Summer Training Project Report on

SUGGESTIONS TO STIMULATE FINANCING UNDER

MICRO & SMALL ENTERPRISES

Undertaken at

FOR THE PARTIAL FULFILLMENT OF THE REQUIREMENT

FOR THE AWARD OF

MASTER’S IN BUSINESS ADMINISTRATION

UNDER THE SUPERVISION OF: SUBMITTED BY:

Mr, Pretam Sethi AARUSHI MATHUR

MBA - II SEM

SWAMI KESHVANAND INSTITUTE OF TECHNOLOGY, MANAGEMENT &

GRAMOTHAN

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 ACKNOWLEDGEMENT

“Successful passage and outcome of every work comes with dedication,

determination and team work. All these turn futile in the absence of a
visionary guidance”

The internship opportunity i had with Bank of Baroda was a great chance for
learning and a profession development. Therefore I consider myself as a very
lucky individual as i was provided with an opportunity to be a part of it. I am also
grateful for having a chance to meet so many people and professional who led
me through this internship period.

Bearing in mind in previous I am using this opportunity to express my deepest

gratitude an special thanks to Mr. PREETAM SETHI, Chief Manager, who in
spite of being extraordinary busy with his duties, took time to hear, guide and
keep me on the correct path and allowing me to carry out my project at their
esteemed organization and extending during the training. I would also like to
thanks and warm regards to Mrs. Ritu Bhagchandani ,Joint Manager who
supported to through out the course of my project. I convey my special thanks
to Mr. Nitin Bakliwal (Manager) Mrs. Megha Gupta(Manager), without their
wholehearted co-operation my training wouldn't have been successful. for their
careful and precious guidance which were extremely valuable for my study both
theoretically and practically.

I am indebted to all the faculty members, who have disciplined my mode of work
and have been pillars of great strength to me. The love and affection of my
beloved parents that has brought me to this stage are the most valuable
ingredients of my life. I wish convey my love and respects to them. Finally I
convey my heartfelt thanks to friends and all my well-wishers.

I perceive this opportunity as a big milestone in my career developmen.I will

strive to use gained skills and knowledge in the best possible way and i will
continue to word on their improvement in order to attain desired career
objectives.

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 PREFACE
The foundation idea for this work rooted in the intent to work on the criteria of
assessing a company’s financial position before sanctioning loan. As it includes
all practical application of financial aspects viz. Financial Ratios, Fund Flow
Statement, B/s, P&L A/c, Cash Flow Statement etc. So to gain all practical
knowledge in the SME, this project is undertaken.

For preparing the Project Report, I was given various loan proposals to avail the
necessary information. The blend of learning and knowledge acquired during my
practical studies at the company is presented in this Project Report.

Various Inspections in the various industries were also done which gave
exposure related to checking of security and other documents given by the
borrower party.

The rationale behind preparing the Project Report is to study the credit appraisal
basics, history and development of MSME’s ,major players in MSME’s ,
contribution of MSME’s in the growth of Bank &economy and its functional areas
like relationship managing, credit managing, marketing etc.

The Project Report starts with the introduction & history of bank of Baroda, basic
concepts of MSME’s, importance of MSME’s and suggestions to support
financing under micro and small enterprises..

The information presented in this Project Report is obtained from sources like
Bank Personnel, Bank websites, other websites, Bank reports, and Other
literature works.

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 DECLARATION

I hereby declare that the project report on “ Suggestions to stimulate

financing under Micro and Small enterprises " is my original work as a part of
the summer training undertaken at SME department of Bank of Baroda, Vaishali
Nagar branch , Ajmer region.

All the information contained in the report has been obtained from the primary
research and data available and searching through internet and books which
provided in depth knowledge about the topic undertaken.

I also declare that all the data presented is true to best of my knowledge which is
fully and specifically acknowledged.

AARUSHI MATHUR

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 Executive Summary

The Small and Medium Enterprises (SMEs) play a vital role in the industrial
development of any country. The importance of the SME sector is well
recognized worldwide due to its significant contribution to gratifying various
socio-economic objectives, such as higher growth of employment, output,
promotion of exports and fostering entrepreneurship.

Outlook towards the SMEs is very much important to strengthen it. The premises
for such an outlook that is essential for Indian SMEs to combat the challenges
ahead, are outlined below:

a) SMEs continued to be the thrust area for government policies.

b) The growing economy and the tremendous market potential of the country
promise well for the sustained growth of SMEs in a country.
c) Avenues for employment and decentralized industrial development.
d) With the enactment of MSME Act, the sector is set to emerge as the most
vital contributor to the national economy.
e) SIDBI as the apex institution will continue to play its key role in facilitating
timely and adequate credit besides meeting the developmental needs of
the sector.
The constraints come across by the SMEs in India to be export competitive
include product reservations , regulatory hassles- both at the entry and exit
stages , insufficient finance at affordable terms , inflexible labor markets and
infrastructure related problems- like high power tariffs, and insufficient export
infrastructure.

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 CONTENTS

Acknowledgement 2

Preface 3

Declaration 4

Executive Summary 5

1. Micro, Small & Medium Enterprises – Introduction 8-29

2. Introduction to Bank of Baroda 35-47

3. Bank of Baroda – SME Loan Factory 49-72

4. Research Methodology 74-75

5. Data Analysis and Interpretation 77-85

6. Findings of the research 86

7. Suggestions 87-89

8. Limitations 90

9. Conclusion 91-92

10. Learning during the Training 94-113

11. Summary 114

12. Bibliography 115

13. Questionnaire 116-119

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MSME–Micro,
Small and
Medium
Enterprises

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The Micro Small and Medium Enterprises (MSMEs) sector is a major contributor
to the socio-economic development of the country. In India, the sector has
gained significant importance due to its contribution to Gross Domestic Product
(GDP) of the country and exports. The sector has also contributed immensely
with respect to entrepreneurship development especially in semi-urban and rural
areas of India.

The definition of MSME was altered, and was announced by the Government of
India on 13th May 2020. Given below is the new definition of MSME:

 The criteria for MSME classification have been changed from Investment to
Investment and Annual Turnover.
 The Government of India also increased the investment limit for classification
of MSME units. This means, that more firms and enterprises can now avail
MSME schemes.
 Criteria for the classification of MSMEs is now uniform for Manufacturing and
Services Enterprises which is given below in the table below:

Govt. of India vide Gazette notification S.O. 2119(E) dated 26.06.2020

(Annexure-I) has notified revised criteria for classifying the enterprises as
Micro, Small and Medium enterprises and the revised definition is effective
from 1st day of July 2020

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Classification Micro Small Medium

 Investment does not  Investment doe  Investment doe  Investment doe

exceed Rs.1 crore and s not s not s not
Turnover does not exceed Rs.1 exceed Rs.10 exceed Rs.20
exceed Rs.5 crore crore and crore and crore and
Turnover does Turnover does Turnover does
not not not
exceed Rs.5 exceed Rs.50 exceed Rs.100
crore crore crore

Micro, Small, and Medium Enterprises can avail MSME loans for the expansion
of businesses or for setting up new enterprises. The interest rates on MSME
loans start at 7.65% p.a. The loan amount sanctioned ranges from as low as
Rs.50,000 and can go up to a few crores. On the basis of the sanctioned loan
amount, the loan repayment tenure can go up to 15 years.

Manufacturing Enterprises i.e. enterprises engaged in the manufacture or

production, processing or preservations of goods with investment in Plant &
Machinery as stated above.

Service Enterprises i.e. Enterprises engaged in providing or rendering services

and whose investment in equipment as specified above. (Original cost excluding
Land & Building and furniture, fittings and other items not directly related to the
service rendered or as may be notified under the MSMED Act, 2006).

The Ministry of Micro, Small and Medium Enterprises 26th June 2020 regarding
revision of definition of MSMEs Apart from the old criteria of categorization of
MSMEs on the basis of investment in Plant and Machinery/Equipment, an
additional criterion This revision is expected to pave way for strengthening and

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growth of the MSMEs. Particularly, the provision of excluding the exports from
counting of turnover will encourage the MSMEs to export more and more without
fearing to MSME enterprises. Secondly, the difference between manufacturing
and services sector has been removed and now both are at same level of
treatment. Now an enterprise is being classified as a micro, small or medium
enterprise basis of the following criteria,

A. Micro enterprise: where the investment in plant and machinery or

equipment does not exceed one crore rupees and turnover does not
exceed five crore rupees;

B. Small enterprise: where the investment in plant does not exceed ten
crore rupees and turnover does not exceed fifty crore rupees; and

C. Medium enterprise: where the investment in plant and machinery or

equipment does not exceed fifty crore rupees and turnover does not
exceed two hundred and fifty crore rupees.

To facilitate the procedure of MSME registration in accordance with the revised

MSME definition, Ministry of MSME launched a new portal
([Link] Udyam Registration Portal is a unified portal
with registration process free of cost paperless and digital. The portal is aimed at
reducing transaction time and costs for entrepreneurs and to promote signed
MoU with CBDT for data exchange In order to understand MSME landscape
based on information system for 10 lakh MSMEs during registration analysis has
been conducted by MSME. The objective of the analysis is to create better
understanding of MSMEs among different stakeholders. Office of Development
Commissioner Ministry of Micro, Small and Medium of Micro, Small and Medium
Enterprises has issued a notification dated revision of definition of MSMEs and
process of registration Apart from the old criteria of categorization of MSMEs on
the basis of investment in Plant and Machinery/Equipment, an additional criterion

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of turnover has been included This revision is expected to pave way for
strengthening and growth of the MSMEs. Particularly, the provision of excluding
the exports from counting of turnover will encourage the MSMEs to export more
and more without fearing to forgo the benefits Secondly, the difference between
manufacturing and services sector has been removed and now both are at same
level of treatment. classified as a micro, small or medium enterprise basis of the
following criteria, namely: -- where the investment in plant and machinery or
equipment does not exceed one crore rupees and turnover does not exceed five
crore where the investment in plant and machinery or equipment does not
exceed ten crore rupees and turnover does not exceed fifty crore where the
investment in plant and machinery or equipment does not exceed fifty crore
rupees and turnover does not exceed two To facilitate the procedure of MSME
registration in accordance with the revised MSME definition, Ministry of MSME
launched a new portal –Udyam Registration Portal [Link]) on
1st July 2020. is a unified portal with registration process portal is aimed at
reducing transaction time and costs for entrepreneurs and to promote Ease of
Doing Business. Ministry of MSME has also with CBDT for data exchange.
understand MSME landscape based on information available in the database
MSMEs during registration on the portal since 1st JULY,2020 an analysis has
been conducted by Office of Development Commissioner, Ministry The objective
of the analysis is to create better understanding of MSMEs among different
stakeholders. issued a notification dated and process of registration. Apart from
the old criteria of categorization of MSMEs on the basis of investment in has
been included. This revision is expected to pave way for strengthening and
growth of the MSMEs. Particularly, the provision of excluding the exports from
counting of turnover will forgo the benefits of Secondly, the difference between
manufacturing and services classified as a micro, small or medium enterprises
on the

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 composite criteria of investment and turnover for classification

i. A composite criterion of investment and turnover shall apply for classification of

an enterprise as micro, small or medium.
ii. If an enterprise crosses the ceiling limits specified for its present category in
either of the two criteria of investment or turnover, it will cease to exist in that
category and be placed in the next higher category but no enterprise shall be
placed in the lower category unless it goes below the ceiling limits specified for
its present category in both the criteria of investment as well as turnover.
iii. All units with Goods and Services Tax Identification Number (GSTIN) listed
against the same Permanent Account Number (PAN) shall be collectively treated
as one enterprise and the turnover and investment figures for all of such entities
shall be seen together and only the aggregate values will be considered for
deciding the category as micro, small or medium enterprise.

Calculation of investment in plant and machinery or equipment

iv. The calculation of investment in plant and machinery or equipment will be linked
to the Income Tax Return (ITR) of the previous years filed under the Income Tax
Act, 1961.
v. In case of a new enterprise, where no prior ITR is available, the investment will
be based on self-declaration of the promoter of the enterprise and such
relaxation shall end after the 31st March of the financial year in which it files its
first ITR.
vi. The expression ‘’plant and machinery or equipment’’ of the enterprise, shall have
the same meaning as assigned to the plant and machinery in the Income Tax
Rules, 1962 framed under the Income Tax Act, 1961 and shall include all
tangible assets (other than land and building, furniture and fittings).
vii. The purchase (invoice) value of a plant and machinery or equipment, whether
purchased first hand or second hand, shall be taken into account excluding

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 Goods and Services Tax (GST), on self-disclosure basis, if the enterprise is a
new one without any ITR.
viii. The cost of certain items specified in the Explanation I to sub-section (1) of
section 7 of the Act shall be excluded from the calculation of the amount of
investment in plant and machinery.

Calculation of turnover

ix. Exports of goods or services or both, shall be excluded while calculating the
turnover of any enterprise whether micro, small or medium, for the purposes of
classification.
x. Information as regards turnover and exports turnover for an enterprise shall be
linked to the Income Tax Act or the Central Goods and Services Act (CGST Act)
and the GSTIN.
xi. The turnover related figures of such enterprise which do not have PAN will be
considered on self-declaration basis for a period up to 31st March, 2021 and
thereafter, PAN and GSTIN shall be mandatory.

2.5 In case of an upward change in terms of investment in plant and machinery

or equipment or turnover or both, and consequent re-classification, an enterprise
will maintain its prevailing status till expiry of one year from the close of the year
of registration. In case of reverse-graduation of an enterprise, whether as a result
of re-classification or due to actual changes in investment in plant and machinery
or equipment or turnover or both, and whether the enterprise is registered under
the Act or not, the enterprise will continue in its present category till the closure of
the financial year and it will be given the benefit of the changed status only with
effect from 1st April of the financial year following the year in which such change
took place. Other aspects relating to registration of enterprises, grievance
redressal, etc. are mentioned in the Gazette Notification S.O. 2119 (E) dated
June 26, 2020.

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3. The above instructions supersedes our earlier guidelines dated April 4, 2007,
except paragraph 6 relating to delayed payment to micro and small enterprises.

