SME - The Game Changers

SME
The Game Changers
SME
The Game Changers
Debt Equity Advisory Training| | |
Knowledge Partner
n a o at on w t
MINISTRY OF MICRO, SMALL & MEDIUM ENTERPRISES
GOVERNMENT OF INDIA

DearMembers,
Small and Medium Enterprises (SMEs) is a key engine of economic growth and employment in
India. Government of India in the past four years has taken many positive steps to boost this
sector. These include re-implementation of Public Procurement Policy, Pradhan Mantri MUDRA
Yojana, Make in India, Startup India, and Skill India. The strong emphasis on ease of doing
business has also been seen as a key economic reform. Government plans to make inancial and
technical support more accessible while aiming at increasing growth of manufacturing sector by
12-14%perannumandincreaseitsshareofGDPto25%by2025.
The SME sector is an important vehicle for attaining faster, sustainable and more inclusive
growth of the Indian economy. Besides being highly resilient with greater capital productivity,
the sector also contributes greatly towards reducing regional disparities and raising socio-
economic empowerment level. Therefore, this sector oﬀers tremendous growth potential which
mayfacilitatetowardsthedoubledigitnationalgrowth.
It is my pleasure to bring to you a report on the ‘SME Sector’ put together for the Delhi SME
FinanceSummit2018.
SME Finance Summit is a lagship event of CII Delhi of ice. Over the years, this Summit has
witnessed increased participation from SME Members as well as banking and non-banking
of icials.
WehaveplannedaseriesofinsightfulsessionsattheDelhiSMEFinanceSummit2018thatIhope
will enrich you with thought provoking ideas and insights. The Summit is a common platform for
various stakeholders to come together and collectively address the challenges being faced by the
industry.Thesesessionswillseektoaddressvariousissuesrangingfromlackofaccessto inance,
private equity inancing process, importance of credit rating and insurance for an SME, GST and
otherregulatoryissues.
This report will give you an understanding of sector’s growth canvas that also bring to attention
someoftheindicatorswhichwillbekeyinourpathtoachievethelargervisionfortheSMEsector.
AbhimanyuMunjal
ViceChairman-DelhiState
ConfederationofIndianIndustry
MESSAGE

I have had the privilege to be part of all seven Delhi SME Finance Summits. It has been a journey
full of learning and knowledge sharing. We have seen experts share their thoughts on various
inancialaspectswithregardstoSME'sinIndiaandmorespeci icallyinDelhi.CIIhasbeenagreat
warrior for promoting SME's in the country and I feel they have done a great job at raising issues
for SME's. The economy of Delhi is the 13th largest among states and union territories of India.
The nominal GSDP of the NCT of Delhi for 2017-18 was estimated at 6.86 lakh crore (US$110
billion) recording an annual growth of 8.1%. Growth rate in 2014-15 was 9.2%.In 2017-18, the
tertiary sector contributed 85% of Delhi's GSDP followed by the primary and secondary sectors
with 12% and 3% respectively. The services sector recorded an annual growth of 7.3%. Delhi has
one of India's largest and fastest growing retail industries.Delhi was able to attract a high FDI
in lowintherealtysector.
AstheSME’sinDelhiareconcerneditcanbestatedthattheyareshowinganincreasingtrendand
a positive growth. There are many sectors in Delhi which have a positive outlook such as IT, Food,
Automobile, hotel and tourism. The number of SME in Delhi is increasing and is adding to the
growth of industrial growth. Government is providing proper inancial assistance and taking
many other initiatives to promote the sector. Also, at present, the biggest hurdle in the trouble-
free operation of SMEs is that these irms lack in quali ied and professional assistance from the
learned professionals holding degrees in relevant streams. Despite the fact that many steps are
taken in making SMEs in Delhi inancially strong, yet the SMEs ind it dif icult to obtain credit
fromthebanksandotherbiglenderswhooftentakeintoaccountthebasicassetsofthe irmsuch
as primary infrastructure or inventory which SMEs may not be able to show. I think this initiative
willhelpinthebettermentoftheSMEsector.
JyotiPrakashGadia
ManagingDirector
ResurgentIndiaLtd.
MESSAGE

