CHAPTER 1-INTRODUCTION

“GOOD THINGS IN LIFE BEGIN SMALL”

 1.1 SSI SECTOR

Small Scale Industry accelerates Indian economy not only in terms of its contribution to industrial output and
national export but also in growing employment opportunities. Small Scale Industries accounts for about 95% of
industrial units, contributes about 40% of the value added manufacturing sector and over 33% of the national
exports through 28 lack units spread all over the country.

MEANING OF SSI

The Government of India grouped small-scale industrial undertaking into 2 categories-those using power but
employing less than 50 persons and those not using power but employing less than 100 persons. All small-scale
enterprises however had capital investment of less than Rs.5 lacks. The ownership and management in small
enterprises is predominantly proprietary with individual ownership or partnership. The small-scale sector has been
assigned a significant role in industrialization and economic development in India as an effective tool in sub
serving the national objective of growth with social justice. Its importance has been increasingly recognized in
India as a solution for the widespread unemployment and under unemployment. Small-scale sector is credited
with short gestation periods, generation of conduciveness for its dispersal over of widening base of indigenous
entrepreneurship. Up gradation and adoption of other modernization measures have received added attention in
the recent years to make this sector more cost effective.
 ESSENTIAL FEATURES OF THE SSI POLICY 1991

SR OBJECTIVES MAJOR FEATURES

NO
1. To meet the emerging demand for credit.  Emphasis to shift from cheap credit to
adequate credit.
 Equity participation by other
undertakings domestic foreign up to
24%.

2. To strengthen small industry marketing.  Introduction of factoring service

through Banks.
 Marketing of mass consumption good
sunder common brand name.
 Setting up subcontracting exchanges.
3. To upgrade technology and promote  Technology developmental in SIDO
modernization.  Quality counseling and testing
technology information centre.
 Technology Up gradation
programmes.
 OPPORTUNITY

The opportunities in the small-scale sector are enormous due to the following factors:

 Less Capital Intensive

 Extensive Promotion & Support by Government

 Reservation for Exclusive Manufacture by small scale sector

 Project Profiles

 Funding - Finance & Subsidies

 Machinery Procurement

 Raw Material Procurement

 Manpower Training

 Technical & Managerial skills

 Tooling & Testing support

 Reservation for Exclusive Purchase by Government

 Export Promotion

 Growth in demand in the domestic market size due to overall economic growth

 Increasing Export Potential for Indian products Growth in Requirements for ancillary units due to the
increase in number of Greenfield units coming up in the large-scale sector.

Growth in Requirements for ancillary units due to the increase in number of Greenfield units coming up in the
large-scale sector.
 1.2 POST WORLD WAR II SCENARIO

The second half of the 20th century has been called the 'era of development'. The origins of this era have been
attributed to:

 The need for reconstruction in the immediate aftermath of World War II;

 The evolution of colonialism or "colonization" into globalization and the establishment of new free
trade policies between so-called 'developed' and 'underdeveloped' nations.

The start of the Cold War and the desire of the United States and its allies to prevent the Third World
from drifting towards communism. Before the date, however, the United States had already taken a leading role in
the creation of the International Bank for Reconstruction and Development (now part of the World Bank
Group)and the International Monetary Fund (IMF),both established in 1944, and in the United Nations in 1945.

The concept of development banking rose only after Second World War, after the Great Depression in
1930s. The demand for reconstruction funds for the affected nations compelled in setting up a worldwide
institution for reconstruction. As a result the IBRD was set up in 1945 as a worldwide institution for development
and reconstruction. This concept has been widened all over the world and resulted in setting up of large number of
banks around the world which coordinating the developmental activities of different nations with different
objectives among the world.

The early history of Indian banking and finance was marked by strong governmental regulation and
control. The roots of the national system were in the State Bank of India Act of 1955, which nationalized the
former Imperial Bank of India and its seven associate banks. In the early days, this national system operated
alongside of a large private banking system. Banks were limited in their operational flexibility by the
government’s desire to maintain employment in the banking system and were often drawn into
troublesome loans in order to further the government’s social goals.
The major issues confronting SSI‟s 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 SSI‟s.

