Micro, small and medium enterprises (MSMEs) in the manufacturing sector can get soft loans and term loans at concessional interest rates from a new fund that the Small Industries Development Bank of India (SIDBI) has set up, said a top official.

Further, the financial institution is planning to raise resources by floating ‘Mudra Bonds’ via its wholly-owned subsidiary Mudra Bank to help refinance lenders giving loans to micro units.

Kshatrapati Shivaji, Chairman and Managing Director, SIDBI, said the SMILES Fund (Small and Medium Enterprise Soft Loans Scheme) has been carved out of the ₹10,000 crore allocated by the RBI to SIDBI from banks’ priority sector lending (PSL) shortfall for a period of three years.

While about ₹2,000 crore of this will go into investment in funds started by State Governments and financial institutions for investment in start-up companies, the balance will go to support SMILES, he added. He pointed out that there will be no upper ceiling on the amount of funds that can be raised under SMILES. Top-rated MSMEs could get soft as well as term loans at 10 per cent.

On ‘Mudra Bonds’, Shivaji said these bonds will be floated by leveraging Mudra’s initial corpus of ₹20,000 crore. Currently, a non-banking finance company can leverage its corpus 10 times to raise funds. What this means is that Mudra Bank can potentially raise up to ₹2 lakh crore via bonds.

Meanwhile, SIDBI on Tuesday signed a Memorandum of Understanding with e-commerce player Snapdeal to provide financial support to its MSME vendors.

Under the MOU, Snapdeal’s MSME vendors can scale up their online business via financial support from SIDBI.

The financial institution will not only facilitate financial assistance but would also work towards capacity building of the small vendors by making them digitally empowered through its cluster interventions.

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