For Small and Medium Enterprises there is yet another reason for smile – the Small Industries Development Bank of India, SIDBI, has begun directly to lend to companies instead of through banks. In a move that could benefit almost 5 crore small and micro enterprises, these loans are at least 300 basis points lower than what they would have received from banks
Besides refinancing of loans to banks and other financial institutions the MSME lender has also started lending directly to small and micro enterprises at way below market rates “We recently got regulatory approval to lend directly to micro and small businesses for new projects as well as diversification at 8.1% through all our 80 branches across the country” said Mohammad Mustafa, chairman and managing director SIDBI, in an interaction with ET.
These loans would be long-term loans of upto five years. SIDBI gets these funds at around 5% from RBI which is essentially a part of the priority sector lending shortfall of commercial banks which is routed through the central bank at concessional rate.
Wherever, SIDBI does not have any branch, these loans will be sold online, Mr Mustafa said. It has already made 3300 such disbursal aggregating to Rs 716 crore. Since August SIDBI’s overall loan book has risen by nearly Rs 19000 crore from Rs 57,000 crore in August to Rs 76,000 crore. To assess the viability of lending Sidbi has in place model bankable projects on its website.
Experts say that the move would go a long way in reviving the MSME sector where commercial banks have been cautious. Lending to micro and small enterprises contracted 0.4% between March and December according to latest RBI data.