MANAGEMENT THESIS -1

FINAL REPORT

“A THESIS ON CREDIT SERVICES OFFERED TO SMALL AND MEDIUM ENTERPRISES BY ICICI BANK GUNTUR”

BY

M. SRAVANYA

ENROLLEMENT NO: 7NBGU021

1

MANAGEMENT THESIS -1

FINAL REPORT

“A THESIS ON CREDIT SERVICES OFFERED TO SMALL AND MEDIUM ENTERPRISES BY ICICI BANK GUNTUR”

BY

M.SRAVANYA

Enrollment No: 7NBGU021

MBA program (Class of 2007-2009)

Under the esteemed guidance of

Mr. SITA RAMAIAHA, Mr. GURU PRASAD

Center Head, Faculty Member,

ICFAI National College ICFAI National College

Guntur Guntur.

A report submitted in partial fulfillment of

The requirement of

M.B.A program (class of 2007-2009)

ICFAI National College, GUNTUR.

2

TABLE OF CONTENT

1. Cover

2. Title

3. Table of contents

4. Acknowledgements

5. List of tables & illustrations

6. Abbreviations

7. Abstract/ summary

8. Introduction – objectives & limitations

9. Research design/ methodology

10. Review of literature

11. Empirical analysis

12. Findings &Suggestions

13. Conclusion

14. Appendices

15. References

16. Glossary

3

ACKNOWLEDGEMENT

I am thankful to Mr. T.SITA RAMAIAHA, my CENTER HEAD for his valuable guidance in on going the project successfully and also for providing the necessary facilities.

I am extremely thankful to Mr.P.GURU PRASAD, Faculty SUPERVISOR, ICFAI National College, for his timely assistance and support throughout the project work.

Lastly I am indebted to our all faculty members for their co-operation and support.

It was indeed a learning experience for me.

M.SRAVANYA

Enrollment no: 7NBGU021

4

CERTIFICATE

This is to certify that the management thesis “A THESIS ON CREDIT SERVICES OFFERED TO SMALL AND MEDIUM ENTERPRISES BY ICICI BANK GUNTUR “bona fide work of M.SRAVANYA, is original and has been done under my supervision in partial fulfillment of the requirement for the award of M.B.A for the period of time. This report neither full in part has ever before been submitted for awarding of any degree of either this university. I am pleased to say that his performance during the period was extremely satisfactory.

MR. T. SITA RAMAIAH

CENTER HEAD

ICFAI NATIONAL COLLEGE

GUNTUR.

5

CERTIFICATE

This is to certify that the management thesis “A THESIS ON CREDIT SERVICES OFFERED TO SMALL AND MEDIUM ENTERPRISES BY ICICI BANK GUNTUR “bona fide work of M.SRAVANYA, is original and has been done under my supervision in partial fulfillment of the requirement for the award of M.B.A for the period of time. This report neither full in part has ever before been submitted for awarding of any degree of either this university. I am pleased to say that his performance during the period was extremely satisfactory.

Mr. P. GURU PRASAD

FACULTY SUPERVISOR

ICFAI NATIONAL COLLEGE

GUNTUR.

6

DECLARATION

I hereby declare that this project work entitled “A THESIS ON CREDIT SERVICES OFFERED TO SMALL AND MEDIUM ENTERPRISES BY ICICI BANK GUNTUR” is my work, carried out under the guidance of my faculty guide Mr. P. GURU PRASAD my center head this report neither full nor in part has ever been submitted for award of any other degree of either this university or any other university.

M. SRAVANYA

Enroll. No: 7NBGU021

7

LIST OF TABLES

TABLE--1------------------------------------- 33

TABLE--II------------------------------------- 34

TABLE--III------------------------------------- 35

TABLE--IV------------------------------------- 36

TABLE--V-------------------------------------37

8

Abbreviations

ICICI : Industrial Credit Investment Corporation of India

HUL : Hindustan Uni Leaver

P&G : Proctor and Gamble

C&P : Colgate Palmolive

TV : Tele Vision

FMCG : Fast Moving Consuming Goods

AMFI : Association of Mutual Funds India

AUM : Assets under Management

CBFI : Crisis Balanced Fund Index

CCBI : Crisis Composite Bond Index

CRISIL : Credit Rating & Information Services of India Ltd.

FDI : Foreign Direct Investment

NAV : Net Asset Value

NFO : New Fund Offer

SEBI : Securities Exchange Board of India

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ASL : Allianz Securities Limited

SE : Securities

Mf : Mutual Fund

MF’S : Mutual Funds

NASDAQ : National Association of Securities Dealers Automated Quotation

BSE : Bombay Stock Exchange

NSE : National Stock Exchange.

SIP : Systematic Investment Plan

.

AMC : Asset Management

SUMMARY

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• SMEs have been playing a dominant role in most of the economies - developed and developing - in shaping their industrial destiny and path of economic growth.

• Innovation has been the unique and biggest strength of SMEs the world over. Most of the modern products have their origin in the small and medium sector.

• At present the SSI sector in India contributes about 35% of the total exports, over 40% of the manufactured output besides generating substantial employment of around 18 million persons.

• Small Scale Sector is provided working capital by commercial banks and in some cases by cooperative banks and regional rural banks.

• Technological empowerment is an important and critical factor for the growth of small

and medium enterprises (SME). SMEs need to invest in sophisticated and state of the art

office equipment to increase productivity and efficiency. Considering these varied

requirements of our SME customers, we have created ICICI Bank’s office Equipment

Financing product as a convenient and hassle free way to procure the equipment they

need. Our simplified procedure and minimum documentation ensures fast and easy funds.

NEED FOR THE STUDY

11

The main objective behind the study is ,to find out whether ICICI BANK providing business loans to small & medium enterprises. I had a prejudice that the banks are not providing loans to SME sector. Based upon my observations I conduct study from the bankers perceptive. The ICICI bank always focusing on loan segment for its revenue .My study also focus on the loan procedures followed at ICICI bank.

OBJECTIVES& LIMITATIONS

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To know the credit service offered by the ICICI Bank

To know the credit sanctioning procedures followed by ICICI Bank

To know the criteria of credit services offered to SMEs by ICICI Bank

To know the how the bank is encouraging SMEs

To discuss the credit facilitates offered to the SMEs

LIMITATIONS The biggest constraint to this survey is the time element.

