Canara Bank launches new loan scheme for SMEs

Under the scheme SMEs would be given term loans at a rate of interest that is 1 per cent less than the normal rate.

BANGALORE, DHNS:

Keeping in line with the current emphasis on Small and Medium Enterprises, Canara Bank on Saturday announced the launch of a new scheme targeting the energy efficiency sector.

The scheme, launched by the Chairman and Managing Director of the Bank R V Shastri at a function organised by the Peenya Industries Association, is part of a three-nation initiative from India, Brazil and China, sponsored by UNEP, UN Foundation and World Bank.

The three-country energy efficiency project focuses on encouraging commercial banks from the three designated countries to expand credit facilities and to increase investments in energy efficiency projects through various financing models, especially those targeting the end-use facilities.

Under the scheme SMEs would be given term loans at a rate of interest that is 1 per cent less than the normal rate and with a margin of 10 per cent against the 15 to 20 per cent of the project cost.

Small and Medium Enterprises who consume a large quantum of energy in their production processes would be eligible to be a part of the scheme.

SMEs would need to undergo an energy audit and submit project reports specifying measures for energy efficiency.

A grant of 25 per cent of the cost of energy audit and consultancy charges with a maximum of Rs 25,000 to the first 100 units would be provided on a first come first serve basis, besides the Rs 25,000 grant extended by the Indian Renewable Energy Development Agency (IREDA).

“Energy cost is a significant part of the production cost in many industries. With the dramatic rise in the cost of energy in the processing and servicing units, SMEs have been left without much of a financial support to implement efficiency measures to control costs. Large corporates, on the other hand, have been able to implement energy efficiency measures on their own and thereby reduce cost of production. The concessional lending is to ensure energy efficiency in the SME sector too,” Shastri said.

“Given the fact that there is a 13 per cent peak shortage level in electricity generation in the country and with a potential for energy conservation at 23 per cent, nearly 40 MW of power can be saved if SMEs are given sufficient end-use support to remove inefficiencies in generation,” said R Prabha General Manager, Canara Bank, Priority Credit Wing in his presentation detailing the scheme.