Project report on
Finance to SMEs
State Bank of India
As a part of partial fulfillment of the curriculum of MBA-
AES Post Graduate Institute of
Business Management, Ahmedabad
Today is an era of competition. Existence in today’s dynamic world
requires some doing. Skills of different kinds are required to excel
in one’s corporate career. Mere studying theories, models and
definitions will not help in the day-to-day functioning. The practical
application of the theory is required. And for management
students, it is must.
So the industrial training from the practical study point of view is
very important for MBA student.
Every year First year MBA students have to undergo industrial
training as per the curriculum of Gujarat University before entering
into the second year of MBA Course.
Industrial training makes a student enough aware of how, where,
when and up to what extent theoretical knowledge can be used to
solve problems in practice etc.
In MBA, students study the management and administration of
business and get knowledge about handling of the routine
operations and decision-making. Since, there is a vast difference
between theoretical knowledge and practical implication this
training helps the individual to know what he or she is supposed to
do when entering into the corporate world.
I am heartily thankful to the GUJARAT UNIVERSITY, which has
given me the golden opportunity to under go the industrial summer
training and a chance to prepare the project report of an industry
after taking the training for a period of 2 months.
I am also thankful to the authorities and the staff of STATE BANK
OF INDIA Regional Business Office, Main Branch and Commercial
Branch for spending their valuable time in giving me the summer
training and for giving me all the information and suitable guidance
whenever I required.
I am heartily thankful to all the faculty members without whose
guidance and support this work would have been an impossible
task to complete. Their inspiration and encouragement has led me
to get through the task successfully.
I would be failing my duty, if I will not mention my family and
friends for the help and encouragement provided by them.
TABLE OF CONTENTS
Sr. No. Particulars Page
1 Executive Summary 01
2 Objective of Study 02
3 Scope Of Study 03
4 Introduction to SBI 04
5 Introduction to SME sector 07
6 Finance to SME sector 10
7 Procedure of financing SMEs at SBI 14
8 Services provided to SMEs 15
9 Research Methodology 18
10 Introduction to the industrial areas of Rajkot 21
11 Charts and their interpretations 25
12 Findings 35
13 SWOT analysis 37
14 Suggestions Recommendations 42
15 Limitation Of Study 43
16 Conclusion 44
17 Bibliography 45
18 Glossary 46
19 Annexure 47
SME sector in India and especially in Gujarat is getting the
momentum and is spreading its wings across the globe in terms of
growth. It has a vital role to play in the development of the Indian
economy as a whole. SMEs contribute in the fields of increased
production, export promotion and employment generation.
State Bank of India, the largest Indian bank has realized the
importance and potential of the SME sector. Though it is putting
lots of efforts in financing to SMEs, it has a long way to go.
Speeding up the marketing efforts in the industrial areas of Rajkot
will definitely prove to be fruitful in the years to come.
In the dynamic era of growing globalization and service sector, fine
tuning the services will help SBI tremendously.
The marketing efforts implemented through this project have
helped State Bank of India in earning the business of 18 Crores.
OBJECTIVE OF THE STUDY
The main objective of preparing this report and conducting the
survey is to know about the procedure of financing SMEs and
finding out the probable reasons of association and non-
association of SMEs located at Rajkot city, with SBI whereby
persuading the SMEs to take the finance from SBI.
Moreover, the study was undertaken with the secondary objectives
of knowing the perceptions of the industrialists of SMEs about SBI
and finding out the current bankers for SMEs and services
provided by them so as to improve the services of SBI.
SCOPE OF THE PROJECT
The project has been carried out under the State Bank of India,
Rajkot. So, the study is limited to the Rajkot city only.
The study has been confined to the industrial area visited, as all
the industrial areas were not covered due to time constraint. In
total, 350 SMEs have been surveyed from two industrial areas
visited, namely; GIDC (Lodhika) Industrial Estate and GIDC AJI
The study is limited to the convenient sample taken for the survey.
The analysis is based upon the responses and information given
by the respondents.
INTRODUCTION TO SBI
This project report has been prepared based on the information
collected during the summer training taken with “STATE BANK OF
SBI is a world-class nationalized bank. It is considered as one of
the best bank through out the nation. The Gujarat head office of
SBI is situated at Ahmedabad.
SBI is India’s largest bank and currently ranks amongst Asia's top
20 commercial banks. With over 9500 branches in India , 54
foreign offices in 28 countries and advanced technology at
fingertips, State Bank of India is one of the most extensive
commercial bank networks worldwide. SBI is a one-stop shop
providing financial products and services of a wide range for large,
medium and small customers, both domestic and international.
