A PROJECT REPORT

ON
SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA
SUBMITTED BY
VEMULA MANISHA SRINIVAS

T.Y.B.B.I. [Semester V]

00
PADMASHREE ANNASAHEB JADHAV BHARTIYA SAMAJ UNNATI MANDALS

B.N.N. COLLEGE
DHAMANKAR NAKA, BHIWANDI, 421302
SUBMITTED TO

UNIVERSITY OF MUMBAI
ACADEMIC YEARE BAN
2016-2017

UNDER THE GUIDANCE OF

PROF. CHARMI GONDALIYA

A PROJECT REPORT
ON
Page
1

SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA

SUBMITTED BY
VEMULA MANISHA SRINIVAS
T.Y.B.B. I. [Semester V]

PADMASHREE ANNASAHEB JADHAV BHARTIYA SAMAJ UNNATI MANDALS

B.N.N. COLLEGE
DHAMANKAR NAKA, BHIWANDI, 421302
SUBMITTED TO

UNIVERSITY OF MUMBAI
ACADEMIC YEAR
2016-2017

UNDER THE GUIDANCE OF

PROF. CHARMI GONDALIYA

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2

Padmashree Annasaheb Jadhav Bhartiya Samaj Unnati Mandals

B.N.N.College, Bhiwandi.
(Arts, Science & Commerce) Dist.Thane 421 305
SELF FUNDED COURSES
Est. June 1966

Bachelor of Banking and Insurance (BBI)

CERTIFICATE

This is to certify that, MISS. VEMULA MANISHA SRINIVAS.

(Roll

No.81) of TYBBI, B.N.N College, Semester V (Academic Year 2016 - 2017) has
successfully

completed

the

project

entitled

SMALL

INDUSTRIES

DEVELOPMENT BANK OF INDIA and submitted the Project Report in partial

fulfillment of the requirement for the award of the Degree of B.Com (Banking &
Insurance sem-V) of University of Mumbai.

Prof. Charmi Gondaliya Dr. Suvarna T. Rawal Dr.Ashok.D.Wagh

(Project Guide)

Examiner: -

(Co-ordinator)

1._______________________
2._________________________

DECLARATION
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3

(Principal)

I, Miss VEMULA MANISHA SRINIVAS (Roll No.81) of

TY.B.COM.(Banking and Insurance) Semester V, studying in B.N.N.
College, Bhiwandi, hereby declare that the information contained in the
project titled SMALL INDUSTRIES DEVELOPMENT BANK OF
INDIA is true and correct to the best of my knowledge and belief.

________________________
VEMULA MANISHA SRINIVAS
T.Y.B Com (B&I)

PLACE: BHIWANDI
DATE:

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4

ACKNOWLEDGMENTS
I am deeply indebted to my project guide, my family and friends who have supported me all
through my project by encouraging and inspiring me. They have also contributed to the quality of
the material presented in the project. I would like to acknowledge all those whom I owe a debt of
gratitude. It is my foremost duty to express my sincere gratitude towards my mentor, guru and
guide, Miss Charmi Gondaliya ,Assistant Professor, B.N.N. College, Bhiwandi, Dist.Thane,
Maharashtra for her constant encouragement, support and generous attitude which helped me with
new insights not only in understanding different aspects of my project but also the intricacies of life.
It was truly an enriching experience working under her guidance.
I must thank the Management of B.N.N. College, Dist.Thane, Maharashtra and
Dr. Ashok D. Wagh, Principal, B. N. N. College for constantly encouraging me for my project.I
also thank to Dr. S.T. Rawal, Head Department of Banking and Insurance and all Vice-Principal of
B.N.N. College for their support and cooperation from time to time and also to my other friends in
the T.Y.B.B.I. for their support as and when I required.
I must specially thank my mother.. for instilling confidence in me to pursue my project work.
Discussions with them have helped me develop great clarity of thought and understanding in my
project.I am also thankful to the staff of library of B.N.N. College. I express my deep sense of
gratitude to all my teachers, friends and all well wishers who were always concerned about my
project and contributed directly or indirectly for the successful completion of my project work.

PATEL SONALI ARVIND

INDEX
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5

CHAPTER

CONTENTS

PAGE NO.

S
1

Introduction

1-3

Profile

4-6

Review of literature

Data Analysis and interpretation

Observations and Conclusions

Suggestions

Bibliography

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6

INTRODUCTION
Small Industries Development Bank of india is an independent financial institution aimed to aid
the growth and development of micro, small and medium-scale enterprises (MS was incorporated
initially as a wholly owned subsidiary of Industrial Development Bank of India. Currently the
ownership is held by 34 Government of India owned / controlled institutions.[1] 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 to5
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. (SMERA - provides composite ratings to SME. Another entity founded by
SIDBI is ISARC - India SME Asset Reconstruction Company in 2009, as specialized entities for
NPA resolution for SME

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.

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7

ESHTABLISHMENT

Small Industries Development Bank of India (SIDBI), set up on April 2, 1990 under small
industries development bank of India act, is the Principal FinancialMedium Enterprise (MSME)
sector and for Co-ordination of the functions of the institutions engaged in similar activities. 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 and financing or developing industry in the small scale sector and for matters connected
therewith or incidental thereto

The SIDBI was established as a wholly owned subsidiary of Industrial Development Bank of India
(IDBI) under a special Act of the Parliament 1988 and started its operations on April 2, 1990. It took
over the responsibility of administering Small Industries Development Fund and National Equity
Fund which were earlier administered by IDBI. 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. It is
managed by a team of 10 Board of Directors. The authorised capital of the Bank is Rs. 1000 crore
and the Paid up capital is Rs. 450 crore.

OBJECTIVES OF SIDBI
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Mandatory Objectives
Four

basic

objectives

Financing

Promotion

Development

Co-ordination

are

set

out

in

the

SIDBI

Charter.

They

are:

for orderly growth of industry in the small scale sector. The Charter has provided SIDBI
considerable flexibility in adopting appropriate operational strategies to meet these
objectives. The activities of SIDBI, as they have evolved over the period of time, now meet
almost all the requirements of small scale industries which fall into a wide spectrum
constituting modern and technologically superior units at one end and traditional units at the
other

Development Outlook
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The

major

issues

confronting

MSMEs

are

identified

to

be:

Technology obsolescence

Managerial inadequacies

Delayed Payments

Poor Quality

Incidence of Sickness

Lack of Appropriate Infrastructure and

Lack of Marketing Network

There can be many more similar issues hindering the orderly growth of MSMEs. Over
the years, SIDBI has put in place financing schemes either through its direct

financing mechanism or through indirect assistance mechanism and special focus programmes
under its P&D initiatives. In its approach, SIDBI has struck a good balance between financing and
providing other support services.

Co-ordination and Understanding

As an apex institution, SIDBI makes use of the network of the banks and state level financial
institutions, which have retail outlets. SIDBI supplements the efforts of existing institutions
through its direct assistance schemes to reach financial assistance to the ultimate borrowers in
the small scale sector. Refinancing, bills rediscounting, lines of credit and resource support
mechanisms have evolved over the period of time to route SIDBI's assistance through the
network of other retail institutions in the financial system.

Improved levels of co-ordination for development of the small scale sector is also achieved
through a system of dialogue and obtaining feedback from the representatives of institutions
of small scale industries who are on the SIDBI's National Advisory Committee and Regional
Advisory

Committees.

SIDBI has entered into Memoranda of Understanding with many banks, governmental
agencies, international agencies, research & development institutions and industry
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associations to facilitate a co-ordinated approach in dealing with the issues for development
of small scale industries.

