RBI unveils scheme to facilitate SSI term loans

The Reserve Bank of India (RBI) today unveiled a scheme of Small Enterprises Financial Centres (SEFCs) for co-financing of term loan requirements of small scale industrial (SSI) units by banks and the Small Industries Development Bank of India.

The working capital requirements of the co-financed units will be met by banks.

Under the scheme, banks will be encouraged to establish mechanisms for better co-ordination between their branches and branches of SIDBI which are located in the 388 clusters identified by the ministry of SSI.

The SEFC scheme is meant for co-financing the SME sector, including tiny services sector, on mutually agreeable operational modalities between SIDBI and strategic partner banks.

Out of the 388 SSI clusters, 123 clusters are being catered to by 30 existing branches of SIDBI and few more branches/ delivery channels are proposed during the year.

Thus in terms of coverage, 46 SIDBI branches are likely to be in place by the end of July, 2005, broadly covering 149 SSI clusters. The branches of SIDBI in the clusters will be rechristened as SEFCs.

All tiny units, irrespective of loan size, will be eligible for coverage under SEFCs. Special focussed attention will be given to financing to tiny sector as they have limited access to institutional finance.

New SME units, proposals for expansion, modernisation, marketing and exports and existing units not having or having limited banking linkage will be eligible for finance under the SEFC scheme.

Generally accepted norms for debt equity ratio, repayment period, security coverage, rate of interest, etc would be aligned as per mutual consent of SIDBI and strategic partner banks.

The scheme has been worked out in consultation with the ministries of finance and SSI, SIDBI, Indian Banks' Association and select banks.