The Core Banking Solution provides the state-of-the art anywhere
anytime banking for the customers. The facility is available at 2704
branches of SBI covering 49% of the Bank’s business at 612
centers and at all the 4715 branches of the Associate Banks
covering 100% of their business at 2341 centers.
HISTORY AND DEVELOPMENT
The origin of the State Bank of India goes back to the first decade
of the nineteenth century with the establishment of the Bank of
Calcutta in Calcutta on 2nd June, 1806.
Three years later, the bank received its charter and was re-
designed as the Bank of Bengal (2nd
January, 1809). A unique
institution, it was the first joint-stock bank of British India
sponsored by the Government of Bengal. The Bank of Bombay
April, 1840) and the Bank of Madras (1st
July, 1843) followed
the Bank of Bengal.
These three banks remained at the apex of modern banking in
India till their amalgamation as the Imperial Bank of India on 27th
January, 1921. When India attained freedom, the Imperial Bank
had a capital base (including reserves) of Rs.11.85 crores,
deposits and advances of Rs.275.14 crores and Rs.72.94 crores
respectively with the network of 172 branches and more than 200
sub offices extending all over the country.
In 1951, when the First Five Year Plan was launched, the
development of rural India was given the highest priority. The
commercial banks of the country including the Imperial Bank of
India had till then confined their operations to the urban sector and
were not equipped to respond to the emergent needs of economic
regeneration of the rural areas.
In order, therefore, to serve the economy in general and the rural
sector in particular, the All India Rural Credit Survey Committee
recommended the creation of a state-partnered and state-
sponsored bank by taking over the Imperial Bank of India, and
integrating with it, the former state-owned or state-associate
An act was accordingly passed in Parliament in May, 1955 and the
State Bank of India was constituted on 1st
July, 1955. More than a
quarter of the resources of the Indian banking system thus passed
under the direct control of the State. Later, the State Bank of India
(Subsidiary Banks) Act was passed in 1959, enabling the State
Bank of India to take over eight former State-associated banks as
its subsidiaries (later named Associates).
The State Bank of India was thus born with a new sense of social
purpose aided by the 480 offices comprising branches, sub offices
and three Local Head Offices inherited from the Imperial Bank.
The concept of banking as mere repositories of the community's
savings and lenders to creditworthy parties was soon to give way
to the concept of purposeful banking sub serving the growing and
diversified financial needs of planned economic development.
The State Bank of India was destined to act as the pacesetter in
this respect and lead the Indian banking system into the exciting
field of national development. SBI is a one stop shop providing
financial products / services of a wide range for large, medium and
small customers both domestic and international.
State Bank of India's linkages with Government business, are
widespread. No wonder that out of 9500 branches in India, about
7200 branches are conducting Government business. The large
network of our branches provides easy access to the common
man to deposit their Government dues such as Income Tax,
Corporation Tax, Central Excise and Customs Duty, etc.
INTRODUCTION TO SMEs
Small and Medium Enterprises or SMEs refer to the companies
whose headcounts or turnover falls below certain limit. The
abbreviation SME started commonly being used in EU and other
international organizations such as the World Bank, United
Nations, and WTO.
Definition of SME:
There is no universal definition of small and medium enterprises.
In some countries, there are certain objective standards, which
classify the units as micro, small or medium enterprises depending
on the number of employees. In some other countries, annual
turnover of the company determines the size of an enterprise. The
concept of size is also a relative phenomenon with reference to the
local economies, since a large company in a small country could
possibly be considered as a small company in a larger country.
In India, the small-scale industry has been conventionally defined
in terms of the quantum of investment. Globally, the sector has
had more flexibility and has been termed the Small and Medium
Enterprise or SME sector. Certain parameters tend to characterize
them: the entities are likely to be unquoted; ownership of the
business is restricted to few individuals, typically a family group;
and they are micro to medium sized businesses that have an
objective larger than self-employment.
Over the years, the process of graduation of several SSI units into
medium enterprises has been witnessed. Therefore, the Working
Group on Flow of Credit to SSI Sector, appointed by the Reserve
Bank of India, recommended for the creation of a separate
category of Medium Enterprises (ME). While Medium Enterprise
may not qualify for priority sector lending, they must be seen as
closest with SSI.
As per the recommendation of Working Group on Flow of Credit to
SSI Sector, Small and Medium Enterprises (SME) comprising of
tiny, small and medium enterprises are defined as follows:
(A) Tiny Industries: Turnover being up to the financial limit of
(B) Small Industries: Turnover being above Rs. 2 crores but
less than Rs. 10 crores.