SIDBI's MOU
Banks-(18)
Swiss Agency for Development and Co-operation
Small Industries Development Organisation
Auto Components Manufactures Association
Council for Scientific and Industrial Research
Asia and Pacific Centre for Transfer of Technology
United Nations Industrial Development Organisation
Confederation of Indian Industry
National Research Development Organisation
Government of India for channelising TREAD assistance
Small Enterprise Assistance Funds (SEAF) For setting up of SEAF India SME Equity Fund
and for other capacity building initiatives for SMEs

Mission
"To facilitate and strengthen credit flow to MSMEs and address both financial and
developmental gaps in the MSME eco-system"
Vision
To emerge as a single window for meeting the financial and developmental needs of the
MSME sector to make it strong, vibrant and globally competitive, to position SIDBI Brand as
the preferred and customer - friendly institution and for enhancement of share - holder
wealth and highest corporate values through modern technologplatform

ROLE OF SIDBI

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Role of Small Industries Development Bank of India: Small Industries Development Bank of India
(SIDBI), set up on April 2, 1990 under an Act of Indian Parliament, 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. Financial support is provided by way of refinance to eligible Primary Lending
Institutions (PLIs) such as banks, State Financial Corporations (SFCs), State Industrial
Development Corporations (SIDCs), State Small Industries Development Corporations (SSIDCs)
etc. for onward lending to MSMEs, financial assistance in the form of loans, grants, equity and
quasi- equity to Non Government Organisations / Micro Finance Institutions (MFIs) for on-lending
to micro enterprises and economically weaker sections of society, enabling them to take up income
generating activities on a sustainable basis and direct assistance to MSMEs which is channelized
through the Bank's network of 103 branch offices. SIDBI plays a significant role in promotion,
financing and development of MSMEs and coordinating the functions of institutions engaged in
similar activities. Its sphere of activities include (i) Direct Finance Operations to MSMEs and
Service Sectors besides Infrastructure; (ii) Indirect Finance by way of resource support to Banks,
NBFCs, SFCs, and other Central Financing/Development Agencies, Development of Micro Credit
Institutions; (iii) Promotion of Associate Institutions like Venture Capital, Rating Agency, Credit
Guarantee Fund, Asset Reconstruction Company and so on; and (iv) Nodal Agency for Government
of India MSME Schemes like Technology Up gradation Fund Scheme (TUFS), Credit Linked
Capital Subsidy Scheme (CLCSS), Integrated Development of Leather Sector Scheme,
Development of Infrastructure Development Projects and a few. SIDBIs focus is on development
of manufacturing, service and infrastructure sectors through the growth of MSMEs and their
promotion

HEAD OFFICE AND BRANCHES OF SIDBI

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12

Head office
SIDBI Tower
15, Ashok Marg
Lucknow - 226001
Phone No:- +91 - 522 - 2288547 / 48 / 49 / 50
SIDBI with its Head Office at Lucknow caters to 600 clusters through a network of 80
Branches and 15 Regional Offices with a total of around 1050 employees.
The business domain of SIDBI consists of Micro, Small and Medium Enterprises (MSMEs),
which contribute significantly to the national economy in terms of production, employment
and exports. MSME sector is an important pillar of Indian economy as it contributes greatly
to the growth of Indian economy with a vast network of around 3 crore units, creating
employment of about 7 crore, manufacturing more than 6,000 products, contributing about
45% to manufacturing output and about 40% of exports, directly and indirectly. In addition,
SIDBI's assistance also flows to the service sector including transport, health care, tourism
sectors etc.
SIDBI has been addressing needs of MSMEs through its niche products viz. Energy
Efiicinecy, Risk Capital, Bill Discounting and Service Sector.

STRUCTURE OF SIDBI

SIDBI attaches a great deal of importance to the cornerstones of good corporate governance
particularly the clear division of responsibility,
^ SIDBI. Annual Report,IQQS-QS
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13

appropriate checks and balances. The policy and strategic decisions, monitoring of performance and
other important matters are dealt with by the' Bank at the level of Board of Directors. As regard
operational matters, the bank has decentralized the process of decision-making with adequate
delegation of powers. SIDBI is operating through its head-office at Lucknow, with a network of 6
regional and sixty-three branch offices in the country. Since its inception, SIDBI is doing well in the
area of financing
SSIs.
Small Industries Development Bank of India Act provides for a fifteen-member board of directors.
Out of these eight members or directors are appointed by the Central Government, three directors
are nominated by the three largest share holding institutions, banks and insurance companies owned
and controlled by Central Government, and four are elected by the public share holders.

The Bank has constituted subcommittees of the Board namely Executive Committee (EC), Audit
Committee (AC) and Empowered Committee on Micro Finance (ECM). Besides, there are
committees of the officials of the Bank viz. Central, Zonal Branch Credit, settlement and promotion
and development proposals. Credit proposals and other operational matters are considered by the
EC. The AC in addition to overseeing the functioning of the Audit Department and reviewing its
major observations and also provide guidance is matters relating to finalisation of accounts of Bank
and ECM guiding the Bank in matters pertaining to micro finance

DOMAIN OF SIDBI

The business domain of SIDBI consists of Micro, Small and Medium Enterprises (MSMEs), which
contribute significantly to the national economy in terms of production, employment and exports.
MSME sector is an important pillar of Indian economy as it contributes greatly to the growth of
Indian economy with a vast network of around 3 crore units, creating employment of about 7 crore,
manufacturing more than 6,000 products, contributing about 45% to manufacturing output and
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14

about 40% of exports, directly and indirectly. In addition, SIDBI's assistance also flows to the
service sector including transport, health care, tourism sectors etc.
SIDBI Among Top 30 Development Banks of the World
SIDBI retained its position in the top 30 Development Banks of the World in the ranking of The
Banker, London. As per the May 2001 issue of The Banker, London, SIDBI ranked 25th both in
terms of Capital and Assets.
In its endeavour towards holistic development of the MSME sector, SIDBI adopts a Credit Plus
approach wherein, besides credit, the Bank also provides grant support for the Promotion and
Development (P&D) of the sector to make it strong, vibrant and competitive. The P&D activities of
the bank include Micro Enterprise Promotion, Entrepreneurship Development, Cluster
Development, Capacity Building of the MSME Sector, promoting Responsible Finance among
Micro Finance Institutions, Sustainable Finance to MSMEs including Energy Efficiency,
Environment Protection, etc.
Cumulative disbursements as at end March 2014 have crossed ` 3260 trillion ( 40.75 trillion)
benefiting more than 32 million persons in the MSME sector. The total outstanding portfolio as at
end March 2014 aggregated ` 612.71 billion (7.66 billion).
SIDBI also functions as a Nodal/ Implementing Agency to various ministries of Government of
India viz., Ministry of MSME, Ministry of Textiles, Ministry of Commerce and Industry, Ministry
of Food Processing and Industry, etc.
SIDBI has taken the initiative to promote several institutions viz., Credit Guarantee Fund Trust for
Micro and Small Enterprises, SIDBI Venture Capital, SME Rating Agency of India Ltd and India
SME Technology Services Ltd., for the benefit of the MSME sector.
Micro Units Development & Refinance Agency (MUDRA) Bank, an initiative by Government of
India to support non-corporate small business, is proposed to initiate it as a unit of SIDBI to benefit
from SIDBIs initiatives and expertise.

FUNCTIONS OF SIDBI
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Functions of SIDBI
SIDBI refinances loans extended by the primary lending institutions to small scale industrial units,
and also provides resources support to them.
SIDBI discounts and rediscounts bills arising from sale of machinery to or manufactured by
industrial units in the small scale sector.
To expand the channels for marketing the products of Small Scale Industries (SSI) sector in
domestic and international markets.
It provides services like leasing, factoring etc. to industrial concerns in the small scale sector.
To promote employment oriented industries especially in semi-urban areas to create more
employment opportunities and thereby checking migration of people to urban areas.
To initiate steps for technological up-gradation and modernisation of existing units.
SIDBI facilitates timely flow of credit for both term loans and working capital to SSI in
collaboration with commercial banks.
SIDBI Co-Promotes state level venture funds in association with respective state government.
It grants direct assistance and refinance loans extended by primary lending institutions for financing
exports of products manufactured by small scale units.IONS OF SIDBI

The important function of SIDBI are as follows:

(i) SIDBI Refinance loans and advances extended by the primary lending institutions to small scale
industrial units and also provide sources support to them
(ii) SIDBI discounts and rediscounts bills arising from sale of machinery to or manufactured by
industrial units in the smallscale sector,
(iii) SIDBI extends seeds capital / soft loan assistance under National Equity Fund, Mahila Udyam
Nidhi and Mahila Vikas Nidhi and seed capital scheme through specified lending agencies,
(iv) SIDBI grant direct assistance as well as refinance loan extended by primary lending Institution
for financing export of products manufactured by industrial concerns in the small scale sector,
(v) SIDBI provides services like leasing, factoring etc. to industrial concerns in small scale sector.
132
(vi) SIDBI extends financial support to state small Industries Development Corporation (SSIDCs)
for providing source raw materials to and marketing the end products of industrial units in small
scale units,
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16

