Small industrial Development Bank of India (SIDBI) is a development financial institution in India, headquartered at Lucknow and having its offices all over the country. Its purpose is to provide refinance facilities and short-term lending to industries, and serves as the principal financial institution in the Micro, Small and Medium Enterprises (MSME) sector. SIDBI also coordinates the functions of institutions engaged in similar activities. It was established on 2 April 1990, through an Act of Parliament. It is headquartered in Lucknow. SIDBI operates under the Department of Financial Services, Government of India.
SIDBI is one of the four All India Financial Institutions regulated and supervised by the Reserve Bank of India; other three are India Exim Bank, NABARD and NHB. But recently NHB came under government control by taking more than 51% stake. They play a statutory role in the financial markets through credit extension and refinancing operation activities and cater to the long-term financing needs of the industrial sector.
SIDBI is active in the development of Micro Finance Institutions through SIDBI Foundation for Micro Credit, and assists in extending microfinance through the Micro Finance Institution (MFI) route. Its promotion & development program focuses on rural enterprises promotion and entrepreneurship development.
In order to increase and support money supply to the MSE sector, it operates a refinance program known as Institutional Finance program. Under this program, SIDBI extends Term Loan assistance to Banks, Small Finance Banks and Non-Banking Financial Companies. Besides the refinance operations, SIDBI also lends directly to MSMEs.
State Bank of India is the largest individual shareholder of SIDBI with holding of 16.73% shares, followed by Government of India and Life Insurance Corporation of India.
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.
SIDBI has floated several other entities for related activities, including:
- SIDBI Venture Capital Limited (SVCL): For providing Venture Capital (VC) assistance to MSMEs;
- Micro Units Development & Refinance Agency (MUDRA): For ‘funding the unfunded’ micro enterprises in the country;
- Receivable Exchange of India Ltd. (RXIL) to enable faster realisation of receivables by MSMEs;
- SMERA Ratings Limited (SMERA): For credit rating of MSMEs, renamed as Acuite Ratings & Research Limited.
- India SME Technology Services Ltd (ISTSL): For technology advisory and consultancy services and
- India SME Asset Reconstruction Company Ltd. (ISARC) for speedier resolution of Non-Performing Assets (NPA) in the MSME sector.
Benefits of SIDBI
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.
- 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.
- 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.
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.
- Security Free
Businesspersons could get up to INR 100 lakhs without providing security.
- Capital Growth
Without tempering the ownership of a company, the entrepreneurs could acquire adequate capital for meeting their growth requirements.
- 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.
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.
Its processes and the rate structure are transparent. There aren’t any hidden charges.
Functions of SIDBI (Small Industries Development Bank of India)
- 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
- It discounts and rediscounts bills
- 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
- It offers services like factoring, leasing etc. to the industrial concerns in the small-scale sector
- It promotes employment-oriented industries particularly in semi-urban areas for creating employment opportunities and thus checking relocation of people to the urban areas
- It also initiates steps for modernisation and technological up-gradation of current units
- 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
- It also co-promotes state level venture funds
Finance Facilities Offered by SIDBI
Small Industries Development Bank of India, offers the following facilities to its customers:
- 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.
- 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.
- Micro Finance
Small Industries Development Bank of India offers microfinance to small businessmen and entrepreneurs for establishing their business.