Sidbi signs pact for co-financing in SME

Monday, August 29, 2005

To give a major thrust to small and medium enterprises (SME) lending, Indian Overseas Bank (IOB) and Small Industries Development Bank of India have signed an MOU for co-financing the projects in the segment. Under the agreement, term loan for viable projects in the sector would be financed by Sidbi, while the working capital requirement would be fulfilled by IOB. Initially, the scheme would be implemented at select clusters, including Chennai, Erode, Tiruchi and Madurai and would later be extended to other places based on the scope.

IOB is targetting lending Rs 1,000 crore to the SSI sector during this year. In the first three months of this fiscal, it had financed about Rs 150 crore to the sector.

?The major feature of this MOU is the availability of Sidbi?s expertise for IOB to assess the risks associated with the financing of SME sector and help quicken the loan delivery process,? elaborated N Balasubramanian, CMD, Sidbi, ?We?ll use technology and better mechanisms in all clusters for early delivery of credit.?

Sidbi as an apex institution to improve the credit flow to the SME sector has tied-up with eight public sector banks in the country. With these tie-ups, it has covered 150 SME clusters, out of the total 388 clusters identified across the country. The remaining clusters were expected to be covered in the next one year through tie-ups with more banks.

Meanwhile, P Chidambaram will launch Sidbi?s SME rating agency next month. The proposed credit rating agency, exclusively for small and medium enterprises, would be launched on September 5 at Coimbatore, and is expected to come up in other parts of the country, Balasubramanian said.

Sidbi had roped in international agency Dun and Bradstreet to get the required expertise for the new agency, which was aimed at assessing the credit worthiness of firms in the SME segment. Balasubramanian said that companies with AAA rating in the segment could demand lowest interest from the lending banks once the new rating agency was in force.

He also said there was a need to develop industry-based products by banks. The products should be developed depending upon the requirements of every industry and Sidbi was exploring the possibility of developing such product.


[Julia’s note: Rs 1 crore %7E USD 228,000]

Source: Financial Express (link opens in a new window)