projecton SMEs

7/28/2019 projecton SMEs

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CHAPTER 1

AN INTRODUCTION

SMEs stands for small medium enterprises (alsoknown in some countries as Town and village

enterprises-TVEs) .The Basel Committee considers

the full form of SMEs as small and medium sized

entity and the acronym SME has turned out to be a

worldwide champion for the cause of development

of entrepreneurship in the underdeveloped and

developed countries .The SME sector contains an

element of welfare for the masses . For example,

the Bangladesh Gramin Bank recently provided

each indentified beggar with a mobile phone to start

a way side PCO , and earn his or her living .

Small and medium enterprises have acquired

enormous importance in contemporary world

finance . SMEs have a unique contribution in

providing employment to skilled unskilled people.

Quality goods and services are made available at

cheaper rates generally by SMEs.

SMES form the lifeblood of any vibrant economy. In

an emerging economy like India, SMES have a

significant socio-economy role as they are


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estimated to employ more than 42 million people in

the country.

India has nearly 13 million SMEs, which account for

almost 50 percent of the country total exports.

In fact, the SMEs sector plays a dual role since the

output produced by SMEs is not only about final

consumption, but also a source of capital goods in

the form of input to heavy industries .Thesignificance of SMEs in the Indian economy is

growing. The output of SMEs is not only increasing,

but the productivity in terms of per unit is also

growing at a higher rate.

SME DEFINED

There is no standards Universal definition of small

and medium enterprises.

In June 2004, The Basel Committee stated in the

BASEL ACCORD.

SME borrows are defined as those with annual

sales of less than rupees 250 crores.

SMEs are usually defined as companies with up to

250 employees.


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SME may be defined as any business enterprises

that involves processing

Manufacturing and servicing operation, or only

trading activities, with an annual turnover (sales)

gross income up to 50 crores.

Features of SMEs

1.SMEs are mostly promoted and run by individual

as sole proprietary concern ,or by a group of

individual as partnership concern sometimes as

Private Limited Companies , or any other form of

organization .SMES as Public Limited Companies

are rarely seen.

2. An SME is a business that is predominantly

dependent upon technical managerial enterprise of

promoter owner skilled personal are also employed

wherever necessary.

3. SMEs mostly operate on a regional basis , more

in rural semi-urban centres and depending upon

size and nature of their goods services they often

have a national presence.


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4. Capital funds of SMEs are generally small

compared to external funds in the form of loans

advances .Hence ,their debt-equity is larger than

conventional 2:1 ratio.

5. At present ,many Indian SMEs do not have a

compatible technological base.

6. Products service of SME are generally cheaper

as compared to those from large sized ones ,primarily due to lower business overheads.

7. SMEs are better equipped to render personalized

attention and care to their customers.

8. SMEs having backward forward linkages with

large corporate in matter of purchase sale are in a

position to show better business performance.


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ABOUT THE REPORT

1. Title of the study.

The present study is titled A PROJECT REPORT

ON FINANCE PROVIDEDBY BANKS TO SMEs-A

CASE STUDY on IDBI BANK

2.Objectives of study

The following are the objectives of the study.

a. objective of the study is to have an in depth

study about SMEs Sector in India.

b. To study about the finance schemes of banks

to small and medium enterprises.

c. To study about the problem faced by the small

and medium enterprises.

3. Data and Methodology.

For the purpose of the study both primary and

secondary data were used. The primary data

collected from the bank visit interviewing staff

etc. The secondary data collected from books,

magazines, and journals and newspapers .


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4. Limitation of the study

The present study has all the limitation of case

study method.

5. Presentation of studies

The present study is arranged as follows:

CHAPTER 1- Chapter 1 an introduction gives an

Introduction to the title and to the

report.

CHAPTER 2 - Chapter 2 deals with profile of

IDBI Bank.

CHAPTER 3 - Chapter 3 give theoretical view of

the title.

CHAPTER 4 - The topic under the study is

given in Chapter 4.

CHAPTER 5- chapter 5 summarizes the results

of the study.


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CHAPTER 2

IDBI BANK A PROFILE

The Industrial Development Bank of India Limited,

now more popularly known as IDBI Bank, was

established as a wholly-owned subsidiary of

Reserve Bank of India. The foundation of the bank

was laid down under an Act of Parliament, in July

1964. The main aim behind the setting up of IDBIwas to provide credit and other facilities for the

Indian industry, which was still in the initial stages of

growth and development. In February 1976, the

ownership of IDBI was transferred to Government of

India.

