In 1990, SIDBI was established under an Act of Parliament. It is the leading financial institution engaged in promoting, financing, and advancing MSMEs (micro, small, and medium-sized entities) and coordinating the functions of several organisations involved in similar activities. In this regard, this article reveals the main elements of SIDBI, including its financial services, its functions, benefits, and many more.
Overview of SIDBI
SIDBI is IDBI’s wholly owned subsidiary, set up under the special Act of the Parliament of 1988 that came into effect on 02 April 1990.
Small Industries Development Bank of India is respon sible for administrating the Small Industries Development Fund and the National Equity Fund, which were previously administered through IDBI. It is mainly responsible for encouraging, financing, and advancing medium and small-sized enterprises. Along with this, SIDBI is also engaged in promoting energy efficient activities.
What is Small Industries Development Bank of India (SIDBI)?
SIDBI, the Small Industries Development Bank of India, is a self-governing financial institution with the objective of supporting the progress and advancement of Micro, Small, and Medium Enterprises (MSMEs), which play a vital role in the nation’s economy through their contributions to production, employment, and exports.
The primary purpose behind the establishment of SIDBI is to enhance and empower the availability of credit to MSMEs while addressing the developmental and financial challenges within the MSME ecosystem. It operates as a legally mandated entity, established by an act of the Indian Parliament in 1990.
SIDBI Highlights – 2023
- SIDBI provides refinance support to small-scale industries (SSIs) and Micro Small and Medium Enterprises (MSMEs).
- Funding support is offered to the MSME sector.
- Discounting of bills for Small Scale Industries is facilitated.
- Refinance is provided to financial institutions, including Banks, NBFCs & Small Finance Companies.
- Financial services such as hire purchase, factoring, and leasing services are offered.
- Employment opportunities among SSIs are promoted.
- Assistance is provided to handle experts.
- Bank loans are offered to women entrepreneurs and underprivileged groups of people.
Purpose of SIDBI
- Help financial institutions advancing to small entities (MSMEs) confirm their financial health
- It directly provides loans to the organisations listed in the MSME sector
- It performs promotional activities for small-scale entities on a worldwide scale
- It offers bill discounting and rediscounting
- It is engaged in refinancing loans that are accelerated through PLIs to the small-scale units and provides resource support to them
- It provides services such as factoring, leasing, and others to the entities running businesses in the MSME sector
- It encourages employment-oriented sectors, specifically in semi-urban places, to create job opportunities, thereby preventing individuals from relocating to urban areas
- SIDBI also takes initiatives regarding the modernisation and technological advancement of existing entities
- State-level venture funds are also co-promoted through SIDBI
- It also supports the credit flow of working capital promptly and term loans to small entities.
Key Functions of SIDBI
Some of the important functions of SICBI are listed below:
- To ensure the financial well-being of financial institutions (cooperative and commercial banks) that lend to Small and Medium Enterprises (MSMEs) in the small-scale industry sector.
- Provide direct loans from SIDBI to companies classified under the Small and Medium Enterprises (MSMEs) sector.
- Undertake global marketing initiatives for small-scale industries.
- Offer opportunities for venture funding to industries within the Small and Medium Enterprises (MSMEs) sector.
- Promote employment generation and technology advancement in the sector.
- Provide employment opportunities for individuals interested in working in the sector. SIDBI recruitment updates can be found on the website: https://www.sidbi.in/en/careers/archived
- Extend loan offerings for the development and maintenance of small-scale industries in the country.
- Engage in global marketing efforts for small-scale industries.
- Encourage employment-oriented industries in the small-scale industry sector.
- Facilitate technology upgrading in the small-scale industry.
- Ensure the financial stability of cooperative banks and commercial banks that provide loans to small-scale industries.
- Promote the availability of venture funds.
Advantages of SIDBI
The following are some of the primary benefits of SIDBI:
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Custom Made
Small Industries Development Bank of India provides loans according to the organisation’s needs. If the business’s requirements do not belong to the normal categories, SIDBI will properly provide funding.
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Dedicated Size
SIDBI modifies credits and loans according to the organisation’s size. As a result, companies that meet the MSME criteria can obtain various types of loans tailored to their specific business requirements.
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Striking Rate of Interest
Small Industries Development Bank of India has ties with numerous banks and financial organisations across the globe and can provide loans at a lower rate of interest.
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Assistance
SIDBI is not only engaged in providing loans but also provides help and recommendations. Relationship managers of Small Industries Development Bank of India support the entities in taking the correct decision and providing assistance till the completion of the loan procedure.
