Setting up of Small Industries Development Bank of India (SIDBI) Marked the fulfillment of a long felt need to have a separate institution at the national level to exclusively cater to the requirements of the small scale sector in the country.
SIDBI became operational on April 2, 1990 with an initial paid- up capital of Rs. 250 crore and taking over the outstanding portfolio of IDBI relating to small scale sector held under the Small Industries Development Fund (SIDF) as of March 31, 1990 amounting to Rs. 4,200 crore. The authorised capital and paid-up capital of the Bank were subsequently raised to Rs. 500 crore and Rs. 450 crore respectively.
SIDBI, a wholly owned subsidiary of the IDBI, is designed to function as the principal financial institution for promotion, financing and development of industry in the small scale sector and to coordinate the functions of institutions engaged in similar activities.
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The role envisaged is wide ranging. SIDBI’s Statute allows considerable flexibility and empowers it to assist the entire spectrum of small, tiny, village and cottage industries in the decentralised sector.
The range of assistance comprises promotional, financing and extension support, which will be made available through appropriate schemes to cover setting up of new projects and expansion, diversification, modernisation and rehabilitation of existing units.
As principal institution for development of small scale sector, SIDBI would make full use of the existing credit delivery structure and support service agencies and strengthen their capabilities so as to reach out their services to the smallest of the small scale units situated in the remotest parts of the country.
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SSI units which number more than 18.3 lakh have a wide geographical spread-out in the country. The network of branches and field offices of banks and State-level institutions are ideally located for serving the small sector units.
These factors have been kept in view while envisaging the role of SIDBI as the principal financial institution as provided in its Statute.
SIDBI will, however, step in for directly assisting the activities which are essential for the healthy growth of small scale units but not covered by the existing agencies. Thus, the approach of SIDBI will be to supplement the efforts of existing institutions, strengthening their capabilities through financial and other forms of support and instituting suitable co-ordination mechanism.
SIDBI’s assistance by way of refinancing is channelised through SFCs, State Industrial Development Corporations (SIDCs), commercial banks, co-operative banks and RRBs. It provides rediscounting facilities to commercial banks apart from resource support to SSIDCs and NSLC for extending raw material and marketing support and leasing and hire-purchase facilities to SSI units.
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The activities of SIDBI have been patterned to Suit the requirements of small scale industries consisting of both modern and traditional ones. Broadly, these activities can be categorised as under:
(i) Refinancing of term loans granted by banks and other eligible financial institutions;
(ii) Direct discounting as well as rediscounting of bills arising out of sale of machinery/capital equipment by manufacturers in small scale sector on deferred credit;
(iii) Equity type assistance under National Equity Fund (NEF) and by way of seed capital to entrepreneurs;
(iv) Rediscounting of short term trade bills arising out of sale of products of small scale sector,
(v) Resource support to NSIC and other institutions engaged in supply of raw materials, marketing of SSI products, setting up of industrial estates, development of industrial areas and infrastructure, extension of hire-purchase and leasing facilities;
(vi) Direct assistance for setting up and expansion of marketing outlets for SSI products and development of industrial areas for SSI units;
(vii) Share capital and resource support to factoring organisations;
(viii) Assistance for promotion of exports of SSI products; and
(ix) Extension of technical and other related support services for promotional development and growth of small sea le sector.
In consonance with the objectives envisaged in the Statute, SIDBI has evolved new schemes of assistance while at the same time continuing the schemes of assistance hitherto operated by IDBI for the small scale sector under SIDF. SIDBI has also given special attention to liberalisation and simplification of existing schemes of assistance, simultaneously with extension and support services like modernisation and technology upgradation.