(C) Medium Industries: Turnover being between Rs. 10 crores
and Rs. 50 crores.
Contribution of SMEs to the Economy:
There is a growing worldwide appreciation of the fact that Small
and Medium Enterprises (SMEs) play a catalytic role in the
development process of most economies. This position gets
reflected in the form of their increasing number and rising
proportion in the overall product manufacturing, exports,
manpower employment, technical innovations and promotion of
SMEs contribute to around 56% of manufactured products, 35.8%
of the exports and ranks second in providing employment next only
to agriculture. They have been identified to possess the unique
strength of innovation and have served as incubators for new
technologies and practices.
Within the SME sector, the small sector serves as a green field for
nurturing of entrepreneurial talent and helping the units to grow
into medium and large size. The promotion of SMEs, therefore,
becomes a major area for policy focus, both in developed as well
as developing countries.
For the recently announced Small and Medium Enterprises Fund,
the Government of India has approved the limit of investment in
plant and machinery above Rs.10 million and up to Rs.100 million
for defining a unit as a Medium Enterprise. Amongst the
developing countries, India has been the first to display special
consideration to SSIs and basic focus has been to make
economical use of capital and absorb the abundant labor supply in
FINANCE TO SME SECTOR
In recognition of the contribution and vast potential of the sector in
the economy as well as its inherent infirmities, provision of
adequate credit to this sector has continued to be an element of
banking policy, even though economic and financial policies
themselves have undergone significant transformation, particularly
after the initiation of structural reforms in 1991.
The Indian private sector banks and foreign banks have an
additional outstanding SME portfolio of more than Rs.100 billion. In
the policy context, the Government of India introduced a
comprehensive policy package for SMEs, which included fiscal,
credit, infrastructural and technological measures. The
Government in 1999, to provide more focused attention to the
sector, created an exclusive Ministry dedicated to small industries.
The financial sector needs to step up lending to the sector.
Depending on the requirements of each niche market segment and
sectors, credit delivery would vary from pure debt finance to
providing risk capital or a hybrid of both.
While this kind of funding is readily available, it comes with the
downside of high servicing costs. There in lies the opportunity for
the financial sector. If it can provide credit in small buckets at rates
that are more remunerative than the industrial sector, but
competitive when compared with the unorganized sector, then it
has an attractive new segment to tap.
While this may appear attractive on paper, there are several
challenges that need to be circumvented successfully, before this
business model becomes viable. Critical among these would be
the management of transaction costs. Since the number of
transactions required to deliver a certain amount of credit will
increase substantially, the financial sector will need to devise
innovative methods of risk appraisal and credit delivery. Of
paramount importance will be the availability of local knowledge.
Measures to promote SMEs:
There exists a well-structured institutional set up both in the public
and private sectors to cater to the credit needs of SMEs. The
Small Industries Development Bank of India (SIDBI) was set up in
April 1990, as the principal financial institution for financing and
development of SSIs and coordination of institutions engaged in
A fair code of practices has been adopted by the Bank in its day-
today operations while functioning as an apex financial institution
for the sector. Various steps taken by the GOI / RBI to enhance
the flow of credit to SMEs in the recent past include:
(I) Increase in the loan limit of composite loan scheme for SSIs
upto Rs.5 million,
(II) Providing loans to SSIs within the interest rate band of 2
percent above and below the respective bank's PLR,
(III) Setting up of Technology Bureau for Small Enterprises to
address the technology related needs of SSIs and proposal to
convert TBSE into a full fledged Technology Bank,
(IV) Opening of specialized SSI branches throughout the country,
presently numbering 417,
(VI) Introduction of Laghu Udyami Credit Card for SME borrowers
with satisfactory track record,
(VII) Identification of 60 clusters for focused development by
including their credit requirements in the respective State
Credit Plans, and
(VIII) Setting up of a Credit Guarantee Fund Trust for Small
Industries. In order to boost investment in SSI sector, the
benefits of exemptions of capital gains arising from the
transfer of long term capital assets are allowed, if such capital
gains are invested in the bonds issued by SIDBI.
Issues involved in financing to SMEs:
The business of lending to SMEs can potentially be a highly
profitable initiative. While regulated lending through SIDBI and other
entities has been able to satisfy the demands of this sector to a
certain extent, there is a significant gap between demand and
supply of SME finance. This gap is generally plugged by the
unorganized sector—local money lenders and cash in the economy.
