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Chapter 1
1.1 Introduction
Micro, Small & Medium Enterprise in India evolved rapidly in the last
decade. From SME the evolution to another new perorming sector, i.e.
MSME has created !uite a "u## in Indian "usiness scenario. $ver the years
the progress o the MSME sector scaled a new height also contri"uting to
the Indian %&P. 'he sector nurtures the "udding entrepreneurs creating
employment or thousands, thus ma(ing it an essential sector or the
growth o the Indian economy. In last )ve years this sector demonstrated
an average growth o *+, thus contri"uting a good share in the growth o
the manuacturing and the service industry. -ower investment and higher
employment capacity ma(es this sector more attractive.
.eeping all this in mind the /est 0engal government is trying to ocus on
the development o this sector to create new opportunities or the state
economy. 'he new government eels the urgency to nurture this sector
and attract many investors to induce an inclusive economic growth o the
state. 'hough there are various matters to "e ta(en care o or the growth
o MSME, li(e 1 Mar(eting, availa"ility o raw materials, training o "udding
entrepreneurs etc. this paper is an attempt to highlight one ma2or
challenging area, i.e. the role o )nance in MSME and how the /est 0engal
government is acing this challenge and creating new avenues or the
growth o MSME. 'his study attempts to highlight the various schemes
and )nancing methods availa"le or MSME in /est 0engal. 'he report
descri"es the crucial role o the credit rating agencies in assessing and
esta"lishing the authenticity o )rms who see( )nancial support. It also
highlights alternative )nancing options li(e venture capital, actoring and
supply chain )nancing as a route to access capital rom "an( and non3
"an( sources.
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1.2 Background
'he MSME sector contri"utes to the growth o Indian economy signi)cantly
creating employment or 40 million o people manuacturing more than
5000 products, contri"uting a"out 67, to manuacturing output and
a"out 60, o e8ports, directly and indirectly.
/est 0engal has the potential to "ecome the leading state in coming
uture in terms o MSME productivity within India. 'his is not only "ecause
o huge num"er o MSME units "ut also the diversi)ed approach rom
production to services. 'he varied segments are ood processing, agro
industries, leather, gems and 2ewellery, mineral "ased, iron and steel,
handicrats, manuacturing industries and service sector. 'here are
2513303 wor(ing micro, small & medium enterprises 9"oth :egistration &
;n3registered< providing employment o 5831566 persons with 9.63%
as wor(ing units and 9.81% as employment ater ;ttar Pradesh and
Maharashtra. $ne o the largest employments can "e created in this
segment within ne8t )ve years. Micro & Small Scale Enterprises plays a
vital role in employment generation in /est 0engal.
&espite showing ro"ust growth in the MSME sector the sector aces
various challenges due to the nature o the "usiness. =arious (ey actors
li(e 1 $perational actors, Inrastructure and 'echnology related, -egal and
'a8 related. 0ut one o the ma2or issues the %overnment is acing is
Financing in the sector. MSME re!uires ade!uate capital inta(e through
term loans or wor(ing capital loans that too mainly in the initial stage o
the "usiness. It has "een noted that the entrepreneurs naturally rely on
the unregulated loan sector or tries to arrange capital rom personal
sources. Mainly they arrange capital rom 1
:etained earnings, unding through sale o assets
>ncestral capital, personal savings, loans rom relatives, loans rom
unregulated mar(et
Institutional )nancing rom scheduled commercial "an(s
=enture capital unds? seed unds
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'o meet this issue the /est 0engal government is ta(ing various ade!uate
measures and also made various nota"le changes in their recent MSME
Finance policy. 0est in the class incentives including @apital Investment
Su"sidy, Interest Su"sidy, /aiver o Electricity &uty, Su"sidy on Energy
@harges, Su"sidy or Employment %eneration, Su"sidy or Auality
Improvement and Su"sidy on Patent :egistration, and incentives or
women, minorities, S@?S' and Sel Belp %roup 9SB%< entrepreneurs have
"een announced in the new Incentive Scheme +0*C. >lso with the
implementation o @redit %uarantee Fund Scheme or MSME the
government is trying to address the various )nance related issues. /e will
discuss this in detail later in the study.
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1.3 Literature Reiew
'he comprehensive literature demonstrates that MSMEs are necessary or
sustained economic growth and development o any economy including
India. 'o 2ustiy the need o present study, ollowing literature has "een
reviewedD
!a"i #1998$ o"served that small and medium enterprises 9SMEs< and
micro enterprises have to ace increasing competition in the present
scenario o glo"ali#ation, they have to speci)cally improve themselves in
the )elds o management, mar(eting, product diversi)cation,
inrastructural development, technological up gradation. Moreover, new
small and medium enterprises may have to move rom slow growth area
to the high growth area and they have to orm strategic alliance with
entrepreneurs o neigh"ouring countries. Data bank on industries to guide
the prospective entrepreneurs including investors from abroad is also
needed.
Ba"a %u&rah'an(a #200)$ highlighted the impact o glo"ali#ation and
domestic reorms on small3scale industries sector. 'he study stated that
small industry had suEered in terms o growth o units, employment,
output and e8ports. 'he :esearcher highlighted that the policy changes
had also thrown open new opportunities and mar(ets or the small3scale
industries sector. He suggested that the focus must be turned to
technology development and strengthening of fnancial infrastructure in
order to make Indian small industry internationally competitive and
contribute to national income and employment.
