PROJECT REPORT

ON

STUDY ON CASH MANAGEMENT IN STATE BANK OF INDIA

Under the guidance of

Mr. Hemant kapoor

Submitted by

Yangkila Bhutia

Registration no.17RSMMBA001

University no.-317501

In partial fulfillment for the award of the degree of

MASTER OF BUSINESS ADMINISTRATION

SCHOOL OF MANAGEMENT

ABHILASHI UNVERSITY MANDI (H.P.)

Submitted to: Submitted by:

Mr. Hemant kapoor Yangkila Bhutia

RollNo.17RSMMBA001
 DECLARATION

I undersigned Yangkila Bhutia student of MBA 4th semester declare that I have done the
project on study on perception of investors investing in life insurance has been personally
done by me in partial fulfillment of MBA program during academic year 2017-2019. All
the data represented in this project is true and correct to best of my knowledge and belief.
I also declare that this project report is my own preparation and not copied from
anywhere else.

Date:
Signature:

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Chapter No. Particulars Page No.

1. Introduction
2 Literature Review
3 Research Methodology
4

5 suggestions and conclusion

Bibliography

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 CHAPTER1

INTRODUCTION

“The Business of Insurance is related to the protection of the economic values of the
assets”. Every human being has the tendency to save to protect him from risks or events
of future. Insurance is one form of savings where in people try to assure themselves
against risks or uncertainties of future. It is assurance against risks or events or losses.
People can save their earnings either in the form gold, fixed assets like property or in
banking and insurances. All the savings of people of a country account for gross
domestic savings. In India, although savings rate is high but people prefer to invest
either in gold or fixed assets so that they can make money out of it. Hence insurance
sector is still untapped in India

CONCEPT OF INSURANCE

Life has always been an uncertain thing. To be secure against unpleasant possibilities,
always requires the utmost resourcefulness and foresight on the part of man. To pray or
to pay for protection is the spirit of the humanity. Man has been accustomed to pray God
for protection and security from time immemorial. In modern days Insurance Companies
want him to pay for protection and security. The insurance man says "God helps those
who help themselves"; probably he is correct. Too many people in this country are not in
employment; and work for too many no longer guarantees income security. Several
millions are part-time, self employed and low-earning workers living under pitiable
circumstances where there is no security cover against risk. Further the inherent
changing employment risks, the prospect of continual change in the work place with its
attendant threats of unemployment and low pay especially after the adoption of New
Economic Policy and the imminent lifecycle risks - a new source of insecurity which
includes the changing demands of family life, separation, divorce and elderly
dependents are tormenting the society. Risk has become central to one's life. It is within
this background life insurance policy has been introduced by the insurance companies
covering risks at various levels. Life insurance coverage is against disablement or in the
event of death of the insured, economic support for the dependents. It is a measure of
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social security to livelihood for the insured or dependents. This is to make the right to
life meaningful, worth living and right to livelihood a means for sustenance. Therefore,
it goes without saying that an appropriate life insurance policy within the paying
capacity and means of the insured to pay premium is one of the social security measures
envisaged under the Indian Constitution. Hence, right to social security, protection of the
family, economic empowerment to the poor and disadvantaged are integral part of the
right to life and dignity of the person guaranteed in the constitution. Man finds his
security in income (money) which enables him to buy food, clothing, shelter and other
necessities of life. A person has to earn income not only for himself but also for his
dependents, viz., wife and children. He has to provide legally for his family needs, and
so he has to keep aside something regularly for a rainy day and for his old age. This
fundamental need for security for self and dependents proved to be the mother of
invention of the institution of life insurance.

OVERVIEW OF CURRENT INSURANCE INDUSTRY

WHAT IS INSURANCE?

Insurance is a tool by which fatalities of a small number are compensated out of funds
(premium and payment) collected from plenteous. Insurance is a safeguard against
uncertain events that may occur in the future. It is an arrangement where the losses
experienced by a few are extended over several who are exposed to similar risks. It is a
protection against financial loss arising on the happening of an unexpected event.
Insurance companies collect premium to provide security for the purpose. Loss is paid
out of the premium collected from people and the insurance companies act as trustees to
the amount so collected. These companies have proposal forms which are filled to give
details of insurance required. Depending upon the answers in the proposal from
insurance companies assess the risk and decide on the premium. Insurance companies
are risk bearers. They underwrite the risk in return for an insurance premium. The
function of insurance is to provide protection, prevent losses, capital formation etc.
hence insurance can be defined as a tool in which a sum of money as a premium is paid
by the insured in consideration of the insurer’s bearing the risk of paying a large sum .it
may also be defined as a contract wherein one party (insurer) agrees to pay the other
party (insured) or his beneficiary, a certain sum upon a given contingency against which
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insurance is required. Insurance industry commands massive funds through sales of
insurance products to large number of clients. Insurers also create liabilities and commit
themselves to compensate for losses occurring to the policyholders on future date. It also
plays an important role in process of capital formation.

NATURE OF INSURANCE

a) Risk sharing and risk transfer: Insurance is used to share the financial losses that
might occur to an individual or his family on the happening of specified events. The loss
arising from such events are shared by all the insured in the form of premium. Example:
suppose in a village, there are 250 houses, each valued at Rs.200000.Everyyear one
house gets burnt, resulting into a total loss of Rs 200000.If all the 250 owners come
together and contribute Rs.800 each, the common fund would be Rs200000.This is
enough to pay to the owner whose house gets burnt. Thus the risk of one owner is spread
over 250 house owners of the village.

b) Risk assessment in advance: Insurance companies are risk bearers. They assess
the risk before insuring to charge the amount of premium.

c) Its not gambling or charity: The uncertainty is changed to certainty by insuring property and
life because the insurer promises to pay a definite sum at damage or death. Insurance is
antithesis of gambling. Failure of insurance amounts to gambling because the uncertainty of loss
is always looming. Moreover insurance is not possible without premium. So it is different from
charity because charity is given without consideration.

d) Huge number of insured people: It is essential to insure larger number of people or property
to make cost of insurance less consequently premium would also be less.

e) Assists in capital formation: Insurance provides capital to society. Accumulative funds are
invested in productive channels.

ADVANTAGES OF LIFE INSURANCE:

1. In the event of death, the settlement is easy. The heirs can collect the moneys quicker, because
of the facility of nomination and assignment. The facility of nomination is now available for
some bank accounts.

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2. There is a certain amount of compulsion to go though the plan of savings. In other forms, if
one changes the original plan of savings, there is no loss. In insurance, there is a loss.

3. Certain cannot claim the life insurance moneys. They can be protected against attachments by
courts.

4. There are tax benefits, both in income tax and in capital gains.

5. Marketability and liquidity are better. A life insurance policy is property and can be
transferred or mortgaged. Loans can be raised against the policy. The following tenets help
agents to believe in the benefits of life insurance. Such faith will enhance their determination to
sell and their perseverance.

6. Life insurance is not only the best possible way for family protection. There is no other way.

7. Insurance is the only way to safeguard against the unpredictable risks of the future. It is
unavoidable.

8. The terms of life are hard. The terms of insurance are easy.

9. The value of human life is far greater than the value of property. Only insurance can preserve
it.

10. Life insurance is not surpassed by many other savings or investment instrument, in terms of
security, marketability, stability of value or liquidity.

11. Insurance, including life insurance, is essential for the conservation of many businesses, just
as it is in the preservation of homes.

12. Life insurance enhances the existing standards of living.

13. Life insurance helps people live financially solvent lives.

14. Life insurance perpetuates life, liberty and the pursuit of happiness.

15. Life insurance is a way of life.

SEMANTICS:

1. Risk: It is defined as an uncertainty of a financial loss. It is the unintentional decline in or

disappearance of value arising from contingency.

2. Policy: It is the document which embodies the insurance contract.

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3. Whole life policy: It is the policy under which the amount of policy will be paid only on
death of the insured. Premiums may be payable throughout the life or for a limited period.

4. Endowment policy: Endowment policies entitle the insured to receive the amount of the
policy on his reaching a certain age and premiums also stops. If death occurs earlier, amount of
the policy will be paid at that time and payment of premium will also stop at that time.

5. Claim: It is the amount which an insurer has to pay against a policy.

6. Reinsurance: It refers to placing a part of the risk by an insurer with another insurer. The
object is to reduce the possible loss to be borne by the original insurer, who pays premiums at
the ordinary rates to the reinsurer. Reinsure must pay commission to the original insurer.

7. Premium: A periodic payment made on an insurance policy.

8. Insurance penetration: It is defined as insurance premium as a share of gross domestic

product.

9. Insurance density: Insurance density is defined as per capita expenditure on insurance

premium i.e. premium per capita.

10. Actuary: The actuary is a specialist who combines an understanding of risks and
mathematical technique to develop financial products to manage these risks, price these
products. He helps in designing insurance plans and then evaluates the financial risk of the
company which it takes while selling an insurance policy.

TYPES OF INSURANCE: Insurance is broadly divided in two segments, based on the nature of
insurance, those are:

1. Life Insurance

2. Non-Life Insurance or General Insurance.

It can be again subdivided into the following categories:

Fire insurance.

Marine Insurance.

Social Insurance

Miscellaneous Insurance. (Health insurance, Liability Insurance etc…

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 CHAPTER 2
LITERATURE REVIEW

Entrepreneurship plays an eminent function in creating an avenue for

employability for rural communities, providing self-employment for those who
have started-up a business of their own and enhancing the economic status of the
rural sector as well. Entrepreneurship has transformed many entrepreneurs into
successful business persons and generated income for rural communities.
Entrepreneurs in rural area have transformed their vicinity into trading hubs thus
enabling them to become urbanized areas.

Conducting a literature review is a vital component of the research process.

Familiarity with the previous research and theory in the area of the study would
help in conceptualizing the problem, conducting the study and interpreting the
findings. The literature studies that have been conducted reveal the impact of
entrepreneurial activities in India as well as other countries. During the literature
review, it is noticed that the term “entrepreneurship” has been used in different
senses by researchers from India and other countries. This chapter will be
covering the historical events and the research on entrepreneurial development
activities both abroad and in India

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Entrepreneurship at middle Ages

In the middle Ages, the term entrepreneur was used to describe both an actor and a person
who managed large production projects. In such large production projects, this individual did not
take any risks but merely managed the project using the resources provided, usually by the
government of the country. A typical entrepreneur in the Middle Age was the cleric, the person
in-charge of great architectural works such as castles and fortifications public buildings, abbeys
and cathedrals.