Bank Employees are very busy and unable to share their opinions on credit services

of SMEs

There were lots of difficulties in getting the data from the small and medium scale

Survey demands more time but the survey is restricted to less time.

But utmost care was taken to maintain the quality aspect in the data.

Though there has been chance for basis, the investigator has taken all steps for the

reduction of bias.

INTRODUCTION TO SMEs

13

Small and Medium enterprises play an important role in the development of the country. However, these industries face difficulty in accessing adequate finance for their businesses. Apart from the traditional modes of financing like banks and money lenders, newer sources of financing such as venture capital investment, can take care of their financing requirements. In the case of India, the government has taken several initiatives both at the national and international levels to improve the availability of finance. But there are still certain impediments that the SMEs face that are required to be addressed by the government.

SMEs encourage entrepreneurial development and dispersal of the industries throughout the length and breadth of the country. It also generates a lot of employment opportunities and the capital cost per employee is very minimum. With the service sector contributing a major share to the GDP and as this sector relies on the SMEs, the scope for SME finance by the commercial banks has increased tremendously. The government is also committed to give a fillip to the sector through infrastructural development, skill development effort, technological up gradation and by expending the role of small industries Development Bank of India in SME development.

SMEs contribute nearly 9% of India’s GDP and the Reserve Bank of India has advice all commercial banks to achieve 20% annual growth in SME lending till 2010, so that the SME Sector exposure to commercial banks is doubled. Public sector banks’ overall credit to SME sector grew by 26% in 2006-2007, which amounted to Rs. 1, 85000 cores. Among the large PSBs, state bank of India’s SMEs exposure grew by 24% and all banks are targeting SMEs credit growth of 25%

As the small and medium enterprises (SME) sector is one of the fastest growing industrial sectors all over the world, initiatives are being taken by both the national and develop small and medium enterprises. Prominent among them are the small industries development organization (SIDO), national small industries corporation (NSIC), export promotion authorities, SIDDBI, NABARD, state infrastructure corporation by the national and state level agencies in fostering the overall growth of SME sector is phenomenal. Apart from providing extension an economy develops and advisory services, these agencies play a significant role to channelize financing by various institutions and intermediaries and entrepreneurs in the contest of SMEs heading towards epitome in the market economy. In order to see that Indian economy develops fast, planners and Economists advocated development of small and medium industry.

Accordingly several intuitional and non institutional strategies also have been developed to initiate and sustain the growth of small and medium industries in India. A space program of instructional financing is one of the several strategies that government of India introduced to give a maximum fillip to small scale industries through the credit facilities offered by national banks, institutions and government subsidies.

A small scale industry / Ancillary industry is defined as a unit whose investment in fixed assets in plant and machinery does not exceed Rs.3 cores. (Subject to the condition that the unit

14

is not owned, controlled or subsidiary of any other industrial undertaking). The small scale sector has emerged as dynamic and vibrant sector of Indian economy and it has been making significant contribution to industrial production, export and employment generation.

In most developing counties, as also in India, Small Enterprises have been viewed as an engine of employment generation. SME sector in India creates largest employment opportunities for the Indian populace, next only to Agriculture. It has been estimated that a lakh rupees of investment in fixed assets in the small scale generates employment for four persons. Employment contribution by SMEs in Andhra Pradesh is 7.5%

SME industries form a significant part of Andhra Pradesh economy. The sector

contributes around 6 per cent of GSDP and employs close to 2.5 lakh people. Many of the

growth engines selected for focused development, e.g . , construction and pharmaceuticals, will

give rise to many opportunities for small-scale industries. The sector will thus be a major focus

in the strategy to create rapid growth in the State. By 202o, Andhra Pradesh will have many dynamic and profitable small-scale industries. Propelled by technological development and capability building, small scale units will flourish all over the State. The proliferation of these industries will provide many opportunities for entrepreneurship and employment, leading to a

significant rise in income for the state’s people.

The small and medium industries occupy a very important position in any economy. Traditionally they produce certain specialized items for which they enjoy virtual monopoly of skill and expertise developed over the years. Many items produced in the small scale sector are also used as raw materials in the large scale industry and thus small scale industries contribute to large scale production is no small measure.

In a free economy, the small and medium scale industrial sector is not insulated from competition from the large scale sector and for their survival and growth; they will have to face competition from the large scale sector out of their own ingenuity and resources.

Governments across the globe are increasingly leveraging variants of credit guarantee mechanisms to promote entrepreneurial growth in the Micro, small and medium enterprises (MSMEs) sector. The experience has been rewarding both for the financial system as well as the recipient sector of the economy….

Industry profile

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In the late third century B.C., the barren Aegean island of Delos, known for its magnificent harbor and famous temple of Apollo, became a prominent banking center. As in Egypt, cash transactions were replaced by real credit receipts and payments were made based on simple instructions with accounts kept for each client. With the defeat of its main rivals, Carthage and Corinth, by the Romans, the importance of Delos increased. Consequently it was natural that the bank of Delos should become the model most closely imitated by the banks of Rome.

Ancient Rome perfected the administrative aspect of banking and saw greater regulation of financial institutions and financial practices. Charging interest on loans and paying interest on deposits became more highly developed and competitive. The development of Roman banks was limited, however, by the Roman preference for cash transactions. During the reign of the Roman emperor Gallienus (260-268 CE), there was a temporary breakdown of the Roman banking system after the banks rejected the flakes of copper produced by his mints. With the ascent of Christianity, banking became subject to additional restrictions, as the charging of interest was seen as immoral. After the fall of Rome, banking was abandoned in western Europe and did not revive until the time of the crusades.

Religious restrictions on interest

Most early religious systems in the ancient Near East, and the secular codes arising from them, did not forbid usury. These societies regarded inanimate matter as alive, like plants, animals and people, and capable of reproducing itself. Hence if you lent 'food money', or monetary tokens of any kind, it was legitimate to charge interest.[2] Food money in the shape of olives, dates, seeds or animals was lent out as early as c. 5000 BC, if not earlier. Among the Mesopotamians, Hittites, Phoenicians and Egyptians, interest was legal and often fixed by the state. But the Jews took a different view of the matter.

The Torah and later sections of the Hebrew Bible criticize interest-taking, but interpretations of the Biblical prohibition vary. One common understanding is that Jews are forbidden to charge interest upon loans made to other Jews, but allowed to charge interest on transactions with non-Jews, or Gentiles. However, the Hebrew Bible itself gives numerous examples where this provision was evaded.