*enkate+h and !uthiah #2012$ ound that the role o small & medium
enterprises 9SMEs< in the industrial sector is growing rapidly and they
have "ecome a thrust area or uture growth. They emphasized that
nurturing SM sector is essential for the economic !ell"being of the
nation.
'he a"ove literature highlights aspects li(e )nance along with
perormance, growth & pro"lems o MSMEs in Indian economy and
induces or continuous research in this )eld.
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1.) ,&-ectie o. the %tud(
'he study will highlight the diEerent )nance related issues in MSME in
/est 0engal and the steps ta(en "y the /est 0engal government to ace
these challenges. >lso to identiy new channels through which the
%overnment can induce capital in the mar(et.
'he issues to "e ocused on are 1
Fon3availa"ility o ade!uate and timely credit
Bigh cost o credit
@ollateral re!uirements
-imited access to e!uity capital
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1.5 /ata and !ethodo"og(
'he study is "ased on survey techni!ue and secondary research data
collected rom various issues o >nnual :eports, %overnment we"sites,
@irculars "y Ministry and :eserve 0an( o India and %a#ettes on MSME.
'he study consists o analysis rom eed"ac(s collected. For the purpose
o the study concerned authorities have "een contacted and their views
solicited on diEerent parameters. 'he methodology adopted includesD
&iscussions with the concerned
>nalysis o data collected
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1.6 Li'itation+ o. the %tud(
Since segment wise investors, @redit acilitators or @oncerned
authorities were not availa"le overall concept is ta(en or the study
Inormation is partly "ased on secondary data and hence the
authenticity o the study can "e visuali#ed and is measura"le
-evel o accuracy o the results o research is restricted to the
accuracy level with which the customers have given their answers
and the accuracy level o the answers cannot "e predicted
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Chapter 2
2.1 Conceptua" 0ra'ework
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2.2 !%!1 0inance2 3he Indian %cenario
Micro, Small, Medium Enterprises 9MSME< are de)ned on the "asis o the
investment in plant and machinery or manuacturing industries or or
e!uipments in the service industry. In the year +005 the %overnment o
India imposed the MSME &evelopment 9MSME&< >ct in which they have
capped the investment sla" "oth in the manuacturing and service
industry which will categories the "usiness as Micro, Small or Medium
enterprise.
In case o manuacturing sector, micro enterprise is where the investment
in plant and machinery does not e8ceed twenty )ve la(h rupeesH small
enterprise is that enterprise in which the investment in plant and
machinery is more than twenty )ve la(h rupees "ut does not e8ceed )ve
crore rupeesH medium enterprise is that having investment in plant and
machinery more than )ve crore rupees "ut does not e8ceed ten crore
rupees.
In case o enterprises that are engaged in service sector, micro enterprise
is that one in which the investment in e!uipment does not e8ceed ten
la(h rupeesH small enterprise is where the investment in e!uipment is
more than ten la(h rupees "ut does not e8ceed two crore rupeesH medium
enterprise is where the investment in e!uipment is ranging "etween two
crore rupees and )ve crore rupees.
'he investment ceiling as imposed "y the MSME& >ct can "e summarised
as ollowsD
CL4%%I0IC43I,5 ,0 !%!1+ B4%1/ ,5 I5*1%3!153 %L4B%
Manuacturing Enterprise
Enterprises Investment in Plant & Machinery
Micro ;pto :s. +7 -a(hs
Small More than :s. +7 -a(hs and upto :s. 7 @rores
Medium More than :s. 7 @rores and upto :s. *0 @rores
Service Enterprise
Enterprises Investment in Plant & Machinery
Micro ;pto :s. *0 -a(hs
Small More than :s. *0 -a(hs and upto :s. + @rores
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Medium More than :s. + @rores and upto :s. 7 @rores
SourceD Micro, Small & Medium Enterprises &evelopment >ct, +005.
In India, given the growth potentiality the MSME sector is seeing a good
investment Jow overall. For e8ample, )8ed investments rose at a @>%: o
I.5 per cent during FK0+1**. >nalysts "elieve a ma2or portion o
investments has "een directed towards technological developments,
resulting in an improvement in volume and !uality. Production in the
MSME sector outpaced overall growth in industrial production. For
instance, the sector registered a growth rate o **.7 per cent in FK**H this
is C.C percentage points 9ppt< higher than growth in the overall industrial
sector.
'hough this sector shows huge potentiality and attracting investments,
still the sector elts the presence o unding gap which o"structs the
growth o the sector. In +0*0, the Prime Minister o India appointed a tas(
orce set up under the chairmanship o the Principal Secretary, to consider
various issues raised "y MSME associations, discuss with the sta(eholders
and chal( out an action agenda. $ne o the (ey issues identi)ed "y the
tas( orce, and su"se!uently ta(en up "y the Planning @ommission in the
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*+th plan is #I$%$&. 'hough there are various modes o )nance still
those are not simply availa"le to the entrepreneurs orcing them to "orrow
money rom unregulated mar(ets paying higher interest rates which
directly aEects the price o the product and also limits the producer to
enhance !uality, !uantity, upgradation o technology etc. aEecting the
overall "usiness (illing many "usinesses die in the midway.
