State Bank of India to lend $21.720 interest-free

SBI SMILE aims to encourage aspiring Indian entrepreneurs to open business by providing seed-capital.

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 unit of SBI.

Currently, banks give loans to the entrepreneurs, only if they have a substantial capital to invest. The loan amount is around 70-80 percent 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.

View the full story in Economic Times.