The issues related to the provision of finance to SMEs are as
1) Non-availability of bank credit to the SME sector is a major
2) Inadequate credit sanction, and
3) Delays in credit sanction. Inadequate sanction takes place
(i) Lack of understanding of business and requirements
of genuine needs,
(ii) Lack of transparency on the part of borrowers,
(iii) Lack of information made available by borrowers to
banks for credit appraisal,
(iv) Lack of appreciation on the part of the borrower
regarding bank formalities,
(v) Diversion of funds by borrowers which prevents
bankers from being liberal in credit sanction,
(vi) Lack of coordination between banks and financial
institutions in carrying out a joint appraisal,
(vii) Lack of skills in appraising hi-tech projects, and
(viii) Inadequate support from controlling office and legal /
technical cells in banks.
Federation of Indian Small & Medium Enterprise
FISME is an institution, which works for the growth and
development of SMEs in INDIA. FISME is a network that reaches
to more than 100,000 SMEs through state level SME associations
and sectorial associations.
PROCEDURE OF FINANCING SMEs IN SBI
The procedure followed by SBI to finance SMEs involve following
(1) First of all the proposal comprising of all the details regarding
the project from the SME is sought. The proposal should be
prepared in the Performa prescribed by RBI.
(2) if the project is of below Rs. 2 crores, it is handled by Central
Processing Cell (CPC). For projects above Rs. 2 Crores, Retail
Asset Centre for Small Enterprise (RACSE) works on it.
(2)Then the background of the promoter is examined by the
concerned authority of the bank.
(3) If the project is of expansion, the financial statements of the
unit are asked for and the analysis is performed. But if the
project is for establishment of new unit, the economic and
technical viability of the project is checked through experts.
(4) For existing units, various ratios are calculated to use them as
performance parameters. Commonly used ratios are Return on
Capital Employed (ROCE), Inventory holding ratio, Current
ratio; Debt- equity ratio etc. asset- liability check is also
(5) The SMEs are then given the State Bank Ranking (SBR) from
SB – 1 to SB – 7 but SBI does not consider the SMEs with
ranking above SB – 4. This ranking helps in deciding the rates
over and above the SBAR or PLR.
(5) Then, the project including all the results is prepared by the
Chief Manager of the processing cell of the respective branch.
(6) The presentation is made by the processing cell in front of the
Credit Circle Committee (CCC).
(7) If it is found satisfactory and as per the standards set, the
proposal is accepted and the fund is dispersed to the party.
SERVICES PROVIDED TO SMEs
Except some portion of the SME cluster, most of the SMEs need
finance from outside to run their business. “Finance is the life
blood of business.” The same applies here also.
SMEs require fund not only at the time of inception but also at
some other point of time. SMEs require finance mainly for three
1) At the time of commencement of the business,
2) At the time of expansion of business, i.e.: acquiring
new unit, acquiring new machinery etc.
3) For day to day requirements
i.e.: Purchasing raw materials,
Repairs and maintenance of machinery,
Banks provide variety of services to SMEs to match with their
needs and to increase the ease of operation with a view to provide
services which are beneficial mutually.
Varieties of services provided to SMEs by bank mainly involve the
1) Cash credit
2) Term loan
3) Current account
4) Letter of credit discounting
5) Export Packing Credit (EPC)
6) At par cheques and drafts
7) Outstation clearing
Brief description of each service provided to SMEs is as follows:
(1) Cash credit:
Cash credit is the amount allowed to the customer for use for a
stipulated time period at a specified rate. This amount is given
by the bank mainly for the purpose of purchasing goods from
suppliers. The rate of CC is decided based on the size of the
CC limit. The interest is charged only on the unpaid amount.
Generally the CC is used to fulfill working capital requirements.
CC is given to the customers who have good credit in the
(2) Term loan:
The loan given for acquiring any fixed asset or to renovate or to
repair the existing ones is called Term loan. The SMEs are
segregated in categories like SB-1 SB-2, SB-3, etc. based upon
the ranking given to the SME by the concerned examiner. The
interest rate for the term loan is decided over and above the
SBAR (State Bank Advance Rate) or PLR (Prime Lending Rate)
based on the category of the SME. Current SABR/PLR is
(3) Current account:
Current account refers to the account from which any number of
withdrawals can be made by the account holder. This facility is
generally availed by a merchant or a businessman, who has to
withdraw money frequently. No interest is given on the current
(4) L/C discounting:
L/C is a short form of letter of credit. Banks provide L/C
discounting for purchasing of goods, in case the person wants
to purchase on credit. The bank takes the responsibility of
paying the amount of purchase in case the customer defaults.