After the transfer of its ownership, IDBI became the

main institution, through which the institutes

engaged in financing, promoting and developing

industry were to be coordinated. In January 1992,

IDBI accessed domestic retail debt market for the

first time, with innovative Deep Discount Bonds, and

registered path-breaking success. The following

year, it set up the IDBI Capital Market Services Ltd.,

as its wholly-owned subsidiary, to offer a broad

range of financial services, including Bond Trading,

Equity Broking, Client Asset Management.


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In September 1994, in response to RBI's policy of

opening up domestic banking sector to private

participation, IDBI set up IDBI Bank Ltd., in

association with SIDBI. In July 1995, public issue of

the bank was taken out, after which the

Government's shareholding came down (though it

still retains majority of the shareholding in the bank).

In September 2003, IDBI took over Tata HomeFinance Ltd, renamed IDBI Home finance Limited,

thus diversifying its business domain and entering

the arena of retail finance sector.

The year 2005 witnessed the merger of IDBI Bank

with the Industrial Development Bank of India Ltd.

The new entity continued to its development finance

role, while providing an array of wholesale and retail

banking products (and does so till date). The

following year, IDBI Bank acquired United Western

Bank (which, at that time, had 230 branches spread

over 47 districts, in 9 states). In the financial year of

2008, IDBI Bank had a net income of Rs 9415.9

crores and total assets of Rs 120,601crores.


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Business Summary

The genesis of "Industrial Development Bank ofIndia Limited" (IDBI Ltd) can be traced to the

establishment of The Industrial Development

Bank of India (IDBI), its predecessor entity, in

1964, by an Act of Parliament to provide credit

and other facilities for the development of Indian

industry.

IDBI Ltd entered commercial banking with the

incorporation of IDBI Bank Ltd as a its

subsidiary. On April 2, 2005, IDBI Bank Ltd was

merged into IDBI Ltd as per the scheme of

amalgamation sanctioned by RBI.

The merger seeks to consolidate business

across the value chain and provide economies

of scale to the merged entity, enabling it to offer

an array of customer friendly services to its

existing and prospective clients, both within the

geographical boundaries of India and, in due

course, abroad.


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IDBI was the First Bank to introduce:

ATM Next -Online information on the ATM like

Cricket scores, movie listings

First ATM network with Audio instructions

Easy Fill-'The online mobile refilling service

ATM locator on MMS mobile

E-Tax collections system-First in India

Cart to Card-First in Asia Pacific

PROBLEMS FACED BY IDBI AFTER

LIBERALIZATION

Net profit dropped.

Decline in sanction and disbursements.

Lack of proper leadership.

IDBIs NPA increased rapidly.

Improper business practices.

ICRA downgraded IDBIs rating in 2001.

Failed to retain its top-rated customers.


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Achievements

IT Team of the Year(2007) Award of IBA5

Best IT Security Practices Award of NASSCOM

Best CTO Award of Cyber Media

Won two special awards, for Best Payments

Initiative and Outstanding Achiever of the Year

(2007)

New Business Initiatives

o IDBI completed the reorganization of its business

into separate verticals focused on SME, Agri-

business, Personal Banking, Mid Corporate, Large

Corporate and Infrastructure.

o Bank will also open branches in Singapore, Dubai

and Shanghai, with either the Dubai or Singapore

branch opening likely by the end of March.

o Steps initiated for mortgage guarantee business.


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o Took another initiative in reaching out to the smaller

clients by introducing facility of online application for

educational loan.

o Bank introduced a new product for encashment/sale

of Foreign Currency by NRI Clients and

encashment of Travelers Cheques by Bank.

