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INDEX CHAPTER 1 TOPIC INTRODUCTION 1.1 SSI sector 1.2 Post World War II Scenario 1.3 Technology 2 DEVELOPMENT BANKING 2.1 What is Development Banking? 2.2 Overview Of Development Banking in India 2.3 Technological Problems in the Modern Process 3 SIDBI 3.1 History and Business Domain 3.2 Promotional & Development Initiatives 3.3 Objectives 3.4 Products 3.5 Channels of Assistance 3.6 Schemes 3.7 Subsidiaries
3.8 Interpretation of Managers View
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FINDINGS, SUGGESTIONS, CONCLUSION. 5.1 Findings 5.2 Suggestions 5.3 Conclusion REFERENCES 52-54
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y OBJECTIVES The major objective behind doing this project is to get a clear view about how SIDBI, an apex institution in Small Industries Financing Programmes came into existence, is organized and managed, its objectives, lending terms and conditions, lending purposes, challenges faced and tackled. y LIMITATIONS The study of the project is limited to the SIDBI. It renders the limited information provided by the officials, books and websites. Time, length and depth of the study were limited in making the project to the requirement of Mumbai University. y SCOPE The scope of this study is to get the knowledge about how credit granted by SIDBI helps in Small Industrial development.
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PRIMARY SOURCE DATA The primary source data for this project has been collected by visiting the office of SIDBI located at Bandra Kurla Complex, Mumbai.
SECONDARY SOURCE DATA Secondary data for this project has been gathered through various books, newspapers and internet.
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CHAPTER 1-INTRODUCTION
Chapter 1- INTRODUCTION
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MEANING OF SSI
The Government of India grouped small-scale industrial undertaking into 2 categories- those using power but employing less than 50 persons and those not using power but employing less than 100 persons. All small-scale enterprises however had capital investment of less than Rs. 5 lakhs. The ownership and management in small enterprises is predominantly proprietary with individual ownership or partnership.
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The small-scale sector has been assigned a significant role in industrialization and economic development in India as an effective tool in sub serving the national objective of growth with social justice. Its importance has been increasingly recognized in India as a solution for the wide spread unemployment and under unemployment.
Small-scale sector is credited with short gestation periods, generation of conduciveness for its dispersal over of widening base of indigenous entrepreneurship. Up gradation and adoption of other modernization measures have received added attention in the recent years to make this sector more cost effective.
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SI NO 1
OBJECTIVES
MAJOR FEATURES
Emphasis to shift from cheap credit to adequate credit. Equity participation by other undertakings upto 24%. domestic foreign
To
strengthen
small
Introduction of factoring service through Banks. Marketing of mass consumption goods name. Setting exchanges. up subcontracting under common brand
industry marketing.
To and
upgrade
technology promote
Technology SIDO.
developmental
in
modernization.
Quality counseling and testing technology information centre. Technology programmes. Up gradation
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OPPORTUNITY
The opportunities in the small-scale sector are enormous due to the following factors:
y y y
Less Capital Intensive Extensive Promotion & Support by Government Reservation for Exclusive Manufacture by small scale
sector
y y y y y y y y y y
Project Profiles Funding - Finance & Subsidies Machinery Procurement Raw Material Procurement Manpower Training Technical & Managerial skills Tooling & Testing support Reservation for Exclusive Purchase by Government Export Promotion Growth in demand in the domestic market size due to
Growth in Requirements for ancillary units due to the increase in number of Greenfield units coming up in the large-scale sector.
