SIDBI : A review of Small Industrial Bank of India

Overview

SIDBI or Small Industrial Development Bank of India is a primary financial institution responsible for promoting, developing and financing MSMEs (Micro Small and Medium Enterprises). It ensures proper administration of the Small Industries Development fund and National Equity Fund that were administered by IDBI before.

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In addition to this, SIDBI also promotes cleaner energy and energy efficiency.  It is an institution that provides several schemes and offers financial services & products to meet the individual’s requirements of various businesses.

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Facilities provided by SIDBI

Direct finance

SIDBI provides financial assistance by providing direct finance features as given below:

• Working capital assistance
• Term loan assistance
• Foreign currency loan
• Support against receivables
• Equity support scheme for MSME sectors

Indirect finance

SIDBI provides finances to Primary lending institutions that would ultimately enable the MSME sector to get credit. This is given to help these institutions financially. Some of these are:

• Primary lending institutions (PLIs)
• Banks
• State Level financial institutions

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Microfinance

Along with all of this, SIDBI also offers microfinance to small businessmen & entrepreneurs to establish their business from scratch.

Functions of SIDBI

• SIDBI refinances the loan offered that are extended by the SLIs to the small scale industrial units and offers resources to them.
• This institution discounts and rediscounts the bills.
• SIDBI helps the SSI (Small Scale Industries) to expand marketing channels in domestic as well as international markets.
• Along with this, it offers services like factoring, leasing, etc. to the small scale sector industries.
• It puts the relocation of people in check by promoting employment opportunities in semi-urban areas.
• SIDBI also initiates steps for modernization and technological up-gradation of the current units.
• Co-promoting state-level venture funds.
• This institution also promotes the timely flow of credit to the small scale industries in cooperation with small banks.

The process of applying for SIDBI loans

There are mainly 5 steps in the application of loans by SIDBI and these are as follows.

Step 1:

The panel of consultants enrolled with the SIDBI would prepare the documents required for this loan. According to the requirements and information specified, the consultants would prepare BIM (Basic Information Memorandum). This document contains all the information related to rating agencies and banks.

Step 2:

All the information mentioned in the BIM would then be approved by the MSME entrepreneur. Then, this document will be submitted to the SIDBI for further process.

Step 3:

The proposal would then be rated by the rating agency approved by the Reserve Bank of India (in case required).

Step 4:

SIDBI handles the following cases:

• This financial institution offers equity or quasi-equity to the existing units that are growth-oriented
• The bank enables investments in the units which are in the service sector.
• It offers credit for the purpose of cleaner production processes and energy-efficient.

Step 5:

The application will submit for the loan to the Public- sector banks. This financial institution has MOU with the public sector banks for the issuing loans. It would also help the entrepreneur at each stage until the processing of the loan is done. All the MSMEs stand a better chance of availing the loan in time and also could avoid needless delays.

Benefits of SIDBI

Custom-made investments by SIDBI

SIDBI ensures custom-made funding for your business according to the stage of your business. In case your business doesn’t fall in the usual category, you can avail of this option.

Dedicated size

According to the different stages of your business, you may require a loan of different sizes as compared to the ordinary and usual category. Any MSME can acquire the loan that suits their requirements.

Attractive interest rates charged by SIDBI

The institution has tie-ups with different financial institutions like the World Bank, Japan International Cooperation Agency, etc. and thus can provide loans to businesses at concessional rates.

Assistance by SIDBI

This financial institution also provides assistance and much-required advice. The relationship managers assist entrepreneurs in making the right decisions & offering assistance until the loan process ends.

Security free charged by SIDBI

MSME could avail a loan of even Rs. 100 lakhs and not pay any security.

Capital growth ensured by SIDBI

The entrepreneurs needn’t give up their ownership (in the form of equity shares) to attain loans. They could easily attain their capital requirements by availing of this option.

Equity and venture funding

SIDBI has a subsidiary company known as SIDBI venture capital limited. It offers growth capital through venture capital funds that focus on MSMEs.

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Subsidies by SIDBI

The schemes offered by this institution have concessional rates and comfortable terms. So, it has in-depth knowledge and a deeper understanding of schemes and loans and so, helps enterprises in making wise decisions.

Transparency

The interest rate and the process is transparent i.e. there aren’t any involvement of hidden charges.

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