Banking Awareness: All about Small Industries Development Bank of India (SIDBI)
Small Industries Development Bank of India(SIDBI):
An Apex All-India financial institution with an equity of Rs. 250 crores has been set up (as a subsidiary of the IDBI). It started functioning with effect from April 2, 1990, through its 25 offices located in different States of the country.Small Industries Development Bank of India is a non-independent financial institution aimed to aid the growth and development of micro, small and medium-scale enterprises (MSME) in India. Set up on April 2, 1990 through an act of parliament, it was incorporated initially as a wholly owned subsidiary of Industrial Development Bank of India. Current shareholding is widely spread among various state-owned banks, insurance companies and financial institutions. Beginning as a refinancing agency to banks and state level financial institutions for their credit to small industries, it has expanded its activities, including direct credit to the SME through 100 branches in all major industrial clusters in India. Besides, it has been playing the development role in several ways such as support to micro-finance institutions for capacity building and onlending. Recently it has opened seven branches christened as Micro Finance branches, aimed especially at dispensing loans up to INR5 lakh.
It is the Principal Financial Institution for the Promotion, Financing and Development of the Micro, Small and Medium Enterprise (MSME) sector and for Co-ordination of the functions of the institutions engaged in similar activities. SIDBI has also floated several other entities for related activities. Credit Guarantee Fund Trust for Micro and Small Enterprises provides guarantees to banks for collateral-free loans extended to SME. SIDBI Venture Capital Ltd.is a venture capital company focussed at SME. SME Rating Agency of India Ltd. Another entity founded by SIDBI is ISARC - India SME Asset Reconstruction Company in 2009, as specialized entities for NPA resolution for SME.
Functions of SIDBI:
( I ) SIDBI is to function as the principle financial institution for the promotion, financing, and development of industry in the small-scale sector, and to coordinate the functions of institutions engaged in promoting the small units.
( II ) The Bank undertakes the business of discounting or re-discounting of bills of exchange made by industrial concerns in the small-scale sector subscribing to or purchasing stocks, leasing any assets to any industrial concern in the small-scale sector and planning and promoting the industries in the small-scale sector.
( III ) Refinancing is being provided by the SIDBI to primary leading institutions like the commercial banks, State financial corporations, and State Industrial Development Corporations for meeting the equity requirements of SSI's, under schemes like Mahila Udyam Nidhi Scheme, National Equity Fund Scheme, Seed Capital Scheme, etc,. The coverage and some of the refinance assistance rendered by the SIDBI has been radically widened recently, particularly in response to the recommendations of the P.R. Nayak Committee which examined the adequacy of institutional credit to the SSI sector.
( IV ) SIDBI is gradually involving itself actively in the major problems being faced by the small-scale sector, viz., insufficient infrastructural support, delayed payments and lack of marketing expertise. With a view to ensuring larger flow of financial and non-financial assistance to the small-scale sector,
SIDBI's immediate thrust is on:
( V ) SIDBI provides refinance of the primary lending institutions at concessional rates. So it has to look for a higher income portfolio too. Increasingly, therefore, there is a shift towards direct lending through scheme like venture capital assistance. Direct lending also implies an increased risk of bad loan and recovery problems. To take care of both problems, SIDBI is negotiating with banks for commencing small sector advances. SIDBI will participate in the appraisal and provide between 50 percent and 75 percent of the term loans, at the discretion of the bank. The bank will take care of working capital, monitoring and recovery.
- Initiating steps for technological up gradation and modernisation of existing units. It has set up a Technology Development and Modernisation Fund
- Expanding channels for marketing products of SSI's in domestic and overseas markets
- Promotion of employment oriented industries, especially in suburban areas, to create more employment opportunities.
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