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sme interest rates of banks
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COMPARISION OF OUR INTREST RATE AND SERVICES CHARGES WITH OTHER BANKS IN SMESUMMER TRAINING REPORT
SUMMER TRAINING REPORT SUBMITTED FOR THE PARTIAL FULFILLMENT OF THE REQUIREMENT FOR MASTER OF BUSINESS ADMINISTRATION
DEPARTMENT OF MANAGEMENT STUDIESMAULANA AZAD NATIONAL INSTITUTE OF TECHNOLOGY
(DEEMED UNIVERSITY)BHOPAL
Submitted by:RASHMI KHARE092103102
Performed at: STATE BANK OF INDIABHOPAL
31 May to aug 2010
1
ABSTRACT
In the growth and progress of any country, its small scale sector is of equal importance as of other large scale sectors because a country cannot progress in its true sense unless its small scale sectors progress. Be it a developed country like Japan and USA or a developing country like Thailand and Pakistan, they form the backbone of the economy. A dynamic and vibrant SME sector plays a key role in successful economic growth of the countries. The developmental role of SMEs has been highly recognized. They provide most of the employment opportunities for the general public of the country and as a result, they prosper in these conditions. SMEs allow a homogeneous geographic development throughout the length and breadth of a country because of the fact that the development is done at a micro level due to the initiative taken by the general public.The Government of India, realizing the potential of SMEs has very rightly turned its attention toward the uplift of this sector. The formation of SMEDA (Small and Medium Enterprises Development Authority) and SME Bank are a step in right direction. Furthermore, the State Bank of India has instructed all the commercial banks to establish a SME counter in their premises. This will have a positive effect on the sector as whole
2
BONAFIDE CERTIFICATE
3
DECLARATION
I, Rashmi Khare, student of MBA THIRD Semester, studying at Maulana azad national institute of technology, Bhopal, hereby declare that the summer training report on “comparison of our interest rate and service charged with other bank in SME” submitted to maulana azad national institute of technology, Bhopal in partial fulfillment of Degree of Master’s of Business Administration is the original work conducted by me.
4
The information and data given in the report is authentic to the best of my knowledge. This summer training report is not being submitted to any other University for award of any other Degree, Diploma and Fellowship.
Rashmi Khare
Acknowledgement
It is my proud privilege to release the feelings of my gratitude to several persons who helped me
directly or indirectly to conduct this project work. I express my heart full indebtness and owe a deep
5
sense of gratitude to my teacher and my faculty guide…………, Professor, MANIT national Institute
of technology, Bhopal and to my corporate guide Mr. ……………….. AGM, SBI, Main Branch
Bhopal, Mr. ……………..& Miss. SME-2, SBI, Main Branch, Bhopal, for their sincere guidance and
inspiration in completing this training.
I am extremely thankful to the head of department (humanities), faculties of the MANIT
MBA DEPARTMENT for their coordination and cooperation and thankful to Prof. ……………….
for his kind guidance and encouragement.
I am also extremely thankful to all those persons who have positively helped me
I also thank all my friends who have more or less contributed to the preparation of this
project report. I will be always indebted to them.
Thanking You
CONTENT
Page no.
Executive Summary…………………….............................................................07
Chapter 1……………………………………………………………………………....08 Company Profile
Overview………………………………………………………………………09 History…………………………………………………………………….......10
International presence…………………………………………………………11
Chapter 2……………………………………………………………………………….12
Introduction to SME………………………………………………………….13
6
Comparison of SME interest rate…………………………………………….16
Need of comparison………………………………………………………….16
Introduction to interest rate…………………………………………………..17
Comparison of SME product…………………………………………………23
Research objectives…………………………………………………………..38
Significance and scope……………………………………………………….39
Chapter 3………………………………………………………………………………..40
Research methodology
Chapter 4 ………………………………………………………………………............44Analysis of data
Chapter 5……………………………………………………………………….............51 Findings………………………………………………………………………52 Limitations………………………………………………………………….53 Conclusion…………………………………………………………………..57
Annexure (Questionnaire & survey)………….……………………………………………………………………..58
Bibliography………………………………………………………………….….....63
Executive Summary
In the growing global competition, the productivity of any business concern depends upon the
behavioral aspect of consumers. This topic deals with the customer’s perception towards SME
Product from SBI. This project report contains 5 different chapters. The report begins with the
introduction to company, its history, international presence structure.
7
Second chapter deals with introduction of interest rate, base rate, and policy of different bank in term
of their lending rates i.e. interest rate
The third chapter, methodology adopted in preparing this report is mentioned. It covers the sample
procedure, types of data used and the data collection method.
The fourth chapter comprehensive coverage of forecasting concepts and techniques which shows the
analysis of data through tabulation, computation and graphical representation of data collected from
survey.
The fifth chapter deals with the findings, suggestion & conclusion part which is very much
important after analysis is made.
As we know that only analysis and conclusion is not the end of a research, so in the sixth chapter the
recommendation part is covered which are made after a depth study of the analysis part of thesis.
In each of the five chapters as described above, every chapter has been scheduled in a manner so as
to enable the reader to appreciate the contents easily. The report is supported by figures and data
wherever necessary with a view to assist the reader in developing a clear cut understanding of the
topic.
I hope this report will be extremely useful for those it is meant.
RASHMI
Chapter 1
Company Profile
8
OVERVIEW
State Bank of India (SBI) is the largest nationalized commercial bank in Indiain terms of assets, number of branches, deposits, profits and workforce. Withthe liberalization of the Indian banking industry in the mid-1990s, SBI facedstiff competition from the private sector and foreign banks which resulted insignificant loss of its market share. The case describes the efforts of SBI toregain its lost market share by undergoing a major restructuring exercisewhich involved redesigning its branch network, providing alternate bankingchannels, emphasis on lean structure and technology up gradation. The casealso discusses how SBI is building its image as a customer friendly bank bylaunching innovative products & services and promoting its brand.
