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Small Industries Development Bank of India By A Special Correspondent

Small Industries Development Bank of India (SIDBI), set up on April 2, 1990 under an Act of Indian Parliament, is the Principal Financial Institution for the Promotion, Financing and Development of the Micro, Small and Medium Enterprise (MSME) sector and for Co-ordination of the functions of the institutions engaged in similar activities. Financial support to MSMEs is provided by way of (a) refinance to eligible Primary Lending Institutions (PLIs), such as, banks, State Financial Corporations (SFCs) for onward lending to MSMEs and (b) direct assistance in the niche areas like risk capital/equity, sustainable finance, factoring & reverse factoring, service sector financing, etc.  These financial support to MSMEs is channelised through the Bank's network of 82 branches.  By this way, SIDBI would be complementing and supplementing efforts of banks in meeting diverse credit needs of MSMEs. As on September 30, 2013, SIDBI has made a cumulative disbursements of over ` 3.04 lakh crore benefitting more than 32.8 million persons.

Indirect Finance

The details of indirect assistance extended by SIDBI is discussed below:

The Bank is primarily a refinancing Institution.  Refinance constitutes around 80% of the Bank’s portfolio as on September 30, 2013.    It provides refinance support to more than 900 Primary Lending Institutions (PLIs) having a combined network of over 90,000 branches. Refinance support is extended for

Setting up of new projects and for technology upgradation/modernisation, diversification, expansion, rehabilitation, energy efficiency, adoption of clean production technologies, etc. of existing MSMEs

(ii)  Service sector entities and

(iii)  Infrastructure development and upgradation.  Besides, SIDBI also provides resource support to MSME focused NBFCs against their lending to MSMEs.

Micro Finance:
SIDBI’s micro finance serves as a potent tool of inclusive growth and attainment of Millennium Development Goals by catering to the bottom-of-the-pyramid sections of the society. In that respect, SIDBI works with and through a large number of Micro Finance Institutions (MFIs) who have been nurtured, incubated and strengthened through a comprehensive range of financial and non-financial assistance. Responsible Lending has been one of the top priorities of the Bank. As part of its responsible finance initiative, SIDBI has created a Lenders’ Forum comprising key MFI Funders with a view to promote cooperation among MFI lenders for leveraging support to MFIs. SIDBI has developed Code of Conduct Assessment Tool, which applies to providing credit services, recovery of credit, collection of thrift etc, for MFIs to assess their degree of adherence to the voluntary microfinance Code of Conduct formulated by the MFIs. SIDBI has developed in line with the MIX Market, which is a global, web-based, microfinance information platform, a market tailored for India, i.e. the India Microfinance Platform (IMFP) - to provide and disseminate valuable information on the Indian MFIs. SIDBI has partnered with ACCION International and is supporting the Smart Campaign, which is a global effort to embed a set of Client Protection Principles (CPPs) amongst MFIs.

Direct Finance

SIDBI provides direct credit to MSMEs mainly to supplement and complement the efforts of banks and FIs in providing credit to the MSME sector, besides continuing with the on-going refinance support to banks/FIs,.  Focus of direct lending is mainly on the areas where banks are not strongly present, where gaps exist or in clusters or in niche areas through product and process innovations.  Some of the major financing schemes of SIDBI are:

Sustainable Finance:
As a part of its Green initiative, SIDBI has formulated certain specialized loan schemes to promote energy efficiency, environment protection and improving social standards in the MSME sector.  With a view to promoting energy saving and facilitate adoption of clean production technologies in MSMEs, SIDBI has devised special schemes for providing assistance for investment in Energy Efficiency Projects and Cleaner Production Options to MSMEs, under which assistance is provided at concessional terms.

Addressing Delayed Payments:
In order to help the MSMEs for quicker realization of their receivables, SIDBI fixes limits to well-performing purchaser companies and discounts usance bills of MSMEs / eligible service sector units supplying components, parts, sub-assemblies, services, etc. so that the MSME / service sector units realise their sale proceeds quickly. SIDBI also offers invoice discounting facilities to the MSME suppliers of purchaser companies.

