A Study on New MSMEs Products and its Financing of Vijaya Bank

Transcription

1 33 A Study on New MSMEs Products and its Financing of Vijaya Bank Srinivas K T, Associate Professor, CIMS-B School, Jayanagara, Bangalore ABSTRACT Worldwide, the micro and small enterprises (MSEs) have been accepted as the engine of economic growth and for promoting equitable development. In India, the sector is generally referred to as the Micro, Small and Medium Enterprises. MSMEs are playing a pivotal role in the overall industrial economy of the country. In recent years the MSME sector has consistently registered higher growth rate compared to the overall industrial sector. The major advantage of the sector is its employment potential at low capital cost. In this background study is choose to know the new MSME products and financing of MSME by Vijaya Bank in Bangalore north regional office. The Present study found that Vijaya bank is offering more than seven schemes to MSMEs sectors. From the data collection it is found that from last three years Vijaya bank(ro) north, Bangalore financed and crore to micro manufacturing and service sectors respectively And crore to small manufacturing and service sectors respectively and crore to medium enterprises. Keywords MSMEs (Micro, Small and Medium Enterprises), RFD INTRODUCTION: The development of the micro, small and medium enterprises (SME) sector is on the priority of Government Agenda. As per the Results-Framework Document (RFD) for Ministry of Micro, Small and Medium Enterprises ( ), the Mission of the government is to Promote growth and development of globally competitive Micro, small and Medium Enterprises, including Khadi, Village and Coir industries, in cooperation with concerned Ministries / Departments, State Governments and other stakeholders by providing support to existing enterprises and encouraging creation of new enterprises. To Endeavour to achieve a cumulative growth of 40%-50% in the number of registered enterprises by the end of 12th Plan and enhance this sector's contribution to GDP from the present 8% to 10% by the end of 12th Plan. The role of micro, small and medium enterprises (MSMEs) in the economic and social development of the country is well established. As per the Report of the Working Group on Micro, Small and Medium Enterprises (MSMEs) Growth for 12th Five Year Plan ( ), the sector accounts 45% of the manufacturing output and 40% of total exports of the country. MICRO, SMALL & MEDIUM ENTERPRISES: In accordance with the provision of Micro, Small & Medium Enterprises Development (MSMED) Act, 2006 the Micro, Small and Medium Enterprises (MSME) are classified in two Classes: (a) Manufacturing Enterprises: The enterprises engaged in the manufacture or production of goods pertaining to any industry specified in the first schedule to the industries (Development and regulation) Act, 1951). The Manufacturing Enterprise is defined in terms of investment in Plant & Machinery. (b) Service Enterprises: The enterprises engaged in providing or rendering of services and are defined in terms of investment in equipment. The limit for investment in plant and machinery / equipment for manufacturing / service enterprises, as notified, vide S.O. 1642(E) dtd are as under: Manufacturing Sector Enterprises Micro Enterprises Small Enterprises Medium Enterprises Service Sector Enterprises Micro Enterprises Small Enterprises Medium Enterprises OBJECTIVES OF MSMEs: Investment in plant & machinery Does not exceed twenty five lakhs rupees More than twenty five lakhs rupees but does not exceed five crore rupees More than five crore rupees but does not exceed ten crore rupees Investment in equipments Does not exceed ten lakhs rupees: More than ten lakhs rupees but does not exceed two crore rupees More than two crore rupees but does not exceed five core rupees 1. Creation of greater employment opportunities and increased output, income and standards of living.