Over the years, SIDBI has put in place financing schemes either through its direct financing mechanism or
through indirect assistance mechanism and special focus programmers under its P&D initiatives. In its approach,
SIDBI has struck a good balance between financing and providing other support services.
 1.3 TECHNOLOGY

In the process of industrialization in general and development of SSI‟s in particular,

technology plays a key role in providing cutting edge for development. SIDBI, since inception, has been giving
thrust to technology up gradation of the SSI‟s and towards this end; various steps were taken by the
bank aimed at identifying their needs in terms of process technology, environment management, quality
management, common facilities center etc. & adopting suitable measures to address them. Thus, apart from
meeting the credit needs of SSI‟s, SIDBI has developed support mechanism and facilitated institutional and
infrastructural framework for development and use of technology on an increasing scale.

The technology (APCTT), a United Nations outfits, is gradually emerging as a

technologybank for SSI‟s providing information on range of technologies, sources
and facilitating collaboration together with financial tie-up, when feasible. It has also been successfully
exporting the SSI technologies to various countries. In April 1995 SIBI out of its own resources set up technology
development and modernization fund (TDMF) with an earmarked amount of Rs. 200 crores for encouraging
existing industrial units in the small scale sector to modernize their production facilities and adopt improved and
updated technology.

Assistance under this scheme is being provided at SIDBI‟s prime lending rate to
beneficiary units. Though the assistance under TDMF since inception crossed the originally earmarked amount,
the bank extended its operation for another 3 years by earmarked another Rs. 100 crores from out its own
resources. The major initiatives in this direction include cluster based intervention programmed for technological
up gradation, organizing skill cum technology up gradation programmed and expanding information base on
status of technologies in specific sub-sector within SSI‟s.

SIDBI is also performing the role of nodal agency in respect of specialized schemes of Government of
India for technological up gradation of cotton textile industry and tanneries in the small scale sector.
 The range of assistance comprising financing, extension support and promotional are made available through
appropriate schemes of direct and indirect assistance for the following purposes:-

o Setting up of new projects.

o Expansion, diversification, modernization, technology up gradation, quality improvement, rehabilitation

of existing units.

o Strengthening of marketing capabilities of SSI units.

o Development of infrastructure for SSI‟s and

o Export promotion.
CHAPTER 2: REVIEW OF LITERATURE OF SIDBI
 2.1 SIDBI

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 and financing or
developing industry in the small scale sector and for matters connected therewith or incidental
thereto.

The business domain of SIDBI consists of small-scale industrial units, which contribute
significantly to the national economy in terms of production, employment and exports. Small-
scale industries are the industrial units in which the investment in plant and machinery does not
exceed Rs.10 million. About 3.1 million such units, employing 17.2 million persons account for
a share of 36 per cent of India's exports and 40 per cent of industrial manufacture. In addition,
SIDBI's assistance flows to the transport, health care and tourism sectors and also to the
professional and self-employed persons setting up small-sized professional ventures.

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.

SIDBI is committed to developing a strong, vibrant and responsive small-scale sector.

This commitment is to be achieved through a variety of means. Principal amongst them is
finance. Alongside finance, SIDBI provides appropriate support in the form of promotional and
developmental services. SIDBI has been built up as a financially sound, vibrant, forward looking
and technically oriented institution and, it intends to sustain this orientation in future. SIDBI
intends to provide quality services to its clients, devoid of any systemic and procedural
difficulties.

SIDBI, in its operational strategy, emphasises, enhancement in the flow of financial

assistance to SSIs and enhancement in the capabilities of SSIs at all levels, with focus on
adoption of improved and modern technology. The small industries sector in India is dominated
by a large number of small units. These micro-enterprises require special nurturing. SIDBI has
been operating schemes like: Single Window Scheme and Composite Loan Scheme To ensure
that financial assistance is made available to such units on easy terms and with hassle-free
procedures.
 It has been a matter of policy in SIDBI to identify the areas of gaps in credit delivery
system and fill them through devising appropriate new schemes and implementing them. In the
last 9 years, 26 new schemes have been introduced.

A. Development Outlook

The major issues confronting SSIs 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 SSIs. 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.

B. Shareholding:

The entire issued capital of Rs.450 crore has been divided into 45 crore shares of Rs.10 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 the Central Government.
 2.2 REVIEW OF LITERATURE

KOLKATA: Small Industries Development Bank of India said it is reviewing its equity
holding in Bandhan and other financial services firms as part of an exercise to prepare a future
investment plan.

Sidbi holds 8.13 percent in Bandhan Financial Services, the holding firm for Bandhan Bank, and
held another 0.32 percent in the bank itself before the bank’s share sale. Sidbi also holds 8.4 per
cent in RGVN (North East) Microfinance among others.

