c
c


   
c
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SIDBI plays the most important role in developing small- scale industries .The small-scale
industries plays important role in developing nation. Ultimately we can say that SIDBI plays
an important role in developing our nation economically.
It is all because finance is the lifeblood of industry & is a pre-requisite for accelerating the
industrial development. Especially in case of SSI¶s the finance is the key input of growth and
development. Let¶s see what SIDBI does for small-scale industries.
0? Established in April 2, 1990
0? ›rincipal development financial institution for:
0? ›romotion
0? Ôinancing and
0? Development of industries in the small ± scale sector and
0? ÿo-coordinating the functions of other institutions engaged in similar activities.
 SIDBI was established on April 2, 1990. The charter establishing
it, The small industries development bank of India act, 1989 envisaged SIDBI to be ³The
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 there to.
0? 

c
c
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 & machinery does
not exceed RS. 10 million. About 3.1 million such units, employing 17.2 million persons
account for a share of 36% of India¶s exports and 40% 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.
c
c !"#$%!&'(%$
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 2003 issue of the banker, London, SIDBI ranked 25th both in
terms of capital and assets.

Range of service c
c Loans granted by ›LI¶s for new SSI projects and for
expansion, technology up gradation, modernization ,quality promotion. Loans sanctioned
by ›LI¶s to small road transport operators ,qualified professionals for self-employment ,small
hospitals and nursing homes and to promote hotels and tourism-related activities.

c
c$%)
`? SSI units for new/expansion/diversification/modernization projects.
`? Marketing development projects, which expand the domestic and international marketability
of SSI products.
`? Existing well-run SSI units and ancillaries/sub ±contracting units\vendor units for
modernization and technology up gradation.
`? Infrastructure development agencies for developing industrial areas.
`? 

c

*+ c %
Investments
Sample Investee ÿompanies ,-%  $.  % Axiom
ÿonsulting ›rivate Limited (Axiom), is a "Ôull Service ›roduct Design" ÿompany. The
ÿompany provides integrated ›roduct Design (ÿAD) and Engineering solutions (ÿAE) which
includes ideation, design and engineering services.   ( /c$+ 
$ Bhrigus is a highly skilled IT service provider in the domain of voice-web
convergence. Key areas of focus are: Interactive Voice Response (IVR) ÿomputer Telephony
Integration (ÿTI) § Speech Voice-Web Integration of Voice, Data, and Technology
-!%') $. Software ›roducts in the area of ›rofessional Services
Automation (›SA) and complementary µproductised¶ services and consulting.

-  - -  $. %'   International Voice-based ÿontact
ÿenter. 
 c c% $.     Software services and products
company in the area of ›rocess Quality Monitoring, Database Administration, Total Quality
Management (TQM), ›rocess Improvement & ›roblem Solving and Decision support
software.0-&c$% $. $Smart ÿard Solutions
%  ) $.1)$&$Naturol Bio Energy, is a new company setting up an
integrated Bio-diesel and allied products (specialty esters for usage as bio-lubricants and
phytochemicals/ neutraceuticals) manufacturing facility, with an installed capacity of 99,000
tpa.
(% 2 $2.
ÿompany develops technology and products for the Indian language (Multi-lingual) software.
( $
Manthan is a provider of specialised software solutions for the retail and consumer goods industries.
3+4($!%
Investments
Sample Investee ÿompanies
1% $
Manufacturer of wide range of pharmaceuticals products, OTÿ products and
Nutraceutical supplements.
Range includes Tablets, Hard Gel ÿapsules, Soft Gel ÿapsules, Injectables, Syrups, ›owders,
Ointments and ÿreams - each designed individually for the specific markets across the world.
-5c$ $
ÿarzonrent India ›rivate Limited is the licensee of Hertz for India.
The ÿompany offers ÿhauffer drive, Self drive, Ôleet Management Services and Limousine
Services.

 &) $.  %
Ôocused on entering the mobile phone business (GSM Handset, accessories and value added
services) in India with feature-rich & high-quality products at competitive prices, customized
for the Indian market with primary focus on rural and semi-urban/ low-income urban market.

cc


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SIDBI is committed to developing a strong, vibrant and responsive small-scale sector. This
commitment is to be achieved through a variety of means. ›rincipal amongst them is finance.
Alongside finance ,SIDBI provides appropriate support in the form of promotional and
developmental services. SIDBI has been built up as a financially sound, vibrant, forward
 looking and technically orientation in future. SIDBI intends to provide quality services to its
clients ,devoid of any systemic and procedural difficulties.

!%!
SIDBI, in its operational strategy, emphasizes:

`? Enhancement in the flow of financial assistance to SSI¶s and

`? Enhancement in the capabilities of SSI¶s at all levels, with focus on adoption of improved
and modern technology.

The small industries sector in India is dominated by a large number of small units.
These micro ±enterprises require special nurturing. SIDBI has been operating schemes like:
`? Single window scheme and
`? ÿomposite loan scheme

To ensure that financial assistance is made available to such units on easy terms and with hassle-
free procedures.

It has been a matter of policy in SIDBI to identify the areas of gaps in credit delivery system and fill
them through devising appropriate new schemes and implementing them. In the last 9 years,
26 new schemes have been introduced.

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`? Equity
`? Term loan (domestic and foreign currency)
`? Working capital
- Ôor inventory
- Ôor raw material
- Through finance against receivables and for intangibles.

The purposes for which SIDBI¶s assistance is provided include new projects, expansion, quality
improvement ,environmental management, marketing(domestic &international) and
rehabilitation of sick SSI¶s.

%

Besides financing, SIDBI provides developmental (›&D) schemes. The focus of such assistance
is to ensure:

`?Enterprise promotion
`?Human resource development
`?Technology up gradation
`?Environmental and quality management
`?Information dissemination and

7-c
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&8

Ôour basic objectives are set out in the SIDBI ÿharter. They are : 
`? Ôinancing
`? ›romotion
`? Development
`? ÿo-ordination

Ôor orderly growth of industry in the small ±scale sector. 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 in to a wide spectrum constituting modern
and technologically superior units at one end and traditional units at the other.

%!
&8

The major issues conforming SSI¶s are identified to be:

0? Technology obsolescence
0? Managerial inadequacies
0? Delayed payment
0? ›oor quality
0? Incidence of Sickness
0? Lack of appropriate infrastructure
0? Lack of marketing network

There can be many more similar issues hindering the orderly growth of SSI¶s.

Over the years, SIDBI has put in place financing schemes either through its direct financing
mechanism through indirect assistance mechanism and special focus programmes under its
›&D initiatives. in its approach ,SIDBI has struck a good balance between financing and
providing other support services.

-0$$
&8

As an apex institution, SIDBI makes use of the network of the banks and state level financial
institutions, which have retail outlets.SIDBI supplements the effort of existing institutions
through its direct assistance schemes to reach financial assistance to the ultimate borrowers in
the small-scale sector. Refinancing, bills rediscounting, lines of credit and resource support
mechanisms have evolved over the period of time to route SIDBI¶s assistance through the
network of other retail institutions in the financial system.

c
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`? Equity
`? Term loan (domestic and foreign currency)
`? Working capital
- Ôor inventory
- Ôor raw material
- Through finance against receivables and for intangibles.

The purposes for which SIDBI¶s assistance is provided include new projects, expansion, quality
improvement ,environmental management, marketing(domestic &international) and
rehabilitation of sick SSI¶s.

%
 Besides financing, SIDBI provides developmental (›&D) schemes. The focus of such assistance
is to ensure:

`?Enterprise promotion
`?Human resource development
`?Technology up gradation
`?Environmental and quality management
`?Information dissemination and

7-c
c
c

$)
&8

Ôour basic objectives are set out in the SIDBI ÿharter. They are : 
`? Ôinancing
`? ›romotion
`? Development
`? ÿo-ordination

Ôor orderly growth of industry in the small ±scale sector. 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 in to a wide spectrum constituting modern
and technologically superior units at one end and traditional units at the other.

%!
&8

The major issues conforming SSI¶s are identified to be:

0? Technology obsolescence
0? Managerial inadequacies
0? Delayed payment
0? ›oor quality
0? Incidence of Sickness
0? Lack of appropriate infrastructure
0? Lack of marketing network

There can be many more similar issues hindering the orderly growth of SSI¶s.

Over the years, SIDBI has put in place financing schemes either through its direct financing
mechanism through indirect assistance mechanism and special focus programmes under its
›&D initiatives. in its approach ,SIDBI has struck a good balance between financing and
providing other support services.

-0$$
&8

As an apex institution, SIDBI makes use of the network of the banks and state level financial
institutions, which have retail outlets.SIDBI supplements the effort of existing institutions
through its direct assistance schemes to reach financial assistance to the ultimate borrowers in
the small-scale sector. Refinancing, bills rediscounting, lines of credit and resource support
mechanisms have evolved over the period of time to route SIDBI¶s assistance through the
network of other retail institutions in the financial system.

