SIDBI: Role of Small Industries Development Bank of India in growth of MSME sector

Small Industries Development Bank of India (SIDBI) set up on 2nd April 1990 under an Act of the Indian Parliament, acts as the Principal Financial Institution for the Promotion, Financing, and Development of the Micro, Small, and Medium Enterprise (MSME) sector as well as for co-ordination of functions of institutions engaged in similar activities. The bank was a wholly owned subsidiary of IDBI at the time of establishment, but it was delinked from IDBI with effect from March 27, 2000.

Indirect lending: SIDBI has undertaken refinance facilities through Banks, SFBs, NBFCs, MFIs, and New Age Fintechs for a larger reach in financing the MSME sector. Non-Banking Financial Companies (NBFCs) registered with RBI as “ICC – Investment and Credit companies”, both Deposits taking and Non-Deposit taking, which is engaged in financing enterprises in the Micro and Small Enterprises are eligible for assistance. The eligibility parameters for the Scheme of Refinance to NBFCs (for NBFCs with external credit rating up to AA- ).

SIDBI Offers direct loans to companies categorised in the Small and Medium Enterprises (MSME) sector. Direct Lending- aims to fill the existing credit gaps in the MSME sector and is undertaken through demonstrative and innovative lending products, which the credit delivery ecosystem can further scale up.

Under Fund of Funds (FoF), SIDBI contributes to the corpus of SEBI registered Venture Funds / Alternative Investment Funds [category I & II only]. The VCFs / AIFs supported are required to invest a specified amount of their corpus in MSMEs / Startups as per the scheme’s mandate. Fund of Funds- boosts entrepreneurship culture by supporting emerging startups through the Fund of Funds channel.

SIDBI promotes entrepreneurship and handholding budding entrepreneurs for holistic development of the MSME sector through credit-plus initiatives.

SIDBI plays the role of facilitator like the Nodal Agency for the MSME-oriented schemes of the Government.

SIDBI facilitates access to affordable credit to informal micro-entrepreneurs/ micro-enterprises (IMEs) for their livelihood enterprise promotion under the PRAYAAS scheme. The scheme provides doorstep assistance with the help of Partner Institutions like BC/ MFI/ SHPI/ NBFC/FinTechs, etc., who assist SIDBI in the credit processes including collection of application information, digital documentation, collections, etc.

TReDS is an electronic platform for online discounting of bills of MSMEs for supplies to large Corporates. It addresses the issue of delayed payments to MSMEs. Three TReDS platforms are presently operational in India. Receivables Exchange of India Ltd (RXIL), a SIDBI and NSE joint venture, operates one of the TReDS platforms. The other two Platforms are M1xchange and Invoicemart. TReDS enables the MSMEs to secure financial assistance digitally at competitive terms and without any collateral security, based on the invoices/bills for supplies to large corporates. This also improves the liquidity for MSMEs resulting in better cashflow management. SIDBI is now participating as a Financier on all three operational TReDs platforms viz. RXIL, M1 Exchange, and InvoiceMart. In the FY 2022-23, SIDBI has assisted 1897 MSMEs by discounting their 87106 invoices for a total amount of ` 1759.62 Crores (To know more Click TReDS).

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