16

Capitalism

Around the time of Adam Smith (1776) there was a massive growth in the banking industry. Within the new system of ownership and investment, the State's intervention in economic affairs was reduced and barriers to competition were removed.

In the 1970s, a number of smaller crashes tied to the policies put in place following the depression, resulted in deregulation and privatization of government-owned enterprises in the 1980s, indicating that governments of industrial countries around the world found private-sector solutions to problems of economic growth and development preferable to state-operated, semi-socialist programs. This spurred a trend that was already prevalent in the business sector, large companies becoming global and dealing with customers, suppliers, manufacturing, and information centres all over the world.

Global banking and capital market services proliferated during the 1980s and 1990s as a result of a great increase in demand from companies, governments, and financial institutions, but also because financial market conditions were buoyant and, on the whole, bullish. Interest rates in the United States declined from about 15% for two-year U.S. Treasury notes to about 5% during the 20-year period, and financial assets grew then at a rate approximately twice the rate of the world economy. Such growth rate would have been lower, in the last twenty years, were it not for the profound effects of the internationalization of financial markets especially U.S. Foreign investments, particularly from Japan, who not only provided the funds to corporations in the U.S., but also helped finance the federal government; thus, transforming the U.S. stock market by far into the largest in the world.

Nevertheless, in recent years, the dominance of U.S. financial markets has been disappearing and there has been an increasing interest in foreign stocks. The extraordinary growth of foreign financial markets results from both large increases in the pool of savings in foreign countries, such as Japan, and, especially, the deregulation of foreign financial markets, which has enabled them to expand their activities. Thus, American corporations and banks have started seeking investment opportunities abroad, prompting the development in the U.S. of mutual funds specializing in trading in foreign stock markets.

Such growing internationalization and opportunity in financial services has entirely changed the competitive landscape, as now many banks have demonstrated a preference for the “universal banking” model so prevalent in Europe. Universal banks are free to engage in all forms of financial services, make investments in client companies, and function as much as possible as a “one-stop” supplier of both retail and wholesale financial services.

Many such possible alignments could be accomplished only by large acquisitions, and there were many of them. By the end of 2000, a year in which a record level of financial services transactions with a market value of $10.5 trillion occurred, the top ten banks commanded a market share of more than 80% and the top five, 55%. Of the top ten banks ranked by market share, seven were large universal-type banks (three American and four European), and

17

the remaining three were large U.S. investment banks who between them accounted for a 33% market share.

This growth and opportunity also led to an unexpected outcome: entrance into the market of other financial intermediaries: nonbanks. Large corporate players were beginning to find their way into the financial service community, offering competition to established banks. The main services offered included insurances, pension, mutual, money market and hedge funds, loans and credits and securities. Indeed, by the end of 2001 the market capitalisation of the world’s 15 largest financial services providers included four nonbanks.

In recent years, the process of financial innovation has advanced enormously increasing the importance and profitability of nonbank finance. Such profitability priorly restricted to the nonbanking industry, has prompted the Office of the Comptroller of the Currency (OCC)to encourage banks to explore other financial instruments, diversifying banks' business as well as improving banking economic health. Hence, as the distinct financial instruments are being explored and adopted by both the banking and nonbanking industries, the distinction between different financial institutions is gradually vanishing.

Major events in banking history

Florentine banking — The Medici’s and Pities among others Knights Templar- earliest Euro wide /Mideast banking 1100-1300. Banknotes — Introduction of paper money 1602 - First joint-stock company, the Dutch East India Company founded 1781 - The Bank of North America was found by the Continental Congress 1800 - Rothschild family founds Euro wide banking. 1803 - The Louisiana Purchase was the largest land deal in history 1929 - Stock market crash 1989 - Junk bond scandal and charges against Michael Milken resulted in new legislation for investment banks 2001 - Enron bankruptcy, causing new legislation for annual reporting 2007 - Sub-prime mortgage crisis 2008 - Collapse of Lehman Brothers, a major investment bank. Two other major investment banks Bear Stearns and Merrill Lynch were forcefully merged with JP Morgan Chase and Bank of America respectively. These events will reshape the future of the banking industry worldwide.

Oldest private banks

Monte die Pasha did Siena 1472 - present, the oldest surviving bank in the world. Founded in 1472 by the Magistrate of the city state of Siena, Italy. C. Hoare & Co founded 1672 Barclays, which was founded by John Frame and Thomas Gould in 1690[4] and renamed to Barclays by Frame’s son-in-law, James Barclay, in 1736 Rothschild family 1700 - present Hope & Co., founded in 1762

18

For French banking history, read the History of banks in France (in English or in French) on the FBF website.

Oldest national banks

Bank of Sweden — the rise of the national banks, began operations in 1668 Bank of England — the evolution of modern central banking policies, established in 1694 Bank of America — the invention of centralized check and payment processing technology Swiss banking United States Banking The Pennsylvania Land Bank, founded in 1723 and receiving the support of Benjamin Franklin who wrote "Modest Enquiry into the Nature and Necessity of a Paper Currency" in 1729 [1] . Imperial Bank of Persia (Iran) — History of banking in the Middle-East

.

Religious restrictions on interest

Most early religious systems in the ancient Near East, and the secular codes arising from them, did not forbid usury. These societies regarded inanimate matter as alive, like plants, animals and people, and capable of reproducing itself. Hence if you lent 'food money', or monetary tokens of any kind, it was legitimate to charge interest.[2] Food money in the shape of olives, dates, seeds or animals was lent out as early as c. 5000 BC, if not earlier. Among the Mesopotamians, Hittites, Phoenicians and Egyptians, interest was legal and often fixed by the state. But the Jews took a different view of the matter.[3]

The Torah and later sections of the Hebrew Bible criticize interest-taking, but interpretations of the Biblical prohibition vary. One common understanding is that Jews are forbidden to charge interest upon loans made to other Jews, but allowed to charge interest on transactions with non-Jews, or Gentiles. However, the Hebrew Bible itself gives numerous examples where this provision was evaded.

Capitalism

Around the time of Adam Smith (1776) there was a massive growth in the banking industry. Within the new system of ownership and investment, the State's intervention in economic affairs was reduced and barriers to competition were removed.