4. We advise you to initiate necessary action for reclassification of enterprises as

per the new definition w.e.f July 1, 2020 and issue necessary instructions to your
branches/controlling offices in this regard, at the earliest

Market Size

India has approximately 6.3 crore MSMEs. As per the MSME Ministry data, as of
May 16, 2021, the Udyam Registration portal registered 30,00,822 MSMEs,
which replaced the former process of filing for Udyog Aadhaar Memorandum
(UAM). Registered micro-enterprises stood at ~ 28 lakh (93%), followed by small
enterprises at 1.78 lakh (6%) and midsized enterprises at 24,657 (1%). The
Indian MSMEs sector contributes about 29% towards the GDP through its
national and international trade.
The BSE SME (small and medium enterprises) platform is expected to witness
>60 SMEs to enter the market in one year (2021-22) to bring up equity funds for
meeting their business requirements. The initial public offering (IPO) route
witnessed 16 SMEs enter the market; they raised Rs. 100 crore (US$ 13.74
million) in 2020. In June 2021, Bombay Stock Exchange (BSE) announced that it
has collaborated with Electronics and Computer Software Export Promotion
Council (ESC) to build awareness among small businesses and start-ups about
advantages of listing.
MSMEs are being encouraged to market their products on the e-commerce site,
especially through Government e-Marketplace (GeM), owned and run by the
government, wherefrom Ministries and PSUs (public sector undertakings) source
their procurement. As of June 25, 2021, GeM portal has served 6.87 million
orders worth Rs.116,291 crore (US$ 15.67 billion) from 2 million registered
sellers and service providers for 52,651 government buyers.

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Recent Developments:

In June 2021, Bombay Stock Exchange (BSE) announced that it has

collaborated with Electronics and Computer Software Export Promotion Council
(ESC) to build awareness among small businesses and start-ups about
advantages of listing.

 Owing to numerous revenue options, the key Indian telecom players,

including Vodafone Idea (Vi), Reliance Jio and Bharti Airtel, are focusing
on medium and small-scale enterprises (MSME) for digital services, over
established organisations that have fixed providers for network services.
 The BSE SME (small and medium enterprises) platform is expected to
witness >60 SMEs to enter the market in one year (2021-22) to bring up
equity funds for meeting their business requirements. The initial public
offering (IPO) route witnessed 16 SMEs enter the market; they raised Rs.
100 crore (US$ 13.74 million) in 2020.
 In May 2021, Emergency Credit Line Guarantee Scheme (ECLGS)
expanded ‘ECLGS 4.0’ for onsite oxygen generation, wider coverage of
ECLGS 3.0 and increase in tenor for ECLGS 1.0. In May 2021, the
sanctioned loan amount disbursed stands at Rs. 2.54 lakh crore (US$
35.09 billion), an increase of 53% from Rs. 165,886 crore (US$ 22.92
billion) in January 2021.
 In May 2021, IDBI Bank announced the introduction of its fully digitised
loan processing system, with >50 products for MSMEs and agriculture.
 In May 2021, BSE, a stock exchange platfom, collaborated with Dun &
Bradstreet Information Services India to establish an ecosystem for small
and medium enterprises for promotions and boosting growth.
 In May 2021, CSIR-CMERI handed over a technology for Oxygen
Enrichment Unit to two MSMEs to enhance the technology capabilities of
companies.

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  In May 2021, NI-MSME (the National Institute for Micro, Small and
Medium Enterprises, Hyderabad) signed an MoU with IIM Nagpur for
collaboration in the areas of MSME development, training, research &
consulting and entrepreneurship.
 In May 2021, Flipkart, through its financing programme, expanded benefits
for MSME sellers. Under the new financing programme, the sellers can
avail loan at an interest of 9% and raise credit for funds worth Rs. 5 lakh
(US$ 6.91 thousand) to Rs. 5 crore (US$ 690.84 thousand).
 In March 2021, Spoton Logistics announced customisable logistics
solutions for MSMEs. As part of this, the company has also enhanced its
logistics hubs in locations such as Hyderabad, Bengaluru, Calcutta, Delhi,
Ambala, Kochi, Chennai, Patna and Ranchi.
 In April 2021, the non-banking finance companies (NBFCs) requested the
Reserve Bank of India to extend the one-time restructuring scheme of
MSME advances till March 31, 2022, as these players are unable to revive
their businesses.
 In March 2021, the Ministry of MSME, through the Development
Commissioner (DC-MSME) implemented the Technology Centre Systems
Program (TCSP) to establish 15 new Technology Centres (TC). The
centres provide assistance to the industry predominantly MSMEs in
General Engineering, Automotive, Fragrance & Flavour and ESDM
sectors.
 In March 2021, the Finance Ministry allowed private retirement funds to
invest up to 5% in Category I & II AIFs regulated by SEBI; this will help
widen the fundraising options for MSMEs and expand the domestic pool of
capital
o Category 1 AIFs consists of infrastructure, venture capital, angel and
social venture funds. Category II AIFs covers funds where at least 51% of
the size can be invested in either infrastructure, SMEs, venture capital or
social welfare entities

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  In March 2021, MSME support and development organisation, National
Small Industries Corporation (NSIC) announced that they will assist
MSMEs working with the Agricultural and Processed Food Products
Export Development Authority (APEDA) across multiple areas
 The NSIC, through an MoU with APEDA, will help its MSME members in
exploring the export potential of their agricultural and processed foods
products. Additionally, APEDA members will get access to NSIC schemes,
which would help them address issues pertaining to technology adoption,
skills, product quality, and market access
 The relationship will also support promotion of green & sustainable
manufacturing technology for MSME clusters, enabling units to switch to
sustainable and green production processes and products
 In February 2021, Walmart's Vriddhi programme was extended to Uttar
Pradesh, with launch of an e-institute to facilitate small businesses in
granting access to skills and competencies across online and offline
platforms such as Flipkart's marketplace and Walmart's global supply
[Link] company stated that this new e-institute will benefit 50,000
MSMEs across the country to expand domestically and globally.

Statutory Bodies
MSME Ministry has four statutory bodies namely, Khadi and Village Industries
Commission (KVIC) who is responsible for promoting and developing khadi and
village industries for providing employment opportunities in rural areas, thereby
strengthening the rural economy, Coir Board in charge of promoting overall
development of the coir industry and improving living conditions of workers in this
industry, National Small Industries Corporation Limited (NSIC) responsible for
promoting, aiding and fostering growth of micro and small enterprises in the
country, generally on commercial basis, National Institute for Micro, Small and
Medium Enterprises, (NI-MSME) incharge of enterprise promotion and
entrepreneurship development, enabling enterprise creation, performing

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diagnostic development studies for policy formulation, etc. and lastly, Mahatma
Gandhi Institute for Rural Industrialisation (MGIRI) responsible for accelerating
rural industrialisation for sustainable village economy, attract professionals and
experts to Gram Swaraj, empower traditional artisans, encourage innovation
through pilot study/field trials and R&D for alternative technology using local
resources. New online system of MSME/Udyam Registration launched by the
Union MSME Ministry, w.e.f. July 01, 2020, successfully registered >1.1 million
MSMEs until November 2020. In June 2021, the Ministry of Micro, Small and
Medium Enterprises extended the validity of Udyog Aadhaar Memorandum from
March 31, 2021, to December 31, 2021.

Achievements in the Sector

The Ministry of MSME runs numerous schemes targeted at providing credit and
financial assistances, skill development training, infrastructure development,
marketing assistance, technological and quality upgradation and other services
for MSMEs across the country.

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Risks Faced by SME Units

isks

- 19 -
1. Distribution of Micro, Small and Medium Enterprises

800000 721096 80.0%

71.9%
700000 70.0%

600000 60.0%
7
500000 43532 50.0%
9357
400000 4.3% 40.0%
0.9%
Micro Small Un-Clasified
300000 2287 2 30.0%
Medium
Total Enterprises Percentage 22.8% 20.0%
200000
10.0%
100000 a

Figure 1 showcases
0 distribution of Micro, Small, and Medium enterprises in the country.0.0%
There are a
total of 10,02,757 registrations till end of October 2020. It may be seen that the most of registered
enterprises are Micro enterprises with a total of 7,21,096, which is 71.9% of total registrations.
Small enterprises with a total registration of 43,532
enterprises, share 4.3% of all registrations. Medium category registrations are only
9,357 (0.9%). 2,28,772 (22.8%) registrations are being verified and further classified. But as per the
category details received for 7,73,985 enterprises; shares of Micro, Small and Medium enterprises
are 93.17%, 5.62% and 1.21% respectively.

- 20 -
Turnover wise Trends for Micro Enterprises

600000
537307

500000

400000

101213
100000
34487 27707 23368 25402
300000
0
Up to 10 lakh More th n 10 lakh More than 25 lakh More than 50 lakh More than 1 C . to More than 2 Cr. to to 25
lakh a to 50 lakh to 1 Cr. 2 Cr. r 5 Cr.

200000

The above graph depicts turnover wise segregation of Micro enterprises. According to data, more than
5,00,000 micro units have turnover up to Rs. 10 lakh, whereas more than 25,000 micro units have
turnover between Rs. 2 Cr. to 5 Cr.

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IMPACT OF COVID -19 ON TIMES MICRO, SMALL, MEDIUM ENTERPRISES

Access to finance is a key constraint to the growth of micro and small businesses
across economies. Data from 119 developing countries shows that MSMEs
perceive access to finance as the most significant obstacle, which hinders their
growth. In India, where MSMEs account for about 99% of all enterprises,
comprising 63 million MSMEs across various industries and diverse geographic
locations, financing of MSMEs has been regularly identified as a priority amongst
India’s economic goals Even as the inancial infrastructure has improved over the
years, the access to finance for SMEs remains a challenge across countries.
MSMEs, particularly the micro and small businesses, face a funding gap, as they
generally have a harder time obtaining credit from formal financial institutions.
This is largely due to information asymmetry, lack of a previous credit history,
and formal documentation, etc, which leads to unwillingness of lenders to provide
financing to these borrowers. Even if they get financing, it typically takes time in
approval and requires hard collateral like movable property and other onerous
documentation ..

COVID -19 has had an unforeseen impact on the global economy. Although the
pandemic has affected firms of all sizes, but SMEs have been more vulnerable.
These smaller firms are typically more financially fragile and have smaller cash
buffers than their larger counterparts, making them less resilient to crises. A
recent survey by EY amongst 1000 MSME entrepreneurs highlighted that more
than 70% of the respondents were impacted during COVID-19 because of
reduced orders, loss in business, availability of raw and liquidity issues.

At the same time, the access to finance challenges has been exasperated for
these firms. As per RBI’s data, credit growth to micro and small industries

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decelerated to 0.5 per cent in March 2021 from 1.7 per cent a year ago. Despite
having multiple Central, State, Bank schemes targeting financial assistance,
availing credit from banks remains a pain point for all MSMEs.

Digitization of MSMEs and fintech ecosystem

In the online economy, the rapid development of digitization, automation,
processes, etc., has offered a promising potential to unlock the bottlenecks faced
by MSMEs. Historically, MSMEs have significantly low adoption of technology
such as use of online channels for sales, digital accounting, payment
transactions through multiple online channels or even for business
communication
The Government of India’s push towards digitization has been a significant
contributor in the growth of digital infrastructure. A case in point is the growth in
the number of POS terminals in India over the last 4 years from 1.4 million in
2016 to 4.43 million in 2020. Although digitization is an ongoing process, the
COVID-19 pandemic has compelled an even larger segment of MSMEs to
transform their businesses through digital means. Beyond providing greater ease
and convenience for their customer .. improving reconciliation, & accessing new
markets, MSMEs are creating a large digital footprint of financial and non-
financial data.

At the same time India’s fintech ecosystem continues to evolve and push
traditional boundaries. These entities have removed administrative layers to
make transactions more effective, making delivery of loans more decentralized.
More collaboration between Fintech and traditional lending institutions can help
spur world-class infrastructure and capabilities.

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Power of Alternate Data

It is well known that in the absence of collateral, under-writing the MSME

customers often entails higher operating cost for banks. However, smaller firms
have fewer assets to provide as collateral for loans. A World Bank report further
suggests that 80% of these firm’s capital stock consist of movable assets and are
less likely to have access to fixed assets like plot or building. Policy makers have
been advocating and nudging financial institutions to institute frameworks that
can lower collateral requirements for SME borrowers.

Many fintechs and other financial institutions are utilizing technological tools to
conduct online due diligence of MSMEs by analysing data from several sources
using automated algorithms and managing risks more effectively. Beyond the
transaction and financial data, this also includes social & mobile data, utilities
data, macro data, and other environmental data, and generating a
comprehensive credit score for the customer leveraging AI/ML based risk
models. This has the potential to move from assessing physical collateral to
assessing information collateral.

Re-imagining financing structures

In recent years, policymakers have also increasingly begun to push innovative

lending models for MSMEs and believe that some of the structural barriers can
be addressed by bringing greater innovation in loan and product structures. Cash
flow-based lending models envisage a shift in bank’s appraisal system from
parameters such as balance sheets, tax returns, credit bureau to evaluation
based on historical cash flows and repayments predicated on future cash flows.
Such structures are highly Suitable for MSMEs with volatile cash flows &
seasonality in business, etc. Many small businesses associated with online
marketplaces, aggregators and platforms are utilizing the power of cash-flow
based lending.

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Innovative supply chain financing solutions are allowing MSME vendors and
distributors to manage their receivable and payable cycle efficiently by integrating
with corporates’ ERP and enabling financing from financial markets. Banking
surrogates-based products are being utilized to disburse loans to micro
enterprises in the range of Rs 1 lakh – Rs 5 lakh. Similarly, sector-based lending
is providing in-depth view and comprehensive understanding to new-age lenders,
utilizing sector specific peculiarities and apply different yardsticks, risk-reward
ratios for different sectors.
When financial institutions are too selective and cautious in their loan decision-
making to MSMEs, it can be assumed that there are significant inefficiencies in
the system. This will create a negative impact on the economic growth of the
country. Revitalizing MSME financing with the help of innovative financial
structures using digital tools and cash flow based lending will bolster the MSME
sector and ensure stated policy objectives are fully realized.

Fiscal Policy Support from RBI

The Reserve Bank of India recently issued a notification allowing banks to deduct
the amount released to new MSME borrowers from their net demand and time
liabilities. This means that banks are exempted to maintain cash reserve ratio for
the loans disbursed from January 1 to October 31 2021 to first time MSME
borrowers. Furthermore, RBI has also allowed Non-Banking Financial
Companies (NBFCs) to avail bank funding under Targeted Long Term Repo
Operations (TLTRO) to promote incremental lending and push revival of stressed
sectors. Under the scheme, NBFCs will be able to provide a credit lifeline to
financially drying MSMEs.
While these measures will help NBFCs battle liquidity crunch by receiving
financial support from larger financial institutions and banks, they will also make
funds more readily available for MSMEs.

