APSFC may cut interest rates for SMEs

MoU with Sidbi allows corporation to access funds at lower interest rate

The Andhra Pradesh State Finance Corporation (APSFC) is mulling a proposal that will see it restructure high interest loans extended earlier to the small and medium enterprises (SMEs).

The reduction in interest rates for outstanding and future loans is being considered by APSFC as the corporation has been able to access low cost funds from the Small Industries Development Bank of India (Sidbi).

Sidbi has been providing funds to APSFC at an interest of 7.5 per cent, as part of the Rs 10,000-crore small and medium enterprise (SME) fund set up by Government of India in January this year. Announcing this at a press conference, APSFC chairman M Gopalkrishna said that the restructuring would be considered on the basis of performance of the borrowers.

Addressing a joint press conference with N Balasubramanian, deputy managing director of Sidbi, he said that APSFC was considering an expansion in its portfolio, recover old loans, enter into new areas and increase the size of the loans. "APSFC has enough funds for future activities due to the improvement in recovery of old loans," Gopalakrishna said.

APSFC also signed an MoU with Sidbi which has enabled the former to avail a further concession of 0.5 per cent in interest rates from Sidbi. State finance corporations which have not signed MoUs typically can access Sidbi only at about eight per cent interest.

Balasubramanian also announced that the focus on other support areas like working capital finance, joint finance and infrastructure will be given importance.

He said Sidbi was now making available credit in the market directly, through commercial banks who can take refinance, and with the help of state financial organisations like APSFC.

Appreciating the good work done by the APSFC, he said: "The corporation has done well over the year as it has met all the requirements of Sidbi." APSFC disbursed Rs 280 crore against a target of Rs 270 crore. The recovery rate of the corporation was also high at Rs 440 crore as against a target of Rs 430 crore.

Sidbi is also expected to sign similar MoUs with other states. Sidbi, he said, had not put a limit to how much a state was entitled to borrow from the fund. "There is no ceiling. Sidbi is only looking at the recovery rates and if they are good we will give fresh loans," he said.