Entrepreneurship at 17th Century

The connection of risk with entrepreneurship emerged during the 17th century. An entrepreneur
was perceived as a person who entered into a contractual arrangement with the government to
perform a service or to supply stipulated products. Since the contract price was fixed, any
resulting profits or losses were the entrepreneur’s. One entrepreneur in this period was John Law1,
a Frenchman, who was allowed to establish a royal bank. (Will and Ariel Durant, 1965 p13) The
bank eventually evolved into an exclusive franchise to form a trading company in the new World,
the Mississippi Company. Richard Cotillion, a noted economist and author in the 1700s,
understood Law’s intention and developed one of the early theories of the entrepreneur and he is
regarded by some as the originator of the term. He viewed the entrepreneurs as risk takers,
observing that merchant, farmers, craftsmen, and other sole proprietors “buy at certain price and
sell at an uncertain price, therefore operating at risk” (Burr Ridge and Richard D Irwin, 1985).

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Entrepreneurship at 18th Century

In the 18th century, the person with capital was differentiated from the one who needed
capital. In other words, the entrepreneur was distinguished from the capital provider (the present
day venture capitalist). One reason for this differentiation was the industrialization occurring
throughout the world. Many of the inventions developed during this time were reactions to the
changing world, as was the case with the inventions of Eli Whitney2 and Thomas Edison3
(Lakwete, Angela. 2004; Albion, Michele Wehrwein. 2008).

Entrepreneurship at 19th and 20th century

In the late 19th and early 20th centuries, entrepreneurs were frequently not distinguished from
managers and were viewed mostly from an economic perspective.

Richard T. Ely and Ralph H. Hess briefly stated:The entrepreneur organizes and operates an
enterprise for personal gain. He pays current prices for the materials consumed in the business, for the
use of the land, for the personal services he employs, and for the capital he requires. He contributes
his own initiative, skill, and ingenuity in planning, organizing, and administering the enterprise. He
also assumes the chance of loss and gain consequent to unforeseen and uncontrollable circumstances.
The net residue of the annual receipts of the enterprise after all costs have been paid, he retains for
himself

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Andrew Carnegie4 is one of the best examples of this definition (Morris C R, 2005). Carnegie
invented nothing, but rather adapted and developed new technology in the creation of products to
achieve economic vitality. In the middle of the 20th century, the notion of an entrepreneur as an
innovator was established.Joseph Schumpeter’s vision on entrepreneurs is as follows:The function
of the entrepreneur is to reform or revolutionize the pattern of production by exploiting an
invention or, more generally, an untried technological method of producing a new commodity or
producing an old one in new way, opening a new source of supply of materials or a new outlet for
products, by organizing a new industry.(Joseph Schumpeter 1952, p 72),The concept of innovation
and newness is an integral part of entrepreneurship in this definition. Indeed, innovation, the act of
introducing something new, is one of the most difficult tasks for the entrepreneur (Robert D.
Hisrich and Michael P. Peters, 2002). This ability to innovate can be observed throughout history,
from the Egyptians who designed and built great pyramids out of stone blocks weighing many tons
each, or the Great Big Temple5 in Thanjavur, Tamil Nadu –India, that was built with extraordinary
design to Apollo Lunar module that was sent to Moon and laser beams. Although the tools have
changed with advance in science and technology, the ability to innovate has been present in every
civilization. Interest in entrepreneurship today arises from the recognition that it is an activity that is
important for.

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Economic growth. (Baume 1968, Stevenson and Jarillo, 1990; Wennekers and Thurik, 1999; Van
Stel and Caree, 2004)
Entrepreneurship is not confined to any one particular industry, country or group of persons; it
exists in everybody but depends on individual’s desire. Enterprising behavior has been found in all
societies, and in all types of economic circumstances. Whilst the term usually refers just to an
individual, it is also possible to find whole organizations that can be classified as entrepreneurial in
the way they do business and seek to grow (Michael Schaper, 2004).

The entrepreneur is one who drives the process of economic growth and mediates the inputs and
outputs of the economic system (Vosle, 1994). In the broadest sense, an entrepreneur may be
described as a person who has the ability to explore the environment, identify opportunities for
improvement, mobilize resources and implement actions to capitalize on those opportunities.
Entrepreneurs have a well-defined sense of opportunities. After identifying the opportunities they
then creatively assemble the necessary resources to capitalize on them (Zimmer and Scarborough,
2005; Thomas and Mueller, 2000). As risk takers, entrepreneurs bring about new products and
services, and indeed, add colors to a society. (Zimmer and Scarborough, 2005)

Purpose of Literature Review and Categories

According to Cooper H., the value of any single study derives as much from how it fits with and
expands on previous work as from the study’s intrinsic properties. If some studies seem more
significant than others, it is because the piece of the puzzle they solve or the puzzle the y introduce
is extremely important; not because they are solutions in and of themselves. (Cooper, H., 1998)

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According to Dellinger, literature review is characterized by logical flow of ideas; current and
relevant references with consistent, appropriate referencing style; proper use of terminology; and
an unbiased and comprehensive view of the previous research on the topic. (Dellinger, A., 2005)

Definitions of Terms used in Research Review:

Terms used in Research Review
TERMS MEANINGS
Rural Historically, “rural’ has been a spatial concept, most simply defined as
all that is not urban. Rural was identified with the countryside,
agriculture, traditional culture and geographic peripherality. The OECD
definitions distinguish two hierarchical levels of territorial unit; local
and regional. At local community level, OECD identifies rural areas as
communities with the population density below 150 inhabitants per
square kilometers
Small Medium Companies which have fewer than 50 employees are categorized as
Enterprise "small” and those with fewer than 250 as "medium".
Small Scale Industries A small scale industry is one that is privately owned and operated, with
a small number of employees and relatively low volume of sales. Small
businesses are normally privately owned corporations, partnerships, or
sole proprietorships
Small Firm Small firms are generally those with fewer than 50 employees, while
micro-enterprises have at most 10, or in some cases 5, workers
Family Business A family business is a business in which one or more members of one
or more families have a significant ownership interest and significant
commitments toward the overall well-being of the business
Rural Enterprise Companies which are set-up in rural area having fewer than 50
employees are classified as "small” and those with fewer than 250 as
"medium".
Rural Industrial The term ‘Rural Industry’ is often considered to be synonymous with
Entrepreneurship cottage industries (which constitute household based petty production
activities) and, consequently, ‘rural industrialization’ with the
development and promotion of cottage industries.
Microenterprises Businesses employing no more than four persons

Rural Entrepreneurship Business set-up within the village and operated by the villagers’ natural
Resources

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Purpose of Literature Review on Entrepreneurial Development in Rural Area

The purpose of the literature review on entrepreneurial development in rural area is to identify
the related facts in the research work that were determined by other authors through their
research in the similar field of work and to know the outcome of their research. The literature
reviews will throw light on the broad spectrum of entrepreneurial activities in India and other
countries, especially in rural sector. The literature review has been grouped into seven
categories as follows:
CATEGORIES
 Entrepreneurship Development In PURA Scheme Villages –Thanjavur

 Entrepreneurship Development in Rural Area of other countries

 Entrepreneurship Development and Economic Growth

 Entrepreneurs’ role in Entrepreneurial Activities

 Institution’ role in Entrepreneurship Development

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 CHAPTER 3

RESEARCH METHODOLOGY

The procedure for conducting the research requires a lot attention as it has direct bearing on
accuracy, reliability, and adequacy of results obtained .It is due to this reason that research
methodology, which we used at the time of conducting the research, needs to be elaborated
upon. It may be understand as a science of studying how research is done scientifically. So the
research methodology not only talks about the research methods but also considers the logic
behind the method used in the context of the research study. Research methodology is a way to
systematically study and solve the research problems. If a researcher wants to claim his study as
a good study, he must clearly state the methodology adapted in conducting the research so that it
way he judged by the reader whether the methodology of work done is sound or not.

The research methodology here includes-:

1. Objective of study.
2. Meaning of research
3. Research design.
4. Data collection method
5. Method of data analysis
6. Limitation of study.

3.1 OBJECTIVE OF THE STUDY

Objective are the ends that states specifically how goal be achieved. Every study must have an
objective for which all the efforts have been done. Without objective no research can be
conducted and no result can be obtained. On the basis of objective all the research process is
followed. Objectives are the main aspect of every study. The objective of the study gives

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direction to go through the research problem. It guides the researcher and keeps him on track. I
have some objectives regarding my research project these are shown below -:

1. To study about the policies and various products of SBS.

2. To analyze the financial statements of the corporation to access it’s true financial
position by the use of different financial tools.
3. To analyze the trend of different measures of last five years i.e. from 2013-14 to 2017-
18.
4. To suggest measures for the improvement on the basis of findings.

IMPORTANCE OF THE STUDY

* By “FINANCIAL PERFORMANCE ANALYSIS OF SBS. We would be able to get a fair picture of

the financial position of SBS.

* By showing the financial performance to various lenders and creditors it is possible to get
credit in easy terms if good financial condition is maintained in the company with assets
outweighing the liabilities.

* Protecting the property of the business.

* Compliances with legal requirements.

3.2 MEANING OF RESEARCH

Research is defined as “a scientific and systematic search for pertinent information on a specific
topic’’ .Research is an art of scientific investigation. Research is a systematized effort to gain
now knowledge. It is a careful investigation or input especially through search for new facts in
any branch of knowledge. Research is an academic activity and this term should be used in a
technical sense. Research comprises defining and redefining problems, formulating hypothesis or
suggested solution. Making deductions and reaching conclusions to determine whether they if
the formulating hypothesis. Research is thus, an original contribution to the existing stock of

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knowledge making for its advancement. The search for knowledge through objective and
systematic method of finding solutions to a problem is research.

RESEARCH PROBLEM

The first step while conducting research is careful definition of research problem. To ERR is the
human is a proverb which indicates that no one is perfect in the world. Every researcher has to
face many problems which conducting any research that’s why problem statement is defined to
know which type of problems a researcher has to face while conducting any study. It is that,
“Problem well defined is problem half solved ’’.

Basically, a problem statement refers to some difficulty, which researcher experiences in the
context of either a theoretical or practical situations and wants to obtain the solution for the
same.

3.3 RESEARCH DESIGN

A research designs is the arrangement of conditions for collections and analysis data in a manner
that aims to combine relevance to the research purpose with economy in procedure. Research
design is the conceptual structure with in which research is conducted. It constitutes the
blueprint for the collection measurement and analysis of data. Research design includes an
outline of what researcher will do from writing the hypothesis and it operational implication to
the final analysis of data. A research design is a framework for the study and is used as guide in
collection and analyzing the data. It also includes the time and cost budget since must studies are
done under these two cost budget since most studies are done under theses to constraints. The
design is such studies must be rigid and not flexible and most focus attention on the following:-

What is the study about?