- 25 -
Budgetary and Policy Support

The Union Budget 2021-2022 brought relief to the capital-starved MSMEs, with
the government infusing Rs 15,700 crore for the sector. The decision to
incentivize the incorporation of One Person Companies (OPCs) in the budget will
feed the MSME ecosystem.
Also by redefining MSME, the central government and Ministry of MSMEs have
brought in a large number of micro and small units under the sector, benefitting
them with their measures, schemes and concessions.
Often the National Company Law Tribunal (NCLT) proceedings lead to drainage
of precious financial resources for the sector. To push for faster resolution of
cases, the government has sought to strengthen NCLT framework while
announcing the introduction of alternate methods of debt resolution, such as via
e-courts and special framework for MSMEs.
The government had already initiated numerous measures under Atmanir bhar
Bharat Abhiyan. The measures include Rs 20,000 crore subordinate debt .. for
MSMEs and Rs 50,000 crore equity infusion through MSME funds of funds.
MSMEs also benefited from Rs 3 lakh crore Emergency Credit Line Guarantee
Scheme (ECLGS). With a cumulative of Rs 2.39 lakh crore loan already been
sanctioned as of January 29, the collateral free automatic loan for businesses
has been a major support to the sector. The rationalization of taxes and duties
(for various products from steel and alloys to garments and leather) favours
domestic manufacturers and will further boost the sector.

- 26 -
 MSME Lending Portfolio Trends
The total on-balance sheet commercial lending exposure in India stood at ₹67.03
lakh crores in Jun’20, marginally lower than ₹69.77 lakh crores from Jun’19.
MSME Segment is at ₹16.94 lakh crores credit exposure as of Jun’20 and has
observed reduction in credit exposure across most sub-segments of MSME
lending except the Very Small and Micro1 sub-segments. Large corporates
segment is at ₹50.09 lakh crores credit exposure as of Jun’20 and has observed
a YoY contraction of 3.3% for the period Jun’19 to Jun’20

Balance-Sheet Commercial Credit Exposure (In ₹ Lakh Crore)

Very Small Micro 1 Micro 2 Small Medium1 Medium2 Large

<`10 `10-50 `50 `1-10 `10-25 `25-50 >`50 Overall
Lakhs Lakhs Lakhs- 1 Crores Crores Crores Crores
Crores
Jun’18 0.78 1.91 1.30 6.51 3.27 2.67 44.90 61.33

Sep’18 0.82 2.02 1.37 6.84 3.38 2.75 48.93 66.11

Dec’18 0.85 2.10 1.42 7.04 3.45 2.78 49.99 67.63
Mar’19 0.88 2.18 1.48 7.29 3.55 2.87 52.33 70.59
Jun’19 0.88 2.14 1.45 7.23 3.48 2.79 51.79 69.77
Sep’19 0.89 2.20 1.47 7.25 3.47 2.78 51.50 69.57
Dec’19 0.92 2.23 1.50 7.33 3.48 2.77 51.49 69.73
Mar’20 0.93 2.19 1.45 7.02 3.33 2.62 52.03 69.58
Jun’20 0.91 2.17 1.42 6.81 3.18 2.46 50.09 67.03

Y-o-Y 3.2% 1.0% -1.9% -5.8% -8.7% -11.8% -3.3% -3.9%

growth

Commercial loans classified on the basis of credit exposure aggregated at entity level, Very Small:
<10L; Micro1: 10L-50L; Micro2: 50L-1Cr; Small: ≥1Cr<10Cr; Medium1: ≥ 10Cr
<25Cr;Medium2: ≥ 25Cr <50Cr; Large ≥ 50Cr. Micro segment includes Very Small, Micro1 and Micro2
segments and Medium segment includes Medium 1 and Medium 2

- 27 -
 CREDIT GROWTH IN MSME LENDING

Growth rate in MSME credit outstanding has contracted across regions. Sharpest
drop in credit observed in Metro and Urban areas. Rural and Semi-urban areas
have also witnessed slowdown in growth, but at a lower rate in comparison with
Metro and Urban areas.

Region-wise MSME YoY credit growth

19% 18% 18%

17%

13%
12%
9%
8%
Jun'18
Jun'19

Jun

METR URBA SEMI- RURA

O N URBAN L -3%
-4%
-6% -6% Jun'20

State-wise MSME portfolio growth indicates that credit outstanding has contracted in
most of the States. Top 18 States are depicted in order of MSME credit outstanding.
Maharashtra experienced highest slowdown in growth, followed by Gujarat. While
Chhattisgarh and Bihar witnessed slight growth in the MSME portfolio.

- 28 -
 Sl. Name of the Scheme Benefit Type Total no. of Total Expendi- ture
No beneficiarie (Rs. crores) (2020-21)
. s (2020-21) (upto 31.12.20)
(upto 31.12.20)
1 ATI Scheme (Training Component) In Kind 1279 0.86

2 MPDA Grant to Khadi Institutions Cash 200827 54.52

3 Coir Vikas Yojana Cash 89 0.035
4 SFURTI SI In Kind 7523 0.00
5 Prime Ministers Employment Generation Programme Cash 22977 707.16
(PMEGP)
6 National Awards Cash 45 0.45
7 Entrepreneurship and Skill Development Programme In Kind 14357 0.00
(ESDP)
8 International Co-operation(IC) Schemes Cash 68 1.25

- 29 -
 Governmental Schemes
Scheme 1: Prime Minister Employment Generation
Programme and Other Credit Support Schemes

 Prime Minister Employment Generation Programme (PMEGP)

PMEGP scheme aims to generate employment opportunities in both rural and
urban areas for the MSMEs through setting up of new self-employment projects
in the country. This MSME scheme is being managed by Khadi and Village
Industries Commission (KVIC) at the national level and being implemented
by State KVIC Directorates, State Khadi and Village Industries Boards (KVIBs),
District Industries Centres (DICs) and banks at the state and districts level
 Credit Guarantee Trust Fund for Micro & Small Enterprises (CGTMSE)
Ministry of MSME and SIDBI has jointly established the Credit Guarantee Fund
Trust for Micro and Small Enterprises (CGTMSE) to implement Credit Guarantee
Scheme for MSEs. The corpus of CGTMSE is contributed by the Government of
India and SIDBI.
 Credit Linked Capital Subsidy for Technology Upgradation (CLCSS)
To facilitate technology to MSEs through institutional finance for induction of well
established and proven technologies in the specific and approved 51 sub-
sector/products. Both upgradation projects (with or without expansion) and new
projects are eligible.

Scheme 2: Development of Khadi, Village and Coir

Industries
 Market Promotion & Development Scheme (MPDA)
This MSME scheme is an amalgamation of different MSME schemes
implemented by the Khadi sector including publicity, marketing, market promotion
and marketing development assistance.

- 30 -
  Revamped Scheme of Fund for Regeneration of Traditional Industries
(SFURTI)
The main objectives of the SFURTI scheme is to organise traditional industries,
provide sustained employment, enhance marketability, equip traditional artisans
and further boost the governance cluster systems.
 Coir Vikas Yojana (CVY)
o Coir Industry Technology Upgradation Scheme (CITUS)
o Science and Technology (S&T) for Coir
o Skill Upgradation & Mahila Coir Yojana (MCY)
o Export Market Promotion (EMP)
o Domestic Market Promotion Scheme (DMP)
o Trade and Industry Related Functional Support Services (TIRFSS)
o Welfare Measures (Pradhan Mantri Suraksha Bima Yojana (PMSBY))
o CVY aims to promote skill development of artisans for modernization,
upgradation and establishment of new units under Coir Industry Technology
Upgradation Scheme (CITUS) and further promotion of the domestic as well as
export market.

Scheme 3: Technology Upgradation and Quality

Certification
 Financial Support to MSMEs in ZED Certification Scheme
o The scheme aims at supporting & promoting the Make in India initiative,
achieving Zero Defect & Zero Effect practices in manufacturing processes
and ensure continuous improvement.
 A Scheme for Promoting Innovation, Rural Industry & Entrepreneurship
(ASPIRE)
This MSME scheme aims to create new jobs and reduce unemployment,
promote entrepreneurship culture in India, boost economic

- 31 -
 development, facilitate innovative business solution for un-met social needs,
and promote innovation to further strengthen the competitiveness of the MSME
sector.
 National Manufacturing Competitiveness Programme (NMCP)
o Credit Linked Capital Subsidy for Technology Upgradation
o Marketing Support/Assistance to MSMEs (Bar Code)
o Lean Manufacturing Competitiveness for MSMEs
o Design Clinic for Design Expertise to MSMEs
o Technology and Quality Upgradation Support to MSMEs
o Entrepreneurial and Managerial Development of SMEs through Incubators
o Enabling Manufacturing Sector to be Competitive through QMS&QTT
o Building Awareness on Intellectual Property Rights (IPR)

Scheme 4: Marketing Promotion Schemes

 International Cooperation
This MSME scheme covers activities such as visiting of MSME delegations to
other countries for exploring new areas of technology
infusion/upgradation, participating in international exhibitions, trade fairs and
buyer-seller meets in foreign countries
 Marketing Assistance Scheme
This MSME scheme provides assistance for the activities such as
organising exhibitions abroad and participating in international exhibitions/ trade
fairs, organising buyer-seller meets, intensive campaigns and other marketing
promotion activities
 Procurement and Marketing Support Scheme (P&MS)
This MSME scheme aims to encourage MSEs to develop domestic markets and
promotion of new market access initiatives, to facilitate market linkages for
effective implementation of Public Procurement Policy for MSEs and educate
MSMEs on various facets of business development.

- 32 -
 Scheme 5: Entrepreneurship and skill Development
Programme

 Entrepreneurship Skill Development Programme (ESDP)

This aims to organise Entrepreneurship Development Programmes on a regular
basis to nurture the talent of youth by bulding their capacity on various aspects of
industrial activity required for setting up MSEs.
 Assistance to Training Institutions (ATI)
This MSME scheme aims to provide capital grant to the training institutions at
country level which are operating under the Ministry of MSME for the purpose of
creation and strengthening of infrastructure and support for entrepreneurship and
skill development training/ capacity building programmes.

Scheme 6: Infrastructure Development Programme

 Micro & Small Enterprises Cluster Development (MSE-CDP)
This MSME scheme provides financial assistance for establishment of Common
Facility Centres (CFCs) for testing, training centres and other R&D and to create/
upgrade infrastructural facilities (IDs) in the new/ existing industrial areas/
clusters of MSE’s.

Scheme 7: Scheme of Fund for Regeneration of

Traditional Industries (SFURTI)
The major objectives of the SFURTI scheme are to organize the traditional
industries and artisans into clusters, provide sustained
employment, enhance marketability of products, strengthen the cluster
governance system, make a paradigm shift from a supply driven selling
model to a market driven model and make substantial investment in the
area of product design and quality improvement

- 33 -
Bank of Baroda
(An Introduction)

- 34 -
HISTORY

Bank of Baroda is having a long, eventful and glorious history of 100 years. HH
Sir Maharaja Sayajirao Gaekwad-III founded the Bank. The Bank made a humble
beginning in 1908 in a small building in Baroda. On 20 th July 1908 Bank of
Baroda Limited was registered under the Baroda Companies Act of 1897, with a
paid up capital of Rs.20 lacs and Shri Vithaldas
Damodar Thackersey as the first Chairman.

1908-1959

1908: Maharaja Sayajirao Gaekwad III set up Bank of

Baroda (BOB).

1910: BoB established its first branch in Ahmadabad.

1953: BoB established a branch in Mombasa and

another in Kampala.

1954: BoB opened a branch in Nairobi.

1956: BoB opened a branch in Dar-es-Salaam.

1957: BoB established a branch in London.

1959: BoB acquired Hind Bank.

1960s

1961: BoB merged in New Citizen Bank of India. This merger helped it increase
its branch network in Maharashtra. BOB also opened a branch in Fiji.

1962: BoB opened a branch in Mauritius.

1963: BoB acquired Surat Banking Corporation in Surat, Gujarat.

- 35 -
1964: BoB acquired two banks, Umbergaon People’s Bank in southern Gujarat
and Tamil Nadu Central Bank in Tamil Nadu state. BoB lost its branch in
Narayanganj (East Pakistan) due to the Indo-Pakistan war. It is unclear when
BOB had opened the branch.

1965: BoB opened a branch in Guyana.

1967: The Tanzanian government nationalized BoB’s three branches there and
transferred their operations to the Tanzanian government-owned National
Banking Corporation.

1969: The government of India nationalized 14 top banks, including BoB. Bob
incorporated its operations in Uganda as a 51% subsidiary, with the government
owning the rest.

1970s

1972: BoB acquired The Bank of India’s operations in Uganda.

1974: BoB opened a branch each in Dubai and Abu Dhabi.

1975: BoB acquired the majority shareholding and management control of

Bareilly Corporation Bank (est. 1928) and Nainital Bank (est. in 1954), both in
Uttar Pradesh. Since then, Nainital Bank has expanded to Uttarakhand State.

1976: BoB opened a branch in Oman and another in Brussels. The Brussels
branch was aimed at Indian firms from Mumbai (Bombay) engaged in diamond
cutting and jewellery having business in Antwerp, a major center for diamond
cutting.

1977: BoB Opened a branch in Imphal .

1978: BoB opened a branch in New York and another in the Seychelles.

1979: BoB opened a branch in Nassau, The Bahamas.

- 36 -
1980s

1980: BoB opened a branch in Bahrain and a representative office in Sydney,

Australia. BoB, Union Bank of India and Indian Bank established IUB
International Finance, a licensed deposit taker, in Hong Kong. Each of the three
banks took an equal share.

1985: BoB (20%), Bank of India (20%), Central Bank of India (20%) and ZIMCO
(Zambian government; 40%) established Indo-Zambia Bank (Lusaka). BoB also
opened an Offshore Banking Unit (OBU) in Bahrain.

1988: BoB acquired Traders Bank, which had a branch network in Delhi.

1990s

1990: BoB opened an OBU in Mauritius, but closed its representative office in
Sydney.

1991: BoB took over the London branches of Union Bank of India and Punjab &
Sind Bank (P&S). P&S’s branch had been established before 1970 and Union
Bank’s after 1980. The Reserve Bank of India ordered the takeover of the two
following the banks' involvement in the Sethia fraud in 1987 and subsequent
losses.

