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An Assignment On Small Industries Development Bank of India (SIDBI)
An Assignment On Small Industries Development Bank of India (SIDBI)
Contents
SSI as a Sector
Introduction to SIDBI
History
Objectives
Mission
SSI as a Sector
It has been said in the past that SSI has outperformed the overall industrial
sector. As per the estimates available in third census of SSIs, the production
in the SSI sector, at current prices is estimated to have increased to
Rs.3,48,059 crore during FY2004 from Rs.3,11,993 crore in the previous year,
thus recording a growth of 11.5 per cent in output at current prices, as
compared to growth of 6.6 per cent registered in the industrial sector and 7.1
per cent growth in the manufacturing sector. Employment in the sector is
estimated at the level of 273.97 lakhs at end-March 2004 as compared with
261.38 lakhs at end-March 2003. SSI exports increased from Rs.71,244 crore
in FY2002 to Rs.86,013 FY2003. The share of SSIs in output was 39 percent
and in exports it was 34 percent during the year.
8000
7000
1990-91
6000
1991-92
1992-93
5000
1993-94
1994-95
1995-96
4000
3000
1996-97
1997-98
2000
1000
0
Sanction
Disbursement
Subsidiaries
The operations and functions of the subsidiaries of SIDBI viz., SIDBI Venture
Capital Limited, SIDBI Trustee Company Ltd., Technology Bureau for Small
Enterprises and Associate organization, Credit Guarantee Fund Trust for Small
Industries were satisfactory during FY2004. I am also very pleased to inform
our shareholders that the Bank has initiated steps in the direction of setting
up of a Technology Services Bank for the small and medium enterprises sector
and I am hopeful that the same will commence operation during FY2005.
History
Established in April 2,1990
Principal Development Financial Institution for:
-- Promotion
-- Financing and
-- Development of Industries in the small-scale sector and
--Co-ordinating the functions of other institutions engaged in similar
activities.
Provision of Charter
SIDBI was established on April 2, 1990. The Charter establishing it, The Small
Industries Development Bank of India Act, 1989 envisaged SIDBI to be "the
principal financial institution for the promotion, financing and development of
industry in the small scale sector and to co-ordinate the functions of the
institutions engaged in the promotion and financing or developing industry in
the small scale sector and for matters connected therewith or incidental
thereto.
Objectives
Mandatory Objectives
Four basic objectives are set out in the SIDBI Charter. They are:
Financing
Promotion
Development
Co-ordination
For orderly growth of industry in the small-scale sector. The Charter has
provided SIDBI considerable flexibility in adopting appropriate operational
strategies to meet these objectives. The activities of SIDBI, as they have
evolved over the period of time, now meet almost all the requirements of
small scale industries which fall into a wide spectrum constituting modern and
technologically superior units at one end and traditional units at the other.
Development Outlook
The major issues confronting SSIs are identified to be:
Technology obsolescence
Managerial inadequacies
Delayed Payments
Poor Quality
Incidence of Sickness
Lack of Appropriate Infrastructure and
Lack of Marketing Network
There can be many more similar issues hindering the orderly growth of SSIs.
Over the years, SIDBI has put in place financing schemes either through its
direct financing mechanism or through indirect assistance mechanism and
special focus programmes under its P&D initiatives. In its approach, SIDBI has
struck a good balance between financing and providing other support services.
MOU
SIDBI has entered into Memoranda of Understanding with many banks,
governmental agencies, international agencies, research & development
institutions and industry associations to facilitate a co-ordinated approach in
dealing with the issues for development of small-scale industries.
SIDBI's MOUs
Banks-(18)
Swiss Agency for Development and Co-operation
Small Industries Development Organization
Auto Components Manufactures Association
Asia and Pacific Centre for Transfer of Technology
Council for Scientific and Industrial Research
United Nations Industrial Development Organization
Confederation of Indian Industry
National Research Development Organization
Government of India for channelising TREAD assistance
Small Enterprise Assistance Funds (SEAF)
For setting up of SEAF India SME Equity Fund and for other
capacity building initiatives for SMEs
Mission
SIDBI is committed to developing a strong, vibrant and responsive small-scale
sector. This commitment is to be achieved through a variety of means.
Principal amongst them is finance. Alongside finance, SIDBI provides
Operation Emphasis
SIDBI, in its operational strategy, emphasizes:
Enhancement in the flow of financial assistance to SSIs
Enhancement in the capabilities of SSIs at all levels, with focus
on adoption of improved and modern technology.