Global banking

In the 1970s, a number of smaller crashes tied to the policies put in place following the depression, resulted in deregulation and privatization of government-owned enterprises in the 1980s, indicating that governments of industrial countries around the world found private-sector solutions to problems of economic growth and development preferable to state-operated, semi-socialist programs. This spurred a trend that was already prevalent in the business sector, large

19

companies becoming global and dealing with customers, suppliers, manufacturing, and information centers all over the world.

Global banking and capital market services proliferated during the 1980s and 1990s as a result of a great increase in demand from companies, governments, and financial institutions, but also because financial market conditions were buoyant and, on the whole, bullish. Interest rates in the United States declined from about 15% for two-year U.S. Treasury notes to about 5% during the 20-year period, and financial assets grew then at a rate approximately twice the rate of the world economy. Such growth rate would have been lower, in the last twenty years, were it not for the profound effects of the internationalization of financial markets especially U.S. Foreign investments, particularly from Japan, who not only provided the funds to corporations in the U.S., but also helped finance the federal government; thus, transforming the U.S. stock market by far into the largest in the world.

Nevertheless, in recent years, the dominance of U.S. financial markets has been disappearing and there has been an increasing interest in foreign stocks. The extraordinary growth of foreign financial markets results from both large increases in the pool of savings in foreign countries, such as Japan, and, especially, the deregulation of foreign financial markets, which has enabled them to expand their activities. Thus, American corporations and banks have started seeking investment opportunities abroad, prompting the development in the U.S. of mutual funds specializing in trading in foreign stock markets.

Such growing internationalization and opportunity in financial services has entirely changed the competitive landscape, as now many banks have demonstrated a preference for the “universal banking” model so prevalent in Europe. Universal banks are free to engage in all forms of financial services, make investments in client companies, and function as much as possible as a “one-stop” supplier of both retail and wholesale financial services.

Many such possible alignments could be accomplished only by large acquisitions, and there were many of them. By the end of 2000, a year in which a record level of financial services transactions with a market value of $10.5 trillion occurred, the top ten banks commanded a market share of more than 80% and the top five, 55%. Of the top ten banks ranked by market share, seven were large universal-type banks (three American and four European), and the remaining three were large U.S. investment banks who between them accounted for a 33% market share.

This growth and opportunity also led to an unexpected outcome: entrance into the market of other financial intermediaries: nonbanks. Large corporate players were beginning to find their way into the financial service community, offering competition to established banks. The main services offered included insurances, pension, mutual, money market and hedge funds, loans and credits and securities. Indeed, by the end of 2001 the market capitalization of the world’s 15 largest financial services providers included four nonbanks.

In recent years, the process of financial innovation has advanced enormously increasing the importance and profitability of nonbank finance. Such profitability priory restricted to the nonbanking industry, has prompted the Office of the Comptroller of the Currency (OCC)to

20

encourage banks to explore other financial instruments, diversifying banks' business as well as improving banking economic health. Hence, as the distinct financial instruments are being

Explored and adopted by both the banking and nonbanking industries, the distinction between different financial institutions is gradually vanishing.

Major events in banking history

Florentine banking — The Medicos and Pettis among others Knights Templar- earliest Euro wide /Mideast banking 1100-1300. Banknotes — Introduction of paper money 1602 - First joint-stock company, the Dutch East India Company founded 1720 - The South Sea Bubble and John Law's Mississippi Scheme, which caused a European financial crisis and forced many bankers out of business 1781 - The Bank of North America was found by the Continental Congress 1800 - Rothschild family founds Euro wide banking. 1803 - The Louisiana Purchase was the largest land deal in history 1929 - Stock market crash 1989 - Junk bond scandal and charges against Michael Milken resulted in new legislation for investment banks 2001 - Enron bankruptcy, causing new legislation for annual reporting

21

COMPANY PROFILE

ICICI Bank is India's second-largest bank with total assets of Rs. 3,997.95 billion (US$ 100 billion) at March 31, 2008 and profit after tax of Rs. 41.58 billion for the year ended March 31, 2008. ICICI Bank is second amongst all the companies listed on the Indian stock exchanges in terms of free float market capitalization*. The Bank has a network of about 1,308 branches and 3,950 ATMs in India and presence in 18 countries. ICICI Bank offers a wide range of banking products and financial services to corporate and retail customers through a variety of delivery channels and through its specialized subsidiaries and affiliates in the areas of investment banking, life and non-life insurance, venture capital and asset management. The Bank currently has subsidiaries in the United Kingdom, Russia and Canada, branches in Unites States, Singapore, Bahrain, Hong Kong, Sri Lanka, Qatar and Dubai International Finance Centre and representative offices in United Arab Emirates, China, South Africa, Bangladesh, Thailand, Malaysia and Indonesia. Our UK subsidiary has established branches in Belgium and Germany.

ICICI Bank's equity shares are listed in India on Bombay Stock Exchange and the National Stock Exchange of India Limited and its American Depositary Receipts (ADRs) are listed on the New York Stock Exchange (NYSE).

History

ICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian financial institution, and was its wholly-owned subsidiary. ICICI's shareholding in ICICI Bank was reduced to 46% through a public offering of shares in India in fiscal 1998, an equity offering in the form of ADRs listed on the NYSE in fiscal 2000, ICICI Bank's acquisition of Bank of Madura Limited in an all-stock amalgamation in fiscal 2001, and secondary market sales by ICICI to institutional investors in fiscal 2001 and fiscal 2002. ICICI was formed in 1955 at the initiative of the World Bank, the Government of India and representatives of Indian industry. The principal objective was to create a development financial institution for providing medium-term and long-term project financing to Indian businesses. In the 1990s, ICICI transformed its business from a development financial institution offering only project finance to a diversified financial services group offering a wide variety of products and services, both directly and through a number of subsidiaries and affiliates like ICICI Bank. In 1999, ICICI become the first Indian company and the first bank or financial institution from non-Japan Asia to be listed on the NYSE.

