Summer Project

Credit Guarantee Fund Trust for Micro and Small Enterprises
Declaration
I, Mr. Abdul Kabir, student of Master of Business Administration(MBA) hereby, declare that this project report titled Financing under Credit Guarantee Fund Trust for Micro & Small Enterprises (CGTMSE): Comparative Study of BOB, PNB & BOI. is the record of authentic work carried out by me during the academic year 2011 2012 and has not been submitted to any other University or Institute towards the award of any degree.
Abdul Kabir MBA (Finance) III Sem. Enrolment No. 301027 2010-12 Batch
1 Banaras Hindu University
ACKNOWLEDGEMENT
The satisfaction, which accompanies the successful completion of the project, is incomplete without the mention of a few names. I take this opportunity to acknowledge the efforts of many individuals who helped me make this project possible. I would like to express my heartfelt appreciation and gratitude to my project head Mr. Ashish Dutta Roy, Chief Manager, SME Loan Factory, Bank of Baroda, Varanasi .This project is a result of his teaching, encouragement and inputs. He made sure that my stay in the office was a learning experience. I would also like to thank Mr. S.K Srivastava, Officer Sales and Debabrata Sahoo, Officer Processing for their constant support, continued encouragement and guidance throughout my training period. Further I am indebted to Prof. H.C Chaudhary to act as my mentor for preparing this project more valuable & for his timely help and guidance. He had given me constant support, continued encouragement and guidance throughout my project preparation. Finally, I would like to thank my Institute, FMS BHU, for making this experience of summer training in an esteemed organization like Bank of Baroda possible. The learning from this experience has been immense and would be cherished throughout my life.
Abdul Kabir MBA( Finance) III Semester FMS-BHU
PREFACE
A project is a scientific and systematic study of real issues on a problem with the application of management concept and skills. The study can deal with small or big issues in any division of an organization. It can be case study where a problem has been dealt with, through the process of management. The essential equipment of a project is that, it should contain scientific collection of data, analysis and interpretation of data leading to a valid conclusion.
Summer Training is an essential part in the MBA curriculum. It enables the student to share the real experience in the corporate world. My summer training was placed in SME Loan Factory, Bank of Baroda, Varanasi.
The topic of my project is Financing under Credit Guarantee Fund
Trust for Micro & Small Enterprises (CGTMSE): Comparative Study of BOB, PNB & BOI.
I hope this study will contribute to the organization.
INDEX
Table of Content 1. Executive Summary 2. Banking Structure in INDIA 3. Classification of Banks 4. Introduction to Bank of Baroda 5. MSME 6. Bank of Barodas approach to SME sector 7. Business & Financial Performance 8. Financial Statement 9. SWOT Analysis 10. Research Methodology 11. Conceptual Framework of CGTMSE 12. Data Analysis & Interpretation 13. Comparison Table 14.Findings 15. Suggestions 16.Limitations 17.References 18.Annexure
Page Number 5 6 11 16 22 25 27 37 39 40 42 58 63 65 66 67 68 69
EXECUTIVE SUMMARY
Objective
The objective of this report was to study about the CGS of Credit Guarantee Trust for Micro and Small Enterprises (CGTMSE) and compare BOB, PNB & BOI for financing under the CGTMSE Scheme and thereby give certain suggestions to Bank of Baroda.
Approach
The study was conducted by analyzing the data collected through survey and also through the published data. Both primary and secondary data was collected in order to
Findings
During the study I found that it is necessary to create widespread awareness about the key features and benefits of the Credit Guarantee Scheme (CGS) of Credit Guarantee Trust for Micro and Small Enterprises (CGTMSE) to the customers. BOB is far behind its competitors in terms of achievement of target for opening of accounts under CGTMSE in Varanasi region for the financial year 2010-11. BOB was able to achieve only 43.2% of its target, whereas PNB and BOI were much ahead of its target. In spite of passing all the burden of upfront and annual service fees to the customer PNBs performance is best among the three banks.
BANKING STRUCTURE IN INDIA

Banking in India has its origin as early as the Vedic period. It was believed that transition from money lending to banking must have occurred even before Manu, The great Hindu Jurist, who has devoted a section of his work to deposit advance and laid down rules relating to rates of interest. During the Mogul period, the indigenous Bankers played a very important role in lending money financing foreign trade and commerce. During the days of East India Company, it was turn over the agency houses to carry on the business. The General Bank of India was the first to join sector in the year 1786.The others that followed were the Bank of Hindustan and the Bengal bank. The bank of Hindustan is reported to have continued till 1906 while the other two failed in the meantime. In the first half of the 19th century the East India Company established three banks: 1. Bank of Bengal (1809). 2. Bank of Bombay (1840). 3. Bank of Madras (1843. These three banks are also known as Presidency Banks were independent units and functioned well. These three banks were amalgamated in 1920 and Imperial Bank of India was established on 27th january1921, which started as private shareholders banks, mostly Europeans shareholders, with the passing of time Imperial bank was taken over by the newly constituted State bank of India act in1955.In 1865 Allahabad Bank was established and first time exclusively by Indians, Punjab National Bank Ltd. was set up in 1894 with headquarters at Lahore. Between 1906 and 1913, Bank of India, Central Bank of India, Bank of Baroda, Canara Bank, Indian Bank and Bank of Mysore were set up. Reserve Bank of India came in 1935. On July, 1969, 14 major banks of India were nationalized and on 15th April, 1980 six more commercial private banks were also taken over by the government. The growth in the Indian Banking Industry has been more qualitative than quantitative and it is expected to remain the same in the coming years. Based on the projections made in the "India Vision 2020" prepared by the Planning Commission and the Draft 10th Plan, the report forecasts that the pace of expansion in the balance-sheets of banks is likely to decelerate. The total assets of all scheduled commercial banks by end-March 2010 is estimated at Rs 40,90,000 crores. That will comprise about 65 per cent of GDP at current market prices as

compared to 67 per cent in 2002-03. Bank assets are expected to grow at an annual composite rate of 13.4 per cent during the rest of the decade as against the growth rate of 16.7 per cent that existed between 1994-95 and 2002-03. It is expected that there will be large additions to the capital base and reserves on the liability side. The Indian Banking Industry can be categorized into non-scheduled banks and scheduled banks. Scheduled banks constitute of commercial banks and cooperative banks. There are about 67,000 branches of Scheduled banks spread across India. As far as the present scenario is concerned the Banking Industry in India is going through a transitional phase. The Public Sector Banks(PSBs), which are the base of the Banking sector in India account for more than 78 per cent of the total banking industry assets. Unfortunately they are burdened with excessive Non Performing assets (NPAs), massive manpower and lack of modern technology. On the other hand the Private Sector Banks are making tremendous progress. They are leaders in Internet banking, mobile banking, phone banking, ATMs. As far as foreign banks are concerned they are likely to succeed in the Indian Banking Industry. In the Indian Banking Industry some of the Private Sector Banks operating are IDBI Bank, ING Vyasa Bank, SBI Commercial and International Bank Ltd, Bank of Rajasthan Ltd. and banks from the Public Sector include Punjab National bank, Vijaya Bank, UCO Bank, Oriental Bank, Allahabad Bank among others. ANZ Grindlays Bank, ABN-AMRO Bank, American Express Bank Ltd, Citibank are some of the foreign banks operating in the Indian Banking Industry. Today banks have become a part and parcel of Kotak Bank's life. There was a time when dwellers of the city alone could enjoy their services. Now banks offer access to even a common man and their activities extend to areas hitherto untouched. Banks cater to the needs of agriculturalists, industrialists, traders and to all the other sections of the society. In modern age, the banking constitutes the fundamental basis of economic growth. Thus, they accelerate the economic growth of a country and steer the wheels of the economy towards its goals of self reliance in all fields. It naturally arouses Kotak Bank's interest in knowing more about the Bank and the various men and the activities connected with it.
Performance of Indian Banking Sector in 2010-11

Indian banking sector emerged stronger during 2010-11 in the aftermath of global financial meltdown of 2008-10 under the watchful eye of its regulator. The timely and calibrated policy responses by the RBI and the government excellently supported the economic recovery process and aided the banking business during the year 2010-11. As inflation remained the dominant policy concern in 2010-11, the monetary and liquidity conditions during the year remained consistent with the anti-inflationary stance of the RBI. Liquidity conditions had switched to deficit mode since endMay 2010, due to large increase in government balances with the RBI resulting from 3G/BWA auctions combined with the impact of advance tax outflows. Structural factors like imbalances between deposit and credit growth coupled with high currency demand too added to the pressure on liquidity during most part of the year. However, by allowing the banks to avail of additional liquidity support under the LAF and by conducting second LAF on daily basis, the RBI tried to ease the liquidity pressures. During the third quarter of 2010-11, the RBI undertook open market operations and other measures to improve the availability of liquid funds. Liquidity conditions improved satisfactorily during the last quarter of 2010-11 due to pick up in government spending and staggered open market operations of the RBI since midDecember. For the year as a whole, Indian banking industry delivered a strong performance underpinned by better than expected loan growth, improvement in NIMs helped by faster re-pricing of assets than liabilities and a higher CD ratio. During 2010-11, the non-food credit of commercial banks grew by 21.2% (y-o-y) against 17.1% in 2009-10, while aggregate deposits expanded by 15.8% (y-o-y) in 2010-11 versus 17.2% in 2009-10. The banks total accommodation of commercial sector (as measured by non-food credit plus non-SLR investments) too improved healthily by 21.3% (y-o-y) during 2010-11 against 16.9% in 2009-10. Bank finance continued to be the major source of finance for the commercial sector as during 2010-11, funding from non-bank sources registered a marginal decline as compared to the previous year.

