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TOPIC: - Institutional Assistance to SSI

In Indian economy small-scale and cottage industries occupy an important

place, because of their employment potential and their contribution to total
industrial output and exports.
Government of India has taken a number of steps to promote them. However,
with the recent measures, small-scale and cottage industries facing both
internal competition as well as external competition.
(i) Small-Scale Industries:
These are the industrial undertakings having fixed investment in plant and
machinery, whether held on ownership basis or lease basis or hire purchase
basis not exceeding Rs. 1 crore.
Characteristics of Small-Scale Industries:
(i) Ownership: Ownership of small scale unit is with one individual in
sole-proprietorship or it can be with a few individuals in partnership.

(ii) Management and control: A small-scale unit is normally a one man show
and even in case of partnership the activities are mainly carried out by the
active partner and the rest are generally sleeping partners. These units are
managed in a personalised fashion. The owner is activity involved in all the
decisions concerning business.

(iii) Area of operation: The area of operation of small units is generally

localised catering to the local or regional demand. The overall resources at the
disposal of small scale units are limited and as a result of this, it is forced to
confine its activities to the local level.

(iv) Technology: Small industries are fairly labour intensive with comparatively
smaller capital investment than the larger units. Therefore, these units are
more suited for economics where capital is scarce and there is abundant
supply of labour.

(v) Gestation period: Gestation period is that period after which teething
problems are over and return on investment starts. Gestation period of small
scale unit is less as compared to large scale unit.

(vi) Flexibility: Small scale units as compared to large scale units are more
change susceptible and highly reactive and responsive to socio-economic

(vii) Resources: Small scale units use local or indigenous resources and as such
can be located anywhere subject to the availability of these resources like
labour and raw materials.

(viii) Dispersal of units: Small scale units use local resources and can be
dispersed over a wide territory. The development of small scale units in rural
and backward areas promotes more balanced regional development and can
prevent the influx of job seekers from rural areas to cities

The objectives of small scale industries are:

1. To create more employment opportunities with less investment.
2. To remove economic backwardness of rural and less developed regions of
the economy.
3. To reduce regional imbalances.
4. To mobilise and ensure optimum utilisation of unexploited resources of the
5. To improve standard of living of people.
6. To ensure equitable distribution of income and wealth.
7. To solve unemployment problem.
8. To attain self-reliance.
9. To adopt latest technology aimed at producing better quality products at
lower costs.
1. Industrial Finance Corporation of India (IFCI)
Government of India set up the Industrial Finance Corporation of India (IFCI) in
July 1948 under a special Act. This is the first financial institution set up in India
with the main object of making medium and long term credit to industrial
The authorised share capital of the IFCI was Rs. 10 crore at the initial stage, the
authorised capital of the corporation has been raised from Rs. 100 crore to Rs.
250 crore (the authorised capital may be fixed by the government of India by
notification from time to time)

The functions of the IFCI base as follows:

(i) The corporation grants loans and advances to industrial concerns.
(ii) Granting of loans both in rupees and foreign currencies.
(iii) The corporation underwrites the issue of stocks, bonds, shares etc.
(iv) The corporation can grant loans only to public limited companies and co-
operatives but not to private limited companies or partnership firms.

The promotional activities of IFCI:

1. Soft Loan Assistance:
This scheme provides soft loan assistance to existing industries in small and
medium sector for developing technology through in-house research and
2. Entrepreneur Development:
IFCI provides financial support to EDPs (Entrepreneur Development
Programmes) conducted by several agencies all-over India. In co-operation
with Entrepreneurship Development Institute of India.
3. Industrial Development in Backward Areas:
IFCI also take measures to promote industrial development in backward areas
through a scheme of concessional finance.
4. Subsidised Consultancy:
(i) Small Entrepreneurs for Meeting (iii) To do the Market Research.
the Cost of Project. (iv) Reviving Sick Units.
(ii) Promoting Ancillary Industries (v) Implementing Modernisation.
(vi) Controlling Pollution in

5. Management Development:
To improve the professional management the IFCI sponsored the Management
Development Institute in 1973. It established the Development Banking Centre
to develop managerial, manpower in industrial concern, commercial and
development banks.

