 25% of loan amount plus personal guarantee. 32 | P a g e Shekhani Vasim 08BS0001577
  • 33. 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 Lacs & 25 Lacs.- 10.25% 33 | P a g e Shekhani Vasim 08BS0001577
  • 34. 3.3.6 SBI Shoppe Purpose:  Purchase of new/old shops/offices.  Modernization/renovation Expansion/addition/alteration 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 years  Maximum moratorium period – 6 months Collateral:  Hypothecation/Pledge / Mortgage of property. Eligibility:  Individual, Partnership firm, Ltd. Company, Trust/Franchisees. 34 | P a g e Shekhani Vasim 08BS0001577
  • 35. 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 – 100%  Over Rs. 25,000 and up to Rs. 5 Lacs – 90%  Over Rs. 5 Lacs and up to Rs. 10 Lacs – 80% Repayment:  Minimum-3 years , Maximum -5-10 years  Maximum moratorium period – 6 months, for construction purpose it is 12 months Collateral:  Hypothecation/Pledge / Mortgage of property. 35 | P a g e Shekhani Vasim 08BS0001577
  • 36. Eligibility:  Individual, Partnership firm, Ltd. Company, Trust/Franchisees.  Promoters should have minimum BDS and should be registered practitioners. 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 Lacs & 25 Lacs.- 10.25% 36 | P a g e Shekhani Vasim 08BS0001577
  • 37. 3.3.8 Cyber Plus Purpose:  To set up internet/cyber cafes especially at rural and semi-urban centers 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 basic computer knowledge. Interest Rate:  Loan – 9.5% 37 | P a g e Shekhani Vasim 08BS0001577
  • 38. 3.3.9 Rice Mill Plus Purpose:  Acquisition of machinery/factory building for modernization or expansion.  Working capital needs. Loan amount:  Based on Project cost. 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 months  For working capital-12 months can be extended to other 12 months under certain conditions. Collateral:  Loans >5 Lacs - Equitable mortgage of property/ tangible security. 38 | P a g e Shekhani Vasim 08BS0001577
  • 39. 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 amount 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% 39 | P a g e Shekhani Vasim 08BS0001577
  • 40. 3.3.10 Rice Mill Plus Purpose:  Acquisition of machinery/factory building for modernization or expansion.  Working capital needs. Loan amount:  Based on Project cost. Amount of loan available:  85-75% of project cost.  Working capital- 85-75% Repayment:  Minimum-5 years , Maximum -7 years  Maximum moratorium period – 12 months Collateral:  Loans < 5 Lacs – No security  Loans >5 Lacs - Equitable mortgage of property/ 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 amount 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% 40 | P a g e Shekhani Vasim 08BS0001577
  • 41. 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 belongs as seen in case of SBI. ICICI bank has introduced SME financing for SME belonging to sectors like: Automotive Transport Tourism Education Construction Apparels Gems and jewelry and many more. Few Facts about ICICI bank:  The total loans given 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. 2256.16 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 corporate: 12% Rural: 4% SME: 4%  Thus out of the total loans given by the ICICI bank in year 2008 i.e. Rs.2125 billion, the SME loans come out to be 4% of 2125 billion = Rs. 85 billion 41 | P a g e Shekhani Vasim 08BS0001577
  • 42. 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 investigating the same 4. Estimating the amount of loan to be sanctioned and if all credentials are positive then sanctioning of loan by SME cell. 5. Disbursement of loan in the account of the SME. 42 | P a g e Shekhani Vasim 08BS0001577
  • 43. 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 area, where by the loan application is been filled by the SME. The local area branch sends the file of necessary documents to the SME branch, which is a special branch 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 appraisal, determining cost of project, understanding various means of finance used, profitability estimate, cash flow projections , marketing appraisal etc. This step 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 of 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 application to disbursement of loan amount takes approximately 15-20 days as the procedure 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 as there is to and fro movement of documents between several branches in SBI.. 43 | P a g e Shekhani Vasim 08BS0001577
  • 44. 4.2 SME Financing schemes by ICICI bank for various sectors 4.2.1. Automotive Sector Purpose:  To set up an automobile manufacturing unit, expansion, Upgradation of technology. 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 extended to 7years. Collateral:  Immovable property, Assets financed or Tangible security of about 30-40% of loan amount. Eligibility:  Networth should be minimum Rs. 40 Lacs Interest Rate:  Loan : 16% Service Charges:  0.50-2.50% 44 | P a g e Shekhani Vasim 08BS0001577