This is exercised through issuing letter of credit to the customer
by bank. The bank charges the commission for providing this
(5) Export Packing Credit (EPC):
Export Packing Credit (EPC) is same as Cash Credit but the
only difference is that it is provided for an export purpose. The
rates of EPC are less than Cash Credit as a part of promoting
(6) At par cheques and drafts:
This is a facility whereby the cheques are transferable and
drafts are both issuable and transferable without any
commission. These facilities were chargeable earlier by banks.
(7) Outstation clearing:
In this service, outstation cheques are accepted and cleared in
the bank. This service is chargeable.
It refers to the ways of collecting the information or data. There
are mainly two types of data sources available like:-
(1) Primary data:
Primary data means the data generated for the first time for a
The data about SMEs has been collected through survey. 350
SMEs have been personally visited and the questionnaires are
(2) Secondary data:
Secondary data refers to the data which has already been
generated and is available for use.
The data about some of the SMEs visited has been extracted
from the book of GIDC Lodhika Industrial Association (GLIA).
Other data has been extracted from websites and links
mentioned in the bibliography.
Research approach refers to the way of conducting the study.
In this study, analytical approach has been used.
Research instrument refers to the tools available with the
surveyor for the survey. The mainly used research instruments
The instrument used for conducting the survey is
questionnaire. The questionnaire is made up of open-ended
Small & Medium Enterprises (SMEs) of two industrial areas,
namely; GIDC (Lodhika) Industrial Estate and GIDC AJI
Vasahat, are used as a sampling unit.
In total, 350 SMEs were visited and surveyed. Out of which
250 units were from GIDC (Lodhika) Industrial Estate and 100
units were of GIDC AJI Vasahat.
Sampling Procedure refers to the type of sampling method
used to conduct a survey. Various sampling methods can be
Simple random sampling, Stratified random sampling,
Convenient Sampling etc. Sampling Procedure used in
preparing this project is convenient sampling
It refers to the method used for contacting the sampling
units. There are various contact methods available namely:
Contact though mail
Here, personal contact method is used to conduct a study.
Each and every SME has been visited personally and the
data has been gathered.
INDUSTRIAL AREAS OF RAJKOT
Rajkot is an industrial hub of Saurashtra. The first industrial estate
in India was established in AJI area of Rajkot in the year 1955.
There are many industrial areas in and around Rajkot city including
17 GIDC areas. As per the scope of this project, two major
industrial areas namely, GIDC-Lodhika and GIDC-AJI are covered
to conduct a study.
The brief introduction of both the areas is as follows:
(1) GIDC-Lodhika (Metoda):
GIDC (Lodhika) Industrial Estate is located at the distance of 15
kms from Rajkot city on Kalawad Road. This Industrial Estate is
spread in over 421 hectares of land. As information furnished, it
has been divided into 1200 plots. At present, there are 750 SMEs
engaged in industrial production of various items. All the plots of
industries of this Estate are allotted and are in various stages of
development of starting the industrial activity.
Status of plots allotted and operational units in the Industrial
Status of plots/units No of plots
No of plots allotted 1200
Operational units 750
Merged plots 400
Non-operational plots 50
Total plots 1200
GIDC (Lodhika) Industrial Estate is one of the well planned
Industrial Estates of the GIDC. This industrial association was
established in 1995. The estate has three portals on the entry
The facilities like bank, telephone exchange, post office are
available. The estate is connected with the city and is served by
the State Transport buses. The roads and buildings department
of the government of Gujarat has undertaken the job of
widening the Rajkot-Kalawad state highway no. 23 to four lane
highway. This will facilitate the transportation between the city
and the industrial area.
The following table gives industry wise classification of units in
Product wise break up of operating industries
Type of industry No. of units
Machine tools 220
Cement product 30
Cold storage 10
Marble Granite 20
Plastic industries 115
Food products 35
Inherent strengths of GIDC (Lodhika) Industrial Estate:
Pollution free environment
Availability of labor
Availability of power
Four lane link road with Rajkot city
Availability of water from Narmada canal system
The following table shows the economic performance of the SMEs
operating at GIDC (Lodhika) Industrial Estate.
Economic aggregates for SMEs operating in GIDC (Lodhika)
Investment Rs.313.2 Cr.
Annual Turnover Rs. 800 Cr.
Annual export Rs. 250 Cr.
