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 Definition
á In 1977, units having investment of less than Rs 10 lakh were
defined as small scale industrial undertaking. Units with investment
of less than Rs 1 lakh were defined as tiny enterprises.

á In 2006, separate investment limits have been prescribed for

manufacturing and service enterprises. The new definition is as
follows:

Manufacturing Enterprises:
u Πmicro enterprise, where the investment in plant and machinery
does not exceed Rs 25 lakh;
u Πsmall enterprise, where the investment in plant and machinery is
more than Rs 25 lakh but does not exceed Rs 5 crore;
u Πmedium enterprise, where the investment in plant and machinery
is more than Rs 5 crore but does not exceed Rs 10 crore.
 Definition
Service Enterprises:

u Πmicro enterprise, where the investment in equipment does

not exceed Rs 10 lakh;

u Πsmall enterprise, where the investment in equipment is

more than Rs 10 lakh but does not exceed Rs 2 crore; and

u Πmedium enterprise, where the investment in equipment is

more than Rs 2 crore but does not exceed Rs 5 crore.
 croblems of Small scale Industries
The small scale industries face a number of problems.
Some of them have been listed below:

á Finance and Credit.

á Infrastructural Constraints.
á Obsolete Technology.
á Marketing croblems.
á coor Managerial and Organizational Skills.
á Raw Material Œvailability.
 Role of Small Businesses in National
Economy
Small scale industries have an important role in
India͛s industrial and economic development:

á Employment Generation.
á Balanced Regional Development.
á Development of Entrepreneurship.
á Contribution to Exports.
á Less Industrial Disputes.
 colicies with regard to Small Scale
Industries
á Reservation for SSIs:

u This policy was initiated in 1967 with 47 items which was enlarged
to 807 items in 1978 and further to 873 items in 1984.

u Œs on 10 October 2008, following items are reserved for exclusive

manufacture by micro and small enterprise sector:

Food and Œllied Industries.

caper croducts.
Glass & Ceramics.
Chemical croducts.
Wood croducts.
 colicies with regard to Small Scale
Industries
á crice creference colicy.

á Export cromotion crogrammes

(carticipation in International Fairs/Exhibitions)

á Setting up of SIDBI:

u For meeting the long standing demand of small scale industries and
to provide financial assistance to them, the government set up the
Small Industries Development Bank of India.

á clan Expenditure.
 Nirma (Started as a Small Scale Unit)

á In 1969, Karsanbhai set up

Nirma (named after daughter
Nirupama) selling detergent
powder.

á This was an after-office-

business-the one-man company
would bicycle through the
neighborhoods selling
handmade detergent packets
door to door.
 Nirma (Started as a Small Scale Unit)
á Nirma was a home grown product that
revolutionized the detergent market in
India and successfully challenged large
multinationals in the process.

á Œpart from strong positioning that the

brand had. Karsanbhai catel also
benefited from the government policies of
small scale sector growth.

á By operating as an SSI for sometime,

Nirma enjoyed the benefits of investment,
subsidy, tax concessions and no
restrictions on capacity.
 Nirma (Started as a Small Scale Unit)

áNirma͛s basic strategy was quality at reasonable prices.

Therefore, it tried to maintain an overall low cost structure-
low overheads, indigenous machinery, cost control through
personal supervision at every state.

áThe management realized that if Nirma was to be

successful, it would be largely as result of careful monitoring
of fixed and variable cost, distribution network and so on.
 Indian Banking System
á Central Bank (Reserve Bank of India)
á Commercial banks (222)
á Co-operative banks
Commercial Banks can be classified as:
Scheduled (Second Schedule of RBI Œct, 1934) ʹ (218)
Non-Scheduled ʹ (4)
á Scheduled banks can be classified as:
cublic Sector Banks (28)
crivate Sector Banks (Old and New) (27)
Foreign Banks (29)
Regional Rural Banks (133)
 RBI͛s Major Functions
á The Reserve Bank of India was established as a
shareholders bank on Œpril 1, 1935. RBI was
nationalized on January 1, 1949.
á Main Functions of RBI.

u Issue of currency notes.

u Banker to the government.
u Banker͛s Bank.
u Œgricultural finance.
u Extending banking to unbanked areas.
 Role & cerformance of Commercial
Banks since Nationalization
á In order to mobilize resources of the banking system for larger
social purpose, the Indian scheduled banks having deposits
over Rs 50 crore were nationalized on 19th July 1969.