After consideration of various corporate structuring alternatives in the context of the emerging competitive scenario in the Indian banking industry, and the move towards universal banking, the managements of ICICI and ICICI Bank formed the view that the merger of ICICI with ICICI Bank would be the optimal strategic alternative for both entities, and would create the optimal

22

legal structure for the ICICI group's universal banking strategy. The merger would enhance value for ICICI shareholders through the merged entity's access to low-cost deposits, greater opportunities for earning fee-based income and the ability to participate in the payments system and provide transaction-banking services. The merger would enhance value for ICICI Bank shareholders through a large capital base and scale of operations, seamless access to ICICI's strong corporate relationships built up over five decades, entry into new business segments, higher market share in various business segments, particularly fee-based services, and access to the vast talent pool of ICICI and its subsidiaries. In October 2001, the Boards of Directors of ICICI and ICICI Bank approved the merger of ICICI and two of its wholly-owned retail finance subsidiaries, ICICI Personal Financial Services Limited and ICICI Capital Services Limited, with ICICI Bank. The merger was approved by shareholders of ICICI and ICICI Bank in January 2002, by the High Court of Gujarat at Ahmadabad in March 2002, and by the High Court of Judicature at Mumbai and the Reserve Bank of India in April 2002. Consequent to the merger, the ICICI group's financing and banking operations, both wholesale and retail, have been integrated in a single entity.

ICICI Bank has formulated a Code of Business Conduct and Ethics for its directors and employees.

*Free float holding excludes all promoter holdings, strategic investments and cross holdings

Among public sector entities.

23

Board Members

Mr. N. Vaghul, Chairman

Mr. Sridhar Iyengar

Mr. Lakshmi N. Metal

Mr. Narendra Murrumba

Mr. Anupam Purl

Mr. Arun Raman than

Mr. M.K. Sharma

Mr. P.M. Sinha

Prof. Marti G. Subrahmanyam

Mr. T.S. Vijayan

Mr. V. Prem Watsa

Mr. K.V. Kamath, Managing Director & CEO

Ms. Chanda Kochhar,Joint Managing Direct& chief financial officer

Mr. V. Vaidyanathan, Executive Director

Ms. Madhabi Puri-Buch, Executive Director

Mr. Sonjoy Chatterjee, Exe

24

K. V. KamathManaging Director and Chief Executive Officer

Chanda KochharJoint Managing Director& Chief Financial Officer

Madhabi Puri BuchExecutive Director

Mr. Sonjoy Chatterjee Executive Director

V. VaidyanathanExecutive Director

25

ICICI Group

26

Awards & Recognitions

ICICI Bank

2008

ICICI Bank wins the 2008 Symantec visionary awards, recognizing the way the Bank secures and manages systems and information.

   ICICI Bank wins the 'Excellence in Remittance Business 2008' award by The Asian Banker

   

Mr. K.V. Kamath, MD & CEO, ICICI Bank receives the UK Trade & Investment Award (2008), in recognition of the significant contribution made towards India-UK trade relationship and visionary leadership.

   ICICI Bank NRI Services wins the World Finance (London) Award for Best Bank for NRI Services Worldwide, 2008

ICICI Group Global Private Clients wins the World Finance (London) Award for Excellence in Private Banking Award for APAC Region 2008

   ICICI Bank wins Finance Asia Country Awards for Achievement 2008 for   • Best Trade Finance Bank    • Best Foreign Exchange Bank    • Best Private Bank

   ICICI Bank wins the 'Excellence in Remittance Business 2007' award by The Asian Banker

   Ms. Madhabi Pure Bunch, ED, ICICI Bank wins FICCI's "Young Women Achievers" Award

27

   Mr. K. V. Kamath, MD & CEO, ICICI Bank wins "The Asian Banker Leadership Achievement Award" for the Asia Pacific and Gulf Region 2007

   Euro Week award for “Most Improved Market Profile” The award is designed to recognize the institution that has been most successful in building its own niche in Asia's competitive syndicated loan market

   The Asset Triple A Transaction Banking Awards, 2008   • Best Trade Finance Bank in India    • Best Transaction Bank in India    • Best Cash Management Bank in India    • Best Domestic Custodian in India

 Global Finance Award for:   • Best "Trade Finance Bank and Provider" in India

   ICICI Bank wins the Gold Shield for " Excellence in Financial Reporting" by Institute of Chartered Accountant of India (ICAI) for the Year ended March 31, 2007

 Mr. K. V. Kamath, MD & CEO, ICICI Bank awarded the "Pad Bhutan"

METHODOLOGY

28

TYPE AND SOURCE OF DATA:

Proposed method or approach towards this project is to collect the information through primary and secondary data on channel development.

PRIMARY DATA:

Primary data is firsthand information which is collected through a questionnaire designed for the specific purpose by conducting direct personal interview. The questions are open-ended in nature. Collecting information from the management in ICICI Bank.

SECONDARY DATA:

Secondary data was collected through Internet, journals, and reference books etc….

REVIEW OF LITERATURE

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BRAHMANANDAM, G, N., RAI, H.L., DAKSHINA MURTHY, D, “Financing Small Scale Sector”. The Role of Banks” INDIAN BANKING TODAY AND TOMORROW, MAY 1981-the above article was prepared on the role of banks in financing the SMEs in the year 1981. At those times the Indian banking was not all interested in financing the SMEs, because of their credit worthiness. Later due to changes in the industrial policy of India, the commercial banks come forward made immense help to the growth of SMEs. This article was written before the economic reforms taken place. Here is a gap for more analysis about the role of the banks in the post economic reforms. My study on this topic totally focused on the credit facilities available to the SMEs in the wake of MSME act 2006. Due to the presence of the gap about the present to day activities are different to those of 1980’s. I made in depth study of the bankers role in providing the credit to promote the SMEs.

CHOPRA, K.C., “Financing for the Decentralized sector –small and medium industries” THE BANKER, AUGEST, 2006 – The above article prepared on the thesis, reveals the financing for the SMEs in the decentralized sector. This article helped me in selecting the path for my study on credit facilities for SMEs. The article vividly discussed about the possible ways to finance the SMEs in the decentralized sector like agricultural based and artisan based SMEs. Really there is a gap between the centralized and decentralized sectors in getting the finance from the banks. The banks are very much lenient in providing lone facilities to the centralized sector. Through my study I made an attempt to study the intricacies faced by the decentralized sector SMEs in Guntur District, well known for its agricultural based industries.

JAILAL SAAW,”Growth of small scale industries in India” JOURNAL OF INDUSTRY AND TRADE, April -2005- The growth of small and medium industries in India was discussed in the above article. The expected growth was not there because of lot of root causes to sickness and under development in the SME sector. This article discussed about the slow growth rate of SMEs, dues to several problems. Through my study I focused on the one problem that is financial problems faced by the SME segment. I concentrated on the credit facilities offered by the governmental agencies as well as the commercial banks.

