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Small Industries Development Bank of India

Last Update Date : November 15, 2018

Small Industries Development Bank of India or SIDBI was brought into operations on 2nd April 1990 under the act of the Indian Parliament to promote and uplift the Micro, Small and Medium Enterprises (MSME) sector. Reserve Bank of India is the regulatory for SIDBI. SIDBI assists the other financial institutions like small finance banks, non-banking financial institutions and other banks in providing the loans to the MSME industrial sector. This guide by H&R Block covers the functioning of SIDBI and the process for applying for a loan through the same.

What is SIDBI?

SIDBI was formed under the Department of Financial Services, Ministry of Commerce, and Government of India. For the Financial Year 2017-18, the advances given by SIDBI is approximately Rs 95,300 Cr. which has risen by around 40% as compared to Financial Year 2016-17. The gross non-performing assets were reduced by 0.9%, and the net non-performing assets were reduced by 0.25%.

Objectives and Importance

The objectives of SIDBI are:

  • Promotion and evolution of small-scale industries in the international market.
  • Provision of modern technology for the MSME industries to enhance the quality of the products.
  • Provision of assistance to the small-scale business regarding efficient energy use.
  • Provision of financial aid to the MSME sector.
  • Encouragement of employment from the rural and semi-urban areas.

Functions

The functions of SIDBI are:

  • Providing Finance to the institutions which have financed the MSME Industries
  • Discounting and re-discounting of bills
  • Monetary assistance to micro and small industries for marketing the product in the international market
  • Provision of initial capital to budding entrepreneurs and loan assistance at a concessional rate of interest for the longer duration
  • Non-core services like assistance in setting up the plant and marketing of the same for the small-scale industries
  • Factoring and leasing assistance to set up technologically sound machinery for the MSME industries
  • Provision of venture capital to the upcoming ventures to promote self-employment
  • Improvisation of the departments where the MSME lacks functioning

Benefits

There are a lot of benefits of SIDBI, which is why the government introduced decided to introduce and implement it. These benefits include:

  • Personalised loans of a different amount as per the requirement of the enterprise
  • Subsidised rate of interests to boost the manufacturing sector of the nation
  • Consultation services to the enterprises for development and growth
  • Non-mortgage loans offered to MSME sector
  • Growth loans provided for expansion and investment of the industry
  • Provision of equity capital through Venture Capital Funds

Business Domains

There are two types of assistance provided to the MSME Sector, namely financial and non-financial assistance.

Following are the types of financial assistance provided to the MSME Sector:

  • Working Capital and Risk Capital Loan
  • Business Loan
  • Machinery, Equipment, DG Sets procurement loan
  • Renewal and Enhancement of existing working capital loan
  • Receivables Finance
  • Micro Finance
  • It also provides special facilities to the industries which are dealing with the energy sector and cleaner production techniques

Following are the types of non-financial assistance provided to the MSME Sector:

  • Collaboration with CRISIL providing Crisidex Index to the various industries
  • Consultation Services
  • Skill and Technology Development Programs
  • Promotion of Micro Industries
  • Guidance to Start-ups

Accredited Consultants

Providing consultation services and creating awareness amongst the MSMEs is also a step taken up by the government to obtain the final result. Some of these services consisted of the following:

  • Consultation services for new and existing MSMEs.
  • Create awareness for different financial and non-financial assistance provided for MSME development
  • Create awareness about different government schemes to boost the manufacturing sector for MSMEs.
  • Debt structuring for the loan applicants
  • Preparation of Basic Information Memorandum (BIM) to sanction the loan.
  • Assistance to loan applicants for resolving bank queries.

Process for Loan Application

Following are the steps required to get a loan sanctioned from SIDBI:

  • The applicant has to download the respective application form as per its requirement.
  • According to the information filled in the application form, the accredited consultants by the SIDBI will prepare the Basic Information Memorandum of the enterprise.
  • The concerned official of the enterprise further approves this BIM to submit it to the SIDBI
  • The BIM will be also transferred to a rating agency if required to sanction the aspired loan.
  • After all the approval required loan will be sanctioned to the enterprise.
  • Assistance will also be provided after sanctioning the loan for proper utilisation of funds.
  • The application may be forwarded to the PSU Banks with which SIDBI has MoU to provide financial assistance to certain enterprises.
  • Credit will be provided to the enterprise if it is dealing with the energy sector and cleaner production.

SIDBI is the perfect financial solution to the upcoming and existent Micro Small and Medium Scale Enterprises for their growth and expansion in the domestic as well as international market. SIDBI not only provides finance to these industries but it also assists business doing to boost the manufacturing sector of the nation which is responsible for its economic growth.

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