Founded:
Kolkata, 1806 (as Bank of Calcutta)
Headquarters:
Corporate Centre, Madam Cama Road, Mumbai 400 021 India
Key people:
Om Prakash Bhatt, Chairman
Industry:
Banking Insurance Capital Markets and allied
Industries
Products:
Loans Credit Cards, Savings Investment vehicles SBI
Life (Insurance) etc.
Revenue:
▲ US$ 24.577 billion (2008) Net income
▲ US$ 2.25 Billion (2008)
Total assets:
▲ US$ 257.183 billion (as of 31st March2009)
Employees:
205,896
9
History
The roots of the State Bank of India rest in the first decade of 19th century, when the Bank of
Calcutta, later renamed the Bank of Bengal, was established on 2 June 1806. The Bank of Bengal
and two other Presidency banks, namely, the Bank of Bombay (incorporated on 15 April 1840) and
the
Bank of Madras (incorporated on 1 July 1843). All three Presidency banks were incorporated as joint
stock companies, and were the result of the royal charters. These three banks received the exclusive
right to issue paper currency in 1861 with the Paper Currency Act, a right they retained until the
10
formation of the Reserve Bank of India. The Presidency banks amalgamated on 27 January 1921,
and the reorganized banking entity took as its name Imperial Bank of India. Pursuant to the
provisions of the State Bank of India Act (1955), the Reserve Bank of India, which is India's central
bank, acquired a controlling interest in the Imperial Bank of India. On 30 April 1955 the Imperial
Bank of India became the State Bank of India. The Govt. of India recently acquired the Reserve
Bank of India's stake in SBI so as to remove any conflict of interest because the RBI is the country's
banking regulatory authority. In 1959 the Government passed the State Bank of India(Subsidiary
Banks) Act, enabling the State Bank of India to take over eight former State-associated banks as its
subsidiaries. On Sept 13, 2008, State Bank of Saurashtra, one of its Associate Banks, merged with State Bank
of India.
The evolution of State Bank of India can be traced back to the first decade of the 19th century. It
began with the establishment of the Bank of Calcutta in Calcutta, on 2 June 1806. The bank was
redesigned as the Bank of Bengal, three years later, on 2 January 1809. It was the first ever joint-
stock bank of the British India, established under the sponsorship of the Government of Bengal.
Subsequently, the Bank of Bombay (established on 15 April 1840) and the Bank of Madras
(established on 1 July 1843) followed the Bank of Bengal. These three banks dominated the modern
banking scenario in India, until when they were amalgamated to form the Imperial Bank of India, on
27 January 1921.
An important turning point in the history of State Bank of India is the launch of the first Five Year
Plan of independent India, in 1951. The Plan aimed at serving the Indian economy in general and the
rural sector of the country, in particular. In order to serve the economy as a whole and rural sector in
particular, the All India Rural Credit Survey Committee recommended the formation of a state-
partnered and state-sponsored bank.
The All India Rural Credit Survey Committee proposed the take over of the Imperial Bank of India,
and integrating with it, the former state-owned or state-associate banks. Subsequently, an Act was
passed in the Parliament of India in May 1955. As a result, the State Bank of India (SBI) was
established on 1 July 1955. This resulted in making the State Bank of India more powerful, because
as much as a quarter of the resources of the Indian banking system were controlled directly by the
State. Later on, the State Bank of India (Subsidiary Banks) Act was passed in 1959. The Act enabled
the State Bank of India to make the eight former State-associated banks as its subsidiaries.
INTERNATIONL PRESENCE
11
State Bank of India (SBI) is the largest Indian .The bank traces its ancestry back through the to
imperial bank of India the founding in 1806 of the Bank of Calcutta, making it the oldest
commercial bank in the Indian Subcontinent. The Government of India nationalised the Imperial
Bank of India in 1955, with the Reserve Bank of India taking a 60% stake, and renamed it the State
Bank of India. In
2008, the Government took over the stake held by the Reserve Bank of India. SBI provides a range
of banking products through its vast network in India and overseas, including products aimed at
NRIs. The State Bank Group, with over 16000 branches, has the largest branch network in India.
With asset base of $250 billion and $195 billion in deposits, it is a regional banking behemoth.
It has market share among Indian commercial banks of about 20% in deposits and advance
CHAPTER 2
Introduction to sme
Comparison of sme interest rate
12
introduction to interest rate
Statement the Problem
Research objectives
Significance and scope
SMALL AND MEDIUM ENTERPRISES (SMEs) IN INDIA
INTRODUCTION
Small and medium enterprises (SMEs) are one of the principal driving forces in economic
development. They stimulate private ownership and entrepreneurial skills, they are flexible and can
adapt quickly to changing market demand and supply situations, they generate employment, help
diversify economic activity and make a significant contribution to exports and trade. Small and
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medium enterprises (SMEs) have played an important role in boosting up economies of the
developing countries and particularly in recent times the success of the South East Asian countries is
indebted to this very sector. 8 SMEs account for almost 90 percent of privately-owned businesses
and bulk of employment all over the globe. Experience has shown that neglect of this sector is bound
to keep that country below its potential growth level. The SME sector covers all types of businesses,
but it is the common profile of service and manufacturing business concerns. Reason being the large-
scale manufacturing sector is unable to cater to all demands of goods and services and depends
largely on subcontracting arrangements with smaller business units. If viewed in global scenario,
SMEs are found to generate 80 per cent of total industrial employment, contributing 30 per cent to
GDP and adding to export earnings to the extent of 1/4th of total industrial sector contribution. The
globalization and trade liberalization, which is a favored move on the part of the developed countries
has increased the competition for SME sector in all the developing countries, particularly in Asian
countries, and is bound to further widen the gap between rich and poor nations. Thus it is imperative
for economic survival of Asian countries that they review their national economic policies.
