CHENNAI: The Hongkong and Shanghai Banking Corporation has lowered its internally fixed threshold for offering forward cover to $50,000 per consignment to suit the convenience of small and medium exporters, according to Mr Subir Mehra, Head-Commercial Banking, India.

"Even this limit is too high for most SMEs. It will be possible for our bank to expand coverage of small businesses if the Reserve Bank of India allows offer of cover up to a specified cut-off point without insisting on every forward deal being supported by a document of merchandise transaction,'' Mr. Mehra said here on Monday

Addressing a press conference along with Margaret Leung, General Manager, Global-Co-Head, Commercial Banking, based in Hong Kong, Mr. Mehra said the present regulatory dispensation posed a hurdle to small exporters in getting fine rates and concluding deals expeditiously.

Mr. Mehra pointed out that unlike factoring, the traditional cash-credit system operated by banks in India to finance small and medium businesses posed the disadvantage of needing a collateral and being inflexible with respect to the volume of customers' orders on hand. Still factoring had not taken off for long because of the banks' failure to "educate'' potential customers on its benefits.

Focussing his remarks on HSBC's thrust on serving the SME sector, Mr. Mehra said the domestic factoring product of the bank in particular was being received well with the growth rate of the economy on the uptrend and with value added tax (VAT) and service tax encouraging financial discipline and transparency among SMEs (by inducing them to shun under-reporting of business and incomes).

The bank's product portfolio for SMEs (including sole proprietorships and partnerships, besides private limited companies) would be available to customers with a turnover of up to Rs. 50 crore.

HSBC had recently introduced credit protection against defaults due to bankruptcy of buyer in both domestic and export factoring. Its other product offerings to the SME sector included cash management and channel financing.

The bank, which already had more than 40 branches in India, had received licences to open new branches in Lucknow, Jodhpur and Raipur, Mr. Mehra said.

Ms. Leung said that even in Britain and Hong Kong, where there was no regulatory requirement on banks to finance SMEs, HSBC had a large SME portfolio because of the opportunities the sector offered to the bank and the major role that SMEs played in production, employment and economic growth.

HSBC, which was the world's largest bank in terms of assets and third largest in terms of market capitalisation, was planning a global campaign to highlight the role of SMEs in national economies and the support that the banking system could give the enterprises.

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