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A study on awareness level among MSMEs about Credit Rating

Submitted to Lovely Professional University

In partial fulfillment of the requirement for the degree of

Master of Business Administration (Hons)

Submitted By

Amit Ola

MBA (Hons)

Reg No. 11005480

Department of Management

Lovely Professional University

Phagwara

Punjab

August 2011

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Acknowledgement

I owe a great thanks to all people who helped and supported me to successful completion of this

project. My deepest thanks to Mr. Rahul Sharma (Asst. professor) the guide of project for

guiding and correcting various documents of mine with attention and care, he taken the pain to

go through the project and make necessary correction as and when needed. Thanks and

appreciation to all the respondents who gives their valuable information about the project. In

starting there were many problems included in the RIICO area visit but due to good behavior of

RIICO authority people it was possible to get the address information of the industries which are

in manufacturing business. I would also thank my institution and my faculty members without

whom this project would have been a distant reality.

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Declaration

I hereby declare that the study titled A study on awareness level among MSMEs about Credit

Rating submitted in partial fulfillment of the requirement for the degree of Master of Business

Administration (Hons) is entirely original work of research by me and has not been published or

submitted elsewhere for the requirement of a degree program. Any literature, data or work done

by others and cited within this study has been given due acknowledgement and listed in the

reference section.

Amit OlaReg.No. 11005480

MBA (Hons)

Lovely Honors School of Business

Lovely Professional University

Phagwara

Punjab

August 2011

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Executive Summery

Credit rating is basically to rate a particular company on the basis of its financial and other

performance basis. Rating of MSMEs is the new concept through which the companies can get

the benefits of subsidies given by the banks and the government, on the basis of the grade.

CRISIL is a global analytical company providing ratings, research, and risk and policy advisoryservices. This is India's leading ratings agency. CRISIL is also the foremost provider of high-end

research to the world's largest banks and leading corporations. With sustainable competitive

advantage arising from our strong brand, unmatched credibility, market leadership across

businesses, and large customer base, we deliver analysis, opinions, and solutions that make

markets function better. Major shareholder of CRISIL is Standard and Poor's. Standard & Poor's,

a part of The McGraw-Hill Companies, is the world's foremost provider of credit ratings.

Main objective of the research is to check the awareness level among MSMEs about credit

rating. Along with make them aware about credit rating and benefits of credit rating. For this the

exploratory research was conducted in RIICO areas of Sikar, Palsana, Reengus, Chirawa and

Pilani (Rajasthan). Main manufacturing business were granite tiles and slabs, plastic granules

manufacturing, furniture manufacturing, bag manufacturing, cattle feed manufacturing,

transformers manufacturing. Except this there are many other industries which are manufacturing

other goods and grocery products.

The sample was taken in the research was 220 manufacturing industries. After the research is

was found that approx 85% industry people are not aware about the credit rating schemes. Only

15% industry people were aware about rating. Industries that have done credit rating were using

the subsidies given by the banks but most of them were not satisfied for services provided by

CRISIL.

Response about rating was approx 35%, as they were interested in rating only for getting loan

and to get the benefit of subsidies on loan and interest.

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CONTENTS

Topic Pg. No.

1 Introduction 2-7

2 Literature review 9-10

3 Objective of the study

Research Methodology

11

4 12

4.1 Research Design

4.2 Research Method

4.3 Source of Data

4.4 Tools of data collection

5 Analysis of Research 13-21

5.1 Granite manufacturing Industry

5.2 Plastic product manufacturing industry

5.3 Furniture manufacturing industry

5.4 Steel manufacturing industry

5.5 Agriculture instruments manufacturing industry

5.6 Grocery product manufacturing industry

5.7 Other manufacturing industry

6 Findings 23-34

6.1 Findings in RIICO area of Sikar

6.2 Findings in RIICO area of Palsana

6.3 Findings in RIICO area of Reengus

6.4 Findings in RIICO area of Chirawa & Pilani

7 Recommendations 35

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Conclusion

Annexure

A Questionnaire

Refrences

36

37-40

41-42

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INTRODUCTION

The credit rating represents the credit rating agency's evaluation of qualitative and quantitative

information for a company or government; including non-public information obtained by the

credit rating agencies analysts. Credit ratings are not based on mathematical formulas. Instead,

credit rating agencies use their judgment and experience in determining what public and private

information should be considered in giving a rating to a particular company or government.

The credit report contains information regarding the financial history and current assets and

liabilities of an individual. A bank or credit card company will use the credit score to estimate

the probability that the individual will pay back loan or will pay back charges on a credit card.

A poor credit rating indicates a credit rating agency's opinion that the company or government

has a high risk of defaulting, based on the agency's analysis of the entity's history and analysis of

long term economic prospects. A poor credit score indicates that in the past, other individuals

with similar credit reports defaulted on loans at a high rate. The credit score does not take intoaccount future prospects or changed circumstances.

CRISIL is the pioneer of credit ratings in India, now offers credible and affordable special rating

services to help Micro, Small and Medium Enterprises (MSMEs) make the most of these

opportunities. CRISIL has set up a dedicated team of specialists in SME ratings, and has

designed separate rating scales for rating SMEs and Small Enterprises (earlier known as Small

Scale Industries or SSIs). CRISIL has already rated more than 12000 MSMEs up to May 2010.

CRISIL is assigning 600 new ratings to MSMEs every month.

According to the ministry of micro, small and medium enterprises recent ceilings on investmentfor enterprises to be classified as micro, small and medium enterprise are as follows

Classification Manufacturing Enterprises Service Enterprises

Micro Rs 25 lakh Rs 10 lakh

Small Rs 5 Crore Rs 2 Crore

Medium Rs 10 Crore Rs 5 Crore

The credit rating is used by individuals and entities that purchase the bonds issued by companiesand governments to determine the likelihood that the government will pay its bond obligations.

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Benefits of credit Ratings-

Cheaper and faster bank loansCRISIL enjoys a high level of credibility with banks. Therefore, banks use CRISIL ratings to

make lending decisions and determine interest rates and terms. CRISIL has already signed MoUs

with 32 banks and financial institutions to rate their borrowers. As per these MOUs, CRISIL

charges fees at concessional rates to the banks customers, and the banks in turn offer favorable

terms to entities with high CRISIL ratings.

