The Hindu Business Line : Govt may hike target for bank credit to SSIs

The Union Finance Minister, Mr P. Chidambaram, on Friday said credit to the agriculture sector grew after setting higher targets for public sector banks and that the Government may set similar targets to enhance the flow of credit to the SSI sector.

He said the flow of credit to SSI and medium enterprises must be increased. "Last year, we made efforts to change the mindset of banks in lending to the farm sector. This year, we are working with SIDBI and public sector banks to formulate an eight-year programme to vastly expand credit to the SSI sector," he said at the inauguration of the SIDBI-SME Development Centre here on Friday.

It is time the small-scale industries sector graduates to becoming the small and medium enterprises sector, he emphasised.

"Small although beautiful, is not the most efficient way to do business. Scale and size are important. In the real world, what matters is one's ability to compete and deliver better than the rival. It is time to re-orient our attitude about this sector as being SMEs and not just SSIs," he said.

Of SIDBI's advances of Rs 11,000 crore, credit to State Finance Corporations constituted Rs 5,200 crore, refinance around Rs 2,800 crore and direct lending around Rs 3,000 crore. The pace of growth of advances has not been up to expectations, he said.

When SIDBI was originally promoted 15 years back, the old model envisaged was perhaps a flawed one, as it did not anticipate the changes that would take place in the banking sector. "The model envisaged 15 years ago was that SIDBI should lend only to state finance corporations and provide refinance to banks. It did not anticipate that SFCs are not always run professionally and banks don't always need refinance," he said.

SIDBI has presented a new business model and the Finance Ministry is looking at it closely. SIDBI wants to expand its role by getting into expanded direct lending and working capital lending. All these issues were being examined, Mr Chidambaram said.

`3 Cs to drive banking'

CONSOLIDATION, convergence and competition will be the key drivers of the banking industry in the future. Bank employees need to recognise this truth and dispel any irrational fears, said the Finance Minister, Mr P. Chidambaram, here on Friday.

"Size and scale for banks are important and, therefore, public sector banks need to consolidate. We must let off irrational fears. Even when there are consolidations, the public sector characteristic of these banks will be maintained. Retrenchment will not be allowed. Branch closures will not be allowed," he said.

Banking is not an extended activity of the government. Even if the government is the owner of banks, we must give banks greater and greater autonomy, he said.

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