“We are working on our investment strategy, which will cover treatment of our existing
investments including Bandhan, strategy for future investments, and how to facilitate enhanced
value to our existing shareholders,” Sidbi chairman Mohammad Mustafa told ET. “We will
complete this in a couple of months.”
Sidbi also holds investment in MFIs through its wholly-owned subsidiary Sidbi Trustee Co.
Sidbi has been associated with the MFI sector providing the lenders financial services ranging
from loans, grant and equity.

“We continue to offer equity as also quasi-equity support to MFI ventures through the
government’s India Microfinance Equity Fund scheme. Under the IMEF plan, the development
bank provides Rs 1-3 crore quasi-equity support when MFIs are smaller in size and need equity
to grow. Sidbi was set up in 1990 to meet the financial and developmental needs of the micro,
small and medium enterprise (MSME) sector, which today contributes about 37 per cent to the
nation’s GDP. The MSME sector also contribute.

“While Sidbi started to intervene in both financial and non-financial space to help small-
scale industries, it could not achieve the scale to make a difference,” Mustafa said. “We further
realised that there are enough players in the market to extend finance while data related
interventions can make a lot of difference. We at Sidbi have decided to focus on that,” he added.
 There has been a significant rise in the new borrowers entering the formal credit market,
which has accelerated to about 4 lakh at the end of December 2017 from about 2.7 lakh as on
June 2016, indicating fresh investments being made.

Sidbi is also planning to gain currency in the MSME refinance market. “We are
intervening in the digital space, we have created first successful online loan market place. We
are also working to create an online loan sanction ecosystem. We are trying to re-imagine Sidbi,”
the chairman said.
 2.3 OVERVIEW OF DEVELOPMENT BANKING IN INDIA

The course of development of financial institutions and markets during the post-Independence period was
largely guided by the process of planned development pursued in India with emphasis on mobilization of savings
and channeling investment to meet Plan priorities. At the time of Independence in 1947, India had a fairly well-
developed banking system. The adoption of bank dominated financial development strategy was aimed at
meeting the sector credit needs, particularly of agriculture and industry. Towards this end, the Reserve
Bank concentrated on regulating and developing mechanisms for institution building. The commercial banking
network was expanded to cater to the requirements of general banking and for meeting the short-term working
capital requirements of industry and agriculture. Specialized development financial institutions (DFIs) such as the
IDBI, NABARD, NHB and SIDBI, etc., with majority ownership of the Reserve Bank were set up to meet the
long-term financing requirements of industry and agriculture. To facilitate the growth of these institutions, a
mechanism to provide concessional finance to these institutions was also put in place by the Reserve Bank.

The first development bank in India incorporated immediately after independence in 1948 under the
Industrial Finance Corporation Act as a statutory corporation to pioneer institutional credit to medium and large-
scale. Then after in regular intervals the government started new and different development financial institutions to
attain the different objectives and helpful to five-year plans.

The Financial Institutions in India were set up under the strong control of both central and state
Governments, and the Government utilized these institutions for the achievements in planning and development of
the nation as a whole. The All India Financial Institutions can be classified under four heads according to their
economic importance that are:

 All-India Development Banks

 Specialized Financial Institutions

 Investment Institutions

 State-level institutions

 Other institutions
 CHAPTER 3 : RESEARCH METHODOLOGY

Research methodology is the systematic process dealing with identifying problem,

gathering facts or data, analyzing these data and reaching at certain conclusion or result in the
form of solutions towards the problem concerned or certain generalization for some theoretical
formulation. The research methodology followed for the present study is discussed here in
detailed manner.

3.1 STATEMENT OF PROBLEM:

Uttar Pradesh is a state where the employment problem is most crucial. Small scale
industries are the means to reduce unemployment and achieving economic growth. The
difficulty in getting the adequate and timely finance is a major problem faced by Small scale
sector in Uttar Pradesh. Due to the reason of low capital contribution they are not in a position to
raise the funds by equity from capital market.

Government has developed the network of various public sector financial institutions for
supporting SSIs in Uttar Pradesh such as IDBI, IFCI, ICICI, IIBI, IVCF, ICICI Venture, TFCI,
LIC, UTI, GIC and SFCs etc. SIDBI is one of them established to meet the requirement of Small
scale units. SIDBI not only provides financing facility it also facilitates training and
development.

