Electronic Dealer Financing Scheme

• ELECTRONIC DEALER FINANCING SCHEME:

The scheme provides for financing purchases of dealers from corporate/industry

Majors

With whom tie-up has been entered. It is completely web based solution with customised MIS provided to the shareholders. The industry major enjoys timely availability of funds. The dealer can make effective utilization on working capital funds. Both industry major and dealer can make use of improved cash flow forecasting.

SME LIABILITY PRODUCTS FOR DEPOSIT AND TRANSACTION BANKING:

There are different types of deposit and transaction banking products offered by SBI to its SME customers:

• Deposit products:

Unfixed deposit

Power pack products

Normal current account

SAHAJ current account

• SWEEP account products:

SURABHI

CLTD

• Internet banking products:

KHATA

KHATA plus

• Transaction products

VYAPAR

VISTAR

SARAL

• Transaction products (collection products):

Power jyoti

I-COLLECT

• Transaction products (bundled products)

Cash pick up

Point of sales

INSTA deposit card

State bank business debit card

TABLE: 5

Financial performance of SMECCC JP nagar

Portfolio as on 31st may 2014

Particulars	No. of accounts	Amt (Rs crores)
CC (cash credit)	456	81.33 crores
TL (term loan)	315	23.95 crores
Total	771	105.28 crores

New application received/disposed (Rs. in crores) as on 1st may 2014-31st may 2014

Period	Number	Amount (in crores)
Application received	11	2.57
Sanctioned	3	0.65
returned/ rejection for want of data/ clarification	9	1.74
Pending for want of required papers	1	1

Renewal Applications (Rs. in crore) as on 1st may 2014-31st may 2014

Period	Number	Amount (in crores)
enhancements (enhanced portion only)	0	0
Review/Renewal at exist level	5	0.7

NPA as on 31st may 2014:

Number	Amount	No. of accounts
39	1.93	1.82%

Break up of sanctions as on May 2014

Particulars	No. Of accounts	Amt (Rs crores)
New from branches	03	0.65
Existing	05	0.70
Total	08	1.35

New collateral free loan (CFL) sanctioned (in crores)

No. Of accounts	Amt (Rs crores)
2	0.58

Collateral free loans are provided under the scheme CGTMSE. It is a popular and widely used SME product launched with the support of the government. More details have been provided under the section “SME Products”.

Study of Credit Appraisal

Credit appraisal means an assessment done by the bank before providing any loans and advances. Credit appraisal checks the commercial, financial and technical viability of the project. It also checks the primary & collateral security cover available for recovery of such funds, in case the account turns irregular.

Credit Appraisal is a process to ascertain the risks associated with the extension of the credit facility. It is generally carried by all the financial institutions which are involved in providing financial assistance to its customers.

The credit appraisal involves assessing the unit by conducting different types of feasibility tests to ensure that the unit is fit for lending. These feasibility tests are:

• Technical feasibility:

It involves the location factor. Because of a good location, the unit may have better access to resources like transportation facilities, water supply, power supply etc. This may positively impact the unit in the long run.

Considerations are also given to the size of the plant. A plant operating at optimum level and producing EOQ (economic order quantity) may be well poised to generate better returns. However, it does not mean that the proposals for smaller plants would be rejected.

The kind of technology the unit uses also makes difference. It it is new and competitive, and then it would reflect in its output with minimum inputs. The availability of the labour in the region where the unit is located also affects the technical viability of the project.

All the above feasibility tests are difficult to assess and requires a lot knowledge, understanding of the situation and the experience. Thus, normally credit officers analyse the above mentioned factors and is competent to perform the job. However, in case the complexity of the project is high and the credit officer is unable to assess the technical feasibility. As per the report received by the credit officer, the credit appraisal is undertaken.

• Economic Feasibility:

It involves assessing the earning capacity of the unit. The present situation is assessed not only of the project, by the industry as well. The size of the market, competion level, existing demand, scope of the future earnings etc is assessed.