Confidence building with business partners:

CRISIL is the best-known rating agency in India. Hence, a CRISIL rating will help increase the

confidence and comfort levels of your customers, suppliers, and business partners.

Support for export initiatives

For exporters, CRISILs international linkage offers an additional advantage: Standard & Poors,

a globally respected rating agency, is the majority shareholder in CRISIL. Therefore, a CRISIL

rating will help establish your credentials with international customers.

A tool for self-improvementAlong with its ratings, CRISIL provides detailed analytical reports on the strengths and

weaknesses of rated entities. Based on the CRISIL report, you can take steps to strengthen your

operations and become more efficient. Each report provides reliable and independent feedback

from customers, suppliers and banks.

Improved visibility

Along with the CRISIL rating, you get a free listing in CRISILs SME Connect and website,

both of which are used as reference points by stakeholders in the SME sector. The listing will

thus improve your visibility in your target market.

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Affordable

CRISILs SME Rating Services, while being highly credible, are also very much affordable.

CRISIL offers an attractive concession in the rating fee for Small Enterprises. Also, NSIC Ltd,

which is a corporation under the Ministry of MSME, Govt. of India provides 75% subsidy in the

rating fee for Small Enterprises. Thus, the rating fee payable by the Small Enterprises ranges

from Rs.7,456 to Rs.13,236 depending upon the turnover of the enterprise. For enterprises not

registered as Small Enterprises, the fee is higher as the subsidy is not available from NSIC.

Company profile

History

Since its inception CRISIL has constantly redefined industry standards through best

practices and innovations. CRISIL was incorporated and promoted in 1987 by ICICI ltd

along with UTI and other financial Institutions. Mr. N Vaghul and Mr. Pradip Shah are

CRISIL's first Chairman and Managing Director, respectively.

In 1996 CRISIL forges a strategic business alliance with Standard & Poor's (S&P)

Ratings Group. This was a part of CRISIL,s strategy to develop skills and processes. In

1998 CRISIL sets up India Index Services Ltd (IISL), a joint venture with NSEIL, to

provide a variety of indices and index-related services and products to India's capital

markets.

The year 2000 CRISIL acquires the business, and brand, INFAC, of Information Products

and Research Services (India) Pvt Ltd. INFAC is a leading provider of research to India's

financial sector. The acquisition strengthens CRISIL's research business, and makes it

India's leading provider of integrated research.

In 2005 CRISIL launches Small and Medium Enterprise (SME) Ratings to serve the

specialized needs of the SME sector. CRISIL partners CNBC-TV18 for Emerging India

Awards - the first platform to recognize and reward the achievements of India's Small &

Medium Enterprises. CRISIL's SME Ratings group assigns its 5000th SME rating.

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CRISIL captures about half of India's bank loan rating market

In 2006 CRISIL launched IPO grading services to provide investors with independent,

reliable, and consistent assessments of the fundamental strengths of new public issues.

Irevna is ranked globally as the top Investment Research Outsourcing Firm by The Black

Book of Outsourcing.

In 2010 CRISIL SME Ratings crosses its 15,000th SME rating. CRISIL launches Real

Estate Star Ratings.CRISIL acquires Pipal Research, further strengthening its leadership

in the KPO industry.

Ratings

CRISIL is the largest credit rating agency in India.

CRISIL pioneered ratings in India more than 20 years

ago, and is today the undisputed business leader, with

the largest number of rated entities and rating

products: CRISIL's rating experience covers more

than 38,663 entities, including 18,000 small and

medium enterprises (SMEs). As on March 31, 2011,we had more than 12,684 ratings (including over

6,500 SMEs) outstanding.

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Board of Directors

Mr. Deven Sharma,

Chairman

Mr. Deven Sharma is President of Standard & Poor's, a division

of the McGraw-Hill Companies, and the world's foremost source

of financial market intelligence, providing independent credit

ratings, indices, risk evaluation, investment research and data. Mr.

Sharma joined S&P in 2007 as executive vice president,

Investment Service and Global Sales. Prior to joining S&P, Mr.

Sharma was executive vice president, Global Strategy at The McGraw-Hill Companies for five

years. Deven joined The McGraw-Hill Companies in January 2002 from Booz Allen &

Hamilton, a global management consulting company, where he was a partner.

During his 14 years with that firm, he provided guidance to client companies on business

strategy and globalization, as well as on branding and sales management. Much of his experience

includes work with global corporations in U.S., Latin America, Europe and parts of Asia. Prior to

BoozAllen, Deven worked with manufacturing companies, Dresser Industries and Anderson

Strathclyde. Deven holds a bachelor's degree from the Birla Institute of Technology in India, a

master's degree from the University of Wisconsin and a doctoral degree in Business Management

from Ohio State University. Deven has authored several publications on competitive strategy,

customer solutions, sales and marketing. He is a Board member of the Asia Society Business

Council.

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LITERATURE REVIEW

Gonzalez et.al.(2004) stated that rating agencies who strive to provide credit assessments that

remain broadly stable through the course of the business cycle have been themselves affected as

the growing reliance on rating mean that they are increasingly expected to satisfy a widening

range of constituencies with different and sometimes conflicting interests.Companies have

responded to this challenge largely by adding more products to their traditional product palette

but also through modifications in the rating process. So its not predicted that these changes

mean fundamental shift in the approach of the companies in risk measurement.

Huang. Zan et al. (2004 found that in Credit rating analysis Artificial Intelligence (AI) methods

achieved better performance than traditional statistical methods. This article introduces a

relatively new machine learning technique, support vector machines (SVM).Another direction of

the research was to improve the interpretability of the AI-based model and on that basis they

conducted a market comparative analysis on the difference of determining factors in the United

States.

Altman .Edward et al (2004) didresearch on collateral values and recovery rates on corporate

defaults can be volatile and, moreover, that they tend to go down just when the number of

defaults goes up in economic downturns. This traditional focus on default analysis has been

partly reversed by the recent significant increase in the number of studies dedicated to the subject

of recovery-rate estimation and the relationship between default and RRs. Empirical evidence

concerning this issue is also presented and discussed.