Several research have been done on the role of SIDBI for boosting the small scale
industries in metropolitan cities of India, but no research was associated with Uttar Pradesh in
terms of SSIs and SIDBI. The present study aims to minimize the gap in existing literature. Such
a study is expected to throw light on the current position of SSIs in Uttar Pradesh and also the
role played by SIDBI for overall development of SSIs in the state.
 3.2 OBJECTIVES:

1. To identify the socio profile of the entrepreneurs of SIDBI aided units.

2. To identify the type, status, level of investment of SIDBI aided units.

3. To evaluate the financing difficulties faced by entrepreneurs of SIDBI aided units.

4. To evaluate the approach of SIDBI towards NPAs (Non performing assets).

5. To assess the improvement in the performance of Small scale industries after

financial assistance from SIDBI.

3.3 SCOPE OF STUDY:

The study of small-scale industries are always been a subject of enormous interest in
research work. An industrial undertaking is defined as a small-scale unit if the investment in
fixed assets in plants and machinery does not exceed Rs. 10 million. In U.P. various types of
Public financial institutions are providing financial assistance to SSIs. SIDBI is one of them who
assists the SSIs by giving financial assistance to them as well as it also provides development
programs to SSIs for their overall growth. The present study is confined –

1. The role of SIDBI with reference to development of SSI in U.P. in the form of finance
(short term loaning).
 3.4 RESEARCH DESIGN:

Research design is a blue print of action in research work. Research design is a

comprehensive plan of the sequence of operations that a researcher intends to carry out to
achieve the desired research objectives. It involves selecting the most appropriate methods and
techniques to solve the problem under investigation. In the present study the exploratory and
descriptive design is adopted due to the nature of the study. Exploratory research is a type of
research which is used when problem has not been clearly defined. It helps to provide insights
into and comprehension of an issue of situation. In this study, the exploratory research includes
literature reviews in order to achieve more detailed information about the research problem. On
the other hand descriptive research, also known as statistical research describes data and
characteristics about the population or phenomenon being studied. In this study, descriptive
study is also taken in order to know the growth of small scale units after getting finance by
SIDBI and other financial institutions. On the basis of the above the two research designs were
adequate for the present study. Thus the study Research design is Exploratory-Cum-Descriptive
in nature.
 CHAPTER 4 : DATA ANALYSIS OF SIDBI.

MISSION STATEMENT

“To empower the Micro, Small and Medium Enterprises (MSMEs) sector with a view to
contributing to the process of economic growth, employment generation and balanced regional
development.”

VISION STATEMENT

“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 shareholder wealth and
highest corporate values through modern technology platform”
 4.1 ORIGIN

SIDBI is the principal Financial institution for the promotion, financing and development
of industry in the Micro, Small and Medium Enterprises (MSME)sector and to co-ordinate the
functions of the institutions engaged in the promotion, financing or developing industry in the
MSME sector and formatters connected therewith or incidental there to Since its inception,
SIDBI has made a historical journey of 20 years, which are replete with many milestones. Two
decades are a short span in the life of a financial institution. But for SIDBI, the journey has been
more eventful and memorable. The setting up of SIDBI primarily as a Refinancing institution
(RFI) coincided with the Great Economic Reform in1991. With these two decades, the Bank
passed through many webs and lows of vicious cycles and economic crisis. Exactly after 10
years, SIDBI became an autonomous financial institution in 2001. In its incessant strive towards
meeting the diverse and developmental needs of the MSME sector, the Bank started providing
direct finance, introduced a number of innovative financial products, reverse factoring
introduced in 1997 being one of them with the objective that no bankable project in the MSME
sector should languish for want of resources and ensure that all deserving needs of potential
MSME entrepreneurs are met seamlessly. SIDBI has also promoted a number of subsidiaries /
associate institutions like SIDBI Venture Capital Ltd. for venture capital, Credit Guarantee Fund
Trust for Micro and Small Enterprises for credit guarantee, SME Rating Agency of India Ltd. for
credit rating, India SME Technology Services Ltd. for technology transfer and India SME Asset
Reconstruction Ltd. for asset reconstruction. Many such innovative institutions had bagged a
number of international awards. The business operation shave also moved on an upward
trajectory. As on December31, 2009, the Bank has made cumulative disbursement of Rs.
1,47,704 crore to the MSME sector. It has always provided the required support to the MSME
sector with the full commitment towards the holistic development of
the sector. SIDBI’s operations have reached out to 216.5 lakh beneficiaries by way of :

1. 214.5 lakh beneficiaries through financial assistance (indirect, direct and micro finance);
2. 2 lakh beneficiaries through Promotional & Developmental support. The journey from a
Refinancing Institution to a Responsible Financial Institution.
 4.2 PRIMARY COLLECTION OF SIDBI.

