Small Industries Development Bank of India (SIDBI) was set up, by an Act of Parliament, as an apex institution for promotion, financing and development of industries in the small-scale sector and for co-ordinating the functions of other institutions engaged in similar activities. SIDBI is a wholly owned subsidiary of Industrial Development Bank of India (IDBI). It commenced operations on April 2, 1990.

SIDBI under the Charter has, inter alia, been assigned the task of being the main purveyor of term finance to the small scale in the country. All projects in the small scale as also service sector industries including tourism related activities are normally eligible for assistance. The minimum promoter’s contribution prescribed under the schemes generally varies between 10% and 33.3%. The debt-equity ratio up to 3:1 is normally applicable in respect of loan amount up to Rs.10 lakh and up to 2:1 for loans above Rs.10 lakhs. Interest rate for most activities is related to the size of the loan under various schemes of assistance and is presently kept within a band of 14% to 17.5%. Repayment period for the term loan is fixed after taking into account the profitability and debt service capacity of the project, but up to a maximum period of 10 years with initial moratorium period of maximum 2 years.

SIDBI’s assistance is mainly through three routes, viz (1) Indirect Assistance (II) Direct Assistance and (III) Development and Support Services.

  Indirect assistance, namely refinance and bills rediscounting is channelised by SIDBI through a network of 88Primary
    Lending Institutions (PLI’s) including banks and State Financial Corporations, which have over 65,000 outlets. SIDBI has its
    own network of 38 offices (5 Regional Offices and 33 Branch Offices) in India to dispense direct assistance under several
    tailor made schemes as also to administer its assistance schemes.

SIDBI Refinance is granted against loans granted by PLI’s for new projects and for expansion, technology up gradation, modernization, quality promotion, diversification and rehabilitation of existing units. Loans sanctioned by PLI’s to small road transport operators; qualified professionals for self- employment, small hospitals and to promote hotels and tourism related activities are refinanced. There are a few schemes tailor made to meet the requirements of village and timy industries. For example, under composite loan scheme, loan not exceeding Rs.2 lakh is available for equipment/work shed and or working capital to village, cottage and tiny industries as well as to ST/SC and physically handicapped entrepreneurs, without insisting on the promoter’s contribution.

Another special scheme is the National Equity Fund Scheme (NEF). Under NEF, interest free soft loan of 25% of project cost is provided to new and existing tiny enterprises including service industries (except Road Transport operators) with investment up to Rs.10 lakh, to meet gap in equity. Similar scheme is also operated for Women Entrepreneurs under Mahila Udyoga Nidhi.

  Direct assistance is extended to select small scale and services sector industries under Project Finance Scheme (where
    project cost should be not less than Rs.150 lakh), Venture Capital Scheme (need Based), Scheme for financing activities
    (including Intangible assets) relating to marketing of SSI products (loan not below Rs. 10 lakh), Equipment Finance Scheme
    (loan not less than Rs.50 lakh), Scheme for Development of Infrastructure for SSI sector, tourism activities, hospitals, etc.,
    (project cost to be normally within Rs.10 crores), Pre-shipment and Post shipment Credit in Foreign Currency (need Based in
    USS & DEM), Technology Development & Modernization Fund Scheme (minimum loan of Rs.10 lakh), assistance for
    obtaining ISO 9000 certification (need Based), Micro Credit Scheme (to well managed voluntary agencies with at least 5
    years existence and good track record) etc.

  Development and support services: SIDBI provides most of the Development and Support Services to the small scale sector
    by way of technology up gradation, enterprise development, environment management, human resource development etc. It
    also co-ordinates its efforts with the Non-Governmental Organizations, management and technical institutions, research
    organizations, etc for effective reach.

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