WINTER PROJECT REPORT

ON

MSME FINANCE GOVERNMENT INITIATIVE

SUBMITTED
BY

POOJA JHA
2K12BFS14
TO

PROF. RAVINDRA BHATIA

In

Partial Fulfillment & Requirements of PGDM Programme

Asia-Pacific Institute of Management, New Delhi

Date: 09-01-14

CERTIFICATE
This is to certify Ms. Pooja Jha has undergone the winter project under my supervision and
guidance from (November to December). This is an original winter project report to the best of
my knowledge carried out by her in partial fulfillment and requirements of PGDM Programme at
Asia-Pacific Institute of Management, New Delhi.

Sincerely,

Prof. Ravindra Bhatia

Date: 09-01-14

DECLARATION
I do hereby declare that I have completed the winter project titled MSME Finance Government Initiative from (November to December). The project report submitted is my
original work carried out under the supervision and guidance of Prof. Ravindra Bhatia
in partial fulfillment and requirements of PGDM Programme at Asia-Pacific Institute of
Management, New Delhi. It has not been submitted elsewhere for award of any degree / diploma.

Truly Yours,

Pooja Jha
2K12BFS14

ACKNOWLEDGEMENT
It is a matter of great satisfaction and pleasure to present this report on MSME FinanceGovernment Initiative. I take this opportunity to owe my thanks to all those involved in
my guidance.
This project report could not have been completed without the guidance of our WIP
Faculty Supervisor Prof. Ravindra Bhatia. I express my gratitude towards my faculty
supervisor who has helped me in completing this project.

Pooja Jha

CONTENTS
Serial No.

Description

Page No.

1.

Introduction, Need & Relevance and Objective of the study

Literature Review

7-12

2.

Financing of MSME

13-14

MSME Financing in Eastern India, Government Institute and

Schemes

15-26

Improving Credit Health for MSMEs

4

27-32

Expanding The Financing Horizon & Use of Alternative

Financing Options

33-41

Micro Research:
Research Methodology, Results & Discussion Limitations,
Findings & Suggestions, Problems relating to MSMEs

42-49

Conclusion & References

50-51

Appendix

52-54

ABSTRACT
The MSME sector plays a significant role in the Indian economy. A catalyst for socio-economic
transformation of the country, the sector is critical in meeting the national objectives of
generating employment, reducing poverty, and discouraging rural-urban migration. These
enterprises help to build a thriving entrepreneurial eco-system, in addition to promoting the use
of indigenous technologies. The sector has exhibited consistent growth over the last few years,
but it has done so in a constrained environment often resulting in inefficient resource utilization.
Of the many challenges impeding the growth and development of MSMEs, inadequate access to
financial resources is one of the key bottlenecks that make these enterprises vulnerable,
particularly in periods of economic downturn. The term MSME is widely used to describe small
businesses in the private sector. Regulators and financial institutions across the world use
parameters such as employee strength, annual sales, value of fixed assets, and loan size proxies
to define the sector in the context of finance. Micro enterprises mostly operate in order-driven
industries such as retail trade, repair and maintenance, restaurants and textiles among others,
and have a significant working capital demand. In this project it will be seen that what necessary
steps have been taken to promote and grow MSME Finance by the Government of India.

INTRODUCTION
The Micro, Small and Medium enterprises (MSMEs) have been accepted as the engine of
economic growth and for promoting equitable development in all over the world. Let there be
any category of countries (Developed, Developing and Under Developed), the existence of
MSMEs is inevitable. The major advantage of the sector is its pivotal role through its
contribution in Industrial output, Exports, and majorly in Employment generation at low capital
cost. The labor intensity of the MSME sector is much higher than that of the large enterprises.
The MSMEs constitute over 90% of total enterprises in most of the economies and are credited
with generating the highest rates of employment growth and account for a major share of
industrial production and exports.
. Government focus on MSMEs intensified with the passage of the Micro Small and
Medium Enterprises Development (MSMED) Act in 2006.
This Act introduced the concept of enterprise
Which expanded on industries to include both manufacturing and service entities
And defined MSMEs based on their total investment in plant, property, and equipment.
The 2006 Act also created the Ministry of Micro, Small, and Medium Enterprises (MMSME),
which coordinates policy and regulation affecting MSMEs, and included provisions for:
Preferences to MSMEs in government procurement activities
Mechanisms to assist with delayed payment problems
A scheme to help MSMEs with business closures
Specific funds to promote, develop, and enhance MSME competitiveness.7
The government has also worked to promote MSMEs by improving credit availability via higher
loan limits and facilitating cooperation amongst MSMEs.8 Cluster development programs

encourage MSMEs to physically locate themselves near each other in order to increase collective
bargaining power, take advantage of infrastructure and technology upgrades, and avoid
fragmentation. Such policies have translated into growth for both small and medium sized firms
and the economy as a whole.

Definition of MSMEs (Based on Investment in Plant & Machinery and

Enterprises
Micro Enterprises
Small Enterprises
Medium Enterprises

Enterprises
Micro Enterprises
Small Enterprises
Medium Enterprises

Equipments)

Manufacturing Sector
Investment in Plant & Machinery
Does not exceed twenty five lakh rupees.
More than twenty five lakh rupees but does not
exceed five crores rupees.
More than five crores rupees but does not exceed
ten crores rupees.
Service Sector
Investment in Equipments
Does not exceed ten lakh rupees.
More than ten lakh rupees but does not exceed two
crores rupees.
More than two crores rupees but does not exceed
five core rupees.

In accordance with the provisions of Micro, Small & Medium Enterprises Development
(MSMED) Act, 2006, the Micro, Small and Medium Enterprises (MSME) are classified
into two Classes:
(a) Manufacturing Enterprises: The enterprises engaged in the manufacture or
production of goods pertaining to any industry specified in the first schedule to the
industries (Development and regulation) Act, 1951). The Manufacturing Enterprise
are defined in terms of investment in Plant & Machinery.
(b) Service Enterprises: The enterprises engaged in providing or rendering of services
defined in terms of investment and are in equipment.