á The nationalization of the 14 major commercial banks was a

historic event.

á In 1980, 6 more banks were nationalized. These 20 banks in

addition to State Bank of India and its associate banks-
commonly called State Bank of India Group which were taken
over by Government in 1955.
 Role & cerformance of Commercial
Banks since Nationalization
á Branch Expansion after Nationalization of all
Commercial Banks.
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 Banking/Financial Sector Reforms
á The Government appointed a Committee on the financial
system under the chairmanship of M.Narasimhan in Œugust
1991.

á The report of the Narasimhan Committee submitted in 1991

provided a basis for the financial sector reforms.
 Narasimhan Committee Report- 1991
á Reduction in SLR and CRR.
u RBI reduced CRR from 15% in 1996 to 4% in 2003.
u SLR had risen to 38% in 1991. It was reduced to 25% in 1997.

á Deregulation of Interest Rates.

u Narasimhan committee ignored social concerns and advocated that
interest rates should be allowed to be determined by market forces.

á Rehabilitation of cublic Sector Banks through Recovery of

debts.
u The govt. of India passed the ͞Recovery of Debts due to Banks and
Financial Institutions Œct 1993͟ in order to facilitate and speed up
the recovery of debts due to banks and financial institutions.
 Narasimhan Committee Report- 1991
á chasing out of Directed Credit.
u Committee suggested that credit target for the priority sector
be reduced from 40% to 10%.

á Supervision of Commercial Banks.

u In 1993, a new department known as the Department of
Supervision was established by RBI as an independent unit for
supervision of commercial banks.

á Freedom of Operation.
u Scheduled Commercial Banks have now been given the
freedom to open new branches and upgrade extension
counters.
 E-Banking
á The evolution of electronic banking (e-Banking)
started with the use of automatic teller machines
(ŒTMs) and has included telephone banking, direct
bill payment, online banking.

á Œccording to some, the future direction of e-banking

is the acceptance of mobile telephone. However, it
has been forecast by many that online banking will
continue to be the most popular method for future
electronic financial transactions.
 E-Banking (croducts & Services)
Bill cayment.

E-Ticketing.

Œccount Statement.

Cheque Book Request.

Œccount Opening Request.

Transaction Enquiry.
Œdvantages of E-banking to Customers

Convenience.

Speed.

Ease.

Œccess.

Options.
 Disadvantages of Online Banking

á The biggest problem is that most people lack trust.

á Online banking can be difficult to learn for a beginner

and a site could take time to start up.

á Œbsence of ͞cersonal touch͟ aspect of customer

service.

á Lack of instructions on how to use online banking very

well.
 Telephone Banking

á Telephone banking is a service provided by a

financial institution which allows its
customers to perform financial transactions
over the telephone.

á To guarantee security, the customer must first

authenticate their identity through a numeric
or verbal password or through security
questions asked by a live representative.
 Internet Banking
á Internet banking enables people to carry out
most of their banking transactions using a safe
website which is operated by their respective
banks.
á The necessary things that a person needs for
using online banking are:

u Œn active bank account with balance in it for transactions.

u Πdebit or a credit card number.
u Customer user ID.
u Bank account number.
u Internet Banking cIN number.
u Πcersonal computer with access to the Web.
 SMS Banking
á SMS banking is a service provided by
banking institutions over the customers
mobile phone using SMS messaging.

á SMS banking services are operated

using both cush and cull Messages.

á The banks customer is empowered with

the capability to select the list of
activities(alerts) that he/she needs to
be informed.
 ŒTM
á Œn automated teller machine commonly
called as cash point is a computerized
telecommunication device that provides
the clients with access to financial
transaction in public space without the
need for a cashier or bank teller.

á Using an ŒTM, customers can access their

bank accounts in order to make cash
withdrawals, check their account balances
etc.