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1 | Page Shekhani Vasim Opulence Business Solutions Pvt. Ltd. 43, World Business House, Above IndusInd Bank, Nr. Parimal Garden, C. G. Road, Ahmedabad 380 009 E-Mail: [email protected] Website: www.opulencebiz.com 2009 A Report on Comparative Study of SME Financing Services Provided By Nationalised and Private Sector Bank. Submitted By Shekhani Mohamed Vasim W. 08BS0001577 Date of Submission: 16/05/2009
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Comparison of SME financing services provided by SBI and ICICI

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Page 1: Comparison of SME financing services provided by SBI and ICICI

1 | P a g e S h e k h a n i V a s i m 0 8 B S 0 0 0 1 5 7 7

Opulence Business Solutions Pvt. Ltd.

43, World Business House,

Above IndusInd Bank, Nr. Parimal Garden,

C. G. Road, Ahmedabad – 380 009

E-Mail: [email protected] Website: www.opulencebiz.com

2009

A Report on

Comparative Study of SME Financing Services Provided By Nationalised and Private Sector Bank.

Submitted By

Shekhani Mohamed Vasim W.

08BS0001577

Date of Submission: 16/05/2009

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A REPORT

ON

COMPARATIVE STUDY OF SME FINANCING

SERVICES PROVIDED BY NATIONALISED AND

PRIVATE SECTOR BANK.

By

Shekhani Mohamed Vasim Md. Wahid

Opulence Business Solutions Pvt. Ltd.

43, World Business House,

Above IndusInd Bank, Nr. Parimal Garden,

C. G. Road, Ahmedabad – 380 009

E-Mail: [email protected] Website: www.opulencebiz.com

Submitted to:

Dr. Himani Joshi

IBS, Ahmedabad

Date of Submission: 16/05/2009

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Preface

As a part of my course curriculum of MBA in summer Internship program, we are

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.

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Acknowledgement

I would like to express our immense gratitude to mentor guide Mr. BHAVESH

PATEL (CMD, Opulence Business Solution Pvt. Ltd), Mr. EDWARD MACWAN

(Vice President, 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.

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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

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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

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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

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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

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1. Introduction

1.1. Purpose & Scope

The Purpose of carrying out this project is to identify the best source of SME

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

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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.

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2. A Brief profile of SMEs in India

2.1 Importance of SMEs

Small and medium-sized enterprises (SMEs) are the backbone of all economies

and are a key source of economic growth, dynamism and flexibility in advanced

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.

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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.

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In the given scenario, it can be broadly said that the SME segment would

include the following

Traders (Wholesale & Retail) Manufacturers Services

Small Owners

Examples

Mom & Pop Stores

Small Producers

Cash 'n' Carry

Retail Merchants Wholesale

Traders

Manufacturers Service Providers

Examples

Convenience

Stores

Examples

Export-

Importers

Wholesalers

Examples

Light Industries

Processing

Companies

Examples

Agencies

Consulting

Services

Personal

Services

Restaurants

Travel &

Tourism

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2.4 SMEs in India

2.4.1 Micro, Small and Medium Enterprise Sector: Profile

SMEs by Geographical Regions (in %)

SMEs by Geographical Regions

East

11%

West

23%

North

23%

South

43%

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SMEs by size

Micro

43%

Small

52%

Medium

5%

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

(in Lakhs)

Production

(Rs Crs.)

Employmen

t

(in Lakhs)

Export

s

(Rs.

Crs.) Regd Unreg Total At

Current

Prices

At

Constant

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,

VC, ECBs, etc.)

