Mission

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.

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 share - holder
wealth and highest corporate values through modern technology
platform.

HISTORY

Established in April 2,1990

Principal Development Financial Institution for :

-- Promotion
-- Financing and
-- Development of Industries in the small scale sector and
--Co-ordinating the functions of other institutions engaged in similar
activities.

PROVISION CHARTER

SIDBI was established on April 2, 1990. The Charter establishing it, The
Small Industries Development Bank of India Act, 1989 envisaged SIDBI to
be "the principal financial institution for the promotion, financing and
development of industry in the small scale sector and to co-ordinate the
functions of the institutions engaged in the promotion and financing or
developing industry in the small scale sector and for matters connected
therewith or incidental thereto.
Business Domain of SIDBI

The business domain of SIDBI consists of small scale industrial units, which
contribute significantly to the national economy in terms of production,
employment and exports. Small scale industries are the industrial units in
which the investment in plant and machinery does not exceed Rs.10 million .
About 3.1 million such units, employing 17.2 million persons account for a
share of 36 per cent of India's exports and 40 per cent of industrial
manufacture. In addition, SIDBI's assistance flows to the transport, health
care and tourism sectors and also to the professional and self-employed
persons setting up small-sized professional ventures.

SIDBI Among Top 30 Development Banks of the World

SIDBI retained its position in the top 30 Development Banks of the World in
the latest ranking of The Banker, London. As per the May 2001 issue of The
Banker, London, SIDBI ranked 25th both in terms of Capital and Assets.

Background of SIDBI

As the Apex Financial Institution for SSIs, SIDBI has been undertaking
Policy Supportive research studies to enhance the competitiveness of SSIs
against the backdrop of increasing competition in the Indian Industry
accelerated by the process of globalisation. One of the major challenges
facing most of the developing countries today is the new World Trade
Regime, brought in by World Trade Organisation (WTO). WTO established
in 1995 embodies the principles of uniformity, certainty and transparency in
the international trading system. The various agreements entered into by
WTO member nations including India will have far reaching implications on
Indian Industry particularly the SSIs, as they have traditionally been
constrained by a number of factors impeding their competitiveness. Some of
the Agreements which have already had a significant impact on Indian
industry and particularly the SSIs are GATT (General Agreement on Tariffs
& Trade) and the Principles of Most Favoured Nation and National
Treatment, Agreement on Technical Barriers to Trade, Trade Related
Intellectual Property Rights (TRIPS), Agreement on Anti-dumping
Measures and Trade Related Investment Measures (TRIMS).
During the last few years, Government policies relating to trade and industry
in India have been substantially liberalized and modified in keeping with the
WTO related trade obligations. These have accelerated competition for SSIs
not only in the global markets but even in the domestic market due to the
increased inflow of low cost imports and substantial FDI even in the hitherto
SSI dominated sectors.

It was against this background that SIDBI initiated a series of WTO related
sectoral studies to assess the impact of WTO Agreements on the SSIs and
recommend strategic policy initiatives to enable them to face the challenges
of WTO and capitalize on the emerging opportunities. These studies got
conducted by SIDBI from professional consultancy organisations having
expertise in respective field

In the first phase, the following six sectors were selected for the study:

1. Leather and Leather Products

2. Gems & Jewellery
3. Drugs & Pharmaceuticals
4. Dyes & Intermediates
5. Textiles including Readymade Garments
6. Toys.

Small Industries Development Bank of India (SIDBI)

Origin & Objectives

Small Industries Development Bank of India (SIDBI) was established in

April 1990 under an Act of Indian Parliament as the principal financial
institution for :

• Promotion
• Financing
• Development of industry in the small scale sector
• Co-ordinating the functions of other institutions engaged in similar
activities

Since its inception, SIDBI has been assisting the entire spectrum of SSI
Sector including the tiny, village and cottage industries through suitable
schemes tailored to meet the requirement of setting up of new projects,
expansion, diversification, modernisation and rehabilitation of existing units.
Domain of Service

The Small Scale Industries (SSIs) sector is a vibrant and dynamic sector of
the Indian economy. The sector presently occupies an important place and
its contribution in terms of generation of employment, output and exports is
quite significant. The Small Scale Industries sector including tiny units,
comprises the domain of SIDBI's business. Besides, the projects in the
services sector with total cost upto Rs.250 million are also taken within the
area of SIDBI's operations. The Bank also finances industrial infrastructure
projects for the development of SSI sector.