JAYA PRAKASH REDDY, R., BRAHANANDAM G.N., “Small Scale Sector: problems and prospects” YOJANA 1-15, JAN, 1987- the above article deals with the various problems like marketing, raw material, labor, technical and financial problems. The focus on the finance related issue is very limited. They gave more importance to the procurement of raw material and marketing and labor problems in SME segment. But not discussed about the credit facilities for the SMEs.

From study I focused more on the credit facilities available to the SMEs from the central Government and Commercial Banks.

KAURA, M.V., SHARMA G.L.,”Financing Small Industries – institution should Change Their Attitudes, Procedures” “JOURNAL OF INDUSTRY AND TRADE, MARCH, 1999, -

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the above article discussed very vividly the attitudes of the financial institutions where belong to Central Government or State Government or the Governmental Agencies promoted for these propose. In the wake of the MSME act 2006 passed in the interest of the small scale sector by the Government of India, the attitude of the financial institutions towards SME sector was totally changing The employees of above said financial institutions are very much helpful and friendly with the promoters of the SMEs.

NAMBIAR, P.C.D., “FINANCING FOR PRIORITY SECTORS” S.B.I MONYHLY REVIEW DEC16, 2007-The article on the above topic paved the way for the thinking strategy for the financing the small scale and medium scale industries by the bank offers. The Government of India through its industrial policy clearly stated that the commercial banks should give priority treatment to the SMEs. The nature of the banking officials also discussed in the article. But that is not sufficient to promote the SME sector because the sector was totally neglected for the last several decades due to invasion of the MNCs. By enacting the MSME act, 2006 the government of India clearly indicated the signal to the banking people to provide the credit facilities to the SMEs. This article is very much helpful in preparing the script for my thesis.

PATNAIK,S.M., “ COMPREHENSIVE LEGISTSTION NEEDED ECONOMIC TIMES DEC 2004- in the year 2004 the author was this article expressed his grief for an enactment to safe guard the SME sector. The Government of India in the year 2006 came with the special law for the protection of SME sector. Really it is a welcome gesture for the safekeeping the SMEs. In my thesis I discussed the intricacies and the implementation of the act by the nodal agencies for the promotion of the SMEs.

RAMACHANDRA, K.S., REVIVING SICK UNITS, “FINANCIAL EXPRESS” ACT 9, 2001 – the above article discussed the reviving the sick SMEs in various aspects, like providing technology, management training, skilled labor, export promotion and giving finance. The root cause for all the above problems is the financial problem. The financial institution should provide sufficient amount at the easy disbursal system to promote the SMEs. The topic which I am preparing focused more on the credit facility awareness and availability of several schemes for SMEs.

SAHNEY, M., “BANKS ASKED TO STEM INDUSTRIAL SICKNESS” INDUSTRIAL INDIA VOL 36, 12 DEC 2005. Through this the author tires to express the need for banks intervention in the promotion of the SMEs. The officials of the banks in India are belong to middle class families and unaware of the industrial promotion and its need. Mere advice to the bankers is not helpful. So for that reason SRIMATY INDIRA GANDI nationalized all private banks for the development of agricultural sector in 1971. The MSME act 2006 instigates the banks to provide the credit facilities without any hesitation to the SMEs.

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SOUNDARRAJA, FINANCING SMALL SCALE INDUSTRIES, A REPORT, “RESERVEBANK OF INDIA BULLETIN 1980”APR –the reserve bank as a central bank and bankers bank and the prime lending bank to the government should take initiatives to promote the SME sector. The author is very interested in financing the small and medium scale industries in India, because it is providing more employment than any other sector. It arrests the migration to the cities from the villages in search of better jobs and better facilities. This topic has given me the encouragement to think in this way for the betterment of village and cottage industry development.

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EMPIRICAL ANALYSIS

Table-1

The credit services offer by ICICI Bank to SMEs

TERM LOAN 50%

WOKING CAPITAL 25%

BANK GUARANTY 10%

BILLS OF EXCHANGE 5%

Graph-1

The credit services offer by ICICI Bank to SMEs

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Table-II

Credit offering for SMEs

10,000-10,00,000 60%

10,00,000-50,00,000 30%

50,00,000-ABOVE 10%

Graph-II

The credit services offer by ICICI Bank to SMEs

Table-III

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Number of SMEs got loan sanction

RURAL SEGMENT 200

SEMI RURAL 500

URBAN SEGMENT 300

Graph-1II

The credit services offer by ICICI Bank to SMEs

Table-IV

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Credit policy of ICICI Bank

ENCORAGE THE SMEs 25%

DISCOURAGE THE SMEs 25%

SUPPORT THE SMEs 25%

TRAINNING DEVELOPMENT 25%

Graph-1V

The credit services offer by ICICI Bank to SMEs

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Table-V

Rate of Interest charged for SMEs

1MONTH-6MONTHS 12%

6MONTHS-1YEAR 14%

1YEAR-3YEARS 16%

3YEARS-ABOVE 18%

Graph-V

The credit services offer by ICICI Bank to SMEs

It is observed during the survey that the SMEs are suffering from several problems which hamper their growth. The SMEs industry concerned is small but their problem seen to be many. It is observed that every unit is facing by one problem or their depending on its size and

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structure. The root cause for all the above problems are lack of availability of credit the entrepreneurs are lack of knowledge regarding the credit facilities available to them. Though the government and its agencies are providing all sorts of credit facilities in various forms, are unaware of the credit facilitates offered by ICICI bank.

Sources of finance:

For most of the owners of SMEs, shortages of finance or capital are considered to be the most important factor responsible for a host of problems faced by them. Small units generally depend on two kinds of capital, 1. Own capital and 2. Borrowed capital consisting of (1) Long term capital for its investment in equipment and other capital assets and (2) short term capital to meet current needs of the industry.

Own capital or equity capital is usually provided by the industrialists themselves. It is sometimes supplemented by the resource raised from friends and relatives either as partners or shareholders. Small entrepreneurs generally do not encourage equity capital from outside agencies as is involves sharing of management control. Much of this initial capital is required for the purchase of fixed assets like, land, building, plant equipment and the balance for working capital.

Owned capital may not be sufficient to meet the long term needs. In such case, besides the own capital, long term capital is needed for expansion and renovation of plant and modernization of machinery. Short term credit is needed for working capital to by raw material and stores, to pay wages, to hold stocks of finished goods etc..

Financing small and medium units by ICICI bank:

The facilities available for financing small and tiny units in ICICI bank are reflected in the analysis of the actual amount of loans granted to them by various organized and un organized agencies, besides their own funds invested by the industrialists in their in their respective units.