  • 45. 4.2.2. Construction Sector Purpose:  To set up a construction company, purchase of equipments, Upgradation of technology. 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 extended to 7years. Collateral:  Immovable property, Assets financed or Tangible security of about 30-40% of loan amount. Eligibility:  Networth should be minimum Rs. 40 Lacs Interest Rate:  Loan : 16% Service Charges:  0.50-2.50% 45 | P a g e Shekhani Vasim 08BS0001577
  • 46. 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 extended to 7years. Collateral:  Immovable property, Assets financed or Tangible security of about 30-40% of loan amount. Eligibility:  Networth should be minimum Rs. 40 Lacs Interest Rate:  Loan : 16% Service Charges:  0.50-2.50% 46 | P a g e Shekhani Vasim 08BS0001577
  • 47. 4.2.4. Apparel Sector Purpose:  To set up an apparel manufacturing unit, retail stores, expansion, Upgradation. 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 extended to 7years. Collateral:  Immovable property, Assets financed or Tangible security of about 30-40% of loan amount. Eligibility:  Networth should be minimum Rs. 40 Lacs. Interest Rate:  Loan : 16% Service Charges:  0.50-2.50% 47 | P a g e Shekhani Vasim 08BS0001577
  • 48. 4.2.5. Transport Sector Purpose:  Finance for new four wheelers i.e. trucks, tankers, trailers, luxury buses and cars. 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 extended to 7years. Collateral:  Immovable property, Assets financed or Tangible security 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:  0.50-2.50% 48 | P a g e Shekhani Vasim 08BS0001577
  • 49. 4.2.6. Gems & Jewelry Sector Purpose:  To set up a gems and jewelry unit, expansion of the old unit, Upgradation. 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 extended to 7years. Collateral:  Immovable property, Assets financed or Tangible security of about 30-40% of loan amount. Eligibility:  Networth should be minimum Rs. 40 Lacs Interest Rate:  Loan : 16% Service Charges:  0.50-2.50% 49 | P a g e Shekhani Vasim 08BS0001577
  • 50. 4.2.7. Travel and Tourism Sector Purpose:  Construction, renovation, modernization, addition to hotels, Yatri niwas, Dharmsala, Restaurants, Travel Agency etc.  Construction of office premises.  Purchase of computer & equipments; purchase of luxury buses, cars, vans, house boats etc.  Fast food centers, coffee houses, ice cream parlours, amusement park, ropeway, health 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 extended to 7years. Collateral:  Immovable property, Assets financed or Tangible security of about 30-40% of loan amount. Eligibility:  Networth should be minimum Rs. 40 Lacs 50 | P a g e Shekhani Vasim 08BS0001577
  • 51. Interest Rate:  Loan : 16% Service Charges:  0.50-2.50% 51 | P a g e Shekhani Vasim 08BS0001577
  • 52. 4.2.8. Education Sector Purpose:  Construction of new building/repairing.  Purchase of equipments, software, and furniture.  Additional land for expansion or play ground, bus 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 extended to 7years. Collateral:  Immovable property, Assets financed or Tangible security 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% 52 | P a g e Shekhani Vasim 08BS0001577
  • 53. 4.2.9. Medical Sector Purpose:  Equipments, setting up of clinic, Labs etc.  Computers/ ambulance.  Expansion or renovation of existing premises.  Any other activities related to medical profession. 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 extended to 7years. Collateral:  Immovable property, Assets financed or Tangible security of about 30-40% of loan amount. Eligibility:  Networth should be minimum Rs. 40 Lacs  Promoter must be a Qualified Doctor. Interest Rate:  Loan : 16% Service Charges:  0.50-2.50% 53 | P a g e Shekhani Vasim 08BS0001577
  • 54. 4.2.10. Climate Change Initiative Purpose:  To help climate change initiative programs, which help to preserve environment 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 extended to 7years. Collateral:  Immovable property, Assets financed or Tangible security of about 30-40% of loan amount. Eligibility:  Networth should be minimum Rs. 40 Lacs Interest Rate:  Loan : 16% Service Charges:  0.50-2.50% 54 | P a g e Shekhani Vasim 08BS0001577
  • 55. 5. Sector wise comparison of SME financing services Medical Sector Bank SBI ICICI bank Interest rate  < Rs. 50,000 – 8.5%  Loan : 16%  Rs. 50,000 - 2 Lacs.- 9.0%  Rs. 2 Lacs - 5 Lacs.- 9.25%  Rs. 5 Lacs - 25 Lacs.- 10.25% Service charge  Nil  0.50 – 2.50% of loan amount Loan amount  Maximum – Rs. 5 Crores  Minimum Rs. 10 Lacs For working Capital:  No upper limit  10% of amount upto Rs. 1 Crore.  5% of amount above Rs. 1 Crore and minimum Rs. 10 Lacs. Margin/  < Rs. 5 Lacs - 90%  75-90% Amount of  > Rs. 5 Lacs- 85% loan sanctioned Repayment  Maximum – 7 years  On demand Period  Maximum 5 years but in cases upto 7 years Security/  Allopathic/other doctors upto Rs.  Immovable property collateral 15 Lacs/10 Lacs – No security  Assets Financed  Tangible security of 30-  Loans over Rs. 15 Lacs/ 10 Lacs. 40% of loan amount For Allopathic/other doctors – 25% of loan amount plus personal guarantee. Eligibility  Based on simplified scoring  Networth should be model. minimum Rs. 40 Lacs  Qualified Doctor. 55 | P a g e Shekhani Vasim 08BS0001577