Financial Assistance

SIDBI has introduced various market driven new schemes to emerge as single window for
meeting the credit and non-credit needs of the MSME sector to make it strong, vibrant
and globally competitive. The schemes are first introduced as pilot projects and after their
successful testing, these schemes are rolled out at the national level. The evolution of various
Refinance and Direct Finance schemes over the last two decades are given in Box 7.3.The brief
highlights of refinance and direct finance schemes are given in the following parameters:
Refinance : Sidbi is Primarily refinancing institute. Its provide the refinance to augment the
resourse position of primary leading institutions like banks, SFCs, SIDCs/SSIDCs, MFIs Etc. so
as them to provide greater flow of credit to MSME Sectors. The Bank is able to access the vast
geographical area of the country as the assistance is channelized through PLI shaving a network
of over 82,000branches across-the-country. The Bank also provides resource support to
institutions / Non-Banking Finance Companies(NBFCs) engaged in financing to large pool of
MSMEs.

The Refinance support is extended for (i) Setting up of new projects and for technology
up gradation. Modernization, diversification, expansion, energy efficiency adoption of clean
production technologies etc. of existing MSMEs (ii) Service sector entities and (iii)
Infrastructure development and up gradation.

Resourse Support : SIDBI provides resource support to institutions / Non- Banking Finance
Companies (NBFCs)engaged in promotion and development of MSME sector to facilitate
channelising of assistance to a large number of MSMEs and infrastructure projects having
linkages to MSMEs.
 Direct Assistance

SIDBI started its direct finance with the object that no bank able project in MSME sector
languishes for want of resources. Accordingly, direct finance is provided to fill in the credit gaps
by way of supplementing and complementing the efforts of the banks/SFCs/MFIs to meet
adequate credit needs of MSME sat affordable rates. It is also undertaken to showcase lending to
the MSME sector is a viable and profitable proposition. Over the years, SIDBI has evolved. itself
as a one-stop institution to meet the various types of credit requirements of the MSME sector by
directly offering tailor-made fund based and non-fund based financial products and services.
Direct finance is channelized through the Bank’s present network of 103 branches all over the
country covering more than600 MSME clusters.

Term Loan Assistance :

Term loans are provided for (i) Setting up of new projects and for technology up gradation/
Modernization ,diversification, expansion ,energy efficiency, adoption of clean production
technologies, etc. Of existing MSMEs (ii) Service sector entities and (iii) Infrastructure
development and up gradation

Working capital work loan :

The objective of the Scheme is to provide term loans to MSMEs to meet the short fall in working
capital including WC margin.

Working capital with IDBI bank :

SIDBI has a strategic arrangement with IDBI Bank to provide Working Capital Limit to its
MSME customers by utilising the banking platform of IDBI bank.

MSME Receivable Finance Scheme :

SIDBI operates the MSME Receivable Finance Scheme (RFS) for MSME sellers / eligible
service providers in respect of sales & services rendered to purchaser companies. Under the
Scheme, SIDBI fixes limits to well-performing purchaser companies and discounts us once bills
of MSMEs / eligible services sector units supplying components, parts, sub-assemblies, services,
etc. so that the MSME / service sector units realise their sale proceeds quickly. This initiative of
reverse factoring addresses the delayed payment issues of MSMEs.
 FINANCING

Auto Rickshaw Financing :

600 CNG Fitted Auto Rickshaws were provided assistance in Chandigarh by Delhi Finance
Corporation(DFC). SIDBI provided refinance to DFC for this clean energy initiative.

Solar lanterns :

Women’s World Banking(FWWB), an MFI was sanctioned assistance of Rs.10 crore for
providing assistance to micro entrepreneurs for Solar Lanterns of 2 watts each.50,000 micro
entrepreneurs are proposed to be covered under the assistance.

