The small industries development bank of India (SIDBI) was set up by an Act of parliament passed in 1989.
It commenced it’s operations on April 2, 1990, after taking over the SIDF and National equity fund of the IDBI. The SIDBI is a wholly-owned subsidiary of the IDBI.
It has been assigned the role of the principal financial institution for promotion, financing and development of small and tiny enterprises and to co-ordinate the functions of institutions engaged in promoting the small sector.
The Small industries development bank of India (SIDBI) is governed by a Board of Directors consisting of the representatives of the Central Government, Reserve Bank of India, Industrial development bank of India and the small scale sector.
It provides assistance to the small scale units through the state financial corporations, state industrial development corporations, commercial banks, Co-operative Banks and Regional Rural banks.
The Small industries development bank of India has set up Technology Development and Modernisation fund for direct assistance of small industries to encourage existing units to modernize production facilities and update technology so as to strengthen their expert capabilities.
Functions of Small industries development bank of India:
The following are the functions of SIDBI:
I)Refinancing of term loans granted to the small sector by commercial banks, state financial corporation.
II) Discounting and rediscounting of bills arising out of the sale of products of the small scale enterprises.
III) Providing assistance for the development of marketing infrastructure, creating new marketing channels for the products of small scale units.
IV) Providing financial assistance to special target groups like new promoters, women and ex-serviceman, etc.
V) Assistance for development of industrial estates/areas with requisite infrastructure facilities.
VI) Providing resource support for the promotion of factoring companies, to mitigate the difficulties faced by small scale units on account of delayed payments.
VII) Direct assistance to help widen the supply base of small scale ancillary units and encouraging the existing units.
VIII) Financial support of National small industries development corporation and state industries development corporation for their raw material supply and marketing of products as well as their purchase and leasing activities.
IX) Extending technical and related support services to small enterprises.
Different Role of SIDBI:
The Small industries development bank of India plays an important role in the development of small industries in India.
It also coordinates the functioning of institutions engaged in promoting the small units including those in the backward, rural and hilly areas.
It provides refinance to commercial banks, regional rural banks, state financial corporation against their direct finance to small industries.
That means institutions lending money directly to small units are entitled to avail credit from SIDBI at concessional rate of interest.
The SIDBI has also introduced direct finance scheme for specialised marketing agencies and ancillary units in the rural sector.
It provides finance for the purchase of plant and machinery under the equipment finance scheme.
Besides, the SIDBI operates a venture fund for equity support to enterprise intending to introduce the latest technology.
SIDBI’s Financial assistance scheme:
Some of the schemes are explained below:
A) Composite loan scheme: Under this scheme, loan up to Rs. 50,000 is given to artisans, village and cottage industries and industries in the tiny sector for the purchase of equipment and also to meet working capital requirements.
B) Scheme for physically handicapped persons: Under this scheme, financial assistance up to Rs. 50,000 is given to physically handicapped persons.
C) Scheme for tourism-related activities: Under this scheme loan up to Rs. 45 lakhs can be granted to entrepreneurs for setting up a restaurant, hotel, tourism service, etc.
D) Scheme for marketing organisation: For setting up new sales outlets and for undertaking expansion programme of existing outlets, financial assistance up to Rs. 25 lakhs is given to individuals, partnership firms, private and public limited companies.
E) Scheme for small road transport operators: Through this scheme financial assistance is given to small road transport operation who do not own more than six vehicles.
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