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How a Professional/BDS Provider can help an MSME – An Example
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SIDBI

Mission Statement

“To empower the Micro, Small and Medium Enterprises (MSMEs) sector with a view to contributing to the process of economic growth, employment generation and balanced regional development.”

Vision

“To emerge as a single window for meeting the financial and developmental needs of the MSME sector to make it strong, vibrant and globally competitive, to position SIDBI Brand as the preferred and customer-friendly institution and for enhancement of shareholder wealth and highest corporate values through modern technology platform”.

Origin and Objective

Small Industries Development Bank of India (SIDBI), set up in April 1990 under an Act of Indian Parliament, acts as the Principal Financial Institution for the Promotion, Financing and Development of the MSME sector and Co-ordination of the functions of the institutions engaged in similar activities. The authorised capital of the Bank is Rs. 1000 crore and the Paid up capital is Rs. 450 crore. 

  l.

Indirect Finance
 
The Indirect assistance in the form of Refinance is provided to more than 900 Primary Lending Institutions (PLIs), comprising banks, State Level Financial Institutions, etc. having a network of over 82,000 branches all over the country. The main objective of Refinance Scheme is to augment the resource position of PLIs which would ultimately facilitate the flow of credit in an increasing measure to MSME sector. 
 

  ll. Direct Finance
 
  • Term Loan Assistance
  • Working Capital Assistance
  • Support against Receivables
  • Foreign Currency Loans
  • Scheme of Energy Saving for MSME sector
  • Recent Business Initiatives, such as,
    • New Thrust on Refinance
    • Risk Capital Fund
    • Equity Support
    • Non - Fund Based Scheme
    • Customised Cluster based Arrangements
  lll.

Micro Finance
 
In order to meet the high untapped demand for credit and support service in the unorganised and informal sector, SIDBI launched its Micro Credit programme on a pilot basis in 1994. The primary objective of SIDBI’s Micro Finance operation is to create a national network of strong, viable and sustainable Micro Finance Institutions (MFIs) from the informal and formal sectors to provide micro finance services to the poor, especially women. SIDBI provides a complete range of financial and non-financial services, such as, loan funds, grant support, equity/quasi equity and institution building support to the MFls, so as to build their capacities to enable them to become financially sustainable entities.
 

  lV.

Promotional & Developmental Support
 
The Promotional and Developmental (P&D) activities of SIDBI are designed to achieve the twin objectives of national importance, viz.

(a)

Promotional - enterprise promotion resulting in self-employment and creation of additional employment through its select programmes, such as, Rural Industries Programme (RIP), Entrepreneurship Development Programme (EDP), Vocational Training Programmes, etc., and
 

(b)

Developmental - enterprise strengthening to enable MSMEs to face the emerging challenges of globalisation and growing competition through select interventions, such as, Skill-cum-Technology Upgradation Programme (STUP), Small Industries Management Programme (SIMAP), Cluster Development Programme (CDP), Marketing Assistance, etc.
 

  V.

Institution Building
 
1.

SIDBI Venture Capital Limited (SVCL)
SIDBI Venture Capital Limited (SVCL) is an asset management company, established in March 1999 for managing venture capital fund. At present, it manages two SEBI registered venture capital funds, viz. the National Venture Fund for Software and Information Technology Industry (NFSIT) and the SME Growth Fund (SGF). NFSIT has completed nine years of operations. The Growth Fund has the main focus on growth sectors of the economy, such as, life sciences, retailing, light engineering, food processing, information technology, health care, logistics and distribution; etc.
 

2.

Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE)
In order to encourage banks to lend more to MSME Sector, Government of India (GoI) and SIDBI set up the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) in July, 2000. It operates the Credit Guarantee Scheme (CGS) for Micro and Small Enterprises (MSEs) which guarantees collateral free / third-party guarantee free loans up to Rs. 100 lakh extended by Member Lending Institutions (MLIs) to MSEs. CGTMSE has changed its scheme to make it more attractive viz. raising the upper limit for guarantee cover to Rs.100 lakh per borrower, reduction of lock-in period for claims settlement to 18 months, raising guarantee cover to 85% for loans up to Rs.5 lakh to micro enterprises. The credit guarantee is provided for 75% of the credit facility for loans up to Rs. 50 lakh. However, a higher guarantee cover of 80% is provided to MSEs operated and / or owned by women and units in the NER. For availing guarantee cover, a one-time guarantee fee of 1.5% and annual service fee 0.75% per annum is levied on the sanctioned credit amount, which has been lowered to 1.0% & 0.5 %, respectively, in respect of all loans up to Rs. 5 lakh.
 

3.

SME Rating Agency of India Ltd. (SMERA)
In order to provide an independent, third-party credit rating support to MSMEs, SIDBI, along with Dun & Bradstreet Information Services and Public Sector Banks, set up SMERA on September 2005.
 

4.

India SME Technology Services Ltd. (ISTSL)
India SME Technology Services Limited (ISTSL) was set up in November 2005 to render technical services for technology transfer and attendant support services in order to enhance market competitiveness of MSMEs and promote sustainable development. Accordingly, ISTSL has entered into partnership with various national and international organisations engaged in similar activities. Efforts have also been made to facilitate energy efficient technologies leading to reduction in Green House Gases (GHG). Such initiatives of ISTSL are expected to strengthen and accelerate the process of technological modernization in the MSME sector.
 

5.

India SME Asset Reconstruction Company Ltd. 
India SME Asset Reconstruction Company Ltd. (ISARC) was incorporated in April 2008 as an ARC. The objective of the company is to acquire non-performing assets (NPAs) and strive to maximize recovery value through its innovative resolution methods. The focus of business would be on NPAs of MSME sector. ISARC has been granted Reserve Bank of India’s Certificate of Registration, on March 05, 2009 subsequent to which, it has commenced the business.
 

  Vl.

Co-Ordination Role
 
With the objective of all-round development of MSME sector, SIDBI coordinates with a number of national and international organizations.
 

  Vll. Policy Advocacy Role
 
Being the principal financial institution for the MSME sector, SIDBI plays an effective policy advocacy role in the process of MSMEs policy making by the Govt. of India, Planning Commission, Reserve Bank of India (RBI), Indian Banks’ Association, etc
 
  Vlll. Rating Of SIDBI Instruments
 
CARE AAA – Best Quality having negligible investment risk.
 
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