We Provide Need-based Finance To SMEs - State Bank of India

What does SBI look for while considering an application for a business loan from an SME?
Our bank has been a pioneer in SME finance. Over the years we have introduced several need-based schemes for supporting the industry specific requirements of SME units. In addition to satisfying the mandatory KYC norms, the bank looks to the viability of the project which includes, among other things, the promoter’s background, management of the company, promoter’s experience, market, infrastructure availability and future plans.  The bank provides need based finance to the units. The quantum of finance is not linked to the security or collateral offered by the unit, but is based on the requirements of the units for carrying on its activity profitably.

Tell us about your SME products.
We have wide range of SME products right from “SME Smile” for new generation entrepreneur to “Open Term Loan” for various categories of SMEs. We also have some industry-specific products (like Rice Mill Plus for rice millers). These products are structured such that all categories of SMEs can be catered to. Recently we came up with ‘SME CFL’ a product based on CGTMSE scheme wherein we are providing loans without collaterals at special concessionary interest rate of as low as 9% for working capital and 9.5% for term loans. Similarly there are schemes for various trade & services and products like Doctor Plus and Transport Plus, etc.

What is your credit exposure to SME sector?
Our credit exposure to SME is around 19.73% of overall credit expo-sure of the bank.[PAGE BREAK]

What is the target mandated by government in terms of total credit exposure to SME sector and how much you are able to achieve?
Banks are advised to achieve a 20 per cent year-on-year growth in credit to MSME sector and 50% of the MSME advances should go to MSE sector. MSME credit in our bank is growing at CAGR of 26.24% and MSME credit has more than doubled in 3 years ended as on 31.03.2009. MSE advances account for 55% of the MSME advances as against target of 50%.

What difficulties do SMEs experience while approaching banks for financial assistance?
SMEs generally experience lack of organized approach in terms of preparing the proposals and collecting the documents while approaching financial assistance. Apart from these, SMEs are unaware of various schemes, subsidies, facilities and grants available from government.

Is it true that it is easier for manufacturing sector SMEs to raise loans vis-a-vis those in the services sector?
No, it is not true that it is easier for manufacturing sector SMEs to raise loans. We support all activities and as mentioned above, the viability of the project and other parameters are key for supporting the unit. The services sector is given the same importance as manufacturing sector as far as providing loans is concerned. What is important is the techno-economic viability of the business proposal. Incidentally our exposure to services sector in SME is around Rs 40,000 crore.

With the implementation of base rate how will your lending rate to SMEs be effected and what will be its impact on your margin?
Our lending rates are now linked to base rate which is fixed at 7.5% w.e.f 1st July 2010. However, at present we have kept our effective rates same for all schematic lending. The base rate has been introduced to have greater transparency to the customer. The base rate has been arrived at taking in to consideration all the relevant factors so profitability should not be affected.[PAGE BREAK]

How did your bank help the SMEs during economic slowdown?
While the recovery would definitely have its impact on credit offtake, we introduced timely schemes like ‘SME Care’ and ‘SME Help’ to support the SMEs. We also made efforts to contain our NPAs through OTS scheme.