Employment 12,000 employees
GIDC (Lodhika) Industrial Estate has an excellent track record of
social service. The association has donated 2000 Sq. m. of land to
the Rotary Club of Rajkot for construction of 175 houses, a
hospital and a school building for the earth quake affected people
Upgradation of infrastructure at GIDC (Lodhika) Industrial Estate
would help SMEs in the estate to leapfrog in terms of investment,
turnover, export and employment.
(2) GIDC- AJI Vasahat:
GIDC- AJI Vasahat is situated on the bank of the river AJI. It is
spread in 90acres of land with around 250 plots and sheds. It has
been developed in two phases. The Phase-I was developed in
1973 and the Phase-II was developed in 1980.
Most of the SMEs situated here are operating in following areas:
The inherent strengths of the area are as under:
The area is located in the city itself thereby getting all the
There are many banks located on the 80ft link road,
providing all the needed banking facilities very easily.
Being situated in the city, labour and transportation facilities
are available at a lower cost along with other amenities.
From among the SMEs visited, 75% of the industries cater to
the local market or the inland market.
21% of the industries are into exports and some of them are
availing the benefits of operating as a 100% Export Oriented
4% of the SMEs are not exporting directly but are involved in
the indirect export through agents.
The inability of the SMEs to export is due to their scale of
operation, lack of capital and sufficient margin available in
From among the industries visited, the highest 48% of the
SMEs follow the Partnership format of the organization. As
the people don’t have enough capital to operate as a sole
proprietor, they indulge in forming up the partnership
30% of the units are following Private Limited format. Most of
the industries operating on a fairly vast scale are of this
21% of the industries are of the Sole Proprietorship nature.
They are operating at a very low scale and can be included
in the category of tiny units. Most of them are involved in the
process like casting, machining, fabrication etc.
The percentage of units following the Public Limited format is
10% of the industries visited are associated with Central
Bank of India and Bank of India each. The reason for Central
Bank of India’s highest exposure is existence of their branch
at the GIDC (Lodhika). It is the only nationalized bank
situated at GIDC (Lodhika).
9% of the market is shared by State Bank of Saurashtra
(SBS), Corporation Bank and HDFC Bank each. The major
reason for more exposure covered by these banks is the
level of service.
Bank of Baroda and ICICI each cover 6% of the market
State Bank of India surprisingly gets only 5% of the market
share. The figure is an eye-opener for SBI for deciding the
future course of action.
The category “Others” include several banks, the data of
which can be referred from the annexure at the end of the
The reason given, for selecting the present bank, by 25% of
the SMEs is that they are dealing with the particular bank
from a long time. They can change the bank only if they get
substantial benefit in terms of interest rates. They would not
like to change the bank for a minor interest rate difference.
23% of the SMEs have selected and continued to deal with
the banks on the basis of services provided by banks. As per
them the present bank is providing satisfactory services and
they have no reason to change the bank in near future.
16% of the SMEs have given importance to the PROXIMITY
factor at the time of selecting the bank. Especially, in GIDC
(Lodhika), there are only two banks, namely; Central Bank of
India and District Commercial Co-operative Bank. So, even if
their services are not satisfactory, SMEs have to choose
these banks for ease of operation.
14% of SMEs have selected the banks without considering
any particular factor, while 4% industries have reasons like
good relations with the bank or with the bank staff and fast
Only 3% of the industries have considered lower interest rate
as a criterion of selection. This shows that customers can not
be retained only on the basis of interest rate benefits, good
Hefty 63% of the industries have not opted State Bank of
India for dealing because State Bank of India has never
approached them. So, State Bank of India needs to market
itself aggressively to have substantial market share in Rajkot.
15% of SMEs have not selected State Bank of India
considering the proximity factor. State Bank of India’s
nearest branch is situated at almost 15 kms from GIDC
(Lodhika) Industrial Estate; however the project of opening
up the branch at the link road is in process. This will bring
considerable business to the bank.
Higher interest rate charged and delayed services of State
Bank of India as well as satisfactory services rendered by the
present banks of SME contribute to the extent of 3% as a
reason for not selecting State Bank of India.
The findings, based on the customer responses, are as under:
• The major reason for non-association of SMEs with SBI is
lack of marketing efforts by SBI. Hefty 63% of the SMEs
visited, have not been approached by SBI.
• From among the SMEs visited, 75% of the industries cater to
the local market or the inland market.
• The highest 48% of the SMEs follow the Partnership format
of the organization. As the people don’t have enough capital
to operate as a sole proprietor, they indulge in forming up the
• State Bank of India surprisingly gets only 5% of the SME
market share. The figure is an eye-opener for SBI for
deciding the future course of action.
