Commercial Banks play an important role in the growth and development of economy in general and enterprise sector in particular. Commercial Bank in India comprises the State Bank of India (SBI) and its subsidiaries, nationalized banks, foreign banks and other scheduled commercial banks, regional rural banks and non-scheduled commercial banks. The total numbers of branches of commercial banks are more than 50,000 and the regional rural banks are approximately 8,000 covering 280 districts in the country. Commercial banks mostly provide short term loans and in some cases medium term financial assistance also to small scale units. According to the Data compiled by RBI, of all the advances given to small scale industries by the commercial banks, the share of ' term loan' is nearly 30%. The lead in this regard was taken by the State Bank of India (SBI) in 1956 when a pilot scheme for guaranteed credit to small scale units was started. Initially, the scheme was confined to the branches of the SBI in the country. Subsequently, some of the other commercial banks also adopted the scheme. Under this scheme, the banks provide to the SSIs the medium term and installment credit for acquiring fixed asset for the purpose of establishment and extension of their units, and term credit for meeting their working capital needs. The borrower is required to make a down payment of 20 to 33 1/3% of cost of equipment to be purchased from one's own resources while the rest is financed out of the loan. The rate of interest charged on these loans varies from time to time as per the directive of the Reserve Bank of India (RBI). The period for which this loan is granted varies from 7 to 10 years. These loans are repayable in half yearly or yearly instalments.
Most of the commercial banks have got specialized units in their administrative structure to take care of the financial needs of the small scale industrial units. The fixed capital needs or the long and medium term needs of the small scale industrial units are presently being taken care of by the banks under their integrated scheme of credit for the small entrepreneurs. New units apart from the existing units are also eligible to avail of the advances financed to meet their medium and long-term credit needs for replacement of machinery, addition of the machinery, modernisation etc. The rate of interest charged normally from the small scale industrial units is between 12% and 15% against 18 % from the large scale units.
The commercial banks also establish letter of credit on behalf of their clients for favoring supplies of raw materials/ machinery (both Indian and foreign) which extend the bankers assurance for payment and thus help their delivery.
Most of the commercial banks are now geared to provide counseling services to prospective and existing entrepreneurs. Some of the banks have even established consultancy cells to provide guidance to entrepreneurs at the time of project report preparation. Such consultancy cells undertake detailed studies in established units also for improving their functioning.