Summer Training report on SME loan repayment behavior of Customers: Indusind Bank Ltd.DAYALBAGH EDUCATIONAL UNIVERSITYDEEMED UNIVERSITY Submitted by Gagan Kumar PanditBBM V SEMESTERRoll No: 117513

Acknowledgement It was a great pleasure to prepare summer training paper on The process of SME loan and repayment behavior of Customers: INDUSIND Bank Limited in Indusind Bank. At first, I thank almighty for helping me to move on the right direction that helped me to complete my summer training report. Preparation of this report received assistance, guidance and took valuable time of many important and prestigious personalities. I would like to express my appreciation to them for providing me all the guidance and support that I needed mostly during the course of summer training. Then, I express my sincere gratitude to Mr. Praveen Rai, Branch Sales Manager, INDUSIND Bank Limited. Without his help I could not prepare my report so informative. Finally I am grateful to all the cooperative people of Indusind bank.

Sl. No.Table of Contents

Contents

1 Historical Background

2 INDUSIND Bank: At a Glance

3 Location Head Office

4Logo of INDUSIND Bank

5Corporate Vision

6Corporate Mission

7Management Team

8Currently offered Product & Service of INDUSIND Bank Ltd

9SME Banking

10Loan Products

11 Retail Banking

12 Wholesale Banking

13Introduction

14Observation

15Objective of the Report

16Broad Objective

17Specific Objectives

18Limitations:

19Methodology

20Data requirements

21Sources of data

22Analysis of SME Loan Repayment Behavior

23Relationship of recovery rate with age of the borrowers:

24Relationship of recovery rate with education of the borrowers:

25Relationship of recovery rate with experience of the borrower:

26Relationship of recovery rate with Amount of loan taken:

27Relationship of recovery rate with term of loan:

28Relationship of Recovery Rate with Income of the Borrowers:

29Relationship of Recovery Rate with the Personal Asset of the Borrower

30Relationship of Recovery Rate with the Nature of Business:

31Findings

32Conclusion

33Limitations and Scope of Further Research:

34References

Executive SummaryBefore going to the analysis, it is mandatory to know something about the organization, its core products that it offers to its customers; about the SME loan, its classifications and the whole of its process starting from loan sanction to recovery and closing of the loan. Thats why, first of all, Ive made an overview of the organization, INDUSIND bank Limited, where I had completed my summer training program. Here I tried to focus the banks history of origination, its mission and vision, major departments and business units and major products and services. Then, in the next part, I said something about the methodology of the report. How the data have been collected, how the study has been conducted. Next, comes the focal part of the report. The module of SME is the most vital part if this report, where I gave my concentration. Here I focused on SME products, the terms and conditions of giving SME loan, enterprise selection criteria and documentation. Then talked about the procedure of SME loan where I delineated the sanction, disbursement, repayment and closing of SME loan. After talking about the whole process of SME loan, I made an attempt to analyze the repayment behavior of SME loan borrowers in the last part. Then I have chosen variables which have an impact on the recovery rate of SME loan. That is, these are the variables which may change the repayment behavior of SME borrowers. I found some significant variable like age, experience and income of the entrepreneurs which might have an impact on repayment of the loan. Finally I got some findings from the analysis of the repayment behavior of SME loan borrowers. Then I conclude my report saying some policy implications and limitations of the report.

Chapter: 1 (The organization)

1: Historical Background1994 - The bank was incorporated on January and obtained Certificate ofCommencement of Business in February 1994. The bank was promoted byIndusInd Enterprises and Finance Ltd. (IEFL) and five Mauritius basedcompanies viz. IndusInd International Holdings Ltd. (IIHL) IndusInd(Mauritius) Holdings Ltd. (IMHL) IndusInd Ltd. (IL) IndusIndInvestments Ltd. (IIL) DeFive Mauritius Holdings Ltd. (DFMHL). Thebank commenced commercial operation in April. It undertook all kindsof banking business.

- The bank proposed to set up an investment bank as a subidiary ofthe bank for concentrating on various faces of investment bankingviz. issue management, corporate advisory service, infrastructurefinancing, mergers and acquisitions, trading and depository servicesetc. It wasalso proposed to introd uce the concept of investment boutique atselected branches viz. Ahmedabad, Chennai, Mumbai etc.