1992:BoB incorporated its operations in Kenya into a local subsidiary with a small
tranche of shares quoted on the Nairobi Stock Exchange.

1993: BoB closed its OBU in Bahrain.

1996: BoB Bank entered the capital market in December with an Initial Public
Offering (IPO). The Government of India is still the largest shareholder, owning
66% of the bank's equity.

1997: BoB opened a branch in Durban.

- 37 -
1998: BoB bought out its partners in IUB International Finance in Hong Kong.
Apparently this was a response to regulatory changes following Hong Kong’s
reversion to the People’s Republic of China. The now wholly owned subsidiary
became Bank of Baroda (Hong Kong), a restricted license bank.

BoB also acquired Punjab Cooperative Bank in a rescue.

BoB also incorporate wholly owned subsidiary BOB Capital Markets [Link]
Broking Business.

1999: BoB merged in Bareilly Corporation Bank in another rescue. At the time,
Bareilly had 64 branches, including four in Delhi.

In Guyana, BoB incorporated its branch as a subsidiary, Bank of Baroda Guyana.

BoB added a branch in Mauritius, but closed its Harrow Branch in London.

2000s

2000: BoB established Bank of Baroda (Botswana).

2002: BoB acquired Benares State Bank (BSB) at the Reserve Bank of India’s
request. BSB was established in 1946 but traced its origins back to 1871 and its
function as the treasury office of the Benares state. In 1964, BSB had acquired
Bareilly Bank (est. 1934), with seven branches; it also had taken over Lucknow
Bank in 1968. The acquisition of BSB brought BOB 105 new branches.

2002: Bank of Baroda (Uganda) was listed on the Uganda Securities Exchange
(USE).

2003: BoB opened an OBU in Mumbai.

2004: BoB acquired the failed Gujarat Local Area Bank, and returned to
Tanzania by establishing a subsidiary in Dar-es-Salaam. BoB also opened a
representative office each in Kuala Lumpur, Malaysia, and Guangdong, China.

- 38 -
2005: BoB built a Global Data Centre (DC) in Mumbai for running its centralized
banking solution (CBS) and other applications in more than 1,900 branches
across India and 20 other counties where the bank operates. BoB also opened a
representative office in Thailand.

2006: BoB established an Offshore Banking Unit (OBU) in Singapore.

2007: In its centenary year, BoB’s total business crossed 2.09 lakh crores, its
branches crossed 1000, and its global customer base 29 million people.

2008: BoB opened a branch in Guangzhou, China (02/08/2008) and in Kenton,

Harrow United Kingdom.

2008: BoB opened a joint venture life insurance company with Andhra Bank and
Legal and General (UK) called India First Life Insurance Company

2009: The Bank of Baroda registered with the Reserve Bank of New Zealand,
enabling it to trade as a bank in New Zealand (2009/09/01)

2010: Malaysia awarded a commercial banking license to a locally incorporated

bank to be jointly owned by Bank of Baroda, Indian Overseas Bankand
AndhraBank. The new bank, India BIA Bank (Malaysia), will reside in Kuala
Lumpur, which has a large population of Indians. Andhra Bank will hold a 25%
stake in the joint-venture, Bank of Baroda will own 40% and IOB the remaining
35%.

- 39 -
Bank of Baroda Bank of Baroda (BOB) is an Indian nationalised banking and
financial services company. It is under the ownership of Ministry of
Finance , Government of India. It is the fourth largest nationalised bank in India,
with 132 million customers, a total business of US$218 billion, and a global
presence of 100 overseas offices. Based on 2019 data, it is ranked 1145
on Forbes Global 2000 list.[3][4]
The government of India announced the merger of Bank of Baroda, Vijaya
Bank and Dena Bank on September 17, 2018, to create the country's second
largest lender. The amalgamation is the first-ever three-way consolidation of
banks in the country, with a combined business of Rs14.82 trillion (short scale),
making it the third largest bank after State Bank of India (SBI) and ICICI Bank.
The Maharaja of Baroda, Maharaja Sayajirao Gaekwad III, founded the bank on
20 July 1908 in the Princely State of Baroda, in Gujarat.[6] The Government of
India nationalized the bank, along with 13 other major commercial banks of India
on 19 July 1969; the bank has been designated as a profit-making public sector
undertaking (PSU).
The bank has received RBI approval to open various offices in the overseas
territory. Its products includes loans, Credit cards, Savings, Investment vehicles
etc. The Corporate office is situated in Mumbai. Its shares are listed in BSE and
NSE.

Backed by the great vision of the founding father, Maharaja Sayajirao Gaekwad
III, Bank has a rich heritage of many flagship achievements, pioneering
endeavors and an undisputedly strong place in the Indian Banking industry
today. The Bank of Baroda has seen many ups and downs over a period of 100
years but stood undaunted to surmount all hurdles, coming out with flying colors
and reinforcing its strong fundamentals. The world was convinced time and again
that this is the Bank with impregnable foundation and immense potential to forge
ahead to contribute to the nation’s economic growth.

- 40 -
Bank of Baroda is one of the oldest banking institutions in India, having been
established in 1908 from a small building in Baroda, Gujarat State. It was set up
with a paid up capital of Rs.20 lakhs by the then ruler of Baroda, Maharaja
Sayajirao Gaekwad.

International presence

The bank has 107 branches/offices in 24 countries (excluding India) including 61

branches/offices of the bank, 38 branches of its 8 subsidiaries and 1
representative office in Thailand. The Bank of Baroda has a joint venture
in Zambia with 16 branches.[19]

Among the Bank of Baroda's overseas branches are ones in the world's major
financial centres (e.g., New York, London, Dubai, Hong
Kong, Brussels and Singapore), as well as a number in other countries. The bank
is engaged in retail banking via the branches of subsidiaries
in Botswana, Guyana, Kenya, Tanzania, and Uganda. The bank plans has
recently upgraded its representative office in Australia to a branch and set up a
joint venture commercial bank in Malaysia. It has a large presence
in Mauritius with about nine branches spread out in the country. [20]

The Bank of Baroda has received permission or in-principle approval from host
country regulators to open new offices in Trinidad and Tobago and Ghana, where
it seeks to establish joint ventures or subsidiaries. The bank has
received Reserve Bank of India approval to open offices in the Maldives,
and New Zealand. It is seeking approval for operations in Bahrain, South
Africa, Kuwait, Mozambique, and Qatar, and is establishing offices
in Canada, New Zealand, Sri Lanka, Bahrain, Saudi Arabia, and Russia. It also
has plans to extend its existing operations in the United Kingdom, the United
Arab Emirates, and Botswana.

The tagline of Bank of Baroda is "India's International Bank".

- 41 -
Type Nationalised Bank

Traded as  BSE: 532134

 NSE: BANKBARODA

ISIN INE028A01039

Industry Banking
Financial services

Founded 20 July 1908; 113 years ago

Founder Sayajirao Gaekwad III

Headquarters Vadodara, Gujarat

India[1]

Number of 8,214 Branches

locations 10,033 ATMs (2020)

Area served India & Worldwide

Key people  Hasmukh Adhia

(Chairman)
 Sanjiv Chadha
(MD & CEO)[2]

Services Consumer banking, corporate

banking, finance and

- 42 -
 insurance, investment
banking, mortgage
loans, private banking, private
equity, savings, Securities, asset
management, wealth
management

Revenue ₹45,800
crore (US$6.4 billion) (2021)

Operating ₹22,683
income crore (US$3.2 billion) (2021)

Net income ₹1,548

crore (US$220 million) (2021)

Total assets ₹1,202,676

crore (US$170 billion) (2021)

Total equity ₹81,354

crore (US$11 billion) (2021)

Owner Government of India (63.97%)

Number of 84,283 (2020)

employees

Parent Ministry of
Finance , Government of India

Subsidiaries Bank of Baroda Uganda Limited

 Vijaya Bank
 Dena Bank
 Nainital Bank

Capital ratio 13.87%

Website [Link]

- 43 -
BANK NETWORK

OVER SEAS SUBSIDIARIES

Bank of Baroda (Botswana) Ltd.

Bank of Baroda (Kenya) Ltd.

Bank of Baroda (Uganda) Ltd.

Bank of Baroda (Guyana) Inc.

Bank of Baroda (Trinidad & Tobago) Ltd.

Bank of Baroda (Tanzania) Ltd.

Bank of Baroda (Ghana) Ltd.

Bank of Baroda (New Zealand) Ltd.

Joint Venture

India-Zambia Bank Ltd. (Lusaka)

Representative Offices

Australia, Malaysia, Thailand.

Indian Subsidiaries:

1. BOB Assets Management Co. Ltd.

2. BOBCARDS Ltd.

3. BOB Capital Market Ltd.

- 44 -
International Net work

At present, the Bank has an overseas network of 72 branches / offices in the

following 26 countries as under:

(1) Bahamas (2) Belgium (3) Botswana (4) Bangkok (5) China (6) Fiji Island (7)
Guyana (8) Hong Kong (9) Kenya (10) Mauritius (11) Malaysia(12) South Africa
(13) Seychelles (14) Sultanate of Oman (15) Singapore (16) Tanzania (17)
Uganda (18) UAE (19) UK (20) USA (21) Zambia (22) Australia (23) Bahrain (24)
Ghana (25) Trinidad & Tobago (26) New Zealand

POSITION

Bank of Baroda is at 3rd position in India’s top 5 Public sector banks after State
Bank of India and Punjab National Bank. After BOB are IDBI and Bank of India.

BANK’S MISSION STATEMENT

To be a top ranking National Bank of International Standards committed to

augmenting stake holder’s value through concern, care and competence

BANK’S VISION

It has been a long and eventful journey of almost a century across 19 countries.
Starting in 1908 from a small building in Baroda to its new hi-rise and hi-tech
Baroda Corporate Centre in Mumbai, is a saga of vision, enterprise, financial
prudence and corporate governance

- 45 -
PRODUCTS AND SERVICES

Given below is the list of services offered by the Bank of Baroda:

 Retail Banking

 Rural / Agri Banking

 Wholesale Banking

 SME Banking

 Wealth Management

 De mat account

 Product Enquiry

 Internet Banking

 NRI Remittances

 Baroda e-trading

 Interest Rates

 Deposit Products

 Loan Products

 ATM / Debit cards

- 46 -
International Services

 NRI Services

 FGN Currency Credits

 ECB (External Communication Borrowings)

 FCNR (B) Loans

 Offshore Banking

 Finance in Export and Import

 Correspondent Banking Facility

 International Treasury

- 47 -
Bank of Baroda –
SME Loan Factory

- 48 -
ORGANIZATIONAL SET UP

Bank of Baroda has set up SME Department at Corporate Office headed by the
General Manager with a view to take quick decisions. Bank of Baroda has 60
Specialized SME branches all over India.

SME LOAN FACTORY- Objectives

 To grab vast business opportunities available and with an aim to extend

focused attention to Industries & Service Sector, Bank Of Baroda has
come out an unique model in the form of SME LOAN FACTORY
exclusively for SMEs.
 It is a revolutionary step taken by Bank of Baroda amongst the
nationalized Banks. Is envisages setting up of Centralized Processing Hub
to ensure speedy appraisal and sanctioning of proposals of SME Sector
within a time bound schedule.
 The models works on assembly line principles with simplified processes
using latest technology and in-house skilled men power to deliver focused
services to SME customers.
 A team of relationship Officers / Relationship Managers have been
stationed at different key places spread over the micro segment of the city
who will reach out to SME customers.
 At present 36 SME Loan Factories have already been operationalised all
over India with deployment of team of experts.

- 49 -
 FEATURES OF THE MODEL

 Team of officers having expertise in the area of credit with positive

approach is selected.
 Instead of appointing DSAs (Direct Selling Agents), bank has appointed
officers from existing dedicated team only.
 The hubs main role is ensuring speedy appraisal & sanctioning of
proposals pertaining to SME Sector in a time bound program.
 The team members reach out to different market segments.
 It’s important feature is working of the SME Loan Factory on assembly line
principles with simplified processes.
 We have two nodes to take care of the marketing/ sales (SALES HUB)
and credit processing/ sanction (CREDIT HUB), under a single umbrella of
the SME Loan Factory.

MSME Loan – Features, Fees & Interest Rates

Interest
Depends on applicant’s profile and business requirements
Rate

Loan Minimum Limit to borrow is Rs. 30,000 and Maximum is up to Rs. 1 crore,
Amount can exceed as per business requirements

Repayment
Tenure

- 50 -
Collateral Not required for Unsecured Business Loans

Processing
Fee From Nil to 4% of the loan amount

Foreclosure
Charges From Nil to 5% of the outstanding principal amount

Part-
payment From Nil to 4% of the outstanding principal amount
Charges

Loan
Cancellatio Varies from bank to bank
n Charges

Subsidy Offered by selected financial Institutions

Credit
Working Capital Loan, Bill discounting, Overdraft, Cash Credit, Letter of Credit, Bill
Facilities of Purchase, Merchant Cash Advance, etc.