Kavvathas,D. ( 2000) Research was based on motivating and exhibiting the potential of

conditioning on economy wide state variables in improving the forecasting of the Credit Rating

Transition Probability (CRTP) Matrix, both statistically and economically in sample and out

sample experiments.findings of the study were that an increase in nominal short and long and

real rates, a lower equity return and a higher equity return volatility are associated with higher

relative downgrade intensities. They found that financial sector was more sensitive.

http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=248890http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=248890http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=248890http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=248890http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=248890http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=248890http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=248890http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=248890http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=248890http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=248890http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=248890http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=248890http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=248890http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=248890http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=248890

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Cantor. Richard et al. (1996 ) did research on determinants and impact of sovereign credit

ratings assigned on two leading U.S agencies,Moody's Investor Services and Standard and

Poor's. Of the large number of criteria used by the two agencies, six factors appear to play animportant role in determining a country's credit rating: per capita income, GDP growth, inflation,

external debt, level of economic development, and default history. In addition, the authors find

that sovereign ratings influence market yields particularly those on non-investment-grade issues -

independently of any correlation with publicly available information.

Altman, E. et al.( 2007) Conducted a research to know the contribution of small and medium

sized enterprises (SMEs) the economy of many countries and the considerable attention placed

on SMEs in the new Basel Capital Accord. They took the sample over 2,000 U.S. firms (with

sales less than $65 million) on panel data of over the period 19942002, and develop a one-year

default prediction model. This model has an out-of-sample prediction power which is almost 30

per cent higher than a generic corporate model. An associated objective is to observe our model's

ability to lower bank capital requirements considering the new Basel Capital Accord's rules for

SMEs.

Altman,E. & Sabato,G. (2004) two researchers did their research competitive effects of

implementation of Basel II capital requirements on banks in the market for credit to SMEs in the

U.S. After the research they came to know that only relatively minor competitive effects on most

community banks because the large A-IRB adopters tend to make very different types of SME

loans to different types of borrowers than community banks.

Lehmann, I. (2001) found in a research that strong lending relationships between banks and

small and medium sized enterprises (SMEs) play a key role in the bank-based financial system of

Germany. So far, they have been mainly described by the notion of a house bank and

transactional features of long term bankcustomer relationships. Data taken from the banks about

the relationship and interaction variables prove to affect loan prices, collateral requirements and

credit availability.

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1028774##http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1028774##

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Czarnitzkr,D. ( 2006) The objective of the research was to know the research and development

activities in German small and medium-sized firms (SME). The empirical evidence suggests that

West German SMEsare financially constrained in their R&D activities by both internal and external

resources. Special attention is paid to the role of public research and development (R&D) subsidies.

The results show that R&D in East Germany is to a large extent driven by public subsidies and that

the usual financial market mechanisms are dysfunctional with respect to R&D in this region.

Chernih, A. et al ( 2006 ) did a research related to base II Accord outlines a general frame work

for determining regulatory capital requirements for credit risk portfolios. Different obligors

usually operate in dependent socio-economic environments and these structural correlations are

the main reason why regulatory capital is needed. There for it is not surprising that an important

component of the regulatory regime for capital is the asset correlation between obligors.

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3. OBJECTIVE OF THE STUDY

Check the awareness level among MSMEs about rating. CRISIL is a pioneer of credit ratings in

India. It offers credible and affordable special rating services to help Micro, Small and Medium

Enterprises. CRISIL has set up as dedicated team of specialist in SME ratings, and has designed

separate rating scales for rating SMEs and small enterprises.

Visit to the manufacturing units of RIICO area and collect the data which product is being

manufactured those industries. Make the industry people aware about the ratings and future

benefits of credit ratings. Make them aware about different Government schemes and the

benefits from these schemes.International Cooperation Scheme

Performance and Credit Rating Scheme

Technology Up gradation Fund Scheme (TUFS) for the textile sector

Marketing Assistance Scheme

Rajiv Gandhi Udyami Mitra Yojana (RGUMY)

Trade Related Entrepreneurship Assistance and Development (TREAD) Scheme

for Women

Credit Linked Capital Subsidy Scheme for Technology Up gradation

Credit Guarantee Scheme

ISO 9000/ISO 14001 Certification Reimbursement Scheme

National Manufacturing Competitiveness Programme (NMCP) Schemes Under

XI Plan: there are 10 schemes under NMCP like Marketing Support, Lean

Manufacturing, Mini Tool rooms, etc

Micro & Small Enterprises Cluster Development Programme (MSE-CDP)

MSME MDA

Mini Tool Rooms

http://rgumy.nic.in/http://www.dcmsme.gov.in/schemes/Credit_link_Scheme.htmhttp://www.dcmsme.gov.in/schemes/sccrguarn.htmhttp://www.dcmsme.gov.in/schemes/sciso9000.htmhttp://www.dcmsme.gov.in/schemes/NMCPDetail.htmlhttp://www.dcmsme.gov.in/schemes/NMCPDetail.htmlhttp://www.dcmsme.gov.in/MSE-CDProg.htmhttp://www.dcmsme.gov.in/schemes/MSME_MDA_Guidelines.pdfhttp://www.dcmsme.gov.in/schemes/scminitool.htmhttp://www.dcmsme.gov.in/schemes/scminitool.htmhttp://www.dcmsme.gov.in/schemes/MSME_MDA_Guidelines.pdfhttp://www.dcmsme.gov.in/MSE-CDProg.htmhttp://www.dcmsme.gov.in/schemes/NMCPDetail.htmlhttp://www.dcmsme.gov.in/schemes/NMCPDetail.htmlhttp://www.dcmsme.gov.in/schemes/sciso9000.htmhttp://www.dcmsme.gov.in/schemes/sccrguarn.htmhttp://www.dcmsme.gov.in/schemes/Credit_link_Scheme.htmhttp://rgumy.nic.in/

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4. METHODOLOGY

The methodology applied for this project is to undergo exploratory research. Since, CRISIL is

itself undergoing through various activities, therefore the research format was to be kept

exploratory. It will not only help us to identify the various businesses which can be successful

and well organized in the small towns and all the RIICO areas, but also come out with some

other useful findings which would help CRISIL in one way or other (e.g. Rating and bank loan).