PROBLEMS OF SMEs:

Some of the major problems are briefly as follows:

Financial problem of SMEs:

The financial problem of SMEs is of the root cause for all the other problems faced by the SME sector. The small and medium industrialists are generally poor and there are no facilities for cheap credit. They fall into the clutch of money lender who charges very high rates of interest, or else they borrow from the dealers of their goods, who exploit them by completing to sell their products at very low price.

Raw material problem of SMEs:

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This difficulty is experienced in a very pronounced form. The quantity, quality and regularity of the supply of raw materials are not satisfactory. There are no quantity discounts, since they are purchased in small quantities and hence charged, higher prices by suppliers. Difficulty is also experienced in promoting semi- manufactured materials. Financial weakness stands in the way of securing raw materials in bulk in a competitive market.

Production problem of SMEs:

SME units suffer from inadequate work space, power, lending and ventilation, and safety measures etc... These short coming have tended to endanger the health of workmen and have adversely affected the rate of production. Many units are following primitive methods of production. Adoption of modern techniques is either disliked by the entrepreneurs or not feasible. Wage rates and service conditions of small industries are not attractive to skilled labor.

Marketing problem of SMEs:

As marketing is not properly organized, the helpless artisans are completely at the mercy of middle man. The potential demand for their goods remains under developed. The SMEs have to face the competitions from large scale units in marketing their products. It causes damage to the growth and stability of SMEs. SME cannot afford to spend lavishly for advertisement to promote their sales.

Managerial problem of SMEs:

Small scale industries in our country have suffered from the lack of entrepreneurial ability to develop initiative and undertake risks in the unexplored industrial fields. The efficiency in management comes first among managerial problems. The entrepreneurial ability of promotes of cottage industries and SMEs are handicapped by technical knowhow in the areas of production, finance, accounting and marketing management.

Sickness of SMEs:

A serious problem which is hampering small and medium sector has been sickness. Many small units have fallen sick due to one problem are the other. Sickness is caused by two sets of factors, internal and external factors. From among the various internal and external causes of sickness the important once are bad management, high rate of capital gearing, inadequacy of finance, short of raw materials, outdated plant and machinery, low labor productivity etc…

CREDIT FACILITIES FOE SMES

SME industries form a significant part of Andhra Pradesh economy. The sector contributes around 6 per cent of GSDP and employs close to 2.5 lakh people. Many of the growth engines selected for focused development, e.g., construction and pharmaceuticals, will give rise to many

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opportunities for SME industries. The state is going towards industrialization after green revolution through the small scale and tiny sectors.

Guidelines for SMEs

In the Budget 2008-09 speech, finance minister Mr. P. Chidambaram has thrown light on the present status of small and medium enterprise. He said that there has been considerable rise in the number of registered units, unregistered units, production, export and employment. As per an estimate small scale industries produce more than 8000 products and have an industrial output of nearly 40%. After agriculture it is the major employment provider sector. Therefore, the sector opens up an avenue for the country to utilize the local advantages by keeping an eye open for the international arena. For fillip up the sector, finance minister has declared out the creation of a risk capital fund in the Small Industries and Development Bank of India (SIDBI). The SIDBI has shell out a scheme of reducing the guarantee fee from 1.5 per cent to 1 per cent and similarly annual service fee is also shell out from 0.75 per cent to 0.5 per cent for loans up to a maximum Rs.5 lakh. This year budget has also paved out the way for creating the two funds of each Rs.2000 core in the SIDBI. The one fund is decided to be set aside for risk capital financing and the other one has been declared for increasing the refinance capability to the micro, small and medium enterprises. Furthermore by creating the Credit Linked Capital Subsidy Scheme the government has come up for assisting 15% of the bank credit with a motive of replacing old machinery and equipments. with technologically and high graded one. The creation of the 'Outreach Programmed for Skill Development in Less Developed Areas' in 2006 is considered to be one of the important step taken in the direction of micro, small and micro enterprises (MSEs) progress. The said programmed is directed towards developing skills and for imparting training to people.

Problems of SMEs

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SMEs have inadequate accession to the monetary institutions due to the improper or absence of any financial information. They fail to reach to the private equity and venture capital and are confined only to the secondary financial instruments.

SMEs are generally fragmented and are more prone to market fluctuations.

Their area of business is limited only to the national territory. They fail to harness booming international trading opportunity.

In the absence of any technical knowhow, SME's witness a major struck in their business.

Small and medium enterprises counter to huge problems when it comes about settling monetary issues with big scales of buyers.

Reserve Bank Guidelines for SMEs

Every Bank is required to set up its own policies for providing monetary assistance to the SME.

Banks may start taking important steps for rationalizing the cost of loans granted to the SME sector. They should adopt a transparent rating system. SIDBI has its own Credit Appraisal & Rating Tool (CART) and Risk Assessment Model (RAM) along with a rating model. These have been developed for assessing risk involved in SMEs projects. The National Small Industries has their own Credit Rating Scheme, which in turns boost up the Small scale enterprises for getting them credit rated by the eminent credit rating agencies.

For making formal credit possibilities accessible to the small and medium enterprises, all banks including of regional and rural banks are required to take up concrete steps for providing credit facilities to an average of at least 5 micro, small and medium enterprises (MSME's).

Reserve Bank has issued a notification to all banks for detailing out their procedures of disposition of loan applications of MSME's including of the extent to which banks are permitted to grant collateral free loans etc.

Reserve Bank has made special arrangements in institution for analyzing credit requirements of such units. Like the Standing Advisory Committee in Reserve Bank and cells at head office and regional centers of the bank, check and review the credit flow to SME.

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SEBI Guidelines for SMEs

Indian financial markets regulator, the Securities and Exchange Board of India (SEBI) has decided to frame out plans and policies for developing small and medium enterprises. For this purposes comments and discussion are invited by the SEBI from market players with the help of its discussion paper. The move of SEBI in progressing SMEs is considering as a concrete step taken in the direction of improving condition of this segment.

While discussing its plans, SEBI ruled out the concern areas of SMEs, which it has outlined during its regular interactions with the different market participants. High cost involved in raising of capital is doted out to be a major problem. To facilitate more capital inflow into the small and medium enterprises, SEBI has come up with an idea of creating a separate stock exchange for the small & medium enterprises in India.