'hus availa"ility o und at competitive rates and rom many sources is an
important aspect o MSME )nance. 'his not only help long term growth
"ut will also ensure that it will attract good investment or the sector
encouraging the entrepreneurs to do much more !uality "usiness. In this
instance, Small Industries &evelopment 0an( o India 9SI&0I<Ls
contri"ution to the sector so ar has "een remar(a"le. >mong the ormal
)nancial institutions, commercial "an(s constitute the largest source o
)nancial assistance or the MSME sector at a"out G4, as o C*st March
+0**. 'he outstanding MSE credit "y S@0s recorded a strong growth o
C6, in FK +0** on a strong "ase o C,5+,+I* crore IF: as o C*st March
+0*0.
In the states li(e 0ihar, $rissa, Mhar(hand, @hhattisgarh, the %overnment
has wor(ed well in setting up )nancial aids through "oth traditional and
emerging options o unding. $verall, throughout the nation the central
%overnment and the State %overnments "oth are wor(ing well in ta(ing
out new schemes and also using various )nancial tools in colla"oration o
"oth the private sector and the pu"lic sector "an(s and other )nancial
institutions. 'husthe num"er o new MSMEs has "een consistently
increasing across the nation. Financial support can "e attri"uted as a
reason or this.
&ue to some strong commitment o the Indian %overnment and also with
the help o the States the Pu"lic Sector 0an( are pioneering the )nancial
supply to the MSMEs. &ue to these steps ta(en "y the Pu"lic Sector 0an(s
the :eserve 0an( o India 9:0I< has mandated scheduled commercial
"an(s to achieve +0, year3on3year credit growth to the MSME sector.
MSMEs needing )nancial assistance can approach the "an(s or aid as per
the speci)c schemes constituted or diEerent types o )nancial aid.
'he ollowing ta"le captures in "rie the nodal government "odies loo(ing
ater MSME development and some o the central government )nancing
schemes availa"leD
Fame o
Scheme?Institutes
Fature o >ssistance
Fational Small
Industries @orporation
9FSI@<
Financial and mar(eting assistance to the small scale unit
supplying re!uisite machinery on hire purchase and
leasehold "asis
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Small Industries
&evelopment >gency
9SI&><
Single window service or SSI
units
@redit -in(ed @apital
Su"sidy Scheme
9@-@SS<
Facilitates technology upgradation o micro and small
enterprises. 'he scheme provides *7, capital su"sidy on
institutional )nance availed "y them or induction o well3
esta"lished and improved technology in approved
su"sector products. 'he ma8imum limit o loan or
calculation o capital su"sidy under the scheme is *00 la(h
IF: with a ma8imum su"sidy o *7 la(h IF:.
PME%P 'raining
Programme
0ene)ciaries can set up micro enterprises "y availing o
margin money su"sidy o +7, 9C7, or special categories<
o the pro2ect cost in rural areas. 'he ma8imum cost o the
pro2ects assisted under PME%P is +7 la(h IF: in the
manuacturing sector and *0 la(h IF: in the service sector.
Small Industry
&evelopment 0an( o
India 9SI&0I<
Promotion, )nancing and development o the small scale
sector, and co3ordination o the unctions o the institutions
engaged in the promotion and )nancing or developing
industry in the small scale sector.
SI&0I also re)nances institutions such as state )nancial
corporations 9SF@s<, state industrial development
corporations 9SI&@s<, and commercial "an(s against loans
granted to the small3scale sector. SI&0I also acts as
)nancer or small3scale pro2ects directly on a selective
"asis.
Products and services oEered "y SI&0I may "e "roadly
classi)edD
InstitutionalD Focuses on re)nance schemes, li(e Mahila
;dyam Fidhi, )nance to small transport operators,
technology upgradation und or te8tile units, loans or
ac!uisition o IS$ certi)cation, sel3employment loan or
e83servicemen, single window )nance or short term credit,
all o them operated through SF@s or SI&@s or primary
lending institutions or 0an(s or other micro)nance
institutions, depending upon the category o loans.
PromotionalD SI&0I acts as a nodal agency or several
%overnment schemes such as 'echnology ;pgradation
Fund Scheme or the te8tile sector, Integrated
&evelopment o -eather Sector Scheme or the leather
sector and Moderni#ation?;pgradation o Food Processing
Industry.
SI&0I =enture @apital Fund -td 9S=@-< manages two unds
set up "y SI&0I at the national level.
'he Fational =enture @apital Fund or Sotware and I'
Industry 9FFSI'< is worth *00 crore IF:, esta"lished with
the ocus o supporting incu"ation pro2ects o small3scale
units in the I' and related "usiness.
'he SME %rowth Fund has a corpus o 700 crore IF: which
targets growth3oriented "usinesses in the areas o lie
sciences, retailing, light engineering, ood processing, I',
inrastructure related services, healthcare, logistics and
distri"ution, or ma(ing primary e!uity and e!uity related
investments.
Fational 0an( o
>griculture 9F>0>:&<
>ssistance and re)nance to arm and rural development
agro processing sector
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@redit %uarantee Fund
'rust or Micro and
Small Enterprises
9@%'MSE<
@%'MSE, esta"lished 2ointly "y SI&0I and the government
o India, e8tends credit acilities to the micro and small
enterprises sector.
