A PROJECT REPORT ON FINANCING UNDER CGTMSE- STRATEGIES ADOPTED BY PNB AND BOI SUGGEGTIONS FOR BOB PREPARE FOR BANK OF BARODA, BORIVALI (EAST) MASTER OF MANAGEMENT STUDIES (MMS) UNIVERSITY OF MUMBAI SUBMITTED TO SINHGAD INSTITUTE OF BUSINESS MANAGEMENT CHANDIVALI UNDER THE GUIDANCE OF Mr. SUBHAS GARG – CHIEF MANAGER / Mr. VISHALDONKALWAR – CREDIT OFFICER SUBMITTED BY (PRAVIN S. MALUSARE) (BATCH 2012-14 & ROLL NO.98) (SPECIALISATION:-FINANCE) 1
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A
PROJECT REPORT
ON
FINANCING UNDER CGTMSE- STRATEGIES ADOPTED BY PNB AND BOI
SUGGEGTIONS FOR BOB
PREPARE FOR
BANK OF BARODA, BORIVALI (EAST)
MASTER OF MANAGEMENT STUDIES (MMS)
UNIVERSITY OF MUMBAI
SUBMITTED TO
SINHGAD INSTITUTE OF BUSINESS MANAGEMENT
CHANDIVALI
UNDER THE GUIDANCE OF
Mr. SUBHAS GARG – CHIEF MANAGER /
Mr. VISHALDONKALWAR – CREDIT OFFICER
SUBMITTED BY
(PRAVIN S. MALUSARE)
(BATCH 2012-14 & ROLL NO.98)
(SPECIALISATION:-FINANCE)
1
CERTIFICATE
This is to certify that PRAVIN SHANKAR MALUSARE has successfully completed
the project work as a part of academic fulfillment of Masters of Management Studies
(M.M.S.) Semester II examination.
Name : Prof. Sreelatha Guntupalli
Signature:
Date : _________________
DIRECTOR
SIBM
2
DECLARATION
I, Pravin S. Malusare of Master of Management Studies (Semester) of Sinhgad Institute
of Business Management (SIBM), hereby declare that I have successfully completed this
Project on Financing under CGTMSE – strategies adopted by PNB and BOI suggestions
for BOB in the academic year 2012 - 2014.
The information incorporated in this project is true and original to the best of my
knowledge.
_____________________________
Signature
3
ACKNOWLEDGEMENT
I am very glad to have the vocational training in Bank of Baroda. I am very thankful to
Mr. S. S. Mundra (Chairman & Managing Director) and Mr. Jayant Rao (Asst. General
Manager, Greater Mumbai Zone), Mr. Ashok K. Bajaj (Asst. General Manager, MMNR)
& Mr. Subhas Garg (Chief Manager, Borivali East Branch) who have granted me the
permission for doing summer training in The Bank of Baroda.
I am also very grateful to Mr. Subhas Garg who is a chief manager of SME’s
management department of Boriwali (E) branch, who has guided me through out my
training period. With all the necessities being fulfilled by the department and I am again
thankful to all the employees of finance and HR, Credit department who had given me
support for the work to be done during training.
Last but not least I am also grateful to my Institute Sinhgad Institute Of Business
Management(SIBM) and Director Mrs. Meera Vijay and My Project Head Mrs.
Sreelatha Guntupalli and also all the faculty members who had inspired me for doing the
summer training.
Thanking You,
Yours faithfully,
(PRAVIN S. MALUSARE)
4
TABLE OF CONTENTS
Sr.No. TOPIC Pg. No.