1c-
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`? Ôactoring ÿompanies
`? Technology Bureau of Small Enterprises
`? North Eastern Development Ôinance ÿorporation Ltd.
`? IDBI Bank Ltd.
`? Indian Institute of Entrepreneurship,Guwahati
!%!!$c
c
`? National Equity Ôund
`? Mahila Vikas Nidhi
`? Mahila Udyan Nidhi
`? Venture ÿapital Ôund
`? Technology Development and Modernization Ôund
`? Marketing Development Assistance Ôund with special earmarked corpus for women

4
  
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-1

`? ,!

? Exim ›olicy for Small Scale Sector

? Export ›romotion ›rograms & Measures

? National Small Industries ÿorporation

4%

? ›olicies
U? ›olicy of Reservation
U? Licensing ›olicy
U? Trade ›olicy - Imports & Exports
U? ›rice & ›urchase ›reference ›olicy
U? Labour ›olicies

? 
U? Single Window Scheme
U? Industrial Estates
U? National Awards for Outstanding SSI Entrepreneurs
U? National Awards for Quality ›roducts in Small Scale Sector.



$ 9

? %
U? ›olicy of Ôiscal Support
U? ›olicy of ›riority ÿredit
U? Equity ›articipation
U? OTÿ Exchange

? 
U? Excise Exemption Scheme Tax Holiday
U? Venture ÿapital
U? National Equity Ôund Scheme
U? Ôactoring Services
U? Other SIDBI Schemes
U? NSIÿ Schemes

$59 

? %
U? Quality ÿertification Schemes (ISO9000)
U? Application for the Reimbursement of ÿertification ÿharges for acquiring ISO-9000
ÿertification (or its equivalent)
U? ›olicy of Technology Upgradation (U›TEÿH)
U? Technology Bureau for Small Enterprises
U? ›olicy for Development of Information Technology

? 
U? Technology Development Ôund Schemes
U? Testing ÿentres
U? Integrated Infrastructure Development
U? Training Infrastructure
U? Growth ÿentres
U? Technology Development & Modernisation
U? Quality ÿertification Schemes

 )9

? %
U? ›ollution & ÿontrol Measures
U? Environmental ÿontrol

? 
U? ›ollution ÿontrol Schemes
U? Energy ÿonservation Schemes
U? Alternative Energy Use Schemes
U? Ozone Depleting Substances ›hase-out

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 - c
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%%%

During Ô 2003,the SSI sector is estimated to have recorded a growth of 7.5% in

output ,at 1993-94 prices, as compared to growth of 6% registered in the industrial sector
as a whole and a 6.1% growth in manufacturing sector. The production in the SSI sector, at current
prices, is estimated to rise to RS.7,60,844 crore during the year 2002-03, from RS.6,90,316
crore in the previous year. During the year 200-03,the number of units in SSI sector
increased to an estimated 35.72 lakhs with a net addition of 1.3 lakh units. Employment in the
sector anticipated in the level of 199.65 lakh at end-march 2003 also expanded during the
year, with an addition of 7.42 lakhs persons to the sector¶s aggregate employment of 192.23
lakhs at end-march 2002.

The total production of village and small industries (VSI) sector which includes modern SSI¶s,
power looms and traditional industries in 2002-03 was higher at RS.8,39,532 crore as
compared to RS.7,60,017 crore during 2002-03. The employment in the VSI sector is
estimated to have increased from 539 lakhs persons as at end-march 2002 to 555 lakhs as at
end-march 2003. exports from the VSI sector are estimated at RS.1,04,964 crore during the
year 2002-03, as compared to RS. 91,237 crore during the previous year.








 !

The SSI sector has contributed significantly to the Indian economy and has emerged as a
dynamic and vibrant partner. The sector, as stated earlier, has been outperforming the overall
GD› growth rates as well as industry sector growth rates.

While the sector has been playing an important role in the process of development, the
dynamics of global environment have generated enormous competitive pressures on the SSI¶s
to mould and shapeup their development strategies. In this direction, the government of India
and other institutions concerned has taken a number of initiatives to help the sector in facing
new challenges. A comprehensive policy package for SSI¶s and tiny units announced by
hon¶ble prime minister on August 30,2000 was preceded by the constitution of a group of
ministers under chairman ship of honble union home minister to consider the
recommendations of Dr. S.›. Gupta study group on development of small enterprises. The
tenth five year plan launched by the government of India with effect from April 01,2002
stipulates 8 % growth target in GD› and a 10 % rate of growth to be a achieved by the
industry sector. The plan has laid great thrust on employment intensive sectors to ensure rapid
and well-distributed growth of income to sustain the pace of poverty reduction accomplished
during the past decade. In order to facilitate the targeted GD› growth rate of 8%, SSI sector
is expected to achieve a growth of 12% p.a during the tenth five year plan. Ôurther, for
pursuing one million jobs a year agenda during the plan, great reliance has been placed on the
small and medium enterprises and the unorganized sector. Based on the said premise, a
working group on SSI sector for tenth plan, appointed by the government of India, projected
a long term credit requirement of the order of RS. 63,357 crore during the plan period(2002-
07) and an amount of RS.1,23,000 crore as working capital during the terminal year of the
plan.

To enable the SSI sector as projected in the plan, special efforts would be required to be made and
the strategies for SSI sector would need to concentrate on

I.? Making the sector competitive,

II.? ÿreating hassles free environment in terms of policy framework,
III.? ›romoting appropriate linkages between large and small industries,
IV.? ›roviding adequate infrastructure facilities, and
V.? Expansion of marketing network including thrust on exports.




c$$

A mention was made in he last annual report about SIDBI¶s entering in to memorandum of
understanding with small enterprise assistance funds (SEAÔ) of united states of America. The
bank has, in ± principle agreed to contribute RS. 25 crore to the initial corpus of the proposed
SEAÔ India SME fund of US dollar 40 million. The fund would be utilized towards equity
and equity related investments in small and medium enterprises(SME¶s) in India.

c$ :

The humble union finance minister, while presenting budget 2002-03, announced setting up or
a micro venture capital fund for small innovations, to be initiated by SIDBI ,in collaboration
with the national innovation foundation .during the year, SIDBI committed a contribution of
RS. 500 lakhs towards the corpus of the proposed micro ventures innovation fund. NIÔ is in
the process of structuring the fund and finalizing its operational modalities.
-&c$$%!$ 

›ursuant to the announcement made in the union budget for 2002-03 and with a view to
facilitating faster private investment in infrastructure sector, IDÔÿ has set up India
development fund with the corpus of RS.1000 crore. The prime objective of the fund is to
facilitate infrastructure development in country by investing in equity and/or equity- linked
and/or debt capital of infrastructure projects. The fund is expected to facilitate investment of
the order of RS.10,000 crore in infrastructure projects in energy, oil gas, telecom, IT,
integrated transportation systems, urban infrastructure, special economic zones, etc.
SIDBI,being the apex development financial institution for the SSI sector, has decided to
expected that substantial direct and indirect benefits would accrue to the SSI sector on account
of the investment in infrastructure catalyzed by this fund.

0!(


During the year, a memorandum of understanding focusing on economic development of
North Eastern region of India was signed between SIDBI and South Asian enterprise
development facility (SEDÔ), an agency established by the world bank and international
finance corporation. Two sub-sectors,viz.food and fruit processing and silk have since been
identified for focused attention in the North Eastern region.




!!c% (-$
!

SIDBI has been endeavoring to expand linkages with public financial institutions for
supplementing the existing partnership with primary lending institutions. Towards this end,
the bank had approached Gol for specific authorization to consider financial assistance by way
of resource support involving two tier credit dispensations. The goal granted such approval in
respect of ›ÔI¶s specified under section 4A of the companies act, 1956,and such other
financial institutions/agencies. Besides offering synergy with strong intermediaries and
encouraging business potential, the initiatives offers an additional window to SIDBI for
canalizing assistance for the development of the SSI sector.




% )! $$,%$7c$ 

The scope of the technology Up gradation schemes for textile and Jute- industries launched by
the Gol on April 01, 1999 was enlarged.

The enlarged covers investments made in projects compatible under the scheme after the date of
launch but funded by sources other than bank loan, transactions under the bank¶s direct
discounting scheme, etc. besides, the list of eligible machinery was expanded and norms
pertaining to certain machinery were relaxed. ÿonversion of rupee loan in to foreign currency
loan and vice- versa on annual basis and coverage of cost of forward exchange cover for
currency loan were also incorporated in the scheme.





In the context of the important role played by entertainment industry in the small-scale
sector,SIDBI included establishing studios for making/producing films/software for television
,inter alia ,for letting out the facilities to other producers on rent/fee basis, as eligible activities
for direct assistance from the bank.

 $


Keeping in view the requests from various quarters, the bank reduced the minimum loan limit
for direct assistance from SIDBI under project finance schemes (›ÔS) and equipment finance
scheme (E›S).Accordingly ,the revised limits for ›ÔS and EÔS are RS. 50 lakhs . However ,
for SIDBI offices located in Eastern ,North Eastern Regions ,
Jammu, and shimla and other centers ,the limit for EÔS has been kept still at a lower level of RS. 25
lakhs.