- 51 -
 RATE OF INTEREST ON REGULATORY AND NON REGULATORY MSME
LOANS

For Limits up to Rs. 25.00 Lacs (FB &

NFB)
Limits Micro | Sma Medium Non-
ll Regulator
y
Upto Rs.50000/- BRLLR+ SP BRLLR+
SP+2.00%
Above Rs. 50000/- BRLLR+ SP- BRLLR+ SP-
to Rs. 2.00 Lacs r2.00% t r2.20% BRLLR+ MCLR+
Above Rs. 2.00 Lacs BRLLR+ BRLLR+ SP+2.70% SP+2.75%
to Rs. 10.00 Lacs SP+2.20% SP+2.35%
Above Rs. 10.00 Lacs BRLLR+ BRLLR+
to Rs. 25.00 Lacs SP+2.35% SP+2.50%

For limits above Rs.25 Lakhs and up to Rs.5.00 crores (FB

& NFB)
Eligible Immovable Regulatory MSME Non
Security CMR Rating Regulator
Coverage Micro Small Medium
Enterpri Enterprise Enterprise y MSME
ses
s s
CMR1 BRLLR+ BRLLR+0.35 BRLLR+0.40 MCLR+0.45
A. 0.30% % % %
CMR 2 BRLLR+ BRLLR+ BRLLR+ MCLR+
SP+0.60% SP+0.65% SP+0.70% SP+0.75%
100% and CMR3 BRLLR+ BRLLR+ BRLLR+ MCLR+
above
SP+0.65% SP+0.75% SP+0.85% SP+1.00%
CMR4 BRLLR+ BRLLR+ BRLLR+ MCLR+
SP+1.00% SP+1.10% SP+1.20% SP+1.35%
cMR5 BRLLR* BRLLR+ BRLLR+ MCLR+
SP+1.65% SP+1.80% SP+1.95% SP+2.20%
cMR6 BRLLR+ BRLLR+ BRLLR+ MCLR+
SP+2.20% SP+2.35% SP+2.S0% SP+2.75%

- 52 -
 CMR 7 & Below BRLLR+ BRLLR+ BRLLR+ MCLR+
SP+4.75% SP+5.00% SP+5.25% SP+5.25%
Unrated BRLLR+ BRLLR+ BRLLR+ MCLR+
SP+1.40% SP+1.50% SP+1.60% SP+1.75%
B. CMR1 BRLLR+ BRLLR+ BRLLR+ MCLR+
85% to less 0.40% 0.45% 0.50% 0.50%
than 100% CMR 2 BRLLR+ BRLLR+ BRLLR+ MCLR+
SP+0.70% SP+0.75% SP+0.80% SP+0.85%
CMR3 BRLLR+ BRLLR+ BRLLR+ MCLR+
SP+0.75% SP+0.85% SP+0.95% SP+1.10%
CMR4 BRLLR+ BRLLR+ BRLLR+ SP+ MCLR+
SP+1.15% SP+1.25% 1.35% SP+1.50%
CMR5 BRLLR+ BRLLR+ BRLLR+ MCLR+
SP*1.75% SP+1.90% SP+2.05% SP+2.30%
CMR6 BRLLR+ BRLLR+ BRLLR+ MCLR+
SP+2.45% SP+2.60% SP+2.75% SP+3.00%
CMR 7 & Below BRLLR+ BRLLR+ BRLLR+ MCLR+
SP+5.00% SP+5.25% SP+5.50% SP+5.75%
Unrated BRLLR+ BRLLR+ BRLLR+ MCLR+
SP+1.60% SP+1.70% SP+1.80% SP+1.75%
C. CMR1 BRLLR+ BRLLR+ BRLLR+ MCLR+
70% to less 0.60% 0.65% 0.70% 0.75%
than 85% CMR 2 BRLLR+ BRLLR+ BRLLR+ MCLR+
SP+0.95% SP+1.00% SP+1.05% SP+1.10%
CMR3 BRLLR+ BRLLR+ BRLLR+ MCLR+
SP+1.20% SP+1.30% SP+1.40% SP+1.55%
CM R4 BRLLR+ BRLLR+ BRLLR+ MCLR+
SP+1.85% SP+1.95% SP+2.05% SP+2.20%
CMR5 BRLLR+ BRLLR+ BRLLR+ MCLR+
SP+2.80% SP+2.95% SP+3.05% SP+3.20%
CMR6 BRLLR* BRLLR+ BRLLR+ MCLR+
SP+3.90% SP+4.05% SP+4.20% SP+4.45%
CMR 7 & Below BRLLR+ BRLLR+SP+ BRLLR+ MCLR+
SP+6.50% 6.75% SP+7.00% SP+7.25%
Unrated BRLLR+ BRLLR+ BRLLR+ MCLR+
SP+2.30% SP+2.40% SP+2.50% SP+2.55%
D. CMR1 BRLLR+ BRLLR+ BRLLR+ MCLR+
55% to less 0.80% 0.85% 0.90% 0.95%
than 70% CMR 2 BRLLR+ BRLLR+ BRLLR* M CLR+
SP+1.20% SP+1.25% SP+1.30% SP+1.35%
CMR3 BRLLR+ BRLLR+ BRLLR+ MCLR+
SP+1.65% SP+1.75% SP+1.85% SP+2.00%

- 53 -
 CM R4 BRLLR+ BRLLR+ BRLLR+ MCLR+
SP+2.60% SP+2.70% SP+2.80% SP+2.95
%
CMR5 BRLLR+ BRLLR+ BRLLR+ MCLR+
SP+4.30% SP+4.55
SP+4.00% SP+4.15% %
CMR6 BRLLR+ BRLLR+ BRLLR+ MCLR+
SP+6.00% SP+6.25
SP+5.70% SP+5.85% %
CM R 7 & BRLLR+ BRLLR+ BRLLR+ MCLR+
SP+8.25% SP+8.25
Below SP+8.25% SP+8.25% %
Un rated BRLLR+ BRLLR+ BRLLR+ MCLR+
SP+3.20% SP+3.35
SP+3.00% SP+3.10% %
E. CMR1 BRLLR+ BRLLR+ BRLLR+ MCLR+
40% to less 1.00% 1.00% 1.00% 1.05%
than 55% CM R 2 BRLLR+ BRLLR+ BRLLR+ MCLR+
SP+1.55% SP+1.60
SP+1.45% SP+1.50% %
CM R3 BRLLR+ BRLLR+ BRLLR+ MCLR+
SP+2.30% SP+2.45
SP+2.10% SP+2.20% %
CMR4 BRLLR+ BRLLR+ BRLLR+ MCLR+
SP+3.55% SP+3.70
SP+3.35% SP+3.45% %
CMR5 BRLLR+ BRLLR+ BRLLR+ MCLR+
SP+5.45% SP+5.70
SP+5.15% SP+5.30% %
CMR6 BRLLR+ BRLLR+ BRLLR+ MCLR+
SP+7.45% SP+7.45
SP+7.45% SP+7.45% %
CMR 7 & Below BRLLR+ BRLLR+ BRLLR+ MCLR+
SP+8.25% SP+8.25% SP+8.25% SP+8.25
%
Unrated BRLLR+ BRLLR+ BRLLR+ MCLR+
SP+3.70% SP+3.80% SP+3.90% SP+4.05
%
F. CM R1 BRLLR+ BRLLR+ BRLLR+ MCLR+
1.30% 1.35%
30% to less 1.20% 1.25%
than 40% CMR 2 BRLLR+ BRLLR+ BRLLR+ MCLR+
SP+1.70% SP+1.75% SP+1.80% SP+1.85
%
CMR3 BRLLR+ BRLLR+ BRLLR+ MCLR+
SP+2.65% SP+2.80
SP+2.45% SP+2.55% %
CMR4 BRLLR+ BRLLR+ BRLLR+ MCLR+
SP+4.15% SP+4.30
SP+3.95% SP+4.05% %
CMR5 BRLLR+ BRLLR+ BRLLR+ MCLR+
SP+6.15% SP+6.30% SP+6.45% SP+6.70
%

- 54 -
 CMR6 BRLLR+ BRLLR+ BRLLR+ MCLR+
SP+7.45% SP+7.45
SP+7.45% SP+7.45% %
CMR 7 & Below BRLLR+ BRLLR+ BRLLR+ MCLR+
SP+8.25% SP+8.25% SP+8.25% SP+8.25
%
Unrated BRLLR+ BRLLR+ BRLLR+ MCLR+
SP+4.30% SP+4.40% SP+4.50% SP+4,65
%
G. CM R 1 BRLLR+ BRLLR+ BRLLR+ MCLR+
Less than 1.65% 1.70% 1.75% 1.80%
30% CM R 2 BRLLR+ BRLLR+ BRLLR+ MCLR+
SP+2.40% SP+2.45
SP+2.30% SP+2.35% %
CMR3 BRLLR+ BRLLR+ BRLLR+ MCLR+
SP+3.50% SP+3.60% SP+3.70% SP+3.85
%
CMR4 BRLLR+ BRLLR+ BRLLR+ MCLR+
SP+5.65% SP+5.75% SP+5.85% SP+6.00
%
CMRS BRLLR+ BRLLR+ BRLLR+ MCLR+
SP+7.25% SP+7.25
SP+7.25% SP+7.25% %
CM R6 BRLLR+ BRLLR+ BRLLR+ MCLR+
SP+7.45% SP+7.45% SP+7.45% SP+7.45
%
CM R 7 & BRLLR+ BRLLR+ BRLLR+ MCLR+
Below SP+8.25% SP+8.25% SP+8.25% SP+8.25
%
Unrated BRLLR+ BRLLR+ BRLLR+ MCLR+
SP+6.10% SP+6.2S
SP+5.90% SP+6.00% %

It is also decided to take into consideration only hard categories, with

their Haircuts, as under:

- 55 -
Details of Eliaible Immovable Securities: security, defined in five

Nature of Property Haircut to be Eligible Hard Security

taken/applied Coverage to be
Considered after
haircut
Residential Property 20% of Market Value 80% of Market Value
Commercial Property 25% of Market Value 75% of Market Value
Industrial Property 40% of Market Value 60% of Market Value
CGTMSE 25% of Market Value 75% of Market Value
Plant & Machinery 25% of Written Down 75% of Written Down
Value Value

 Liquid security (FD/LIC Policy etc.) other than margin on NFB limits can
be considered for computation of the eligible security coverage for pricing
without any haircut.
 Further pricing based on CMR Ranking shall be decided only after
fulfilling the other terms and conditions as per circular no
BCC/BR/110/304 dated 11.06.2018
 The facilities under BCECL & BGECL are sanctioned as a part of COVID
Regulatory Package and have specific rate of interest which are not
linked to CMR Rank. Considering this, the credit exposure under both the
schemes should not be considered for arriving at pricing linked to CMR
Rank.

- 56 -
 For limits above Rs. 5.00 crores
(FB & NFB)
Regulatory MSME
Internal Non-Regulatory MSME
( Micro, Small &
Rating
Medium)*
CR1 MCLR -rSP+1.00%
BRLLR+ SP+0.50%
CR2 BRLLR+ SP+1.00% MCLR
+SP+1.25%
CR3 BRLLR+ SP+1.25% MCLR
+SP+2.75°/«
CR4 BRLLR+ SP+2.00% MCLR
+SP+3.50%
CR5 BRLLR+ SP+3.00% MCLR +
SP+4.50%
CR6 & Below BRLLR+ SP+6.00% MCLR
+SP+7.00%

For exposure above Rs. 5 crores under Regulatory MSME segment: As per the existing
guidelines, differential pricing is charged to Micro, Small & Medium category. However, the
same is now discontinued and uniform pricing is introduced for Micro, Small and Medium
category borrowers under Regulatory MSME segment.

INITIATIVES TAKEN BY BANK IN MSME FINANCING DURING 2020-21

 Contactless Underwriting (PSBLoansin59minutes)

PSB Loans in 59 minutes is an online marketplace which helps in providing loan

amount starting from Rs 1 Lakh to Rs 5 Crore to all the business entity. This
initiative was taken to ease the MSME Business by reducing the loan approval
process. The platform leverages technology to strengthen credit delivery system
and facilitate smooth flow of credit to MSMEs in hassle free manner

- 57 -
 TReDS Online Discounting Platform

Bank of Baroda has on boarded all 3 RBI approved Trade Receivables

Discounting System (TReDS) platforms i.e. [Link], RXIL, MYNDSOL thereby
becoming the first Bank to support this novel Fintech initiative. This online
platform enables discounting of invoices of MSME sellers through a bidding
process to ensure prompt realisation of receivables

 Digital Seller Financing

Collaboration with Amazon and Flipkart to offer collateral-free working capital

loan to the merchants engaged in online selling through e-tailer

 Alternate Data Base Underwriting

Tie-up with CreditMantri for technology that helps Bank to draw data of our SME
merchants and assess the customers on the strength of personal and Business
data points. Also helpful in offering low ticket credit products to first time
borrowers and gradually capture other business requirements from them.

 Baroda Tankerz

It is finance to SC/ST entrepreneurs for purchase of LPG tankers, who are

successful allottees of transportation contract by Oil Marketing Companies
(IOC/BPCL/HPCL) under Stand-Up India Scheme.

 Vehicle Financing

Bank has partnered with UBER, to finance individuals desirous of owning a

vehicle and attaching it to UBER's platform. This initiative is promoting "Start-up
India" Scheme by plummeting entry barrier to financing and fostering drivers to
become entrepreneurs.

- 58 -
  GST Enabled Accounting Solution

Tie-up arrangement with Versify to offer their ready built GST enabled accounting
software as 3rd party product to our customers on monthly subscription basis.

MoU with SIDBI

Bank of Baroda signed a MoU with SIDBI with the objective of working together
to strengthen credit delivery system and facilitate smooth flow of credit to the
MSMEs and Startups in a hassle-free manner and thereby becoming preferred
partner for various initiatives of SIDBI to support the MSMEs.

Information-As-A-Service

Collaboration with Probe42 to obtain information on listed/un-listed companies

from a number of sources, including the ROC, defaulter's lists, public filing, etc.
available on demand for lending and gaining new business.

DURING YEAR 2019-20, BANK HAS MADE EXPENDITURE

UNDER CSR IN DIFFERENT ACTIVITIES AS UNDER:

Segment Amount (Rs. in Lacs)

Education & Skill Development 402.89

Health & Care 79.57

Socio-Economic Development 64.98

Grand Total 547.44

- 59 -
The Future

Revolutionary and discontinuous changes in the operating environment are stark

reminders that business success is 'impermanent'. Bank has achieved
substantial progress in technology and is continuously integrating multiple
platforms of technology to generate synergies. Bank continuously attempts to
adapt to the dynamic economic environment while engaging in long term
relationships to provide superior customer [Link]’s constant endeavor to
delight its customers, which is built on its strong fundamentals will make it
stronger, more resilient and enable to achieve its vision of to be the Most
Admired Bank.

SME PRODUCTS

1. Baroda SME Loan Pack

2. Baroda Vidyasthali Loan
3. Baroda Arogyadham Loan.
4. SME Short Term Loans
5. SME Medium Term Loans
6. Baroda SME Gold Card.
7. Baroda Property Pride Loan
8. Baroda SME Capex Loan
9.
FEATURES OF THE PRODUCT

 Bank of Baroda has posted skilled own employees who are stationed at
micro level in the market.
 Liberal approach for the SMEs.
 No hidden charges in any of the products.
 The products have very competitive rate of interest.
 Time Bound Turnaround Time of SME Proposals.
 Simplified Processing and System.
 A Unique product launched SME Loan Pack, which is a single line of
credit for fund-based, non-fund based long term requirements.

- 60 -
 BRIEF DETAILS OF SME PRODUCTS

1. BARODA SME LOAN PACK

Provides single line of credit for meeting SME borrowers working capital as well
as long term requirements within the overall limit approved by the bank..

