Small Industries Development Bank of India (SIDBI)

Last Updated : 03 Nov, 2023

Small Industries Development Bank of India (SIDBI): SIDBI was established as a statutory body in 1988 under a special Act of the Indian Parliament, which came into force on April 2, 1990. SIDBI full form is Small Industries Development Bank of India. SIDBI headquarter is in Lucknow, Uttar Pradesh. It is one of the four All-India Institutions, the others being NABARD, EXIM, and NHB.

Initially, SIDBI was fully involved in industrial development activities in the country by managing SIDF (Small Industries Development Fund) and NEF (National Equity Fund) and was the financial base for funding the MSME (Micro, Small, and Medium enterprises) sector. SIDBI was owned by a consortium of SBI as a share with 15.65 %, LIC as a share with 13.33 %, the Government of India as a share with 20.85 %, NABARD as a share with 9.36 %, and other public financial institutions as share with 40.81 %.

SIDBI assists around Rs 5.45 lakh crore to the MSME sector in the country to expand the market and develop its innovative thoughts and technologies to help to produce profitable products. SIDBI aims to work with and reinforce the flow of credit to MSMEs and address monetary, formative, and developmental gaps in the MSMEs industry zones across the country

SIDBI is mainly focusing on establishing more than 55% of MSMEs located in the rural areas of the country. In 2013, the Government of India set up a committee called R.S. Gujaral’s committee of financial exports to boost the MSME sector. To minimize human interaction in the MOU process Government of India has implemented a module called “E-biz” under the National E-governance plan by the DIPP (Department of Industrial Policy and Promotion).

Table of Content

Functions of SIDBI
Finance Facilities Offered by SIDBI
Benefits of SIBDI
Schemes Offered by SIDBI in MSME Sector:
Indirect Loan Schemes Offered Under SIDBI
How to Apply for Loan Through SIDBI?
Who is Eligible for SIBDI Loan?

Functions of SIDBI

Here’s a detailed look at the functions of SIDBI:

1. Financing

SIDBI provides direct and indirect financial assistance to MSMEs. Direct finance includes term loans for setting up new industrial units and for the expansion, modernization, or diversification of existing units. Indirect finance is provided through the refinance of loans given by primary lending institutions like commercial banks and state finance corporations.

2. Microfinance

SIDBI is instrumental in promoting microfinance through various schemes. It extends support to Micro Finance Institutions (MFIs) and also directly participates in micro-lending activities, aiming to reach the underserved and financially excluded segments of society.

3. Promotion and Development

Beyond financing, SIDBI also engages in the promotion and development of MSMEs by supporting technology upgradation, modernization, skill development, and infrastructure development.

4. Market Development

It helps in expanding marketing capabilities of MSMEs, including facilitating their participation in trade fairs, exhibitions, and providing assistance in product marketing both domestically and internationally.

5. Venture Capital

SIDBI provides venture capital support to startups and businesses operating in emerging sectors. It aids innovation-driven enterprises, particularly in their early stages of growth.

6. Rehabilitation of Sick Units

SIDBI takes measures for the revival and rehabilitation of sick industrial units that have potential for recovery.

7. Credit Guarantee

Through the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), SIDBI provides credit guarantees to financial institutions for loans extended to MSMEs, thereby enhancing their creditworthiness.

8. Cluster Development

SIDBI promotes cluster development to enhance the productivity and competitiveness of MSMEs. This involves creating common facilities, improving technology, and strengthening market linkages.

9. Energy Efficiency

It also undertakes initiatives to promote energy efficiency and sustainable development among MSMEs, providing financial assistance for adopting greener technologies.

10. Capacity Building

SIDBI conducts various training and development programs for entrepreneurs to enhance their managerial and technical skills.

11. Policy Advocacy

The bank actively engages in policy advocacy by providing feedback and suggestions to the government for shaping policies that benefit the MSME sector.

12. Information Dissemination

It serves as a repository of information related to the MSME sector, providing data, research findings, and industry trends to stakeholders.

13. International Cooperation

SIDBI collaborates with international agencies for financial and technical cooperation, aiming to bring best practices and global standards to the Indian MSME sector.

14. Credit Flow Enhancement

SIDBI works to enhance the flow of credit to MSMEs by developing credit products, supporting non-banking financial companies, and fostering partnerships between various stakeholders.

Through these functions, SIDBI plays a pivotal role in empowering the MSME sector, which is a significant contributor to India’s economic growth, employment generation, and export earnings.

Finance Facilities Offered by SIDBI

SIDBI’s finance facilities are tailored to support the diverse and evolving needs of the small industries sector in India.

Here is a brief overview of the finance facilities offered by SIDBI:

1. Term Loans

Export credit is a type of loan that is specifically designed to support small industries in exporting their products and services. It can be used to finance the production of goods for export, the marketing and promotion of goods abroad, and the shipment of goods to overseas buyers. Export credit typically has a repayment period of 6 to 12 months.

2. Working Capital Loans

Working capital loans are short-term loans that are used to finance day-to-day operating expenses such as inventory, accounts receivable, and accounts payable. They can be used to meet seasonal fluctuations in demand or to finance growth. Working capital loans typically have a repayment period of 6 to 12 months.