Why is the study being made?
Where will the study be carried out?
What type of data is required?

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 Where can be required data be found?
What period of time will the study include?
RESEARCH DESIGN USED IN THE STUDY:

Descriptive research design is used in this study because it will ensure the minimization of
bias and maximization of reliability of data collected. Descriptive study is based on some
previous understanding of the topic. Research has got a very specific objective and clear cut
data requirements the researcher had to use fact and information already available through
financial statements of earlier years and analyze these to make critical evaluation of the
available material. Hence by making the type of the research conducted to be both
Descriptive and Analytical in nature. From the study, the type of data to be collected and the
procedure to be used for this purpose were decided.

3.4 Data Collection Method

The process of data collection begins after a research problem has been defined and research
design has been chalked out. There are two types of data -

PRIMARY DATA -

It is first hand data, which is collected by researcher itself. Primary data is collected by
various approaches so as to get a precise, accurate, realistic and relevant data. The main
tool in gathering primary data was investigation and observation. It was achieved by a
direct approach and observation from the officials of the company.

SECONDARY DATA - it is the data which is already collected by someone else. Researcher
has to analyze the data and interprets the results. It has always been important for the completion
of any report. It provides reliable, suitable, adequate and specific knowledge

3.5 Limitations of study

 Difficulty in data collection.
 Limited knowledge about the bank in the initial stages.
 Branch manager was reluctant for giving financial data of the bank.

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  The analysis and interpretation are based on secondary data contained in the published
annual reports of SBS for the study period.
 Due to the limited time available at the disposable, the study has been confined for a
period of 5 years (2014-2018).
 Ratio itself will not completely show the company’s good or bad financial position.
 Inter firm comparison was not possible due to the non availability of competitors data.
 The study of financial performance can be only a means to know about the financial
condition of the company and cannot show a through picture of the activities of the
companies

3.6 STATEMENT OF THE PROBLEM

There is dearth of financial institutions which cater for long and medium term credit needs
of businesses operating in the economy. Small scale enterprises are no exceptions to these, and
they suffer a great deal for want of capital for development and expansion of the economic
survival of the country. It cannot be over emphasized that they have moved from the subsistence
level of pre-indigenization period to a position of importance in the country’s industrialization
process.
In an attempt to modernize many small scale enterprises, their standard of operation has moved
into the capital intensive stage. The need in many cases is beyond the financial capability of the
entrepreneurs who set up the business. The major alternative for the provision of such capital is
the financial institutions and among the financial institutions operating in the country, state banks
of Sikkim is the major sources of credit to the various sectors of the economy.
However, it is common knowledge that getting financial support from state banks Sikkim has
been grossly inadequate for budding indigenous entrepreneurs, small farmers and even for those
who have been in the manufacturing business for a longer. Three types of credit are usually
required by small scale enterprises. . They include:

1. Short Term: This type of credit is used to finance yearly operation until the product
or proceeds from the industry are sold. The amount which is involved in this type of
credit is usually small but lack of this type of credit is most accurately felt by small

20
 scale entrepreneurs who have little or no saving upon which to withdraw as they are
mostly beginners.

2. Medium Term Loan: This type of loan is for more than one year maturity period but
not exceeding three to five years. This loan is mostly required for acquisition of
inexpensive equipment with relatively short life span.

3. Long Term Loan: This type of credit is necessary for acquisition of major industrial
machines, improvement in industrial equipment, building and land: It is a type of loan
that the maturity period is for quite longer durable.

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 CHAPTER 4

4.1 ROLE OF BANK IN ENTREPRENEUR DEVELOPMENT

In finance, a loan is the lending of money by one or more individuals, organizations, and/or
other entities to other individuals, organizations etc. The recipient (i.e. the borrower) incurs a
debt, and is usually liable to pay interest on that debt until it is repaid, and also to repay the
principal amount borrowed.

The document evidencing the debt, e.g. a promissory note, will normally specify, among other
things, the principal amount of money borrowed, the interest rate the lender is charging, and date
of repayment. A loan entails the reallocation of the subject asset(s) for a period of time, between
the lender and the borrower.

The interest provides an incentive for the lender to engage in the loan. In a legal loan, each of
these obligations and restrictions is enforced by contract, which can also place the borrower
under additional restrictions known as loan covenants. Although this article focuses on monetary
loans, in practice any material object might be lent.

Acting as a provider of loans is one of the main activities of financial institutions such as banks
and credit card companies. For other institutions, issuing of debt contracts such as bonds is a
typical source of funding.

Types of loans

Secured

In a secured loan is a loan in which the borrower pledges some asset (e.g. a car or house)
as collateral.

A mortgage loan is a very common type of loan, used by many individuals to purchase
residential property. The lender, usually a financial institution, is given security – a lien on the
title to the property – until the mortgage is paid off in full. If the borrower defaults on the loan,
the bank would have the legal right to repossess the house and sell it, to recover sums owing to
it.

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Similarly, a loan taken out to buy a car may be secured by the car. The duration of the loan is
much shorter – often corresponding to the useful life of the car. There are two types of auto
loans, direct and indirect. In a direct auto loan, a bank lends the money directly to a consumer. In
an indirect auto loan, a car dealership (or a connected

(Company) acts as an intermediary between the bank or financial institution and the consumer.

Unsecured

Unsecured loans are monetary loans that are not secured against the borrower's assets. These
may be available from financial institutions under many different guises or marketing packages:

 credit card debt

 personal loans
 bank overdrafts
 credit facilities or lines of credit
 corporate bonds (may be secured or unsecured)
 peer-to-peer lending

The interest rates applicable to these different forms may vary depending on the lender and the
borrower. These may or may not be regulated by law. In the United Kingdom, when applied to
individuals, these may come under the Consumer Credit Act 1974.

Interest rates on unsecured loans are nearly always higher than for secured loans because an
unsecured lender's options for recourse against the borrower in the event of default are severely
limited, subjecting the lender to higher risk compared to that encountered for a secured loan. An
unsecured lender must sue the borrower, obtain a money judgment for breach of contract, and
then pursue execution of the judgment against the borrower's unencumbered assets (that is, the
ones not already pledged to secured lenders). In insolvency proceedings, secured lenders
traditionally have priority over unsecured lenders when a court divides up the borrower's assets.
Thus, a higher interest rate reflects the additional risk that in the event of insolvency, the debt
may be uncollectible.

Demand

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Demand loans are short-term loan that typically do not have fixed dates for repayment. Instead,
demand loans carry a floating interest rate which varies according to the prime lending rate or
other defined contract terms. Demand loans can be "called" for repayment by the lending
institution at any time. Demand loans may be unsecured or secured.

Subsidized

A subsidized loan is a loan on which the interest is reduced by an explicit or hidden subsidy. In
the context of college loans in the United States, it refers to a loan on which no interest is
accrued while a student remains enrolled in education.

Concessional

A concessional loan, sometimes called a "soft loan", is granted on terms substantially more
generous than market loans either through below-market interest rates, by grace periods or a
combination of both. Such loans may be made by foreign governments to developing countries
or may be offered to employees of lending institutions as an employee benefit (sometimes called
a perk).

Target markets

Loans can also be subcategorized according to whether the debtor is an individual person
(consumer) or a business.

Personal

Common personal loans include mortgage loans, car loans, home equity lines of credit, credit
cards, installment loans and payday loans. The credit score of the borrower is a major component
in and underwriting and interest rates of these loans. The monthly payments of personal loans
can be decreased by selecting longer payment terms, but overall interest paid increases as well.

Commercial

Loans to businesses are similar to the above, but also include commercial
mortgages and corporate bonds. Underwriting is not based upon credit score but rather credit
rating.

Loan payment

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The most typical loan payment type is the fully amortizing payment in which each monthly rate
has the same value over.

4.2Loan provide by state bank of Sikkim for the development of

entrepreneur:

1) Unemployment loan

The Government of Sikkim and state bank of Sikkim, the sole focus of which is the
educated unemployed youth of the country. The basic premise of this scheme is that self-
employment in rural areas is considered as the best means to solve growing
unemployment.

Objective of the scheme

The main objective of the scheme is to provide easy subsidized financial assistance to
those who are unemployed but educated youth for the sole purpose of starting their own
venture in manufacturing, business, service, and trade sectors.
There is certain eligibility criteria that you must conform to if you wish to apply for this
scheme:

You must be between the age group of 18-40 years. 10 years relaxation is given
for SC/STs, ex-servicemen, physically handicapped and women You must be a Matrix pass or
fail, or ITI pass or having undergone a Govt. sponsored technical course for a minimum
duration of 6 months The combined family income shall not exceed Rs.40000 p.a. Should reside
in the current place of residence for at least 3 years Should not be a loan defaulter.

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Project Cost

Under this scheme projects up to Rs.1 lakhs is covered in case of individuals. If you are
applying jointly as a partnership along with two or three eligible partners, projects with
higher costs would also be covered provided share of each person in the project cost is
Rs.1 lakhs or less.

Collateral guarantee required

Loans covered under this scheme would not require any kind of collateral guarantee.
Only hypothecation/pledge/mortgage of assets procured under the Scheme would be
required.

Repayment Schedule

The repayment tenure is meant to be easy and flexible. It generally ranges from 3 to 7
years after an initial moratorium of 6 to 18 months as decided by the lender.

Training

You must undergo compulsory training for entrepreneurs after the loan is sanctioned.

New to Credit

Students passing out of institutions across the country and look to start their own
enterprise, SBS can help you.

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2) State Bank of Sikkim Personal Loan
A personal loan is a type of unsecured loan and helps to meet your current financial
needs. You don’t usually need to pledge any security or collateral while availing a
personal loan and your lender provides you with the flexibility to use the funds as per
your need. It can serve as your solution for managing your ongoing business and as well
as the expenses of a personal business, debt consolidation and others.

Amount of Loan
The maximum amount loan under the scheme is restricted to Rs. 3, 00,000/-.

Rate of Interest

The rate of interest on the loan shall be 12.00% on monthly rest basis and interest shall be
calculated from the date of disbursement of loan

Disbursement

The loan will be disbursed to the borrower's Savings Bank Account maintained with State
Bank of Sikkim after deduction of applicable charges.

Processing Fee

Loans shall be charged a processing fee @ 1% with minimum of Rs. 500.00

Procedure

Application for SBS Pensioners Loan will have to be made in prescribed loan application
form available at Head Office.

State Bank of Sikkim reserves the right to decline the application with or without any
reason.