2 34 2. Meeting a substantial part of the economy s requirements for consumer goods and simple producer goods. 3. Provides employment and a steady source of income to the low-in-come groups living in rural and urban areas of the country. 4. Provides substitutes for various industrial products now being imported into the country 5..Improves the quality of industrial products manufactured in the cottage industry sector and to enhance both production and exports. 6. Encourage market forces, through competition, to achieve higher operating standards 7. Elimination of economic backwardness of rural and underdeveloped regions in the country MSMEs have been established in almost all-major sectors in the Indian industry such as: Food Processing, Agricultural Inputs, Chemicals & Pharmaceuticals, Engineering; Electrical, Electronics, Electro-medical equipment, Textiles and Garments, Leather and leather goods, Meat products, Bio-engineering, Sports goods, Plastics products etc BANK PROFILE: Vijaya Bank was established by Shri. Attavara Balakrishna Shetty at Bunts Hostel in Mangalore on October 23, 1931.Since it was established on Vijayadashami Day, it was named Vijaya Bank. The objective was to promote banking habits, thrift and entrepreneurship among the farming community of Dakshina Kannada district in Karnataka State. The bank became a scheduled bank in Vijaya Bank steadily grew into a large All India bank; with nine smaller banks merging with it during The bank was nationalized on 15th April Vijaya Bank boasts of being one of the few banks which has undertaken the principal membership of VISA International and MasterCard International. Vijay Bank has been constantly focusing on technological up gradation. Vijaya Bank grew steadily by merging nine smaller banks into it between Shri. Mulki Sunder Ram Shetty, who was the Chief Executive of the bank, is largely credited with these mergers. The bank was nationalized on April 15, Currently, Vijaya Bank employs 12,500 people. The Bank has recently recruited young workforce to cope up with the changing banking scenario & to compete with the growing private sector & foreign banks functioning in the country. NEW MSME PRODUCTS OF VIJAYA BANK: 1. Vijaya Vidya Vahini: The transportation of students from schools/colleges is identified as a separate important segment to cater to the need of this segment a separate scheme for the benefit of the entrepreneurs who are engaged in the service of facilitating the transport of students /employees has been envisaged.v-vidya Vahini Loan Scheme: is a tailor made loan scheme for entrepreneurs who are engaged in the service of facilitating the transport of Students/Employees and having a tie up arrangement with the Schools/Colleges/ Universities / Educational Institutions with many attractive features and as such we expect branches to popularize the scheme to increase our retail lending portfolio. This scheme which would give an edge to the field functionaries to compete in the market as this is a collateral free loan, and would be covered under CGTMSE. 2. Vijaya Dhaanya Rice Mill: Rice is the basic food item of India which is consumed by almost 90% of the huller type thus in order to upgrade the plant and machinery and to the financial requirement of the existing and new rice mills the bank has come out with a new loan scheme for rice mills.v-dhaanya Rice Mill Loan Scheme: is a tailor made loan scheme for Rice Mill Entrepreneurs. The scheme is having attractive features & branches are expected to popularize the scheme to increase SME portfolio. 3. Vijaya Dhanvantari: There is a need for addressing the requirements of doctors/medical practioners who would like to set up clinic, nursing home, hospitals and radiological laboratories and with a desire to establish their practice independently. The professional doctors segment provides an opportunity for the bank to garner SME business realizing the need, the bank has come out with a new loan scheme for doctors/medical practioners. V-Dhanvantari Loan Scheme: is a tailor made loan scheme for Registered Medical Practitioners who are engaged in the medical service. The scheme is having many attractive features and as such we expect branches to popularize the scheme to increase our SME Portfolio.. 4. Vijaya Restaurant: Increasing urbanization and rising disposable income are characteristics that are common across several emerging economics particularly in Asia. However,the pace at which this taken place in India in the last few years is likely to continue over the next decade and will outpace most other economies in the region. India is producing a large number of young people entering the job market compared to other Asian economies the number of working adults in the country is using at a fast pace.this has resulted in demographic shift which has increased the food service sector in India. Thus, the