- All operating outlets have direct access to Nostro Accounts throughsophisticated computerised system SWIFT.

1995 - 1200,00,000 No. of Equity shares issued. - The Company joined hands with Kredietbank NV, (KB) - Brussels, Belgium and a Memorandum of Understanding for strategic alliance has been signed with them in order to enhance capability to global standards. - The Bank has made a preferential offer of 2 crores equity shares of Rs. 10 each for cash at a premium of Rs. 40 per share aggregating Rs. 100 crores on private placement basis to the shareholders of the Bank, (other than promoters), shareholders of the promoter companies, and the employees of the Bank and of the promoter companies. 1996 - The Bank has a state-of-the-art dealing room at Nariman Point, Mumbai, catering to several additional positions of dealers and corporate analysts aimed at further enhancing the profitability of its investments. - The bank caters to the needs of NRI customers from 40 countries with deposits totalling Rs 905 crores. - 9 branches were added to the network and the number of branches doubled to 18.

1997 - The company issued 400,00,000 No. of equity shares of Rs 10 each for cash at a premium of Rs 35 per share to the public. - The Company has successfully launched the 'anywhere banking' concept and bank's customers can look at it as 'one Bank'. - IndusInd Bank has launched Fast Forex to wipe out delays in sending and receiving funds to and from foreign centres. Fast Forex is an international remittance product utilising the 24-hour processing and communication capabilities of SBC Warburg, the bank's USD clearing agent, through their electronic banking system Keylink. - The bank's shares were admitted for dematerialisation under a tripartite agreement signed by the bank, its registrars, Spectrum Corporate Services, and NSDL. 1998 - IndusInd Bank Ltd has launched its Banking on the Net service on March 24. This facility will serve as an alternate delivery channel that IndusInd Bank offers its customers in addition of branch banking, on-line ATM's and tele-banking. The customer can access Internet access Internet banking facilities not only through the Net but also through dial-up access on a common browser platform. - IndusInd Bank, has launched its new product, Fast Forex, which can remit funds to any part of the world at the fastest possible speed. - Bank has introduced net bank a product offering on the internet and the site can be visited on www.indusind.com by any customer who can register for this service. 1999 - The Bank has entered into an agreement with National Securities Clearing Corporation Ltd. of National Stock Exchange (NSE) whereby the Bank will act as official banker to NSE. - The private sector bank has also introduced a number of technologically superior products--like fast forex, anywhere banking, Internet banking and depository services--through the electronic delivery channels. 2000 - IndusInd Bank signed a memorandum of understanding (MoU) with HSBC for issuing global credit card under the MasterCard franchise to its customers. - IndusInd Bank Limited has launched its exclusive international remittance system-FAST (Fully Automated Straight Through) Forex. - IndusInd Bank has appointed Tata Consultancy Services for implementation of the asset-liability management (ALM) plan of the bank. - The Bank has tied up with the cellular company, Orange, for short messaging service facilities for mobile banking in Mumbai. - The Bank has signed an agreement with Financial Software and Systems for acquisition of the BASE24-ATM switch. - The Bank has opened its 28th Branch in Surat, Gujarat. - The Bank has launched its global credit card, to be issued in association with the HongKong and Shanghai Banking Corporation Ltd. under the Mastercard franchise. - IndusInd Bank has launched an e-broking platform, eTrading, at its Mumbai main branch to facilitate online trading of equity shares. - Kothari Pioneer Mutual Fund and IndusInd Bank have joined hands to enter into an alliance. 