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Our Bureau

Coimbatore, Sept. 26 The Small and Medium Enterprises (SMEs) segment is witnessing a paradigm shift with two clear models emerging and SMEs functioning on a stand-alone basis would find the going tough, according to a senior executive of State Bank of India.

The bank, which launched the concept of SME City Credit Centres (SME CCCs) to quicken the process of loan processing from the SME sector, is planning to replicate the model in rural and semi-urban areas, he said.

Speaking to presspersons in Coimbatore on Friday, after inaugurating the renovated premises of SME CCC in Coimbatore main branch of the bank, Mr J. Chandrasekaran, Chief General Manager, SBI (Chennai Circle), said the entire SME segment was undergoing a structural shift and it was not like earlier when they could be established on a stand-alone basis and survive.

SMEs could be successful and survive in two formats. They flourish when they are in clusters, — several auto component and textile clusters were coming up — providing them economy of operation. The other model was SMEs functioning as dedicated ancillaries to big manufacturing units, as has been done by vendors of Hyundai Motors.

He said SMEs functioning on a stand-alone basis, supplying to diverse companies, would find the going tough. SMEs were getting into some sort of a value chain, entering into joint ventures with larger players.

Even foreign buyers were finding outsourcing from SMEs a cost-effective quality proposition. Mr Chandrasekaran said “SMEs can thrive, but they have to look at global markets now”, become net savvy, look at multiple sources of raw material, etc. SMEs making generalised products in hopes of finding a market will die out, he added.

Mr Chandrasekaran, who had earlier worked as CGM (SME) for the whole bank, said there were a lot of processes involved in giving home loans and SME loans. The bank wanted to centralise these processes and establish a back office where skilled personnel could be deployed to process the applications.

The bank managers would have to just collect the loan applications and do minimum documentation and then forward the applications to the SME city centres for further processing.

The multi-product sales teams also have been vested with the responsibility of scouting for prospective loan applicants whose applications would be processed at these centres.

He said this has enabled the bank to bring in “much better standard of appraisal, risk management is much better”. Since the branches are under core banking system, the customers would continue to do their business with the branches closer to them.

He said the SME CCCs would handle customers for up to a Rs 1-crore limit and branches would handle customers with limits higher than that, as needs of medium enterprises would be different.

He said the division of work has helped in hastening the turnaround time (TAT-processing of applications) — from four-six weeks earlier to less than ten days now. The customers are intimated of the bank’s decision faster and there has been ‘tremendous improvement’ in the quality of appraisal after SME CCCs were launched.

More Stories on : SSI | Credit Market | Outlook | State Bank of India

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