3 35 restaurant is an important component of our nation s economy and employment opportunities in this sector would continue to grow in the future as d direct result of the demographic changes taking place. The bank has introduced separate scheme for the target group of restaurants and fast food chains. V-Restaurant Loan Scheme: is a tailor made loan scheme for the target group of owners of restaurant and fast food chains and the field functionaries would be able to compete with other public sector banks to bring the retail trade customers to our ford the scheme is having many attractive features and as such we expect branches to popularize the scheme to increase our SME portfolio. 5. Vijaya Dhaanya Daal Mill : India is one of the major pulse growing countries in the world.pulse processing industry helps in processing the law pulse into edible form the processing of pulses is by dehusking and splitting both dry and wet milling processes are employed.the traditional methods of dehusking and splitting a grain cause huge waste and yield to the extent of 65%The productivity of the Daal mill can be increased by modernization.in this context the need to facilitate financing of daal mill arises and the banks has come out with a new loan scheme. V-Dhaanya Daal Mill Loan Scheme: It is a tailor made loan scheme for Daal Mill Entrepreneurs. The scheme is having attractive features & branches are expected to popularize the scheme to increase SME portfolio 6. Vijaya Vyapar: Traders act as a vital link between manufactures of goods / commodities and the final consumers there is need for addressing the financial requirement of this segment, which provides an opportunity for the bank to garner big volume of business.as per the feedback received from the field functionaries, the department proposes a new scheme to insure hassle free finance to traders. The bank has introduced a separate scheme for target group of trading company. V-Vyapar Loan Scheme: is a tailor made loan scheme for the target group of trading community.the scheme has been formulated keeping in view that,trading community needs quick and timely financial support an simple terms. The scheme is having many attractive features and as such we expect branches to popularize the scheme to increase our retail portfolio. 7. Vijaya Flour Mill: Roller flour mill serve the purpose of processing wheat to convert it into flour.the plant will have facility to produce Maida, suji, Atta, these products will be sold as per the guidance issued by food and civil suppliers department of concerned state.thus milling is an imperative physical function involved in conventions.wheat grains are the seed of the wheat plant, which is to grow in kinds of soil and under widely differing climate conditions. To meet the financial needs of existing and new roller mills the bank has come out with new loan scheme. V-Flour Mill Loan Scheme: is a tailor made loan scheme for existing and new roller flour mills and the scheme is having many attractive features hence the field functionaries to popularize the scheme to increase our MSE portfolio. OBJECTIVES OF THE STUDY: 1. To study the new products offered by the Vijaya bank to MSMEs sector 2. To identify the financial assistance of the Vijaya bank to MSMEs Scope of the study and data collection: The main source of data for this study is the past records prepared by Vijaya bank (Ro) north Bangalore. The yearly progress reports on outstanding loans of MSME of the year 2011 to 2013 are used for the purpose of analysis. The present study is confined to financial assistance provided by Vijaya bank and data will be analyzed based on the information provided by Vijaya bank (RO) North Bangalore. DATA ANALYSIS: Table No: 1 Advances to MSMEs Vijaya Bank (RO) North, Bangalore (Rs. In crore) Micro Micro Small Small Sl.N Year o Manufacturing Service Manufacturing Service Total Source: Annual Reports Medium enterprises INTERPRETATION: The above table depicts the financial assistance of Vijaya bank (RO) North, Bangalore to MSMEs sectors. Micro and Small manufacturing enterprises being a priority sector for lending as per bank guidelines. From the above table it can observe that Micro manufacturing and micro service sector received and crore

4 36 respectively from last three years, it is also noticed that lending to the above said sector is increasing year by years for the promotion of enterprises. Small manufacturing and small service sector received and crore respectively from last three years, even for this sector also lending is increasing year by year. Medium enterprises being a non-priority sector for lending as per bank guidelines. The study reveals that there is a fluctuating trend in the advances given to medium enterprises. It received only crore from last three years. 250 Graph No: 1 Graph showing Advances to MSMEs Micro Micro Service Small Manufacturing Small Service Medium enterprises INFERENCE: The above graph shows advances to MSMEs by Vijaya bank (Ro) North, Bangalore. It can inferred that advances to MSMEs are increasing trend year by year to promote Micro, Small and Medium enterprises for balanced regional development. Table No: 2 Non-performing Asset of MSME at Vijaya bank (RO) North Bangalore S.No Year Number of accounts Total INTERPRETATION: Amount (Rs. in crore) The above table depicts the Non-performing assets Vijaya bank (Ro) North, Bangalore from MSMEs sectors. It can observe that number of borrowers who not repaying within due date to bank is also increasing along with amount Crore of amounts become non-performing assets from last three years. So this is the need of the day to Vijaya bank to take proper measures to reduce NPA in MSME sectors. Because NPA affects the profitability of the bank. FINDINGS OF THE STUDY: 1. The total advances are increasing in the Priority Sector every year as compared to the base year i.e The study reveals that there are more advances sanctioned to micro and small enterprises by Vijaya bank 2. The Growth rate of Priority Sector with the aid of advances is positive 3. The advance to medium enterprises is being fluctuating compared to base year The study reveals that there are fewer advances towards medium enterprises compared to that of micro and small. 4. Vijaya bank supports the micro, small, and medium enterprises. Where it helps cottage industries in increasing their production. Where there is high demand for such products especially in abroad

