entrepreneurs and sidbi

8/6/2019 Entrepreneurs and Sidbi

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Entrepreneurs are the backbone of a nations progress. They organize different factors of

production like land, labor and capital and in this process provide goods and services to the

people. Entrepreneurs create wealth and give employment to large sections of the society.

The economically developed nations provide ample evidence to the emergence of

entrepreneurial class in those countries. Many underdeveloped countries have realized thefact that the governments in these countries are unable to produce goods and services

needed by the people and offer employment. So attempts are being made to develop and

sustain entrepreneurial skill in the people, so that they become good entrepreneurs in the

years to come.

India requires a good entrepreneurial class for developing small scale and large scale

industries. Government at the centre and states are unable to solve the problem of teeming

unemployed. Besides liberalization has given an added impetus to entrepreneurs to start

industries in small scale and large scale sectors.

IMPORTANCE OF AN ENTREPRENEUR

In the economic development of a country or of any region within the country. Entrepreneur

is one of the important inputs. In India, the state and private entrepreneurship competence

makes all the difference in the rate of economic growth. Therefore important role has been

assigned to the identification and promotion of entrepreneurs.

In India the need for a broad based entrepreneurial call arises from the need to speed up

the process of activating the factors of production leading to a higher rate of economic

growth, dispersal of economic activities, development of backward areas, creation of

employment opportunities and improvement in the standard of living of the weaker section

of the society. Individuals who initiate, establish maintain and expand new enterprises make

the entrepreneurial class. The following factors have a bearing on the growth of

entrepreneurship:

a) The availability of industrial know-how and technology.b) Socio-political and economic conditions.c) State of art and culture of trading and business.d) Existence of market for products and services ande) Incentives and facilities available for starting an industry or business.


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What is rural industry?

Micro, Small or Medium Enterprise

The earlier concept of Industries has been changed to Enterprises

Enterprises have been classified broadly into:

(i) Enterprises engaged in the Manufacture / production of Goods pertaining to any

industry; &

(ii) Enterprises engaged in providing / Rendering of services.

y Manufacturing enterprises have been defined in terms of investment in plant andmachinery (excluding land & buildings) and further classified into :

- Micro Enterprises - investment up to Rs.25 lakh.

- Small Enterprises - investment above Rs.25 lakh & up to Rs. 5 crore

- Medium Enterprises - investment above Rs. 5 crore & up to Rs.10 crore.

Service enterprises have been defined in terms of their investment in

equipment (excluding land & buildings) and further classified into:

- Micro Enterprises investment up to Rs.10 lakh.

- Small Enterprises investment above Rs.10 lakh & up to Rs.2 crore.

- Medium Enterprisesinvestment above Rs. 2 crore & up to Rs. 5 crore

It is not necessary to engage in manufacturing activity for self-employment. One can set up

service enterprises as well .

The following major inputs are required for setting up an enterprise:

y Land, building or shedy Machinery and equipmentsy Raw Materialsy Power and Watery Skilled manpowery Capital


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Financial Assistance

Financial assistance is available from institutions such as

y Nationalised Banks,y Small Industries Development Bank of India,y Regional Rural Banks,y National Small Industries Corporation,y State Financial Corporations etc.

depending upon the project requirement and promoters background. Financial assistance

has two components. Loan for fixed capital is used to acquire Plant and Machinery, land and

building. Working capital loan is used to meet day to day operational cost of the production.

State Financial Corporation and National Small Industries Corporation generally provideworking capital. However under package assistance, State Financial Corporations also

provide a composite loan covering plant and machinery and working capital.

What is SIDBI ?

INTRODUCTION:- It is a real fact that more than 70% of Indian population resides in rural

areas of our country. But the majority of that population is still backward due to less

support of external environment. The quoted quote that "wheel is the symbol of

development" is proven false in case of Rural India because there is lack of development

which may be because of unfair political environment and government negligence.

SIDBI is an apex financial institution which provides financial support to the sick / small

scale industries. So, we can say that SIDBI is the institution which engaged in the business

of rural industrialization in India.

The small Industries Development Bank of India is Principal Financial institution engaged in

development initiative in rural sector and improving the SSI unit. The another very

important role is keeping by this Bank is that it is also encouraging SSIS and generating

employment in rural India. The Bank also performing the rehabilitation duty and improving

the performance of small Industries.


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SIDBI is an apex financial institution in the field of rural development. SIDBI is a locally

owned subsidiary of IDBI. It was setup under the SIDBI act 1989 and commenced operation

from April 1990.

Small Industries Development Bank of India (SIDBI), set up on April 2, 1990 under an Act

of Indian Parliament, is the Principal Financial Institution for the Promotion, Financing and

Development of the Micro, Small and Medium Enterprise (MSME) sector and for Co-

ordination of the functions of the institutions engaged in similar activities.

ROLE OF SIDBI

The main functions of SIDBI are:-

1. Refinance assistance2.

Direct assistance

3. Bills receivableProducts and services of SIDBI :-

1. Direct finance2. Refinance3. Bills finance4. International finance5. Microfinance6. Government subsidy scheme7. Other schemes8. Promotional activities9. Fixed deposit scheme

Operations

Any banks operational excellence is measured by aggregate sanctions, subsequent

disbursement of the sanctioned amount, the amount of revenue generated from the

difference in spread over the loan taken and advances granted, higher amount of fee based

income and the last and the most important timely recovery of dues. In addition, the banks

assistance towards promotional and developmental efforts in the form of loans and

advances for project financing as well as its overall utilization of available resources lying

with the bank under study is another significant indicator of operational effectiveness.


