What changed
RBI announced a strategic alliance scheme between bank branches and SIDBI branches in identified SSI clusters, redesignating SIDBI branches as SEFCs. SEFCs will co-finance or exclusively finance term loans with banks, while banks meet working capital (subject to mutual agreement). Banks can pay a nominal fee to use SIDBI's credit appraisal expertise. The scheme covers tiny units regardless of loan size and initially targets 149 clusters via 46 SIDBI branches by end-July 2005.
What it means for you
Banks gain a structured mechanism to improve credit flow to SSIs, especially tiny units, by partnering with SIDBI in clusters. This reduces appraisal burden and standardizes processes, potentially lowering NPAs. However, banks must operationalize alliances quickly and adapt to local conditions via SLBCs (which may monitor and modify), adding coordination costs.
What you must do
- Identify SIDBI branches in your operational clusters and initiate strategic alliance discussions as encouraged by RBI.
- Set up internal processes to leverage SIDBI's appraisal services for SSI term loans, including nominal fee payment mechanisms.
- Coordinate with SLBCs to monitor scheme performance and suggest modifications for local suitability (SLBCs may monitor and modify).
- Train branch staff on co-financing procedures and simplified documentation for tiny and small units.
Who it affects
All scheduled commercial banks with branches in SSI clusters (encouraged to participate), SLBC convenor banks, SIDBI branches designated as SEFCs, SSI and tiny industrial units in identified clusters
What is the SEFC scheme's main objective?
To expand bank outreach and improve credit flow to SSIs by creating strategic alliances between bank branches and SIDBI branches in clusters, enabling co-financing or exclusive financing and leveraging SIDBI's expertise.
Are tiny units eligible under SEFCs?
Yes, all tiny units are eligible regardless of loan size, with special focus due to their limited access to institutional finance.
How will the scheme be monitored?
SLBCs may monitor and modify the scheme to suit local conditions, and coverage may be extended based on experience.