Definition of micro, small and medium enterprises
micro enterprise is an enterprise where investment in plant and machinery does not exceed
Rs. 25 lakh.
small enterprise is an enterprise where investment in plant and machinery is more than Rs.
25 lakh but does not exceed Rs. 5 crore
medium enterprise is an enterprise where investment in plant and machinery is more than
Rs. 5 crore but does not exceed Rs. 25 crore
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CHARACTERSTIC OF SME
1. Growth recorded by SSI in India 2% more than any other sector
2. The sector accounts for 9% of the country GDP.
3. The sector employs more then 20 million people( employee contribution by SME
in Madhya Pradesh is 4.5%)
4 .It has been estimated that a lakh rupees of investment in fixed assets in smaller
sector generates employment for four persons.
5. Among the large PSBs, state bank of India SMEs exposure grew by 28% in 2009.
6. Public sector bank’s overall credit to SME grew by 28% in 2008-2009 accounted to
Rs.2, 10,000 crores.
7 .Reserve bank of India advices all commercial banks to achieve 20% annual growth
in SME lending till 2010
8. SME on traditional products constitute a massive of 95% of the SSI exports.
Advantage of sme
More job per unit capital.
Integrated into domestic corporation.
Increased the employment
Flexibility
Rapid growth of small scale industries in long run.
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OBJECTIVE -COMPARISION OF INTEREST RATE FOR SME PRODUCT
NEED OF THE COMPARISION
We need to examine of two or more than two banks in terms of their interest rate for SME product with a view of discovering the resemblances or differences in their policies ,advancement ,ease to the customer.
16
Product is:
Traders easy loans
Doctor plus
School plus
Rent Plus
Shoppe Plus
INTRODUCTION TO INTEREST RATE
INTEREST RATE
Interest can be said to be the price paid by the borrower for the use of funds saved by the lender and the compensation to the lender for his deferring expenditures. This compensation comprises two elements, namely a payment equal to the loss of purchasing power of the principal during the term of the loan and a balance that represents the real interest accruing to the lender. However this simplicity does not extend into the area of rate determination since rates vary not only because of inflation, as implied above, but also because of a number of other influences, including:
- The amount, purpose and period of the transaction;
17
- The credit-worthiness of the borrower;
- The collateral offered and/or other guarantees/guarantors available;
- The competition for the transaction;
- Government policy.
As a consequence, there will be numerous rates applying to the large number of transactions that are in effect at any one time in any one country. While efforts have been made in the rate selection to ensure as much international comparability as possible, the fact remains that the institutional features of each member’s financial markets are distinct and often markedly different from those of other members. However, the intent is to present for each country a range of rates, from ‘overnight’ through ‘short-term’ to ‘long-term’. In general, ‘overnight’ and ‘short term’ rates relate to money market instruments, while ‘long term’ rates are secondary market yields of long term (usually 10 year) bonds
How the rate is determined?
The simplest theory is the loan able funds one, that it is the rate that equilibrates the supply of loan able funds in an economy with the demand for such funds. Then there is the classical theory, which defines the interest rate as the point of intersection of the savings and investment curves. Investment represents the demand for investable resources and saving represents the supply, whilst the rate of interest is the “price” at which the two are equated
There is just more than one interest rate in an economy?
No. The rate at which the government (sovereign) borrows—or the rate that equilibrates government’s demand for funds with the supply—is called the risk-free rate of interest (the logic being, there is no risk in lending to government, as it can always print money).
All other interest rates will be at a premium over the risk-free rate for the period in question, the amount of premium determined by the credit-risk of the borrower. Someone with a good record of returning loans will be able to borrow at a cheaper rate compared to someone with a credit history as a defaulter.
How do central banks influence interest rates?
The main function of central banks is to preserve the value of money i.e. to keep inflation in check. They do so in a number of ways — by targeting a particular rate of inflation or by targeting a certain level of money supply in the economy. Typically, a central bank assesses the amount of funds required to oil the economy’s wheels, commensurate with the desirable level of economic activity. It raises rates whenever it feels the economy is over-heating and lowers these when it wishes to spur investment and growth.
18
How does RBI influence the rates?
In a number of ways. Directly, through the reverse repo : repo rates (at which it sucks out and pumps in liquidity into the system). And indirectly through the cash reserve ratio (CRR), which is the ratio of their demand and time deposits that banks must keep with the RBI, by open market operations wherein it buys and sells government securities, the liquidity adjustment facility, etc. The bank rate, the traditional route, is largely unused.
Why is the interest rate important?
The rates are an important determinant of the level of investment in an economy. Broadly, if rates increase across the board, then, other things remaining the same, investment will decrease (as it will no longer be as profitable as before to invest) and so will the growth rate. If interest rates fall, investment will pick up and so will growth.
So should economies like India keep interest rates low?
No, while high rates may dampen ‘animal spirits,’ keeping interest rates artificially low can have far worse consequences over the long-term. This is because any investment decision is a tradeoff between the cost of capital (whether borrowed or own funds) and the rate of expected return from the investment.
So, if interest rates are kept artificially low, many investment decisions that are otherwise unviable may be taken. The result could well be the creation of excess capacity—companies producing more cars, scooters, fridges, TVs and so on, relative to demand— bringing in its wake the inevitable painful adjustment later, when companies downsize and lay off workers.
What is real interest rate? How is it different from the nominal one?
The real interest rate is the nominal one minus the expected rate of inflation. People often err in their calculation by using the actual rather than expected rate of inflation. Of course, to the extent there is seldom any unanimity on the expected rate of inflation, different real rates can safely be bandied about!