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Security Free
Entrepreneurs can obtain loans of up to ₹ 100 lakhs without giving any security.
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Capital Growth
The owner of an organisation can acquire sufficient capital to meet its growth needs without diluting its ownership.
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Subsidies
Several schemes have been offered by SIDBI with a concessional rate of interest and easy terms. It has detailed information and a broader understanding of the schemes and loans available, and it can assist owners in making sound decisions for their businesses.
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Transparency
The fee and process prescribed by the Small Industries Development Bank of India are clear. The organisation does not levy any concealed charges.
Products Offered Under SIDBI
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SIDBI Make in India Soft Loan Fund For Micro Small and Medium Enterprises (SMILE)
- Loan repayment tenure extends up to 10 years, including a moratorium period of 36 months.
- Competitive and appealing interest rates are provided.
- Services and manufacturing sectors receive priority in loan allocation.
- Loans up to Rs. 2 crore may be eligible for coverage under the Credit Guarantee Scheme.
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SMILE Equipment Finance (SEF)
- Minimum loan amount available is Rs. 10 lakh.
- Competitive and appealing interest rates are provided.
- Loan repayment tenure extends up to 72 months, including the moratorium period.
- Eligibility for loans is restricted to MSMEs with a minimum operational history of 3 years and must demonstrate financial stability.
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Loans Under Partnership With OEM
- Loan amounts of up to Rs. 1 crore may be offered as the maximum limit.
- MSMEs with a minimum operational history of 3 years and financial stability are eligible for loans.
- The loan amount must be utilised specifically for investment in Plant and Machinery.
- Loan repayment tenure extends up to 60 months, including the moratorium period.
- Attractive interest rates are available for the loans.
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SIDBI – Loan For Purchase of Equipment For Enterprise’s Development (SPEED)
- Financing of up to 100% may be offered.
- Fast disbursal of funds.
- Eligibility for loans is limited to MSMEs with a minimum operational history of 3 years and financial stability.
- Loan repayment tenure ranges from 2 years to 5 years, including a moratorium period of 3 months to 6 months.
- The interest rate varies between 9.25% p.a. and 10% p.a.
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SIDBI – Loan For Purchase of Equipment For Enterprise’s Development PLUS (SPEED PLUS)
- Full financing options are available for the acquisition of high-end machinery.
- Fast disbursal of funds.
- No requirement for collateral.
- The interest rate varies between 8.80% p.a. and 10.50% p.a.
- Loan repayment tenure ranges from 2 years to 5 years, including a moratorium period of 3 months to 6 months.
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Top up Loan for Immediate Purposes (TULIP)
- Loan approval is granted within a timeframe of 7 days.
- No requirement for collateral.
- The interest rate varies between 10.00% p.a. and 11.00% p.a.
- Loan repayment tenure extends up to 60 months, including a moratorium period of 6 months.
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SIDBI Term-loan Assistance For Rooftop Solar PV Plants (STAR)
- Loans are extended to MSMEs with the objective of minimising their power bills.
- The loan amount may vary between ₹ 10 lakh and ₹ 2.5 crore.
- The interest rate ranges between 9.10% p.a. and 10.20% p.a.
- Loan repayment tenure extends up to 60 months, including a moratorium period that ranges from 3 months to 6 months.
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SIDBI Assistance to Healthcare Sector in War Against Second Wave of COVID19(Shwas)
- Full financing options may be available.
- Attractive interest rates are offered.
- No processing fee is charged.
- The interest rate varies between 4.50% p.a. and 5.00% p.a.
- The maximum loan amount provided is ₹ 2 lakh.
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Sidbi Assistance to MSME’S for Recovery & Organic Growth During COVID19 Pandemic(AROG)
- Full financing options may be available.
- Attractive interest rates are offered.
- Minimal collateral requirements.
- No processing fee is charged.
- The interest rate ranges between 5.50% p.a. and 6.00% p.a.
- The maximum loan amount provided is ₹ 2 lakh.
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Timely Working Capital Assistance to Revitalise Industries in Times of Corona Crisis (TWARIT)
- The interest rate stands at 8.25% per annum.
- The loan repayment tenure extends up to 48 months, including a moratorium period of 12 months.
- There are no penalties for prepayment.
Financial Facilities Provided by SIDBI
SIDBI provides the following financial facilities:
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Direct Finance
SIDBI is engaged in providing foreign currency loans, working capital support, equity support for MSMEs, etc., in numerous schemes of direct finance.