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The second half of the 20th century has been called the 'era of development'. The origins of this era have been attributed to:
y
The need for reconstruction in the immediate aftermath of World War II;
The evolution of colonialism or "colonization" into globalization and the establishment of new free trade policies between socalled 'developed' and 'underdeveloped' nations. The start of the Cold War and the desire of the United States and
its allies to prevent the Third World from drifting towards communism. Before the date, however, the United States had already taken a leading role in the creation of the International Bank for Reconstruction and Development (now part of the World Bank Group) and the International Monetary Fund (IMF), both established in 1944, and in the United Nations in 1945. The concept of development banking rose only after Second World War, after the Great Depression in 1930s. The demand for reconstruction funds for the affected nations compelled in setting up a worldwide institution for reconstruction. As a result the IBRD was set up in 1945 as a worldwide institution for development and reconstruction. This concept has been widened all over the world and resulted in setting up of large number of banks around the world which
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coordinating the developmental activities of different nations with different objectives among the world.
The early history of Indian banking and finance was marked by strong governmental regulation and control. The roots of the national system were in the State Bank of India Act of 1955, which nationalized the former Imperial Bank of India and its seven associate banks. In the early days, this national system operated alongside of a large private banking system. Banks were limited in their operational flexibility by the governments desire to maintain employment in the banking system and were often drawn into troublesome loans in order to further the governments social goals.
Technology obsolescence Managerial inadequacies Delayed Payments Poor Quality Incidence of Sickness Lack of Appropriate Infrastructure and Lack of Marketing Network
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There can be many more similar issues hindering the orderly growth of SSIs.
Over the years, SIDBI has put in place financing schemes either through its direct financing mechanism or through indirect assistance mechanism and special focus programmes under its P&D initiatives. In its approach, SIDBI has struck a good balance between financing and providing other support services.
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1.3 TECHNOLOGY
In the process of industrialization in general and development of SSIs in particular, technology plays a key role in providing cutting edge for development. SIDBI, since inception, has been giving thrust to technology up gradation of the SSIs and towards this end; various steps were taken by the bank aimed at identifying their needs in terms of process technology, environment management, quality management, common facilities center etc. & adopting suitable measures to address them. Thus, apart from meeting the credit needs of SSIs, SIDBI has developed support mechanism and facilitated institutional and infrastructural framework for development and use of technology on an increasing scale.
The technology (APCTT), a United Nations outfits, is gradually emerging as a technology bank for SSIs providing information on range of technologies, sources and facilitating collaboration together with financial tie-up, when feasible. It has also been successfully exporting the SSI technologies to various countries. In April 1995 SIBI out of its own resources set up technology development and modernization fund (TDMF) with an earmarked amount of Rs. 200crores for encouraging existing industrial units in he small scale sector to modernize their production facilities and adopt improved and updated technology.
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Assistance under this scheme is being provided at SIDBIs prime lending rate to beneficiary units. Though the assistance under TDMF since inception crossed the originally earmarked amount, the bank extended its operation for another 3 years by earmarked another Rs. 100 crores from out its own resources. The major initiatives in this direction include cluster based intervention programmed for
technological up gradation, organizing skill cum technology up gradation programmed and expanding information base on status of technologies in specific sub-sector within SSIs.
SIDBI is also performing the role of nodal agency in respect of specialized schemes of Government of India for technological up gradation of cotton textile industry and tanneries in the small scale sector. The range of assistance comprising financing, extension support and promotional are made available through appropriate schemes of direct and indirect assistance for the following purposes:-
y Setting up of new projects. y Expansion, diversification, modernization, technology up gradation, quality improvement, rehabilitation of existing units. y Strengthening of marketing capabilities of SSI units. y Development of infrastructure for SSIs and y Export promotion.
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The development bank must act as an engine of socioeconomic growth in promoting technological transformation so as to achieve the goal of entrepreneurial self-reliance in year to come. The dominant influence hitherto exerted by the west in the area of development banking had to be broken. The countries of the third world break this hegemony and develop their independence style of development banking. The concept of development banking could assume this new role in helping the third world so that it could emerge as the main force for the evolution of world economy. -Dr. Man Mohan Singh.