SUBSIDIARY COMPANY OF

IDBI BANK

IDBI Capital Market Services Limited

IDBI Capital Market Services Ltd. (head quartered

in Mumbai), is a leading provider of financial

services and is a 100% subsidiary of IDBI Bank

Ltd. The company was set up in 1993 with the

objective of catering to specific financial

requirements of financial institutions, banks, mutual

funds and corporate houses. The company

provides a complete range of financial products

and services that includes:


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Stock Broking-Institutional and Retail

Derivatives Trading

Distribution of Mutual Funds

Investment Banking

PF/Pension Fund Management

Retail Marketing of Bonds and IPOs

Depository Services

IDBI Home Finance Limited

IDBI Home finance Ltd. is 100% subsidiary of IDBI

Bank Ltd. acquired the entire shareholding of Tata

Finance Ltd. in Tata Home finance Ltd. in

September 2003. The name of the company was

changed to IDBI Home finance Ltd. Over the

years, the company has taken steps to enhance its

retail reach, strengthen brand image, improve

asset quality, thereby achieving business growth.

IDBI Intech Limited

IDBI Intech Ltd. is a wholly owned subsidiary of

IDBI Bank Ltd. IDBI has set up IDBI Intech Ltd.

(INTECH) in March 2000 to tap the opportunities

arising from the IT sector. INTECH capitalizes on


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the banking business knowledge acquired over the

years supplemented with experience in

Implementation & Management of state-of-the-art.

IDBI Gilts ltd

IDBI Gilts Ltd. was set up as a wholly owned

subsidiary of IDBI Bank Ltd. to undertake Primary

Dealership [PD] Business. In accordance with RBI

guidelines, the PD business of IDBI Capital Market

Services Ltd. [ICMS] has been de-linked and

transferred to IDBI Gilts Ltd. The company was

incorporated in December 2006 and became

operational from July 24, 2007. The company's

business ambit includes Bond trading, underwriting

in auctions of primary issuance of Government

dated securities and treasury bills. In addition, IDBI

Gilts also plans to be a major player in the interest

rate and credit derivative market.


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CHAPTER 3

THEORITICAL VIEW

Micro, small and medium enterprises (MSME)

sector has been recognized as an engine of growth

all over the world. The sector is characterized by

low investment requirement, operational flexibility,

location wise mobility, and import substitution. In

India, the Micro, Small and Medium Enterprises

Development (MSMED) Act, 2006 is the first single

comprehensive legislation covering all the three

segments. In accordance with the Act, these

enterprises are classified in two:- (i) manufacturing

enterprises engaged in the manufacture or

production of goods pertaining to any industry

specified in the first schedule to the Industries(Development and regulation) Act, 1951. These are

defined in terms of investment in plant and

machinery; (ii) service enterprises engaged in

providing or rendering of services and are defined in

terms of investment in equipment.

India has a vibrant micro and small enterprise

sector that plays an important role in sustaining the

economic growth, by contributing around 39 per

cent to the manufacturing output and 34 per cent to

the exports in 2004-05. It is the second largest
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employer of human resources after agriculture,

providing employment to around 29.5 million people

(2005-06) in the rural and urban areas of the

country. Their significance in terms of fostering new

entrepreneurship is well-recognized. This is

because, most entrepreneurs start their business

from a small unit which provides them an

opportunity to harness their skills and talents, to

experiment, to innovate and transform their ideas

into goods and services and finally nurture it into alarger unit.

IMPORTANCE OF SMALL AND MEDIUM

ENTERPRISES

Large scale generation of wage employment is

possible with the growth of SMEs in on economy.

The pattern of contribution of GDP in any economy

will show that the SME sector is a dominant

contributor to the well being of a country.

SME projects do not generally involve large

financial resources , but at the same time the sector

is growth driver in an economy.


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THE time lag between conception of an SMEs

project and commencement of business is not

substantial.

SME cluster take care of the 4Cs ,as per the

Ganguly Committee Report ,Customer focus, Cost

Control , cross sale and containing Risk.

When compared to similar products and service of

large sized units, SME products and service are

competitive and customer friendly in terms of cost,

without compromising quality.

BENEFITS IN FINANCING SMEs

Benefits in financing SMEs from the view point of

the national economy. The benefits arising from

higher order focus of SME financing may be broadly

states as follows.

1. Increasing the contribution of the SME sector in the

GDP of the country.


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2. Entrepreneurial interest would be encouraged and

growth in number of SMEs may be possible.

3. New products and services would be increasingly

available for consumers.

4. Competitiveness in business will increase.

ACTIVITIES OF SMEs

The SME sector may concern itself with a

commercial activity permissible under law .Hence,

any type of manufacturing, processing or industrial

activity or trading or allied operation , may be the

domain of the SME sector. However, the followingactivities may be encouraged for the SME sector:

1. Village and cottage industries.

2. Computer software development and computer

service.

