SIDBI Targets ₹5,000 Crore Capital Increase Through Rights Offering in 2024-25

Preeti Bali / 1:23 pm / March 13, 2024
Seeking Funds to Fuel MSME Lending Growth

Small Industries Development Bank of India (SIDBI) plans to raise ₹5,000 crore ($60 million) in fresh capital next fiscal year to support its expansion plans. The bank’s Chairman and Managing Director, S. Ramann, revealed this information on Tuesday.

Boosting MSME Portfolio Share

SIDBI aims to increase the proportion of loans dedicated to micro, small, and medium enterprises (MSMEs) within its overall lending portfolio from the current 17% to 25%. Ramann highlighted that achieving this ambitious target necessitates additional capital injection.

“Our MSME lending focus has grown significantly in recent years. We were at just 7% three years ago. Now, we’ve reached 17%, but ideally, we want to reach 25%. This growth trajectory necessitates securing more capital in the upcoming fiscal year (2024-25),” he explained. Ramann further clarified that the ₹5,000 crore capital increase might be implemented in phases rather than a single transaction.

Government’s Potential Role and Timeline

With the Indian government holding a 20% stake in SIDBI, there’s a possibility of their contribution towards the rights issue being allocated during the upcoming budget announcement in June-July.

“SIDBI’s transition to Basel III compliance necessitates additional capital inflow. We must secure the targeted ₹5,000 crore within the next financial year. Otherwise, we won’t be able to accommodate the rising MSME credit demand,” Ramann emphasized.

Current Financial Performance

SIDBI anticipates concluding the current fiscal year with a total loan portfolio of ₹5.2 lakh crore, having already surpassed the ₹5 lakh crore mark. The bank’s current paid-up capital stands at ₹560 crore, with a net worth of ₹32,000 crore.

Jan Aushadhi Kendras Receive Credit Support

In a separate development, Union Minister for Chemicals and Fertilizers and Health and Family Welfare, Mansukh Mandaviya, inaugurated a credit assistance program specifically designed for Jan Aushadhi Kendras on Tuesday.

Strengthening Jan Aushadhi Network

The program involved an MoU exchange between SIDBI and the Pharmaceuticals and Medical Devices Bureau of India (PMBI). Additionally, a dedicated website to facilitate credit access for Jan Aushadhi Kendras was launched.

Highlighting the program’s significance, Mandaviya pointed out the exponential growth of Jan Aushadhi Kendras, expanding from merely 80 in 2014 to over 11,000 operational units nationwide today.

“An estimated 10 to 12 lakh people visit Jan Aushadhi Kendras daily, granting them substantial medication cost savings and ensuring access to essential drugs. The MoU between SIDBI and PMBI presents a golden opportunity for small and new entrepreneurs. It has the potential to significantly strengthen and modernize the Jan Aushadhi Kendra network across the country,” he stated.

The initiative aims to expand the program’s geographical reach by increasing the number of Jan Aushadhi Kendras to 25,000 within the next two years. As per the MoU, SIDBI will offer project loans with a credit limit of up to ₹2 lakh at competitive interest rates to support small Jan Aushadhi Kendra entrepreneurs.

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