ENTREPRENEURSHIP & FINANCE eJOURNAL

Vol. 7, No. 46: Aug 31, 2012

STEVEN NEIL KAPLAN, EDITOR

Neubauer Family Professor of Entrepreneurship and Finance, University of Chicago - Booth School of Business, National Bureau of Economic Research (NBER)

skaplan@uchicago.edu
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Table of Contents
Cash Holdings and the Effects of Pre-IPO Financing in Newly Public Firms Christa H. S. Bouwman, Case Western Reserve University - Department of Banking & Finance,
Wharton Financial Institutions Center Michelle Lowry, Pennsylvania State University - Mary Jean and Frank P. Smeal College of Business Administration

Competitive Valuation Effects of Australian IPOs Andrew McGilvery, affiliation not provided to SSRN Robert W. Faff, University of Queensland Shams Pathan, University of Queensland - Business School Family Ownership, Organisational Control and Agency Costs in Australian Small and Medium-Sized Enterprises Dong Xiang, Griffith University - Department of Accounting, Finance and Economics Andrew C. Worthington, Griffith University Helen Higgs, Griffith University Small and Medium Enterprises Listing Prem Mardi, affiliation not provided to SSRN Serial Entrepreneurs: Are They Better? - A View from Stanford University Alumni Herv Lebret, Ecole Polytechnique Fdrale de Lausanne Ownership Structure and Performance of Closely Held Young Firms Tatyana Sokolyk, Brock University William Bradford, affiliation not provided to SSRN

Small Business Credit Card Scheme of State Bank of India [SBI] and Other Public Sector Banks in Gangapur City, Rajasthan - Analysis of Customer Satisfaction K. Pavan Gupta, National Law University, Jodhpur

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ENTREPRENEURSHIP & FINANCE eJOURNAL

"Cash Holdings and the Effects of Pre-IPO Financing in Newly Public Firms" CHRISTA H. S. BOUWMAN, Case Western Reserve University - Department of Banking & Finance,
Wharton Financial Institutions Center Email: christa.bouwman@case.edu MICHELLE LOWRY, Pennsylvania State University - Mary Jean and Frank P. Smeal College of Business Administration Email: mlowry@psu.edu

Newly public firms hold far higher levels of cash than mature firms, and these substantially higher cash holdings remain relatively stable for extended periods after the IPO. This is puzzling since many measures of firm growth, which are generally hypothesized to be related to demand for cash, converge to those of mature firms over this period. Interestingly, newly public firms are unique in the extent to which they benefit from these high cash holdings: among newly public firms a high cash portfolio significantly outperforms a lower cash portfolio, but we do not find a similar relation among mature firms. We posit that newly public firms cash holdings and the associated benefits are driven by uncertainty regarding the availability of post-IPO financing. Those with pre-IPO syndicated loans (one-third of our sample) likely face the least uncertainty. Consistent with this conjecture, both the high level of cash holdings and the benefits of these cash holdings are restricted to the subsample of newly public firms without syndicated loans prior to the IPO. "Competitive Valuation Effects of Australian IPOs" International Review of Financial Analysis, Forthcoming ANDREW MCGILVERY, affiliation not provided to SSRN

Email: andrew_mcgilvery@hotmail.com ROBERT W. FAFF, University of Queensland Email: r.faff@business.uq.edu.au SHAMS PATHAN, University of Queensland - Business School Email: s.pathan@business.uq.edu.au

This study examines the valuation effects that Australian initial public offerings (IPOs) have on industry competitors and to what extent this can be explained by the IPO firms corporate governance profile and the intended use of their offer proceeds. Using a sample of 106 IPOs between 1999 and 2009, the results indicate that companies experience negative stock price reactions to the completion of an IPO in their industry on days leading up to and including the event date. The multivariate results show that in relation to corporate governance factors, both board size and CEO share ownership exhibit negative relationships with rival firm abnormal returns. Moreover, IPOs which disclose either investment, or both debt reduction and investment as the intended use of proceeds result in a greater negative price impact upon rival firms. "Family Ownership, Organisational Control and Agency Costs in Australian Small and Medium-Sized Enterprises" DONG XIANG, Griffith University - Department of Accounting, Finance and Economics Email: d.xiang@griffith.edu.au ANDREW C. WORTHINGTON, Griffith University Email: a.worthington@griffith.edu.au HELEN HIGGS, Griffith University Email: h.higgs@griffith.edu.au Using the Business Longitudinal Database compiled by the Australian Bureau of Statistics, we examine the level and determinants of agency costs in small and medium-sized enterprises (SMEs), with a particular focus on the impact of family ownership and the variation in agency costs associated with firm size and the level of ownership concentration. Using univariate and multivariate analysis, we find that family ownership appears to reduce agency costs in smaller SMEs. However, among medium-sized familyowned SMEs, these gains appear offset by an increase in the lack of self-control and problems arising from the possible presence of parental altruism. For larger family-owned SMEs, agency costs again decrease, likely because of the effects of other forms of firm monitoring, such as by bank lenders and non-family investors, and the increased professionalization of management associated with an increase in the size and complexity of the firm. "Small and Medium Enterprises Listing" PREM MARDI, affiliation not provided to SSRN Email: mardi.prem6@gmail.com SME listing provision in Bombay Stock Exchange. This is the opportunities of listing in SME and procedural requirement. "Serial Entrepreneurs: Are They Better? - A View from Stanford University Alumni" HERV LEBRET, Ecole Polytechnique Fdrale de Lausanne Email: herve.lebret@epfl.ch More than 2700 start-ups and founders affiliated with Stanford University are analyzed to

