Sidbi's venture capital fund approved

The Small-Scale Industries Development Bank of India (Sidbi) has constituted a Rs 500 crore venture capital fund to be made operational by September 2004.

The proposal has been approved by the Securities and Exchange Board of India (Sebi), Sidbi chairman and managing director V K Chopra said on the sidelines of the small-scale industry convention. This is Sidbi's latest move to reposition itself as a one-stop shop to meet financing requirements in the small-scale sector.

Chopra also announced the setting up of a consortium of banks which have pooled in for a credit rating facility for the SSI sector. He said that apart from the Punjab National Bank, Bank of Baroda, Bank of India, Canara Bank and the Oriental Bank of India are facilitating the credit rating facility.

Respective boards of the banks have approved the proposal and it would be operational by January next year.

Besides direct lending to the SSI sector, Sidbi also provides refinancing to State Financial Corporations and commercial banks for their lending to the sector. Sidbi is the government's principal coordinating agency for new initiatives in the SSI sector.

The Reserve Bank of India (RBI) had refused permission to Sidbi to foray into commercial banking and had asked for an amendment in the Sidbi Act. Sidbi is categorised as a financial institution.

The proposal to convert into a bank had however been cleared by both the Sidbi board and the ministry of finance and small-scale industries.