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Sarbajeet K. Sen

New Delhi , Sept. 6

THE Small Industries Development Bank of India (SIDBI) has been at the centre-stage of building a vibrant small and medium sector in the country.

The Chairman and Managing Director, Mr V.K. Chopra spoke to Business Line on the initiatives being taken by the institution.

Excerpts:

The small and medium sectors have been getting lot of attention from successive Governments. What role is SIDBI's playing in supplementing the Government's efforts to augment the flow of credit to the sector?

Besides direct lending, SIDBI provides refinance to State Financial Corporations (SFCs) and commercial banks for their lending to SSI. It is also the principal coordinating body for new initiatives in SSI sector.

Earlier refinance was our largest activity, but later banks became flush with funds and off-take through the refinance window came down substantially. That was the time when we expanded our direct lending portfolio.

We have been lending to SSI or large corporates who source goods from SSI industries financed by us. These include BHEL, Escorts, Bajaj Electricals, Hero Cycles and Atlas Cycles among others.

We are also lending to infrastructure sector projects such as those in the power and roads sector that help in promoting SSI clusters and the service sector that have linkages to the SSI sector such as multiplexes, shopping malls.

SIDBI does not have a large number of offices. How do you plan over the handicap?

It is true that our main limitation has been our reach. Our visibility has been poor. But this will change. We have drawn up extensive plans to increase our presence and visibility by opening high-profile branches in industry clusters.

We have already opened four such branches during the last year in Mumbai (Andheri), Surat, Gurgaon and Noida.

How is the progress of disbursals under the SME Fund?

The SME Fund has been operational since April 1. Our aim is to disburse Rs 10,000 crore in the next two years under this window, which would include refinance.

During the last four months, we have already disbursed Rs 602 crore mainly to SSI sector.

Proposals from the medium sector are coming in, but not to a very large extent.

SIDBI had drawn up plans to restructure SFCs. What is the progress?

The health of many SFCs has not been very good. The total exposure of SIDBI to SFCs has been brought down to around Rs 4,200 crore from over Rs 5,000 crore earlier, mainly through recoveries.

Recently, a restructuring package for the SFCs was approved which provided equity support. Under it, SFCs where managements were making conscious attempts to bring down their NPAs would get assistance at 2 per cent below the SIDBI's normal lending rate of 9.5 per cent.

There would also be a one-year moratorium on repayments. After the restructuring package was announced, 14 SFCs out of the 18 have been showing improvement. However, four have bad debts of Rs 566 crore.

What are the new initiatives being undertaken by SIDBI?

As I told you our focus is to expand out direct lending operations. We are also taking up micro-finance in a big way through micro-finance institutions.

Earlier, total exposure under this window was barely Rs 50 crore that we increased to Rs 95 crore at the end of March 31, 2004.

We now plan to raise it to Rs 200-250 crore by the end of this fiscal. Total beneficiaries under this window would be around 12 lakh.

The recoveries are at a healthy 97 per cent. This is also a socially beneficial activity.

We are also planning to set up a dedicated Venture Capital Fund (VCF) and a credit rating agency (CRA), both for the SME sector.

The VCF would start this year with Rs 100-crore corpus that would be raised to Rs 500 crore within two to three years.

It would fund start-ups in areas such as agriculture, biotech, food processing and auto ancillaries which have growth and export potential.

The CRA would also be set up within the current fiscal. We are looking at tie-ups with a number of public sector banks for these two initiatives.

We are also planning to increase the corpus of the Credit Guarantee Fund Trust from the present Rs 800 crore to Rs 2,500 crore.

This would provide major comfort to the lenders.

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