RBI/2004-05/475
RPCD.PLNFS.BC.No.101/06.02.31/2004-05
May 20, 2005
The Chairman/Managing Director
All Scheduled Commercial Banks
All SLBC Convenor Banks
Dear Sir,
Scheme for Small Enterprises Financial
Centres (SEFCs)
Please refer to the announcement
made by the Governor in paragraph No.84 of the Annual Policy Statement 2005-06
regarding formulation of a scheme of strategic alliance between branches of
banks and SIDBI located in the clusters (extract of the paragraph
is enclosed). A scheme for 'Small Enterprises Financial
Centres (SEFCs)' has been worked out in consultation with the
Ministry of SSI and Banking Division, Ministry of Finance, Government of India,
SIDBI, IBA and select banks which is enclosed herewith for your perusal.
2. As the above scheme is important
in the context of expanding outreach of banks and improving credit flow to the
Small Scale Industries (SSIs) sector, banks are requested to initiate an early
action in this regard.
3. Please acknowledge receipt.
Yours faithfully,
(G.Srinivasan)
Chief General Manager
Extract of the
Annual Policy Statement for 2005-06
Credit Flow to Small Scale Industries
84. The small scale industries
(SSI) sector plays a very important role in the development of the economy.
While large industries have access to various sources of finance, the SSI sector
has to primarily depend on finance from banks and other financial institutions.
With a view to further smoothening the flow of credit, the following measures
have been initiated:
• Under a scheme to be drawn up
by the RBI, banks will be encouraged to establish mechanisms for better co-ordination
between their branches and branches of SIDBI which are located in 50 clusters
that have been identified by the Ministry of Small Scale Industries, Government
of India. Under the scheme of strategic alliance (i) the existing branches of
SIDBI redesignated as 'Small Enterprises Financial Centres' (SEFC)
will take up co-financing of term loan requirements of SSI units along with
the bank branches and the working capital requirements of these units will be
met by the banks; (ii) the expertise of the SIDBI in appraisal of credit requirements
of SSI units will be leveraged by the branches of commercial banks, by payment
of a nominal fee; (iii) SIDBI will provide other expert services to help the
banks in simplifying the application forms, documentation and disbursement procedures,
etc.; and (iv) the working of the scheme may be monitored and modified to suit
the local conditions by the State Level Bankers’ Committee (SLBC) and, depending
on the experience, the coverage of the scheme may be extended to more clusters.
The services of SEFCs will be available for tiny industrial units also.
Scheme for Small
Enterprises Financial Centres (SEFCs)
1. Background
Reserve Bank of India in the
Annual Policy Statement for 2005-06 announced formulation of a scheme of strategic
alliance between branches of banks and branches of SIDBI located in the clusters.
2. Proposed operational mechanism
2.1 Strategic Alliance with Banks
:
Under the scheme, banks are encouraged
to establish mechanisms for better co-ordination between their branches and
branches of SIDBI which are located in the clusters identified by the Ministry
of SSI, Government of India for co-financing of SME sector (including tiny
and services sector) on mutually agreeable operational modalities to be worked
out by SIDBI and the strategic partner banks.
Coverage :
- 388 SSI clusters have been identified by UNIDO
spread over 21 states in the country. Out of these SSI clusters 123 clusters
are being catered to by 30 existing branches of SIDBI and few more branches/
delivery channels are proposed during the year. Thus in terms of coverage,
46 SIDBI branches are likely to be in place by the end of July 2005 broadly
covering 149 SSI clusters (details enclosed).
- The branches of SIDBI in the clusters shall
be rechristened as 'Small Enterprises Financial Centres' (SEFC).
2.2 Eligibilty Criteria:
Projects :
a) All tiny units irrespective
of loan size will be eligible for coverage under SEFCs. Special focussed attention
will be given to financing to tiny sector as they have limited access to institutional
finance.
b) New SME units (including service
sector units) will be eligible under SEFC Scheme.
c)All proposals from existing units
for expansion/modernisation/ diversification/technology upgradation/ marketing/exports
etc. will also be eligible.
d) Existing units, which are not
having banking linkage or having limited banking linkage, will be eligible under
SEFCs.