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Repayment of Principal and Interest

(I) the loans along with interest shall be repayable in maximum of 36 equated monthly
installments.

(ii) The recovery will commence from the next month of disbursement of Pension.

(iii) The loanee can, if so desires, may repay before the due date with any amount against
future installments payable to him.

(iv) If the repayment of principal and interest are not made as per the declaration /
authorization made by the applicant in the application form, penal interest at the rate of 2
(two) percent shall be charged.

3) PERSONAL EMPLOYED LOAN: It is an unsecured loan taken by

individuals from banks or non banking financial company to meet their personal needs, it is
provided on the basis of key criteria such as income level, credit and employment repayment
capacity, fixed amount installment over fixed term etc.

Personal Loan for Self Employed

Last Updated 31st Aug 2018

Self Employed Personal Loans Aug 2018

Interest Rate Starting @ 13.00%

Processing Fee Up to 2% of loan amount

Lowest EMI Per Lakhs Rs. 2,275 for 5 Years

Loan Tenure 5 Years

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 Prepayment Charges Up to 5%

 Loan available without any security or collateral.

 Quick loan processing in a turnaround time of 3 – 15 days
 Interest rate starting @13.00%*

What is a personal loan used for?

You are free to use the funds you get from a personal loan any way you wish – fund a holiday,
buy a gadget, pay for medical treatment, use on home renovation, spend on a wedding, finance
your children’s education, etc.

How do personal loans work?

A personal loan works pretty much the same way as most loans. You apply for a loan, submit the
documents, the bank checks your credit worthiness and makes a loan offer. If you accept it, the
funds are transferred to your bank account, and you can use them any way you like.
You must repay the loan in equated monthly installments (EMI), which will depend on factors
such as loan amount, tenure and interest rate.

Tenure and repayment:

You can get a loan for a tenure that suits your needs. You must repay the loan in equated
monthly installments or EMIs in a fixed sum every month. The EMI will depend on the loan
amount, tenure and interest rate.

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4) A car loan

A car loan is a personal loan that allows the potential buyer to pay the vehicle off in monthly
payments instead of having to pay the full price all at once. This means that a lending servicer or
bank will pay off the car in full, while in return the borrower pays off the debt in monthly
payments with an interest fee included as well.
This type of personal loan may be either a secured or non-secured loan depending on the
situation they are in. But for the most part lenders will usually offer a loan that is secured just in
case the borrower falls behind on their payments and fails to pay off the debt. If the borrower
fails to pay the monthly payments, their lender will repossess the car to pay off the debt. To
qualify for an unsecured loan the borrower must have a very high credit score and also issue a
higher interest rate on the loan as well.
Most of the time lenders will be very quick to offer a secured loan even with bad credit; because
of the fact that the vehicle is used as collateral if the borrower fails to pay. People with a very
low credit rating may be able to take advantage of this loan by paying all the monthly payments
on time. By doing this they will be able to begin restoring their credit score.
If you are deciding whether or not to get a car loan, it is wise for you to first calculate your
income and expenses. You do not want to get a new loan if it does not fit into your monthly
budget; you are just acquiring even more debt than you already have. Also it is important think
about all of the additional fees that will come along with the vehicle such as gas, maintenance,
taxes, and registration. If possible, you should put down a higher down payment than required
because this will help lower your interest rate and monthly payment altogether.
Remember, it is very important that you always make your monthly payments if you get a car
loan. If you fail to make these payments the bank may be able to come after you and repossess
your vehicle, leaving you with no way to get around. Even with unsecured loans the bank will
come after the borrower, usually by suing them for the remaining debt. Also any missed
payments will be reported to the credit bureaus and the borrower will notice their score begin to
drop.

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 Eligibility

A. Individuals, aged 21 years or above not defaulter borrower of any Bank / Financial
Institutions.
B. Preferably loan is given in joint names of two or more individuals, i.e. Co-owner (s) o
f property (must) / spouse / parents / son or daughter / brother or sister.

Purposes

1. Car for taxi

2. for personal use

 Amount of Loan

The maximum amount of loan under the scheme is Rs. 75, 00,000/=

 Rate of Interest

10.00% per annum under fixed rate with resetting option after 5 years. Interest will be
charged on monthly compounding system.9.25% per annum under floating rate.

(Fixed rate of interest shall be subject to resetting by the bank after every five years and
floating rate shall be revised from time to time as per bank's discretion)

 Repayment and Period of Loan

Repayment / Realization of EMI will be made directly out of deduction from ten salary
and remittance to ten Bank by cheque/DD in favor of State Bank of Sikkim

1. Maximum repayment period of 20 years (excluding moratorium period of maximum

12 months)

2. The loan shall be repaid within superannuation period of the main borrower

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Procedure

Application will have to be made in the prescribed form available at Head Office,
Gangtok (Loans Section) with all the required documents as per annexure.

The Bank reserves the right to reject any application without assigning any reasons
thereof.

Upon approval, the loanee will have to complete all the documentations as per State Bank
of Sikkim norms.

Property Documents to be submitted with Application Form

a. Registered Sale Deed of own land / property.

b. Approved BP plan for construction / extension from competent authority.

C. Mutation Certificate / Parch, Latest Tax receipts.

d. Cost estimate from Architect (Empanelled) for the proposed construction/ extension /
repair.

e. Search Report / Non Encumbrance Certificate from concerned/competent authority.

F. No Objection Certificate from family members.

 Disbursement of Loan

Disbursement will be made in installments in the following manner.

4,3 SBS Home Loan

A home loan or housing loan is an amount borrowed by individuals for a fixed tenure
from financial institutions to buy, construct, repair or renovate a residential property.
Lenders charge an interest on the amount borrowed, which has to be paid by the
borrowers along with the principal amount.

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 State Bank of Sikkim offers Home Loans at the most affordable rate of interest. Your
dream of your own house is now possible with our Home Loan.
Hassle free documentation, easy processing, flexible repayment schedule and low interest
rate makes our Home Loan scheme the most sought after loan in Sikkim.
Whether it is for construction of house, renovation/extension/repair of your house, State
Bank of Sikkim Home Loan is ideal for all your needs
Eligibility

A. Individuals, aged 21 years or above having regular salaried income and not defaulter
borrower of any Bank / Financial Institutions.
B. Preferably loan is given in joint names of two or more individuals, i.e. Co-owner (s) o
f property (must) / spouse / parents / son or daughter / brother or sister.
C. Salaried Person should be in regular and permanent service of Government of Sikkim
only.

 Purposes

1. Construction of House on own land.

2. Renovation/extension/repair of owner-occupied or tenant – occupied house or flat.

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 2. Takeover of standard Home Loan from other financial institution with or without
additional funding.

Note: Property should be for own residential use or residential cum commercial use.
When for purely commercial purpose, loan will be considered under commercial loan.

Amount of Loan

The maximum amount of loan under the scheme is Rs. 75, 00,000/=

Rate of Interest

10.00% per annum under fixed rate with resetting option after 5 years. Interest will be
charged on monthly compounding system.

9.25% per annum under floating rate.

(Fixed rate of interest shall be subject to resetting by the bank after every five years and
floating rate shall be revised from time to time as per bank's discretion)

Repayment and Period of Loan

Repayment / Realization of EMI will be made directly out of deduction from ten salary
and remittance to ten Bank by cheque/DD in favor of State Bank of Sikkim

1. Maximum repayment period of 20 years (excluding moratorium period of maximum

12 months)

2. The loan shall be repaid within superannuation period of the main borrower

 Procedure

Application will have to be made in the prescribed form available at Head Office,
Gangtok (Loans Section) with all the required documents as per annexure.

The Bank reserves the right to reject any application without assigning any reasons
thereof.

34
 Upon approval, the loanee will have to complete all the documentations as per State Bank
of Sikkim norms.

 Property Documents to be submitted with Application Form

a. Registered Sale Deed of own land / property.

b. Approved BP plan for construction / extension from competent authority.

C. Mutation Certificate / Parch, Latest Tax receipts.

d. Cost estimate from Architect (Empanelled) for the proposed construction / extension /
repair.

e. Search Report / Non Encumbrance Certificate from concerned/competent authority.

F. No Objection Certificate from family members.

LOANS AGAINST PROPERTY:

Is exactly what the name implies -- a loan given or disbursed against the mortgage of property?
The loan is given as a certain percentage of the property's market value, usually around 40 per
cent to 60 per cent.
Loan against property belongs to the secured loan category where the borrower gives a guarantee
by using his property as security.

Different types of loan against property :

 Loan against Self Occupied Residential Property: Up to 65% of fair market value
 Loan against Vacant Residential Property: Up to 50% of fair market value
 Loan against Rented Residential Property: Up to 50% of fair market value
 Loan against Self Occupied Commercial Property: Up to 60% of fair market value.
 Loan against Rented Commercial Property: Up to 60% of fair market value
 Loan against Residential Plot: Up to 40% of fair market value

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  Loan against mixed use property: Up to 55% of fair market value
 Loan against vacant Commercial Property: Up to 50% of fair market value.
 Loan against Industrial Property: Up to 60% of fair market value

Enjoy the SBS Advantage

(a)Complete transparency in operations,

(b)Personal loan to individual owners of residential home/flat and select commercial properties,
(c)Access this loan from our wide network of branches,
(d)Interest rates are levied on a daily reducing balance method,
(e)Lowest processing charges,
(f)Rental income in select cases also considered for loan eligibility, and
(g)No prepayment penalties. You can have surplus funds at any time thereby conveniently
reducing your loan liability and interest burden.

Property Loan Scheme

A personal purpose loan against mortgage of your residential and/or select commercial property.

Purpose

Any personal purpose other than speculative purpose .or for the business purpose.

Eligibility

An individual who is;

 An Employee or
 A Professional, self-employed or an income tax assesses
B. Minimum net monthly income of Rs. 25000/- (or Rs. 3 lakhs per annum)
C. Loan under LAP should be liquidated before eldest borrower attain the age of 70 years.

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Salient Features

Loan Amount
Minimum: Rs.10 lakhs
Maximum: Rs.7.5 cores. Subject to location of property

Processing Fees

1% of the loan amount plus service tax, maximum of Rs. 50,000/- plus Service Tax
Security
I) Equitable mortgage of the property
ii) In cases where the commercial properties are rented out on lease, equitable mortgage on the
property will be created and assignment of rental receivable will be obtained. In addition a
Tripartite Agreement / Irrevocable power of attorney is also required.