1. OverviewofSMEinDelhi 1
2. ImpactofDigitizationonSME 9
3. ImportanceofCreditratingforSME 12
4. ImpactofGSTonSME 13
5. ImportanceofinsuranceforSME 19
6. FinancingTrendsofSME 23
7. Conclusion 27
Table of Content

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OVERVIEW OF SME IN DELHI

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Delhi, the capital of India, has emerged as a major commercial capital and industrial hub
of India. It is home to a wide range of industries including textiles, electrical and
electronics, IT &ITeS services, hotel and tourism, which have contributed immensely to
economic and industrial growth of the country. Nearly 88% of the SMEs in Delhi revealed
that this cluster is as an attractive destination for conducting business. Delhi has become
an attractive business and tourist destination. This is driven by its improved
infrastructure, good connectivity with other Asian and western regions, ease of access to
market and availability of skilled labor among others. Consequently, it has emerged as
one of the most preferred investment and business destinations.
Industries No. of firms Investments
Rubber, plastic & Petro based 142 5254
Metal based 83 2905
Engineering units 73 2701
Electrical 151 5436
Repairing and servicing 85 3230
Agro based 19 475
Cotton textile 2 45
Jute 7 210
Wooden 17 595
Leather based 22 748
Others 232 10690
Table: Existing SME’s in Delhi
(Source: Dun& Bradstreet)
Features of SME’s in Delhi
 Delhi SME Cluster - SME Perspective Nearly 88% of the SMEs in Delhi revealed
that this cluster is as an attractive destination for conducting business Delhi, the
capital of India, has emerged as a major commercial capital and industrial hub of
India.
 Mostly SME’s are small entrepreneurs and have income less than 10million.

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 Very few SME’s around 3% falls in the high income bracket.
 Only around 3% of the respondent SMEs were earning export revenues in the
range of 80% to 100%.
Challenges faced by MSME in Delhi
 Majority of the MSME Units are facing difficulties in obtaining EM-Part II due to
cumbersome procedure for issue of MCD Licenses and NOC from Delhi Pollution
Control Committee (DPCC). Because of that the MSMEs are unable to get the benefit
under the various Govt. Schemes. On-line EM Filing has been started on the trial run
basis in Delhi state.
 There is lack of availability of timely credit. Entrepreneurs are facing difficulties in
getting Bank Loan. Banks avoid accepting the cases under Credit Guarantee Fund
Scheme especially for the new entrepreneurs.
 The availability of land for industrial use is a major bottleneck for entrepreneurs of
Delhi. More Flatted Factory Complexes are needed to overcome this problem.
 Delhi has excellent overall infrastructure, but the state of infrastructure and
facilities available within the industrial estates is poor. The industrial estates suffer
from bad quality roads, poor drainage, encroachments and lack of parking facilities.
 Some of State Govt. Agencies/PSUs do not recognize NSIC Certificates and insist on
earnest money.
 Deficiency of trained operators & service providers for manufacturing and service
sector units still exists to some extent.
Ease of Doing business in Delhi
As the cosmopolitan capital city of the Republic of India, New Delhi is the political,
commercial and financial center of the country. The vast amount of workforce available
combined with the fact that English is one of India’s official languages have made New
Delhi an excellent destination for doing business. Particular sectors which are attracting
an increasing amount of foreign investment include tourism, banking,
telecommunications, media and IT. New Delhi is known for its flexible attitude to time so
business people will be forgiving if you will reach a few minutes late. Government officials

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may arrive late for meetings or cancel at the last minute but they will not normally
tolerate you arriving late as they see this as disrespectful.
Table: Expected Investment cost in setting up of business in Delhi
(Source: IBEF)
Advantages of operating in Delhi
 Wide market access
 Easy to product sale
 Loan financing available
 Market growth
 Simplified Tax structure
 Power supply
 Easy available raw material
 Industrial Land available
 Favorable government policies
 Export promotion
 Import/Export benefits
 Connectivity: Considered the largest agglomeration in the world, Delhi NCR
(National Capital Region) is comprised of the states of Rajasthan, Uttar Pradesh,
Haryana as well as the National Capital Territory of Delhi. The area covers
approximately 33,578 sq. km and is home to over 17 million people. The Indira
Gandhi International Airport connects this city to other major cities across India.