,!$

SIDBI has been providing export credit to SSI exporters and Export/trading Houses sourcing
their requirements from SSI units both in Rupees and foreign currency . In addition to direct
export credit in foreign currency to commercial banks and factoring companies for canalizing
resources for the benefit of SSI sector .

-$ '$-!%&$)% )! $

%%%c$

As per decisions taken by the Governing and technology Approval board , which monitors the
scheme, certain changes as well as additional features have been incorporated in the scheme.
Accordingly, the ›LI¶s would hence forth release the entire subsidy amount to the beneficiary
units if the loan is disbursed in one installment. However, if the loan is
disbursed in more than one installment, 50 % of the eligible subsidy may be released with the first
installment and balance 50 % along with the last installment .Existing SSI units, which are
likely to graduate to medium scale on account of additional loan, will also now be eligible for
assistance under the scheme. Seven additional sub-sectors have been added to the list of
existing 14 products /sub-sectors under the scheme which are medicinal and aromatic plants,
combustion devices/appliances, gold plating and jewellary,common effluent treatment plants,
biotech industries ,plastic molded/extrude products and parts/components and corrugated
boxes. With these additions, the total no. of products /sub-sectors eligible the scheme would
now be 27.





c$c 


In view of the general decline in interest rates and requests made by borrowers to reduce
interest rates in respect of loans contracted at higher rates in the past, a rebate scheme was
introduced by SIDBI in the annum.

&%'c

Based on the recommendation of a working group headed by shri S.S.kohli,the chairman, IBA,
RBI has issued fresh guidelines for rehabilitation of sick SSI units ,which, inter alia, include
revision in definition of sick SSI unit. Accordingly, this new definition has been adopted buy
SIDBI for the purpose of bank¶s assistance and the extant guidelines.
4$% (

In continuation of ongoing efforts towards building better customer relationship and educating
its borrowers, the bank has brought out a booklet titled ³Guidelines to the Borrowers.´
enumerating the formalities to be completed by them for availing the term loan sanctioned by
SIDBI. The booklet is given to borrowers after an in-principle decision is taken to consider
the proposal so as to aid speedy documentation and creation of security.

)

During the year under review, guidelines were issued for rehabilitation of potentially viable sick
assisted SSI units / concerns, including modifications in the existing guidelines. The
Securitization and Reconstruction of Ôinancial Assets and Enforcement of security interest
Ordinance / Act,2002´ (SRÔAESI) enacted by the Government of India, was adopted by the
Bank for take over of assets of defaulting borrowers under Section 38 of the SIDBI Act.
The Bank for implementation has also adopted revised guidelines for compromise settlement of
chronic non-performing assets introduced by the Reserve Bank of India in January 2003,
which are non-discretionary and non- discriminatory. Besides, the guidelines for one time
settlement of dues of the bank were further streamlined in the wake of past experience and the
directions given by the Board, from time to time.

-
!%-6

In view of the high importance attached by SIDBI to the outstanding portfolio in respect of
SÔÿ¶s, a series of proactive steps were initiated by the Bank to suitably address the issues
involved with regard to their functioning. A committee was constituted by the bank to look in
to the operational matters of SÔÿ¶s under the chairmanship of Shri ›.B. Nimbalkar, The
ÿMD of SIDBI. The committee submitted its Report during the year and has offered vide
ranging recommendations covering areas such as categorization of SÔÿ¶s , Asset-Liability
management in SÔÿ¶s ,containment of N›A¶s, composition of resource mix, new business
avenues, accounting practices, corporate governance, etc. In terms of the recommendation
related to classification, SÔÿ¶s would now be classified in to four broad categories viz.,I,II,III,
and IV , based on objective criteria related to DSÿR, recovery performance over the years.
Ôurther, SIDBI would adopt liberal approach in all matters under its purview in respect of
SÔÿ¶s placed in category I including extending higher annual refinance limit.

%$)$&%)$)-6

During the year, performance evaluation studies for two SÔÿ¶s viz.Haryana financial
corporation were carried out. While the study provided important inputs for SIDBI for
managing its refinance portfolio, the findings of these studies are expected to help these SÔÿ¶s
to improve heir functioning.

 !

In order to develop standardized accounting system and policies for SÔÿ¶s, a consultant was
appointed who has since submitted its report. The recommendations contained in the report
have been circulated to all SÔÿ¶s for initiating measures for implementation of the new
guidelines.
This study, besides being of help to SÔÿ¶s,would be useful for RBI, banks and financial institutions
to assess the strength and weaknesses of SÔÿ¶s in proper perspective.

 -:

SIDBI, in association with ÿouncil of State Industrial Development & Investment
ÿorporations of India (ÿOSIDIÿI), has been conducting various training programmers for the
benefit of the officers of SÔÿ
s and SlOG
s. During the year under review, SIDBI sponsored
two training programmers of one-week duration each, which were conducted by the ÿollege
of Agricultural Banking, ›une for the benefit of 50 officers from these institutions.


c%-!

The International ÿooperation Division of the Bank has been holding interactions with the
embassies of various countries and their visiting missions to India. During the year under
review, delegations from the Government of Egypt, Mauritius, Nigeria, ÿote D
ivoire,
Senegal, Sri-lanka, Sudan and Republic of ÿhina as well as from Asian Development Bank
visited SIDBI and held discussions on the areas of mutual interest. Some of these delegations
have evinced interest in seeking consultancy from the SIDBI for setting up of a SME
development bank in their country besides the possibility of setting up of a Line of ÿredit
facility for promoting, facilitating and financing joint SME business activities. It is expected
that some of these initiatives would result into strategic business alliances between SIDBI and
overseas agencies.

c

›ursuant to reduction in Bank Rate by RBI during the year under review, SIDBI effected
downward revision in its ›rime Lending Rates (›LR
s) by 50 basis points w.e.f. December 12,
2002. Accordingly, the Long Term ›LR (for loans of maturity more than 3 years), Medium
Term ›LR (for loans of maturity between 1 and 3 years) and Short Term
›LR (loans up to 1 year maturity) have been reduced to 12 per cent, 11.75 percent and 11.25 percent
per annum,· respectively. The corresponding reduction in interest rates has been effected
across the board under various refinance and direct assistance schemes including products
offering assistance at sub-›LR rates. The existing score chart system for direct assistance
schemes was also liberalized so as to offer more competitive rates to small-scale units
obtaining direct loans from SIDBI.

 
c


SIDBI
s overall operations recorded an impressive growth during 2002-03. The

aggregate sanctions under all schemes during 2002-03 reached Rs. 10,903.60 crore,
registering an increase of 20.8 per cent over the sanctions of RS.9, 025.52 crore during 2001-
02. The disbursements during
2002-03,Increased to RS.6, 789.41 crore from RS.5, 919.33
crore during .2002-03 recordings growth of 14.7 per cent. The cumulative sanctions and
disbursements over the 13-year period since inception of the Bank were at RS.86, 158 crore
and RS.59, 101 crore, respectively, thus registering .. compound annual; growth rates of 13.4
per cent and 11.4 percent, respectively. The growth in aggregate sanctions and disbursements
of SIDBI during 2002-03 in absolute as well as in percentage terms was mainly contributed by
 increase in operations under Resource Support to Institutions and Ôinancial Support (Short
Term Loan) to Banks.



The aggregate sanctions and disbursements under the refinance schemes during 2002-03 were
RS.8034.74 crore and Rs.4872.10 crore, respectively. The refinance assistance has helped in
establishing/ expanding/ modernizing around 29,678 SSI units.

sanctioned. Service sector continued to receive the maximum share of refinance assistance followed
by Ôood & Ôood products, Textiles (including Jute), Metal products and ÿhemical &
ÿhemical products.



;)

The aggregate sanctions and disbursements during 2002-03 under equity assistance schemes
including National Equity Ôund (NEÔ), Mahila Udyog Nidhi (MUM) and Scheme o! Self-
Employment for Ex-Servicemen (SEMÔEX) aggregated RS.54.76 crore and Rs.41.61 crore,
respectively. The assistance registered an increase of 0.88 per cent in terms of sanctions and
15.7 per cent in terms of disbursements, over the sanctions and disbursements of RS.54.28
crore and RS.35.96 crore, respectively during the previous year.

!!c

Resource support is extended to institutions engaged in the promotion and development of
SSI
s to ensure the augmented flow of credit to the sector. Sanctions and disbursements under
resource support schemes aggregated RS.1049.56 crore and RS.660.39 crore, respectively
during 2002-03 compared with sanctions and disbursements of Rs.492.00 crore and Rs.451.66
crore, respectively during 2001-02.The sanctions under Short Term Loan Scheme to State
Electricity Boards/ ›ower ÿorporations aggregated RS.30 crore. Resource support extended to
other institutions included the ›ower Ôinance ÿorporation, Loc in Ôoreign ÿurrency to banks,
Associates of SIDBI, M› State Warehousing ÿorporation, Orissa State Small Industries
ÿorporation, State Industrial Development ÿorporation of Uttaranchal and ›unjab State Small
Industries ÿorporation to which sanctions and disbursements were RS.737.56 crore and
Rs.431.19 crore, respectively.