'he mandate isD
@redit acilities, including term loans, und and non3und
"ased wor(ing capital acilities up to * crore IF: e8tended
to micro and small enterprises are guaranteed up to G0,
o the amount in deault, su"2ect to a ma8imum o 57 la(h
IF:. /ith regard to loans up to 7 la(h IF: to micro units,
the coverage is G7,. -oans guaranteed under the scheme
carry #ero percent ris( weight and provision or the lending
institution or the guaranteed portion. 'he scheme also
acilitates lending institutions "y the evaluation o the
credit proposals on the "asis o intrinsic merits o the
pro2ects, rather than merely on ade!uacy o collaterals.
:eserve 0an( o India
:ural Planning and
@redit &epartment
Providing re)nance to nationalised "an(s and )nancial
institutions in the industry sector and raming o policy
decision in the wor(ing o "an(s
E8im
0an(
@redit acilities are availa"le or )nancing all stages o the
e8port cycle o Indian )rms. 'he "an(Ls lines o credit 9-$@<
e8tend to commercial "an(s, )nancial institutions, regional
development "an(s, and entities overseas serve as a
mar(et entry mechanism to Indian e8porters and provide a
sae mode o nonrecourse )nancing option to Indian
e8porters. 'he "an( oEers "uyerLs credit and supplierLs
credit or e8ports on deerred payment terms. 'hese
acilities help SMEs, to oEer competitive credit terms to the
"uyers and to e8plore newer geographical mar(ets.
';F
';F acilitates those SMEs that loo( to improvise their
technological s(ills. It provides *7, margin money su"sidy
or the SSI te8tile and 2ute sector in lieu o 7, interest
reim"ursement on investment in ';F compati"le speci)ed
machinery su"2ect to a capital ceiling o +00 la(h IF: and
ceiling on margin money su"sidy *7 la(h IF:. > minimum o
*7, e!uity contri"ution rom "ene)ciaries is ensured.
@-@SS ;nder @-@SS, tiny units with investment in plant and
machinery o less than *0 la(h IF: are eligi"le or a loan
support o upto G la(h IF:.
'iny units with investment in plant and machinery "etween
*0 la(h IF: to +7 la(h IF: are eligi"le or a loan support o
upto +0 la(h IF:.
Small units with investment in plant and machinery o
a"ove +7 la(h IF: are eligi"le or a loan support o upto 60
la(h IF:.
Interest su"sidy
scheme o IP:, which
wor(s eEectively with
the active assistance
o "an(s and )nancial
institutions
'he interest su"sidy scheme helps in dispensation or
la"our3intensive industry "y e8tending the acility o +,
interest su"vention or handlooms, handicrats, carpets and
small and medium enterprises 9SMEs<.
FEF ;nder FEF, loans are given to )rms with a pro2ect cost
9including margin money or wor(ing capital< not e8ceeding
70 la(h IF: in case o new pro2ects. Fo interest is charged
on the loan component e8cept service charge o 7, p.a.
Scheme o Fund or
:egeneration o
'raditional Industries
9SF;:'I< through @oir
47, or @F@, technology upgradation, product
development and *00, or capacity "uilding, mar(et
development with component3wise ceiling. 'he
components o unding are technology upgradation,
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0oard setting3up o common acility centres 9@F@s<, development
o new products and designs, new and improved
pac(aging, etc, mar(et promotion activities, capacity3
"uilding activities, other activities identi)ed "y the
implementing agency 9I>< as necessary or the
development o the cluster
Furthermore, the num"er o MSME accounts need to register *0.0 per cent
growth annually. Some o the ma2or orms o MSME )nancing are leasing,
trade credit, and )scal incentives in the orm o ta8 "rea(s. Perhaps one o
the "est incentives or aiding MSME )nancing and growth is the
%overnment o IndiaLs directive to include MSMEs in the priority sector.
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2.3 !%!1 0inance2 3he Internationa"
%cenario
'he International picture o MSME is much rosier than the Indian scenario.
Most o the European nation, South East >sian @ountries or the ;nited
States )nd MSME as the "ac("one o their economy. In these regions the
de)nition o MSME also diEers rom that o India. /hile we de)ne MSME
according to the nature o investment in most o the other countries MSME
is de)ned "y the num"er o wor( orce associated with the enterprise. 'he
"an(s or other )nancial institutions are also up"eat in case o supplying
und or the start ups. -ending and "orrowing money or MSMEs is much
more simpli)ed. 'hey have a speci)c target and always are they eager to
introduce new policies and actions or which the num"er o registered
MSMEs is also increasing day "y day. $n average, there are C* MSMEs per
*,000 people across the top *C+ economies in the world. 'he )ve
countries with the highest ormal MSME density are as ollowsD
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Some o the recent policies or trends that have too( place or )nancial
"etterment o the entrepreneurs and the start ups in these countries are
discussed "elowD
1urope2 :ecently the European countries were hit "y a sudden )nancial
turmoil that triggered huge unemployment and shut down o many
"usiness units ta(ing the economic condition all time low or many
countries. 'hus these nations e8cept attracting huge investments or large
industrial sectors which is not easy at this time they are trying to revive
their lending policies with help o the "an(s so that they can "oost the
SMEs & the MSMEs.