Channels of Assistance

SIDBI's financial assistance to small scale sector have three major

dimensions:

1. Indirect assistance to primary lending institutions (PLIs);

2. Direct assistance to small units; and
3. Development and Support Services

Indirect Assistance

SIDBI's Schemes of indirect assistance envisages credit to SSIs through a

large network of 913 PLIs spread across the country with a branch network
of over 65000. The assistance is provided by way of refinance, bills
rediscounting, and resource support in the form of short term loans/Line of
Credit (LoC) in lieu of refinance, etc.

Direct Assistance

The objective behind SIDBI's direct assistance schemes has been to

supplement the efforts of PLIs by identifying the gaps in the existing credit
delivery mechanism for Small Scale Industries. Direct assistance is provided
under several tailor made schemes through SIDBI's 41 Regional/Branch
offices spread across the country.
Development And Support Services

The Bank extends development and support services in the form of loans
and grants to different agencies working for the promotion and development
of SSIs and tiny industries. Over the years, the initiatives of SIDBI under
promotional and developmental activities have crystallised into the
following important areas:

• Enterprise Promotion with emphasis on Rural Industrialisation

• Human Resource Development to suit the SSI sector needs
• Technology Upgradation
• Quality and Environment Management
• Marketing and Promotion and
• Information Dissemination.
•

World Bank led Multi-agency Project on

Financing and Development of SMEs

Introduction:

SIDBI is implementing a World Bank-led multi agency / multi activity

Project on Financing and Development of SMEs. While SIDBI has been
assigned with the responsibility of implementing the project, the Banking
Division, Ministry of Finance, Government of India is the nodal agency for
the same. The IBRD, DFID UK, KfW Germany and GTZ Germany are the
international partners in the Project. The Project is aimed at making SME
lending an attractive and viable financing option as also facilitate increased
turnover and employment in the sector. In order to achieve its aims, the
Project, besides upgrading direct flow of credit to SMEs, addresses demand
side issues of credit and streamlining access to qualitative financial and non-
financial enterprise oriented services. This is being done with support of
Technical Assistance to be utilised for strengthening the credit information
system, credit rating, credit scoring, structuring of innovative products,
capacity building of the participating banks, policy and regulatory issues and
promotion of market oriented business development services for the sector.
Components:

The Project has three major components:

• Credit facility from the IBRD and KfW Germany

• A Risk Sharing Facility

• Technical Assistance from DFID, UK and GTZ, Germany

Financing Pattern

Lending Partner Amount in Purpose Tenor /

USD Utilisation
Period
International Bank for 120,000,000 Credit Facility 15 Years
Reconstruction and
Development (IBRD) (USD 120 million)
Department for 37,000,000 Technical component 7 Years
International Development
(DFID), UK (GBP 20 million)
Kreditanstalt fur Credit Facility 12 Years
Wiederaufbau (KfW),
Germany , Line of Credit 52,500,000 (Euro 43.5 million)

Technical Assistance Technical Component Agreement

for TA yet
1,200,000 (Euro 1 million) to be
signed
Deutsche Gesellschaft fur 6,000,000 Technical Component 3 Years
Technische in Kind (Euro 5
Zusammenarbeit (GTZ), million) (Phase I)
GmbH
In addition to above, there is a provision for 10 percent contribution in the
LoC by SIDBI / PFIs and similar contribution is envisaged from the user's
end under respective TA component, wherever feasible.
A) Credit Facility (CF)

• The CF primarily addresses the financing needs of SMEs and enables

them to access longer-term funds required for capital formation and
technological upgradation.

• The Facility is being implemented by SIDBI in association with

Participating Finance Institutions (PFIs) and is being utilised for extending
credit to existing/ new SMEs.

• The Project covers Small and Medium Enterprises and industry related
service sector establishments as defined by the Government of India, from
time to time.

• The Project has been designed in such a way as to encourage SMEs adopt
best practices followed internationally on the environmental and social
issues. Industries falling in Negative List of World Bank are excluded from
the purview of the Project.