3. Data conversion /Data processing service.

4. Medical/Legal transcription activities.

5. Website design and development.

6. Call centers .

7. Content development and animation.


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8. Video film making.

9. Tailoring.

10. Studio.

11. Cable TV network

12.Laundry and dry cleaning.

In India , as there is no specific policy of reservation or

preferential treatment for a particular type of activity for

SMEs, they stand on an equal footing with large sized

business units .However , the items listed above areconsidered more suitable for SMEs having regard the

following factors:

1. Involvement of lesser amount of financial resources.

2. Lower gestation period.

3. Wide scope of marketing.

LEGAL CONSTITUTION FOR SMEs

Under the general Law/principles of Equity, any

individual or group of individual , may form an

acceptable form of organization to undertake the

business of an SME, provided they have attained

the age of majority .Whenever specific rules of

constitution exist the same should be complied with.

Any particular form of constitution by itself does not


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confer special benefits for an SME . The choice of a

constitution

(whether partnership or private limited etc)by agroup of individual depends upon their resources

level , business perception , convenience of

management and coverage of business operation ,

etc.

SMEs in India are generally constitute in any of the

following forms:

Sole Proprietary concern.

Partnership concern

Limited company

Hindu Undivided Family

It is also possible to run SMEs as Public Trust.


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UTILITY OF CREDIT RATING FOR

SMEs

Credit rating is an important tool for the

assessment of any credit account, as well as for

under taking post disbursement monitoring and

follow-up . In this respect, the Basel Committee

considers that credit rating facilitates the monitoring

of credit risk . The system in each bank should be

integrated into the institutions overall analysis of

credit risk and capital adequacy . The system

should be strong enough to support the

identification and measurement of risk from credit

exposures.

In the context of an SMEs , the utility of a credit

rating may be viewed from the following aspects;

1. Evaluation of the borrower in totality

2. Transaction level analysis, credit pricing and tenure.

3. Activity-wise , sector wise portfolio study, keeping in

view a macro level position.

4. Fixation of outer limit for taking up , maintaining an

exposure that arises out of risk rating.


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5. Monitoring of existing exposures , and deciding

exist strategies in appropriate cases.

6. Allocation of risk capital (economic capital) in cases

of poorgraded accounts.

7. A voidance of an overconcentration of exposure in

specific risk grades.

In short ,the credit rating mechanism for SME

enables :

Bifurcation of accounts into graded risk attributes.

Pricing of credit based on risk grade.

Focusing higher order attention on monitoring

poorly graded accounts.


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Credit RatingGrades

Grade no. Nature ofgrade

Definition of the Grade

1. AAA Highest Safety

2. AA Very High Safety

3. AA- High Safety

4. A+ Adequate Safety

5. A- Moderate Safety

6. BBB Marginal Safety

7. BB+ Low Safety or RiskProne

8. BB- Substandard or High

probability of Default

9. BB Doubtful or Very HighProbability of Default

10. B Loss or HighestProbability of Default


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PROBLEMS OF SMEs

1.Low capital base for and inadequate availability of

institutional funds.

2.Low technology base and inability to move up to

the current technological system owing , mainly to

lack of funds required for technology up gradation.

3. Poor quality of products/service as compared to

those provided by large sized units due , mainly to

absence/inadequacy of quality control assessment.

4.Weak/ineffective management unable to copewith contemporary business requirements.

5.Proportionately higher amount of Non- Performing

Advance (NPA)of banks/financial institution in SME

sector creates risk aversion in lending.

6. Economic efficiency is limited affecting their

products / services in competition with large sized

units.


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Nursing of SMEs

Nursing of borrowal accounts involves taking care of

sick accounts so as o improve the position from the

angle of safety of loans advances of lender over a

period of time. Therefore both the borrower and the

bank(in case of bank lending) would be interested in

adopting a structured nursing programme , in view

of the following .

1.From the borrowers side, it provides opportunity

for designing a final restructuring ,with a roadmap

for settling the final commitments in an acceptance

,with a roadmap for settling the final commitments in

an acceptable manner. Wherever considered

justified, the finance charges (rate of interest/service

charges 0 may be reduced by the financing bank,

thereby providing necessary relief. Also through the

window of the nursing arrangement , the borrower

may be allowed respiratory finance on concessional

terms.