@urrently 'he European Investment 0an( 9EI0<, the European ;nionNs
long3term lending institution along with IF%, is ma(ing E;:C70m
9;SO647m< availa"le or investment "y small and medium3si#ed
enterprises 9SMEs< in the Fetherlands, 0elgium and -u8em"ourg. For
"usinesses in these countries the EI0Ns involvement means that they
"ene)t rom a lower interest rate. /ith the )nance supported "y the EI0,
individual )rmsN investment costs can "e covered *00,, up to a ma8imum
o E;:*+.7m per pro2ect.
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%outh 1a+t 4+ia 6 7aci8c2 @ountries li(e Bong .ong, Indonesia,
Singapore are always )ghting or the )rst place other in case o
"etterment o the SME or MSME sector. Policies li(e waiving up o "usiness
registration ees, reducing pro)t ta8, increase o income ta8 allowances
are ew steps in the mind o their )nancial policy ma(ers that are going to
help attract more youths or entrepreneurship.
9nited %tate+2 'he story is not that diEerent in case o the ;nited
States. 'hey were also hit "y a ma2or recession or which the "an(s or
other )nancial institutions were "ound to tighten their lending policies.
0ut as the economic conditions are easing up the "an(s once again are
more willing to lend to small "usinesses and the conditions are improving.
Few research released recently "y the Fational Federation o Independent
0usiness 9FFI0< shows that small "usinesses are )nding it easier to "orrow
the capital they need to run their "usinesses. 'he %overnment also eased
somewhat the credit standard which is helping to improve the overall
)nancial climate showing economic "oost over the States.
'here are ew other countries li(e @ameroon, Saudi >ra"ia etc. who are
doing remar(a"ly well or the growth o the SMEs and the MSMEs. For
instance the Finance Minister o @ameroon is setting up a MSME 0an( or
Saudi >ra"ia is setting up new la"our wage policy which is only going to
help the MSMEs to grow.
2.) :e+t Benga" ; a new era .or !%!1
8nance
/est 0engal is the land o possi"ilities. It has got the potentiality to
"ecome the leading state in the MSME sector. &ay "y day the MSME
productivity rate is increasing in /est 0engal. >lso the %overnment is
ocusing mainly on the development o the MSMEs or the uture growth o
its industrialisation policy. /est 0engal not only has a large num"er o not
only registered "ut also large num"ers in respect o un registered MSME
units, that too in varied sectors li(e the manuacturing and the industries.
&ue to this varied approach and also due to the presence o a rich culture
and tradition in the State it en2oys a diversi)ed "usiness environment li(e,
ood processing, agro industries, leather, gems and 2ewellery, mineral
*4 | P a g e
"ased, iron and steel, handicrats etc. the new government ater coming
to its e8istence is ocusing mainly on the development o the Micro, Small
& Medium Enterprises, the reJection o which can "e seen in the recent
)nancial policies or the industrialisation policies. @oming out with new
schemes and )nancial aids or arranging or diEerent mar(eting activities
to "oost the sentiment o the present Enterprises or to attract new
entrepreneurs "ut important o all attracting new investors or the Micro,
Small & Medium Enterprises is a very "old and welcome initiative rom
industrial point o view.
.eeping all o the a"ove in mind the /est 0engal %overnment is also
trying to revive their "an(ing inrastructure and )nancial policy or the
MSMEs. It has got a ro"ust "an(ing inrastructure which is helping the
government to realise its dreams. In respect o Institutional Finance, the
State o /est 0engal has a dynamic and resilient "an(ing inrastructure.
In recent times, the State has shown signi)cant increase in "oth deposits
and credit. 'he num"er o "oth pu"lic sector "an( and private sector "an(
along with F0F@s in /est 0engal can put other States in the country or a
good run.
@urrent )nancial institution inrastructure in /est 0engalD
/est 0engal has +5 Pu"lic Sector 0an(s, *G renowned Private 0an(s
are operating in the State, C :egional :ural 0an(s, *G @o3operative
"an(s and G Foreign 0an(s operating across State
'he @redit3&eposit :atio 9@&:< o the State is around 56,, creating
huge potential or credit availa"ility or industrial )nance
Some o the important "odies ormed or MSME )nance in /est 0engal
areD
5a'e o. the
%che'e<In+titute
5ature o. 4++i+tance
:e+t Benga" =andicra.t+
/ee"op'ent Corporation
Ltd
Promotion and development o handicrats through
s(ill development and organisation o direct haats in
rural and ur"an areas, to provide artisans a mar(et
:e+t Benga" Indu+tria"
/ee"op'ent Corporation
Ltd #:BI/C$
Fodal agency o the state government or the
promotion and )nancing o medium and large3scale
industries. Provides support to industries "y
acilitation, )nancing, dis"ursing incentives and "y
setting up industrial par(s
*G | P a g e
3he :e+t Benga" %'a""
Indu+trie+ /ee"op'ent
Corporation Ltd #:B%I/C$
Providing inrastructural support, mar(eting
assistance, supply o raw materials and other
promotional assistance or SSI units
:e+t Benga" Indu+tria"
In.ra+tructure
/ee"op'ent Corporation
Providing supporting inrastructure relating to roads,
drainage, water and power supply, street lighting,
@F@ o *+ esta"lished growth centres in the state
:e+t Benga" 0inancia"
Corporation #:B0C$
Providing term loan assistance to small3scale
industries in the state
!odu"ar 0ood 7ark
!odu"ar Indu+tria"
In.ra+tructure Ltd
Sponsored "y the FPI department, it provides
inrastructure at &an(uni and other support o ood
processing industries.
