Skip to main content

SIDBI


SIDBI

SIDBI stands for Small Industries Development Bank of India and as the name says development financial institution for small scale industries. Its headquarters is in Lucknow and has offices all over India. 

History and Activities

Established on April 2nd in the year 1990 under the act of Indian parliament, SIDBI is one of the four financial institutions (Others being EXIM- Export Import Bank, NABARD and NHB) regulated but the central bank RBI (Reserve Bank of India). SIDBI is ranked 30 among the world most development banks by the bankers group of London. SIDBI is indirectly responsible for developing over 7000 products and contributing to around 45% of GDP over the years through the large number of MSMEs spread across the countries. There are approximately over 25 million MSMEs in India. RBI has allotted 10000 crore rupees to SIDBI to facilitate and venture capital start-ups in the year 2015.

SIDBI mainly concentrates on re-finance activities to MSMEs (Micro, small and medium enterprises) also in co-ordinating functions of institutions in similar line of business. The main objective of SIDBI is to uplift the economy by helping micro, small and medium sized enterprises. SIDBI apart from the financial support also takes part in many non-financial activities to regulate the flow of MSMEs. It collaborates with CIBIL to generate the credit worthiness of over a million MSME players by checking their credit repayment capacity. It has also developed the CriSidEx, the first index for the MSMEs. Likewise the SIDBI in collaboration with various authorities frames different policies which will help the small enterprises one way other the other in raising capital and running business. Role of SIDBI is to provide financial assistance for such these enterprises. The objective from the country’s perspective is to provide micro finance and generate mass employment for the citizens across the country.

Role of SIDBI

The SIDBI’s main purpose of existence is to provide refinance facilities for the MSMEs. It also engages in short term lending for the small to medium scale sized industries. For many medium and small enterprises the shortage of money or resource can be the main reason for its hindrance. Even though the business plan is very much feasible and can reap profits in the future, just because of the cost it will incur to reach that point, the enterprise can be forced to shut down. Scheduled banks will also not show interest to credit amount. In such difficult scenarios and for such vision enterprises the SIBI steps in and assists with the required help to run business. Few important roles are listed below

• Infrastructure and direct finances to MSMEs

• Indirect financing through Banks, NBFCs, SFCs and other financing institutions in the country.

• In collaboration with other rating agencies, venture capital, credit guarantee funds, SIDBI launches various programs and policies for MSME’s to benefit from.

• Nodal agency for the government to monitor, regulate and anticipate the MSME sector to bring their words into action.

Objectives of SIDBI

• SIDBI promotes and markets the products developed from MSME sectors directly through various mediums.

• To make MSMEs afford the required and updated technology to be able to compete with big players.

• Help financially by providing capital to small micro enterprises.

• To generate mass employment through micro financing.

• SIDBI co-ordinates with all the small to medium enterprises with their production and help them market the small scale industries.

Functions of SIDBI

• SIDBI refinances the loan provided to MSMEs by the banks and bring its burden down significantly.

• Provided additional finance to banks to promote credit lending for small and medium scale industries.

• SIDBI will discount the outstanding liability bills of MSMEs and provides a cushion of few years to bounce back and run business effectively.

• MSMEs oriented towards exports receive special assistance from SIDBI to encourage and increase exports.

• SIDBI also provides seed capital for start-ups. Soft loans by SIDBI have repayment tenure range from 15-20 years.

• With assistance from other institutions SIDBI explores the scope for SSI in particular areas and also sometimes helps in procurement of raw materials.

• Privilege type of leasing (Equipment leasing) and HP financing are other functionalities of SIDBI.

Services of SIDBI

The SIDBI makes the capital available to the MSME through various channels directly and indirectly. Its main services are as below,

1. Direct loans: Loans with flexible repayment tenure, lower interest rate, loans without collateral are the few types of loans by the SIDBI from which MSMEs can benefit.

