Project Report on Analysing Working Capital Limits of Small & Medium Enterprises in Ing Vysya Bank (Now Kotak Mahindra Bank)

PROJECT REPORT ON ANALYSING WORKING CAPITAL LIMITS OF SMALL & MEDIUM ENTERPRISES IN ING VYSYA BANK (NOW KOTAK MAHINDRA BANK) SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENT OF MASTER OF MANAGEMENT STUDIES BY PANDEY AMITKUMAR HARISHCHANDRA HEERA DEVI ROLL NO 2014212 MMS-II (SEM III) YEAR 2014 - 2016 LALA LAJPATRAI INSTITUTE OF MANAGEMENT MAHALAXMI, MUMBAI – 400034 1 | P a g e A PROJECT REPORT ON ANALYSING WORKING CAPITAL LIMITS OF SMALL & MEDIUM ENTERPRISES SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENT OF MASTER OF MANAGEMENT STUDIES BY PANDEY AMITKUMAR HARISHCHANDRA HEERA DEVI ROLL NO 2014212 MMS-II (SEM III) YEAR 2014-2016 LALA LAJPATRAI INSTITUTE OF MANAGEMENT MAHALAXMI, MUMBAI – 400034 2 | P a g e A PROJECT REPORT ON ANALYSING WORKING CAPITAL LIMITS OF SMALL & MEDIUM ENTERPRISES BY PANDEY AMITKUMAR HARISHCHANDRA HEERA DEVI Roll No: 2014212 ING VYSYA BANK (NOW KOTAK MAHINDRA BANK) 3 | P a g e COLOURED XEROX OF THE INTERNSHIP CERTIFICATE GIVEN BY THE COMPANY 4 | P a g e Certificate This is to certify that the project work titled “Analysing Working Capital Limits Of Small & Medium Enterprises” is a summer internship work carried out by Mr. Pandey Amitkumar Harishchandra Heera Devi. The project was completed for “ING Vysya Bank (Now Kotak Mahindra Bank)”, under the guidance of Mr. Vicky Punwani I further certify that the said work has not been submitted in the part or in full, to any other University. Date: 31st August, 2015 _____________________ __________________________ Prof. Arti Modi Dr V.B. Angadi Project Guide Director 5 | P a g e DECLARATION I, Mr. Pandey Amitkumar Harishchandra Heera Devi , student of Lala Lajpatrai Institute of Management of MMS II (Semester III) hereby declare that I have completed the summer internship project on Analysing Working Capital Limits Of Small & Medium Enterprises with ING Vysya Bank (Now Kotak Mahindra Bank) in the Academic year 2014 - 2016. The information submitted is true & original to the best of my knowledge. PANDEY AMITKUMAR 6 | P a g e ACKNOWLEDGEMENT At the outset of this project, I would like to express my profound thanks to a few people without whose help, completion of this project would not have been possible. First and foremost, I would like to express sincere thanks to ING Vysya Bank (Now Kotak Mahindra Bank) for giving me this opportunity to work with them. The list is endless but to name a few special people, I would like to thank Mr. Vicky Punwani for being extremely supportive and guiding me throughout my internship and giving me constant motivation and expert advice. I would also like to thank the entire service department for providing me their precious time and making this internship a successful learning experience. I am very grateful to Dr. Angadi, Director of Lala Lajpat Rai Institute of Management, for giving me the opportunity to do this project in ING Vysya Bank (Now Kotak Mahindra Bank). I would also like to thank Prof. Arti Modi for being an excellent mentor and helping me whenever I approached him/her. Last but not the least; I take pride in thanking my parents Mr. Harishchandra Pandey & Mrs. Heera Devi, siblings and friends for their much valued support. 7 | P a g e EXECUTIVE SUMMARY Introduction: ING Vysya Bank( now Kotak Mahindra Bank) which aims at providing “Funding in SME sector” providing different types of facilities to customers according to their needs. ING Vysya Bank decided to merge with Kotak Mahindra Bank, creating the fourth largest private sector bank in India. On 1 April 2015, the Reserve Bank of India approved the merger. Objective: 1. To evaluate the structure of SMEs and regulatory. 2. Mechanism over SMEs. 3. Financing of SMEs. 4. Working Capital Management 5. To know evaluation of credit lending norms for SMEs by RBI and committees under Ministry of Finance. 6. Evaluate the availability of Credit Methodology: The methodology used was both qualitative and quantitative market research Financial Statement Analysis & Forecasting then preparing Fin spread sheet and process note for SMEs. Use of Cash Flows, Balance sheet, CPV and other Financial Analysis were another methodology for designing the customized business plans of the franchisees. Findings and Conclusions: The SME sector in India, which includes the micro, small and medium enterprises, constitutes an important part of the economy. However, a major concern for the SMEs is the availability of an adequate amount of finances. The government has recognised the key role that the SME segment plays in creating new enterprises and in providing employment to a large segment of the population and has adopted several public policy measures to enhance flow of credit to the sector. 