The sectoral deployment of bank credit continued to remain broad-based, with high growth in flow of credit to services and personal loans. Disaggregated analysis suggests that credit to the industrial sector continued to be led by credit to infrastructure, metal & metal products, textiles, engineering, food processing and gems & jewellery. The high growth in credit to infrastructure is especially noteworthy as it is on a high base. Even the asset quality for most of the banks remained well within limits and under norms set by the RBI. The process of banking reforms too received a further push during 2010-11. For instance, the government presented this year the Banking Laws (Amendment) Bill 2011 in the Lok Sabha. The bill proposed the following amendments among other recommendations in the existing Banking Law. To raise the voting rights of shareholders of nationalized banks to 10.0% from the existing 1.0%. For private sector banks, the voting rights would be proportionate with investors shareholding. To remove the voting right restriction of 10.0% for private sector banks in the total voting rights of all the shareholders of the banking company. To give powers to nationalised banks to issue two additional instruments bonus shares and rights issues to be able to get funds from capital market to expand the banking business. To grant powers to RBI to impose such conditions as it deems necessary while granting such approval for acquisition of 5.0% or more share capital of a banking company if it considers necessary. To confer power on the RBI to call for information and returns from associate enterprises of banking companies and also to inspect the same. The outlook for Indian banking industry remains positive during 2011-12, given the underlying growth momentum in the real sector and continued steam of high credit demand.
Reserve Bank of India

The Banking system is an integral sub-system of the financial system. It represents an important channel of collecting small savings from the households and lending it to the corporate sector. The Indian banking system has The Reserve Bank of India (RBI) as the apex body from all matters relating to the banking system. It is the Central Bank of India and act as the banker to all other banks .
Functions of RBI:
Currency issuing authority Banker to the government. Banker to other Bank. Framing of monetary policy. Exchange control. Custodian to foreign exchange and gold reserves. Development activities. Research and development in the banking sector.
CLASSIFICATION OF BANKS
On the basis of Ownership PUBLIC SECTOR BANKS Public sector banks are those banks that are owned by the government. The government owns these banks. In India 20 banks were nationalized in 1969 and 1980 respectively. Social welfare is there main objective. PRIVATE SECTOR BANKS These banks are those banks that are owned and run by private sector. An individual has control over these banks in proportion to the shares of the banks held by him. CO-OPERATIVE BANKS These are those banks that are jointly run by a group of individuals. Each individual has an equal share in these banks. Its shareholders manage the affairs of the bank. According to the Law SCHEDULED BANK Schedule banks are the banks, which are included in the second schedule of the banking regulation act 1965. According to this schedule bank: 1. Must have paid-up capital and reserve of not less than Rs500, 000. 2. Must also satisfy the RBI that its affairs are not conducted in a manner Determinate to the interest of its depositors. Schedule banks are sub-divided as:a) State co-operative banks b) Commercial banks NON-SCHEDULED BANKS Non -schedule banks are the banks, which are not included in the second schedule of the banking regulation act 1965. It means they do not satisfy the conditions lay down by that schedule. These are the banks having paid up capital, less than Rs.5Lakhs. They are further classified as follows:(A)Central Co-operative banks and Primary Credit Societies.(B)Commercial banks

According to Function COMMERCIAL BANKS These are the banks that do banking business to earn profit. These banks make loans for short to business and in the process create money. Credit creation is the main function of these banks. FOREIGN BANKS These are those banks that are incorporated by foreign company. They have set up their branches in India. These banks have their head offices in foreign countries. Their principle function is to make credit arrangement or the export and the import of the country and these banks deals in foreign Exchange INDUSTRIAL BANKS Industrial banks are those banks that offer long term and medium term loan to the industries and also work for their development. These banks help industries in sale of their shares, debentures and bonds. They give loan to the industries for the purchase of land and machinery. AGRICULTURAL BANKS Agricultural banks are those banks that give credit to agricultural sector of the economy. SAVING BANKS The principle function of these banks is to collect small savings across the country and put them to the productive use. In India department of post office functions a savings banks. CENTRAL BANK Central Bank is the apex bank of the banking system of the country. It issues currency notes and acts a banker's bank. Economic stability is the principle function of this bank. In short, it regulates and controls the banking system of the country. RBI is the Central Bank of India.
Credit Guarantee Fund Trust for Micro and Small Enterprises STRUCTURE OF BANKING SYSTEM
Different countries of the world have different types of banking systems. However, commercial banking had grown under all these banking systems. To understand the structure of banking system, let us take up various types Of banking systems one by one. These types are: (1) UNIT BANKING Unit Banking originated in the United State of America. It grew in the United States of America. As a counter part of independent or industrial units. An independent unit bank is a corporation that operates one office and that is not related to other banks through either ownership or control. Shaper, Solomon and White. Thus under unit banking, a single bank is a complete organization in itself having its own management. The scale of operation is small and the area is restricted to a locality only. Unit banking is localized banking and is much more responsive to the needs of the locality. It has better understanding of the local problems and conditions, which helps it to cater to the needs of the area in a better way. The staff of the unit bank is generally local and is in a better position to determine the standing or desirability of the customers. The failure of the unit bank will not endanger the banking system and economy. It is free from the difficulties and diseconomies of large scale operations. It will not drain out the financial resources of villages and small towns to big industrial centers and will ensure a balanced growth. (2) BRANCH BANKING: Economic and Managerial problems faced by the unit banks let to the emergence of banking system. Now, This the most popular and important banking system. In branch banking, a bank has a large network of branches scattered all over the country. Branch banking developed in England. Subsequently most of the countries of the world adopted the system. In terms of branches, the State Bank of India has emerged as one of the largest banks in the world. As under the system the resources of a number of branches get pooled under the same management, any individual branch is in a better position to face excessive withdrawals by the customers. It facilitates diversification of activities because the area covered by the branches is generally widespread.

Under the system branches can operate without keeping large idle cash reserves. It becomes possible for the bank to hire the services of competent and professionally qualified managers, capable of understanding the handling technical problems and complex situations. The cost of remitting or transferring funds from one place to another works out to be less. The staff stays at a branch only for a limited period, so the chances of objective decision making in the branch banking are high. Branch Banking tends to bring homogeneity in the prevailing Interest Rates as it increases the mobility of resources from one place to another. It is easier for the Central Bank to exercise Control. It will communicate only with a few Registered /Head Offices of the Banks and not with each individual branch. In this system there more safety and liquidity of funds. The choice of securities and investments is larger. Branch banking makes complete banking services available to the smallest communities. The branches in small localities can be initially operated at loss in expectation of future gains. The comparative study of unit banking and branch banking is a case of small scale banking versus large scale banking. It is evident that the scale is clearly titled towards branch banking. With the growth of large scale business it is no wonder that the trend is almost every country towards the branch banking i.e. big banks with a network of branches all over the country. Even in the U.S.A. The birthplace of unit banking. The Bank of America has now more than 500 branches in the state of California itself. (3) CHAIN BANKING : Shaper, Solomon and White have defined Chain Banking as An arrangements by which two or more banks each of which retains its identity, capital and personnel are brought under common control by any device other than a Holding Company. Under the system there is pooling of resources. Chain banking overcomes certain limitations of unit banking. But the system suffers from certain limitations of its own. There may be a lack of co-ordination, proper control etc. (4) GROUP BANKING : It is similar to Chain Banking, the difference being that under Group Banking two or more banks are brought under the control of the same management through a Holding Company. Both the systems aim at gaining the advantages of large scale operations. The banks are able to pool their resources in case of emergency or when large amount of cash is required to meet the loan requirements of the customer. The advantages and disadvantages of both the systems are similar. Both

the systems developed in the United State of America as a result of attempts to overcome the difficulties or limitations of unit banking. (5) CORRESPONDENT BANKING: Under Correspondent banking, small banks serving local communities hold deposits with joint banks serving in big cities. This kind of banking is prevalent in U.S.A. The correspondent banks perform two important services of outstation cheque clearing and loan participation for the respondent banks while they benefit for the deposit funds of respondent banks.
INTRODUCTION (BANK OF BARODA)

The bank was founded by Maharaja Sayajirao Gaekwad III (also known as Shrimant Gopalrao Gaekwad), the then Maharaja of Baroda on 20th of July 1908 with a paid capital of Rs. 10 Lacs. From its introduction in a small building of Baroda, the bank has come a long way to achieve its current position as one of the most important banks in India. On 19th of July 1969, Bank of Baroda was nationalized by the Government of India along with 13 other commercial banks. Bank of Baroda is the 3rd largest bank in India after State bank of India & Punjab national bank and ahead of ICICI bank. The bank provides an international standard of services to its customers with tag line Indias International Bank. Bank of Baroda has a network of 3132 branches (in India) and 1179 ATM's spread throughout India. Bank of Baroda started its overseas journey by opening its first branch way back in 1953 in Mombassa, Kenya. Since then the Bank has come a long way in expanding its international network to serve NRls/PIOs, Indian Corporates around the world and to meet the banking requirements of the local population in the country of operation. The Bank has transformed into India's International Bank. The Bank has significant international presence with a network of 85 branches/ offices in 26 countries including 53 branches/offices of the Bank, 28 branches of its 8 Subsidiaries and 3 Representative Offices in Malaysia, Thailand & Australia. The Bank also has a Joint Venture in Zambia with 12 branches. The Bank has presence in world's major financial centers i.e. New York, London, Brussels, Dubai, Hong Kong and Singapore. .
History 1908-1959
1908: Maharaja Sayajirao Gaekwad III set up Bank of Baroda (BOB). 1910: BoB established its first branch in Ahmadabad. 1953: BoB established a branch in Mombasa and another in Kampala. 1954: BoB opened a branch in Nairobi. 1956: BoB opened a branch in Dar-es-Salaam. 1957: BoB established a branch in London. 1959: BoB acquired Hind Bank.
1960s
1961: BoB merged in New Citizen Bank of India. This merger helped it increase its branch network in Maharashtra.BOB also opened a branch in Fiji.1962: BoB opened a branch in Mauritius. 1963: BoB acquired Surat Banking Corporation in Surat, Gujarat. 1964: BoB acquired two banks, Umbergaon Peoples Bank in southern Gujarat and Tamil Nadu Central Bank in Tamil Nadu state. 1964: BoB lost its branch in Narayanjanj (East Pakistan) due to the Indo-Pakistan war. It is unclear when BOB had opened the branch. 1965: BoB opened a branch in Guyana. 1967: The Tanzanian government nationalized BoBs three branches there and transferred their operations to the Tanzanian government-owned National Banking Corporation. 1969: The government of India nationalized 14 top banks, including BoB. BoB incorporated its operations in Uganda as a 51% subsidiary, with the government owning the rest.
1970s
1972: BoB acquired The Bank of Indias operations in Uganda. 1974: BoB opened a branch each in Dubai and Abu Dhabi. 1975: BoB acquired the majority shareholding and management control of Bareilly Corporation Bank (est. 1928) and Nainital Bank (est. in 1954), both in Uttar Pradesh. Since then, Nainital Bank has expanded to Uttarakhand State. 1976: BoB opened a branch in Oman and another in Brussels. The Brussels branch was aimed at Indian firms from Mumbai (Bombay) engaged in diamond cutting and jewellery having business in Antwerp, a major center for diamond cutting. 1978: BoB opened a branch in New York and another in the Seychelles. 1979: BoB opened a branch in Nassau, the Bahamas.
1980s
BoB opened a branch in Bahrain and a representative office in Sydney, Australia. BoB, Union Bank of India and Indian Bank established IUB International Finance, a licensed deposit taker, in Hong Kong. Each of the three banks took an equal share. 1985: BoB (20%), Bank of India (20%), Central Bank of India (20%) and ZIMCO (Zambian government; 40%) established Indo-Zambia Bank (Lusaka). BoB also opened an Offshore Banking Unit (OBU) in Bahrain. 1988: BoB acquired Traders Bank, which had a branch network in Delhi.
1990s
1990: BoB opened an OBU in Mauritius, but closed its representative office in Sydney.

