CHAPTER-6 THE ROLE OF FINANCIAL INSTITUTIONS IN SSI DEVELOPMENT- AN OVERVIEW

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1 CHAPTER-6 THE ROLE OF FINANCIAL INSTITUTIONS IN SSI DEVELOPMENT- AN OVERVIEW INTRODUCTION In a labour oriented and capital scarce country like India, Small Scale Industries have come to occupy an important position in the planned industrialisation of the economy. Most of the Small Scale Industries have a low capital intensity and high potential for employment generation. Small and medium sized enterprises in market economies are the engines of economic development owing to their flexibility and adaptability as well as their potential to react to challenges and changing environments, SMEs are contributing to sustainable growth and employment generation in a significant manner. SMEs have a strategically importance for each nation s economic development due to wide range of reasons. Thereby, the Government shows a major interest in supporting entrepreneurship. As this is one of the means through which new jobs could be created, which can lead to increase in GDP and raising standard of population. Every surviving and successful business means new jobs and growth of GDP. Designing a comprehensive, coherent and consistent approach of council of ministers and entity governments to entrepreneurship development in the form of government support to SSI has been an absolute priority. This priority has provided for a full coordination of activities of various government institutions and NGOs dealing with entrepreneurship development and SSIs development. In this context, the development of National SME support institutions and networks is one of the key conditions for success. The development of small enterprises has been assigned a crucial role in India s five year plans. With a view to protect, support and promote small enterprises to become self-supporting and to facilitate balanced growth of small and large sector, a number of policy and promotional measures have been taken up by the Government. The policy 169

2 measures include exclusive purchase under the stores purchase policy and differential excise duty. The promotional measures include: Development of entrepreneurship along with package of consultancy services, improvement in techniques, and institutional support in respect of supply of credit and raw materials, factory accommodation in industrial estates, capital subsidy, and rebates on sales of certain products. Contribute significantly to export revenues because of the low cost labour intensive nature of its products. Has a positive effect on trade balance since SSIs generally use indigenous raw materials, reducing dependence on imported machinery, raw material or labour. Assist in fostering self-help and entrepreneurial culture by bringing together skills and capital through various lending and skill enhancement schemes. Provide rural people an opportunity for income generation and personal growth since they can work at home. This helps to achieve fair and equitable distribution of wealth by creating nationwide non-discriminatory job opportunities. It attracts direct foreign investment since multinationals and big conglomerates have started to outsource from countries with strong SME sectors. The low labour cost makes production of semi-finished goods very economically for large concerns operating in international markets. The SSIs act as engine through which the growth objectives of developing countries can be achieved. ROLE OF FINANCIAL INSTITUTIONS Financial sector plays an indispensable role in the overall development of a country. The most important constituent of this sector is the financial institutions, which act as an intermediary for the transfer of resources from net savers to net borrowers. The financial institutions have traditionally been the major source of long term funds for the economy. These institutions provide a variety of financial products and services fulfil the varied needs of the commercial sectors. They play a vital role in reducing regional 170

3 disparities by inducing in providing assistance to new enterprises, small and medium firms as well as to the industries established in backward areas. The Government of India in order to provide adequate supply of credit to various sector of the economy has developed a fine structure of financial institutions in the country. These financial institutions can be broadly categorised into All India institutions and State level institutions, depending upon the geographical coverage of their operations. At the national level, they provide long and medium term loans at reasonable rate of interest. These institutions subscribe to the debenture issue of companies, underwrite public issue of shares, guarantee loans and deferred payments etc. although the State level institutions are mainly concerned with the development of medium and small scale enterprises, but they also provide the similar type of financial assistance as the national level institutions. NATIONAL LEVEL INSTITUTIONS A wide variety of financial institutions have been established at the nation level. These institutions cater to the diverse financial requirements of the entrepreneurs. They include all India development banks like IDBI, SIDBI, IFCI, IIBI; specialised financial institutions like IVCF, ICICI venture Funds lid, TFCI; Investment institutions like LIC, GIC, UTI; etc. 1. All-India Development Banks (AIDBs) These includes all those development banks which provide institutional credit to not only large and medium enterprises but also helps in promotion and development of small scales industrial units. 1.1 Industrial Development Bank of India (IDBI): It was established in July 964 as apex financial institutions for industrial development in the country. It caters to diversified needs of medium and large scale industries in the form of financial assistances, both direct and indirect assistance. Direct assistances is provided by way of underwriting of or direct subscription to industrial securities, soft loans, project loans etc. while indirect assistance is provided in the form of refinance facilities to industrial concerns. 171

4 1.2 Industrial Finance Corporation of India ltd (IFCI ltd): It was the first development finance institution set up in 1948 under the IFCI Act in order to provide long term institutional credit to medium and large industries. Its objectives is to provide financial assistance to industry by way of rupee and foreign currency loans, underwriting or by way of subscribing to the issues of stocks, shares, bonds and debenture of industrial concerns etc. It also undertakes various diversified activities like merchant banking, loan syndication, formulation of rehabilitation programmes, assignments relating to amalgamations and mergers, etc. 1.3 Small Industries Development Bank of India(SIDBI): It was set up by the Government of India in April 1990, as a wholly owned subsidiary of IDBI. It is the principal financial institution for promotion, financing and development of small scale industries in the economy. It aims to empower the Micro, Small and Medium Enterprise (MSME) sector with a view to contributing to the process of economic growth, employment generation and balanced regional development. 1.4 Industrial Investment Bank of India ltd (IIBI): The institution was set up in 1985 under the Industrial reconstruction Bank of India Act, 1984, as the principal credit and reconstruction agency for sick industrial units. It was converted into IIBI on March 17, 1997, as fullfledged development financial institutions. It assists industry mainly in medium and large sector through wide ranging products and services. Apart from project finance, IIBI also provides short duration non project asset backed financing in the form of underwriting/direct subscription, deferred payment of guarantee and working capital/other short-term loans to companies to meet their fund requirements. 172

5 2. SPECIALISED FINANCIAL INSTITUTIONS(SFIs): These are the institutions which have been set up to serve the increasing financial needs of commerce and trade in the area of venture capital, credit rating and leasing, etc. 2.1 IFCI Venture Capital Funds ltd (IVCF): It was formally known as Risk Capital Technology Finance corporation ltd (RCTC), is a subsidiary of IFCI ltd. It was promoted with the objective of broadening entrepreneurial base in the country by facilitating funding to ventures involving innovative product process/technology. Initially it started providing financial assistance by way of soft loans to promoter under its Risk Capital Scheme. Since 1988, it also started providing finance under Technology Finance and Development Scheme to projects for commercialisation of indigenous technology for new process, products, market or services. 2.2 ICICI Venture Funds ltd: It was formally known as Technology Development and Information Company of India limited (TDICI), was founded in 1988 as joint venture with the Unit Trust of India. Subsequently, it became a fully owned subsidiary of ICICI. It is a technology venture finance company set upto sanction project finance for new technology ventures. 2.3 Tourism Finance Corporation of India ltd(tfci): It is a specialised financial institution set up by the Government of India for promotion and growth of tourist industry in the country. Apart from convention tourism projects, it provides financial assistance for nonconventional tourism projects like amusement parks, ropeways, car rental services, ferries for inland water transport, etc. 173

6 3. INVESTMENT INSTITUTIONS: They are the most popular form of financial intermediaries, which particularly caters to the need of small savers and investors. They deploy their assets largely in marketable securities. 3.1 Life Insurance Corporation of India(LIC): It was established in 1956 as a wholly-owned corporation of the Government of India. It was formed by Life Insurance Corporation Act, 1956, with the objective of spreading life insurance much more widely and in particular to the rural area. It also extends assistance for development of infrastructure facilities like housing, rural electrification, water supply, etc. In addition, it extends resource support to other financial institutions through subscription to their shares and bonds, etc. The life Insurance Corporation of India also transacts business abroad. 3.2 Unit Trust of India (UTI): It was set up as a body corporate under the UTI Act, 1963, with a view to encourage savings and investment. It mobilises savings of small investors through sale of units and channelises them into corporate investments mainly by way of secondary capital market operations. Thus, its primary objective is to stimulate and pool the saving of the middle and low income groups and enable them to share the benefits of the rapidly growing industrialisation in the country. In December 2002, the UTI Act, 1963 was repealed with the passage of Unit Trust of India Act, 2002, paving the way for the bifurcation of UTI into 2 entities, UTI-I and UTI-II with effect from 1 st February General Insurance Corporation of India (GIC): It was formed in pursuance of the General Insurance Business Act, 1972, for the purpose of superintending, controlling and carrying on the business of general insurance or non-life insurance. Initially, GIC had four subsidiary branches, namely, National Insurance Company Ltd, The New India Assurance Company Ltd, The Oriental Insurance Company Ltd and United 174

7 India Insurance Company Ltd. But these branches were delinked from GIC in 2000 to form an association known as GIPSA (General Insurance Public Sector Association). STATE LEVEL INSTITUTIONS Several financial institutions have been set up at the State Level which supplements the financial assistance provided by the all India institutions. They act as catalyst for promotion of investment and industrial development in the respective States. They broadly consist of State financial corporations and State industrial development corporations. 1. State Financial Corporation s (SFCs): They are the State-level financial institutions which play a crucial role in the development of small and medium enterprises in the concerned States. They provide financial assistance in the form of term loans, direct subscription to equity/debentures, guarantees, discounting of bill of exchange and seed/special capital etc. SFCs have been set up with the objective of catalysing higher investment, generating greater employment and widening the ownership base of industries. They have also started providing assistance to newer types of business activities like floriculture, tissue culture, poultry farming, commercial complexes and services related to engineering, marketing, etc. there are 18 State Financial Corporation s (SFCs) in the country. 2. State Industrial Development Corporations (SIDCs): They have been established under the Companies Act, 1956, as whollyowned undertakings of State Government. They have been set up with the aim of promoting industrial development in the respective States and providing financial assistance to small entrepreneurs. They are also involved in setting up of medium and large industrial projects in the joint sector/assisted sector in collaboration with private entrepreneurs. 175

8 NATIONAL LEVEL INSTITUTIONS AN EVALUATION SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA (SIDBI) MISSION STATEMENT To empower the Micro, Small and Medium Enterprises (MSMEs) sector with a view to contributing to the process of economic growth, employment generation and balanced regional development. COMPANY PROFILE Small Industries Development Bank of India (SIDBI), set up on April 2, 1990 under an Act of Indian Parliament, is the Principal Financial Institution for the Promotion, Financing and Development of the Micro, Small and Medium Enterprise (MSME) sector and for Co-ordination of the functions of the institutions engaged in similar activities. Financial support is provided by way of refinance to eligible Primary Lending Institutions (PLIs) such as banks, State Financial Corporation s (SFCs), State Industrial Development Corporations (SIDCs), State Small Industries Development Corporations (SSIDCs) etc. for onward lending to MSMEs, financial assistance in the form of loans, grants, equity and quasi-equity to Non Government Organisations / Micro Finance Institutions (MFIs) for on-lending to micro enterprises and economically weaker sections of society, enabling them to take up income generating activities on a sustainable basis and direct assistance to MSMEs which is channelized through the Bank's network of 100 branch offices. FINANCING THE SMALL SCALE SECTOR Credit is the prime input for sustained growth of small scale sector and its availability is thus a matter of great importance. The main objective of SIDBI has been to provide short term credit/working capital to small enterprises for its day to day requirement for purchasing raw material and other inputs like electricity, water, etc. and for payment of wages and salaries; and long term credit for creation of fixed assets like land, building, plant and machinery. To ensure that financial assistance is made available to small units on easy terms and with hassle-free procedures it has been a matter of policy in SIDBI to identify the areas of gaps in credit delivery system and fill them through devising 176

9 appropriate new schemes and implementing them. It provides credit to SSIs through a good network of PLIs spread across the State and in the country as a whole under the schemes of indirect assistance in addition to making provision for credit under direct assistance schemes. The assistance under indirect schemes is provided by way of refinance, bills rediscounting, and resource support in the form of short term loans, etc. However, direct assistance is provided under several tailor made schemes through its Regional/Branch offices. The objective behind direct assistance schemes has been to supplement the efforts of PLIs by identifying the gaps in the existing credit delivery mechanism for Small Scale Industries. SIDBI is the principal financial institution for promotion, financing and development of industry in the small scale sector and co-ordinates the functions of institutions engaged in similar spectrum of the SSI sector, including tiny, village and cottage industries through number of schemes. Since its inception, SIDBI has been endeavouring to meet the diverse needs of the MSMEs through various tailor-made schemes and fulfil its stated Vision. VISION STATEMENT To emerge as a single window for meeting the financial and developmental needs of the MSME sector to make it strong, vibrant and globally competitive, to position SIDBI Brand as the preferred and customer friendly institution and for enhancement of shareholder wealth and highest corporate values through modern technology platform. Here is list of the finance operations by SIDBI: 1. OPERATIONS I. INDIRECT FINANCE II. DIRECT FINANCE III. MICRO FINANCE 177

