SIDBI to expand MSME working capital portfolio, partners Yes Bank

Small Industries Development Bank of India (SIDBI) is looking to expand its working capital portfolio and has partnered Yes Bank to cater working capital needs of its Micro, Small and Medium Enterprise (SME) clients.

Under the pact, Yes Bank would provide various banking services, including working capital, to SIDBI customers at its pan-India branches, which currently number around 1100. A memorandum of understanding (MoU) was signed between SIDBI chief general manager K I Mani and Yes Bank group president (international and institutional banking) Arun Agarwal here this evening.

Currently, merely about 550 SIDBI customers avail of its working capital facility, which forms a miniscule part of its customer base. The Bank had earlier entered into an agreement with a public sector bank, yet the scheme could not take off as expected.

"We want to refocus on this area and have partnered Yes Bank to route the working capital needs of our MSME customers through their counters," Mani informed. As MSME refinancer, SIDBI had been more focussed to providing term loan to enterprises, who had to approach other commercial banks for their working capital and other routine banking needs.

The agreement would facilitate smooth flow of credit to SIDBI’s MSME customers availing term loan facility, which is offered at low interest rate of 8.12% per annum. Besides, Yes Bank would offer value added services to such customers, including digital banking, current accounts, cash management services (CMS) etc.

Meanwhile, Agarwal said SME advances comprised almost 22% of Yes Bank’s total advances of about Rs 2 trillion. “Through this association with SIDBI, we want to expand our SME portfolio and reach out to more customers.”

Meanwhile, Uttar Pradesh posted highest growth in MSME credit with total outstanding of Rs 570 billion at the end of December 2017. Between December 2016 and December 2017, UP registered MSME credit growth of21%, which is double compared to corresponding figures of Gujarat and Maharashtra clocking growth of 10.7% and 10% respectively. UP was followed by Andhra Pradesh 18.6%, Rajasthan 18.3% and Haryana 18%.

However, in value terms, the total MSME credit flow in Maharashtra during Dec 16-Dec 17 at Rs 1.23 trillion was more than double compared to UP at Rs 570 billion. Tamil Nadu, Gujarat and Andhra Pradesh followed next with total MSME credit flow of Rs 820 billion, Rs 672 billion and Rs 671 billion respectively.

UP ranks 5th in domestic MSME credit flow, according to a Small Industries Development Bank of India (SIDBI) report. These five states collectively account for about 45% of the total MSME credit in the country.

Non-Performing Assets (NPA) in UP MSME sector stood at 8.3% at the end of December 2017, lower than the corresponding figures in Maharashtra at 11.5%, West Bengal 12.5 %, Delhi 10.3% and Andhra Pradesh 9.9%.