1991: BoB took over the London branches of Union Bank of India and Punjab & Sind Bank (P&S). P&Ss branch had been established before 1970 and Union Banks after 1980. The Reserve Bank of India ordered the takeover of the two following the banks' involvement in the Sethia fraud in 1987 and subsequent losses. 1992 BoB incorporated its operations in Kenya into a local subsidiary with a small tranche of shares quoted on the Nairobi Stock Exchange. 1993: BoB closed its OBU in Bahrain. 1996: BoB Bank entered the capital market in December with an Initial Public Offering (IPO). The Government of India is still the largest shareholder, owning 66% of the bank's equity. 1997: BoB opened a branch in Durban. 1998: BoB bought out its partners in IUB International Finance in Hong Kong. Apparently this was a response to regulatory changes following Hong Kongs reversion to the Peoples Republic of China. The now wholly owned subsidiary became Bank of Baroda (Hong Kong), a restricted license bank.BoB also acquired Punjab Cooperative Bank in a rescue. 1999: BoB merged in Bareilly Corporation Bank in another rescue. At the time, Bareilly had 64 branches, including four in Delhi. In Guyana, BoB incorporated its branch as a subsidiary, Bank of Baroda Guyana. BoB added a branch in Mauritius, but closed its Harrow Branch in London.
2000s
2000: BoB established Bank of Baroda (Botswana). 2002: BoB acquired Benares State Bank (BSB) at the Reserve Bank of Indias request. BSB was established in 1946 but traced its origins back to 1871 and its function as the treasury office of the Benares state. In 1964, BSB had acquired Bareilly Bank (est. 1934), with seven branches; it also had taken over Lucknow Bank in 1968. The acquisition of BSB brought BOB 105 new branches.

2002: Bank of Baroda (Uganda) was listed on the Uganda Securities Exchange (USE). 2003: BoB opened an OBU in Mumbai. 2004: BoB acquired the failed Gujarat Local Area Bank, and returned to Tanzania by establishing a subsidiary in Dar-es-Salaam. BoB also opened a representative office each in Kuala Lumpur, Malaysia, and Guangdong, China. 2005: BoB built a Global Data Centre (DC) in Mumbai for running its centralized banking solution (CBS) and other applications in more than 1,900 branches across India and 20 other counties where the bank operates. BoB also opened a representative office in Thailand. 2006: BoB established an Offshrore Banking Unit (OBU) in Singapore. 2007: In its centenary year, BoBs total business crossed 2.09 lakh crores, its branches crossed 1000, and its global customer base 29 million people. 2008: BoB opened a branch in Guangzhou, China (02/08/2008). 2008: BoB opened a joint venture life insurance company with Andhra Bank and Legal and General (UK) called IndiaFirst Life Insurance Company 2009: The Bank of Baroda registered with the Reserve Bank of New Zealand, enabling it to trade as a bank in New Zealand (2009/09/01)
2010-11
2010: Malaysia awarded a commercial banking license to a locally incorporated bank to be jointly owned by Bank of Baroda, Indian Overseas Bank and Andhra Bank. The new bank, India BIA Bank (Malaysia), will reside in Kuala Lumpur, which has a large population of Indians. Andhra Bank will hold a 25% stake in the joint-venture, BoB will own 40% and IOB the remaining 35%. Online subscription of IPO/FPO (ASBA) was enabled. During financial year 2010-11, the total number of transactions in BCMS were 10,80,000 with total turnover of Rs 11,027 crore.
Banks Mission Statement
Banks Logo
Banks logo is a unique representation of a universal symbol. It comprises dual B letterforms that hold the rays of the rising sun. They call this the Baroda Sun. The sun is an excellent representation of what our bank stands for. It is the single most powerful source of light and energy its far reaching rays dispel darkness to illuminate everything they touch. At Bank of Baroda, it seek to be the source that will help all our stakeholders realize their goals. To our customers, we seek to be a one-stop, reliable partner who will help them address different financial needs. To our employees, we offer rewarding careers and to our investors and business partners, maximum return on their investment.
Micro, Small and Medium Enterprises (MSME)

Worldwide, the micro small and medium enterprises (MSMEs) have been accepted as the engine of economic growth and for promoting equitable development. The major advantage of the sector is its employment potential at low capital cost. The labour intensity of the MSME sector is much higher than that of the large enterprises. The MSMEs constitute over 90% of total enterprises in most of the economies and are credited with generating the highest rates of employment growth and account for a major share of industrial production and exports. In India too, the MSMEs play a pivotal role in the overall industrial economy of the country. In recent years the MSME sector has consistently registered higher growth rate compared to the overall industrial sector. With its agility and dynamism, the sector has shown admirable innovativeness and adaptability to survive the recent economic downturn and recession. As per available statistics (4th Census of MSME Sector), this sector employs an estimated 59.7 million persons spread over 26.1 million enterprises. It is estimated that in terms of value, MSME sector accounts for about 45% of the manufacturing output and around 40% of the total export of the country. In a nation's economy, it's the small and micro enterprises which play a vital role. For, they not only give employment to a large number of unskilled and semiskilled people but also support bigger industries by supplying raw material, basic goods, finished parts and components, etc. The critical role and place of the MSME sector in the Indian economy in employment generation, exports and economic empowerment of a vast section of the population is well known. There are about 2.6 crore enterprises in this sector. The sector accounts for 45 per cent of the manufactured output and 8 per cent of the Gross Domestic Product (GDP). MSMEs contributed close to 40 per cent of all exports from the country and employ nearly 6 crore people which is next only to the agricultural sector. MSME is the best vehicle for inclusive growth, to create local demand and consumption. MSMEs cater to niche markets. The MSMEs of yesterday are the large corporates of today and could be MNCs of tomorrow. Thus the banks and other agencies should take pride while servicing the MSMEs as they are playing an instrumental role in the formation of MNCs of tomorrow. It was, therefore, only appropriate that the Government of India enacted the Micro, Small and Medium Enterprises Development Act, 2006. Public Policy has rightly accorded high priority to this sector in order to achieve balanced, sustainable, more

equitable and inclusive growth in the country. Advances extended to the MSE sector are treated as priority sector advances and as per the extant Reserve Bank guidelines, banks are required to extend at least 60% of their advances to the MSE sector to Micro Enterprises. MSEs primarily rely on bank finance for a variety of purposes including purchase of land, building, plant and machinery as also for working capital, etc. Availability of timely credit at reasonable rates is the need of the sector. As at the end of March 2009, the total outstanding credit provided by all Scheduled Commercial Banks (SCBs) to the MSE sector was Rs. 2,56128 crore, constituting 11.4 percent of the Adjusted Net Bank Credit. Credit flow to MSMEs had therefore, doubled from Rs 1,27,000 crore in 2006-07 to Rs 2,57,000 crore in 2008-09. In 2007-08, credit flow to the sector was Rs 2,13,000 crore. In September 2009 the total outstanding credit stood at 323565 crore and in February 2010 it further increased to Rs 369866 crore. Despite the global financial crisis, there was enough liquidity in the Indian banking system and banks were willing to extend credit to viable projects. Despite the fact that there is no dearth of credit in the system there exists a gap in perception of the lenders and SME borrowers. While the lenders felt that credit to the sector is expanding, the SME borrowers felt that the lenders are not doing enough for the SMEs and are catering more to the needs of the large corporate. As only 4-5 % MSMEs are covered by institutional funding given that approx 95 % of villages are not covered by banks. There is, therefore, a need to bridge this gap through enabling policies. The Micro, Small and Medium Enterprises in Manufacturing and service sector are defined as under in MSMED ACT, 2006. Manufacturing Sector Micro Enterprise (Manufacturing) is an enterprise engaged in manufacture/production or preservation of goods and whose investment in plant and machinery (original cost excluding land and building and the items specified by the Ministry of Small Scale Industries) does not exceed Rs. 25.00 Lacs irrespective of location of the unit. Small Enterprise (Manufacturing) is an enterprise engaged in manufacture/production or preservation of goods and whose investment in plant and machinery (original cost excluding land and building and the items specified by the Ministry of Small Scale Industries) is more than Rs. 25.00 lacs but does not exceed Rs. 5.00 crores and

Medium Enterprise (Manufacturing) is an enterprise engaged in manufacture/production or preservation of goods and whose investment in plant and machinery (original cost excluding land and building and the items specified by the Ministry of Small Scale Industries is more than Rs.5.00 crores but does not exceed Rs.10.00 crores. Service Sector Enterprises engaged in providing or rendering services whose investments in equipment (original cost excluding land & Building and Furniture, Fittings and other items not directly related to the service rendered or as may be notified under MSMED Act, 2006) are as detailed here under: Micro Enterprise (Service) is an enterprise where the investment in equipment does not exceed Rs. 10.00 lacs; Small Enterprise (Service) is an enterprise where the investment in equipment is more than Rs.10.00 lacs but does not exceed Rs. 2.00 crores and Medium Enterprise (Service) is an enterprise where the investment in equipment is more than Rs. 2.00 crores but does not exceed Rs. 5.00 crores. Investment in Plant & Machineries in case of Manufacturing Enterprises Up to Rs. 25/- lacs Investment in Equipment in case of Service Sector Enterprises Up to Rs.10/- lacs
Particulars
Micro Enterprises Small Enterprises
Above Rs. 25/- lacs and Above Rs.10/- lacs and up to Rs.500/- lacs up to Rs.200/- lacs Above Rs.500/- lacs and up to Rs.1000/lacs Above Rs.200/- lacs and up to Rs.500/- lacs
Medium Enterprises
Bank of Barodas approach to SME sector

