The Hindu Business Line : SIDBI venture fund for SMEs to take off this month

THE Small Industries Development Bank of India (SIDBI) is setting up a venture capital fund targeted specifically at small and medium enterprises (SMEs) in the country.

Speaking at the FICCI conference on banking here on Wednesday, Mr V.K. Chopra, Chairman and Managing Director of SIDBI, said that corpus of the fund would be Rs 500 crore. Six banks and financial institutions would participate in creating the corpus.

The participating banks in the fund included Punjab National Bank, Bank of India, SIDBI and Canara Bank. Two banks including BoI, he said, had agreed in principle to participate in the fund. PNB and SIDBI had agreed to contribute Rs 100 crore each for the fund. However, he said, that the fund would be operationalised by this month-end, without awaiting for the full contribution to the corpus.

In addition, SIDBI is also taking the initiative to set up separate credit rating agency aimed specifically at SMEs. It would set up this rating agency in association with PNB, Canara Bank, Union Bank of India, Oriental Bank of Commerce and one of the credit rating agencies. This rating agency would be used to assess lending risks to the SME sector and restricting the build up of non-performing loans in the sector.

Mr Chopra said that there were 11.52 million small enterprises in the country contributing to an output of Rs 3.5 lakh crore.

Despite the relaxation in the guidelines for SME financing, funding for such funds continued to be a major hindrance. As a result some new instruments were created. This included a credit guarantee fund trust for small enterprises with a corpus of Rs 700 crore. This fund would focus to provide hindrance free credit delivery to the SME sector, he added.

In addition to this, a risk sharing facility for lending to the SME sector is also in place.

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