1 EXECUTIVE SUMMARY 06
2 OBJECTIVES OF PROJECT 07
3 RESEARCH METHODOLOGY 08-09
4 INTRODUCTION OF THE TOPIC (CGTMSE) 10
4.1 ROLE OF MSMEs 11-12
4.2 CREDIT FACILITIES ELIGIBLE UNDER
THE SCHEME
13
4.3 CREDIT FACILITIES NOT ELIGIBLE
UNDER THE SCHEME
14
4.4 GUARANTEE FEE & ANNUAL SERVICE
FEE
15
4.5 EXTENT OF THE GUARANTEE 16
5 REVIEW OF LITERATURE 17
6 BANK OF BARODA 18 - 24
7 PUNJAB NATIONAL BANK 25 – 29
8 BANK OF INDIA 30 – 33
9 CONCLUSION 34
10 SUGGESTIONS 35
11 BIBLOGRAPHY 36
5
1. EXECUTIVE SUMMARY
(Key Strengths)
Bank of Baroda is a 104 years old State-owned Bank with modern &
contemporary personality, offering banking products and services to Large
industrial, SME, retail & agricultural customers across the country.
Uninterrupted Record in Profit-making and Dividend Payment.
Overseas Business Operations extend across 24 countries through 100 Offices.
Strong Domestic Presence through 4, 276 Branches.
Provides Financial Services to around 50.86 million Customers Globally.
Robust Technology Platform with 100% CBS in Indian Branches.
First PSB to receive Corporate Governance Rating (CGR-2).
Pioneer in many Customer-Centric Initiatives.
A well-accepted & recognized Brand in Indian banking industry.
Relatively Strong Presence in Progressive States likes Maharashtra.
6
2. OBJECTIVES OF PROJECT:
To study and understand the concept of CGTMSE
To analyze the CGTMSE Scheme
To understand the effect of CGTMSE on banks profit
To understand the corrective measures taken by bank for CGTMSE
To analyze the CGTMSE of Bank of Baroda and get a insight on its performance
7
3. RESEARCH METHODOLOGY:
Study is all about the research & analysis of credit services offered to small and medium
enterprises Study is being made for the purpose of analysis of credit services and relief to
the borrowers by the bank that the future growth of the bank by providing better services
by bank can earns more profit. Study will be carried out at Mumbai. Secondary data is
required for analysis of report. Period of the study is limited to 45 days.
The method adopted to carry out this report was based on both the primary and secondary
sources.
Primary sources:
Interaction with the Credit Officer and Chief Manager.
Personal interaction with the customers visiting to the bank.
Secondary sources:
Manuals of the bank.
Websites
Journals
Circulars
Annual Report
8
BENEFITS FROM THE STUDY:
It helps me to know more about CGTMSE Scheme and the situation of CGTMSE in
bank.
It helps me to know the strategies adopted by banks to increase the CGTMSE customer
and to understand the CGTMSE provisions norms in bank.
ANALYSIS AND REPORT WRITING:
Here I have done CGTMSE scheme analysis in PNB and BOI and used various data for
analysis purpose. And also I have written report on it.
9
4. INTRODUCTION OF THE TOPIC
CREDIT GUARANTEE FUND TRUST FOR MICRO AND SMALL
ENTERPRISES (CGTMSE)
The scheme was originally launched from August 1, 2000 known as Credit Guarantee
Fund Scheme for Small Industries (CGFSI) covering eligible credit facilities from June 1,
2000. Subsequent to the enactment of MSMED Act-2006 the Trust was renamed as
Credit Guarantee Fund Trust for Micro and Small Enterprises and scheme as Credit
Guarantee Scheme for Micro and Small Enterprises.
MSE as defined in MSMED Act 2006
10
4.1 Role of Micro, Small and Medium Enterprises (MSMEs)
The role of micro, small and medium enterprises (MSMEs) in the economic and social
development of our country is well established. The MSME sector is a nursery of
entrepreneurship, often driven by individual creativity and innovation. Thus, MSMEs are
important for the national objectives of growth with equity and inclusion. The MSME
sector contributes about 9 per cent of the country's GDP, 45 per cent of the manufactured
output and 40 per cent of its exports. The overall growth in the MSME sector has been
much higher than in the large industries over the last five years.
Although Indian MSMEs are a bed rock for innovation and despite being a diverse and
heterogeneous group they face some common challenges with regard to access to
institutional credit, collateral requirements, equity capital, etc. It was against this
background that the Credit Guarantee Fund Trust for Micro and Small Enterprises
(CGTMSE) was established with the objective of guaranteeing collateral and third party
guarantee free credit facilities so as to enable enhanced flow of credit to the MSE sector
in India.