SMEs are growth engines for development of Economy. Our bank has therefore for internal purposes given focused attention to finance all Commercial enterprises i.e. enterprises which may be outside the purview of regulatory definition of SME but having turnover upto Rs 150.00 crores and new infrastructure and real estate projects where the project cost is upto Rs. 50/- crores by treating them as part of SME segment. SME Banking business will thus include the following across the bank: Micro, Small and Medium Enterprises as per regulatory definition irrespective geographical location, i.e. rural, semiurban, urban, metro areas. All other entities with their annual sales turnover of Rs. 1/- crore to Rs. 150/crores and new infrastructure and real estate projects, where the project cost is upto Rs. 50/- crores. SMEs which are Associate/sister concerns of Wholesale Banking customers. Clubs, Trusts, etc. ESTABLISHMENT OF SME LOAN FACTORIES Business Model which operates on assembly line principle is adopted by the bank for hassle free and faster dispensing of credit to SME segment. This model titled SME Loan factory has separate Hub for Centralized Processing of SME proposals. As of March, 2011, 36 SME Loan Factories have been operationalized across the country. It is a revolutionary step taken by Bank of Baroda amongst the Nationalised Banks. It envisages setting up of Centralized Processing Hub to ensure speedy appraisal and sanctioning of proposal of SME Sector within a time bound schedule. The model works on assembly line principles with simplified processes using latest technology and in-house skilled men power to deliver focused services to SME customers. A team of Relationship Officers/Relationship Managers have been stationed at different key places spread over the micro segment of the city who will reach out to SME customers.
Credit Guarantee Fund Trust for Micro and Small Enterprises Attractive features of the model are as under:
Team of officers having expertises in the area of credit with positive approach is selected. Instead of appointing DSAs(Direct Selling Agents), bank has appointed officers from existing dedicated team only.
The hubs main role is ensuring speedy appraisal & sanctioning of proposals pertaining to SME sector in a time bound program. The team members reach out to different market segments. Its important feature is working of the SME Loan Factory on assembly line principles with simplified processes. We have two nodes to take care of the marketing /sales(SALES HUB) and credit processing sanction(CREDIT HUB), under a single umbrella of the SME Loan Factory.
Business & Financial Performance

The share of Banks deposits in total resources stood at 85.22% as of 31st March 2011. The total deposits grew from Rs 2, 41,261.93 crore to Rs 3, 05,439.48 crore, posting a growth of 26.60% over the previous year. Of this, Savings Bank Deposits an important constituent of low cost deposits grew by 22.67% - from Rs 52,543.92 crore to Rs 64,454.04 crore. The share of low cost deposits (Current plus Savings) in Total Deposits (Domestic plus Overseas) was at 28.68% and in Domestic Deposits at 34.36%. During the year 2010-11, interest rates offered on the most popular buckets of retail term deposits of commercial banks in India increased by 200 to 250 bps making low cost deposits a less attractive proposition. Across the banking industry, the share of low cost deposits (CASA) to total deposits shrank sharply during 2010-11. Even for Bank of Baroda the domestic CASA share marginally declined from 35.63% to 34.36% on a year on year basis. The Banks Global Advances expanded significantly and much above the banking industry average by 30.65% during 2010-11 led by 28.69% expansion in domestic advances and 36.59% expansion in overseas advances . Unlike the experience of Indian banking industry, Bank of Barodas Total Credit growth (at 30.65%) was in proper alignment with its Total Deposit growth (at 26.60%) during 2010-11.
Composition of Funds Global Particulars End March 2010 (Rs crore)

2,41,261.93 1,85,500.25 55,761.68 13,350.09
End March 2011 (Rs crore)

3,05,439.48 2,33,323.30 72,116.18 22,307.85
Growth
Deposits
-Domestic -Overseas Borrowings
26.60% 25.78% 29.33% 67.10%
Global Advances Particulars End March 2010 (Rs crore)

1,75,035.28 1,31,643.62 43,391.66
End March 2011 (Rs crore)

2,28,676.36 1,69,407.86 59,268.50
Growth
Advances
30.65% 28.69% 36.59%
-Domestic -Overseas
Business Initiatives
To mobilize low cost deposits aggressively, a Savings Bank Deposit Campaign was launched on 21st June, 2010 for the period of three months. An amount of Rs 1,944 crore as fresh Savings Bank Deposit was mobilized during this campaign. A second Savings Bank Deposit Campaign was launched from 1st December, 2010 to 31st March, 2011, which generated a fresh Savings Bank Deposit to the tune of Rs 3,081 crore under 1,014,589 accounts. For augmenting Retail Loan Portfolio, a Retail Loan Festival Campaign was launched from 1st October, 2010 to 31st December, 2010. During the campaign, a total of Rs 1,218 crore was disbursed under both Home and Auto Loans. Another Retail Loan Campaign specially focused on Home Loans and Auto Loans was launched from 1st February, 2011 to 31st March, 2011. A fresh business of Rs 891.74 crore was generated during this campaign. To increase the attractiveness, maximum period of deposits under Recurring Deposit and Yatha Shakti Jama Yojna were increased to 120 months from the existing 36 months. Interest Rate Structure on Car Loans was revised from Quantum Based Interest Rates to Tenor Based Interest Rates with effect from 1st September, 2010. To facilitate the borrowers, an Online Auto Loan Application Module was made live with effect from 9th August, 2010.

A Tie-up Arrangement was made with India First Life Insurance Company for providing Life Insurance Cover to the Banks Home Loan borrowers. A Reward & Recognition Scheme for the Banks staff under Group Credit Insurance scheme in a tie-up arrangement with Kotak Life Insurance and India First Life Insurance was initiated with effect from 1st October, 2010. The Bank opened a new Gen-next branch in NOIDA during the first quarter of 2010-11 and now the total number of Gen Next Branches is eight. Five new Retail Loan Factories at Karol Bagh New Delhi, Raipur, Ludhiana and Nasik were opened during 2010- 11, whereas one existing RLF at Jodhpur was closed. With this the total tally of the Banks Retail Loan Factories (RLFs) is 35. Existing accounts of Home Loans and Education Loans were also brought into the ambit of Group Credit Life Insurance Cover under the tie-up arrangement with Kotak Life Insurance and IndiaFirst Life Insurance with effect from 31st December, 2010.
MSME Business
The Micro, Small and Medium Enterprises (MSME) segment is a vital component of Indian economy. This sector accounts for around 40.0% of total industrial production, 34.0% of industrial exports and 95.0% of industrial units and 35.0% of total employment in manufacturing and service sectors of India. The contribution of services sector within the SME segment is quite significant, especially the IT enabled services, hospitality services, tourism, couriering, transportation, etc. 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 made operational in 36 centres of the Bank and well accepted in the market place. The SME Loan Factory is an innovative model for streamlining processes and for timely sanction of SME loan proposals. The model comprises of the Central Processing Cell for speedy appraisal and sanctioning of proposals within the stipulated deadline and a sales team to follow up on leads generated by the branches. Going by the past success, the Bank is planning to open more such loan factories in the ensuing year. The Bank has SME Loan Factories at all major

business centres across the country, viz. Agra, Ahmedabad, Bangalore, Bareilly, Baroda, Bhilwara, Bhubhaneshwar, Bulsar, Chandigarh, Chennai, Coimbatore, Dehradun, two Factories in Delhi, Hyderabad, Indore, Jaipur, Jamshedpur, Jamnagar, Jodhpur, Kanpur, Kolhapur, Kolkata, lucknow, Ludhaina, 3 Factories in Mumbai, Nagpur, Nashik, Pune, Rajkot, Raipur, Surat, Varanasi and Vishakhapatnam. These SME Loan Factories together sanctioned loans aggregating Rs 14,530 crore during 2010-11 as against Rs 11,071 crore in the previous year.
Growth of Business
The total outstanding in MSME Sector works out to Rs 27,365 crore as on 31st March 2011. The growth in lending to MSME Sector during the last three years is given in the table below.
Year 2008-09 2009-10 2010-11
Growth 24.18% 43.98% 29.63%
The percentage growth of MSME credit during 2009-10 was relatively high as the advances up to Rs 20 lakh to Retail Trade were classified for the first time under the Micro & Small Enterprises Sector in 2009-10, in line with the RBIs revised guidelines issued during September, 2009. The growth rate was normalized during the year 2010-11.
Initiatives in MSME Financing During 2010-11

1. During this year, the Bank introduced five new customer centric, area-specific products to suit the local cluster needs along with the renewal of eight existing customer-centric area-specific products. 2. The Bank sponsored a workshop on Management Skills to Source Financing and Management of Technology by SMEs for entrepreneurs organized by the AIMA at Faridabad. 3. The Bank introduced Protrack -an e-tracking system for the SME credit proposals with a view to have control over the turnaround time. 4. The Bank celebrated SME Festival from 1st January 2011 to 28th February 2011 in order to give boost to SME advances. Some concessions in the rate of interest and service charges were announced for loans sanctioned during the celebration period. 5. The Bank participated in the Workshops arranged by CGTMSE on Bank Credit to Micro & Small Enterprises and the Role of Credit Guarantee. 6. The Bank accorded higher importance to Increase the flow of credit to MSME with a special emphasis on Micro Enterprises. 7. The Bank focused on collateral free credit under the CGTMSE scheme through a special campaign. 8. The Bank achieved total customer relationship through enhanced cross selling, locational meetings, involvement of trade bodies at the national and state levels. 9. The Bank placed emphasis on continuous knowledge updating and skill building of processing/marketing officers attached to its SME factories with the help of external and internal training outfits.
Performance Highlights
Total Business (Deposit+Advances) increased to Rs 5,34,116 crore reflecting a growth of 28.30%. Gross Profit and Net Profit were Rs 6,981.61 crore and Rs 4,241.68 crore respectively. Net Profit registered a growth of 38.7% over previous year. Credit-Deposit Ratio stood at 86.77% as against 84.47% last year. Retail Credit posted a growth of 33.8% constituting 18.88% of the Banks Gross Domestic Credit in 2010-11. Net Interest Margin (NIM) as per cent of interest earning assets in global operations was at the level of 3.12% and in domestic operations at 3.72%. Net NPAs to Net Advances stood at 0.35% this year against 0.34% last year. Capital Adequacy Ratio (CAR) as per Basel I stood at 13.02% and as per Basel II at 14.52%. Net Worth improved to Rs 19,750.63 crore registering a rise of 43.27%. Book Value improved from Rs 378.44 to Rs 504.43 on year. Business per Employee moved up from Rs 981 lakh to Rs 1,229 lakh on year.
Segment-Wise Performance
The Segment Results for the year 2010-11 reveal that the contribution of Treasury Operations was Rs 882.51 crore, which of Corporate/Wholesale Banking was Rs 1,525.49 crore, which of Retail Banking was Rs 1,517.89 crore, and of Other Banking Operations was Rs 2750.61 crore. The Bank earned a Profit after Tax (PAT) of Rs 4,241.68 crore after deducting Rs 1,026.18 crore of unallocated expenditure and Rs 1,408.64 crore towards provision for tax.
Dividend
The Banks Directors have proposed a dividend of Rs 16.50 per share (on the face value of Rs 10/-per share) for the year ended March 31st, 2011. The total outgo in the form of dividend, including taxes, will be Rs 753.35 crore.
Capital Adequacy Ratio (CAR)

