Appraisal and Monitoring of SME Credits

Financing services available for Small and medium enterprises

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Introduction

Punjab National Bank(PNB) is one of the well-

renowned banks of India.Mr.K.R.KAMATH is the Chairperson of PNB bank.

Punjab National Bank (PNB) was registered on May 19, 1894 under the

Indian Companies Act with its office in Anarkali Bazaar Lahore.PNB had

authorized 175 branches for handling foreign exchange Businesses. Bank has

its Corporate Office at New Delhi and supervises 67 Circle Offices under

which the branches function.It has opened International Service Branch at

Delhi.There are 5675 branches under PNB. PNB has 1064 approved banks

worldwide to facilitate trade transactions of its clients. It has also set up 11

specialized International Banking Branches (IBBs) at important centers for

providing services to its exporter/ importer clients. 2

Introduction to SME creditsSME credit services are the special services to

meet the specific needs of Small and Medium Enterprises and thus enhance their development.Small and Medium enterprises play a very significant role in strengthening Indian economy. 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.

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Classification Investment Ceiling for Plant, Machinery or

Equipments

Manufacturing

Enterprises

Service

Enterprises

Micro Upto Rs.25 lakh Upto Rs.10 lakh

Small Above Rs.25 lakh

& upto Rs.5crore

Above Rs.10 lakh

& upto Rs.2crore

Medium Above Rs.5 crore

& upto Rs.10

crore

Above Rs.2 crore

& upto Rs.5crore

Objectives of the Study

To know about the various SME financing schemes of PNB and their

usage.

To know the scope of SME credits ,in future, for PNB.

To know the effectiveness of various SME financing schemes provided by

Punjab National Bank.

To know the problems faced by SMEs in getting credits.

To know the benefits of SME financing schemes to the Punjab national

bank.

To check the satisfaction level of Small and Medium enterprises regarding

SME financing schemes provided by PNB.4

Research Methodology

Research DesignA type of conclusive research, which has as its major Objective the

description of something-usually market characteristics or functions.In other

words descriptive research is a research where in researcher has no control

over variable.It just presents the picture, which has already studied.

Tools Used:

Tables-This tool was used to present the data in tabular form.

Bar Graphs and Pie Charts- These tools were used for analysis of data

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Data Collection

Information has been collected from: 

Secondary sources of data collection-Secondary sources-Secondary data

are those, which have already been collected by someone else, which already

had been passed through the statistical process . Secondary data had been

collected through websites, newspapers and journals.

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Analysis and Discussion

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Medical Sector

Bank PNB HDFC Interest rate

< Rs.2 0 lakh -

10.50%

>Rs.20 lakh -

11.25%

17.50% to 22.00%

Service charge < Rs.20 lakh - NIL

>Rs.20 lakh - 0.60 %

2% of loan amount

Loan amount

Need based maximum of 80% of the quotation

value

Repayment 10 years 12 - 84 months

Collateral <Rs.10 lakh - no

collateral.

>Rs.10 lakh - two

third party

guarantees is to be

obtained.

Collaterals are not mandatory

Eligibility Qualified registered medical

practicing with minimum qualification of

MBBS.

To be eligible for a Healthcare loan

you must belong to one of the

following categories:

Speciality Hospital , Nursing

Home ,Diagnostic Centre ,

Pathology Lab , Speciality Clinics

(like Skin and Dental

Clinics) ,Dialysis Centre , Endoscopy

Centre , IVF Centre , Educational

Institute , Med ical/Paramedical

College, Dental College

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Business Sector

Bank PNB HDFC

Interest rate

working capital < Rs.5 cr ore - 10.5%+4.25% > Rs.5 cr ore - 10.5+4.50 Others

Rs.5crore 10.5%+4.25% +0.50%

17.50% to 22.00%

Service charge

< Rs.2 lakh - NIL >Rs.20 lakh - 0.60% +ST of loan

amount.

2 .50 % of loan amount

Loan amount

Need based 50,000/ - to Rs. 15, 00,000/ -

Repayment 5 - 7 years 12 - 36 months

12 - 60 for professional

s.

Collateral <Rs.10 lakh - no collateral. >Rs.10 and <Rs.25 lakh – good

track record and financial position.

Collaterals are not mandatory

Eligibility Micro Enterprises: Enterprises

engaged in the Manufacturing or Pro duction upto Rs. 25 lakh. Small

Enterprises: Enterprises engaged in the Manufacturing

or Production, Processing above 25 lakh upto 500 lakh.

Minimum Turnover of

Rs. 40 Lakhs.

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Construction Sector

Bank PNB HDFC

Interest rate

working capital <Rs.5crore10.5%+4.25% >Rs.5crore - 10.5+4.50

Others Rs.5crore10.5%+4.25%+0.50%

17.50% to 22.00%

Service charge

< Rs.2 lakh and upto Rs.5 crore - 1% >Rs. 5 crore and upto Rs.50 crore - 0.75 %

2% of loan amount

Loan amount

Need based Upto Rs.15 lakhs.

Repayment 8/10 years 12 - 36 months Collateral V alid mortgage of land,

buildings and other immovable assets of the entrepreneurs

Collaterals are not mandatory

Eligibility Cooperative Societies, partnership firms and joint stock companies who have sponsored

projects for establishing economically viable industrial estates and have the necessary approval of State Directorate of

Industries and local authorities.

Self Employed ( Private Ltd. Co. and Partnership Firms) include Private

Companies and Partnership firms in the

Business of Manufacturing, Trading

or Services.

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Automobile Sector

Bank PNB HDFC Interest rate

working capital <Rs.5crore10.5%+4.25% >Rs.5crore-10.5+4.50 Others Rs.5crore10.5%+4.25%+0.50%

17.50% to 22.00%

Service charge

1.00% of the loan amount

2% of loan amount Or Rs.5000 which is lowest.

Loan amount

Need based 80% of invoice value

Repayment 5-7 years Upto 48 months Or 1-7 years

Collateral <Rs.100 lakh-no collateral. >Rs.100 lakh –third party guarantee is required.

Collaterals are not mandatory

Eligibility Small Scale Service Units including those which go in for modernisation / technology upgradation.

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Summary and Conclusions

From the above comparison between SME plans provided by PNB and HDFC 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:

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Sector

Public Sector Bank (PNB) Private Sector Bank (HDFC Bank)

Medical

Transport

Business

Construction

Recommendations

Customer feedback should be taken regarding services so that improvements can be done.

New products should be provided in particular sectors ( garments,gems and jewellery etc.)to provide financing services to customers.

All kind of charges should be disclosed before giving loan to the customers.

Agents should be well educated and trained and able to convince customers.

Fastest settlement of customer’s problems should be carried out. Programme like customer awareness should be organized so that more and

more people attract towards the SME sevices offered by bank. Special offers should be launched periodically to attract customers and

agents.

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