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There is also a sophisticated bus system in the Delhi NCR, as well as a modern
metro rail system. Along with that Delhi has a good metro connectivity with NCR.
So, this good connectivity helps in ease of business and transfer of products and
services from one place to another.
 Trade and Commerce hub: Delhi has emerged as a key state with immense scope
for development of the services industry such as Banks and Financial Services
Institutions (BFSI), IT and ITeS, Consulting, etc. It is a prominent agri-trade centre
of the country as well as a preferred tourist destination. Many of the global
corporations have offices in the state
 Policy and fiscal incentives: The state proposes a wide range of fiscal and policy
incentives for businesses under the Industrial Policy for Delhi, 2010-2021.
Additionally, the state has well drafted sector-specific policies.
 Infrastructure: Delhi has well developed social, physical and industrial
infrastructure and virtual connectivity. It has an international airport and well
developed rail and road infrastructure. There has been significant infrastructure
and environmental development in Delhi over the last 20 year.
 Govt. policy being the seat of the Central Government, Delhi has an important
position in the country in terms of formulation of policies. It has also become an
important centre for trade and commerce with a number of key industry
associations being present. The state also hosts several trade conventions and
fairs throughout the year.

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Table: Cost of doing business in Delhi
(Source: IBEF)
Initiatives by Delhi Government to promote SME’s
Export Promotion and International Trade Fairs
To promote exports from the small scale industries there are many initiatives taken by
government. They are:
 Assistance to the small scale units in the field of export procedures/ facilities/
export marketing.
 Identifying export worthy units.
 Organizing training courses and seminars on export promotion exhibition of
export worthy products.
 Maintaining liaison with State Trading Corporation, Trade Development Authority
& Export Promotion Councils etc.
 To provide proper market platform and marketing development assistance.
 To promote buyers-sellers to provide a healthy growth of SME.
Information Technology promotion:
The CTC in collaboration with ICSIL (Intelligent Communication Systems India Ltd.) since
January 2008 to caters to the need of entrepreneurs of Small Scale Sector as well as for
the internal needs of the Institute. The Institute has also initiated special programs for
introduction of Information Technology in the small- scale sector in the jurisdiction to
improve their competitive strength for successfully facing the challenges of domestic and
Export Market.
There are various initiatives taken by the government to boost the IT skills:
 Providing MS Office training program
 Office and accounting package
 Computer hardware and networking package.

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Scheme for 'Providing financial assistance on International Cooperation
IC Scheme provides financial assistance of up to 95% of the airfare and space rent of
entrepreneurs. Assistance is provided on the basis of size and the type of the enterprise.
It also provides assistance for common expenses of the delegation like freight &
insurance, local transport, secretarial/communication services, printing of common
catalogue etc.
The Scheme would cover the following activities:
 Deputation of MSME business delegations to other countries for exploring new
areas of technology infusion/up gradation, facilitating joint ventures, improving
market of MSMEs products, foreign collaborations, etc.
 Participation by Indian MSMEs in international exhibitions, trade fairs and
buyer-seller meets in foreign countries as well as in India, in which there is
international participation.
 Holding international conferences and seminars on topics and themes of interest
to the MSME.
Scheme for providing establishment of new institutions (EDIs), strengthening the
infrastructure for EDIs under ATI Scheme.
 The maximum assistance under the scheme to a State level EDI will be restricted
to Rs.250 lakh in each case. This grant would be utilized for development of
physical infrastructure, equipment, faculty training and development of capability
in undertaking studies and research on issues related to MSME sector.
 Research and Studies: The maximum assistance will be Rs. 15 lakh in each case.
 Training (SDP): Assistance will be provided to training institutions of Ministry of
MSME for conducting Skill Development Programs.
Scheme for providing financial assistance on marketing support under Marketing
Assistance Scheme
Financial assistance of up to 95% of the airfare and space rent of entrepreneurs.
Assistance is provided on the basis of size and the type of the enterprise.

