labels: bank of india, small industries development bank of india, industry - general, finance - general, banks & institutions
BOI and SIDBI forge strategic alliance to fund SME sectornews
Our Banking Bureau
13 June 2005

Bank of India (BOI) and Small Industries Development Bank of India (SIDBI) have, entered into a strategic alliance and signed a MOU, which formalises a comprehensive arrangement to boost credit flow to the small and medium (SME) sector. BOI expects to leverage the 'term loan' assessment skills of SIDBI in meeting the requirements of the SME sector.

Under the mutually agreed arrangement Bank of India and SIDBI would jointly identify projects for financing and those found viable and acceptable as per norms of SIDBI /BOI would be taken up for comprehensive financing. The finance would also be in foreign currency for export units. SIDBI / BOI would either take-up co-financing or exclusive financing of term loans (at 9.5 per cent fixed rate interest), while working capital requirements (at10.75 per cent floating rate of interest) would be met exclusively by BOI. Along with SIDBI, BOI will also widen the extension of micro credit through the vast network of rural and semi-urban branches.

N Balasubramanian, chairman, SIDBI, said that its BOI alliance was the first of its kind and would be initially be implemented at 11 centers (Pune, Aurangabad, Ahmedabad, Surat, Indore, Faridabad, Ludhiana, Tirupur, Coimbatore, Bangalore and Visakhapatnam.) covering 58 identified clusters. Financing under this alliance would encompass the SSI sector, medium sector, services and infrastructure sector.

According to M. Balachandran, chairman and managing director, Bank of India this alliance assumes particular significance in the context of the finance minister's recent exhortation to chairmen of public sector banks to step up credit flow to the SME sector, which is a growth engine contributing significantly to the country's economy in terms of production, exports as well as employment generation.

"With the emerging conducive environment, the SME sector is expected to play a dominant role as a loyal vendor base for large corporates and MNC's who have evinced keen interest to look at India as an important manufacturing hub for their global operations," Balachandran added.

He also said that this alliance would pave the way for the bank to enlarge its reach to SMEs through SIDBI at 11 centres. BOI's financing of the SME sector currently exceeds Rs8,000 crore of which Rs4,600 crore has funded the SSI sector. For the fiscal 2005-06 BOI has budgeted an incremental growth of Rs720 crores to this sector, up from Rs600 crore in 2004-

BOI, pioneer in financing small scale industries, has a SME strategic business unit at its Mumbai corporate office and 32 specialised branches exclusively for SSIs all over the country. The bank was conferred first ever-'national award for excellence in SSI financing' for the year 2001-02.
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As a prelude to the alliance, the bank has already trained SIDBI officials at its BOI Management Development Institute, to familiarise them on the banks perspective on working capital finance. Moreover, it has entered into an agency arrangement with ECGC.

SIDBI has a dedicated SME Development Centre, in Mumbai at Bandra Kurla complex.

Balasubramanian indicated that with this alliance, SIDBI expected to realise its vision of 'bank within a bank' and register a quantum growth in lending to the SME sector by utilising BOI's branch network. Earlier BOI had joined SIDBI's venture capital fund along with other banks.

SIDBI proposes to set up a credit rating agency for rating of constituents in the SME sector for which BOI has already given its "in-principle" consent. These initiatives are expected to provide comfort for lenders to fund units in the SME sector.


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BOI and SIDBI forge strategic alliance to fund SME sector