The Indian Bank is one of the pioneers in financing the SME sector. Ms. A. Revathi, industrial development officer of Indian Bank shares the details about the bank’s policy of lending to small and medium enterprises and the bank’s various schemes, with Small Enterprise India.com. Here are the excerpts from the interview.
“The Indian Bank is one of the pioneers in financing SME sector. We have even formulated structured loan products for financing industrial clusters with finer rates of interest. Since market conditions are fast changing, there is a dire need to understand the domestic and global markets for SME’S so that we can create value for customers and in the process, enlarge our business too.. To enhance flow of credit to MSME, a department as formed as Small and Medium Enterprises Development Department from November 30, 2006.”
What is the focus of SMEDD?
a. To primarily review the existing policy framework to provide credit to SME’s.
b. To take measures to centralise the processing of SME proposals in major centres.
c. To take over SMEs from other financial agencies or banks.
What are the structured loan products provided under SMEDD?
A. IB Annapoorna and Arogya.
B. IB Ayushman.
C. IB BPO Finance.
D. IB Caterer.
E. IB Doctor plus.
F. IB My own shop.
G. IB Professional special.
H. IB Shanthi niketan.
I. IB Star rice mill.
J. IB Travel tour.
K. IB Vidya Mandir.
L. IND SME secure.
M. IND Vahana.
What is the SME policy of Indian Bank?
On receipt of loan application an acknowledgement is issued to the client immediately. The applicant is called for discussion within ten days after receipt of loan application. The working capital limits recommended must be need based and realistic, especially to new units. The fund based working capital limits for Micro and small enterprises is up to Rs 5 crore should be assessed based on the turn over method as suggested by Nayak committee Recommendations., wherein a minimum of 20 % of the projected turn over should be financed by the bank or short term bank credit method whichever is higher.
What is the interest rate structure?
For advances upto Rs 25 lakhs, there is no credit rating and for advances above Rs 25 lakhs, it is linked to the credit rating under Risk Assessment Model. T o have an independent assessment of the risk on lending to a borrower under SME sector, borrowers a re informed through branches to get rated with Small and Medium Enterprises Rating agency (SMERA_ the rating agency floated by SIDBI) or CRISIL.
Are there any incentives provided to borrowers for timely repayment of loans?
Yes. For prompt payment of term loan instalment, a rebate of 0.50%by way of reduction in interest rate shall be sanctioned , subject to following conditions.:
1. The installments should have been paid on or before due date.
2. There should not be any interest arrears or over dues.
3. Rebate of 0.5% will be calculated only on the amount of installment promptly paid for the period from the date of advance to the due date , whichever is earlier.
The rebate so calculated shall be adjusted towards the subsequent interest charges, installment dues and there should not be any cash refund on account of this rebate.
Small entrepreneurs who have obtained ISO quality certification will be sanctioned one time incentive of Rs 10,000 and a memento.
What is the centralised processing unit for SME?
In the process of expanding credit to SME sector, it is important that the entrepreneur‘s requirements are catered properly and credit needs met on time. Timely delivery of credit is achieved by expediting the sanctioning process either by carrying out joint appraisals or by centralising the processing of proposals. With Indian Bank, both concepts are in vogue. In order to expedite credit to SME sector, and to prevent branch managers from focusing on retail loan products, Indian Bank has introduced the Centralised Processing Unit of SME proposals at Chennai, Ahmedabad, Banglore, Coimbatore, Kolkatta, New Delhi, Pune, Mumbai and Kancheepuram.
To study the developments in industrial and governm,ent initiated projects in different areas of the country including Tamil Nadu, Central Consultancy Cells have been set up to stimulate acceleration in establishment of SMEs and to improve the financing of SME sector, by the Bank.