The research has been kept flexible and both the existing and potential industries were mapped

so as to avoid the narrow minded approach towards the project. Another profit for the research

that the industry in which CRISIL people will go for research for the crediting rating program of

MSMEs the will be a potential customer will go under rating upcoming future.

4.1 Research Design

The research study follows an exploratory research design in order to study the awareness level

about credit rating among MSMEs.

4.2Sources of Data

The primary data for the research study has been collected through a questionnaire containing 16

questions which were filled by the industries which are manufacturing units or manufacturing

cum trading units. The questionnaire included various parameters such as awareness, responseabout credit rating, banker and products. Various supplementary questions were also asked to

gain maximum information from the respondents.

4.3Sampling

It is basically stratified quota sampling. For this study, 220 manufacturing units have been taken

as the sample. The sample size research area was approx 250 km

4.4Tools of Data Collection

A questionnaire has been used for the purpose of collecting the primary data. Total 220questionnaires were filled up through one on one interaction with respondents.

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5 ANALYSIS OF THE RESEARCH

There are approx 230 samples of industries for the survey to check the awareness level of

crediting rating of MSMEs. The project work is to visit the industrial areas and to know that in

which kind of the business the industries are. All industries are manufacturing units; some of

them are manufacturer cum trading industries. As its clear in the objective that we are to check

the awareness level about crediting rating and make the industry people aware that they are

interested for ratings. Industry people are not aware about the rating companies and the scheme

of rating of MSMEs. Some industries have gone through the rating services but they are not able

to get profit after rating.

Main source of awareness among these areas according to the research is TV and news paper.

Some respondents are asking about SMS facilities on their mobile, but that should be only once.

If somebody will be interested in rating services he will contact you.

5.1 Granite Manufacturing Industry

Granit industry is a medium enterprise in RIICO

areas.

Awareness level is Approx 33% of the industry

which was included in the random sampling.

Reason behind this is mostly companies are at

small scale and the big industries have done

their ratings.

The Response about the Credit ratings was so not goodand the report did not include those companies which

have rated.

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There is one third part of the industry who wants to rate their industry.

Most of the granite industries are self finance since the companies which have rated they did not

get any kind of profit so another industry people do not want rating of the Industry.

Banker plays a vital role in the case of ratings. In RIICO are most of the Industries are self

financed and mostly their Banker are SBI,

SBBJ, PNB. In Granite Industry the SBI

user Bank are more as compare to PNB

SBBJ and other banks.

Main Reasons before this is many

Industries are using the subsidy schemes

given by these banks.

Another reason for this is the loyalty about

the banks. Banks like Coperative bank,

ICICI are new market player, since most of the granite Industries are more than 20 years old so

they people are less interested in shifting their banks.

5.2 Plastic manufacturing Industries

Plastic manufacturing industry is in the business

of plastic granules, plastic tanks and other plastic

materials.

The response about credit ratings is quite good,

since industry people less aware about the credit

rating scheme. After the visit and they come to

know about the rating schemes and 38 % of

industry people are interested for ratings. They

supply plastic tanks and granules all over India.

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The plastic industry people are not much aware

about credit rating of MSMEs.

Most of the industries are new internets and some

plastic industries which are in the business of

Polythene bags manufacturing are closed. Approx

13% of people who are in market are aware about

that and have done ratings.

Main Banker of the industry is SBBJ and PNB .the amount of PNB users is increasing because

many plastic industries in Palsana have taken

loan form PNB banks at a low interest rate as

compare to the other banks.

There are some industries which are using

services of Banks like ICICI,OBC and

Cooperative banks as they are new entrants and

providing fast services as compare to other

banks.

5.3Furniture Manufacturing Industries

Furniture manufacturing industries are the

small and medium enterprise. The main

banker that the enterprises use for transaction

and loan is SBBJ. This is the most reliable and

oldest bank of India.

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Many small scale furniture manufacturer have taken loan from SBI ( State bank of India) and

PNB as they are providing good services at low interest rate

Awareness level in Furniture industry is 35%, and as compare to this same is response of the

industry people about crediting ratings. The industries which are aware about Credit rating do

not want to do rating of their firms and vice versa.

Some small scale industries that are using subsidy scheme or have taken loan from banks are

interested since they want more subsidy and less interest on the loan taken.

5.4 Steel Manufacturing industries

Steel manufacturing in the RIICO are of Chirawa,

Pilani and Palsana is at small scale and micro

level as there is a lot of small enterprises which

are manufacturing steel gate and windows. They

did not respond positive for rating since they are

less aware about the rating schemes and benefits

of rating.

RIICO area of Reengus is developing in case of

steel angle manufacturing and steel melting. Some big marketers have done the rating. Steel

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industries which are new in the market earning a handsome profit are interested for rating since

they want to increase their business

Bankers of the steel Industries are SBBJ

PNB and OBC and SBI Banks. Though the

steel Industries are small and micro level

enterprises and most of them are self

financing firms with no loan amounts.

As the Steel enterprises are small and micro

level enterprise in RIICO are as well as in the

domestic market of Sikar, Palsana and Chirawa.

Firms are not aware about Credit rating Scheme

of MSMEs as this is new concept for them and

many of them do not want to indulge any kind

of activity of the companies because they think

that like insurance and other sales oriented

companies they will disturb them for the schemes. So they are did not take interest in the

schemes for them during the research.

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5.5 Agriculture Instruments Manufacturing

Main banker of the Agriculture industry is SBBJ,

SBI and PNB bank. Users of PNB and SBI are

same. This is order base manufacturing industry

and they do not need to manage inventory and

other materials.

SBBJ user is 33% and the customers of another

business are 17%.

For manufacturing they take advance from the

customers and then give the delivery to the

customers.

The agriculture instruments manufacturing people are

25% aware about the Credit ratings. These industries are

medium organizations and deal with heavy instruments.

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Response of the agriculture industry is not positive.