10 I. INDIRECT FINANCE: The Indirect Financial Assistance is extended in the form of Refinance support to more than 900 PLIs, comprising banks, SFCs, SIDCs etc. having a network of over 82,000 branches and Micro finance support to over 130 partner MFIs all over the country. a) Refinance Scheme The main objective of the Bank's Refinance Scheme is to augment the resource position of PLIs which would ultimately facilitate the smooth flow of credit in an increasing measure to MSMEs. While the banks are provided Refinance support against their term loans to micro and small enterprises (MSEs), other PLIs like SFCs and SIDCs are provided support against their loans to MSMEs. The Refinance support is extended for (i) Setting up of new projects and for technology up gradation / modernisation, diversification, expansion, energy efficiency adoption of clean production technologies etc. of existing MSMEs (ii) Service sector entities and (iii) Infrastructure development and up gradation. b) Resource Support SIDBI provides resource support to institutions / Non- Banking Finance Companies (NBFCs) engaged in promotion and development of MSME sector to facilitate channelizing of assistance to a large number of MSMEs and infrastructure projects having linkages to MSMEs. c) Lines of Credit (Refinance) in favour of: -- State Financial Corporations -- State Industrial Development Corporations -- State Small Industries Development Corporations II. DIRECT FINANCE: SIDBI, over the years, has evolved itself to meet the various types of credit requirements of the MSME sector by directly offering tailor-made financial products and services. Direct Finance is channelised through its present network of 100 branches all over the country covering more than 580 MSME clusters. Some of the major schemes of SIDBI under Direct Finance are: 178

11 a) Term loan assistance Term loans are provided for (i) Setting up of new projects and for technology up gradation / modernisation, diversification, expansion, energy efficiency, adoption of clean production technologies, etc. of existing MSMEs (ii) Service sector entities and (iii) Infrastructure development and up gradation. It also includes Privileged Customer Scheme, Scheme for Energy Saving and Clean Production Technology Projects in MSME Sector, Risk Capital Fund. b) Working capital assistance The objective of the Scheme is to provide term loans to MSMEs to meet the shortfall in working capital including WC margin. It also includes Working Capital arrangement with IDBI Bank. c) Support against receivables MSME Receivable Finance Scheme: SIDBI operates the MSME Receivable Finance Scheme (RFS) for MSME sellers / eligible service providers in respect of sales & services rendered to purchaser companies. Under the Scheme, SIDBI fixes limits to well performing purchaser companies and discounts usance bills of MSMEs / eligible service sector units supplying components, parts, sub-assemblies, services, etc. so that the MSME / service sector units realise their sale proceeds quickly. SIDBI also offers invoice discounting facilities to the MSME suppliers of purchaser companies. d) Foreign currency loans SIDBI offers forex assistance to its MSME customers in various forms including foreign currency term loans, booking of forward contract, etc. SIDBI also offers Line of Credit in Foreign Currency to institutions / banks for extending export and domestic credit to MSME units / Export Houses / Trading Houses, etc. e) Assistance for industrial infrastructure Financial Assistance is extended for industrial infrastructure like industrial estates. Strengthening of existing industrial clusters, providing support services viz. common 179

12 utility centres, common testing centres etc. and other infrastructure projects which benefit MSMEs. f) Non-fund based scheme SIDBI offers guarantee and Letter of Credit facilities in foreign currency and rupee to its customers to meet their non-fund based credit requirements. g) Recent liquidity easing measures Liquidity easing measures: To provide timely and requisite support to meet the varied credit and developmental requirements of the MSME sector during the global financial turmoil and slowdown, SIDBI devised certain tailor-made financial products / services, some of which are: i) Ad-hoc Assistance Scheme for existing MSME customers. ii) One-time Liquidity Support. iii) Additional limit under MSME RFS. iv) Diesel Generator Set Financing Scheme. v) Restructuring. h) Other recent business initiatives Structured Credit Delivery arrangements: In order to expand its outreach and speed up credit delivery to a larger number of MSMEs,some of whom were outside the formal banking system so far, SIDBI devised certain innovative measures like entering into a Memorandum of Understanding with Faridabad Small Industries Association (FSIA) for providing pre-approved limits to well-performing MSME members of FSIA; providing assistance to taxi drivers for replacing taxis plying in Mumbai which are more than 25 years old, providing assistance to MSMEs for procurement of equipment from Original Equipment Manufacturers as per predetermined credit screen under a simplified sanction process and terms. Micro Enterprises Loan Scheme: With a view to extending direct financial assistance to micro enterprises under SFMC dispensation, a new scheme Micro Enterprises Loan (MEL) Scheme was introduced. This scheme involves providing need-based composite assistance in the range of Rs. 50,000 Rs. 0.5 million under the Bank's micro finance 180

13 programme directly to micro enterprises with guarantee cover from Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE). i) Nodal / implementing agency for government schemes SIDBI is the Nodal Agency for implementation of some of the subsidy schemes of the Government of India (GOI) for encouraging implementation of technology up gradation and modernisation by manufacturing enterprises in the MSME sector. SIDBI provides Nodal Agency services for implementation of: (i) Credit Linked Capital Subsidy Scheme: Cumulative subsidy claims of Rs billion for about 5700 eligible MSEs have been settled. (ii) Technology Up gradation Fund Scheme for Textile Industry: Under the scheme, capital subsidy and interest incentive claims for an aggregate amount of Rs billion have been settled benefiting over 7100 units (iii) Integrated Development of Leather Sector Scheme: Cumulative subsidy claims aggregating Rs billion in respect of about 750 units have been settled. (iv) Scheme of Technology Up gradation / Setting up / Modernisation / Expansion of Food Processing Industries: Cumulative subsidy amounting to Rs million has been released to 11 units. III. MICRO FINANCE Micro Finance has emerged as a new paradigm of inclusive growth by empowering hitherto relatively disadvantaged sections of our society, such as, women, minorities, backward caste and the poor in general. SIDBI is committed to attain the national goal of a broad-based equitable and inclusive growth by providing micro credit through its partner MFIs for on-lending to this segment of the society which is at the bottom-ofthe-pyramid, with special thrust on un-served and under-served regions of the country. In order to accelerate the process of 'financial inclusion', SIDBI had initiated micro finance activities by setting up of a dedicated department in 1999 called SIDBI Foundation for Micro Credit (SFMC) to develop a cadre of MFIs from formal and informal sectors. As at end of September, 2009, SIDBI had nurtured, developed and strengthened more than 130 MFIs all over the country. 181

14 2. PROMOTIONAL & DEVELOPMENTAL SUPPORT: The Promotional & Developmental (P&D) activities of SIDBI are designed to achieve the twin objectives of national importance, viz. (a) Promotional - Enterprise promotion resulting in self-employment and creation of additional employment through its select programmes such as, Rural Industries Programme (RIP), Entrepreneurship Development Programme (EDP) and Vocational Training Programme etc. (b) Developmental - Enterprise strengthening to enable MSMEs to face the emerging challenges of globalisation and growing competition through select interventions such as Skill-cum- Technology Up gradation Programme (STUP), Small Industries Management Programme (SIMAP), Cluster Development Programme (CDP) and Marketing Assistance. Highlights of select programmes are given below: a. Rural Industries Programme. b. Entrepreneurship Development Programme. c. Skill-cum-Technology Up gradation Programme / Small Industries Management Programme. d. Cluster Development Programme. e. Marketing Initiatives. f. MSME Financing and Development Project. g. Technical Assistance. h. Risk sharing facility. i. Credit Facility. j. Capacity Building of Banks. 182

15 3. INSTITUTION BUILDING: SIDBI'S SUBSIDIARIES AND ASSOCIATES: a. SIDBI Venture Capital Limited b. Credit Guarantee Fund Trust for Micro and Small Enterprises c. SME Rating Agency of India Ltd. d. India SME Technology Services Ltd. e. India SME Asset Reconstruction Company Ltd. Sanctions and disbursement Graph 6.1-showing the credit sanctions Credit Sanctions for MSME The Bank has for the first time crossed the landmark of sanctions of Rs. 35,000 crore and disbursements of Rs. 30,000 crore during FY and recorded the highest ever sanctions and disbursements of Rs. 35,521 crore and Rs 31,918 crore, respectively as shown in graph 6.1 and graph 6.2. The cumulative disbursements of SIDBI as on March 31, 2010 stood at Rs 1,64,331 crore, reaching out to around 360 lakhs beneficiaries. Micro finance assistance increased by 53% to Rs. 2,670 crore and micro 183

16 finance outstanding crossed the Rs crore mark for the first time to reach to Rs. 3,812 crore as on March 31, 2010, reflecting an increase of 78%. The aggregate outstanding portfolio of the Bank grew by 23% to Rs. 37,969 crore as on March 31, The total assets of the Bank recorded sizable increase of 21% to Rs. 41,885 crore as on March 31, Net NPA as a percentage of net outstanding stood at 0.18% as on March 31, 2010, reflecting strong monitoring, persistent follow-up and timely action by the Bank, as also adequate provisioning. The total income of the Bank for FY has shown an impressive growth of 22% and stood at Rs. 2,540 crore, net of provisions. Consequently, the profits have also increased by over 41% to Rs. 421 crore. The Earnings Per Share (EPS) have improved to Rs The Bank has declared a higher equity dividend of 25% for FY Total assistance (direct and indirect) are shown in the graph 6.3 with all bifurcation in graph 6.4 and 6.5. Graph 6.2-showing the disbursement Graph- 6.3-showing the total assistance provided by the institution 184

17 Graph-6.4- showing the various schemes of assistance undertaken Indirect Assistance / Refinance Graph-6.5-showing the various credit facilities Direct Assistance 185

18 INDUSTRIAL FINANCE CORPORATION OF INDIA (IFCI) COMPANY PROFILE INDUSTRIAL FINANCE CORPORATION OF INDIA (IFCI) was established under IFCI Act 1948 during July 1948 as India s first development bank. The main objective for which IFCI was established, are to make medium and long term credit available to the industrial undertakings and to assist them in creation of industrial facilities. Its functions include: Direct financial support (by way of rupee term loans as well as foreign currency loans) to industrial units for undertaking new projects, expansion, modernisation, diversification etc. Subscription and underwriting of public issues of shares and debentures. Guaranteeing of foreign currency loans and also deferred payment guarantees. Merchant banking, leasing and equipment finance During 1994, IFCI was converted into a joint-stock company and came out with a public issue of shares. It is managed by a Board of Directors. It floated institutions such as TFCI, ICRA etc. IFCI offers a wide range of products to the target customer segments to satisfy their specific financial needs. The product range includes following credit products: Short-term Loans (upto two years) for different short term requirements including bridge loan, Corporate Loan etc. Medium-term Loans (more than two years to eight years) for business expansion, technology up-gradation, R&D expenditure, implementing early retirement scheme, Corporate Loan, supplementing working capital and repaying high cost debt. Long-term Loans (more than eight years to upto 15 years) - Project Finance for new industrial/ infrastructure projects Takeout Finance, acquisition financing (as 186

19 per RBI guidelines / Board approved policy), Corporate Loan, Securitisation of debt. Structured Products: Acquisition finance, Pre-IPO investment, IPO finance, promoter funding, etc. Lease Financing Takeover of accounts from Banks / Financial Institutions / NBFCs Financing promoters contribution (private equity participation)/subscription to convertible warrants Purchase of Standard Assets and NPAs The product mix offering varies from one business/ industry segment to another. IFCI customises the product-mix to maximize customer satisfaction. Its domain knowledge and innovativeness make the product-mix a key differentiator for building enduring and sustaining relationship with the borrowers. Graph -6.6-Showing the credit sanction Credit Sanction During the FY , the total fund based approvals were Rs.6, Crore as against Rs.4, Crore in the previous year registering a rise of 68.51% as shown in the graph 3. Out of the above approvals, an amount of Rs.2, 620 Crore (38.73%) was by way of short & medium term loans, Rs.1, 826 Crore (26.99%) by way of corporate loans and Rs.1, Crore (15.13%) by way of rupee term loans. Total Disbursements during FY amounted to Rs.6, Crore compared to Rs.3, Crore in the previous year registering a rise of 82.81% as shown in the 187