study if serial entrepreneurs are more successful or not than novice entrepreneurs. The value creations are measured through the acquisition values or market capitalizations of companies and compared. The study also compares how serial entrepreneurs do in their new venture compared to the previous ones. As an interesting complement, the author also analyzes how novice and serial entrepreneurs access venture capital. It appears that serial entrepreneurs are not better than novice entrepreneurs in their new ventures, but were more successful with their first venture. Serial entrepreneurs also raise more money with their new ventures but less money with their first venture than novice entrepreneurs. "Ownership Structure and Performance of Closely Held Young Firms" TATYANA SOKOLYK, Brock University Email: tsokolyk@brocku.ca WILLIAM BRADFORD, affiliation not provided to SSRN Email: bradford@uwashington.edu This study documents that manager-shareholder conflict plays an important role at the earliest stage of business formation. Using data on closely held start-up firms, we focus on the owner who has the greatest managerial responsibility in the firm. Controlling for the endogenous relation between the initial equity ownership by the owner-manager and firm performance, we find that increased equity ownership by the owner who actively managers the firm results in better firm performance. In contrast, the owner-managers personal contribution of debt and the share of personal wealth invested in the firm are negatively related to firm performance. This evidence is consistent with the idea that start-ups with poor performance prospects are unable to raise funds externally and, instead, rely on internal capital. "Small Business Credit Card Scheme of State Bank of India [SBI] and Other Public Sector Banks in Gangapur City, Rajasthan - Analysis of Customer Satisfaction" K. PAVAN GUPTA, National Law University, Jodhpur Email: guptapavan21@gmail.com This study entitled credit schemes of State Bank of India (SBI) and other banks will be helpful for bankers to maintain customers service policy, for customers while deciding their financing needs and also helpful for other researchers for further research in the future. Banking regulation Act 1949 defines banking as accepting for the purpose of lending or investment, of deposits of money from the public, repayable on demands or otherwise and with draw able on demand by cheques, draft or order otherwise. Small Business Card (SB Card) provides customers with an option, in addition to the existing banking credit facilities available. With an SB card customers can enjoy hassle-free credit facilities. This study would help us to know about the problems that are faced by the consumers during transactions. It would also reveal the problems that are being faced by the bank employees while dealing with customers and would also highlight the future prospect of SB card. Review of existing literature: It is very essential to know whether the study has already been conducted before. If so, how and to what extent? And because of this I have to go through all the existing literature related to the study. SB Card, very limited studies have been conducted on the subject. Due to the time restrictions I can seek advice from only the limited literature, which is available with the bank. As the concept is completely under the control of various banks and RBI, the information would be taken directly from these

sources. Conceptualization: As the concept includes two terms i.e. cash credit or working capital loans and terms loans. Therefore both the terms are taken into consideration in the proposed study. Due to the privatization of banking sector many big private players entered in this sector giving a tough competition to the existing players. So, to face this stiff competition all the public sector banks have to review their functioning. These aspects will be given importance in this project report. The concept of SB card, question crops in mind what is a SB card, what is its shape and size, what is its function. A SB card is nothing but a identity card containing card holders photographs with signature, card no. Name, A/c No. limit, validity period, branch code with signature of Branch Manager. Focus of the problem: The study would be conducted at Gangapur City, Rajasthan. The main focus of the study is to know about customers perceptions about SB card credit scheme. As SB card is an integral part of SBF (small business financing). So the due weightage would be given to SB card. This study would be conducted by classifying customers into two categories. ^top

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A DISSERTATION On Small Business Credit Card Scheme of State Bank of India

[SBI] and other Public Sector Banks in Gangapur City, Rajasthan - Analysis of Customer Satisfaction

Submitted towards the partial fulfilment of VI semester of MBA-MBL Degree course

Submitted by: Pavan Kumar Gupta Roll No. 262 MBA-MBL (VI Semester) NLU, Jodhpur National Law University Jodhpur

Submitted to: Prof. (Dr.) Rituparna Das Associate Professor Faculty of Management NLU, Jodhpur

Electronic copy available at: http://ssrn.com/abstract=2133110

ABSTRACT

This study entitled credit schemes of State Bank of India (SBI) and other banks will be helpful for bankers to maintain customers service policy, for customers while deciding their financing needs and also helpful for other researchers for further research in the future. Banking regulation Act 1949 defines banking as accepting for the purpose of lending or investment, of deposits of money from the public, repayable on demands or otherwise and with draw able on demand by cheques, draft or order otherwise. Small Business Card (SB Card) provides customers with an option, in addition to the existing banking credit facilities available. With an SB card customers can enjoy hassle-free credit facilities. This study would help us to know about the problems that are faced by the consumers during transactions. It would also reveal the problems that are being faced by the bank employees while dealing with customers and would also highlight the future prospect of SB card. This study entitled credit schemes of State Bank of India (SBI) and other banks will be helpful for bankers to maintain customers service policy, for customers while deciding their financing needs and also helpful for other researchers for further research in the future. Banking regulation Act 1949, defines banking as accepting for the purpose of lending or investment, of deposits of money from the public, repayable on demands or otherwise and with draw able on demand by cheques, draft or order otherwise. Small Business Card (SB Card) provides customers with an option, in addition to the existing banking credit facilities available. With an SB card customers can enjoy hassle-free credit facilities. This study would help us to know about the problems that are faced by the consumers during transactions. It would also reveal the problems that are being faced by the bank employees while dealing with customers and would also highlight the future prospect of SB card.

Electronic copy available at: http://ssrn.com/abstract=2133110

Review of existing literature It is very essential to know whether the study has already been conducted before. If so, how and to what extent? And because of this I have to go through all the existing literature related to the study. SB Card, very limited studies have been conducted on the subject. Due to the time restrictions I can seek advice from only the limited literature, which is available with the bank. As the concept is completely under the control of various banks and RBI, the information would be taken directly from these sources. Conceptualization As the concept includes two terms i.e. cash credit or working capital loans and terms loans. Therefore both the terms are taken into consideration in the proposed study. Due to the privatization of banking sector many big private players entered in this sector giving a tough competition to the existing players. So, to face this stiff competition all the public sector banks have to review their functioning. These aspects will be given importance in this project report. The concept of SB card, question crops in mind what is a SB card, what is its shape and size, what is its function. A SB card is nothing but a identity card containing card holders photographs with signature, card no. Name, A/c No. limit, validity period, branch code with signature of Branch Manager. Focus of the problem The study would be conducted at Gangapur City, Rajasthan. The main focus of the study is to know about customers perceptions about SB card credit scheme. As SB card is an integral part of SBF (small business financing). So the due weightage would be given to SB card. This study would be conducted by classifying customers into two categories. SB Card holders Non SB Card holders RESEARCH OBJECTIVES: 1. To find out the market potential of SB cards issued by different public sector banks in Gangapur City. 2. To know customers perceptions about various SB card credit scheme of different public sector banks. 3. To compare the SB Cards credit scheme of different banks. 3