• The reason given, for selecting the present bank, by 25% of
the SMEs is that they are dealing with the particular bank
from a long time. They can change the bank only if they get
substantial benefit in terms of interest rates. They would not
like to change the bank for a minor interest rate difference.
• Many customers are not satisfied with the quality of services
provided by the SBI staff. I.e. Rude behavior, not attending
the customers properly, delays in providing services like
monthly statements, approving the proposals.
• Another problem is frequent transfers of the authorities and
the subordinate staff. It results in customers having to start
from the scratch.
• The problems faced by customers are as follows:
Lack of professionalism.
Delay in attending the customers and providing
services like providing monthly statements, passbook
Getting the finance from SBI is a very time-consuming
Greater amount of documentation is involved in taking
finance from SBI, which makes customers prefer other
Most of the customers are not ready to change their
dealings from present bankers because of the reasons
like family relations, rapid services, convenience and
association with the present bank from
Some customers find the behavior of the staff
undisciplined and rude.
• People are not yet ready to change their mindsets and
attitude towards the functioning of the government
organizations and so towards SBI.
The overall evaluation of company’s strengths, weakness,
opportunities and threats is called SWOT Analysis. The external
environmental analysis and the internal environmental analysis are
conducted to arrive at SWOT analysis.
Internal environmental analysis helps to find out the strengths and
weaknesses of an institution. While, external environmental
analysis helps to find out the opportunities and threats prevailing in
the market. Depending on the analysis, the company can build up
its future strategies and goals.
As the SBI is the nationalized and famous bank of the India,
running successfully all over the India, it is very much obvious that
the bank will have quite a number of strengths but some of the
main strengths of SBI can be described as under.
• Brand name and goodwill:
SBI is a world – class nationalized bank and it is considered as
one of the best bank through out the nation. Moreover, it is
India’s largest bank and currently ranks amongst Asia's top 20
commercial banks. So, its goodwill and the brand name attract
• World – class products:
SBI provides world class products to satisfy the basic, crucial,
and all the essential needs of the customers.
• Strong customer base:
As SBI is serving the nation from a very long time, it has gained
a strong customer base over a period of time. This is the reason
why SBI is still running successfully, even after establishment of
• Nationalized bank:
SBI is the nationalized bank. It is spread through out the nation
through 9500 branches. So, it is more trustworthy and more
reliable for the customers. This is one of the most crucial
strengths of the bank.
• Wide network:
SBI’s network is very widespread. It serves the customers not
only nation wide but also on the global horizons. The customers
can use the ATM card of SBI in any of its subsidiary and
associate banks. In the subsidiary banks, SBI ATM can be used
without any additional charge.
• Sound financing procedure:
The procedure for deciding whether SBI should finance a
particular SME or not, is very sound and flawless. This ensures
that no loopholes are left for SMEs.
• More documentation:
There is a great amount of documentation involved in all the
procedures of SBI compared to other banks.
Industrialists don’t have time to go through these formalities
every time he asks for the services. So, they prefer the banks
where less documentation and formalities are required so as to
save time and ensure ease of operation.
• Delayed services:
There is slowness in the functioning of SBI. Delay in attending
the customers and providing services like providing monthly
statements, passbook printing keep many customers away from
coming to SBI.
• Frequent transfers:
Another problem is frequent transfers of the authorities and the
subordinate staff. It results in customers having to start from the
scratch. This becomes very time consuming process.
• Lack of co-operation from staff :
The co-operation from staff of SBI is missing. They are not
customer-oriented whole heartedly. Their attitude has to change
to bring more customers to the bank.
• Technological advancements:
Constant innovations in the field of information technology can
help SBI to serve its customers with a greater efficiency.
Various banking software are being developed. This can
increase the service level of SBI.
Core banking system has already benefited the customers as
well as the bank and has increased the operational ease.
• Commencement of new SMEs:
As per the data given by the GIDC association, Lodhika, almost
250 industries are under construction. SBI can contact them
and convince them for a deal. Moreover, some industries are
planning to expand themselves in near future. SBI can finance
them by catering to their needs.
• SBI branch in nearness to industrial area:
As mentioned earlier in the project, the nearest branch of SBI
from GIDC (Lodhika) Industrial Estate is almost 15 kms away.
There is only one nationalized bank i.e. Central Bank of India
situated at the GIDC (Lodhika) Industrial Estate. So, opening up
the branch in the nearer area can bring many customers to the
• Basel-2 contract:
As per the Basel-2 contract of WTO, India will be opening up
the economy for the foreign banks to enter along with several
other institutions. So, to keep pace with their performance, SBI
will have to increase its efficiency tremendously.