Industrial Credit and Investment Corporation of India (ICICI)

Industrial Credit and Investment Corporation of India (ICICI) was established in
1955 as public limited company under Indian Company Act, for developing
medium and small industries of private sector.
Initially its equity capital was owned by companies, institutions and individuals
but at present its equity capital has been owned by public sector institutions
likeBanks, LIC, CIC and its associate companies

The important objectives of the ICICI are as follows:

(i) To provide loans to industrial projects in private sector.
(ii) To stimulate the promotion of new industries.
(iii) To assist the expansion and modernization of existing industries.
(iv) To provide Technical and managerial aid to increase production.

Financial Assistance of ICICI:

(i) Long term and medium term loans both in terms of rupee and foreign
(ii) Participating in equity capital and in debentures.
(iii) Underwriting new issues of shares and debentures.
(iv) Guarantee to suppliers of equipment and foreign loaners.
The activities of ICICI are discussed below:
1. Project Finance:
The project finance is provided to industries for the cost of establishment,
modernization or expansion of manufacturing and processing activities in the
form of rupee and foreign loans, underwriting, subscription to shares and
debentures and guarantees to supply of equipment and foreign donors.

2. Leasing:
The leasing operations of the ICICI commenced in 1983. Leasing assistance is
given for computerization, modernization/replacement, equipment of energy
conservation, export orientation, pollution control etc.

3. Project Advisory Services:

The Project advisory services are provided to the Central and State
Governments and public sector and private sector companies. Advice to the
governments is provided on policy reforms and on value chain analysis and to
private sector companies on strategic management.

4. Facilities for Non-resident Indians:

The information regarding on facilities and incentives given by the Government
of India to the non-resident Indians for judicious investing in India are offered.

5. Provision of Foreign Currency Loans:

The ICICI has a provision of foreign currency loans and advances to enable
Indian Industrial concerns to secure essential capital goods from foreign
Industrial Development Bank of India (IDBI):

Industrial Development Bank of India (IDBI) established under Industrial

Development Bank of India Act, 1964, is the principal financial institution for
providing credit and other facilities for developing industries and assisting
development institutions. The Head office of IDBI is located in Mumbai. The
bank has five regional offices, one each in Kolkata, Guwahati, New Delhi,
Chennai and Mumbai. Besides the bank have 21 branch offices.

Functions of IDBI:
(i) To provide financial assistance to industrial enterprises.
(ii) To promote institutions engaged in industrial development.
(iii) To provide technical and administrative assistance for promotion
management or expansion of industry.
(iv) To undertake market and investment research and surveys in connection
with development of industry.

Developmental Activities of IDBI:

(1) Promotional Activities:
developmental programmes for new entrepreneurs, consultancy services for
small and medium enterprises and programmes designed for accredited
voluntary agencies for the economic upliftment of the underprivileged.
These include entrepreneurship development, self-employment and wage
employment in the industrial sector for the weaker sections of society through
voluntary agencies, support to Science and Technology Entrepreneurs Parks,
Energy Conservation, Common Quality Testing Canters for small industries.

(2) Technical Consultancy Organisations:

With a view to making available at a reasonable cost, consultancy and advisory
services to entrepreneurs, particularly to new and small entrepreneurs, IDBI, in
collaboration with other All-India Financial Institutions, has set up a network of
Technical Consultancy Organisations (TCOs) covering the entire country.
(3) Entrepreneurship Development Institute:
Realising that entrepreneurship development is the key to industrial
development; IDBI played a prime role in setting up of the Entrepreneurship
Development Institute of India for fostering entrepreneurship in the country. It
has also established similar institutes in Bihar, Orissa, Madhya Pradesh and
Uttar Pradesh. IDBI also extends financial support to various organisations in
conducting studies or surveys of relevance to industrial development.

