SME Bank, a development finance institution, will get a commercial bank licence from the State Bank next month, according to local sources. The licence would enable SME Bank to raise cheaper funds from the market through deposits and help reduce lending rates.
At present SME Bank, formed through merger of two Development Finance Institutions (DFIs), gets a line of credit from the State Bank at five per cent. The commercial banks raise deposits at much cheaper rates.
Small- and medium-sized enterprise (SME) loans vary according to size and the risks involved: for loans over Rs10 million, the interest rate is at 10 per cent; 11 per cent for amounts ranging from Rs5 to 10 million and 12 per cent for Rs2-5 million credit.