2001 - The Bank has entered into a strategic alliance with Sri Lanka-based National Mercantile Bank. 2002 - IndusInd Bank Ltd has informed that the Board of Directors have appointed Mr S Venkitramanan as Additional Director and Non-executive Chairman subject to approval of Reserve Bank of India. 2003 -IndusInd Bank gets RBI permission to set up offices abroad. -Bank secures ISO 9001:2000 certification for all its branches in the 10th year of its operations. -IndusInd hires KPMG Consulting for assisting the bank to develop an enterprise wide risk management framework to cover risks across all function streams. -Shareholders approved delisting of shares from Pune Stock Exchange -IndusInd, Corp Bank sign agreement for sharing of ATMs -IndusInd Bank Board approves scheme of merger of Ashok Leyland Finance. 2004 -IndusInd Bank Ltd has informed that the Bank has received approval for delisting of its shares from Pune Stock Exchange (PSE) with effect from January 16, 2004. -IndusInd Bank on April 30 launched Indus AIM (anywhere instant money) for inter-bank real time gross settlement (RTGS) transactions. -IndusInd Bank Ltd has accepted the resignation of Mr. Gopal Lohiya, Company Secretary of the Bank with effect from July 5, 2004 -Nagarajan selected as IndusInd Joint MD -IndusInd Bank has offered personal loans for the salary account holders at Global Trust Bank (GTB) -IndusInd Bank inks pact with DDA 2005 -IndusInd Bank opens its 11th branch in Gujarat at Bhavnagar -Morvi Royal Family launches Indusind International Mahila Card in Gujarat -IndusInd Bank sets up new branch at Malappuram -Indusind Bank opens Branch at Trichy -Indusind Bank opens branch at Allahabad -Indusind Bank introduces new services for retail customers 2006 -Indusind Bank Ltd has announced that Doha Bank, Qatar and the Bank, India announced their strategic alliance in Doha -IndusInd joins hand with 2 Gulf banks - Indusind Bank Ltd has informed that the Board of Directors of the Bank at its meeting held on October 31, 2006 has appointed Mr Ajay Hinduja and Mr Premchand Godha as Additional Directors of the Bank, subject to the approval of Reserve Bank of India. 2007 -On January 16, 2007 Aviva Life Insurance and Indusind Bank Ltd has announced their tie-up as Bancassurance partners. - Indusind Bank Ltd has appointed Mr. R Seshasayee has been appointed, with the approval of Reserve Bank of India, Part-time Non-Executive Chairman of the Bank for a period of two years. -Indusind Bank Ltd has appointed Mr. R Seshasayee as the Non-Executive Chairman for a period of two years. -Indusind Bank opens its 19th branch in Tamil Nadu at Sivakasi. -Cholamandalam MS enters into a strategic partnership with IndusInd Bank 2008 - Indusind Bank Ltd has tied up with TVS Motors -IndusInd Bank signs Rs 150-cr deal with SKS Micro -IndusInd Bank signs co-partner agreement with World Gold Council 2009 -lndusind Bank launches new look branch model at Bandra -IndusInd Bank signs MoU with ICRA -IndusInd Bank inaugurates its first Solar-powered ATM in Mumbai -Indusind Bank Ties Up With Maruti Suzuki India Ltd 2010 -IndusInd Bank ties-up with Tata Motors for dealer financing -Indus Bank ties up with Toyota Kirloskar Motor -IndusInd Bank ties-up with Ashok Leyland for Channel Financing -Indusind Bank ties up with Unistream Bank for Remittances 2011 -Mahindra's Automotive Sector ties up with Indusind Bank for vehicle finance. -IndusInd Bank bags the IBA award for 'Best use of technology in E-learning - 2010 -IndusInd Bank awarded the Most Improved Bank Performance of the Year'. -IndusInd Bank enters into an agreement with Deutsche Bank to acquire its credit card business in India. -Indusind Bank partners with Finacle from Infosys for its core banking transformation. -Indusind Bank signs an MoU with HDFC Ltd for home loans 2012 -Indusind Bank opens it's first Currency Chest in Mumbai. -Suzuki Motorcycle partners with IndusInd Bank to offer retail customer finance -IndusInd Bank introduces new foreign currency pre-paid travel card

