FINANCING OF SMALL SCALE INDUSTRIES SSI BY J&K BANK
Yasir Yousoof Mir , MBA-USB
Priyanka Panday, Research Scholar,USB,Chandigarh university
Dr. Sajjan Chaudhary,Associate professor,Chandigarh university
Abstract
The study was conducted in Jammu and Kashmir bank and has special implications for J & K
bank in long run. The reason behind the financing of small scale industries in special
reference to J & K Bank has to be briefly analysed in order to bring out certain judicious
justifications.
OBJECTIVES: Objectives of this study to find out the key role of J&K bank in financing
SSI units with special focus on challenges faced by SSI in availing credit facility and the
satisfaction level of SSI holders with J& K bank. The study is related to the role played by
the J&K Bank Ltd in financing the small-scale industries operating in Kashmir to ascertain
how far the bank has succeeded in fulfilling the working capital financial requirements of
these industries and what factors influence the loan disbursement to small‐scale industries
METHOD/STATISTICAL TOOL: Primary data was collected through structured
questionnaire and secondary data was used from internet. The data collected is raw and it is
compiled, classified, tabulated and then analyzed using financial techniques and statistical
tools. The data collected was analysed with the help of using Microsoft Excel
APPLICATION: This study was being undertaken and helps us to explore future prospects of
the topic.
Keywords: SSI units, J&K bank, Kashmir, credit facilities
1. Introduction:
The industrial sector plays an important role in the economic growth of both developed and
developing countries. The Small-Scale Industrial (SSI) sector is very important for any
country irrespective of the level of development because, SSI contributes maximum socio-
economic benefits with low level of investment and results in employment creation, income
generation, and poverty alleviation and restricts migration of unemployed and
underemployed workers into cities. It is also one that maximizes the utilization of local
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resources and results in innovations, new technology and is a pathway to emerging
entrepreneurs. It is a starting point for industrial growth.
The Department of Industries & Commerce has a history of hundreds of years. However, the
department was organized in the systematic manner after independence. The last official
document available in the department is of year 1945. Since then Department is continuously
making efforts to promote and develop industrial activity in the state of Jammu & Kashmir.
The Department provides authorization to consultancy set up by unemployed but skilled and
educated youth. At present there are about twenty two consultancy units functioning under
the said departmental authorized to encourage new entrepreneurs to establish new industrial
units. The department has the following approach & strategy to augment industrial activities.
i) Rehabilitation of potentially viable sick industrial units.
ii) Enabling manufactures of quality consistent products to augment their sales within and
outside the state by brand promotion.
iii) Export promotional measures to augment export of products of the state outside the
country.
iv) Environment protection, to conform to state, national & global regulations.
v) Entrepreneurship development in the state, to provide opportunities to educated but
unemployed.
vi) To encourage research and development.
Previously the definition of SSI was any industrial unit in which the investment in fixed
assets in plant and machinery does not exceed Rs 10 lakh but after the enactment of MSME
Act 2006 from in order to ensure the balanced developed of the industrial sector throughout
the country. Under this act the erstwhile “Industry” has been replaced by the nomenclature
“Enterprise” and this has been done with the view to emphasise the importance of service
sector. The act has classified the enterprises into two categories:
1) Enterprises doing manufacturing of goods
2) Enterprises providing services
Manufacturing industries have been defined in terms of investment in machinery and
equipment as under and further classified into:
MICRO ENTERPRISES INVESTIMENT UPTO RS. 25.00 LACS
SMALL ENTERPRISES INVESTIMENT ABOVE RS.25.00 LACS UPTO
RS. 5 CRORE
MEDIUM ENTERPRISES INVESTIMENT ABOVE RS.5.00 CRORE UPTO
RS. 10.00 CRORES
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2. Review of literature:
Nayak and Purusottam (2015) conducted a similar study in north east part of India to find out
the challenges of SSI units. Researchers explained the various aspects of entreprenureship in
these states. Government is promoting this at bigger leel but in line with the earlier studies,
they also concluded the lack of technical assistance and credit facilities as a one of the biggest
challenges. Magnus Magnusson et.al (2012) conducted a study on financing SSI and
concluded that low credit worthiness make these units vulnerable for denial of credits and
even difficult for government to finance fully. One suggestion was also given by the author to
make use of institutional investors for the same purpose.