2. Promotions: SIDBI promotes the products coming out of small scale industries who cannot afford marketing budget.

3. Indirect Loans: SIDBI increase funds available to the MSMEs in banks and guarantees on behalf of MSMEs.(Example- Single window schemes)

4. Discounts on bills: MSMEs not making good money to meet credit liabilities can reach out to SIDBI and get the bills discounted (conditions apply) and SIDBI also makes sure the MSMEs get discounts on electricity bills.

5. Promotes Exports: SIDBI provides loan capital to export oriented MSMEs to greater extent to promote export of the country.

Benefits and importance of SIDBI

• Attractive and lower interest rate for small industries will encourage the sector to grow and thus create employment.

• Customized loans as per the business requirement to SSIs in a right way is done by SIDBI.

• Range of amount and repayment schedule is provided by SIDBI to SSIs so that they can chose the most suitable loan to run their business.

• Banks will not provide loans to all SSIs. SIDBI provide business loans not only to all enterprises falling under that category but also at a lowered interest rate. 

• No collateral is required for SIDBI loans.

• Venture capital, equity and seed funding to the budding small scale industries.

• Various kinds of subsidies are made available to SSIs and also the whole process is carried out in a transparent way.

CONCLUSION

SIDBI is an entity formed due to act of parliament. The main purpose of this entity is to empower the large number of small scale to medium scale industries and thus boost the economy. There are approximately 5 million MSMEs in India at present. SIDBI acts as a caretaker of the whole sector by providing low interest loans, subsidies, discounts, export assistance and etc. By empowering the sector, the majority of stakeholders which happens to be the common people of country. The growing MSME sector creates millions of jobs to local citizens and boost the country’s GDP. It also helps in promoting and marketing the products produced from SSIs.  Overall SIDBI acts as the guardian and backbone of the MSME sector.


Comments

Post a Comment

Popular posts from this blog

SHAREHOLDER

  SHAREHOLDER A person who legally owns one or more shares of stock in a public or a private corporation. A shareholder can be an individual or an institution. In layman terms a shareholder is the owner of the company. The number of shares he/she holds defines his/her percentage of ownership of the company. The law defines the shareholder only after his/her name or the entity’s name (in case of institution) is mentioned in the company’s register of shareholder or members. Shareholders of a company or the corporation are legally separate from the corporation itself and thus are not liable for the corporation’s liability. Until and unless the shareholder has offered guarantee, he/she has limited liability to the unpaid share price underlying. Shareholder can acquire share either from primary market (during the IPO of the company) and thus provide the capital for the corporation or from the secondary market. Shareholders are considered to be the subset of stakeholders of the com...
Post a Comment
Read more

CLOSED ECONOMY

  CLOSED ECONOMY Closed economy is a type of economy where the import and export of goods and services doesn’t happen. Such economy has no trade activity from outside economics. Closed economy is self-sufficient economy, the sole purpose of the economy is to meet all the domestic consumers’ needs within country’s border. No trade activity is conducted outside the national borders in a closed economy. In practical there are no countries with closed economies at present. Brazil has the closest to the closed economy. It has the least import of goods compared to the countries from rest of the world. It is impossible to meet the all the goods and service demands with in the domestic boundary. With the globalization and technology dependency building and maintaining such economies can be a herculean task. It can be considered that India was a closed economy till 1991 and so are the other countries across the globe. At present it is not quite possible to run a closed economy. The ne...
Post a Comment
Read more

Statement of operations

Statement of operations Company’s overall performance is usually assessed by three financial statement. Balance sheet, cash flow statement are the first two and the last one is known as statement of operations. This is also known as income statement, profit-loss statement or statement of income. The statement of operations is to report the income of the corporation for that particular period. It records the income and expenses due to operations in a standard format accepted broadly. The format is common for all companies from all industries. The standard format and flow of statement of operations is as below. For the organization ABC and for the period, the income statement looks as below. The reporting period income statement can be quarterly, monthly or yearly as in case of other financial statements. How to create statement of operations? Consider a company with net sales of 5 million. The expenses (COGS and Operating expense) for the company are removed from net sales to arrive at ...
Post a Comment
Read more