2: Indusind Bank: At a Glance

IndusInd Bank Limited is a Mumbai based Indian new generation bank, established in 1994. The bank offers commercial, transactional and electronic banking products and services. Indusind Bank was incorporated in April 1994 by Dr. Manmohan Singh the then Union Finance Minister. Indusind Bank is the first among the new-generation private banks in India.The bank started its operations with a capital amount of Rs.1,000 million among which Rs.600 million was donated by the Indian Residents and Rs.400 million was raised by the Non-Resident Indians. The bank has specialized in retail banking services and continuously upgrades its support systems by introducing newer technologies. It is also working on expanding its network of branches all across the country along with meeting the global benchmark. According to the bank, its name is derived from the rich and vivid Indus Valley Civilisation. IndusInd Bank has 441 branches, and 796 ATMs spread across 303 geographic locations of the country as on September 30, 2012 with 2 representative offices, one each in London and Dubai. Mumbai has the maximum number of bank branches followed by New Delhi and Chennai.

3: Location Head Office

Headquarters-Mumbai, Maharashtra, India

4: Logo of INDUSIND Bank

Location Details - IndusInd Bank

Location TypeAddress

Registered Office2401, General Thimmayya Road, (Cantonment) Pune - 411001Maharashtra - IndiaPhone : 26343227, 26343228Fax : 26343241Email : investor@indusind.comInternet : N.A.

Secretarial Office731, Solitaire Corporate Park, 167, Guru Hargovindji Marg, Andheri Mumbai - 400093Maharashtra - IndiaPhone : 66412487Fax : 66412347Email : investor@indusind.comInternet : N.A.

Branch OfficeSudarshan Building Old No.86 New No. 92 Chamiers Road Chennai (Madras) - 600018Tamil Nadu - IndiaPhone : Fax : Email : N.A.Internet : N.A.

Overseas Office203 Safa Commercial Building Opp. Burjuman Centre P O Box 111873Dubai - Not Specified - United Arab EmiratesPhone : 3978803Fax : 3978805Email : ibldubai@indusind.aeInternet : N.A.

Overseas OfficeCountry Mark Home 50, Ragent Street London WIB 5 RD London - Not Specified - United KingdomPhone : 4845585Fax : 4324504Email : sharukh.wadia@indusind.comInternet : N.A.

Branch OfficeAnanthapur 10/373, Nama Towers Subhash Road Ananthapur District - 515001Andhra Pradesh - IndiaPhone : 244955, 249373Fax : Email : anap@indusind.comInternet : N.A.

Corporate Office8th Floor, Tower 1, One Indiabulls Centre, 841, Senapati Bapat Marg, Elphinstone Road (W)Mumbai - 400013Maharashtra - IndiaPhone : 24231999, 30493999Fax : 24231998, 30493998Email : investor@indusind.comInternet : N.A.

5: Corporate Vision

A knowledge-based organization where the INDUSIND Bank professionals will learn continuously from their customers and colleagues worldwide to add value. They will work as a team, stretch themselves, innovate and break barriers to serve customers and create customer loyalty through a value chain of responsive and professional service delivery. Continuous improvement, problem solution, excellence in service, business prudence, efficiency and adding value will be the operative words of the organization. INDUSIND Bank will serve its customers with respect and will work very hard to instill a strong customer service culture throughout the bank. It will treat its employees with dignity and will build a company of highly qualified professionals who have integrity and believe in the Banks vision and who are committed to its success. INDUSIND Bank will be a socially responsible institution that will not lend to businesses that have a detrimental impact on the environment and people. So INDUSIND Bank operates following a specific vision like: Building a profitable and socially responsible financial institution focused on Markets and Business with growth potential, thereby assisting INDUSIND and stakeholders build a "just, enlightened, healthy, democratic and poverty free ".

6: Corporate Mission

Sustained growth in 'small & Medium Enterprise' sector Continuous low cost deposit growth with controlled growth in Retained Assets Corporate Assets to be funded through self-liability mobilization. Growth in Assets through Syndications and Investment in faster growing sectors Continuous endeavor to increase fee based income Achieve efficient synergies between the bank's Branches, SME Unit Offices and INDUSIND field offices for delivery of Remittance and Bank's other products and services

1

7: Management Team:

NameDesignation

R SeshasayeeChairman

T T Ram MohanDirector

S C TripathiDirector

Kanchan ChitaleAdditional Director

R S SharmaAdditional Director

Romesh SobtiManaging Director & CEO

Ajay HindujaDirector

Ashok KiniDirector

Vijay VaidAdditional Director

Y M KaleAlternate Director

8: Currently offered Product & Service of INDUSIND Bank Ltd

9: SME Banking

INDUSIND Bank, took a step to break away from usual tradition and tapped into the true suburb entrepreneurial initiatives. Today, with over 10,000 crores of loans disbursed till date, INDUSIND Bank is countrys largest SME financier that has made more than 265,000 dreams come true!

