Mumbai, May 12: Small Industries Development Bank of India (Sidbi) will extend credit to medium-scale enterprises whose net investments are up to Rs 10 crore. It is also looking at providing working capital loans and letters of credit and overdraft facility to small and medium enterprises (SMEs).

The government has designated Sidbi as the nodal agency for an SME fund of Rs 10,000 crore and the bank expects to disburse the amount in two years. The borrower would receive credit at around 9.3 per cent under the fund.

Sidbi is currently negotiating lines of credit from the World Bank, Kreditstalt fur Wiederaufbau (KFW) and Asian Development Bank (ADB) to meet the fund requirements.

Senior bank officials today said Sidbi’s attempts to fund medium scale enterprises recently received a fillip when the Centre clearly defined these units as having net investments of up to Rs 10 crore in plant and machinery. On the other hand, the current ceiling on investment in plant and machinery for a small-scale unit is Rs 1 crore.

Chairman and managing director V. K. Chopra said the bank is keen to provide working capital assistance to units as well. It is now awaiting a Reserve Bank of India (RBI) clearance to provide other services also. The objectives behind this approach is to provide integrated credit services to clients.

The bank has posted a 17.39 per cent rise in net profit in 2003-04 at Rs 243 crore compared with Rs 207 crore in the preceding year.

Chopra said while the exposure of Sidbi to state finance corporations (SFCs) was at around Rs 4,100 crore, it has entered into agreements with seven SFCs to ensure financial discipline.

Fresh lending will be provided to these SFCs only if their non-performing assets (NPAs) are not more than 5 per cent and their administrative costs are less than 10 per cent, Sidbi said. While financing, the bank is providing a rebate of 2 per cent for such SFCs, it added.

To provide an impetus to commercial bank loans to the SSI sector, Sidbi and the Punjab National Bank have decided to set up a credit rating agency, Chopra said. While this agency will join hands with existing players to develop various models, it is could get going in six months.