Loan to Value Ratio

Loan Amount LTV Ratio

Up to Rs. 1crs 65%

Rs. 1 cr & up to Rs. 7.5 crs. 60%

Loan Tenure
Minimum - 5 Years
Maximum - 15 Years (*) Condition apply
EMI / NMI Ratio-
Maximum permissible EMI/NMI will be as below:

Net Annual Income EMI/NMI ratio

> Rs. 3 lacs<= Rs.5 50%

> Rs. 5 lacs <= Rs.10 lacs 55%

> Rs.10 lacs 60%

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 5) Loan for Animal Husbandry

Sikkim has always put emphasis on farm livestock resources, with agriculture aptly
complemented with animal husbandry practices. There are several schemes from various public
and private sector companies that deal with animal husbandry and Agriculture Loans. These
loans are primarily aimed at the rural populace so as to enable them to adopt animal husbandry
practices without worrying about the finances involved.

Animal husbandry loans are generally offered for purchase or creation of assets and
infrastructure related to poultry, sericulture, piggery, dairy development, fisheries development
and apiculture etc. The loans are usually secured against mortgage of land, hypothecation of
acquired assets or third party guarantee.

Features of Animal Husbandry Loan

 Loans are available for up to 100% of cost of asset or project cost.

 Typically longer repayment tenures.
 Minimal paperwork and quick loan processing.
 Flexible repayment options that include cheques, ECS, internet banking, standing instructions
and automated loan recovery, among others.
 Loans are generally disbursed at low interest rates.

Documents required for Animal Husbandry Loan

There are minimal documentation requirements for applying for an animal husbandry loan.

 One identity proof among PAN card, passport, driving license, voters ID.
 One address proof among passport, lease agreement, sales tax certificate, electricity or
telephone bill, ration card etc.
 Quotation for the acquiring assets may be asked for by the lender.

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Types of Animal Husbandry techniques covered under loans
These loans can be used for a variety of purposes such as dairy development programmers, milk
production activities such as buying and maintenance of milch animals, rearing of female calves,
cattle breeding through artificial insemination, milk house constructions, milk processing facility
financing, pasture development financing and lots more in the dairy side of financing.

The loans also cover other avenues of animal husbandry such as fishery, piggery, poultry,
apiculture, sericulture and many other techniques.

Choosing an Animal Husbandry Loan

Each bank has its own criteria for offering animal husbandry loans and you are advised to
contact banks individually to know what their loan product actually covers. Most of the public
sector banks are involved in some form of agriculture and agriculture allied loans, so you should
look at your requirements and make a choice accordingly. There are also some subsidies
available from the government for people of backward categories to acquire assets related to
animal husbandry. As such, you should also enquire about the related benefits of an animal
husbandry scheme while applying for a loan.

6) Business loan: A business loan is a loan specifically intended for business purposes. As with
all loans, it involves the creation of a debt, which will be repaid with added interest. There are a
number of different types of business loans, including bank loans, mezzanine financing, asset-
based financing, invoice financing, microloans, business cash advances and cash flow loans.

Business Loans Eligibility

A business loan can be availed with or without security, it depends on the bank that
offers loan and then the amount of risk they are ready to take. Whether business loan is
for an existing business or to start a brand new one, there are many banks in India that
offers loan for both small and big businesses. Getting approval and money is possible
within few days if you have all necessary documents and if you meet the eligibility
criteria. Here is the list of eligibility criteria to apply for a business loan in India.

39
Eligibility Criteria for Different Employment Types

 Limited or Private Limited Company

Net income of the concern should be more than Rs. 150,000 per annum for
business loan up to Rs. 1.5 million and over Rs. 300,000 for business loan above
Rs. 1.5 million.

 Partnership Co-applicants: This is optional to the applicant, not mandatory in

case of business loan.

4.4 Factors that Negatively Impact Business Loan Eligibility

There are main factor that affect business loan eligibility directly and indirectly, some
on the critical ones are explained below. This helps each individual to make sure they
are legally eligible for a business loan. The negatively impacting factors are:

 Credit Rating: Each individual applicant’s credit worthiness is evaluated by the

bank before processing the application. Good credit rating will increase the
chance of getting the loan with more flexibility. Default payments, fraudulent
activities, and outstanding huge loan will impact negatively on the potential, if
one bank rejects you application due to credit rating issue; there is less chance of
other banks accepting it, unless you are ready to pay big amounts as interest.
 Employer: If the employer with whom the applicant is working has a bad
reputation in the market, without any second consideration, the application will
be rejected. There are ample examples of this type seen often. The employer
should be having a good credit rating, there are many rating agencies that rate
these companies in today’s market and this information is readily available
online for each and every one. Working for such employer should be
reconsidered as it will not just affect you when applying loans by also to the
career itself in the long run.

40
  Criminal Background: If ever the applicant has had a criminal background or if
there is a suspect case filed against the applicant, there is absolutely no
probability of getting a loan. All banks will be willing to offer loan only to those
who are capable of paying the principal amount along with interests and those
who are good in the eyes of law.
 Business Instability: It’s a crucial aspect for business loan consideration. If the
income of the business is not stable and the profit is marginal then banks will be
in need of collateral for approving the loan. Weak profit will affect the business
negatively, thus it is essential to apply for a business loan only if the business is
able to meet all eligibility criteria.

Customer Profiles that Banks Consider for Business Loans

There are various types of business loan customers, while some are direct individual
who are self-employed or salaried, the other are entities and companies. A big bank will
have both types of customers when it comes to a request of business loan. The criteria,
applicant judgment style, measurability, rate of interest and tenure will differ according
to each customer type. Thus while applying for a loan, check which custo mer category
you belong to and accordingly look for the eligibility criteria.

 Self Employed Professionals (SEP) are usually Chartered accountants, allopathic

doctors, company secretaries, architects and designers who are practicing a
profession. The other type is Self-Employed Non-Professionals (SENP) such as
the traders and manufacturers. The eligibility criteria, documentation
requirement, interest rate; loan tenure alters per their category.
 Entities - Limited Liability Partnership, Partnerships firms, Private Limited and
closely-held Limited companies are those that fall under this category. This even
includes banks and non-banking financial companies who are looking for funds
from reputed banks.

41
  Other constitution types depending on the business profil e on a case by case
basis are considered by banks, the criteria for these are mentioned in every
bank’s policies and procedures.

Business loans are basically divided into different types they are as follows:
 Line of credit loans
 Installment loans
 Balloon loans
 Secured and unsecured loan
 Letter of credit
 Others loans

State Bank of Sikkim provides loans to Entrepreneur depend upon.

42
 1) Viability of the line business feasibility.
2) Cost of project.
3) Profitability of the project.
4) Repayment capacity.
5) Valuation of the collateral security that the prospective loanee may offer against the loan.

4.5 Role of state Banks of Sikkim in entrepreneur development of Sikkim

Banks play a very useful and crucial role in the economic life of every nation. They have control
over a large part of the supply of money in circulation, and they can influence the nature and
character of production in any country. In order to study the economic significance of banks, we
have to review the general and important functions of banks.

1) Removing the deficiency of capital formation

In any economy, economic development is not possible unless there is an adequate degree of
capital accumulation (or) formation. Deficiency of capital formation is the result of low saving
made by the community. The serious capital deficiency in developing economies is reflected in
small amount of capital equipment per worker and the limited knowledge, training and scientific
advance. At this juncture, banks play a useful role. Banks stimulate saving and investment to
remove this deficiency. A sound banking system mobilizes small savings of the community and
makes them available for investment in productive enterprises. The important implications of

43
this activity include Banks mobilize deposits by offering attractive rates of interest and thus
convert savings into active capital. Otherwise that amount would have remained idle.

Banks distribute these savings through loans among productive enterprises which are helpful in
nation building. It facilitates the optimum utilization of the financial resources of the community.

2) Provision of finance and credit

Banks are very important sources of finance and credit for industry and trade. It is observed that
credit is the lubricant of all commerce and trade. Hence, banks become nerve centers of all trade
activities and therefore commerce and trade could function in the presence of sound banking
system.

The banks cover foreign trade transactions also. Big banks also undertake foreign exchange
business. They help in concluding deferred payments, arrangements between the domestic
industrial undertakings and foreign firms to enable the former import machinery and other
essential equipment.

3) Extension of the size of the market

Commercial bankers help commerce and industry in yet another way. With the sound banking
system, it is possible for commerce and industry for extending their field of operation.
Commercial banks act as an intermediary between buyers and the sellers. Goods are supplied on
bank guarantees, making it viable for industry and commerce to cultivate and locate markets for
their products. The risks are undertaken by the bank. When the risks have been set free by the
banks, the industry can look forward to derive economies of the large size of the market.

4) Act as an engine of balanced regional development

Commercial banks help in proper allocation of funds among different regions of the economy.
The banks operate primarily for profits. When the banks lend their funds for more productive
uses, their profits will be maximized. Introduction of branch banking makes it possible to choose
between different regions. A region with growth potential attracts more bank funds. But in recent

44
years, the approach of banks towards regional growth has been undergoing a change. Banks help
create infrastructure essential for economic development. Thus banks are engines of balanced
regional development in the country.

5) Financing agriculture and allied activities

The commercial bank helps the farmers in extending credit for agricultural development.
Farmers require credit for various purposes like making their produce, for the modernization and
mechanization of their agriculture, for providing irrigation facilities and for developing land.

The banks also extend their financial assistance in the areas of animal husbanding, dairy farming,
sheep breeding, poultry farming and horticulture.

6) For improving the standard of living of the people

The standard of living of the people is estimated on the basis of the consumption pattern. The
banks advance loans to consumers for the purchase of consumer durables and other immovable
property, which will raise the standard of living of the people.

7) Promote Commercial Virtues

The businessmen are more afraid of a banker than a preacher. The businessmen should have
certain business qualities like industry, forethought, honesty and punctuality.

These qualities are called “commercial virtues” which are essential for rapid economic progress.
The banker is in a better position to promote commercial virtues. Banks are called “public
conservators of commercial virtues.”

8) Promote Industrial Development

Industrial development needs finance. In some countries, commercial banks encouraged

industrial development by granting long-term loans also. Loan or credit is a pillar to
development.

45
In underdeveloped countries like India, commercial banks are granting short-term and medium-
term loans to industries. They are also underwriting the issue of shares and debentures by
industrial concerns. This helps industrial concerns to secure adequate capital for their
establishment, expansion and modernization.

Commercial banks are also helping manufacturers to secure machinery and equipment from
foreign countries under installment system by guaranteeing deferred payments. Thus, banks
promote or encourage industrial development.

9) Implementation of Monetary Policy

Economic development needs an appropriate monetary policy. But a well-developed banking is a

necessary pre-condition for the effective implementation of the monetary policy.

Control and regulation of credit by the monetary authority is not possible without the active co-
operation of the banking system in the country.

