The Small Industries Development Bank of India (SIDBI) has structured a Small and Medium Enterprises Fund for making available timely and adequate financial resources at competitive interest rates for SME sector. The fund envisages a corpus of Rs 10, 000 crore spread over next two years.

Under the Fund, 80 per cent of the resources are proposed to be reserved for SSI Units having investment in plant and machinery up to Rs 1.0 crore and the remaining 20 per cent is to be utilized for other SSI units and Medium sized Enterprises. Assistance under the Fund would be made available directly by SIDBI through Primary Lending Institutions. The maximum rate of interest would be 2 per cent below the PLR of SIDBI under direct assistance, it is learnt.

With the current investment limit of drug SSI's continuing to be Rs one crore, the small-scale drug sector is likely to benefit out of the SIDBI move. The availability of loans at cheaper interest rates for capital investment was one of the major attractions for the drug SSIs to remain within the Rs one- crore limit.

Interestingly, the same has been the motivating factor for bigger pharma units too as they found that an increase in the investment limit for drug SSIs to Rs 5 crores can help accommodate them also into the SSI group. According to sources, the interest rates for SSIs are PLR + 2%, while that of other units is PLR + 4%. The SSIs feel that by demanding for an investment increase to Rs 5 crore, the bigger companies are trying to enjoy the so-called concession meant for SSIs.

Meanwhile, the Central Government is planning an infrastructure development programme through consortium funding for bigger segments of the industry. An Inter-Institutional Group (IIG) has been formed involving several financial institutions like IDBI, IDFC, ICICI Bank, SBI, LIC, Bank of Baroda and Punjab National Bank to facilitate an efficient credit delivery system for infrastructure development, it is learnt. These institutions are to pool their resources on a callable basis, and a sum of Rs 40,000 crore will be made available as and when necessary at a competitive interest rate. The IIG will ensure speedy conclusion of loan agreements and implementation of infrastructure projects.