Oct 30: AU Small Finance Bank, one of the fast growing banks in India, has signed a Memorandum of Understanding (MoU) with Small Industries Development Bank of India (SIDBI) to provide an impetus to funding MSMEs.
Under ‘AU SIDBI Joint Financing Programme’, both the financial institutes have decided to work together in the areas of joint financing of projects relating to MSMEs in manufacturing and service sectors. They will adopt a common approach towards project identification, appraisal, monitoring, follow-up and client servicing, the company said.
“Under the advice of SIDBI, AU Bank will play the anchor in this programme as all the processes including disbursement, monitoring and recovery will be handled by them. With its MSME focused approach, the programme will provide stimulus to the purpose of financial inclusion in India,” it added.
According to the bank, the programme will fund term loan proposals worth 25 lakh to 2 crore. The appraisal of the proposal shall be done jointly by AU Bank and SIDBI. Both the financial institutes would earmark a corpus of Rs 100 crore for lending under this MOU for FY18. The corpus for the subsequent FYs would be decided after mutual consultation and seeing the progress made during FY18. The 3 year-long agreement will focus on timely and adequate credit availability to Medium Scale Enterprise (MSEs) units and efforts will be made for augmenting credit flow to MSE.
Commenting on the development, Sanjay Agrawal, MD & CEO, AU Small finance Bank, said, “our cordial relationship with SIDBI started in 2010, when they provided credit facility of Rs 10 Cr for the promotion and development of MSME sector units in rural and semi urban areas, which has now reached Rs 1,000 crore and will strengthen further in the times to come. SIDBI has always been one of our prime lender and partner in extending credit to the MSME Sector in the unserved areas towards financial inclusion. Our success today in MSME portfolio is largely due to this partnership. We look forward to the same support even for our banking platform. This joint financing programme with SIDBI shall be a crucial step and milestone in the direction to build values for our customers.”
According to Mohammad Mustafa (IAS), Chairman and Managing Director, SIDBI, “the MoU with SFBs is a continuum of series of SIDBI’s effort in addressing the gaps in the MSME eco system. This initiative will act as a catalyst to improve financial inclusion of hitherto under-served sectors of the nation. On successful operationalisation, this could be a milestone in the MSME financing in the country.”