SBI to ramp up SME lending

State Bank of India (SBI) plans to increase the share of SME lending to 50 per cent of its total advances from the current 20 per cent over three to four years.

SBI's lending to small and medium enterprises (SMEs) as on January 31, 2006 totalled Rs 42,452 crore. The bank's retail loans portfolio, on the other hand, constitutes 30 per cent of its loan assets, chief general manager, A Ramesh Kumar, said today at an SME Business Development Meet.

In earlier days, lending to the government sector alone constituted 50 per cent of the bank's balance sheet.

Small Industries Development Bank of India chairman and managing director, N Balasubramaniam said talks were recently held with the Reserve Bank of India for addressing various issues concerning the SME sector.

These issues include a clear definition for the services sector, which is a key contributor to the nation's gross domestic product, availability of adequate timely credit to SMEs and ensuring that even smaller enterprises having up to ten employees also have access to bank credit.

SBI's Ramesh Kumar said, "Currently, SMEs are given loans at the rate of 9-11 per cent. These rates are unlikely to see a rise in the immediate future."

He said there is immense potential for venture capital firms in the SME sector. Investments made in the sector carries a huge risk element, which makes it a difficult proposition for banks. SBI has a stake in the Rs 500 crore venture capital fund floated by Sidbi for the SME sector.