Punjab units expand as banks lend aggressively

The last fiscal (2007-08) witnessed aggressive lending by banks to Punjab SMEs. This helped banks exceed targets and also helped thousands of SMEs expand operations. According to the SLBC (State Level Bankers’ Committee Meet) data compiled by the Punjab National Bank, banks provided financial assistance to 171,142 SME units amounting to Rs 15,362 crore.

The assistance provided to small enterprises was Rs 11,305 crore to 167,594 units. The banks registered 31.9 per cent growth in the last fiscal year as against an increase of 30.6 per cent during the same period. The banks provided assistance to the tune of Rs 4,057 crore to 3,548 medium enterprises. Also, the share of incremental SSI advances to incremental priority sector advances was 42.8 per cent.

A senior official in a public sector bank said the repayment culture among the SMEs in Punjab was quite healthy. He added that the initiatives taken by the industrial bodies like CII to promote clusters also helped them identify potential and viable units in the state. The expansion of existing units ancillaries to some large automobile units and textile units has also helped banks in expanding loan portfolio to SMEs.

Also, according to the policy announced by the union Finance Minister, P Chidambaram, each urban & semi-urban bank branch must provide financial assistance to at least 5 new units under tiny, small and medium industry in a year.

Taking a cue from this policy, during the financial year 2007-08, 1822 urban/semi urban branches of different banks in Punjab financed 23,499 new accounts for SMEs. The per branch new SME account ratio comes to 12.90, against the target of 5. However, banks like the ICICI and the Bank of Maharastra have not even financed even a single new unit and many of the new accounts opened by the banks like Corporation Bank, Bank of Rajasthan, IDBI bank etc. are less than the annual target, which suggests scope for improvement.

To further encourage SMEs and SSIs sector in Punjab, the state government recently set up separate Industrial Development Boards, thus directly involving the leading players from the industry in the decision-making process of the government to create an industry-friendly climate in the state.