Credit to MSMEs is expected to improve through SIDBI branch expansion, say experts

SIDBI is largely used for refinancing purposes by MSMEs and SMEs but the entity has been lately reporting robust credit growth due to its investments in some fintech institutions.

Credit to the micro, small and medium enterprises (MSME) is expected to improve through the Small Industrial Development Bank of India’s (SIDBI) branch expansion plan, industry experts said. Union Finance Minister Nirmala Sitharaman, in her budget address on July 23, said that the union government plans to expand branches of SIDBI to serve the MSME clusters within three years.

This, according to Ajay Kumar Srivastava, Managing Director & CEO, Indian Overseas Bank, will lead to more focused funding facilities for the sector. “The expansion of branches by SIDBI is expected to provide the much-needed accessibility to credit and additional support required for further growth of the sector,” Kumar said.

Additionally, Shachindra Nath, Founder and Managing Director, UGRO Capital, said that this announcement alongside other measures will empower the credit needs of MSMEs. “The announcements collectively signify a significant focus on MSMEs, empowering lending institutions in priority sector to provide more credit,” Nath said.

For this year, Sitharaman said the SIDBI will open 24 branches. The branches will cover 168 clusters of the total 242 clusters, she added. "With the opening of 24 such branches this year, the service coverage will expand to 168 out of 242 major clusters.”

SIDBI is largely used for refinancing purposes by MSMEs and SMEs but the entity has been lately reporting robust credit growth due to its investments in some fintech institutions.

For instance, it had, in November 2023, partnered with the Technology Development Board (TDB) to facilitate easier access to credit for enterprises engaged in the development and commercial application of indigenous or imported technology. Through this MoU, TDB and SIDBI started a credit alliance, wherein TDB and SIDBI shall refer to additional funding needs of mainly MSMEs and other companies.