Bank Financing of Small and Medium Enterprises

Objectives of the Study

1. To throw light on the development of SME sector through its evolution, its contribution to GDP and various sectors, the various problems faced by them and its role in The Indian Economy.

2. To examine how banks perceive the SME segment today, what all challenges are faced by them while lending to SMEs and what are their approaches towards such challenges.

3. To examine the role of government in supporting and overcoming issues arising in SME Banking.

4. To provide tactical guidance for the banks to enter or expand their operations in the SME market.

Data Sources

• The research is based on secondary data collected from various articles, magazines, research papers and books that explained the basics of the topic.

• Moreover, a qualitative approach was used where I had an informal discussion with the employees of various banks and I was provided with the relevant information by him.

• Further, the Internet was used by me that helped me to improvise on my project and save the time and efforts to collect the data.

Limitations of the Study

a) The data collected for my dissertation was limited.

b) I didn’t get enough time to do more research on my topic.

c) There are various other aspects of SME sector but due to data and time constraint I could only work upon the financing part of it.

There are many challenging aspects to SME banking. To understand how toaddress each challenge, the banking “value chain” facilitates a discussion of the challenges in serving the SME market by bankingactivity. Risk management, especially credit risk management, is a cross-cutting component of the SME banking value chain.

Highlighted observations from the five value chain stages are:-

Understanding the ...

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...ank/SME relationships.

4. Banks should follow a 28-day turnaround for 95% of finance applications.

5. The government should formulate policies that would make it compulsory for banks to lend to the SMEs.

6. Commercial banks should refine services for SMEs. For this, they should have a separate segment or department and all services should be compiled in one basket.

Conclusion

Small and Medium Enterprises play a major role in economic development by creating employment opportunities for rural and urban area and providing goods& services at affordable costs.

SMEs should involve public assistance and participationof the banking industry.

Banks with SME operations are hoping to carve out profitableroles for themselves in the rapidly growing emergingmarkets private equity space by insight obtained from understanding the market.