3. Export Credit

4. Technology Upgradation Loans

Technology upgradation loans are provided to help small industries adopt new technologies to improve their productivity and competitiveness. These loans can be used to finance the purchase of new machinery, equipment, and software. Technology upgradation loans typically have a repayment period of 3 to 5 years.

5. Infrastructure Development Loans

Infrastructure development loans are provided to small industries to help them develop essential infrastructure such as roads, power, water, and sanitation. These loans can also be used to finance the construction of factory buildings, warehouses, and other facilities. Infrastructure development loans typically have a repayment period of 5 to 10 years.

6. Skill Development and Training Loans

Skill development and training loans are provided to help small industries improve the skills and competencies of their employees. These loans can be used to finance the training of employees in new technologies, management practices, and other areas. Skill development and training loans typically have a repayment period of 2 to 3 years.

7. Energy Efficiency and Environmental Protection Loans

Energy efficiency and environmental protection loans are provided to help small industries adopt energy-efficient technologies and practices to protect the environment. These loans can be used to finance the purchase of energy-efficient equipment, the installation of renewable energy systems, and the implementation of waste management systems. Energy efficiency and environmental protection loans typically have a repayment period of 3 to 5 years.

8. Cluster Development Loans

Cluster development loans are provided to help small industries form and develop industry clusters. These loans can be used to finance the construction of common infrastructure facilities, the development of marketing and branding strategies, and the promotion of exports. Cluster development loans typically have a repayment period of 5 to 10 years.

9. Women Entrepreneurs Loans

Women entrepreneurs loans are specifically designed to empower women entrepreneurs by providing them with access to finance. These loans can be used to finance any business activity that is undertaken by a woman entrepreneur. Women entrepreneurs loans typically have a repayment period of 3 to 5 years.

10. Backward and Forward Linkages Loans

Backward and forward linkages loans are provided to small industries to help them establish linkages with other industries. These loans can be used to finance the purchase of inputs from other industries, the sale of products to other industries, and the joint development of new products and services. Backward and forward linkages loans typically have a repayment period of 3 to 5 years.

11. Micro and Small Enterprises Loans

Micro and small enterprises loans are specifically designed to help micro and small enterprises grow. These loans can be used to finance any business activity that is undertaken by a micro or small enterprise. Micro and small enterprises loans typically have a repayment period of 2 to 3 years.

In addition to these finance facilities, SIDBI also offers a number of other products and services to support the MSME sector, such as equity investment, venture capital financing, and credit guarantee schemes.

Benefits of SIBDI

Here’s a detailed look at the benefits you’ve outlined:

1. Reasonably Priced Interest Rates

SIDBI’s collaborations with various domestic and international banks enable it to offer loans at competitive interest rates. This is critical for MSMEs as lower interest rates can significantly reduce the cost of borrowing and help businesses invest more in growth and expansion.

2. Loans without Collateral

One of the significant barriers for MSMEs in accessing finance is the lack of collateral. SIDBI addresses this by offering collateral-free loans of up to Rs. 1 crore under certain schemes. This encourages more MSMEs to avail of financial services without the fear of risking their assets.

3. Sustainable and Innovative

By promoting the adoption of new technologies and modern practices, SIDBI helps MSMEs increase their productivity and stay competitive. This approach not only aids in business growth but also ensures that businesses are sustainable and prepared for future challenges.

4. Encourages Business Ownership

SIDBI provides financing without taking equity stakes in the company. This means that entrepreneurs can retain full ownership of their businesses while still having access to the necessary funds for growth.

5. Transparent Loan Procedure

Transparency is crucial in financial dealings. SIDBI’s clear and straightforward loan procedures, free of hidden charges, build trust and reliability among MSMEs.

6. Risk Sharing

Through various risk-sharing mechanisms and credit guarantee schemes, SIDBI reduces the financial risk associated with lending to MSMEs. This encourages banks and other financial institutions to extend credit to smaller businesses that they might otherwise consider too risky.

SIDBI’s impact on the MSME sector in India has been significant. It has helped to create millions of jobs, boost exports, and promote inclusive growth. SIDBI is a true partner to MSMEs and is committed to helping them achieve their full potential.

Schemes Offered by SIDBI in MSME Sector:

Here’s a table containing some of the prominent schemes offered by SIDBI:

Loan Scheme	Loan Tenure	Loan Amount	Eligibility Criteria
Smile Equipment Finance (SEF)	72 months	Minimum Rs.10 Lakhs	3 years of financial or business sector experience
SIDBI Make in India Soft Loan Fund for MSME (SMILE)	10 years (incl. 3-year moratorium)	Rs. 10 Lakhs to Rs. 25 Lakhs	Open to both new and existing enterprises
Working Capital (Cash Credit)	Variable (as per terms)	Based on financial capability	Available to existing customers of SIBDI and other banks
Loans under partnership with OEM	5 years (with eligible moratorium)	Up to Rs. 1 Crore	3 years of financial or business sector experience
SIDBI – Loan for Purchase of Equipment for Enterprise’s Development (SPEED)	5 years (incl. 6-month moratorium)	New customers: Up to Rs. 1 Crore; Existing customers: Up to Rs.2 Crores	3 years of business existence with 2 years of profit-making
SIDBI-Loan for Purchase of Equipment for Enterprise’s Development Plus (SPEED PLUS)	5 years (incl. 6-month moratorium)	New customers: Up to Rs.2 Crores	5 years of business existence with 3 years of profit-making
TOP UP LOAN FOR IMMEDIATE PURPOSES (TULIP)	5 years	30% of existing exposure or 20% of net sales, Max Rs. 2 Crores	1-year association with SIDBI loan scheme; Proof of cash profit in the previous financial year
SIDBI TERM-LOAN ASSISTANCE FOR ROOFTOP SOLAR PV PLANTS (STAR)	5 years (incl. 6-month moratorium)	Up to Rs. 2.5 Crores	2 years of cash profit for existing customers; 4 years for new customers; Good financial records
SIDBI ASSISTANCE TO HEALTHCARE SECTOR IN WAR AGAINST SECOND WAVE OF COVID19(SHWAS)	5 years	Up to Rs. 2 Crores	Proof of 2 years cash profit for new customers; Cash profit in the last audited balance for existing customers
SIDBI ASSISTANCE TO MSMES TO TACKLE COVID19 PANDEMIC(AROG)	5 years	Up to Rs. 2 Crores	Proof of 2 years cash profit for new customers; Cash profit in the last audited balance for existing customers
CORONA CRISIS ASSISTANCE FOR TIMELY WORKING CAPITAL (TWARIT)	4 years (incl. 1-year moratorium)	20% of total outstanding loans with SIDBI up to Rs.25 Crore	Annual turnover of Rs.100 Crores; Outstanding credit facilities up to Rs.25 Crores

Also Read: Schemes For MSMEs in India

Indirect Loan Schemes Offered Under SIDBI

Here’s a table of indirect loan schemes offered by SIDBI:

Scheme	Objective	Beneficiaries	Features
Assistance to NBFCs	To support NBFCs in providing credit to the MSME sector.	RBI-registered NBFCs financing MSMEs.	-Loans for on-lending to MSMEs. -Refinancing options to improve liquidity. -Encourages lending to underserved MSME segments.
Refinance Scheme	To offer financial assistance to banks for extending credit to MSMEs.	Scheduled commercial banks involved in MSME lending.	-Refinancing against bank loans to MSMEs. -Reduces the cost of funds for banks. -Includes sub-schemes for different MSME segments.
Assistance to Small Finance Banks (SFBs)	To support SFBs in raising capital for lending to the MSME sector.	Small Finance Banks focusing on financial inclusion and MSME financing.	-Equity assistance for capital requirements. -Strengthens the capital base to enhance MSME lending. -Aims to serve micro and small enterprises, especially in rural and semi-urban areas.

How to Apply for Loan Through SIDBI?

Here is a detailed explanation of the 5-step process to apply for a loan from SIDBI:

Step 1: Visit the official website of SIDBI and click on the ‘Borrower’s Corner.’

This will take you to the page where you can access SIDBI’s various loan schemes and apply for a loan online.

Step 2: Click on ‘Online Loan Application.’

This will open a new page where you can log in to your SIDBI account or create a new account if you do not have one.

Step 3: Enter your username and password.

If you have an existing SIDBI account, enter your username and password to log in. If you are a new user, click on “Create New Account” and follow the instructions to create an account.

Step 4: Select the loan scheme you want to apply for.

Once you are logged in, you will be able to see a list of all the loan schemes offered by SIDBI. Select the loan scheme that is most suitable for your needs and click on “Apply Now.”

Step 5: Fill up the loan application form.

The loan application form will ask for various information about your business, your financial situation, and the loan you are applying for. Fill up the form completely and accurately and attach all the required supporting documents.

Once you have completed the loan application form and attached all the required supporting documents, click on “Submit” to submit your application.

SIDBI will review your application and assess your creditworthiness. If your application is approved, you will be offered a loan sanction letter. You will then need to sign the loan agreement and accept the loan offer.

Who is Eligible for SIBDI Loan?

The eligibility criteria for SIDBI loans vary depending on the specific loan scheme. However, there are some general eligibility criteria that apply to all SIDBI loans:

The borrower must be a MSME as defined by the Micro, Small and Medium Enterprises Development Act, 2006.
The borrower must be engaged in a viable business activity.
The borrower must have a good financial record and credit rating.
The borrower must have the necessary collateral to secure the loan.

In addition to these general eligibility criteria, SIDBI also has specific eligibility criteria for each of its loan schemes. For example, the eligibility criteria for the SIDBI Make in India Soft Loan Fund for Micro and Small Enterprises (SMILE) scheme are as follows:

The borrower must be a new enterprise in the manufacturing and services sector or an existing enterprise undertaking expansion.
The borrower must have a project with a minimum investment of Rs. 10 lakh for Equipment Finance and Rs. 25 lakh for other purposes.
The borrower must have a good financial record and credit rating.
The borrower must have the necessary collateral to secure the loan.