Industrial Reconstruction Bank of India

The Government of India set up the Industrial Reconstruction Corporation of
India (IRCI) in April 1971, under the Indian Companies Act mainly to look after
special problems of sick units and provide assistance for their speedy
reconstruction and rehabilitation, if necessary, by undertaking the
management of the units and developing infrastructure facilities like those of
transport, marketing etc.

Activities of IRBI:
IRBI provides term loans and working capital finance to medium, large, sick,
small and tiny sector units.
It also provides ancillary services, such as consultancy, preparation of schemes
of amalgamation, merger, sale, reconstruction, equipment leasing, merchant
banking etc.
IRBI has full power to take any step to remove industrial sickness.

functions were laid down for the IRBI:

i. To provide financial assistance to sick industrial units.
ii. To provide managerial and technical assistance to sick industrial units,
iii. To secure the assistance of other financial institutions and government
agencies for the revival and revitalisation of sick industrial units,
iv. To provide merchant banking services for amalgamation, merger,
reconstruction, etc.,
v. To provide consultancy services to the banks in the matter of sick units,
vi. To undertake leasing business.
In a similar fashion, the IRBI is to function as the principal credit and
reconstruction agency for industrial revival and co-ordinate the activities of
other institutions engaged in the revival of industries and also to assist and
promote industrial development and rehabilitation of industrial concerns.

Tamil Nadu Industrial Investment Corporation Limited (TIIC)

The Tamil Nadu Industrial Investment Corporation Limited (TIIC Limited is an
institution owned by the government of Tamil Nadu and is intended as a
catalyst for the development of small, medium and large scale industries in
Tamil Nadu. It was established in 1949.

TIIC as a State Level Financial Institution, offers long and medium term
financial assistance to various industries including service sector in the
following forms:
Term Loans

Term Loan and Working Capital Term Loans under the Single Window
Special types of assistance like Bill Financing Scheme, etc.

National Small Industries Corporation Ltd (NSIC)

The National Small Industries Corporation Ltd. (NSIC), an ISO 9000 certified
company, since its establishment in 1955, has been working to fulfill its mission
of promoting, aiding and fostering the growth of small-scale industries and
industry related small-scale services/businesses in the country.

Its main functions are to:

a. Provide machinery on hire-purchase scheme to small-scale industries.
b. Provide equipment leasing facility.
c. Help in export marketing of the products of small-scale industries.
d. Participate in bulk purchase programme of the Government.
e. Develop prototype of machines and equipments to pass on to small-scale
industries for commercial production.
f. Distribute basic raw material among small-scale industries through raw
material depots.
g. Help in development and up-gradation of technology and implementation of
modernization programmes of small-scale industries.
h. Impart training in various industrial trades.
i. Set up small-scale industries in other developing countries on turn-key basis.
j. Undertake the construction of industrial estates.

Activates of NSIC
The major areas of operation are:
a. Exports of products such as handicrafts, leather items, hand tools, pipes/
fittings, builders hardware etc.
b. Supply of small industry products on turnkey basis.
Credit Support:
NSIC provides credit support to small enterprises in the following areas:
Equipment Financing:
The Corporation is facilitating small enterprises in securing loans for purchase
of equipment and machinery.
Tie-up with Commercial Banks:
To meet the credit requirements of small enterprises, NSIC has tied up with
commercial banks for sanction of term loans and working capital facilities as
per the convenience of the small enterprises. The accreted small enterprises
under the performance and credit rating scheme of NSIC will stand at a good
chance to get the credit from these commercial banks at liberal rates.
Financing for Procurement of Raw Material (Short-Term):
NSICs Raw Material Assistance Scheme aims at helping small-scale
industries/enterprises by way of financing the purchase of raw material (both
indigenous and imported).
Functions of NSIC:
NSIC provides a wide range of services, predominantly promotional in
character, to small-scale industries.
Its main functions are to:
a. Provide machinery on hire-purchase scheme to small-scale industries.
b. Provide equipment leasing facility.
c. Help in export marketing of the products of small-scale industries.
d. Participate in bulk purchase programme of the Government.
e. Develop prototype of machines and equipments to pass on to small-scale
industries for commercial production.
f. Distribute basic raw material among small-scale industries through raw
material depots.
g. Help in development and up-gradation of technology and implementation of
modernization programmes of small-scale industries.
h. Impart training in various industrial trades.
i. Set up small-scale industries in other developing countries on turn-key basis.
j. Undertake the construction of industrial estates.