8 

The lower availment of disbursements against the sanctions made during the previous year
under the project related financing schemes has affected the operations under these schemes
during 2002-03. SIDBI
s sanctions under project related financing during 2002-03 decreased
to RS.964.83 crore from RS.1276.18 crore during the previous year. The disbursements were
lower at RS.474.87 crore during 2002-03 as compared to disbursements of RS.550.74 crore
during 2002-03. Under project related financing, SIDBI has been placing
thrust on financing of infrastructure projects, exports, technology development and modernization
and the activities relating to marketing of SSI products. The a ailment of credit under
technology up gradation and modernization schemes remained subdued because of poor
demand of credit for capacity expansion and modernization. Venture capital financing has
 been one of the priority areas of SIDBI financing. In order to facilitate the availability of
venture capital assistance to SSI
s, SIDBI has promoted three-tier venture capital system,
including international, national and regional venture funds. The sanctions and disbursements
under venture capital scheme during 2002-03 aggregated RS.32.53 crore and RS.9.15 crore
compared with sanctions and disbursements of RS.13.05 crore and RS.2.15 crore, respectively
during 2002-03. The sanctions under venture capital assistance include RS.25 crore to SEAÔ
equity fund. The sanctions and disbursements under Marketing Assistance Schemes during
2002-03 aggregated RS.91.78 crore and RS.2.84 crore, respectively. As the marketing projects
are long term in nature, the disbursements are likely to be availed during the current year.
Similarly, the availment of disbursements under infrastructure development schemes is
expected to pick up during 2003-04.

%$
%!%

The Bank extends loans and grants to various agencies working for the promotion and
development of SSI
s and tiny industries under its ›romotional and Developmental (›&D)
assistance schemes. The aggregate sanctions and disbursements under various ›&D schemes
aggregated Rs.46.36 crore and RS.37.04 crore, respectively, during 2002203. Out of this,
sanctions under Micro ÿredit Scheme, aggregated RS.38.51 crore and disbursements
aggregated RS.31.04 crore during 2002-03.

)


The focus of the Bank
s policy relating to recovery of dues with an impetus on past dues, are
by way of grant of need based relief / concessions to units facing temporary problems,
finalizing rehabilitation packages / suitable restructuring of loans in respect of
potentially viable sick SSI units, reaching compromise settlement in respect of chronic and deserving
N›A
s and initiating legal action, as a last resort. One Time Settlement (OTS) of dues in
respect of 152 defaulting cases involving an aggregate amount of RS.130 crore, have been
approved by the Bank since inception. During the year under review, seventy OTS cases were
approved involving an amount of RS.55 crore. The Bank also issued notices to 255 chronic
defaulters that were found eligible for settlement under revised RBI guidelines for
compromise settlement in respect of chronic N›A
s introduced in January 2003. In terms of
the
Securitization and Reconstruction of Ôinancial Assets and Enforcement of Security
Interest Ordinance/Act, 2002
the relevant provisions were invoked in respect of 4 chronic
cases.


 -)

In Ô 2003, SIDBI signed a line of credit with KfW, Ôrankfurt for Euro 8.79 million which
includes a grant component of Euro 0.61 million. An amount of USD 457,971 (Rs. 2.19 crore)
was received from DÔID, UK in the form of grant during 2002-03. Ôurther, during the year
loan amount, of USD 1 million (Rs. 4:84 crore) was received from IÔAD, Rome.



The resources raised from the domestic sources during 2002-03 are as under:

-!%4 $
 SIDBI was authorized to issue ÿapital Gains Bond (ÿGB) under Section 54Eÿ of Income Tax
Act, 1961 in the Union Budget of Ô 2003.The Board of Directors approved the issue of the
bonds at its meeting held on May 20, 2002 and after receipt of necessary approvals and
completion of formalities, the issue of ÿGB was launched on August 1, 2002. The bonds have
two tenure options viz. i) three years & ii) five years with put! call option after three years.
Interest on these bonds is payable annually as well as on a cumulative basis. ÿoupon rate
initially fixed at 7.5 per cent per annum was reset from time to time in line with market
conditions and was brought down to 5 per cent per annum with effect from January 30, 2003.
The issue was closed on March 31, 2003. As on March 31, 2003, resources raised through
ÿGB
s amounted to Rs.572.52 crore.

) $
An amount of Rs. 388 crore was raised at an average coupon rate Jf 5.82 per cent per annum
under taxable priority sector bonds as against Rs. 1224 crore mobilized during the previous
year.

!(c
c&)  '

The deposits received from foreign banks operating in India with SIDBI representing the
shortfall in their priority sector lending targets, aggregated Rs.428.35 crore during current Ô
compared to Rs. 328.13 crore received during the previous year.

4$4c$
Government of India released Rs. 24.15 crore during the Ô 2003 towards its contribution to
the National Equity Ôund (NEÔ).

,$
!
SIDBI mobilized an amount of Rs. 2.60 crore by way of fixed deposit at the rate of 6.80 per
cent per annum during 2002-03.

) ( 

An amount of RS.150 crore was raised by SIDBI by way of Term Money Borrowing during the
year under review.

 c
c $

ÿredit Analysis and Research Ltd. (ÿARE) assigned
ÿARE AAA
rating, up to a maximum
umbrella amount of Rs. 1600 crore for bonds, including ÿapital Gains Bonds to be issued
during the current Ô . ÿARE has also retained the
ÿARE AAA
for the outstanding
borrowings through :taxable priority sector bonds and the ongoing Ôixed Deposit programmer
of SIDBI and the
›R1+
for the commercial paper of SlDBI. Instruments carrying the above
rating are considered to be of the best quality, carrying negligible investment risk.


 

c-

As an apex development financial institution for small-scale sector in the country, the Bank
continued with its promotional and developmental initiatives to improve the efficiency and
competitiveness of the SSI sector. Support was extended to various agencies in conducting
structured programmes for the purpose. Special emphasis was given on employment
generation and livelihood promotion of the poor by encouraging them to undertake income-
generating activities through enterprise promotion as well as self- employment ventures.
During the year, the Bank further strengthened its Rural Industries ›rogramme by undertaking
district-wise review to assess the strengths and weaknesses of the programme. Another
initiative was to widen the scope and reach of vocational training programmes for school
dropouts and poor.
 A number of innovative products / processes are being developed in rural areas to improve
productivity and efficiency of farmers as well as artisans, besides developing eco-friendly and
appropriate solutions to local problems. However, more often than not these innovations
remain confined to a limited geographic area and the development does not reach out to the
masses. In order to address this problem, the Bank has, during the year, committed support for
the establishment of a Micro Venture Innovation Ôund. The Ôund will be Operationalised and
administered by the National Innovation Ôoundation, Ahmedabad and will be utilized for
extending assistance to projects for commercialization of innovations. The process of
commercialization of innovations will involve prototyping, preparation of business plan,
measures for protecting Intellectual ›roperties Rights and financial assistance for project
implementation.

Other developmental programmes of the Bank were consolidated during the year based on
the external evaluation exercises carried out in the previous years. The major developments
under various programme heads have been presented in the following paragraphs.

%c$ :

The Rural Industries ›rogramme (RI›) of the Bank is basically designed to provide impetus
to rural development by creating sustainable industrial and service enterprises in rural areas,
leading to higher employment generation and effective utilization of local skills and resources.
ÿonsidering its sizeable benefits, the Bank continued its thrust on up scaling and geographical
expansion of RI ›
s. During the year under review, the Bank launched the programme in 7
new districts, extended the programme tenure in 11 districts and discontinued in 7 districts.
ÿonsequently, as on March 31, 2003, the programme was in progress in 62 districts of 24
states through 32 implementing agencies. ÿumulatively, around 10,800 enterprises were
promoted under RI› including around 2,350 units during the year. In view of the increased
spread of RI›, the monitoring mechanism has been further strengthened. Regional
Development ÿenters (ROÿ
s), which were created to outsource professional expertise for
monitoring as well as providing interactive management support to the implementing
agencies, have already been put in place by the Bank for all the five regions. A new ROÿ has
been commissioned in the North Eastern region, which has been entrusted with the
responsibility of not only monitoring the programme but also increasing the overall coverage
of developmental initiatives in the region. The Bank continued its capacity building exercise
of RI› implementing agencies. In this endeavor, a reorientation-training programme to
sharpen the skills of agencies was conducted by Andhra ›radesh Industrial and Technical
ÿonsultancy Organization (A›ITÿO) in Anantpur, Andhra ›radesh. Entrepreneurship institute
of India (EDII), Ahmedabad was supported for conducting certificate course for Rural
Business Service ›roviders as well as fellowship programme for skill up gradation of NGOs.

