SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA
(SIDBI) www.edutap.co.in
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Contents
1 INTRODUCTION..................................................................................................................................................... 3
1.1 History ............................................................................................................................................................... 3
1.2 Mission .............................................................................................................................................................. 3
1.3 Corporate Structure .......................................................................................................................................... 3
1.4 Definitions of Micro, Small & Medium Enterprises ........................................................................................... 3
1.5 Business Domain of SIDBI .................................................................................................................................. 4
2 Objectives of SIDBI: ................................................................................................................................................... 5
2.1 Mandatory Objectives ....................................................................................................................................... 5
2.2 Other Objectives: ............................................................................................................................................... 5
3 Functions of SIDBI ...................................................................................................................................................... 5
4 Major Digital and other Initiatives undertaken by SIDBI ........................................................................................... 8
4.1 SIDBI StartUp Mitra ........................................................................................................................................... 8
4.2 SIDBI Udyami Mitra ........................................................................................................................................... 8
4.3 MUDRA Mitra App ........................................................................................................................................... 10
4.3.1 What is MUDRA? ..................................................................................................................................... 10
4.3.2 Why MUDRA has been set up? ............................................................................................................... 10
4.3.3 What will be the role and responsibilities of MUDRA? ........................................................................... 11
4.3.4 Features of MUDRA ................................................................................................................................. 11
4.3.5 Who are the target clients of MUDRA/ What kind of borrowers are eligible for assistance from
MUDRA? 12
4.3.6 What is the Scope of PMMY and various types of loan available and which are the agencies that will
provide loan? ........................................................................................................................................................... 12
4.3.7 Who will monitor the implementation of PMMY? .................................................................................. 12
4.3.8 What is the eligibility of persons for availing MUDRA loans? ................................................................. 12
4.3.9 Features of MUDRA Card? ....................................................................................................................... 13
4.4 SIDBI Venture Funds ........................................................................................................................................ 13
4.5 Stand Up Mitra Portal ...................................................................................................................................... 14
4.6 Udyog Aadhar .................................................................................................................................................. 14
5 Budget 2017-2018 announcements for MSME sector ............................................................................................ 16
6 Recent SIDBI and MSME sector related News......................................................................................................... 16
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1 INTRODUCTION
1.1 History
Small Industries Development Bank of India (SIDBI) set up on April 2, 1990 under an Act of
Indian Parliament- the SIDBI Act, 1989. The charter establishing SIDBI envisaged it to be ‘the
Principal Financial Institution for the Promotion, Financing and Development of the Micro,
Small and Medium Enterprise (MSME) sector and for Co-ordination of the functions of the
institutions engaged in similar activities.
SIDBI commenced its operations by taking over the outstanding portfolio and activities of
IDBI pertaining to the small scale sector. In pursuance of the SIDBI Amendment Act,2000
and as approved by GOI, 51.1 percent equity shares of SIDBI held by IDBI have been
transferred to public sector banks, LIC, GIC and other institutions owned and controlled by
the central Government.
Presently, the shares of SIDBI are held by 29 institutions/PSBs/insurance companies owned
or controlled by the Central Government, with State Bank of India (16.73%), IDBI Bank Ltd.
(16.25%) and GOI (15.40%) as its three largest shareholders.
1.2 Mission
Its mission is to facilitate and strengthen credit flow to MSMEs and address both financial
and developmental gaps in the MSME eco-system.
1.3 Corporate Structure
Presently Mohammad Mustafa is the Managing Director of the organization. SIDBI is
headquartered in Lucknow. It has 15 Regional offices and 80 Branches located all over the
India.
1.4 Definitions of Micro, Small & Medium Enterprises
MSMEs in India were defined in terms of investment in plant and machinery / equipment
up to Rs 10 Crore but this keeps on changing by time. We cover the latest figures in the RBI
Notifications in current affairs sub-course
In accordance with the provision of Micro, Small & Medium Enterprises Development
(MSMED) Act, 2006 the Micro, Small and Medium Enterprises (MSME) are classified in two
Classes:
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1. Manufacturing Enterprises-he enterprises engaged in the manufacture or production of
goods pertaining to any industry specified in the first schedule to the industries
(Development and regulation) Act, 1951) or employing plant and machinery in the process
of value addition to the final product having a distinct name or character or use. The
Manufacturing Enterprise is defined in terms of investment in Plant & Machinery.
2. Service Enterprises: -The enterprises engaged in providing or rendering of services and are
defined in terms of investment in equipment.
1.5 Business Domain of SIDBI
The business domain of SIDBI consists of Micro, Small and Medium Enterprises (MSMEs),
which contribute significantly to the national economy in terms of production, employment
and exports.