- $3.0 Billion*

Total $7.8 Billion $ 12 Billion

*Estimates based on certain broad assumptions, Exchange rate 40 INR = 1$

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2.5 Challenges Faced by the SME Sector

Mentoring & Advocacy

Credit/Financing

Technology

Information about Technology

Actual procurement of technology

Finance for Technology up gradation

Market Access

Infrastructure

Procedures

Exit Mechanism

Strategy Interventions for Revitalization and Growth

Source: Sickness and Rehabilitation of MSMEs in India, Milagrow Business and

knowledge Solutions

Reasons attributed to sickness of SMEs

0

10

20

30

40

50

60

70

80

Finan

ce

Man

ageria

l

Gov

ernm

ent D

elay

s

Mar

ketin

g

Techn

ology

Infra

stru

ctur

e

Pro

mot

ers Disagr

eem

ent

Com

petition

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2.6 Various ways of Financing SMEs

SMEs

Government

Specialized

Banks for SMEs

Loans and Equity

Private Financial

Institutions

e.g.

Banks

Finance Companies

Loans

Venture Capitalists

Equity

Leasing Companies

Lease

Investment

&

Assistance

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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

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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

India (SIDBI)

www.sidbi.com

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

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Investment in SMEs

Sr. No. Year Total SME Units

(Lakhs)

Fixed Investment

(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

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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

Units

Assisted

Amount

sanctioned

(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

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Amount Invested in SMEs by ministry of Small scale industry via ISO

9000 Incentive Scheme

Year No. of

Units

Assisted

Amount sanctioned

(Rs. Crores)

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

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3. SME Services Provided by State Bank of India

State Bank of India (SBI) is the forerunner in the field of SME financing.

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

TOTAL

% OF

Y-O-Y

GROWTH

% OF

Q-O-Q

GROWTH

RS IN

BN

782 621 691 19 26 13.1

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3.1 Steps for SME loans by State Bank of India (SBI)

1. Application for loan by SME to local branch of a particular area.

2. Inspection/Survey of SME by the Executives of that Local branch.

3. Sending the Documents of survey by Local branch to SMECC branch

4. Preparing credentials of Promoters and firm by SMECC branch and

investigating the same

5. Estimating the amount of loan to be sanctioned and forwarding the

documents for sanctioning.

6. If the loan is been sanctioned by the central authority then

disbursement of the loan amount into account of the SME.

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The above figure shows the steps for availing finance through State Bank of

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.

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3.2 Credit Appraisal By banks

2. Technical Appraisal

1. Credit Worthiness of Borrower/ KYC form

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

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3.3 SME Financing Schemes by SBI

3.3.1 Open term Loan

Purpose:

Expansion and Modernization

Upgradation of Technology/machinery, 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.

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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%

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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.

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Eligibility:

Individual, Partnership firm, Ltd. Company, Trust.

Interest Rate:

Loan < Rs. 50,000 – 8.5%

Loan amount between Rs. 50,000 & 2 Lacs.- 9.5%

Loan amount between Rs. 2 Lacs & 5 Lacs.- 10.25%

Loan amount between Rs. 5 Lacs & 25 Lacs.- 11.00%

Loan above Rs. 25 Lacs – 11.00 to 12.75%

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3.3.4 Transport Plus

Purpose:

Finance for new four wheelers i.e. trucks, tankers, trailers, luxury

buses and 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%

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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.

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Eligibility:

Assessment based on simplified scoring model. Min. score-60%

Interest Rate:

Loan < Rs. 50,000 – 8.5%

Loan amount between Rs. 50,000 & 2 Lacs.- 9.0%

Loan amount between Rs. 2 Lacs & 5 Lacs.- 9.25%

Loan amount between Rs. 5 Lacs & 25 Lacs.- 10.25%

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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.

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3.3.7 Dental Doctor Plus

Purpose:

To boost the financing to Dental equipment under tie-up arrangement.

To finance qualified dentists

For buying equipment

Any other activities related to Dental profession

Loan amount:

Maximum- Rs. 10 Lacs.

Amount of loan available:

Up to Rs. 25,000 – 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.

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Eligibility:

Individual, Partnership firm, Ltd. Company, Trust/Franchisees.

Promoters should have minimum BDS and should be registered

practitioners.

Interest Rate:

Loan < 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%

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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%

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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.

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Eligibility:

Profit making existing units and new units of good credit rating.