These three programmers benefited 55 participants. In order to have regular assessment of the
performance of units promoted under the ›rogramme in the past, the Bank undertook review,
through ROÿ, of 35 bank-financed units out of 190 units promoted during the first year of
RI›, i.e. 1998-99 in Hazaribagh district of Jharkhand. The study reveals that about 98 percent
:f these units have repaid/are regular in repaying their loans to banks. The entrepreneurs have
also been able to increase their income significantly as a result of RI› intervention.

% %c$%5

During the year, National ›rogramme for Rural Industrialization (N›RI) was extended to
dhokra art cluster at Bankura, West Bengal, taking the total dusters to 14 in 10 states. The
programme is designed to improve the quality of the product by introducing new tools and
 processes, to reduce raw material wastage, and to impart skill development training to artisans
in the cluster.

Another intervention, which has been supported under N›RI, seeks to set up a design
development centre for the benefit of artisans in the zari work cluster at How rah, West
Bengal. This is the second tranche of assistance for the cluster. In the first phase, skill
development training programmers were supported in the cluster. The Bank¶s earlier
intervention in N›RI clusters has started yielding positive results. In the case of Mango Jelly
cluster in East Godavari of Andhra ›radesh, critical gaps in three areas, viz. manufacturing
process, packaging and marketing network, were identified and remedial measures taken.
ÿonsequently, the products have become more hygienic and ecofriendly.


%' $

The Mahila Vikas Nidhi (MVN) provides a developmental window through which the Bank
aims at bringing about economic empowerment of women by facilitating the creation of
appropriate infrastructure. During the year under; review, assistance under MVN was
extended to Helping Hands, BHEL Ladies Welfare Society, Bhopal for setting-up/
establishing a mini offset printing press for providing training in the field of off-set printing,
computer designing, etc. With this, the total assistance sanctioned under the MVN scheme
since inception stands at Rs. 859 lakh which has directly benefited about 24,000 women
working with 162 NGOs.

Besides support under MVN, the Bank extended assistance to ›REM, an Orissa-based NGO
for constructing 100 work shed ±cum-tenements. The loan-cum-grant support is expected to
provide cyclone victims with permanent structures to carry out income generating activities.
The intervention also seeks to create innovative financing instruments with application in
disaster relief efforts. In another intervention targeted entirely at women entrepreneurs,
Mukherjee Knowledge Ware Association, Mumbai was extended assistance for undertaking a
study of the Small Office Home Office (SOHO) women entrepreneurs and their needs in
terms of credit and support services.

!!
%! 

The Bank
s Entrepreneurship Development ›rogrammers (ED›
s) emphasize on promotion of

enterprises, especially in rural areas targeting less privileged sections of the society. During
the year, the Bank supported 128 ED›
s taking the cumulative number of ED›
s to 1709
comprising 779 programmes for rural youth, 331 for women and 599 for other groups. These
programmes are conducted through well trained NGOs and specialized agencies, the major
ones being Edit, Ahmedabad and Rural Development and Self Employment Training Institute
(RUDSETI), Ujire, Karnataka. Besides, the Bank continued to lend capacity building support
to conducting agencies by way of trainers
training, NGO - banker interface, financial
management programmes etc.

As a part of the periodic evaluation to developmental activities, the Bank commissioned the
services of XLRI, Jamshedpur to evaluate ED›
s conducted by three major institutes, viz.
RUDSETI, EDII and ÿentre for Entrepreneurship Development (ÿEDMA›) Bhopal, Madhya
›radesh. The major findings of the study include high success rate in terms of percentage of
participants in setting up enterprises (44 per cent for RUDSETI followed by 37 per cent for
EDII and 22 per cent for (ÿEDMA›) and increase in average monthly income to Rs. 2,065/-.
The study recommended that the ED›
s should be conducted as a part of integrated business
development service and that emphasis should be put more on product! process 1 skill sector
market specific ED›
s. During the year, the Bank extended support for an innovative project
launched by Development Education (International) Society, ›une on "›overty Alleviation
 and ›revention through Enterprise Development in India". The project would span across the
states of Uttar ›radesh, Madhya ›radesh, Maharashtra, Orissa and Assam. Under the project,
non-credit, media and field programme based training inputs would be provided to various
target groups such as people below poverty line, underprivileged and disadvantaged women
and school going children.

1
%!

The Human Resource Development intervention of the Bank for the benefit of SSI sector is
undertaken through two structured mechanisms (i) the Small Industries Management
›rogramme (SIMA›) which targets educated unemployed as well as industry-sponsored
candidates with the overall objective of providing competent managers to SSI sector and (ii)
the Skill-cum- Technology Up gradation ›rogramme (STU›) which aims at enhancing
technology profile of SSI units. Besides providing support to various technical/management
institutions,
these programmes are being conducted in an on-going manner by 18 national
level institutions out of the corpus fund provided by the Bank.
During the year, the Bank supported 21 SIMA›
s and 172 STU›
s, taking the total programmes
supported so far to 240 and 1074, respectively. During the year, the five year term of corpus
support extended to HT-Kharagpur, II T-ÿhennai and XIM- Bhubaneshwar came to an end.
On a review, it was observed that these institutes were conducting SIMA›
s regularly.
Keeping in view their satisfactory performance, corpus support was renewed for a further
period of three years. A Task Ôorce on SIMA› and STU›, constituted for overseeing gradual
institutionalization of these programmes, held its 10th meeting in Ôebruary 2003 at II T Delhi
and reviewed the progress made by corpus assisted institutions.

 

During the year, the environment management initiative of the Bank was consolidated. The
intervention with the ›unjab State ÿouncil for Science and Technology (›SÿST) endeavored
to seed cleaner production technologies in a number of sectors like foundries, rice mills, brick
kilns, electroplating units, etc. The intervention, in its second phase has targeted clusters in the
states of Himachal ›radesh, Jammu and Kashmir, ›unjab, Haryana and Uttar ›radesh. A total
of twelve demonstration projects have been established in the second phase, which is in
addition to the 14 technologies demonstrated earlier in ›hase. Besides,

the Bank extended support to ›SÿST for conducting 18 workshops for specific industrial sectors to
enable the units to appreciate the concept of cleaner production.

The reach of the environmental intervention was enhanced with support to Development
Alternatives, New Delhi for taking up cleaner production measures for the cluster of stone
crusher units at Tikamgarh, M.›. The intervention will enable units to undertake formulation
of ÿleaner production options, equipment design and demonstration of clean technology.

' c

During the year, the Bank supported 93 events/ activities such as trade fairs, buyer-seller
meets; seminars, trade delegations, etc. with are assistance aggregating to Rs. 148 lakh to
enhance the marketing capabilities of the small scale sector. The initiatives at the nationals
and regional levels covered various industry groups / activities such as knitwear, textiles,
gems and Jewellery, engineering goods, leather products, stones, handicrafts, rubber, food
processing etc.

To provide focused attention to marketing needs of small scale and cottage industries of
North-East, the Bank has been supporting a variety of initiatives; prominent among these are
Enterprise Development Expo 2003 by North-East ÿhamber of ÿommerce and Industry,
 Handloom & Handicraft Expo at Sivasagar by North-East Women Association and Assam
Apex Weavers and Artisans ÿo-operative. Ôurther, the Bank has also supported buyer- seller
meets for Northeast products at Bangalore and Shillong as also preparation of catalogue of
handicraft products made in the region.




!!c$)
 5

The Bank has been making efforts for the past few years to initiate developmental
programmes through proactive industry associations. In this regard, during the year under
review, support was extended to the Indian Industries Association, Lucknow to setup a model
Small Industries Information and Service ÿentre (SIISÿ) at its ÿentral Office for providing
information and consultancy support to SSI entrepreneurs throughout the state of Uttar
›radesh. SIISÿ will also create a data base on SSI
s in U› with special reference to
their products and raw material needs and help in widening the market sphere of small scale units
through Internet and Eÿommerce. In terms of consultancy support, the ÿentre will develop
capacity in the areas of technology up gradation, credit availability and taxation for the benefit
of their members.

The Bank has extended assistance to the Belgaum Small Scale Industries Association for setting
of a material-testing centre at Belgaum. The centre has already become operational and is
providing testing facilities to foundries and manufacturing units in the region, besides
providing calibration and metrological facilities. The centre is expected to benefit more than
600 small, scale units operating in and around Belgaum.

%'

The developmental area for the SSI sector is an ever-evolving field with innovative products
being designed to reach out to the target group. The Bank is a front-runner in evolving new
developmental products for the SSI sector and the introduction of vocational training
programmes for school dropouts is a step in this direction. Another innovative programme on
the anvil seeks to enhance the competitiveness of small industries.

The project is being conceptualized with professional and financial support from the
Department for International Development, Government of UK and seeks to target specific
sub-sectors of small industries. The key features of programme design include a
comprehensive range of demand driven services and a sub-sectoral approach with scaleable
dimensions to national level.The programmed envisages environment management as one of
the key areas of intervention with performance linked incentive to implementing agencies and
partner institutions.