10: Products

Transactional accounts Checking accounts (American english) Current accounts (British english) Savings accounts Debit cards ATM cards Credit cards Cheques Mortgages Home equity loans Personal loans Time deposits/Term deposits

11: Retail Banking

Retail banking is when a bank executes transactions directly with consumers, rather than corporations or other banks. Services offered include savings and transactional accounts, mortgages, personal loans, debit cards, and credit cards. The term is generally used to distinguish these banking services from investment banking, commercial banking or wholesale banking. It may also be used to refer to a division of a bank dealing with retail customers and can also be termed as Personal Banking services.In the US the term Commercial bank is used for a normal bank to distinguish it from an investment bank. After the great depression, through the GlassSteagall Act, the U.S. Congress required that banks only engage in banking activities, whereas investment banks were limited to capital markets activities. This separation was repealed in the 1990s. Commercial bank can also refer to a bank or a division of a bank that mostly deals with deposits and loans from corporations or large businesses, as opposed to individual members of the public (retail banking).

12: Wholesale BankingINDUSIND Bank offers a full array of Financial Services to Corporations and Institutions. Wholesale banking is the provision of services by banks to the likes of Mortgage Brokers, large corporate clients, mid-sized companies, real estate developers and investors, international trade finance businesses, institutional customers (such as pension funds and government entities/agencies), and services offered to other banks or other financial institutions.(Wholesale finance means financial services, which are conducted between financial services companies and institutions such as banks, insurers, fund managers, and stockbrokers.)Modern wholesale banks are engaged in: finance wholesaling, underwriting, market making, consultancy, mergers and acquisitions, fund management. Having access to the deepest end of the country, INDUSIND Bank is there to assist businesses anywhere.13:Introduction: In 2010, INDUSIND Bank Limited has established a Research and Development department (R&D) wing with a View to equip the Bank with innovation in existing products , processes, service outlets and business strategies. This wing will work to gain valuable market insight to make product and informed business decisions. With the increasing degree of competition among different financial institutes, constant innovation and re-engineering in products and services is a key differentiating factor for a bank to achieve and sustain the leading market position in the industry. For this, a small team of highly skilled researchers has been appointed to pioneer the R &D Division of the Bank in becoming a one stop center for providing all kinds of research needs of commercial Bank.14: Observation:

The Environment of INDUSIND Bank is very friendly The work activities are always set and divided for each of the employees. He/ she have to carry the duty throughout the day. Generally work is never kept pending for the next day unless it is necessary. The corporate culture of INDUSIND Bank limited the employees can only leave the office after their boss leaves. The employees are always available to help each others out in times of need.

Chapter: 2 (Description of the report)

This paper is entitled The process of SME loan and repayment behavior of Customers: INDUSIND Bank Limited originated from the fulfillment of the summer training program.15: Objective of the Report16: Broad ObjectiveThe prime objective is to gain practical experience by working in an office of an organization and thus relate theoretical knowledge with reality.17: Specific Objectives

To know the SME loan activities in INDUSIND Bank To find out basic appraisal of SME loan To know the enterprise selection criteria to provide SME loan To know the terms and conditions of SME loans To know the internal strength of SME related services of INDUSIND Bank Ltd. To know the disbursement and recovery procedures of SME loans To analyse SME loan repayment Behavior

18: Limitations:

The presented study was not out of limitations. Some limitations are presented as follows:

They did not disclose much information for the sake of the confidentiality of the organization. Updated information is not available. The clients were very busy to provide me much time for interview. Time is also a big constraint for my research. I have to submit a broader deal in a shorter form of outcome. I had to go under my day to day job responsibility that I was supposed to do so. So I could get few more time to spend in collecting data for preparing my summer training report.