(vii) SIDBI provides support to National Small Industries Corporation (NSICs) for providing
leasing, hire-purchase, and marketing support to industrial units in the small scale sector,
(viii) Refinancing of loans & advances extended by the primary lending institution to small scale
industrial unit concern and also providing resources support,
(ix) Discounting and rediscounting of bills arising from scale of machinery to or manufactured by
industrial units in the small scale sector,
(x) Extension of seed capital/soft loan assistance under National Equity fund. Mahila Udyam Nidhi
and Mahila Vikas Nidhi and seed capital schemes through specified lending agencies,
(xi) Granting direct assistance as well as refinancing of loans extended by primary lending
institution for financing export of products manufactured by industrial concern in the small scale
sector, and
(xii) Providing services like learning factoring etc. to industrial concerns in the small scale sector. In
setting up SIDBI, the intention of the Govt, of India was to ensure larger flow of financial
assistance to small scale sector, SIDBI has in already initiated step for technological upgradation
and modernization of existing units. It is expanding the channels for marketing of products of SSI
sector in internal and International market it is promoting in a big way employment oriented
industries especially in semi - urban areas to credit more employment opportunities and thereby
checking migration of rural population to urban and cosmopolitan areas.

ACHIEVEMENT OF SIDBI

SIDBI retained its position in the top 30 Development Banks of the World in the latest ranking of
The Banker, London. As per the May 2001 issue of The Banker, London, SIDBI ranked 25th both in
terms of Capital and Assets.[updation needed

Credit Guarantee Fund Trust for Micro and Small Enterprises popularly known as CGTMSE is
widely being used by many PSU Banks and Private sector banks to fund MSME sector. During the
year 2002-03 the aggregate sanction and disbursements of SIDBI amounted to 10,904 crore
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and 6,789 crore respectively. SIDBI has been permitted to raise finances up to 2,730 crore the
year 2013 onward by the Reserve Bank of India.

SIDBI has taken the initiative to proions viz., Credit Guarantee Fund Trust for Micro and Small
Enterprises, SIDBI Venture Capital, SME Rating Agency of India Ltd and India SME Technology
Services Ltd., for the benefit of the MSME sector.

Micro Units Development & Refinance Agency (MUDRA) Bank, an initiative by Government of
India to support non-corporate small business, is proposed to initiate it as a unit of SIDBI to benefit
from SIDBIs initiatives and expertise.

SIDBI Associates
CREDIT GUARANTEE FUND TRUST FOR MICRO AND SMALL ENTERPRISES
INDIA SME TECHNOLOGY SERVICES LTD.
SME RATING AGENCY OF INDIA LTD. (SMERA)
INDIA SME ASSET RECONSTRUCTION COMPANY LTD
SIDBI VENTURE CAPITAL LIMITED (SVCL)
SIDBI TRUSTEE COMPANY LIMITED (STCL)
SIDBI Subsidiaries
SIDBI provides direct, indirect and micro finance facilities.
Direct Finance: In the form of Term Loan Assistance, Working Capital Assistance, Support
against Receivables, Foreign Currency Loan, Scheme of Energy Saving for MSME sector,
equity support etc.
Indirect Finance: The Indirect assistance in the form of Refinance is provided to Primary
Lending Institutions (PLIs), comprising banks, State Level Financial Institutions, etc. having
a wide network of branches all over the country. The main objective of Refinance Scheme is
to increase the resource position of PLIs which would ultimately facilitate the flow of credit
to MSME sector.
Micro Finance: SIDBI provides micro finance i.e. credit to small entrepreneurs and
businessmen for establish their business.
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SERVICES PROVIDED BY SIDBI

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19

What is Loan Facilitation & Syndication Service?

Under this initiative, SIDBI facilitates Bank loans for new as well as existing manufacturing
and service sector units.

SIDBIs initiative in partnership with Banks, Rating Agencies (RAs) and Accredited
Consultants (ACs).

Its a transparent, structured mechanism for timely consideration of loan applications.

Why Is It Needed?

To generate complete structured applications alongwith necessary documents as are needed

by Banks for sanctioning of loans.

Independent Validation by ACs of the information furnished by MSMEs in the loan

applications provides a second check thereby enhancing the reliability of furnished information
and acts as an additional comfort to the banks in handling the loan applications.

Rating (not mandatory) of proposals by Rating Agencies, as and when required, provides an
independent opinion and helps the bankers for considering applications expeditiously.

The initiative would reduce delays and is expected to enhance flow of assistance to MSME
sector.

Benefits to MSME Entrepreneurs

Bank Loan Process Made Easier
Improved Acceptance of the loan proposals by banks

How does it Work?

SIDBI has empanelled Accredited Consultants (ACs) who will prepare the Basic
Information Memorandum (BIM) for the MSME entrepreneurs based on the information and
requirements indicated by the MSMEs. It is not only a loan proposal but more than that. BIM
will capture all information required by the Banks and the Rating Agencies, if needed,

BIMs prepared by ACs would be submitted to SIDBI by ACs with the approval of MSME
entrepreneur.
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20

If required, SIDBI may get the proposal rated by RBI approved Rating Agencies.

SIDBI provides Equity / Quasi- Equity for Growth Oriented existing units, Finance for
Service Sector Units, and provides credit to MSMEs for Energy Efficient and Cleaner
Production Processes.

In all other cases, the application would be forwarded to Public Sector Banks with whom
SIDBI has entered into a MoU for the purpose of Loans.

SIDBI, in essence, will handhold the Entrepreneur through all stages of loan processing.

Services provided by Accredited Consultants

Guide new / existing entrepreneurs regarding availability of schemes of SIDBI / commercial

banks

Inform MSMEs of Government subsidies / benefits

Provide borrowers with debt counselling

Prepare Basic Information Memorandum (BIM)

Facilitate response to queries raised by banks etc.

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BENIFITS OF SIDBI

Uniquely Designed Products to meet your needs

We have a range of Products and Services that are Flexible as well as Specialised to meet
the unique needs of Micro, Small and Medium Enterprises.
If your needs are not ordinary, we shall be happy to especially design a product for you.
After all continuous product Innovation has been a way of life for us.

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Focused attention on Industrial & Service Sector Funding

Development of Micro, Small and Medium Industry is the sole reason for our being. We
focus on Industrial as well as Service Sector Funding needs of the MSME sector. Ask us
how our schemes for Industrial as well as Service Sectors can help you achieve your
business objectives.

Attractive Rates on Financial Products

Looking at the need for Energy Efficiency and Cleaner Technology, SIDBI has tied up with
International Financial Institutions like World Bank, Japan International Cooperation
Agency (JICA), KfW ....etc to provide loans at concessional rates of Interest for Cleaner
Production and Energy Saving Projects. Get in touch with us and understand how we can
help you reduce costs, enhance profits and be at the leading edge technologically.

Relationship Managers to help you navigate the Entrepreneurship Journey

It is at the beginning of any endeavour that you need maximum help. Our team has been
specially trained to provide the handholding that you need

Presence in all major Industrial Clusters

You will discover that we are never too far away

Easier Access to Collateral Free Finance

The Ministry of Micro, Small and Medium Enterprises and SIDBI have established a Trust
named Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) to
implement the Credit Guarantee Fund Scheme for Micro and Small Enterprises. This
scheme helps New Entrepreneurs get collateral free loans up to Rs 100 Lakhs.

Risk / Growth Capital for Your Business

Get adequate capital to meet the Growth aspirations for your business without diluting
ownership.
Benefit from innovative financial instruments like - Subordinated debt (SD)/ Optionally
Convertible Subordinated Debt (OCSD).
Ask us how Equity and Sub Debt Assistance from SIDBI can help you raise higher debt
funds from SIDBI and other Banks.

Access Equity / Venture Funding

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SIDBI Venture Capital Limited, a wholly owned subsidiary of SIDBI provides growth
capital in the form of equity through its MSME focused venture capital funds.