The Banks Capital Adequacy Ratio (CAR) is comfortable at 14.52% under Basel II as on 31st March 2011. During the year, the Bank strengthened its capital-base by raising Rs 1,500 crore through unsecured subordinated bonds and Rs 711.50 crore through innovative perpetual bonds. The Banks Net Worth as at 31st March 2011 was Rs 19,750 crore comprising paid-up equity capital of Rs 392.81 crore and reserves (excluding revaluation reserves) of Rs 19,357.82 crore. An amount of Rs 3,488.33 crore was transferred to reserves from the profits earned.
Provisions towards Retirement and Other Benefits

During the year 2010-11, the Bank has made provision towards contribution to gratuity (Rs 382.90 crore), pension funds (Rs 788.55 crore), leave encashment (Rs.-21.20 crore) and additional retirement benefits (Rs 10.17 crore) on actuarial basis. Total provisions under these four categories amounted to Rs 1,160.42 crore during the year 2010-11, against Rs 402.71 crore during 2009-10. Total corpus available with the Bank at the end of March 2011 under these heads was: Rs 1,289.75 crore (gratuity), Rs 5,177.08 crore (pension funds), Rs 506.31 crore (leave encashment), and Rs 396.13 crore (additional retirement benefits).
Key Financial Ratios Particulars Return on Average Assets (ROAA) (%) Average Interest Bearing Liabilities (Rs crore) Average Cost of Funds (%) Average Interest Earning Assets (Rs crore) Average Yield (%) Net Interest Margin (%) Cost-Income Ratio (%) Book Value per Share (Rs) EPS (Rs) International Business
The improvement in global economic scenario, strong economic revival especially in the advanced countries and a substantial growth in the International Trade flows supported growth of business and profitability of International Operations. The Bank leveraged on its long experience of international banking, strong and loyal customer base, time-tested business model, technological initiatives to live up to its position as the Indias International Bank. During 2010-11, there was a better than expected growth in the business and profits of the Banks International Operations. The asset growth was further assisted by Foreign Currency requirements of Indian Corporates for their overseas expansion, and, also, to take advantage of the difference in cost of resources. To meet the requirements of borrowers, the Bank raised Foreign Currency resources in timely fashion at overseas centres at the finest terms supported by the Banks strong credit story.
2010-11 1.33
2009-10 1.21
2,80,098.94 2,15,886.21 4.67 4.98 2,82,109.79 2,16,735.54 7.76 3.12 39.87 504.43 116.37 7.70 2.74 43.57 378.44 83.96

The Bank kept continuous watch on economic, social and political developments around the world to safeguard its business interests. The business model was aligned and risk management functions were further strengthened to take care of any shocks in the ever-changing international scenario. The overseas branch network was further expanded to 85 branches/offices offering further opportunities for generating profitable growth of business.
Business and Profit Performance

During 2010-11, the total business (Deposits + Advances) of the Banks Overseas Branches registered a growth of 32.51% (y-o-y). The Customer Deposits increased by 23.44%, Total Deposits by 29.33 % and Advances by 36.59%. The International Operations contributed 24.6% to the Banks global business as on 31st March, 2011.
Total Assets
Total Assets of the Banks International Operations increased from Rs 68,375 crore to Rs 91,273 crore registering a growth of 33.49% during the year.
Net Profit
The Gross Profit for the year 2010-11 registered a healthy growth of 23.94% over the level of previous year. The Net Profit, however, declined by 7.32% due to an unfavourable statistical base effect. During the year 2009-10, the Net Profit had increased sharply because of the reversal of provisions made under Mark to Market of Investments. The contribution of international operations to the Banks Total Net Profit stood at 19.15% during 2010-11.
Asset Quality
Consistent with its past practices, the Bank took all the necessary safeguards at the time of asset creation and ensured monitoring of assets on an ongoing basis to be in readiness for any eventualities in the economic scenario around the world.

The accounts restructured in previous years as per the RBI norms were continuously monitored during 2010-11 to ward off any deterioration in the asset quality. In NPA accounts, there were continuous efforts for upgradation/recoveries as per the norms in the country of operation. As a result, the Gross NPAs to Total Advances were contained at 0.62% as on March 2011. The Net NPAs too were modest at 0.19%.
International Presence
With the commencement of operations in New Zealand, the Bank extended its overseas presence to 26 countries with 85 branches/offices as under.
Banks Overseas Branches Banks Representative Offices Branches of Banks Overseas Subsidiaries Total
54 3 28 85
In addition to the above, the Banks associate in Zambia has 12 branches.
FINANCIAL STATEMENT OF BANK OF BARODA

Balance Sheet as on 31st March, 2011
(000s omitted)
CAPITAL & LIABILITIES
31st Mar,2011 31st Mar,2010
Capital Reserves and Surplus Deposits Borrowings Other Liabilities and Provisions TOTAL
ASSETS
392,80,73 20600,30,46 305439,48,19 22307,85,48 9656,72,68 358397,17,54
365,52,77 14740,85,50 241261,92,52 13350,08,50 8598,30,99 278316,70,28
Cash and Balances with Reserve Bank of India Balances with Banks and Money at Call and Short Notice Investments Advances Fixed Assets Other Assets TOTAL Contingent Liabilities Bills for Collection
19868,17,89 30065,88,89 71260,63,09 228676,36,09 2299,71,83 6226,39,75 358397,17,54 127163,87,03 18844,71,94
13539,96,91 21927,08,85 61182,37,54 175035,28,59 2284,76,48 4347,21,91 278316,70,28 87836,07,99 18185,57,81

Profit & Loss Account for the year ended 31st march 2011 (000s omitted)
INCOME
31st Mar,2011 31st Mar,2010
Interest Earned Other Income TOTAL

EXPENDITURE
21885,91,56 2809,18,60 24695,10,16 13083,65,77 4629,83,49 2739,92,93 20453,42,19 4241,67,97 4241,67,97
16698,34,24 2806,35,65 19504,69,89 10758,85,66 3810,58,13 1876,93,00 16446,36,79 3058,33,10 3058,33,10
Interest Expended Operating Expenses Provisions and Contingencies TOTAL

PROFIT
Net Profit for the year Available for Appropriation

Appropriations
Transfer to : a) Statutory Reserve b) Capital Reserve c) Revenue and Other Reserves I) Investment Fluctuation Reserve II) General Reserve III) Special Reserve IV) Statutory Reserve (Foreign) d)Proposed Dividend (including Dividend Tax) e) Investment Reserve Account TOTAL Basic & Diluted Earnings/ Share
1060,41,99 20,99,56 _ 2100,45,56 335,39,00 2,46,92 753,35,20 (31,40,26) 4241,67,97 116.37
764,58,28 126,58,95 _ 1256,99,61 270,00,00 90,22 639,26,04 -3058,33,10 83.96
SWOT ANALYSIS
- It is 3rd largest bank in India
- It has maximum number of international branches. - It has good image among the customers
-Lesser branches across the country when compared with SBI and PNB -Insufficient Workforce
- Bank Of Baroda has huge opportunity to increase its customer base overseas. - Expansion in the rural areas
-New licenses for commercial banks is going to make competition more intense.
RESEARCH METHODOLOGY
RESEARCH OBJECTIVES: To understand Credit Guarantee Scheme (CGS) of CGTMSE. To make a Comparative study of Bank of Baroda, Punjab National Bank and Bank of India for providing loan under CGS of CGTMSE.
RESEARCH DESIGN:The project was a research project. Both primary and secondary data was used. The research design was a exploratory research design.
SAMPLE DESIGN:Population Size Sampling Size (No. of Respondents) Data Collection Tool Data Analysis Tool Sampling Technique Location Duration Data collection design Credit Managers of BOB, PNB & BOI 20 Questionnaire Charts and graphs Convenience sampling Varanasi May and June Primary & secondary
Type of data collected:

Primary data General Observation MethodThe operational aspect of the organization was observed to have an insight about the operation. The working mechanism was pen down. Personal Interview MethodSome officials of the organization like the processing officer of SME loan factory were interviewed to understand about how the processing of loan application is done under CGTMSE. This was conducted without the help of any questionnaire. The objective was to draw a general understanding about the operation. This technique helped to clear doubts arising due to observation method. Data Collection InstrumentA set of questionnaire was prepared by consulting my mentor for surveying the branches of BOB, PNB & BOI and thereby making a comparative study among these banks for financing under CGTMSE. Secondary data Secondary data were collected from CGTMSE web site www.cgtmse.com Bank of Barodas internal database, Brochure, websites of the three banks
www.bankofbaroda.com www.pnbindia.in & www.bankofindia.com.

Various circulars of Bank of Baroda issued by the head office from time to time to the branches regarding the CGTMSE.
CONCEPTUAL FRAMEWORK
CREDIT GUARANTEE TRUST FOR MICRO AND SMALL ENTERPRISES (CGTMSE)
The Board of Trustees of Credit Guarantee Fund Trust for Small Industries, having decided to frame a Scheme for the purpose of providing guarantees to a substantial extent in respect of credit facilities to borrowers in Micro and Small Enterprises, hereby make the following Scheme: 1. Title and date of commencement (i) The Scheme shall be known as the Credit Guarantee Fund Scheme for Small Industries (CGFSI) (ii) It shall come into force from August 1, 2000. (iii) It shall cover eligible credit facility extended by the lending institutions to eligible borrowers effective June 1, 2000. Subsequent to the enactment of MSMED Act-2006 the Trust was renamed as Credit Guarantee Fund Trust for Micro and Small Enterprises and scheme as Credit Guarantee Scheme for Micro and Small Enterprises. 2. Definitions For the purposes of this Scheme (i) "Amount in Default" means the principal and interest amount outstanding in the account(s) of the borrower in respect of term loan and amount of outstanding working capital facilities (including interest), subject to a maximum of fund based & non-fund based working capital limits sanctioned and guaranteed as on the date of the account becoming NPA, or such of the date as may be specified by CGTMSE, for preferring any claim against the guarantee cover. (ii) "Collateral security" means the security provided in addition to the primary security, in connection with the credit facility extended by a lending institution to a borrower. (iii) "Credit facility" means any financial assistance by way of term loan and / or fund based and non-fund based working capital (e.g. Bank Guarantee, Letter of credit etc) facilities extended by the lending institution to the eligible borrower. For the purpose of calculation of guarantee fee, the "credit facility extended" shall

mean the amount of financial assistance committed by the lending institution to the borrower, whether disbursed or not. For the purpose of the calculation of service fee, the credit facility extended shall mean the credit facilities (both fund and nonfund based) covered under CGS and for which guarantee fee has been paid, as at March 31, of the relevant year. (iv) "Eligible borrower" means new or existing Micro and Small Enterprises to which credit facility has been provided by the lending institution without any collateral security and/or third party guarantees. (v) Guarantee Cover means maximum cover available per eligible borrower of the amount in default in respect of the credit facility extended by the lending institution. (vi) "Lending institution(s)" means a commercial bank for the time being included in the second Schedule to the Reserve Bank of India Act, 1934 and Regional Rural Banks as may be specified by the Trust from time to time, or any other institution (s) as may be directed by the Govt. of India from time to time. The Trust may, on review of performance, remove any of the lending institution from the list of eligible institution. (vii) "Material date" means the date on which the guarantee fee on the amount covered in respect of eligible borrower becomes payable by the eligible institution to the Trust. (viii) "Non Performing Assets" means an asset classified as a non-performing based on the instructions and guidelines issued by the Reserve Bank of India from time to time. (ix) "Primary security" in respect of a credit facility shall mean the assets created out of the credit facility so extended and/or which are directly associated with the project or business for which the credit facility has been extended. (x) "Prime Lending Rate" for a lending institution means the rate so declared by that lending institution for the relevant time period / duration for which the credit facility has been extended.

