The Small Industries Development Bank of India (Sidbi) is going to start with commercial banks on extending working capital loans to the small- and medium-sized enterprises (SMEs) as it is not permitted to do so on its own under the current Sidbi Act.
“We have already finalised the Punjab National Bank and Bank of India as partners for this and are looking at a few more,” Balasubramaniam, chairman, Sidbi, told.
The finance ministry has given its green signal to allow Sidbi to extend working capital funds to SMEs directly but this will require amendments to both the Banking Act and the Sidbi Act. Sidbi has started work on a draft plan for the working capital scheme. “This process will take about three to six months,” the chairman said.
Sidbi is not under the Banking Regulation Act and consequently doesn’t fall under Negotiable Instruments Act, which prevents it from extending working capital loans directly.