2. From the financing banks side also , it may be

useful in case where the ultimate viability of the

business of the borrower has been satisfied . This


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will enable the bank , in the course of time, to

recover the amount lent to be lent under a nursing

arrangement. In case a nursing arrangement is not

entertained, the only other alternative available to a

bank is to crystallize the securities , if any, and file a

law suit for recovery . Such an extreme course of

action would be undertaken when a bank is

convinced that no nursing persuasion would be of

any avail.

WHEN AN SME IS CONSIDERED

SICK

An SME is considered sick , if :

a)The account remain SUB-STANDARD formore than six months.

b)50% of the net worth (i.e. capital + reserves) is

eroded due to accumulated losses.

c)the borrower has been in the business

(commercial production in the case of

manufacturing unit) for at least two years.


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It is observed from the above that of the two

minimum identification criteria, being in business

commercial production is a compulsory criterion ,

while either the account has to remain sub

standard for six months, OR erosion in net worth,

are criteria of which one must be applicable so that

the account may be classified as sick.

WARNING SIGNALS OF

INCIPIENT SICKNESS

Prevention is better than cure, as the age old

saying goes. This spirit is applicable in SME

financing also. Hence , if warning signals are

spotted at a nascent stage in financing an SME , the

appropriate remedial measures can be initiated

promptly , thereby prevention the units from actually

becoming sick.

While the Regulatory Authority have not laid down

any specific warning signals (as this is not possible)

the following features generally indicate the incipient

sickness of accounts:


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Default delayed payment of installments and/or

interest in borrowal accounts like term loan ,cash

credit ,overdraft etc.

Cash credit overdraft facilities are supposed to be

drawn up to a maximum of the sanctioned limit

,barring exceptional situation. In case there is

continuous excess drawing in such accounts and/orthe value of securities does not cover the

outstanding balance , as per terms and condition for

the facilities , this a warning signals.

Frequent return of cheques due to financial

reasons.

Frequent return of bills drawn on various parties.

Invocation of guarantees by the beneficiaries ,

issued on behalf of SME.

Frequent complaints from suppliers of material of

the SME about non payment of there bills.


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Large inventory build-up as compared to the volume

of business.

Allowing trade credit to its buyers for a very long

period, say , over 6 months or so (this is also

subject to the nature of the business)

Non submission /delayed submission of Balance

sheet (and profit/loss accounts).

GENERAL FACTORS RESPONSIBLE

FOR ACCOUNTS BECOMING SICK

Reasons for sickness of each SME account need tobe studied separately and appropriate remedial

steps taken. However , the following general factors

are found responsible for sickness in SME

accounts:

INTERNAL FACTORS:

Diversion of fund, especially for associated sister

concerns with without any interest.

Business failure (product, marketing , etc.)


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Strained labour relations, leading to frequent

disruption of work.

Recurrent technical problem without any

permanent solution.

Product obsolescence.

EXTERNAL FACTORS:

Recession / severe deceleration.

Non-payment of customer of concerned SME.

Input/ power shortage.

Accidents and natural calamities (many SMEs

reportedly suffered in a massive way in the major

earthquake in Gujarat on 26.1.2000)

Change in government policies on excise duty/

import duty/ pollution control orders.

WHEN FINANCIAL NURSING

SHOULD BE TAKEN UP

A financial nursing programme for an SME accounts

may be prepared on the following basis:

The unit/business is considered potentially viable.


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Thus, it must be satisfied that the borrower would

be in a position to service its repayment obligation

after implementation the relief package under the

nursing programme , spread over a period not

exceeding 5 years.

The repayment period for restructured past debts

should not exceed 7 years.

No concession / relief should be extend after a

period of 5 years from the of commencement of

nursing programme.

HOW FINANCIAL NURSING IS

GENERALLY UNDERTAKEN

Once an SME is identified as POTENTIALLY

VIABLE, financial nursing is to be drawn up in such

way that the unit turns out and starts normal

functioning as soon as possible, with regardto meeting its financial commitments. The aforesaid

financial nursing takes the form of providing various

RELIFES AND CONCESSIONS which are generally

as follows:

Penal interest, if any, charged in borrowel accountis to be waived, from the date of the unit incurring

cash losses.