19: Methodology

The report is divided into two parts. One is the Organization Part and the other is the Project Part. The parts are virtually separate from one another. The information for the Organization part of the report was collected from secondary sources like books, published reports and web site of the INDUSIND Bank Limited (www.indusindbank.com). For general concept development about the bank short interviews and discussion session were taken as primary source. The information for the Project Analysis of SME loan in INDUSIND Bank Limited both were collected from primary and secondary sources. To identify the implementation, supervision, monitoring and repayment practice- interview with the employee and extensive study of the existing file was and practical case observation was done.

20: Data requirements

In fact, my aim was to collect as much information as it can be possible for me to make an overview of the bank, its mission and vision, its departments and its functions. Of course I had to collect enough information so that I can make an analysis of SME loan and the specific behavior of its borrowers. The data collected allowed me to make an analysis regarding SME loan, its process starting from sanction of loan to closing of loan and especially regarding SME loan borrowers behaviors that is whether they are paying dully or lately or they have any default tendency.

21: Sources of data

For collecting the required data, I have used different sources or methods like the following:

Primary data sources: Focus group meetings Direct observation

Secondary data sources: Operational manual Official Website Banking journals Research paper

Chapter: 3 (Main part of the report)

22: Analysis of SME Loan Repayment Behavior

SME loan in fact, a small loan ranging from 2 lacks to 30 lacks given to small or medium enterprises not for initiating the business but for the purpose of working capital management or for purchasing any long term asset. Any sound organization after one year of their starting of business can apply for this loan. It almost a rare case for INDUSIND Bank that an SME borrower will default to repay the loan he/she has taken even the loan is given without taking any collateral. There are several reasons for which the SME loan borrowers hardly default. These reasons may like:

The loan amount is not as large as it would be difficult to repay it. Mediocre entrepreneurs hardly default to repay loans. They are very conscious about their reputation in the market. As the loan is taken for meeting up of working capital, it can be easy to repay after the sales revenue is collected from respective customers.

However, from the observation of SME loan borrowers personal and repayment information we find the following results: Average age of SME borrowers is 39 Average education of most of the SME borrowers is Class IX or X. Average Experience(As an employee of the same business) is 8 years Monthly income and expenditure of the Entrepreneur is around RS.. 30000 and RS.. 23000 respectively. Average personal and family assets are around RS.. 150000 and RS.. 240000 respectively Almost all of the borrowers are 55% retailer and 45% whole seller Average number of employees they have is 3 Average Amount of loan taken by them is around RS.. 379729.7 Average time period of loan they take to repay is 26 months

We have gathered 8 variables to analyze the relationship of each variable with recovery rate. These variables are:

Age of the borrowers Education of the borrowers Experience of the borrowers related to their business. Amount of loan taken by the borrowers Term of loan Income of the borrowers Personal Asset of the borrowers Nature of business

23: Relationship of recovery rate with age of the borrowers:We can analyze the relationship sequentially: The relationship of recovery rate with the age of the customers can be described from the following charts:Age group Frequency Recovery rate (%)

21-25 1 80%

26-30 4 96%

31-35 9 100%

36-40 9 98%

41-45 7 98%

46-50 4 96%

51+ 3 100%

From the above chart we can see that recovery rate increases as the age of the borrowers increases. Here the recovery rate is lowest at the age group of 21-25 for the lacking of experience and knowledge in the related business. They cant make the proper use of funds. And thats why their business fails. At the age of 31-35 recovery rate is 100%. At that age group people like to behave professionally and control everything with strict discipline. They are highly concerned about their career which brings success to their business. So at that time recovery rate is the highest. Again at the age of 50 and above recovery rate is also 100% because of their huge experience and success in business.