In the coming years, the Bank will continue and strengthen its relationship with partner
institutions like the Swiss Agency for Development and ÿo-operation. This relationship has
spawned many innovative programmers in the last 10. years and has been, a source of strength
for the Bank.

RI› will continue to be a focus area for the Bank in the coming years which will be integrated
with ED›
s and Udhyog Sadhana Radio programmers in the quest for rural industrialization.
 ÿluster development with focus on specific sub-sectors will be another thrust area during the
year. Networking with partner agencies and NGOs will be a priority area for the Bank in its
quest for enhancing the reach of the developmental network.

The Bank realizes the importance of developmental efforts in providing a competitive edge to
small industries, and programmers in the coming years will be designed with this objective.
There will be a conscious effort to network with industry associations and link the
developmental activities of the Bank with schemes of direct assistance. The move is intended
to provide SSI units with developmental support and financial assistance under one window.

c
c

c

c-
-
c

Micro Ôinance has been acknowledged as one of the important, effective and financially
sustainable tools for tackling poverty in developing countries and is therefore increasingly
being supported by a cross section f national and international funding agencies, commercial
banks, apex level institutions and others. SIDBI has taken lead in popularizing the concept in
India. It aims at creating and building a strong and viable network of grass root micro finance
Institutions. SIDBI has made ÿonsiderable progress in this field since 1994 when it started
with a pilot scheme of Micro ÿredit.

Since 1999, SIDBI Ôoundation manages the operations under Micro ÿredit Scheme (MÿS) for
Micro ÿredit (SÔMÿ). The operation of ÔMÿ, over a period of more than four years, has
recorded encouraging performance, With consistent growth in its areas of operations. The
details I the progress during the Ô 2003 are enumerated as under:

!-

SÔMÿ sanctioned financial assistance of RS.38.51 crore, during the year, as compared to Rs.
41.70 crore in the previous year. Total disbursements during the year were Rs. 31.04 crore as
against Rs. 21.79 me in Ô 2002. The assistance is expected to provide income generating
avenues to about 1.35 lakh poor, mostly women.

Out of the total sanctions of RS.38.51 crore, SÔMÿ provided loan ,assistance of RS.32.33 crore
(disbursements RS.26.78 crore), while grant, assistance was RS.6.18 crore (disbursements
RsA.26 crore) Of the total ant assistance, RS.3.32 crore was sanctioned to 24 Micro Ôinance
situations (MÔI
s) for their capacity building and RS.2.86 crore for various her capacity
building initiatives for the sector.

The cumulative assistance since inception of SIDBI
s micro finance initiatives as at the end of
March 31, 2003 aggregated RS.161.26 crore through 185 MÔI
s benefiting approximately 8.62
lakh poor, mostly women.The Bank
s outstanding loan portfolio under MÿS as on March 31,
2003 stood at Rs 54.92 crore. The recovery efforts of the Bank were intensified during the
year which resulted in One-Time Settlement of two cases in the North-Eastern region,
prepayment of loan in one case and clearance / part payment of over dues in two cases. The
N›A under MÿS as on March 31,2003 was 1.14 per cent, as compared to 1.51 per cent at the
end of previous year.

During the year, 39 ÿapacity Assessment Ratings of MÔI
s were commissioned through M-
ÿRISIL and ÿRISIL, besides 3 ratings undertaken by the internal rating team. S1 DB1
Ôoundation has, so far, commissioned ratings of 141 MÔI
s.
 ($

In an effort to increase the resource flow to partner MÔI
s, SÔMÿ has introduced two new
products during the year viz., Liquidity Management Support and Transformation Loan. The
Liquidity Management Support (LMS) is envisaged to help the partner MÔI
s to meet the
urgent liquidity needs for their micro finance programmers. The LMS will be offered to the
MÔI on an annual basis. The quantum of support will be limited to a maximum of 15 per cent
of the loan outstanding, subject to a maximum of RS.25 lakh. The Transportation Loan (TL) is
envisaged as a quasi-equity type support to a select band of top level non-corporate MÔI
s. TL
would help the MÔI
s not only in transforming themselves into corporate entities but also in
enhancing their resource base thus helping in leveraging loan funds and expanding their micro
credit operations on a sustainable basis.

The product would have the feature of conversion of loan into equity after a specified period
of time subject to the MÔI attaining certain structural, operational and financial benchmarks.
The support will be limited to RS.100 lakh per MÔI.

During the year, one of the partner MÔI
s of SIDBI Ôoundation has been sanctioned Rs.90 lakh
as transformation loan to enable it to set up an NBÔÿ for undertaking micro credit activity in
Mirzapur and Ghazipur districts of Uttar ›radesh. SIDBI Ôoundation has also sanctioned loan
assistance of Rs.25 lakh to a partner MÔI under Liquidity Management Support to tide over
the short-term liquidity problem.

-!) %$ c:

Ôinancial assistance by way of grant is being provided to MÔI
s for meeting their capacity
building needs encompassing all areas of operations and organization & management. Ôunds
are provided for meeting the programme expansion costs with a view to making them

Sustainable in the long run. The capacity building support to partner MÔI
s is provided after an
intensive needs assessment exercise. The capacity building package includes technical
assistance for automation, Management Information System development, training,
consultancy services, etc.

SIDBI Ôoundation is also implementing the TREAD programme of the Government of India.
Under this programme, SIDBI Ôoundation provides loan assistance to the NGOs while the Gol
provides grant. The cumulative disbursement of grant assistance of Rs.123lakh to 8 MÔI
s has
been effected by SIDBI on behalf of Gol under this scheme.

-!) %$ %%c

Besides strengthening of MÔI
s, the Bank has also commissioned a national consultancy
assignment through National Institute of Bank Management (NIBM), ›une to examine the
Ôormal Ôinancial Institutions sector as well as propose a strategy for work in developing the
ÔÔI
s role in Micro Ôinance in India.

As a prelude to this assignment, NIBM was commissioned to conduct a workshop on Expanding the
Micro Ôinance Operations of ÔÔI
s at ›une on August 17, 2002. The workshop was aimed at
identifying a suitable capacity building input to ÔÔI¶s to enable them to deliver quality micro
finance products! Services to poor more effectively.

4%-!) %$ 

 In addition to the specific capacity building support to the partner institutions, SÔMÿ has also
been taking initiatives aimed at capacity building of the various stakeholders in the micro
finance sector. Towards this end, SÔMÿ provided financial support to specialized technical
and management institutes for conducting training and orientation programmers for the
functionaries and staff of MÔI
s. Institutions such as Institute of Rural Management (IRMA),
Anand, Xavier Institute of Management (XIM-B) - Bhubaneshwar and Indian Institute of
Ôorest Management (IIÔM), Bhopal have been identified as potential training partners with the
objective of creating a cadre of micro finance professionals in India. It is planned to build the
capacities of these institutions through training of trainers, exposure to core faculty to
national/international best practices, attachments with MÔI
s, courseware development etc.
Efforts are also being made to build up the capacity of service providers, consultants, technical
personnel etc. to ensure faster and qualitative growth of the sector.

During the year, grant assistance was sanctioned to IRMA and EDA Rural Systems ›vt. Ltd.,
Gurgaon towards conducting a Training of Trainers (ToT) programme at IRMA. The ToT on

Delinquency Management
was held with faculty support from ÿonsultative Group to
assisting the ›oor (ÿGA› - an affiliate of World Bank) and EDA Rural systems. The
participants were drawn from various national level training institutions.

SÔMÿ also supported short term training programmers conducted f Sa-Dhan, New Delhi;
Bankers Institute of Rural Development, Lucknow; Nursed Monjee Institute of Management
Studies, Mumbai and Indian Institute of Management, Ahmedabad for the micro finance
practitioners, besides programmers organized by the Association of ÿommunity Development
Ôinancial Institutions, New Delhi.

IRMA has been provided grant assistance towards mentoring assistance of an international
consultant in its endeavor to design and develop long-term electives in Micro-finance. Similar
assistance has been provided to XIM-B, during the year, to obtain the services of an expert for
teaching the post-graduate diploma students who opted for Micro Ôinance electives in their
courses.

SÔMÿ has also renewed the oung ›rofessionals ›rogrammed during the year and offered the
services to 19 partners, aimed at providing professional manpower to the sector.

($! %)

A conducive policy environment for the growth of the Micro Ôinance sector is still not
prevalent in India. The issues faced by MÔI
s currently include lack of appropriate legal form
for MÔI
s, and various changes that are required in the existing legal framework to facilitate
the operations of MÔI
s throughout the country. Hence SÔMÿ has been involved with various
national level efforts towards improving the policy environment for the sector, including the
deliberations other Empowered ÿommittee on Micro Ôinance
set up by the ›rime Minister
s
Office and the RBI Informal Group on Micro Ôinance sector, during the year. SÔMÿ has also
been supporting the process of dialogues and deliberations at state and national levels by
various stakeholders, aimed at formulation of appropriate and coherent policy guidelines and
regulatory norms for the sector.
 SÔMÿ organized the third annual National Workshop on Micro Ôinance during the year, the
theme of the workshop being "Key Issues in Transformation - Ôrom NGOs to Ôormal
Institutions". The workshop, a national event in the sector, was organized at Indian School of
Business (ISB), Hyderabad and was attended by international micro finance experts, national
micro finance professionals, policy makers, bankers. Development Ôinance Institutions and
SIDB1 assisted MÔI
s.