Privileged Customer Scheme:

In view of the persistent demand from the existing customers for an open ended credit product
which could be delivered quickly for meeting their unforeseen /emergent business expenditure,
etc. anew scheme viz. Privileged Customer Scheme (PCS)was introduced to provide annual
credit limits to the existing well performing customers of SIDBI for their annual non project
specific investment plans.

Non-fund based Scheme:

SIDBI offers guarantee and Letter of Credit facilities in foreign currency and rupee
to its customers to meet their non-fund based credit requirements.
 SIDBI – Small Industries Development Bank of India & its Functions.

The SIDBI (Small Industries Development Bank of India) is a wholly owned subsidiary of IDBI
(Industrial Development Bank of India), established under the special Act of the Parliament 1988
which became operative from April 2, 1990.

In this article, we cover the following topics:

Finance Facilities Offered by SIDBI

Functions of SIDBI

Benefits of SIDBI

How to apply for the loan through SIDBI

SIDBI was made responsible for administering Small Industries Development Fund and National
Equity Fund that were administered by IDBI before. SIDBI is the Primary Financial Institution
for promoting, developing and financing MSME (Micro, Small and Medium Enterprise) sector.

Besides focussing on the development of the Micro, Small and Medium Enterprise sector, SIDBI
also promotes cleaner production and energy efficiency. SIDBI helps MSMEs in acquiring the
funds they require to grow, market, develop and commercialize their technologies and innovative
products. The bank provides several schemes and also offers financial services and products for
meeting the individual’s requirement of various businesses.
Finance Facilities Offered by SIDBI : Small Industries Development Bank of India, offers the
following facilities to its customers:

1. Direct Finance

SIDBI offers Working Capital Assistance, Term Loan Assistance, Foreign Currency Loan,
Support against Receivables, equity support, Energy Saving scheme for the MSME sector, etc.

2. Indirect Finance

SIDBI offers indirect assistance by providing Refinance to PLIs (Primary Lending Institutions),
comprising of banks, State Level Financial Institutions, etc. with an extensive branch network
across the country. The key objective of the refinancing scheme is to raise the resource position
of Primary Lending Institutions that would ultimately enable the flow of credit to the MSME
sector.

3. Micro Finance

Small Industries Development Bank of India offers microfinance to small businessmen and
entrepreneurs for establishing their business.

Functions of SIDBI (Small Industries Development Bank of India)

1. Small Industries Development Bank of India refinances loans that are extended by the PLIs to
the small-scale industrial units and also offers resources assistance to them

2. It discounts and rediscounts bills

3. It also helps in expanding marketing channels for the products of SSI (Small Scale Industries)
sector both in the domestic as well as international markets

4. It offers services like factoring, leasing etc. to the industrial concerns in the small-scale sector

5. It promotes employment oriented industries particularly in semi-urban areas for creating

employment opportunities and thus checking relocation of people to the urban areas

6. It also initiates steps for modernisation and technological up-gradation of current units
7. It also enables the timely flow of credit for working capital as well as term loans to Small
Scale Industries in cooperation with commercial banks.

Benefits of SIDBI

1. Custom-made

SIDBI policies loans as per the requirements of your businesses. If your requirement doesn’t fall
into the ordinary and usual category, Small Industries Development Bank of India would assist
funding you in the right way.

2. Dedicated Size

Credit and loans are modified as per the size of the business. So, MSMEs could avail different
types of loans custom-made for suiting their business requirement.

3. Attractive Interest Rates

It has a tie-up with several banks and financial institutions world over and could offer
concessional interest rates. The SIDBI has tie-ups with World Bank and the Japan International
Cooperation Agency.

4. Assistance

It not just give provides a loan, it also offers assistance and much-required advice. It’s
relationship managers assist entrepreneurs in making the right decisions and offering assistance
till loan process ends.

5. Security Free

Businesspersons could get up to INR 100 lakhs without providing security.

6. Capital Growth

Without tempering the ownership of a company, the entrepreneurs could acquire adequate capital
for meeting their growth requirements.
7. Equity and Venture Funding

It has a subsidiary known as SIDBI Venture Capital Limited which is wholly owned that offers
growth capital as equity through the venture capital funds which focusses on MSMEs.

8. Subsidies

SIDBI offers various schemes which have concessional interest rates and comfortable terms.
SIDBI has an in-depth knowledge and a wider understanding of schemes and loans available and
could help enterprises in making the best decision for their businesses.

9. Transparency

Its processes and the rate structure are transparent. There aren’t any hidden charges.