Electronic copy available at: http://ssrn.com/abstract=2133110

4. To find out main obstacles while getting finance under various SB cards.

RESEARCH METHODOLOGY: Depending upon the objective of the study the research I would be adopting the Descriptive Research methodology. Data Collection: There are two sorts of data available: 1. Primary Data : These data will be basically observed and recorded for the first time for my Dissertation work. The data will be collected through survey method by using the tool Questionnaire. 2. Secondary Data: The secondary data will be collected from the following sources: Financial News Papers. RBI website. Websites of banks lying in my research area. Identified Independent and Dependent variables: Independent variables: All the external factors are independent variables: Govt. policy of RBI Environmental factors War Technology Natural Calamities Dependent variables: All the internal factors of organization are dependent variables:

 Company policy Infrastructure Sampling Design: All the customers availing credit schemes in Gangapur City is my universe while the sample size is 40. The sample unit is individuals. I would be taking the sample on my convenience. The sample respondents/customers will be curved out in 4 categories according to their type of small business or profession for 6 banks (namely SBI, PNB, UCO, OBC, CANARA, IOB) Sampling techniques: For the present study, convenient technique of sampling non-probability (Non-probability sampling involves personal judgment somewhere in the process) would be used. Significance of the Study This study entitled comparative study of small business card credit schemes of SBI V/s other banks will be helpful for bankers to maintain customers service policy, for customers while deciding their financing needs and also helpful for other researchers for further research in the future. SBI card provides customers with an option, in addition to the existing banking credit facilities available. With an SBI card customers can enjoy hassle-free credit facilities. This study would help us to know about the problems that are faced by the consumers during transactions. It would also reveal the problems that are being faced by the bank employees while dealing with customers and would also highlight the future prospect of SBI card. CHAPTERISATION The Chapterization of the dissertation report is as following: Chapter 1: In the chapter 1st a brief introduction has been made. In the introduction banking scene in India and Emerging environment of banking in India have been discussed. Chapter 2: 5

 In the chapter 2nd the small business credit cards of SBI bank and other public sector banks has been discussed. The credit card, why it is a convenient banking product is also has been discussed. What is status and popularity is there of SB (small Business) cards in India especially in low income areas like semi urban and urban, has been covered. Chapter 3 In the chapter 3rd the Reasons for choosing the Gangapur city as research place and the field work in sampling space (Gangapur City) has been discussed. Chapter 4: In this chapter the comparison of SB cards on the basis of different parameters like interest rates, collateral security, documents required etc. has been made. It consists of the detail descriptions about the raw data. Here the complete analysis of the data, which is collected from the primary sources. For tabulation the data is converted into the percentage and after that it is tabulated. On the basis of this data the graph are inserted. At last the conclusion is drawn on the basis of this data. Chapter 5: In this chapter a detailed conclusions have been drawn from the data tabulated, interpreted and analyzed. The research objectives have been solved in detail and described in different points clearly. Chapter 6: In this chapter the suggestions on the basis of my research have been made for the customers in view of facilitation and convenience purposes and to the bankers to enable them customer oriented. Chapter -7: In this chapter the limitations observed in my dissertation work has been acquainted with.

Chapter 8: It consists of the appendices part of the dissertation report in this part I have mentioned the names of all those books, magazines, journals and web-sites from where I have collected the material comes under the head of bibliography. It also consists of the questionnaire, which is used for collecting the data.

ATTESTATION

I understand the nature of plagiarism, and I am aware of the Universitys policy on this. I certify that this dissertation reports original work by me during my University project except for the following: The theory part in the chapter first and second has been referred to secondary sources like banks websites, websites of financial newspapers and RBI website. The rest part of my dissertation was developed by me during VI semester internship period with the collaborating company. In addition, this used ideas I had already developed in my own time.

Signature (Pavan Kumar Gupta)

Date: 1st of May, 2012

ACKNOWLEDGEMENT

A mind troubled by doubt Cannot focus on the course to victory As a child, you acknowledged everything you accomplished, as you grow older and more sophisticated, you acknowledge only major accomplishments but an endeavor of this magnitude would not have been possible without the invaluable help and support of Professor (Dr.)

Rituparna Das, Faculty, National Law University, Jodhpur, whose support was instrumental in
accomplishing this task. His simplified teaching techniques based on examples have helped me gain more understanding of the subject. The very essence of the Dissertation work is the linguistic precision which has an impact of conveying more details in least possible words. I feel very much gratified to the company in which I have undergone for an internship in my VI semester of degree, for providing practical exposure and rich infrastructure assisting me in this research work. Finally, I feel very much gratified to the administration of the National Law University, Jodhpur for providing comfortable environment and rich infrastructure which has always been a facilitating stuff.

Table of contents

Sr No.
1. 2. 3. 4. 5.

Contents
Abstract Attestation Acknowledgement Table of contents

Page No.
2 8 9 10 11-12

Chapter 1

Introduction:

a. Banking Scene in India b. Emerging environment of banking in India c. Growing privatization and commercialization infrastructure

6.
Chapter 2 Small business credit cards of SBI bank and other public sector banks

13-22

7. 8. 9. 10. 11. 12.

