Good news for small enterprises: SIDBI to offer loans at lower interest rate than Banks

Small Industries Development Bank of India (SIDBI) has decided to offer loans directly to SMEs at a low market rate. Such loans will be 300 basis points lower than what the banks usually offer.

Unlike bank loans that are a time-consuming process, SIDBI loan would be easily accessible to SMEs.

Loans provided by the financial institution would be long-term and will have gestation period of five years. Besides offering loans at its branches, the bank will let borrowers get it approved online.

Apex banking body Reserve Bank of India (RBI) will provide capital to the financial institution at 5 per cent interest rate.

"The bank has got regulatory approval to lend MSME businesses for new projects with the diversification at 8.1 per cent " Mohammad Mustafa, chairman and managing director SIDBI told to ET, adding that the bank has already made 3300 loan disbursals amounting to Rs 716 crore.

The total loan book of SIDBI bank has increased by Rs 19,000 crore since August from Rs 57,000 crore to Rs 76,000 crore. The bank has currently 80 branches across the country.

In January this year, the government had announced Rs 2.11 lakh crore recapitalization plan for the public-sector banks to push its lending to MSME sector.

Also Read: DIPP asks Sidbi to commit Rs 1600 Cr more to support venture funding

SIDBI had earlier announced to commit Rs 200 crore to three AIFs (alternative investment funds), received a shot in the arm when the Department of Industrial Policy and Promotion (DIPP) officially asked the Sidbi to commit Rs 1,600 crore in additional funds.

The bank will provide the funds from the government’s Rs 10,000 crore Fund of Funds launched under the Startup India Action Plan in 2016 for which it had received Rs 600 crore.