• Threat from private banks:
Because of the sloppy services of nationalized banks and
customer friendly environment created by private banks,
customers have developed more preference towards dealing
with private banks.
• Establishment of other banks near SMEs:
Dena Bank, Bank of India and several other banks are planning
to open up their branches near GIDC (Lodhika) Industrial
Estate. If SBI does not take action quickly, it will miss out on the
• 47% of the industries visited are associated with the banks
like Bank of India, Central Bank of India, HDFC, State Bank
of Saurashtra & Corporation Bank, mainly on the basis of the
good services and their co-operation, whereas SBI has only
5% of the market. So, SBI need to look into these aspects to
tap the market of SMEs in the concerned industrial areas.
• Almost all the units have not been approached by SBI, so
SBI need to market itself aggressively and approach these
• GIDC (Lodhika) Industrial Estate authorities are compelling
the owners of the vacant land plots to either use or sell the
plot and thereby utilizing all the resources available at GIDC.
Next 6 months will be of the inception of new units and
expansion of the existing units. So, it is a good opportunity
for SBI to tap the finances of these units.
• Lack of co-operation, professionalism, discipline, and
delayed approvals are major reasons for non-association
with SBI, as given by the units visited. So, SBI should train
the staff in the concerned areas.
• Today is the era of CUSTOMER SATISFACTION and no
organization can afford to ignore them. Retaining the
customers is more difficult then acquiring them. So, they are
to be attended properly and with due respect. Continuous
customer follow up system should be incorporated.
• Delay of all types should be avoided.
• Efforts are required to be put in to create a convenient,
cohesive, and customer-friendly environment.
LIMITATIONS OF THE STUDY
Some obvious barriers in conducting the study were as follows:
In many cases, the authority of the SME was reluctant to
provide the information required for the study.
The responses of the people of both the industrial areas
visited were different.
In some of the cases, people have disclosed the figures of
turnover as per their books of account and not the actual
Out of total industries existent, all have not been covered
because of the time constraint, so the actual data may vary
slightly from the results arrived at.
As it is known, SBI is the largest bank in Asia. But to retain its
position, SBI needs to customize its services as per the needs of
As far as the future of cotton industry is concerned, it is bright. So,
bank finance to cotton industry will help not only the banks but also
the industry to a great extent. This will ultimately help in the export
promotion, employment generation and growth of nation.
Working with State Bank of India was a memorable and value
adding experience. The practical learning from this project will
surely help in the future.
The following study materials have been referred during the study.
The directory of GIDC (Lodhika) Industrial Association
The Critical Infrastructure Project (CIP) of GIDC (Lodhika)
The web sites referred and links visited during the study are as
CCC: Credit Circle Committee
FISME: Federation of Indian Small & Medium Enterprise
GIDC: Gujarat Industrial Development Corporation
PLR: Prime Lending Rate
SBAR: State Bank Advance Rate
SME: Small and Medium Enterprise
TBSE: Technology Bureau for Small Enterprises
The questionnaire used for conducting the study is as under:
STATE BANK OF INDIA
Commercial Branch, RAJKOT
1. Location: ________________________________________________
2. Name of the unit: __________________________________________
4. Contact no.: ________________
5. E-mail: ___________________________________
6. Name of the promoters: _________________
7. Contact no.: (M)_______________ (R)________________
8. Type of industry: __________________________________
9. Form of organization: _______________________________
10.Line of activity: ____________________________________
11.Do you export? Yes No
12.Approximate Turnover (p.a.) ___________________________
14.Facilities enjoyed with the present banks: ______________________
15. Reasons for selection of the present banks: _____________________
16.Why not SBI? ____________________________________________
17.Present requirement / Future plans: _____________________________
18.Mode of salary payment:__________________________________
19.If through bank, which bank? ______________________________
The break up of the category “Others” in case of the banks
selected by the SMEs visited is as follows:
Bharat Co-operative Bank
Citizen Co-operative Bank
Dharti Co-operative Bank
Gujarat Industrial Co-operative Bank
Indian Overseas Bank
ING Vysya Bank
Jeevan Commercial Bank
Karur Vysya Bank
Kotak Mahindra Bank
Oriental Bank of Commerce
Punjab National Bank
Rajkot Nagrik Sahkari Bank
Saurashtra Grameen Bank
State Bank of Hydrabad
Union Bank of India
Veraval Mercantile Co-operative Bank
Vearaval People’s Co-operative Bank
Vijay Commercial Co-operative Bank