Rubayat( 2012) found out that there is a greater need to assess the funding requirement and
should provide a wider access to such unit for financing their projects. Various studies have
shown various challenges faced by these SSI units and most of the studies agreed on to the
point of credit related challenges. Gonzaleset et al. (2001) concluded in his study that
financing the projects of SSI is the most critical factor in Asian countries. Many companies
face liquidity issue and find difficult to operate with their internal funding. Saikia and
hemanta(2011) conducted one study on condition of SSIs post globalaization and concluded
that SSIs have played a very important role in the recent development as far as employment
generation is concerned, contribution is significant.G.T, Fatunla et.al (1999) asserted that
SSI should be given proper technical assistance in order to switch from traditional units to
modern way of production. Their capacity is under utilized as they are still not able to have
access to easy credit.
3. Research methodology
The study is confined to five small scale industries in Kashmir (Handi-Crafts, Sericulture,
Cement, Khadi and Food Processing industries). The study is related to the role played by the
J&K Bank Ltd in financing the small-scaleindustries operating in Kashmir to ascertain how
far the bank has succeeded in fulfilling the working capital financial requirements of these
industries and what factors influence the loan disbursement to small‐scale industries
3.1 scope of the study
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This study is confined to five small scale industries (Handi-Crafts, Sericulture, Cement,
Khadi and Food Processing industries), operating in the Kashmir division. This study is
related to the role played by The Jammu & Kashmir Bank in financing the small-scale
industries in Kashmir.
3.2 Objective of the study
The various objectives of the study are:
To study the key role of J&K Bank in financing SSI.
To study the problems faced by small scale industries in availing the credit
facility.
To Study the level of satisfaction of SSI’s holders with J&K bank
regarding the financial help provided by the bank.
To find out the present requirements of financing products by SSI’s.
To study the incentives provided by the Department. Of Industries &
Commerce J&K for SSI, s in the Valley.
3.3 Sampling and data collection
Survey method and personal interview is used to collect data from the randomly selected five
small scale industries by using the close‐ended structured questionnaire. This study is
empirical and mostly depends on primary data. Study is based on the various data provided
by bank officials and data from research literature is thoroughly studied and interpretations
made thereof. Primary data has also been collected from anonymous bank staff. The
responses of all the questions in the questionnaire were tested by using the five-points Likert
scale.
3.4 sample size
In the study the sample size was 60, the respondents were selected from different regions
across the valley. For the study I have targeted respondents from major areas.
These areas were selected for the data collection due to certain reasons. Here I have easy
access to the targeted people, easily targeted different income group respondent. The target
respondents were Entrepreneurs, Managers and employees of SSI’s. I have targeted
respondent from different Managerial levels and occupations. The technique of sampling
used is Simple Random Sampling
3.4 sources of data
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Primary data was collected through structured questionnaire and secondary data was used
from internet and other internal sources of company. Additionally many finance blogs were
consulted including some books and some journals, pump-lets published by DIC as well.
Some research papers on financing of small scale industries also proved to be of very great
help.
3.5 Data analysis method
The data collected is raw and it is compiled, classified, tabulated and then analyzed using
financial techniques and statistical tools. Graphs and charts are used to highlight the statistics.
Based on this data and analysis, inferences were drawn.
4. Data analysis
The data collected was analysed with the help of using Microsoft Excel
Pie Chart
Bar Chart
Mean
1: Age of the industry [SSI unit financed by jk bank?
0-10yrs 10-20yrs 20-30yrs 30-40yrs Above 40yrs
15 6 29 7 3
2: Investment in the industry for establishment of the unit?
0-10yrs25%
10-20yrs10.00%
20-30yrs48.33%
30-40yrs12%
Above 40yrs5.00%
Age of the Industry
0-10 yrs
10-20 yrs
20-30 yrs
30-40 yrs
Above 40 yrs
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3:Your Banking Relationship?