20 graph 4, Out of the said disbursement, Rs.2, Crore (38.65%) was by way of short & medium term loans, Rs.1, Crore (26.02%) by way of corporate loans, Rs.1, Crore (17.88%) by way of rupee term loans and Rs.1, Crore (17.46%) was disbursed against investment commitments mainly in the Infrastructure sector. Graph 6.7-Showing the disbursement Disbursement Initiatives during the fiscal year IFCI's approach towards lending was guided by maximization of return on investment, while maintaining the emphasis on due diligence, ensuring security cover as well as putting in place appropriate risk mitigants. High yielding short term lending, backed with strong and easily enforceable security, formed the key strengths helping the Company to expand its asset base without any NPAs. With sectoral focus on services and infrastructure, Company has already set up a Project Development Group (PDG) with expertise in appraisal of infrastructure projects. The group is part of IFCI's strategy to enter infrastructure projects early in their life cycle, ensuring IFCI reasonable returns over cost of funds. PDG has expanded its footprint in project development activities for generating better and consistent return on its investments in infrastructure projects like Hydro and Thermal Power, Power Transmission, Roads etc. 188

21 GOVERNMENT OF KARNATAKA DEPARTMENT OF INDUSTRIES AND COMMERCE (DIC) INTRODUCTION The Department of Industries and Commerce, Government of Karnataka is one of the oldest institutions set up under the aegis of the Government. Established in the year 1913 under the erstwhile Princely State of Mysore, the Department oversees the Industrial Development in the State. This Department works operates under the Commerce and Industries Department, Government of Karnataka. The Department operates at the State level through the Directorate of Industries and Commerce, at the District level through the network of District Industries Centres, Industrial wing of Zilla panchayath and in coordination with related Boards and Corporations. The Department plays pivotal role in implementation of Schemes and Policies of the State and Union Governments for the promotion of Industrial Development throughout the state. Karnataka is considered as one of the most desired industrial location for setting industries in the country. State has been consistently pursuing progressive outlook to meet the changing needs of the State's economy and industry. Karnataka is also considered one of the countries Industrialists State comprising large public sector industrial undertakings, large privately owned industries like steel sugar, textiles etc., in recent times, Karnataka has emerged as the leader in IT & BT and knowledge based industrial sector, making rapid strides in IT & computer related industries and biotechnology with a strong research and development base. The State has a number of traditional cottages, Handicrafts, Micro Enterprises like Handlooms, Power looms, silk weavers, Khadi and village industries etc. OPERATIONAL GUIDELINES (FOR PACKAGE OF INCENTIVES AND CONCESSIONS FOR ) The Government of Karnataka has announced the Karnataka New Industrial Policy The salient features of the Karnataka Industrial Policy are as follows: 189

22 (i) Envisions making Karnataka prosperous through development of human & natural resources in a systematic, scientific and sustainable manner. (ii) Target to provide additional employment for about 10 lakhs persons in the next five years. (iii) Efforts to increase the Share of industry to the State GDP to 20% by the year (iv) To double the State s export from the current level of Rs.1, 30,000 crores. (v) Focus on providing quality infrastructure across the State. (vi)thrust on Skill Development & Entrepreneurship Promotion. (vii) Added focus on development of MSME sector. (viii) Performance and Employment linked Incentives & Concessions. The above industrial policy and package of incentives and concessions shall come into effect from and will have a span of five years i.e. upto INITIATIVES & BOARDS FOR MSME DEVELOPMENT: 1. INDUSTRIAL INFRASTRUCTURE DEVELOPMENT INITIATIVES a) Karnataka Industrial Areas Development Board: Karnataka Industrial Areas Development Board (KIADB) is a statutory body established under the provisions of the Karnataka Industrial Area Development Board Act 1966, with the objective of acquiring land for formation of industrial areas/estates and allied industrial infrastructure. b) Karnataka State Small Industries Development Corporation (KSSIDC): KSSIDC has been a catalyst in the development of small scale industries in the State. Establishment of Industrial Estates, construction of Industrial sheds and formation of Industrial plots are the major functions of the Corporation. c) Special Economic Zones: Special Economic Zones are being established to encourage exports and to attract Foreign Direct Investments. Special Economic Zone is specially delineated duty free enclave and shall be deemed to be foreign territory for the purpose of trade operations, duties and tariff. 190

23 In order to support and encourage development of SEZ in the State, State Policy of SEZ 2009 has been announced. The policy provides for a package of incentives. d) Assistance to State for Development of Export Infrastructure and Allied Activities (ASIDE): The objective of the scheme is to involve the States in the export effort by providing assistance to the State Governments for creating appropriate infrastructure for the development and growth of exports. e) Food Parks 2. SSI & VILLAGE INDUSTRIES SECTOR INITIATIVES a) New Industrial Policy ( ): Implementation of Suvarna Karntaka Abhivrudhi corridor programme, Development of Sector Specific Zones viz., Steel, Cement, Sugar, Automobile, Food processing, Readymade garments etc., and to motivate the prospective entrepreneurs, Guidance Cell in the DICs will be strengthened. This cell will help entrepreneurs from the initial stage to the implementation level. b) Constitution of Vision Group: It is constituted for the rapid industrialisation of Karnataka. c) Kaigarika Adalath: It is a platform to find solutions to the problems faced by industrialists under a single roof for promotion of Industrial and Economic growth in the region were all the concerned Departments / Corporations / Boards / Associations and Industrialists brought under one roof and find the solution to a problem. d) 4 th All India Census of MSME: The main objective of the census was updating the frame list of registered Micro, Small and Medium Enterprises, to identify sick and incipient sick units with reasons thereof and to collect other useful information for policy formulation. 191

24 3. INDUSTRIAL DEVELOPMENT INITIATIVES a)kaigarika Vikasa: The scheme envisages creation of new economic opportunity by utilizing local resources. Skill and demand by providing ready to use infrastructure, human resource development etc. b) State Investment Subsidy to SSI/Tiny units: c) Prime Minister s Rozgar Yojane (PMRY): It is known as Prime Ministers Employment Generation Program (PMEGP). The scheme contemplates to provide self employment to unemployed youths by extending financial assistance to start their own Industrial ventures/ business/ Service etc., the scheme also envisages for creation of employment to rural artisans and thereby avoid the rural artisans to migrate from villages to cities. d) Kayakanagara Programme: The programme contemplates a multi-craft township for traditional artisans like cobblers, bamboo workers, sheet metal and brass workers, pinjaras, tailors and such other craftsmen. e) Vishwa: Vishwa programme aims at continuous productive employment in rural areas by promoting cottage and village industries by utilizing local resources for manufacture of goods and services for mass consumption. f) Establishment of New Industrial Cluster (SCP/TSP): It is establishment construction of Living cum work sheds for SC/ST artisans. 4. HUMAN RESOURCES DEVELOPMENT INITIATIVES a) Suvarna Kayaka Koushalya Abhivrudhi Yojane: The Scheme envisages promoting / helping / facilitating establishment of specialized skill development institutions at key locations suitable for the manufacturing industries and emerging vocations in the service sector. b) Jewellery Training Institute: 192

25 The main objective of providing training to young artisans is also to provide advanced knowledge and professionalism in Gem & Jewellery activity. c) Karnataka Institute for Leather Technology: The main objective of the institute is to offer 3½ years Diploma course in Leather Technology and short-term courses in leather garments, Foot-wear and Leather goods manufacturing. The Institute also provides assistance in design development of Leather articles and R&D programmes. d) Science and Technology Entrepreneurs Parks (STEPs): The scheme of Science and Technology Entrepreneurs Park (STEP) mainly aims at targeting the young engineers and professionals coming out of engineering colleges, technical and management institutions with a view to motivate them and assist them in becoming entrepreneurs to take up industrial ventures. STEP provides facilities for upgradation of skills and transfer of technology. e) Rural Development and Self Employment Training Institutes (RUDSETIs): The Rural Development and Self Employment Training institutes are being established in association with the Banks with an objective of preparing the Rural youths to have their own Industrial / service ventures by imparting Training and guidance. 5. ARTISANS INITIATIVES a) The Karnataka State Handicraft Development Corporation (KSHDC): The Corporation is a nodal agency for handicrafts promotion programmes in the State. KSHDC is implementing various programmes for the development, promotion and marketing of handicrafts, procuring directly from the artisans b) Urban Haat: GOI has evolved a scheme called Urban Haat to be established in prime locations in the State to enable the artisans to sell their products directly to the consumers. It is planned to have 40 to 50 stalls in the artisans complex and exhibition halls to cater to the requirement of artisans and to sell their products by organizing weekly exhibitions. c) Khadi & Village Industries Board: 193

26 The main objective of the KVIB is to give priority for Khadi and Village Industries in rural areas in developing and regulating Khadi sector and to provide assistance for the cottage Industries to generate employment opportunities to improve upon the economic status of the rural artisans. d) Karnataka State Coir Development Corporation Ltd: The Corporation was established with the main objective of developing Coir sector in the State. The main functions of the Corporation are to: 1) Carry on the business of developing, promoting and stabilizing the coir and coir based and coconut based industries in Karnataka. 2) To support, protect maintain increase and promote the production and sale of coir, coir products and coconut products. 3) To implement scheme of the Government of Karnataka and the Government of India for the development of coir and coconut based industries. 4) To generate rural employment to women (including SC/STs) by providing training and engaging in production of coir products in the coir complexes. e) Karnataka State Coir Co-operative Federation Ltd: Its main objective is to assist and support primary coir co-operative societies, provide training, marketing coir products, technical guidance & implementation of ICDP & Government sponsored schemes in coir sector. f) Dr.Babu Jagjeevan Ram Leather Industries Development Corporation (LIDKAR): Karnataka Leather Industries Development Corporation Ltd, (LIDKAR) was established by Government of Karnataka in the year 1976, keeping in view objectives of overall developmental Leather Industry in Karnataka and upliftment of Socio Economic conditions of SC Leather Artisans in the State. 6. INVESTMENT AND TRADE PROMOTION INITIATIVES a) Karnataka Udyog Mitra: KUM was established with a main objective of providing escort services to entrepreneurs for establishment of Industrial ventures in the State. It also acts as Secretariat for State Level Single Window Agency Meeting. KUM organizes various publicity propaganda programmes, Investors Meet, Road-shows to attract the Investors not only within the State but also from abroad. 194

27 b) Visveswaraya Industrial Trade Centre: The main is function of trade and export promotion. It is engaged in conducting programmes in export management/ export awareness/export documentation and allied assistance for the community of exporters. Also trade promotion activities are taken up in the form of participation in exhibitions and trade fairs both within the State and outside the State and abroad. c) Kalavaibhava Exhibitions: It is organised and related Kalavaibhava Exhibitions, Agriculture & Industrial Exhibitions. 7. TECHNOLOGY UPGRADATION INTIATIVES Karnataka Council for Technology Up gradation: The main objectives of the KCTU are to enhance competitive status of SME s, catalyse technology up gradation through acquisition, adoption and modernisation and to reduce cost of productivity, quality improvement to make the SMEs products more competitive both nationally and internationally. It assists the SMEs to obtain ISO 9001/14000 or any other Nationally and Internationally recognised Certification. The Council is a Nodal Agency for creating awareness and provides assistance for registration of Intellectual Property Rights, guidance in Plant Layout, diversification, modernisation and expansion. 8. ENTREPRENEUR DEVELOPMENT PROGRAMME INSTITUTIONS a) Centre for Entrepreneurship Development of Karnataka, Dharward (CEDOK): CEDOK was established by Government of Karnataka with an objective to contribute for the development and disbursal of Entrepreneurship by conducting various EDPs, Skill Development programmes to expand the social and economic base of entrepreneurial class. Main functions To augment the number of entrepreneurs through entrepreneurship, training and research. 195

28 To produce multiplier effect on opportunities for self-employment. To improve the managerial capabilities of small entrepreneurs. To contribute to the dispersal of entrepreneurship and thus expand the social base of the entrepreneurial class in urban/ rural areas. To be centre of learning for trainer-motivation on entrepreneurship development. To contribute to growth of entrepreneurship cultures, spirit and entrepreneurship developing countries. b) Technical Consultancy Services Organisation of Karnataka (TECSOK): TECSOK is a multi disciplinary consultancy organization engaged in providing consultancy services for entrepreneurs who wish to set up industries or service ventures in Karnataka. TECSOK provides basic information on potential products, suitable location, policy and procedures of the Government and other related organizations, incentives and facilities offered by the Government to the entrepreneurs. TECSOK focuses more on promotion of Entrepreneurship amongst rural Entrepreneurs and Entrepreneurs belonging to SC/ST/Backward Community and other under privileged classes utilizing various special schemes available for such entrepreneurs. TECSOK also organizes Entrepreneurship Awareness Programmes, Entrepreneurship Development Programmes and Seminars/Workshops on current topics at various locations for the benefit local Entrepreneurs. Further, TECSOK participates in various programmes organized by other agencies and counsel with Entrepreneurs. Graph 6.8-showing investment trend in the state Investment approval trend in the State 196