Over the past 12 years, CGTMSE has been ably serving India's MSEs through the Credit
Guarantee Scheme by providing guarantee cover to collateral and third party guarantee
free credit facilities sanctioned by Member Lending Institutions (MLIs) to eligible MSEs.
CGTMSE has extended guarantees for loans aggregating to over Rs.38,000crore covering
approximately. CGTMSE is well placed to meet the challenges of the future.
It is heartening to note that the positive impact that CGTMSE has had on credit flow to
the MSE Sector has been recognized by the Government and the credit guarantee
framework in the country is poised for expansion with the announcement of setting up of
Credit Guarantee Funds for housing, educational loans and skill development by the
Hon'ble Finance Minister during the budget speech in Parliament.
11
I take this opportunity to thank the Government of India, Reserve Bank of India, Small
Industries Development Bank of India, all Member Lending Institutions, MSE
Entrepreneurs and other national and international partner agencies for their support and
co-operation. I am sure that with the active support of all stakeholders, CGTMSE would
continue to excel by achieving higher performance parameters. I would also like to
compliment team CGTMSE for their hard work and dedication.
12
4.2 CREDIT FACILITIES ELIGIBLE UNDER THE SCHEME:
The Trust shall cover credit facilities (Fund based and/or Non fund based) extended by
Member Lending Institution(s) to a single eligible borrower in the Micro and Small
Enterprises sector for credit facility not exceeding Rs.100 lakh by way of term loan
and/or working capital facilities on or after entering into an agreement with the Trust,
without any collateral security and\or third party guarantees provided that the lending
institution applies for guarantee cover in respect of credit proposals sanctioned in the
quarter April-June, July-September, October-December and January-March prior to
expiry of the following quarter viz. July-September, October-December, January-March
and April-June respectively. Provided further that, as on the material date:
The dues to the lending institution have not become bad or doubtful of recovery;
and / or
The business or activity of the borrower for which the credit facility was granted
has not ceased; and / or
The credit facility has not wholly or partly been utilized for adjustment of any
debts deemed bad or doubtful of recovery, without obtaining a prior consent in
this regard from the Trust.
For Example,
XYZ & Co. has been sanctioned the cash credit limit of Rs.5.00 lacs on 15.04.2012.The
application for the guarantee cover should be submitted by next quarter i.e. July to Sept.
quarter online latest by 30.09.2012. Credit facilities extended by more than one bank
and/or financial institution jointly and/or separately to eligible borrower up to a
maximum up to Rs.100 lakh per borrower subject to ceiling amount of individual MLI or
such amount as may be specified by the Trust.
13
4.3 CREDIT FACILITIES NOT ELIGIBLE UNDER THE SCHEME:
Any credit facility in respect of which risks are additionally covered under a
scheme operated / administered by Deposit Insurance and Credit Guarantee
Corporation or the Reserve Bank of India, to the extent they are so covered.
Any credit facility in respect of which risks are additionally covered by
Government or by any general insurer or any other person or association of
persons carrying on the business of insurance, guarantee or indemnity, to the
extent they are so covered.
Any credit facility, which does not conform to, or is in any way inconsistent with,
the provisions of any law, or with any directives or instructions issued by the
Central Government or the Reserve Bank of India, which may, for the time being,
be in force.
Any credit facility granted to any borrower, who has availed himself of any other
credit facility covered under this scheme or under the schemes mentioned in
clause (i), (ii) and (iii) above, and where the lending institution has invoked the
guarantee provided by the Trust or under the schemes mentioned in clause (i), (ii)
and (iii) above, but has not repaid
any portion of the amount due to the Trust or under the schemes mentioned in
clause (i), (ii) and (iii) above, as the case may be, by reason of any default on the
part of the borrower in respect of that credit facility.
Any credit facility which has been sanctioned by the lending institution against
collateral security and / or third party guarantee.
Any credit facility which has been sanctioned by the lending institution with interest rate
more than 3% over the Prime Lending Rate (PLR) of the lending institution.(Branches to
link this corresponding to Base Rate).