25%
41.66%
16.66%10%
5% 1.66%0
20
40
60
80
100
0-15 lacs 15-30 lacs 30-45 lacs 45-60 lacs 60-75 lacs 75lacs-1cr
Investment
Banking Relations
83.33%
6.66% 3.33% 3.33% 3.33%
0
20
40
60
80
100
JK bank HDFC PNB SBI None
Banking Relations
Banking Relations
% a
ge o
fSS
I's
0-15
Lacs
15-30
Lacs
30-45
lacs
45-60
Lacs
60-75
lacs
75 lacs-1 cr
15 25 10 6 3 1
JK BANK HDFC PNB SBI None
50 4 2 2 2
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4: Amount of loan taken from the JK bank:
Rs 0-5
Lacs
5-10
lacs
10-15
lacs
15-20
lacs
20-25
lacs
25 -30
Lacs
30-35
lacs
Above
35 lacs
For Term loan 12 17 20 8 2 1 0 0
For Working
Capital loan
24 20 9 4 2 1 0 0
5: Satisfaction level with the JK bank?
Fully
satisfied
Somewhat
Satisfied
Neutral Somewhat
unsatisfied
Fully
unsatisfied
10 25 15 7 3
20%
28.33%33.33%
13.33%
3.33% 1.66%
40% 33.33%
15%
6.66%
3.33%1.660
5101520253035404550556065707580859095
100
0-5 lacs 5-10 lacs 10-15 lacs 15-20 lacs 20-25 lacs 25-30 lacs
Working CapitalLoan
% a
ge o
f S
SI's
W.C Loan
Term Loan
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6: Awareness about the RBI guidelines (regarding SSI loans)?
7:
7: Satisfaction with the security demanded by the JK Bank for loans?
0
5
10
15
20
25
30
F.S Sw. S Neutral Sw. NS F.Us
Column1
Series 1
10%16.66%
35% 31.66%
6.66%
0
20
40
60
80
100
Fully aware Somewhat aware Neutral Somewhatunaware
fully unaware
Awareness
% age
of SSI's
Fully
Aware
Somewhat
aware
Neutral Somewhat
unaware
Fully
unaware
6 10 21 19 4
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8: JK bank keeps privacy & confidentiality of your business & personal information?
9: How much of your profitability has been increased by getting loan?
46.66%
16.66%
16.66%
13.3%
6.6%
Satisfaction
fully satisfied
somewhat satisfied
neutral
somewhat unsatisfied
fully unsatisfied
S.D.A11.66%
D.A13.33%
N18.33%A
33.33%
S.A23.33%
.
Strongly disagreed(S.D.A)
Disagreed(D.A)
Neutral(N)
Agreed(A)
Strongly agreed(S.A)
Strongly
disagreed
Disagreed Neutral Agreed Strongly
agreed
7 8 11 20 14
Fully
satisfied
Somewhat
Satisfied
Neutral Somewhat
unsatisfied
Fully
unsatisfied
28 10 10 8 4
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10: Which measure will be more effective to improve SSI’s?
Implementation
of schemes
Decreasing
Interest
rate
Introduction
new
schemes
Advertiseme
nt
Decreasing
Demand for securities
8 26 6 13 5
48.33%
25%16.66%
8.33%1.66%0
10
20
30
40
50
60
70
80
90
100
0 5 10 15 20 25
Profitability
% age
of
SSI'
s
13.33%
43.33%
10%
21.66%
8.33%
0102030405060708090
100
Implementation ofschemes
Decreasing int.rate Itroduction of newschemes
Advertisement Decreasing Demandfor security
Effectiveness
.
% a
ge o
f S
SI's
0-5% 5-10% 10-15% 15-20% Above 20%
29 15 10 5 1
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11: Does J&K bank maintain transparency?
Q12: Most effective type of Working capital loan?
Cash Credit Letter of Credit Bank of
warrantee
Bill of Purchase
40 10 7 3
13: Is the bank advertising their schemes regarding financing of SSI’s to make you
aware about these schemes?
S.D.A25%
D.A16.66%
Neutral8.33%
A33.33%
S.A16.66%
Transparency
Strongly disagreed(S.D.A)
Disagreed(D.A)
Neutral(N)
Agreed(A)
Strongly agreed(S.A)
66.66%
16.66%11.66%
5%
0
20
40
60
80
100
Cash Credit Letter of Credit Bank of Warrantee Bill of Purchase
Effective working capital
% a
ge o
f
SSI's
Strongly
disagreed
Disagreed Neutral Agreed Strongly
agreed
15 10 5 20 10
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Yes No
40 20
14: what type of Promotional mix will be effective to make you aware about the schemes
regarding financing of SSI’s?
0
20
40
60
80
100
Advertising
.
% a
ge o
f
SSI's
Sales promotion Advertisement Publicity Personal
selling
Social mobalisation
& ownership capital
2 18 5 15 20
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FINDINGS
JK Bank is the bank providing loans to SSI’s at very low interest rate.
