Introduction
The Micro, Small, and Medium Enterprise (MSME) sector is promoted, financed, and developed by the Small Industries Development Bank of India (SIDBI), which was established on April 2, 1990, by an Act of the Indian Parliament. The SIDBI also coordinates the operations of other institutions that carry out similar tasks.
What Is SIDBI?
• The main organization in the nation for fostering, funding, and expanding micro- and small-scale industries is SIDBI.
• It manages the operations of other organizations engaged in comparable pursuits.
• SIDBI helps MSMEs acquire the capital they require to develop, market, and commercialize their cutting-edge technology and goods.
• To satisfy the needs of people in many industries, the bank provides a number of programs in addition to financial services and products.
Historical Perspective
• Since its founding, the Industrial Development Bank of India has held the position as the top bank in the area of funding all sectors, including small-scale companies.
• A separate apex bank for small-scale companies, however, became necessary as the financing activities of these businesses significantly increased.
• As a result, the Small Industries Development Bank of India (SIDBI) was founded and took over IDBI's small-scale industry financing operations.
• A special Act of Parliament passed in 1988 created the SIDBI (Small Industries Development Bank of India), which became operational on April 2, 1990.
• The Central Government of India, along with 22 other organizations, public sector banks, and insurance firms, owns or controls the shares of SIDBI.
SIDBI'S Function
• When funding the MSME sector, indirect lending which is carried out through banks, SFBs, NBFCs, MFIs, and new age fintechs has a multiplier impact and a greater reach.
• Through new and exemplary lending solutions that can be scaled up by the credit delivery ecosystem, direct lending seeks to overcome credit gaps that currently exist in the MSME sector.
• Fund of Funds - By providing capital to nascent firms through the Fund of Funds channel, it encourages entrepreneurship.
• Promotion and development - through credit-plus programs, promoting entrepreneurship and aiding potential entrepreneurs in the comprehensive growth of the MSME sector.
• Through positions like Nodal Agency for the Government's MSME-oriented Schemes, plays a facilitative role.
SIDBI'S Financing Initiatives:
The two categories of SIDBI's funding activity are as follows:
Direct Support
• Both the creation of new units and the growth, diversification, modernization, and technological advancement of already existing units are eligible for project financing.
• Equipment Finance Scheme: With the help of this scheme, existing units can be expanded and modernized.
• A new SIDBI programme called the Technology Development and Modernization Fund Scheme offers support to businesses in the engineering, clothing, electrical and electronics, crockery, and pottery industries, among others.
• Plan for Bill Financing: The majority of SIDBI's direct support comes from bill financing.
• Equity Assistance Programme: SIDBI provides equity support to a range of commercial entities. It offers lines of credit to merchant bankers so they may complete bought-out transactions for their small industrial unit clients.
• The National Equity Fund Scheme provides help to small units. The
Mahila Udyam Nidhi Scheme and the Scheme for Employment of Ex-Servicemen both provide access to seed money.
• Venture Capital Programme: Through the Venture Capital Fund, SlDBI also offers venture capital help.
• SIDBI also contributes to the venture capital funds of other companies. High risk, specialised, and import-substituting projects can receive venture capital help from SIDBI.
• Most of these ventures call for the use of technology that has been developed locally, and they are supported by seasoned technical entrepreneurs.
• Here are a few of the loan financing programmes offered by SIDBI.
• Some of the Loan Financing schemes under SIDBI are
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Loan Scheme
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Loan Amount
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Eligibility Criteria
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SIDBI Make in India Soft Loan Fund for MSME (SMILE)
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Minimum loan size – Rs.10 lakh for Equipment Finance and Minimum Loan Size for Others – Rs.25 lakh.
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New enterprises in the manufacturing and services sector and existing enterprises undertaking expansion.
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Smile Equipment Finance (SEF)
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Minimum loan amount is Rs.10 lakh
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MSMEs in existence for at least 3 years and having satisfactory financial position.
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Loans under partnership with OEM (Original Equipment Manufacturer)
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Up to Rs.1 crore
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MSMEs in existence for at least 3 years and having satisfactory financial position.
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Working Capital (Cash Credit)
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Depends upon the financial ability of the applicant
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MSME units which are existing customers under SIBDI or of other banks.