(xi) "Scheme" means the Credit Guarantee Fund Scheme for Micro and Small Enterprises (xii) "SIDBI" means the Small Industries Development Bank of India, established under Small Industries Development Bank of India Act, 1989 (39 of 1989). (xiii) 'Micro and Small Enterprises' As per the MSMED Act, 2006 an "enterprise" means an industrial undertaking or a business concern or any other establishment, by whatever name called, engaged in the manufacture or production of goods, in any manner, pertaining to any industry specified in the First Schedule to the Industries (Development and Regulation) Act, 1951 or engaged in providing or rendering of any service or services; and "Micro and Small Enterprises" are defined in 7.1.a.i) and ii) & in 7.1.b.i) and ii) of the said Act . (xiv) "Tenure of guarantee cover" means the maximum period of guarantee cover which shall run through the agreed tenure of the term credit and for a period of 5 years or block of a 5 years where working capital facilities alone are extended, or for such period as may be specified by the Trust. (xv) "Trust" means the Credit Guarantee Fund Trust for Micro and Small Enterprises set up by Government of India and SIDBI with the purpose of guaranteeing credit facility (ies), extended by the lending institution(s) to the eligible borrowers.
SCOPE AND EXTENT OF THE SCHEME

3. Guarantees by the Trust
(i.) Subject to the other provisions of the Scheme, the Trust undertakes, in relation to credit facilities extended to an eligible borrower from time to time by an eligible institution which has entered into the necessary agreement for this purpose with the Trust, to provide a guarantee on account of the said credit facilities. (ii.) The Trust reserves the discretion to accept or reject any proposal referred by the lending institution which otherwise satisfies the norms of the Scheme.
4. Credit facilities eligible under the Scheme:

The Trust shall cover credit facilities (Fund based and/or Non fund based) extended by Member Lending Institution(s) to a single eligible borrower in the Micro and Small Enterprises sector for credit facility (i) not exceeding Rs. 50 lakh (Regional Rural Banks/Financial Institutions) and (ii) not exceeding Rs.100 lakh (Scheduled Commercial Banks and select Financial Institutions) by way of term loan and/or working capital facilities on or after entering into an agreement with the Trust, without any collateral security and\or third party guarantees. Provided that the lending institution applies for guarantee cover in respect of credit proposals sanctioned in the quarter April-June, July-September, October-December and January- March prior to expiry of the following quarter viz. July-September, October-December, January-March and April-June respectively Provided further that, as on the material date (i) The dues to the lending institution have not become bad or doubtful of recovery; and / or (ii) The business or activity of the borrower for which the credit facility was granted has not ceased; and / or (iii) The credit facility has not wholly or partly been utilised for adjustment of any debts deemed bad or doubtful of recovery, without obtaining a prior consent in this regard from the Trust.
5. Credit facilities not eligible under the Scheme

The following credit facilities shall not be eligible for being guaranteed under the Scheme: (i) Any credit facility in respect of which risks are additionally covered under a scheme operated / administered by Deposit Insurance and Credit Guarantee Corporation or the Reserve Bank of India, to the extent they are so covered. (ii) Any credit facility in respect of which risks are additionally covered by Government or by any general insurer or any other person or association of persons carrying on the business of insurance, guarantee or indemnity, to the extent they are so covered. (iii) Any credit facility, which does not conform to, or is in any way inconsistent with, the provisions of any law, or with any directives or instructions issued by the

Central Government or the Reserve Bank of India, which may, for the time being, be in force. (iv) Any credit facility granted to any borrower, who has availed himself of any other credit facility covered under this scheme or under the schemes mentioned in clause (i), (ii) and (iii) above, and where the lending institution has invoked the guarantee provided by the Trust or under the schemes mentioned in clause (i), (ii) and (iii) above, but has not repaid any portion of the amount due to the Trust or under the schemes mentioned in clause (i), (ii) and (iii) above, as the case may be, by reason of any default on the part of the borrower in respect of that credit facility. (v) Any credit facility which has been sanctioned by the lending institution against collateral security and / or third party guarantee. (vi) Any credit facility which has been sanctioned by the lending institution with interest rate more than 3% over the Prime Lending Rate (PLR) of the lending institution. (vii) Credit facilities extended jointly by two or more banks to a single borrower or credit facilities extended jointly by two or more institutions to a single borrower, shall not be eligible for guarantee cover. However, CGTMSE shall provide guarantee cover in respect of the credit facility financed jointly by a bank with SIDBI, out of the Micro and Small Enterprises (MSE) Fund for North Eastern Region (NER) created by SIDBI, subject to the following conditions: 1. The modification of CGS would be applicable to units covered under SIDBI's "Micro and Small Enterprises Fund for North East Region (NER)" of Rs. 10 crore under co-financing arrangement with banks for a maximum term credit facility of Rs.50 lakh. 2. The co-financed cases shall be lodged for guarantee cover by the co-financing bank for the entire credit facility extended by both the co-financing bank and SIDBI. 3. The co-financing bank shall ensure that all other norms of CGS have been complied with by SIDBI and the co-financing bank before lodging the application for guarantee cover with CGTMSE.

4. The maintenance of guarantee cover i.e, payment of guarantee fee / service fee / lodgment of claim application, etc. shall be the responsibility of the co-financing bank. The eligible claim amount shall be paid to the co-financing bank and it shall be the responsibility of the co-financing bank to share the claim proceeds with SIDBI. 6. Agreement to be executed by the lending institution A lending institution shall not be entitled to a guarantee in respect of any eligible credit facility granted by it unless it has entered into an agreement with the Trust in such form as may be required by the Trust for covering by way of guarantee, under the Scheme all the eligible credit facilities granted by the lending institution, for which provision has been made in the Scheme. 7. Responsibilities of lending institution under the scheme: (i) The lending institution shall evaluate credit applications by using prudent banking judgement and shall use their business discretion / due diligence in selecting commercially viable proposals and conduct the account(s) of the borrowers with normal banking prudence. (ii) The lending institution shall closely monitor the borrower account. (iii) The lending institution shall safeguard the primary securities taken from the borrower in respect of the credit facility in good and enforceable condition. (iv) The lending institution shall ensure that the guarantee claim in respect of the credit facility and borrower is lodged with the Trust in the form and in the manner and within such time as may be specified by the Trust in this behalf and that there shall not be any delay on its part to notify the default in the borrowers account which shall result in the Trust facing higher guarantee claims. (v) The payment of guarantee claim by the Trust to the lending institution does not in any way take away the responsibility of the lending institution to recover the entire outstanding amount of the credit from the borrower. The lending institution shall exercise all the necessary precautions and maintain its recourse to the borrower for entire amount of credit facility owed by it and initiate such necessary actions for recovery of the outstanding amount, including such action as may be advised by the Trust. (vi) The lending institution shall comply with such directions as may be issued by the Trust, from time to time, for facilitating recoveries in the guaranteed account,

or safeguarding its interest as a guarantor, as the Trust may deem fit and the lending institution shall be bound to comply with such directions. (vii) The lending institution shall, in respect of any guaranteed account, exercise the same diligence in recovering the dues, and safeguarding the interest of the Trust in all the ways open to it as it might have exercised in the normal course if no guarantee had been furnished by the Trust. The lending institution shall, in particular, refrain from any act of omission or commission, either before or subsequent to invocation of guarantee, which may adversely affect the interest of the Trust as the guarantor. In particular, the lending institution should intimate the Trust while entering into any compromise or arrangement, which may have effect of discharge or waiver of personal guarantee(s) or security. The lending institution shall also ensure either through a stipulation in an agreement with the borrower or otherwise, that it shall not create any charge on the security held in the account covered by the guarantee for the benefit of any account not covered by the guarantee, with itself or in favour of any other creditor(s) without intimating the Trust. Further the lending institution shall secure for the Trust or its appointed agency, through a stipulation in an agreement with the borrower or otherwise, the right to list the defaulted borrowers' names and particulars on the Website of the Trust.
GUARANTEE FEE
8. Guarantee Fee and Annual Service Fee
(i) A one time guarantee fee at specified rate (a)currently 1.00% in the case of credit facility upto Rs. 5 Lakh and 1.5% in the case of credit facility above Rs. 5 Lakh (b) 0.75%, in case of credit facilities upto Rs.50 lakh sanctioned to units in North Eastern Region including State of Sikkim) of the credit facility sanctioned (comprising term loan and / or working capital facility) shall be paid upfront to the Trust by the institution availing of the guarantee within 30 days from the date of first disbursement of credit facility or 30 days from the date of Demand Advice (CGDAN) of guarantee fee whichever is later. (ii) The annual service fee at specified rate (currently 0.50% in the case of credit facility upto Rs. 5 Lakh and 0.75% in the case of credit facility above Rs. 5 Lakh) of the credit facility sanctioned (comprising term loan and / or working capital facility) shall be paid by the lending institution within 60 days ie. on or before May