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The idea of development bank is seeking new dimensions every day. Development Banks as an institutional device to accelerate the pace of socio-economic development in the undeveloped and developing countries are of a comparatively recent origin. The development bankers have moduled the ideology of top financial institutions to act as a development banks so as to fulfill the aspirations of the changing society at large. They are acting as gap filler in the present set up of the entrepreneurial world.
Government and private entrepreneurship and others have sponsored them by joint entrepreneurship of the two. Some development banks are of national and international characters while the other are of state and regional level.
A development bank's policies or programs center on the following priorities: a) Economic Growth b) Human Development c) Gender and Development d) Good Governance e) Environmental Protection f) Private Sector Development g) Regional cooperation
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a) Increase loans and equity investments to its developing associate countries (DMCs) for their monetary and social development.
b) Provides technical help for the planning and implementation of development projects and programs and for advisory services.
c) Promotes and facilitates speculation of public and private capital for growth and development.
d) Responds to requests for assistance in coordinating growth policies and plans of its increasing member countries.
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The
ideology
of
development
banking
is
based
on
entrepreneurship promotion in every sector of the national economy. Thus, development banks are assiduously endeavoring to create an economy of surplus and abundance by using innovative and entrepreneurial devices.
1. To generate entrepreneurial environment in every sector of national economy. 2. To bridge gap of entrepreneurial expertise, knowledge, wisdom and experience. 3. To promote, encourage and stimulate the dormant and passive entrepreneurial human wealth of the country. 4. To accord top priority to backward regions. 5. To nurse and protect the mushroom growth of entrepreneur promotion. 6. To modify the inhibitive environment by providing necessary finance for it.
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7. To advise the Government and Planning Commission on matters of national policies and strategies to be conceived for socioeconomic development and reformation.
If the development bank virtually happens to be the principal development bank of the country, then it should act as a guide, friend and philosopher for other DFIs operating at state and national level.
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The course of development of financial institutions and markets during the post-Independence period was largely guided by the process of planned development pursued in India with emphasis on mobilization of savings and channeling investment to meet Plan priorities. At the time of Independence in 1947, India had a fairly well-developed banking system. The adoption of bank dominated financial
development strategy was aimed at meeting the sectoral credit needs, particularly of agriculture and industry. Towards this end, the Reserve Bank concentrated on regulating and developing mechanisms for institution building. The commercial banking network was expanded to cater to the requirements of general banking and for meeting the shortterm working capital requirements of industry and agriculture. Specialized development financial institutions (DFIs) such as the IDBI, NABARD, NHB and SIDBI, etc., with majority ownership of the Reserve Bank were set up to meet the long-term financing requirements of industry and agriculture. To facilitate the growth of these institutions, a mechanism to provide concessional finance to these institutions was also put in place by the Reserve Bank.
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The first development bank in India incorporated immediately after independence in 1948 under the Industrial Finance Corporation Act as a statutory corporation to pioneer institutional credit to medium and large-scale. Then after in regular intervals the government started new and different development financial institutions to attain the different objectives and helpful to five-year plans. The Financial Institutions in India were set up under the strong control of both central and state Governments, and the Government utilized these institutions for the achievements in planning and development of the nation as a whole. The All India Financial Institutions can be classified under four heads according to their economic importance that are:
y y y y y
All-India Development Banks Specialized Financial Institutions Investment Institutions State-level institutions Other institutions
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The general level of technology in terms of installed equipment is backward in the SSI sector when compared to the others. The present low level of new product lines hampers the developments of SSI. The vast majority of the machines used by the SSI sector are conventional. Moreover, accessories for the imported machines are not manufactured in India, because of their age, they need constant attention and maintenance and problem of spare parts is acute. Old machinery is never replaced due to variety of reasons. Finance, long waiting periods for deliveries, risk aversion and some of the reasons for the slow replacement of machines in the SSI sector.
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Those who use indigenous machines generally feel that they lack speed and are made of tempered steel, lack precision, lack durability and often lead to frequent repairs. For those who wish to modernize or diversify their production, it is difficult to get imported machines because of restrictions over imports.
