Worldwide, the wind has been changing in the finance sector in general and banking-investment sector in particular. Such a panorama teaches us that now, is the time of cooperation rather than a competition, now it’s a time of convergence rather than cutting each other’s neck over customers and markets, now it’s a time of consolidation rather than antagonism.

Curing the fatal disease requires the doses of small pills; impressive thoughts come out from the small brain, similarly, India requires prominence of small and medium enterprises for curing its problem of low economic growth vis-à-vis developed nations.

To cure the overall disease of lack of appropriate growth of Indian SMEs – Small and Medium Enterprises, India needs several small pills such as adequate credit delivery to SMEs, better risk management, technological upgradation of Banks esp. Public Sector Banks, attitudinal change in Bankers and so on. Among them, the major problem of inadequate financing to SMEs needs an urgent attention.

Having said this, it is pertinent to mention that Small Industrial Development Bank of India has achieved landmark results in the domain of small and medium enterprise financing and fulfilling their credit requirements time to time in various forms such as long term project finance, working capital finance, bill discounting etc.

However considering the level of appetite for credit facilities of Indian small and medium enterprises, private and public sector banks in India need to work out an unique and innovative model of financing to this vital sector (SME) of Indian Economy.

In today’s changing world, retail trading, SME financing, rural credit and overseas operations are the major growth drivers for Indian banking industry. The scene has changed since the adoption of financial sector restructuring programme in 1991.

The reform in the financial sector in India along with the overall second generation economic reforms in Indian economy has transformed the landscape of banking industry and financial institutions. GDP growth in the 10 years after reforms averaged around 6 %.

With the introduction of the reforms especially in financial sector and successful implementation of them resulted into the marked improvement in the financial health of the commercial banks measured in terms of capital adequacy, profitability, asset quality and provisioning for the doubtful losses.

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