B) Risk Sharing Facility (RSF)

• Risk Sharing Facility carries forward the objective of accelerating

commercial banks' financing to SMEs. Under the Project, the RSF is
proposed to offer guarantees for the SME loans generated by banks and FIs.
The credit risk sharing is envisaged on a pari passu basis.

• Out of the IBRD Line of Credit of USD 120 million, a portion of USD 5
million is earmarked for initial capitalisation of the RSF. This is linked to
other donors’ proceeds.

C) DFID funded Technical Assistance (TA)

• The TA component is a cornerstone of the Project and will help address

the medium term policy, regulatory and institutional constraints that hamper
the efficiency of the SME credit markets in India. The TA covers the
following:

• Strengthening the policy/legal/regulatory framework and its enforcement :

It aims at preparing and implementing a time bound action plan for key
policy, legal and regulatory measures that are critical to establishing a more
efficient framework underpinning SME financing and development.

• Improving credit information (positive and negative information) on

SMEs: It mainly aims at assisting SIDBI and the PFIs to collate historic data
on SMEs with a view to strengthening credit information building and its
dissemination, capacity building of credit information agencies so as to
enable them to provide SME credit histories and develop credit-scoring
products, develop a dedicated rating agency for SMEs and a framework that
encourages banks/ financial institutions to make use of ratings.

• Building institutional capacity within the participating banks to reduce

banks' transactions costs and reduce/manage risks related to SME lending :
It aims at assisting banks (including SIDBI) in implementing credit scoring
systems and cluster financing approaches, training of bankers in the relevant
fields as also broad-basing knowledge, delivering a targeted study to
augment the current understanding of the participating banks with respect to
SME clusters and a knowledge transfer program with respect to global best-
practices in servicing the SME segments. It shall also aim at introduction of
new and innovative products and delivery mechanisms so that the PFIs can
increase their overall business in the SME segment profitably.

• Business Development Services (BDS) for SMEs: This is designed to

strengthen SMEs' access to BDS, to facilitate designing & implementing
strategies to foster BDS market development, strengthening BDS in select
25-30 SME clusters and develop them as "Role Models", with a strong
demonstration effect.

• Institutional support to Project Management Division (PMD) and

Monitoring and Evaluation (M&E): It will provide focussed support to
SIDBI's PMD and to build up its capacity in the areas of Project
management, implementation and monitoring. The M&E envisages
monitoring the impact of the Project on SMEs relating to Project goals and
objectives.

D) GTZ Funded Technical Cooperation

It aims at enabling SMEs to have better access to qualitatively appropriate

financial and non-financial enterprise services. The SME financial services
would endeavour to address banks' offering demand oriented and profitable
financial services. The non-financial component focuses on strategic plan for
BDS activities, development of monitoring system and pilot measures
concerning the development of BDS markets at select 4-5 locations.
Project Management Division

In order to ensure smooth implementation of the Project, SIDBI has set up a

dedicated Project Management Division at New Delhi. The present PMD
team comprises of officials from SIDBI. Placement of officials from PFIs
and need-based recruitment of specialists / experts on short to medium term
basis is envisaged under the Project.

Project Review Committee

In order to oversee and guide the performance of the Project, a high level
Project Review Committee comprising representation from the Government
of India, World Bank, DFID UK, KfW, GTZ, BMZ, Germany and SIDBI
has been constituted. The Chairman and Managing Director of SIDBI is
Chairman of the Committee.

Implementation Status (July 15,2006):

(i)Credit facility (CF)

a) World Bank (IBRD) - Line of Credit (USD 120 mio)

• The Bank has drawn an amount of USD 100 mio, which is being
channelised, to SMEs through 13 designated branches in 10 states identified
for focused lending under the project. The project’s development outcomes
over the period April 2005 to March 2006 have exceeded target values.

b) Line of Credit from KfW (Euro 43.5 mio)

• The Project has also introduced a new long tenor facility for on lending to
SMEs throuSIDBI has, in the first week of July 2006, contracted LOC of
Euro 43.5 million (KfWIV). It shall be channelised through 9 identified BOs
of SIDBI across eight states.
(ii)Risk Sharing Facility

• In order to provide the commercial banks with much needed confidence

and encouragement to scale up SME lending and to have demonstration
effect, it was proposed under the Project that a Risk Sharing Facility (RSF)
be set up. A new framework under the ambit of Credit Guarantee Fund Trust
for Small Industries is being worked out.

