What is the full form of SIDBI?

What is SIDBI?

The full form of SIDBI is Small Industries Development Bank of India. This bank is a subsidiary bank of IDBI. The bank was established under the special Act of the Parliament 1988. SIDBI has been developed for the administration of the National Equity Fund and Small Industries Development Fund. Previously, managing these two funds was the responsibility of IDBI. SIDBI is also responsible for the promotion, development, and finance of the MSME sector. MSME can be expanded as Micros, Small, and Medium Enterprise. SIDBI helps MSMEs to get the funds required for the growth, development, marketing, and commercialization of their technologies.

The Finance Facilities that SIDBI provides

SIDBI provides different types of finance facilities and some of them are discussed here in detail.

Direct Finance

SIDBI has many direct finance loan schemes through which it offers the following −

• Working Capital Assistance

• Term Loan Assistance

• Foreign Currency Loan

• Support against Receivables

• Energy Saving Scheme

Many other things under direct finance are provided by SIDBI to MSMEs.

Indirect Finance

SIDBI also offers indirect finance to primary lending institutions or PLIs. These PLIs include banks, state-level financial institutions, etc. Indirect finance is provided with the help of a large number of branches available all over the country.

Micro Finance

SIDBI also provides microfinance to entrepreneurs and small businesses so that they can establish their businesses easily.

Functions of SIDBI

SIDBI has different types of functions which are discussed below −

• SIDBI refinances loans to the small scale industries and these loans are extended by PLIs

• Bills can be discounted and rediscounted

• It helps in the expansion of the marketing channels to sell the products of the small scale industries

• Employment-oriented industries are promoted to create opportunities for employment

• It also helps to modernize the current units of small scale industries

Applying loan through SIDBI

SIDBI provides loans to small businesses and entrepreneurs and the steps to be followed are described below −

• Consultants who are recognized and enrolled with SIDBI have the responsibility of preparing documents which are needed for the loan. The consultants prepare a Basic Information Memorandum(BIM) according to the information and documents provided by MSMEs.

• MSME entrepreneurs approve this BIM and consultants submit it to the SIDBI

• A rating agency rates the proposal and it is approved by the RBI

• SIDBI can handle the following

  • Equity is offered to those units that are growth-oriented

  • Units in the service sector receive finance from SIDBI

  • Credits are also offered to the MSMEs for cleaner production process

• Applications for the loans are submitted to the public sector banks in other cases. Public sector banks can provide loans as they have an MOU with SIDBI

Types of Loans provided by SIDBI

SIDBI provides different types of loans and we will discuss them here.

SIDBI Make in India Soft Loan Fund for Micro Small and Medium Enterprises

This is a type of loan that is provided to cover all the financial needs of the new entrepreneurs. INR 10 lakh is provided to purchase equipment and INR 25 lakh is provided for other reasons.

Loans under Partnership with the OEM

This is a loan scheme which MSMEs can use to purchase machinery required for their business. These machines can be purchased from the Original Equipment Manufacturer. A loan of INR 1 lakh is provided for 60 months. The loan is provided to those MSMEs whose business has been established for the past three years.

SIDBI Trader Finance Scheme

This is a loan that SIDBI provides to MSME retailers and wholesalers. The loan is provided only to those retailers and wholesalers whose business set up is of three years. The minimum loan amount is INR 10 lakh and the maximum is INR one crore.

Smile Equipment Finance

This is a type of loan whose interest rate is competitive. The minimum amount of loan is INR 10 lakh and its repayment period is 72 months.

Loan for Purchase of Equipment for Entrepreneur’s Development

This is a loan provided by SIDBI whose amount can go up to INR 1 crore for new businesses and INR 2 crore for existing ones. The loan can be paid back within a period of two to five years.

Advantages of SIDBI

SIDBI has many advantages and some of them are listed below −

• SIDBI provides loans according to the requirements of a business

• Loans and credit can be modified but it depends on the size of a business

• SIDBI can offer concessional interest rates as it has a tie-up with many national and international banks and financial institutions.

• Business people can get INR 100 lakh without paying any security

Conclusion

SIDBI can be expanded as Small Industries Development Bank of India. This bank is a subsidiary id IDBI and deals with the development of small scale industries. Businesses can take loans to purchase machinery and equipment to start. The interest rates are reasonable and the repayment period is long.

FAQs

FAQ 1: What is the full form of SIDBI?

Ans: The full form of SIDBI is Small Industries Development Bank of India

FAQ 2: Which ministries are responsible for SIDBI working as a nodal agency?

Ans: These ministries are as follows −

• Ministry of MSME

• Ministry of commerce and industry

• Ministry of Textiles

• Ministry of the food processing industry

FAQ 3: Does SIDBI come under RBI?

Ans: Yes! SIDBI comes under RBI.

FAQ 4: In which year SIDBI was established?

Ans: SIDBI was established in 1990.