Grant assistance was extended to MÔI networks, such as, Sa-Dhan and INAÔI India for
conducting the annual conference on topical themes related to the policy and regulatory issues
in Micro Ôinance. Support was also extended to such initiatives through regional and state
level forums in Orissa, Rajasthan and Tamil Nadu.

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New innovative ideas in areas such as micro finance practices, credit delivery techniques
and methodologies, products, etc. are supported as part of the action research plan which
includes support towards studies, field testing, pilot implementation and commercialization of
feasible ideas. In this connection, grant assistance was extended to V. Nagarajan & ÿo., New
Delhi towards conducting and facilitating Auditors
Workshop on "Best ›ractices for
Independent Audit of MÔI
s - International and Indian ›erspective" with faculty support from
ÿGA›. Also, considering the growing reach of IT networks in India, SÔMÿ renewed its
support during the current financial year, for the operations of an electronic network,
Mitrabharathi which provides platform for information sharing and exchange of ideas.

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An impact assessment study of micro finance programme of SÔMÿ has been commissioned
through EDA Rural Systems ›vt. Ltd. and the draft report has been received. The report has
provided useful information on the effectiveness and outreach of SÔMÿ
s micro finance
programmes and important observations regarding effect of micro finance on poverty
reduction, vulnerability, and enterprise promotion and gender. The report has indicated that
access to micro finance had a significant positive impact on women
s economic and social
empowerment, in terms of contribution to household income, decision-making, increased
mobility and increase in asset ownership, etc.

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SÔMÿ, in a bid to provide capacity building support to potential MÔI
s, especially in hitherto
less served regions, such as North-eastern states, Jharkhand, Madhya ›radesh, Orissa, etc., is
developing long term relationships with committed capacity providers. Indian Grameen
Services, Hyderabad has been assisted for capacity building often ÿommunity Based Micro
.Ôinance Institutions in the states of Madhya ›radesh, Jharkhand, etc. while support has been
provided to Independent ÿommission for ›eople
s Rights and Development, New Delhi for
taking up capacity building initiatives in Jharkhand.

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Under the ongoing SIDBI-DÔID collaboration, the Bank has received grant assistance of
RS.2.19 crore, during the current financial year, by way of reimbursement of grant disbursed
for various capacity building programmes initiated by SÔMÿ. Under the aegis of this
 collaboration, SÔMÿ has access to the services of two international advisers for providing
strategic inputs for the capacity building initiatives of SÔMÿ. The collaboration has helped
SÔMÿ in taking important capacity building initiatives for the micro finance sector during the
year. Under the ongoing SIDBI-IÔAD collaboration, the Bank has received an advance of
USD 1 million. The support from IÔAD has helped SÔMÿ to carry forward its mandate of
providing micro credit to the poor, especially in rural areas.

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SIDBI Venture ÿapital Limited (SVÿL) was established to carry out the business of setting up,
advising and managing venture capital funds and has been acting as the Investment Manager
to National Venture Ôund for Software & Information Technology Industry (NÔSIT).

NÔSIT is a 10-year close-ended Venture ÿapital Ôund, with a committed corpus of RS.1 00
crore. The fund has been contributed by Small Industries Development Bank of India,
Ministry of ÿommunications & Information Technology (MÿIT) (formerly called as Ministry
of Information Technology / Department of Electronics), Government of India and Industrial
Development Bank of India. Investment by NÔSIT includes Info-tech sector, software
industry and related businesses such as networking, multimedia, data communication, and
value-added telecommunication services and/ or any other related sectors.
As on March 31, 2003, the Board of Directors of SVÿL comprised S/Sh Brij Mohan, ED,
SIDBI, R. Tewari, ÿEO, SVÿL, A.K. Kapur, ÿM, SIDBI, ›une, besides Shri A.A. Thakkar,
›artner, Ambalal Thakkar & ÿo. and Shri Nalin Kohli, ÿhairman & ÿEO, Terabyte
Informatics ›vt. Ltd., as Directors. During the year, Shri ›.B. Nimbalkar, ÿMD, SIDBI (and
ex-officio ÿhairman, SVÿL) retired from the services of SIDBI and consequently retired from
the Board of Directors of the ÿompany as ÿhairman. Shri N. Bal Subramanian, Deputy
Managing Director, SIDBI has been nominated on the Board of SVÿL by SIDBI!. The Board
met five times during the year. Investment ÿommittee, constituted by SVÿL to examine all
the investment proposals also held five meetings during the year.The global downturn in IT
spending and other macro economic and political factors around the world affected the
software and IT companies, especially the units in the SME sector.

However, new opportunities in the Business ›rocess Outsourcing (B›O)/ Information

Technology Enabled Services (ITES) sector are emerging and it is expected that this sector
would grow at over 70 per cent in the next 1 -2 years. While overseas Venture ÿapital (Vÿ)
funds focused on large size investments, the domestic funds were highly selective in their
investments. Exit has become a major problem for the Vÿ industry in India.

NÔSIT, which is being managed by SVÿL, has raised an amount of Rs.66.67 crore from the
contributors out of a committed corpus of RS.1 00· crore. During the year under review,
SVÿL sanctioned Vÿ assistance aggregating RS.16.50 crore (7 units) as compared to
Rs.15.20 crore (6 units) in the previous year. The cumulative sanctions (net of cancellations)
aggregated RS.54.89 crore (24 companies). During the year, SVÿL disbursed an amount of
Rs.7.47 crore (4 companies) as compared to RS.6.81 crore (3 companies) in the previous year.
ÿumulative disbursements since inception of the fund aggregated Rs.30.09 crore (17
companies). Slow growth in sanctions and disbursements is due to cautious approach followed
by SVÿL in line with similar domestic Vÿ Ôunds on account of depressed market conditions.
In order to spread risk, SVÿL has created a diversified portfolio to cover a wide area of IT
industries viz. ›roducts, Services, Internet Related businesses, IT training and IT enabled
services. In view of the high growth prospects of B›O / ITES units, NÔSIT has increased its
stake in this sector during the year. Even in the present difficult Vÿ environment, three of the
 investor companies have received sanction for second round Vÿ funding at higher valuation
compared to the valuation at the time of investment by SVÿL. Exit possibilities for the fund
are emerging in one unit in the B›O segment. SVÿL has also initiated steps to raise the
balance amount of Rs.33.33 crore from the fund contributors out of their total commitment of
Rs.100 crore.

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SIDBI Trustee ÿompany limited (STÿL) was established to carry out trusteeship functions in
general and for Venture ÿapital Ôunds in particular. The ÿompany, at present, is acting as the
Trustee for the National Venture Ôund for Software & Information Technology Industry
(NÔSIT). The ÿompany has appointed SIDBI Venture ÿapital limited to act as Investment
Manager to NÔSIT.

As on March 31, 2003 the Board of Directors of STÿL comprised Shri Brij Mohan, ED,
SIDBI, Shri R. Tewari, ÿEO, SVÿL, Shri ashwant S. Bhave, joint Secretary & Ôinancial
Advisor, Ministry of ÿommunications & Information Technology (MÿIT), Gol and Shri B.›.
Singh, ÿOG, IDBI as Directors. During the year, Shri ›.B. Nimbalkar, ÿRM, SIDBI (and ex-
officio ÿhairman, STÿL) retired from the services of SIDBI and consequently retired from the
Board of Directors of the ÿompany as ÿhairman. Shri N. Bal Subramanian, Deputy Managing
Director, SIDBI has been nominated on the Board of STÿL by SIDBI!. The Board met 4
times during the year ended March 31,2003.

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In collaboration with United Nations-Asian and ›acific ÿentre for Transfer of Technology
(A›ÿTT), SIDBI set up Technology Bureau for Small Enterprises (TBSE) in 1995 with the
objective to strengthen the efforts of small scale units in technology access and transfer.
Services rendered by TBSE include technology promotion through multi-channels, facilitation
of transfer of technology, joint ventures, and business collaboration and finance syndication.
With a view to providing an institutionally coordinated arrangement to small-scale industries
for overseas technology partnerships, TBSE has developed linkages with relevant
organizations. SUBEX-M, a subcontracting and partnership exchange set up by the Ministry
of Industry, Government of Mauritius, entered into a MoU with TBSE to ›romote business
cooperation amongst SME
s for technology transfer, joint ventures, subcontracting
opportunities etc. Out of the 29 proposals for collaboration referred to SUBEX-M, it has
selected 15 for partnership search in the African region.

