Money

SIDBI has procured a loan of $400 million from the World Band

Small Industries Development Bank of India (SIDBI) has procured a loan of $400 million from the World Bank to assist small and medium enterprises (SMEs) that are reeling under severe credit crunch and high rate of interest. 
 
The government's efforts to bring down lending rates to be affordable for the SME sector have failed till now. A recent survey of 300 units having turnover between Rs 1 crore and Rs 40,000 crore had revealed that besides the SME sector, even bigger industries were facing problems securing easy loans. 
 
The fact-finding report, prepared by Ficci, had disclosed that credit was available at 12% and above despite the government having urged commercial banks to lend at affordable rates. 
 
Besides financing SMEs, the World Bank loan will be used to fund development projects that are being assisted by SIDBI. The loan is being taken by SIDBI directly from the World Bank with a guarantee from the government. 
 
SIDBI had earlier requested for an additional IBRD financing of $200 million, which was forwarded by the finance ministry in August 2008 to the multilateral agency. The request was later enhanced to $400 million owing to the enhanced credit requirements of SMEs.
 
The objectives of the additional loan include improved access of SMEs to confessional finance and providing business development services, thereby fostering growth competitiveness and employment creation of SMEs, said a release from the finance ministry. 
 
The loan component includes credit facility, risk sharing facility and technical assistance.