The Indian Institute of Management, Ahmedabad (IIM-A) and the Union Bank of India (UBI) have signed a memorandum of understanding (MoU) to undertake research on the small and medium enterprise (SME) sector.

According to the MoU, the organisations will be setting up a 'Union Bank-IIMA Centre of Excellence' as well as a 'Union Bank Chair Professor of SME', a research chair to study SMEs.

With a grant of Rs 2 crore from UBI, the research chair will be headed by Sebastian Morris, a faculty member of IIM-A, for an initial period of six years, with an option of renewing the project.

"The chair will undertake theoretical research in terms of policies that need to be formulated by the government and empirical research in terms of the current growth status of SMEs and future prospects," said Samir Barua, director of IIM-A.

According to MV Nair, chairman and managing director of UBI, the bank has been focusing a lot on SMEs lately, given the scope of the sector.

"Around 16 per cent of our advance portfolio, i.e. Rs 14,000 crore, belongs to the SME sector. We have also identified 172 business banking branches, which will be focusing on SMEs only. With the results of the research, it will help the credit system to serve the sector in a better way. Findings of the research can be incorporated for in-house training and to train budding entrepreneurs," said Nair.

"The SME sector has already attracted a lot of research earlier. However, what has been missing is its linkage with the credit system. During the slowdown, SME segments including textile and commercial vehicles have been affected, apart from other export oriented segments. The research will help in finding ways to tackle it," said Morris.

The Union Bank was the largest recruiter at IIM-A during the recently concluded final placements of post graduate programme (PGP) students. The bank recruited around 18 students from the institute.