31, of every year. In the event of non-payment of annual service fee by May 31 of that year or any other specified date, the guarantee under the scheme shall not be available to the lending institution unless the Trust agrees for continuance of guarantee and the lending institution pays penal interest on the service fee due and unpaid, with effect from the subsequent June 01, at four per cent over Bank Rate, per annum, or at such rates specified by the Trust from time to time, for the period of delay. Provided further that in the event of non-payment of annual service fee within the stipulated time or such extended time that may be agreed to by the Trust on such terms, liability of the Trust to guarantee such credit facility would lapse in respect of those credit facility against which the service charges are due and not paid. Provided further that, the Trust may consider renewal of guarantee cover for such of the credit facility upon such terms and conditions as the Trust may decide. In the event of any error or discrepancy or shortfall being found in the computation of the amounts or in the calculation of the guarantee fee / annual service fee, such deficiency / shortfall shall be paid by the eligible lending institution to the Trust together with interest on such amount at a rate of four per cent over and above the Bank Rate, or as may be prescribed by the Trust from time to time. Any amount found to have been paid in excess would be refunded by the Trust. In the event of any representation made by the lending institution in this regard, the Trust shall take a decision based on the available information with it and the clarifications received from the lending institution, and its decision shall be final and binding on the lending institution. (iii) The amount equivalent to the guarantee fee and / or the service fee payable by the eligible lending institution may be recovered by it, at its discretion from the eligible borrower. The guarantee fee and / or annual service fee once paid by the lending institution to the Trust is non-refundable. Guarantee fee / Annual Service Fee, shall not be refunded, except under certain circumstances like (a) Excess remittance, (b) Remittance made more than once against the same credit application, (c) Guarantee fee & / or annual service fee not due, (d) Guarantee fee paid in advance but application not approved for guarantee cover under the scheme, etc.
GUARANTEES
9. Extent of the guarantee
CATEGORY
Maximum extent of guarantee where credit facility is

Above Rs.50 lakh Upto Rs.5 Lakh. Above Rs.5 upto Rs.100 lakh. 85% of the lakh upto Rs.37.50 lakh amount in Rs.50 lakh. plus 50% of default subject 75% / amount in default to a maximum Rs.37.50 above Rs.50 lakh of Rs.4.25 lakh subject to overall ceiling of Rs.62.50 lakh
Micro Enterprises
Women entrepreneurs/ Units located in Rs.40 lakh plus 50% North East 80% of the amount in of amount in default Region (incl. default subject to a above Rs.50 lakh subject Sikkim) other than maximum of Rs.40 lakh to overall ceiling of Rs.65 credit facility upto lakh Rs.5 lakh to micro Enterprises
All other category of borrowers
75% / Rs.37.50 lakh
Rs.37.50 lakh plus 50% of amount in default above Rs.50 lakh subject to overall ceiling of Rs.62.50 lakh
All proposals for sanction of guarantee approvals for credit facilities above Rs. 50 lakh and upto Rs.100 lakh will have to be rated internally by the MLI and should be of investment grade. Proposals approved by the MLIs on or after December 8, 2008 will be eligible for the coverage upto Rs.100 lakh. The guarantee cover will commence from the date of payment of guarantee fee and shall run through the agreed tenure of the term credit in respect of term credit / composite credit. Where working capital alone is extended to the eligible borrower, the guarantee cover shall be for a period of 5 years or a block of 5 years, or for such period as may be specified by the trust in this behalf.
CLAIMS
10. Invocation of guarantee
(i)The lending institution may invoke the guarantee in respect of eligible credit facility if the following conditions are satisfied: (a) The guarantee in respect of that credit facility is in force; (b) The lock-in period of 18 months from either the date of last disbursement of the loan to the borrower or the date of payment of the guarantee fee in respect of credit facility to the borrower, whichever is later, has elapsed; (c) The amount due and payable to the lending institution in respect of the credit facility has not been paid and the dues have been classified by the lending institution as Non Performing Assets. Provided that the lending institution shall not make or be entitled to make any claim on the Trust in respect of the said credit facility if the loss in respect of the said credit facility had occurred owing to actions

/ decisions taken contrary to or in contravention of the guidelines issued by the Trust (d) The credit facility has been recalled and the recovery proceedings have been initiated under due process of law. Mere issuance of recall notice under SARFAESI Act 2002 cannot be construed as initiation of legal proceedings for purpose of preferment of claim under CGS. MLIs are advised to take further action as contained in Section 13 (4) of the above Act wherein a secured creditor can take recourse to any one or more of the recovery measures out of the four measures indicated therein before submitting claims for first installment of guaranteed amount. In case the MLI is not in a position to take any of the action indicated in Section 13(4) of the aforesaid Act, they may initiate fresh recovery proceeding under any other applicable law and seek the claim for first installment from the Trust. (ii) The claim should be preferred by the lending institution in such manner and within such time as may be specified by the Trust in this behalf. (iii) The Trust shall pay 75 per cent of the guaranteed amount on preferring of eligible claim by the lending institution, within 30 days, subject to the claim being otherwise found in order and complete in all respects. The Trust shall pay to the lending institution interest on the eligible claim amount at the prevailing Bank Rate for the period of delay beyond 30 days. The balance 25 per cent of the guaranteed amount will be paid on conclusion of recovery proceedings by the lending institution. On a claim being paid, the Trust shall be deemed to have been discharged from all its liabilities on account of the guarantee in force in respect of the borrower concerned. (iv) In the event of default the lending institution shall exercise its rights, if any, to takeover the assets of the borrowers and the amount realised, if any, from the sale of such assets or otherwise shall first be credited in full by the lending institutions to the Trust before it claims the remaining 25 per cent of the guaranteed amount. (v) The lending institution shall be liable to refund the claim released by the Trust together with penal interest at the rate of 4% above the prevailing Bank Rate, if such a recall is made by the Trust in the event of serious deficiencies having existed in the matter of appraisal / renewal / follow-up / conduct of the credit facility or where lodgment of the claim was more than once or where there existed suppression of any material information on part of the lending institutions for the settlement of claims. The lending institution shall pay such penal interest, when demanded by the Trust, from the date of the initial release of the claim by the Trust

to the date of refund of the claim. The Guarantee Claim received directly from the branches or offices other than respective operating offices of MLIs will not be entertained. 11. Subrogation of rights and recoveries on account of claims paid (i) The lending institution shall furnish to the Trust, the details of its efforts for recovery, realisations and such other information as may be demanded or required from time to time. The lending institution will hold lien on assets created out of the credit facility extended to the borrower, on its own behalf and on behalf of the Trust. The Trust shall not exercise any subrogation rights and that the responsibility of the recovery of dues including takeover of assets, sale of assets, etc., shall rest with the lending institution; (ii) In the event of a borrower owing several distinct and separate debts to the lending institution and making payments towards any one or more of the same, whether the account towards which the payment is made is covered by the guarantee of the Trust or not, such payments shall, for the purpose of this clause, be deemed to have been appropriated by the lending institution to the debt covered by the guarantee and in respect of which a claim has been preferred and paid, irrespective of the manner of appropriation indicated by such borrower or the manner in which such payments are actually appropriated. (iii) Every amount recovered and due to be paid to the Trust shall be paid without delay, and if any amount due to the Trust remains unpaid beyond a period of 30 days from the date on which it was first recovered, interest shall be payable to the Trust by the lending institution at the rate which is 4% above Bank Rate for the period for which payment remains outstanding after the expiry of the said period of 30 days.
MISCELLANEOUS
12. Appropriation of amount received from the lending institutions The amount received from the lending institutions shall be appropriated in the order in which the service fee, penal interest and other charges have fallen due. If the service fee and the penal interest have fallen due on the same date, then the appropriation shall be made first towards service fee and then towards the penal

interest and finally towards any other charges payable in respect of the eligible credit facility. 13. Appropriation of amount realised by the lending institution in respect of a credit facility after the guarantee has been invoked. Where subsequent to the Trust having released a sum to the lending institution towards the amount in default in accordance with the provisions contained in the Section 10 of this scheme, the lending institution recovers money subsequent to the recovery proceedings initiated by it, the same shall be deposited by the lending institution with the Trust, after adjusting towards the cost incurred by it for recovery of the amount. The Trust shall appropriate the same first towards the pending service fee, penal interest, and other charges due to the Trust, if any, in respect of the credit facility towards which the amount has been recovered by the lending institution, and the balance, if any, shall be appropriated in such a manner so that losses on account of deficit in recovery of the credit facility between the Trust and the lending institution are in the proportion of 75% / 80% / 85% and 25% / 20% / 15% , respectively. 14. Trust's liability to be terminated in certain cases I. If the liabilities of a borrower to the lending institution on account of any eligible credit facility guaranteed under this Scheme are transferred or assigned to any other borrower and if the conditions as to the eligibility of the borrower and the amount of the facility and any other terms and conditions, if any, subject to which the credit facility can be guaranteed under the Scheme are not satisfied after the said transfer or assignment, the guarantee in respect of the credit facility shall be deemed to be terminated as from the date of the said transfer or assignment. If a borrower becomes ineligible for being granted any credit facilities under the Scheme, by reason of cessation of his activity or his activity or his undertaking ceasing to come within the definition of a MSE unit, the liability of the Trust in respect of any credit facilities granted to him by a lending institution under the Scheme shall be limited to the liability of the borrower to the lending institution as on the date on which the borrower becomes so ineligible, subject, however, to the limits on the liability of the Trust fixed under this Scheme. However, notwithstanding the death or retirement of a partner where the borrower is a partnership firm or the death of one of the joint borrowers, if the lending institution is entitled to continue the credit
II.

facilities to the surviving partner or partners or the surviving borrower or borrowers, as the case may be and if the credit facilities have not already become non performing asset, the guarantee in respect of such credit facilities shall not to be deemed to be terminated as provided in this paragraph.
15. Returns and Inspections I. The lending institution shall submit such statements and furnish such information as the Trust may require in connection with any credit facility under this Scheme. The lending institution shall also furnish to the Trust all such documents, receipts, certificates and other writings as the latter may require and shall be deemed to have affirmed that the contents of such documents, receipts, certificates and other writings are true, provided that no claim shall be rejected and no liability shall attach to the lending institution or any officer thereof for anything done in good faith. The Trust shall, insofar as it may be necessary for the purposes of the Scheme, have the right to inspect or call for copies of the books of account and other records (including any book of instructions or manual or circulars covering general instructions regarding conduct of advances) of the lending institution, and of any borrower from the lending institution. Such inspection may be carried out either through the officers of the Trust or of SIDBI (except in case of Institutions other than SIDBI) or any other person appointed by the Trust for the purpose of inspection. Every officer or other employee of the lending institution or the borrower, who is in a position to do so, shall make available to the officers of the Trust or SIDBI or the person appointed for the inspection as the case may be, the books of account and other records and information which are in his possession.
II.
III.
16. Conditions imposed under the Scheme to be binding on the lending institution

