The Small Industries Development Bank of India (SIDBI) focusses primarily on the development of the MSME sector and promotes energy efficiency and cleaner production. The bank has contributed significantly in making India greener and cleaner. The bank helps micro, small and medium enterprises acquire the funds they need in order to grow, develop, market and commercialize their innovative products and technologies. The bank offers varied schemes and also tailors financial products and services to meet the individual's needs of different businesses.
Tailor-made - SIDBI designs loans according to the needs of your enterprise. If your needs do not fall into the usual and ordinary category, SIDBI will help fund you in the right way.
Specialised Size - Loans are altered according to the size of the enterprise. So micro, small and medium enterprises can get different loans tailored to suit their business.
Attractive Rates - SIDBI has a tie-up with many banks and international financial institutions and can get concessional rates of interest. The tie-ups include KfW, World Bank and Japan International Cooperation Agency.
Assistance - SIDBI doesn’t just give you a loan, it also gives your assistance and much needed advice. Relationship managers help entrepreneurs make the right decisions and provide assistance till the end of the loan process.
Collateral Free - Entrepreneurs can get up to Rs. 100 lakhs without offering collateral. This is done through the establishment of a Trust called Fund Trust for Micro and Small Enterprises (CGTMSE).
Risk and Growth Capital - Without diluting the ownership of the company, entrepreneurs can acquire sufficient capital to meet growth requirements.
Venture and Equity Funding - SIDBI has a wholly owned subsidiary called SIDBI Venture Capital Limited that can provide growth capital in the form of equity through venture capital funds that are focussed on MSMEs.
Government Subsidies - Take advantage of various schemes that have concessional rates and relaxed terms offered by the Government. SIDBI has a wider understanding and in-depth knowledge of loans and schemes available and can help you make the best decision for your company.
Transparency - The process and rate structure is transparent. There are no hidden charges.
SIDBI offers a loan facilitation and syndication service through partnerships with banks, accredited consultants and rating agencies. SIDBI helps existing manufacturing and service sector units get loans from banks through a structured mechanism. The process is transparent and strives for timely loan sanction or consideration of these loan applications. This initiative helps business avoid delays in the loan application process. It enhances the flow of financial assistance to the MSME sector.
The accredited consultants provide a number of useful services for the purpose of loans.
To process a loan through SIDBI, the entrepreneur will have to go through the following process.
Step 1: Accredited consultants empanelled with SIDBI will prepare the documents required. Based on the information and requirements indicated by the MSMEs, the ACs will draft a Basic Information Memorandum (BIM). This document will contain all information relevant to the banks and rating agencies.
Step 2: The BIM is approved by the MSME entrepreneur. The ACs will then submit the BIM to SIDBI.
Step 3: If needed, the proposal will be rated by a rating agency approved by the RBI.
Step 4: SIDBI will directly handle the following cases:
Step 5: For any other case, the loan application will be submitted to Public Sector Banks. SIDBI has a memorandum of understanding (MOU) with public sector banks for the purpose of loans.
SIDBI will assist the entrepreneur through every stage till the loan is processed. MSMEs have a much better chance of getting their loan sanctioned in time and can avoid unnecessary delays.
These schemes are aimed at helping companies and manufacturers who deal with saving energy, facilitating cleaner production and the like. These schemes strive to provide attractive rates of interest to encourage energy saving projects. Companies can reduce their energy costs and enhance their profit. The schemes help achieve waste reduction, control pollution, recover valuable by-products during production and participate in sustainable growth.
The schemes are funded in the following ways:
The financing received through these schemes are intended for the following use:
The aim of this project is to encourage and improve energy efficiency through commercial investments. The target of this scheme is the small and medium enterprises that invest and deal with energy efficiency goods and services that help reduce greenhouse gases. MSMEs can apply for finance under such grants by submitting an application to SIDBI with a brief about the business and requirements.