29 As per the data collected through interview and as per the financial report of the company, the graph 6.8, above shows that due to, recession in the global economy there was decrease in the investment. But the figures in the year shows again rise in the investment in the SME sector which also helps in the development of the country. STATE LEVEL INSTITUTIONS AN EVALUATION KARNATAKA STATE FINANCIAL CORPORATION (KSFC) COMPANY PROFILE Karnataka State Financial Corporation is a state level financial institution established by state government in the year-1959, under the state financial corporation Act-1951 to meet mainly the long term financial needs of Small and Medium Enterprises (SMEs) in the state of Karnataka. In 1950 the government of India circulated a draft bill for eliciting the views of the state and of the RBI. The SFCs bill was introduced in parliament in December 1950 and passed in 1951; it came into force on AUG 1, 1952 KSFC gives financial assistance to set up tiny, small, medium and large scale industrial units in the Karnataka State. The Corporation extends term loans to new & existing unit s upto Rs. 500 lakhs for corporate bodies and registered co-operative societies. Term loans upto Rs. 200 lakhs are sanctioned to proprietary, partnership and joint Hindu undivided family concerns. KSFC extends lease financial assistance and hire purchase assistance for acquisition of machinery/equipment/transport vehicles. KSFC has a merchant banking department and is approved as a category I merchant banker by SEBI. Under this activity it does management of public issues, under-writing of shares, project report preparation, deferred payment guarantee, syndication of loans, bill discounting etc. KSFC is one of the fast track term lending financial institutions in the country. With assistance to more than 1, 56,758 units amounting to nearly 7,744 Crores over the last 47 years in the State of Karnataka, it is one of the robust, professionally managed State Financial Corporations. The focus of Karnataka State Financial Corporation (KSFC) has always been on the small scale sector, artisans, tiny units and 197

30 disadvantaged groups. KSFC has been the main term lending institution in most of the districts for first generation entrepreneurs. Its area of activities is: Assistance to the small scale sector Assistance to artisans, tiny, village and cottage industries. Assistance to medium scale industries Assistance to local entrepreneurs Assistance to backward areas Assistance to special segments of society Graph 6.9-showing the sanctions of funds Sanctions Karnataka State Financial Corporation (KSFC) has recorded 14.7 per cent rise in its sanctions at Rs 724 crore during compared to Rs 631 crore sanctioned in the previous year as shown in the graph 6.9. Its disbursements have gone up by 33.3 per cent to Rs 580 crore as against Rs 435 crore in the previous year as shown in the graph Its net profit for the year stood at Rs 13.2 crore and the operating profit at Rs 17.8 crore. The gross income for stood at Rs crore and the gross expenditure is Rs crore 198

31 Graph 6.10-showing the disbursement of funds NATIONALIZED COMMERCIAL BANKS BANK OF BARODA (BOB) Mission Statement To be a top ranking National bank of International standards committed to augmenting stake holders value through concern, care and competence BANK PROFILE The Bank of Baroda was established in the year 1908 in Baroda. Ever since its inception, the bank has been growing and expanding its branches successfully. At the turn of a century, the bank has its presence in 25 countries across the world. Bank of Baroda has progressively taken a step towards commitment and values by providing uncompromising standards of service to its customers, stakeholders, employees and the like. The Bank of Baroda was started on 20th July 1908 under the Companies Act of The initial capital invested was ` 10 Lakhs. The Maharaja was none other than Sayajirao Gaekwad who, with his visionary insight, planned the beginning of a reputed journey which over the years, came to be known as the Bank of Baroda. It is interesting to note that during the period of 1913 to 1917; almost 87 banks in India succumbed to a financial crisis. However, the Bank of Baroda survived the economic depression by dint of its financial integrity, business prudence and concern uncompromising concern about 199

32 its customers and clients. This has transcended down to the present ages and has become the motto of the bank. A SAGA OF VISION AND ENTERPRISE It has been a long and eventful journey of almost a century across 25 countries. Starting in 1908 from a small building in Baroda to its new hi-rise and hi-tech Baroda Corporate Centre in Mumbai, it is a saga of vision, enterprise, financial prudence and corporate governance. It is a story scripted in corporate wisdom and social pride. It is a story crafted in private capital, princely patronage and state ownership. It is a story of ordinary bankers and their extraordinary contribution in the ascent of Bank of Baroda to the formidable heights of corporate glory. It is a story that needs to be shared with all those millions of people - customers, stakeholders, employees & the public at large - who in ample measure, have contributed to the making of an institution. MSME BUSINESS The Micro, Small and Medium Enterprises (MSME) segment has been a vital component of Indian economy. This sector accounts for around 40.0% of total industrial production, 34.0% of industrial exports, 95.0% of industrial units and 35.0% of total employment in manufacturing and service sectors of India. The unorganized sector which forms a major component of the MSE segment comprises almost 95.0% of total industrial units and employs over 65 million people. The contribution of Services Sector within the SME segment is quite significant; especially IT enabled services, hospitality services, tourism, couriering, transportation, etc. The SMEs have also been playing a vital role in the job creation process. To give a focused attention to emerging SMEs in India, the Bank has been considering other commercial units with a turnover up to Rs 150 Crore at par with the SMEs. To promote the growth of SME Sector, the Bank has launched a special and novel delivery model, viz. SME Loan Factory, which at present, is operationalized in 36 centres of the Bank and well accepted in the marketplace. The SME Loan Factory is an innovative model for streamlining processes and for timely sanctions of SME loan proposals. The model comprises of the Central Processing Cell for speedy appraisal and sanctioning of 200

33 proposals within the stipulated deadline. Out of 36 SME Loan Factories as on 31st March 2010, three SME Loan Factories have been established during the year. These SME Loan Factories sanctioned loans aggregating Rs 11,071 Crore during FY10 as against Rs 8,508 Crore in the previous year. Table 6.1-showing the credit sanction YEAR SANCTION 8508cr 11071cr Source: Bank of Baroda- Financial Statements, March 2010 The total outstanding in MSME Sector works out to Rs 21,111 Crore as on 31st March The growth in lending to MSME Sector during the last three years is given in the table below. Table 6.2-showing the growth trend Financial Year Percentage Growth % % % Source: Annual Reports of Bank of Baroda Graph 6.11-showing the growth trend GROWTH TREND 201

34 Growth in MSME Sector Graph given above shows the percentage growth of MSME credit during FY10 is relatively high to 43.98% as the advances up to Rs 20 lakhs to Retail Trade are, now, classified under the Micro & Small Enterprises Sector after the RBI s revised guidelines issued during September, The Bank has taken the following initiatives in its SME business segment during the year under review. Scheme s and programs conducted by the banks for SME Working Capital Finance. Term Finance &Technology Up gradation Fund Scheme (TUFS) For Textile and Jute Industries. Credit Linked Capital Subsidy Scheme (CLCSS) For SSI Units. Collateral Free Loans under Guarantee Scheme of Credit Guarantee Fund Trust for Micro and Small Enterprises. SME Short Term Loans & SME Medium Term Loans. Scheme for Financing Energy Efficiency Projects. Loans under Interest Subsidy Eligibility Certificate Scheme of Khadi & Village Industries Commission (KVIC-ISEC). BANK OF INDIA (BOI) Mission "To provide superior, proactive banking services to niche markets globally, while providing cost-effective, responsive services to others in our role as a development bank, and in so doing, meet the requirements of our stakeholders". Bank Profile Bank of India was founded on 7th September, 1906 by a group of eminent businessmen from Mumbai. The Bank was under private ownership and control till July 1969 when it was nationalised along with 13 other banks. In order to facilitate lending to SME segment, number of SME branches has been increased from 50 to 100 and SME hub have been set up at all Zonal Centres to address the problems faced by the SMEs. Bank has also extended reliefs and concessions to MSME borrowers in tune with the various 202

35 stimulus packages announced by Government of India and Reserve Bank of India to help them cope up with the sudden and unexpected hardships. To enable your Bank to increase its reach, 173 new branches were opened and 13 extension counters were converted to branches, thus increasing Domestic outlets to 3207 in March, 2010 from 3021 as at March end The Bank s delivery channels include 201 specialised Branches catering to the specific needs of target beneficiaries, including Large and Mid Corporate, Foreign Trade, NRIs, SMEs and Retail segments. Business accounts for around 17.82% of Bank's total business. Vision "To become the bank of choice for corporate, medium businesses and upmarket retail customers and to provide cost effective developmental banking for small business, mass market and rural markets" Micro, Small & Medium Enterprise Lending: India has emerged as one of the fastest growing economies in the world, having recorded second best Compounded Annual Growth Rate (CAGR) of 8.70% in GDP during FY05-FY09.Government recognizes that in order to sustain the country s economic progress, broad based robust growth in the industrial and service sector is necessary. MSME plays significant role in development of the economy as also in ensuring regional balance. MSME sector is thus being perceived as an agent of economic transformation and growth. Bank has devised a Composite Loan Scheme for MSE sector borrowers in Rural / Semi Urban and Urban areas for maximum exposure of up to Rs. 5 lacs per borrower. The scheme has unique features like simplified application cum proposal format, hassle free minimum documentations, relaxed margin and interest rates, etc. The gross domestic credit of the Bank registered a growth of 17.20% from Rs.115, 354 crore on to Rs.135, 194 crore. The growth rate in the last year was %. Robust sanctions / disbursement by Large Corporate, Mid Corporate, SME and Agriculture enabled the growth. Credit to SME sector grew from Rs.25, 441 crore to Rs.29, 568 crore recording a growth of 16.22%. Bank has been and continues to be a pioneer in extending liberal credit to Micro, Small and medium Enterprises (MSME). Even before the enactment of MSME development act in 2006, the Bank was a leader in respect to financing to small scale industries and tiny sector. Keeping in line with Government of 203

36 India guidelines and policy to double flow of Credit to MSME sector during the Five- Year plan period from to , Bank has taken a lead by more than doubling the credit to MSME in the first 4 year period itself. Graph 6.12-showing the lending s Lending to MSME Sector The Bank s lending to MSME sector has grown from Rs.11,649 crore as on to Rs.29,567 crore as on as shown in the graph 9, showing an average annual growth rate of over 30%. The Bank continues to focus on MSME sector growth as reflected in new MSME accounts with sanctioned amount of Rs.15, 447 crores in the current financial year. The MSME portfolio of the Bank has grown at the rate of 16.90% in the current financial year to Rs. 29,567 crores as on March, 2010 despite the lower credit off-take in the overall credit portfolio. NEW INITIATIVES FOR GROWTH IN LENDING TO MSE SECTOR IN THE CURRENT YEAR: Simplified loan application and loan proposal forms for MSE borrowers. In order to mitigate the hardship & to facilitate the easy availability of credit to SRTO, the proposals for SRTO borrowers up to the limit of Rs.100 lacs have been exempt from the Small Business Services (SBS) credit rating model by introducing a simplified scoring model of credit rating for such accounts. 204

37 Encouraged loans to micro and small sector through increased coverage under CGTMSE cover. Increased number of SME branches from 50 to 100. Set-up SME hubs and Nodal Officers at all Zonal Centres. Have devised a NEW Composite Loan Scheme for MSE Sector borrowers in Rural/SU/U areas for maximum exposure of up to Rs. 5 lacs per borrower. The scheme has unique features like simplified application cum proposal format, hassle free minimum documentations, relaxed margin and interest rates etc. STATE BANK OF MYSORE (SBM) State Bank of Mysore was established in the year 1913 as Bank of Mysore Ltd. under the patronage of the erstwhile Government of Mysore, at the instance of the banking committee headed by the great Engineer-Statesman, Late Dr. Sir M.Visveswaraya. Subsequently, in March 1960, the Bank became an Associate of State Bank of India. State Bank of India holds 92.33% of shares. The Bank's shares are listed in Bangalore, Chennai and Mumbai stock exchanges. The Bank has a widespread network of 707 branches (as on ) and 22 extension counters spread all over India which includes 6 Small and Medium Enterprises Branches, 4 Industrial Finance branches, 3 Corporate Accounts Branches, 6 specialised Personal Banking Branches, 10 Agricultural Development Branches, 3 Government Business branches, 1 Asset Recovery Branch and 8 Service Branches, offering wide range of services to the customers. PROFILE: State Bank of Mysore was established in the year 1913 as Bank of Mysore Ltd. under the patronage of the erstwhile Government of Mysore, at the instance of the banking committee headed by the great Engineer-Statesman, Late. Subsequently, in March 1960, the Bank became an Associate of State Bank of India. State Bank of India holds 92.33% of shares. The Bank's shares are listed in Bangalore, Chennai, and Mumbai stock exchanges. Mission: A premier commercial bank in Karnataka, with all India presence, committed to provide consistently superior and personalized customer service backed by employee 205

