Date:28/08/2005 URL: http://www.thehindubusinessline.com/2005/08/28/stories/2005082801550300.htm

Back IOB's SME lending may grow by Rs 800 cr this year

Our Bureau

Mr T.S. Narayanasami (right), CMD, IOB, exchanging documents with Mr N. Balasubramanian (left), CMD, Small Industries Development Bank of India, in Chennai on Saturday. Mr A.R. Nagappan, Executive Director, IOB, is in the centre. — S.R. Raghunathan

Chennai , Aug 27

INDIAN Overseas Bank's loans to small and medium enterprises (SMEs) are likely to grow by Rs 800 crore this year, the bank's Executive Director, Mr A.R. Nagappan, said on Saturday.

Last year, the bank closed its SME book with an outstanding of around Rs 3,000 crore. The average yield, Mr Nagappan said, was nine per cent.

Towards lending more to SMEs, the bank today signed an MoU with the Small Industries Development Bank of India (SIDBI). The agreement involves joint financing of SMEs.

At a press conference here, the Chairmen and Managing Directors of IOB and SIDBI explained that co-financing would enhance mutual "comfort level" and hence would help freer flow of credit to SMEs.

The CMD of IOB, Mr T.S. Narayanasami, said the joint financing would help "mitigate risks" and pool resources such as expertise, branch network and technology.

The SIDBI CMD, Mr N Balasubramanian, explained it with a metaphor: Two men who have to walk a kilometre in the dark would prefer to walk together, rather than separately.

Besides, SIDBI does not provide working capital finance, which commercial banks do. Joint lending, therefore, helps a small enterprise seek both term loan and working capital in one go. Mr Balasubramanian said the SIDBI-promoted specialised credit rating agency for SMEs would be inaugurated by the Finance Minister at Coimbatore on September 5.