The Small Industries Development Bank of India/ SIDBI was formed under the Department of Financial Services in the Ministry of Commerce.SIDBI primarily focusses on the development of the MSME Sector along with the promotion of energy efficiency and cleaner production.The bank plays a vital role in helping micro, small and medium enterprises acquire necessary funds in order for them to grow, develop, market and commercialize their products and technologies.
SIDBI also takes the initiative to offer various schemes and creates financial products and services that are tailor-made to meet an entrepreneur’s need for their business.
SIDBI was vested with the duties of administering the Small Industries Development Fund, as well as the National Equity Fund, both of which were earlier operated by the Industrial Development Bank of India (IDBI).SIDBI also assists other financial institutions such as small finance banks, non-banking financial institutions and other banks to stretch out a helping hand to the MSME Industrial Sector.
Set up on April 2, 1990 under an Act of Indian Parliament as a principal financial institution for: — Promotion — Financing and — Development of industries in the MSME sector and — Co-ordinating the functions of other institutions engaged in similar activities. Provision and Charter: SIDBI was established on April 2, 1990. The Charter establishing it, The Small Industries Development Bank of India Act, 1989 envisaged SIDBI to be “the principal financial institution for the promotion, financing and development of industry in the small-scale sector and to co-ordinate the functions of the institutions engaged in the promotion, financing or developing industry in the small-scale sector and for matters connected therewith or incidental thereto”. Business Domain of SIDBI: The business domain of SIDBI consists of small-scale industrial units, which contributes significantly to the national economy in terms of production, employment and exports. Business Strategy of SIDBI: The business strategy of SIDBI is to address the financial and non-financial gaps in the MSME ecosystem. Financial support to MSMEs is provided by way of (a) indirect finance / refinance to banks / financial institutions for onward lending to MSMEs and (b) direct finance in the niche areas like risk capital, sustainable finance, receivable financing, service sector financing, etc.
What is Small Industries Development Bank of India (SIDBI)?
Small Industries Development Bank of India (SIDBI) is an independent financial institution aimed at aiding the growth and development of Micro, Small and Medium Enterprises (MSMEs) which contribute significantly to the national economy in terms of production, employment and exports.
- SIDBI was established with the mission of facilitating and strengthening the flow of credit to Micro, Small and Medium Enterprises and for addressing the developmental and financial gaps in the ecosystem of MSMEs.
- It is a statutory body set up under an act of the Indian Parliament in 1990.
Mission
The following is the mission of SIDBI.- To facilitate and strengthen the flow of credit to MSMEs and to address financial, as well as developmental gaps, in the MSME eco-system.
Vision
The following is the vision of SIDBI.-To emerge as a single window that meets the financial and developmental needs of the MSME sector. To make the Sector robust, vibrant and globally competitive. To position SIDBI as a most-preferred brand and a customer-friendly institution. To enhance shareholder wealth and to uphold the highest corporate values through the latest technology.
Functions
The following are the functions of the SIDBI.
- Provides financial assistance to institutions and banks that have financed the MSME Industries.
- Discounts and Re-discounts bills.
- Offers monetary assistance to micro and small industries in order to market their products in the international market.
- Offers provisions for initial capital to entrepreneurs and provides loan assistance at a concessional rate of interest for a long duration.
- Offers assistance in setting up of non-core services such as plants and marketing of the same for the small scale industries.
- Factors and leases assistance to set up technologically-sound machinery for MSME Industries.
- Offers provisions for venture capital to upcoming ventures with the aim to promote self-employment.
- Offers improvisation for departments where an MSME may lack functioning.
Functions of SIDBI
- It aims at emerging as a single-window to meet the developmental and financial needs of MSMEs in order to make them globally competitive, strong, vibrant and to protect the institution as a customer-friendly financial body.
- It also aims at enhancing the wealth of shareholders through the modern technology platform.
- It is involved in the promotion and development of the MSME sector.