(iii)Technical Assistance (TA) Component - DFID Technical Assistance

• SME Rating Agency (SMERA), a Credit Rating Agency for SMEs has
been set and made operational from September 2005. Capacity building
support to SMERA is being extended under the project.

• Capacity building support to Credit Information Bureau of India Limited

(CIBIL) towards SME Commercial Bureau is being extended under the
project.

• SIDBI has developed and successfully implemented a Credit Appraisal

and Rating Tool for loans upto Rs. 5 million and Risk Assessment Model for
larger loans. Scheme has been formulated to share CART with Banks on
payment of nominal fee.

• Regular Trainings are being organized/ covered under the project to

enhance the service delivery capacity, sensitization on Environment and
Social guidelines etc.

• National Workshop on Credit Scoring was conducted on March 03-04,

2006. Senior Executives of major Indian banks attended the programme. A
followup workshop is on the anvil.

• SIDBI has structured and introduced a new long-tenor credit facility for
banks.

• PMD has short listed 50 clusters for Business development Services

(BDS) intervention, which is aimed at creating model clusters for being
replicated. For the current Fiscal (2006 –07) BDS intervention will cover 8
clusters in 3 sub sectors.

• A baseline survey for result monitoring is being instituted by a consultant

through competitive bidding process.
• CMD SIDBI is associated with important committees / expert groups of the
Government of India / Reserve Bank of India. SIDBI is represented on the
apex board set up by the Government of India for Policy Formulation for
SMEs.

• Systems have since been developed and guidelines put in place for
functioning of PMD.

Acknowledgement

SIDBI acknowledges the valuable guidance and unstinted support being

received from the Government of India, Ministry of Finance, Department of
Economic Affairs, Banking Division, World Bank, DFID UK, KfW, GTZ
Germany and other related agencies for smooth implementation of the
Project.

Disclaimer Clause

The contents of this write-up has been prepared by Project Management

Division of Small Industries Development Bank of India (‘SIDBI’) on the
basis of information available at its end. It is for general information. Every
effort has been made to ensure that figures and information are correct. Any
one using the information shall be doing so on his own judgment. SIDBI or
its project Partners do not accept any responsibility for the consequences
arising on account of relying on the information provided herein. The
information contained herein, may not be reproduced or passed to any
person or used for any purpose in any form without written consent of
SIDBI. Nothing contained in the said information is capable or intended to
create any legally binding obligations.
Refinance Scheme For Textile Industry Under Technology
Upgradation Fund (RTUF)
Objective

To provide encouragement to textile industrial units (including units in the Cotton

Ginning and Pressing sectors) in the small scale sector for taking up technology
upgradation and to modernise their production facilities. The scheme envisages
interest incentive of 5 percentage points on the loans availed by small scale units
from eligible Primary Lending Institutions (PLIs) for undertaking technology
upgradation / modernisation. New units being set up with technology as per the
guidelines of the scheme would also be eligible for the above incentive.

However, availment of Refinance from SIDBI is not compulsory in respect of

SFCs, Scheduled Commercial Banks and select co-opted Co-operative Banks. In
case Refinance is availed from SIDBI, such proposals shall conform to norms and
parameters stipulated by SIDBI in addition to the guidelines prescribed by GoI.

Purpose

Assistance under the scheme would be available for installation of specified types
of machinery (to fall in line with definition laid down by Government of India
(GOI) for technology upgradation) in a new unit or in an existing unit by way of
replacement of existing machinery and / or expansion will be eligible for coverage
under RTUF scheme (details of list of machinery are furnished in Section 4 of
Technology Upgradation Fund Scheme booklet issued by GOI)

i] The following investments will also be eligible to the extent necessary for the
plant and equipment to be installed for Technology Upgradation and the total of
such investments will not normally exceed 25% of the total investment in such
plant and machinery: a) Land and factory building including renovation of
factory building and electrical installations.

b) Energy saving devices

c) Effluent treatment plant (ETP)

d) Water treatment plant for captive industrial use

e) Captive power generation

IDBI, LIC to co-finance infrastructure projects. Friday, 22 December , 2006,
09:27

Mumbai: The rise in demand for credit from the infrastructure sector has
led to several banks joining up for infrastructure financing with the latest
being IDBI Ltd, which today signed an agreement with LIC for joint and
take-out financing.