What is needed right now is to spot the possibilities that exist all round and to either adapt existing techniques or devise new ones for the best utilization of the available raw materials. It is such improvement effected on a wide scale that can bring about a revolutionary transformation in the SSI sector.
There at present two arrangements for providing technical advice and assistance to small firms. First, the Central Small Scale Industries Organization which through its service institutes provides a staff of technically qualified people whose job is to give advice to small entrepreneurs or the technical problem facing them and secondly the common facility workshops which undertake production operations on behalf of the small firms for a cost.
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CHAPTER 3- SIDBI
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SIDBI retained its position in the top 30 Development Banks of the World in the latest ranking of The Banker, London. As per the May 2001 issue of The Banker, London, SIDBI ranked 25th both in terms of Capital and Assets.
Small Industries Development Bank of India [SIDBI] as the principal financial institution for promotion, financing and development of industry in the small-scale sector, has been assisting the entire spectrum of the SSI sector, including the Tiny, Village and Cottage industries.
During the year 2002-03, the aggregate sanctions and disbursements of SIDBI amounted to Rs.10904 crore and Rs.6789 crore respectively.
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Cumulative assistance, as at the end of March 2003, surged to Rs.86, 158 crores in terms of sanctions and at Rs.59, 101 crores of disbursements, thus recording a compounded annual growth rate of 13.4 % and 11.4 % respectively. Net worth of the Bank is Rs.4075 crores as at the end of March 2003.
Role of Small Industries Development Bank of India (SIDBI) is envisaged as "the principal financial institution for the promotion, financing and development of industry in the Small Scale Sector and to coordinate the functions of the Institutions engaged in similar activities. SIDBI is headquartered at Lucknow with networking of 5 Zonal Offices, 1 Regional office and 59 Branch offices covering all the states and important industrial locations in the country.
In line with the international concept of Small and Medium Enterprises (SMEs), Government of India has permitted SIDBI to extend assistance to medium enterprises, in addition to the SSIs and service enterprises served hitherto. SIDBI, as a part of its operational strategy, has been emphasizing on increasing the flow of financial assistance to SMEs and enhancement in the capabilities of SMEs at all levels, with focus on adoption of improved and modern technology. As a matter of policy, SIDBI has tried to identify the gaps in the credit delivery system so as to fill them through appropriate new Schemes. Over the years, SIDBI has been continuously expanding its credit horizon and is assisting enterprises in the sectors like Tiny, Small Scale, Medium, Service and Micro-Finance Sector.
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In order to improve the flow of credit to small and medium enterprise sector, strategic business initiatives were taken by the Bank by broad basing certain schemes in line with the changing requirements of the sector. Steps were taken to enhance the scale of operations under direct finance schemes, in addition to refinance activities. Greater emphasis was laid on liberalizing the schemes as well as simplifying the systems and procedures and increasing the retail portfolio of the Bank. Some of the major contributions are launching of Small and Medium Enterprises Rating Agency (SMERA) for credit rating of SMEs, launching of SME Growth Fund of Rs 500 Crore, launching SME Fund for providing Credit to SMEs at concessional rate of interest, a tie up with OBI for providing working capital facilities and signing of MoUs with commercial banks for joint lending/co-financing of SME projects.
SIDBI is the principal financial institution for the promotion, financing and development of industry in the small-scale sector and to coordinate the functions of the institutions engaged in the promotion, financing or developing industry in the small-scale sector and for matters connected therewith or incidental thereto. The Bank has also been authorized by Government of India (GoI) to provide financial assistance to small and medium enterprises.
There is a well-defined system in the Bank regarding decision-making process. The Bank follows a committee based approach for all its lending decisions wherein Credit/Settlement committees have been set up right from branch level depending upon the nature and size of loan.