  • 56. 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 there 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 ICICI is better.  In case of SBI the amount of loan available is 90% for loan amount 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 repayment period of SBI is maximum 7 years 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 this figures it is clear that in this case SBI is better option than ICICI 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 amount 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 clear that SBI is better compared to ICICI bank in case of security.  For eligibility criteria, In SBI there is credit scoring model and based on the score obtain in 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 they are eligible but in case of ICICI the SME should have a Networth of minimum Rs. 40 lacs otherwise they fail to qualify for loan. Thus SBI seems to be a better option here. Looking at the above interpretations it is clear that for SME belonging to Medical sector SME loan from SBI will be better option as compared to ICICI bank. 56 | P a g e Shekhani Vasim 08BS0001577
  • 57. Education Sector Bank SBI ICICI bank Interest rate  < 2 Lacs.- 9.25%  Loan : 16%  Rs. 2 Lacs - 5 Lacs.- 10.25%  Rs. 5 Lacs - 25 Lacs.- 11% Service charge  Nil  0.50 – 2.50% of loan amount Loan amount  Need based  Minimum Rs. 10 Lacs  No upper limit  No upper limit Margin/  85%  75-90% Amount of loan sanctioned Repayment  Minimum-3 years  On demand Period  Maximum – 7 years  Maximum 5 years but in cases upto 7 years Security/  < Rs. 2 Lacs – Personal  Immovable property collateral Guarantee of promoters/others.  Assets Financed  Tangible security of 30-  > 2lacs – Personal Guarantee + 40% of loan amount Equitable mortgage of land & building of the school. Eligibility  Government schools/ Private  Networth should be schools/ Colleges having minimum Rs. 40 Lacs necessary approval from the  Institutes having necessary approval government (Excluding from Government. professional colleges & coaching institutes) 57 | P a g e Shekhani Vasim 08BS0001577
  • 58. 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 there 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 better than ICICI bank as there is no minimum loan limit, it is need based.  In case of SBI the amount of loan available is 85% while in case of ICICI bank it varies 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 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 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 SBI the security for loan amount below Rs. 2 lacs is only personal guarantee of Promoter and for loan amount above Rs. 2 lacs the security is personal guarantee of Promoter as well as equitable amount of mortgage but in ICICI bank the security 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 eligibility 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. 40 lacs otherwise they fail to qualify for loan. Thus SBI seems to be a better option here. Looking at the above interpretations it is clear that for SME belonging to Education sector SME loan from SBI will be better option as compared to ICICI bank. 58 | P a g e Shekhani Vasim 08BS0001577
  • 59. Transport Sector Bank SBI ICICI bank Interest rate  Rs. 15 Lacs – 7.5 Crores - 11%  Loan : 16% Service charge  Nil  0.50 – 2.50% of loan amount Loan amount  Minimum- Rs. 10 Lacs  Minimum Rs. 10 Lacs  Maximum- Rs. 10 Crores  No upper limit Margin/  80%  75-90% Amount of loan sanctioned Repayment  Maximum – 5 years including  On demand Period Maximum moratorium period of  Maximum 5 years but in cases upto 7 years 3 months. Security/  Tangible security for at least  Immovable property collateral 50% of loan amount.  Assets Financed  Tangible security of 30- 40% of loan amount Eligibility  Transport operators owning  Networth should be more than 10 vehicles including minimum Rs. 40 Lacs the proposed ones.  SMEs having National/state permits.  Chief promoter should be IT assessee and having National/State permits 59 | P a g e Shekhani Vasim 08BS0001577