Realise Sales Proceeds Quickly

Our Receivable Finance Scheme helps you in Quicker Realisation of Receivables. You
benefit from Efficient Cash Management as well as Cost Effective Discounting.

Easier Access to Government Schemes

SIDBI is a nodal agency to roll out Government Schemes for the Micro, Small and Medium
Enterprises. With our unique, in-depth understanding of the various schemes, we can help
you secure maximum possible advantage

Assistance to Match Your Growing Needs

Additional assistance for future growth is never too difficult with SIDBI

Transparent Rate Structure, No Hidden Surprises

PROBLEMS AND ISSUES IN SIDBI

Because of their unique characteristics, SIDBI face a variety of problems. In this section, the
problems are examined in connection with two stages of environmental performance improvement.
Environmental perfomiance improvement can be divided into two major stages, namely, awareness
raising and implementation. The awareness raising is significant as it relates to the establishment of
a solid foundation for SIDBI to move towards environmental improvement.

Stage I: Awareness Raising

Lack of information on the cost-benefits of improving environmental performance basically, a
fimdamental obstacle to improving environmental performance of the SME sector is a lack of
knowledge and information concerning environmental issues. SIDBI generally have a perception
that the only driving force to improve environmental performance is legislative compliance.
Moreover, SIDBI tend to believe that their processes have little or no impact on the environment
due to their small-scale production. This perception is derived from the fact that they have limited
information on the operational losses in their production processes. Hence, this mental model
prevents a great number of SME's from realizing the hidden costs of inefficiencies in production.
Accordingly, the SIDBI keep running their businesses as usual and resist change.
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In order to motivate the SME's to improve their environmental performance critical information on
cost-benefits can illustrate the benefits of environmental improvement and help to develop a
positive attitude regarding environmental improvement. However, it seems that such information is
not widely disseminated in the SME sector.

Weak External Pressures/Incentives

Environmental policy development in various countries began with command-and-control (CAC)
measures. Accordingly, regulatory instruments were applied to force polluters to comply with
regulations and standards. However, due to the large number and distribution of SME's, the
command and control approach became less efficient due to resource limitations in terms of the
monitoring and inspecting of personnel and budget allocation. While public pressure regarding
environmental conservation and requirements by global markets on environmental standards
increases, most companies are carefijlly watching the International Standard Organization (ISO)
certification and the introduction of Enviromnental Management System (EMS) within their
corporate and manufacturing facilities. Most industries, particularly those producing goods for
export, are focusing on developing environmentallyfriendly products. However, most SME's, unlike
large-scale industries, are not fully aware of the trend in the international market since they are
often isolated from it.

In addition, voluntary approaches, such as ISO 14000, green labeling, and clean technology have
become other means of management of natural resources and the environment as the market created
was stimulated by consumer demand. However, compared to the SME sector, large firms are more
active in taking voluntary initiatives.

STAGE II; IMPLEMENTATION

Lack of Internal Capacity

Even though a number of SME's are moving towards better environmental performance, they are
limited from taking action. The major obstacles are their weak capacity and limited resources in
terms of:
Financial resources
One of the major obstacles is the limited financial resources of SIDBI since the majority of the
SME sector is pursuing a survival business strategy. They suffer fi-om financial problems, such as
late payment of bills and lack of access to loan financing, they find it difficult to adapt to the
changing markets and they lack the capability to attract new financial resources. As a consequence,
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the adopfion of full-scaled EMS, such as the ISO 14001 model, or the installation of pollution
abatement technologies, seems to be too costly for SIDBI. Moreover, investment capital for major
process improvement is another issue of concern since accessibility to financial resources is a major
problem for a number of SME's as they tend to lack self-capacity to attract funding from local,
regional and national financial institutions and also from international institutions and
organizations. The problem has a supply and demand component. From the supply side, SIDBI face
difficulties in obtaining loans due to the banks' perceptions of high associated risks. On the demand
side, SIDBI often have inadequate financial statements and lack accounting records, business plans
and the necessary knowledge to present their business case in a realistic and favorable light to
financial sources. In order to address this problem, there is, therefore, a need for better information
flows among the financial providers, the SME's and the concerned government agencies.

Human resources
Lack of trained and qualified human resources is another barrier that requires improvement.
Generally, human resource allocation in the SME sector is limited to essential business functions,
such as technical, accountancy, sales and marketing. In most cases, there are no environmental
personnel in the SIDBI to undertake related tasks effectively.

Technologies
Utilization of outdated technology, as a resuh of limited capital investment, makes the SIDBI less
competitive. The majority of SME's is relying on outdated technologies that cause pollution and are
inefficient in production. In addition, inappropriate pollution abatement technologies result in
inefficiencies in pollution treatment.

R&D activities
R&D activities are limited in the SIDBI. This inhibits innovative improvement within the sector.
One of the major reasons for the poor performance is technological obsolescence coupled with
information deficiency and poor management practices. Thus, SIDBI lack technical capacity in
these enterprises to identify access, adapt and adopt better technologies and operating practices to
improve their environmental performance.

Business-as-usual operation and management

Normally, SIDBI functions in a business-as-usual mode. They are not fully aware of the emergence
of a new business environment. For example, non-tariff barriers, new trade and technology. The
nature of the SIDBI establishment is a major problem affecting environmental improvement of
SIDBI in terms of infrastructure as the physical distribution of SIDBI tends to be haphazard. Many
of SME's are located in concentrated commercial and residential areas, thus, they are unable to
expand their sites and install pollution treatment facilities. Moreover, the scattered distribution
prohibits the development of shared treatment facilities, while the stand-alone treatment system of
SIDBI is not in an economy of scale to operate efficiently.
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Weak Supporting Framework

Despite obstructive structures in the awareness-raising and implementation stages, the framework
support of SIDBI is weak. Also, the various programmes supporting the performance of SIDBI have
not helped SIDBI effectively.

Weak institutional arrangement of supporting SIDBI

Linkages among agencies involved with the SIDBI development have not been strengthened. The
network of institutions that is supposed to deliver supporting programmes to SIDBI development is
fragmented and cannot offer the corresponding services effectively.

Lack of SIDBI focused programmes

Many developing countries previously pursued a strategy of accelerated industrialization based on
large-scaled enterprises. Accordingly, development programmes and investment schemes were
established in light of large industry promotion while there are limited focused programmes that are
devoted to SIDBI development.

Gaps between international support and local implementation. Even

though the environmental improvement of SIDBI has drawn the attention of international
organizations, the international support for SIDBI development cannot reach local SME's
effectively. The major barriers include language and the adjustment of the programmes to the local
context. SIDBI have been struggling with these problems for many years and their challenge
becomes more severe when they wish to improve their environmental performance.

SIDBI Plan to Develop Alternate Market for Small Scale Industries:

At a time when focus of attention is on ICE Stock information, communication and entertainment
the Small Industries Development Bank of India is making effort to develop alternative market for
small scale Industries (SSIs) in the new millennium. The whole idea of SIDBFs present exercise in
bring about greater corporation of SSI sector and encourage growth limited companies, which are in
better position to access funds in the form of equity debt: "SSIs are characterized by a very low
equity base and, therefore, any improvement in equity capital will bost their capacity to withstand
competition in the market source added. The report deal with the changes required in the setting up
ofexisting capital market to make them accessible and suitable to SSIs and development of a
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alternative markets for equity and debt tailored for the Small -Scale Sector. These recommendations
will also be useful for the Union. Finance Ministry for framing suitable policies and bringing about
modification in the existing policies relevant to SSIs sector. According to available statistics, a large
majority SSI units (nearly 80% are proprietorship, while 17 are partnership only 2% comprising
about 60,000 units) are limited companies. Further, tentative estimates, indicate that even if these
units raised 50j percent of their capital requirement from the market, the size would be of order of
Rs. 5000 crores.

ASSISTANCE PROVIDED BY SIDBI

SIDBI provides assistance mainly to the small scale units through the channel of assistance. SIDBI
provide financial assistance to small scale industries have three major dimension.
1- Indirect Assistance to Primary Lending Institution (PLIs).
2- Direct Assistance to small scale units and
3- Development and Support Services (DSS)

1. Indirect Assistance:
SIDBI's scheme of indirect assistance credit to small scale industries through a large number of 913
PLIs (Primary lending institutions) spread across the country with the branch network of over
65000. The assistance is provided by way of refinance, bills rediscounting and resource support in
form of short term loan/ line of credit in lieu of refinance etc.