38 pride and will to excel, earn progressively high returns for its share holders and be a responsible corporate citizen contributing to the well being of the society. BRANCH NETWORK: The Bank has a widespread network of 707 branches (as on ) and 22 extension counters spread all over India which includes 5 Small and Medium Enterprises Branches, 4 Industrial Finance branches, 3 Corporate Accounts Branches, 6 Specialised Personal Banking Branches, 10 Agricultural Development Branches, 3 Government Business branches, 1 Asset Recovery Branch and 8 Service Branches, offering wide range of services to the customers. HUMAN RESOURCE: The Bank has a dedicated workforce of 9926 employees consisting of 3179 supervisory staff, 6747 non-supervisory staff (as on ). The skill and competence of the employees have been kept updated to meet the requirement of our customers keeping in view the changes in the environment. ORGANISATIONAL SETUP: While the Chairman of State Bank of India is also the Chairman of the Bank, The Managing Director is assisted by a Chief General Manager and 6 General Managers. FINANCIAL PROFILE The paid up capital of the Bank is Rs.360 Millions as on out of which State Bank of India holds 92.33%. The net worth of the Bank as on is Rs Crores and the Bank has achieved a capital adequacy ratio of 12.42% as at the end of The Bank has an enviable track record of earning profits continuously and uninterrupted payment of dividend since its inception in The Bank earned a net profit of Rs Crores for the year ended March 2010 and earnings per share is at Rs.124/- 206

39 BUSINESS PROFILE: Total deposits of the Bank as at the end of June 2010 is Rs Crores and the total advances stood at Rs Crores which include export credit of Rs Crores. The Bank is a major player in foreign exchange dealings also and has achieved a merchant turnover of over Rs Crores and a trading turnover of over Rs Crores for the year ended March HIGHLIGHTS OF THE FINANCIAL RESULTS FOR THE YEAR ENDED 31st MARCH, 2010 The Board of Directors of State bank of Mysore approved the financial results for the year ended 31st March, 2010 at its meeting held in Mumbai on 20th April The highlights of the performance and working results are as under. NET PROFIT: The Net Profit of the Bank increased to Rs crores from Rs crores in the previous year registering a growth of Rs crores (32.31% as against 5.66% for the previous year). The net profit for the 4th quarter grew from Rs crores to Rs crores year on year, clocking in a growth rate of over 148%.The Bank s Board has declared a dividend of 100% for the year OPERATING PROFIT: The Operating Profit increased to Rs crores as on 31st March 2010 from Rs crores as on 31st March, 2009 representing a growth of 43.44% (15.15% for the previous year). The increase in Operating Profit is on account of growth of Rs crores (from Rs cr to Rs cr, at 47.52%) in Net Interest Income. (Operating profit saw a growth of over 60% on quarter on quarter basis, from Rs cr to Rs cr). Interest Income grew, year on year, by 9.60%, we were able to reduce the Interest Expenses by 3.60% by shedding high cost bulk deposits and borrowings, and, by increasing low cost Current and Savings Deposits during the year. The 207

40 growth in Staff Expenses was contained at 8.01%, while other Operating Expenses increased moderately by 10.29%, year on year. KEY FINANCIALS: The Return on Assets improved to 1.06% from 0.91% and Return on Equity was at 21.58% up from 20.16%.Net Worth of the Bank (excluding revaluation reserves at Rs cr) increased to Rs crores from Rs crores representing a growth of over 24%. The Bank has been BASEL II compliant since 31st March 2008 and Capital to Risk weighted assets (CRAR) under Basel II, is at 12.42% against the regulatory benchmark of 9%. Core CRAR was at 7.59%. Earnings Per Share (EPS) improved to Rs from Rs The Book Value of a share (Face value Rs 10) _ has improved to Rs.562 from Rs.449. Business per Employee has risen from Rs.602 Lacs in March, 2009 to Rs.675 lacs in March, Net Interest Margin (NIM) improved to 3.19% from 2.47%. Cost of Deposits declined to 6.01% from 6.92%. Yield on Advances declined to 10.33% from 10.68%. DEPOSITS: Aggregate Deposits increased from Rs crores in March, 2009 to Rs crores in March, 2010 registering a growth of 18.69% (Rs.6052 crores). ADVANCES: The total advances of the Bank reached Rs crores in March 2010, registering a growth of 15.43% over the previous year. In the absence of demand for credit from the corporate sector, the Bank focused on personal segment advances for its asset growth. These advances grew by over Rs 760 crores, clocking in a growth rate of over 19%. Within personal segment, housing loans grew by over Rs 400 crores and vehicle loans grew by over Rs 100 crores. The Bank has lent over Rs 3100 crores to MSE sector, Rs 3975 crores to Agriculture, Rs 2500 crores to housing, and 489 crores to Education. Education loans grew by over 25% during the year. The Bank has also achieved the Government of India (GOI) stipulated target of 208

41 doubling SME credit (November 2008) well ahead of the deadline of March 2010 fixed by GOI. The Credit Deposit Ratio stood at 77.72% as at March 31st, AGRICULTURE FINANCE: Agricultural advances continued to receive high priority and are at Rs.3975 crores. Bank s advances to agriculture in Karnataka stood at Rs.3491 crores and constituted 25.76% of the total advances of the bank in the State. The Agriculture Debt Waiver and Debt Relief Scheme 2008 of Government of India have been implemented by the Bank. In terms of guidelines issued by Government of India, the farmers eligible for relief under Agriculture Debt Relief Scheme have been provided with an opportunity to settle their dues till 30th June An OTS within OTS Scheme to assist farmers and to enable them to avail benefit under the extended Debt Relief Scheme of the Government of India is currently in force. During the year, Bank implemented new loan schemes to assist farmers viz., Tractor Naveekarana (for renovation/repairs to tractors), Comprehensive relief measures to persons affected by natural calamities and Organic Coffee Scheme. OTHER NEW SCHEMES/ PRODUCTS INTRODUCED: CORPORATE SALARY PACKAGE: The Bank also introduced Corporate Salary Package, a package offering a bouquet of benefits, depending upon the salary of the employees, without any minimum balance requirement. The scheme offers auto sweep facility, additional free cheque leaves, easy overdraft, concession in processing charges etc. SME SECTOR: While continuing all the existing products and schemes introduced to take care of the varying financial needs of the sector, the Bank has introduced during the year, three schemes viz., - SME Help, SME Care, and Micro Sector Collateral Free Loan to support SME sector. Micro Sector Collateral Free loan scheme provides for sanction of loans up to Rs.5.00 lacs, to these entrepreneurs without any collateral security. This limit would be increased to Rs 10 lacs shortly 209

42 AWARDS: MSME SECTOR: Government of India, Ministry of MSME has conferred to our Bank National Award for Excellence in MSE Lending and National Award for Excellence in lending to Micro Enterprises (amongst Associate Banks) for the year This special award is conferred to us in recognition of our creditable performance in lending to MSE sector and Micro Enterprises. FINANCING OF SELF HELP GROUPS: The Bank has Credit linked groups with an advance amount of Rs.338 crores during the current year and taking the cumulative total of such credit linkage program to 1,16,040 groups with a financial outlay of Rs.897 crores up to 31st March These efforts of the Bank have been recognized and the Bank has been awarded the 1st Best Bank Award instituted by NABARD under the Commercial Banks Category for its performance under SHG Bank Linkage Program for the year The Bank has been the winner of either the 1st or the 2nd prize award since March 2000 continuously. The Bank s Branch at Malavalli has also been selected as the best performer in SHG Financing amongst all the commercial bank branches in the State of Karnataka. NPA MANAGEMENT: Gross NPA ratio stood at 2.00% and Net NPA ratio stands at 1.02%, as at March NPA coverage ratio including prudential write offs is at 66.93%. TECHNOLOGY: The bank is fully on Core Banking Platform since 1st January The software provides for Anywhere Banking, Internet Banking, ATM, Real Time Gross Settlement, National Electronic Funds Transfer etc. The new functionalities introduced during the year under CBS include Mobile Banking Service. Automated Teller Machines (ATMs): The Bank installed 227 new ATMs during this year taking the total number of ATMs installed to 608 of which 521 are in the State of Karnataka. Our ATMS are part of over strong ATM network of the State Bank Group. The card base has crossed Lacs as on 31st March Paper less online ATM customer complaints reporting and redressing has been 210

43 introduced through the Banks intranet to reduce the time gap between reporting and redressing of customer complaints relating to ATM transactions to adhere to the RBI guidelines on ATM customer complaints. BRANCH EXPANSION: The Bank opened 15 (fifteen) General Banking Branches and one Centralised Processing Centre during the year. The last Branch opened during the year was at Muddenahalli, Chickballapur Taluk, the birth place of Sir M.Visveswaraya - the founder of the Bank, on 29th March The total branch network of branches as on 31st March 2010 stood at 689. FINANCIAL INCLUSION- ISSUSE OF SMART CARD: To promote Branch-less Banking, Smart Cards have been put in place facilitating customers to transact banking business in remote places under the Business Correspondent Model. The Bank proposes to add 300 hand held machines to facilitate these correspondents. The Smart Card scheme has been introduced in Tumkur, Bellary, Chitradurga and Chamarajnagar districts and would be extending to other FUTURE PLANS: The Bank proposes to reach a business level of over Rs.86,000 crores during the year aiming a growth rate of 26%, from the present level of Rs crores. The Bank has drawn up ambitious plans to open 100 new branches and install 182 additional ATMs during the financial year The Bank is in the process of adding more than 700 personnel to support its expansion plans. It is our aim to emerge as the Bank of 1st Choice in Karnataka; to attract young and new customers and at the same time retain the existing customers. New IT enabled services and products are being introduced to suit the needs of all customers. The Bank is aiming to achieve a higher mind space of customers to emerge as MOST PREFERRED BANK in the state. 211

44 LOAN SCHEMES AVAILABLE AT SBM: CREDIT GURANATEE FUND TRUST SCHEME FOR MICRO & SMALL ENTERPRISES (CGTMSE): SALIENT FEATURES: CGTMSE was set up jointly by GOI and SIDBI. The scheme is extended to all New and Existing units of Micro and Small Enterprises. The scheme is available both under Manufacturing Sector and Service Sector. Eligible loan limit is up to Rs lakhs. No collaterals including the third party guarantee. The loans to Micro enterprises up to Rs.5.00 lacs the max guarantee cover will be 85% of amount in default/max 4.25 lakhs and loans to MSE for credit facility upto Rs.50 lakhs operated by women entrepreneurs are covered up to 80% of amount in default/max Rs.40 lakhs. The Maximum guarantee cover where credit facility above Rs.5 lakhs upto Rs.50 lakhs is 75% of amount in default/max Rs lakhs, Above Rs.50 lakhs upto Rs.100 lakhs Rs lakhs plus 50% of amount in default above Rs.50 lakhs/max lakhs. One Time upfront guarantee fee has to be paid within one month from date of first disbursement/demand advice date whichever is later and Annual Service fee at specified rate on the credit facility has to be paid to the Trust before 31st of May every year. 212

45 LOANS TO MICRO & SMALL ENTERPRISES (MSES): Eligibility Any individual / partnership firm / Public or Private Ltd. Companies desirous of promoting MSEs (Manufacturing sector) with investment in Plant & Machinery not exceeding Rs. 5 crore and Medium Enterprises with investment in plant & Machinery is above Rs. 5 Crore and upto Rs. 10 crores. Extent of Finance. Need based (both fund based and non-fund based), Margin: Working Capital/ Medium Term Loan a) No margin up to Rs.25000/- b) Credit limit over Rs.25000/- Flexible approach: 15% - 25% depending on the merits of each case. Security: Primary: i) Assets created out of Bank finance Collateral: Obtaining of collateral Security exempted Up to Rs. 5 lacs Over Rs. 5 lacs and up to Rs. 25 lacs, based on good track record and satisfactory financial position Over Rs.25 lacs at the discretion of the Bank Interest: As per prevailing rates from time to time Export Finance Establishment of Letter of Credit Pre-shipment finance Post-shipment finance Assistance against Duty draw back SMALL BUSINESS FINANCE: Retail Trade- Advances to Retail Traders (Other than Fertilizers & Mineral Oils 213

46 Eligibility: All types of Retail Traders are eligible. Persons who propose to start retail trade business, fair price shop, consumer co-operative stores are also eligible for finance Extent of Finance: Credit limits up to Rs.20 lacs Rate of Interest: As per prevailing rates from time to time Margin: No margin up to Rs.25000/-, 15 to 25 percent, for credit limits exceeding Rs /- Security: Assets created out of Bank s finance, Collateral security as per Bank s norm SMALL BUSINESS ENTERPRISES: Eligibility: Individuals and firms managing a business enterprise established mainly for the purpose of providing any service other than professional services. Extent of Finance: Individual limits for working capital will be fixed depending upon the requirement of activities pursued. Advances for acquisition, construction, renovation of House Boats and other tourist accommodation will be financed. Advances for distribution of mineral oils will also be considered under this category Rate of Interest: As per prevailing rates from time to time Margin: No margin up to Rs.25000/-, 15 to 25 percent for credit limits exceeding Rs.25000/- Security: Assets created out of Bank s finance, Collateral security as per Bank s discretion PROFESSIONALS & SELF-EMPLOYED PERSONS: Eligibility: Medical practitioners including Dentists, Chartered Accountants, Cost Accountants, practicing Company Secretary, Lawyers or Solicitors, Engineers, Architects, Surveyors., Construction Contractors or Management consultants Extent of Finance: Professional and self employed persons are eligible for assistance up to Rs.10 lacs of which not more than Rs.2 lacs should be for working capital 214