MSME sector is an important pillar of Indian economy as it contributes greatly to the growth
of Indian economy with a vast network of around 5.1 crore units, creating employment of
about 11.7 crore, manufacturing more than 6,000 products, contributing about 45% to
manufacturing output and about 40% of exports in terms of value, about 37% of GDP.
The business strategy of SIDBI is to address the financial and non-financial gaps in MSME
eco-system. Financial support to MSMEs is provided by way of
(a) Indirect / refinance to Financial Institutions including banks, state entities, Micro
Finance Institutions (MFIs) for onward lending to MSMEs and
(b) Direct finance to MSMEs in the niche areas like risk capital, sustainable finance,
receivable financing, service sector financing, etc.
As on March 31, 2016, SIDBI has made cumulative disbursements of about `4.50 lakh crore
benefitting about 350 lakh persons. By this way, SIDBI would be complementing and
supplementing efforts of banks/ FIs in meeting diverse credit needs of MSMEs.
Development Outlook
In order to promote and develop the MSME sector, SIDBI adopts a ‘Credit Plus’ approach,
under which, besides credit, SIDBI supports enterprise development, skill up-gradation,
marketing support, cluster development, technology modernization, etc., in the MSME
sector through its promotional and developmental support to MSMEs. These P&D support
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have benefitted more than 2.3 lakh persons in the MSME sector, created more than 1.5 lakh
employment and helped in setting up more than 80,000 units, mostly rural enterprises.
While extending financial assistance to the small units all over the country SIDBI makes use
of the existing banking and financial institutions, such as the commercial banks, cooperative
banks and RRBs, SFCs and SIDCs which have vast network of branches all over the country.
As many as 870 institutions are eligible for assistance from SIDBI.
2 Objectives of SIDBI:
2.1 Mandatory Objectives
Four basic objectives are set out in the SIDBI Charter. They are:
1. Financing
2. Promotion
3. Development
4. Co-ordination
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 modem and technologically superior units at one end and
traditional units at the other.
2.2 Other Objectives:
• To empower the Micro, Small and Medium Enterprises (MSME) sector with a view to
contributing to the process of economic growth, employment generation and
balanced regional development.
• 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
share – holder wealth and highest corporate values through modem technology
platform.
3 Functions of SIDBI
The important functions of SIDBI are as follows:
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1. SIDBI Refinance loans and advances extended by the primary lending institutions to
small scale industrial units and also provide sources support to them,
2. SIDBI discounts and rediscounts bills arising from sale of machinery to or
manufactured by industrial units in the small scale sector,
3. SIDBI extends seeds capital / soft loan assistance under National Equity Fund, Mahila
Udyam Nidhi and Mahila Vikas Nidhi and seed capital scheme through specified
lending agencies,
4. SIDBI grant direct assistance as well as refinance loan extended by primary lending
Institution for financing export of products manufactured by industrial concerns in
the small scale sector,
5. SIDBI provides services like leasing, factoring etc. to industrial concerns in small scale
sector.
6. SIDBI extends financial support to state small Industries Development Corporation
(SSIDCs) for providing source raw materials to and marketing the end products of
industrial units in small scale units,
7. SIDBI provides support to National Small Industries Corporation (NSICs) for providing
leasing, hire-purchase, and marketing support to industrial units in the small scale
sector,
In setting up SIDBI, the intention of the GOI was to ensure larger flow of financial assistance
to small scale sector. SIDBI has in line initiated steps for technological up gradation and
modernization of existing units. It is expanding the channels for marketing of products of SSI
sector in internal and International market. It is also promoting employment - oriented
industries especially in semi - urban areas to credit more employment opportunities and
thereby checking migration of rural population to urban and cosmopolitan areas.
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4 Major Digital and other Initiatives undertaken by SIDBI
4.1 SIDBI StartUp Mitra
An online start-up ecosystem platform -- SIDBI Startup Mitra -- developed by the state-
owned funding institution as part of its efforts to scale up initiatives targeted at
entrepreneurship development.
The launch of the ‘www.sidbistartupmitra.in’ portal is in line with the objective of the
government in forging innovation-led growth through various measures, including start-up
action plan and Atal Innovation Mission.
The platform will enable entrepreneurs in the start-up community to get connected with
various stakeholders, namely incubators, angel investors, venture capital funds and the like,
SIDBI said in a statement.
This gives an opportunity for discussion and implementation of several suggestions to
strengthen financing and other aspects relating to innovation ecosystem. This would also
include greater participation by banks in financing innovation and creating policy at board
level, enhancing domestic pool of capital for start-ups, establishment of the National
Innovation Promotion Board.
4.2 SIDBI Udyami Mitra
Under portal ‘www.udyamimitra.in’, financial assistance is provided for all enterprise loans
including MUDRA loans up to Rs 10 Lakh and MSME loans for amount beyond 10 Lakh and
upto 1 Crore for existing and new enterprises.
