SIDBI (Small Industries Development Bank of India)

Small Industries Development Bank of India 

The SIDBI or Small Industries Development Bank of India is a wholly owned subsidiary of the IDBI, also known as the Industrial Development Bank of India. The SIDBI was set up in 1988 under the special Act of the Parliament. It became operative from April, 02nd, 1990.

SIDBI is the primary financial institution for promotion, financing, and developing the MSME (Micro, Small, and Medium Enterprise) domain. The SIDBI is responsible for regulating and supervising the Small Industries Development Fund and National Equity Fund that were looked after by the IDBI previously. Moreover, other than emphasizing on the development of the MSME, the SIDBI also promotes cleaner production and energy efficiency.

Overview

The Small Industries Development Bank of India (SIDBI) is an autonomous financial organization set up to aid the growth and development of the Micro, Small, and Medium Enterprises (MSMEs). The establishment of SIDBI is aimed at empowering these MSMEs as they contribute.

Along with the Reserve Bank of India (RBI), the government of India set up SIDBI as a subsidiary of IDBI under a special Parliament Act. It was created with a mission to facilitate and strengthen the flow of credit to MSMEs and for addressing their financial and developmental gaps in the ecosystem.

The SIDBI assists MSMEs in the country in acquiring funds that they would need to grow, market, commercialize, and develop innovative products. The Small Industries Development Bank of India provides several schemes and provides financial products and services for meeting the MSMEs requirements across various parameters.

SIDBI – Important Facts

• SIDBI is one of the major financial institutions supervised and regulated by the Reserve Bank of India (RBI). With the other three being EXIM Bank, National Housing Bank (NHB), and the National Bank for Agriculture and Rural Development (NABARD).
• SIDBI was established on 02nd April, 1990 under the Ministry of Finance
• It is headquartered in Lucknow, Uttar Pradesh.
• The Chairman and Managing Director of SIDBI is Mr. Siva S. Ramann (IAS)
• SIDBI subsidiaries include the Micro Units Development & Refinance Agency Ltd. (Mudra Bank), India SME Asset Reconstruction Company Limited, Acuité Ratings & Research Limited, and SIDBI Trustee Company Limited.
• SIDBI’s key initiatives over the last 25 years include:
• Providing an assistance of INR 5.40 lakh crore to the MSMEs
• Extending loans to millions of underprivileged people, mostly women, through its microfinance operations
• Supporting new and existing small-scale entrepreneurs by taking in initiatives to help them build their businesses and skills

SIDBI – Features

In this section, let us have a quick look at the key features of the Small Industries Development Bank of India.

• Provides refinance support to the MSMEs
• Extends monetary and developmental assistance to the small scale entrepreneurs
• Helps in providing concessions and discounts on the Small Scale Industries (SSIs) bills
• Offers financial services such as factoring, hire purchase, and leasing
• Provides assistance to exports
• Promotes and creates employment opportunities among the MSMEs
• Aids in Bank loans for the underprivileged section of the society, especially women

SIDBI Functions

Following are some of the prime SIDBI Functions:

1. Refinancing loans that are extended to the small scale industries by the financial institutions
2. Aiding in expanding the marketing channels for the products of the SSIs
3. Offering services like leasing, factoring, etc. to the MSMEs
4. Promoting employment opportunities across the SSIs in the semi-urban areas as well
5. Initiating steps towards technological innovations
6. Enabling credit flow as working capital or as term loans to the SSIs

Finance Assistance Offered by SIDBI

The Small Industries Development Bank of India (SIDBI) offers the following financial assistance to its customers:

Direct Finance	Indirect Finance	Micro Finance
Working Capital Term Loan Assistance Foreign Currency Loan Support against Receivables Energy Saving scheme for the MSMEs	Providing refinance to Primary Lending Institutions (PLIs) such as banks, state-level financial institutions, etc. Helps raise the resource position of PLIs to enable credit flow to the MSMEs	Microfinance to small entrepreneurs and businessmen for establishing their businesses

SIDBI Loan Products

The SIDBI caters to the needs of the small scale industries through the following direct loans mentioned as below:

• SIDBI Make in India Soft Loan Fund for Micro Small and Medium Enterprises (SMILE): It covers the financial needs for new entrepreneurs in the manufacturing or services sector. A minimum loan amount of INR 10 lakh for equipment finance and INR 25 lakh for other purposes is offered as per this scheme.
• Loans under Partnership with the OEM: This loan scheme is beneficial for the MSMEs to purchase machinery directly from the OEM (Original Equipment Manufacturer). Loan amount offered is up to INR 1 crore. The business is required to be existing for a minimum of 3 years and the repayment period is of 60 months.
• SIDBI Trader Finance Scheme (STFS): This loan scheme is for the MSME retailers and/ or wholesalers who have their businesses setup for at least 3 years. The minimum loan amount offered is INR 10 lakh and maximum amount is up to INR 1 crore.
• Smile Equipment Finance (SEF): It has a simplified application procedure with a competitive interest rate. The loan amount starts from INR 10 lakh and the repayment period is 72 months.
• Loan for Purchase of Equipment for Entrepreneur’s Development (SPEED): Under this scheme, the SIDBI offers 100% financing with loan amounts of up to INR 1 crore for new and INR 2 crore for existing customers. The repayment period ranges from 2 to 5 years.
• Working Capital (Cash Credit): The SIDBI offers working capital for the MSME units in this scheme. Working capital is offered with seamless approvals, but as per the loan applicant’s needs and preferences.

SIDBI’s Financial Support for MSMEs in India

The Small Industries Development Bank of India (SIDBI) provides financial support to the Micro, Small, and Medium Enterprises through the following prime ways:

• Direct financing in the form of service sector financing, risk capital and sustainable financing, receivable financing, etc.
• Indirect financing through refinancing the banks and/ or financial institutions for onward lending to the MSMEs