TOPIC ROLE OF SIDBI SUBMITTED BY DIVYA DWARKA DUBEY PROJECT GUIDE PROF.

DEEPTI SONI SUBMITTED TO UNIVERSITY OF MUMBAI RAJASTHANI SAMELANS Ghanshyamdas Saraf College Affiliated To University Of Mumbai ACCREDITED BY NAAC WITH A GRADE &
DURGADEVI SARAF JUNIOR COLLEGE (ARTS & COMMERCE) S.V.ROAD, MALAD (W) MUMBAI: 400 064 YEAR: 2011-2012

CERTIFICATE
I Prof.Dipti Soni here by certified that Ms.Divya Dwarka Dubey a student of Ghanshyamdas Saraf College of T.Y.B.C.B.I. (Semester V) has completed project on ROLE OF SIDBI in the Academic Year 2011-2012.This information submitted is true and Original to the best of my knowledge.

External examiner: Date:

Principal:

Project Co-ordinator: Date:

College Seal:

ACKNOWLEDGEMENT
I take the opportunity to thank the UNIVERCITY OF MUMBAI for giving me a chance to do this project. I express my sincere gratitude to the principle; course Co-ordinator Mrs. Bhanukrishnan Madam, Guide Prof. Dipti Soni and our librarian and

other teachers for their constant support and helping for completing the project. I am also grateful to my friends for giving support in my project. Lastly, I would like to thank each and every person who helped me in completing the project especially MY PARENTS.

DECLERATION
I Miss Divya Dwarka Dubey a student of Ghanshyamdas Saraf College, Malad (W) T.Y.B.C.B.I. (Semester V) hereby declares that I have completed project on ROLE OF SIDBI in the Academic Year 20112012.This information submitted is true and Original to the best of my knowledge.

Date:

Signature of Student

ROLE OF SIDBI

INDEX
CHAPTER
1

TOPIC
Executive summary Design of the study Methodology of the study

PG NO

INTRODUCTION
1.1 SSI sector 1.2 Post World War II Scenario 1.3 Technology

DEVELOPMENT BANKING
2.1 What is Development Banking? 2.2 Overview Of Development Banking in India 2.3 Technological Problems in the Modern Process

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

SIDBIS FINDINGS
4.1 Findings

CONCLUSION.
5.1 Conclusion

CASE STUDY REFERENCES

Executive Summary
SMEs are major contributors to GDP, and an even larger contribut o r t o e x p o r t s a n d employment. Given this background, banks will find SME financing an attractive business o p p o r t u n i t y r a t h e r t h a n a c o m p u l s i o n , o f l e n d i n g t o t h e p r i o r i t y s e c t o r . S I D B I a n d b a n k s jointly have to play a pivotal and proactive role in financing the SMEs.The present slow down in lending to the SME sector is principally due to the risk aversion a r i s i n g o u t o f a h i g h p r o p o r t i o n o f t h e l e n d i n g b e c o m i n g n o n p e r f o r m i n g . T h i s c a l l s f o r reassessment of the strategy of lending to this sector and this reassessment has led us to t h r e e p r i n c i p l e e l e m e n t s o f o u r s t r a t e g y. ( 1 ) O n e i s d i r e c t e d a t t h o s e u n i t s w h i c h h a v e linkages with large corporate undertakings as vendors or suppliers. To these units, provision and flow of credit could be tied up with the large undertakings which would facilitate recovery but more important than finance our proposal is that the linkage will have to be strong enough to ensure a win win approach for both. This could be achieved by technology transfer of the large undertakings to the small units accompanied by a greater oversight and the quality of t h e p r o d u c t s d e l i v e r e d ; ( 2 ) t h e s e c o n d l e g o f o u r s t r a t e g y i s a i m e d a t d e v e l o p i n g a s e t o f standard products for units belonging to the same cluster of industries; (3) the third leg of our strategy is to develop local financial intermediaries specifically aimed at financing units in the tiny and small sectors and more particularly to the former. These would be in the nature of the NBFCs but without any permission to accept deposits from the public. They would draw their resources from the banking system, by originating the loans and selling the same to the banks as a portfolio with appropriate arrangements for risk sharing. T h i s r e p o r t , t h e r e f o r e , e m p h a s i z e s t h e n e e d f o r new vehicles and instruments viz. bankpromoted (nondeposit taking) NBFCs, micro credit intermediaries ded i c a t e d t o S M E financing, etc. Such micro credit intermediaries (funded by individual or a group of banks)would be able to credit -rate and risk assess and serve as instruments for extending quick credit to SME clusters, accredited to them. This report also reinforces the importance of SIDBIs

DESIGN OF THE STUDY

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.

