Chennai, Aug. 27 (PTI): Laying stress on lending to small and medium enterprises (SMEs), Indian Overseas Bank (IOB) and the Small Industries Development Bank of India (Sidbi) today signed a memorandum of understanding for co-financing the SME projects.

Under the agreement, term loan for viable SME projects will be financed by Sidbi, while IOB will lend the working capital.

Initially, the scheme will be implemented at select clusters in Chennai, Erode, Tiruchi and Madurai and will later be extended to other places.

“The major feature of this pact is the availability of Sidbi’s expertise for IOB to assess the risks associated with the financing of SME sector and help quicken the loan delivery process,” Sidbi chairman and managing director, N Balasubramanian said after signing the MoU.

Balasubramanian also said Union finance minister P. Chidambaram would launch the proposed credit rating agency exclusively for the SME sector on September 5 at Coimbatore.