In India, the MSMEs contribution is highly remarkable in the overall industrial economy of the
country. In recent years the MSME sector has consistently registered higher growth rate
compared to the overall industrial sector. With its agility and dynamism, the sector has shown
admirable innovativeness and adaptability to survive the recent economic downturn and
recession. In Indian market, MSMEs rapid growth could be seen as Indian entrepreneurs are
making remarkable progress in various Industries like Manufacturing, Precision Engineering
Design, Food Processing, Pharmaceutical, Textile & Garments, Retail, IT and ITES, Agro and
Service sector. The sector not only serves for urban market but also helps in industrialization of
rural and backward areas, reducing regional Imbalances and assuring more equitable distribution
of national income and wealth. MSMEs complement large industries as ancillary units and
contribute enormously to the socioeconomic development of the country.
MSMEs account for 45% of Indias manufacturing output, about 40% of Indias total exports;
employ about 73 million people in more than 31 million units spread across the country,
manufacture more than 6,000 products ranging from traditional to high tech items. The report
also projects the total production coming from the MSME sector at 10,957.6 billion in FY12, an
increase of more than 11% over the previous year contribution.
Though, MSMEs contribution is phenomenal in the growth of Indian economy.
Simultaneously, MSMEs are facing intense pressure and constraints to sustain their
competitiveness in globalized world. Some other issues such as recession, low demand, finance,
heavy competition from MILLIONCs etc. are becoming conspicuous dilemma to MSMEs in
India. In this competitive world, MSMEs need to be able to confront the increasing competition
from developed and emerging economies and to plug into the new market opportunities,
provided by these countries. There is a direct link between internationalization and increased

MSMEs performance. International activities reinforce growth, enhance competitiveness and

support the long term sustainability of companies. Yet Indian MSMEs still depend largely on
their domestic markets despite the opportunities brought by the enlarged single market and by
globalization at large. De-reservation of items which were earlier reserved for MSMEs,
increasing competition by liberalizing the policies and allowing foreign companies to operate in
Indian market are some of the emerging challenges before MSMEs. Internationalization strategy
is studied in this research as one of the important strategies for countering global challenges for
MSMEs. This term basically is not new; it has been studied by various authors in differentdifferent ways. Internationalization does not only mean exporting but it compasses trade across
the border, cross-border collaboration, alliances, cross-cultural diversity and the different
business environment beyond the home country environment. So to counter the global
competition and to access the global market, internationalization strategy is become the need of
the hour for MSMEs to use all the opportunities created due to globalization. A natural way of
internationalization would be to first get involved in inward and outward activities which are
nothing but imports and exports. There are also many enterprises which are inclined to born
global concept, however this emerging concept requires more capital investment at the initial
phase of the enterprises. Wherein the internationalization strategy goes through the steps and the
MSMEs could make their presence globally at low capital cost.

NEED & RELEVANCE

The need and relevance of this study is to see in what ways Government of India could reduce
poverty, generate employment and discourage rural-urban migration.
10

OBJECTIVE OF THE STUDY

The main objective of the study is to see what necessary steps have been taken by Government
of India to promote MSME Finance.

11

LITERATURE REVIEW
Indias economy grew slowly for more than thirty years following its independence in 1947 due
to tight government control and adherence to socialist policies. In the late 1970s, the Janta Party
came to power and enacted a series of economic reforms that paved the way for further
liberalization and higher growth throughout the next decade. Indias economy grew at a much
faster pace until problems arose beginning in the late 1980s and culminating in 1991 with a
severe external debt crisis. Yet rather than defaulting on foreign debt obligations, Indian leaders
responded by embarking on a new period of economic liberalization marked by significant
changes in the country's development strategy and increasing integration into the world
economy. Within this context, the government also turned its attention toward the growth
potential and economic importance of smaller enterprises.
Parliament created the Small Industries
Development Bank of India (SIDBI) in 1990 as the main financial institution to promote, finance
and develop small-scale industry. Today, according to SIDBIs annual report, it provides direct
financing to the MSME sector and operates two funds of Rs 2,000 crores ($430 million) each to
focus on risk capital financing and enhancing the MSME sectors refinancing capabilities.
In 1991, the government created the Ministry of Small Scale Industries (SSI) and provided direct
assistance to the MSME sector by giving smaller enterprises priority production rights to a list of
about 4,000 goods and services over larger firms. In keeping with the countrys progression
towards more liberal economic policies, this protection has been gradually phased out. As of
March 2005, the list contains only 506 goods/services

12

Financing of MSMEs
MSMEs require timely and adequate capital infusion through term loans and working capital
loans, particularly during the early and growth stages. Historically the MSMEs have relied on
following sources for financing their needs:

Retained earnings, funding through sale of assets

Ancestral capital, personal savings, loans from relatives, loans from unregulated market

Institutional financing from scheduled commercial banks

Venture capital funds/ seed funds

Among the formal financial institutions, commercial banks constitute the largest source of
financial assistance for the MSME sector at about 87% as of 31st March 2011. The outstanding
MSE credit by SCBs recorded a strong growth of 34% in FY 2011 on a strong base of 3, 62,291
crores INR as of 31st March 2010.
The traditional and emerging options for financing MSMEs in the eastern states of West Bengal,
Bihar, Odisha, Jharkhand and Chhattisgarh, MSMEs have been discussed in the subsequent
section.

13

Financing related

Legal and tax related

Non-availability of adequate and timely credit

High cost of credit;
Collateral requirements;
Limited access to equity capital.

Multiplicity and procedural complexity of

labor laws;
No mechanism for quick revival of viable sick
units and speedy shutdown of unviable ones;
Issues relating to taxation, both direct and
indirect, and procedures thereof.

Operations related

Infrastructure and technology related

Problems in supply to government

departments and agencies;
Cost efficient procurement of raw materials;
Problems of storage, designing, packaging and
product display.

Lack of access to global markets;

Inadequate infrastructure;
Lack of access to modern technologies;
Lack of skilled manpower in manufacturing,
services, marketing, etc.

Various action points were included in the Task Forces recommendations, but the financing
problems still persist. MSME owners generally have limited access to credit. This forces them to
borrow from unregulated lending markets.

MSME Financing in Eastern India

14

Traditional Financing Options

The number of new MSMEs has been consistently increasing across the nation. Financial support
can be attributed as a reason for this. This has been possible through various debt instruments,
limited equity capital and a slew of government schemes. However, the picture is less rosy in the
eastern region of India. To address this, many schemes for the development of MSMEs have
been launched by the central and state governments. Many central and state institutes provide
varied assistance for the growth of MSMEs in eastern India.

Financial support from public sector banks

Public sector banks have been pioneers in providing financial assistance to several MSMEs
which can approach the banks for loans under various schemes. The government of India has
shown strong commitment to double the credit flow to this sector in the next five years. Hence
the RBI has mandated scheduled commercial banks to achieve 20% year-on-year credit growth
to the MSME sector. MSMEs needing financial assistance can approach the banks for aid as per
the specific schemes constituted for different types of financial aid.

Government Institutes and Schemes

15

Central institutes and schemes

The following table captures in brief the nodal government bodies looking after MSME
development and some of the central government financing schemes available.

