The Centre along with the Reserve Bank of India (RBI) has extended credit to the tune of Rs 7,200 crore to Small Industries and Development Bank of India (Sidbi) for the development of the medium, small and micro enterprises (MSME) sector, which contributes 8 per cent to the country’s GDP and 40 per cent to the total exports.
Speaking to Business Standard, R M Malla, Chairman and Managing Director (CMD) of Sidbi, said out of Rs 7,200 crore, the bank has extended Rs 6,500 crore to public sector banks (PSBs) and around Rs 600-700 crore to state financial corporations. The bank has set a target to increase credit to Rs 13,000 crore by March 31, 2009.
Malla said Sidbi has lent the Rs 6,500 crore to PSBs at 6.5 per cent (5.5 per cent repo rate plus 1 per cent) with the condition that the banks have to lend these credits to the MSME sector at 10 per cent interest and that disbursements have to be made before March 31, 2010. Sidbi has also assured the banks that it will refinance loans to them if necessary and the measure will double their lending to the MSME segment, he added.
Sidbi’s measures include restructuring of loans to the banks, no collateral for new loans up to Rs 5 lakh, a new credit guarantee scheme and increase in credit limit.
Approximately 1.3 crore MSMEs are there in India, out of which only 39 lakh had been provided loans by PSBs in 2008. However, not many MSMEs are aware of such measures and hence they are deprived of low-interest loan benefits. Sidbi is now making efforts to create awareness among MSMEs so that they access these funds, Malla said.
The Sidbi CMD said that RBI has directed PSBs to restructure loans given to the MSME sector on a case to case basis before January 31, 2009. So, MSMEs can approach the banks for restructuring of loans, he added.
Malla said that Sidbi has told its partner lending institutions to extend loans without collateral under its credit guarantee scheme, which was increased to Rs 1 crore from Rs 50 lakh last year. Sidbi would guarantee this type of loans to an extent if it turned bad. With effect from January 2, the percentage of guarantee has been increased to 85 per cent from 75 per cent earlier.
Meanwhile, RBI has directed banks not to demand from MSMEs collateral security for new loans up to Rs 5 lakh.
In December, banks were told to augment their limits to MSMEs by 20 per cent on an ad hoc basis and that Sidbi would refinance that if banks needed. As of now, this facility is available on a first come first served basis, Malla said, adding that Sidbi has increased its direct lending limit by 15 per cent.