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Branches receive applications for credit facilities and recommend to the appropriate sanctioning authority. In the case of major loan products applications are processed at branches and Centralized Credit Processing Cells.
There is a defined organizational structure and clear system of accountability based on RBI / CVC guidelines. All credit decisions approved by any sanctioning authority are reported to the next higher authority for control / monitoring purpose. The system of exercising proper delegation of power and submission of control reports is in place and control officers monitor them.
Administrative decisions are taken at various levels of Officers and also by Executive Directors and Chairman & Managing Director as per the powers delegated to them by the Board.
The documents being obtained at the time of lending are preserved at the respective branch offices of the Bank. The Bank maintains register of share holders and record of proceedings of the Board meetings at its Head Office at Lucknow
The Banks shareholders are IDBI, LIC, GIC, other Nationalized Banks / FIs. Representatives of the shareholders and Industry Association / SSI Sector are members on the Board of Directors. The issues
concerning the policies can be raised by the shareholders in the Annual General Meetings of the Bank and by members in the Board meetings.
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1. Board of Directors. 2. Executive Committee. 3. Audit Committee. 4. Risk Management Committee. 5. Committee Corporations. for supervision of State Financial
The Board and its Committees meet at regular intervals and guide the bank in achieving its objectives. The meetings of the Board or Committees are not open to the public and the minutes of such meetings are not accessible to public.
There are no plans and budgets for expenditure of public money. The provision is not applicable to that extent to the Bank.
The Bank does not have its own subsidy programmes or plans for lending activities. However, the Bank is the nodal agency for implementing GoI sponsored schemes like Credit Linked Capital Subsidy Scheme (CLCSS), Technology Upgradation Fund Scheme (TUFS) & Integrated Development of Leather Sector (IDLS).
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Former Chairman & Managing Director, Bank of India Former Secretary, Government of India Chairman, West Bengal Financial Corporation Former Deputy Managing Director State Bank of India Executive Director, IDBI Bank Ltd. Executive Director (IT-BPR) Life Insurance Corporation of India
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Credit Guarantee Fund Trust for Small Industries (CGTSI) Coverage in North Eastern Region
The Ministry of Small Scale Industry, Government of India, and SIDBI have set up the Credit Guarantee Fund Trust for Small Industries (CGTSI), to help small scale/tiny units in accessing institutional credit, both term loan and working capital, for their viable projects without arranging for collateral security and/or third party guarantee. As on August 30, 2006 banks/institutions have availed of CGTSI guarantee in North Eastern Region in respect of 1147 units covering aggregate assistance of Rs 2718 lakhs in North Eastern Region.
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Mission To empower the Micro, Small and Medium Enterprises (MSME) sector with a view to contributing to the process of economic growth, employment generation and balanced regional development
Vision To emerge as a single window for meeting the financial and developmental needs of the MSME sector to make it strong, vibrant and globally competitive, to position SIDBI Brand as the preferred and customer - friendly institution and for enhancement
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of share - holder wealth and highest corporate values through modern technology platform.
Four basic objectives are set out in the SIDBI Charter. They are:
y y y y
Financing Promotion Development Co-ordination For 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 into a wide spectrum constituting modern and technologically superior units at one end and traditional units at the other.
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SIDBI has sanctioned grants to various organizations like TCOs, Industry Associations, reputed NGOs and other agencies to conduct topical seminars and EDPs, and also sponsored the participation of SSI units in exhibitions at subsidized rates to enable them to market their products. In pursuance of its multifaceted P&D activity, synergistic with its business activities aimed at development of the small industries, SIDBI looks forward to a partnership with NGOs, associate financial institutions, corporate bodies, R&D laboratories, marketing agencies, etc., for national level programmes. The sanction and disbursement of grant under P & 0 activities in NER during the last three financial years amounted to Rs 125 lakh and Rs 92 lakh respectively.
