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|Small Industries Development Bank of India: An Overview||By S. Ramakrishnan, Regional Head, SIDBI, Kolkata|
Small Industries Development Bank of India (SIDBI), set up on April 2, 1990 under an Act of Parliament, presently acts as the Principal Financial Institution for the Promotion, Financing and Development of the Micro, Small and Medium Enterprise (MSME) sector and also co-ordinates the functions of the institutions engaged in similar activities. Presently, the Bank provides refinance support through a network of eligible member lending institutions for onward lending to MSMEs and direct assistance is channelised through the Bank’s Branch Offices spread across the country. Besides, SIDBI extends financial assistance in the form of loans, grants, equity and quasi-equity to Non Government Organisations (NGOs) / Micro Finance Institutions (MFIs) for on-lending to micro enterprises and economically weaker sections of the society, enabling them to take up income generating activities on a sustainable basis.
SIDBI has been financing various manufacturing and service sector activities under SIDBI Act, MSMED Act and under various approvals received from Board/ Govt. of India over the years. However, to have better clarity on the activities being financed, the major thrust areas of direct financing of SIDBI may be stated as follows:
In order to meet the risk capital requirements of MSMEs, especially those involving innovations and new technologies, SIDBI provides Risk Capital assistance to MSMEs in the form of equity, preference capital, optionally convertible debenture, optionally convertible debt, sub-ordinated debt, etc., directly as well as through venture capital funds.
Secured Business Loan
The objective of the Scheme is to provide fast dispensation of credit to MSMEs for planned or unplanned requirements. The assistance is in the nature of term loan for any business related expenditure on the strength of the collateral security and repayment capacity based on current operations / cash flows.
Asset Light Scheme
Several service sector businesses/projects do not have / create immovable assets and they generally operate from leased premises. Such proposals may not meet the Fixed Asset Coverage Ratio (FACR) norms of asset backed assistance to service sector entities. SIDBI will assist such businesses selectively with i) more stringent eligibility criterion, ii) lower Debt Equity Ratio (DER) and iii) by exploring debt service comforts through free cash flow streams, wherever possible.
GEMS (Growth Capital and Equity Assistance Scheme for MSMEs)
To provide growth capital to deserving MSMEs for:
Responsible Micro Finance
Responsible Lending has been one of the top priorities of the Bank and SIDBI’s endeavours on spearheading the issue of responsible finance amongst the assisted MFIs was initiated much before the sectoral setback seen in Andhra Pradesh in the later half of 2010. As part of its responsible finance initiative, SIDBI has created a Lenders’ Forum, comprising key MFI lenders, with a view to promoting cooperation among MFI lenders for leveraging support to MFIs across the geography to promote more responsible lending practices. Pursuant to the initiatives of SIDBI, regional chapters of Lenders’ Forum have been set up for better co-ordination amongst the lenders and closer interaction with the MFIs.
SIDBI has developed a Code of Conduct Assessment Tool, which applies to providing credit services, recovery of credit, collection of thrift etc., by MFIs to assess their degree of adherence to the voluntary Microfinance Code of Conduct adopted by the MFIs. SIDBI has also partnered with ACCION International and is supporting Smart Campaign, which is a global effort to embed a set of Client Protection Principles (CPPs), viz., - awareness about client protection, develop, disseminate and assist MFIs to implement best practices and create processes to certify MFIs as pro-client and has undertaken the following activities, viz., educating MFIs on Client Protection Principles, conducting Client Protection Assessments and Capacity Building and Strengthening Client Protection amongst assisted MFIs under the SIDBI-Smart Campaign Partnership. These initiatives are in line with the Responsible Lending agenda adopted, practiced and advocated by SIDBI and efforts are on to further mainstream these initiatives.
SIDBI AS NODAL AGENCY FOR GOVERNMENT SCHEMES
SIDBI extends Nodal Agency services to the Government of India for schemes sponsored by various Ministries for encouraging implementation of modernisation and technology upgradation projects by manufacturing units in the MSME sector, viz.,
SUBSIDIARIES / ASSOCIATES:
SIDBI has facilitated setting up of the following subsidiaries/ associates:
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