PURPOSE:

 To provide hassle free credit for working capital (fund based and non-fund
based) as also long term requirements, taking into account nature of business,
cyclical trends, cash flow projections, peak time requirements and any
eventuality of unforeseen spurt in the business.

. ELIGIBILITY:-

 All Enterprises, i.e. Micro, Small & Medium Enterprises, as defined under
MSMED Act, 2006, and other entities with annual sales turnover up to Rs. 150/-
crores exclusively banking with our bank/new borrowers desirous of having sole
banking arrangement with our bank.


COMPOSITE LIMIT:

4.5 times of borrower’s tangible net worth as per last audited Balance Sheet, or,
Rs.10 .00 Crores, whichever is lower.

MARGIN:

25% .

As per credit rating of the borrower.

Security

 Exclusive charge on the assets of the enterprise.

 Personal Guarantees of all promoter Directors / Partners.
 Charge on the unencumbered personal properties of the partners, promoter
Directors, wherever applicable.

- 61 -
 Third party guarantee in case of credit line above Rs.100.00 lacs to Micro &
Small Enterprises as per Regulatory definition.
 Any other collateral for the credit line above Rs. 25.00 lacs in case of other
Enterprises, i.e. Medium Enterprises and Enterprises based on the turnover
criteria to maintain asset coverage ratio above 1.25.

Rate of Interest

Competitive pricing linked to Repo rate/MCLR

Delivery of Product

By way of fund based (Short or Long term) or non-fund based facilities as per the
requirements of the borrower, within the overall composite limit sanctioned to the
borrower.

Period for TL

Maximum period up to 7 years

4. BARODA VIDHYASTHALI LOAN

Baroda Vidyasthali Loan is a special scheme for financing Educational

Institutions.

PURPOSE:

 Construction of building including expansion, modernization & renovation

activities of educational institution.
 Purchase of instruments for Education / Training purpose.
 Finance for purchase of land alone is not permissible. However, if the land cost is
included in the total cost of project, the same can be financed. However, land
cost should not be more than 20% of the total project cost and an undertaking to
be obtained that building construction will be completed within a period of 2
years.
 OD for short term fund requirements based on Cash budget provided the
institution is profit making and without any other Bank liability.
 Vehicles can be financed as per CV finance product guidelines.

- 62 -
. ELIGIBILITY:

Educational institutions, Schools, Colleges and other education bodies running

education activities set up by firms, company, trusts etc (Note: HUF are not
eligible.)

Credit rating BOB-6 and above only to be financed under the Scheme.

LIMIT:

For Term loan Min: Rs.25.00 lacs, Max: Rs.15.00 crores

(Rs 25.00 Crs for Mumbai/ Greater Mumbai, Delhi-NCR, Bangalore, Hyderabad).
For vehicle funding limit, as per CV guidelines. (Bus funding limit-max Rs. 2.00
crores)

For Overdraft: Maximum – Rs. 3.00 crs (Rs 5.00 Crs for Mumbai/ Greater Mumbai
and Delhi-NCR) or 60% of expected total fees collection, whichever is less.
Target group

Educational institutions

Nature of Facility

Term Loan/Overdraft (OD to existing profit making concerns only)

OD to those with L&B as primary security along with fee module facility with us

Rate of Interest

Competitive pricing linked to Repo rate/MCLR

- 63 -
 5. BARODA AROGYADHAM LOAN

PURPOSE: -

 Setting up/ Purchase of ready possession of new Clinic/Hospital etc.

 Expansion/renovation/modernization of existing Hospitals/facility.
 Purchase of new medical diagnostic equipment/office equipments.
 To meet working capital requirements including stock of medicines.
.

ELIGIBILITY: -

o All MSMEs in Regulatory and Expanded.

Exclusion: Real Estate Projects are not eligible
Promoters /owners should not be HUF.
Note: At-least one of the Promoters/ Director ( non-individual) / Doctors should
have requisite qualification in any branch of medical science.

LIMIT: -

Minimum Rs. 0.05 crs

Maximum (Rs. In Crores)
Rural 0.25
Semi Urban 6.00
Urban 12.00
Metro 30.00

Financial Ratios

DE Ratio TTL/TNW 3:1

TOL/TNW 4.5 : 1

DSCR Average 1.75

- 64 -
 DSCR should not go below the level of 1.25 in any particular year.
 Operating Profit Margin (before I, D & T) not to be below 10% of sales.
 Minimum Interest coverage Ratio should be 2.
 current ratio 1.17 (assessed only in working capital facilities)

Other imp conditions

 Stock/Book Debts statement to be obtained once in a year.

 Cibil condition as per below:
 For Individual, score should not be below 700. 0 or -1 can be considered.
 For Non-individual, CMR ranking should not be below the rank of CMR -6.
 Collateral free loans upto Rs. 200/- lacs are eligible for guarantee cover under
CGTMSE.
 Credit rating not less than ‘BOB 6’ as per CRISIL model.

Rate of Interest

 Competitive pricing linked to Repo rate/MCLR

8. BARODA SME GOLD CARD

Baroda SME Gold Card envisages provision of additional limit of 10% of the
assessed eligible bank finance for Working Capital to existing Small & Medium
Enterprises, on request along with regular application for Working Capital limits
to meet emergent requirements.

PURPOSE:

To meet emergent requirements and tie up temporary mismatch in liquidity

arising out of delayed payment by buyers, tax payment etc.

- 65 -
 ELIGIBILITY:

 All Micro, Small and Medium Enterprises – as per regulatory definition and SMEs
as per expanded definition viz ;. entities with their annual sales turnover up to Rs.
250/- crores fulfilling following criteria:-
In case of existing accounts-

 A/c in Standard Category for last 2 years

 Obligor credit rating of “BOB-5” and above
 Working capital limits of Rs. 25/- lacs and above.

In case of Take Over accounts:-

 Obligor credit rating of “BOB-5” and above

 No deviation allowed in Take over norms while taking over account
 Working capital limits of Rs. 25/- lacs and above.
 Eligible for the facility only after one year of takeover of the a/c

Notes :

 Accounts having sole banking arrangement with our bank are only eligible for
Baroda SME Gold Card under both the above cases.
 There should not be any major inspection irregularities in the account .

Nature of facility

 Working Capital

Limit

 10% of the assessed MPBF

RATE OF INTEREST:

As per Credit Rating and as applicable to Cash Credit

- 66 -
 PERIOD:

12 months – to be allowed on 4 occasions during the year for a maximum period

of 2 months on each occasion. However, there should be a minimum gap of 15
days between two drawals.

SECURITY:

 Charge on current assets, extension of charge on fixed assets if stipulated for

CC.
 Personal guarantee of Directors
 Collateral security as available to other facilities.

9. SME SHORT TERM LOANS

PURPOSE:

To meet temporary shortfall / mismatch in liquidity, for meeting genuine business

requirements only.

ENTERPRISES GROUP:

Micro, Small & Medium Enterprises as per Regulatory definition and all other
entities with annual sales turnover up to Rs.150/-crores

ELIGIBILITY CRITERIA:

 Satisfactory credit rating for the last three years (BOB 5 and above)
 Latest Balance Sheet etc. should be available.
 Satisfactory financial performance in terms of sales/turnover and profits.
Negative variance, if any, should not be more than 10%
 Satisfactory dealings with the Bank for at least three years

- 67 -
LOAN AMOUNT:

Up to 25% of the existing Fund based Working capital limits (depending on the
Credit Rating), subject to a minimum of Rs. 10 Lakhs and maximum of Rs. 250
Lakhs.

Repayment PERIOD:

To be repaid in 12 months including moratorium period

SECURITY:

 First charge / Equitable mortgage of fixed assets of the company / firm or

extension of existing first charge / equitable mortgage of fixed assets,
ensuring that there is a minimum asset cover of 1.25.
 Extension of Charge on current assets for the additional facility ensuring
that adequate drawing power is available.
 Extension of all existing guarantees of Directors / Third party guarantees
to cover the additional facility.

Interest Rates & Charges

As applicable to exiting working capital facilities

Processing Charges
25% concession in applicable charges

- 68 -
[Link] MEDIUM TERM LOANS

PURPOSE:

To augment enterprise’s working capital gap and to help in improvement of

current ratio and also for meeting genuine business requirements. The facility will
also be available for repayment of secured and unsecured Loans of other banks
or institutions, but not for any purpose, which is not related to the enterprises
activity.

ENTERPRISES GROUP:

Micro, Small & Medium Enterprises as per Regulatory definition and all other
entities with annual sales turnover of Rs.1/-crore to R.150/-crores

ELIGIBILITY CRITERIA

 Satisfactory credit rating for the last three years

 Latest Balance Sheet etc. should be available.
 Satisfactory financial performance in terms of Sales/turnover and profits.
Negative variance, if any, should not be more than 10%.
 Total Debt-equity ratio should not be higher than 4.5:1 and total Term
Liability and equity ratio should not be more than 3:1
 Satisfactory dealings with the Bank for at least Three years.
 Average DSCR should not be less than 1.75:1

LOAN AMOUNT:

Upto 25% of the existing fund based Working capital limits (depending on the
Credit Rating), subject to a minimum of Rs. 25 Lakhs and maximum of Rs. 500
Lakhs.

- 69 -
 Repayment PERIOD:

Not exceeding –36- months, to be repaid in equal quarterly or half-yearly

installments.

SECURITY: -

 First charge / Equitable mortgage of fixed assets of the Company / firm or

extension of existing first charge/ equitable mortgage of fixed assets,
ensuring that there is a minimum asset cover of 1.25
 As per credit rating for the additional loan
 Prepayment penalty of 1%, if loan is prepaid within-24-months of
drawdown

Processing Charges / Upfront Fee

25% concession in applicable charges

.SME LOAN POLICY OF BANK OF BARODA

The loans and advances offered by Bank of Baroda for MSME Units can be
used for the basic needs of

 Acquisition of factory, land and construction of building spaces.

 Purchase of plant and machinery including lab equipment, testing equipment,
etc.
 Meeting working capital requirements, like raw materials, stock-in-progress,
finished goods and for purchase or discounting of bills.
 Temporary additional assistance for meeting the urgent needs of raw material.
 Additional monitory assistance for any eligible purpose.

- 70 -
  Manufacturing Enterprises i.e. enterprises engaged in the manufacture or
production, processing or preservations of goods with investment in Plant
& Machinery as stated above.
 Service Enterprises i.e. Enterprises engaged in providing or rendering
services and whose investment in equipment as specified above. (Original
cost excluding Land & Building and furniture, fittings and other items not
directly related to the service rendered or as may be notified under the
MSMED Act, 2006).
 Govt. of India vide Gazette notification S.O. 2119(E) dated 26.06.2020
(Annexure-I) has notified revised criteria for classifying the enterprises as
Micro, Small and Medium enterprises and the revised definition is effective
from 1st day of July 2020.

SCOPE OF POLICY

This Policy will form a part of Bank’s Domestic Loan Policy and will cover
following:
 Composition of SME Sector—Micro, Small and Medium enterprises in
Manufacturing and Service areas.
 Broad guidelines on lending to SME Sector—regarding application norms,
time norms, submission of credit proposal, type of facilities, assessment of
requirement, margin, rate of interest, penal interest, credit rating, collateral
free loans, techno-economic viability study and financial analysis
 SME Loan Factory Model—includes credit and sales hub.
 Pricing Policy—as per the facility and amount demanded.
 Identifying Thrust Industries—includes
o IT & IT enabled services
o Drugs & Pharmaceuticals
o Auto components, Auto Ancillary units
o Food and Agro based industries
o Textile machineries

- 71 -
 o Dyes & intermediates
o Engineering equipments
o Chemicals
o Defense equipments manufacturing Units

TYPES OF FACILITIES - SME Units may be granted a variety of credit facilities

for their different needs which will include the following:

(a) Term Loan / Demand loan / Deferred Payment Guarantee: For

acquisition of capital goods (including second hand), fixed assets,
vehicles, plant &machinery, purchase of land, construction of buildings
etc.
(b) Working Capital by way of Cash Credit, Overdraft etc for:

1. Purchase of raw material, components, stores, spares and maintenance of

stock of these items at minimum level and stock in process and finished goods.
2. Finance against receivables including receipted challans / invoices. 3. Meeting
marketing expenses where the units have to incur large-scale expenditure
towards marketing of their products.

(c) Bills Purchase / Discounting under L/c or outside L/c.

(d) Export Credit facilities like Packing Credit, FBP / UFBP.

(e) Letter of Credit

(f) Bank Guarantees

- 72 -
Research
Methodology

- 73 -
 Research Methodology
The Research part of the project included finding the factors that will stimulate
financing in micro and small enterprises and whether the approach of Bank of
Baroda is satisfactory.

The research work followed by the

1. Analysis of existing facilities i.e. various loans granted by Bank of Baroda

to the SME Companies particularly of Ajmer region.
2. Effective working of SME Loan Factory.
3. Recommendations for the requisite improvement in the lending criteria of
a SME Loan Factory.

Title of the Study

“Suggestions to stimulate financing under micro and small enterprises “

RESEARCH OBJECTIVES

 To gauge the level of satisfaction of existing customers (who are enjoying

various loan facilities) of Bank of Baroda.
 To prepare a loan scheme for the SMEs.
 To suggest the ways and benefits of cluster approach of Banks in
Financing SMEs in India
 To give recommendations towards enhancements of lending and effective
working of SME Loan Factory.

- 74 -
RESEARCH TYPE

Exploratory Research: It has the goal of formulating problems more

precisely, clarifying concepts, gathering explanations, gaining insights and
eliminating impractical ideas.

SAMPLE SIZE

Existing Customers* of Bank of Baroda

*- Existing customers here means those who are enjoying various facilities of
Bank of Baroda till March 2021

RESEARCH AREA

Asian Construction Contractor which is a AAA class contractor mainly deals in

Government building material business

SOURCES OF THE RESEARCH DATA

Primary Data : Questionnaire.

Secondary Data : Internet and Books.

- 75 -
Data Analysis And
Interpretation

- 76 -
 ANALYSIS OF THE RESEARCH

The following graphs with their elaboration will explain the analysis done to draw
conclusions out of the data generated with the help of questionnaire used for the
research purpose:

Fig. 1

20%

Private Ltd.
20% 60% Partnership
Proprietary

The Figure 1 represents the Ownership pattern of various Companies.

Out of the 15 Companies

 60 % are Private Ltd.

 20 % are Partnership.
 20 % are Proprietary.
This reveals that larger part of the Organizations includes Private Limited.
Partnership and Proprietary Companies hold equal portions in SME.