Are interest rates in India market-determined?
Most are, now. Those which aren’t include the rate of interest on savings bank deposits and small savings (provident funds, national savings certificates, RBI bonds, etc)....
SOME OTHER TERMINOLOGY
Interest Coverage RatioA ratio used to determine how easily a company can pay interest on outstanding debt. The interest coverage ratio is calculated by dividing a company's earnings before interest and taxes (EBIT) of one period by the company's interest expenses of the same period:
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The lower the ratio, the more the company is burdened by debt expense. When a company's interest coverage ratio is 1.5 or lower, its ability to meet interest expenses may be questionable. An interest coverage ratio below 1 indicates the company is not generating sufficient revenues to satisfy interest expenses. under 1.5.. The history and consistency of earnings is tremendously important. The more consistent a company’s earnings, the lower the interest coverage ratio can
Interest Rate Swap An agreement between two parties (known as counterparties) where one stream of future interest payments is exchanged for another based on a specified principal amount. Interest rate swaps often exchange a fixed payment for a floating payment that is linked to an interest rate (most often the LIBOR). A company will typically use interest rate swaps to limit or manage exposure to fluctuations in interest rates, or to obtain a marginally lower interest rate than it would have been able to get without the swap.
Interest Rate RiskInterest rate risk affects the value of bonds more directly than stocks, and it is a major risk to all bondholders. As interest rates rise, bond prices fall and vice versa. The rationale is that as interest rates increase, the opportunity cost of holding a bond decreases since investors are able to realize greater yields by switching to other investments that reflect the higher interest rate. For example, a 5% bond is worth more if interest rates decrease since the bondholder receives a fixed rate of return relative to the market, which is offering a lower rate of return as a result of the decrease in rates.
INEREST DERIVATIVE
a derivative which has an underlie activity to pay or receive a given amount of money at a given interest rate. Interest rate derivative are most popular derivative and include interest rate swap
INTEREST RATE FUTUREan interest rate future is a financial derivative (a futures contract) with an interest-bearing instrument
as the underlying asset.
Examples include Treasury-bill futures, Treasury-bond futures and Eurodollars futures.
The global market for exchange-traded interest rate futures is notionally valued by the Bank for International Settlement at $5,794,200 million in 2005.
INTEREST RATE OPTIONSAn investment tool whose payoff depends on the future level of interest rates. Interest rate options are both exchange traded and over-the-counter instruments.
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ZERO INTEREST POLICY
The (ZIRP) is a concept in macroeconomics where economies exhibit slow growth with a very low interest rate, such as contemporary Japan and since December 16, 2008, the United States.
INTEREST RATE = BASE RATE+ BORROWER SPECIFIC CHARGE
Where
BORROWER SPECIFIC CHARGE=
PRODUCT SPECIFIC OPERATING COST
CREDIT RISK PREMIUM, AND TENOR PREMIUM
BASE RATE
Unlike the BPLR that was set somewhat arbitrarily by banks, the base rate will follow an explicit formula that factors in a bank's cost of deposits, operating costs (expenses of running its branches, for instance), the cost of statutory drafts on bank funds imposed by the Reserve Bank of India (the Cash Reserve Ratio and Statutory Liquidity Ratio) and the profit margin.
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BENIFITS OF BASE RATE
The base rate will help borrowers to compare interest rates offered by various banks and make the process of how banks arrive at interest rates for loans more transparent. In the existing system, banks are free to fix their PLRs. Most of the variable rate loans, like home loan and some of the term loans are pegged against PLR. This means, if the PLR is not changed, the loan rates remain the same
Banks have taken advantage of existing PLR system at the cost of their borrowers. When interest rates increase, banks hike their PLRs immediately, leading to rise in the home loan rates. But, when interest rates fall, they don't reduce PLRs. Because of this, the existing customers are not benefited by the lowering of the interest rates. However, banks pass on the benefit to new customers by increasing the discount against PLRs.
Under the new system, home loans and other variable loans will be pegged against a base rate. As the new base rate is fixed on the basis of cost of funds, any change in the interest rate will reflect in the base rate. And therefore, it will be automatically passed on to the existing customers also. At the same time, RBI has clearly said that the base rate will be minimum rate for all commercial loans and banks will not be permitted to resort to any rate below it.
NAME OF THE BANK BASE RATE (11/07/10) IN %
SBI 7.50
PNB 8
IDBI 8
BANK OF BARODA 8
CANNARA BANK 8
ALLAHABAD BANK 8
UNION BANK OF INDIA 8
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CENTRAL BANK OF INDIA 8
INDIAN BANK 8
UCO BANK 8
CORPORATION BANK 7.75
HDFC 7.25
BASE RATE OF DIFFERENT BANK
Sme Product
FOR TRADERS
PURPOSE- this is a hassle product for traders to acquire fixed asset fot the business or to build up of inventory /current assets.
23
INTEREST RATE OFFERED
SBI BANK
Upto Rs. 50,000 8.50%
24
CHARACTE-RSTIC
SBI UNITED BANK OF INDIA
IDBI UCO BANK
ELIGIBILITY
Existing customer
existing trader/ business person/ service provider operating and earning profit for at least two year
Distribution chain partners comprising dealers, stockiest, distributors, etc.
enterprises engaged in business for at least 2 years /New trading unit started by existing UCO Trader
FACILITIES Cash credit, OD ,term loan
Overdraft,term loan
OD, Cash Credit, Term loan. , Bill Discounting.
Term loan,Cash credit,
ASSSEMENT OF BANK FINANCE
Loan not exceeds 90% of total worked out requirements, or 65% of collteral, whichever is less.