Venture Capital:
SIDBI’s wholly owned subsidiary SIDBI Venture Capital Ltd. (SVCL) is providing venture capital to emerging sectors, such as, life sciences, biotechnology, pharmaceuticals, engineering and information technology. SIDBI also offers special financial assistance to bridge the gap between the two chief sources of finance viz. bank loans (senior debt) and promoter’s capital. SIDBI offers this assistance in form of mezzanine/ convertible instruments, subordinated debt and equity (in deserving cases). This quasi-assistance is collateral free, has higher moratorium on repayment and a flexible structuring.


Information dissemination:
SIDBI has been consistently addressing the information gaps by ensuring availability of relevant  information to MSMEs. In order to address the information gap, SIDBI has set up a website www.smallB.in.  The website would guide the youth on,

(i)  awareness, understanding and identification and choosing of the business opportunities that exist,   

(ii)  understanding the basics of finance and regulatory aspects,

(iii)  preparation of business plan and detailed project report,

(iv)  how to incorporate business in India and (v) attending to various requirements of Banks and Financial Institutions.

Credit Advisory:
In order to provide a number of free escort services to MSMEs like guiding new / existing entrepreneurs regarding availability of schemes of commercial banks, government subsidies / benefits, providing borrowers with debt counselling, answering queries raised by banks, etc., SIDBI has set up 306 Credit Advisory Centres (CACs) in as many clusters in partnership with cluster level industry associations. More than 4,800 MSME units have been contacted by the CACs, upto September 30, 2013.

Loan Facilitation:
SIDBI provides loan facilitation/syndication to MSMEs to help them avail credit from banks/FIs. This is a validated model which is expected to go a long way in facilitating access to credit by MSMEs. Loan Syndication system was launched on January 19, 2013. MOU entered with 8 Banks, 7 rating agencies and 235 ACs appointed after a due screening. Initiated work in connection with software required and is at RFP stage.

Capacity building of smaller banks:
Regional Rural Banks (RRBs) / Urban Cooperative Banks (UCBs) / District Central Cooperative Banks (DCCBs) are well suited to meet last mile credit requirement of mostly micro enterprises.  In order to enable these banks to purvey credit to MSMEs, SIDBI is extending capacity building training support to these institutions for handling micro enterprises loans (MEL). The assistance will be in the areas of free access to software on Downscaling Methodology developed for lending to micro enterprises.

Financial Inclusion and women’s empowerment:
Department for International Development (DFID), UK sponsored Poorest States Inclusive Growth (PSIG) Programme (Samridhi Programme) with a budget of GBP 24.23 million was awarded to SIDBI through a process of global bidding. The programme (duration of 6 years) shall improve access for poor men and women to a variety of financial services in the 4 low income states (Bihar, Orissa, Madhya Pradesh and Uttar Pradesh).

6. Other developmental services to promote and strengthen enterprises through select programmes like:

Micro Enterprises creation:
SIDBI has developed a unique performance linked Micro Enterprises Promotion Programme (MEPP) which aims at promoting viable rural enterprises leading to employment generation in rural areas. MEPP was implemented in more than 121 districts in 24 States. Cumulatively, more than 38,000 enterprises have been promoted. These enterprises have provided employment to over 1.05 lakh persons, mostly in rural areas.

Entrepreneurship and Skill development:
Skill development and entrepreneurship development are provided through reputed institutions throughout the country, with special emphasis on women, weaker section, specific industry groups/service sector. So far we have supported more than 5000 such programmes benefitting more  than 1.25 lakh persons. 

Cluster Development:
SIDBI has adopted cluster based approach for providing credit and non-credit support to the MSME sector. Under cluster development approach, SIDBI provides various Business Development Services (BDS), such as, new technologies, use of IT, skill development, energy efficiency, marketing, etc. 