5 37 countries. This implies that MSME indirectly helps in increasing national income. 5. Support and guidance provided by nationalized bank like Vijaya bank has enhanced opportunities for entrepreneurs. 6. The NPAs towards MSME sector of Vijay bank (RO) north Bangalore is significantly high that has become one of the reasons that bank can take great concern before lending to these sectors. 7. Because of the higher NPAs in Small Scale Industries most of the bank restrict their lending s only to meet the norms of RBI. 8. National priorities are focused by Vijaya bank to help MSME industries and to uplift MSME by reducing the rate of interest. 9. CTGSME under this scheme parties are not required to offer any collateral security of the immovable property and also not required to offer any other guarantee. SUGGESTIONS: 1. The bank should organize many Seminars and Workshops for creating a relationship and increasing awareness of financing with micro, small and medium enterprises. 2. Many of the rural areas in country are not facilitated with basic infrastructure. Due to this reason banks are not coming forward and lending advances to this sector this is causing high cost to entrepreneurs to produce goods and to start their business as well. So measures and plans on facilitating such areas should be focused. 3. The bank should be in constant touch with the borrowers so that their attitude towards the bank does not change. This will motivate the borrowers to repay. 4. There should be proper control system by the head office on the advances granted by the branches. 5. Not only for startup businesses but also for expansion and growth of existing entities deepen the customer relationship. 6. The bank should appoint a regional nodal officer to look after the loans provided to MSME sector, to analyze and provide necessary inputs to the MSME unit to help them to repay their loans to bank. This will be helpful to reduce NPA of Vijaya bank. 7. The government should also take necessary steps to promote the MSMEs product in the market by arranging trade fair, export shows etc. so that the revenue of MSMEs can increase and they can discharge their liability as soon as possible. CONCLUSION: Worldwide, the micro small and medium enterprises (MSMEs) have been accepted as the engine of economic growth and for promoting equitable development. The major advantage of the sector is its employment potential at low capital cost. In India too, the MSMEs play a pivotal role in the overall industrial economy of the country. In a developing country like India where we have an immense presence of unskilled labour, to utilize such labour MSME is the best way; through opening of labour intensive units. The country s main contribution towards GDP is of agriculture which is also dependent on natural climate in this situation Micro, Small and Medium enterprises provide diversity for the contribution to GDP of the country. In recent years the MSME sector has consistently registered higher growth rate compared to the overall industrial sector. With its agility and dynamism, the sector has shown admirable innovativeness and adaptability to survive the recent economic downturn and recession. There is also need to cope up with the world market, Where MSME can play a major role in the field of export and contribute the country to achieve its balance of payment. It can be finally conclude that although government is continuously supporting the MSMEs to grow. At the present situation considering the exposure level of the entrepreneurs in the country should focus on the lending of banks which are one of the traditional and trusted ways to finance the business. In this scenario Vijaya bank MSME advances is a blessing in disguise because is not only concentrating on different categories in order to uplift and strengthen India to move on the path of strong economic development.this shows that the bank offers many kind of benefits and support to the new entrepreneurs through launch of new MSME products. REFERENCE: 1. Agyapong Daniel (2010) Micro, Small and Medium Enterprises Activities, Income Level and Poverty Reduction in Ghana International Journal of Business & Management, Vol. 5 Issue 12, Pp , 2. Lokhande, Madhavi A. (2011) Financial Inclusion: for Micro, Small and Medium Enterprises., Vol. 9 Issue 2, Pp39-50, 3. Macaws, Carrington M Seymour, Lisa F (2012) A Review for Small and Medium-Sized Enterprises.Journal of Innovation Management in Small & Medium Enterprises; Pp1-15, 4. Annual progress report of MSME