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.

SCOPE
The scope of this study is to get the knowledge about how credit granted by SIDBI helps in Small Industrial development.

METHODOLOGY OF THE STUDY

The data for this project is obtained in two ways- primary source and secondary source.

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.

CHAPTER 1-INTRODUCTION GOOD THINGS IN LIFE BEGIN SMALL

1.1 SSI SECTOR

Small Scale Industry accelerates Indian economy not only in terms of its contribution to industrial output and national export but also in growing employment opportunities. Small Scale Industries accounts for about 95% of industrial units, contributes about 40% of the value added manufacturing sector and over 33% of the national exports through 28 lack units spread all over the country.

MEANING OF SSI
The Government of India grouped small-scale industrial undertaking into 2 categoriesthose 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 lacks. The ownership and management in small enterprises is predominantly proprietary with individual ownership or partnership.

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.

ESSENTIAL FEATURES OF THE SSI POLICY 1991

SR NO
1

OBJECTIVES

MAJOR FEATURES
Emphasis to shift from cheap credit to adequate credit. Equity participation by other

To meet the emerging demand for credit.

undertakings domestic foreign up to 24%. 2 To strengthen small industry marketing. Introduction of factoring service

through Banks. Marketing of mass consumption goods under common brand name. Setting up subcontracting exchanges. Technology developmental in SIDO. Quality counseling and testing

To upgrade technology and promote modernization.

technology information centre. Technology programmes. Up gradation

OPPORTUNITY

The opportunities in the small-scale sector are enormous due to the following factors:

Less Capital Intensive Extensive Promotion & Support by Government Reservation for Exclusive Manufacture by small scale sector 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 overall economic growth Increasing Export Potential for Indian products

Growth in Requirements for ancillary units due to the increase in number of Greenfield units coming up in the large-scale sector.

1.2 POST WORLD WAR II SCENARIO

The second half of the 20th century has been called the 'era of development'. The origins of this era have been attributed to:

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 so-called '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 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.

The major issues confronting SSIs are identified to be:

Technology obsolescence Managerial inadequacies Delayed Payments Poor Quality Incidence of Sickness Lack of Appropriate Infrastructure and Lack of Marketing Network

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 programmers under its P&D initiatives. In its approach, SIDBI has struck a good balance between financing and providing other support services.

1.3

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 the small scale sector to modernize their production facilities and adopt improved and updated technology. 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 subsector 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:

Setting up of new projects. Expansion, diversification, modernization, technology up gradation, quality improvement, rehabilitation of existing units. Strengthening of marketing capabilities of SSI units. Development of infrastructure for SSIs and Export promotion.

CHAPTER 2- DEVELOPMENT BANKING

2.1WHAT IS DEVELOPMENT BANKING?

The concept of development bank is not very much old. It has seen the light of the day after World War II in the worlds economy and from 1948 onwards in Indian economy. It is true that the idea of development bank has developed first of all in the West and has emerged elsewhere later on. The World Bank has sponsored 68 development Banks in 44 countries so far up to June 30, 1986. The concept of development bank has been perceived, viewed and interpreted by the doyens of development banking in different tone and style according to the prevailing environment of their region. Thus, every doyen of development banking has defined and opined the term development bank in their own flavor. The development bank must act as an engine of socio-economic 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.

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 module 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

The main functions of a Development Bank:

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.

OBJECTIVES OF DEVELOPMENT BANKS

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.

The major objectives are: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. 7. To advise the Government and Planning Commission on matters of national policies and strategies to be conceived for socio-economic 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.

2.2OVERVIEW OF DEVELOPMENT BANKING IN INDIA

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 sector 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 short-term 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. 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:

All-India Development Banks Specialized Financial Institutions Investment Institutions State-level institutions Other institutions

2.3 TECHNOLOGICAL PROBLEM IN THE MODERN PROCESS

In this modern age new technology is making possible decentralized production units at a high efficiency, which at one time seemed impossible. Appropriate technology is not static but a dynamic concept that must change as the countrys technological skills develop. Appropriate technology is primarily meant for SSIs that employ local raw materials, utilize available skills and cater largely to a large demand.

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.

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.

CHAPTER 3- SIDBI

3.1 HISTORY AND BUSINESS DOMAIN

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

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.

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. 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 co-ordinate 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. 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.

The Bank has the following bodies:

1. Board of Directors. 2. Executive Committee. 3. Audit Committee. 4. Risk Management Committee. 5. Committee for supervision of State Financial Corporations.