  • 60. Interpretation: Following inference can be made from table above:  For SBI the interest 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 otherwise SBI will be a better option.  The repayment period in case of SBI is Maximum 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 thus in this case ICICI bank is a better option.  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 for at least 30-40% of loan amount or assets financed or immovable 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 eligibility 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 while in case of ICICI the SME should have a Networth of minimum Rs. 40 lacs as well 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 interpretations it is clear that for SME belonging to Transport sector SME loan from SBI will be better option as compared to ICICI bank. 60 | P a g e Shekhani Vasim 08BS0001577
  • 61. Travel &Tourism Sector Bank SBI ICICI bank Interest rate  < Rs. 50,000 – 8.5%  Loan : 16%  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% Service charge  Nil  0.50 – 2.50% of loan amount Loan amount  Need Based  Minimum Rs. 10 Lacs  No upper limit  No upper limit Margin/  80% of project cost  75-90% Amount of  60% for purchase of old vehicles loan sanctioned Repayment  Minimum-3 years  On demand Period  Maximum -7 years  Maximum 5 years but in cases upto 7 years  Excluding Maximum moratorium period – 1.5 years Security/  Tangible security for at least  Immovable property collateral 50% of loan amount.  Assets Financed  Tangible security of 30- 40% of loan amount Eligibility  Individual, Partnership firm, Ltd.  Networth should be Company, Trust. minimum Rs. 40 Lacs. 61 | P a g e Shekhani Vasim 08BS0001577
  • 62. 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 there 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 better than ICICI bank as there is no minimum loan limit, it is need based.  In case of SBI the amount of loan available is 80% of project cost and 60% for purchase of old vehicles while in case of ICICI bank it varies between 75-90% so in this case ICICI bank is better option than SBI.  The repayment period of SBI is minimum 3 years and maximum 7 years (excluding moratorium period of maximum 1.5 years) 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 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 SBI the security is tangible security for at least 50 % of loan amount but in ICICI bank the security is tangible security for at least 30-40% of loan amount or assets financed or immovable 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.  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 otherwise they fail to qualify for loan. Thus SBI seems to be a better option here. Looking at the above interpretations it is clear that for SME belonging to Travel & Tourism sector SME loan from SBI will be better option as compared to ICICI bank. 62 | P a g e Shekhani Vasim 08BS0001577
  • 63. Apparel Sector Bank SBI (Open Term Loan ) ICICI bank Interest rate  12.25%  16% Service charge  Nil  0.50 – 2.50% of loan amount Loan amount  Service sector: Max. Rs. 1Crores  Minimum Rs. 10 Lacs  Manufacturing sector: Max Rs. 2.5  No upper limit Crores. Margin/  90%  75-90% Amount of loan sanctioned Repayment  Maximum 3 years, extendable upto  On demand Period 5 years.  Maximum 5 years but in cases upto 7 years Security/  Personal Guarantee of Promoters.  Immovable property collateral  Assets Financed  Tangible security of 30- 40% of loan amount Eligibility  Individual, Partnership firm, Ltd.  Networth should be Company, Trust. minimum Rs. 40 Lacs. 63 | P a g e Shekhani Vasim 08BS0001577
  • 64. Interpretation: Following inference can be made from table above:  For SBI the interest 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 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.  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 upper 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 more than Rs. 1 Crore in case of service industry and Rs. 2.5 Crores in case of manufacturing sector than ICICI is a better option.  The amount of loan sanctioned by SBI 90% of project cost while for ICICI bank it may vary between 75-90% thus in this case SBI seems to be a better option than ICICI bank.  The repayment period 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 years in ICICI bank. So looking at these figures it is clear that in this case ICICI bank is better option than SBI as maximum limit in all cases for ICICI bank is 5 years.  In case of SBI no tangible security is required only personal guarantee of promoters is required while in case of ICICI bank the firm should have a Networth f minimum Rs. 40 lacs otherwise it will be not eligible. Thus in this case 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 otherwise they fail to qualify for loan. Thus SBI seems to be a better option here. Looking at the above interpretations it is clear that for SME belonging to Apparel sector 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 both are on equal positions for Apparel sector. 64 | P a g e Shekhani Vasim 08BS0001577
