The SIDBI (Small Industries Development Bank of India) is a wholly owned subsidiary of IDBI (Industrial Development Bank of India), established under the special Act of the Parliament 1988 which became operative from April 2, 1990. SIDBI was made responsible for administering Small Industries Development Fund and National Equity Fund that were administered by IDBI before. SIDBI is the Primary Financial Institution for promoting, developing and financing MSME (Micro, Small and Medium Enterprise) sector.
Besides focussing on the development of the Micro, Small and Medium Enterprise sector, SIDBI also promotes cleaner production and energy efficiency. SIDBI helps MSMEs in acquiring the funds they require to grow, market, develop and commercialize their technologies and innovative products. The bank provides several schemes and also offers financial services and products for meeting the individual’s requirement of various businesses.
Finance Facilities Offered by SIDBI
SIDBI offers the following facilities to its customers:
- Direct Finance: SIDBI offers Working Capital Assistance, Term Loan Assistance, Foreign Currency Loan, Support against Receivables, equity support, Energy Saving scheme for MSME sector, etc.
- Indirect Finance: SIDBI offers indirect assistance by providing Refinance to PLIs (Primary Lending Institutions), comprising of banks, State Level Financial Institutions, etc. with an extensive branch network across the country. The key objective of the refinancing scheme is to raise the resource position of Primary Lending Institutions that would ultimately enable the flow of credit to the MSME sector.
- Micro Finance: SIDBI offers microfinance to small businessmen and entrepreneurs for establishing their business.
Functions of SIDBI (Small Industries Development Bank of India)
- Small Industries Development Bank of India refinances loans that are extended by the PLIs to the small-scale industrial units and also offers resources assistance to them.
- It discounts and rediscounts bills
- It also helps in expanding marketing channels for the products of SSI (Small Scale Industries) sector both in the domestic as well as international markets.
- It offers services like factoring, leasing etc. to the industrial concerns in the small-scale sector.
- It promotes employment oriented industries particularly in semi-urban areas for creating employment opportunities and thus checking relocation of people to the urban areas.
- It also initiates steps for modernisation and technological up-gradation of current units.
- It also enables timely flow of credit for working capital as well as term loans to Small Scale Industries in cooperation with commercial banks.
- It also co-promotes state level venture funds.
Benefits of SIDBI
- Custom-made: SIDBI policies loans as per the requirements of your businesses. If your requirement doesn’t fall into the ordinary and usual category, SIDBI would assist funding you in the right way.
- Dedicated Size : Credit and loans are modified as per the size of the business. So, MSMEs could avail different types of loans custom-made for suiting their business requirement.
- Attractive Interest Rates: It has a tie-up with several banks and financial institutions world over and could offer concessional interest rates. The SIDBI has tie-ups with World Bank and the Japan International Cooperation Agency.
- Assistance: It not just give provides a loan, it also offers assistance and much-required advice. It’s relationship managers assist entrepreneurs in making the right decisions and offering assistance till loan process ends.
- Security Free: Businesspersons could get up to INR 100 lakhs without providing security.
- Capital Growth: Without tempering the ownership of a company, the entrepreneurs could acquire adequate capital for meeting their growth requirements.
- Equity and Venture Funding: It has a subsidiary known as SIDBI Venture Capital Limited which is wholly owned that offers growth capital as equity through the venture capital funds which focusses on MSMEs.
- Subsidies: SIDBI offers various schemes which have concessional interest rates and comfortable terms. SIDBI has an in-depth knowledge and a wider understanding of schemes and loans available and could help enterprises in making the best decision for their businesses.
- Transparency: Its processes and the rate structure are transparent. There aren’t any hidden charges.
How to apply for loan through SIDBI
For processing a loan through SIDBI, an entrepreneur would have to go through the below-mentioned process:
- Step 1: Recognized consultants empanelled with the SIDBI would prepare the documents needed. Depending on the requirements and information specified by the MSMEs, the consultants would prepare a BIM (Basic Information Memorandum). This document would include all the information related to the rating agencies and banks.
- Step 2: The Basic Information Memorandum is approved by MSME entrepreneur. The accredited consultants would then submit the Basic Information Memorandum to SIDBI.
- Step 3: In case required, the proposal would be rated by the rating agency which is approved by the Reserve Bank of India.
- Step 4: SIDBI would directly handle the below-mentioned cases:
a) SIDBI would offer equity or quasi-equity to the existing units that are growth oriented
b) The bank would finance units which are in the service sector
c) It would offer credit to MSMEs for Cleaner Production Processes and Energy Efficient.
- Step 5: For other case, the application for the loan would be submitted to the Public-Sector Banks. SIDBI (Small Industries Development Bank of India) has an MOU (memorandum of understanding) with the public-sector banks for the issuing loans. SIDBI would help the entrepreneur at each stage till the loan is finally processed. MSMEs stands a better chance of availing the loan in time and also could avoid needless delays.