47 requirements. However, in case of professionally qualified medical practitioners, financial assistance will be up to Rs.15 lacs for working capital limits for setting up practice in semi-urban and rural areas Rate of Interest: As per prevailing rates from time to time Margin: No margin up to Rs.25000/-, 15 to 25 percent for credit limits exceeding Rs.25000/- Security: Assets created out of Bank s finance, Collateral security as per Bank s norms TRANSPORT OPERATORS: Eligibility: Advances to Small Road and Water Transport operators. Extent of Finance: Not exceeding Rs 200 lakhs Rate of Interest: As per prevailing rates from time to time Margin: No margin up to Rs.25000/-, 15 to 25 percent for credit limits exceeding Rs.25000/- Security: Assets created out of Bank s finance, Collateral security as per Bank s norms LAGHU UDYAMI CREDIT CARD SCHEME: Eligibility: Small businessmen, retail traders, artisans, Small industrial units including those in tiny sector, Professionals and self employed persons, enjoying working capital up to a limit of Rs 10 lacs. Limit: Fixed at 20% of annual sales turnover declared in Income Tax/Sales Tax returns, Professionals and Self- employed persons are eligible for credit limits up to 50% of their gross annual income, as declared in their income- tax return (The assessment norms in vogue is as per the Nayak Committee recommendations) For units above Rs. 2 lacs and up to Rs. 10 lacs, scoring model method will be followed. Those who score more than 60% would qualify for coverage under the scheme Primary security: Hypothecation of stock in trade, receivables, machinery, office equipment etc. 215

48 Collateral Security: As decided by the Bank Margin: 25% Validity: Valid for 3 years. Half-yearly review will be done on the basis of last 12 months turnover in the account Interest: As per prevailing rates from time to time Insurance: Insurance cover is waived for limits up to Rs.25000/- CONTRIBUTION BY SBM: MICRO AND SMALL ENTERPRISE LENDING: Government of India, ministry of MSME has conferred to our bank national award for excellence in MSE lending and national award for excellence in lending to micro enterprise for the year This special award is conferred to us in recognition of SBM creditable performance in lending to MSME sector. MICRO AND SMALL ENTERPRISE MANUFACTURING: The banks advance to MSME manufacturing sector has increased from Rs crores in March 09 to Rs crores as at the end of March 2010 registering a growth of 14.40%. The impact of the economic slowdown had its effects during this year also. The bank has extended all the initiatives of the government of India and reserve bank of India to MSME sector this year also to help them to tide over the problems. GRAPH SHOWING CONTRIBUTION MADE BY SBM TO SME SCHEME AND FINANCIAL ASSISTANCE: 216

49 THE PROMINENT STEPS TAKEN BY SBM: Reduction in the rate of interest on working capital limits. Sanction of additional credit limits of 20% of the fund based working capital limit. Relaxing the norms for carry inventory and receivables to support the elongated working capital cycle. Reduction in the margin requirements for issuing letters of credit and bank guarantees. Rescheduling the instalments of term loans wherever felt necessary. Extending term loan for purchasing gensets, machines, and tools at a concessional rate of interest at 9% p.a. for the first year. While continuing all the existing products and schemes introduced to take care of varying financial needs of the sector, the bank has also introduced following schemes to extend finance at a concessionary rate of interest to all the new accounts for a period of one year. SME help SME care Micro sector collateral free loan upto Rs 5.00 lacs. MICRO AND SMALL ENTERPRISE SERVICE: Banks lending to this sector increased from Rs crores as at the end of March 2009 to Rs crores at the end of March 2010 registering a growth of 4.33%. LINKAGES WITH VARIOUS BANKS: The various other institutions with which SBM has linkages for coordinating activities are: KVIC KVIB 217

50 DIC ACTIVITIES AND FUNCTIONS: The activities and function in which they are linked are direct financial assistance and indirect financial assistance. GRAPH SHOWING LOAN SANCTIONED AND LOAN DISBURSED: GRAPH 6.15-SHOWING CONTRIBUTION MADE BY SBM FOR SME EXPANSION: 218

51 TECHNOLOGY UPGRADATION AND UNDER MODERNISATION LOAN TO SME: The SBM do give support to technology up gradation and the criteria for the selection of SME are implement the scheme of ministry of textile, GOI, for power looker, spinning and jute industry. The SBM gives support for purchase of new machinery. DIVERSIFICATION SCHEMES AND SUPPORT TO QUALIFIED PROFFESIONALS: The diversification scheme provided by SBM is by providing vehicles. The financial support given to qualified professional for self employment is by providing machinery and by providing any other help. SCHEMES NOT PROVIDED BY SBM: SBM does not give financial support to scheduled banks, leasing arrangement, hire purchase, direct factoring service, venture capital. LOAN CREDITED TO BORROWERS: The loan credited to borrowers is of two types: 1. Fund based Cash credit Term loan 2. Non fund based Bank guarantee Letter of credit 219

52 GUIDELINES BY RBI Classifications of MSME sunder Priority Sector: The RBI has since taken into account the definition ofmsmes as per the MSMED Act 2006 for purposes of their classification under Priority Sector. Accordingly all the following advances would be eligible for classification as Priority Sector. It may importantly be noted that all advances to Micro & Small Enterprises in both the manufacturing and services sectors except private Retail Traders with credit limits up to Rs.20 lakhs and advance to Traders under Public Distribution System or Fair Price Shops/Consumer Co-op Societies, have been synchronised with the MSMED definition to fall under Priority Sector classification. (a) Small Enterprises (Direct and Indirect Finance): (i) Direct finance to small enterprises shall include all loans given to micro and small (manufacturing) enterprises engaged in manufacture/ production, processing or preservation of goods, and micro and small (service) enterprises engaged in providing or rendering of services, and whose investment in plant and machinery and equipment (original cost excluding land and building and such items as mentioned therein) respectively, does not exceed the amounts specified above under (vi) Investment Criteria. The micro and small (service) enterprises shall include small road & water transport operators, small business, professional & selfemployed persons, and all other service enterprises, subject to the above investment criteria. (Please importantly note that Retail Trade is dealt separately below). ii) Indirect finance to small enterprises shall include finance to any person providing inputs to or marketing the output of artisans, village and cottage industries, handlooms and to cooperatives of producers in this sector. (iii) Reserve Bank of India has classified Retail Trader advances separate from MSME Enterprises. As such, advances to Retail Traders would not be classified under MSMEs, although such advances would be handled and reported by SME- SBU. 220

53 Under Retail Traders, Private Retail Traders with credit limits up to Rs.20 lakhs would alone be eligible to be classified as Priority Sector. Thus, all advances to Private Retail Traders exceeding Rs.20 Lakhs would not be covered under Priority Sector. Retail Trade shall include retail traders dealing in essential commodities (fair price shops), and consumer co-operative stores (irrespective of credit limits). Medium Enterprises: Bank s lending to Medium Enterprises in both the manufacturing and services sectors would not be included for the purpose of reckoning under the Priority Sector Target for Micro & Small Enterprises Credit: 1.4. Table-6.3-The RBI has prescribed the following overall target for the Bank as a whole for Micro & Small Enterprises credit : 32 per cent of ANBC or credit equivalent Small enterprises Advances amount of Off-Balance Sheet Exposure, whichever is higher. 10 per cent of ANBC or credit equivalent amount of Off-Balance Sheet Exposure, whichever is higher. Micro enterprises Advances within Small Enterprises Sector (i) 40 per cent of total advances to small enterprises sector should go to micro (manufacturing) enterprises having investment in plant and machinery up to Rs 5 lakhs and micro (service) enterprises having investment in equipment up to Rs.2 Lakhs. ii) 20 per cent of total advances to small 221

54 enterprises sector should go to micro (manufacturing) enterprises with investment in plant and machinery above Rs 5 lakhs and up to Rs. 25 lakhs, and micro (service) enterprises with investment in equipment Micro enterprises Advances within Small Enterprises Sector above Rs. 2 lakhs and up to Rs. 10 lakhs. (Thus, 60 per cent of small enterprises advances should go to the micro enterprises) iii) By corollary, the rest 40% should go to Small Enterprises(Manufacturing) with investment in plant and Machinery more than Rs.25 lakhs and up t Rs.5 Crores as well as to Small Enterprise (Services) with investment in equipment more than Rs.10 lakhs and up to Rs.2 Crores. 12 per cent of ANBC or credit equivalent Export Credit amount of Off-Balance Sheet Exposure, whichever is higher? Source: RBI Bulletin 222

55 Filing of Memorandum by Micro, Small & Medium Enterprises: There is a change in the entire registration process with the MSMED Act.2006 coming into force w.e.f. 02/10/2006. Vide Chapter III Section 8 (Page 7); the Act stipulates certain important requirements from the Entrepreneurs which are quoted verbatim in the Annexure hereto. Accordingly, the following would be the requirements under the MSMED Act 2006: a. New Enterprises established/to be established after the MSMED Act 2006: A Memorandum has to be filed with the District Industries Centre under whose jurisdiction the enterprise is located/proposed to be located. Depending on the activity of the Enterprise, the filing of the said memorandum is either mandatory or discretionary as shown below: Sl. No. Enterprises Memorandum A. Micro & Small Industries in both Manufacturing and services sector. Not mandatory but only discretionary with the discretion left to the Entrepreneur concerned. Source: DIC-Bangalore Urban District However, with the advantages/benefits available in many ways to such enterprises (A & B above), from several Authorities/Organisations, it is always desirable (though not mandatory) to file Memorandum of Registration. Wherever SSI Registration Certificate Number is asked for by any other body/authority, the units may furnish the date of filing the Memorandum and the date of acknowledgement thereof, as received from the authorities. 223

56 b. Existing SSI & Medium Industries: In much the same way as above, it is not mandatory for an existing SME (Mfg.) unit to file the Memorandum as above; however, at their discretion the SME (Mfg.) may file the Memorandum, in view of the benefits available due to Registration. An existing Medium industry (in the manufacturing sector), however, should mandatorily file the Memorandum as required. c. Period for Filing: (i) Already Established Medium Enterprises: In respect of established Medium Enterprises, such a filing of memorandum was to be done within 180 days from the date of commencement (02/10/2006) of the MSMED Act 2006 i.e. on or before 30/03/2007. If units financed by us, more particularly in the Medium Enterprises segment where mandatory filing is required, have not filed the requisite memorandum before 30/03/2007 and submitted the copy of DIC acknowledgement thereof, they should be advised to seek the permission for late filing from the respective DICs. The Local DIC should be contacted for the latest guidelines in this regard. Branches/Zones should insist upon the filing before extending any further limits. Since online filing is also permitted, there is no reason why medium industries cannot file the requisite memorandum in time. No concessions should be extended to such units till they file the memorandum and produce the copy of the acknowledgement from the DIC. 224

57 Newly established/proposed Medium Enterprises: In respect of newly established/proposed Medium Enterprises, the Branches should insist on the filing and production of the acknowledgement before consideration of any limits/taking up the proposals. d. Procedural Guidelines for the Entrepreneurs: The form of the Entrepreneur s Memorandum comprises of Parts I & II: Existing units to file only Part II of the Memorandum. Part I to be filed as an expression of interest by all intending entrepreneurs. Part II to be filed once the enterprise starts production or starts providing/rendering services, within two years from the date of filing Part I. invalid. If Part II not filed within the said two years, Part I would automatically become Whenever changes/additions take place in the investment/product/services, the filing to be done within three months of such changes/additions. The Memorandum to be filed would be in quadruplicate. There is no fee prescribed for processing such memorandum. The DIC issues an acknowledgement (Specimen Enclosed For ready reference) after allotting an Entrepreneur memorandum Number: Within five days of the receipt of the memorandum - If submitted by post. Same day - If submitted in person or online. Copy of this acknowledgement has to be obtained and kept on records. The Entrepreneurs Memorandum issued by DIC would also be available at the Small Industries Service Institutes of the State/Jurisdiction as well as with the Joint 225

