Small Industries Development Branch of India – SIDBI

The Small Industries Development Bank of India (SIDBI) is India’s top governing agency for licensing and managing micro, small, and medium enterprises (MSMEs). It is administered by the Government of India’s Ministry of Finance. The SIDBI headquarter is in Lucknow along with 5 Regional Offices and 33 Branch Offices throughout the nation. Its mission is to extend refinance services to banks and commercial organisations, as well as invest in term lending and working capital loans to enterprises. SIDBI serves as the MSME sector’s primary banking institution.

SIDBI also manages the operations of organisations that do comparable tasks. It came into effect after an Act of Parliament was passed on April 2, 1990. The Reserve Bank of India (RBI) administers and monitors 4 All India Financial Institutions including SIDBI, India Exim Bank (Export and Import Bank), National Bank for Agriculture and Rural Development (NABARD), and National Housing Bank (NHB). 

Although, of late, NHB was taken over by the Indian government, with the government owning over 51 per cent of the enterprise. These institutions serve the industrial sector’s long-term funding requirements by exercising a legal duty in the banking markets via extending credit and refinancing activities.

SIDBI is actively involved in the establishment of Microfinance Institutions and supports the expansion of microfinance utilising the Micro Finance Institution (MFI) approach via the SIDBI Foundation for Micro Credit. Its marketing and growth programme aim at improving rural businesses and fostering entrepreneurship.

SIDBI administers a refinance scheme named the Institutional Finance program to expand and enhance the supply of money to the MSE sector. It offers Contract Loans to Banks, Small Finance Banks, and Non-Banking Financial Companies using this initiative. SIDBI loans actively to MSMEs in addition to these refinancing services.

Functions of SIDBI

SIDBI was given the task of managing the Small Industries Development Fund and the National Equity Fund, which were formerly overseen by IDBI. SIDBI encourages sustainable production and energy optimization in addition to promoting the growth of the MSME sector.

The following are SIDBI’s functions: – 

• SIDBI provides loans to small scale industries that have been issued by PLIs, as well as providing them with resources

• Bills are reduced and rediscounted by the SIDBI

• It aids in the expansion of distribution networks for Small Scale Industries (SSIs) products in both international and domestic marketplaces

• It provides services to small-scale industrial enterprises such as factoring and leasing

• It encourages the development of the workforce in the sectors, especially in semi-urban regions, in order to provide jobs and prevent people from moving to cities

• It gives a push to the process of modernising and technologically upgrading existing units

• It also facilitates the appropriate credit flow for both term loans and working capital

Facilities Provided by SIDBI

SIDBI offers a variety of programs as well as monetary services and commodities to satisfy the needs of individuals and enterprises.

Direct Loans

SIDBI’s numerous direct finance credit initiatives include Working Capital Support, Term Loan Financial support, Foreign Currency Funding, Assistance against Receivables, Equity Assistance, and an Energy Saving Plan for the MSME sector, among others.

Indirect Finance

SIDBI provides indirect finance support by refinancing Primary Lending Institutions (PLIs), which include banks, State Level Banking firms, and other financial institutions with a substantial office network throughout the nation. The refinancing program’s main goal is to improve PLI’s resource condition, which will eventually allow credit to flow toward the MSME sector.

Small-Scale Finance

SIDBI provides microfinancing to minor business owners and entrepreneurs that are just starting out with their businesses.

Business Loan Programme for MSMEs

MSMEs in the manufacturing and service sectors are eligible for business loans. This program provides monetary support for both planned and unplanned firm expenses. The credit amount is determined by the collateral or security of the MSME and its present repayment capacity.

Characteristics of Secured Bank Loan(SBL)

• The loan is an open-term loan in nature

• The loan balance can be up to Rs. 10 crores and is based on total cash accruals and the value of the collateral

• The discount rate is a predetermined interest rate that is tied to the PLR based on the credit score

• Up to ten years of security, plus a moratorium

• Under the program, foreign currency aid could be accessible for the establishment of tangible assets, according to natural hedge and other rules and criteria

Criteria for Eligibility for SBL

• Established MSMEs that have made a net profit in two of the last three years and have made cash profits throughout all three years

• A borrower must not default on the loans from any bank

• Other monetary standards may be imposed periodically

Conclusion

SIDBI is a fully owned subsidiary of the Industrial Development Bank of India (IDBI). It was founded in 1988 by a special Act of Parliament and went into effect on April 2, 1990. SIDBI bank is primarily concerned with the funding, marketing, and improvement of Micro, Small, and Medium Enterprises (MSMEs). 

The major goal of SIDBI is to boost the MSME sector by enabling cash flow. It aids MSMEs in obtaining capital for technology and product innovation, marketing, and commercialising their business. SIDBI provides tailored lending solutions in three types: direct loans, indirect loans, and microfinance. It offers pertinent services to satisfy the requirements of different business undertakings.