Since they persons are having order base

manufacturing and the domestic are is 60% depend on

agriculture and farmers who are having tractors willbuy agriculture instruments.

5.6 Grocery (Bread, Dal, Snakes, Flour) products manufacturing

In Grocery business the main bankers

are PNB, SBBJ, SBI, Dena bank,OBC.

Flour and Dal manufacturing are small

industries and the Snakes and Bread

manufacturing industries have taken

loan from PNB.

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As the small grocery companies are not aware about credit ratings and the rating schemes by

CRISIL. But after the industrial visit many of small and medium industries that are looking for

loan and subsidy on the interest rate gave their positive response. Some industries like snake

manufacturing want to expand their business

5.7 Industry in different manufacturing business (sodium, clothes, plywood)

The industries which are have small units

of sodium manufacturing , clothes and

banners are also have the same bank as

SBBJ and PNB are dominating in the

industries and the awareness level of these

industries is 15% as per sample size and

after the visit many of them want credit

rating of their company. It will benefit for

them, to take loan easily and to expand

business. Due to that macro and small

enterprises will able to establish themselves in the market.

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Response of small and macro enterprise was good and

many of them were really interested for rating so that

new entrants can come in the market and become the

part of growth in the economy.

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6 FINDINGS OF THE RESEARCH

In RIICO areas where the survey was conducted the existing business is adding a high value of

living standard of the industry people as well as the skilled labor who are working with those

industries. The common business in those areas ( Sikar, palsana, Reengus, Chirawa, Pilani) that

is manufacturing of furniture, Granite slabs and granite tiles, manufacturing of transformers as

well as the boxes of transformers. Except this other industries are in manufacturing of Cattle

feed, plywood and bread, snakes.

From the survey, existing business were identified which if organized have potential to provide

employment to hundreds of labor. The products involved in these businesses are in high demand

in their respective markets. These businesses have tremendous opportunity for the economic and

social security of women and youth.

Manufacturing business units in RIICO Areas:

Granite Tiles & Slabs Manufacturing

Furniture Manufacturing

Cattle feed

Transformers Manufacturing

Plastic granules and Tanks

Bag manufacturingMilk Products( cheese, ice-cream & sweets)

Agriculture Instruments

PVC pipes and Sprinklers Manufacturing

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6.1 Finding in RIICO Area Sikar

Granite Industries-

The main business in the industrial area is the

manufacturing of Granite slabs and tiles and stone

cutting. There are many industries which are in granite

business for example Raj garanites, Khetan granite

industries Granite India. These all industries are

manufacturing units. Some of them are having their

trading units in the market of Sikar.

Material and instruments-

Granite stone, stone cutter, finishing machine electricity, stone lifter and work force.

The raw material for these industries is granite stone which they purchase form Jodhpur,

Bikaner, Makarana, Kishangrah or Jhunjhunu.

Manufacturing and supply-

All the industry people have more than 1000 squre feet area for the manufacturing plants and

having go downs for the slabs and tiles form there they supply to their trading units of theircustomers in different states of India. In Rajasthan the main supply area is Jaipur, Jhunjhunu,

Bikaner, Barmer, Ajmer.

Process-

In manufacturing process at starting the workers cut

the big stone in small slabs by the stone cutter, the

this process water is needed so that the stone could be

cut easily. Then they put it down in a circle and finish

its one side by the cleaner and then cut the stone

according to different measure. Granite slabs are

mostly come for the use of making kitchen and the

dining tables in hostels. Tiles are used in floor and on roofs. In Rajasthan many people who are

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lying in good income group are using granite tiles on their roofs to make the house water

resistant.

Bag Manufacturing

Manufacturing is another main business in the market of Sikar. It is growing with a fast pace.

Main reason to increase this business is that sikar on top in the area of education. There are many

school collages and computer education centre. Strength of the students in Sikar is more than

20000. The main player of the educational market is CLC (Carrier Line Coaching), GCI (Guru

Kripa Carrear Institute), Prince Senior Secondary School. They are providing foundation course

along with the preparation of RPMT, CPMT, ATEEE, IIT and ICAR.

There are many computer institutes like Vision IT College,

ICA,IIJT. They are providing basic computer course and

professional course as Tally, C++, Java, MNSC and CCNA.

They all have adopted a market strategy that is called value

added facility along with the courses, they give the diary of

that particular institute and a study bag with the logo of that

institute on that. For that they give the order to the

manufacturer in the local market. They charge approx Rs.125

for a study bag.

Along with the study bags they manufacture carry bag and travelling bags and for that they

charge more than 30% of the cost price and get a good amount of profit.

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Furniture Manufacturing-

In RIICO area of Sikar there are some flour mills and

some industries as manufacturing plastic granule and

plastic tanks. Some industries are manufacturing cattle

feed. These people have their shops as well as supply in

the local market in Rajasthan.

Some industries are in steel manufacturing. Main

products which they manufacture are cooler, chairs steel

box, steel gates and steel windows. In summer season

they earn a handsome profit from the sale of cooler or steel box. In steel furniture the industry

manufacture steel gate, channel gates collar, table chair and steal railing. The main reason to use

the steal furniture is durability and cheaper as compare to wooden.

Wooden Furniture-

In RIICO area there are some industries which are in the business of furniture manufacturing. It

was their traditional business which their ancestors used to do. At that particular time it was not a

profitable business. That time they

used to do this for their livelihood but

at present the tome has totally

changed. The Economy of India is

growing so the customers will go for

luxury goods.

In wooden furniture the Industry

manufactures Beds, sofa, chair, table,

wooden railing, temple and many

other wooden products. Ghasloyia

Furniture House, Karimi Furniture

House, Jyoti Furniture House, Kayamkhani Furniture House are some famous industries which

are in this business for last many years. They are having a good brand image in the domestic

market and are earning good profit from their business.

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Material and instruments-

Material required for furniture is wood, and plywood, and the instruments are wood cutting

machine, finishing instruments and painting machine. The raw material for the furniture

manufacturing they purchase form farmers of local area or import from neighboring state of

Rajasthan.