- 77 -
 Fig. 2

0%
0% 0%

Public Banks
Private Banks
Cooperative Banks
Regional Banks

100%

The Figure 2 represents the Categories of Banks which are approached for
loans and advances. Here, we can see that all the Organizations approached for
Public Sector Banks.

This reveals that facilities provided by Public Sector Banks for SMEs are
comparatively good and Organizations belief on Public Sector banks. Other
banks should also make efforts to contribute in the growth of SME sector.

- 78 -
 Fig. 3

Awareness in the customers regarding schemes

provided by the Bank

27%

Yes
No
73%

The Figure 3 represents the number of the existing clients out of the sample size
15 that whether they are aware of the loans and advances schemes given by the
Bank of Baroda to the SMEs.

Out of 15 Clients, only 27 % are aware of the schemes provided by the Bank.
Rest 73 % is unaware about all the loans and advances schemes given by the
Bank to the SMEs.

- 79 -
 Fig. 4

Limit of the credit taken by the customers

0%

13.33% 20%
upto 25 lakhs
20% 25 lakhs - 1 crore
1 crore-5 crores
46.67% 5 crores - 10 crores
above 10 crores

The figure 4 indicates the Limit of the Credit taken by the existing customers.

This reveals that mostly customers have taken loan in the Rs. 1 crore and 5
Crores range that is 47 %. There are equal number of customers who have taken
loan in the range of 25 lacs to 1 crore and 5 crores to 10 cores.

Only 13 % have taken loan more than 10 crores that is only 2 customers out of
15 have taken loan which is above 10 Crores.

- 80 -
 Fig. 5

In Future, whether the customers will opt for Bank of

Baroda for Loans and Advances

13%

27% yes
60% Not thinked yet
No

This figure represents the number of customers that will opt for bank of Baroda if
in future; they will have a loan requirement.

Out of the total sample size, 60 % will opt for Bank of Baroda. 27 % have not
thinked yet. And 13 % will never opt for Bank of Baroda for their loan
requirement.

- 81 -
 Fig. 6

Customers having accounts in other Banks

40%

Yes
60%
No

This Figure indicates the percentage of customers who have accounts in other
Banks.

40 % of the customers have account in other Banks while 60 % do not have

account in the Bank other than Bank of Baroda.

- 82 -
 Fig. 7

Key factors that motivated the Customers to take Loan

from Bank of Baroda

13%
long term business
relations
Near Branch
87%

This figure shows that 87 % Customer’s motivation is long term business

relations while the remaining 13 % customers took loan from Bank of Baroda
because it is the nearby Branch to their Organization.

The bifurcation on the basis of these key factors shows that yet the Bank has to
do a lot in the same direction so that the motivation level of the existing
customers can be increased and it can motivate to the new customer to take loan
willingly from the Bank of Baroda.

- 83 -
 Fig. 8

Whether Bank of Baroda’s products are sufficient or not

26%

yes
no
74%

This figure shows that the 74 % of the customers are satisfied with the Bank’s
Products and they feel that the products are sufficient to the SME sector. While
26 % customers feel that SME products provided by the Bank is in-sufficient.

- 84 -
 Fig. 9

Services provided by the Bank

0%
6.50%
6.50%

40% Very Satisfied

Satisfied
Neutral
Dis-satisfied
47%
very Dis-satisfied

This figure represents the level of satisfaction regarding the services provided by
the Bank among the existing Customers.

40 % of the customers are highly satisfied by the services of Bank. Near about 7
% customers are neutral and 7 % are dis-satisfied with the services of the Bank.

So the Bank should concentrate on increasing the level of satisfaction among the
customers.

- 85 -
 FINDINGS OF THE RESEARCH

 I have visited one of the largw account of M/S Asian Construction Co.
which is a AAA class contractor mainly deals in Government building
material business
 Main work of this taking contract of Govt. to build stadiums hospitals etc.
 As these firm is doing it's business in all over India like in Bhuj, Delhi,
Pondicheri etc.
 Bank has sanction limit to the firm in OD contractor scheme
 OD, Term Loan, BG .SME GOLD card are the most demanded facility of
the firm
 There is good amount of support provided by the government/banks to the
Industries.
 All the firms expect low rate of Interest loans from the Banks.
 Most of the firms want that the Government should provide various
subsidies and rebates.
 Most of the customers are aware of the Bank’s new schemes.

- 86 -
 SUGGESTIONS
To improve the flow of credit to MSE sector and to achieve the various targets
and commitment for the MSE sector, the bank should adopt the following
strategies:

1. The SMEs should need more and more awareness of the facilities
provided the Government and the Banks.

2. The Bank should invest in Customer Relationship Management in which

the following actions can be taken :

a) Bank should provide or give information (related to a particular concern

for e.g. information of sanction, disbursement, letters that bank posts
etc.) to the party through direct calls.
b) Bank should send greetings or gifts or sweets to its all customers on
various occasions.
c) Timely processing should be there i.e. if Bank says that we will
sanction a proposal within 15 days, then it should be done in the given
time.
d) Bank should fulfill all its promises given to the customers.
e) Bank rules should be clear related to the different charges and
concessions. It helps in long-term customer relationship.

Through above-mentioned points, the Bank can increase customer satisfaction

as well as the motivation level of customers and eventually it will attract the other
concerns also.

3. Banks should increase the staff.

4. Services should be made easy for the convenience of the customers.

- 87 -
5. Sanction of loan is very time-taking process so it should be made easier
and shorter so that less time is involved.

6. If a proposal does not satisfy all the rules and regulations, the Bank should
give suggestions to the customer that how he can fulfill these conditions. It
will build good brand image of the Bank.

7. Government should give benefits in various subsidies and rebates.

8. The bank should increase the number of personnel in the SME

Department so that the complaints of the clients of delaying the
sanctioning of proposal can be listened and solved properly.

9. There should be one IT personnel in each department which will help in

the work process and problem.

10. There should be less time duration for the documentation work done for
the customers who are applying for loan.

11. The bank should find out the key problem areas where the development of
SME is lacking.

12. Adequate marketing contacts & reach should be managed.

13. Simplified loan application forms in bilingual formats should be made

available for loans to Micro Enterprises.

14. Region wise and branch wise targets should be fixed for lending to MSE
sector and monthly review notes on Region wise performance should be
placed to Top Management.

- 88 -
15. SME branches and specialized SME branches should be opened at
potential centers, identified clusters and industrial estates to enhance the
flow of credit to MSE sector. The reason behind this is that distances
create problems to the customers.

16. Latest technology should be adopted for on line submission of MSE credit
applications, tracking of applications and for MIS requirements.

17. New credit products should be developed for MSE sector to meet the
emerging requirements of the sector from time to time.

18. Bank should improve the ability of R & D and innovations.

19. Financial Institutions should strengthen the willingness to extend credit to

SME and emerging industries.

20. Bank should wisely utilize SME credit products in line with government
policies.

21. There should be system software which automatically checks the CMA
Data.

22. Bank requires a strong anti-virus in every system.

23. Bank should introduce new and advance technology in systems because
system is working at MS 2003.

24. System speed and net connection speed is also very slow. So Bank
should work in this area as there is a requirement of fast working net
connection and system.

- 89 -
 LIMITATIONS OF THE RESEARCH

 Sample size was considerably small in size.

 Sample comprised of existing customers of Bank of Baroda only.
 Lack of interaction with Proprietors / Directors of the Manufacturing
concern due to non-co-operation of the company management.
 Customers of bank of Baroda (particularly of Ajmer region) are situated in
far-flung areas that are why approach to all was a cumbersome task.

- 90 -
 CONCLUSION OF THE SECTOR
Opportunities in the MSMEs are enormous due to the following factors

 Less Capital Intensive

 Extensive Promotion & Support by Government

 Reservation for Exclusive Manufacture by small scale sector & Project

Profiles

 Funding - Finance & Subsidies

 Machinery & Raw Material Procurement

 Manpower Training & Technical & Managerial skills

 Tooling & Testing support

 Reservation for Exclusive Purchase by Government

 Growth in demand in the domestic market size due to overall economic

growth

 Increasing Export Potential for Indian products & export promotion

By its less capital intensive and high labor absorption nature, SSI sector has
made significant contributions to employment generation and also to rural
industrialization. This sector is ideally suited to build on the strengths of our
traditional skills and knowledge, by infusion of technologies, capital and
innovative marketing practices. This is the opportune time to set up projects in
the small-scale sector. It may be said that the outlook is positive, indeed
promising, given some safeguards. However, the bug bear of the sector has
been the inadequacies in capital, technology and marketing. The process of
liberalization will therefore, attract the infusion of just these things in the sector.

- 91 -
“ TO THE ORGANIZATION”
 Access to the field areas which full-time sales officers are unable to tap
due to lack of time.
 Preparation of the new scheme and making aware customers about all the
facilities of Bank of Baroda will be helpful for the bank.
 Although Bank is growing at a very fast pace, but still lack at some points
regarding awareness and motivation among the new customers. So they
should work in the concerned area.

“ TO THE INTERN”
 The summer internship gives a rendezvous with the corporate world,
which prepares the intern to be a full-time member of it.
 This is a simulation process , which prepares the intern to handle the real
life business situations.
 Last but not the least, it enhances knowledge related to the SME Loan
Factory.

- 92 -
Learning during
the Training

- 93 -
HOW SME-LF WORKS?

- 94 -
 Credit support officer Sanction authority
Credit officer

1. 2.
Check on completeness
of proposal
Receipt of proposal

3. Returned to
On complete Proposal On Incomplete
BO/ Party for
Proposal
Study of file, pre- Completion
sanction visit, raising
customer queries and
customer meeting Credit officer Sanction authority

File with Ratios 4.

Sending Queries to the

party and the Branch

5.
Data entry for credit
rating and financial
analysis
6.

Request for advocate,

7. valuer and TEV reports

(Where required)
Satisfactory response
from customer of
queries and
preparation of
Appraisal Note
- 95 -
8.
9.
Receipt of Check on
advocate, valuers advocate, valuers
and TEV reports and TEV reports
(where required)

11
.. Issue of final
sanction letter with
10
signature from
.
credit officer
Final sanction by
sanction
authority

Workflow for
12 sanction and
. Preparation and disbursement
stampings of process
documents

13 14
.
Execution of Sanctioned & vetted
documents in Document released for
presence of Branch Disbursement by disbursement
Officer/ Manager
Branch

- 96 -
STUDY OF CREDIT MONITORING APPRAISAL (CMA)

There is a particular format to represent the various direct & indirect expenses,
profit, various assets & liabilities, capital etc. for the parties who wants to get
loans from the bank, is known as CMA.

In the CMA a party gives its brief detail of operating expenses, profit & loss
account, balance sheet items etc. that shows the complete picture of financial
position of the party in concern.

In the study of credit monitoring appraisal the financial position is analyzed. Its
study gives the knowledge of how should company represents all its financial
affairs.

If the information is available in the general form, it can be filled in the standard
format known as CMA. Therefore in CMA study, the preparation of it is also
included.

CIBIL

CIBIL is the CREDIT INFORMATION BUREAU (INDIA) LIMITED. It is India’s

first credit information bureau – is a repository of information, which contains the
credit history of commercial and consumers borrowers. CIBIL provides this
information to its members in the form of credit information reports. Its official
website is [Link] Banks, Financial Institutions, State Financial
Corporations, Non-Banking Financial Companies, Housing Finance Companies
and Credit Card Companies are the members of CIBIL. These members are
provided with a user Id and Password for accessing it. Bank of Baroda has 5 %
stake in CIBIL. From this site, a CIBIL Information Report is created which is a
factual record of a borrower’s credit payment history compiled from information
received from different credit grantors. Its purpose is to help credit grantors make
informed lending decisions – quickly and objectively.

- 97 -
A CIBIL report shows history of various accounts of the borrower. All should be
standard. And no account should be sub- standard, settled, written-off or
overdue.

CREDIT ANALYSIS

While analyzing a credit proposal, several factors, apart from analysis of

statements, are taken into account. The process of credit analysis can broadly be
divided into the following major heads :

(a) Promoters and their business background

(b) Nature of the industry/business

(c) Factors of production

(d) Past financial record, present position and future profitability

(e) Financial Planning

(f) Borrower's integrity

(g) Purpose of advance

(h) Repayment program

(i) Security and other terms and conditions

(j) Associate concerns, if any, and their performance

(k) Promoters'/Borrowers' dealings with our Bank and other banks, where
applicable

The entire gamut of credit appraisal can be segregated into 7 sections is under:

- 98 -
 Borrower appraisal
Man behind the project should be very competent and banker would willingly

Grant a credit facility to a borrower, if he has sufficient confidence in the borrower

That it will not be necessary to seek the help of a court for its recovery.

5 C’s of the borrower -

 Character—integrity of the borrower and his intention to repay. Character

is constituted by honesty, sobriety, good habits, personality, the ability and
willingness to keep his word under all circumstances, reputation of the
people with whom he deals etc.
 Capacity--- ability of the borrower to manage an enterprise or venture
successfully with the resources available to him.
 Capital:--ability to meet the loss, if borrower has some stake in the
business, he may not take much interest in its success.
 Collateral
 Conditions

For this Banks are following the KYC (Know your customer) norms, which
include:

 Customer identification
 Customer verification
 Document verification
 Credit report on borrowers
 Application form
 Borrower’s past dealing with the branch

- 99 -
 Reports from persons having dealing with the borrower
 Reports from the guarantors
 Reputation in the line of trade in which he is engaged in
 Reputation in the society, community
 Credit information from other banks and financial institutions
 Credit information from RBI

Technical Appraisal:
 Availability of basic infrastructure:-Land, Location, Power, Water
 Licensing/ Registration Requirements
 Selection of technology: availability, application, Plant size and
production capacity, availability of skilled technical personnel/
training facility, continuous updating, availability of suitable raw
material and consumables

Management Appraisal
Individuals, proprietary concerns, partnership firms, corporate borrower

Financial Appraisal
Refers to the study of the following:

 Determination of the cost of the project.

 Assessment of the source of funds/means of financing the project
 Break even analysis
 Profit & Loss statement and balance sheet of last 3 years
 Cash flow projections
 Projected balance sheet
 Ratio Analysis

- 100 -
 Economical analysis
Project should yield best possible return to the society in general and the
investor in particular.

Sensitivity analysis—the process of computing the IRR and the repaying

capacity of the borrower for different values of each of these parameters is called
the sensitivity analysis.