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3.3 OBJECTIVES
Four basic objectives are set out in the SIDBI Charter. They are:
y y y y
Financing Promotion Development of industry in the small scale sector and Co-ordination the functions of other institutions engaged in similar activities. For 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 into a wide spectrum constituting modern and technologically superior units at one end and traditional units at the other.
SIDBI has an Integrated (Rupee and Forex) Treasury set up at Mumbai which functions as a separate business unit. The Treasury is headed by a Chief General Manager and has Front, Mid and Back offices which are manned by experienced officers. The Treasury has various required IT infrastructure to support the day-to-day operations and MIS requirement. The forex treasury is equipped with RMDS, SWIFT and WANDA settlement systems.
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3.4 PRODUCTS
DIRECT FINANCE SIDBI had been providing refinance to State Level Finance Corporations / State Industrial Development Corporations / Banks etc., against their loans granted to small-scale units
Since the formation of SIDBI in April, 1990 a need was felt/ representations were made that SIDBI being the principal financial institution for the small sector, should take up the financing of SSI projects directly on a selective basis.
So it was decided to introduce direct assistance schemes to supplement the other available channels of credit flow to the small industries sector. Since then, SIDBI has evolved itself into a supplier of a range of products and services to the Small & Medium Enterprises [SME] sector.
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Setting up of a new SSI unit/ service sector unit. Expansion / Diversification/ modernization/ technology up gradation/ quality certification.
y y y y
Any other activity considered relevant to the project. For undertaking various marketing related activities Acquisition of additional machinery / equipment Meeting working capital requirements including gap in MPBF or margin on selective basis.
Any other activity as per guidelines (having linkages and benefits accruing to SSI sector from the proposed assistance).
All activities covered under erstwhile marketing assistance scheme for SSIs.
Generally Rs.50 lakhs for setting up new unit and Rs.25 lakhs for other purposes.
In respect of well-run existing SSI units, the minimum loan could be Rs. 10 lakhs.
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To be eligible under the various bills schemes, one of the parties to the transactions to the scheme has to be an industrial unit in the smallscale sector within the meaning of Section 2(h) of the SIDBI Act, 1989.
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i)
Direct assistance: The objective behind SIDBI's direct assistance schemes has been
to supplement the efforts of PLIs by identifying the gaps in the existing credit delivery mechanism for SSIs. Assistance is provided directly through 43 branches of SIDBI. The assistance is extended directly for setting up of new SSI units, small hotels, hospitals/nursing homes, technology up gradation and modernization, expansion and
diversification, marketing of SSI products, setting up of multiplexes, development of infrastructure for the SSI sector, discounting of bills etc.
ii)
through a large network of 913 PLIs SIDBI has bagged the prestigious "ADFIAP Development Award 2003" for its Rural Industries Programme designed to give impetus to rural development by creating sustainable industrial and service enterprises in rural areas spread across the country with a branch network of over 65,000. The assistance is provided by way of refinance, bills rediscounting and
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resource support in the form of short-term loans/line of credit in lieu of refinance etc.
iii)
SIDBI extends development and support services in the form of loans and grants to different agencies working for the promotion and development of SSIs and tiny industries. The support is given for enterprise promotion with emphasis on rural industrialization, HRD development in the SSI sector, technology up gradation, quality and environment management, marketing promotion, information
dissemination etc.
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3.6 SCHEMES
SIDBI, primarily a refinancing institution has offered various direct as well as indirect (through refinance to the financial institution) starts up term loan facilities to the small entrepreneurs.
This includes the following:GENERAL SCHEME Purpose- For setting up new small-scale units & for all activities eligible for assistance under the scheme including professionals practice/ consultancy ventures & services sector units such as tourism related activities/hospitals/nursing homes/hotels/marketing & industrial infrastructure projects. Eligibility- All forms of organizations in the small scale sector (i.e. Proprietary, Partnership Company, Cooperative Society etc.) for infrastructure development all forms of organization such as public, private ltd.
