Small Industries Development Bank of India

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(June 2009)

Click [show] on right for more details.[show] Small Industries Development Bank of India ([1]) is an independent financial institution aimed to aid the growth and development of micro, small and medium-scale enterprises in India. Set up on April 2, 1990 through an act of parliament, it was incorporated initially as a wholly owned subsidiary of Industrial Development Bank of India. Current shareholding is widely spread among various state-owned banks, insurance companies and financial institutions. 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 to Rs. 5.00 lakh. It is an apex body[clarification needed] and nodal agency for formulating, coordination and monitoring the policies and programme for promotion and development of small scale industries. SIDBI has also floated several other entities for related activities. Credit Guarantee Fund Trust for Micro and Small Enterprises ([2]) provides guarantees to banks for collateral-free loans extended to SME. SIDBI Venture Capital Ltd.([3]) is a venture capital company focussed at SME. SME Rating Agency of India Ltd. (SMERA - [4]) provides composite ratings to SME.

Contents

1 Provision Of Charter 2 Functions meant to help small scale industries 3 Achievements 4 Role in green finacing 5 References

[edit] Provision Of Charter

SIDBI was established on April 2, 1990. The Charter establishing it, The Small Industries Development Bank of India Act, 1989 envisaged SIDBI to be "the principal financial institution for the promotion, financing and development of industry in the small scale sector and to co-ordinate the functions of the institutions engaged in the promotion and financing or developing industry in the small scale sector and for matters connected therewith or incidental thereto. 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 . 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. 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.

[edit] Functions meant to help small scale industries

1. Refinances loans given to small scale sector by primary lending institutions. 2. Discounts and rediscounts bills relating to the transaction of machinery of the small scale sector. 3. Extends seed capital through specified agencies. 4. Assistance for export of products of small-scale sector. 5. Provides services like leasing and factoring. 6. Give financial support to purchase raw material and the sales of finished products.

[edit] Achievements
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. 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.

[edit] Role in green finacing

There has been an increasing global concern about green and clean environment and SMEs have not been away from its purview. Environmental degradation caused due to industrialization has caught everyones concern and it is realized that steps to protect the environment have to be taken.[1] Its not only just the technology used by SMEs that has been in the focus, but there is also the change in production processes that needs to be made to minimize the energy consumption. Lack of information about clean technology

and lack of awareness about its advantages are the major reasons for SMEs not being able to upgrade the technology.[2] As the apex body for promoting finance and development of SMEs, SIDBI has proactively been working in the area of sustainable development of SME sector. It has been involved in cluster level intervention for modernization and technology evolution. It has also been acting as the key agency for developing government schemes in the area of technology advancement for SMEs. It has been involved in two major ways-[3] 1. Financing for energy efficiency- SIDBI has taken several initiatives to promote lending for green and energy efficient technologies in MSME sector. SIDBI follows focused lending schemes for those who want to upgrade to green technology. SIDBI has provided loans under the JICAscheme to more than 2000 MSMEs with aggregate assistance of more than Rs.800 crore for cleaner production and energy saving. This has lead to establishment of electronic waste recycling facility in E-Parisara Pvt. Ltd. In Bangalore. The advantages from this project has helped more than 100 MSMEs to become compliant with regulatory requirements, reduction in waste treatment cost and reuse & recycling of treated materials. Moreover, Environ Protection & Infrastructure Ltd. In Surat, Gujarat has been assisted by SIDBI to set up Treatment Storage and Disposal Facilities (TSDF) to help create a proper waste-disposal method. Eco Green Solution Systems (P) Ltd. has been assisted for setting up of a Treatment Storage and Disposal Facilities (TSDF) facility for toxic waste. SIDBI has also provided assistance to taxi-drivers in Mumbai to get new Taxis without any collateral security under CGTMSE coverage. A micro-finance institution named Friends of Women's World Banking (FWWB) was also provided assistance of Rs.10 crore for providing Solar Lanterns of 2 watts each to various microentrepreneurs. SIDBI has also signed an MOU with American India Foundation to provide support to low-income groups under Rickshaw-Sangh Programme. Under this, with the help of finance from SIDBI, BMC has been able to provide 500 rickshaws to poor people residing in and around lucknow. 2. Further green growth with development support- SIDBI has entered into a Memorandum of Understanding (MoU) with the Bureau for Energy Efficiency (BEE) for creation of a shelf of energy efficient technologies for 25 MSME clusters. Multi-activitymulti agency MSME Financing and Development Project (MSMEFDP) has also come out with knowledge series publication on energy efficiency in Fruit & Vegetable Processing, Ceramics, Foundry and Engineering clusters to combat the problem of information asymmetry. Thus, clearly, SIDBI has been able to get international best practices in Green Financing. It has visibly been an active change maker for the country focusing extensively on the millennium development goals.
Small Industries Development Bank of India (SIDBI) was established as wholly owned subsidiary of Industrial Development Bank of India (IDBI) under the small Industries Development of India Act 1989. It is the principal institution for promotion, financing and development of industries in the small-scale sector. It also coordinates the functions of institutions engaged in similar activities. For this purpose, SIDBI has taken over the

responsibility of administrating Small Industries Development Fund and National Equity Fund from IDBI. Capital. SIDBI started its operations from April 1990 with an initial authorised capital of Rs. 250 crore, which could be increased to Rs. 1000 crore. It also took over the outstanding portfolio of IDBI relating to small scale sector held under Small Industries Development Fund as on March 31,1990 worth over Rs. 4000 crore.

What are the objectives of SIDBI?

In the setting up of SIDBI, the main purpose of the government was to ensure larger flow of assistance to the small-scale units. To meet this objective, the immediate thrust of the SIDBI was on the following measures: (i) initiating steps for technological upgradation and modernisation of existing units; (ii) expanding the channels for marketing the products of the small scale sector; and (iii) promotion of employment-oriented industries, especially in semi- urban areas to create more employment opportunities and thereby checking migration of population to urban areas.

What are the functions of SIDBI?

SIDBI provides assistance to the small-scale industries sector in the country through the existing banking and other financial institutions, such as, State Financial Corporations, State Industrial Development Corporations, commercial banks, cooperative banks and RRBs. etc. The major functions of SIDBI are given below: (i) It refinances loans and advances provided by the existing lending institutions to the smallscale units. (ii) It discounts and rediscounts bills arising from sale of machinery to and manufactured by small-scale industrial units. (iii) It extends seed capital/soft loan assistance under National Equity Fund, Mahila Udyam Nidhi and Mahila Vikas Nidhi and seed capital schemes. (iv) It grants direct assistance and refinance loans extended by primary lending institutions for financing exports of products manufactured by small-scale units. (v) It provides services like factoring, leasing, etc. to small units. (vi) It extends financial support to State Small Industries Corporations for providing scarce raw materials to and marketing the products of the small-scale units. (vii) It provides financial support to National Small Industries Corporation for providing; leasing, hire purchase and marketing help to the small-scale units.

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