  • 65. Gems & Jewelry Sector Bank SBI (Open Term Loan ) ICICI bank Interest rate  12.25%  16% Service charge  Nil  0.50 – 2.50% of loan amount Loan amount  Service sector: Max. Rs. 1Crores  Minimum Rs. 10 Lacs  Manufacturing sector: Max Rs. 2.5  No upper limit Crores. Margin/  90%  75-90% Amount of loan sanctioned Repayment  Maximum 3 years, extendable upto  On demand Period 5 years.  Maximum 5 years but in cases upto 7 years Security/  Personal Guarantee of Promoters.  Immovable property collateral  Assets Financed  Tangible security of 30- 40% of loan amount Eligibility  Individual, Partnership firm, Ltd.  Networth should be Company, Trust. minimum Rs. 40 Lacs. 65 | P a g e Shekhani Vasim 08BS0001577
  • 66. Interpretation: Following inference can be made from table above:  For SBI the interest 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 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.  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 upper 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 more than Rs. 1 Crore in case of service industry and Rs. 2.5 Crores in case of manufacturing sector than ICICI is a better option.  The amount of loan sanctioned by SBI 90% of project cost while for ICICI bank it may vary between 75-90% thus in this case SBI seems to be a better option than ICICI bank.  The repayment period 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 years in ICICI bank. So looking at these figures it is clear that in this case ICICI bank is better option than SBI as maximum limit in all cases for ICICI bank is 5 years.  In case of SBI no tangible security is required only personal guarantee of promoters is required while in case of ICICI bank the firm should have a Networth f minimum Rs. 40 lacs otherwise it will be not eligible. Thus in this case 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 otherwise they fail to qualify for loan. Thus SBI seems to be a better option here. Looking at the above interpretations it is clear that for SME belonging to Gems & Jewelry sector 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 both are on equal positions for Gems & Jewelry sector. 66 | P a g e Shekhani Vasim 08BS0001577
  • 67. Other Sectors Bank SBI (Open Term Loan ) ICICI bank Interest rate  12.25%  16% Service charge  Nil  0.50 – 2.50% of loan amount Loan amount  Service sector: Max. Rs. 1Crores  Minimum Rs. 10 Lacs  Manufacturing sector: Max Rs. 2.5  No upper limit Crores. Margin/  90%  75-90% Amount of loan sanctioned Repayment  Maximum 3 years, extendable upto  On demand Period 5 years.  Maximum 5 years but in cases upto 7 years Security/  Personal Guarantee of Promoters.  Immovable property collateral  Assets Financed  Tangible security of 30- 40% of loan amount Eligibility  Individual, Partnership firm, Ltd.  Networth should be Company, Trust. minimum Rs. 40 Lacs. 67 | P a g e Shekhani Vasim 08BS0001577
  • 68. Interpretation: Following inference can be made from table above:  For SBI the interest 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 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.  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 upper 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 more than Rs. 1 Crore in case of service industry and Rs. 2.5 Crores in case of manufacturing sector than ICICI is a better option.  The amount of loan sanctioned by SBI 90% of project cost while for ICICI bank it may vary between 75-90% thus in this case SBI seems to be a better option than ICICI bank.  The repayment period 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 years in ICICI bank. So looking at these figures it is clear that in this case ICICI bank is better option than SBI as maximum limit in all cases for ICICI bank is 5 years.  In case of SBI no tangible security is required only personal guarantee of promoters is required while in case of ICICI bank the firm should have a Networth f minimum Rs. 40 lacs otherwise it will be not eligible. Thus in this case 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 otherwise they fail to qualify for loan. Thus SBI seems to be a better option here. Looking at the above interpretations it is clear that for SME belonging to sector other 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 to be better thus both are on equal positions for other sectors. 68 | P a g e Shekhani Vasim 08BS0001577
  • 69. Conclusion From the above comparison between SME plans provided by SBI and ICICI bank it can be judged that for a SME belonging to a particular sector which bank is providing a better SME plan. It can be tabulated as follows: Sector Public Sector Bank Private Sector Bank (SBI) (ICICI Bank) Medical Education Transport Travel & Tourism Apparel Gems & Jewelry Other Sectors 69 | P a g e Shekhani Vasim 08BS0001577
  • 70. References BUSINESS WORLD, 2009. The SME Whitebook 2009-2010. New Delhi: ABP Pvt. Ltd. http://www.statebankofindia.com/ http://www.icicibank.com/ http://www. smallindustryindia.com/ http://www.laghu-udyog.com/ http://www. rbi.org.in/ http://www. smeiift.com/ http://www.lubindia.org/ 70 | P a g e Shekhani Vasim 08BS0001577