Chapter 3 - The field work in sampling place (gangapur city) Chapter 4 - Data Tabulation and Analysis Chapter 5 Conclusions Chapter-6- Suggestions Chapter-7 - Limitations of the study Chapter 8- Appendices a) Bibliography b) Questionnaire

23-24 25-27 38 39 40 41-44

10

CHAPTER-1 INTRODUCTION

BANKING SCENE IN INDIA The banking sector in India is passing through a period of structural change under the combined impact of financial sector reforms, internal competition, changes in regulations, new technology, global competitive pressure and fast evolving strategic objectives of banks and their existing and potential competitors. Until the last decade, banks were regarded largely as institutions rather akin to public utilities. The market for banking services were oligopolies and Centralized while the market place was regulated and banks were expected to receive assured spreads over their cost of funds. This phenomenon, which was caricatured as 3-6-3 banking in the United States, meaning that banks accepted deposits at 3%, lent at 6%, and went home at 3 p.m. to play golf, was the result of the sheltered markets and administrated prices for banking products. Existence of entry barriers for new banks meant that competition was restricted to existing players, who often operated as a cartel, even in areas where the freedom to price their products existed. 1 The market place began to change for banks in India as a result of reforms of the financial sectors initiated in the current decade. On account of policy measures introduce to infuse greater competitive vitality in the system, the banking has entered in to a competitive phase. Competition has emerged not only from within the banking system but also from non-banking institutions. Lowering of entry barriers, deregulation of interest rates and growing sophistication of customers have made banking far less oligopolistic today. Introduction of capital adequacy and other prudential norms, freedom granted to enter into new turfs and greater overlap of functions between banks and non-banks have forced banks to get out of their cozy little world and think of the future of the banking. EMERGING ENVIRONMENT OF BANKING IN INDIA The Full convertibility of rupee leading to free mobility of capital which will mean virtual collapse of the national borders for trade and capital flows.Greater coordination between monetary, fiscal and exchanged rate policies for achieving the goals of faster and sustainable economic growth, macro-economic stability and export promotion.
1

www.ucobank.com

11

Close integration of various financial markets such as money market, capital market and Forex market. Removal of lowering of existing barriers of competitiveness, which are present today in the form of quantitative instructions on certain imports protective custom duties, reservation of certain utilities for the public sector.2 GROWING PRIVATIZATION AND COMMERCIALIZATION INFRASTRUCTURE SECTOR Today, Bank customers are better informed, more sophisticated and discerning. They also have a wide choice to choose from various banks and non-bank intermediaries. Their expectations are soaring. This is particularly true for banks corporate clientele but also applies to customers from personal segment. This is changing profile of customers call for a shift from product-based approach to customers-based approach. A bank aiming at maximizing customer value must, of necessity, plan for customized products. A combination of marketing skills and state-of-the-art technology should enable to bank in maximizing its profits through customer satisfaction. In the next millennium banks will have to be more and more cautious about customer service, profitability, increased productivity, to keep face with changing banking scenario. As banks in India prepare themselves for the millennium these are the shifts in the paradigm they are likely to experience. The 21st century may see the dawn of DARWINIAN BANKING. Only the banks could fulfill the demands of markets and changing items would survive and prosper. 3

cpolicy.rbi.org.in

cpolicy.rbi.org.in

12

CHAPTER2. SMALL BUSINESS CREDIT CARDS OF SBI BANK AND OTHER PUBLIC SECTOR BANKS

A WORD ABOUT SB CARD SB Segment: Small business credit card (SB credit card) Preamble: Small business units, retail traders, artisans, village industries, small-scale industrial units and tiny units, professionals and self employed persons etc., contribute significantly to the growth of our economy. The entrepreneur himself manages many of the units. Very often, these entrepreneurs complain of procedural delay in sanctions and renewal of limits. They also find it difficult to cope with the demands for audited balance sheet and other statements sought by the bank from time to time for availing credit facilities. With a view to providing hassle free financial supports to the above categories of entrepreneurs who have shown commitment to run the unit successfully and who are dealing with the banks for last two years satisfactorily, new and friendly credit product namely small business credit card scheme is designed. Under the scheme, cumbersome procedural aspects relating to reviews and renewals, submission of balance sheet, stock statements and other statements are done with credit delivery made simple and easy. Purpose: To meet the credit requirements of small business units, industrial unit, retail trader, artisan, Small Scale Industry (SSI) and tiny units. Eligibility:

13

A. Customers of the following segments with a satisfactory track record for the last two years enjoying credit facilities. 4

Small industrial units (SSI and tiny units including artisans) Small retail traders (Under SBF) Professional and self employed persons Small business enterprise

B. Units who do not enjoy credit limit with us/other banks at present with excellent performance and credential may be considered. Quantum of loan: Loan up to Rs. 5 Lac can be sanctioned to eligible persons. 5 Assessment: The small business credit card limit can be fixed as follows:

For small business, retail trader etc. 20% of the annual turnover declared for tax purpose or last twelve months turnover in the operative accounts, whichever is higher.

In respect of parties with good track record, where sales tax returns are not available, the credit limits may be decided taking into consideration the actual turnover in the accounts during the last two years.

For professionals and self employed persons, 50% of their gross annual income as per IT return shall be considered as the limit for issuing the SB credit card.

For small scale industrial units, tiny sector units the assessment norms in vogue as per the Nayak Committee recommendations would continue.

Validity:

Credit card limit will be valid for a period of three years, subject to satisfactory conduct of the accounts.

3 SBI Card SBI Credit Card Offers, Eligibility and Apply Deal4loans.mht 5 Pricing and Costs of Small Business Credit Cards - Business Guides & Articles - Business_com.mht

14

Annual review will be done based on conduct/operations of the A/cs. A major portion of the sales turnover should have been routed through the accounts as revealed by the credit summations.

Repayment:

The working capital advance may be continued subject to that review every year provided the credit summations in the account is not less than 50% of the projected sales turnover.

If the credit summations is less than 50% of projected sales turnover. The outstanding as on the due date of review should be made repayable in suitable monthly installments.

The term loan is repayable in suitable installments within a maximum period of five years. In case of composite loans, only the term loan is repayable in installments up to a maximum period of five years.

Interest rate: As per extent instructions issued from time to time relating the market segment. Refinance: No refinance is to be claim from SIDBI Security: Primary: Hypothecation of the stock in trade, receivables, machinery, office equipments Collateral: Under SSI No collateral security as per existing guidelines of RBI. User SBF:

Up to Rs. 25000/- No collateral security. Over Rs. 25000/- charge over movable/immovable property or third party granted.

However, in case of the excellent track record, sanctioning authority may waive collateral requirement.