The study reveals that about 90% of Small Scale Industries in Kashmir have
maintained their relationship with JK Bank and only 10% of SME’s have maintained
their relationship with other (i.e. SBI ,PNB etc) banks.
The study reveals that most of the SSI’s have investment not greater than 20 lacks i.e.
these industries are at the bottom of given value of investment given by RBI for an
industry for being an SSI (i.e. 1 corer).
The study reveals that most of the SSI’s are satisfied with the overall contribution of
JK bank towards SSI’S.
The study reveals that most of the SSI’s are not fully aware from the guidelines given
by RBI to the banks for financing SSI’s.
About 70% of SSI’s are not satisfied with securities demanded by the bank for getting
loans. According to them bank is demanding collateral securities which is about two
times greater than the actual loan to be taken, While as other banks are demanding
less collateral securities in comparison to JK Bank.
The study reveals that 70-75% Management of SSI’s in Kashmir are not satisfied with
the Privacy & confidentiality of their information(both of business & personal) kept
by the bank.
About 85% of SSI’s are saying that they are making a reasonable increase (from 5-
15%) in the profit by getting loan from the bank.
Most of the SSI’s are more interested in getting working capital loan rather than Term
loans .Only about 25% of SME’s are interested in taking Term loans for purchasing
the new technological machineries.
3.33%
30%
8.33%
25%33.33
0
20
40
60
80
100
Sales promotion Advertisement Publicity Personal selling SM&OC
Effectivness
.
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Most of the SSI’s want decrease in the Interest rate, also are unsatisfied with
commitments of the bank to implement new schemes & also are unsatisfied with the
Advertisement strategy of the bank for the new schemes.
Most of the SSI’s are more interested in the Cash credit type of working capital loan.
About all SSI’s are complaining about the low consideration by the government.
Bank is continuously taking steps to improve SME’s.
SSI managers are also complaining about the slow service & overall behaviour of the
bank staff.
This time bank is continuously organizing meetings with the entrepreneurs of SSI’s in
order to discuss the new steps that should be taken to improve SSI’s.
The managers of SSI’s are also complaining about the non-implementation of the
scheme i.e. lower down rate and also rescheduling the instalment schedule.
The managers of SSI’s are also complaining about the winding up of Business
Development Promotion Cell (BDPC) and are not satisfied with Cluster making
strategy by the bank.
Most of the Sick industries are winded up in the valley because of 30% margin kept
by bank to sick industries.
.Most of the %age of the managers of SME’s are complaining about the editing of
Project plan (deposited by SME’s to the bank for which they have applied for loan) by
the bank.
Most of the %age of the managers of SSI’s are not satisfied with the Marketing
strategies of the bank.
Suggestions and Recommendations
RBI should make new strategies to make Industries and SSI’s particularly aware
about their guidelines to the banks for financing Industries and SSI’s in the Valley.
The formalities for SSI’s for getting loan should be reduced.
The Securities especially Collateral securities demanded for getting loans, which are
about twice the actual amount of loan, should be decreased.
Although the bank is providing loan to SSI’s at low rate of interest in comparison
with the other banks , but SSI’s have more expectations on J&K Bank ,so the bank
should decrease the interest rate which is PLR-1.50 for 2-5 lacks should be
decreased to PLR-2.
J&K Bank should keep Privacy & confidentiality of information (both of business &
personal) of SSI’s.
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Bank should not do any kind of editing in SME’s Project plan for which they have
applied for loan because it can make failure of that plan.
All loan applications received under SSI Sector should be disposed Off by the
branches within in minimum period of time
The bank should follow sharply all the RBI guidelines in financing SSI’s .
The bank should make available, free of cost, simple standardized, easy to understand,
and application form for loans.
The bank should focus more on improvement of SSI’s and should achieve targets in
Priority Sector Lending.
The bank should restore Business Development Promotion Cell (BDPC).If BDPC is
restored their focal point should be industries.
The bank should locate branches in every industrial area for the convenience of SSI’s.
Every SSI Entrepreneur should be given rights to present their grievances and
suggestions to the bank.
Government should help SSI’s through providing Subsidy, good Infrastructure and
also should help them in the marketing of their products.
The new schemes/policies should be implemented which needs sharp supervision on
middle and lower management.
