SIDBI will launch SME credit-rating agency

The Small Industries Development Bank of India (SIDBI) will set up a credit rating agency for small and medium enterprises in association with Dun & Bradstreet by next month.

The company will be a joint venture with these two partners and this, according to SIDBI, will empower the lending banks to quickly assess the status of SMEs they will lend to.

Said N Balasubramanian, CMD, SIDBI: "By September the new company should be in place and this is among the several measures we are undertaking to make borrowing by small scale sector easier."

In addition to this initiative, SIDBI is also entering into pacts with nationalised banks across India to develop various industrial clusters in the country. On Saturday, SIDBI announced a pact with Corporation Bank to increase the flow of credit to SME sector in South India.

According to an MoU signed by the two financial institutions, it will aim to leverage the strength of SIDBI in term lending, and expertise and reach of Corporation Bank in working capital lending to deliver better value to customers of both the banks.

Both will work jointly to identify the prospects and take up co-financing or exclusive financing of term loans by SIDBI, while Corporation Bank will extend working capital finance.

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

He added that the government and banking sector recognises the importance and contribution of the SME sector in the economy and place high priority for meeting the needs of the sector.

Added V K Chopra, CMD, Corporation Bank: "SMEs form the backbone of the economy not only in developed countries but also in emerging economies such as India. The SME sector in the country has been estimated to provide direct employment to over 2 crore people, serving as the second largest provider of employment after agriculture and contributes over 34 per cent of nation's exports and 7 per cent of GDP."

SIDBI has similar pacts with Bank of India, Bank of Baroda, UCO Bank, Indian Bank, Punjab National Bank and Oriental Bank of Commerce.