14
4.4 GUARANTEE FEE AND ANNUAL SERVICE FEE
Credit
Facility
Annual Guarantee Fee
(AGF) [% p.a]
Women, Micro
Enterprises
and units in
North East
Region (incl. Sikkim)
Others
Upto Rs.5 Lakh 0.75 1.00
Above Rs. 5 Lakh
and upto Rs.100
Lakh
0.85 1.00
of sanctioned credit facility shall be paid upfront to the Trust by the institution
availing of the guarantee cover within such period as may be specified by the
Trust.
In the event of non-payment fee by the MLI within such period or any other
specified date, the guarantee under the scheme shall not be available to the
lending institution unless the Trust agrees for continuance of guarantee and
the lending institution pays penal interest on the fee due and unpaid, with effect
from the due date, at four per cent over Bank Rate, per annum, or at such
rates specified by the Trust from time to time, for the period of delay.
15
4.5 EXTENT OF THE GUARANTEE
The Trust shall provide guarantee as under:
Category Maximum extent of Guarantee where credit facility is
Micro Enterprises Up to Rs.5 lakh Above Rs.5
lakh up to
Rs.50 lakh
Above Rs.50 lakh up
to
Rs.100 lakh
85% of the
amount in
default subject
to a maximum
of Rs.4.25 lakh
75% /
Rs.37.50 lakh
Rs.37.50 lakh plus
50% of amount in
default above Rs.50
lakh subject to overall
ceiling of Rs.62.50
lakh
Women entrepreneurs/
Units located in North
East Region (incl.
Sikkim) other than
credit facility up to
Rs.5 lakh to micro
enterprises
80% of the amount in default
subject to a maximum of Rs.40
lakh
Rs.40 lakh plus 50%
of
amount in default
above Rs.50 lakh
subject to overall
ceiling of Rs.65 lakh
All other category of
borrowers
75% /
Rs.37.50 lakh
Rs.37.50 lakh plus
50% of amount in
default above Rs.50
lakh subject to overall
ceiling of Rs.62.50
lakh
All proposals for sanction of guarantee approvals for credit facilities are to be rated as per
the extant guidelines wherever required and should be acceptable to Bank.
16
5. REVIEW OF LITERATURE
BRAHMANANDAM, G, N., RAI, H.L., DAKSHINA MURTHY, “Financing Small
Scale Sector”. The Role of Banks” INDIAN BANKING TODAY AND TOMORROW,
The above article was prepared on the role of banks in financing the SMEs in the year.
At those times the Indian banking was not all interested in financing the SMEs, because
of their credit worthiness. Later due to changes in the industrial policy of India, the
commercial banks come forward made immense help to the growth of SMEs. This article
was written before the economic reforms taken place. Here is a gap for more analysis
about the role of the banks in the post economic reforms. BRAHMANANDAM, G, N.,
RAI, H.L., DAKSHINA MURTHY, has focused on role of banks in financing SMEs. He
also focused on how economic reforms have changed the bank role in extending credit to
SMEs. They also focused on the credit facilities available to the SMEs in the wake of
MSME act 2006.
17
6. BANK OF BARODA
Bank Of Baroda, is a Body Corporate (Nationalized Bank) constituted under The
Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, with its Head
Office at Mandvi, Baroda and Corporate Office at Mumbai.
Present day Bank of Baroda is the successor of the erstwhile "The Bank of Baroda
Limited", founded in 1908 in a small town - Baroda - by the great visionary the late
Maharaja of Baroda - Sir Sayajirao Gaekwad-III. From its humble beginnings, the Bank
has grown, over the years, to emerge as an Indian Financial Powerhouse, with a network
of over 4,043 branches in India across the length and breadth of the country and 96
overseas branches/foreign offices in 25 countries across 5 continents serving a Global
customer base of over 45 million.
In tune with times and in response to the emerging market requirements, the Bank has set
up specialized branches dedicated to specific Customer segments. Bank has also set-up
specialized Retail, Corporate and SME Loan factories across the country which work on
assembly line principle to reduce turnaround time for sanction of retail and corporate