In a bid to facilitate MSMEs financially, the Small Industries Development Bank of India (SIDBI) is targeting total lending of almost Rs 1.40 trillion during the current fiscal year. This would be a growth of over 30% compared to total advances of Rs 1.09 trillion during 2017-18. Besides, the central refinance agency is also working to tap the large yet 'unquantified' lending in the informal or unorganized sector by facilitating cheaper credit to micro and small units.
"The lending rates are much steeper in the informal sector, as high as 20-25% compared to the formal economy, where credit rates are cheaper and loans are easier to get. Our target is to provide such loans at around 15% interest rate," SIDBI CMD Mohammed Mustafa said in a statement.
Towards this end, the Bank would work closely with micro finance institutions (MFI) and non banking financial companies (NBFC) to 'institutionalize' the informal sector lending as this space has yet not been focused upon by any top central financial body.
This move by SIDBI will empower MSMEs and thus will create a spillover effect in terms of creating opportunities. Needless to say, owing to its low risk banking norms and due diligence, SIDBI has so far not been facing any sort of financial crunch like other commercial banks.
Despite the domestic banking being plagued with asset quality deterioration, SIDBI has seen its non-performing assets (NPA) ratio declining from 1.2% in 2016-17 to 0.94% in 2017-18, which reflected robust asset management. Likewise, the net NPA stood at a lower level of 0.26%.
At its 20th annual general meeting, the board reiterated to implement SIDBI Vision 2.0, which envisages a broader integrated credit and development support, multiplier effect and aggregator roles for the Bank going forward.
Also, bank is conducting a comprehensive MSME Census in consort with different banks and financial institutions to ascertain their actual status and funding requirements, so as to devise an appropriate strategy to address the gaps, said Mustafa.
For creating startup eco-system on the lines of one it forged with IIM Lucknow last year, SIDBI is in talks with Indian Institute of Management, Bangalore (IIM-B) for creating one such more.
“We are discussing the issue with IIM Bangalore and a decision would soon be taken," he added. Similar tie-ups with other premier institutions are also on the agenda to promote entrepreneurship.
Further, the Bank is working closely with the Uttar Pradesh government to offer financial advisory services and adopting 10 districts for state-of-art credit interventions. Further it will lend support in promoting UP government ODOP scheme.