Credit dispensation system for NBFCs

The Small Industries Development Bank of India (SIDBI) and the National Bank for Agriculture and Rural Development (NABARD) have agreed to evolve a credit dispensation arrangement to provide support to NBFCs catering to the SME and agriculture sectors.

RM Malla, chairman of SIDBI, said, "We are focussing on micro SMEs, whereas NABARD is targetting agriculture. Through SIDBI, the credit flow will go to SMEs. We have lent to 100 MFIs, 20 of which are NBFCs lending to micro SMEs. We have also supported 10,000 to 30,000 small scale enterprises, several of which are NBFCs lending for trucks and equipment."

"We provide onward lending to the ultimate SMEs. In the second type of arrangement, we have a co-sharing of the loan. We want to ensure that no worthwhile SME project languishes for want of resources," Malla added.

SIDBI provides refinance to NBFCs and commercial banks as well as direct loans. SIDBI and NABARD are also working at strengthening the NBFCs' capacity to finance the SME and agricultural sectors. SIDBI has granted Rs 12 crore to around 12 NBFCs.

The Reserve Bank is examining the issue of smooth flow of bank finance to NBFCs in order to develop them into financially strong powerhouses, equipped with improved skills and technology.