The New ork Economic Development ÿorporation has agreed to become nodal body for
TBSE on a reciprocal arrangement basis to facilitate match making and contacts exchange
between small businesses. To promote technologies available indigenously, TBSE developed
linkages with Defense Material and Stores Research Establishment (Kanpur), Indian
Agricultural Research Institute (New Delhi), ÿentral Mechanical Engineering Research
Institute (Durgapur), Electronics Research and Development ÿentre (NOIDA), and through
industry targeted publications such as ÿhemical Digest, Invention Intelligence (of NRDÿ),
Bridge SSI and Vyavasayakeralam (of Govt.of Kerala).

Support extended to tl1eme specific events included the Science and Technology India 2002,
Workshop for Technology ›roviders organized by ÿonsultancy Development ÿentre at New
Delhi, Rural Enterprise Summit at ÿhandigarh, Workshop on Technology Management at
Hyderabad, Renewable Energy Summit at New Delhi, seminar on Technology Up gradation
for SME
s, Way and Means at Mangalore, International Global Summit for SME
s at New
Delhi, Meet on Doing Business with ÿhina at Jaipur and ADB workshop on Ôinancing
ÿleaner ›roduction at New Delhi.In line with TBSE objectives, assistance was provided to
small-scale units in negotiating new, cost effective technologies from different sources.
 Mention may be made of fast and easy building systems for low cost housing, portable bio-
safe laminar airflow unit, export of pearl drilling know-how and equipment, cold water
soluble starch, channel casting process, herbal based products / processes, automation in
brick-making, granola bar confectionery product, advanced technology solution for ÿIS
activity, carbon dioxide laser tubes, irradiation of food items/ medical disposables, inkjet
cartridge toner, collaboration for making new variety of biscuits, joint venture for material
handling equipment, mini blast furnace technology and mosquito repellent.

To address cluster level requirements in select industrial activities, TBSE took initiatives for
sourcing technology to manufacture gas fired cupola for foundries in Agra and tied up
technical consultancy for technology up gradation of cold storages in two districts of north
Bihar. TBSE also associated with ›roject Management ÿell under Ministry of Steel,
Government of India to develop environment friendly and energy efficient technology
packages for steel re-rolling mills under a special programmed.

A few opportunities emerged for TBSE to interface through representation in important

committees. ÿonfederation of Indian Industry made TBSE the ÿonvener of its Task Ôorce on
Technology set up under the National ÿouncil for Small Industry. TBSE served on Technical
Subcommittee for ÿredit Linked ÿapital Subsidy Scheme for Technology Up gradation and
the ›roject Advisory ÿommittee for National ›rogrammed on Development of Lock Industry
set up by the Office of Development ÿommissioner (SSI). Under a new initiative, a MoU was
signed with Rajasthan Ôinancial ÿorporation (RÔÿ), which envisages joint efforts at
improving information access, transfer of appropriate technology and facilitating business
partnerships for SSI units in Rajasthan. To begin with, a study has been taken up, with SIDBI
financial support, to assess the technology requirements and capabilities of 100 small scale
units financed by RÔÿ with a view to assisting them in upgrading their manufacturing
processes to become more competitive. This study will cover units engaged in stone
processing, mineral grinding, textiles, SS sheets manufacturing, food processing, etc.

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August 05, 2005. SIDBI Venture ÿapital Ltd and Karnataka IT Venture Ôund exit from
EÿAD Technologies Ltd., Bangalore
SIDBI Venture ÿapital Ltd (SVÿL), today announced acquisition of EÿAD Technologies
Ltd (EÿAD), an early stage IT company funded by SVÿL together with Karnataka IT Venture
ÿapital Ôund (KITVEN) by an overseas ÿompany. ›ursuant to this acquisition both NÔSIT
and KITVEN have successfully exited from EÿAD. After nurturing EÿAD for a period of
four years, SIDBI Venture and KITVEN (who had invested Rs.2 crore and Rs.1 crore
respectively) have fully divested from their investment for a total consideration of Rs.7.50
crore i.e. with a profit of 150% over the original investment.
EÿAD was promoted by Shri S.L.N. Murthy, an ex-BELL executive and others in September
1997. It received venture capital funding from SIDBI Venture and KITVEN in March 2001. It
is engaged mainly in design, simulation and testing of high end ›rinted ÿircuit Board (›ÿB)
used in critical applications. The ÿompany has built a wide and diversified clientele
comprising of reputed MNÿs, private sector companies and ›SUs. Its customer list includes
Texas Instruments, Sanmina SÿI ÿorp, National Semi conductors, BELL, HAL, ISRO,
Defence Labs etc. The ÿompany is also engaged in marketing and support of special ÿAE
tools and solutions and represents internationally renowned companies. The company has
been consistently making profit for the past three years.
 Austria Technologies & System technique AG (AT&S), an Austrian company, Europe¶s
largest supplier of printed circuit boards with turnover of about euro 332 million has acquired
controlling interest in EÿAD.
Announcing SVÿL¶s exit from EÿAD, Shri.N.Balasubramanian, ÿhairman, SVÿL said, ³ We
are delighted to announce our exit from EÿAD. The most difficult part of the Vÿ process is
the exit and to have accomplished it smoothly is the ideal end result. The exit of our
investment from EÿAD vindicates our faith in the SME segment that it offers good
investment and profit opportunities to Vÿs´.
³SMEs contribute immensely in generating employment opportunities and also contribute by
way of generating revenues, including exports, to the national exchequer. We are committed
to our goal of supporting deserving projects / ventures in the SME especially for innovative
businesses through Venture ÿapital funding´, Shri Bal Subramanian added.
Shri.S.L.N.Murthy, Ôounder and Director of EÿAD stated, ³Vÿ funding for early stage SME
besides being difficult, requires deep understanding of the special features of the SME units.
SVÿL assisted in strengthening our systems and broad basing our Board, linkages with
Overseas Vÿ funds and gave us the visibility. The support provided by SVÿL is validated by
the rapid growth achieved by us´.
Shri.A.K.Kapur, ÿEO, SVÿL said, ³ It gives us great satisfaction to announce that we have
funded and nurtured a small enterprise and barely under four years, the Vÿs have been able to
make a profitable exit. Our exit establishes the fact that Vÿs too can invest in early stage
projects in the SME segment and exit with good returns on their investments´.
SIDBI Venture invested in the company out of National Venture Ôund for Software and IT
Industry (NÔSIT) which has been set up by Small Industries Development Bank of India
(SIDBI) in association with Ministry of ÿommunications and Information Technology
(MÿIT), Govt. of India and IDBI. It is a close ended 10 year fund with an initial corpus of
Rs.100 crore. SIDBI Venture, has committed investments aggregating about Rs.75 crore out
of the fund in 30 companies.
Investments made are in B›O/ITES, Software ›roducts, Software Services and Internet related
businesses. The investible corpus of the fund is expected to be fully committed during th e
current financial year.
In a span of less than five years since inception, SVÿL has funded over 28 projects spread
across the country largely in the ›roduct, Services, IT Enabled services, Internet and B›O - all
in the SME segment. NÔSIT along with the State/regional funds supported by SIDBI, has
become the major source of Vÿ funding for the SME segment. This structure also enables
rapidly growing S\Es to avail subsequent round of funding from bigger Vÿ funds.
SIDBI Venture ÿapital Ltd. in October 2004 also launched SME growth fund, a wide focus
new venture capital fund with a large corpus of Rs. 500 crore, dedicated to the SME sector.
The 8-year life Ôund is being established with an objective to meet the long-term risk capital
requirement of innovative and technology oriented units in this sector. SVÿL has already
committed investment in three companies aggregating Rs.26 crore. The corpus of SME
Growth Ôund has been contributed by SIDBI and other leading commercial banks such as
›unjab National Bank, State Bank of India, Bank of Baroda, Bank of India, ÿentral Bank of
India, Union Bank of India, Oriental Bank of ÿommerce and ÿorporation Bank. SME growth
fund distinguishes itself as the largest domestic Vÿ fund dedicated to the SME.
Karnataka Information Technology Venture ÿapital Ôund (KITVEN Ôund) is an Information
Technology specific Rs.15 crore Ôund registered with Securities & Exchange Board of India
(SEBI).
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The Small Industries Development Bank of India after its establishment has grown by leaps
and bounds and is still growing though being a Government organization which is considered
to be bad regarding development in the Indian business scenario.

It has established branches all over the country and is still trying to increase them so that it
can reach even the remotest of areas in India. As India is a agriculture based economy more of
such banks should be initiated and-built so that there is a wide scope for more farmers to
participate and establish themselves in the market. It has provided the farmers a great sense of
security to trade in the Indian market without much fear of exploitation. Also because of the
new and upcoming schemes offered to farmers by SIDBI they get that bit of encouragement to
grow more and earn more for them.

It also provides special impetus to women which are an added advantage as more and more
women get employed and earn. This indirectly helps the Indian economy as it grows because
of more and more people earning and many problems faced by India getting eradicated.

Thus I conclude on the note that SIDBI is a bank which should be given as much importance
as the other private banks and should be given more opportunities to grow.


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