What changed
RBI issued a circular on January 9, 2006, enclosing the SEFC scheme formulated with Ministry of SSI, SIDBI, IBA, and select banks. UCBs are now advised to participate in this scheme on mutually agreed terms with SIDBI, extending the earlier policy announcement to co-operative banks.
What it means for you
UCBs can now partner with SIDBI branches in SSI clusters (149 clusters covered by 46 SIDBI branches as of July 2005) to co-finance term loans and provide working capital. This leverages SIDBI's appraisal expertise via the CART model for faster credit processing of existing well-performing units up to Rs 50 lakh. Banks may pay a nominal fee for SIDBI's appraisal services, potentially reducing risk and improving credit flow to tiny and SME units.
What you must do
- Identify SIDBI branches in your operational area that are designated as SEFCs.
- Negotiate mutually agreeable terms with SIDBI for co-financing and sharing of financial assistance.
- Utilize SIDBI's CART model for quick appraisal of credit proposals up to Rs 50 lakh for existing well-performing units.
- Focus on financing tiny units and new SME units, including those without existing banking linkage.
Who it affects
All Primary (Urban) Co-operative Banks, SIDBI branches in SSI clusters, Small Scale Industries (SSI) and SME units in identified clusters
What is the SEFC scheme?
SEFC stands for Small Enterprises Financial Centres. It is a strategic alliance between bank branches and SIDBI branches in identified SSI clusters for co-financing of SME sector, including tiny and service units.
How can UCBs benefit from this scheme?
UCBs can partner with SIDBI to co-finance term loans while providing working capital. They can use SIDBI's CART model for quick credit appraisal of existing well-performing units up to Rs 50 lakh and pay a nominal fee for this service, improving efficiency and credit flow.
Which units are eligible under SEFCs?
All tiny units irrespective of loan size, new SME units (including service sector), existing units for expansion/modernization, and units without banking linkage are eligible. Focus is on tiny sector with limited access to institutional finance.