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It is an enabling platform and aims at instilling ease of access to MSMEs financial and non-
financial service needs.
Key Features
The Portal, as a virtual market place endeavors to provide 'End to End' solutions not only for
credit delivery but also for the host of Credit-plus services by way of hand holding support,
application tracking, and multiple interfaces with stakeholders (i.e. banks, service providers,
applicants). The important features include: -
• Matchmaking platform- It provides a unique match making platform to MSME loan
seekers, lenders as also handholding agencies. The portal has designed capability to
accept varied MSME loan applications. Presently loans up to 1 crore can be accessed.
The portal aims to be a crucial interface layer to create a support system involving
varied stakeholder
• Inclusive Access to all - It provides access to both financial (1.25 lakh bank branches)
and non-financial services (17000+ handholding agencies) with three distinct features
viz.
(i) Seek Handholding support;
(ii) Select and apply for loans to preferred banks;
(iii) Enable faster loan processing.
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Borrowers) and disposal of the applications are expected to be ensured as per Code
of Commitment for its Customers adopted by respective banks.
4.3 MUDRA Mitra App
‘MUDRA Mitra’ is a mobile phone application providing information regarding ‘Micro Units
Development and Refinance Agency Ltd. (MUDRA)’, a wholly owned subsidiary of SIDBI and
its various products/schemes. It will guide a loan seeker to approach a banker in availing
MUDRA loan under Pradhan Mantri Mudra Yojana (PMMY). Users can also access useful
loan related material including sample loan application forms.
Below, we have explained about the MUDRA scheme and its features.
4.3.1 What is MUDRA?
MUDRA, which stands for Micro Units Development & Refinance Agency Ltd, is a financial
institution being set up by Government of India for development and refinancing micro
units enterprises. It was announced by the Finance Minister while presenting the Union
Budget for FY 2016. The purpose of MUDRA is to provide funding to the non-corporate small
business sector through various Last Mile Financial Institutions like Banks, NBFCs and MFIs.
MUDRA is a refinance agency and not a direct lending institution. MUDRA provides
refinance support to its intermediaries viz. Banks, Micro Finance Institutions and NBFCs,
who are in the business of lending for income generating activities in the non farm sector in
manufacturing, processing, trading or service sector and who in turn will finance the
beneficiaries.
4.3.2 Why MUDRA has been set up?
The biggest bottleneck to the growth of entrepreneurship in the Non–Corporate Small
Business Sector (NCSB) is lack of financial support to this sector. More than 90% of this
sector does not have access to formal sources of finance. GoI is setting up MUDRA Bank
through a statutory enactment for catering to the needs of the NCSB segment or the
informal sector for bringing them in the mainstream. Pending enactment of an act for
MUDRA Bank, a Non Banking Finance Company as MUDRA Ltd has been set up as a
subsidiary of SIDBI.
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4.3.3 What will be the role and responsibilities of MUDRA?
MUDRA would be responsible for refinancing all Last Mile Financiers such as Non-Banking
Finance Companies, Societies, Trusts, Co-operative Societies, Small Banks, Scheduled
Commercial Banks and Regional Rural Banks which are in the business of lending to
micro/small business entities engaged in manufacturing, trading and services activities.
MUDRA would also partner with State/Regional level financial intermediaries to provide
finance to Last Mile Financier of small/micro business enterprises.
4.3.4 Features of MUDRA
Under the aegis of Pradhan Mantri MUDRA Yojana (PMMY), MUDRA has already created its
initial products / schemes. The interventions have been named ‘Shishu’, ‘Kishor’ and ‘Tarun’
to signify the stage of growth / development and funding needs of the beneficiary micro
unit / entrepreneur and also to provide a reference point for the next phase of graduation /
growth to look forward to. The financial limit for these schemes is:-
a. Shishu : covering loans upto 50,000/-
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b. Kishor : covering loans above 50,000/- and upto 5 lakh
c. Tarun : covering loans above 5 lakh to 10 lakh
MUDRA’s delivery channel is conceived to be through the route of refinance primarily to
Banks/NBFCs/MFIs.
4.3.5 Who are the target clients of MUDRA/ What kind of borrowers are eligible for assistance from
MUDRA?
Non–Corporate Small Business Segment (NCSB) comprising of millions of proprietorship /
partnership firms running as small manufacturing units, service sector units, shopkeepers,
fruits / vegetable vendors, truck operators, food-service units, repair shops, machine
operators, small industries, artisans, food processors and others, in rural and urban areas.
4.3.6 What is the Scope of PMMY and various types of loan available and which are the agencies that
will provide loan?