10) Encouragement to Right Type of Industries

Banks generally provide financial resources to the right type of industries to secure the necessary
material, machines and other inputs. In this way they influence the nature and volume of
industrial production.

11) State banks of Sikkim and entrepreneurial promotion:

A State Bank of Sikkim contributes in a number of ways in the promotion of Entrepreneurship

the areas of role of development banks in the promotion of Entrepreneurship are listed here
under: -

1. It generates entrepreneurial environment and promotes, encourages and stimulates the

entrepreneurial resources and spirit systematically.

46
2. It assists the potential entrepreneurs from the stage of generation of idea to the stage of
appraisal of the projects and facilitates the entrepreneur to engage in a manufacturing activity.

3. It motivates and encourages the new entrepreneurs to step in and explore new areas of
manufacturing processes or the qualitative change in the existing process with available inputs or
substitution of cheaper inputs or inputs available locally.

4. It advises the State Governments on matters of planning, policy-making and devising

strategies to achieve socio-economic development with growth in employment opportunities and
reduction in economic disparity.

5. It mobilizes savings and deposits in innovative and diverse economic activities.

6. It promotes balanced socio-economic growth.

7. It advises the entrepreneurs and allocates funds to the most productive venture in the areas
desired by the state policy.

8. It encourages socially useful investment in order to increase and improve the social service
quantitatively and qualitatively.

9. It helps to know the operational, financial and economic health of a particular area by
conducting researches, compiling data and helps in planning at governmental level.

10. It provides financial aid, technical assistance, project appraisal, evaluation and economic
viability in short and long run.

11. It develops harmony and co-ordination between industry and agriculture. This results in
availability all inputs in time and in sufficient quantity which alternatively encourages new
enterprise and generation of employment and better utilization of available resources. Indirectly
it helps in creating market for locally available raw material.

47
12. It sponsors and organizes seminars, conferences, symposia and compendium on various
economic issues, which help in solving many problems in various sectors of the economy.

13. It strengthens the entrepreneurial drive, awareness and campaign in rural and backward areas,
hilly regions and industrially backward geographic regions.

4.6 Economic Development: Overview

By the problem of economic development I mean simply the problem of accounting for the
observed pattern, across countries and across time, in levels and rates of growth of per capita
income. This may seem too narrow a definition, and perhaps it is, but thinking about income
patterns will necessarily involve us in thinking about many other aspects of societies too, so I
would suggest that we withhold judgment on the scope of this definition until we have a clearer
idea of where it leads us.
We should never lose sight of the ultimate purpose of the exercise, to treat men and women as
ends, to improve the human condition, to enlarge people’s choices. A unity of interests would
exist if there were rigid links between economic productions (as measured by income per head)
and human development (reflected by human indicators such as life expectancy or literacy, or
achievements such as self-respect, not easily measured). But these two sets of indicators are not
very closely related. Economic development is the primary objective of the majority of the
world’s nations. This truth is accepted without controversy, or so it would appear in public
discourse at least. Raising the well-being and socioeconomic capabilities of peoples everywhere
is easily the most crucial
Social task facing us today. Every year, aid is disbursed, investments are undertaken, policies are
framed, and elaborate plans hatched to achieve this goal, or at least to get closer to it. How do we
identify and track the results of these efforts? What criteria do we use to evaluate the

48
Extent of “development” a country has undergone or how “developed” or “underdeveloped” a
country is at any point in time? How do we measure development?
The issue isn’t easy to resolve. We all have intuitive notions of”development.” Presumably,
when we speak of a developed society, we have in mind a world in which people are well fed
and well clothed, have access to a variety of goods and services, possess the luxury of leisure and
entertainment, and live in a healthy environment.
We think of a society free of violent discrimination, with tolerable levels of equality, where the
Sick receive proper medical care and people do not have to sleep on the sidewalks. In short, most
of us would insist that a minimal requirement for a “developed” nation is that its physical quality
of life be high, uniformly so rather than restricted to an incongruously a minority.
Of course, the notion of a good society goes further.
We might stress political rights and freedoms, intellectual and cultural development, stability of
the family, a low crime rate, social civility and so on. However, a high and widely accessible
level of material well-being is probably a prerequisite for most other kinds of advancement, quite
apart from being a worthy goal in
Itself Economists and policy makers therefore do well (and have enough to do!) by concentrating
on this aspect alone. It is, of course, tempting to suggest that the state of material well-being of a
nation is captured quite accurately by its per capita gross national income (GNI): the per person
value of income earned by the people of a country over a given year. (Or one might invoke its
close cousin, gross domestic product, GDP, which restricts itself to domestically produced
income, and ignores net income received from other countries, such as dividends, interest or
repatriated profits.) Indeed, since economic development at the national level was adopted as a
conscious goal, there have been long phases during which development performance was judged
exclusively by the yardstick of per capita income growth. In the last few decades, this practice
increasingly has come under fire from various quarters. The debate goes on, as the quotations at
the beginning of this chapter suggest.
We must be careful here. No one in their right mind would ever suggest that economic
development be identified, in a definitional sense, with the level or growth of per capita income.
It is perhaps universally accepted that development is not just about income, although income
(economic wealth, more generally) has a great deal to do with it. For instance, we noted

49
Previously that economic advancement should not be restricted to a small minority. This means,
in particular, that development is also the removal of poverty and under nutrition it is an increase
in life expectancy; it is access to sanitation, clean drinking water, and health services; it is the
reduction of infant mortality; it is increased access to knowledge and schooling, and literacy in
particular.
There is an entire multitude of yardsticks. Paul Streeten’s thoughts, summarized in the quotation
at the beginning of this chapter, capture this “multidimensionality” very well. Far more
intriguing is the sharp focus of Robert Lucas’ words (see quotation). At first they appear narrow;
perhaps even missing the point, whereas the more holistic scenario sketched in the foregoing
paragraphs seems pretty much the way to go. In thinking this we would be wrong. Neither Lucas
nor any intelligent person believes that per capita income is development. What’s hidden in these
words is actually an approach, not a definition. It is really a belief about the world, which is that
the universal features of economic development—health, life expectancy, literacy, and so on—
follow in some natural way from the growth of per capita income, perhaps with the passage of
time. Implicit here is a belief in the power of aggregate economic forces to positively every other
socioeconomic outcome that we want to associate with “development.” This outlook may be
contrasted with the view that a correlation between per capita income and other desired features
is not automatic, and that in many cases those connections may not be present at all. According
to this view, per capita income fails as an adequate overall measure and must be supplemented
by other indicators directly. The debate implicit in the two quotations is not, therefore, about
what development means, on which there is possibly widespread agreement.
It is really about a view of the world—about the possibility of finding a smaller set of variables
that correlates well with the multifaceted process of development. Note well that, in a way,
saying too much is saying too little.
It may be that per capita income does not capture all aspects of development, but a weighty
assertion that no small set of variables ever captures the complex nature of the development
process and that there are always other considerations is not very helpful. In this sense, the view
that economic development is ultimately fueled by per capita income may be taking things too
far, but at least it has the virtue of attempting to reduce a larger set of issues to a smaller set,
hopefully in a way that is supported by sound reasoning and empirical evidence.

50
This book implicitly contains a reduction as well, although not all the way to per capita income
alone. In part, sheer considerations of space demand such a reduction. Moreover, we have to
begin somewhere, so we concentrate implicitly on understanding two sets of connections
throughout this book. One is how average levels of economic attainment influence development.
To be sure, this must include an analysis of the forces that, in turn, cause average levels of
income and other indicators to grow. The other connection is how the distribution of economic
attainment, across the citizens of a nation or a region and across the nations of the world,
influences development.
The task of understanding these two broad interrelationships takes us on a long journey. In
some chapters the relationships may be hidden in the details, but they are always there: levels
and distribution as twin beacons to guide our inquiry. This is not to at the basic features of
development will be ignored. Studying them is our primary goal, but our approach to them lies
through the two routes described in the previous paragraph. We begin with a summary of the
historical experience of developing countries over the past few decades. We pay attention to per
capita income, then to income distribution, as well as other indicators of development.
We describe the structural characteristics of developing countries: the occupational distribution
of the population, the share of deferent sectors (such as agriculture and services) in national
income, the composition of imports and exports, and so on.

4.7 ROLE OF ENTREPRENEUR IN ECONOMIC DEVELOPMENT

Financial development is an intermediation process through which entrepreneurial activities are

converted to positive economic developmental projects in the economy. It is an essential part of
economic development with one preceding the other or reinforcing each order, indeed, the
concepts are intertwined.
Entrepreneurial development activities, whereas financial institution engagements Strengthen
financial development and the importance of entrepreneurial activities to economic development.

Entrepreneur

51
 The development of an economy depends on the people who are motivated to achieve
something by taking responsibilities and are willing to take risk. They are called ‘entrepreneurs’.
Success stories of such entrepreneurs are in abundance.
The third world countries engaged in fuller utilization of resources Human or natural abundantly
available in these countries felt need of entrepreneurial skills. A person, real or fictitious, who
undertakes any manufacturing or trading activity, is called entrepreneur; his activity or adventure
is called ‘enterprise’; and desire and capability, ‘entrepreneurship’.
Various authors differed on the term ‘entrepreneur.’ They, however, agreed as to how the skills
that make an entrepreneur could be developed and how its supply could be increased. Most of
the authors have simply given definitions in terms of entrepreneurial functions. Some of them
emphasized on their functions whereas the others emphasized on their characteristics and still
others the requisites of their development. ‘Entrepreneur’ bears non-insurable risk, says
Cotillion, by buying factors of production and selling his products at uncertain prices.

J.B. says while differentiating the entrepreneur from the capitalist, added functions of continuous
management of co-ordination, organization and supervision to an entrepreneur. Walrus agrees.24
Knight’s entrepreneur bears uncertainty and risk which cannot be calculated, insured or
salaried.2 5 Pioneer introduced human element saying that the entrepreneur was an innovator and
engineer of change and made development by introduction of new goods; new methods of
production; opening new market; new source of raw materials or half-manufactured goods; and
carrying new organization for any industry. According to him “earnings for management”
(monopoly gains, windfalls or speculative gains) without entrepreneurial profits was not the role
of entrepreneurship.
Profits are the premium for innovation and arise from no other source. If they accrue from other
sources (monopoly, windfall or speculation) it is not desirable for the economic development.
Innovation sets up only a temporary monopoly gain which is soon wiped out by imitation. For
profits to continue it is necessary to keep one step ahead of rivals with innovations. Schumpeter
differentiated an investor and an innovator.