District Industries Centre

The 'District Industries Centre' (DICs) programme was started by the central
government in 1978 with the objective of providing a focal point for promoting
small, tiny, cottage and village industries in a particular area and to make
available to them all necessary services and facilities at one place. The finances
for setting up DICs in a state are contributed equally by the particular state
government and the central government.

Activities of District Industries Centre (DIC):

i. Economic Investigation
ii. Plant and Machinery
iii. Research, education and training
iv. Raw materials
v. Credit facilities
vi. Marketing assistance
vii. Cottage industries
Functions of District Industries Centre (DIC):
i. Acts as the focal point of the industrialisation of the district.
ii. Prepares the industrial profile of the district with respect to :
iii. Statistics and information about existing industrial units in the district in the
large, Medium, small as well as co-operative sectors.
iv. Opportunity guidance to entrepreneurs.
v. Compilation of information about local sources of raw materials and their
vi. Manpower assessment with respect to skilled, semi-skilled workers.
vii. Assessment of availability of infrastructure facilities like quality testing,
research and development, transport, prototype development, warehouse etc.
viii. Organises entrepreneurship development training programs.
ix. Provides information about various government schemes, subsidies, grants
and assistance available from the other corporations set up for promotion of
x. Gives SSI registration.
xi. Prepares techno-economic feasibility report.
xii. Advices the entrepreneurs on investments.
xiii. Acts as a link between the entrepreneurs and the lead bank of the district.
xiv. Implements government sponsored schemes for educated unemployed
people like PMRY scheme, Jawahar Rojgar Yojana, etc.
xv. Helps entrepreneurs in obtaining licenses from the Electricity Board, Water
Supply Board, No Objection Certificates etc.
xvi. Assist the entrepreneur to procure imported machinery and raw materials.
xvii. Organises marketing outlets in liaison with other government agencies.
Technical Consultancy Organizations
Technical Consultancy Organisations (TCOs) were created for facilitating
technical consultancy for industrial projects. These organisations were
established by the All India Financial Institutions (IDBI, ICICI, IFCI, etc) in
collaboration the state level financial / development organisations and
commercial banks. There are in all 18 state-level TCOs across India.

Activities of TCOs can be summed up as below:

Development of Industry Clusters

Conducting Industry Potential Surveys /Techno-Economic Viability (TEV)

Infrastructure Planning

Energy and Environment Research and Management

NPA Resolution

Vocational Training

Technology Facilitation / Preparation of Project Profiles

Conducting Entrepreneurship Development Programs

Carrying out Market Research for specific products

Offering Merchant Banking Services

Offering Consultancy for Export-oriented Enterprises

The functions of the TCOs include,

conducting surveys on industrial potential,
preparing project profiles,
undertaking techno-economic appraisal of projects,
carrying out market research, providing technical and managerial
assistance to entrepreneurs, assistance in modernisation,technology
upgradations and rehabilitation programmes and organising information
Data Bank concerning industrial and economic
activities and provide these to entrepreneurs.
Small Industries Development Bank of India (SIDBI)
With a view to ensuring larger flow of financial and non-financial assistance to
he small-scale sector, the Government of India set up the Small Industries
Development Bank of India (SIDBI) under a special Act of the Parliament in
October 1989 as wholly-owned subsidiary of the IDBI. The bank commenced its
operations from April 2, 1990 with its head office in Lucknow. The SIDBI has
taken over the outstanding portfolio of the IDBI relating to the small-scale