Pradhan Mantri Mudra Yojana (PMMY) loans will be extended by all Public Sector Banks
such as PSU banks, Regional Rural Banks (RRBs), Cooperative Banks, Private Sector Banks,
Foreign Banks, Micro Finance Institutions and Non Banking Finance Companies. All loans
sanctioned on or after April 08, 2015 upto a loan size of 10 lakh for non-farm income
generating activities will be branded as PMMY loans.
4.3.7 Who will monitor the implementation of PMMY?
Monitoring of PMMY progress at the State level will be done through SLBC forum and at
National level by MUDRA/Department of Financial Services, Government of India. For this
purpose, MUDRA has developed a portal, wherein the banks and other lending institutions
directly feed their achievement details which are consolidated by the system and reports
are generated for review.
4.3.8 What is the eligibility of persons for availing MUDRA loans?
Any Indian Citizen who has a business plan for a non farm income generating activity such as
manufacturing, processing, trading or service sector whose credit need is less than 10 lakh
can approach either a Bank, MFI or NBFC for availing of MUDRA loans under PMMY. The
usual terms and conditions of the lending agency may have to be followed for availing of
loans under PMMY. The lending rates are as per the RBI guidelines issued in this regard from
time to time.
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4.3.9 Features of MUDRA Card?
MUDRA Card is an innovative credit product wherein the borrower can avail of credit in a
hassle free and flexible manner. It will provide a facility of working capital arrangement in
the form of CC/OD to the borrower. Since MUDRA Card will be RuPay debit card, it can be
used for drawing cash from ATM or Business Correspondent or make purchase using Point
of Sale (POS) machine. Facility is also there to repay the amount, as and when, surplus cash
is available, thereby reducing the interest cost.
4.4 SIDBI Venture Funds
MSMEs have been largely dependent on the promoters’ resources, borrowings from friends
and relatives and secured loans from banks/ financial institutions for meeting their financial
requirements. Financing of MSMEs, particularly knowledge-based enterprises has some
issues as these industries do not create tangible assets. The conventional method of raising
finance by MSMEs continues to be debt finance, which has its own inherent limitations like
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gearing ratio norm, asset coverage, etc. To facilitate the flow of equity capital to this sector,
the stake holders in the echo system have taken up several measures.
SIDBI has played a critical role in developing the MSME venture eco- system in the country.
SIDBI has so far contributed to the corpus of 88 venture capital funds which has catalyzed
investment of more than Rs.5600 Crore to more than 472 MSMEs.
4.5 Stand Up Mitra Portal
The portal ‘www.startupmitra.in’ facilitates bank loan between `10 lakh to `1 crore to at
least one SC/ST and one women borrower per bank branch for setting up Greenfield
enterprises in manufacturing, services or trading activities. The portal acts as a virtual
market place with eased business leads, standardized application with entire annexures
downloadable in one go, enable applicant to revisit and submit edited applications, reduced
reporting/M&E involvements and so on. The maximum rate of interest under the scheme is
capped at MCLR + 3% plus tenure premium.
Details regarding the Stand up India Scheme have already been discussed in the report on
Social Justice.
4.6 Udyog Aadhar
If small and medium small industries want to start any business then they need to do the
registration with MSME. This registration with MSME can be done in two ways i.e. one is
online and other one is offline.
Udyog Aadhaar is the online method.
The Ministry of MSME, in consultation with the National Board of MSMEs and the Advisory
Committee in this behalf, has prepared a one-page registration form that would constitute a
self- declaration format under which the MSME will self-certify its existence, bank account
details, promoter/owner’s Aadhaar details and other minimum basic information required.
Based on the same, the MSMEs can be issued online, a unique identifier i.e. Udyog Aadhaar
Number.
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The Ministry of MSME has set up the infrastructure i.e. the Udyog Aadhaar (UA) Portal
(http://udyogaadhaar.gov.in) for online filing of Udyog Aadhaar Memorandum (UAM) by
enterprises located anywhere in the country. The UA portal is also accessible on mobile
devices.
Udyog Aadhaar registration will enable the units/enterprises to seek information and apply
online about various services being offered by all Ministries and Departments.
Earlier only medium enterprises were insisted to file as it was very cumbersome to file, the
simplified Udyog Aadhaar will enable all enterprises to file and register themselves simply
by using Udyog Aadhaar Number.
The process of obtaining Udyog Aadhaar Number is free-of cost, paperless and results in
instant registration.
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5 Budget 2017-2018 announcements for MSME sector
The announcement in budget related to the MSME’s have been covered in the coverage of
Budget by EduTap. Please read the respective section for the same
6 Recent SIDBI and MSME sector related News
In exam, the questions from this chapter if asked are current affairs based, so please read
the FM Current Affairs section in your course
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