'he /est 0engal %overnment has also introduced various lucrative
Incentive and Su"sidy Schemes which is going to help investors and
entrepreneur to indulge more into MSME. 'hese diEerent schemes are
noted "elowD
C47I34L I5*1%3!153 %9B%I/>
P For new Micro & Small Enterprise in Qone @ & &
1 Micro enterprise in Qone @ 1 +7,
1 Micro enterprise Qone & 1 60,
1 Small enterprise in Qone @ 1 *7,
1 Small enterprise in Qone & 1 C0,
a< Su"2ect to a ceiling o :s 70 -a(h or Small Enterprise.
"< +0, additional su"sidy on admissi"le su"sidy or all enterprises wholly
owned "y women, S@?S' and minority community entrepreneurs.
c< 'hese entrepreneurs will also get incentive or setting up o units in
Qone >& 0as ollowsD
3 Micro ;nit 1 *7,
3 Small ;nit 1 *0,
d< 'his incentive would "e in addition to what the units get rom %$I
under any other scheme
I531R1%3 %9B%I/> ,5 31R! L,45
Micro & Small Enterprise
P Su"vention o 5, or all units and 4.7 , or units set up in the @ and &
Qone districts or 7 years.
Medium Enterprise
P Qone 0 & @ 1 +7, o total 'erm -oan Interest su"2ect to ceiling o :s.
*47.00 -a(h per year or 7 years.
P Qone & 1 +7, o total 'erm -oan Interest su"2ect to ceiling o :s. *47.00
-a(h per year or 4 years.
*I | P a g e
1L1C3RICI3> /93>
Micro & Small Enterprise
P 70, waiver or 7 yrs or Qones > & 0 & 47, or Qones @ & &.
P 'he units set up in any #one and wholly owned "y women, S@?S' and
minority community entrepreneurs will "e eligi"le or *00, waiver or 7
years
Medium Enterprise
P Qone 0 & @ 3 *00, waiver o electricity on the electricity consumption
or 7 years su"2ect to ma8imum o :s. +7.00 -a(h per year or :s. *.+7
@rore or 7 years
P Qone & 1 *00, waiver o electricity duty on the electricity consumption
or 7years and 47, waiver rom the si8th year up to tenth year su"2ect to
ma8imum o :s. 70.00 -a(h per year or :s. +.7 @rore in 7 years
7,:1R %9B%I/>
Micro & Small Enterprise
P Su"sidy o :s. *.00 ? .wh or Qone > & 0
P Su"sidy o :s. *.70 ? .wh or units in Qone @ & &
For 7 yearsH su"2ect to a ceiling o :s +0 -a(h per annum or small
enterprises and :s C0-a(h or medium enterprises.
I5C153I*1 0,R 151R?> 100ICI15C>
Micro & Small Enterprise
P 70, re3im"ursement o the cost o energy audit underta(en "y a
certi)ed agency to "e availa"le ater implementation o the
recommendations
P +7, reim"ursement o the cost o installations or energy conservation
as per energy audit su"2ect to a ceiling o :s + -a(h
%34!7 /93> 6 R1?I%3R43I,5 011
Micro & Small Enterprise
P *00, or units in Qone &, 47, or Qone @, 70, or Qone 0 and +7, or
Qone >.
Medium Enterprise
P 0, @ & & Qone reund R 47, o Stamp &uty.
+0 | P a g e
153R> 34@
P :eim"ursement o E' on plant and machinery availa"le ater "eginning
o commercial production "y the unit
P :eim"ursement o E' on procurement o raw materials or the initial C
years.
*43
Micro, Small & Medium Enterprises
P Qone 0 & @ 1 G0, =>' reund paid or G years or 47, o )8ed @apital
Investment whichever reached earlier
P Qone & 1 I0, =>' reund paid or G years or 47, o )8ed @apital
Investment whichever reached earlier.
C%3
'otal reund or C years rom the date o commencement o commercial
production.
:431R C,5%1R*43I,5 < 15*IR,5!153 C,!7LI45C1
Micro & Small Enterprise
P >ssistance up to 70, or :s + -a(h ma8imum or water conservation?
pollution control measures
CL9%31R /1*1L,7!153
P Support up to :s. 7 crore or common inrastructure such as road, power
etc or each micro and small industrial cluster in Qone 0 and @.
P Support up to :s. *0 crore or common inrastructure such as road,
power etc or each micro and small industrial cluster in Qone &
%345/4R/ A94LI3> C,!7LI45C1
Micro & Small Enterprise
P 70, o cost up to a ma8imum o :s. 7 la(h or o"taining certi)cation
?accreditation li(e 3 IS$3I000, IS$3*6000, IS$3*G000, Social
>ccounta"ility Standards, $E.$3'ES etc.
