The Hindu Business Line : SIDBI ties up with Federal Bank to offer SMEs loans, products

SMALL Industries Development Bank of India (SIDBI) is planning to tie up with Federal Bank to offer loans and other products to small and medium enterprises in Kerala, said Mr N. Balasubramanian, Chairman and Managing Director, SIDBI. The move is expected to help SIDBI increase its reach.

This will be SIDBI's second tie-up with a private sector bank after the one with Yes Bank in July this year. SIDBI has also entered into similar alliances with 10 public sector banks to provide term loans to SMEs.

For the first half of this fiscal, SIDBI has seen around 50 per cent growth in its lending, said Mr Balasubramanian. "We hope to maintain this rate of growth in the full year," he said. "We now want to focus on direct lending unlike earlier when we were more focused on refinancing. But we have a limited delivery channel as we do not have as many branches as banks." he said.

Another challenge for SIDBI is that it cannot provide working capital to the SME segment. It can only provide term loans and refinancing. But SMEs would also need products such as forex and letters of credit, which banks can provide.

"Unfortunately we do not have a day-to-day contact with the borrowers. That would have helped us increase our disbursals. Hence, we are joining hands with various commercial banks," Mr Balasubramanian said. However, it will take a while for these tie-ups to translate into higher lending to the SME segment.

"The top end of the SME segment get serviced by banks, but the small industries with turnover of less than Rs five crore get left out," he said.

SMERA, the specialised credit rating agency for SME, promoted by SIDBI jointly with other banks and rating agencies, has completed the rating of around 50 companies; it has applications from some 140 more companies, said Mr Rajesh Dubey, CEO, SMERA.

The rating agency had also tied up with State Bank of India and Bank of India to provide its services and was likely to tie up with a couple of more banks in one week's time, Mr Dubey said.

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