Small Industries Development Bank of India (SIDBI) was established on April 02, 1990 under an Act of the Indian Parliament as the principal financial institution for the financing, promotion and development of the SSI sector and co-ordination of the functions of the institutions engaged in similar activities. Presently, the bank provides financial and developmental support to the micro, small and medium enterprises (MSMEs).
While refinance support is provided to a vast network of eligible primary lending institutions for onward lending to MSMEs, direct assistance is channelised through SIDBI’s 64 branch offices.
SIDBI also extends micro finance support in the form of loans and grants to accredited NGOs/Micro Finance Institutions, Self Help Groups for on-lending and providing other support services to economically weaker sections of society enabling them to take up income generating activities on a sustainable basis.
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The authorized capital of the bank is Rs. 1,000 crores and paid-up capital is Rs. 450 crores, which is held by thirty six institutions/public sector banks/insurance companies owned or controlled by the Government of India. Since its inception, SIDBI has been endeavoring to meet the diverse needs of the MSMEs through various tailor-made schemes.
Direct Finance:
Although it started functioning as a refinancing institution, SIDBI now provides assistance to MSME units directly. Its assistance is by way of:
Term Loan:
Term loans are provided for (i) setting up new projects and for modernization, diversification, expansion, etc. of existing MSMEs, (ii) service sector entities like hotels, entertainment parks, hospitals/nursing homes, retail chains, logistic support services, IT and IT enabled services, etc. and iii) infrastructure development and up gradation.
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It also provides working capital term loans, bill discounting facilities in various forms as also equity support to potentially growth oriented SME units. Direct assistance is available in rupee as well as foreign currency.
Resource Support:
The bank provides resource support to institutions/Non-Banking Finance Companies to facilitate channelising assistance to a large number of MSMEs and infrastructure projects having linkages to MSMEs.
SIDBI as the Nodal/Implementing Agency:
SIDBI extends Nodal Agency services to the Government of India for schemes sponsored by its various Ministries for encouraging implementation of modernization and Technology up gradation by manufacturing units in the MSMEs sector, such as Credit Linked Capital Subsidy Scheme (CLCSS), Technology Up gradation Fund Scheme (TUFS) for textile industry and Integrated Development of Leather Sector Scheme (IDLSS).
Micro Finance:
To meet the micro credit demand, SIDBI constituted a specialized department called SIDBI Foundation for Micro Credit to create a national network of strong, viable and sustainable Micro Finance Institutions (MFIs) from the formal and informal sectors to provide micro finance services to the poor, especially women.
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SFMC provides a complete range of financial and non-financial services, such as, loan funds, grant support, equity and institution building support to the retailing MFIs so as to facilitate their development into financially sustainable entities, besides developing a network of service providers for the sector. The bank has also set up a SIDBI Growth Fund for MFIs for providing pure equity and quasi-equity support to eligible MFIs.
Indirect Finance:
The indirect assistance of the bank consists of refinance and resource support in the form of short-term loans/line of credit to Primary Lending Institutions (PLIs), comprising State Level Financial Institutions and banks having a large network of over 950 PLIs with a branch network of over 65,000 branches. It also provides rediscounting of bills facility to banks.
Promotional and Developmental Support:
As the apex developmental financial institution, SIDBI undertakes various promotional and developmental (P & D) activities for the MSME sector in India designed to achieve two prime objectives of national importance:
(a) Enterprise creation in the MSME sector, thereby generating employment and alleviating poverty through its select programmes, such as, Rural Industries Programme (RIP), Entrepreneurship Development Programme (EDP), Vocational Training Programme (VTP) and Small Industries Management Programme (SIMAP) and
(b) Strengthening the existing MSMEs to face the emerging challenges of growing internationalization and intensifying competition, through its select programmes, such as, Cluster Development Programme (CDP), Skill-cum-Technology Up gradation Programme (STUP), Environmental Initiatives, Marketing Assistance and Information Dissemination.
Besides financial assistance and promotional and developmental support, SIDBI has been instrumental in setting up subsidiaries/associate institutions for related services ‘ to MSME sector.
SIDBI Venture Capital Limited (SVCL):
In order to provide venture capital support to innovative, knowledge-based first generation entrepreneurs having neither equity nor collateral, SVCL – an asset management company is established as a wholly-owned subsidiary of SIDBI, for managing venture capital funds sponsored by SIDBI.
At present, it manages the National Venture Fund for Software and Information Technology (NFSIT) set up in 1999 and the SME Growth Fund, launched in 2004. The Growth Fund focuses on sectors like life sciences, retailing, light engineering, food processing, information technology, infrastructure related to services like healthcare, logistics and distribution, etc.
SIDBI has also a Fund of Fund approach for providing .venture capital assistance to MSME units in terms of which SIDBI has provided corpus funds to a large number of venture funds set up by the various State Governments and FIs.
Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE):
The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) helps micro and small enterprises in accessing institutional credit, both term loan and working capital, for their viable projects without facing the difficulties of arranging collateral security and/or third party guarantee.
3.14.2 SIDBI has set up a foundation for micro credit with a capital of Rs. one billion to assist NGOs/voluntary organizations for on-lending at micro level; to build capacities of MFIs; Rating of MFIs and to help Micro Finance Product innovations.
Though it took ten years to come out of its legacy of being a refinancing institution and a bill re-discounting finance support in the name of preventing delayed payments to the SSIs – where the history did not prove this support effective — its efforts to lend for clusters, setting up of CGTFS, setting up a rating arm in SMERA, starting SME Financial Centers, during the last five years repositioned it in the form of a leader committed to SME development.