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October 8, 2013

SIDBI NOTES Objectives and Functions

Small Industries Development Bank of India 

(SIDBI) - Objectives and Functions
The Small Industries Development Bank of India (SIDBI in short) was established in the year 1990 (Date : 2nd April 1990) under the Small Industries Development Bank of India Act 1989 as a subsidiary of Industrial Development Bank of India.It is the principal financial institution for promotion, financing and development of small, tiny and cottage sector. Originally, it was a refinancing organization. But today, it finances on its own. At present it has grown into a multifaceted organization offering a seamless chain of financial services.


Capital :
The authorized capital of SIDBI is Rs. 250 crores which would be enhanced upto Rs. 1000 Crore. It also took over the outstanding portfolio of IDBI relating to small scale sector held under Small Industries Development Fund as on 31st March 1990 worth over Rs. 4000 crore.

Objectives :
Technological Up-gradation : Initiating steps for technological up-gradation and modernization of existing units.

Market Expansion : Expanding the channels for marketing the products of the small scale sector.
Employment Oriented Industries : Promotion of employment oriented industries, especially in semi-urban areas to create more employment opportunities and thereby checking migration of population to urban areas.
Co-ordination of Activities : To co-ordinate the functions of institutions engaged in similar activities.

Functions / Schemes :Following are the major functions of SIDBI
Refinance : It refinances loans and advances provided by the existing lending institutions to the small scale units.

Discounting Bills : It discounts and re-discounts bills arising from sale of machinery to and manufactured by small scale industrial units.

Seed Capital / Soft Loan : It extends seed capital / soft loan assistance under National Equity Fund, Mahila Udyam Nidhi and Mahila Vikas Nidhi and seed capital schemes.

Refinance for Exports : It grants direct assistance and refinance loans extended by primary lending institutions for financing exports of products manufactured by small scale units.

Factoring Services : It provide services like factoring, leasing, etc, to small units.
Financial Support to SSICs : It extends financial support to State Small Industries Corporation for providing scare raw materials to and marketing the products of the small scale units.

Assistance to NSIC : It provides financial support to National Small Industries Corporation for providing, leasing, hire-purchase and marketing help to the small scale units.
Co-promotes State Level Venture Funds : SIDBI Co-Promotes state level venture funds in association with respective state government.

Setting Up of Incubation Centers : SIDBI takes initiative for setting up of incubation centers under its National Programme for Innovation and Incubation for Small Industries with a view to harnessing the entrepreneurial talents.

Financing Projects Relating to Transport Health : SIDBI finances projects relating to transport, health care and tourism sectors and also to the professional and self-employed persons setting up small-sized professional ventures.

Promotional Role of SIDBI :SIDBI plays a key role in implementation of government policies and initiatives for the sector. It facilitates creation of an environment for self-sustaining and growing SSI units. Some of the institutions SIDBI that promoted includes :
  • SIDBI Venture Capital Ltd.
  • Credit Guarantee Fund Trust for Small Industries.
  • Technology Bureau for Small Enterprises.
  • SIDBI Foundation for Micro Credit.
Performance and Progress :
  • SIDBI retained its position in the top 30 Development Banks of the World in the latest ranking of The Banker, London (25th Rank).
  • The cumulative sanctions and disbursements of SIDBI since its inception stood at Rs. 75,255 Crore and Rs. 52,312 crore respectively during financial year 2002.
  • The aggregate sanctions of SIDBI during financial year 2002 amounted to Rs. 9.025 crore as against Rs. 10,821 crore in financial year 2001.
  • As regards financial performance, the profit before tax in financial year 2002 stood at Rs. 405 crore as against Rs. 477 crore in the previous year.
  • Disbursements were also lower at Rs. 5,919 crore as against Rs. 6,441 crore in previous year. 
  • SIDBI has been permitted to raise finances upto Rs. 2,730 crore the year 2013 onward by the Reserve Bank of India.
Challenges
The coming years would be crucial for SIDBI. The major challenges includes,
  • The accelerated pace of deregulation of financial sector.
  • Softer interest rate.
  • Expected decline in availment of refinance by banks which, hitherto formed major chunk of the bank's business.

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