AGENCIES

PREPARED BY
 ABDUL MOEED SYED
PRANAV K R
 CONTENTS
• INTRODUCTION
• INDIGENOUS BANKERS AND MONEY LENDERS
• PUBLIC DEPOSITS
• COMMERCIAL BANKS
– WEAKNESSES IN SMALL SCALE UNITS
– ATTITUDE OF BANKS

• STATE FINANCIAL CORPORATIONS

• INDUSTRIAL CO-OPERATIVES
• OTHER INSTITUTIONS

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 INTRODUCTION
• A business or organization providing a particular service on behalf of another
business, person, or group.
• Agencies providing funds to small scale industries in India. The agencies are:
1. Indigenous bankers and money lenders 
2. Public deposits 
3. Commercial banks 
4. State financial corporations 
5. Industrial co-operatives 
6. Other institutions.

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 INDIGENOUS BANKERS AND MONEY LENDERS
• Indigenous bankers and money lenders are an important source of finance for small
scale sector.
• Because of complex procedures and security requirements of banks, small
entrepreneurs have to borrow from money lenders etc.
• These lenders provide funds generally for short periods i.e. working capital needs.
• Their procedures of lending are simple and flexible but interest rates are excessive.
• The loans are given as and when needed by the borrower and amount of security
demanded differs from borrower to borrowers.

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 INDIGENOUS BANKERS AND MONEY LENDERS
• Money lending business is not an organised activity like other lending
agencies.
• They devise their own methods and procedures for giving loans.
• The rates of interest to be charged also vary.
• The reputation of the borrower is considered while fixing various terms and
conditions.
• The expansion of banking sector and lending by various other agencies has
reduced the dependence of small entrepreneurs on money lenders.

12:27:54 PM
 PUBLIC DEPOSITS
• Another way of raising funds by industrial units is to get public deposits.
• These deposits can be raised without offering any security.
• The rate of interest to be offered on such deposits should be higher than that
offered by commercial banks on time deposits.
• The small scale units generally get deposits from the employees. These workers
sometimes leave some part of their earnings with the concern as deposit.
• These are like recurring or periodic time deposits. The units collect only small
amount in this way. Moreover, workers may get back these deposits after short-
periods only.
• So public deposits do help in raising some funds but it is not a significant source in
small scale-sector.

12:27:54 PM
 COMMERCIAL BANKS
• Commercial banks are the most important source of short-term financial needs.
• The major portion of working capital loans of industrial sector are provided by
commercial banks.
• They provide a wide variety of loans to meet specific requirements. The banks provide
facilities such as loans, cash credits, overdrafts, and purchasing and discounting of bills.
• But, the commercial banks have not been helping small scale industries to the extent it
was required.
• This was mainly due to two reasons:
(a) Weaknesses in small units, and
(b) Attitude of commercial banks.

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 WEAKNESSES IN SMALL SCALE UNITS
• Small scale units do not have enough funds of their own. It implies that they acquire
much less assets with their own funds.
• Thus, the units are not in a position to offer sufficient securities required by banks for
grant of loans.
• As the demand of banks for securities is not met, it results into lesser grant of loans and
under financing of units.
• Further, the demand for products of small scale units remains fluctuating.
• The scarce inputs like raw material, etc. are not available sometimes in required quantity.
• These factors lead to unstable income and small scale units are not able to stand by to the
strict schedules of payments.
• Thus, the weaknesses of small scale industries do not allow them to make use of
financial resources of commercial banks.

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 ATTITUDE OF BANKS
• The commercial banks have a inflexible and unfavourable attitude towards small
units.
• Their traditional lending policies do not allow them to accept less securities for
giving loans to small scale units.
• Banks even demand additional securities in the form of guarantee securities to protect
their loans.
• Small units are unable to satisfy the bankers because of their limited financial base.
• The resources available with banks for small-scale sector are limited in relation to
demand for money in the market. The losses suffered by banks in lending to small
units also discourage them to extend more credit to this sector. These banks usually
prefer large-scale sector as compared to small scale sector.

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 STATE FINANCIAL CORPORATIONS
• The state financial corporations were set up with a view to provide financial
assistance to small and medium scale industries.
• At present there are 19 such corporations working in different states. These provide
them loans to medium and small-scale units at the regional level.
• Besides sanctioning loans and advances to industrial concerns these corporations
guarantee loans raised by industrial concerns; underwrite the issue of stocks, shares,
bonds in connection with purchase of capital goods in India.
• These corporations also act as agents of the central government or state government
in respect of any business with an industrial concern in respect of loans sanctioned.

EXAMPLE
9:51:40 AM Telangana State Cooperative Bank Limited
 INDUSTRIAL CO-OPERATIVES
• Industrial co-operatives are playing an important role in financing village and cottage
industries in India.
• Through co-operatives small scale units can utilise financial assistance from the
government and also guidance from training centres.
• In rural areas co-operatives have proved very useful to small business units.
• The co-operatives get funds from financial institutions at concessional interest rates
and extend both long-term and short-term loans to small scale units.

EXAMPLE
VIJAYA DAIRY
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 OTHER INSTITUTIONS
• There are a number of exclusive institutions for helping the development of small
scale sector.
• National Small Industries Corporation (NSIC),
• State Small Industries Development Corporations (SSIDC’s)
• NSIC was set up in 1955 for helping the small sector. It arranges supply of machinery
under hire-purchase scheme and is also empowered to underwrite and guarantee
loans from banks and similar institutions for small units.
• SSIDC’s at the state level also help in supplying machinery on hire-purchase basis
and also help in getting rare raw materials.

EXAMPLES
9:57:06 AM COMMISSIONARATE OF INDUSTRIES, MoMSME, Etc.
 DISCUSSIO
N
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 THANK YOU
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