Maximum 50 lack subject to 20% of the annual sales/turnover
Min: Rs.10 lakh Max Rs 500 lakh
Minimum Rs. 1 Lac and Max Rs 200 Lac
REPAYMENT(months)CCTL(based on cash flow)OD
On demand
Max of 60
Max 60
Limit valid,12
Up to 60 years with interest reset clause
Max 60
Above Rs. 50,000 to Rs. 2 lakh 9.50%
Above Rs. 2 lakh to Rs. 5 lakh 10.25%
Above Rs. 5 lakh to Rs. 25 lakh 11.00%
Above Rs. 25 lakh based on credit assessment -
UNITED BANK RATE
Revised wrf 01.07.2010
BR + 4.50% i.e. 12.75% p. a.
BANK OF BARODA
Traders Loan (irrespective of loan limit/OD/TL)
4.00 % above Base Rate i.e.12.00%
ORIENTAL BANK OF COMMERCE
Upto 0.50 lacs Base Rate + 2.00 % i.e. 10.00%
Above 0.50 lacs and Upto Rs 2 lacs Base Rate + 2.50 % i.e. 10.50 %
Above Rs 2 lacs and Upto Rs. 20.0 lacs Base Rate + 3.00 % i.e. 11.00 %
Above Rs 20.0 lacs to Rs. 25.0 lacs Base Rate + 4.00 % i.e. 12.00 %
25
ALLHABAD BANK
For credit limits up to Rs.20.00 Lac for Trade
CANARA BANK
Up to Rs.2 lakh 12.50% p.a.
Above Rs.2 lacs including loans under
priority sector 13.75% p.a.
DOCTOR PLUS
PURPOSE- product for qualified Doctors,Medical practioners, for purchase of equipment,for
setting up clinic,nursing home,Lab,Drug store,Ambulance,expansion or renovation of
exixting premises.
characteristic SBI BANK OF BARODA
IDBI CANARA BANK
26
Loan upto Rs.50000/- 8.75% (Fixed) 9.25% (Fixed)
Loan above Rs.50000/- to Rs.2.00 Lac BR+1.00% BR+1.50%
Loan above Rs.2.00 Lac to Rs.10.00 Lac BR+1.50% BR+2.00%
Rs.10.00 Lac & above (Linked to Rating of the account)
AB -1 : BR+1.50%AB -2 : BR+1.50%AB -3 : BR+2.50%AB -4 : BR+3.50%AB -5 : BR+5.00%
AB -1 : BR+2.00%AB -2 : BR+2.50%AB -3 : BR+3.00%AB-4 : BR+4.00%AB-5 : BR+5.50%
ELIGIBILITY Registered
practitioner,
possess
minimum
qualification
individuals,
Proprietorship
/ Partnership
firms, Private
Limited
companies
All medical
practitioners/
doctors/
clinics·
registered
medical
practitioners,
Min exp of 3
years.
FACILITIES Medium term
loan
Term loan/OD Term loan &
Overdraft/
Cash Credit
Term loan
ASSSEMENT OF BANK FINANCE
Max of 5 crore
,with sub
ceiling for
working
capital limits
at 10%of amt
of loan
Min 50,000
Max, 50 lakh
Minimum: Rs.50, 000/-
Maximum:
Rs. 2 crores
Maximum of Rs.10 lacs
REPAYMENT(months)CCTL(based on cash flow)
Max upto 84 35 TO 84 84 Term Loan –
60-84 /24-36
months in
installments /
EMI
SBI INTEREST RATE
Loan amount Rate Repayable in 3 years and above
Upto Rs. 50,000 8.50 1.25% below SBAR 9.00
27
Above Rs. 50,000 to Rs. 2 lakh 9.00 0.75% below SBAR 9.50
Above Rs. 2 lakh to Rs. 5 lakh 9.25 0.50% below SBAR 9.75
Above Rs. 5 lakh to Rs. 25 lakh 10.25 0.50% above SBAR 10.75
UNITED BANK INTEREST RATE
a Limit up to Rs 25000/- BR, 8.25%
b Limit > Rs 25000/- and up to Rs50000/- BR+0.50%, i.e. 8.75%
c Limit > Rs 50000/- and up to Rs 2,00,000/- BR+1.50%, i.e. 9.75%
d Limit > Rs 200,000/- and up to Rs500,000/- BR+2.50%, i.e. 10.75%
e Limit > Rs 500,000/- and up to Rs 10,00,000/- BR+3.00%, i.e. 11.25%
f Limit > Rs 10, 00,000 and up to Rs 25,00,000/- BR+3.00%, i.e. 11.25%
g Limit > Rs 25,00,000/- upto Rs10.00 crores As per Credit Risk Rating
BANK OF BARODA INTEREST RATE
upto Rs 2 lacks3.00% above the base rate i.e. 11.0%
Above Rs 2 lacks 2.50% above base rate i.e10.50%
ORIENTAL BANK OF COMMERCE
Rate of Interest: wrf to 01.07.2010
For .Micro enterprises
Up to Rs 50,000 BR + 0.75% = 08.75%Above Rs. 50,000 and upto Rs. 2.00 lac BR + 1.50% = 9.50%Above Rs. 2.00 lacs and upto Rs. 25.00 lac BR + 1.75% = 9.75%
Limit Above Rs. 25 Lac and upto Rs. 1.00 Crore
28
If credit rating is A++ : BR + 1.50% = 9.50% If credit rating is A+ - : BR + 2.00% = 10.00% If credit rating is A - : BR + 3.00% = 11.00%
If credit rating is below A : BR + 4.00% = 12.00%
For Small Enterprises
Upto Rs. 50,000/- BR + 1.25% = 9.25%
Above Rs. 50,000/ - and upto Rs. 2.00 lakh
BR + 2.00% = 10.00%
Above Rs. 2.00 lacs and upto Rs. 25.00 Lakh
BR + 2.25% = 10.25%
Limit Above Rs. 25 Lac and upto Rs. 1.00 crores If credit rating is A++: BR + 2.00% = 10.00% If credit rating is A+ - : BR + 2.50% = 10.50% If credit rating is A - : BR + 3.50% = 11.50% If credit rating is below A: BR + 4.50% = 12.50%
AXIS BANK
Rate of Interest 14.00% to 21.00%
ALLAHABAD BANK
Bank’s Base Rate (BR) wrf. 01.07.2010 IS 8.00%