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Financial assistance for co-sponsoring would be limited to 40 % of the net expenditure,
subject to maximum amount of Rs. 5 lakh.
The assistance is provided for the following activities:
 Organizing Exhibitions abroad and participation in International
Exhibitions/Trade Fairs.
 Co-sponsoring of Exhibitions organized by other organizations/ industry
associations/agencies.
 Organizing Buyer-Seller Meets Intensive Campaigns and Marketing Promotion
Events.
(Source: MSMED)

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IMPACT OF DIGITSATION ON SME

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The success of Digital India depends on the creation of an ecosystem in which every
citizen is digitally empowered and has access to key services made available
electronically. Globally, technology has been the most important enabler in ensuring the
success of such massive transformational projects. While the government has been
focused on developing key technology enablers for Digital India; adoption of digital
technologies has remained a challenge.
It has been analyzed that a major part small business is still have no digital presence and
are operates in traditional way. The small businesses who are using digital platform to
operate their business have realized double revenue and a better market access. 51% of
small business increased their reach to different cities as compared to the offline
business.
It has been found that there are various reasons for being online:
 They believe that this will not add much value to their business.
 Limited knowledge, expertise or IT skills.
 Higher cost of software
 Internet issues
Impact of Digitization on SME
Wide market Capture: Having only physical presence limits an organization's market
reach. Upgrading digital technology and having an online presence can provide
significant opportunities for SMEs to grow and increase their top line. Engagement
through a company website or shifting to an e-commerce platform can increase sales by
allowing SMEs to access new customers in local and overseas markets. It also allows
flexibilities of time, geographical location and delivery to conduct business. The growth
of SMEs is driven by ecommerce. The study also states that 46% of the SMEs have
witnessed a significant growth by adopting an online sales channel.
Accessibility to wider customer base: Increased digital engagements allow SMEs to
explore new markets, enabling them to compete with the bigger giants in the industry. E-
commerce has provided cost-effective solutions for the companies in large cities and

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rural areas alike to connect and trade with customers around the world. SMEs can often
lack the skills to enter international markets due to limited knowledge, language barriers,
unfamiliarity with cultural differences and narrow business outlook.
Operational efficiencies: Access to e-commerce platforms allow SMEs to decrease
overall expenditure by optimizing operational and marketing costs like call centers, trade
shows, and individual product advertising. The study by Snapdeal found that SMEs can
optimize marketing spend by 60% to 80% of the total cost.
Enriched customer engagement: Data Analytics and Business Intelligence have
provided opportunities for the SMEs to make better decisions by providing a deeper
understanding of the customers. Use of customer intelligence and insights to predict their
needs, design new products that meet their requirements and delivering the right
products at the right time at a cost-effective price has equipped SMEs with next
generation customer engagement capabilities.

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IMPORTANCE OF CREDIT RATING FOR SME

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Why credit rating is important for SME?
A survey study revealed that, merely around 5% of the SMEs surveyed in Delhi cluster
had a credit rating and face problem in availing adequate finance from their lender, as
banks turn apprehensive about their business credibility in the absence of a credit rating.
This acts as a hurdle in their business growth. This is primarily because they do not want
to expose their business operations details to a third party and attract more tax liability.
Getting a credit rating can support the SMEs in negotiating the borrowing rates, gaining
flexibility in repayment and strengthen their relationship with their lender. Further, they
can utilize the ratings to boost their credibility with their business associates such as
vendors, clients and consultancy or support services providers.
A good credit rating helps in:
 Enables large corporate units build confidence to invest in the SME units and helps
SME in building healthy relationship with the large corporate bodies.
 Strengthens the position of SME among peers for the one bearing credit rating and
also allows easy comparison.
 Allows SMEs to explore opportunities internationally as rating provides a
platform for trade partnerships with global players.
 Concessional funding: A good rating can help you gain faster and cheaper credit
for your venture. The agencies that provide rating for SMEs—CRISIL Ratings, SME
Rating Agency of India (SMERA), ICRA, Credit Analysis &Research (CARE), Onicra,
and Fitch—have tie-ups with several banks to offer preferential interest rates
based on ratings. For instance, CRISIL Ratings has such a working arrangement
with 35 banks and financial institutions, while SMERA has entered into such pacts
with 29. If a firm gets a good rating, he can even approach other banks to get a
better rate bargain than the one provided by his existing banker.
 Better business opportunities: The independent risk evaluation of SMEs by an
unbiased third party lends credibility to them and opens doors for them while
dealing with MNCs and corporate. You can submit credit rating for tenders and
make yourself more credible to get bigger orders. It also provides easier access to