58 Development Commissioner in the Office of the Development Commissioner (Small Scale Industries). Please bring the above important provisions of the MSMED Act 2006 (relating to the Filing of Memorandum) to the notice of all their existing as well as prospective Micro, Small & more particularly Medium Enterprises (MSME) Customers by addressing individual letters as per the enclosed format. Delayed Payments By Companies to Micro/Small Enterprises: (a) The MSMED Act inter alia states that where any buyer (of our SME borrower s products) is required to get his annual accounts audited under any law for the time being in force, such buyer shall furnish the following additional information in his annual statement of accounts, namely:- (i) The principal amount and the interest due thereon (to be shown separately) remaining unpaid to any supplier (read our borrower SME) as at the end of each accounting year; (ii) The amount of interest paid by the buyer in terms of section 18, along with the amounts of the payment made to the supplier (our SME borrower) beyond the appointed day during each accounting year; (iii) The amount of interest due and payable for the period of delay in making pay- ment (which have been paid but beyond the appointed day during the year) but without adding the interest specified under this Act; (iv) The amount of interest accrued and remaining unpaid at the end of each year (i.e. accounting year); and (v) The amount of further interest remaining due and payable even in the succeeding years, until such date when the interest dues as above are actually paid to the small enterprise (read our borrower SME), for the purpose of disallowance as a deductible expenditure under section

59 (b) Please take note of the above provisions of the MSMED Act, 2006 while verifying the receivables shown by the SME Borrower in their Book Debts Statement as well as annual balance sheet by cross-checking if these receivables appear in the respective buyers audited balance sheet(s). For the same reason, if any Corporate or otherwise buyer (of any SME suppliers products) happens to be our Bank s borrowers, one should verify if these borrowers reflect their dues (to these supplier SMEs) in their audited balance sheet(s). Credit Officers/Managers should importantly bring the above provisions to our SME Borrowers knowledge/information for their necessary action Interest Rate for MSME Advances: Concessions: (a) Only those enterprises which can be classified as MSMEs in accordance with the above definitions would qualify for interest rate concessions. Any other activity/enterprise, not falling under above MSME definition cannot, therefore, be extended any concessions available to MSMEs. Wherever concessions need to be given for such non-sme advances, the same would be in the normal course (as applicable to and stipulated under C & IC advances). Wherever such concessions were already given in the past, the same would have to be withdrawn immediately under advice to the borrower concerned and appropriate interest rate fixed. If it is desired to extend any concessions to such borrowers for business exigencies, the same would be considered under Commercial & Institutional Credit and not MSME. (b) A detailed list of the activities eligible for classification as SME (Manufacturing & Services) is as per Annexure V (i) & (ii). (c) In respect of schematic lending s, or advances under any specialized scheme like Priyadarshini Yojana, Star SSI Supreme, Star Laghu Udyog Suvidha or medimobile scheme or finance under Star Channel Credit or finance to cluster of accounts under Cluster Finance, the rate prescribed for the scheme as a whole would 227

60 prevail over, and the rate concessions would not be applicable. Thus, wherever the interest rates are: Fixed The existing rates would continue till reset The existing rates would be increas Floating, i.e. linked to BPLR decreased in tune with the PLR Increase/decrease. Source: RBI Bulletin Judicious Concessions: Although the concessions allowed as above are applicable generally to NEW accounts, concessions may also be offered under the following conditions: Only when there is an imminent threat of take-over of our existing accounts. Delegates have to satisfy themselves that such threat of take-over is genuine and there is every chance of losing the account if the concession is not granted. Our bid for taking over of satisfactory accounts from other Banks through offer of concessional rates. The authority should be exercised with great restraint and with adequate justifications so that the Bank s bottom line does not get affected much. Extant concessions to Borrowers who are no longer covered under MSMEs (such as Retail Traders etc) would be withdrawn forthwith and in any case, such concessions to non-msme Traders would, as already stated, be as applicable to advances under Commercial & Institutional Credit (C & IC) sector. Rating done by External Agencies such as CRISIL, Dun & Bradstreet, SMERA etc before interest concessions are extended. 228

61 1.6. Take Over of Accounts: Take-over of advance accounts from other Banks/FIs if the following minimum financial parameters and conditions are complied with: Accounts should be eligible for a credit rating of minimum AA as per our credit rating model treating the account as a new one. The accounts to be taken over should be standard accounts with the existing Bank. The firm/company continuously registering increasing trend in sales volume and making cash profit for at least last three years. Maximum debt equity ratio of 3:1 in the case of Medium Enterprises, and Small Enterprises enjoying working capital limits over Rs.5.00 Crores and 4:1 in the case of Tiny Enterprises, and Small Enterprises enjoying working capital limits up to Rs.5.00 Crores. Current Ratio around 1.20:1 for accounts with limits up to Rs 5 crores, where Turn Over Method alone would be applied for assessment of the Working Capital (as against 1.33 prescribed normally). Minimum Interest Service Coverage Ratio (ISCR) of 1.50:1 as against 1.75:1 prescribed normally. If Term Loan is also proposed to be taken over, the minimum Debt: Service Coverage Ratio (DSCR) should be The Asset Coverage Ratio should not be less than Credit Appraisal Although same appraisal norms cannot be uniformly applied to Micro, Small and Medium Enterprises, broadly the appraisal would involve: Proper identification of the Proponent(s) and his/her/their antecedents in accordance with KYC Norms/Guidelines, the proponents experience, educational and social background, technical/ professional competence, integrity, initiatives, etc,. Checking out for Willful Defaulters List of RBI, Specific Approval List (SAL) of ECGC etc, 229

62 The acceptability of the product manufactured, its popularity/market demand, market competitors. Evaluation of State and Central Govt. Policies (enabling environment) with specific reference to the Enterprise in question, Environmental stipulations, Availability of necessary infrastructure-roads, power, labour, raw material and markets. Project Cost, the Proponent s own financial contribution, projections for three years, and other important parameters which would include the BEP, liquidity, solvency, and profitability ratios, etc,. Working Capital Assessment For working capital limits up to Rs.5 Crores,Turnover Method would be applicable as mandated under Nayak Committee Recommendations for financing working capital needs of the 20% of the projected turnover based on the assumption of a three month operating cycle. It is abundantly clarified that this 20% is the minimum WC limit to be sanctioned even if the proponent s operating cycle is shorter than 3 months. However, one should ensure to restrict the drawings in such cases to actual drawing power. MPBF method may be resorted in specific cases with longer operating cycle. One should obtain and scrutinise latest audited financials of the constituent in all cases of WC limits above Rs.10 lakhs. In case of provisional balance sheets it should be ensured that in the audited financials, the variation is not beyond +/- 5%. CMA Data are not also required to be obtained in case of SME Proposals up to Rs.5 Crores under Turnover Method. The next year s sales projections made by the borrower, however, would have to be corroborated by the trend in sales over 2 years, last year actual sales through verification of the following indicative parameters (besides the financial data submitted by the borrower): Sales Ledger/Sales Turnover. Credit Summation in the account. Sales Memos or Invoices/Delivery Challans. Sales Tax Paid/Turnover Tax/Excise Register, as applicable, Electricity Bills wherever applicable. 230

63 Orders on hand/expected orders. Installed capacity vis-à-vis the projections. Overall market trend etc, Such projections should be within reasonable limits say 25% over last year s sales. However, in exceptional cases deviations from this may be allowed if supported by LCs/Firm orders on hand etc, Current Ratio: While a benchmark current ratio of 1.33:1 is always desirable, it is felt that some relaxations are provided to SMEs in their Current Ratio. They may be permitted to maintain a minimum current ratio of 1.20:1 as against :1 stipulated for others, although ideally under Turnover Method this ratio should be 1.25:1. Such deviations are not to be allowed, particularly if the rating gets below AA. Borrower has to improve the position by building up the current assets through infusion of more capital/funds. Classification of Current Assets and Current Liabilities under MPBF method would be based on extant RBI/Bank guidelines. Debt: Equity Ratio: The following may be accepted as the benchmark in this regard: W/C Limits up to Rs.5 Crores to Micro & Small Enterprises: 4:1. W/C Limits over Rs.5 Crores to Micro & Small Enterprises: 3:1. W/C Limits to Medium Enterprises: 3: Credit Rating Govt. /RBI had advised that Banks may initiate necessary steps to rationalise the cost of loans to SME sector by adopting a transparent rating system with cost of credit being linked to the credit rating of enterprise. The Bank has adopted the Internal rating Model developed in house. The ratings given by reputed Credit Rating agencies such as SMERA, CRISIL etc, which have been approved by the National Small Industries Corporation, may also be considered for granting concessions in the interest rates, in tune with such credit ratings, based on parameters 231

64 such as turnover, market position, operating efficiency, existing financial position, and management evaluation. Internal Credit Rating as advised by HO will be used for rating purposes before pricing the facilities to any borrower with limits over Rs. 10 lakhs Collateral Security and Margin Norms: As per extant RBI guidelines, Micro & Small Enterprises with limits up to Rs.5 Lakhs (i.e. erstwhile Tiny and SSI) may be sanctioned credit facilities without any collateral security. For customers with good track record, this waiver of collateral security may be for limits up to Rs.50 Lakhs, provided Credit Guarantee Fund Trust for Small Industries (CGFTSI) -since renamed as Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) - cover is available. However, the issue of collateral security would be addressed on a case-specific basis. Credit facilities extended to Micro & Small Enterprises either by way of Term Loan or Working Capital or both, without any collateral security or third party guarantee, will be covered, if eligible, under CGTMSE scheme. The coverage of the Scheme has since been extended to all new and existing Micro and Small Enterprises (both in the manufacturing and Services Sectors). The credit guarantee cover has been raised from 75% to 80% for the following category of MSME advances: Loans to Micro Enterprises up to Rs.5 lakhs, and Loans to Micro and Small Enterprises operated and/or owned by women. For all others, the cover would be available up to 75% of the amount in default subject to maximum of Rs Lakhs. Till now, CGMTSE (erstwhile CGFTSI) charged one-time Joining fee of 1.50% and Annual Service fee of 0.75% of the sanctioned limits with credit facilities up to Rs.25 Lakhs. This fee structure has since been revised by CGMTSE (erstwhile CGFTSI) and a differential pricing based on slab of coverage has been introduced for credit limits up to Rs.50 lakhs. Thus the following fee structure is 232

65 prescribed by CGTMSE (erstwhile CGFTSI) to all eligible MSME advances covered under the scheme. However, SBM would continue with the coverage to the extent of 75% of the credit facility sanctioned in all cases (and 80% in specified categories such as to women and borrowers in North eastern states) Time Norms for Disposal of Applications: With the switch over to the simple Turnover Method for all advances in the SME segment up to Rs.5 Crores, the time for processing of the applications and sanction has to be curtailed as under (from the date of submission of complete papers by the borrower): Limits Up to and including Rs.25,000/= Time Limit Not Exceeding 4 Business Days. Over Rs.25,000/= and up to 8 Business Days. Rs.10 Lakhs Over Rs.10 Lakhs up to Rs.5 Crores 12 Business Days. Source: Annual Reports-State Bank of Mysore, Bangalore A register should be maintained at the branches to record the dates of receipt of applications/ sanction/ disbursements/ rejections with reasons therefore Purpose of the Loans: The Advances can be given for Capital expenditure and Working Capital requirements only Loan Amount: The Loan amount is as per the requirements of the Customer and eligibility arrived as per the Appraisal/Analysis. 233

66 1.13 Tenor/ period of Advance: Working Capital loans will be sanctioned for a period of one year on renewal basis and the Tenor of the Term Loans is defined based on the cash flows and repayment capacity of the applicant Disbursal of Loans: The Disbursement of Loans will be done only after completion of the all documentation and pre sanction conditions as mentioned in the Sanction Letter Documentation: The Documentation of the loans will be done based on the Banks policy. 1.16: Right to Recall: At the option of the Bank, and without necessity of any demand upon or notice to the Borrower, all of which are hereby expressly waived by the Borrower, and notwithstanding anything contained herein or in any security documents executed by / to be executed by the Borrower in the Bank s favour, the said Dues and all of the obligations of the Borrower to the Bank hereunder, shall immediately become due and payable irrespective of any agreed maturity, and the Bank shall be entitled to enforce its security, upon the happening of any of the following events ( Events of Default ) (a) If any representations or statements or particulars made in the Proposal of the Borrower are found to be incorrect or the Borrower commits or threatens to commit any breach or default in performance or observance of these presents or fails to keep or perform any of the terms or provisions of any other agreement between the Bank and Borrower in respect of the Loan; (b) If the Borrower commits any default in the payment of principal or interest of any obligation of the Borrower to the Bank when due and payable; (c) If there is any deterioration or impairment of the said Securities or any part thereof or any decline or depreciation in the value or market price thereof (whether actual or reasonably anticipated), which causes the said Securities created in favour of the Bank, in the judgment of the Bank to become unsatisfactory as to character or value; 234