:,RB 0,RC1 :1L04R1 4%%I%345C1
C :eim"ursement o *00, in *st year & 47, in ne8t remaining years
e8penditure incurred towards Employees State Insurance 9ESI< and
Employees Provident Fund 9EPF< as ollowsD Qone 037 yrs., Qone @34 yrs.,
Qone &3I yrs.
+* | P a g e
?I < 743153 R1?I%3R43I,5
P State %overnment will provide consultancy and acilitation services or
identi)cation and registration o %eographical Indicators 9%I< o items.
P :eim"ursement o 70, o e8penditure or o"taining patent registration
su"2ect to a ma8imum o :s. 7 la(h.
Chapter 3
3.1 Bandhan
++ | P a g e
Fow, stating a"ove ew o the incentive policies and the mention o the
"odies loo(ing ater MSME )nance in /est 0engal, we cannot overloo(
another very important "ody, i.e., a Fon 0an(ing Financial Institution
9F0F@< 'andhan. It is a micro)nance institution started "y Mr. @handra
Se(har &as in the year +00+ with the vision o eradicating poverty and
empowering the women "y giving them the )nancial reedom. 'o give his
dreams a shape Micro)nance was the only important )nancial tool that
could have helped, "ecause micro)nance has its inherent potential o
providing door step credit. 0andhan now is operating through its F0F@
entity in the micro)nance space, doling out credit to the )nancially
e8cluded.
0andhan today operates out o *G0C "ranches across a wide geography o
++ Indian States & ;nion 'erritories. 'hough the main ocus o 0andhan is
mainly Eastern and the Forth Indian states which are economically in a
disadvantageous position than other states. 47, o its clients are rom
/est 0engal.*+4I4 o its staE are "ased at the )eld with only *G* "ased
at the Bead $Tce.
UU#ig. represents the increasing no. of branches year on year.
UU#ig.
represents
the
increasing
no. of
borro!ers( year on year.
+C | P a g e
UU)resence of 'andhan across the country
3.2 !icro 8nance actiitie+ o. Bandhan and "ink with
!%!1
+6 | P a g e
0FSP- lends only to women clients, and primarily or income generating
purposes. 'he selection o clients is "ased on their income levels and
repayment capacities. VPoor >sset3less womenL are de)ned as the target
o 0FSP- in its operational policy. Bowever, chec( on ownership o assets
is not usually done directly. 'he income limit is :s+700 monthly in rural
areas and :sC700 in ur"an areas. 'he assumption is that income would
reJect householdLs access to productive assets. 0FSP-Ls policy allows
individual loans to "e e8tended to men also, along with women.
0andhan presently is doing wonders in the )eld o Micro)nance, more
over it is helping the "udding entrepreneurs to start up their "usiness. It
has won various awards and got recognised or its contri"ution, most
important o all "eing *
st
in India & +
nd
in /orld in the For"es "est 70
Micro)nance Institutions and S(och Financial Inclusion >ward in the year
+0**. It is ran(ed in the Wm:CX category "y @:ISI- credit rating.
0andhan has introduced several )nance schemes which wor(s in diEerent
areas li(e, Micro -oan & Micro Enterprise -oan, !%!1 -oan, Bealth -oan
& Micro Education -oan. It has a client3centric product development
process. 'here are currently our types o loan products, vi#. Suchana*
Shristi* Samriddhi + Suraksha.
%uchana #!icro Loan$2 Suchana is a group "ased micro loan, intended
or new clients who )t into the target criteria o 0FSP-. It was introduced
in the year +00+. 'he loan si#e is :s. *000 to :s. +7000. It has a
repayment schedule o 66 instalments, and clients have the option o
oreclosing it ater 60 instalments, without any penalty. 0FSP- gives a
grace period o 43G wee(s or the repayment o Suchana. 'his has an
interest o Jat *0, /est 0engal and Forth East States and *+.7, Jat at
other states. > reunda"le security deposit o *0, o the loan amount is
collected rom the clients upront.
%hri+ti #!icro 1nterpri+e Loan$2 'his loan product was launched in the
year +005. @lients can avail this loan graduating rom Suchana loan. 'he
-oan si#e is :s. +7000 to :s. 70000. 'he main diEerence is that it is
granted to an individual not a group li(e in case o Suchana. >ll the
conditions are also same e8cept the reunda"le security deposit which is
7, or this loan and that this loans can "e given to men too.
'he products are designed to cater to the demand or higher loan
amounts "y the clients or e8pansion o their "usiness activities, ater they
get sta"ilised through Suchana loan. 'he management aspires that *0,
+7 | P a g e
o Suchana clients would graduate to Srishti loans, and *0 , o Srishti
clients to Samridhhi loan in this year.
0elow we will see a summarised ormat o these -oan schemes and
amount o -oan dis"ursed in one )scal year 1
UU#ig ., - )ictorial .epresentation of 'andhan(s /oan Scheme
UU#ig .0 - )ictorial .epresentation of 'andhan(s /oan Disbursement in
MSM
In the year +0*0 0andhan too( a very "old and nota"le step o slashing
the interest rate in case o its Micro)nance lending schemes. 'he lending
rates were slashed rom +6, to *G.I4, with eEect rom *
st
May, +0*0
which is a very crucial step or the entire Micro)nance sector.