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other sources of finance such as private equity. "Better ratings have helped the
SMEs retain customers and suppliers, and negotiate better terms with them.
 Government support: The government also favors rated SMEs, restricting
certain contracts for such firms. It also operates a performance and credit rating
scheme through various credit rating agencies via the National Small Industries
Corporation. The scheme provides a one-time subsidy to SMEs to get rated. "The
rating agencies have by far done a good job as external ratings have been
coinciding with our internal risk evaluation mechanism. This is a very important
benchmark while giving loans.
 Tools for self-improvement: Another advantage of rating is that the highlighting
of strengths and weaknesses acts as a trigger for self-correction. A regular renewal
of ratings not only helps improve a firm’s performance but also builds confidence
within the lender fraternity and trading channel.
(Source: MINT News)
For this purpose a scheme was launched by government to create awareness regarding
credit rating and also introduced many benefits to the small business.
Performance and Credit Rating Scheme
Performance & Credit Rating Scheme was formulated in consultation with Industry
Associations, Indian Banks’ Association (IBA) and Rating Agencies, with the objective of
creating awareness amongst Small Scale Units (now known as micro & small enterprises)
about the strengths and weaknesses of their existing operations and to provide them an
opportunity to enhance their organizational strengths. The Scheme launched in April,
2005 has been well appreciated by the various stakeholders. Indian Banks’ Association
(IBA) circulated the scheme among its member banks mentioning that the government
expects the rating product to help SSI units in accessing credit from banks faster and on
better terms. It has been analysed thatmore than 110,828 units have been rated under
the Scheme.
The fee to be paid to the rating agencies shall be based on the turnover of the MSEs which
has been categorized into three slabs. The balance amount towards the fee shall be borne

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by the SME’s. The slabs of the Turnover and the share of Ministry of MSME towards the
fee charged by the Rating Agency have been indicated in the table given below:-
Turnover Fee to be reimbursed by Ministry of MSME
Up to Rs.50 lacs 75% of the fee charged by the rating agency subject
to a ceiling of Rs.25,000/-
Above Rs.50 lacs to Rs.200
lacs
75% of the fee charged by the rating agency subject
Above Rs.200 lacs 75% of the fee charged by the rating agency subject
Benefits under the scheme:
The major benefits accruing under the scheme to the rated units include:
 Rating is an independent, trusted third party opinion on capabilities and credit
worthiness of SME’s.
 Rating enables SME units to ascertain the strengths and weaknesses of their
existing operations and take corrective measures to enhance their organizational
strength.
 Good rating enables MSEs to access to funds at cheaper rates and better terms,
 Rating facilitates prompter credit decisions from Banks on proposals of SME’s.
 Good rating enhances the acceptability of the MSEs with their customers and
buyers.
 Facilitate buyers in capability & capacity assessment of MSEs before finalizing
purchase contracts

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IMPACT OF GST ON SME

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Impact of GST
The GST Tax mechanism is being a bit topsy-turvy for the SMEs and the Start-Ups as the
procedures might be complex for them to incorporate with. The new tax regime is
supposed to and is benefitting them in the following ways:
 Easier to start a new business: Previously there were different tax structures
being followed in different states, and had different parameters to comply with
VAT Registration system. Though registering with the state still exists under the
new structure, the rules are clearly defined and are uniformly given in the portal.
 Transparent Transactions: GST will enable an online and transparent view of
tax obligations and on-goings, minimizing the need to liaison with tax authority’s
offline. Though it will take some initial investment now, SMEs that streamline their
transactions now will be setting up future-ready systems and processes.
 Expansion of the business: VAT System had imposed limitations in the
expansion of the business, as there existed different tax structure in different
states, and had increased the burden on the consumers due to increased cost.
However, this barrier no more exists as tax credit can be transferred irrespective
of the location of the buyer and the seller.
 Reduced tax burden due to an increase in threshold limit: GST system will
eliminate the cascading effect of various state and central taxes. Under the old
regime, business owners with an annual turnover of Rs 5 lakh (Rs 10 lakh in the
North East), mandatorily need to register for VAT and make VAT payments. Under
GST businesses above Rs 20 lakh turnover (Rs 10 lakh for North East) qualify for
GST registration, which brings huge relief to SMEs. Thus, businesses that falls in
the Rs 5 lakh – Rs 10 lakh revenue bucket need not register and will experience
better cash flows because they are exempt from GST.
 Better Cash flow due to input credit facility: Cash flows may increase because
of facility of input tax credit, wherein businesses will be able to avail credit on
input expenses such as supplies. For example, for a business that procures steel as
the raw material to manufacture utensils, the businessman will need to pay tax on
the raw materials procured i.e. iron ore. He can adjust the tax paid on inputs from