Under this initiative, World Bank and Global Environment Facility (GEF) are helping MSME clusters in India through SIDBI and the Bureau of Energy Efficiency (BEE) to reduce greenhouse gases and improve energy efficiency through better financing. On September 13th, 2010, the grant agreement was signed and was effected on 28th October, 2010. SIDBI was granted $9.05 million under this grant to be utilized over a period of four years. GEF also granted $2.25 million to BEE to be utilized for the implementation of energy efficiency in MSMEs in India.
SIDBI set up a Project Management Unit at New Delhi to coordinate the disbursement of the grant to the target group which consists of five energy intensive clusters.
Activities under the grant
SIDBI played a major role in this project providing the following services.
Growth Capital & Equity Assistance
SIDBI helps existing small and medium business meet their needs for capital in order to grow.
Under this scheme, SIDBI provides assistance in form of mezzanine or convertible instruments, subordinated debt and equity to deserving enterprises.
For debt-based instruments, SIDBI requires the following security to be provided when applying for finance under this scheme.
Many MSMEs face the problem of delayed payments for the credit sales made to larger purchaser companies. SIDBI recognises the problems that can arise out of this situation for the MSME and how it can significantly affect the financial health of the company. Therefore, it devised a scheme under which these companies can acquire finance against the bills or invoices that the MSME holds against the credit purchase made by the purchaser company.
To help MSMEs maintain their financial health which depends greatly on how quickly their receivables are realised. This scheme helps reduce the issues suppliers face with receivables belonging to MSMEs. It aims to help them improve their liquidity and cash flow. The scheme’s objectives are to help the MSMEs in the following activities.
Usage of Funds
There is a need for constant upgrading when dealing with technology. Companies need to modernize and upgrade their technological processes to stay on par with the current conditions. Companies also need to expand their capacity every now and then. SIDBI plays an important role in these situations to help companies meet their financial needs. SIDBI has been marked as a Nodal Agency to help in assisting and monitoring the interface and coordination with banks, financial institutions and the Government.
Under this scheme, SIDBI provides financial assistance to MSMEs who want to invest in development and upscaling. It also helps out in the demonstration of innovative technology based projects and the need for commercialization.
SIDBI provides assistance in the form of early stage “debt” funding. The terms are relaxed to help the MSME in developing, demonstrating and commercializing new innovations. The scheme supports emerging technology, new products, unproven technology and new processes that have not been commercialized yet. Assistance granted is usually 80% of the cost of the project. The maximum funding granted per project is Rs. 100 lakhs. It could exceed this limit in special cases based on the innovative factor of the project.
Usage of funds
The Project Approval Committee is in charge of approving the interest rate granted under this scheme. The interest rate offered does not exceed 5% per annum.
An upfront fee of 0.5% of the sanctioned amount + taxes is charged.
The loan should be repaid within 6 years from the date of project completion. This 6-year period includes the moratorium period granted. In special cases, this period can be extended.
New and existing MSME units are eligible to apply for finance under this scheme.
SIDBI has a lot to offer to MSMEs and has been identified as a Nodal Agency when it comes to Government Schemes for this sector. Enterprises can secure finance more conveniently. SIDBI will provide assistance to go about it the right way and get the most which will benefit the company and ultimately benefit the country.
by BankBazaar posted on 29th August 2016
“Make in India Soft Loan Fund” was recently launched by the Small Industries Development Bank of India to help micro business units to take part in “Make in India” initiative. Anil Kulkarni, General Manager of SIDBI, stated that going forward entrepreneurs will be provided with loans in nature of term loan and quasi equity, encouraging them to set up new units. This initiative also provide funds for existing units for technical upgradation and expansion purposes. Reserve Bank of India has come up with a corpus of Rs. 10, 000 crore that will be distributed as soft loans. A presentation on interest rates on the loan was presented by PK Nath, Deputy General Manager of SIDBI, stated that the interest rate for the soft loans will range from 9.15% to 9.35% and the interest rate for term loan varies from 9.45% to 9.95%.