Name of scheme/institute

Nature of assistance

National Small Industries

Financial and marketing assistance to the small scale unit supplying requisite

Corporation (NSIC)

machinery on hire purchase and leasehold basis

Small Industries

Single window service for SSI units

Development Agency
(SIDA)

Credit Linked Capital

Facilitates technology up gradation of micro and small enterprises. The scheme

Subsidy Scheme (CLCSS)

provides 15% capital subsidy on institutional finance availed by them for induction

(by various banks and

of well-established and improved technology in approved subsector products. The

institutes

maximum limit of loan for calculation of capital subsidy under the scheme is 100
Lakh INR with a maximum subsidy of 15 Lakh INR.

PMEGP Training

Beneficiaries can set up micro enterprises by availing of margin money subsidy of

Programme

25% (35% for special categories) of the project cost in rural areas. The maximum
cost of the projects assisted under PMEGP is 25 Lakh INR in the manufacturing
sector and 10 Lakh INR in the service sector.

Small Industry
Development Bank of India
(SIDBI) (Eastern Regional
Office)

16

Promotion, financing and development of the small scale sector, and co-ordination
of the functions of the institutions engaged in the promotion and financing or
developing industry in the small scale sector.
SIDBI also refinances institutions such as state financial corporations (SFCs), state
industrial development corporations (SIDCs), and commercial banks against loans
granted to the small-scale sector. SIDBI also acts as financer for small-scale
projects directly on a selective basis.
Products and services offered by SIDBI may be broadly classified:
Institutional: Focuses on refinance schemes, like Mahila Udyam Nidhi, finance to
small transport operators, technology up gradation fund for textile units, loans for
acquisition of ISO certification, self-employment loan for ex-servicemen, single
window finance for short term credit, all of them operated through SFCs or SIDCs
or primary lending institutions or Banks or other microfinance institutions,
depending upon the category of loans.
Promotional: SIDBI acts as a nodal agency for several Government schemes such
as Technology Up gradation Fund Scheme for the textile sector, Integrated
Development of Leather Sector Scheme for the leather sector and
Modernization/Up gradation of Food Processing Industry.
SIDBI Venture Capital Fund Ltd (SVCL) manages two funds set up by SIDBI at
the national level.

The National Venture Capital Fund for Software and IT Industry (NFSIT)
is worth 100 crores INR, established with the focus of supporting
incubation projects of small-scale units in the IT and related business.

The SME Growth Fund has a corpus of 500 crores INR which targets
growth-oriented businesses in the areas of life sciences, retailing, light
engineering, food processing, IT, infrastructure related services,
healthcare, logistics and distribution, for making primary equity and

17

equity related investments.

National Bank of

Assistance and refinance to farm and rural development agro processing sector

Agriculture (NABARD)

Credit Guarantee Fund

CGTMSE, established jointly by SIDBI and the government of India, extends

Trust for Micro and Small

credit facilities to the micro and small enterprises sector.

Enterprises (CGTMSE)

The mandate is:

Credit facilities, including term loans, fund and non-fund based working capital
facilities up to 1 crores INR extended to micro and small enterprises are guaranteed
up to 80% of the amount in default, subject to a maximum of 65 Lakh INR. With
regard to loans up to 5 Lakh INR to micro units, the coverage is 85%. Loans
guaranteed under the scheme carry zero percent risk weight and provision for the
lending institution for the guaranteed portion. The scheme also facilitates lending
institutions by the evaluation of the credit proposals on the basis of intrinsic merits
of the projects, rather than merely on adequacy of collaterals.

Reserve Bank of India

Providing refinance to nationalized banks and financial institutions in the industry

Rural Planning and Credit

sector and framing of policy decision in the working of banks

Dept

EXIM Bank

Credit facilities are available for financing all stages of the export cycle of Indian
firms. The banks lines of credit (LOC) extend to commercial banks, financial
institutions, regional development banks, and entities overseas serve as a market

18

entry mechanism to Indian exporters and provide a safe mode of nonrecourse

financing option to Indian exporters. The bank offers buyers credit and suppliers
credit for exports on deferred payment terms. These facilities help SMEs, to offer
competitive credit terms to the buyers and to explore newer geographical markets.
TUF
(Technological Upgradation

It facilitates those SMEs that look to improvise their technological skills. It

Funds)

provides 15% margin money subsidy for the SSI textile and jute sector in lieu of
5% interest reimbursement on investment in TUF compatible specified machinery
subject to a capital ceiling of 200 Lakh INR and ceiling on margin money subsidy
15 Lakh INR. A minimum of 15% equity contribution from beneficiaries is
ensured.

CLCSS
Under CLCSS, tiny units with investment in plant and machinery of less than 10
Lakh INR are eligible for a loan support of upto 8 Lakh INR.
Tiny units with investment in plant and machinery between 10 Lakh INR to 25
Lakh INR are eligible for a loan support of upto 20 Lakh INR.
Small units with investment in plant and machinery of above 25 Lakh INR are
eligible for a loan support of upto 40 Lakh INR.

Interest subsidy scheme of

The interest subsidy scheme helps in dispensation for labor-intensive industry by

IPR, which works

extending the facility of 2% interest subvention for handlooms, handicrafts, carpets

effectively with the active

and small and medium enterprises (SMEs).

assistance of banks and

financial institutions.

NEF

Under NEF, loans are given to firms with a project cost (including margin money

(National Equity Fund)

for working capital) not exceeding 50 Lakh INR in case of new projects. No

19

interest is charged on the loan component except service charge of 5% p.a.

Scheme of Fund for

75% for CFC, technology upgradation, product development and 100% for

Regeneration of Traditional

capacity building, market development with component-wise ceiling. The

Industries (SFURTI)

components of funding are technology upgradation, setting-up of common facility

through Coir Board

centres (CFCs), development of new products and designs, new and improved
packaging, etc, market promotion activities, capacity-building activities, other
activities identified by the implementing agency (IA) as necessary for the
development of the cluster

ABOUT CGTMSE
Under this scheme, loan up to 100 lakh is available and it can be obtained for working
capital requirements, purchase of machines, expansion plans, etc.

