India is an agriculture-based country. Majority of the population living in the rural areas depend on agriculture for a living. For a nation to progress, apart from agriculture, development of small-scale, medium scale and large scale industry is also essential. This resulted in setting up the Small Industries Development Bank of India.
Small Industries Development Bank of India
The Small Industries Development Bank of India popularly known as SIDBI, is an independent financial institution aimed to aid the growth and development of micro, small and medium-scale enterprises in India.
When was the Small Industries Development Bank of India set up?
SIDBI was set up on April 2, 1990, under Indian Parliament Act. It was initially incorporated as a wholly owned subsidiary of Industrial Development Bank of India (IDBI). SIDBI acts as the principal financial institution for the promotion, financing, and development of the Micro, Small and Medium Enterprises (MSME) sector and for the coordination of the functions of the institutions engaged in similar activities. The ownership is held by 30 Government of India owned or controlled institutions.
Where is the headquarters of SIDBI located?
SIDBI is headquartered in Lucknow, Uttar Pradesh.
Main Business of SIDBI
The purpose of setting up SIDBI is to provide refinancing facilities and short-term lending to industries. The primary business domain of SIDBI consists of Micro, Small and Medium Enterprises, which contributes to the national economy regarding production, employment, and exports.
MSME is an essential pillar of Indian economy. It contributes to the growth of Indian economy with an extensive network of around five crore units. It is creating employment opportunities to crores of people across the country by manufacturing more products it is contributing about 45% to manufacturing and about 40% of exports in terms of value and finally adding around 37% of GDP growth per year.
SIDBI was initially acting as a refinancing agency to banks and state level financial institutions for their credit to small industries; now it has expanded its activities, to provide direct credit to small, medium enterprises through its branches in all the significant industrial clusters in India. It is also playing the development role in several ways such as support to micro-finance institutions for capacity building and on-lending.
Mission Of Small Industries Development Bank of India
"To facilitate and strengthen credit flow to MSMEs and address both financial and developmental gaps in the MSME eco-system".
Business Strategy of SIDBI
The principal business strategy of SIDBI is to provide the financial and non-financial assistance in the MSME sector. The financial assistance to MSMEs are provided through
- Indirect / refinance to banks / financial institutions for onward lending to MSMEs
- Direct finance to niche areas like risk capital, sustainable finance, receivable financing, service sector financing, etc.
Products of SIDBI
- Financing Schemes for Sustainable Development
- Growth Capital & Equity Assistance
- Service Sector Assistance
- Receivable Finance Scheme
- Micro and Small Enterprises Refinance Scheme (MSERS)
- Assistance to NBFCs
- SIDBI Foundation for Micro Credit
- Poorest States Inclusive Growth Programme (PSIG)
3. Government Schemes
- Government Subsidy Schemes
- TIFAC- SRIJAN Scheme
Benefits of Small Industries Development Bank of India
- Tailor-made - The loans are designed by SIDBI in such a way that it meets the requirements of the enterprises. If the original categories does not suit one's needs, then SIDBI will always assist in getting funds in the right manner.
- Size - Loans are given to the industries vary and change depending on the size of the enterprise.
- Attractive Rate of Interest - SIDBI has collaborations with banks and financial institutions, and it receives the loan from them at a concessional rate of interest, and the same benefit is passed on to the industries. SIDBI has the tie-up with World Bank, Japan International Co-operative Agency.
- Venture & Equity Funding - SIDBI Venture Capital Limited is a wholly owned subsidiary of SIDBI. It provides capital to the MSMEs sector for growth through equity funding.
- Subsidies - SIDBI helps entrepreneurs to take benefit of various schemes that the government offers at relaxed terms and concessional rates. SIDBI has a good understanding and in-depth knowledge of multiple loans and plans provided by the government. With this experience, it helps MSMEs to take the best decision for their company.
- Transparency - The process and the rate structure is transparent in nature. There are no hidden charges which the companies have to pay.