2. Direct Assistance;
The objective behind SIDBI direct assistance has been to supplement the efforts of PLIs by
identifying the gaps in existing creding delivery mechanisms for small scale industries. Direct
assistance provided under several tailor made scheme to Small Scale Industries Development Bank
of India. 41 regional branch offices spread across the country.
During 1997-98 sanctioned under direct finance product increased by, 2.7% to Rs 2655 crore
forming 35.5% of total sanctioned for assets creadon while disbursement accounting marginally by
2% to Rs. 7%, crores accounting for 33.8% of assistance for asset creation. Sanctioned rupee and
foreign currency loans increased .by 79.2% and 262.6% respectively to Rs. 895 crore and Rs. 306
crore. Sanctioned under the equity type assistance schemes viz. National Equity Fund (NEF), seed
capital, SUMFEX and Mahila Udyam Nidhi amounted Rs. 3 crore recording a growth of 36.6
percent.
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3. Development and Support Services:

The banks extends development and support services in the form of loan and grants to different
agencies working for the promotion and development of Small Scale Industries or Tiny Industries
over the year. The Initiative of SIDBI under promodonal and developmental activities have
crystallized in to the following areas.
(i) Enterprise permotion with emphasis an rural industralised.
(ii) Human Resource Development (HRD) to suit the Small Scale
Industries sector needs.
(iii) Technology upgradation
(iv) Quantity and Environment Management.
(v) Marketing and promotion , and
(vi) Information Dissemination.

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SHAREHOLDING

The entire issued capital of R5.450 crore has been divided into 45 crore shares of Rs.lO each. Of the
total Rs.450 crore subscribed by IDBI, while setting up of SIDBI, 19.21% has been retained by it
and balance 80.79% has been transferred / divested in favour of banks/ institutions/ insurance
companies owned and controlled by Central Government. (Appendix V)
SIDBI has operationalised SME Fund of Rs. 10,000 crore under which direct assistance is being
provided at an interest rate of two percent below SIDBI's PLR.
SIDBI has been incorporated with an authorized share capital of Rs. 1,000 crore comprising equity
capital of Rs. 750 crore and preference shares of Rs. 250 crore. It has been established with a issued
capital of Rs. 450 crore. Entire issued capital was subscribed by IDBI. Consequent upon the SIDBI
(Amendment) Act, 2000 with effect from March 27, 2000, SIDBI was delinked from IDBI and 51%
of the stake held by IDBI was transferred to Public Sector Banks, the General Insurance
Corporation of India, the Life Insurance Corporation of India and other institutions owned and
controlled by the Central Govemment.GOI, vide its notification dated September 25, 2001,
specified the proportion in which the stake would be divested.
SIDBI has operationalised a national level venture capital fiind called SME Growth Fund of Rs.500
crore which is utilized for investing in equities of growth sectors like life sciences, light
engineering, retailing, food processing, IT and infrastructure related services.
SIDBI, in association with CIBIL, select public sector banks and an existing rating agency, has set
up a specialized rating agency "SMERA" for the SME sector. SIDBI operates special schemes like
Credit Linked Capital Subsidy Scheme, Credit Guarantee Scheme, etc.
SIDBI has helped a number of MFIs in developing a wide range of products as also support other
service providers. SIDBI showed an excellent performance in Micro Credit operations by achieving
a growth of 168 percent in sanctions and 119 percent in disbursements over the previous year.
SIDBI retained its position in the top 30 Development Banks of the World in the latest ranking of
The Banker, London. As per May 2001 issue of The Banker, London, SIDBI ranked 25th both in
terms of Capital and Assets. The total income of the bank during the year 2007-08 was higher at Rs.
1638.17 crore as compared to Rs. 1187.28 crores during the previous year mainly due to growth in
the overall portfolio and better pricing of loan products. The total expenditure during the year was
higher at Rs. 1301.74 crores as compared to Rs. 737.39 crores during the previous year. Profit
before tax for the year was Rs. 336.43 crore, down from Rs. 449.49 crore in the previous year. The
net profit after tax for the year stood at Rs. 198.43 crore as against Rs. 298.10 crore in the previous
year.
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FINANCIAL ASPECT OF SIDBI

The development of Small-Scale Industries (SSIs) is slow because of inadequate and delayed
supply of credit. So, finance is the most important input in the industry for meeting various
expenses. Most of the entrepreneurs of SSIs are economically weak. Therefore, they are poorly
placed in the matter of capital formation as they are not in the position to plough back much into the
business because of limited profits".
The small-scale sector of U.P. both modern and traditional is in crying need of finance. The people
of U.P. do not have the necessary capital to start a new unit with their own funds and they have to
look for other sources of financing their units.
The structure of capital in a SSI unit is simple. "A number of industries commence production
without any capital worth mentioning. Even in cases where there is capital it is invariably
contributed by the Entrepreneurs or by money borrowed from relatives and shown as capital".
However, this does not imply that one can run SSI units without capital.
The fixed capital and working capital are two types of capital that are required by SSIs. The fixed
capital which are met by long-term loans are needed because for meeting the expenses of
acquisition of land and building and installation of plant and machinery whereas the working capital
are met by short term advances need for purchase of raw material and to meet other current
expenses such as fuel, wages, marketing and production, etc.
The fixed capital requirement are met by State Government (under the State Aid to Industries
Act/Rule), State Small Industries Corporation (SSICs), State Industrial Development Corporation
(SIDCs), Commercial Bank, National Small Industries Corporation (NSICs), State Industrial
Investment Corporation, Cooperative Banks, indigenous Bank and moneylenders. The working
capital is mainly provided by commercial banks.
If we discuss directly about the credit to SSI sector, at the end of March 2005, 536 specialized SSI
branches of commercial banks were operational. The credit outstanding by Public Sector Banks
(PSBs) to SSIs stood at Rs. 67,634 crore at the end March 2005. PSBs were advised to
operationalised at least one specialized SSIs branch in every district and centre having cluster of
SSIs units. The credit outstanding of private Banks to SSIs stood at Rs. 8,668 crore as at the end of
March 2005 but their share in Net Bank Credit has come down. Foreign Bank credit to SSIs stood at
Rs. 6,914 crore at the year ended March 2005. The flow of credit to SSI sector by public, private
sector and foreign bank is given below:

Sources of Financing of SSIs in U.P.

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The various financial institutions meet the financial requirements of small-scale industries in UP.
Almost all the banks and financial institutions are working in U.P and provide financial assistance
to SSI units. Commercial Banks, U.P Financial Corporations (UPFC), National Small Industries
Corporation (NSIC), U.P Small Industrial Corporations (UPSIC), U.P Industrial Investment
Corporation etc. are providing direct financial help. SIDBI also provides financial help to SSIs of
U.P. For the development of the micro, small and medium entrepreneurs there are various
institutions and organizations, which are promoted by the Central Government and State
Government are as

U.P Financial Corporation:

State Financial Corporation (SFC) was established under the Central Act, viz, the State Financial
Corporation Act, 1951 with the basic objective of promoting and developing small-scale industry in
the state with a special focus on spreading industrial culture in the rural, semi-urban and backward
areas of the state.
UP Financial Corporation caters to the requirement of the entrepreneurs. It provides term loan to
small and medium scale industry for creation of assets viz, land, buildings and machinery. It also
provides working capital term loan to the industrial units on competitive terms.
The Corporation also provides non-fund based services like merchant banking, underwriting of
public issues, project counseling, bill discounting, leasing and hire purchase. It is operating a
number of financial assistance schemes for the benefit of entrepreneurs such as assistance for
marketing activities equipment finance, special schemes for assistance to ex-service men, single
window scheme etc. U.P Financial Corporation provides maximum loan up to Rs. 200 Lakhs. The
interest on loan ranges between 13.75% to 16.% depending upon size of the loan and term.