+5 | P a g e
3.3 %a'riddhi2 0inance .or !%!1
'his is an initiative o micro3)nancing rom 0andhan to help the "udding
entrepreneurs in MSME sector. /ith the introduction o Samriddhiin the
year +00I, stories o many changed which we will discuss later in the
section. In this segment they grant loan to individuals up to :s. *,00,000
to :s. C,00,000. 'his loan has a criterion to ul)l li(e 3 re!uirement o +
guarantors, land mortgage and *+ post dated che!ues. 'erms and
selection criteria o the products is uniorm across the diEerent states,
e8cept or the interest rates charged in case o Suchana and Shrishti .
/hile Suchana and Shrishti loans are provided at *0, Jat in /est 0engal
and Forth east states, it is *+.7 , in all other states.
0elow we will see the criteria to "e met or loan approval o the diEerent
loan products o 0andhanD
>s mentioned earlier we will now see one lively e8amples /ho has a new
lie story to tell, all than(s to Samriddhi o 0andhan.
+4 | P a g e
Sandhya 1abere, a woman with #eal to succeed in lie deeating all the
odds o her lie, today a successul entrepreneur in the readymade
garment segment. /ith the help o her hus"and Sandhya too( the help o
0andhan "y enlisting her name in the near"y group W.eyaX and too( a
Suchana loan o :s. 7000 to strengthen their "usiness. 'hen gradually
with their hard eEorts they graduated to avail Shristi loan and )nally they
too( the loan o Samriddhio :s. *70000 which set them as a new
entrepreneur in the MSME sector with 67 machines and 77 staE under her.
&espite the loss o her hus"and in the mid ways she didnLt stop and now
"oth her sons 2oined her wal(ing in the path o success.
'hus 0andhan Financial Services Pvt. -td. day "y day is "uilding a strong
uture o the MSMEs "y providing the most needed )nancial help in a
secure and easier way.
+G | P a g e
Chapter )
4.1 Conc"u+ion
'he %overnment o India and the /est 0engal %overnment are wor(ing
hard toward the "etterment o MSME sector through the implementation
o various schemes. >lso there are various "an(ing and non3"an(ing
)nancial institutions wor(ing along with them so that they can attract new
investors and entrepreneurs or realising the potential o the MSME sector
in India. Saying that, it is to "e added that the entrepreneurs also need to
"e aware o the various processes and )nancial aids they can get so they
can Jourish in their sector o "usiness. >lso the %overnment should loo(
ater or value addition "y creating a clean "usiness environment with
transparent and !uality process management. 'hus it is "elieved that
India and de)nitely /est 0engal will rise and shine economically with the
help o the MSMEs.
+I | P a g e
Chapter 5
5.1 BIBLI,?R47=>
*.httpD??mssew".org?htm?home.html
+.httpD??mssew".org?htm?activities.html
C.httpD??mssew".org?htm?assistance.html
6.httpD??mssew".org?htm?msme.html
7.httpD??www.dcmsme.gov.in?ssiindia?msmeYin.htm
5.httpD??dcmsme.gov.in?annual"oth.html
4.httpD??www.dcmsme.gov.in?0udget&>llocation.htm
G.httpD??dcmsme.gov.in?schemes?schemesYscm.htm
I.httpD??www.dcmsme.gov.in?pu"lications?pu"lication.htm
*0.httpD??www.dcmsme.gov.in?ssiindia?msmeYin.htm
**.httpD??www."andhanm.com?
C0 | P a g e
4551@9R1D1B
%39/153E% /1CL4R43I,5
I here"y declare that the Pro2ect /or( with the title WMSME Finance in
/est 0engalX su"mitted "y me or the partial ul)lment o the degree o
0.@om Bonours in >ccounting & Finance under the ;niversity o @alcutta
is my original wor( and has not "een su"mitted earlier to any other
;niversity? Institution or the ul)lment o the re!uirement or any course
o study.
I also declare that no chapter o this manuscript in whole or in part has
"een incorporated in this report rom any earlier wor( done "y others or
"y me. Bowever, e8tracts o any literature which has "een used or this
report has "een duly ac(nowledged providing details o such literature in
reerences.

SignatureD
FameD :in(y Balder
>ddressD P.$Z=illD
Podrah,
Balderpara, >ndul:d,
BowrahD 4***0I
:egistration FoD ++63
*++*306*63**
:oll FoD *0*7
C* | P a g e
PlaceD .ol(ata
&ateD
>FFES;:E *>

S;PE:=IS$:LS &E@->:>'I$F
'his is to certiy that Ms.:in(y Balder a student o 0.@om Bonours in
>ccounting & Finance o Seth >nandram Maipuria @ollege under the
;niversity o @alcutta has wor(ed under my supervision and guidance or
her pro2ect wor( and has prepared a pro2ect report titled WMSME Finance in
/est 0engalX which she is su"mitting, is her genuine and original wor( to
the "est o my (nowledge.
SignatureD
PlaceD .ol(ata FameD Ms.Sarodiya
&utta
&ateD &esignationD
Proessor

Fame o @ollegeD
Seth
>nandram Maipuria @ollege
C+ | P a g e