SIDBI has benefitted the MSME sector through its Promotional and Developmental activities by setting up of over 1 lakh enterprises, which generated employment of around 3 lakh and benefitting around 4 lakh persons.

SIDBI is the Nodal Agency for implementation of some of the schemes of the Government of  India  (GoI)  for  encouraging  implementation  of technology  upgradation  and  modernisation  in  the  MSME  sector. SIDBI provides Nodal Agency services for implementation of Credit Linked Capital Subsidy Scheme and Technology and Quality Upgradation Programme (Ministry of MSME), Technology Upgradation Fund Scheme for Textile Industry (TUFS) (Ministry of Textiles), Integrated Development of Leather Sector Scheme (IDLSS) (Ministry of Commerce & Industry) and Scheme of Technology Upgradation of Food Processing Industries (Ministry of Food Processing Industries).

SIDBI Venture Capital Limited: SIDBI Venture Capital Ltd. (SVCL), a subsidiary of  SIDBI set up in July,1999, is an asset management  company, presently managing two venture capital funds, viz. the National Venture Fund for Software  and Information Technology Industry (NFSIT) and  the SME Growth Fund (SGF) for providing venture capital  assistance  to  knowledge  based  MSMEs,  especially in the areas of life  sciences,  clean  technologies,  information technology, bio-technology, etc. Till March 31, 2013, a total of ` 540 crore has been disbursed under the two funds.  SVCL has launched its third fund viz., India Opportunities Fund. The fund has done a final closure in April 2012 and has a corpus of `600 crore. As of September 30, 2013, IOF has made commitments worth `129 crore in 12 companies.

DFID, UK has identified SVCL as the investment manager to manage a VC fund titled Samridhi Fund of GBP 35 million. The primary investment focus of the fund will be early and growth stage investments in companies that are economically viable, provide access to markets for the poor, are socially relevant and impact the poor as producers / consumers and/or employees and have economic impact, with target beneficiaries in the 8 poorer states of India viz. Bihar, Madhya Pradesh, Odisha, Uttar Pradesh, Rajasthan, Jharkhand, Chhattisgarh and West Bengal.

Credit Guarantee Fund Trust for Micro and Small Enterprises:
In order to encourage  banks  to  lend  more  to  this  sector,  Government of India and SIDBI have set up the  Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) in July 2000, to provide credit guarantee support to collateral free / third-party guarantee free loans upto ` 100 lakh extended by banks and lending institutions for micro and small enterprises (MSEs). Cumulatively, as on September 30, 2013, 12.65 lakh guarantees (97% for loans below ` 25 lakh) for an amount of ` 61,947 crore have been approved under CGS.  Out of this 12.33 lakh guarantees, 2.20 lakh, 9 lakh, 8.9 lakh guarantees were provided to enterprises promoted by women, SC/ST and Minority, respectively.

SME Rating Agency of India Ltd.:
SIDBI,  alongwith  Dun  &  Bradstreet  (D&B)  and  several Public  and Private Sector  banks, has  set  up  the  SME  Rating  Agency of India Ltd. (SMERA) in September 2005, as an MSME dedicated third-party rating agency to  provide  comprehensive,  transparent  ratings to MSMEs.   SMERA has achieved considerable success in rating over 23,100 MSMEs, of which Micro and Small Enterprises constitute more than 98%, as on end September 30, 2013.

India SME Asset Reconstruction Company Ltd.:
India  SME  Asset  Reconstruction  Company  Ltd.  (ISARC) is the country's first MSME focused Asset  Reconstruction  Company  striving  for  speedier resolution  of  non-performing  assets (NPA)  by unlocking the idle NPAs for productive purposes  which would facilitate greater flow of  credit from the banking sector to the MSMEs.  Set up in April 2008, ISARC's objective is to acquire non-performing assets (NPAs) and to resolve them, through its innovative mechanisms, with a special focus on the NPAs of MSME sector.  As on September 30, 2013, ISARC has assets under management of over 640 crore.

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