U.P Industrial Development Corporations (UPIDCs):

State Industrial Development Corporations -were established under the Companies Act 1956 as
wholly owned undertaking of the State Governments. UPIDCs provide assistance to small-scale
sector byway of term loan, subscription to equity and promotional services.

UP Industrial Investment Corporations (UPllCs):

Under the Companies Act of 1956 the State Industrial Investment Corporations were established.
SllCs also provide assistance for the development of SSIs sector of UP.

National Small Industries Corporations:

The National Small Industries Corporations, a Government of India undertaking, has been setup
with the specific objective of developing small Industries in the country. It aids development of
small scale industries supply to the party on hire purchase terms. Machines, both foreign and
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indigenous, can be had from this source on a security deposit ranging upto 20% of the cost of the
machines.
Apart from these National and state level institutions, there are various exclusive agencies, which
assist the growth of the small-scale industries of the state. Prominent among them are the State
Small Industries Development Corporations (SSIDC), District Industries Centres (DIG), etc. The
various terms of assistance rendered by SSIDCs and DIG to the SSI sector ofthe UP are:
(a) Supply of machinery on higher purchase basis;
(b) Procurement and distribution of raw materials;
(c) Securing contracts from Government stores/purchasing agencies;
(d) Provisionof technical and consultancy services;
(e) Marketing assistance etc.

Commercial Banks:
Commercial banks are playing an important role in the deployment of credit to various sectors
including SSI sector. The commercial banks have indeed formed the backbone of the financial
system in the country. These banks can be broadly divided into three categories viz. public sector
banks, private sector banks and foreign banks and have been playing a dominant role in the
mobilization of public savings and credit to various sectors of the economy.
Commercial banks were advised to make concerted efforts to provide credit cover, on an average to
atleast 5 new tiny, small and medium enterprises at each of their semiurban/urban branches every
year. They were further advised to formulate a comprehensive and more liberal policy relating to
advances to SME sector.
In U.P, commercial banks are playing an important role in the deployment of credit to various sector
including SSI sector. As far as U.P. is concerned some of the commercial banks provide financial
assistance to Small Scale Sector of U.P.. These banks include Gramin Bank, Canara Bank and State
Bank of India etc.

(a) Gramin Bant In U.P. Gramin Bank provides financial assistance to SSIs of U.P.District for the
development of SSIs. This bank provides short-term loan to small farmers and entrepreneurs for
setting up an unit.
(b)Lead Bank Scheme: U.P. endowed with rich natural resources, with industrious and progressive
nature of the farmers, was allotted to Canara Bank where it had been entrusted with all the
responsibilities of a lead Bank. Canara Bank, the lead bank, started functioning in Aligarh District
by opening its first branch on 12 April 1971. Under the scheme this bank was allotted 18 districts in
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33

UP including, Agra, Etah and Aligarh. Its two fold .objectives in the district were massive
mobilization of rural deposits and stepping up of bank's lending to the weaker sections in the
district.
(c) State Bank of India (SBI): Recently State Bank of India (SBI) started an Equity Fund Scheme
for small-scale industry to assist entrepreneurs setting up new small-scale industrial units in need of
equity support through interest free loans repayable on soft terms. The entrepreneurs eligible for
assistance are those financial under the banks entrepreneurs scheme and other educated persons
who under-go training under their entrepreneurial Development Programme and are eligible for
credit guarantee cover of DICs assistance under the schemes given by the way of interest free loans
to the maximum of 25% of the total cost of the scheme which should not be less than Rs. 25000.
Preference is given to units in western UP areas, export oriented units, tiny sector units in rural
areas and units producing import substitute items.
(d) Regional Rural Banks: Regional Rural Banks (RRBs) were established since 1976 under the
provisions of the Regional Rural Banks Act, 1975 with a view to developing the rural economy as
well as to creating and alternative channel to 'Co-operative Credit Structure' in order to ensure
sufficient institutional credit for rural and agriculture sector. These banks were also intended to
mobilize rural savings and channelize them for supporting the productive activities in the rural
areas.
Besides, having these banks there are some schemes, which are introduced by the RBI for the
development of SSI units.

Reserve Bank of India guidelines for SSI lending :

The RBI has prepared a consolidated set of guidelines for SSI sector
lending. Finance provided to SSI falls into two categories
(i) Direct finance provided to SSI units and
(ii) Indirect finance provided to industrial units.

Direct finance to the categories of SSI is included

(a) Artisans (irrespective of their locations)
(b) Cottage/village industries in villages and small towns with a population not exceeding 50,000
persons involving utilization of locally available natural resources and / or human skills where
individual credit requirements do not exceed Rs. 25000,
(c) Other small-scale industries that are engaged in manufacture, processing and preservation of
goods.
Indirect finance to small-scale industry sector includes:
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(a) Credit to agencies involved in assisting the decentralized sectors in the supply of input and
marketing of output of artisans, village and cottage industry,
(b) Credit to government sponsored corporation organization providing the funds to the weaker
sections in the priority sector, and
(c) Loan for setting up industrial estate margin money.

Introduction of New Schemes:

During the year 2005-06, several new credit products were launched with the objective of meeting
the varied financial needs of the SME customers. These are given below:
Short-term resource support to SME intermediaries- A new product was desired for financial
intermediaries like Non-Banking Financial Corporations (NBFCs) and factoring Companies. To
augment their fund base for further lending to the SME units.
- Inland Letter of Credit Scheme- The Scheme was launched on an all India basis to provide
domestic letter of credit facilities to SIDBI's customers.
- Privileged Customer Scheme- An innovative scheme for extending annual credit limits to existing
good customers of the Bank for meeting their unforeseen bonafide business expenditure.
- SME IT loan- A new scheme was launched to provide small loans to SME units for producing IT
products.
- In order to double, the flow of credit to SSI sector from Rs. 67600 crores in 2004-2005 to Rs.
1,35,200 crore by 2009-10 i.e. in a period of 5 years, public sector banks were advised to fix their
own target for funding SSIs.
- In order to reduce the cost of guarantee to the weaker segments or the borrowers particularly tiny
units, the Credit Guarantee Funds Trust for small industry was advised to reduce the one time
guarantee fee from 2.5% to 1.5% for all.
- A Council for Advancement of Rural Technology (CART) was set up in Oct. 1982 to provide the
necessary technical input to the rural industry.
- Under Union Budget 2006-07, the ministry of SSIs identified a further 180 items for dereservation
in order to encourage technology upgradation and vertical expansion of units.
- The National Manufacturing Competitiveness Council finalized a 5 years national manufacturing
competitiveness programme for the development of SSI units.
- The support under Technology Upgradation Funds Scheme was enhanced from Rs. 435 crore to
Rs. 535 Crore for next year.
- The Commercial banks were advised to make concerted efforts to provide credit cover on an
average to at least 5 new tiny, small and medium enterprises at each of their semi-urban / urban
branches every year.'
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IMPORTANCE OF SIDBI

SIDBI provide financial assistance in the form of:

1. Direct Assistance:
SIDBI has evolved itself to meet the various requirements of the Small & Medium Enterprises
(SME) sector by directly offering various financial products and services. Some of the major
schemes of SIDBI under direct assistance are:
A. Term Loan Assistance
Term Loans are provided for
i) setting up new projects and for technology up gradation, diversification, expansion, etc. of
existing SMEs,
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ii) service sector entities like hotels, tourism related activities, entertainment parks,
hospitals/nursing homes, health & fitness centres, filling stations, retail Chains, logistic support
senices, IT & IT enabled services, etc. and
iii) infrastructure development and up gradation.
Resource Support The Bank provides resource support to institutions/Non-Banking Finance
companies (NBFCs) to facilitate channelising assistance to a large number of SME units and
infrastructure projects having linkages to SMEs.
B. Working Capital Type Support
Working Capital Term Loan (WCTL)
The objective of the Scheme is to help SME units in starting their commercial production without
difficulty and during their up scaling of operations. All the assisted units of SIDBI covered under
the scheme are expected eventually to switch over to commercial banks within a reasonable time
frame (say, 3-5 years) for meeting their regular working capital requirements.