According to V.P. Shetty, Chairman and Managing Director, IDBI Ltd, the
bank has received enquires for infrastructure projects worth Rs 55,000 crore.
Of this, about Rs 15,000 crore was sanctioned. The average duration of these
projects is between 10 and 20 years and is spread over power, ports and
airports and non-infrastructure segments such as textile industries.

Under the agreement, LIC will get the first chance to reject any long-term
project that IDBI takes up, Shetty said.

IDBI could finance the first five years and LIC the remaining 10 years for a
15-year project. Or, the repayment could be structured so that in the first five
years, 70 per cent of IDBI's loan and 30 per cent of LIC's loan are repaid and
vice-versa in the remaining period, explained a senior IDBI official.

IDBI is one of the lenders in several big-ticket infrastructure projects such as

the Rs 5,000-crore Mumbai economic zone. It is also the lead arranger for
the Mumbai airport upgradation project, which has a debt component of Rs
5,200 crore.

• Check out Sify Business yearender

Some of the projects in the pipeline are the Metro Rail project and the Trans
Harbour project, said the official.

LIC has, on a cumulative basis, pumped over Rs 3,67,000 crore in

infrastructure development in the current year, while in the last financial
year it was Rs 13,832 crore.

D.K. Mehrotra, MD, LIC, said in the current year, the corporation had
invested Rs 6,034 crore in housing, power and highway construction.

No hike
IDBI has no plans to hike deposit or lending rates, said Shetty. However, he
admitted to overall cost of funds going up. Credit has been growing at an
annual average of 30 per cent for the past three years, but there has been no
adequate deposit growth. Until now most banks had excess SLR, due to
which they were comfortable. However, now SLR for most banks is in the
26-27 per cent range and this would put pressure on liquidity, he explained.

"As the year comes to a close, most banks will actively mobilise deposits
and rates may go up. But this is more of a balance sheet exercise and not
linked to a rate hike," Shetty added.

T.S. Vijayan, Chairman, LIC, said the corporation is planning to introduce

health insurance products early next year with non-traditional features. At
the end of October, 2006, the corporation raked in Rs 28,906 crore of new
business premium.

Marketing of SSI Products

Objective
• To provide financial assistance to SSI units to undertake
various activites necessary to increase their sales turnover
in the domestic and export markets.

• To finance corporate entities to enable them to provide

support services and/or infrastructural facilities to small
scale sector to improve its marketing capabilities
Eligible Borrowers
• Existing SSI units in the small scale sector with a good
track record and sound financial position are eligible for
assistance under the scheme. New units could also be
considered on a selective basis.

• Specialised organisations incorporated as corporate

entities and providing marketing assistance, infrastructure
and support services to industrial concerns in the small
scale sector.
Purpose
• Assistance under the scheme may be availed of for
undertaking various marketing related activities such as:
1. Marketing research.
2. R & D, product upupgradation and standardisation.
3. Preparation of strategic marketing plan
4. Advertising, branding, catalogue preparation,
 production of audio-visual aids, etc.
5. Participation in trade fairs and exhibitions,
undertaking sales promotion tours, etc.
6. Establishing distribution network including
showrooms/retail outlets and warehousing facilities.
7. Training of personnel in activities relevant to
marketing etc.
• For setting up new showrooms and/or renovation of
existing showrooms for marketing predominantlysmall
scale, cottage and village industry products. Such
showrooms could be set up within the country or abroad.
• Development of infrastructure like permanent exhibition
centres, industrial parks e.g. garment and software parks,
marketing emporia, design and fashion forecasting studios,
auction houses (say for floriculture products), container
depots and container freight stations and trade centres
(within India and abroad) Such infrastructural projects
should largely benefit the small scale, cottage and village
industries.
• Setting up of facilities for providing marketing support to
SSI units, e.g. data bank, libraries, internet services, etc.

• Any other activity directed towards promoting the

marketing of SSI products in domestic or international
markets.