SCHEMES FOR COTTAGE, VILLAGE & TINY INDUSTRIES: Purpose- Assistance for equipments or working capital as also for shed. Eligibility- Artisans, Village & Cottage Industries & Small Industries in tiny sector. Limit- Not to exceed than 0.5 million Rupees.
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SCHEMES FOR SC/ST & HANDICAPPED: Purpose- Assistance for equipments or working capital. Eligibility- SC/ST & Physically Handicapped persons. Limit- Not to exceed than 0.5 million Rupees.
SCHEMES FOR SMALL ROAD TRANSPORT OPERATED (SRTOS): Purpose- To meet expenditure towards cost of chassis, building initial taxes/ insurance and working capital. Eligibility- Small road transport operators. Limit- Need based.
NATIONAL EQUITY FUND SCHEME: Purpose- To meet gap in prescribed minimum promoters contribution and in equity. Eligibility- Small entrepreneur for setting up new projects and existing in small scale sector and rehabilitation of potentially viable sick SSI units irrespective of the location, satisfying the investments ceiling prescribed for tiny entrepreneur undertaking expansion, modernization, technology up gradation and diversification. Limit- Cost of projects not to exceed Rs. 1 million, soft loan limit 25% of cost of projects subjects to max Rs.2, 50,000 per projects service charges 1% p.a. on soft loan.
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MAHILA UDYAM NIDHI: Purpose- To meet gap in prescribed minimum promoters contribution or in equity. Eligibility- Small entrepreneurs for setting up new projects in smallscale sector and rehabilitation of potentially viable sick SSI units irrespective of the location. Enterprises would include all Industrial units and Service Industries satisfying the investment ceiling prescribed for tiny entrepreneurs.
SELF EMPLOYMENT FOR EX-SERVICEMEN: Purpose- For setting up small industrial projects including service industries and specified transport activities which are eligible for finance as per SSI norms. Eligibility- Ex-servicemen sponsored by Director General, Ministry of Defense, Government of India. Limit- Scheme operated through SFCs twin function of project not to exceed than 1.5 million, Soft loan limited to meet gap in equity subject to a maximum of Rs. 2, 25,000 per project. Service charges-1% p.a. during moratorium period thereafter, interest at 6% p.a. on soft loan.
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3.7 SUBSIDIARIES
SIDBI Venture Capital Ltd. [SVCL] a wholly owned subsidiary of SIDBI acts as the Asset Management Company of the National Venture Fund for Software and Information Technology. The fund has a committed corpus of Rs.100 crores as on March 31, 2003.
SIDBI Trustee Co.Ltd. [STCL] has been set up to carry out trusteeship functions for Venture Capital Funds. Presently STCL is acting as Trustee of National Venture Fund for Software and Information Technology.
Credit Guarantee Fund Trust Scheme for Small Industries [CGTSI] promoted jointly by Government of India and SIDBI, was launched by the Hon'ble Prime Minister on August 30, 2000. The credit guarantee scheme of CGTSI aims at helping the new and existing industrial units in SSI sector, in getting collateral free credit by way of both term loan and working capital from eligible member lending institutions. Member Lending Institutions include scheduled
commercial banks; select Regional Rural Banks and Government of India may approve such of the institutions as.
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Technology Bureau for Small Enterprises [TBSE] was set up by SIDBI in 1995 in collaboration with United Nations Asian & Pacific Center for Transfer of Technology. The Bureau aims at helping SSI units to attain international competitiveness through transfer of latest available technologies from both within and outside the country.
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The loan sanctioned to the entrepreneur it is depending upon the three years Balance Sheet of the industry, means the industry was profit making or not and entrepreneur is capable or not to repay the taken loan in case of existing entrepreneur, if the entrepreneur is new then development bank decide upon his/her financial background and nature of project report.
People have preferred Co- operative banks over the sources of finance. General Rate of margin money is 25%.