Bank should do proper recruitment, and train the staff about the proper and quick
service.
Bank should make regular advertisement of their new schemes for SSI’s in order to
make them familiar with the new schemes introduced by the bank.
There should be more than 20 lacks sanctioning competence to the branch placed in
the industrial area.
The bank should introduce new schemes for SSI’s in order to improve them.
Government intervention is very must for the Small Scaleindustries in the valley.
Sound government policy is required for the promotion of this industrial sector.
Financial institutions need to be strengthened.
Entrepreneurs of SSI’s need to come forward with their innovative projects.
LIMITATIONS OF THE STUDY
Some of the information is considered confidential and not available for study
The data taken for interpretation is for a limited period.
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The study is limited to the Kashmir region only.
As the questionnaire was self-administered personal bias of administrator may be
a limiting factor.
CONCLUSION
The industrial sector plays an important role in the economic growth of both developed and
developing countries.
The Small Scale Industrial (SSI) sector is very important for any country irrespective
of the level of development because, SSI contributes maximum socio economic
benefits with low level of investment and results in employment creation, income
generation, and poverty alleviation and restricts migration of unemployed workers
into cities.
SSI’s is also one that maximizes the utilization of local resources and results in
innovations, new technology and is a pathway to emerging entrepreneurs.
SSI’s are the starting point for industrial growth.
Small and medium scale industries (SMIs) have been considered essential for
economic development not only in less developed countries (LDCs) but also in more
developed regions of the world. Since they are seen being more dynamic, innovative
and have higher labour absorptive capacities than their corporate counterparts, the
SMI sector has been the backbone of industrial development in many developed
countries.
SMIs have played a significant role in Valley’s economic development. In Kashmir,
SSI’s have been estimated as providing 21% of total employment and have fulfilled
important functions such as being the foundation for local entrepreneurship and
innovation, as critical supporting industry.
Problems faced by the SMI sector in the Valley can be divided into those from the
demand and supply side.
Constraints of the demand side cover competition from domestic and foreign sources,
non-availability of market information and inadequate market access
The working in DIC is slow which should be streamlined for disposal of cases of
SSI’s
The unit holders requires hassle free services from DIC for clearness and registration
of cases
J&K Bank should categorize its credit policy towards the SSI sector ,this sector has
high potential in the Valley.
The performance of the J&K Bank is quite satisfactory.
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BIBLIOGRAPHY
Websites
https://www.jkbank.net
http://shodhganga.inflibnet.ac.in/bitstream/10603/684/7/07_chapter-i.pdf
https://www.preservearticles.com.
https://moneycontrol.com
Research Papers
Daniel L. Bond, Daniel Platz and Magnus Magnusson, “Financing small-scale
infrastructure investments in developing countries”,may 2012.
Alan Dale C. Gonzales, “Financing Issues and Options for Small-Scale Industrial
CDM Projects in Asia”.
Jesmin, Rubayat, “financing the small scale industries in bangladesh: the much-talked
about, but less implemented issue”,vol 16 ,no1.
Purusottam Nayak, “Role of Financial Institutions in Promoting Entrepreneurship
In Small Scale Sector in Assam.”
Hemanta Saikia, “Total Factor Growth in Small Scale Industries Some Evidences
from India,the Romanian Economic Journal,sep2012.
DamayanthiMenike MGP, “Role of bank in financing SSI’s in srilanka.”
Annul Report 2011-2012, “MSME-DI Jammu Kashmir.”
Magazines/Journals
Prof. Jayshri J Kadam,Prof. Dr. V.N. Laturkar, Lecturer, IBMRD, A.Nagar, India
Reader, SRTMU, Nanded, India,(aug 2011), Intrernational Journal of Exclusive
Management Research”,A study of Financial Management in Small Scale Industries
in India vol 1, issue 3,pp.1 -8.
Dr. K.A. Goyal & Vijay Joshi,(2012) Indian Banking Industry Challenges And
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Dr k Ramakrishnan,(2013)The Indian Banker.the Monthly Journal Published by the
Indian Bank’s Association,vol 8, no 7, pp. 44-48
A.K.Dewani (2005),j&k state industrial policy 2002-2015,Avinash &Avinash.,pp 19-
25
Bajpai ,Naval,Business Research Methods,Pearson publishers Ltd.,pp 70-86, 93-
95,699-705
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