The small industries sector in India is dominated by a large number of small
units. These micro-enterprises require special nurturing. SIDBI has been
operating schemes like:
Equity
Term loan (domestic and foreign currency)
Working capital
o For inventory
o For raw material
o Through finance against bills receivables and for intangibles.
The purposes for which SIDBI's assistance is provided include new projects,
expansion, diversification, technology upgradation, modernization, quality
improvement, environmental management, marketing (domestic and
international) and rehabilitation of sick SSIs.
Promotional Orientation
Besides financing, SIDBI provides developmental and support services to SSIs
under its Promotional and Developmental (P&D) schemes. The focus of such
assistance is to ensure:
Enterprise Promotion
Human Resource Development
Technology Upgradation
Environmental and quality management
Information Dissemination and
Market Promotion
The P&D initiatives of SIDBI have crystallized over the years and are now
oriented to serve rural entrepreneurs and youth, particularly women through
programmes to empower them and motivate them to undertake
entrepreneurial ventures
Future challenges
The coming years would be crucial for SIDBI mainly on account of the
accelerated pace of deregulation of financial sector, softer interest rate and
expected decline in availment of refinance by banks which, hitherto formed
major part of the Bank's business. SIDBI is aware of the challenges and has
been taking steps to address these issues. Direct financing to the SME (small
and medium enterprises) and service sector would be a major focus area for
the Bank. The support infrastructure like industrial areas, power, roads,
telecommunications, etc. are essential for growth and smooth functioning of
each and every economic activity. As such the Bank would also give thrust on
financing of infrastructure, which will directly or indirectly benefit the sector as
also marketing and technology upgradation related activities undertaken in
the sector. Containment of NPAs and monitoring the health of SFCs (State
Financing Corporations) are the other areas receiving our attention
Single Window Scheme to provide both term loans for fixed assets
and loan for working capital through the same agency.
New Schemes
(i) To enhance the export capabilities of SSI units.
(ii) Scheme for Marketing Assistance.
(iii) Infrastructure Development Scheme.
(iv) Scheme for acquisition of ISO 9000 certification.
Major schemes
Technology Development & Modernization Fund
SIDBI has set up Technology Development & Modernization Fund (TDMF)
scheme for direct assistance of small sale industries to encourage existing
industrial units in the sector, to modernize their production facilities and adopt
improved and updated technology so as to strengthen their export
capabilities. Assistance under the scheme is available for meeting the
expenditure on purchase of capital equipment acquisition of technical knowhow, upgradation of process technology and products with thrust on quality
improvement, improvement in packaging and cost of TQM and acquisition of
ISO-9000
series
certification.
SIDBI in July 1996 had permitted SFCs and promotional banks to grant loans
for modernization projects costing upto Rs. 50 lakhs. The Coverage of the
TDMF scheme has been enlarged w.e.f. 1.9.1997. Non-exporting units and
units which are graduating out of SSI sector are now eligible to avail
assistance under this scheme.
National Equity Fund
National Equity Fund (NEF) under Small Industries Development Bank of India
(SIDBI) provides equity type assistance to SSI units, tiny units at one per cent
service charges. The scope of this scheme was widened in 1995-96 to cover
all areas excepting Metropolitan areas, raising the limit of loan from Rs. 1.5
lakhs to Rs. 2.5 lakhs and covering both existing as well as new units:
(a) The following are eligible for assistance under the scheme:i.
(b) Project cost (including margin money for working capital) should not
exceed Rs. 10 lakhs in the case of new projects in the case of existing units
and service enterprises, the outlay on expansion/modernization/technology
upgradation or diversification or rehabilitation should not exceed Rs. 10
lakh per project.
(c) There is no change in the existing level of promoters' contribution at
10% of the project cost. However, the ceiling on soft loan assistance under
the Scheme has been enhanced from the present level of 15% lakh per
project to 25% of the project cost subject to a maximum of Rs. 2.5 lakh
per project.
Case Study
Why is design important? The case of a toy maker
The Indian Toy Industry is dominated by SMEs and micro enterprises even
though toy majors such as Fun School and Mattel are also present. The
domestic industry has been in existence for over 50 years and has
considerable reach through an extensive distribution network. Innovation in
the form of IP creation has, however, been extremely poor. With generational