SBI providing seed capital to SMEs for budding entrepreneurs.

Good news for Small and Medium Enterprises (SMEs). State Bank of India is providing seed capital upto Rs.10 lakhs to budding entrepreneurs. What is so special? Here is the speciality:

• The seed capital is interest free
• You can repay the seed capital in 5 year

This is a good opportunity for the aspiring entrepreneurs to start their ventures. So, walk up to your nearby SBI and get more information on the requirements to avail this seed capital.

I know many bright entrepreneurs looking out for funds and finding it difficult in this economic downturn, to get loans or finance. Either they are asked to pledge their properties or the rate of interest is too high to make it viable to borrow.

So avail this opportunity. Who knows - in the next election, the parties will announce writing off this seed capital also!!

Below is the news article, which appeared in the Economic Times today.

Cheers,
Gopal
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NEW DELHI: State Bank of India (SBI) will provide interest-free seed capital of up to Rs 10 lakh to aspiring entreprenuers under a new scheme, SBI SMILE, which is specially targeted to encourage small and medium enterprises in the country.

The scheme will be in place initially for one year, after which the bank could extend it, if the situation warrants.

“Given the economic downturn, some entrepreneurs have not been unable to raise any capital. The scheme will provide them a platform to kick-start their businesses,” said BS Bhasin, chief general manager, SME, at the country’s largest lender.

Currently, banks give loans to the entrepreneurs, only if they have a substantial capital to invest. The loan amount is around 70-80% of the total project cost. Under the new scheme, SBI will provide the seed capital and entrepreneur will also be able to seek a loan. Loan terms and interest rates will be determined as per the existing guidelines. “There will be no interest on the seed capital. You can pay that amount after you’ve serviced your loan,” Mr Bhasin said.

The bank will offer a five-year moratorium on paying the seed capital amount.

The bank, however, has not set any target for the amount it will disburse under the scheme. Already, SBI has SME loans of Rs 1,00,000 crore outstanding on its account books.

As per the central bank guidelines, a bank can give up to Rs 10 crore as loan to a medium enterprises for investment in plant and machinery.

Other banks are not impressed with the scheme. “This is another gimmick. The bank is flush with liquidity and hence this scheme. Otherwise how would you explain that SBI has lowered the target from 29% to 25% for the current fiscal,” said a senior official with a Mumbai-based private sector bank.

Earlier, the banking regulator RBI had expressed concerns over a slowdown in lending to SME sector. It had extended a special refinance scheme of $1.4 billion to Small Industries Development Bank of India (SIDBI) to enable it to lend to banks and financial institutions towards incremental SME loans.