Friday, April 8 2005 17:24 Hrs (IST) - World Time -

Mumbai: The Government was planning to unveil a new business model for the Small Industries Development Bank of India (SIDBI), to give a push to the activities of the financial institution, subject to amendment to the Banking Regulations Act and the SIDBI Act.

SIDBI was set up to enhance flow of credit to SME sector through financial assistance to State finance corporations (SFCs), and refinance to commercial banks but this model appears to be flawed, Union Finance Minister P Chidambaram said after inaugurating SIDBI Development Centre in Mumbai today (Apr 8, 2005).

Though it was expected that SFC would work on professional lines, it may not always happen and commercial banks may not need refinance for SME lending, he said.

SIDBI would need to look at direct lending, including working capital assistance and co-financing arrangements to grow its business, he added.

SIDBI has submitted a new business model, which the Finance Ministry was studying carefully. The Ministry would take a decision soon to implement plans in the future, Chidambaram said.

The SIDBI Act and Banking Regulation Act needs to be amended to enable the financial institution to engage in working capital assistance to SMEs and co-financing arrangements, a SIDBI official said.