The Hindu Business Line : SIDBI plans credit rating agency for SME sector

SMALL Industries Development Bank of India (SIDBI) is planning to set up a credit rating agency for the small and medium enterprises sector, along with Dun and Bradstreet, Credit Information Bureau of India Ltd and other commercial banks.

This agency will provide an affordable, credible and independent rating to SMEs, which will help them get funds at competitive rates and also enhance their creditability, said Mr N. Balasubramanian, Chairman and Managing Director, SIDBI.

"This will be first credit rating agency for the SME sector. With this agency, we can reach out to a larger number of SMEs," he said.

Once a rating system is in place, those SMEs with strong financials can even enter the capital market through initial public offering, he added.

Other banks that will participate in this agency are Punjab National Bank, Bank of Baroda, Bank of India, State Bank of India and Central Bank. This venture will also give SIDBI access to the SME databases of these banks.

Net profit dips: Mr Balasubramanian was speaking at a press conference to announce SIDBI's annual results. For the year 2004-05, SIDBI achieved an increase of 11.69 per cent in overall sanction at Rs 9,191 crore (Rs 8,229 crore).

Disbursement increased by 40.28 per cent to Rs 6,196 crore (Rs 4,417 crore). However, net profit for the year fell to Rs 316 crore (Rs 374 crore), due to one of the major State finance corporations account becoming a non-performing asset and also due to decline in treasury profits.

Total income for the year fell to Rs 948 crore (Rs 1,151 crore). Net NPA was 3.97 per cent (2.38 per cent).

For the quarter ending March 31, 2005, SIDBI posted net profit of Rs 100 core (Rs 99 crore). Total income was Rs 248 crore (Rs 293 crore).

SIDBI is also setting up a limited liability company with Seco, a Swiss agency for providing a risk-sharing facility.

Under this facility, SIDBI will select a cluster and improve the infrastructure in that particular area such as water and electricity and also provide technical assistance to the SME units in that area.

"We will cover the risks taken by commercial banks," he said.

This is part of a World Bank project. Other international agencies too will provide grant either in cash or kind. SIDBI and Seco will bring in $ 5 million each in the project, while World Bank will provide a loan of $100 million.

DFID of England will bring in 20 million GBP, while GTZ of Germany will bring in 5 million Euro.

The sectors that SIDBI will focus on include textile, light engineering, auto component, pharma, bio-technology, food processing and information technology.

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