There is scope for banks to increase their lending to Small and Medium Enterprises (SMEs) by Rs 50,000 crore, stated a recent study conducted by rating agency Crisil.

The CRISIL study covered more than 2,000 SMEs across the country during the period FY 2007-08 to FY 2008-09.

According to the study, while banks have been lending to the SME sector, they still have significant scope for increasing lending to the sector.  

It added that funding opportunity is greater for smaller SMEs where turnover is less than Rs 5 crore. Furthermore, it stated, bank branches in urban areas have greater scope than their counterparts in the semi-urban and rural areas to increase funding support to SMEs.

Hence, there is a significant business opportunity for India's banks in the form of incremental SME funding, which is currently not being exploited, the study added. 

The study estimateed that Indian banks had funded on an average only around 60 percent of the incremental working capital requirement between 2006-07 and 2008-09 against the common banking practice of financing up to 75 percent of an entity's working capital requirement.

Inadequate and delayed credit has remained a major reason for sickness of more than 4.8 lakh micro, small and medium enterprises (MSMEs) in India. As per the data compiled by the RBI from the scheduled commercial banks, there were 77,723 sick micro and small enterprises (MSEs) in the country as at the end of March 2010.

Last month, a parliamentary committee had also viewed that more credit needs to be availed for SME sector, which are providing employment to a larger section of the society.