How to apply for loan through SIDBI

For processing a loan through Small Industries Development Bank of India, an entrepreneur
would have to go through the below-mentioned process:

Step 1: Recognized consultants empanelled with the SIDBI would prepare the documents
needed. Depending on the requirements and information specified by the MSMEs, the
consultants would prepare a BIM (Basic Information Memorandum). This document would
include all the information related to the rating agencies and banks.

Step 2: The Basic Information Memorandum is approved by MSME entrepreneur. The

accredited consultants would then submit the Basic Information Memorandum to Small
Industries Development Bank of India.

Step 3: In case required, the proposal would be rated by the rating agency which is approved by
the Reserve Bank of India.
Step 4: SIDBI would directly handle the below-mentioned cases:

i. SIDBI would offer equity or quasi-equity to the existing units that are growth-oriented

ii. The bank would finance units which are in the service sector

iii. It would offer credit to MSMEs for Cleaner Production Processes and Energy Efficient.

Step 5: For other cases, the application for the loan would be submitted to the Public-Sector
Banks. SIDBI (Small Industries Development Bank of India) has an MOU (memorandum of
understanding)with the public-sector banks for the issuing loans. Small Industries Development
Bank of India would help the entrepreneur at each stage until the loan is finally processed.
MSMEs stands a better chance of availing the loan in time and also could avoid needless delays.
 4.3 SECONDARY COLLECTION OF SIDBI

Secondary data refers to data which is collected by someone who is someone other than the
user. Common sources of secondary data for social science include censuses, information
collected by government departments, organizational records and data that was originally
collected for other research purposes. Primary data, by contrast, are collected by the investigator
conducting the research.

Secondary data analysis can save time that would otherwise be spent collecting data and,
particularly in the case of quantitative data, can provide larger and higher-quality databases that
would be unfeasible for any individual researcher to collect on their own. In addition, analysts of
social and economic change consider secondary data essential, since it is impossible to conduct a
new survey that can adequately capture past change and/or developments. However, secondary
data analysis can be less useful in marketing research, as data may be outdated or inaccurate.

Secondary data can be obtained from different sources:

 information collected through censuses or government departments like housing, social

security, electoral statistics, tax records
 internet searches or libraries
 progress reports
 ANALYSIS OF PROMOTIONAL AND DEVELOPMENTAL ACTIVITIES OF SIDBI

The Small Industries Development Bank of India provides the following assistance under its
promotional development schemes, which will be highly useful to the development of small-
scale industries in Gujarat.

 Mahila Udhyam Nidhi

 Enterprise Promotion with emphasis on Rural Industrialisation

 Mahila Udhyam Mitra

 Mahila Vikash Nidhi

 Entrepreneurship Development Programme

 Management Development Programme

 Small Industries Management Programme

 Small Skill-Cum-Technology Upgradation Programme

 Technology Upgradation

 Quality and Environment Management

 Fixed Deposit Scheme

It is found that during the period the study the trends in sanctioned and disburse amount by
SIDBI towards promotional and developmental activities shown a increasing trends, which is a
good sign for small scale industries. Under the mahila udyam scheme of SIDBI the trends in
sanctioned and disburse amount shows a fluctuating trends. In mahila vikash nidhi scheme of
SIDBI shows fluctuating trends during the study period in sanctioned and disbursement amount.
SIDBI has also sanctioned sufficient amount of funds under the programme of Quality and
Environmental Programme.
 ANALYSIS OF FINANCIAL POSITION OF SIDBI

As a financial analyst should not be interested in the performance of a business enterprise during
a short period of time because a organization which is financially sound today may eventually
lose its strength in the long period if it suffers prolonged losses. In this chapter financial position
of SIDBI has been analyzed with various angles.

1. The financial strength of SIDBI has been analyzed through Equity Paid Up, Net worth,
Reserve Funds, Capital Employed, Gross Block, Out Standing Portfolio, and Advance / Loans
Funds (%) ratio.

2. During the study period equity paid up capital of SIDBI remains stable.

3. Trends in the reserve surplus of SIDBI have shown an increasing trend during the study
period.

4. The average capital employed in the SIDBI was Rs. 14326.78 during the study period.

5. In the gross block of assets of SIDBI has shown fluctuating trends.

6. Outstanding portfolio of SIDBI has shown decreasing trends during the study period.

7. Advance / Loans Funds (%) ratio of the SIDBI for the study period of 1999-2000 to 2003-05
was always more than 104 percent.

