SIDBI Told to Scale Up MSME Credit as Government Targets Wider Financing Access

The government has asked the Small Industries Development Bank of India (SIDBI) to scale up lending to MSMEs in rural and semi-urban areas nationwide through the network of Regional Rural Banks (RRBs), an official statement said on Wednesday.

Sanjay Lohiya, Secretary, Department of Financial Services (DFS), emphasised at a meeting with top SIDBI and RRB officials the need to synergise the strengths of SIDBI, which understands the credit needs of MSMEs and RRBs, which have an excellent reach across the smaller towns and villages of the country.

RRBs will also be able to achieve their goal of diversifying their loan portfolios by focusing on MSME lending, and rule engine-based underwriting is also expected to help them maintain good asset quality, he added.

He also highlighted the importance of MSME cluster data for a focused approach to reaching out to a large number of micro and small units. RRBs were told to contribute towards making the country a next-generation manufacturing hub and also take an active part in Rozgar Melas, conducted by state governments to disseminate financial awareness among MSMEs.

It was further suggested that RRBs make MSME lending through this Co-Lending arrangement an important target for branches. CMD, SIDBI, also urged the RRBs to come forward and make the arrangement a success.

The Co-Lending Origination Platform, developed by SIDBI, is an end-to-end digital platform providing a faster and paperless credit journey, resulting in the quick sanction and disbursement of loans.

Loan applicants will be informed of their in-principle sanctions within a very short turnaround time once all the details are provided through the application portal.

The digital documentation and disbursement process also ensure that customers receive loan disbursements directly into their accounts without the need to visit branches at any stage of the process.

With encouraging outcomes from the pilot implementation at three RRBs, the proposed expansion of this Co-Lending programme to more RRBs is expected to significantly address the credit needs of borrowers, especially in the micro and small segments, in rural and semi-urban areas, said the statement.