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SIDBI To Raise $1.4 Bn For Stand Up India Fund From RBI

SIDBI To Raise $1.4 Bn For Stand Up India Fund From RBI

The Small Industries Development Bank of India (SIDBI) will be raising the proposed $1.4 Bn (INR 10,000 Cr) corpus for ‘Stand Up India Fund’ from RBI. The fund will be disbursed to Scheduled Castes, Scheduled Tribes and women entrepreneurs, reported PTI.

SIDBI is the principal development financial institution for promotion, financing and development of industries in the MSME sector, and for coordinating the functions of other institutions engaged in similar activities.

SIDBI chairman and managing director, Kshatrapati Shivaji, said that the Stand Up India Fund corpus will be raised from the Reserve Bank through the priority sector lending shortfalls.

He further said that the corpus will be used to refinance loans extended by the banks to the SC, ST and women entrepreneurs as part of the ‘Stand Up India’ scheme announced by the government earlier this year.

The groundwork on implementation of the scheme has already started. Here are the key points of the interview-

  • Under the scheme each bank branch has been mandated to lend to one micro-enterprise promoted by a woman and SC/ST entrepreneur
  • Plans to have a credit guarantee fund for such loans, wherein the entrepreneurs can pay a premium which will help them get a cover in case of a loan default
  • SIDBI has set up a $146 Mn (INR 1,000 Cr) ‘Make in India Fund’ to refinance bank loans to the manufacturing sector; loans worth $58 Mn (INR 400 Cr) have already been sanctioned under the fund
  • SIDBI is currently working on four new credit guarantee funds, apart from the already operational Credit Guarantee Fund Trust for Micro and Small Enterprises; the funds include one each devoted to factoring, educational loans, Mudra loans of up to $14.6K (INR 10 Lakh) and also the Stand Up India loans
  • SIDBI will most likely close FY16 with a refinance of $6.3 Bn (INR 43,000 Cr) of loans extended to small businesses, which is up to $1 Bn (INR 7,000 Cr) more from last year.
  • It has also committed $43 Mn (INR 300 Cr) of the $1.4 Bn (INR 10,000 Cr) ‘Smile Fund’ for small businesses announced earlier this year as part of the Start-Up India initiative

Shivaji additionally said that SIDBI depends on a variety of instruments to raise resources, including certificate of deposits, commercial papers, non-convertible debentures, and credit lines from external agencies. However, the landed cost of the money from external credit lines is very high due to the hedging costs and, therefore, SIDBI has been focusing on domestic borrowings to meet its funding needs.

“Most of our financing is in rupee terms for domestic borrowers. So, it does not make commercial sense to borrow in forex at a higher price,” he said, adding SIDBI is constantly on the lookout for instruments to lower fundraising costs.

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