Sharing Pattern :
As envisaged in the Annual Policy
Statement, the SEFCs will take up co-financing or exclusive financing of term
loan requirements of SSI units along with the bank branches and the working
capital requirements of these units will be met by the banks. The strategic
partners may also work out arrangement for sharing of financial assistance on
mutually agreeable terms on a case to case basis especially in respect of facilities
currently not being extended by SIDBI.
Financing Parameters :
Generally norms for debt equity
ratio, repayment period, security coverage, rate of interest, etc. would be
aligned as per mutual consent of strategic partners.Operational guidelines may
be worked out by SIDBI and strategic partners with mutual consent.
2.3 Delivery Mechanism :
'The expertise of the SIDBI
in appraisal of credit requirements of SSI units will be leveraged by the branches
of commercial banks, by payment of a nominal fee'(Para.84 of Annual Policy
Statement)
- SIDBI has developed expertise in quick appraisal
of small credit proposals of existing well performing units (upto Rs 50 lakh)
through the Credit Appraisal & Rating Tool (CART) model. The same model
shall be suitably modified by SIDBI to cover i) green field projects, ii)
working capital assessment and iii) composite loan. The model along with the
Risk Assessment Model (RAM), comprehensive rating model available with SIDBI
may be utilized to offer efficient appraisal services to SME borrowers. The
appraisal may also be done jointly by SIDBI and banks.
- For tiny units, individual banks may develop
suitable rating model for quick appraisal. SIDBI will also develop a simplified
appraisal model for adoption by banks.
- The fee structure for appraisal may be nominal.
'SIDBI will provide other
expert services to help the banks in simplifying the application forms, documentation
and disbursement procedures, etc.' (Para.84 of Annual Policy Statement)
- SIDBI has developed certain automated systems
for loan documentation processes and the same may be offered to the banks.
After studying the processes, if the banks are interested they may effect
the necessary modifications.
2.4 Monitoring Mechanism
'The working of the scheme
may be monitored and modified to suit the local conditions by the State Level
Bankers’ Committee (SLBC) and, depending on the experience, the coverage of
the scheme may be extended to more clusters. The services of SEFCs will be available
for tiny industrial units also.' '(Para.84 of Annual Policy
Statement)
- A suitable monitoring mechanism will be put
in place by SEFC at cluster level to review progress made on quarterly intervals
and report to respective SLBC convenor.
- SLBC will review the progress under the SEFC
scheme.
- Standing Advisory Committee will review the
progress under the SEFC in its meetings.
- SIDBI may put in place an appropriate mechanism
to collect data under SEFC on quarterly basis and report to Reserve Bank of
India and Ministry of SSI, Government of India.
LIST OF SME CLUSTERS COVERED BY
EXISTING
SIDBI BRANCHES
|
Sr. No.