The important functions performed by of SIDBI include:

1. To initiate steps for technological up-gradation and modernisation of
existing units.
2. To expand the channels for marketing the products of SSI sector in domestic
and international markets.
3. To promote employment oriented industries especially in semi-urban areas
to create more employment opportunities and thereby checking migration of
people to urban areas.
The SIDBIs financial assistance to small-scale industries is channelised through
the existing credit delivery system comprising State Financial Corporation,
State Industrial Development Corporations, Commercial Banks, and Regional
Rural Banks.
The SIDBI introduced two new schemes during 1992-93; equipment finance
scheme for providing direct finance to existing well-run small-scale units taking
up technology up-gradation, modernisation, and refinance for resettlement of
voluntarily retired workers of the National Textile Corporation (NTC).

Establish National and State level Think Tanks for Policy Advocacy.
Initiating demonstration of Pilots on Business Correspondents,
Branchless banking, Credit bureau etc.
Organizing periodic seminars and workshops on emergent issues and
identified thematic areas
Providing advocacy support to MFIs representative organizations for
effective implementation of code of conduct, sensitizing State and
Central Governments on building and maintaining a conducive
environment for MF sector;
Supporting diverse institutions providing financial services like Micro
Finance Institutions (MFIs), Self Help Groups (SHG) channel, Regional
Rural Banks (RRBs) and other community based organizations.
Encouraging institutions to improve outreach in identified areas with low
MF penetration.
Improving access to other financial services such as savings, insurance,
micro-pensions & remittances.
Supporting new loan product development for women centric loan
products, green products and other loans to meet the requirements of
the clients.
Support for piloting/ up-scaling of new technology led models which
leads to improvement in efficiency and ease of delivery for institutions
and improvement in transparency and convenience for the clients.
Build skills, capacities and confidence of women clients of microfinance
through a training focusing on financial literacy, gender issues such as
health, education and legal entitlements, social development and legal
rights (health, education and legal entitlements).
Gender sensitization training of senior level staff of the institutions to
enable them to mainstream gender within their organizational policies
and processes.

ExportImport Bank of India

ExportImport Bank of India is the premier export finance institution in India,
established in 1982 under Export-Import Bank of India Act 1981. Since its
inception, Exim Bank of India has been both a catalyst and a key player in the
promotion of cross border trade and investment.
Commencing operations as a purveyor of export credit, like other export credit
agencies in the world, Exim Bank India has, over the period, evolved into an
institution that plays a major role in partnering Indian industries, particularly the
Small and Medium Enterprises, in their globalisation efforts, through a wide
range of products and services offered at all stages of the business cycle, starting
from import of technology and export product development to export
production, export marketing, pre-shipment and post-shipment and overseas

Functions are segmented into several operating groups including:

Corporate Banking Group which handles a variety of financing
programmes for Export Oriented Units (EOUs), Importers, and overseas
investment by Indian companies.
Project Finance / Trade Finance Group handles the entire range of export
credit services such as supplier's credit, pre-shipment Agriculture
Business Group, to spearhead the initiative to promote and support
Agricultural exports. The Group handles projects and export transactions
in the agricultural sector for financing.
Small and Medium Enterprise: EXIM Bank India handles credit proposals
from SMEs under various lending programmes of the Bank.
Export Services Group offers variety of advisory and value-added
information services aimed at investment promotion.
Export Marketing Services Bank offers assistance to Indian companies, to
enable them establish their products in overseas markets. The idea
behind this service is to promote Indian export. Export Marketing Services
covers wide range of export oriented companies and organizations. EMS
group also covers Project exports and Export of Services.
Besides these, the Support Services groups, which include: Research &
Planning, Treasury and Accounts, Loan Administration, Internal Audit,
Management Information Services, Information Technology, Legal,
Human Resources Management and Corporate Communications.