8. For the purpose of analysis in the present study following ratios were used i.e., Return on
Capital Employed, Return on Net Worth, Earning Per Share and Book Value Per Share.

9. The result of analysis indicates during the study period ROCE and RONW has shown
declining trends. The average ROCE and RONW during the study period were 7.1 percent and
5.40 percent.

10. Earning per share of SIDBI has shown decreasing trends in the first four years of study
period and it slightly increase in last year of the study.
11. During the study period book value per share of SIDBI has shown increasing trends in the
first four years of the study period and in last years it remains stable.

12. The analysis of activity of SIDBI has been made through Total Income, Total Income /
Capital Employed (%), Average cost of funds (%), and Margin (%) ratio.

13. The total income trends of SIDBI has shown declining trends during the study period.

14. The average ratio of total income to capital employed ratio of SIDBI was 10.40 percent and
shown declining trends during the study period.

15. The average cost of funds of SIDBI was around 10 percent in the first three years of study
period and in last year it was 6.4 per cent.

16. Margin ratio of SIDBI has also shown declining trend during the study period.

17. The assets quality of SIDBI has been analyzed with the help of Standard Assets as
percentage of Total Assets, Capital to Risk Assets Ratio (%), and Debt-equity ratio.

18. The Standard Assets as percentage of Total Assets ratio of SIDBI has shown declining trends
during the study period and in last year it was 92 percent which indicates the NPA has been
increased during the study period.

19. The average Capital to Risk Assets Ratio of SIDBI was 39.3 percent and shown an increasing
trends during the study period which is a good sign for SIDBI.

20. The debt equity ratio has shown declining trends during the study period.

21. The liquidity and turn over position of SIDBI has been analyzed through current ratio and
loan turnover ratio.

22. The current ratio of SIDBI has been decreased during whole study period but average current
ratio of whole period of SIDBI was 5.09 times indicates a satisfactory position.

23. The average loan turnover ratio of SIDBI was 0.12 times, which was quite stable during the
study period.
 CHAPTER 5 : CONCLUTION

The main objective of SIDBI is to provide financial assistance to all SSIs throughout India through SFC
s and SSIDC s. SIDBIs motive is promoting industrial development in India, it emphasizes on the development
of the small-scale industries not to earn much profits. The maximum shares of profits of SIDBI are transferred to
reserves. It can have more debt capital, hence the large portion of profits are utilized for the payment of interest to
long-term securities. 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.

Case Study on SIDBI “ A Successful Financial Institution in SME Financing”

Worldwide, the wind has been changing in the finance sector in general and banking-investment
sector in particular. Such a panorama teaches us that now, is the time of cooperation rather than
a competition, now it’s a time of convergence rather than cutting each other’s neck over
customers and markets, now it’s a time of consolidation rather than antagonism.

Curing the fatal disease requires the doses of small pills; impressive thoughts come out from the
small brain, similarly, India requires prominence of small and medium enterprises for curing its
problem of low economic growth vis-à-vis developed nations.

To cure the overall disease of lack of appropriate growth of Indian SMEs – Small and Medium
Enterprises, India needs several small pills such as adequate credit delivery to SMEs, better risk
management, technological up gradation of Banks esp. Public Sector Banks, attitudinal change
in Bankers and so on. Among them, the major problem of inadequate financing to SMEs needs
an urgent attention.
Having said this, it is pertinent to mention that Small Industrial Development Bank of India has
achieved landmark results in the domain of small and medium enterprise financing and fulfilling
their credit requirements time to time in various forms such as long term project finance,
working capital finance, bill discounting etc. However considering the level of appetite for credit
facilities of Indian small and medium enterprises, private and public sector banks in India need to
work out an unique and innovative model of financing to this vital sector (SME) of Indian
Economy.

In today’s changing world, retail trading, SME financing, rural credit and overseas operations are
the major growth drivers for Indian banking industry. The scene has changed since the adoption
of financial sector restructuring programme in 1991. The reform in the financial sector in India
along with the overall second generation economic reforms in Indian economy has transformed
the landscape of banking industry and financial institutions. GDP growth in the 10 years after
reforms averaged around 6 %.
With the introduction of the reformse specially in financial sector and successful implementation
of them resulted into the marked improvement in the financial health of the commercial banks
measured in terms of capital adequacy, profitability, asset quality and provisioning for the
doubtful losses.