Cattle Feed Manufacturing

Many industries like Jain Industries, Anukampa Industries, Anupam Industries and Anurag and

Company are having manufacturing units of cattle feed. Some of them do supply in small towns

of Sikar RIICO area. Some of them as Anupam industries and Khetan Industries are having their

trading units in the market and they are making a handsome profit of this business.

Machine and Material, Mustard , cotton seeds ,oil extracting machine, packaging bags and labor

force

Manufacturing and supply

As the industry persons purchase the raw material

mustard from the local area framers and the cotton seed

that they purchase form Ganganagar district since

Ganganagr is the leading district in the production of

Cotton. In the unit the workers put the grains the machine

which extract the oil and the Khali of the oily grains, the

Khali is the food product of cattle. The workers dry this

for 2 to 3 days and that pack this in the bags and sale or

supply in the market. The price in the domestic market is Rs 1300 per 100 kg and the price of oil

in hole sale that the industries charge that is Rs 55 per kg.

Industries supply this in the neighbor district as Jhunjhunu, Sikar, Mukundgrah and Jaipur.

Industries sale the product at market price in the domestic market.The local market price of

cotton seeds is approx Rs 2000 per 100 kg and Mustard is 2500 per kg.

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Uses of product

The Khali which is made from cotton seeds is more useful for

cattle as compare to Khali made by Mustard seeds. The oil is used

for cooking purpose as well as cattle feed. This helps to the dairy

persons to increase the milk production. To use this dairy persons

or the milk men get more production of milk and earn more profit.

6.2 Finding in RIICO area Palsana

In industrial area of Palsana the industries are in the business of manufacturing of furniture, stonecutting and plywood. In this are the dominant business is granite marble. The industry persons

purchase granite stone from different regions of Rajasthan and then make granite tiles and slabs

and sell this in domestic market and supply in neighbor cities. Another business in Palsana is

manufacturing of transformers plastic granules and plastic tanks.

Transformers & Cement pole manufacturing

These are industries are private limited companies

which work on the contract base and manufacturing

according the order of the contractor who is taking

charge of the make power house in the villages and

towns of the area.

Mainly these companies are having contract with

Ajmer Vidhyut Nigam Ltd. Whereis the main

electricity board of Rajasthan is situated. Some industries as Mor Transformers pvt.ltd., Mahriya

Enterpriese are main transformer manufacturer. Except these companies there are some

companies which are manufacturing transformers cabinet and coils which are used in

transformers.

Same in the case of cement pole manufacturing, the industries manufacture the pole on the

contract base. Cement poles are more durable as compare to the steel poles, since there is no

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rusting problem in cement poles and another thing is that they are cheaper as compare to steal

poles.

The contractors are replacing the steel ones by cement poles so that there will be no risk in rainy

season and expense will be decrease.

Plastic Granules and Plastic Tanks manufacturing

In RIICO area of Palsana the business of plastic granule and tank manufacturing also exists and

the industry persons as Premier Plastic Industries, Shri Agro Industries and Kisan polymers are

getting good amount of profit from this business.

These storage tanks have gained wide appreciation for the

following features such as:

Non-corrosive

Light weight

Durable

Leak proof

Low maintenance

The entire range is widely used to store highly corrosive chemicals at high temperature and

pickling. These are available in the capacity ranging up to 500- 10000 liters. Available in

different shapes such as cylindrical, vertical, horizontal and rectangular, these tanks can also becustomized as per clients requirements.

Flexible tank linings can contain extremely corrosive and high temperature chemicals, acid or

alkaline and waste fluids as well as water, water based products and gases.

Material and manufacturing

PVC linings are made for are made from only highest grade, first run, virgin materials, no

fillers. There is a wide range of other materials available, Polypropylene, Polyurethane, Hypalon,

HDPE, Teflon. The PVC material is dielectrically seamed, that creates max material tear strength

and even thickness of the material over the seal. Other materials may take other manufacturing

methods.

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Uses

Plastic tanks are used in plating, chemical storage linings, ponds, water reservoirs and

cisterns, clarifier tanks, canals, gas recovery systems, membranes in pressure vessels, and

many more places.

Plastic tanks are used for storage of water,

chemical and also used as dustbins.

PVC granules are widely used in the purpose of

refrigeration and automobile industries.

These are mainly use as raw material of plastic products and the use of plastic granules is

in the business of Handicraft. They people use to make many kind of toys and home

interiors from the granules.

PVC pipes and Sprinklers Manufacturing

Arwali Industries, Khendalwal industries Pvt.ltd.and Kohinoor industries are in the manufacturing

business of Irrigation system. These industries

manufacture PVC pipes, sprinklers, water tubes etc.

Khandalwal and Kohinoor are the supplier of

irrigation system all over the country.

In Shekhawati region most of the areas comes under dark zone. In those area farmers cannot

deep tube wells and the farmers who are having their own tube wells most of them got dried. So

the sale of sprinklers is not up to mark. But the new concept of farming is dropping irrigation is

in progress so the industry people are manufacturing the dropping pipes which are 1inch of

diameter and easy to carry in farms. Since they are easy to carry but these are only success full in

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the farm of Aloe Vera and Ratanjot because they take

minimum 3- 5 year time to mature. Earlier in 1980 the

farmer of Shekhwati used aluminum sprinkler system for

irrigation. They were costly and difficult to carry at night.

But plastic PVC pipes and sprinkler system is cheaper as

compare to the aluminum and easy to carry for the farmer

at any point of time.

6.3Finding in RIICO area Reengus

In Reengus industrial are the main business is melting of steel and manufacturing of steel garter,

railing and steel slabs. Except this some industries are in the business of manufacturing of white

cement and powder. One or two industries are in the business of lamination paper, snakes and

bread manufacturing.

Steel gate and Angle manufacturing

In industrial area of Reengus steel manufacturing units which manufacture steel wire, steel

window, steel gate, channel gate and steel slabs. Mayank Industries , Neelkanth industries are in

manufacturing of steel slab and steel melting.

They purchase the scrap from the local market or import

from big steel plants in India and melt them in the

manufacturing unit and make steel slabs from that.

Manufacturing of steel angle is the toughest task the steel

is melt at high degree temperature and then the workers

sent it through the machine to give it shape like slab and

then cut this according to the size. There is a lot of hard

work and concentration needed for this if any worker miss

to catch the angle which is coming to him through the machine he will meet with the harm in his

leg or in hand.