For instance, a case of a unit was studied which tested the competent parts of a material in the laboratory. The future scope in this kind if industry is high.

• Financial Feasibility:

It mainly involves assessing the cost of the project, cost of production and expenses, cash flow estimates, profitability estimates etc.

All these statements are prepares by the credit officer to assess the financial position of the unit. It helps the bank to decide the repayment structure, the amount of loan which can be extended, liquidity etc.

• Managerial Competence:

The management expertise also affects the feasibility of the project. As the business entity functions in a dynamic and competitive environment, it requires the expertise of the manager to successfully operate the business.

Going forward, the succession planning of the business and integrity are also major factors which are assessed. These factors are treated as the parameters in the credit risk assessment.

Thus, all the above mentioned feasibility attests are examined by the credit office of the assessment and the credit appraisal if the proposal.

TABLE:6

Credit Appraisal Process

Case study: Credit Appraisal

The process of performing the credit appraisal is explained by the help of a case study.

Due to confidentiality issue, the personal details and some other data has not been revealed.

The case study has been explained for a SSI (small scale industries) unit.

The proposal has been made for the renewal of fund based working capital (FBWC) of Rs.2.00 lakhs for a period of 24 months subject to annual review.

The product which the customer has taken is SMECFL SME Collateral Free Loan.

Unit: SRI MARUTHI INDUTRIES

Brief Profile of the Unit:

Name of the owners/partners

Office address:

Line of activity:

Banking with SBI:

Insurance validity.....etc

Brief background:

• The unit is a proprietorship, established in November 2008. The firm’s line of activity is manufacturing machine components and allied job work. The unit’s clientele comprise mainly of M/S Ostrich Mobility Instruments PVT Ltd, I WAC [Integrated Welding Automation and Controls Private limited], and Carborundum Universal Ltd etc.
• The unit is banking with SBI since June 2012
• It was sanctioned a Cash Credit limit for working capital requirement and Term loan.
• Conduct of the account is satisfactory. Normal activity reported.

TABLE:7

Performance and Financial Indicators:

(Rs. in lakhs).

	2012 (Audited)	2013 (Audited)	2014 (Estimated)	2015 (Projected)
Net sales (including labour charges)	10.72	14.08	25	30
Net Profit	2.86	3.14	4.82	5.54
Net Profit to sales [%]	26.68%	22.30%	19.28%	18.47%
Cash accruals	3.22	4.4	5.56	6.34
Paid up capital	5.34	5.84	9.05	11.74
TNW	5.34	5.84	9.05	11.74
TOL/TNW (times)	0.16	1.09	0.8	0.73
Current ratio	8.87	1.64	1.98	1.58

Comments on Financials:

• Net sales:

Last year, the unit has earned a turnover and achieved its estimated turnover of [13.40]. In the current year, the unit has earned a turnover of Rs.6.32 lakhs for the first quarter and hence the estimated turnover is considered acceptable.

• Net profit:

Profit levels have also increased. Cash accruals are sufficient to ensure liquidity.

• TOL/TNW:

Gearing ratio is at 1.09 well within the acceptable level, and is poised to improve further, gradually over the years.

• Current ratio:

Current ratio works out to be above the level of standard bench mark.

The name of the individual/directors appears in RBI’s list of defaulters/RBI’s list of wilful defaulters & the individual/directors name figures in ECGC’s caution list.

The names of the company/firm/directors/promoters do not appear in the following lists:-

1. RBI list of defaulters of Rs.1 crore and above as on 31.03.2012-Non suit filed accounts.
2. RBI list of wilful defaulters of Rs.0.25 crore and above as on 31-03-2012
3. CIBIL list of suit filed cases (Rs.1 crore and above and Rs 25 lakhs and above) as on 30-06-2013.
4. CIBIL Consumer report dated 05-08-2013: No adverse remarks seen.
5. CIBIL commercial report search dated 05-08-2013: No search results found

The name of the individual does not appear in any of the above list. Overall, the account is satisfactory.

Cite this page