The time required for completion of project report is 15 days. Processing period in general is 3 months.
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5000 4500 4000 3500 3000 2500 2000 1500 1000 500 0 1990-91 1999-00 2001-04 2006-09
Income Of SIDBI
The bank has achieved consistent growth in financial parameters since inception. The total assets of the bank have grown from a level of Rs. 5309 crores in March 1991 to Rs 36, 561 crores in March 2009. The income has increased from Rs. 425 crores in 1990-1991 to Rs. 1598 crores in 1999-2000 and in 2001-2004 the income has increased to Rs. 1600 crores and to Rs. 5000 crores in 2006-2009. While the net profit has grown from Rs. 36 crores to Rs.459 crores during the same period. The capital to risk asset ratio as at end March 2000 was at 27.8 percent and 96.2 percent of the assets were standard assets. The bank has been paying dividends on equity holding to IDBI since inception.
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4.1 QUESTIONNAIRE Questions asked to manager Q1) What role SIDBI plays in Small Scale Industries Sector?
Q3) How do you analyze that the applicant company has the capacity for replacement of loan?
Q4) What things are taken into consideration while financing a new project or a new industry?
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Q7) How much time is taken for finalizing or rejecting a certain project?
Q8) What types of securities are preferred by bank while financing a project? Do the same securities apply for a new project or an industry?
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5.1 FINDINGS
Over the past decades, SIDBI has evolved into a strong and small-scale sector credit giving facility apex developmental institution with a complete grass roots level understanding of the complexities of the small-scale sector. SIDBI is a major shareholder in the Small-scale Industry in India. The bank is fully equipped organizationally, financially, and domain knowledge wise to emerge as a strong player in the Small-scale Industry Credit system. Promoting various groups reflects SIDBIs capabilities in capacity-building and nurturing the small-scale Industry.
A small-scale industrial unit is considered sick if it has at the end of an accounting year incurred losses equal to or exceeding 50% of its peak net worth in the preceding 5 accounting years. The sickness in SSI units have been causing concerned to policy-makers because of the productive assets lying unutilized or underutilized in this units, the huge assistance from financial institutions and banks locked up in them and the adverse impact on employment in case the unit closes.
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5.2 SUGGESTIONS
With the opening of the Indian economy due to liberalization and globalization this vital sector of the economy is facing huge challenges and competitions from of the domestic as well as multinational corporations. In view of the above, it is necessary to expeditiously consider issues relating to flow of credit to the sector, restructuring of borrowal accounts of SSI and Medium Enterprises, etc.
The Small-scale Industrial Sector has to be made more competitive to face the challenges of globalization and also to enhance its contribution to the national GDP. Accordingly the manpower policy should be formulated.
Lack of knowledge is an important reason for financial exclusion. Financial Education is required to ensure large section of population in urban and rural areas that do not have access to formal banking and financial services are educated of the following advantages of coming into the fold of such services. It would help in building informed customers and would result in a win-win situation for all. Setting up Credit Counseling Centre by banks which would advise public on gaining access to the financial system, would help in this regard.
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5.3- CONCLUSION
As an apex institution, the bank was expected to play more proactive role in reaching out financial and support services to SSIs with the help of existing credit delivery structure and support service agencies besides promoting new intermediaries and strengthening the existing network of institutions engaged in development of small scale sector.
From a predominantly refinancing institution, SIDBI has emerged as a major purveyor of a wide variety of financial services to the small scale sector. At present, financial assistance term loan both in rupee and foreign currencies, working capital term-loan, bill discounting for equipments and component, factoring services, venture capital.
SIDBI Foundation for Micro Credit launched in January 1999, SIDBI received the coveted Asian Banking Awards 1999 by ADFIAP for its Micro Credit Scheme in the Development Finance Products/ programme category. The awards are associated by the Asian Banking Association and the Association of Development Financing Institutions in Asia and Pacific.
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