Business Daily from THE HINDU group of publications
Tuesday, Jul 14, 2009
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Business Daily from THE HINDU group of publications Tuesday, Jul 14, 2009 ePaper | Mobile/PDA Version | Audio | Blogs |
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Money & Banking
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Financial Institutions Industry & Economy - SSI Web Extras - Credit Market SIDBI plans to extend re-finance to banks, SFCs
K. Ram Kumar Mumbai, July 13 The Small Industries Development Bank of India (SIDBI) is considering the possibility of extending re-finance to banks and State Finance Corporations (SFCs) at reasonable interest rates for a longer period – three to five years – against their lending to micro and small enterprises (MSEs). Further, the development financial institution may also impose a cap on the mark-up (over the re-finance rate) that banks and SFCs can charge to MSE borrowers. This move is aimed at motivating banks and SFCs to push credit to MSEs, which have been hit badly by the domestic as well as global economic slowdown in the last one year or so. Currently, the DFI provides re-finance to banks and SFCs for only one year. SIDBI grants re-finance against term loans granted by banks and SFCs for establishing projects in the MSE sector as also for their expansion, modernisation and diversification. Longer period and lower ratesAccording to Mr R. M. Malla, Chairman & Managing Director, banks and SFCs would find it beneficial to tap SIDBI, as the re-finance rate would not only be reasonable but could be provided for a longer period. Further, should interest rates nudge up later during the year the re-finance from SIDBI would be attractive. According to the Union Budget, SIDBI has been allocated Rs 4,000 crore under the Rural Infrastructure Development Fund to provide re-finance to banks and SFCs lending to the MSEs. SIDBI will provide re-finance equivalent to 50 per cent of their incremental lending to MSEs during the current financial year. It means that if banks and SFCs collectively lend Rs 8,000 crore this year, they will get the entire Rs 4,000 crore as re-finance. Special schemeSIDBI would shortly be devising a special re-finance scheme, in consultation with the Department of Financial Services, Ministry of Finance, Reserve Bank of India and the banks, he added. Last year, SIDBI got Rs 7,000 crore as a special line of credit from the RBI at the repo-rate. The DFI added a margin of 100 basis points to provide re-finance to banks and SFCs. “As of now, 50 lakh MSEs have been assisted by public sector banks. Another 10 lakh have received credit from regional rural banks and co-operative banks. Around 40 lakh enterprises have as yet not received any financial assistance from the formal sector. We want these enterprises to be covered by the banking sector,” the SIDBI chief said. Out of 1.3 crore MSMEs in the country, 95 per cent fall in the micro and small enterprises category. SIDBI opens specialised micro-finance branches SIDBI to open extension branches More Stories on : Financial Institutions | SSI | Credit Market
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