8 | P a g e Recommendations: SME sector is perceived as a profitable endeavor for banking business despite significant differences in lending practices, business models, drivers and obstacles in SME finance. Numerous issues relating to SME finance have been analyzed in the study based on first hand impressions of entrepreneurs and banks officials and also observations have made by using industry level statistics on selected data. The following measures are recommended from bankers’ as well as entrepreneurs’ perspective based on the empirical observations of the study which probably would help bankers in making their SME loan book strong for sustainable development of banking industry and inclusive growth of Indian economy. Contribution: My company guide Mr. Vicky Punwani appreciated my work by giving me the different company profiles and doing financial analysis of different companies during the SIP period. My financial analysis portfolio was accepted by the company. My contribution towards the company was also through meeting with Clients of different SME industries and providing useful information like facilities that we offer at the ING Vysya Bank (now Kotak Mahindra Bank). The company is running successfully with the implementation and help of the plan and balanced scorecard suggested by me. There was so much work that was actually being carried out apart from the project which helped me a lot in increasing my knowledge, widened the scope for working and improved my communication and negotiation skills. The mission, vision and goals of the organization has helped me to evolve as a more versatile and multi-tasking person. 9 | P a g e TABLE OF CONTENTS 1. Indian Banking System ................................……………………………………….…..12 1.1.1. History of Banking in India…………………………………...…………..12 1.1.2. Public Sector Banks in India……………………………...………………14 1.1.3. Private Sector Banks in India…………………………………………..14 1.1.4. Co-operative Banks in India…………………………………………….14 1.1.5. Regional Rural Banks in India…………………………………………15 1.1.6. Foreign Banks in India………………………………………………….15 1.2. Banking…………………………………………………………………………………16 1.3. Trends…………………………………………………………………………………..16 1.4. Growth Statistics……………………………………………………………………….17 1.5. Banks and Consumer Finance………………………………………………………...18 1.6. Indian Bank Association………………………………………………………………19 2. ING Vysya Bank (Now Kotak Mahindra Bank)………………………………………20 2.1. About the company………………………………………………………21 2.2. Company’s Vision & Values……………………………………………..24 2.3. Facilities offered by ING KOTAK BANK in SME/ Retail Banking…25 3. FINANCIAL ANALYSIS OF SME FUNDING…………………………………….….27 3.1. Introduction………………………………………………………………….28 3.2. Funding Structure…………………………………………………………..29 3.3. Simple guidelines of funding SME…………………………………………30 3.4. Steps for SME funding Procedure…………………………………………32 4. The Banking System: Commercial Banking- Key Ratios/Factors……………………33 5. Methodology & Sampling……………………………………………………………….36 6. SME Finance from Bankers’ Perspective………………………………………………40 6.1. Human Capital is determinant of growth………………………………….40 10 | P a g e 6.2. Bankability of SME Finance………………………………………………..42 6.3. Causes of default by SMEs………………………………………………….44 6.4. Less security or no collateral with SMEs…………………………………45 6.5. Lengthy and inflexible documentation……………………………………47 6.6. Ways of making finance simpler & cost effective for SMEs…………….47 7. SME Finance - An Industry Analysis………………………………………...…………49 8. Drivers of SME Finance - An Industry Review………………………………………...50 8.1. Incentives for enhancing viability of SME Finance……………………….50 8.2. Institutional advantages to Banks…………………………………………..50 8.3. Policy incentives for MSME finance by banks…………………………….51 8.4. Competitive advantages to SMEs………………………………………..…52 9. STATISTICAL TABLES…………………………………………………………..53 10. Annextures………………………………………………………………………….62 11. My Learning………………………………………………………………………..72 12. Conclusion………………………………………………………………………….73 13. Bibliography…………………………………………………………………..……74 11 | P a g e 1. Indian Banking System Banking System - Introduction 1.1.1 History of Banking in India For the past three decades India's banking system has several outstanding achievements to its credit. The most striking is its extensive reach. It is no longer confined to only metropolitans or cosmopolitans in India. The government's regular policy for Indian bank since 1969 has paid rich dividends with the nationalization of 14 major private banks of India. The first bank in India, though conservative, was established in 1786. From 1786 till today, the journey of Indian Banking System can be segregated into three distinct phases. They are as mentioned below: Phase I During the first phase the growth was very slow and banks also experienced periodic failures between 1913 and 1948. There were approximately 1100 banks, mostly small during those days public had lesser confidence

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