Loan up to Rs.50000/ 8.75% (fixed)Above Rs.50000/- to Rs.2.00 lacs. BR+1.00%Above Rs.2.00 lakh to Rs.10.00 lakh BR+1.50%Rs.10.00 lacs & above (Linked to Rating of the account)
AB-1 : BR+1.50% AB-2 : BR+1.50% AB-3 : BR+2.50% AB-4 : BR+3.50%
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AB-5 : BR+5.00% AB-6 : BR+6.00% AB-7 : BR+7.00%
CANARA BANK
CANARA BANK
SCHOOL PLUS
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Aggregate limit Micro Enterprises Small & Medium Enterprises
Working capital Term Loans Working CapitalTerm Loans
Upto Rs. 50000 8.75 9.25 9.25 9.75
>Rs. 50000 upto Rs. 2.00 lacs 9.25 9.75 9.75 10.25
> Rs. 2 lacs upto Rs.5 lacs 9.50 10.00 10.00 10.50
> Rs. 5 lacs upto Rs.10 lacs 10.50 11.00 11.00 11.50
PURPOSE-product for educational institution
CHARACTERSTIC SBI BANK OF BARODA
eligibility Government
aided/private/run by
trust of good
standing/ AICTE
institute
Government
aided/private/run by
trust of good standing/
AICTE institute
facility Term loan Term loan
Finance assessment Max 25 lakh Max 25
Repayment period 3 year and above 3 years
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STATE BANK OF INDIA
Size of Credit limit Rate Repayable in 3 years and above
Upto Rs. 2 lakh 9.25 1.00% below SBAR 9.25
Above Rs. 2 lakh to Rs. 5 lakh 10.25 0.50% above SBAR 10.75
Above Rs. 5 lakh to Rs. 25 lakh 11.00 1.50% above SBAR 11.75
THE VISHWESHWAR SAHAKARI BANK
Educational Institutions Loan Scheme 14.00
BANK OF BARODA
Loan Limit For Micro Enterprises For Small Enterprises
Upto Rs. 50,000 At Base Rate 0.50% above Base Rate
Above Rs. 50,000 upto Rs. 2.00 lacs
0.50% above Base Rate 1.00% above Base Rate
Above Rs.2 lacs but less than Rs.25 lacs
2.75% above Base Rate
3.25% above Base Rate
SBI SHOPPE
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Purpose
Purchase of new/old shops/establishments/offices .Modernization /expansion Of establishments/shops, etc. All furniture/fixtures, electrical fittings and other accessories required for shops/showrooms/offices.
characteristic SBI BANK OF BARODA IDBIEligibility Individuals
, Firms ,Partnership Firms Trusts
Individuals , Firms ,Partnership Firms Trusts
All existing customers having a satisfactory dealing with the Bank for the last 3 years.
facility Term loan Term loan OD, Open Cash Credit Loan amount Max Rs 25 lakh. Max 25 lakh Max of Rs. 10 lakh
security Hypothecation/ pledge/ mortgage/ assignment of property
Hypothecation/ pledge/ mortgage/ assignment of property
Term Loan: Exclusive Charge on assets financed. Working Capital: Exclusive charge on all the current assets.Collateral: Up to 50% of the loan amount
Repayment period(month)
36 to 84 36 36
.
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STATE BANK OF INDIA
Upto Rs. 50,000 9.00%
Above Rs. 50,000 to Rs. 2 lakh 10.00%
Above Rs. 2 lakh to Rs. 5 lakh 10.75%
Above Rs. 5 lakh to Rs. 25 lakh 11.75%
Above Rs. 25 lakh based on credit assessment
UCO BANK
UCO Shopper BPLR +1% = 13.25% p.a.
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BANK OFBARODA
Repayment Period Upto Rs 30 lacks Above Rs 30 lacks
Upto 5 years 0.50% above Base Rate i.e.
8.50%
1.25% above Base Rate i.e. 9.25%
Over 5 years & up to 15 years 0.75% above Base Rate i.e. 8.75%
1.50% above Base Rate i.e. 9.50%
Over 15 years & up to 25 yrs 1.00% above Base Rate i.e9.00%
1.75% above Base Rate i.e.9.75%
RENT PLUS
PURPOSE- product provides finance against assignment of future rental for meeting the liquidity
requirement to the owner of the building and commercial properties.
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characteristic SBI UCO CANNARA ELIGIBILITY Individual/\partnership
Firms/ corporate
Owners i.e. lassoers of
houses/flats/ go
downs/warehouses etc
Existing
customers,
Satisfactory
dealings
FACILITY Term loan Term loan Term loan
ASSSEMENT OF BANK FINANCE
Min 50,000
Max 10 crore
Maximum 80% of the total rent
receivable, Minimum Rs. 1 Lac
Upto 75% of
the gross
monthly rent
receivables
REPAYMENT(months)CCTL(based on cash flow)
Max 84 max 84
max 84
ALLAHABAD BANK
Scheme Rate of Interest
ALLRENT BR+5.00%
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SBI
Interest Rates 10.75%
UNITED BANK OF INDIA
Revised i.e. 01.07.2010
Other than Landlord of UBI BR + 4.50% i.e. 12.75% p.a.