Rate of interest for existing Term Loan and workingcapital accounts may be reduced where justified,

subject to a maximum reduction of 3 % p.a.


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Interest rate on fresh working capital amount maybe charged at 1.5% p.a. less than the normal rate

for such accounts.

Fund for startup expenses, including payments topressing creditors, may be provided after dueassessment with an interest rate charged at 1.5%

p.a. less than the normal rate for such accounts.

Promoters should contribute fresh funds towards arehabilitation package, which should generally be a

minimum of additional Term Loan requirement

under the rehabilitation package.

The above is only an indicative list. In actual

cases, reliefs concessions would be worked out

depending on the economics of rehabilitation

scheme.


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1. SULAB VYAPAR LOAN

ELIGIBLE SEGMENT

Traders and Services Sector.

FACILITY

Fund based: Overdraft, cash credit, term

loan. Bill discounting. Non fund based: Bank

guarantee and letter of credit.

LOAN AMOUNT

Minimum: Rs. 5 lakhs maximum Rs. 500 Lakhs.

TENOR

TL: up to 5years.

SECURITY

a. Hypothecation of stock and book debts and assets

financed by bank.

b. Personal guarantee of the borrower.

c. Collateral Security up to 110% of the

loan amount.

PROCESSING CHARGES

Up to 1%of loan amount.


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2.DEALER FINANCE

ELIGIBLE SEGMENT

Distribution chain partners comprising

dealer, stockists, Distributors etc.

FACILITY

Overdraft, Cash credit, Term loan, other working

facility.

PURPOSE

a.Over draft/Cash credit working capital /

meeting temporary mismatch of fund.

b.Other working capital facilities on case to

case basis.

c. TL: Acquisition of fixed assets, renovation of

premises, retiring of high cost debt etc.

LOAN AMOUNT

Minimum Rs. 10 lakhs maximum 500 lakhs.

TENOR

1 year to 3 years.


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SECURITY

a. exclusive charge on all assets of the borrowers.

b. Personal guarantee of the borrowers.

c. Collateral security as deemed necessary.

PROCESSING CHARGES

1% of Loan amount.

3. PREFERRED CUSTOMER SCHEME

ELIGIBLE SEGMENT

All Entities in SSI segment as cover under

MSMED Act 2006 having a satisfactory

relationship with either IDBI bank or SIDBI.

FACILITY

General Purpose Overdraft/ Short term loan limit

to be utilized as desired by the client.

PURPOSE

a. Non project specific expenses like adding/

Replacement of machinery, Balancing

Equipment renovation/ addition to factory

building/ fixtures, computer/ software, WC

margin needs, Marketing related expenses,

setting a franchise, brand building, Deposits for

contract, temporary shortage of working capital


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b. Initially investment in new projects where full

project/ schemes as not been crystallized

could also be covered under the schemes

e.g. buying new industrial land or shade for

expansion etc.

c. Expenditure incurred 3 months before

issue of offer letter by the bank could

also be considered.

LOAN AMOUNT

a. Up to Rs. 200Lakhs for customer of IDBI

Bank.

b. Up to 100Lakhs for customer of SIDBI.

TENOR

a. Overdraft- 12 months

b. Short term loan 12 months for equal

repayment and no moratorium.

SECURITY

Extension of existing security and personal

guarantee.

PROCESSING CHARGES

Up to 1.00% of loan amount service tax etc.


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4.LEADING AGAINEST THE SECURITY OF

FUTURE CREDIT CARD RECEIVABLES.

ELIGIBLE SEGMENT

a. Reputed Restaurants

b. Hotels

c. Large Petrol pumps

d. Hospital

FACILITY

Overdraft ,Term loan given to retail merchant

establishment that accept credit/debit card.

PURPOSE

a. OD: Temporary mismatch of funds .

b. TL: Acquisition of fixed asset , renovation of

premises, retiring of high cost debt , etc.

LOAN AMOUNT

a. minimum Rs 50Lakhs

b. Maximum Rs 500Lakhs

TENOR

a. OD up to 1 year.

b. TL up to 3 years.


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PROCESSING CHARGES

Up to 1% of loan amount + service charges as

applicable.

