SIDBI entered into MoU with Indian Overseas Bank to extend assistance to MSMEs

Small Industries Development Bank of India (SIDBI) entered into a memorandum of understanding with Indian Overseas Bank (IOB) on 6 January 2012 to extend assistance to micro, small and medium enterprises (MSME) customers of IOB. The MoU was signed by S. Muhnot, Chairman and Managing Director of SIDBI, and M. Narendra, Chairman and Managing Director of IOB.

Indian Overseas Bank (IOB) received Rs 100 crore from Small Industries Development Bank of India (Sidbi), as part of refinancing agreement. SIDBI lined up Rs 2000 crore equity investment in the country's micro, small and medium enterprises (MSME).

As per the Agreement

SIDBI would initially provide a line of credit worth Rs. 100 crore to IOB for seven years. The amount is to be utilised to provide growth capital to deserving MSMEs for funding their growth requirements towards any bonafide business purpose, including bridging the gap in project funding, working capital margin, intangible expenses.

The assistance to MSMEs could be through a variety of instruments such as subordinate debt, mezzanine/ convertible instruments such as optionally convertible debentures and redeemable preference shares. On a selective basis, IOB would also provide equity funding where business model or exit options would clearly support such investments.

IOB in 2011-12

During 2011-12, the bank disbursed Rs 1983 crore to the sector, which is a growth of 17 per cent compared 2010-11. Total aggregate disbursements stood at around Rs 13822 crore and number of accounts 44871.

IOB recently received an award for its performance in MSME lending during 2010-11 from the President.

Union Government Measures

Union Government had created the Risk Capital Fund for MSMEs within SIDBI and SIDBI in turn, formed a separate business unit, SIDBI Foundation for Risk Capital. The objective was to develop and operationalise appropriate risk capital products for MSMEs of different sizes, constitution and in different industry segments. Apart from direct funding by SIDBI, various delivery channels such as banks and venture capital (VC) funds is to be used for providing risk capital to MSMEs