Overview of Small Industries Development Bank of India and its activities

Small Industries Development Bank of India (SIDBI), set up on April 2, 1990 under an Act of Indian Parliament, presently acts as the Principle Financial Institution for the Promotion, Financing and Development of the Micro, Small and Medium Enterprise (MSME) sector and also co-ordinates the functions of the institutions engaged in similar activities. As on March 31, 2012, the Authorised Capital of SIDBI is ` 1000 crore and Paid Up Capital is ` 450 crore. Presently, the Bank provides refinance support through a network of eligible member lending institutions for onward lending to MSMEs and direct assistance is channelised through the Bank’s branch offices. SIDBI also extends financial assistance in the form of loans, grants, equity and quasi-equity to Non Government Organisations / Micro Finance Institutions (MFIs) for on-lending to micro enterprises and economically weaker sections of the society, enabling them to take up income generating activities on a sustainable basis.

Refinance

SIDBI has initiated various schemes for upliftment of MSME sector and continues to be the prime lending institution for MSME sector. The necessity of continuously providing low cost credit to MSEs through concessional resource support to SIDBI has become more pronounced in the present scenario of recovery of the Indian economy from the economic slowdown. As per the Union Budget 2011-12, SIDBI has been allocated ` 5000 crore to SIDBI for refinancing Banks/SFCs at concessional rates, out of which SIDBI received ` 4,711 crore, which has been channelised to banks/SFCs.

Risk Capital

In order to meet the risk capital requirements of MSMEs, especially those involving innovations and new technologies, the Union Budget for FY 2008-09 announced setting up of a fund of ` 2,000 crore with SIDBI for risk capital financing. Under the Risk Capital Fund, SIDBI provides Risk Capital assistance to MSMEs in the form of equity, preference capital, optionally convertible debenture, optionally convertible debt, sub-ordinated debt, etc. directly as well as through venture capital funds. As on March 31, 2012, a total of ` 1,193 crore out of the Risk Capital Fund has been committed by SIDBI to MSMEs and VC funds. In order to enhance the equity support to MSME sector, Union Budget 2012-13 has announced to set up India Opportunity Venture Fund of ` 5,000 crore with SIDBI.