ROLE PLAYED BY FINANCIAL INSTITUTIONS AND COMMERCIAL BANKS.

Role played by financial institutions and commercial banks in providing financial assistance to small scale entrepreneurs.

The small scale industrial sector raises term credit and working, capital required by it from commercial banks, co- operative banks, regional rural banks and state- financial corporations. The banking system provided mainly working capital and the State Financial Corporations mainly provides investment capital.

Financial assistance in kind is available to the small- scale industrial sector from the National Small Industries Corporation (NSIC) at the national level, the State Small Industries Development Corporations (SSIDCs) at the state level which supply machinery on hire- purchase basis. The Industrial Development Bank of India (IDBI), the National Bank for Agriculture and Rural Development (NABARD) and the Industrial Reconstruction Bank of India (IRBI) provides refinance facilities to banks and financial corporations for financing the small scale industrial sector.

The credit provided by banks to the small scale industrial sector is treated as credit to the ‘priority sector’. The commercial banks are required to lend 40% of their total loans to the ‘priority sector’, of which 15% to 16% are required to be in the form of direct agricultural advances and the rest can be to small scale industry, small business, small transport, operators etc.

State Financial Corporations provide financial assistance up to Rs. 60 Lakhs to private/ public limited companies and up to Rs. 30 Lakhs to proprietors and partnership firms. Rates of interest charged vary according to the size of the loan and category of entrepreneurs like SC/ ST, women entrepreneurs, exservicemen, physically handicapped persons etc. Composite loans up to Rs. 50,000 are provided form meeting both term- loan and working capital so that, the small scale entrepreneurs does not have to go to other institutions.

Locus of control is an attribute indicating the sense of control that a person has over life. One of the concerns the people have when considering forming a new venture is, whether they will be able to sustain the drive and energy required not only to overcome the inertia in forming something new but also to manage the new enterprise and make it grow.