The economic meltdown across the country has prompted the banking industry leader, State Bank of India (SBI) to scale down its credit targets for the small and medium enterprise (SMEs). The bank has lowered the target from 29% to 25% for the current fiscal that is going to end on March 31st.

Advances to SME accounts to nearly one-fourth of the total loan portfolio of the bank and it is the second largest after retail loan portfolio.

However SBI still expects to increase its market share by 1% every year and this would increase its share to 25% by March 2010. Presently the bank's share in the SME sector is nearly 24% and it expects this share to rise because of the launch of a special scheme offering loans at 8% for this sector. The scheme would help in picking up the demand.

SBI has introduced two new schemes named SME Care and SME Help for the sector. SBI deputy general manager (SME trade and services) TS Krishnaswamy said, "The two new loan schemes - SME Care and SME Help - where the bank offers loans at 8%, have seen a good response with sanction of about Rs 600 crore."

Mr Krishnaswamy informed that the bank has sanctioned Rs 600 crore for these schemes and out of this sanctioned amount, nearly 90% is given to SME Care that is primarily a working capital loan. Until now Rs 200 crore has been disbursed by the bank.

On the other hand, SME Help scheme is mainly a term loan. Both the schemes are extended at a fixed rate of 8% for one year. As per scheme, the bank will extend 20% of the borrowers existing limit at 8% interest rate that will be reset after the completion of one year period.

Recently SBI has also come out with 8% interest rate scheme for its home loan products that are been publicized by a mobile publicity van in Panchkula area of Chandigarh. The bank has introduced home loan products like SBI happy home and SBI life style at 8% interest rate for one year without any processing fee.