Market Appraisal
 General market prospects for the product
 Position of the product vis-à-vis the competitors
 Size of the market and share of the proposed unit.
 Pricing structure
 Raw material
 Marketing strategy thrust

Financial Ratios for Credit Appraisal (Not applicable in case of takeover of

accounts)

Following ratios can be accepted for granting credit facilities to SME units
falling as per regulatory guidelines or SMSs as per expanded coverage.

Sr. Ratio Norms

no
Micro and Small Medium Units covered
Enterprises Enterprises under SME
under under Sector as per
manufacturing manufacturing expanded
sector and sector and definition and
service sector service sector outside the

- 101 -
 falling under falling under purview of
regulatory regulatory regulatory
guidelines guidelines definition
1 Current Ratio 1.17 & above 1.20 & above 1.33 & above
2 Debt Equity Ratio 3:1 3:1 3:1
( Total Term
Liability /
Tangible Net
Worth)
3 FACR (Fixed Not below 1.25 Not below 1.25 Not below1.25
Assets / Term
Debts)
4 Average DSCR 1.75 with a 1.75 with a 1.75 with a
for Term Loan condition that in condition that in condition that in
any one year it any one year it any one year it
should not be should not be should not be
below 1.25 as below 1.25 below 1.25
per extant
guidelines.

The above ratios are indicative and deviations can be considered by the
sanctioning authority / competent authority on case-to-case basis, depending on
industry specific problems of unit etc. incorporating justification for the same in
the sanction note.

- 102 -
CREDIT RATING

The exercise of assessing the credit record, integrity and capability of a

prospective borrower to meet debt obligations. Credit rating relates to
companies, individuals and even countries. The rating agencies in India are
Credit Rating and Information Services of India Limited (CRISIL), ICRA, and
Credit Analysis and Research (CARE).

CRISIL RATING MODELS

Eleven models for Credit Risk rating of all commercial advances i.e. existing as
well as new with exposure of Rs.25 lacs and above (FB+NFB) for implementation
have been introduced by our Bank.

New CRISIL Rating Models for commercial advances are based on two-
dimensional rating methodology specified under Basel II Accord requirements.

Eleven Models are applicable to Large Corporate, SME (Manufacturing Sector),

SME (Services), Traders, Banks, NBFCs, Brokers, Infrastructure (Power),
Infrastructure (Roads & Bridge), Infrastructure (Ports) and Infrastructure
(Telecom)

- 103 -
The risk rating flow chart under CRISIL NEW rating models is as under:

Composite Rating

(Indicator of expected
loss i.e. EL)

Obligor (Borrower) Rating Facility Risk Rating (indicator

of Loss given default i.e. LGD)
(Indicator of Probability of
Default i.e. PD) Evaluation of Riskiness of a
Facility
Evaluation of Credit
worthiness of an Obligor
(Borrower).

Obligor (Borrower) Rating Project Risk Rating

1. Industry Risk 1. Project Implementation

2. Business Risk 2. Post Implementation

3. Financial Risk
9Borrower
4. Management Risk

Project Implementation Risk Post Project Implementation

1. Construction Risk 1. Industry Risk

2. Funding Risk 2. Business Risk

3. Financial Risk

4. Management Risk

- 104 -
These Models involves three types of ratings

1. Obligor (Borrower) Rating

2. Facility Rating

3. Composite Rating

Obligor (Borrower) Rating is indicative of credit worthiness of an obligor or the

Probability of Default (PD) and it is based on the assessment of past and
projected Cash flows of the company.

For assessment of an obligor, the rating structure consists of evaluation by way

of four models viz.

1. Industry Risk – The assessment of this module which is external to borrower

and is done by assessment of industry related macroeconomic parameters like
demand supply gap / capacity utilization level / financial ratios like ROCE / OPM
etc. applicable to the specific industry and having different risk weights.

2. Business Risk – The assessment of this module is based on internal working

of the Borrower and relates to parameters such as after sales service, distribution
set up, capacity utilization etc. The parameters, which are only relevant to a
particular industry, are selected for scoring having different risk weights.

3. Financial Risk – The assessment of this module is based on internal working

of the Borrower and relates to parameters such as past (not in case of a green
field/infrastructure company under implementation stage) and projected
financials. The CMA based data input sheet is uploaded into the software and the
same allows computation of financial rating automatically based on the
computation of financial ratios like Net Profit Margin, Current Ratio, DSCR,
Interest Coverage etc.

105
4. Management Quality – The assessment of this module is based on internal
working of the Borrower’s management and relates to parameters such as past
repayment record, quality of information submitted, group support, etc.

Obligor rating grades range from BOB 1 to BOB 10. Obligor grade is used for
deciding about the investment grade or non-investment grade borrower in
absolute terms.

Grade no. Nature of grades Description

I. BOB-1 Investment grade- highest safety

II. BOB-2 Investment grade- high safety

III. BOB-3 Investment grade- high safety

IV. BOB-4 Investment grade- adequate safety

V. BOB-5 Investment grade- moderate

safety

VI. BOB-6 Investment grade- moderate

safety

VII. BOB-7 Sub Investment grade- inadequate

safety

VIII. BOB-8 Sub Investment grade-high risk

IX. BOB-9 Default substantial risk

X. BOB-10 default

106
Facility Rating is carried out for each and every facility separately which is
based on the Basel approach for the calculation of Loss Given Default (LGD).

Facility rating grade ranges from FR 1 to FR 8 with least risky to highest risky
advances facility in that order.

Grade no. Nature of Description

grade

1. FR-1 Highest-safety

2. FR-2 Higher-safety

3. FR-3 High-safety

4. FR-4 Adequate-safety

5. FR-5 Reasonable-safety

6. FR-6 Moderate-safety

7. FR-7 Low-safety

8. FR-8 Lowest-safety

Composite Rating is the matrix or the combination of PD and LGD and indicates
the Expected Loss (EL)in case the facility is defaulted. The composite rating is
worked out automatically by software based on the matrix of Obligor (Borrower)
Grade (BOB Rating) and Facility Rating Grade (FR Rating).

Composite rating grade ranges from CR 1 to CR 10. Bank has accepted BOB
6 as the cut off point for the acceptance of an obligor based on obligor rating
carried out as the applicable model Scoring Models for Educational Loan, Baroda
Traders’ Loan have also been approved by the Board rolled out for

107
implementation. Efforts are being made to have scoring model for all retail
products keeping in view Basel II Accord.

Grade no. Nature of Definition

grade

1. CR-1 Minimum expected loss

2. CR-2 Lower expected grade

3. CR-3 Low expected grade

4. CR-4 Reasonable expected

grade

5. CR-5 Adequate expected loss

6. CR-6 Moderate expected loss

7. CR-7 Extra expected loss

8. CR-8 High probability of loss

9. CR-9 Higher probability of

loss

10. CR-10 Highest expected loss

Proposal from the new borrowers (i.e. borrowers approaching Bank for the first
time) may be entertained with minimum rating category of “Moderate Safety”
‘BOB-6’ (CRISIL Rating Model) fresh / increase facilities to the existing borrower
having credit rating below “BOB-6” to be considered on merits by sanctioning
authority up to 75% of normal lending powers as stated above.

108
WORKING CAPITAL ASSESSMENT

DEFINITION

A firm's working capital is the money it has available to meet current obligations
(those due in less than a year) and to acquire earning assets.

Or

Working Capital is the amount required in different forms at successive stages

of operation during the net operating cycle period of an enterprise.

Concept of Working Capital

Balance Sheet Concept Operating Cycle Concept

Gross Working Capital Net Working Capital

Total Current Assets Current Assets- Current Liabilities

109
WORKING CAPITAL GAP

Difference between gross working capital and current liabilities excluding bank-

Borrowing is known as working capital gap.

Working Capital Gap = Gross Working Capital – Current liabilities*

*Current liabilities excluding Bank borrowings.

ARGUMENT IN FAVOUR OF WORKING CAPITAL Positive Net Working

Capital is an indicator of the financial soundness and the ability to face
depression and contingencies firmly by an enterprise. Positive Net Working
Capital provides better margin of protection to short-term creditors and investors.

APPRAISAL OF BANK FINANCE

The appraisal of bank finance for working capital thus involves the following
steps:

 Estimation of the level of Gross Working Capital

 Estimation of the level of Current Liabilities
 Computation of Net Working Capital Gap
 Computing the share of NWC gap required to be brought by the borrower
as margin
 Computation of the level of Bank Finance.

110
ESTIMATING WORKING CAPITAL REQUIREMENT

Following methods are generally used in estimating working capital for the future
period:

1. Operating Cycle Method: To estimate the gross working capital

requirements, the understanding of the operating cycle of
manufacture/production is very important:

CREDIT SALES

DEBTORS CASH

FINISHED GOODS
CASH SALES

RAW MATERIAL WORK IN PROCESS

Flow chart: Operating cycle of a manufacturing/production concern

COMPONENTS OF GROSS WORKING CAPITAL

1. Raw material
2. Consumable stores and spares
3. Stock in process
4. Finished goods
5. Receivables
6. Cash and Bank of Baroda balance
7. Other Current Assets

111
2. Tondon or chore committee recommendations

(Maximum Permissible Bank Finance system)

CURRENT LIABILITIES CURRENT ASSETS

Creditors for purchase Raw materials

Other Current Liabilities Stock-in-process

Total Current liabilities other Finished Goods

than Bank Borrowings

Bank borrowings including bills Receivables including bills

discounted with bankers
Discounted with bankers

Other Current Assets

Total Current Liabilities Total Current Assets

I Method II Method

Total Current Assets Total Current Assets

Less: Current Liabilities other than Bank Less: 25% of current assets
of Baroda borrowings

Working capital Gap Working capital Gap

Less: 25% of working capital gap Less: current liabilities other than
Bank borrowings

Maximum Permissible Bank finance Maximum Permissible Bank

finance

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3. NAYAK COMMITTEE RECOMMENDATIONS FOR SSI INDUSTRIES

The method originally proposed for SSI borrowers and later made applicable for
all borrowers with Fund based working capital limits up to Rs.5 crore, the
computation is made at 20% of projected gross sales as follows:

Gross working capital minimum of 25% of projected gross sales

Borrower’s margin 20% of gross working capital

4. CASH BUDGET METHOD

The method applicable for the assessment of working capital finance more than
Rs.1000 lac from the banking system for all types of borrowers. As in SME only
proposals upto 1000 lacs are considered thus this method does not apply over
here.

PRELIMINARY STUDY OF TWO PROPOSALS

Proposal is a request in the form of documents made by the party/ organization/

individual to get the requisite loan from the bank.

In the preliminary study an officer confirms that the documents are complete or
not and whether it fulfills the required rules and regulations. It also includes the
detail study of financial position and the validity of documents

PREPARING A QUERRY LETTER

In the case of any problem or query related to the proposal the officer who is
studying it prepare a letter to the branch manager or directly to the party to
collect the required information, known as query letter.

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 SUMMARY
Reading texts and scoring high doesn’t hold a higher position in the professional
courses, they stand equally on the platform with the ability to apply these texts in
the field work and perform.

“Summer Training” is the most vital part in professional courses like MBA as it
not only gives an understanding of the corporate world & its functioning but also
Grooms and matures an individual. This contribution of summer training prepares
a student to step out in the corporate world and start performing in the minimum
possible time.

I personally feel more confident now, with clear understanding and enlarged
horizon towards the work culture of the Indian corporate sector. It also gives me
a sense of immense pleasure to have done my Internship whole heartedly,
contributing the level best and learning not only about the functional aspect of the
work profile of the internship program but also about team- building, superior
subordinate relationship, crisis management, co-operation and co-ordination,
formal and informal groups, etc.

Given a thought today to the almost 45 Days spent as a trainee in Bank of

Baroda, makes me realize that it was all applicably of the teachings and
guidance of the faculty members of my college ( Swami Keshvanand Institute Of
Technology, Management & Gramothan,Jaipur) & all other teachers in my life.

Bank of Baroda’s priorities and strategies for supporting MSMEs are relevant and
effective.

This is not a conclusion of the experience I had during the course of internship
but it’s a beginning of a never ending process of learning while performing whole
heartedly.

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 BIBLIOGRAPHY
BOOKS REFERRED

Bank’s Circulars related to the SME Loan Factory

Bank’s Domestic loan Policy

NEWSPAPER REFERRED

Economic Times

Times of India

WEBSITES REFERRED

[Link]

[Link]

[Link]

[Link]/download/sme-policy

[Link]/sme/NEWS/02272009_SBI%20to%20restructure%2041,000%2
0SME%20accounts%20by%20March%[Link]

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 QUESTIONNAIRE
Name of the Organization:

Address:

Representative:

Designation:

Email id:

Contact No. :

Activity / Deals in:

Ownership pattern of the Company:

1. Proprietary
2. Partnership
3. Private Ltd.
4. Public Ltd.

Which category of bank you approach for loans and advances?

1. Private Banks
2. Public Sector Banks
3. Cooperative Banks
4. Regional Banks

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Are you aware of the loans and advances schemes given by the Bank to
SMEs?

1. Yes
2. No

What is the limit of Credit you want or you have taken?

1. Upto Rs. 25 lakh

2. Rs. 25 lakh to Rs. 1 Crore
3. Rs. 1 Crore to Rs. 5 Crores
4. Rs. 5 Crores to Rs 10 Crores
5. Above rs. 10 Crores

In future, if you have loan requirement, will you opt for Bank of Baroda?

1. Yes
2. Not Thinked yet
3. No

Give reasons, why not?

______________________________________________________________________

Do you have account in other Banks also?

1. Yes
2. No

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Availability of funds from financial institutes / Banks (loan facilities)

1. Very easy
2. Easy
3. Module
4. Difficult
5. Very difficult

Do you think that Indian SME s globally Competitive?

1. Yes
2. No

Is the Bank of Baroda’s SME Products sufficient to make Indian SME

globally Competitive?

1. Yes
2. No

Please mark your opinion about the services provided by the Bank of
Baroda

1. Very satisfied
2. Satisfied
3. Neutral
4. Dis-satisfied
5. Very Dis-satisfied

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Are you satisfied with the working of the SME Department of Bank of
Baroda?

1. Yes
2. no

What are the key factors that motivated you to take loan from Bank of
Baroda?

________________________________________________________________

Any suggestions to stimulate financing?

________________________________________________________________
________________________________________________________________

Filled by …………………………………….

Designation …………………………………….

Signature …………………………………….

Contact no. …………………………………….

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