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SIDBI – Loan for Purchase of Equipment for Enterprise’s Development (SPEED)
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Up to 100% of the machinery cost subject to maximum of Rs.1 crore for New to Bank (NTB) customers and up to Rs.2 crore for existing customers of SIDBI.
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MSME units with at least 3 years operations with stable sales and cash profits in immediate past 2 years.
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SIDBI-Loan for Purchase of Equipment for Enterprise’s Development Plus (SPEED PLUS)
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Up to 100% of the machinery cost subject to maximum of Rs.2 crore for New to SIDBI customers and up to Rs.3 crore for existing customers of SIDBI.
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MSME units with at least 5 years operations with stable sales and cash profits in immediate past 3 years.
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Top Up Loan For Immediate Purposes (TULIP)
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30% of existing exposure or 20% of net sales subject to maximum of Rs.2 crore
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At least 1-year association with SIDBI
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SIDBI Term-Loan Assistance for Rooftop Solar PV Plants (STAR)
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Rs.10 lakh to Rs.2.5 crore
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Proof of 2 years of cash profit and satisfactory financial records
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SIDBI Assistance to Facilitate Emergency Response Against Coronavirus (SAFE)
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Up to Rs.50 lakh
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For New to bank customer – At least two years of cash profits and account and For existing bank customer – Cash profit in last audited balance sheet and account
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SIDBI Assistance to Facilitate Emergency Response Against Coronavirus Plus (SAFE PLUS)
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Up to Rs.100 lakh
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For New to bank customer – At least two years of cash profits and account and For existing bank customer – Cash profit in last audited balance sheet and account
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Timely Working Capital Assistance To Revitalise Industries In Times Of Corona Crisis (TWARIT)
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Up to 20% of total outstanding loans with SIDBI up to Rs.25 crore as of February 29, 2020
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All existing borrower accounts with combined outstanding credit facilities up to Rs.25 crore as of 29.2.2020.
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Indirect Support
• By refinancing term loans given by banks, state finance corporations (SFCs), and state industrial development organizations (SIDCs), as well as by rediscounting bills issued by small-scale industries, SIDBI offers indirect aid to the industrial sector.
SIDBI - Features
• Small Industries Development Bank of India offers small industrial units with resources in addition to refinancing PLIs' loans to them.
• It provides bill rebates and savings.
• Additionally, it helps SSI (Small Scale Industries) sector products get access to more domestic and foreign markets through the expansion of marketing channels.
• It offers small-scale industrial businesses factoring, leasing, and other services.
• To create jobs and deter people from moving to cities, it promotes employment-oriented industries, especially in semi-urban areas.
• Additionally, it starts the process of updating and modernizing old apartments.
• It also provides the prompt flow of credit for working capital and term loans to small scale industries in partnership with commercial banks.
• Additionally, it collaborates with regional venture funds to advance them.
SIDBI - Advantages
• SIDBI insurance and loans are tailored to the requirements of your company. The Small Industries Development Bank of India can assist you in obtaining the necessary finance if your request does not fit into the conventional and customary category.
• Dedicated Size - Loans and credit are based on the company's size. MSMEs may thus be able to get a variety of loans that are designed to meet their particular business demands.
• Low Interest Rates - It may be able to offer low interest rates due to its agreements with numerous banks and financial institutions worldwide. The World Bank and the Japan International Cooperation Agency are partners with the SIDBI.
• Aid - In addition to offering a loan, it also offers aid and crucial guidance. Relationship managers help business owners make wise decisions and offer support throughout the loan application process.
• A security fee of up to Rs. 100 lakhs may be charged to businesspeople who do not provide security.
• Capital Growth: Entrepreneurs could obtain sufficient capital to meet their needs for growth without having to scale back their ownership of a business.
• Equity and Venture Funding: It’s wholly-owned subsidiary SIDBI Venture financing Limited offers growth financing in the form of equity through venture capital funds that target MSMEs.
• Subsidies: SIDBI provides a range of plans with affordable interest rates and adaptable terms. SIDBI can help firms decide which loan or programme is ideal for their operations because it has extensive information and a thorough understanding of the options.
• Its procedures and fee structure are transparent to the public. There are no extra costs.
Conclusion
The triple goal of promoting, financing, and developing the MSME sector as well as coordinating the operations of the many institutions involved in related activities is to be carried out by SIDBI in its capacity as the Principal Financial Institution.