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Workers mostly neglect to work with these industries. But what the industries people have done

they have adopted the HR policy that is called flexi timing. According to that policy the worker

work continuous for 2 hours and then take rest for one hour and again work for 2 hours. Salary

paid to them is according to hourly basis.

Uses

Channel gates are used in office, go dawns and

showrooms

Steel gate is for the houses

Steel angle are used in construction and steel gate

manufacturing and to apply them in the houses.

Steel angles are mainly used by the car painters to

make the furniture durable and strong

Milk products manufacturing

Milk products include Curd, butter and Cheese manufacturing. There are some industries which

are in the manufacturing and supply business of milk to the

different states and different cities of Rajasthan. According toa survey of Amul India is the biggest manufacturer of milk

and milk products and consumer also. The main Industries are

prbhuji Dairy, Gopal G dairy and Kishan dairy. They

purchase milk from the local villages and supply this to the

cities as Jaipur, Bikaner, Gelhi NCR and many other cities.

Some of them supply milk to Saras Dairy and local Sweet

makers who are famous for sweets made by milk, butter, Cheese and lassi.

The main Sweet makers are Rawat and Shodani sweets which are in jaipur and Milan Sweets and

bakery which is situated in Sikar.

The local vender purchase milk form the villages at a margin rate that is Rs 15-20 per liter for

cow milk and Rs 25-30 per liter of buffalo milk.

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Firstly in dairy they the workers burn the milk and separate the fat from milk and then pack it

and supply in the market or supply to small towns or cities.

The price in the market for the milk products is

Product Price (in Rs)

Milk 30 per Kg

Cheese 180 per Kg

Deshi Ghee 400 per kg

Curd 50 Per kg

6.4Finding in RIICO area Chirawa & Pilani

In these areas the main business is furniture manufacturing, steel furniture, and stone cutting.

The RIICO areas of these areas are not having manufacturing units. Some steel manufacturing

cum trading units are in the market but as compare to Sikar and palsana RIICO area this is not so

developed. Except this there is one or two manufacturing unit which is manufacturing Vermicompost. This time vermi compost is most valuable for farms. This is natural compost (khad)

and increase the productivity of the farms as compare to urea and DAP. There is no harm of

excess use of the vermi compost as compare to other fertilizers. Most of the farmers who are

growing vegetables in their farms are using vermi khad and getting handsome profit from the

vegetables as they are natural and fertilizers free.

Brick Manufacturing

A new business is growing in these areas that are Brick

Industry. This time the construction work in the cities is on

peak. The main reason behind this is the income level of

the people who are living in small towns and villages is

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increasing and many government employees who are living in villages are going to cities.

The raw material is sand and water which is easily available and they are charging 3000 rupees

for 1000 Bricks. Some of these industry people are have their own tractors or tractors on contract

basis. They take extra charge for the supply of the bricks to the contractor or the customers.

The industry people are getting handsome profit from this business and providing jobs to the

peoples who are living in nearby villages.

Agriculture Instruments Manufacturing

Shri Shain agro workers and Shri shyam agri

instruments are the main market players in the

RIICO area of Sikar. This is the era of technology.

In 1970 farmers of Rajasthan used to plough his

fields by camel and bulls. Now a day approx 70% of

farmers do farming by tractors. But still there are

some farmers who cannot afford tractors are using

the old trade of farming. Some farmers still believe that farming by the cattle is the best in

cheaper way and the productivity of the land remains same for a long time period.

They manufacture soil digger, two furrow ploughs,

tractor trailer trolly, seed grader and other

agricultural instruments. The industry persons

prepare according to the customers needs and on

order basis.

The target market for this is the domestic farmers or

the farmers in the different cities of Shekhawati

Region which includes Churu, Jhunjhunu and Sikar.

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Businesses that Failed

From the survey, some industries were known which were started in the surveyed small towns.

Some manufacturing units of polythene manufacturing and furniture (Sikar, Palsana) failed.

Main reason of fail of this business is ban on use. The poly bags which are available in the

market are the main cause of pollution. They are making earth pollution as well as air pollution if

one burn them. By burning of the poly bags they release carbon dioxide gas and carbon

monoxide. These gases directly impact on Ozone layer of atmosphere and making it

thin day by day and that is the main cause of global

warming.

Another reason to fail is the unavailability of skilled and

semi skilled labor for the industries. According to the

industry people the main reason of the unavailability of

labor is the different program run by the government,

NAREGA is one of them. Due to this program workers are

not interested to work with the manufacturing industries.

By the government schemes they get good salary for fewer efforts in lesser time. Unskilled

workers who come for the work their performance is not up to mark because they do not have the

knowledge of work done in the manufacturing units. In that case

company does not able to fulfill the order on time and they people

end up with loss at the end. This becomes the cause to loss brand

image as well as customer loyalty for the products.

The labor charges are high as unskilled labor charge is Rs 250 per

day. Reason for high labor charges is unavailability of labor.

Mostly persons have gone to abroad for work and earning more as

compare to India.

Except this there are more duties and taxes on the raw materials if the industry people import

from another states. Due to this they people do not earn their desired profit and closed their

business.

A SWOT analysis of these businesses should be conducted separately so that similar flaws may

not create problems for new upcoming businesses.

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7 Recommendations

1) It is recommended to do the SWOT analysis and develop business plan for the above

suggested industries.

2) Business Plan should consist of detailed study on marketing aspect of the product. This is the

weakest point identified for the failed businesses.

3) Some of the potential industries identified in Brick industries water purifier manufacturer,

vermin compost manufacturer.

4) Mostly industries are self financing industries and if in any case they need money they do

transactions with theprivate financing companies of the Shahukar in the villages. The interest

rate which the Shahukar charge is a bit higher as compare to the bank but in that case there is

no security deposit system and easy availability of money.

5) Top managers of CRISIL should continue with its enthusiastic approach towards the

undertaken project. It keeps the team motivated and helps the project to proceed in the right

direction.