Landlords of UBI BR + 3.50% i.e. 11.75% p.a.
UCO BANK
UCO Rent BPLR+1.00% = 13.25% p.a.
CANARA BANK
SCHEME ROICanara rent 12.50%
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Statement of problem
To know about the customer perception about
the SME product provide by them to the people
To find out what kind of service provide by the
competitors in SME.
To find out the need of the customer and hence
formulate the strategy to level the economy in
the society.
How the SME products are helping the
customer.
To know the utility of the SME product.
Research objectives
Summer Internship Project gives a practical exposure and helps in acquiring the on road skills.
1. Why customer do banking with SBI
2. To find out different banks interest policy, and compare it with our bank policy. 3. To find out the services that other bank given to their customer
4. To study the improvements in SME schemes.
5. To find out the customer awareness on booming SME market and to find out the using patterns of the people 6. To find out which bank provides best SME scheme and what are the interest rates they provide.
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Significance and scope
The geographical scope of the study is restricted to only with sample size of 50, ALL medical shop
owners, at chola road, BHOPAL.
All the analysis and suggestions are based on the analysis of the both primary and secondary data.
There fore the scope of the study revolves around the following aspects:-
Consumer perception towards SME Product
Consumer awareness about SME scheme and its benefit.
Aware the Bank about the customer problems.
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CHAPTER-3
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Research methodology
Research methodology is a methodology for collecting all sorts of information & data pertaining to
the subject in question. The objective is to examine all the issues involved & conduct situational
analysis. The methodology includes the overall research design, sampling procedure & fieldwork
done & finally the analysis procedure. The methodology used in the study consistent of sample
survey using both primary & secondary data. The primary data has been collected with the help of
questionnaire as well as personal observation book, magazine; journals have been referred for
secondary data. The questionnaire has been drafted & presented by the researcher himself.
Research Design
Research Design is the basic framework, which provides guidelines for the rest of research process.
It is a map or blueprint for the collection, measurement and analysis of the data. As such the design
includes an outline of what the researcher will do from writing the hypothesis and its operational
implication to the final analysis of data. The foundation of research design is to ensure that the
required data is accurate and economical. In this project exploratory research design has been used.
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Sample Size:
Sample of 50 SHOP OWNER was taken into study, and their data was collected
Sampling Technique:
To study the Project, a Simple Random Sampling technique is done.
Data Collection:
Primary data
Questionnaires Survey
Secondary data
Executive Manager of SBI -:
Mr.Maniesh Agnihotri Staff members of respective bank
Internet Financial Magazines
Data Analysis:
After data collection, I’m able to analyze customer’s views, ideas and opinions related to
SME and about SBI SME Product and from this, SBI will come to know the customer
requirements.
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Data Interpretation:
Interpretation of data is done by using statistical tools like Pie diagrams, Bar
graphs, and also using quantitative techniques (by using these techniques)
accurate information is obtained.
Classification & tabulation of data:
The data thus collected were classified according to the categories, counting
sheets & the summary tables were prepared. The resultant tables were one
dimensional, two dimensional.
Statistical tools used for analysis:
Out of the total respondents, the respondents who responded logically were taken
into account while going into statistical details & analysis of data. The tools that
have been used for analyzing data & inference drawing are mainly statistical tools
like percentage, ranking, averages, etc.
As per questionnaire and market surveys I have find out different responses from different people.
According to their responses I analyze the findings and draw certain remarks.
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CHAPTER-4
Analysis of data
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GRAPHICAL REPRESENTATION OF DATA
Q1. How many customers prefer sme loan for their Enterprise? And from which bank?
( ) No. of People
PERSONAL FUNDING 40% (20)
SBI 14 % (7)
PNB 12% (6)BANK OF INDIA 10% (5)
BANK OF BARODA 8%(4)
JHARNESHRAN 4%(2)
OTHER 12%(6)
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Q3. Awareness of the of SBI SME product?
YES 95%(47)
NO 5% (3))
TOTAL NO. OF PEOPLE 50
From the above data it is clear that most of the customers (around 85%) have the idea about the SME product & services of SBI, the rest 15% have the idea about the product they are using.
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Q4. Which bank satisfied you more for taking SME loans?
SBI70%(14)
PNB 20% (4)
BANK OF BARODA 10%(2)
TOTAL NO. OF PEOPLE 20
According to my sample size 70% of people prefer SBI for loan product, but some people prefer BOI, PNB Bank for loan because they are customer of these bank and using other services.
Q5. If you prefer SBI for taking loan than what influence you to take Loan from SBI?
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Most of the people said that they prefer SBI for taking loan because of the transparency and the lowest interest rate for any kind of loan product. And it is easy to get loan from SBI as compare to other bank because less paper work is require and as it is the largest govt. bank in India and having partnership with RBI (Reserve Bank of India) and other association, it is easier for SBI to give loan to people with a longer repayment period.
Q7. Services providing by SBI in sme product?
Bad 0% (0)
Satisfactory 2% (1)
Good 55% (27)
Excellent 43% (22)
TOTAL NO. OF PEOPLE 50
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Q8. Which features you like most in SME segments of SBI?
ATTRACTIVE INTEREST RATE 35% (7)
TRANSPARENCY 20% (4)
SIMPLE AND FAST PROCESSING 5% (1)
LONGER REPAYMENT PERIOD 40% (8)
TOTAL NO. OF PEOPLE 20
Most of the people like the attractive interest rate & longer repayment period. It’s easier for people to repay the whole loan amount with its interest with low interest rate and with longer repayment period.