52
ENTREPRENEURSHIP:

The concept of entrepreneurship promotion is emerging with the up-gradation and application of
technology in the industry. The purpose of this chapter is to understand ‘entrepreneurship’, its
development and to specific focus on economic development of Sikkim.
What has been the pace of role and contribution of state banks of Sikkim in the development of
entrepreneurship spirit is also taken up in this study.

Some definitions and characteristics of entrepreneurship;

- Entrepreneurs is defined as self-employed

- Self-employed deals with additional uncertainty
R. Cotillion (1755)
-Entrepreneurs should balance their activities to market demand
- Entrepreneurs shifts economic resources from low to high
J.B. Say (1803) productivity areas with higher yield
- Entrepreneurship implies many obstacles and uncertainties
- Entrepreneurs and managers have different but complementing
A. Marshall (1890) Characteristics
- Entrepreneurship are the main vehicle to move an
economy forward from static equilibrium, based on the
combinatorial capabilities of entrepreneurial individuals
- Combinatorial capabilities results in recognition of a new
J. Schumpeter (1911) good/quality, a new method/process, a new market, a new source of
supply or a new way of organizing the firm/production
- Entrepreneurs’ role is distinctly separated from the role of
Inventors
- Entrepreneurs are a special social class who direct economic
F. Knight (1921) activity
- Uncertainty is the primary aspect of entrepreneurship

53
 - Entrepreneurial and managerial abilities should be distinguished
E. Penrose (1950) -
Detecting and exploiting opportunities for smaller firms is the basic
aspect of entrepreneurship
- Entrepreneurial activity mainly implies decreasing organizational
inefficiencies and reversing organizational entropy
- There are two types of entrepreneurs: a managerial who allocates
inputs into the production process in an effective manner, and a
Schumpeterian who fills observed market gaps by introducing new
H. Liebenstein (1968) products or processes
- Entrepreneurial activity moves the market towards equilibrium as
I.Kirzner (1973, 1997) Entrepreneurs discover profitable arbitrage possibilities.
-
M. Casson (1982) Entrepreneurs specialize in taking judgmental decisions about the
coordination of scarce resources
-
W. Gartner (1985), H. Aldrich Entrepreneurship is the outcome of actions of individuals that act
and C. Zimmer (1986) in and are influenced by the organizational and regional
Environment in which they live and work.
-
Entrepreneurial activity crucial for (radical) innovation and growth.
W. Baumol (1990) - Institutions decide the allocation of entrepreneurial activity
between productive (innovation) and unproductive activities (rent
Seeking, organized crime, etc.).
- Entrepreneurs promote a more productive economy due to more
R. Holcombe (1998) efficient and innovative ways of production, it is the foundation for
economic growth
-
OECD (1998) Entrepreneurs represents the ability to marshal resources to seize
new business opportunities, defined broadly they are central to
economic growth
- Entrepreneurs have multi-task abilities.
S. Wennekers and R. Thurik - Entrepreneurs perceive and creates new opportunities, operate

54
 (1999) under uncertainty and introduce products to the market, decide on
location and the form and use of resources, and, finally manage their
Business and compete with others for a share of the market.
- Entrepreneurial activity not necessarily synonoumos with
H. Aldrich and M.Martinez Innovation since entrepreneurial activities also involves imitation.
(2001) - Support the distinction between innovation and reproduction in
Entrepreneurial activities.

The above brief and, of course, incomplete presentation theorize and describe the perceived char
acteristics believed being possessed by the entrepreneur. Even though explanations as to why ent
repreneurial activities are embarked upon can be inferred from those entrepreneurial characteristi
cs, this is far from presenting a rigorous theoretical model of entrepreneurship. There exists, few,
if any compelling theoretical model of entrepreneurial behavior, which stems from the heterogen
eity and stochastic elements that seems to be an undisputable part of entrepreneurship. The close
st contemporary attempt to model entrepreneurship is probably the occupational choice models (
Evans and Leighton 1989, Banerjee and Newman 1993, van Praag and Cramer 2001). Still, the d
istinction between these and other models of profit maximizing agents based on perfect informati
on is thin. Instead entrepreneurship models are based on processes driven by stochastically distri
buted abilities and learning capacities.
For instance, in Jovanovic’s (1982) model new firms, or entrepreneurs, face costs that are not o
nly random but also differ across heterogeneous firms. A central feature of the model is that new
firms do not know their cost functions, that is, their relative efficiency, which is discovered throu
gh the process of learning from its actual postentry performance once the business is established.
Hence, entry per se is not important and dynamics is characterized by a noisy selection process w
here performance is partly exogenous. Jovanic and Lach (1989), present a modified version of th
e 1982 model which also builds on learning by doing, and generates a S-
shaped diffusion pattern of innovation (and entry) over time.
Neither of these approaches is particularly satisfactory and whether they can offer insights more
valuabl an eclectic approach based on empirical observations is questionable. We therefore restri
ct the remaining presentation to an overview of the most common empirical regularities as to wh
y entrepreneurship occurs.

55
Empirical explanations of entrepreneurship;

According to the literature the fundamental source of economic development, dynamism and cha
nges can be ascribed the institutional setting in which agents operate. Even though needs may dri
ve individual actions, the way those needs are fulfilled and the efficiency in accomplishing them,
depends on institutions.
Hence, at an overarching level, the extent and type of entrepreneurship can always be attributeins
titutions, formal and informal (De Soto 1989, 2000, Baumol 1990, North 1990, 1994, Henrekson
2005.
Institutions also appear at all levels of economic activities: the macroeconomic framework, indu
strial policies, knowledge creation, attitudes and individual incentives.
In the following we will classify the empirical explanations to entrepreneurship on the different f
actors and levels of aggregations that have been presented in the literature. These will also be bri
efly related to other contextual concepts, such as push and pull factors, and the demand and suppl
y of entrepreneurs. The section is concluded with some observation as regards the definition, rol
e and production of knowledge. However, before excavating into the observed empirical regulari
ties in explaining entrepreneurship, the measurement problems related to entrepreneurship will b
e considered.

Measuring entrepreneurship

Rather than being synonymous with starting a new venture, entrepreneurship refers to a set of abi
lities embodied within an individual. Adequately capturing such abilities in data that are compara
ble over individuals, not to mention comparisons across regions or nations are simply not possibl
e. Thus, the measures of entrepreneurship will always be partly erroneous and subject to criticis
m since empirical studies have to rely on proxies which (hopefully) are correlated with entrepren
eurship.
A considerable share of studies on entrepreneurship relies on selfemployment data. One obvious
reason is that those were simply available for a large number of regions and countries (Evans and

56
Leighton 1989, Blanchflower and Oswald 1998, Georgelis et al 2000, OECD 2000, Audretsch a
nd Thurik 2001, Blanchfloweret al 2001, Bruce and HoltzEakin 2001, Fonseca et al 2001). Yet, a
s noted by Blanchlower (2000) and Earle and Sakova (2000), selfemployed consists of a very het
erogeneous group more or less involved in productive entrepreneurial activities, it could just as
well represent employment push factors. Alternative but related measures of entrepreneurship are
the number of establishments (Beck and Levine 2001), density of firms (Klapper et al 2008), or
business ownership (Carré, van Stel and Thurik 2002). As pointed out above, self-
employed less likely to capture productive entrepreneurship, it could just as well represent entrep
reneurial pull as unemployment push. Net birth rate (entry less exits) has also been
Suggested as an indicator of entrepreneurship, in addition to tracing structural industrial changes
(Dejardin 2008). Firm demography is however quite different between industries implying that s
ectorally adjusted indicators are needed to capture structural changes using net birth rates (Geros
ki 1995, Caves 1998).

But also turbulence (entry plus exits) have been advocated as an approximation of entrepreneurs
hip (Fritsch 1996). A relatively new set of data has been compiled by the Global Entrepreneursh
ip Monitor (GEM). These data are based on questionnaires designed to capture both potential ent
repreneurs and other respondents. The data also contain additional information, such as motives f
or embarking on entrepreneurial activity, etc. Comparison with other datasets, for instance those
collected by Eurostat (Flash Eurobarometer) and the World Bank, reveal a high degree of correla
tion (Reynolds et al 2005). That they catch about the same phenomena does not however mean th
at they are good indicators of entrepreneurial activity.
Entrepreneurship is often categorized as opportunityor necessitybased ventures. The former repre
sents a profitable opportunity as perceived by an individual, while the latter is associated with ent
repreneurship as a last resort, i.e., due to impossibility of finding other sources of income. The di
stinction between opportunity and necessity based entrepreneurs could also be interpreted as the
separation between selfemployed and highgrowth entrepreneurship (Glaeser and Kerr 2009).

Macro-level explanations of entrepreneurship;

57
The most commonly defined determinants of entrepreneurship at the macrolevel in the literature
are the level and growth of GDP, together with unemployment, investments, cost levels, inflation
and the interest rate level (Highfield and Smiley 1987, Bosma et al 2005, Wang 2006). Also fact
ors like government spending on education, infrastructure and health seem to be positively correl
ated with startups (Reynolds and Storey 1993).
Some of these factors relate to the business cycle – i.e. there may be a cyclical component in
Entrepreneurship activity while other, albeit less explained, can be associated with long waves in
fluencing economic activity, innovation and entrepreneurship (Schumpeter 1939).
See also Fritsch (1996) who shows that entry and exit varies during the product cycle, i.e. it is pa
rticularly high in the earlier stages.