15

Margins: Up to Rs. 25000/- - NIL Rs. 25001/- to Rs. 5,00,000/- - 20% Documentation: Documents as per extant instructions 6

Credit Card A Convenient Banking ProductThe credit card is a hassle free convenient banking product aimed at simplifying the credit delivery mechanism. Cumbersome procedural aspects relating to reviews and renewals, submission of stock statement, balance sheet and other statements are done away with. The credit limit will be worked as detail above. 7 Small business credit card

Card No. Name Account No. Tel. No. Limit Rs. Date of issue Valid upto .. (Branch Code)

Signature of the Brach Manager Card holders Photograph with signature The borrower would be issued a photo card indicating sanctioned limit and validity of the limit (sample card)

6 7

www.statebankofindia.com www.canarabank.com

16

Insurance:

Fixed assets/stock pledged/hypothecated to the bank be fully insured at least to the extent of the bank interests.

Bank may waive insurance of assets for equipment against the fire and other risk up to Rs.25000/-

Cover under credit guarantee scheme: All eligible loan accounts sanctioned for small scale industries (other than services) would qualify for cover under CGTFSI scheme (presently the scheme has been introduce in five circles on pilot basis viz. New Delhi, Chandigarh, Lucknow, Patna & Hyderabad) 8 Operation:

Small business credit card accounts should be maintained in a separate ledger. Cheque book should be issued and marked as small business credit card account. Pass book should be issued for small business credit card holders. Stock statement waived. Submission of audited balance sheet waived. Borrower would be issued a small business credit card with photograph thereon. Cost of photograph to be borne by banks.

IRAC norms would be applicable. Brief opinion report should be recorded. Marked inquiries should be made and recorded in the opinion report and singed by the field officer/cash officer or officers not below that rank.

Units within a radius of 5 kilometers may be covered intensively for the issue of credit card. This condition may be waived for such of those units already in the book of the branch.

Inspections:

Half-yearly inspection/monitoring to ensure the end user funds.

Sanction:

Required loan may be sanctioned within a week after receipt of detailed information.

www.orientalbankofcommerce.com

17

Control return after sanction may be sent to next higher authority for approval.

Scoring Model:

Loan would be sanctioned up to Rs. 5,00,000/- based on the simplified scoring model as given in annexure- II. Those who are scoring less than 60% would not qualify for the loan.

Rationale:

New schemes for hassle free credit facilities to small borrower.

Attractive Features

Less paper work. Stock Statement waived. Submission of audited Balance-Sheet waived. Borrower to be issued a small plastic card. Half-yearly inspection. Simplified application. Simplified scoring model for appraisal. Annual review based on the conduct of the account. Repayment of term loan component upto 5 years. Business credit cards can be an excellent way to track spending, purchase necessary supplies, and build the credit of your business. If you are familiar with consumer credit cards you may be surprised to find that regulations vary between the two types of cards. While the U.S. government implemented many safeguards under the CARD Act to protect consumers, these regulations do not apply to business credit cards.

Business owners should be aware that the rates and terms they will receive will be tied to their personal credit score. However, if you can obtain 18avourable terms, a business credit card can offer advantages that no other financial product can meet. 10 Tips & Advice to help you make your decision on Small Business Credit Cards

www.indianoverseasbank.com Small Business Credit Cards - Find Small Business Credit Cards Vendors, Tips & Advice, Buying Guides Business_com.mht
10

18

Have you been curious about small business credit cards? Getting credit for any business is essential, and it can be even more important for a small business that does not have a lot of cash on hand or that has to wait on payments from customers or other businesses most months. A good credit card can help ensure your business is able to purchase necessities as you wait for payment from your customers. There are quite a few options when you are looking for a credit card for a small business. Before making your decision you will want to consider some important factors. Perhaps most important you want to be sure you are getting a good rate of interest. A credit card is little good if the interest payments become too steep or if they have a lot of hidden fees that drive up the cost. Some things to look for in this type of credit card are minimum payments, when payments need to be made to the card, and the type of limits on the card. Not every card is right for every business so be sure the type of credit card you get meets your needs. Business.com provides links to companies that may be able to help. View the links to the left and find the small business credit cards that are right for you.11 Benefits

Just like consumer credit cards, business credit cards offer rewards programs and other incentives to attract clients.

Ease of Bookkeeping. Using a business credit card for most purchases can help you track expenses over time. Some credit card companies will issue itemized statements to help you stay within budget for all of your expenses. Having a business credit card also prevents you from mixing personal and business finances.

Protection Against Employee Fraud Each employee responsible for purchasing equipment or services can be issued a credit card. This immediately creates employee accountability for spending. Many credit card companies also offer protection against employee fraud and will cover charges up to a certain dollar amount.

Rewards Can Help Your Business While many credit card companies offer cash back and other typical rewards on their business credit cards, there are also incentives specifically for business owners. Cards may offer discounts on business services, equipment, and travel.

11

www.panjabnationalbank.com

19

Helps Build Business Credit Opening a business credit card can help you establish independent business credit. Business credit cards are also often easier obtain than loans, which makes it easier to establish credit. Once the business is established, you can use the favourable credit history of the business to seek a business loan. Good business credit can also help you find business credit cards with more favourable rates.12 Pitfalls

Due to the limited regulations that apply to business credit cards, keeping your account in good standing can be difficult or confusing. However, while business credit cards are not subject to the same restrictions as consumer credit cards, many credit card companies follow some CARD Act policies when issuing business credit cards. Business cardholders who take advantage of these protections should keep in mind that these policies can change in the future.

Rates Can Change Retroactively Unlike consumer credit cards, the rates on business credit cards can change without notice and be applied retroactively to old purchases. Although some credit card companies will comply with consumer credit card regulations when issuing business cards, policies vary between companies.

Payment Due Dates Can Fluctuate Companies that issue business credit cards are not required to mail the statement 21 days before the payment due date. Due dates can change month-to-month and it is your responsibility to anticipate any changes to avoid high late fees. Late fees are set at the discretion of the credit card company and are not capped by current regulations.

No Restrictions on Over-the-Limit Fees Rather than declining a card that is reaching its limit, the credit card company may accept the charges but will charge you an over-the-limit fee. Unlike a personal credit card, there is no cap on this fee. In fact, the fee for this courtesy could exceed the amount of the over-the-limit charge.