67 (d) If any attachment, distress, execution or other process against the Borrower, or any of the said Securities is enforced or levied upon; (e) If there is a failure in business, commission of an act of bankruptcy, general assignment for the benefit of creditors, if the Borrower suspends payment to any creditors or threatens to do so, any petition in bankruptcy of by, or against the Borrower is filed or any petition for winding up of the Borrower is filed and not withdrawn within 30 days of being admitted. (f) If the Borrower is unable to pay its debts within the meaning of Section 434 of the Companies Act, 1956 (1 of 1956) or if a liquidator, or receiver is appointed in respect of any property or estate of the Borrower or the Borrower goes into liquidation for the purpose of amalgamation or reconstruction, except with prior written approval of the Bank; (g) If a receiver is appointed in respect of the whole or any part of the property /assets of the Borrower; (h) If the Borrower ceases or threatens to cease or carry on its Business; If it is certified by a Firm of Accountants appointed by the Bank (which the Bank is entitled and hereby authorised to so appoint at any time) that the liabilities of the Borrower exceed the Borrower s assets or that the Borrower is carrying on business at a loss; (i) If the Borrower, without prior written consent of the Bank, attempts or purports to create any charge, mortgage, pledge, hypothecation, lien or other encumbrance over the said Securities or any part thereof, except for securing any other obligations of the Borrower to the Bank; (j) If any circumstance or event occurs which is prejudicial to or impairs or imperils or jeopardises or is likely to prejudice, impair, imperil, or jeopardise any other security given by the Borrower or any part thereof; (k) If any circumstance or event occurs which in the opinion of the Bank, would or is likely to prejudicially or adversely affect in any manner the ability/ capacity of the Borrower to perform or comply with its obligations to there under and/or to repay the Loan or any part thereof (or the implementation of the Project); 235

68 (l) If the Loan or any part thereof is utilised for any purpose other than the purpose for which it sanctioned by the Bank; (m) If any substantial change in the constitution or management of the Borrower occurs without previous written consent of the Bank or the Management ceases to enjoy the confidence of the Bank; (n) If any of the foregoing events occur in relation to any third party which now or hereafter has guaranteed or provided security for or given any indemnity in respect of any money obligation or liability hereby secured or such third party if individual shall commit an act of bankruptcy or die or become incompetent to contract. (o) If any circumstances or event occurs which in the opinion of the Bank, would or is likely to prejudicially or adversely affect in any manner the ability/capacity of the Borrower to perform or comply with its obligations to there under and/or to repay the Loan or any part thereof (or the implementation of the Project). (p) If any event of default or any event which, after the notice or lapse of time or both would constitute an event of default shall have happened, the Borrower shall forthwith give the Bank notice thereof in writing specifying such event of default, or such event. The Borrower shall also promptly inform the Bank if and when any statutory notice of winding-up under the provisions of the Companies Act, 1956 or any other law or of any suit or legal process intended to be filed / initiated against the Borrower, is received by the Borrower. On the question whether any of the above events/circumstances has occurred/ happened, the decision of the Bank shall be final, conclusive and binding on the Borrower. (q)the company hereby agree as a pre-condition of the loan given to it by the bank that in case it commits default in the repayment of the loan or in the repayment of interest thereon or any of the agreed instalment of the loan on due date, the bank and/or the Reserve Bank of India will have an unqualified right to disclose or publish its name or the name of its directors as defaulter in such manner and through such medium as the bank or Reserve Bank of India in their absolute discretion may think fit. 236

69 EVALUATION PROCESS FOR SANCTIONING LOAN TO MSME: The borrower approaches the nearby SBM branch and explains the need of loan and fetches the application form and submits with the relevant document as required by the bank. The bank person collects the form, documents and goes through it. If the documents produced by the entrepreneur are legal then the application is forwarded to the small, medium enterprise city credit centre. If the borrower turnover is less than 25 cr (depending on the borrower turn over the application will be moved to that concerned department). There are totally 13 people involved in the evaluation process, where this 13 people are divided in to 4 regions of the city. The concerned person of that region goes through the application and evaluates. If the documents produced are relevant and legal then the loan would be sanctioned within eight days or else the documents will be sent back to entrepreneur and will ask to produce relevant documents. All this process is done by maintenance department. STEPS TAKEN TO CREATE AWARENESS TO ENTREPRENEUR: The steps taken by SBM to create awareness regarding the loan available to the entrepreneurs is by TV advertisement, loan mela, road side banners, cut outs outside the banks, pamphlets, brochures, seminars, exhibitions, etc. FINDINGS: SBM is more customers friendly as it provides the required assistance with respect to sanctioning of loan. SBM constantly up grades their technology with respect to the loan. The SBM adopts a combination of technology which is traditional and modern. The numbers of people who have been benefited with this scheme is tremendously increasing year by year. The SBM adopts various quality promotion strategies with respect to improvising SME s. SBM provides assistance not only to entrepreneurs but also to the potential individual who qualified professionals for self employment. 237

70 SBM do provides help to SME in getting credit rating from accredited credit rating agencies. SBM do provides developmental support service by giving enterprise promotion and technology up gradation. SBM has simplified common loan application form for SME s. Constant monitoring with respect to the performance of SME s Efficient and qualified person are appointed so as to perform the job as well as being customer friendly CANARA BANK History of Canara Bank: Founder- Sri. Ammembal Subba Rao Pai "A good bank is not only the financial heart of the community, but also one with an obligation of helping in every possible manner to improve the economic conditions of the common people" - A. Subba Rao Pai. Founded as 'Canara Bank Hindu Permanent Fund' in 1906, by Late Sri. Ammembal Subba Rao Pai, a philanthropist, this small seed blossomed into a limited company as 'Canara Bank Ltd.' in 1910 and became Canara Bank in 1969 after nationalization. 238

71 Founding Principles: 1. To remove Superstition and ignorance. 2. To spread education among all to sub-serve the first principle. 3. To inculcate the habit of thrift and savings. 4. To transform the financial institution not only as the financial heart of the community but the social heart as well. 5. To assist the needy. 6. To work with sense of service and dedication. 7. To develop a concern for fellow human being and sensitivity to the surroundings with a view to make changes/remove hardships and sufferings. These sound founding principles, enlightened leadership, unique work culture and remarkable adaptability to changing banking environment have enabled Canara Bank to be a frontline banking institution of global standards. Table 6.4: Milestone of Canara Bank Year 1st July 1906 Canara Hindu Permanent Fund Ltd. formally registered with a capital of 2000 shares of Rs.50/- each, with 4 employees Canara Hindu Permanent Fund renamed as Canara Bank Limited major banks in the country, including Canara Bank, nationalized on July th branch inaugurated 1983 Overseas branch at London inaugurated Cancard (the Bank s credit card) launched 1984 Merger with the Lakshmi Commercial Bank Limited 1985 Commissioning of Indo Hong Kong International Finance Limited 1987 Can bank Mutual Fund &Can fin Homes launched 239

72 1989 Can bank Venture Capital Fund started Can bank Factors Limited, the factoring subsidiary launched Became the first Bank to articulate and adopt the directive principles of Good Banking Became the first Bank to be conferred with ISO 9002 certification for one of its branches in Bangalore Opened a 'Mahila Banking Branch', first of its kind at Bangalore, for catering exclusively to the financial requirements of women clientele Maiden IPO of the Bank Launched Internet & Mobile Banking Services % Branch computerization Entered 100th Year in Banking Service, Launched Core Banking Solution in select branches. Number One Position in Aggregate Business among Nationalized Banks Retained Number One Position in Aggregate Business among Nationalized Banks. Signed MoUs for Commissioning Two JVs in Insurance and Asset Management with international majors viz., HSBC (Asia Pacific) Holding and Robeco Groep N.V respectively Launching of New Brand Identity Incorporation of Insurance and Asset Management JVs Launching of 'Online Trading' portal Launching of a Call Centre Switchover to Basel II New Capital Adequacy Framework The Bank crossed the coveted Rs. 3 lakhs crore in aggregate business The Bank s 3rd foreign branch at Shanghai commissioned The Bank s aggregate business crossed Rs.4 lakhs crore mark. Net profit of the Bank crossed Rs.3000 crore. The Bank s branch network crossed the 3000 mark. Source: Website of Canara Bank, June

73 As at June 2010, the total business of the Bank stood at Rs.4, 12,649 crore. PROFILE OF CANARA BANK: Canara Bank was founded by Shri. Ammembal Subba Rao Pai, a great visionary and philanthropist, in July 1906, at Mangalore, then a small port in Karnataka. The Bank has gone through the various phases of its growth trajectory over hundred years of its existence. Growth of Canara Bank was phenomenal, especially after nationalization in the year 1969, attaining the status of a national level player in terms of geographical reach and clientele segments. Eighties was characterized by business diversification for the Bank. In June 2006, the Bank completed a century of operation in the Indian banking industry. The eventful journey of the Bank has been characterized by several memorable milestones. Today, Canara Bank occupies a premier position in the community of Indian banks. With an unbroken record of profits since its inception, Canara Bank has several firsts to its credit. These include: Launching of Inter-City ATM Network Obtaining ISO Certification for a Branch Articulation of Good Banking Bank s Citizen Charter Commissioning of Exclusive Mahila Banking Branch Launching of Exclusive Subsidiary for IT Consultancy Issuing credit card for farmers Providing Agricultural Consultancy Services Over the years, the Bank has been scaling up its market position to emerge as a major 'Financial Conglomerate' with as many as nine subsidiaries/sponsored institutions/joint ventures in India and abroad. As at June 2010, the Bank has further expanded its domestic presence, with 3057 branches spread across all geographical segments. Keeping customer convenience at the forefront, the Bank provides a wide array of alternative delivery channels that include over 2000 ATMs- one of the highest among nationalized banks- covering 732 centres, 2681 branches providing Internet and 241

74 Mobile Banking (IMB) services and 2091 branches offering 'Anywhere Banking' services. Under advanced payment and settlement system, all branches of the Bank have been enabled to offer Real Time Gross Settlement (RTGS) and National Electronic Funds Transfer (NEFT) facilities. Not just in commercial banking, the Bank has also carved a distinctive mark, in various corporate social responsibilities, namely, serving national priorities, promoting rural development, enhancing rural self-employment through several training institutes and spearheading financial inclusion objective. Promoting an inclusive growth strategy, which has been formed as the basic plank of national policy agenda today, is in fact deeply rooted in the Bank's founding principles. "A good bank is not only the financial heart of the community, but also one with an obligation of helping in every possible manner to improve the economic conditions of the common people". These insightful words of our founder continue to resonate even today in serving the society with a purpose. The growth story of Canara Bank in its first century was due, among others, to the continued patronage of its valued customers, stakeholders, committed staff and uncanny leadership ability demonstrated by its leaders at the helm of affairs. We strongly believe that the next century is going to be equally rewarding and eventful not only in service of the nation but also in helping the Bank emerge as a Global Bank with Best Practices". This justifiable belief is founded on strong fundamentals, customer centricity, enlightened leadership and a family like work culture. Vision To emerge as a Best Practices Bank by pursuing global benchmarks in profitability, operational efficiency, asset quality, risk management and expanding the global reach. Mission To provide quality banking services with enhanced customer orientation, higher value creation for stakeholders and to continue as a responsive corporate social citizen by effectively blending commercial pursuits with social banking. 242

75 Table 6.5-Showing list of Board of Directors Sl. No. Directors Photo 1 Mr S Raman Canara Bank Head Office 112, J C Road BANGALORE Chairman & Managing Director 2 Mr Jagdish Pai K L Executive Director Canara Bank Head Office 112, J C Road BANGALORE Smt. ARCHANA S. BHARGAVA Executive Director Canara Bank Head Office 112, J.C. Road BANGALORE Dr. THOMAS MATHEW Joint Secretary (CM) Ministry of Finance Government of India Dept. of Economic Affairs North Block NEW DELHI Director representing Government of India 243

76 5 Shri G Padmanabhan Chief General Manager D/o Payment & Settlement Systems Central Office; Central Office Building, 14 th floor, Shahid Bhagat Singh Road, MUMBAI Director representing Reserve Bank of India 6 Shri. DEVENDER DASS RUSTAGI General Secretary, Canara Bank Employees' Union Canara Bank Circle Office, Nehru Place, NEW DELHI Workmen Employee Director 7 Shri. G.V. MANIMARAN Manager Canara Bank IIT Branch Chennai Officer Employee Director 8 Shri. S. Shabbeer Pasha No.96/8, Al-Ameen Apartments First Cross, South End Road BANGALORE Part-time Non-Official Director 9 Shri. Pankaj Gopalji Thacker Part-time Non-Official S.A.X ADIPUR Kutch Gujarat Director Source: Lead Bank: Bangalore Urban District; District Credit Plan