MICROCAPITAL.ORG STORY: The Central Bank of India, A Nationalized Commercial Bank, Signs Deal with Government of Orissa and State-Owned Industrial Promotion and Investment Corporation (IPICOL) for Rs 25,000 Crore (USD 5.3 Billion) Line of Credit for Micro, Small and Medium Enterprises (MSMEs) Over 5 Years

The Central Bank of India, a nationalized commercial bank has plans to extend Rs 25,000 crore, the equivalent of over USD 5.3 billion worth of credit over five years to micro, small and medium enterprises (MSMEs) in the east coast state of Orissa [1,2]. The credit comes after the Central Bank signed a deal with the government of Orissa and the Industrial Promotion and Investment Corporation (IPICOL), a state-run organization that “[operates] the State incentive schemes to large and medium industries under the Industrial Policy of the Government” [3,4]. Prior to this, the Central Bank of India had only made investments worth Rs 3,000 crore, the equivalent of over USD 644.8 million, in the Orissa state [1].

The Central Bank of India is not to be confused with the Reserve Bank of India, which is the official central bank of India [6]. The Central Bank is a nationalized bank that acts as a commercial bank and promotes key industries [2]. The Reserve Bank controls monetary policy, regulates the financial system, manages foreign exchange, issues currency, and also has a development function to “support national objectives” [5]. Microcapital recently reported on Dr. K.C. Chakrabarty, the deputy governor of the Reserve Bank, who spoke of the “urgent need” to extend credit to the nearly 50 percent of Indian farming households that do not have access to credit [6].

The Central Bank of India will work with the government of Orissa and IPICOL to identify strong investment proposals [7]. The credit will then be deployed through the bank’s branches in Orissa [7]. The Central Bank will also create “entrepreneurship development institutions” to provide “training and capacity planning activities” [7]. They will also begin to establish new bank branches that specifically work with MSMEs on land provided by the Orissa government [7]. Lastly, the Central Bank and the Orissa government will create a “Steering Committee [that] shall supervise and monitor the effective implementation” of the project [1].

The Central Bank of India was founded in 1911 as the first “commercial bank which was wholly owned and managed by Indians” [2]. It was nationalized in 1969 [2]. It has 3541 branches and its network reaches 27 out of the 28 states in India [2]. It has made investments in “agriculture, small scale industries and also medium and large industries,” and currently has over 25 million account holders [2]. Some of its new initiatives include extended finance for vehicle loans and Short Term Loans to companies [2].

IPICOL is run by the state government of Orissa and serves many roles in relation to the economic development of the state [4]. Some of these roles include finding investment opportunities for the state, assisting with technology sourcing, extending the services of merchant banking, and providing financial assistance to flailing firms [4]. Thus far, IPICOL has invested Rs 3750 crore, the equivalent of over USD 806.1 million, in industries such as “Pig Iron, Sponge Iron, High Speed Steel, Aluminium Extrusions, Aluminium Powder, Aluminium Rolled Products, Cement, Textile, Paper, Industrial Gases, Synthetic Fibres, [and] Granite [4]. Through their investments IPICOL have directly created over 37000 jobs [4].

By Christopher Maggio, Research Assistant

Bibliography
[1] My News India article entitled: ‘Orissa: Central Bank of India will strengthen MSME’: http://www.mynews.in/News/Orissa_Central_Bank_of_India_will_strengthen_MSME_N28422.html
[2] Central Bank of India: http://www.centralbankofindia.co.in/site/indexcbi.aspx
[3] Orissa State Government: http://orissagov.nic.in/portal/default.asp
[4] IPICOL: http://www.ipicolorissa.com/ipicol.html
[5] Reserve Bank of India: http://www.rbi.org.in/home.aspx
[6] MICROCAPITAL STORY: Reserve Bank of India (RBI) Deputy Governor States that nearly 50 percent of Farmer Households in India Still Have No Access to Credit; Calls for More Measures to Extend Financial Services in the Country: https://www.microcapital.org/microcapital-story-reserve-bank-of-india-rbi-deputy-governor-states-that-nearly-50-percent-of-farmer-households-in-india-still-have-no-access-to-credit-calls-for-more-measures-to-extend-financial/
[7] Your Story India article entitled: ‘Orissa government tied up with Central Bank Of India to strengthen credit flow to MSME’: http://www.yourstory.in/news/1072-latest-news/2722-orissa-government-tied-up-with-central-bank-of-india-to-strengthen-credit-flow-to-msme

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