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the taxes collected on outputs. This means that only the actual “value addition will
be taxed.
 Online compliance procedures: Under GST all compliance procedures such as
registration, payments, refunds and returns will be carried out through online
portals. The burden on SME’s (due to current taxation system) to interact with
department officers carrying out compliances will be eliminated. GST will help
eliminate time-consuming border tax protocols, allowing for free flow of goods
across borders. This will result in savings in logistical costs. In this way GST will
save time and effort of SME’s.
 Logistics and delivery is becoming faster: GST is eliminating time-consuming
border tax procedures and toll check posts and encourages supply of goods across
borders. The logistical cost for companies manufacturing bulk good would be
reduced by around 20%. Such costs can be crucial for the survival of SMEs. No
entry tax is being charged for goods manufactured anywhere in India. Thus,
making logistics and delivery faster and smoother for small and medium
businesses.

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IMPORTANCE OF INSURANCE FOR SME

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Importance of Insurance coverage for SME
Often, small businesses and startups work with a tight budget. As a result, it might be
tempting to forego certain types of insurance that aren't required by law. In fact, a survey
of 30,000 business owners conducted by Next Insurance found that 44 percent of
responding businesses have never had insurance at all. Many SMEs tend to be
entrepreneurial ventures where the promoter has either invested his/her savings or
borrowed money to start a new venture.
Now, risk is inherent in our lives, but SMEs are especially vulnerable to risks that threaten
the dream venture that they have worked so hard to build. Naturally, with the stakes
being so high, insurance is a prudent way to limit liabilities in the event of damage to
assets, property and business. For SMEs, it could be the key to survival.
However, SME Insurance in India is a highly underpenetrated market especially in the
non-mandatory segments. Even today, among large sections of the population, the
perception is that insurance means either life insurance or health insurance. The fact is
that insurance covers anything and everything under the sun, and is even customized to
fit the specific requirements of offices, industries, shops, small businesses, agriculture etc.
10% of employees of SMEs have health cover, and only 0.1% of other core property risks
like fire, marine etc. are covered. A lack of awareness, coupled with thin margins, makes
insurance a low priority and so it is often neglected by SMEs. Most of them, especially in
the micro and small enterprise segments, lag behind corporate on usage of safety
practices and equipment. They run huge risks of fire and workplace-related accidents,
besides floods during the rainy season. These risks have the potential to cripple their
business.
SME insurance cover is now seeing a rise in India, with respect to the products offered
and the companies that offer these products. An SME Package cover gives the flexibility
to combine covers of one's choice in a single policy. The standard package policies include
cover from fire and natural perils and burglary coverage.

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However, the sector has still not adequately met the need for more tailored and
customized products for the SME segment.
Types of Insurance for SME modes
PROPERTY INSURANCE
Property insurance offers you protection against risks to your business property. This
includes not just your premises (office, shop, building, factory, etc.) but also the assets
and equipment, machinery, appliances, etc. that you have within. The risks that are
typically covered under this policy include fire, earthquakes, flooding, burglaries, theft
and vandalism, mechanical and electrical failure, property loss due to accidents, etc. Note
that insurance cover for equipment and machinery failure does not include wear and tear
and loss of functionality after extensive usage over time. You may also seek cover for loss
of income due to business disruption, and also loss on account of employee
actions/malfeasance, dishonest actions, etc.
LEGAL LIABILITY
This type of business insurance provides you cover against legal liabilities arising due to
personal injury and/or losses caused to employees, customers, business partners and
other third-parties. This may cover accidents that occur on the premises, as well as
incidents arising out of the use of the business products and/or services.
PRODUCT LIABILITY INSURANCE
If a company makes, sells, or distributes a product, they can be held liable for its safety.
Product liability insurance covers claims that arise from defective products that cause
injury or harm. Coverage should vary with the type of product that is made. For example,
a pharmaceutical company is exposed to higher product liability risks than a clothing
manufacturer.
COMMERCIAL AUTO INSURANCE