Activities of Exim Bank:

The bank can raise additional resources through borrowing from Government of
India, from RBI and from the market through the issue of bonds and debentures.
Exam bank also provides refinance facilities to the commercial bank and
financial institutions against their export-import financing activities.

During the Year ending on 31 March, 2003, Exim Bank sanctioned loans of Rs.
7,828 crores while disbursements amounted to Rs. 5,320 crores, Net Profit
(before tax) of the bank for the period 2002-03 on account of General Fund
amounted to Rs. 268 crore.

Small Industries Development Corporation (SIDCO)

In many state governments, for the promotion of small scale industries, a
separate corporation has been set up which is known as Small Industries
Development Corporation. They undertake all kinds of activities for the
promotion of small scale industries. Right from the stage of installation, to the
stage of commencing production, these Corporations help small scale industries
(SSI) in many ways.

Objectives of SIDCO
The following are the main objectives of SIDCO
1. The main objective of SIDCO is to stimulate the growth of industries in the
small scale sector
2. To provide infrastructure facilities like roads, drainage, electricity, water
supply, etc is one of the primary objective of SIDCO.
3. To Promote industrial estates which will provide industrial sheds of
different sizes with all basic infrastructure facilities.
4. To Provide technical assistance through training facilities to the
5. To Promote skilled labor through the setting up of industrial training

Functions of SIDCO
SIDCO supplies scarce raw materials:
Some of the scarce raw materials are procured by the corporation either from
the domestic market or from abroad and are provided to the needy small scale
SIDCO provides marketing assistance:
In order to provide an efficient marketing support to small scale industries, the
corporation has taken up various schemes. In fact, the corporation participates
in the tenders floated by the state government departments and also with the
DGS & D (Director General of Supplies and Disposal).
SIDCO assists in Bills discounting:
When small scale units supply goods to government departments, there is a
delay in receiving payments. In such a situation, the bills drawn on government
departments will be discounted by SIDCO and upto 80% of the bill value is given
to the supplier. This helps the SSI units in solving their working capital crisis.
SIDCO provides Export marketing assistance:
To promote export marketing among the small scale industries, SIDCO has
developed websites because of which it is able to display the products of the
small scale industries in foreign markets and obtain export orders. Once an
export order is obtained, the Common export manager of SIDCO will make
arrangements for extending various services for export of the product.
SIDCO set up Captive power plants:
In order to provide uninterrupted and good quality power supply, SIDCO has
taken up a plan to set up captive power plants in major industrial estates. It is
now planning to set up these plants in 10 industrial estates.
SIDCO promotes skill development centres:
In an effort to supply skilled laborers to various small scale industries, skill
development centres are being set up in various industrial estates which will be
training workers in varied industrial activities and they will be trained in modern
SIDCO promotes women entrepreneurs:
In addition to the above, in order to promote women entrepreneurs, a separate
industrial estate for women has been set up at Tirumullaivoyal, near Chennai,
where women entrepreneurs are trained in various fields of small scale

Small scale industries were dream of Mahatma Gandhi, father of our

They are not capital based rather they are talent based industries which
can be owned and run by middle class people.
Small scale industry is a term which applies to the small entrepreneurs
who are engaged in manufacture and production on a micro scale. It
mainly refers to agro- based rural industry which doesn't require huge
capital influx and large infrastructure.
These small scale industries also include the indigenous cottage industry
and the handicrafts industry. The development of small scale industries is
very important for a country like India which has mainly rural economy.
These small scale industries which are mainly agro- based in nature would
provide job for millions of Indians and would contribute largely to the
overall growth of the Indian economy.