24: Relationship of recovery rate with education of the borrowers:EducationFrequencyRecovery rate (%)

Alphabetic-5897%

6 to 102098%

11 to 15996%

From the above chart we can see that Small and medium businesses are not highly affected with the educational background of the borrowers. Thats why recovery rate also is not much affected with the education of the borrower. There should be some other variables affecting it as well. 25: Relationship of recovery rate with experience of the borrower:Experience(year)FrequencyRecovery rate (%)

1 to 51394%

6 to 109100%

11 to 155100%

16-206100%

20 above499%

From the above table we see that recovery rate is highly affected with the experience of the borrowers in the business he is engaged with. In fact, it is all out true that a business and its success is greatly affected by the experience the entrepreneur have on the same line of business. At the initial periods of the business lack of experience can cause the business to fail which ultimately results in the default of loan repayments. So INDUSIND Bank is always concerned about the related experience of the entrepreneur. They dont give SME loan to anybody having no experience or for initiating any business. And here also we see that recovery rate is lowest at the experience of 1 to 5 years.26: Relationship of recovery rate with Amount of loan taken:Amount of LoanFrequencyRecovery rate (%)

200,000495%

250,0001100%

300,0001297%

350,0002100%

400,0006100%

450,000194%

500,0001097%

850,0001100%

From the above chart we see that its tough to make a relationship with both the recovery rate amount of loan taken by the borrowers. But still it can be said that loan amount ranging from 250000 to 400000 have a good recovery rate on an average. Thats why maximum amount or size of SME loan the authority like to disburse is 300000.

27: Relationship of recovery rate with term of loan:Term Of Loan(Month)FrequencyRecovery rate (%)

15398%

183100%

2110100%

241198%

27194%

36594%

48491%

The above table shows that, as the loan duration increases the rate of recovery decreases. This may be the inherent reason of why the authority of INDUSIND Bank likes to disburse loan at a shorter term of 18 to 24 months.

28: Relationship of Recovery Rate with Income of the Borrowers:Income groupFrequencyRecovery rate (%)

1000-10000594%

10001-200001598%

20001-30000896%

30001-400001100%

40001-500003100%

50000 above5100%

In fact, income of a borrower can be a vital factor to repay his loan. And the above graph is a replica of this truth. Here we see that people with higher income group like 30000 to 50000 or above have the highest recovery rate. Entrepreneurs having a good skill, knowledge and experience in business can make success in their business which ultimately increases their income as well. So their recovery rate is good than those group of people who have lower income.

29: Relationship of Recovery Rate with the Personal Asset of the Borrower:Personal assetFrequencyRecovery rate (%)

100000-500000994%

500001-10000001498%

1000001-1500000599%

1500001-20000003100%

2000000 above797%

Entrepreneurs who have sufficient personal assets and mortgage them for taking the loan have the record of higher recovery rate. They dont have the tendency to make a default in paying the installments. INDUSIND Bank likes to pay SME loans after collecting title deeds of those personal or family assets. People who dont have much personal asset must show that they have sufficient family asset. Here from the above chart we see that entrepreneurs having lowest personal asset have the lowest recovery rate of 94%.

30: Relationship of Recovery Rate with the Nature of Business:Nature of businessFrequencyRecovery rate (%)

Whole sale1398%

Retail2192%

From the above chart we see that entrepreneurs having retail business have a less recovery rate than the entrepreneurs having whole sale business. This may happen because whole sale business transactions happen at a large scale. So they can convert their stocks as well as accounts receivables into cash very quickly before the occurrence of any misfortune. On the other hand, retail business transactions happen at a small lot. So they cannot make swift conversion of their current asset in to cash.