SECURITY

a. Hypothecation of future card receivables.

b. In addition, Bank may require charge on other

current asset / fixed asset for appropriate

value depending upon case to case basis.

c. Personal Guarantee of the borrower.

5. WORKING CAPITAL FINANCING SOFTWARE

DEVELOPMENT ENTITIES

ELIGIBLE SEGMENT

The entity must be engaged in export of

Software /software service to acceptable

countries.

FACILITY

a. Overdraft limit

b. Loan Equivalent Ratio (LER) for booking of

Forward Contracts against underlying

transaction.

PURPOSE

Working Capital Finance.


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LOAN AMOUNT

Minimum Rs 25 lakhs and Maximum Rs 200

lakhs.

TENOR

12 months

PROCESSING CHARGES

Up to 1.00% of loan amount.

6.FINANCE TO MEDICAL PRACTITIONERS

ELIGIBLE SEGMENT

Promoters should have minimum MBBS/ BAMS/

BDS/ BHMS.

FACILITY

Term Loan, Working Capital

PURPOSE

The scheme is exclusively for financing to

Doctor/medical practitioners to undertake all

activities related to medical profession.


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LOAN AMOUNT

a.Minimum :Rs 50,000

b.Maximum :Rs 2 crores

TENOR

a. Not exceeding 7 years

b. No prepayment penalty for loan upto Rs 5

lakhs.

PROCESSING CHARGES

Processing fee up to 1% will be charged with a

minimum of Rs 500.

SECURITY

a. Term loan :Exclusive charges on assets

financed and to be registered with ROC in

case of limited companies.

b. Working capital : Exclusive charges on all the

current assets.

c. Personal guarantee of the promoter director

(in case of limited companies)

MARGINE

1. Term loan:

a. 25%for new assets

b. 35% for old assets


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2. Overdraft:

a. 25%on stock

b. 40% on book debts

7. LOANS TO SMALL ROAD WATER TRANSPORT

OPERATORS (SRWTOs)

ELIGIBLE SEGMENT

a. All SRWTOs

b. All goods/passenger transport vehicles including

light commercial vehicle , auto rickshaws, motor-

buses and lorries are eligible . Small refrigerated

vans , bulk carriers for carrying petroleum/edible oil.

c.Water transport units such as small boats,

launches, etc. are also covered.

FACILITY

a. Term loan

b. Cash credit/overdraft

c. Bank Guarantee


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PURPOSE

a. New Asset finance

b. Working capital

c. Take over of existing loans.

TENOR

a. OD/CC/BG-Not exceeding 1 year

b. TL for new asset finance-not exceeding 5 year

c. Prepayment, if any , may be allowed without any

prepayment penalty.

PROCESSING CHARGES

a. 0.50%p.a.of loan amount.

SECURITY

a. Exclusive charges on assets financed and to be

registered with RTO and ROC as applicable.

b. Personal guarantees of the promoter directors in

case of limited companies.

c.3rd party guarantees

MARGINE

a. Depending upon the nature of facilities.

b.

8. VENDOR FINANCING PROGRAM


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PRE- SALE FUNDING

Target segment

MICRO SMALL AND MEDIUM Enterprises as per

definition gives in MSMED Act 2006

Nature-overdraft/CC and NFC LC for purchase PF

material

ELIGIBLITY CRITERIA

Vendor of existing corporate relationships of IDBIBank.

PURPOSE

Fund the manufacturing cycle

TENOR

one year

REPAYMENT SCHEDULE

From bill/Invoice Discounting

PROCESSING FEES

Up to 1%of loan sanctioned

COLLATERAL

a. second charge on the fixed assets of the vendor

on reciprocal basis with the term lenders.


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b. Personal Guarantee of directors/partners/sole

proprietor.

POST

SALE FUNDING

TARGET SEGMENT

Micro small and medium given in MSMEDAct2006.

NATURE OF LOAN

Bill discounting / financing against invoice.

ELIGIBILITY CRITERIA

Vendor of existing corporate relationship of IDBI

Bank.

PURPOSE

Fund the receivable cycle.

TENOR

180 days maximum

REPAYMENT SCHEDULE

By OEM on due date.

PROCESSING FEES

Up to 1 % of loan sanctioned.


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COLLATERAL

Personal Guarantee of directors/partners/sole

proprietor.

projecton SMEs

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