20

Fundraising has always been a huge challenge for small and medium enterprises (SMEs) in
India. The SMEs in the country have limited owned capital available to start a business and
sustain it during initial years. They find it extremely difficult to find money when they need it
most.
Though there are a number of banks, angel investors and venture capitalists being operational in
the country to provide financial aid to small units in the country, their operations are not
praiseworthy. They ask for collateral before deciding to fund SME business. It is quite clear that
no lender will be ready to risk their money by providing loans to the small enterprises for fear of
defaults. However, we cannot put the entire blame on these lenders, as defaults on loans as well
as non-performing assets (NPAs) have become a common scene these days.
As a boon to the sector, the government and a few public sector banks, such as the State bank of
India (SBI), have already announced collateral-free loans. The CGTMSE (Credit Guarantee Fund
Trust for Small and Medium Enterprises) is one such scheme.
Launched in 2000 by the Ministry of MSMEs, the CGTMSE scheme is aimed at providing
collateral-free loans to small businesses. Loans under this scheme are available to SMEs in both
the start-up as well as existent phases.
The loans are given through Member Lending Institutions (MLIs). All leading banks offer loans
under the scheme. The list of MLIs is available on the website of CGTMSE. Loans given by
MLIs under the scheme are guaranteed by CGTMSE subject to limits.
Under the scheme, loans offered to SMEs are collateral-free. Small enterprises are not required
to bring in their own collateral to avail loan. The credit given to them becomes prime security for
21

the banks. Loan up to 100 lakh is available under CGTMSE. Loans can be obtained for working
capital requirements, purchase of machines, expansion plans, etc.
Loans given by MLIs
It is to be noted that small businesses involved in retail trade are not eligible for this scheme. The
loan under the scheme is disbursed through MLIs. Guarantee fee and annual service fee need to
be paid by the borrower, who avails loan under the scheme. Guarantee fee can be up to 1.5 per
cent of the loan amount and annual service fee can be 0.75 per cent. This depends on the MLIs.
Loans up to Rs 100 lakh can be obtained simultaneously from more than one MLI.

22

Assistance in West Bengal

Name of scheme/ institute
West Bengal Handicrafts Development Corporation Ltd

Nature of assistance
Promotion and development of handicrafts through skill
development and organization of direct haats in rural and

West Bengal Industrial Development Corporation Ltd

urban areas, to provide artisans a market

Nodal agency of the state government for the promotion

(WBIDC)

and financing of medium and large-scale industries.

Provides support to industries by facilitation, financing,

The West Bengal Small Industries Development

disbursing incentives and by setting up industrial parks

Providing infrastructural support, marketing assistance,

Corporation Ltd (WBSIDC)

supply of raw materials and other promotional assistance

West Bengal Industrial Infrastructure Development

for SSI units

Providing supporting infrastructure relating to roads,

Corporation

drainage, water and power supply, street lighting, CFC of

West Bengal Financial Corporation (WBFC)

12 established growth centres in the state

Providing term loan assistance to small-scale industries in

Modular Food Park Modular Industrial Infrastructure Ltd.

the state
Sponsored by the FPI department, it provides
infrastructure at Dankuni and other support of food

Assistance in Jharkhand
There are no specific institutes in Jharkhand but the state government itself undertakes
promotion and support of the MSMEs through following activities.

23

Coordination support for MSMEs to micro finance institutions, raw material focused
market access.

Special emphasis is given on providing common facility centres (CFC) mainly through
public-private-partnership (PPP) initiatives to MSME projects of a cluster.

Implementation of schemes such as ASIDE, Credit Guarantee Fund Trust Scheme,

Cluster Development Programme for MSMEs.

Other financial support for MSMEs:

Tender forms for biding will be made available free of cost.

Exemption from payment of Earnest Money Deposit (EMD) and Security Deposit (SD)
Bill discounting facility will be made available on government orders.
10% price preference i.e. where the bid of micro and small enterprises are within 10% of
L1 (Least priced bid), the local micro and small enterprises will be given an offer of
reasonable part of the order at L1.

Assistance in Odisha
Name of scheme/ institute

Nature of assistance

24

District Co-ordination Committee (DCC)

New small-scale units in priority sectors are entitled to

interest subsidy at the rate of 5% per annum for a
period of five years from the date of commercial
production on term loans availed from recognized
financial institutions and banks.
Small-scale industrial units (existing or new) which
undertake modernization are eligible for interest
subsidy at the rate of 5% per annum for a period of five
years from the date of completion of modernization on
term loans availed from recognized financial
institutions and banks.
The interest subsidy will be limited to 20 Lakh INR in
case of small-scale units and 10 Lakh INR in case of
tiny units.
Industrial units operating in Kalahandi, Nuapada,
Bolangir, Sonepur, Koraput, Malkangiri, Rayagada,
Nawarangpur, Gajapati and Deogarh will get additional
interest subsidy at the rate of 5% of the term loan or 5
Lakh INR, whichever is less, as an incentive for
backward area development.

Odisha Small Industries Corporation (OSIC)

The OSIC has the following objectives:

Odisha State Financial Corporation (OSFC)

To provide quality raw materials

To provide quality building materials
To assist in marketing the products
To act as a syndicate leader as per the IPR of
the government of Odisha
To act as a contract exchange for the MSME
sector

The provide term loans on below loan limit5

Minimum: 5 lakh INR
Maximum: 1000 lakh INR (to corporations, companies,
co-operative societies)
Maximum: 400 lakh INR (to proprietorship concerns
and partnership firms and trusts)
Rate of interest shall be fixed on risk-based rating of
the project which will vary from 13.5% p.a. to 15.5%
p.a.

Assistance in Bihar
Name of scheme/ institute

Nature of assistance

Chief Minister Cluster Development Scheme 6

Bihar State Financial Cooperation

SME requirements are the focal point of this proposed scheme.

Helps in planning and arranging finance

25

Those who allotted land and shed in Industrial Area

Development Authority (IADA), Export Promotion Industrial
Park, Food Park, Agri-Export Zone, etc are eligible for subsidy
after commercial production of unit.

SL Industry Subsidy

Small/Tiny unit, 50% with a ceiling of Rs. 15 lacs

All large/Medium/Mega units 25% with a ceiling of
Rs. 30 lacs

Initiatives like the urban cooperative bank, Self Help Group

(SHG) were strengthened further to ensure wider financial
inclusion and also reduce the incidence of informal credit
lending and high interest rates in Bihar. The MSME units were
made entitled to credit cards similar to the kisan credit card.
The power loom sector needs to be included in the list of the
NABARD schemes
beneficiaries eligible for credit linked subsidy scheme of the
PMEGP as the power loom sector has already benefitted from
the same scheme in the neighboring state of West Bengal. The
central scheme interest subsidy of 3% to enable weavers to
access loans at the rate of 7 to 8% interest for the next three
years had been implemented.