Regions, industry and firm level factors

One strand of entrepreneurial economics looks at how differences in regional characteristics and
preconditions influence entrepreneurship. Low transportation costs, concentration of human capit
al and extensive research and development activities together with availability to financial capital
, seems to be the most critical factors.
Also population (demand), employment and income growth turns out to be important
Determinants of entrepreneurship (ACS and Armington 2002). We will further elaborate on the r
egional dimension of entrepreneurship in section.
On the industry level the most prominent factors that have been identified to impact entrepreneur
ship are the level of profits, entry barriers, level of demand, and the extent of agglomerated or ur
banized production structures (Reynolds 1992, Reynolds and Storey 1993).
The determinants of entrepreneurship thus relate to variables derived in the industrial organizati
on, economic geography and standard micro-economic theories
Of economics. There are mixed results for different variables in different countries but basically
profits, industry growth and industry size are positively related to startups while increasing capit

58
al requirements and need for product differentiation seem to negatively impact entrepreneurship.
Disaggregating to the firm level, human capital (education) shows up as one of the fundamental
variables explaining entrepreneurship (Evans and Leighton 1990, Kim et al 2006). Overall, the li
kelihood of becoming an entrepreneur is strongest for skilled individuals, particularly for entrepr
eneurs seeking to exploit an opportunity. Human capital signals quality, works as a sorting mech
anism, helps overcoming barriers in obtaining credit/equity, as well as improving network formin
g.
Social networks can in turn be expected to reduce transaction costs (Williamson 1971), which al
so has gained empirical support, particularly for opportunity based entrepreneurship.
Regulation as such has been shown to influence entrepreneurship and size of startups (Ciccon a
nd Papaionnou 2006, Ardagna and Lusardi 2009).Particularly detrimental effects are attributed hi
gh startup costs (Fonseca et al 2001, 2007). Glaeser and Kerr (2009) presents (regional) evidence
that cost levels are one of the major impediments to entrepreneurship, while Gordon (1998), and
Cullen and Gordon (2007), conclude that higher taxes has a distinct and significant negative imp
act on entrepreneurship. Moreover, indirect effects have been reported through the effects of taxe
s on wealth formation (Evans and Jovanovic 1989, Banerjee and Newman 1993). Individual weal
th has been shown to be a robust predictor of the probability of starting a firm.
At the individual level progressive marginal tax rates seem to negatively impact entry, even thou
gh the magnitude depends on the difference between taxes on wages and taxes on profits (Gentry
and Hubbard 2000, Hansson 2008). It is also noteworthy that individuals in either the highest or
the lowest income brackets are most likely to start a firm, which probably mirrors that individual
abilities govern whether opportunity or necessitybased entrepreneurial ventures is embarked upn.

Norms and culture

A number of studies find that social norms, or entrepreneurial culture, do influence entrepreneurs
hip. An obvious indicator of this is the parent effect, that is, the likelihood of becoming a firm-
owner or starting a new firm increases if the parents had their own firms (Dunn and Holtz-
Eakin 2000, Davidsson and Honig 2003, Gianetti and Simonov 2004). There also seem to be the
case that an environment dominated by smaller and independent firms become more conducive t
o entrepreneurship than environments hosting larger firms (Glaeser et al 2009, Glaeser and Kerr

59
2009). Holding an industry’s establishment size constant (or/and city), entrepreneurs increase wh
en the surrounding city has a greater number of small establishments. In addition, there is a rema
rkably strong correlation between average establishment size and subsequent employment growt
h through startups, particularly in manufacturing (see also Rosenthal and Strange 2009). Growth
of new startups is thus correlated to the number of existing establishments in the area. The directi
on of causality is however not clear.
Glaeser and Kerr (2009) also finds that higher amenities (defined as exogenous regional differen
ces in
Climate factors) tend to drive up the price of land which attracts low fixed cost industries that ten
d to have a higher share of entrepreneurship. Hence, high amenity places attract people and firms
, labor intensive industries, thereby inducing a positive impact on entrepreneurship.
A related observation is that the fraction of entrepreneurs that are active in the region where they
were born is significantly higher than the corresponding fraction for workers. This local preferen
ce is strongest in developed regions with well developed financial sectors. In addition, Michalecc
i and Silva (2006) show that firms created by locals are more valuable, bigger, more capital inten
sive and obtain more financing per unit of capital invested.

Individual and cognitive factors

A considerable part of the literature is preoccupied with the cognitive processes by which individ
uals discover opportunities and take the decision to start a new firm (Braunerhjelm 2008). These
studies confer that a number of individual abilities and cognitive capabilities are characteristic fo
r entrepreneurs. For instance, risk acceptance (Knighterian uncertainly) is claimed to distinguishe
d entrepreneurs from other individual, as is their tolerance for ambiguity. They are also claimed t
o have a stronger need to achieve, for self-efficacy as well as preferences for autonomy.
In some studies such individual characteristics are broken down at the regional level in order to
capture how variations in social capital, creativity and tolerance may influence entrepreneurship
(Coleman 1988, 1990, Putnam 1993, Lee et al 2004, Florida 2002, Florida et al 2008).
In a recent empirical analysis, Sutter (2009) sets out to test the impact of a composite factor defin
ed as “psychological capital”. Compared to previous studies, Sutter’s embrace a more varied set
of individually defined characteristics, such as those related to enjoying other people’s and one’s

60
own life, ability to control emotions, capability to enthusiasm other people, etc., which are all inc
orporated in a “psychological capital” index. Controlling for other individual factors related to ac
cess to opportunities, education, social capital, creativity and trust, the empirical analysis conclud
e that the psychological index is an important determinant of entrepreneurial endeavor.

Entrepreneurship

Enterprise creation is the outcome of creative application of efforts of an entrepreneur in any

manufacturing activity. The industrial, commercial and trading entrepreneurs are called the
‘prime movers’ and are ‘catalytic’ in the field of creation and promote of an enterprise in a
congenial environment for the development of trading, commercial and manufacturing activity.
They influence and determine the destiny of pace of industrial development of the economy with
the help of their entrepreneurial abilities and skills.
Entrepreneurial history, as given in the beginning of this section of the study, brought a landmark
change in the definition of an entrepreneur from the beginning of the sixteenth century. Today
economists have reached a consensus on entrepreneurial functions and processes. An industrial
entrepreneur identifies the potential areas of the ventures, analyses it critically, estimates the risk
involved accurately, undertakes sound and timely decisions to promote the enterprise, assembles
the relevant inputs to float the venture and finally manages it efficiently for translating his
profitable idea into economic and commercial reality and fruition. His judgmental perseverance
is based on internal and external environment affecting his goal of success in business. Thus, an
ideal and successful entrepreneur performs the following important entrepreneurial functions in
the whole gamut of entrepreneurial process. This process comprises Risk-bearing, innovative,
decision-making, managerial, environmental functions, leadership, effective communication,
social accountability and allegiance, profit making functions, development, and dynamism
functions. The entrepreneurial functions have increased on account of technological revolution,
managerial requirements, information communication revolution, socio-political awareness,
environmental consciousness. Scope of entrepreneurial functions is, thus, widening up and
covers the entrepreneurial policies and strategies.

4.8 Role of Entrepreneurship in Sikkim Economy:

61
Economic development means the material well-being of the people and prosperity. The
entrepreneur takes the risk of innovative enterprise to produce any article or service which is for
the material well-being of the society, increase the income. It raises the standard and quality of
life of the people. It is the process of materialistic upward change resulting in the per capita
income. The entrepreneur plays role of a catalyst in the process of economic growth of any state.
J. Schumpeter once commented that the rate of economic growth of a country depended on its
rate of innovations which, in turn, depends upon the distribution of entrepreneurial talent in the
population. Technical progress alone cannot lead to economic development, unless technological
breakthroughs are put to economic use by the entrepreneurs. The entrepreneur is the person who
puts the capital, labor and technology to an organized enterprise. The entrepreneur helps in
formation of capital, improves per capita income, generates employment, makes balanced
regional development possible and motivates further creation of entrepreneurship in the
economy. “The development does not occur spontaneously as a natural consequence when
economic conditions in some sense are right. A catalyst is needed and this requires
entrepreneurial activity to a considerable extent, the diversity of activities that characterizes the
rich countries can be attributed to the supply of entrepreneurs.” An entrepreneur energizes the
economy and rejuvenates the establishment of projects that make the economic structure for
economic growth of any country.
The entrepreneurial role in Sikkim economy may be briefly stated as under: -
1. It disseminates relevant and useful information of viable areas of operations.
2. It assists the new entrepreneurs in project planning.
3. It promotes industrialization in rural and backward area and hilly regions by canvassing the
benefits being offered by the government in these areas.
4. Its helps in solving socio-economic disparities and strengthens the process of socio-economic
growth.
5. It broadens entrepreneurship creation and rehabilitation.
6. It helps in creating favorable entrepreneurial environment for the promotion of tiny, small,
ancillary, cottage and village industries in industrially backward areas.
7. It creates necessary infrastructure with locally available resources by creating industrial
Estates.

62
8. It creates ‘Entrepreneurs Schools and entrepreneurial spirit’ for Development of new
entrepreneurs.
9. Promote exports, consultancy and collaboration culture.
10. It helps in guiding the future of industrialization growth rate.
Thus, entrepreneurship development is proving a boon to small Entrepreneurs, a bonanza for
backward areas and no-industry districts, a vehicle of socio-economic prosperity, and a panacea
to women entrepreneurs, effective sources of avenues for the government, unique opportunity for
big and innovative corporate entrepreneurs. Entrepreneurship development is transforming the
small Entrepreneurs into medium and large-scale entrepreneurs. Hence, it is playing a catalytic
role in various sectors of the national economy.

63
 CHAPTER 5
SUGGESTION AND CONCLUSION

Conclusion:
On the basis of various scheme for the entrepreneur development of State Bank of Sikkim. We
can arrive at a conclusion that the overall performance of the State Bank of Sikkim is satisfactory
for the development of Sikkim entrepreneur.

There are always ways bank can help an entrepreneur develop their business more easily. Banks
are important for entrepreneurs to use to protect and invest their earnings as well as pay
employees and expenses with a legal paper trait.Banks play an important role in developing
entrepreneurs. Entrepreneurs not necessarily come from sound financial background. They always need
initial loans on reasonable interest rates for generating capital to start their work. They also need this
financial help on regular intervals like during expanding business, getting credit certifications from
financial institutions like banks and many other things like things.
Banks must issue some policies for their development where good ideas will get loans at little
less rate of interest or other kind of facilities but with specific terms and conditions. Banks can
also play the role of middleman to connect people having big amount of money with the people
having great ideas. It is because banks have all types of clients, their full track records and
information.

64
Suggestion:

It can be said that the State Bank of Hyderabad is able to achieve the efficiency. However,
Social Banking is not just achieving the targets. It is not just a scheme, but it is the right
approach, perhaps the properly oriented attitude of the banker is Social Banking in the true sense.
Therefore State Bank of Hyderabad needs to imbibe the spirit of Social Banking in true sense
and should become the torch bearer

65
BIBLIOGRAPHY

Books Referred:

 Accountancy. R.K. Mittal, A.K.Jain.

 Management- Theory and Practice. Shashi.K.Gupta, R.K. Sharma.

 Essentials of entrepreneur 2nd edition, Irwin /McGraw-Hill.Ross, S.A., R.W.

Westerfield and B.D. Jordan.

 Basic Financial Management, 8th edition, Prentice -Hall, Inc. Scott, D.F., J.D
Martin, J.W. Petty and A.Keown.

Internet websites:

 www.Hpscb.Com
 www.Moneycontrol.Com
 www.Money.Rediff.Com
www.Wikipedia.Org
 www.Google.Com
 www.Scribd.Com
 www.Managementparadise.Com

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