I. Any guarantee given by the Trust shall be governed by the provisions of the Scheme as if the same had been written in the documents evidencing such guarantee. The lending institution shall as far as possible ensure that the conditions of any contract relating to an account guaranteed under the Scheme are not in conflict with the provisions of the Scheme but notwithstanding any provision in any other document or contract, the lending institution shall in relation to the Trust be bound by the conditions imposed under the Scheme.
II.
17. Modifications and exemptions I. The Trust reserves to itself the right to modify, cancel or replace the scheme so, however, that the rights or obligations arising out of, or accruing under a guarantee issued under the Scheme up to the date on which such modification, cancellation or replacement comes into effect, shall not be affected. Notwithstanding anything herein contained, the Trust shall have a right to alter the terms and conditions of the Scheme in regard to an account in respect of which guarantee has not been invoked as on the date of such alteration.
II.
III.
In the event of the Scheme being cancelled, no claim shall lie against the Trust in respect of facilities covered by the Scheme, unless the provisions contained in Clause (i) and (ii) of Section 10 of the Scheme are complied with by the lending institution prior to the date on which the cancellation comes into force.
18. Interpretation If any question arises in regard to the interpretation of any of the provisions of the Scheme or of any directions or instructions or clarifications given in connection therewith, the decision of the Trust shall be final. 19. Supplementary and general provisions

In respect of any matter not specifically provided for in this Scheme, the Trust may make such supplementary or additional provisions or issue such instructions or clarifications as may be necessary for the purpose of the Scheme
CGS- Operational Highlights

Period Active MLIs Number of Proposals Approved 951 2296 4955 6603 8451 16284 27457 30285 53708 113029 Credit Amount Approved (Rs. in Crore) 6.06 29.52 58.67 117.60 267.46 461.91 704.53 1055.84 2199.40 5110.09
FY 2000-01 FY 2001-02 FY 2002-03 FY 2003-04 FY 2004-05 FY 2005-06 FY 2006-07 FY 2007-08 FY 2008-09 FY 2009-10*
9 16 22 29 32 36 40 47 57 82
(*) Data of FY 2009-10 is till January 31, 2010. Over 6 lakhs guarantees for an amount of Rs. 26,900 crore has been approved by the trust as on June 30, 2011.
Data Analysis and Interpretation
Target of CGTMSE Accounts for the financial year 2010-11

NAME OF BANK TARGET BANK OF BARODA 750(Regional) PUNJAB NATIONAL BANK 1400(Circle) BANK OF INDIA No Target
1500 1000 1400 500 0 BANK OF BARODA TARGET PUNJAB NATIONAL BANK 750
Interpretation: The target of Bank of Baroda in Varanasi region was 750accounts and for PNB in Varanasi circle was 1400. Bank of India dont receive any target from head office or the zonal office. NOTE: No. of Cities in BOB Varanasi Region= 21 No. of Cities in PNB Varanasi Circle= 12
Common Cities=9 (Azamgarh, Balia, Chandauli, Ghazipur, Jaunpur, Mirzapur, Pratapgarh, Sonbhadra, Sant Ravidas Nagar)
Target achieved in the financial year 2010-11

NAME OF BANK BANK OF BARODA PUNJAB NATIONAL BANK BANK OF INDIA
2500 2000 1500 1000 500 0 324 BANK OF BARODA PUNJAB NATIONAL BANK 2310
ACHIEVED 324 2310 ----------
ACHIEVED
Interpretation: Punjab National Bank has achieved 165 percent of its target whereas Bank of Baroda opened only 324 accounts against the target of 750 in Varanasi region.
Target & Achievement

NAME OF BANK BANK OF BARODA PUNJAB NATIONAL BANK BANK OF INDIA TARGET ACHIEVED 750 324 1400 2310 No Target -----------
CGTMSE Accounts Targets & Achievement in the Financial Year 2010-11

2500
No. of Accounts
2000 1500 1000 500 0 BANK OF BARODA 750 324 PUNJAB NATIONAL BANK 1400 2310
TARGET ACHIEVED
Interpretation: In this graph it can be seen that PNB is the leading bank in achievement of its target.
Number of NPA in the financial year 2010-11 for CGTMSE Accounts

NAME OF BANK NPA BANK OF BARODA PUNJAB NATIONAL BANK BANK OF INDIA TOTAL 12 2 3 17
Number of Non-Performing Assets for the Financial Year 2010-11

BANK OF INDIA 18% PUNJAB NATIONAL BANK 12%
BANK OF BARODA 70%
Interpretation:
Here it can be seen that Bank of Baroda has maximum no. of NPA among the three banks. Out of total 17 NPA of the three given banks 12 belongs to the BOB in Varanasi region.PNB has the least no. of NPA with 2 accounts.
Comparison Table
PARTICULARS BANK OF BARODA PUNJAB NATIONAL BANK
Above 12 40% -60%
BANK OF INDIA
Above 12 40% -60%
Number of Schemes Above 12 for MSME Percentage of total Loan Amount shared by MSME Awareness level regarding CGTMSE among customers Methods adopted to aware the customer about CGTMSE 40% -60%
Low
High
Low
Advertisement through brochures. Personal interaction at branch level.
Customers are mostly aware, those who are not are made aware through interaction at branch level.
When customers are unable to provide collateral security then they are told about the CGTMSE.
Establishment of Target
Head office gives target to zonal offices, zonal offices then gives target to regional offices and regional offices finally gives target to branches.
There is no target for branch. Head Office gives target only to the Circle Office.
There is no target for the zonal offices or for the branches.

Bank bears the For a loan amount upfront fee for up to 50Lacs, Guarantee fee in all amount up to 5 guarantee fee is paid cases is paid by lakhs and shares by both bank & borrower only 50% upfront fee borrower in 50:50 with the borrower ratio; for amount of Above 50Lacs, it is above 5 lakhs . paid only by Annual service borrower charges is paid by the borrower only. 12 2 3
Incidence of Fees
Number of NonPerforming Assets (2010-11) Rehabilitation Assistance covered under CGTMSE. Processing Time (Maximum)
Yes
Yes
Yes
14 days
5-10 days
10-14 days
FINDINGS
Majority of people are unaware about the CGS of CGTMSE. There is no proper advertising for the promotion of the scheme by all the three banks. 40-60% of total loan amount is shared by the MSME in all the three banks. Bank of Baroda is far behind in achieving the target in the year 2010-11. Many of the branches of BOB were even unable to open a single account under CGTMSE in the financial year 2010-11. Bank of Baroda shares the fees in 50:50 ratio up to the amount of 50 lakhs, above 50 lakhs all fees is borne by the borrower, Punjab National Bank passes all the incidence of fees to the borrowers, In Bank of India for loan up to 5 lakhs full upfront guarantee fee is borne by the bank and for loan of above 5 lakhs bank shares the upfront fee with the borrower in 50:50 ratio. Annual service charge is entirely borne by the borrower. Performance of Punjab National Bank is best among the three banks. Bank of Baroda has maximum number of NPA as compared to PNB & BOI. Processing time of loan application is maximum in Bank of Baroda. Bank of Baroda branches receives target from the regional office , In PNB there is no target for the branches, Head Office gives target only to the Circle Offices, whereas in Bank of India there is no target for zonal offices or branches from the head office.
SUGGESTIONS
Effective communication regarding CGS of CGTMSE should be provided to the customer at the branch level. Branch should not only adhere to the target given by the regional office rather they should try to open more and more accounts under CGTMSE. The processing time of loan application should be reduced from 14 days. There should be proper supervision of customers after giving the loans to reduce the defaults. Bank should share the upfront guarantee fee and annual service fee paid to the trust in 50:50 ratio with the borrower for the loan amount of above 50 lakhs and for below 50 lakhs it should entirely be paid by the borrower. Advertisement should be done on frequent basis through print media.
LIMITATIONS
Limited span of time. Uncooperative attitude on a few occasions. Difficulty in surveying the PNBs & BOIs credit managers. Difference in the organizational structure of PNB made the comparison little difficult. Mistakes made being a student.
REFERENCES
1. www.bankofbaroda.com 2. www.pnbindia.in 3. www.bankofinida.com 4. www.cgtmse.com 5. www.rbi.org.in

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Credit Guarantee Fund Trust for Micro and Small Enterprises

1 Banaras Hindu University

Credit Guarantee Fund Trust for Micro and Small Enterprises

Abdul Kabir MBA( Finance) III Semester FMS-BHU

2 Banaras Hindu University

Credit Guarantee Fund Trust for Micro and Small Enterprises

The topic of my project is Financing under Credit Guarantee Fund

I hope this study will contribute to the organization.

3 Banaras Hindu University

Credit Guarantee Fund Trust for Micro and Small Enterprises

4 Banaras Hindu University

Credit Guarantee Fund Trust for Micro and Small Enterprises

5 Banaras Hindu University

Credit Guarantee Fund Trust for Micro and Small Enterprises

BANKING STRUCTURE IN INDIA

6 Banaras Hindu University

Credit Guarantee Fund Trust for Micro and Small Enterprises

7 Banaras Hindu University

Credit Guarantee Fund Trust for Micro and Small Enterprises

Performance of Indian Banking Sector in 2010-11

8 Banaras Hindu University

Credit Guarantee Fund Trust for Micro and Small Enterprises

9 Banaras Hindu University

Credit Guarantee Fund Trust for Micro and Small Enterprises

Reserve Bank of India

10 Banaras Hindu University

Credit Guarantee Fund Trust for Micro and Small Enterprises

11 Banaras Hindu University

Credit Guarantee Fund Trust for Micro and Small Enterprises

12 Banaras Hindu University

13 Banaras Hindu University

Credit Guarantee Fund Trust for Micro and Small Enterprises

14 Banaras Hindu University

Credit Guarantee Fund Trust for Micro and Small Enterprises

15 Banaras Hindu University

Credit Guarantee Fund Trust for Micro and Small Enterprises

INTRODUCTION (BANK OF BARODA)

16 Banaras Hindu University

Credit Guarantee Fund Trust for Micro and Small Enterprises

17 Banaras Hindu University

Credit Guarantee Fund Trust for Micro and Small Enterprises

18 Banaras Hindu University

Credit Guarantee Fund Trust for Micro and Small Enterprises

19 Banaras Hindu University

Credit Guarantee Fund Trust for Micro and Small Enterprises

20 Banaras Hindu University

Credit Guarantee Fund Trust for Micro and Small Enterprises

Banks Mission Statement

21 Banaras Hindu University

Credit Guarantee Fund Trust for Micro and Small Enterprises

Micro, Small and Medium Enterprises (MSME)

22 Banaras Hindu University

Credit Guarantee Fund Trust for Micro and Small Enterprises

23 Banaras Hindu University

Credit Guarantee Fund Trust for Micro and Small Enterprises

Micro Enterprises Small Enterprises

24 Banaras Hindu University

Credit Guarantee Fund Trust for Micro and Small Enterprises

Bank of Barodas approach to SME sector

25 Banaras Hindu University

26 Banaras Hindu University

Credit Guarantee Fund Trust for Micro and Small Enterprises