News: Indian banks eye small scale sector for business

(DNA 31/08/2006) Bangalore - For some time now, India's small and medium enterprise (SME) sector was facing a mid life crisis due to lack of finance, technology and marketing infrastructure. As the sector faced global competition, it caught up with the changing needs of customers and has emerged as the largest generator of jobs in the country.

Now, banks that once helped small enterprises that dot across the landscape of India to thrive are back into business with them.

Corporation Bank has instituted national excellence awards for the SMEs in food and agro processing sector, auto components, drugs and pharmaceuticals, textile and apparels to identify the best among the small sector firms. Besides, it has introduced credit cards for the SMEs to access emergency working capital at short notices.

Similarly, Vijaya Bank and Syndicate Bank have signed pacts with SME Credit Rating Agency of India Ltd (SMERA), which enables independent third-party assessment of SMEs' financial position, their strengths and weaknesses.

"Financing the SME sector is being accorded topmost priority by us. For us size doesn't matter. We are aiming at doubling the SME portfolio within five years," said Vijaya Bank Chairman and Managing Director Prakash P Mallya.

Banks across India lent nearly Rs 67,650 crores to small-scale industries in 2005-06, registering a jump of nearly 9.5% over the previous year.

Canara Bank has a standby term loan scheme tailor-made for Apparel exporters in small and medium sectors and artisan-friendly loan scheme for power tools (Cantools) with a loan limit of upto Rs one crore. The bank also has brought in new schemes like open cash credit, long term loans for new projects, expansion, modernization and diversification, standby credit for capital expenditure, scheme for energy savings for SMEs.

But the small scale sector feels that more needs to be done by the banking sector. "The SMEs bill was passed in the Parliament recently. If we could have proper system (or benchmarking as in the automobile sector) things should be fine for us. While private sector banks, SIDBI and co-operative banks come forward to give us term loans, the need of the hour is working capital, which is lent by commercial banks," former President of Karnataka Small Scale Industries Association (KASSIA), J Crasta said. (EoM).