IDBI to charge 1 percent lower interest on MSME loans

IDBI Bank Friday signed an agreement with industry body Ficci under which it will offer loans to micro, small and medium enterprises (MSME) at one percent lower interest than the market rates and also charge low processing fee.

A memorandum of understanding (MoU) was signed here between IDBI Bank and Ficci Confederation of Micro, Small and Medium Enterprises (Ficci-CMSME).

"The MoU would help IDBI Bank in further increasing its reach to the MSME sector. IDBI Bank is focused on expanding its lending to this sector in view of the fact that the MSME is a key driver of Indian economy in terms of contribution to GDP, employment and exports," deputy managing director of IDBI Bank B. K. Batra said after signing of the agreement here.

"IDBI Bank will continue to play a leading and active role in promoting development of MSME sector in the country," Batra said.

Access to organised finance is a big challenge for the Indian micro, small and medium enterprises.

According to a study by the International Finance Corporation, there is a formal finance gap of Rs.20.9 trillion ($418 billion) to the MSME.

Under the deal IDBI Bank will offer loans to MSME with a concession of 100 bps or 1 percent. It has agreed to charge a low processing fee of 0.10 percent on the proposals referred by Ficci-CMSME.

Speaking on the occasion, Ficci secretary general A Didar Singh said: "Timely availability of credit at the right cost is the key expectation of industry from their banks. While large corporates manage to get the attention of bankers, often the smaller companies have a disadvantage in sourcing credit at right cost and right time."

"MSMEs are known as highest employment generator after agriculture hence, it is imperative to provide an ecosystem that could facilitate their financing, marketing, technological, infrastructural needs and make them more competitive," said Sanjay Bhatia, president of Ficci MSME committee.

"Easy and faster financing options could provide a trigger for faster, inclusive growth for MSMEs," Bhatia said.