K Ram Kumar Small Industries Development Bank of India (SIDBI) is planning to diversify its operations by foraying into trade finance and online sanctioning of loans. It is also seeking to step up focus on co-lending with banks and non-banking finance companies.

Mohammad Mustafa, Chairman and Managing Director, SIDBI, said: “As far as direct (lending) portfolio is concerned, we are looking at many options.

“So, we will not be doing just term loans to manufacturing units. We will be entering trade financing because MSME (micro, small and medium enterprise) is an integrated space. We are now going to lend to traders also.”

Mustafa underscored that legal opinion is in place that SIDBI can get into the trade finance area.

Trade finance usually helps buyers and sellers of goods and services to overcome the trade cycle funding gap.

SIDBI was set up in 1990 by the government under the SIDBI Act, 1989, as the principal financial institution for promoting, financing and developing of industry in the small scale sector.

Referring to SIDBI’s role as more of an enabler to create a conducive environment so that MSMEs can access loans quickly, Mustafa said: “We already have an online portal called ‘Udhyami Mitra’. Now, we are also working on a new concept under which MSMEs will get online sanction for their loans.

“So, we are just trying to cut down the turnaround time for loans. In-principle approval will be available in, say, 30 minutes. Then, following all routine banking procedures, the disbursement can happen in seven to eight days. This is a new intervention that we are working out.”

The SIDBI chief said the online sanctioning of loans will happen soon. In this regard, the financial institution is working with five to six banks.

He elaborated: “We are partnering them. Obviously, they will compete as far as the (interest) rates are concerned.”

Virtual marketplace

Udhyami Mitra is a virtual marketplace that endeavours to provide end-to-end solutions not only for credit delivery but also for a host of credit-plus services by way of hand-holding support, application tracking, multiple interface with stakeholders, including banks, service providers and applicants.

As far as direct financing goes, since SIDBI’s reach is limited, it is trying to diversify with other financing options so that it can co-lend with those who already have on-the-ground presence.

“This is another area we are working on. So far, we have only tied up with small finance banks. But we are planning to tie up with some NBFCs and other banks,” said Mustafa.

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