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Indirect Finance
SIDBI provides indirect finance by offering to refinance to PLIs, state-level financial institutions, etc., with a significant network of branches across India. The main goal behind this finance is to increase the utility aspects of the PLIs, which will finally support the credit flow to the MEMEs.
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Micro-Finance
SIDBI provides microfinance to minor entities to establish their businesses.
Direct Finance Loan Schemes Provided by SIDBI
Some of the few direct finance loan schemes that SIDBI provides are explained as follows –
| Scheme | Amount of Loan | Time Period of Loan | Suitability |
| Small Industries Development Bank of India Make in India Soft Loan Fund for MSME (SMILE) |
Least size of loan for equipment finance= ₹ 10 lakhs For other reasons = ₹ 25 lakhs |
Maximum 10 years, comprising three years moratorium | New entities in the production and service industry and existing entities for the purpose of expansion |
| SEF (Small equipment finance) | Least amount of loan = ₹10 lakhs | Maximum = 72 months | MEMEs that are running business activities for a minimum of three years and possessing reasonable financial performance. |
| Working capital (CC) | based on financial capability | As per norms | Existing entities that are customers under SIDBI or of other banks |
| Loans under partnership with Original Equipment Manufacturer | Maximum = ₹ 1 crore | Maximum = 5 years | MEMEs that are running business activities for a minimum three years and possessing reasonable financial performance. |
| SIDBI – SPEED ( loan is provided for the purchase of equipment for the development of the enterprises ) |
New clients = Maximum ₹ 1 crore Existing clients = Maximum, ₹ 2 crores |
Maximum 10 years, comprising six months moratorium | MEMEs that are running business activities for a minimum of three years and a minimum period of two years, are generating profits. |
| Small Industries Development Bank of India – SPEED PLUS loan is provided for purchase of equipment for the development of the enterprises plus ) |
New clients = Maximum ₹ 2 crores Existing clients = Maximum, ₹ 3 crores |
Maximum 10 years, comprising six months moratorium |
MEMEs that are running business activities for a minimum five years and a minimum period of three years, are generating profits. Net sales shall be at least ₹ 5 crores, with no operating losses in the earlier two years. |
In addition to the above schemes, Small Industries Development Bank of India is also engaged in providing numerous other schemes, and if you want to get information regarding the various schemes, connect with Vakilsearch. Our team will explain to you several schemes as per your business.
Indirect Loan Schemes Offered under SIDBI
SIDBI also provides indirect loans to different banks, NBFCs, and other financial entities. The following are the types of indirect loans available for financial bodies from SIDBI:
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Assistance to NBFCs
Non-Banking Financial Companies (NBFCs), Asset Loan Companies, or any finance company registered with RBI that provides financing services in the MSME sector are eligible to apply for loans from SIDBI. The specific eligibility criteria may vary from one lender to another.
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Refinance Scheme
SIDBI offers financial aid through multiple refinance schemes to scheduled banks. Loans from SIDBI are available to scheduled banks that possess robust financials.
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Assistance to Small Finance Banks (SFBs)
SIDBI supports banks by offering equity investments to capitalise Small Finance Banks (SFBs) and bridge their equity gap. Additionally, SIDBI extends refinance assistance to Microfinance Institutions (MFIs) and Non-Banking Financial Companies (NBFCs) after their conversion into SFBs.
5 Steps to Apply for a Loan From SIBDI
To apply for a loan from SIDBI, please follow the steps provided below:
- Step 1: Go to the official website of SIDBI.
- Step 2: Navigate to the ‘Borrower’s Corner’ tab and select ‘Online Loan Application’.
- Step 3: Provide your username and password.
- Step 4: Specify the desired loan amount and select a suitable scheme.
- Step 5: Enter personal information, including your name, username, email address, mobile number, business address, state, district, and other required details. Finally, click on ‘register’ to complete the application process.
Conclusion
SIDBI(Small Industries Development Bank of India) supports MSMEs in obtaining the funds they need to grow, market, advance, and commercialise their techniques and inventive goods. Several schemes are offered by the bank, along with financial services and products for satisfying the requirements of people in numerous businesses.
If you want to benefit from the loans provided by Small Industries Development Bank of India, contact Vakilsearch. We have an experienced team that will address your issue and support the growth of your business.
Frequently Asked Question
When was SIDBI Established?
Established on April 2, 1990, SIDBI serves as the primary financial institution responsible for promoting, financing, and developing the Micro, Small, and Medium Enterprise (MSME) sector.
Is SIDBI a statutory body?
In 1990, SIDBI was formed as a statutory body through an act passed by the Indian Parliament.
Are MUDRA loans offered by SIBDI?