Improving credit health for MSMEs

Credit related issues
MSMEs depend predominantly on internal sources of finance (personal savings, loan from
relatives, and loan from local money lenders) than that of institutional financing by banks and
other financing institutions. An indication is that even in recent times, MSME credit as a
26

percentage of net bank credit of commercial banks has been below 15%. Banks perceive MSMEs
as risky field of investment due to the following:

Low growth rate of small firms

Firms following informal business practices

Inability of MSME owners to maintain collateral securities

Lack of credit worthiness and goodwill

Relatively high processing costs (in background checks, etc)

Lack of transparency due to poor reporting of firm data

Some of the reasons cited above are uncontrollable from the perspective of MSMEs. MSMEs
generally operate on tight budgets, and are often unable to procure adequate financial resources
for the purchase of machinery, equipment, raw materials, or even day-to-day operational
expenses. This is because on account of their low goodwill and limited fixed investment base,
they find it difficult to borrow at reasonable rates from institutions. Hence, for an MSME, any
unforeseen event (large order, rejection of consignment or inordinate delay in customer payment)
may result in the unit having close operations due to lack of funds. Also, the dearth of capital
also implies there is little scope for growth and expansion.

Role of credit rating in financing

One of the most important procedures taken by financial institutes that offer credit to MSMEs is
to scrutinize their credit rating status in order to get a clear picture of the creditworthiness of the
enterprises. Credit rating is done by the credit rating agency (CRA) which assigns credit ratings
27

for issuers of certain types of debt obligations as well as the debt instruments themselves to form
a basis to prove the authenticity of the new firms who seek financial help from different
organizations for their business. Hence, credit ratings are used by investors, issuers, investment
banks, broker-dealers, and governments.
Credit rating is done on the basis of credit scores that are numerical values assigned to the
MSMEs based on a statistical analysis to notify their credit worthiness. These scores are often
evaluated on the basis of the credit reputation of a company, commonly known as a credit report,
available from the Credit Bureau of India.
The government of India also operates a specialized rating agency known as the SME Rating
Agency of India Limited (SMERA), which is a third-party rating agency exclusively set up for
micro, small and medium enterprises in India for ratings on creditworthiness. It provides ratings
which enable only MSME units to raise bank loans at competitive rates of interest. SMERAs
MSME rating scale consists of two parts, a composite appraisal/condition indicator and a size
indicator. SMERA rating categorizes MSMEs based on size, so as to enable fair evaluation of
each MSME amongst its peers. SMERAs MSME rating scale is specified below:

Condition indicator
MSME 1
Highest
MSME 2
High
A
MSME 3
Above
average
MSME 4
Average
B
MSME 5
Below
average
MSME 6
Inadequate
MSME 7
Low
C
MSME 8
Lowest
D

Size indicator
(based on net
worth)
20Cr INR and
above
Between 5 Cr
INR and 20 Cr
INR
Between 1Cr
INR and 5Cr
INR
Less than 1Cr
INR

28

Some of the important credit rating agencies working in India are CRISIL, CARE, ICRA,
FITCH RATING, NDIA and ONICRA.
A scheme for performance and credit rating mechanism for SSIs has been formulated by the
government of India in consultation with the Indian Banks Association (IBA) and various
rating agencies. The National Small Industries Corporation (NSIC) has been appointed the
nodal agency for implementation of this scheme. Under the scheme, the NSIC provides subsidy
in the rating fees to the small scale industrial units (SSIs) obtaining credit ratings from the
agencies which are empanelled by them.

Guide to better credit worthiness

There are several guidelines laid down by the United Nations, the RBI and many others to
safeguard the working of MSMEs. The most common teething problem faced by MSMEs is
getting access to credit. One of the best ways to ensure credit worthiness, as recommended by
many organizations, is to go for credit rating by a third party. Some others include the following:
Credit rating not only ensures the credibility of the SME, but also helps them to get
interest relaxation against credit from banks even in future credit applications.

29

 Credit rating assists the MSMEs in building their business credibility and hence, reduces
the perceived risk of default from the banks perspective.
Credit worthiness may be further improved by increasing the level of transparency and
process rigor in record keeping and financial reporting. Most micro enterprises are weak
in this aspect and this may be greatly improved through rating. Rating involves analysis
for which the starting point is the financial statement of the firm. The last line should be:
Hence, this process also increases the level of discipline and record keeping standards in
MSMEs.
Financing institutes also apply qualitative parameters extensively in gauging the credit
worthiness of an MSME applicant since the financial statements furnished may not
reflect the correct business strength. Such parameters would include typically
organization structure, background check of promoters (and family), management
strength, resilience of the firm, quality of product, supplier and client network, trade
relationships, previous credit defaults (by any director or kin), etc. Hence, maintaining
transparency is of utmost importance in building credit worthiness. The other aspect is of
having well-defined processes and adhering to them that would ensure quality of product,
consistency of delivery, etc.
Credit rating also helps an MSME by getting more financial support as banks may
increase their credit limits due to higher comfort factor in transacting with a well rated
MSME.
The rating also allows the MSMEs to expand their market base, get new contracts from
export markets.

30

Current Institutional Roles

Government

Academia

Industry

31

Little promotion of the

Colleges/ Schools/ ITIs

R&D and training institution

MSME

primarily suppliers of human

Spending by private

sector domestically and

capital to the MSME industry

enterprises is low.

Internationally.

Lack of spin-offs from

Few linkages among the

Limited outreach of policies

academia

stakeholders as well as

and programs across areas of

Majority of facultys time

between

operations of MSME.

spent on teaching rather

firms and end-users.

Low investment in technology

research and

Low penetration in the

leading to low productivity

entrepreneurship

international market.

and

Low rate of business

poor quality of products.

incubators in educational
institutions of repute

Expanding the Financing Horizon

32

Any start-up generally seeks financial support. Usually in the MSME sector, start-up capital is
funded by personal savings, borrowings from the unregulated market or family members.
Sometimes, such funding may be sufficient, but most of the time, the requirement for financial
support is not met.
Organizations can seek financial assistance depending on the project and the financial support
provided by various financial institutes.

Management Evaluation
The management quality of the MSME is the first and foremost checkpoint for the financing
institution. The background and previous track record of the management and the promoters in
terms of heading businesses as well as their credit history forms an important value add for the
firm. The organization structure is significant as well as it is checked for balance of control and
responsibility. The incorporation documents for the company have to be in line with the
companys intended business vision and areas.
Memorandum and articles of association: Object, authorized and paid-up share capital,
promoters contribution, borrowing powers, list of directors on the board, terms of appointment
of directors
SMEs company as the promoter: Corporate plan of the company, projects promoted,
implemented, under implementation, bankers report on dealings and repayment of past loan
assistance, details of group companies, operations, balance sheet and profit and loss account of
the promoter company.

