Short essay on the industrial development bank of India (IDBI)

Financial assistance is also provided by the IDBI to tiny, small and medium enterprises through State Financial Corporations and State Industrial Development Corporations, Commercial Banks, Cooperative Banks and Re­gional Rural Banks under the following schemes:

Image Source:

Image Source:

(1) Special Share Capital Scheme:


Under this scheme assistance to the extent of gap between promoter’s contribution, which the State Financial Corporation considers necessary, and the actual amount the entrepreneur proposes to arrange himself or from his relatives, friends etc.

Briefly speaking, the maximum assistance under this scheme is limited to 20% of the project cost or Rs. 2 lakhs, whichever is lower. 1 % interest (service charge) is applicable.

Five years’ moratorium is given for repayment of instilments and three years for payment of interest.

(2) Seed Capital Scheme:


Assistance is provided to promoters in the small scale sector for setting up a new project (i.e., for the first time) and to expand, modernise or diversify the units.

All projects that are eligible for financial assistance from IDBI directly or through refinance are eligible, subject to a ceiling on the project cost of Rs. 3 crore.

Both SIDCs and SFCs administer this scheme. Maximum assistance that can be granted under the scheme is Rs. 15 lakhs per project.

The seed capital advance is free of interest. Only a service charge of 1 per cent is applicable.


The repayment of the loan is fixed depending upon the repaying capac­ity. An initial moratorium period of 5 years is granted.

(3) Modernisation Scheme:

This scheme is meant for small and medium industries for modernising their units and to adopt improved and updated technology and methods of production. Assistance granted is at concessional rates.

The units desiring assistance under this scheme should be in existence for a minimum period of 5 years.

In case of replacement of machinery, the machinery should have been in use for a period of not less than 5 years.

Interest rate is 11.5 per cent.

Extent of assistance is need-based.

10% of the promoter’s contribution is expected.

The usual norms are not insisted upon under this scheme.

(4) Scheme for Rehabilitation of Sick Units:

For rehabilitation of Small Industries the Refinance Scheme was intro­duced by the Government in January 1984.

Interest rate is 10% per annum.

The Scheme is operated through SFCs/SIDCs.

From July 1985 refinance facilities is respect of term loans given by SFCs and SIDCs for buying original equipment/capital goods both Indian and imported by the units with sound performance record have also been made available by the IDBI.

Finance and refinance facility is available for original equipment, capi­tal goods for expansion, diversification, modernisation, replacement, renova­tion, balancing schemes etc.

Interest rate on loan to the borrower is 14% per annum while IDBI refinance is 11 per cent per annum.