|
Branch Offices
|
No.of SSI clusters
|
Product
|
|
1
|
Hyderabad
|
5
|
Ceiling Fan, Electronic Goods, Pharmaceuticals-
Bulk Drugs, Hand Pump sets & Foundry
|
|
2
|
Patna
|
1
|
Brass and German Utensils
|
|
3
|
Delhi
|
19
|
Stainless Steel Utensils & Cutlery, Chemicals,
Electrical Engineering Equipment, Electronic Goods, Food Products, Leather
Products, Mechanical Engineering Equipment, Packaging Material, Paper
Products, Plastic Products, Wire Drawing, Metal Fabrication, Furniture,
Electro Plating, Auto Components, Hosiery, Readymade Garments, Sanitary
Fittings
|
|
4
|
Ahmedabad
|
17
|
Pharmaceuticals, Dyes & Intermediates,
Moulded Plastic Products, Readymade Garments, Textile Machinery Parts,
Diamond Processing, Machine Tools, Castings & Forging, Steel Utensils,
Wood Product & Furniture, Paper Products, Leather Footwear, Washing
Powder & Soap, Marble Slabs, Power Driven Pumps, Electronic Goods,
Auto Parts
|
|
5
|
Surat
|
4
|
Diamond Processing, Powerloom, Wood Product
& Furniture, Textile Machinery
|
|
6
|
Baroda
|
3
|
Pharmaceutical- Bulk drugs, Plastic processing
& Wood product & furniture
|
|
7
|
Goa
|
1
|
Pharmaceutical
|
|
8
|
Faridabad
|
3
|
Auto components, Engineering Cluster, Stone
Crushing
|
|
9
|
Gurgaon
|
5
|
Auto Components, Electronic Goods, Electrical
Engineering Equipment, Readymade Garments, Mechanical Engineering Equipment
|
|
10
|
Parwanoo(Baddi)
|
1
|
Engineering Equipment
|
|
11
|
Jammu
|
3
|
Steel Re-rolling, Oil mills, Rice Mills
|
|
12
|
Jamshedpur
|
1
|
Engineering & Fabrication
|
|
13
|
Bangalore
|
6
|
Powerloom, Electronic goods, Readymade garments,
Light engineering, Leather products
|
|
14
|
Kochi/Ernakulam
|
3
|
Rubber products, Powerlooms & Sea Food
processing
|
|
15
|
Aurangabad
|
2
|
Auto components & Pharmaceuticals- Bulk
drugs
|
|
16
|
Mumbai
|
11
|
Electronic Goods , Pharmaceutical-Basic drugs,
Toys (plastic), Ready made garments, Hosiery, Machine Tools, Engineering
equipment, Chemicals, Packaging material, Handtools, Plastic products
|
|
17
|
Nagpur
|
6
|
Powerlooms, Engineering & Fabrication,
Steel furniture, Ready made garments, Handtools, Food processing
|
|
18
|
Pune
|
6
|
Auto components, Electronic goods, Food products,
Ready made Garments, Pharmaceuticals –Bulk Drugs, Fibre glass
|
|
19
|
Thane
|
2
|
Pharmaceuticals –Bulk Drugs & Sea food
|
|
20
|
Bhopal
|
1
|
Engineering equipment
|
|
21
|
Indore
|
4
|
Pharmaceuticals- Bulk drugs, Readymade garments,
food processing, Auto components
|
|
22
|
Ludhana
|
9
|
Auto Components, Bicycle Parts, Hosiery,
Sewing M/C Components, Industrial Fastners, Handtools, Machine tools,
Forging, Electroplating
|
|
23
|
Jaipur
|
7
|
Gems & Jewellery, Ball Bearing, Electrical
Engineering Equipment, Food Products, Garments, Lime, Mechanical Engineering
Equipment
|
|
24
|
Chennai
|
3
|
Auto components, Leather products, Electroplating
|
|
25
|
Coimbatore
|
6
|
Diesel Engines, Agricultural Implements,
Machine Tools, Castings & Forging, Powerloom, Wet Grinding Machines
|
|
26
|
Tirupur
|
1
|
Hosiery
|
|
27
|
Noida/Gaziabad
|
10
|
Electronic goods, Toys, Chemicals, Electrical
engineering equipment, Garments, Mechanical engineering equipment, Packaging
material, Plastic products, Chemicals
|
|
28
|
Kanpur
|
3
|
Saddlery, Cotton hosiery, Leather products
|
|
29
|
Varanasi
|
4
|
Sheetwork (Globe Lamp), Powerloom, Agriculture
implements, Electric fan
|
|
30
|
Dehradun
|
1
|
Miniature Vacuum bulb
|
|
31
|
Nashik (shortly to be opened)
|
1
|
Steel furniture
|
|
Total
|
149
|
|
|