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If a business uses vehicles in the normal course of business, they will require commercial
auto insurance. In addition to covering personal injury and property damage, commercial
auto insurance covers the business for loss of use in the case of an accident.
LIFE INUSRANCE
Offering life insurance for employees can be a valuable benefit when trying to attract
high-quality employees. A business can even offer additional coverage for executives.
These employees are deemed to be crucial to the running and success of the business, and
may sometimes require additional insurance, above and beyond what the normal
employee benefits provide. This can be another benefit in attracting top talent.
RENTER’s INSURANCE
Renter’s insurance is a sub-set of homeowner’s insurance which applies only to those
whose who rent their home. The coverage is protects against damage to the physical
property, contents of the property, and personal injury within the home.

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FINANCING TRENDS OF SME

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Financing trends of SME in Delhi
Reasons for SMEs being Un-bankable:
 Small ticket size and high transaction cost
 Absence of entrepreneurial experience and failure in bringing promoters
contribution.
 The magnitude of risk being high, as due to either low or no credit rating, high rate
of diversions / siphoning off the funds and absence of collaterals.
 Weak and insufficient marketing and globally uncompetitive due to lack of
product branding.
 Majority of the SMEs sourced funds from scheduled commercial banks
(SCBs)
SMEs are traditionally dependent on banks for obtaining finance for expansion purpose
and meeting their working capital requirements. Even though there are various other
funding institutions existing such as Private Equity (PE) and venture capital funds (VCF),
they either lack awareness about the same or are not comfortable in availing finance from
such institutions. There is resistance from SMEs to avail financing from such institutions,
as they do not want PE firms to take control of their owned/family-run business. Some
Surveys results revealed that, more than 80% of the SMEs operating in Delhi cluster
obtained finance from scheduled commercial banks including public and private.
Government institutions such as SIDBI (Small Industries Development Bank of India)
emerged as the second major source of obtaining finance, followed by regional co-
operative banks. Other sources of obtaining finance such as PE, VCF, and NBFCs (Non-
banking Financing Companies) were not popular among the SMEs operating in Delhi
Cluster. Further, around 47% of the SME’s surveyed revealed low chances of changing
their funding institution in the next two years whereas 35% expressed moderate chances
of changing their financing source. The remaining 18% conveyed high chances of
changing their funding institution in the next two years.
 Majority of the SMEs expect loan repayment flexibility from financer

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Loan repayment flexibility garnered around 38% share in various additional services
expected by SMEs from their financer. This was followed by SMEs expecting their lender
to provide them information update on their industry and target market, accounting for
around 30% share in various additional services expected from financer. Similarly,
around14% share was accounted by assistance from their lender on effective working
management and rest 18% share was accounted by expecting tips from their lender to
avoid loan defaults and on effective cash flow management.
Schemes for SME’s funding
 Collateral Free Loans under CGTMSE Scheme
The Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGS) was launched
by the Government of India (GoI) to make available collateral-free credit to the micro and
small enterprise sector. Both the existing and the new enterprises are eligible to be
covered under the scheme. The Ministry of Micro, Small and Medium Enterprises, GoI and
Small Industries Development Bank of India (SIDBI), established a Trust named Credit
Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) to implement the Credit
Guarantee Fund Scheme for Micro and Small Enterprises. The scheme was formally
launched on August 30, 2000. The guarantee cover available under the scheme is to the
extent of maximum 85% of the sanctioned amount of the credit facility. The guarantee
cover provided is up to 75% of the credit facility up to Rs.50 lakh (85% for loans up to Rs.
5 lakh provided to micro enterprises, 80% for MSEs owned/ operated by women and all
loans to NER including Sikkim) with a uniform guarantee at 50% for the entire amount if
the credit exposure is above Rs.50 lakh and up to Rs.100 lakh. In case of default, Trust
settles the claim up to 75% (or 85% / 80% / 50% wherever applicable) of the amount in
default of the credit facility extended by the lending institution. For this purpose the
amount in default is reckoned as the principal amount outstanding in the account of the
borrower, in respect of term loan, and amount of outstanding working capital facilities,
including interest, as on the date of the account turning Non-Performing Asset (NPA).
 Micro Units Development Refinance Agency Ltd. (MUDRA)

