IDBI, Sidbi ink SME funding alliance

State-owned IDBI Ltd today signed a memorandum of understanding (MoU) with the Small Industries Development Bank of India (Sidbi) for co-financing small and medium enterprises (SMEs), the service sector and infrastructure projects in domestic industrial clusters.

Through this tie-up, both these institutions also aim at providing 'anywhere banking' facilities for SMEs. Sidbi's current account with IDBI would enable SME borrowers to avail of this facility with IDBI branches located in the same vicinity.

IDBI chairman V P Shetty said, "Risk sharing between IDBI and SIDBI for project funding and working capital facility would create a new synergy. We would explore a joint front office approach in each other's location while promoting SME sector development."

Under the initiative, Sidbi and IDBI would be creating a joint mechanism for evaluating projects. The tie-up would utilise IDBI's banking facilities to deliver term loans and for operation of working capital facility, said a press statement.

A technology product based on Finacle's core banking solution has been designed to enable SMEs, assisted by Sidbi, to have access to facilities such as electronic fund transfer, debit cards and real time gross settlement (RTGS), provided by IDBI.

Apart from credit to SMEs, the alliance will also focus on joint initiatives in the areas of micro credit, cluster development and other development initiatives.

Sidbi has existing tie-ups with ten public sector banks and private sector Yes Bank and Federal Bank to lend to different SME clusters across India.