The Card Is Tied To Personal Credit Before issuing credit, the credit card company will require that you guarantee you will personally pay any charges. Therefore, even if the company fails, you will be personally liable for the balance of the cards. Also a good payment history may not be reported to the credit agency, but a missed payment or default will be added to the business owners personal report. The only

12

Business Standard

20

exception is for large and established companies that have demonstrated assets that could cover a default.13 SB (Small business) Cards in India (Especially in low income areas like semi urban and urban) Pricing Business credit card rates and annual fees will be strongly tied to the business and personal credit of the potential cardholder. When choosing a card, you should weigh any card rewards against an annual fee or a higher rate. If the business intends to pay all statements promptly, you can often obtain rewards with a monetary value that will offset any annual fees. However, if there is a possibility of carrying a balance over to the next month, most cardholders would be better served with a lower interest rate than card rewards. Business credit cards offer significant advantages when starting a company, but you should be wary to avoid incurring excessive fees and rate hikes. If you intend to apply for a new card, you should carefully cultivate your personal credit to obtain the best terms. You should also be aware that you are personally liable for the companys debts. If you are ready to navigate these potential pitfalls, card rewards and other benefits can make business credit cards a lucrative tool. Fraud insurance can also easily save you thousands of dollars and offer piece of mind14 Comparison of small business cards worldwide: Credit Card American Express Chase Issuer Credit Card American Express Visa, Mastercard Network No annual fee for the first year - $95 $0* Annual Fee Annual Fee thereafter 0.00%* Intro APR N/A* Intro APR N/A* Period Regular APR N/A*
13 14

American Express Chase

American Express

American Express Visa, Mastercard Visa

$0 introductory annual fee for the $0* first year, then $175 N/A* 0.00%* 6 months on 6 months on purchases purchases and N/A* and balance transfers* balance transfers* 13.24%*(Variable) N/A* 13.24%*

See Terms* N/A N/A 23.99%*

SBI Card SBI Credit Card Offers, Eligibility and Apply Deal4loans.mht Financial Express

21

(Variable) Balance Transfers Credit Needed Fraud and Theft Protection Main Rewards Type Phone Customer Support N/A* Yes* N/A* Excellent Credit* Yes Yes* Excellent Credit* Yes N/A* Fair/Poor* Yes

Excellent Credit* Excellent Credit* Yes Yes

General Rewards Cash Back

General Rewards

General Rewards None M-F 9a-6p EST 15

24/7

24/7

24/7

24/7

15

Compare Business Credit Cards Small Business Credit Cards ChooseWhat_com_com-.mht

22

CHAPTER3. THE FIELD WORK IN SAMPLING PLACE (GANGAPUR CITY)

Reasons for choosing the Gangapur city as research place Gangapur city the sample space is a urban area, subdivision of Sawai Madhopur district in Rajasthan. It is enjoying the municipality as local governing body. It is having more than 10,00,000 population. There are hundreds of SSIs and thousands of SBFs. It is economically strong area, well connected with rail, and road transport directly to major economically large cities like Delhi, Mumbai, Bangalore, Chennai, Kolkata, Jaipur etc. There is a lot of entrepreneurs. There a lot of banking institutions like SBI, PNB, IOB, Canara Bank, SBBJ, Dena bank, UCO bank, oriental bank of commerce, ICICI bank etc. The retail traders, small & medium enterprises, professional including Chartered Accountants, Chartered secretaries, Doctors, Stock Brokers, are getting financed through these banking and non banking institutions for working capital and their profession in the form of term loans or credit facilities like small business cards offered by these institutions. On the basis of emerging industrialization in the area there is a huge scope for establishment of financial institutions. Peoples needs are soaring much. Considering these facts I have chosen this area as my research area, and believing that my research will be beneficial to the Credit providers and the customers of these institutions. I have selected the 6 bankers ie. SBI, UCO bank, Indian Overseas bank, Canara bank, Punjab national Bank, and oriental bank of commerce. The customers are categorized in to 4 categories namely, Small industrial units (SSI and tiny units including artisans) Small retail traders (Under SBF) Professional and self employed persons Small business enterprise

23

These above categories are further vertically categorized as SB card holders & Non SB card holders.

I have prepared a questionnaire as tool of gathering primary research data. Direct contacts have been made to these customers and the credit providing institutions officials. 16

16

Economic Times

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CHAPTER - 4 DATA TABULATION AND ANALYSIS

Comparison of SB cards on the basis of different parameters like interest rates, collateral security, documents required etc. Credit Schemes of SBI Bank and other Banks Q1. Are you aware of Small Business card (SB card)? Responseno 8%

Awareness level
yes 92%

Analysis- Most of the respondents are well aware about the small business card credit facility of different Banks. Q2. If yes, from where came to know? (a) Friends (b) Bank Employees (c) Advertisement (d) Publicity

25

Responses40 20 0 10 0 5 no. of respondents

source of information about SB card 35

Analysis- the main source of information was advertisements; bank employees did not give any information. Bank employees seemed to having indifferent attitude towards this scheme. Q3. Are you availing SB card from any bank? Yes No users of SB card

no 12%

yes 88%

Analysis- Most of the respondent are availing credit facilities from Banks. Q4. If yes, from which bank you are availing SB card facility? SBI 18 PNB 14 UCO 04 IOB 06 Others 02

26

no. of users availing SB card from different banks

sbi

6 4

18

pnb uco iob

14

others

Analysis-Nearly 40% of the Respondents are availing credit facilities from SBI followed by PNB. Q5.Since when you are availing this facility? a) More than 3 year c) 1-2 years b) 2-3 years d) Less than 1 year

Time since customers are availing credit facilities More than 3 yrs 10 2 to 3 yrs 16 1 to 2 yrs 14 Less than 1 yr 04

time since customers are availing facility

4 6

more than 3yrs 2 to 3 yrs 1 to 2 yrs

30

less than 1 yr

Analysis - Most of the respondents are availing the credit facilities ranging from 1 to 3 years. Q6. Are you satisfied with your existing bank? No. of satisfied customers 27