33

New promoters: Educational background, any industrial experience, family background,

sources of income, details of personal properties, bankers reference, Income tax and Wealth tax
returns.
Management and organization set-up: Broad composition of the board, details of fulltime
directors and their responsibilities, details of chief executive and functional executives including
qualification, experience, organization set-up for existing company and during project
implementation for new company.

Technical feasibility
The technical feasibility is tested by the financer by a standard assessment procedure of mapping
the local unmet demand for the specific service/ product being sold by the applying SME with
factors like local competition, availability of raw materials and required manpower, logistics and
infrastructure etc. The other important cog that is tested here for soundness is the background of
the contractors setting up the plant/ facility and their project track record. The last and of
increasing importance, is the environmental impact of the proposed project and clearances
needed thereof.
Technology and manufacturing process: Proven and new technology, basis of selection of
technology, competing technologies, performance data of plants based on the technology, details
of licensor of technology, process flow chart and description
Location of the project: Location advantage, availability of raw material and other utilities,
infrastructure facilities, availability of labor, environmental aspects

34

Plant and machinery: List of machinery and equipment, details of suppliers, competitive
quotations, technical & commercial evaluation of major equipment
Raw material, utilities and manpower: Details of raw materials and suppliers, electricity and
water supply, basis of manpower estimates, details of manpower, e.g. managerial, supervisory,
skilled or unskilled, training needs
Contracts: Agreement with contractors detailing on know-how, engineering, procurement,
construction, financial soundness and experience of contractors
Project monitoring and implementation: Mode of implementation, details of monitoring team,
detailed schedule of implementation
Environmental aspects: Air, water and soil pollution, list of pollutants or hazardous substances,
their safety, handling and disposal arrangements, compliance with national and international
standards, clearances and no objection certificates required and obtained, etc.

Commercial viability
Existing and potential market demand and supply for the proposed product in respect of volume
and pattern
Share of the proposed product of the company in the total market through marketing strategy
Selling price of the product and export potential, if any
Buy-back arrangements, if any.

35

Financial appraisal
The financial appraisal is the most crucial aspect from the point of view of the financer. Here the
overall costs, revenue projections are checked for realistic estimates, and also tested with
sensitivity analysis by changing some crucial project parameters like CAGR, service cost
inflation, raw material costs etc. The project is also measured in terms of payback period, break
even period and internal rate of returns, to give an idea about the revenue and profit generating
capacity of the project.
Cost of the project: This includes the cost of land and site development, building, plant and
machinery, technical know-how and engineering fees, miscellaneous fixed assets, preliminary
and preoperative expenses, contingencies and margin money for working capital. SMEs are
expected to submit realistic estimates. The cost of the project will be examined with reference to
various factors such as implementation period, inflation, various agreements, quotations, etc.
Means of financing: This shall have to conform to proper mix of share capital and debt. This
includes share capital, unsecured loans from promoters or associates, internal accruals, term
loans, government subsidy or grant. The reasonableness of promoters contribution in the form of
equity and interest-free unsecured loans, if any, is ascertained in view of commitment to the
project.
Profitability projections: Past records of financial performance of SME will be examined.
SMEs need to submit profitability estimates, cash flow and projected balance sheet for the
project and for the company as a whole. Based on the projections, various financial ratios such as
debt -equity ratio, current ratio, fixed asset coverage ratio, gross profit, operating profit, net
profit ratios, internal rate of return(over the economic life of the project), debt service coverage

36

ratio, earning per share, dividend payable, etc. will be worked out to ascertain financial
soundness of the project.

Economic viability
This aspect is checked for projects where there is either export orientation or probability of
international players entering the domestic market in same area of service/ product as the SME.
Hence this is particularly relevant for IT related businesses as well as any FMCG or light
engineering venture.
SMEs will have to take real value of input as against the value accounted in financial analysis for
the economic evaluation of the project.
SMEs should carry out social cost benefit analysis as a measure of the costs and benefits of the
project to the society and the economy.
Economic analysis is aimed at the inherent strength of the project to withstand international
competition on its own.
Apart from the mandatory documents MSME borrowers can make convincing business cases for
funding by keeping the following things in mind while approaching any lender.
MSME borrowers can meet their borrowing requirements and avail the best possible terms if
they approach banks or financial institutions in an appropriate manner. They must clearly
understand the various criteria that banks employ to screen, rate and process their loan
applications and the importance of furnishing precise and correct information. As commercial
credit bureaus (particularly CIBIL) expand their database, it will become progressively easier for
financial institutions to track past repayment or default behavior of loan applicants.

37

Business Plans
They should ideally have an updated business plan for their company, showing intended capital
investments and forecast revenue and expenditure for the next three to five years. This is an
excellent document to produce during discussions with a banker or financial adviser.
Having a feasibility study of the project the fund is intended for might prove to be useful as well.
Feasibility studies are usually carried out in connection with medium- or long-term projects and
are consequently prepared, among other reasons, as an aid to raising medium- to long-term
project loan finance. They may wish to start a new project or expand an existing activity, and
need capital to finance the additional capital goods required (e.g., machinery, tools, spares and
raw materials). MSMEs will need a feasibility study to present to their banker. They will also
need to give copies of draft or actual loan agreements with other lending institutions. These are
important because the loan agreements may stipulate that they cannot borrow from another
lender unless the loan is subordinated to them. This may mean that they cannot pledge fixed or
current assets if the first lenders have fixed and floating charges on such assets. They may be
limited to providing their bank with a second charge or some other, less secure, form of
guarantee. In many respects, the feasibility study is not dissimilar in its presentation to the
business plan. The main difference lies in its purpose.

38

USE OF ALTERNATIVE FINANCING OPTIONS

In spite of the various policies created to augment financial support to SMEs and the growth in
the credit limits of banks, SMEs still face challenges when it comes to accessing timely and
sufficient credit at a reasonable cost. The credit flow to them is not aligned to the needs of the
economic activities undertaken by them. According to a RBI report,11 statistics reveal that small
businesses rely on multiple sources of financing ranging from internal sources namely personal
funds and funds from friends, to external sources ,both formal and informal, which include
financing from banks, NBFCs, venture capital funds, trade credit factoring, etc. The raw sample
includes more than 14,000 non-financial firms. In particular, trade credits (bank loans) are less
(more) important for Indian firms based on the World Bank surveys. These findings are one of
the many indicators of the increasing importance of alternative source of financing for SMEs in
India.

