Sidbi to raise Rs 1,500 cr through capital gain bonds

New Delhi, March 22 | Updated: Mar 23 2005, 05:50am hrs
Small Industries Development Bank of India (Sidbi) plans to raise Rs 1,500 crore in the coming fiscal through the issue of capital gain bonds and some other issues, Sidbi chairman Balasubramaniam said here on Tuesday. The bank is also working on a scheme so that it can partner with other commercial banks to lend working capital to small and medium enterprises (SMEs), he said.

Sidbi does not come under the ambit of the Banking Regulation Act and consequently does not fall under the Negotiable Instruments Act. As a result it is unable to extend working capital loans. We are in the process of finalising the legal documents for the envisaged scheme, which will abide with the Sidbi Act guidelines, he said. This is aimed at mitigating the view of banks that SME loans result into high amount of non-performing assets.

Sidbi has received commitment worth Rs 475 crore for the Rs 500 crore SME Venture Capital Fund, announced in the Budget, he said. Of this Rs 100 crore comes from Sidbi, Punjab National Bank and State Bank of India (SBI) each. The Bank of Baroda, Union Bank and Oriental Bank of Commerce have committed Rs 50 crore each. The Bank of India has committed Rs 25 crore. Another Rs 50 crore commitment is in the pipeline for the fund and we will thus exceed Rs 500 crore, Mr Balasubramaniam told FE.

Sidbi has identified auto clusters in Ludhiana, Pune and Chennai for providing credit. It has also decided to provide funds for the upgradation of Tirupur hosiery cluster in Tamil Nadu. We are planning in a manner that we get around 16% return on our loans keeping in mind the risks, he said.

The bank will also expand its branch network by setting up about 15 branches exclusively in clusters by the end of this year. Credit disbursals will be made to entrepreneurs in amounts of Rs 5 or Rs 10 or Rs 15 crore so as to enable them to grow to the extent that they can find foreign collaborators or raise funds from the market.