31: FindingsINDUSIND Bank, as we know, is one of the fastest growing banks in India. SME banking which has made the performance of this bank so enlightened is its core product to offer to the small and mediocre business entrepreneurs. But INDUSIND Bank has made this improbable process so successfully through SME banking. However from the analysis of SME loan repayment behavior I can make the following findings: Age have a significant impact on the recovery of SME loan. Young entrepreneurs have a lower rate of recovery. On the other hand as middle aged and experienced entrepreneurs are very loyal with their loan repayment they can make proper and timely repayment of their loans. And thats why most of the SME loan borrowers age rages from 30 to 40. Education does not have any direct relationship with the recovery rate. In fact, Most of the entrepreneurs of retail and whole business (small or medium in size) are not highly educated. Most of them studied up to class 9 or 10. Sometimes there are some entrepreneurs who have only alphabetic knowledge or who can give their signature only. But still they are running their business so well for many years. In this case experience makes them successful in their business. So, education does have much impact on these small and medium enterprises and also on the recovery rate of SME loans. Experience is the most significant variable which has a great impact on any kind of business and recovery rate as well. Experienced entrepreneurs run their business so tactfully, identify the exact time what is their pick time of sales and when they need fund. They take the loan in the pick season when they have excess demand but short of capital. Then they ensures the best use of the loan and finally they reach to success and make the dully installments. So their recovery rate is good and thats why INDUSIND Bank looks always for experienced entrepreneurs. Number of installments (term of loan) and amount of loan taken do affect recovery rate slightly. But trends show that INDUSIND bank prefers to disburse loan of an amount of 300000 and at a term of 18 to 24 months.Another variable affecting recovery rate very much is the income of the borrowers. The higher the existing income of the borrowers, the lower the rate of default. Higher income groups make the best use of the loan they have taken and get success. On the other hand lower income group may misuse the loan and ultimately may default in paying installments. Personal or family asset might have some impact while sanctioning the loan as well as when recovering the loan installments. Suppose if a borrower fails to pay one of his installments, bank can find his personal assets as back up for the recovery of the installments. Retail business and whole sale business both types of businesses get loans from INDUSIND Bank but whole sellers have a higher recovery rate as their business transactions occur at lot size and their collection is much quick. Finally we can say that SME loan is a loan given especially to entrepreneurs who are experienced small or medium businessmen, more or less middle aged, at least moderate income generated and who have reasonable personal or family asset.

Chapter: 4 (Conclusion)

32: ConclusionINDUSIND Bank Limited is proving itself as the fastest growing bank showing remarkable progress of its financial position with the mission of being countries leading bank providing world class services in a cost effective manner. This bank first introduced the SME loan in commercial banking sector which help the people of poor society both in rural and urban area. SME loan is one of such quality product through which they offer the small and mediocre entrepreneurs a quality banking services and earn the maximum profit as well. The recovery rate of this loan is 97% which is extremely good in comparison to any other banks recovery rate. INDUSIND Bank has made it possible as the loan is given to experienced, small and mediocre entrepreneurs most of whom are middle aged, slightly educated and having moderate income and this class of people is very loyal. But they can serve this class of customers with more commitment and loyalty and they can turn the recovery rate to 100%. For this they can make the following policy implications:

Redefine mission/vision towards achievement of Double Bottom-line Commit resources specifically for growth of SME business. Implement strict and continuous monitoring system of the whole recovery process. Train the Customer Relationship officers more comprehensively and realistically so that customers may not face any trouble while getting and repaying the loan. Analyze customers behavior that what type of customer makes default and stop giving them SME loan. Risk Management departments audit report should be more strict and reliable so that possible defaulter may not get the loan. 33: Limitations and Scope of Further Research:The study has suffered from a number of barriers: Data from INDUSIND Bank is highly confidential for the outside people and I had no authority to use the core banking software. This report is prepared based on the SME Loan activities, so it doesnt provide information regarding Financial Statement and ratio analysis. Time is also a big constraint for my research. I have to submit a broader deal in a shorter form of outcome. It was difficult to communicate with the customers, as many of them were unable to give me much time for interview. I had to go under my day to day job responsibility that I was supposed to do so. So I could get few more time to spend in collecting data for preparing my summer training report.

I have done a small study basing the SME Sector of INDUSIND Bank limited. But, INDUSIND Bank alone does not practice SME in India. So, here is a scope of further study regarding the other banks and their customers repayment behavior. I have conducted my research in urban area. So, it does not focus the scenario rural area. So, here exists a scope of study.

34: References:

1. Hmeple, Geore H. Bank Management, 2nd Edition 1986 2. Jhon Wiles & Sons. George Ruth. Commercial Lending, Amrican Bankers Association, 1999 3. www.indusindbank.com 4. http://www.facebook.com/pages/INDUSINDBankLimited/164557134849?v=info 5. Annual Report, INDUSIND Bank 2010