Yes, the MUDRA loan is among the loan products provided by SIDBI.
What documents should I submit if I wish to apply for a SIDBI direct loan?
Applicants seeking the direct loan from SIDBI are required to submit documentation that includes proof of identity and address, PAN card, as well as documents validating their business, among other necessary documents.
What are the types of finance offered by SIBDI?
SIDBI provides direct financing, indirect financing, and microfinance services.
Is SIBDI a subsidiary of the Reserve Bank of India?
No, SIDBI is not a subsidiary of the RBI. The ownership of shares in SIDBI rests with the Government of India and other institutions that are either owned or controlled by the Central Government.
Is the credit score of the individual taken into consideration when applying for a SIBDI loan?
No, the credit score of the individual or partners is not taken into account.
What are the key products and services offered by SIDBI to MSMEs?
Under its several direct financing lending programmed, SIDBI provides working capital assistance, term loan assistance, foreign currency loan, help against receivables, equity support, energy saving plan for the MSME sector, etc.
What advantages do small businesses gain from availing loans and support from SIDBI?
SIDBI assists small business in obtaining the capital needed to expand, promote, create, and sell their cutting-edge technology and goods. In addition to offering financial services and solutions to fulfil the needs of different enterprises, the bank offers a number of programmes.
Can you list some important features that distinguish SIDBI from other financial institutions?
SIDBI (Small Industries Development Bank of India) stands out from other financial institutions due to its exclusive focus on Small and Medium Enterprises (SMEs) and its mission to foster their growth and development. It offers targeted financial products, manages credit guarantee funds, and provides venture capital support. SIDBI's unique role in refinancing and policy advocacy, coupled with its commitment to microfinance and sustainability projects, sets it apart as a dedicated institution for SME development in India.
How can entrepreneurs and businesses apply for loans from SIDBI?
Entrepreneurs and businesses can apply for loans from SIDBI by contacting their nearest SIDBI branch or visiting the official SIDBI website to initiate the loan application process.
Are there different types or categories of loans provided by SIDBI?
Yes the SIDBI provided various loans as per the need, Some of them include: EXPRESS 2.0 Rapid loan approval for 'New to SIDBI' customers in the manufacturing and service sectors through an automated platform. SAATH Support for SC/ST-promoted MSMEs in manufacturing and service sectors for establishment, expansion and modernization with term loan assistance on softer terms. ARJANA Assistance for MSMEs promoted by women entrepreneurs for establishment, expansion, and modernization, including softer-term term loan support. STEP Medium/short-term financial assistance for eligible MSMEs to augment NWC and execute urgent confirmed orders. UBHARTE SITAARE Term loans for export-oriented MSMEs in high-potential sectors for expansion, modernization and technology upgrades. STHAPAN Financial assistance for setting up new Greenfield units, covering land purchase, factory construction, and equipment. ARISE Support for brownfield/existing entities, including expansion, modernization, and capital expenditure, on attractive terms. STAR Term loans for rooftop solar PV plants, aiming to reduce power bills with a coverage of 25 KW to 1 MW.
What are the primary functions of SIDBI under the Ministry of Finance in India?
SIDBI has a central role as the Principal Financial Institution, tasked with a three-fold mission encompassing the promotion, financing, and development of the MSME sector. It also coordinates the efforts of various institutions engaged in similar activities.
Are there any potential disadvantages or challenges associated with SIDBI's services?
Primary drawbacks of SIDBI include limited reach, as it may not extend its financial and support services to all MSMEs across India, leaving some without access to its assistance.
Could you describe the nature of SIDBI and its role in the Indian financial landscape?
SIDBI, serves as a principal financial entity that fosters the promotion, financing, and development of the MSME sector, playing a crucial role in India's financial landscape by bolstering economic growth, job creation, and financial inclusion. SIDBI collaborates with other institutions, channels resources, and implements various loan programs and developmental initiatives, aligning with government policies to empower entrepreneurs and drive economic progress.
What is the minimum loan amount that small businesses can obtain from SIDBI?
The minimum loan amount that small businesses can obtain from SIDBI varies depending on the specific scheme or program they apply for. Loan amounts can range from as low as INR 10 lakh to higher amounts, depending on the scheme's criteria and the borrower's needs.
What is the typical interest rate structure for loans provided by SIDBI to MSMEs?
Loans are extended to MSMEs with a minimum operational history of 3 years, and these enterprises should demonstrate financial stability. The repayment period spans between 2 to 5 years, which includes a moratorium period ranging from 3 to 6 months. The interest rate falls within the range of 9.25% to 10% per annum.
