Small Industries Development Bank of India (SIDBI)

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Context

• Airbus Helicopters has partnered with SIDBI to finance helicopter purchases in India, fostering growth in the aviation sector.

SIDBI Overview:

• The Small Industries Development Bank of India (SIDBI) is a wholly-owned subsidiary of the Industrial Development Bank of India (IDBI).
• Established under a special Act of Parliament in 1988, it became operational on April 2, 1990.

Primary Functions:

• SIDBI administers the Small Industries Development Fund and National Equity Fund, previously managed by IDBI.
• It serves as the primary financial institution for promoting, developing, and financing Micro, Small, and Medium Enterprises (MSMEs).
• Additionally, SIDBI focuses on promoting cleaner production and energy efficiency.

Support for MSMEs:

• SIDBI assists MSMEs in acquiring funds for growth, marketing, development, and commercialization of technologies and innovative products.
• The bank offers various schemes and financial services tailored to meet the diverse needs of businesses.

Finance Facilities Offered by SIDBI:

Direct Finance:

• SIDBI provides Working Capital Assistance, Term Loan Assistance, Foreign Currency Loan, Support against Receivables, equity support, Energy Saving scheme for the MSME sector, etc., through various direct finance loan schemes.

Indirect Finance:

• SIDBI extends indirect assistance by offering Refinance to Primary Lending Institutions (PLIs) such as banks, State Level Financial Institutions, etc., with a wide branch network across the country.
• The primary goal of the refinancing scheme is to bolster the resource position of PLIs, facilitating increased credit flow to the MSME sector.

Micro Finance:

• SIDBI provides microfinance services to small businessmen and entrepreneurs, aiding them in establishing their businesses.

Functions of SIDBI:

• Refinancing: SIDBI refinances loans extended by Primary Lending Institutions (PLIs) to small-scale industrial units, providing crucial resources assistance.
• Bill Discounting: SIDBI discounts and rediscounts bills, facilitating liquidity for small-scale industries.
• Market Expansion: It helps expand marketing channels for products of the Small Scale Industries (SSI) sector, both domestically and internationally.
• Financial Services: SIDBI offers services like factoring, leasing, etc., to industrial concerns in the small-scale sector.
• Promotion of Employment: It promotes employment-oriented industries, particularly in semi-urban areas, to create job opportunities and mitigate urban migration.
• Technological Upgradation: SIDBI initiates steps for the modernization and technological upgradation of existing units in the MSME sector.
• Credit Flow: It ensures timely credit flow for working capital and term loans to Small Scale Industries in collaboration with commercial banks.
• Venture Funding: SIDBI co-promotes state-level venture funds, fostering entrepreneurship and innovation at the regional level.

Benefits of SIDBI:

• Customized Loans: SIDBI tailors loans according to specific business needs, providing assistance even for unconventional requirements.
• Tailored Credit: Credit and loans are adjusted based on the size of the business, ensuring MSMEs can access various types of loans suited to their requirements.
• Competitive Interest Rates: SIDBI offers attractive interest rates through partnerships with global banks and financial institutions like the World Bank and the Japan International Cooperation Agency.
• Comprehensive Assistance: Beyond just providing loans, SIDBI offers guidance and support throughout the loan process, with relationship managers assisting entrepreneurs in making informed decisions.
• Collateral-Free Loans: Entrepreneurs can access loans up to Rs.100 lakhs without providing security, easing financial constraints.
• Capital Infusion: Entrepreneurs can secure capital for growth without diluting company ownership.
• Equity and Venture Funding: Through its subsidiary, SIDBI Venture Capital Limited, it offers equity capital for growth through venture capital funds focusing on MSMEs.
• Subsidized Schemes: SIDBI provides various schemes with concessional interest rates and favorable terms, leveraging its expertise to help enterprises make optimal decisions.
• Transparency: SIDBI maintains transparent processes and rate structures, ensuring no hidden charges for borrowers.

SOURCES:- THE HINDU

PRACTICE QUESTION Q. Which institution administers the Small Industries Development Fund and National Equity Fund? a) Reserve Bank of India (RBI) b) Securities and Exchange Board of India (SEBI) c) Small Industries Development Bank of India (SIDBI) d) Industrial Development Bank of India (IDBI) Answer: c) Small Industries Development Bank of India (SIDBI)