Interest Rate:

Loan < Rs. 50,000 – 8.5%

Loan amount between Rs. 50,000 & 2 Lacs.- 9.5%

Loan 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%

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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%

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4. SME Services Provided by ICICI Bank

ICICI is amongst the leading private sectors bank in India. ICICI is the second

largest bank of the country. ICICI bank has introduced various schemes for SMEs.

The various schemes are according to the sector in which a particular SME 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

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4.1 Steps for SME loans by ICICI bank

1. Application for loan by SME to local branch of a particular area.

2. Sending the Documents collected by Local branch to SME branch

3. Preparing credentials of Promoters and firm by SME cell in SME

branch and 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.

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The above figure shows the steps for availing finance through ICICI banks

using loans. Here is the brief description of the above shown procedure:

First of all the SME who wants to avail loan has to visit the local branch office

of their 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..

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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%

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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%

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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%

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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%

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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%

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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%

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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

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Interest Rate:

Loan : 16%

Service Charges:

0.50-2.50%

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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%

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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%

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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%

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5. Sector wise comparison of SME financing services

Medical Sector

Bank SBI ICICI bank

Interest rate < Rs. 50,000 – 8.5%

Rs. 50,000 - 2 Lacs.- 9.0%

Rs. 2 Lacs - 5 Lacs.- 9.25%

Rs. 5 Lacs - 25 Lacs.- 10.25%

Loan : 16%

Service charge Nil 0.50 – 2.50% of loan

amount

Loan amount Maximum – Rs. 5 Crores

For working Capital:

10% of amount upto Rs. 1 Crore.

5% of amount above Rs. 1 Crore

and minimum Rs. 10 Lacs.

Minimum Rs. 10 Lacs

No upper limit

Margin/

Amount of

loan

sanctioned

< Rs. 5 Lacs - 90%

> Rs. 5 Lacs- 85%

75-90%

Repayment

Period

Maximum – 7 years On demand

Maximum 5 years but

in cases upto 7 years

Security/

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.

Immovable property

Assets Financed

Tangible security of 30-

40% of loan amount

Eligibility Based on simplified scoring

model.

Networth should be

minimum Rs. 40 Lacs

Qualified Doctor.

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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.

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57 | P a g e S h e k h a n i V a s i m 0 8 B S 0 0 0 1 5 7 7

Education Sector

Bank SBI ICICI bank

Interest rate < 2 Lacs.- 9.25%

Rs. 2 Lacs - 5 Lacs.- 10.25%

Rs. 5 Lacs - 25 Lacs.- 11%

Loan : 16%

Service charge Nil 0.50 – 2.50% of loan

amount

Loan amount Need based

No upper limit

Minimum Rs. 10 Lacs

No upper limit

Margin/

Amount of

loan

sanctioned

85% 75-90%

Repayment

Period

Minimum-3 years

Maximum – 7 years

On demand

Maximum 5 years but

in cases upto 7 years

Security/

collateral

< Rs. 2 Lacs – Personal

Guarantee of promoters/others.

> 2lacs – Personal Guarantee +

Equitable mortgage of land &

building of the school.

Immovable property

Assets Financed

Tangible security of 30-

40% of loan amount

Eligibility Government schools/ Private

schools/ Colleges having

necessary approval from the

government (Excluding

professional colleges & coaching

institutes)

Networth should be

minimum Rs. 40 Lacs

Institutes having

necessary approval

from Government.

Page 58: Comparison of SME financing services provided by SBI and ICICI

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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.

Page 59: Comparison of SME financing services provided by SBI and ICICI

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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

Maximum- Rs. 10 Crores

Minimum Rs. 10 Lacs

No upper limit

Margin/

Amount of

loan

sanctioned

80% 75-90%

Repayment

Period

Maximum – 5 years including

Maximum moratorium period of

3 months.

On demand

Maximum 5 years but

in cases upto 7 years

Security/

collateral

Tangible security for at least

50% of loan amount.

Immovable property

Assets Financed

Tangible security of 30-

40% 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

Networth should be

minimum Rs. 40 Lacs

SMEs having

National/state permits.