Yes 32

No 12

No. of satisfied customers

yes

no

Analysis - Customers are highly satisfied with their banks. Q7. If no, then why? Response- Some customers are not satisfied reason having mainly the uncooperative behavior of bank employees. Q.8 Tick the name of banks in Gangapur city whose SB cards are known to you? Awareness level about SB card credit facilities of different banks SBI 42 PNB 40 IOB 22 UCO 14 CANARA 12 OBC 08

28

no. of respondents

50 40 30 20 10 0 sbi pnb iob no. of respondents uco canara obc no. of respondents

Analysis - The credit facilities of SBI and PNB are well known to every respondent. Q9. Rate the banks for SB card credit facility on the basis of following parameters: Factors Banks SBI PNB UCO OBC CANARA IOB Interest Rate Collateral Security Attitude of Field officer Document required Renewal process

(a)Ranking of banks on the basis of interest rate

29

SBI 30

PNB 27

IOB 08

UCO 13

CANARA 08

OBC 14

no. of respondents prefering

obc canara uco iob pnb sbi 0 10 8 27 30 20 30 40 8 13 no. of respondents prefering 14

Data Interpretation- ranking order1. SBI, 2.PNB, 3. OBC, 4. UCO, 5.CANARA & IOB Analysis - SBI and PNB are the most preferred banks in regard of interest rates. (b)Ranking of banks on the basis of collateral security requirement SBI 26 PNB 30 IOB 16 UCO 10 CANARA 06 OBC 12

DATA INTERPRETATION RANKING ORDER1- PNB 2-SBI 3- IOB 4-OBC 5-UCO 6-CANARA BANK

30

no. of respondents

16 10 6 30 6 SBI PNB IOB UCO CANARA OBC 26

Analysis-Respondents are very much satisfied with SBI and PNB in respect of collateral security requirement. (c)Ranking of banks on the basis of attitude of the employees SBI 28 PNB 27 IOB 20 UCO 8 CANARA 10 OBC 07

Data InterpretationRanking order- 1-SBI 2- PNB 3- IOB 4-CANARA BANK 5- UCO 6-OBC

OBC CANARA UCO IOB PNB SBI

0 5

7
10 8 20 27 28 10 15 20 25

30

31

Analysis - Respondents appreciate the attitude of employees of the SBI, PNB and IOB. (d)Ranking of banks on the basis of services SBI 26 PNB 32 IOB 26 UCO 06 CANARA 06 OBC 04

NO. OF RESPONDENTS
6 6 26 SBI PNB IOB 26 UCO CANARA OBC 32

DATA INTERPRETATIONRANKING ORDER- 1- PNB 2-SBI & IOB 3-UCO & CANARA BANK 4-OBC Analysis - Respondents appreciate the level of services provided by SBI, PNB and IOB. (e)Ranking of banks on the basis of documents required SBI 28 PNB 24 IOB 18 UCO 12 CANARA 8 OBC 10

DATA INTERPRETATIONRANKING ORDER: 1-SBI 2-PNB 3-IOB 4-UCO 5-OBC 6-CANARA BANK

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Analysis - Customers are happy with the document requirement of SBI and PNB. (f)Ranking of banks on the basis of renewal process SBI 38 PNB 22 IOB 16 UCO 08 CANARA 08 OBC 08

DATA INTERPRETATIONRANKING ORDER- 1- SBI 2-PNB 3-IOB 4-UCO, CANARA & OBC

16 8 8 8 22 38

SBI

PNB

CANARA

OBC

UCO

IOB

Analysis - Customers are very much satisfied with the renewal process of SBI and thanks to SBI card. Q10. According to you what is the main obstacle while getting finance under SB credit card facility? Main obstacle while getting finance (a) Security Requirements 24 08 04 (b) Document (c) Red Tapism (d) Guarantee requirement 08 (e) Attitude Employees 06 of Bank

33

NO. OF RESPONDENTS
6

8 24 4 8

security requirements
documents red tapism guarantee requirement bank employees attitude

Analysis Most of the respondents accept the Security requirements are the main obstacle while availing any credit facility. Q11. According to you arrange the parameters in the descending order of their preference? a) Interest Rate c) Services e) Document required b) Collateral Security d) Attitude of field Officer f) Validity period

Preference order of different parameters (a) (b) (c) (d) (e) Document (f) Validity period

Interest Rate Services

Collateral Security Attitude of Bank Emp.

42

16

14

12

08

08

34

no. of respondents
45 40 35 30 25 20 15 10 5 0 42

16

14

12

8 no. of respondents

Data Interpretation Ranking order of preferences of parameters (decreasing order)1- Interest rate, 2- Services, 3- collateral security, 4- attitude of bank employees, 5- Document & Validity period Analysis - Customers prefer low interest rates followed by services. Q12. Which banks name comes to your mind first while availing SB Card credit facility? First choice of banks SBI 56 PNB 24 IOB 10 UCO 04 CANARA 04 OBC 02

Data interpretationsChoice order of Banks- 1- SBI, 2- PNB, 3-IOB, 4-UCO & CANARA, 5-OBC

35

First choice of banks

4 10 4 2 SBI

PNB
24 56 IOB UCO

CANARA
OBC

More than half of the respondents prefer SBI followed by PNB. Q13. What are the inconveniences while using the SB card? RESPONSES1. The bank employees showing indifferent attitude towards this scheme. 2. The calculation of limit of 5 lac is not clear to customers. 3. In evaluation of documents required bank employees asks for bribe, else reject the eligibility of the customer. 4. Technical errors have been observed like money is credited in the loan account of customer but in actual customer did not get the credit. 5. Difficulty in remembering the renewal dates, document verification etc. 6. Under the scheme, cumbersome procedural aspects relating to reviews and renewals, submission of balance sheet, stock statements and other statements are done with credit delivery made simple and easy but the bank employees practicing nepotism in this. 7. The second category of eligibility of customers that is B (Units who do not enjoy credit limit with us/other banks at present with excellent performance and credential may be considered) is just to show but in actual there is no criteria of selection of application made under this category, depending wholly on sole discretion of managers and staff, leading to illegal practices like nepotism, bribes etc.

36

Q14. What are the inconveniences in repayment rules? Response

The working capital advance may be continued subject to that review every year provided the credit summations in the account is not less than 50% of the projected sales turnover.