It was not the first attempt made in the direction of implementing policies for the small and medium scale enterprises. In 1989 OTCEI and in 2005 the INDO NEXT Platform of the BSE was launched. But both these experiments were failed to reach out their set objectives. The SEBI is all set to introduce new changes in the Indian capital market as the board is planning to introduce Indian depository receipts (IDRs) for benefiting small and medium enterprises. Besides solving monetary problems it will also deliver financial knowledge for educating investors.

FINDINGS

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All efforts were made by the researcher to make the study as scientific as possible.

1 It is offering working capital finance and term finance and rural and agriculture finance.

1. at present the ICICI bank is not encouraging the SMEs, because they feel their repaying capacity is not up to the level

2. The SMEs are not interested in taking loans from ICICI bank, because of high documentation and higher rate of interest

3. the loan procedure is cumbersome and it may not be able to fulfill all the documents required to submit for credit sanction

4. the bank is not all helping the loans sanctioning to the SMEs

5. All the small industrial owners are illiterates and they like only public banks

6. The bank provides loans only to the well known customers only.

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SUGGESTIONS

The company should take the initiative of training the advisors about the new finance

from time to time which also makes the advisors connected to the company.

Building awareness among small business people about the financial sources offering

by ICICI. Especially in the case of small and medium enterprises is must. So there is

mutual benefits are possible

While granting the loans the bank does not adhere the margin

The company should emphasis on creating awareness about the loans to SME’S.

They should extend the repayment period and decrease the installment amount

To compete effectively in the SME financing sector, they also need to provide financial

services that meet their specialized needs while coping with the high risks and costs

associated with servicing them

The most efficient way to encourage lending to SMEs is to improve the ability of existing institutions to construct profitable and efficient lending programmers

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CONCLUSIONS

1. The ICICI Bank is providing loans for SMEs

2. The system of appraisal is very regarding in sanctioning the loans

3. The SMEs are enable to submit proper documentation for approval of the loan

4. The Bank field officers occasionally provide guidance to business man

5. The industrial owner feel the interest rate at ICICI when compare to other Banks

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APPENDICES

Questionnaire

1. What are the credit services offered by ICICI Bank to SME’s?

2. How much credit are you offering for SME’s?

3. Till now how many SME’s got lone sanctioned from your bank?

4. What is the credit policy of the ICICI Bank?

5. What is the rate of interest charged for SME’s?

6. Is there any subsidy provided by the bank to the SME’s sector?

7. There are any special considerations for SME’s segment?

8. Is there any special services counter allotted for SME segment?

9. Is the bank providing any consultancy service to the SME’s?

10. What are the advantages and benefits provided by the ICICI Bank?

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REFERRENCES

Websites

www.google.com

www.icici bank.com

Books

Retail Banking

Banking theory and law practice : sundaram and varshney/sultan chand and sons,publishers,yerar 2004 edition

practical banking advances :bediH.L.&Hardikar v.k./UBSPD publishers and distributors,2001 edition

money banking and international trade :KPMsundharam./sultan chand and

Sons 2002 edition

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GLOSSARY

Account -- Money deposited with a financial institution for investment and/or safekeeping purposes.

Amortization -- A loan repayment plan, which enables the borrower to reduce his debt gradually through monthly payments of principal and interest.

APR (annual percentage rate) -- To make it easier for consumers to compare mortgage loan interest rates, the federal government developed a standard format called an "Annual Percentage Rate" or APR to provide an effective interest rate for comparison shopping purposes.  Some of the costs that you pay at closing are factored into the APR for ease of comparison.  Your actual monthly payments are based on the periodic interest rate, not the APR.

Balance-- An outstanding amount of money. In banking, balance refers to the amount of money in a particular account. In credit, balance refers to the amount owed.

Bank -- An establishment for lending, issuing, borrowing, exchanging, and safeguarding money.

Borrower -- A person who received funds in the form of a loan with an obligation to repay

principal with interest

Bridge financing – A loan spanning the gap between the termination of one loan (generally short-term) and the start of another (generally permanent long-term) loan.  Also referred to as gap financing.

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Bridge loan – Sometimes called a "swing loan", a bridge loan is generally a loan that is secured by a borrower's current residence to obtain the funds needed to purchase a new home if the current residence will not be sold prior to the purchase of a new home.

Capital --1) The net worth of a business defined by the amount by which its assets exceed its liabilities. 2) Money used to create income. 3) The money or other assets comprising the wealth at the disposal of a person or business enterprise. 4) The accumulated wealth of a business or individual.

Cash—Currency, checks and other negotiable instruments acceptable for direct deposit by a bank..

Collateral -- Anything that a bank accepts as security against the debtor's not repaying a loan. If the debtor fails to repay the loan, the bank is allowed to keep the collateral. Collateral is most commonly in the form of real estate (e.g., a home).

Compound interest – Interest paid on the original principal balance, and on the accumulated and unpaid interest.

Co-signer -- Another person who signs your loan and assumes equal responsibility for it.

Credit rating -- A financial institution's evaluation of whether a person is suitable to receive credit. Credit ratings are based on an individual's character, capacity to repay, and capital.

Credit limit -- The maximum amount of money a borrower can access in a credit account.

Credit report -- A record of an individual's current and past debt repayment patterns.  A credit history helps a lender to determine whether a borrower has a history of repaying debts in a timely manner.  For our comparison purposes, the credit report fee is considered to be a third party fee.

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Interest -- The cost of the use of money.

Late payment -- A payment made later than agreed upon in a credit contract and on which additional charges may be imposed.

Mortgage -- The legal document used by a borrower to pledge their property as security in order to obtain a loan.  In some areas of the country, the mortgage is called a "deed of trust".

Overdraft -- A check written for more money than is currently in the account. If the bank refuses to cash the check, it is said to have "bounced."

Prime rate -- The interest rate that banks charge to their best customers for short-term loans. Changes in the prime rate can influence changes in other interest rates

Secured loan – A loan that is backed by collateral

Term -- The loan term is the number of months that you will make monthly payments. If the loan term is the same as the payment calculation term, you will pay the loan in full during the loan term and no balance will be due. If the payment calculation term is greater than the loan term, a balance or "balloon payment" may be due at the end of the loan term.

Unsecured debt --  A loan that is not backed by collateral

Bank credit: The borrowing capacity provided to an individual by the banking system, in the form of credit or alone. The total bank credit the individual has is the sum of the borrowing capacity each lender bank provides to the individual.

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