6) Most of the companies do not have their personal Wed address and not having any kind of

internet connection. So this can be beneficial for the management to go in these services.

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Conclusion

Credit rating Scheme represents the status and performance of a firm or industry in the national

and international market as well as in domestic market. The industries which are in

manufacturing in the survey areas are more than15 years old, there is a great risk involved in the

market for the new industries.

Rating means the performance of the company and on that basis this will decide the level and

strength of the economic condition of manufacturing units in that area and will help to increase

per capita income and living standard of the persons.

It has facilitated in mapping industries on which further studies should be conducted and

business plan be developed for the same. These industries will result into source of income much

above the current sustenance level.

CRISIL as a facilitator will play very important role in empowering rural women and also giving

gainful employment to the unskilled youth. Further the business plan will take care of the

profitability and check on the shortcomings in the business.

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Annexure: A

Questionnaire

Survey on Awareness Level among MSMEs

Date: ____________

Name of the company ___________________________________________________________

Product ______________________________________________________________________

Place

_____________________________________________________________________________

Contact Person and Designation ___________________________________________________

Mobile: _________________________ Contact number: _______________________________

E-mail: _______________________________________________________________________

Banker________________________________________________________________________

1. Have you heard of Credit Rating for MSMEs?

a) Yes b) No

2. Has any Credit Rating Agency approached you for rating? (please name )

_____________________________________________________________

3. If Yes, have you undergone the Credit Rating exercise for your enterprise?a) Yes b) No

(IF NO, MOVE TO QUES.9)

4. If Yes, what motivated you to opt for the rating?a) Interest rate concession

b) Credibility among customers and suppliers

c) Reputed third-party opinion

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d) All of the above

e) Any other (please specify) __________________________________________

5. Has the rating helped you in bringing improvement to your business?

a) Yes b) No

6. If Yes, what was the kind of improvement?a) Management Strategy

b) Finance

c) Human Resource (HR)

d) Marketing

e) Production Process

f) All of the above

7. Has the rating helped you with your lenders and bankers?

a) Yes b) No

8. If Yes, how did the rating help you in meeting your financial needs?

a) Getting adequate quantum of loan from bank

b) Concession in interest rates

c) Relaxation in providing collaterals

d) Reduction in transaction cost

e) Faster decision on the part of the lenders

f) All of the above

9.

If No, are you interested to go for rating and know the benefits of credit rating?a) Yes b) No

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10.Are you aware about the various government schemes of the Ministry of MSME for the

development of MSMEs?

a) Yes b) No

11.Have you heard of or taken assistance under any of the following government schemes in

the past?

i. No b) if Yes, Kindly tick

1. International Cooperation Scheme

2. Performance and Credit Rating Scheme

3. Technology Upgradation Fund Scheme (TUFS) for the textile sector

4.

Marketing Assistance Scheme

5. Rajiv Gandhi Udyami Mitra Yojana (RGUMY)

6. Trade Related Entrepreneurship Assistance and Development (TREAD) Scheme

for Women

7. Credit Linked Capital Subsidy Scheme for Technology Upgradation

8. Credit Guarantee Scheme

9. ISO 9000/ISO 14001 Certification Reimbursement Scheme

10.National Manufacturing Competitiveness Programme (NMCP) Schemes Under

XI Plan: there are 10 schemes under NMCP like Marketing Support, Lean

Manufacturing, Mini Tool rooms, etc

11.Micro & Small Enterprises Cluster Development Programme (MSE-CDP)

12.MSME MDA

13.Mini Tool Rooms

14.Scheme of National Award

12.

How many government schemes are you aware of ?:

a) None

b) 1-5 schemes

c) 6-10 schemes

d) More than 10 schemes

http://rgumy.nic.in/http://www.dcmsme.gov.in/schemes/Credit_link_Scheme.htmhttp://www.dcmsme.gov.in/schemes/sccrguarn.htmhttp://www.dcmsme.gov.in/schemes/sciso9000.htmhttp://www.dcmsme.gov.in/schemes/NMCPDetail.htmlhttp://www.dcmsme.gov.in/schemes/NMCPDetail.htmlhttp://www.dcmsme.gov.in/schemes/NMCPDetail.htmlhttp://www.dcmsme.gov.in/schemes/NMCPDetail.htmlhttp://www.dcmsme.gov.in/MSE-CDProg.htmhttp://www.dcmsme.gov.in/MSE-CDProg.htmhttp://www.dcmsme.gov.in/schemes/MSME_MDA_Guidelines.pdfhttp://www.dcmsme.gov.in/schemes/MSME_MDA_Guidelines.pdfhttp://www.dcmsme.gov.in/schemes/scminitool.htmhttp://www.dcmsme.gov.in/schemes/scminitool.htmhttp://www.dcmsme.gov.in/schemes/award_scheme.htmhttp://www.dcmsme.gov.in/schemes/award_scheme.htmhttp://www.dcmsme.gov.in/schemes/award_scheme.htmhttp://www.dcmsme.gov.in/schemes/scminitool.htmhttp://www.dcmsme.gov.in/schemes/MSME_MDA_Guidelines.pdfhttp://www.dcmsme.gov.in/MSE-CDProg.htmhttp://www.dcmsme.gov.in/schemes/NMCPDetail.htmlhttp://www.dcmsme.gov.in/schemes/NMCPDetail.htmlhttp://www.dcmsme.gov.in/schemes/sciso9000.htmhttp://www.dcmsme.gov.in/schemes/sccrguarn.htmhttp://www.dcmsme.gov.in/schemes/Credit_link_Scheme.htmhttp://rgumy.nic.in/

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13.If yes, how would you rate the usefulness of the schemes?

a) Very useful

b) Moderately useful

c) Not useful

14.Some of these schemes are operated through banks. Have the banks been supportive in

channelizing assistance under these schemes?

a) Highly supportive b) Somewhat supportive c) Not supportive

15.

Which media do you think will be most effective to make these schemes better known

among the MSMEs?

a) Radio

b) TV

c) Newspaper

d) Website

e) Any other suggestions .

16.Do you have any suggestions for the government to address

______________________________________________________________________________

______________________________________________________________________________

______________________________________________________________________________

______________________________________________________________________________

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