31  Schemes offered by various commercial banks and financial institutions

Commercial banks and financial institutions play a vital role in entrepreneurial financing, offering schemes that address the diverse needs of entrepreneurs—ranging from startup capital, working capital, export finance, to innovation support. These schemes bridge the gap between entrepreneurial vision and financial resources, ensuring that enterprises not only start but also sustain and scale.

Khanka (2020) stresses that banks remain the most accessible source of institutional finance for small and medium entrepreneurs, while Desai (2014) notes that commercial banks complement development banks and government agencies in supporting entrepreneurship.

31.1 Importance of Bank and Institutional Schemes

  • Provide accessible credit to entrepreneurs at different stages.
  • Facilitate financial inclusion for underserved groups.
  • Enable entrepreneurs to access working capital and term loans.
  • Encourage export and international trade.
  • Strengthen innovation and technology adoption.

31.2 Major Schemes by Commercial Banks in India

Scheme Provided By Objective Example
Stand-Up India Scheme Public sector banks Loans for women & SC/ST entrepreneurs Manufacturing unit loans up to ₹1 crore
PMEGP (Prime Minister’s Employment Generation Programme) Banks with KVIC/DICs Promote micro-enterprises in rural & urban areas Financing self-employment ventures
Mudra Yojana (Shishu, Kishore, Tarun) Commercial banks & MFIs Loans up to ₹10 lakh for micro-businesses Street vendors, artisans, small traders
CGTMSE (Credit Guarantee Fund Trust for MSEs) SIDBI & banks Collateral-free credit up to ₹2 crore MSMEs without assets
Export Credit Schemes EXIM Bank, commercial banks Finance for exporters and international trade Exporters accessing pre-shipment finance
Women Entrepreneurship Schemes Banks (SBI, ICICI, PNB) Tailored schemes for women-owned enterprises SBI’s Stree Shakti package
Digital Lending Schemes Fintech partnerships Easy loans via mobile apps and portals Paytm and SBI digital MSME loans

31.3 Role of Financial Institutions

Apart from banks, specialized financial institutions extend entrepreneurial support:
- SIDBI: Apex institution for MSME financing.
- NABARD: Provides credit for rural and agri-entrepreneurship.
- EXIM Bank: Facilitates export credit and global expansion.
- State Finance Corporations (SFCs): Provide regional financial support for small businesses.

31.4 Advantages and Limitations

Aspect Advantages Limitations
Bank & FI Schemes - Accessible to wide population
- Collateral-free credit options
- Promote financial inclusion
- Encourage exports & women entrepreneurship		 - Bureaucratic hurdles
- Risk-averse lending by banks
- High interest rates for some borrowers
- Unequal reach in rural areas

31.5 Indian Perspective

  • Indian banks have shifted from being conservative lenders to becoming active partners in entrepreneurship.
  • Programs like Mudra Yojana and Stand-Up India have brought millions of small entrepreneurs into the formal financial system.
  • Case: Mudra loans supported women-led micro-businesses such as tailoring and food stalls.
  • Case: CGTMSE enabled startups with no collateral to secure funding.

31.6 Global Perspective

  • USA: Small Business Administration (SBA) provides loan guarantees and microloans.
  • Europe: European Investment Bank (EIB) funds SMEs, focusing on innovation and sustainability.
  • China: State-owned banks provide concessional loans and export credit.
  • Africa: Microfinance institutions play a major role in providing small loans to entrepreneurs.

31.7 Case Studies

  1. Mudra Yojana (India): Enabled millions of micro-entrepreneurs to access credit.
  2. Stand-Up India (India): Empowered women and SC/ST entrepreneurs through tailored loans.
  3. CGTMSE (India): Provided collateral-free funding to high-risk startups.
  4. SBA Loans (USA): Supported small businesses during COVID-19 recovery.
  5. EIB (Europe): Funded renewable energy startups under SME schemes.

31.8 Institutional Finance Support Diagram

graph LR
    A["Bank & FI Schemes"] --> B["Startup & Micro Loans"]
    A --> C["Working Capital & Term Loans"]
    A --> D["Export Credit"]
    A --> E["Women Entrepreneurship Schemes"]
    A --> F["Collateral-Free Credit"]
    A --> G["Digital Lending Platforms"]

    %% Style
    classDef dark fill:#004E64,color:#ffffff,stroke:orange,stroke-width:3px,rx:10px,ry:10px;
    class A,B,C,D,E,F,G dark;

31.9 Future Outlook

  • Digital Banking: AI and fintech driving instant loan approvals.
  • Green Finance: Increasing focus on clean energy and sustainable enterprises.
  • Financial Inclusion 2.0: Expanding access to rural, women, and marginalized entrepreneurs.
  • Global Collaborations: Cross-border credit access for Indian entrepreneurs.
  • Blockchain in Lending: Enhancing transparency and reducing fraud.

31.10 Summary

Commercial banks and financial institutions provide a critical financial backbone for entrepreneurship.
- Indian schemes like Mudra, Stand-Up India, PMEGP, and CGTMSE have transformed entrepreneurial finance.
- Globally, SBA (USA), EIB (Europe), and microfinance (Africa) demonstrate diverse approaches.
- Case studies highlight how these schemes enable entrepreneurs to overcome financial constraints.

Strengthening access, reducing bureaucratic hurdles, and leveraging technology will further enhance the role of banks and financial institutions in empowering entrepreneurship.