- It is the principal institution for the development, promotion and financing of the MSME sector and for coordination of functions of the institutions engaged in similar activities.
- SIDBI retained its position in the top 30 Development Banks of the World in the ranking of The Banker, London.
- SIDBI also functions as a Nodal/Implementing Agency to various ministries of the Government of India viz., Ministry of MSME, Ministry of Textiles, Ministry of Commerce and Industry, Ministry of Food Processing and Industry, etc.
Benefits
- Custom-Made: The loans designed by SIDBI are as per the needs of its customers. SIDBI helps people by funding their businesses that do not necessarily fall in the normal category.
- Loan Size: SIDBI alters loans as per the size of the customer’s enterprise. Therefore, Micro, Small and Medium Enterprises may receive various loans that are custom-made suit their business.
- Rates: SIDBI has collaboration with a variety of banks and financial institutions, even on an international level, such as KfW, World Bank and Japan International Cooperation Agency. This enables its customers to avail concessional rates of interest.
- Assistance: Along with loans, SIDBI also ensures to offer expert support and advice on anything their customer requires. Relationship managers go the extra mile with their customers who are entrepreneurs to make the right decisions and to provide assistance throughout the loan process.
- Collateral-Free: Entrepreneurs may get up to INR 100 Lakhs without even offering any collateral. This is achieved through the Fund Trust for Micro and Small Enterprises (CGTMSE).
- Risk and Growth Capital: Entrepreneurs may acquire sufficient capital that is required to grow without diluting the ownership of the company.
- Venture and Equity Funding: SIDBI has a wholly-owned subsidiary known as the SIDBI Venture Capital Limited that provides growth capital in the form of equity; through venture capital funds that are focussed on MSMEs.
- Government Subsidies: Takes advantage of various schemes that have been offered by the Government to avail concessional rates and related terms. SIDBI has a broad understanding and extensive knowledge of loans and schemes that exist for the betterment of their customer’s business.
- Transparency: The process and rate structure that is set by SIDBI is exceptionally transparent and do not comprise of any hidden charges.
Business Domains
Two kinds of assistance are offered to the MSME Sector by the SIDBI. They are Financial Assistance and Non-Financial Assistance.
Types of Financial Assistance by SIDBI
The following are the types of financial assistance that are offered by SIDBI to the MSME Sector.
- Business Loan
- Working Capital and Risk Capital Loan
- Renewal and Enhancement of existing working capital loan
- Machinery, Equipment, DG Sets procurement loan
- Micro Finance
- Receivables Finance
Moreover, SIDBI offers unique facilities to industries that deal with the Energy Sector and promotes cleaner production techniques.
Types of Non-financial Assistance by SIDBI
The following are the types of non-financial assistance that are offered by SIDBI to the MSME Sector.
- Consultation Services
- Collaboration with CRISIL; offers Crisidex Index to various industries.
- Promotion of Micro Industries
- Skill and Technology Development Programs
- Guidance to Startups
Financial Support of SIDBI to MSMEs
SIDBI provides financial support to MSMEs in the following ways:
- Indirect financing by way of refinancing the banks, refinancing financial institutions for onward lending to MSMEs.
- Direct financing by way of service sector financing, receivable financing, risk capital and sustainable financing, etc.
Apart from providing financial assistance, SIDBI focuses on the “credit plus approach” under which it facilitates technology modernisation & upgradation, cluster development, enterprise development, upgrading the skills and support marketing activities.
FAQs
When was SIDBI Established?
SIDBI was set up on 2nd April 1990. It acts as the Principal Financial Institution for Promotion, Financing and Development of the Micro, Small and Medium Enterprise (MSME) sector.
Which are the All India Financial Institutions regulated by the Reserve Bank of India?
All India Financial Institutions that are regulated by the Reserve Bank of India are :
- Small Industries Development Bank of India (SIDBI),
- NABARD (National Bank for Agriculture and Rural Development),
- EXIM Bank (Export-Import Bank) and
- NHB (National Housing Bank)
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