Scheme for Small Enterprises Financial Centres (SEFC)

In order to meet the complete financial requirements of SME customers, particularly working
capital, the Scheme for Small Enterprises Financial Centres (SEFC) Scheme has been
operationalised to take up cofinancing or exclusive financing of term loan requirements of SME
units along with the,commercial banks and the working capital requirements of these units will be
met by the banks in identified clusters. The branches of SIDBI in the clusters are designated as
SEFCs. Under the Scheme, SIDBI has entered into Memorandum of Understanding with 15
commercial banks for joint/co-financing of projects including working capital and nonfund based
facilities for the SME sector.

C. Support against Delayed Payments

R eceivable Finance Scheme (RFS)
Receivable Finance Scheme (RFS) is intended mitigate the problem of delayed payments to SME
sellers/eligible service providers in respect of their sales/services rendered to large purchaser
companies. Under the scheme, the Bank fixes limits to well- performing purchaser companies with
sub-limits to their SME units. The bank offers bills discounting facilities to SMEs/eligible service
sector units supplying components, parts, subassemblies, services, etc. so as to realise their sale
precedes quickly. The Scheme also enables manufactures-sellers in SME / service sector to offer
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deferred payment terms for credit sales and realise sale proceeds by discounting bills of exchange /
promissory notes arising out of such sales. The Bank also offers invoice-discounting facilities to the
suppliers of large Corporate
Seller-wise Receivable Finance Scheme (SRFS)
Whereas under RFS, the facility is given only in respect of a single purchaser from the SMEs, under
Seller-wise Receivable Finance Scheme (SRFS), the SME units' receivables from other purchasers
are also covered to improve their cash flow and liquidity by providing them with immediate
financial assistance against the goods sold and/or services rendered to purchaser companies in the
public /private sector with satisfactory market standing.

D. Foreign Currency Loans

To enhance the capabilities of export oriented units, SlDBl offer prepost - shipment credit to SME
units in foreign currencies like US Dollar, Euro, etc. Foreign currency assistance is also extended by
way of term loans for importing plant and machinery or equipments, etc. The related schemes are
briefly given below;

Pre-Shipment Credit in Foreign Currency / Rupee to enable small and medium enterprises (SME) /
Export Houses (EH) / Trading Houses (TH), etc. to raise finance to fulfill their export commitments.
The assistance may be availed in designated foreign currencies or in rupee.
1- Post-Shipment Credit by way of negotiation/purchase/discount of export bills of eligible entities
which have been sanctioned limits by SIDBI. This facility can be availed either in foreign currency
or in rupee.
2- Foreign Currency Tern, Loan Scheme for setting up new projects as for expansion,
diversification, technology upgradation and modernization of existing units,
3- Opening of Foreign Letters of Credit (FLO) to enable small, and medium enterprises (SMEs),
import capital equipment for new projects, expansion, diversion, technology upgradation and
modernization. PLCs are also opened to enable import of raw materials, consumables etc. by SME
units and Export/Trading Houses sourcing their requirements for export from SMEs.
4 Booking of Forward Contracts to provide SIDB, clients with the facility of hedging of foreign
exchange risks related to their import , export transactions.
5 Line of Credit in Foreign Currency to Commercial Banks for providing resource support to
institutions / banks for extending export and domestic credit to SME units / EH / TH, etc

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AS THE NODEL/IMPLIMENTING AGENCY

Credit Linked Capital Subsidy Scheme (CLCSS): In order to facilitate technology upgradation in
the SSI sector, the Government of India introduced Credit Linked Capital Subsidy Scheme (CLCS)
Scheme by providing 15% capital Subsidy to SSI units for induction of proven technologists /
approved products / sub - sectors. Subsidy will be limited to 15% of the purchase price of eligible
plant and machinery with a ceiling on loan of Rs. 10 million under the Scheme.
Technology Upgradation Fund Scheme (TUFS): For modernisation and technology upgradation
in textile and jute industry. The Scheme provides for an interest subsidy of 5% or upfront capital
subsidy of 15% under CLCSS (TUFS).
Development of Leather Sector Scheme (IDLSS): The Scheme is primarily aimed at enabling
existing tanneries, footwear components and leather products units to upgrade their technology,
leading to productivity gains, right sizing of capacity, cost cutting, design and development for
attaining global competitiveness. The financiala ssistance under the Scheme will be in the form of
an investment grant to the extent of 30% of cost of plant and machinery for SSI and 20% of cost of
plant and machinery for other units (i.e. non-SSI units) subjects to a ceiling of Rs.50 lakh for
technology upgradation /modernisation and/or expansion.
Scheme for Integrated Infrastructural Development (IID): In order to promote SSI and Tiny
Sector clusters and create employment opportunities, the Government of India introduced Integrated
Infrastructural Development (IID) Scheme to provide common facilities and technological back-up
services in selected centres and also to create/upgrade infrastructural facilities in new/existing
industrial centres. Under the Scheme, project cost is not to exceed Rs.50 million, out of which
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Government of India gives grant of 40% (ceiling - Rs.20 million). For North-Eastern States, States
of J & K, Himachal Pradesh, Uttaranchal and Sikkim, Government of India Grant is 80% of project
cost (ceiling - Rs.40 million).
World Bank Project; The main objectives of the Project are to solve both demand side and supply
side credit problems by enhancing the credit absorption capacity of the SMEs on the demand side
and credit delivery capacity of the financial intermediaries on the supply side. The project is
expected to give multiple benefits to the SME sector like increased lending to SMEs, growth in
investment, output and employment, improved credit information on SMEs, better risk monitoring,
cluster development, etc.

Micro Credit: To meet the micro credit demand, SIDBI constituted a specialized department called
SIDBI Foundation for Micro Credit (SFMC) to create a national network of strong, viable and
sustainable Micro Finance Institutions (MFls) from the informal and formal sectors to provide
micro finance services to the poor, especially women. SFMC provides a complete range of financial
and non-financial services such as loan funds; grant support, equity and institution building support
to the retailing MFIS so as to facilitate their development into financially sustainable entities,
besides developing a network of service providers for the sector. Over the years, SIDBI
strengthened more than 100 MFIs in terms of operational and financial sustainability in dispensing
micro credit effectively, benefiting more than 30 lakh persons, mainly women.
Indirect Assistance:
The indirect assistance of the Bank consists of refinance and resource support in the form of shortterm loans/line of credit to Primary Lending Institutions (PLIs) comprising State Level Financial
Institutions and banks having a large network of over 950 PLIs with a branch network of over
65,000 branches.
Refinance: The main objective of SIDBI's refinance schemes has been to
facilitate the flow of credit in an increasing measure to SSI units by suitably
augmenting the resources of the PLIs. The Bank provides refinance to PLIs
against the long term loans granted by them for:
- Setting up new small scale units or expansion, modernisation,
diversification, etc of existing units and for all activities eligible for
assistance under the scheme including professional practice/
consultancy venture and service sector units such as tourism related
activities / hospitals / nursing / homes / polyclinics / hotels / restaurants /
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marketing and industrial infrastructural projects.

- SIDBI also extends financial support (Short Term Loans) to scheduled
commercial banks in respect of their outstanding portfolio relating to SSI
sector against which no financial support has been availed from other
institutions.
Rediscounting: In order to help the machinery manufactures in the SSI
sector and to maximise their sales by offering differed payment credit to the
prospective purchaser-users, the Bank operates a Bills Rediscounting
Scheme. Under the scheme, bills arising out of sale/requisifion of machinery
on differed payment terms for setting up of new SSI units as also for
expansion, diversification, modernisation, replacement, addition for
balancing equipment, etc. and discounted by scheduled commercial banks
are rediscounted by SIDBI.
Equity Support: National Equity Fund:
The objective of the National Equity Fund (NEF) Scheme is to
provide equity type support to entrepreneurs for setting up new projects in
tiny/small scale sector, for undertaking expansion, modernisation,
technology upgradation and diversification and also for rehabilitation of
viable sick units in SSI sector which also fulfill the specified eligibility
164
criteria, irrespective of location. Assistance from NEF helps the small
scale units in strengthening their equity base and thereby improving their
acceptability for term financing by primary lending institutions (PLIs).
Promotional and Developmental Schemes of SIDBI:
As the apex developmental financial institutions, SIDBI undertakes
various Promotional and Developmental (P&D) activities for the SME
sector in India designed to achieve two prime objectives of national
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importance.
Employment generation in the SME sector, 'thereby alleviating
poverty through its select programmes, such as. Rural Programme (RIP),
Vocational Training Programme (VTP) and Strengthening the existing
SME sector to face the emerging challenges of growing
internationalisation and intensifying competition through its select
programmes, such as, Cluster Development Programme (CDP), Skill
cum-Technology Upgradation Programme (STUP), Environmental
Initiatives, Marketing Assistance and Information Dissemination. Some of
the thrust areas of P&D activities are:
Rural Industries Programme (RIP): Through Rural Industries
Programme (RIP), the Bank aims at creation of rural employment through
enterprise promotion in rural and semi-urban areas, thereby addressing
problems such as rural unemployment urban mitigation, under
utilisation of know how and latent rural resources, etc. The programme
provides comprehensive Business Development Services for the rural areas
which include identifying and motivating rural entrepreneurs, identification
of viable ventures based on local skills and resources, training,
appropriate technology linkages and finance tie-up with the formal banking
sector.
165
Entrepreneurship Development Programme (EDP):
The Bank's Entrepreneurship Development Programme (EDPs) aim at
promotion of self-employed ventures capable of generating employment
targeting opportunities, especially less privileged sections of the society
like women and SC/ST. While established EDP institutions such
as RUDSETI, Ujire and Entrepreneurship Development Institute of India
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(EDII), Ahmedabad etc. are provided annual report for conducting