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CHAPTER-5
Findings Suggestion & Recommendation Conclusion
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PROJECT Findings:
From this project it is found that SBI SME product having the 1 st place in the MEDICINE market
at, there is a great opportunity to compete with PNB Bank & to retain its customer by fulfilling
the requirement of customer in SBI advance product.
All of SBI customers are satisfied with the services provided by the bank.
Many of these customers satisfied with the low interest rate and longer repayment period of the
SME product.
Most of the customers prefer to take SME loan from SBI.
Approximately 43% of users said that the service of SBI in SME product is GOOD.
Many customers have no time to call customer care so that they are not able to know about the
service & features of SBI SME product.
Most customers are shifted from other bank’s advance product to SBI because of hidden charges,
high interest rate, less repayment period.
Government Enterprises are more concern than private enterprises for sme product.
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LIMITATIONS
The study is limited to the period of 45 days. Due to time constraints we covered only limited no. of SMEs
Since banks have some confidential reports which cannot be handover to the outsiders, so in-depth research and analysis is not possible.
There is lots of no. of SMEs which is unregistered; due to this proper data’s are not covered.The financials of the firms, were not available, as most of the firms are worried about disclosing their financials, thus for the industry analysis and other qualitative research, we had to rely on the secondary data sources.
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REASONS FOR HIGHLY USE OF SBI ADVANCE PRODUCT:
LESS PAPER WORK
ATTRACTIVE INTEREST RATES
TRANSPARENCY
SIMPLE & FAST PROCESSING
LONGER REPAYMENT PERIOD
QUICK PROCESSING
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Suggestion & Recommendation
Recommendation:
Customer awareness programme is required so that more people should attract towards SME
product.
If there are any kind of hidden charges than that must disclose to customer before giving loan to
them.
SBI must take some steps so that customers can get their loan in time. Like phone verification by
customer care that one customer is got their loan on time or not .It must be before a certain date
so necessary steps can be taken.
SBI should more concern about physical verification rather than phone verification so it will
avoid fraud or cheating.
SME product selling agents must not give any type of wrong information regarding advance
product.
For the better service new offers would be require.
SBI customer care should more concern about the fastest settlement of customer problems.
Before deducting or charging any monetary charge SBI must consult with customer.
Agents should be trained, well educated & proper trained to convince the people about different
advance product.
It is the duty of the bank to disclose all the material facts regarding advance product, like interest
charged, repayment period, other types of charges, etc.
Special scheme should be implemented to encourage both customer and agents.
The bank should increase the period for repayment of loan.
SBI should more focus on Retaining existing customers.
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SBI must focus on Segmentation based on customer knowledge Product offering based on
customer demand.
SBI must take feedbacks of customers regarding features & services.
Suggestions given by the consumers at the time of survey:
o There is more time period for repayment of education loan.
o SBI should take steps to solve customer problems immediately.
o Agents should be trained, well educated & proper trained to convince the people
about different advance product.
o Loan sanction date should be according to customer convenience.
o A customer awareness programme should be taking place in rural area.
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Conclusion
From the analysis part it can be conclude that customers have a good respond towards SBI SME
products in medicine market. SBI is in 1st position having large number of customers & providing
good services to them. The bank has a wide customer base, so the bank should concentrate on this to
retain these customers.
In present scenario SBI is the largest SME product issuer in India. Within a very short period of time
the achievement made by SBI is excellent, what a normal bank cannot expect, but it is being done by
SBI. It happens due to employee dedication towards the organization, fastest growing Indian
economy, & brand image.
To be the largest advance product issuer, SBI should focus on-
Launch Innovative SME product
Better customer services
Fastest customers problem solving techniques
Customer retention
Key ratios affecting the lending rates of bank.
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Apart from all the above, SBI believe in providing good customer services to their customers which
is a key factor for success in future.
ANNEXURE
58
SURVEY
59
Questionnaire
Name - _____________________________________
Occupation-__________________________________
Contact Detail -_______________________________
Q. On which bank you depend for your enterprise?a) SBI
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b) PNBc) BANK OF BARODAd) Other Bank, Specify (_____________)
Q. Are you aware of SME products & services provided by SBI?a) YESb) NO
Q. Which bank you prefer for taking SME loans?a) SBIb) PNBc) BANK OF BARODAd) Other Bank, Specify (_____________)
Q. If you prefer SBI for taking SME loan than what influence you to take Loan from SBI?
_____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________.
Q. What do you feel about the services providing by SBI in SME product?a) Badb) Satisfactoryc) Goodd) Excellent
Q. Which features you like most in SME Loan segments of SBI?a) Less paper workb) Attractive interest ratec) Transparencyd) Simple & fast processinge) Flexibility to choose an EMI base loan or an overdraftf) Longer tenure lone for ease of repayment g) Specially design product for self employedh) Any other feature, specify ( _____________ )
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Q. Any suggestion you want to give for the betterment of SBI SME product.
___________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________.
Bibliography:
Text Books:
Solomon, Michael R. (2002), Consumer Behavior: Buying, Having, Being. 5th Ed.New Jersey: Prentice Hall
Wilson A. (2003), Marketing Research: An Integrated Approach
Naresh Ku. Malhotra, Marketing Research: An Applied Orientation, Fifth Edition
Internet:
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http://www.bankofbaroda.com/bbs/arogyadhamloan.asphttp://www.hdfcbank.com/personal/loans/health_care_finance/health_care_finance_faqs.htm https://www.obcindia.co.in/obcnew/site/inner.aspx?status=R1&menu_id=23 http://www.allahabadbank.com/creditschemes.asp#doctors http://www.canarabank.com/english/Scripts/LoansAccounts.aspxhttp://www.statebankofindia.com/user.htm?action=viewsection&id=0,16,456http://www.idbi.com/sme_finance.asp
Magazines’ Business today Economic times Material provided by company
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