Page 60: Comparison of SME financing services provided by SBI and ICICI

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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.

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Travel &Tourism Sector

Bank SBI ICICI bank

Interest rate < Rs. 50,000 – 8.5%

Rs. 50,000 - 2 Lacs.- 9.5%

Rs. 2 Lacs - 5 Lacs.- 10.25%

Rs. 5 Lacs - 25 Lacs.- 11.00%

> Rs. 25 Lacs – 11.00 to 12.75%

Loan : 16%

Service charge Nil 0.50 – 2.50% of loan

amount

Loan amount Need Based

No upper limit

Minimum Rs. 10 Lacs

No upper limit

Margin/

Amount of

loan

sanctioned

80% of project cost

60% for purchase of old vehicles

75-90%

Repayment

Period

Minimum-3 years

Maximum -7 years

Excluding Maximum

moratorium period – 1.5 years

On demand

Maximum 5 years but

in cases upto 7 years

Security/

collateral

Tangible security for at least

50% of loan amount.

Immovable property

Assets Financed

Tangible security of 30-

40% of loan amount

Eligibility Individual, Partnership firm, Ltd.

Company, Trust.

Networth should be

minimum Rs. 40 Lacs.

Page 62: Comparison of SME financing services provided by SBI and ICICI

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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.

Page 63: Comparison of SME financing services provided by SBI and ICICI

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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

Manufacturing sector: Max Rs. 2.5

Crores.

Minimum Rs. 10 Lacs

No upper limit

Margin/

Amount of

loan

sanctioned

90% 75-90%

Repayment

Period

Maximum 3 years, extendable upto

5 years.

On demand

Maximum 5 years but

in cases upto 7 years

Security/

collateral

Personal Guarantee of Promoters. Immovable property

Assets Financed

Tangible security of 30-

40% of loan amount

Eligibility Individual, Partnership firm, Ltd.

Company, Trust.

Networth should be

minimum Rs. 40 Lacs.

Page 64: Comparison of SME financing services provided by SBI and ICICI

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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.

Page 65: Comparison of SME financing services provided by SBI and ICICI

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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

Manufacturing sector: Max Rs. 2.5

Crores.

Minimum Rs. 10 Lacs

No upper limit

Margin/

Amount of

loan

sanctioned

90% 75-90%

Repayment

Period

Maximum 3 years, extendable upto

5 years.

On demand

Maximum 5 years but

in cases upto 7 years

Security/

collateral

Personal Guarantee of Promoters. Immovable property

Assets Financed

Tangible security of 30-

40% of loan amount

Eligibility Individual, Partnership firm, Ltd.

Company, Trust.

Networth should be

minimum Rs. 40 Lacs.

Page 66: Comparison of SME financing services provided by SBI and ICICI

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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.

Page 67: Comparison of SME financing services provided by SBI and ICICI

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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

Manufacturing sector: Max Rs. 2.5

Crores.

Minimum Rs. 10 Lacs

No upper limit

Margin/

Amount of

loan

sanctioned

90% 75-90%

Repayment

Period

Maximum 3 years, extendable upto

5 years.

On demand

Maximum 5 years but

in cases upto 7 years

Security/

collateral

Personal Guarantee of Promoters. Immovable property

Assets Financed

Tangible security of 30-

40% of loan amount

Eligibility Individual, Partnership firm, Ltd.

Company, Trust.

Networth should be

minimum Rs. 40 Lacs.

Page 68: Comparison of SME financing services provided by SBI and ICICI

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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.

Page 69: Comparison of SME financing services provided by SBI and ICICI

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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

(SBI)

Private Sector Bank

(ICICI Bank)

Medical

Education

Transport

Travel & Tourism

Apparel

Gems & Jewelry

Other Sectors

Page 70: Comparison of SME financing services provided by SBI and ICICI

70 | P a g e S h e k h a n i V a s i m 0 8 B S 0 0 0 1 5 7 7

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/