A K Anandeswaran, GM (SME), Bank of India

Could you tell us about the various SME products that Bank of India offers?
Bank of India offers a wide range of loan products to cater to a wide cross-section of SME customers, some of which are as follows:
Artisan Credit Card Scheme (ACC): It is meant for all the existing artisan borrowers of the bank with satisfactory conduct of the account. The bank sanctions loans up to a maximum amount of Rs 2 lakhs under the scheme. Both investment needs as well as working capital requirements of the borrower are taken into account for finalising the limit. The limits sanctioned under ACC are valid for a period of three years. No collateral security is required to be obtained under the scheme and only assets financed out of bank finance are hypothecated to the bank.
Star Laghu Udyami Samekit Loan: Under the scheme a composite loan in the form of demand loan and / or term loan are provided to all micro and small entrepreneurs at a margin of 15 per cent with prescribed ceilings for the quantum of bank finance varying as per the location of the unit. The maximum quantum of loan given in metro, urban, semi-urban and rural areas is Rs 100 lakhs, Rs 50 lakhs, Rs 10 lakhs and Rs 5 lakhs respectively. CGTMSE coverage has been made mandatory under the scheme. The bank considers loan facilities up to a maximum of Rs 100 lakhs under CGTMSE coverage.
Star MSE Demand / Term Loan: Under the scheme demand loan and term loan can be considered separately for purchase of plant / machinery / equipments and other movable assets at 15 per cent margin with prescribed ceilings depending upon the location of the unit, maximum being Rs 100 lakhs in metro areas and Rs 5 lakhs in rural areas. CGTMSE coverage has been made mandatory in the scheme.
Star Priyadarshini Yojna: The scheme is specially designed for women entrepreneurs for purchase of equipment, machinery, vehicle, furniture and fixtures, etc as well as for their working capital requirements. Under this scheme concession of up to a maximum of 1 per cent is extended to the women entrepreneurs in the applicable rate of interest. There is no upper ceiling for the loan amount.
Star Dhanwantri Suvidha Scheme: The scheme is designed specially for qualified medical practitioners of all disciplines. The credit facility is extended for any bona fide purpose related to the medical profession like setting up a new clinic, purchase of equipment, purchase of vehicle, expansion/upgradation, modernisation of existing clinics, etc. The maximum quantum of loan under this scheme is Rs 50 lakhs.
Star SME Liquid Plus: The product is tailor-made for entrepreneurs who are engaged in business for a period of at least three years and whose audited financials are in place. They can avail term loan for purchase of machinery, equipments and for preliminary R& D activity, marketing and advertising expenses, etc. Minimum and maximum advance facilities available under the scheme are Rs 10 lakhs and Rs 500 lakhs respectively.
Star SME Contractor Credit Line: It is designed to meet the working capital requirements of established contractors engaged in business at least three years with audited financials in place. Finance can be availed in the form of cash credit, bank guarantee, letter of credit, etc with a maximum of Rs 500 lakhs.
Star SME Education Plus: Approved educational institutions i.e. universities, colleges and schools with three years’ audited financials and record of profit making for at least two continuous years can avail of a term loan for construction / renovation and repair of building and for purchase of computers, equipments, furniture, etc. The minimum and maximum loan which can be granted under the scheme is Rs 10 lakhs and Rs 500 lakhs respectively.
Star SME Auto Express: Under the scheme term loan is extended to individuals, proprietor/partnership firms, limited companies, trusts and societies for purchase of new transport vehicles to be used for delivering products and services. Educational institutions too can avail finance under the scheme for plying of students.

What have been the thrust areas for Bank of India in recent times?
The SME sector always occupies a pivotal place in financing by the Bank of India with its wide range of products. The bank provides fund-based as well as and non-fund-based facilities as per the requirements of the SME entrepreneurs. Bank of India’s priorities include:
• Single window  dispensation of credit to SMEs.
• Quick decision with the least turnaround time through specially constituted MSME cells.
• Provision of timely and adequate credit.
• Encouraging technology upgradation for better quality and competitiveness of the products.
• Proactively detecting sick and viable units in time so as to nurse them back to health through appropriate restructuring.
• Financing of clusters with adequate bank finance on liberal terms in several pockets for specified activities concentrated in these pockets, which would result in reducing transaction cost and greater economies of scale.

In order to increase its share in the SME space several initiatives have been taken by the bank. The creation of an SME vertical is one of the important steps taken by the bank to provide focused and need-based attention to the financial requirements of the SMEs. Under the SME vertical, dedicated processing centers are planned to be opened under the name ‘SME City Centre’ at all possible potential locations pan-India. Under the new concept, the ambit of SME definition under the MSME Act 2006 has been widened in order to meet the requirements of SME entrepreneurs whose turnover of business is up to Rs 100 crore.

