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GTU’s Enrollment No: 097690592035

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PROJECT REPORT ON

A Study of Sickness in Small and Medium Scale Enter prise At

BANK OF BARODA

Submitted By:

Priyanka O Batra (Roll no:B3 )

MBA PROGRAMME 2009-2011 (SEMESTER II)

In partial fulfillment of the requirements for Summer Internship Programme for the

award of the degree of

MASTER OF BUSINESS ADMINISTRATION

SHRI JAIRAMBHAI PATEL INSTITUTE OF BUSINESS MANAGEMENT

AND COMPUTER APPLICATIONS (NICM-MBA)

Submitted to

GUJARAT TECHNOLOGICAL UNIVERSITY,

AHMEDA

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Declaration

This project report entitled “Sickness in Small and Medium Scale Enterprise” has

been submitted to Gujarat Technological University, Ahmedabad in partial fulfillment for

the award of degree of Master of Business Administration. I, the undersigned hereby

declare that this report has been completed by me under the guidance of Mr. Vijay

Shah (Assistant General Manager, ARM BRANCH BOB) and Professor Swati Patel

(Faculty Member, Shri Jairambhai Patel Institute of Business Management & Computer

Applications, Gandhinagar.)

The report is entirely the result of my own efforts and has not been submitted either in

part or whole to any other institute or university for any degree.

Name of the Student with Signature/s: Priyanka O Batra

GTU’s Enrollment No/s: 097690592035

Date: 21st July, 2010

Place:Ahmedabad

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Shri Jairambhai Patel Institute of Business Management and Computer Applications (Formerly known as National Institute of Cooperative Management), Approved by AICTE, New Delhi and Affiliated with Gujarat University Opposite Amusement Park, Indroda Circle, Gandhinagar - 382 007 Phone: 079 – 23213043, 37 - 38 - 39 Fax : 079 – 23213036 Web: www.nicm.org.in E mail: director_mbanicm@yahoo.com

CERTIFICATE

This is to certify that PRIYANKA O BATRA, student of MBA

(2009-2011 batch) at Post Graduate Centre of Gujarat Technological University – MBA,

SJPI has prepared a Summer Internship Project Report on “ SICKNESS IN SMALL

AND MEDIUM SCALE ENTERPRISE” in partial fulfillment of two years full-time

MBA Programme of Gujarat Technological University, Ahmedabad. This project work

has been undertaken under my supervision and found satisfactory.

Date : 21/07/2010 (PROFESSOR SWATI PATEL.) Place: Gandhinagar Core Faculty – MBA Deptt & Project Guide

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Practical study plays a vital role in the field of education. It has been introduced for the students to get the practical knowledge along with the theoretical knowledge; only bookish knowledge is not the right way of learning anything especially for the management students. How management principles are implemented in business can only be known through practical study, students can be very well aware about industrial environment like problem, opportunities , different situations etc. This helps the students to have a better understanding and also give them a chance to show their skills and ability. This report throws light to one of the key sector of the key sector of service industry. Banking Sector has been in the limelight due to its rapid development and emergence as a major contributor to the economic progress. However due to the expansion in the lending operations of the banks which is one of its main function; they are exposed to credit risks with an increase in the amount of Non-Performing Assets (NPAs). NPAs are the smoking gun threatening the very stability of Indian banks. They act as a drag on the Banks profitability and inhibit their lending decisions. They wreck a bank’s profitability through a loss of interest income and write off of the principal loan amount itself. With the introduced of prudential norms of income recognition, assets classification and provisioning, banks have become quite sensitive to credit risks and are taking all possible steps to strengthen their loan appraisal and monitoring systems. Banks are initiating various types of strategies to bring down NPAs which include not only account specific actions but also framing policy guidelines which can help in effective recovery in such accounts. Banks has started “Stressed Assets Resolution Centre” which is a separate department for recovery of NPA. This report presents an “Action plan to reduce NPA in SME segment” keeping in view the Reserve Bank of India guidelines in this respect.

PREFACE

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Acknowledgement

It is almost inevitable to incur indebtedness to all who generously helped by

sharing their invaluable time and rich experience with me, without which this

project would have never been accomplished.