General EDPs, Product/Process specific EDPs, trainers training
programme, course for Development Consultants, NGO Bankers Interfaces
etc., the stand-alone EDPs conducted by upcoming NGOs/other agencies
are also supported by the Bank, on a selective basis. The EDPs are
conducted in the cluster or for a heterogeneous group of entrepreneurs.
Strengthening SME Sector:
With a view to strengthening the SME sector, the Bank supports
reputed management / technology institutions, for offering management
development programmes, viz., Skill-cum- Technology Upgradation
Programme and Small Industries Management Programme. While the
former programme aims at technology aims at enhancing technology profile
of SME units, SIMAP targets qualified unemployed as well as
industry-sponsored candidates with the overall objective of providing
competent managers to the SME sector.
Skill-cum-Technology Upgradation Programme (STUP):
Skill-cum-Technology Upgradation Programme (STUPs) are
structured to improve the performance of existing SME imits by
developing/strengthening managerial skills and technical competence of the
entrepreneurs and senior executives of small enterprises. The underlying
intention is to enable the participant entrepreneurs/senior executives to
assess their existing performance level and determine ways of enhancing it.
166
It also aims at creating awareness amongst the SME units on process
improvements, technological developments, etc and inducing the units to
upgrade their technological level.
Marketing Initiatives: As an important ingredient of its P & D initiatives,
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the Bank supports various marketing events with the intention of providing
appropriate marketing linkages to the trainees of EDPs and RIP, etc.
Cluster Development Programmes (CDPs): Cluster Development
Programme (CDP) is a comprehensive package of business development
services, such as, technology upgradation, capacity building, environment,
marketing, credit, quality, WTO, information dissemination, etc. Under
CDP, clusters with homogenous production activities are adopted so as
to have the maximum impact and economies of scale. The main objectives
of CDP are:
- Creation of awareness on new product/process technologies.
- Skill upgradation
-

Development of technology related common facilities for the cluster

Provision of unit-specific modernisation package.
Energy conservation and introduction of environment friendly
technologies and
Quality upgradation in terms of systems and products.

National Programme on Innovation and Incubation

In order to infuse technological advancement in SME sector, SIDBI
has initiated a National Programme on Innovation and Incubation for SME
sector under which two incubation centres have been supported at IIT
Kanpur, and BIT Mesra, Ranchi. Other Promotional and Development
Schemes of SIDBI are:

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SIDBI Venture Capital Limited (SVCL):

In order to provide venture capital support to innovative,
knowledge based first generation entrepreneurs having neither equity nor
collateral, SVCL - an asset management company - is established as a
wholly owned subsidiary of SIDBI, for managing venture capital funds
sponsored by SIDBI. At present, it manages the National Venture Fund for
Software and Information Technology Industry (NFSIT): set up in 1999 and
the SME Growth Fund, launched in October 2004. The Growth Fund has the
main focus on growth sectors of the economy, such as, life sciences,
retailing, light engineering, food processing, information technology,
infrastructure related to services like healthcare, logistics and distribution
etc.
Credit Guarantee Fund Trust for Small Industries (CGTSI):
The Credit Guarantee Fund Trust for Small Industries (CGTSI) was
set up in July 2000 for operating the Credit Guarantee Scheme for small
industries. The Trust helps small enterprises in accessing institutional
credit, both term loan and working capital, for their viable projects without
facing the difficulties of arranging collateral security and/or third party
guarantee. CGTSI extends guarantee cover up to 75 per cent of the collateral
free credits extended by member lending institutions to small enterprises,
subject to maximum credit of Rs. 2.5 million per borrower.
SME Rating Agency of India Ltd.
With a view to assessing the credit risk of SMEs independently,
which will enhance the bankers' confidence in lending to the sector, SIDBI
in association with Dun &, Bradstreet,' CIBII and select banks, established,
for the first time in India, rating agency for the SME sector called SMERA.
India SME Technology Services Ltd. (ISTL):
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SIDBI set up a company in the name of India SME Technology

transfer, joint ventures, business collaboration, finance syndication and
attendant support services in order to enhance market competitiveness of
small and medium enterprises and promote sustainable
development.
(a) Factoring companies, viz., Canbank Factors Ltd. And SBI Factors
Ltd.
(b) Northeastern Development Finance Corporation Ltd.
(c) IDBI Bank Ltd
(d) Indian Institute of Entrepreneurship, Guwahati.
Performance Highlights and working Result of SIDBI:
SIDBI play a very important role in financing small scale industries
in a developing country like India.
During the FY 2008, SIDBI recorded better operational performance
and strengthened its financial fundamentals. The Bank recorded the highest
ever sanctions and disbursements during the year with sanctions increasing
by 4.5.6 percent and disbursements by 47.5 percent over the previous year.
While the Refinance support, which is a key function of Bank, was
enhanced by 76.4 percent, the Direct Credit flow to MSMEs by SIDBI
increased by 18.0 percent during the year under review. The aggregate
outstanding portfolio of the Bank crossed the Rs.20,000 crore mark for the
first time and increased by 26.2 percent to Rs.20,226 crore as at March
31,2008. As a result, the total assets of the Bank increased sizeably to
Rs.23,887 crore at the end of FY 2008. During the year, with focused
attention on business growth and better pricing of loan products, total
income of the Bank increased by 38% to Rs. 1,638 crore from Rs.1,187 crore
during FY 2007. However, due to treatment of earlier / current year's
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cumulative contribution to the corpus of CGTMSE of Rs.317 crore as

expenditure and providing for interest expenditure of Rs.l74 xiii crore on
SIDBI Bonds held by Govt, of India which was waived in the previous year,
net profit for the current year was lower at Rs.l98 crore as against Rs.298
crore in the previous year. The total Reserves and Funds of the Bank
increased from Rs.4,691 crore as on March 31, 2007 to Rs.4,810 crore as on
March 31, 2008 and the Capital Adequacy Ratio was higher at 41.7 percent.
Micro Finance, by reaching out to the poor, has emerged as a powerful tool
for inclusive growth, poverty alleviation and women empowerment. At the
same time, it is also a business opportunity for enlarging the credit portfolio
of the Bank. The total credit sanctions under Micro finance during FY 2008
surged by 93.8 percent to Rs. 745.95 crore and disbursements by almost 100
percent to Rs.695.80 crore. The Micro credit outstanding as on March 31,
2008 was Rs.950.38 crore which showed a higher growth of 73.3 percent
over the previous year. The Bank's Micro Finance support so far has
benefitted more than 50 lakh persons, mostly women.^
The Bank extends loans and grants to various agencies working for
its
Promotional and Development Assistance Scheme. The aggregate sanctions
the promotion and development of SSIs and tiny industries under
^SIDBl, Annual Report, 2007 and disbursement under various promotional and development
schemes
aggregated Rs.355.53 crore and Rs.2646.7 respectively during
2005-06

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