Sidbi wants change in Act to provide working capital
Small Industries Development Bank of India (Sidbi) has proposed an amendment to the Sidbi Act to enable it to provide working capital financing to the small and medium enterprises (SME). Currently, the financial institution can only provide term l...
By TNN |
MUMBAI: Small Industries Development Bank of India (Sidbi) has proposed an amendment to the Sidbi Act to enable it to provide working capital financing to the small and medium enterprises (SME). Currently, the financial institution can only provide term loans to the SME sector.
The finance ministry had earlier said the current business model of Sidbi was flawed, following which the institution has proposed a new business model.
According to N Balasubramanian, CMD, Sidbi, “The new model will focus on direct lending, instead of refinancing. Also till such time an amendment is made to the Sidbi Act we will tie up with commercial banks. We are also looking at a credit rating agency. We will become a one-stop shop jointly with the banks. The RBI clearance is expected in some time.”
Sidbi, along with other public and private sector banks and Dun & Bradstreet and Cibil, is setting up a credit rating agency for the SME sector which will kick off around mid-August.
As a part of its plans to tie up with commercial banks, Sidbi on Tuesday announced an alliance with Yes Bank for a wide range of financial services and products to SMEs. Under the deal, Sidbi will offer term loan financing, while Yes Bank will offer other financial products including working capital under a joint brand.
“The pilot project of the alliance will kick off from Gurgaon. To start with, the alliance will look at the auto, garment and the IT sectors,” said Mr Balasubramanian.
Added Rana Kapoor, MD & CEO, Yes Bank: ”We are looking at a target of Rs 100 crore of incremental loans at a minimum in the first year. We will also look at derivatives, cash management and advisory services.”Yes Bank has a corporate loan book of Rs 1,250 crore and an SME exposure of Rs 350 crore.
Sidbi has already tied up with Bank of India and UCO Bank. According to Balasubramanian, “Each bank has its own strength. There are 380 SME clusters in the country. We will tie-up with banks which have more branches in a particular region.”
Currently, Sidbi is also operating a Rs10,000-crore SME fund which was floated last year. “There has been a credit offtake of Rs 2,800 crore from the fund till March,” he said.
Along with other public sector banks, it had launched an SME Growth Fund with a corpus of Rs 500 crore. There have been total disbursements of Rs 40-50 crore from the fund with another Rs 60-70 crore in the pipeline, said
The finance ministry had earlier said the current business model of Sidbi was flawed, following which the institution has proposed a new business model.
According to N Balasubramanian, CMD, Sidbi, “The new model will focus on direct lending, instead of refinancing. Also till such time an amendment is made to the Sidbi Act we will tie up with commercial banks. We are also looking at a credit rating agency. We will become a one-stop shop jointly with the banks. The RBI clearance is expected in some time.”
Sidbi, along with other public and private sector banks and Dun & Bradstreet and Cibil, is setting up a credit rating agency for the SME sector which will kick off around mid-August.
As a part of its plans to tie up with commercial banks, Sidbi on Tuesday announced an alliance with Yes Bank for a wide range of financial services and products to SMEs. Under the deal, Sidbi will offer term loan financing, while Yes Bank will offer other financial products including working capital under a joint brand.
“The pilot project of the alliance will kick off from Gurgaon. To start with, the alliance will look at the auto, garment and the IT sectors,” said Mr Balasubramanian.
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Added Rana Kapoor, MD & CEO, Yes Bank: ”We are looking at a target of Rs 100 crore of incremental loans at a minimum in the first year. We will also look at derivatives, cash management and advisory services.”Yes Bank has a corporate loan book of Rs 1,250 crore and an SME exposure of Rs 350 crore.
Sidbi has already tied up with Bank of India and UCO Bank. According to Balasubramanian, “Each bank has its own strength. There are 380 SME clusters in the country. We will tie-up with banks which have more branches in a particular region.”
Currently, Sidbi is also operating a Rs10,000-crore SME fund which was floated last year. “There has been a credit offtake of Rs 2,800 crore from the fund till March,” he said.
Along with other public sector banks, it had launched an SME Growth Fund with a corpus of Rs 500 crore. There have been total disbursements of Rs 40-50 crore from the fund with another Rs 60-70 crore in the pipeline, said
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