No task can be achieved alone, particularly while attempting to finish a project of

such magnitude. It took many special people to facilitate it and support it. Hence, I

would like to acknowledge all of their valuable support and convey my humble

gratitude to them. I would like to thank PROF. SWATI PATEL and all other

faculties of SJPI INSTIITUTE for their guidance throughout the preparation of the

project and for their valued suggestion.

I express my sincere thanks to the management of “Bank Of Baroda” for giving me

this golden opportunity to work as a trainee in their company.

The guidance and support provided by the company have really made the training a

learning experience for me. This short period was full of rich experience, which

will definitely help me in my future career.

First of all, I would like thanking Mr.Vijay Shah ( AGM of ARM branch of Bank

of Baroda Ahmedabad) and Mr. Rajesh Shah (Senior Manager) and other staff

member for their valuable guidance and encouragement.

I would also like to thank to Mr.Priya Kumar (Senior Manager HR dept.) and Miss.

Madhurima for their help and guidance.

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EXECUTIVE SUMMARY:

Small and Medium enterprises (SMEs) have been globally recognized as vital

components of domestic economy and major contributors to employment

generation in a country, regardless of geographical barriers According to a World

Bank report, in low-income countries, Gross National Product (GNP) per capita

between $100 & $500, SMEs account for over 60% of the GDP (Gross Domestic

Product). India has 13 million SMEs, which account for almost 50% of industrial

output and 40% of the company’s total exports. However, the biggest problem

plaguing small scale industries is inadequate demand, along with technological,

financial & marketing weaknesses, all of which leads to shortage of Working

Capital. Infact, lack of adequate and timely finance is the root cause of sickness in

the small scale sector.

In my project, I have gone through the cases of two sick SMEs, although funds was

provided by the bank as per their requirement, but due to some extraneous

variables these both have faced losses and unable to pay their dues to the bank and

became NPA i.e. Non performing assets.

SMEs need to be strengthened financially to better withstand external shocks and

lenders have to diagnose and treat sickness promptly when it emerges.

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TITLE PAGE NO.

DECLARATION I

CERTIFICATE FROM ORGANISATION II

CERTIFICATE FROM COLLEGE III

PREFACE IV

ACKNOWLEDGEMENT V

EXECUTIVE SUMMARY VI

CHAPTER 1 INTRODUCTION TO BANKING SECTOR 1

CHAPTER 2 INTRODUCTION TO BANK OF BARODA 19

CHAPTER 3 REASONS OF SICKNESS IN SME SECTOR 35

CHAPTER 4 CONCEPT OF NON-PERFORMING ASSETS 47

CHAPTER 5 REMEDIES TO CURB SICKNESS IN SME 51

CHAPTER 6 RECOVERY OF AMOUNT FROM SICK UNITS 58

CHAPTER 7 CASE STUDY 72

CHAPTER 8 RESEARCH AND FINDINGS 79

CHAPTER 9 CONCLUSION AND SUGGESTIONS 85

WEBOGRAPHY 91

BIBLIOGRAPHY 91

ANNEXURES 92

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FIGURE NO. FIGURE NAME PAGE NO.

1 LACK OF DEMAND (CAUSES OF SICKNESS) 43 2 SHORTAGE OF WC (CAUSES OF SICKNESS) 43 3 NON-AVAILABILITY OF RM (CAUSES OF SICKNESS) 44 4 POWER SHORTAGE (CAUSES OF SICKNESS) 44 5 LABOUR PROBLEMS (CAUSES OF SICKNESS) 45 6 MARKETING PROBLEMS(CAUSES OF SICKNESS 45 7 EQUIPMENT PROBLEM (CAUSES OF SICKNESS) 46 8 MANAGEMENT PROBLEMS (CAUSES OF SICKNESS ) 46 9 SECTORAL BREAK UP 81

10 NPA BREAK UP 83 11 PROPORTION OF NPA. 84

TABLE NO. TABLE NAME PAGE NO.

1 PROPORTION OF INCIPIENT SICK UNITS 42 2 LOANS ADVANCED 80 3 NPA PROPORTION 82

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