Knowledge Partner
26
Micro Units Development and Refinance Agency Limited (MUDRA) has been set up
for ‘funding the unfunded’ micro enterprises in the country. MUDRA will refinance all
banks, Micro-finance Institutions (MFIs) and other lending institutions, which are in the
business of lending to micro / small business entities, engaged in manufacturing, trading
and services activities. Thus, MUDRA will strengthen the Last Mile Financial Institutions
by extending refinance and other development support to expand their outreach. This
will in turn help micro businesses across the length and breadth of the country. MUDRA’s
mandate also includes developing the micro enterprise sector into a viable economic
sector, for which various developmental interventions including financial/ business
literacy programs are planned.
MUDRA loans are available in three categories. For small business, loans up to .50000/-
is available under the ‘Shishu’ category; beyond ` 50,000 and up to ` 5 lakh under the
‘Kishor’ category and beyond ` 5 lakh and up to ` 10 lakh under “Tarun” category.
PMMY loans will be extended by all Banks such as PSU banks, Regional Rural Banks
(RRBs), Cooperative Banks, Private Sector Banks, Foreign Banks, Micro Finance
Institutions and Non-Banking Finance Companies.

Knowledge Partner
27
CONCLUSION
Small business in Delhi maintains a positive outlook for the future in terms of business
confidence and employment growth. Despite facing many challenges they are showing an
increasing trend in terms of growth. There are many SME’s in Delhi which are showing a
tremendous growth and are competing with the large industries.
Delhi Government has taken many initiatives to promote the growth of SME’s such as
promotion of exports, enhancing IT skills, providing financial assistance to the SME’s
which adds more value to the growth and enhance the productivity of SME’s. Government
has initiated many acts and resolutions which describe the ease of doing business in Delhi
such as online industry license, eradication of inspector Raj, single window system in
several sectors to ensure more transparency and comfort in doing business.
As there are many advantages of operating in Delhi such as wide market access, cheap
labor, connectivity, strong transportation etc, which has increased the number of SME’s
in Delhi. With the increasing digitization era SME’s are getting more technology coated
which led to more efficiency in doing business.
It is analyzed that credit rating is very important for growth of a SME since it provides
more ease in availing loans from banks and also describes the financial credibility. It is
very important for SME’s to avail the insurances to avoid future problems or loss.
It can be stated that SME’s in Delhi are performing well and they have a great future
ahead.

The Confederation of Indian Industry (CII) works to create and sustain an environment
conducive to the development of India, partnering industry, Government, and civil society,
through advisory and consultative processes.
CII is a non-government, not-for-profit, industry-led and industry-managed organization,
playing a proactive role in India's development process. Founded in 1895, India's premier
business association has around 9000 members, from the private as well as public sectors,
including SMEs and MNCs, and an indirect membership of over 300,000 enterprises from
around 265 national and regional sectoral industry bodies.
CII charts change by working closely with Government on policy issues, interfacing with
thought leaders, and enhancing efficiency, competitiveness and business opportunities for
industry through a range of specialized services and strategic global linkages. It also provides a
platform for consensus-building and networking on key issues.
Extending its agenda beyond business, CII assists industry to identify and execute corporate
citizenship programmes. Partnerships with civil society organizations carry forward corporate
initiatives for integrated and inclusive development across diverse domains including
affirmative action, healthcare, education, livelihood, diversity management, skill development,
empowerment of women, and water, to name a few.
As a developmental institution working towards India's overall growth with a special focus on
India@75 in 2022, the CII theme for 2018-19, India RISE : Responsible. Inclusive. Sustainable.
Entrepreneurial emphasizes Industry's role in partnering Government to accelerate India's
growth and development. The focus will be on key enablers such as job creation; skill
development; financing growth; promoting next gen manufacturing; sustainability; corporate
social responsibility and governance and transparency.
With 65 offices, including 9 Centres of Excellence, in India, and 11 overseas offices inAustralia,
Bahrain, China, Egypt, France, Germany, Iran, Singapore, South Africa, UK, and USA, as well
as institutional partnerships with 355 counterpart organizations in 126 countries, CII serves as
a reference point for Indian industry and the international business community.
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Principal Sponsor
Banking Partner
Insurance Partners
Knowledge Partner
MINISTRY OF MICRO, SMALL & MEDIUM ENTERPRISES
GOVERNMENT OF INDIA

SME - The Game Changers

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