Following its refinancing activities, the Small Industries Development Bank of India (SIDBI) plans to raise up to Rs 5,000 crore through bonds, reported Business Standard. The proposed offering has been given ‘AAA’ rating by rating agency Icra.
SIDBI is the apex financial institution of the micro, small and medium enterprises (MSME) sector, and is backed by the Government of India. The government has 15.4 percent stake in the organisation. Public sector banks (PSBs), insurance companies and others hold more than 50 percent stake in SIDBI.
Further, the Reserve Bank of India (RBI) has allowed SIDBI to borrow up to a leverage (debt/net-owned funds) of 12 times till July 2019. SIDBI has a strong resource profile supported by MSME fund allocations. It also has access to cheaper MSME fund deposits, which are provided by banks against their shortfalls in meeting priority sector lending targets.
Icra expects MSME fund deposits to account for a significant percentage of SIDBI's incremental borrowings. SIDBI also has MSME fund allocations of Rs 7,500 crore, which can be called at a short notice and will help meet funding gaps. For FY18, the total borrowings under the MSME fund programme stood at Rs 35,000 crore, which comprised 41 percent of its overall borrowings for the fiscal year.
In May 2018, SIDBI signed an MoU with Yes Bank to fulfill the working capital needs of its MSME clients. According to the deal, Yes Bank will provide banking services, including working capital, to SIDBI customers at its 1,100 branches across the country. The MoU was signed between SIDBI chief general manager KI Mani and Yes Bank group president (international and institutional banking) Arun Agarwal in Lucknow.