Sailendra Narain, Managing Director, Small Industries Development Bank of India (SIDBI), has set in motion new action plans to uplift small enterprises to fight competition on domestic and global turfs. Aware that small entrepreneurs operate from a disadvantageous position, Narain wants to clear their path of obstacles. The lending criteria is being liberalised. New schemes have been initiated to encompass marketing and factoring services would be launched soon to take care of working capital requirements of small businessmen. New schemes to create a new fighting-fit breed of entrepreneurs are planned. The tie-up with international giant Dun & Bradstreet's Indian subsidiary for credit rating to exporters has already elicited tremendous response. Bad debts, the bane of financial agencies servicing the small scale sector, are negligible. Sudipto Dey spoke to Narain to discover that the mood at SIDBI is upbeat.

Are you satisfied with SIDBI's performance? What are your priorities and targets for the next five years?

Since its inception in 1990, till March 31, 1996, SIDBI's cumulative sanctions of assistance to small units have been Rs 22,272 crore and disbursements Rs 16,864 crore. The aggregate sanctions of assistance under all schemes in 1995-96 was Rs 6,056 crore. What is more important, we have dovetailed policies, geared up operations, and enlarged the profiles of activities to meet almost every emerging need of small entrepreneurs. From a predominantly refinancing institution, SIDBI has emerged as a purveyor of a wide variety of assistance including equity, term loans, working capital, foreign currency loans and venture capital. Today, we provide assistance for new projects, expansion, modernisation, technology upgradation, quality improvement, marketing, infrastructure development, credit rating, exports and rehabilitation of sick units.

During 1995-96, SIDBI's total income was Rs 1,135 crore and profits, Rs 261 crore. SIDBI is an institution with capital adequacy ratio of 21.8 per cent. Having been listed among the top 50 development banks in the world (by the Banker, London, May 1997), SIDBI has been ranked 21st in terms of assets and 34th in terms of capital.

SIDBI's role will increase considerably in the coming years. The recommendations of the Expert Committee on Small Enterprises headed by Abid Hussain, when implemented, would expand our areas of operation. With the expected increase in the investment limit in plant and machinery to Rs 3 crore and a liberalised environment, SIDBI would devise activity-specific special schemes aimed at enhancing the competitiveness in domestic and global markets.

In a liberalised environment, how is SIDBI helping the small industry to become more competitive?

The small-scale sector has come a long way from an era of protection, subsidisation and reservation to a liberalised regime of dereservation, competition and market-orientation. In tune with the requirement of changing times, SIDBI introduced the Technology Development and Modernisation Fund (TDMF) Scheme in April 1995, earmarking Rs 200 crore initially, for encouraging SSI units to modernise their production facilities.

Quality management is another thrust area. Campaign for creating awareness of ISO 9000 certification is an ongoing exercise. Besides providing grants for acquiring credit rating from reputed agencies, SIDBI has an arrangement with Dun & Bradstreet India Pvt Ltd (D&B) as per which D&B would offer credit rating and other export related informational services at concessional rates.

Do Indian small enterprises operate on a level-playing field? Do you think they should be exposed to the dangers of unchecked competition even before an environment is created for them to stand on their feet?

No. Compared to large industry, small units have been historically at a disadvantage. Government policy has been to support SSIs to gain competitive strength. To ensure adequate credit flows, the government and the RBI have prescribed that of the total amount of funds allocated for the SSI sector, 40 per cent would be for units with investment below Rs 5 lakh, 20 per cent for units with investment between Rs 5 lakh and Rs 25 lakh, and the remaining 40 per cent will be disbursed for the rest of the SSI units.

How do you tackle the problem of sickness and the related bad debts? What has been SIDBI's track record in recovery?

It is true that sickness in the small scale sector is a problem. However, recovery in SIDBI is quite satisfactory. Non-performing assets stand at 2.8 per cent, one of the lowest among the development financing institutions in India.

Are you planning to change the credit appraisal criteria in the wake of economic liberalisation?

We have been liberalising the terms of assistance under various schemes and simplifying the procedure. Improving the system of appraisal is an ongoing process. SIDBI had constituted a task force under the chairmanship of K U Mada (former Executive Director of the Industrial Development Bank of India) to look into the existing formats and procedures under its direct finance schemes and to recommend simplification. We are examining the report.

What is the success rate of the projects undertaken under SIDBI's supervision?

SIDBI finances projects through direct financing schemes besides refinancing and bills rediscounting and aggregate sanctions under direct financing from about 50 per cent of our total sanctions. By and large, the units financed under these schemes are working quite well, and their repayments are satisfactory.

Does SIDBI help in marketing the products manufactured through its assistance?

Yes. We have a Marketing Finance and Development Department (MFDD), established in March 1996, to focus attention to the marketing related services needed by SSIs in domestic and international markets. Besides giving commercial loans for marketing activities, SIDBI has sponsored Small Industries Expo '96, at New Delhi, sponsored an event `India Show 96' in St Petersburg, Russia, and also provided a permanent display window to Indian SSI products at the India International Trade Centre, Rotterdam, the Netherlands.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.