Till date, SME City Centres have been opened at 20 places headed by senior level officials, ably supported by experienced and dedicated sales team as well as credit processing officers. The centre will exclusively look after the processing of the credit requests of the SME sector with a view to substantially reduce the turnaround time. The bank has also entered into tie-ups with several OEMs (original equipment manufacturers) with revamped schemes of financing vehicles/equipments to make inroads into the SRTO sector.

What kind of potential do you see for the SME products?
There are more than 8 million SME entrepreneurs across the country providing employment to over 60 million people thus making it largest source of employment after the agriculture sector. The SME sector constitutes the growth engine of the country’s economy and it accounts for almost 45 per cent of the exports. With the present pace of economic development that is taking place in the country, the number of new SMEs being set up is growing fast. The YOY growth of the SME sector has been 20 per cent for the last five years and the same is mandated to continue by the RBI in the ensuing fiscals also. As per the MSMED Act 2006, the quantum of investment in plant and machinery/equipment is the sole criterion for deciding the status of SMEs in terms of micro, small and medium irrespective of the quantum of finance they require or is sanctioned.

The inclusion of entrepreneurs in the service sector such as retail traders, professional and self-employed, small business enterprises, SRTOs and other enterprises under the purview of the SME sector has further expanded the untapped SME space. Many of the SMEs, particularly in the unorganised segment, are still dependent on private money lenders or NBFCs for their funding requirements due to the comparatively easy access to these traditional financers, longer processing time taken by the banks, cumbersome formalities to be completed in respect of nationalised banks, etc. As such there is tremendous scope for making available cheaper finance to the SME sector by the banking system in India. Therefore tailor-made SME products, requiring lesser formalities, have very good potential to flourish.

What is your view on the current performance of the SMEs and their future?
SMEs in general are outperformers. Their contribution towards the total manufacturing output of the country is 39 per cent while exports are to the tune of 34 per cent. Currently they are manufacturing 8,000 odd products and provide employment to 68 million people in the rural and urban areas of the country. Given the constraints they face, their aforesaid performance can certainly be considered as excellent. However, unlike big industries they are more prone to be affected by any slowdown of economy as happened in 2008. Many of the SMEs are ancillaries manufacturing major components of the assembly lines of the big industries. They entirely depend on orders from such large-scale units, which becomes a limiting factor. Therefore the SMEs may need to have a diversified base of clientele so as to provide a cushion effect against one large-scale unit not been able to provide regular purchase orders to it. Nonetheless, taking a holistic view of the sector we may say that the future of the SMEs is bright.

What should be the financial management approach according to you for the SMEs to be able to perform better?
SMEs often find themselves in trouble as far as debt management is concerned. Their own capital does not prove to be sufficient for all the problems with regard to the operation of their unit. Therefore they need to depend on other sources, particularly banks. Ironically they can easily access dearer funds from private money lenders whereas the cheap funds of the banks are not made available to them easily due to various reasons viz. unorganised book-keeping, low level of collateral security, lesser awareness of the benefits of financial discipline, longer time taken by the banks in processing their requests, etc.

Which are the areas the SMEs should look into for better growth?
As per a recent analysis, 70 per cent of the revenue is generated from nine sectors in India which are:
• Wholesale trading
• Textiles
• IT and professional services
• Retail trading
• Metal works
• Food processing
• Real estate
• Transport and logistics
• Auto and auto ancillary

New SMEs can, therefore, venture into these areas for better returns and the overall growth of the unit.

Could you elaborate about your recently launched door-step services?
To begin with, the bank has launched door-step banking for corporate clients and also high net worth customers. Through this we endeavour to provide certain basic banking services to clients at their office or residence. Clients will be benefited by savings of time and cost as also be absolved of the risk of cash handling whereas the bank will benefit in terms of retaining the existing clients and attracting new clients as well. It will also reduce the load on the branch and allow lot of bulk transactions to be completed at the back office. At present, the following four services will be rendered at the door-step of the clients at selective centres:
• Pick-up of cash.
• Pick-up of instruments.
• Delivery of cash against cheque(s) received at the counter.
• Delivery of demand drafts.

How are you creating value for your investors?
The value of investors will be created and enhanced basically by higher returns on a particular investment/portfolio and ensuring the quality of relative assets. The SME segment will help in achieving both as the returns on SME lending are relatively better and the risk in lending is fairly spread.