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 Up gradation Fund Scheme (TUFS) & Integrated Development of Leather Sector (IDLS).

BOARD OF DIRECTORS (AS ON AUGUST 05, 2011)

1 2 3 4 5 6 7 8 9 Shri Sushil Muhnot Shri Rakesh Rewari Shri N.K. Maini Dr. Shyam Agarwal Shri Anurag Jain Shri T.R. Bajalia Shri K. Sitaramam Shri B. Manivannan Shri Vikas Raj Chairman & Managing Director (CMD) Deputy Managing Director (DMD) Deputy Managing Director (DMD) Government Director Government Director Nominee of IDBI Bank Nominee of State Bank of India Nominee of Life Insurance Corporation of India Nominated by Government of India Nominated by Government of India Co-opted Director Co-opted Director Co-opted Director Co-opted Director

10 Shri Prakash Bakliwal 11 Shri M. Balachandran 12 Shri Janki Ballabh 13 Shri S.K. Tuteja 14 Shri P.A. Sethi

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 lacks in North Eastern Region.

SME Rating Agency of India Ltd (SMERA) Coverage

As a part of SIDBI's thrust towards emerging as one step shop to serve the SME sector, the SME Rating Agency of India Ltd. (SMERA) was launched as country's first and only rating agency dedicated to the SME segment. A joint initiative of SIDBI, Dun & Bradstreet Information Services India Pvt. Ltd., Credit Information Bureau (India) Ltd and banks, SMERA's primary objective is to provide ratings that are comprehensive, transparent and reliable and which would enable the rated units to borrow at competitive rates of interest. SIDBI calls upon the existing SMEs in the country to get them rated by SMERA in order to have competitive edge in availing credit at lower rates.

BUSINESS DOMAIN OF SIDBI

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

Mission
To empower the Micro, Small and Medium Enterprises (MSME) sector with a view to contributing to the process of economic growth, employment generation and balanced regional development

Vision
To emerge as a single window for meeting the financial and developmental needs of the MSME sector to make it strong, vibrant and globally competitive, to position SIDBI Brand as the preferred and customer - friendly institution and for enhancement of share - holder wealth and highest corporate values through modern technology platform.

Four basic objectives are set out in the SIDBI Charter. They are:

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.

3.2 PROMOTIONAL AND DEVELOPMENTAL (P&D) INITIATIVES:

As an apex institution for the small-scale sector, SIDBI also plays a major role in meeting the varied developmental needs of the Indian SSI sector. The P&D initiatives of the Bank aim at improving the inherent strength of the small scale sector so as to enable it to face the emerging challenges of globalization as also economic development of poor through enterprise promotion resulting in self employment and creation of additional employment.

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 lacks and Rs 92 lacks respectively.

RURAL INDUSTRIES PROGRAMME

Besides P&D activities, SIDBI has been providing a cohesive and integrated package of basic inputs like information, motivation, training and credit, backed by appropriate technology and market linkages for the purpose of enterprise promotion under its Rural Industries Programme (RIP). RIP is a unique approach for rural industrialization where the emphasis is on stimulating and helping the potential entrepreneurs to set up small enterprises through a consultancy outfit positioned by SIDBI. The prime objectives of RIP are development of viable and self-sustaining tiny/small enterprises in rural and semi urban India by harnessing local entrepreneurial talent. The programme attempts to address the problems such as rural unemployment, urban migration and under-utilization of local skills and resources, and is designed as a comprehensive Business Development Services programme.

3.3 OBJECTIVES

Four basic objectives are set out in the SIDBI Charter. They are:

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.

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.

Direct Credit Schemes

Purpose: - Assistance for purposes, such as

Setting up of a new SSI unit/ service sector unit. Expansion / Diversification/ modernization/ technology up gradation/ quality certification.

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.

Minimum loan amount

Generally Rs.50 lacks for setting up new unit and Rs.25 lacks for other purposes. In respect of well-run existing SSI units, the minimum loan could be Rs. 10 lacks.

BILLS FINANCE SCHEME

Bills Finance Scheme involves provision of medium and short-term finance for the benefit
of the small-scale sector. Bills Finance seeks to provide finance, to manufacturers of indigenous machinery, capital equipment, components sub-assemblies etc, based on compliance to the various eligibility criteria, norms etc as applicable to the respective schemes.

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 small-scale sector within the meaning of Section 2(h) of the SIDBI Act, 1989.