If the credit summations is less than 50% of projected sales turnover. The outstanding as on the due date of review should be made repayable in suitable monthly installments.

The term loan is repayable in suitable installments within a maximum period of five years. In case of composite loans, only the term loan is repayable in installments up to a maximum period of five years.

Q15 what are the inconveniences in submitting documents required by your bank? Response Inconvenient to customers who do not keep proper accounting system cannot take advantage of the credit scheme even they are playing at large level and having good record and high turnover. Q16. Do you want to give any suggestions to banks? Responses 1. Most of the respondents suggest an increase in existing limit i.e. 5.00 lacs 2. Respondents even require further guidance related to few things. 3. PNB is offering the lowest PLR i.e. 11.25% whereas other banks are offering 11.5%, so the other banks should also reduce their PLR rates. 4. According to most of respondents, PNB is the fastest service provider. It takes only 15 days to disburse the sanctioned loans whereas other banks including SBI takes 40 to 45 days, so the likewise PNB other banks should also provide faster services.

37

CHAPTER 5 CONCLUSIONS
Objective No. 1: To find out the market potential of SB cards issued by different public sector banks in Gangapur City.

Most of the respondents covered in the survey know about the SB card and feel that this facility is beneficial to them as they can fix the limit for three yeras, Respondents even require further guidance related to few things. Customers feel very enthusiastic about the launch of SB card in Gangapur city and very sure about its success. Most of the respondents want an increase in existing limit i.e. 5.00 lacs.

Objective no.2: To know customers perceptions about various SB card credit scheme of different public sector banks. Most of the respondents like the credit facilities provided by SBI and PNB. According to most of respondents, PNB is the fastest service provider. It takes only 15 days to disburse the sanctioned loans whereas other banks including SBI takes 40 to 45 days. PNB is offering the lowest PLR i.e. 11.25% whereas other banks are offering 11.5%

Objective no.3: To compare the SB Cards credit scheme of different banks. The credit facilities of SBI and PNB are well known to every respondent. SBI and PNB are the most preferred banks in regard of interest rates. Customers are happy with the document requirement of SBI and PNB. More than half of the respondents prefer SBI followed by PNB.

Objective No.4: To find out main obstacles while getting finance under various SB cards. According to most of respondents, security and document requirements are the main obstacles while getting finance under various credit schemes.

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CHAPTER-6 SUGGESTIONS

On the basis of data analysis and interpretations, the following suggestions can be made. 1. RBI should reduce the SLR ad CRR to increase the credit creation capacity of the banks. 2. All the nationalized banks should try to improve their service level to face the stiff competition given by private banks. 3. Banks should reduce the length between sanction and disbursement of loan. 4. SBI should increase the limit under SBI card to fulfil the growing requirement of the customers. 5. Bank employees should bring more professionalism in their attitude while dealing with customers to retain and attract more customers. 6. Banks should narrow down the spread between PLR and deposit rates. 7. Banks should advertise and conduct special awareness programmes to make SBI cards more popular among customers.

39

CHAPTER-7 LIMITATIONS OF THE STUDY

The time was very limited as for requirement of study. Taking Sample has carried out the study. Therefore, all the limitations associated with sampling. Sometimes the respondent does not want to disclose some relevant information. The information provided by the respondent may not be authentic. The sample size was restricted to Gangapur City only.

40

CHAPTER 8 APPENDICES

A. BIBLIOGRAPHY 1. RBI Website cpolicy.rbi.org.in 2. Websites of Banks www.statebankofindia.com www.ucobank.com www.canarabank.com www.orientalbankofcommerce.com www.indianoverseasbank.com www.panjabnationalbank.com

3. Other websites Business Cash Advances - Find Business Cash Advances Vendors, Tips & Advice, Buying Guides - Business_com.mht Pricing and Costs of Small Business Credit Cards - Business Guides & Articles Business_com.mht SBI Card SBI Credit Card Offers, Eligibility and Apply Deal4loans.mht Small Business Credit Cards - Find Small Business Credit Cards Vendors, Tips & Advice, Buying Guides - Business_com.mht Compare Business Credit Cards Small Business Credit Cards

ChooseWhat_com_com-.mht 4. Financial News Papers Economic Times Financial Express Business Standard

41

B. QUESTIONNAIRE Name Age . Income... Occupation...

Q1. Are you aware of Small Business card (SB card)? Yes No

Q2. If yes, from where came to know? (a) Friends (b) Bank Employees (c) Advertisement (d) Publicity

Q3. Are you availing SB card from any bank? Yes No

Q4. If yes, from which bank you are availing SB card facility? Q5.Since when you are availing this facility? a) More than 3 year c) 1-2 years b) 2-3 years d) Less than 1 year

Q6. Are you satisfied with your existing bank? Yes Q7. If no, then why? ............................................. Q.8 Tick the name of banks in Gangapur city whose SB cards are known to you? a) SBI b) PNB c) IOB No

42

d) CANARA

e) UCO

f) OBC

Q9. Rate the banks for SB card credit facility on the basis of following parameters: (Scale of Rating- 1-Fully Satisfied, 2-Satisfied, 3-Neutral, 4-Dissatisfied, 5-Very Dissatisfied) Factors Banks SBI PNB UCO OBC CANARA IOB Interest Rate Collateral Security Attitude of Field officer Document required Renewal process

Q10. According to you what is the main obstacle while getting finance under SB credit card facility? a) Security c) Red Tapism b) Document Requirement d) Guarantee requirement

e) Attitude of bank employees Q11. According to you arrange the parameters in the descending order of their preference? a) Interest Rate c) Services e) Document required b) Collateral Security d) Attitude of field Officer f) Validity period

............................................................................................................................. Q12. Which banks name comes to your mind first while availing SB Card credit facility and why? 43

......................................... Q13. What are the inconveniences while using the SB card? ............................................................................................................................. Q14. What are the inconveniences in repayment rules? ............................................................................................................................. Q15 what are the inconveniences in submitting documents required by your bank? ............................................................................................................................. Q16. Do you want to give any suggestions to banks? .....................................

44