Factoring
Factoring is a form of receivables finance whereby a business sells or assigns its accounts
receivables (i.e. invoices) to a finance company (a factor) at a discount in exchange for
immediate money with which to finance continued business.12 The delayed payment cycle by
the large scale customers of SMEs have an adverse effect on their operational facets and fund
recycling efforts.
A CRISIL study on 5000 small and medium enterprises (SMEs) reveals that SMEs can enhance
profits by at least 15 per cent if they receive payments on time from their large corporate
customers. CRISIL estimates that timely payments from large customers will help SMEs reduce
39

interest costs, improve profitability and have a positive impact on the long-term health and
sustainability of Indias SME sector. SMEs with large corporate customers have receivables of
90 to 120 days of sales on their balance sheets, as against 45 days stipulated by the Micro, Small,
and Medium Enterprises Development (MSMED) Act.
Factoring is capable of providing SMEs with the liquidity needed against their receivables and
can be efficient alternate source of working capital. Factors buy the right to collect on invoices
raised against any sales by the SME and releases 80-90% of the invoice value to the firm. It is on
account of its superior conversion time of receivables into cash, absence of geographical
restraints, non requirement collateral security etc makes it a much preferred and superior product
than bank finance.
The Indian factoring market is still at a nascent stage. As per the Factors Chain International
(FCI), a global network of factoring companies worldwide, the turnover of India is only 2750
million Euros, which is less than half of the turnover of Singapore and not even 2% of Chinas
turnover. There are nearly 10 factoring companies in India with Can bank factors and SBI Global
Factors being two of the oldest.

Supply chain finance

Supply chain finance can prove to be another route to facilitate SMEs access to enhanced
working capital from bank and non bank sources. This mode of financing enables SME suppliers
to large OEMS to receive short-term credit against the volume supplied during the payment
receivable period. HSBC for instance has a distributor finance programme (DFP) which assists in
creating the support framework for financing and collection for any SME clients delivery chain.
Regular MIS helps the SME update their sales ledgers and avoid reconciliation issues.

40

Angel funds or venture capital funds

SMEs involved in commercializing innovations and high-end technologies need to be able to
access venture or risk capital fund effectively. These firms need finance during the initial stages
of conceptualizing their product offerings (seed phase) and during development and marketing
phase. These concept and ideas generally need an incubation period before they can be utilized
for generating revenue or profit. This is where venture capital comes in to provide them with
funds required to enter new markets and attain accelerated growth. The GOI in terms of the
recommendations of the PMs task force has been working towards clearing the SME route
towards accessing this kind of much needed fund. In the Union Budget 2012-13 the Finance
Minister had announced to set up a 50 billion INR India Opportunities Venture Fund with SIDBI
to enhance the availability of equity to the MSME sector.
With the government of India putting the development of the MSME sector as top priority, and
the state governments of the eastern region aligning themselves to this objective through
implementation of various schemes, the future for MSMEs in the east is brightening up. The
MSME companies need to be aware of the schemes and financial aids being offered through
various banking and non-banking channels to fund their innovation. With increasing participation
of SMEs in the innovative exchange platform, along with their active opt-in for third party credit
ratings, access to capital, both equity and debt, should no longer be a bottleneck for growth and
expansion. These financial aids and processes will not only give the MSMEs a much needed
reprieve from their liquidity crunch, but also help them in instilling the rigor of process,
transparency and quality.

41

MICRO RESEARCH
METHOD OF STUDY
In the process of completing this project, the research has been referred to several credible
sources of data, including existing research literature and industry publications. In addition, a
series of secondary data was collected in order to understand and evaluate the size of the MSME
finance market.

RESEARCH STATEMENT
The Government of India has developed key strategies to promote and support the MSME sector
to promote competitiveness. This has resulted in a dramatic positive change in the sector. Key
characteristics of Indian MSMEs such as high contribution to domestic production, significant
export earnings, low investment requirements, operational flexibility, location wise mobility,
capacities to develop appropriate indigenous technology, import substitution, contribution
towards defense production, technology-oriented industries, and competitiveness in domestic and
export markets help them tap opportunities in various sectors.

Some of the key announcements for MSMEs in the Union Budget, 2010-11 are:
Allocation for MSMEs to be increased from Rs 1,794 crores to Rs 2,400 crores for the year
2011

42

 Corpus for Micro Finance Development and Equity Fund to be doubled to Rs 400 crores for
2011
extension of existing interest subvention of 2 per cent for one more year for exports covering
handicrafts, carpets, handlooms and small and medium enterprises
Limit of turnover for the purpose of presumptive taxation of small businesses enhanced to Rs
60 lakh
The increase in the extension of existing interest subvention of 2 per cent to the small and
medium enterprises is a positive development. Setting up of High Level
Council on MSME to monitor the implementation of the recommendations of Prime Ministers
High Level Task Force and increase in the allocation for MSMEs augurs well for the overall
development of this sector.

43

Problems Relating to MSMEs

Micro, small and medium enterprises (MSMEs), including khadi and village as well as rural
enterprises, play a pivotal role in the overall industrial development of the country. They have
been the significant contributor to the national income, with their huge involvement in country's
industrial production, exports, etc. They not only help in providing employment opportunities to
millions of people across the country, especially to the village artisans and rural people, but also
check the problem of economic concentration in the hands of a few. They create a sound
entrepreneurial base in the economy by developing and nurturing the talents, skills, etc. of small
and medium scale entrepreneurs. The labor intensity in the MSME sector is estimated to be
considerable higher than the large enterprises. Thus, this sector has been regarded a priority
status by both the Central and the State Governments.
Inspite of this, the MSMEs continue to face several problems in their day-to-day operations, that
is, in production and marketing of their products. They find it difficult to sell their output at
remunerative prices and cannot spend much on advertising, marketing research, etc. They also
face stiff competition from large firms. Inadequate infrastructural facilities and access to credit
are other major problems. MSMEs are often unable to procure adequate financial resources for
the purchase of machinery, equipment and raw materials as well as for meeting day-to-day
expenses. Further, they find it difficult to recruit and motivate skilled managerial and technical
personnel. They are mainly reluctant to adopt modern methods of organization and management.
Although, the primary responsibility for promotion and development of MSMEs lies with the
concerned State/ Union Territory (UT) Governments. But, the Central Government has always
taken active interest in supplementing the efforts of State/UT Governments through its various
44

regulations, as MSMEs have huge potential both in terms of creation of wealth and employment
as well as for the proper growth of related sectors of the economy. In India, the Ministry of
Micro, Small and Medium Enterprises are the main central authority which assists the States/UTs
in their efforts to promote growth and development of MSMEs. It has been implementing several
schemes/programmers and policies so as to enhance the global competitiveness of the MSMEs.
These relate mainly to simplified systems and procedures, easy access to capital, positioning the
MSMEs in the global value chain by enhancing their productivity, technology up gradation,
quality improvement, skill development, access to both domestic and international markets, etc.