3.5 CHANNELS OF ASSISTANCE

SIDBIs financial assistance to small-scale sector has three major dimensions:

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)

Indirect assistance: SIDBI's schemes of indirect assistance envisage credit to SSIs 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 resource support in the form of short-term loans/line of credit in lieu of refinance etc.

iii)

Development and Support Services: 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.

3.6 SCHEMES
SIDBI, primarily a refinancing institution has offered various direct as well as indirect (through refinance to the financial institution) start 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. 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.

MAHILA UDYAM NIDHI:

Purpose- To meet gap in prescribed minimum promoters contribution or in equity. Eligibility- Small entrepreneurs for setting up new projects in small-scale 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.

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.

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.

3.8 INTERPRETATION OF MANAGERS VIEW POINTS

The development banks started before 1991 provide loan for Small Scale Industry and also charge low and high rate of interest on it.

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.

3.9 SIDBIS FINANCIAL HIGHLIGHT

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.

CHAPTER 4- SIDBIS FINDINGS

4.1 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.

CHAPTER 5- CONCLUSION

5.1- CONCLUSION

The main objective of SIDBI is to provide financial assistance to all SSI s throughout India through SFC s and SSIDC s. SIDBI s motive is promoting industrial development in India, it emphasizes on the development of the small-scale industries not to earn much profits. The maximum shares of profits of SIDBI are transferred to reserves. It can have more debt capital, hence the large portion of profits are utilized for the payment of interest to long-term securities.

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.

Case Study on SIDBI A Successful Financial Institution in SME Financing

Worldwide, the wind has been changing in the finance sector in general and banking-investment sector in particular. Such a panorama teaches us that now, is the time of cooperation rather than a competition, now its a time of convergence rather than cutting each others neck over customers and markets, now its a time of consolidation rather than antagonism.

Curing the fatal disease requires the doses of small pills; impressive thoughts come out from the small brain, similarly, India requires prominence of small and medium enterprises for curing its problem of low economic growth vis--vis developed nations.

To cure the overall disease of lack of appropriate growth of Indian SMEs Small and Medium Enterprises, India needs several small pills such as adequate credit delivery to SMEs, better risk management, technological up gradation of Banks esp. Public Sector Banks, attitudinal change in Bankers and so on. Among them, the major problem of inadequate financing to SMEs needs an urgent attention.

Having said this, it is pertinent to mention that Small Industrial Development Bank of India has achieved landmark results in the domain of small and medium enterprise financing and fulfilling their credit requirements time to time in various forms such as long term project finance, working capital finance, bill discounting etc. However considering the level of appetite for credit facilities of Indian small and medium enterprises, private and public sector banks in India need to work out an unique and innovative model of financing to this vital sector (SME) of Indian Economy.

In todays changing world, retail trading, SME financing, rural credit and overseas operations are the major growth drivers for Indian banking industry. The scene has changed since the adoption of financial sector restructuring programme in 1991. The reform in the financial sector in India along with the overall second generation economic reforms in Indian economy has transformed the landscape of banking industry and financial institutions. GDP growth in the 10 years after reforms averaged around 6 %.

With the introduction of the reforms especially in financial sector and successful implementation of them resulted into the marked improvement in the financial health of the commercial banks measured in terms of capital adequacy, profitability, asset quality and provisioning for the doubtful losses.

BIBLIOGRAPHY

INTERNET REFRENSES
http://www.sidbi.com/ http://www.sidbi.com/NOTICES/MicroFinance/TOR%20Impact.pdf http://www.sidbi.com/NOTICES/corporate.pdf http://www.sidbi.com/FAQ.asp http://www.sidbi.com/directobjectives.asp http://www.sidbi.com/directcredit.asp http://www.sidbi.com/directtechnology.asp http://www.sidbi.com/UnderConstruction.asp http://www.sidbi.com/directssi.asp http://www.sidbi.com/directrisk.asp http://www.sidbi.com/billsobjectives.asp http://www.sidbi.com/billsreceivable.asp http://www.sidbi.com/internationalpost.asp http://www.sidbi.com/internationalpre.asp http://www.sidbi.in/Micro/index.htm http://www.sidbi.com/otherschemes.asp http://www.sidbi.com/otherschemes.asp http://www.sidbi.com/promotionalObjectives.asp http://www.sidbi.com/refinanceiso.asp http://www.sidbi.com/customersssi.asp

BOOK REFRNSES
Ramesh IDBI/SIDBI Assistant Manager Guide
By Ramesh

Financial Services Management Deepak Abhyankar

MAGAZINE REFRENSES OPTIMISM

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