Sidbi chairman and managing director N. Balasubramanian (left) with his Uco Bank counterpart V. Sridar in Calcutta on Wednesday. Picture by Kishor Roy Chowdhury

Calcutta, June 29: Uco Bank and Small Industries Development Bank of India (Sidbi) have entered into a strategic alliance to fund small and medium enterprises. A memorandum of understanding was signed between the two banks today.

Uco Bank expects to disburse Rs 500 crore in the current fiscal to the SME sector following this tie-up.

Under the agreement, the two banks will jointly identify viable and acceptable projects for financing. Sidbi or Uco Bank could take up co-financing or exclusive financing of term loans. Working capital requirement will be met exclusively by Uco Bank.

This alliance will increase Uco Bank’s reach to the SME sector by using its own network and leveraging the relationships and appraisal skills of Sidbi.

Uco Bank chairman and managing director V. Sridar said this arrangement would initially operate in Calcutta, which has a high concentration of SME units like readymade garments, hosiery, textile machinery and engineering.

Uco Bank’s exposure in the SME sector is Rs 1953 crore. Sridar said during 2004-05, the incremental lending of the bank to the small-scale sector has been around Rs 227.74 crore. The bank expects to increase the lending to Rs 2800 crore in the current fiscal. “Our tie-up with Sidbi will help us achieve this figure,” he added.

Sidbi will also work with Uco Bank to help widen its micro-credit activities and use the branch network of Uco Bank.

Sridar said, “In order to develop entrepreneurial ability of the first generation small industrialists, Uco Bank has decided to establish a non-residential training centre at Howrah.”

Sidbi chairman and managing director N. Balasubramanian said Sidbi has set up an SME fund to help the sector. The eight-year Rs 500-crore SME Growth Fund has been set up to meet the long-term risk capital requirement of innovative and technology industries in the SME sector.