Inaugural function of

1
Inaugural function of Innovator Identification
Camp 2006 Presentation by S K KAUSHAL Assistant
General Manager Indian Bank, Head Office Small
Industries Finance Department
26th , September 2006 Chennai
2
Indian Bank

• Indian Bank limited, the predecessor of Indian
  Bank was founded as Swadeshi Bank and commenced
  business on 15.08.1907.
• The Bank commenced its business with an
  authorised capital of Rs 20 lakhs
• The Bank was nationalised on 19.07.1967
• At present the Bank is celebrating its centenary
  year and has 1406 branches (468 rural, 356
  semi-urban, 337 urban and 245 metropolitan
  branches)
• The Bank has 2 foreign branches at Colombo and
  Singapore
• 
  

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Indian Bank - Business

• The global deposits of the Bank stood at Rs
  416370 millions as of June 2006 of which
  domestic aggregate deposit constituted Rs 408060
  millions
• Gross credit of the Bank stood at Rs 251570
  millions as of June 2006 of which domestic credit
  was Rs 241550 millions
• Net Profit for 2005-06 was Rs 5045 millions
• Capital Adequacy Ratio was 13.19
• Net NPA was 0.79

4
SME - Definitions
Small Scale Industries (SSI) Investment in
Plant and Machinery upto Rs 10 millions in
general and upto Rs 50 millions for select items
like hosiery, handtools, stationery,
pharmaceuticals, chemicals etc., Medium
Enterprises(ME) Investment in Plant and Machinery
in excess of SSI and upto Rs 100 millions
Tiny Industries Investment in Plant and
Machinery upto Rs 2.5 millions SSSBEs (Small
Scale Service Business Enterprises) Investment in
fixed assets excluding land and building upto Rs
1 million
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Funding innovations Bank Schemes for SMEs

• Project Appraisal
• Financial Technical Marketing
• 
  Entrepreneur
• Innovation Relationship
• Tailor made schemes for specific activity

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Indian Bank Procedure for sanction of loan

• Loan analysis
• Receipt of proposal from the borrower at the
  branch
• Acknowledging the application
• Perusal and calling for additional details if any
• Obtention of additional details and analysis
  thereon for technical feasibility(by Industrial
  Development Officers- Engineers) and financial
  viability of the project
• The financial viability is assessed through
  Current Ratio, Leaverage Ratio etc.,
• Loan approval
• After a careful analysis of ratios,
  profitability, marketability, technical
  competence etc of the project the proposal is
  either sanctioned at branch level or forwarded to
  controlling offices depending upon the quantum of
  loan sought
• The proposal is approved by the competent
  authority and sanction is communicated to the
  borrower
• Disbursement
• The documents concerned are obtained from the
  borrower
• Pre-release audit conducted
• Loan amount disbursed in stages or in full based
  on type of loan

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Indian Bank Credit Scoring Model

• Used for taking quick decisions on SSI loans
  with limits upto Rs 2.5 millions
• There are two models in vogue, CSM 1 for fresh
  units and CSM 2 for units with existing business
• CSM 1 has parameters like person, product,
  projected financials, security cover etc
• CSM 2 has parameters like person, product, actual
  financials, operations in the account and
  security cover
• Units scoring above 60 are selected for
  sanctioning and below 40 are rejected
• Units falling between 40 to 60 category are
  selected based on a careful analysis

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Indian Bank - Check List for SME loans

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Indian Bank - Check List for SME loans

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Indian Bank - Check List for SME loans

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CGTSI SCHEME

• Availability of (Credit Guarantee Fund Trust
  Scheme for Small Industries ) CGTSI cover only
  upto Rs.25.00 lakhs for collateral free loans
• SSI loans upto Rs 25 lakhs without collateral
  security third party guarantee are covered
  upto Rs 5 lakhs Mandatory
• Rs 5 25
  lakhs - Optional
• A guarantee fee of 1.5 and annual service fee
  of 0.75 of the limit per annum is payable to
  the CGTSI
• 75 guarantee cover is available
• Our Bank bears the guarantee fee in proportion to
  interest charged
• By
  the borrower By the Bank
• Upto 10 1.50
  0
• 10 - 11 1.00
  0.50
• 11 - 12 0.50
  1.00
• Above 12 0
  1.50

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Time Norms

• RBI guidelines for disposal of SSI applications
  complete in all respects (means with all relevant
  annexures and information)
• Loans upto Rs 25000 within fortnight
• Upto Rs 5 lakhs within four weeks
• More than Rs 5 lakhs eight to nine weeks
• We have introduced a credit scoring model for
  loans upto Rs.25.00 lakhs for facilitating quick
  decisions

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Working Capital Limits

• Working Capital limits are sanctioned for
  purchase of raw materials, spares and other
  current assets.
• Working Capital is assessed at 20 of the
  projected sales of the unit upto Rs 5 crores
• The Working Capital is sanctioned as FB limits
  (Cash Credit, Overdraft etc.) and as NFB limits
  (LC, Guarantee etc.)

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TERM LOAN

• The Term Loan is sanctioned for construction of
  building, purchase of land, plant and machinery.
• The assessment is based on Project cost and Cash
  Flow.
• The Project cost includes cost of land, building,
  contingencies and margin on working capital
• The means of finance include promoters
  contribution, Bank loan and other long term
  sources

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RATE OF INTEREST

• The interest rate structure on SSI loans is as
  below (subject to change in BPLR)
• Limits below Rs.2.00 lakhs
  BPLR - 1 / BPLRTP-1
• Limits above Rs.2.00 lakhs
• Rating
  Interest Rate
• Prime BPLR / BPLR
  TP
• AAA
  BPLR 0.5 / BPLR TP 0.5
• AA BPLR 1 / BPLR
  TP 1
• A BPLR 1.5 / BPLR
  TP 1.5
• Others BPLR 2 /
  BPLR TP 2
• Current BPLR 12
• Current Tenor
  Premium 0.5

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PROMOTERS CONTRIBUTION (MARGIN)

• Working capital - 25
• Term Loan
• Land and Building 40
  
• Plant and Machinery
  25
• Assets created out of the Bank loan (fixed and
  current) will be primary securities for the Bank
  

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• THANK YOU