45

RESULTS & DISCUSSIONS

The government has taken several measures to solve the problems faced by micro, small and
medium enterprises and enable them to play an effective role in the country's economy. These
measures may be broadly classified into:

Protective Measures: which are designed to protect small scale industries from the
competition of large firms.

Promotional Measures: which have been undertaken to promote the growth of the small
scale sector in the country.

Institutional Measures: which have been taken by the government in the form of setting
up of several institutions or agencies to provide liberal and manifold assistance to small
scale industries.

Recently, major initiatives have been taken by the government to revitalize the MSME sector.
They include:

Implementation of the Micro, Small and Medium Enterprises Development (MSMED)

Act, 2006.

A "Package for Promotion of Micro and Small Enterprises" was announced in February
2007. This includes measures addressing concerns of credit, fiscal support, cluster-based
development, infrastructure, technology, and marketing.

46

To make the Credit Guarantee Scheme more attractive, the following modifications have
been made:
(a) Enhancing eligible loan limit from Rs. 25 lakh to Rs. 50 lakh;
(b) Raising the extent of guarantee cover from 75 per cent to 80 per cent for
(1) Micro enterprises for loans up to Rs. 5 lakh,
(2) MSEs operated or owned by women and
(3) All loans in the North-East Region; and
(c) Reducing one-time guarantee fee from 1.5 per cent to 0.75 per cent for all loans in the
North-East Region.

The phased deletion of products from the list of items reserved for exclusive manufacture
by micro and small enterprises is being continued. 125 items were de-reserved on March
13, 2007, reducing the number of items reserved for exclusive manufacture in micro and
small enterprise sector to 114. Further, 79 items were de-reserved on February 5, 2008,
14 items in October 2008, followed by a revision in July 2010.
Some other suggestions generally put forward are:

Arrangements may be made by the government to ensure the supply of trained and
professional managers for the small scale sector.

47

It would be necessary to consider policy initiatives to incentivize MSMEs to achieve

economies of scale by expanding production.

To facilitate the MSME sector to garner resources, it is imperative that a separate trading
exchange be set up exclusively for the MSMEs.

Provide special incentives for encouraging larger flow of Venture Capital & Private
Equity funds into the sector.

There is an urgent need to devise measures to tackle the problem of loss of fiscal benefits
when the micro and small-scale units graduate into larger units, etc.

48

LIMITATIONS
The study has limited data which is collected as a secondary data from various sources and no
changes can be made in the given tables and data shown in the report as these have been
collected on the basis of research done on MSME.

FINDINGS & SUGGESTIONS

As expected, banks remain a dominant source of finance for MSMEs with over 70% of
respondents accessing finance from banks. However, banks also bring their own set of problems.
In terms of institutional sources, 17.6% accessed NBFCs for finance and 13.7% looked at private
placements for meeting their funding requirements. Other hardships faced by MSMEs include a
high rate of interest, a lack of personalized service and often a lack of justification for denial of
finance.

49

Though the information is available in various websites but awareness amongst the public at
large and in Businessmen is lacking about MSME which government needs to promote it in a
better way through the medium of Advertisements on televisions, newspapers, magazines etc.

CONCLUSION
Despite the sectors strategic importance in overall industrialization strategy and employment
generation, as well as the opportunities that the Indian landscape presents, the MSME sector
confronts several challenges. Technological obsolescence and financing problems have been
associated with the sector since long. Also, constraints such as high cost of credit, low access to
new technology, poor adaptability to changing trends, lack of access to international markets,
lack of skilled manpower, inadequate infrastructure facilities, including power, water, roads, etc.,
and regulatory issues related to taxation (state central), labor laws, environmental issues etc. are
also linked with its growth process. There is a need to develop potential strategies in order to
improve linkages and coordination between the Government, Industry and Academia. There is
also a need to develop an alternate delivery channels through capacity building of the MSME
Associations and the public-private partnerships in the institutional structure as also the schemes.
Given the nature of the enterprises, there is a need to facilitate start-ups and evolve a time-bound
exit mechanism.

50

REFERENCES
Various Bank Sites:
Reserve Bank of India, State Bank, Canara Bank, Allahabad Bank, Union Bank of India.

International Finance Corporation Report

www.ciol.com
www.business.gov.in
www.ficci.com

51

APPENDIX
LIST OF ABBREVIATIONS
ASIDE
CFC
CGST
CGTMSE
CII
CLCSS
CST
DCC
DFP
EFS
EMD
GDP
GOI
IADA
LOC
MSMED
MSMEs
NABARD
NEF
NFSIT
NSIC
OSIC
PMEGP
PwC
SD
SFURTI
SIDA
SIDBI
SLBC

Assistance to States for Infrastructure Development of Exports

Common facility Center
Central Goods and Services Tax
Credit Guarantee Fund Trust for Micro and Small Enterprises
Confederation of Indian Industries
Credit Linked Capital Subsidy Scheme
Central Sales Tax
District Co-ordination Committee
Distributor finance Programme
Equipment Finance Scheme
Earnest Money Deposit
Gross Domestic Product
Government of India
Industrial Area Development Authority
lines of credit
Micro, Small, and Medium Enterprises Development
Micro, Small and Medium Enterprises Development
National Bank of Agriculture
National Equity Fund
National Venture Capital Fund for Software and IT
National Small Industries Corporation
Odisha Small Industries Corporation
Prime Ministers Employment Generation Programme
PricewaterhouseCoopers
Security Deposit
Scheme of Fund for Regeneration of Traditional Industries
Small Industries Development Agency
Small Industry Development Bank of India
State Level Bankers Committees
52

SMERA
SMEs
SVCL
TUF
VAT
VC
WBFC
WBIDC
WBSIDC

Small and Medium Enterprises Rating Agency

Small and Medium Enterprises
SIDBI Venture Capital Fund Ltd
Technology Upgradation Fund
Value Added Tax
Venture Capital
West Bengal Financial Corporation
West Bengal Industrial Development Corporation Ltd
West Bengal Small Industries Development Corporation Ltd

LIST OF TABLES
Page No.

Topic

Definition of MSME

14

Financing of MSMEs

16-20

Govt. Institutions & Schemes

23,25-26

MSME financing in Eastern India

29

Credit Rating

32

Current Institutional Roles

53