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However, an analyst has to keep in mind that these are not the eventual pointers of the

efficiency of any bank since it varies from bank to bank depending upon the area of

operations, profile and status of the bank (Public, private, foreign, cooperative bank),

geographical spread, its target groups and historical achievements. SIDBIs aggregate

sanctions under all schemes during the FY 2004-05 were Rs. 9090.60 crore registering agrowth of 10.24 % over the previous year. The disbursements during the year were Rs.

6187.83 crore recording an impressive growth of 40.18 % over the disbursement in

previous year.

Source- official website of SIDBI

Objectives of 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


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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.

Scheme for Development of Industrial Infrastructure for SSI Sector

Purpose

Setting up of industrial estates / development of industrial areas including such projects

found eligible under KVIC model.

Strengthening of existing industrial clusters / estates by providing increased amenities for

smooth working of the industrial units. Setting up of warehousing facilities for SSI products

/ units.

Providing support services viz., common utility centres such as convention halls, tradecentres, raw material depots, warehousing, tool rooms / testing centres, housing for

industrial workers, etc. Any other infrastructural facilities which will benefit predominantly

SSI units / entrepreneurs.

Eligible Borrowers

One of the major factors inhibiting the growth of Small Medium Enterprises (SMEs) is the

availability of adequate owners capital. Most of the SMEs are also not able to attract

external equity including venture capital funding due to high perceived risk, limited exit

options and high transaction cost.

Also as more than 90% of the SMEs are in non-corporate structure and hence can not

absorb equity. SIDBI, based on the best international practices, has come out with various

risk capital products - quasi equity/ mezzanine financial instruments which are provided on

the backing of cash flows from the business rather than asset cover/ collaterals. Risk capital

is offered in flexible manner with respect to the structuring of return and repayments to the

risk capital provider, thereby ensuring greater chances of success of the ventures.

Norms

Cost ofProject : Not to exceed Rs.100 million.

Debt Equity Ratio: Not more than 3:1

Repayment Period - Not exceeding 10 years including initial moratorium period of upto 3

years.


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Integrated Infrastructure Development

Purpose

For setting up of IID centres with facilities like water supply, power, telecommunication,

common services centre including for technological back up services for small scale

industries in rural backward areas as envisaged under the policy for promoting and

strengthening small, tiny village enterprises announced by Govt. of India (GOI) on August

6, 1991.

The cost of improving / upgrading the deficient infrastructural facilities to increase the

productivity and optimum utilisation of the existing centres / clusters in backward / ruralareas may also be covered under the scheme.

Eligible Borrowers

Implementing agencies (a public sector corporation or a corporate body or a good NGO

having sound financial position) entrusted with the task of implementing the scheme by the

concerned State / Union Territory (UT) Govt.

Norms

Selection of IID centre should be preceded by a comprehensive industrial potential survey of

the area.

Suitable land would be provided by State / U.T. Govt. cost of which may be recovered from

implementing agencies. Normally, agricultural land may not be used for setting up of an IID

centre.

The size of IID centre would be about 15 to 20 hectares. The centre should provide for

various facilities like water supply, power, telecommunication, effluent treatment etc.

The ceiling on project cost is Rs.50 million. Cost in excess of Rs.50 million may be met by

State / UT Govt. Cost of Rs.50 million to be financed by Grant from Govt. of India (GoI)

Rs.20 million and loan from SIDBI, from any other bank / FI of Rs.30 million. In case of

North-Eastern Region, the amount of Grant from GoI and loan from SIDBI, from any other

bank / FI would be Rs.40 million and Rs.10 million respectively.


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Vendor Development Scheme

Purpose

Vendor Development Scheme (VDS) SME (manufacturing and service sector) vendors of

OEMs/ large Corporates.

OEM

Any large well run Corporate, PSU, MNC having a good SME vendor base and a satisfactory

external rating..

Purpose

y SIDBI would sign an MOU with the OEM for the vendor development arrangement.y Under the arrangement flexible term loan assistance would be provided for capital

expenditure for expansion, modernisation, diversification, WC of SME vendors based on

comfort provided by OEM.

y Need based customised Invoice discounting/ bill discounting facility can be structured forthe vendors of OEM.

Bills Finance Schemes

Objective

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.

Bills financing have been another feather in the cap for SIDBIs portfolio of financing for

assistance of the SMEs. The objective of the scheme is to mitigate the problem of delayed

payments to SSI units. The schemes operating under Bills financing are Bills Re-discounting,

Bills direct discounting, receivables financing scheme. This is for short term purposes and


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entrepreneurs in need of such short term requirements for working capital have favored this

scheme along with their financing options.


Total sanctions anddisbursements for the FY 2003 and FY 2004 can be seeninthis figure where the

sanctions have increased by 37.19% inthe year 2003 anddisbursements have increased by 40.69%

in the year 2004 which shows that the sanctions anddisbursements have been at par with the

targetof SMEs beingable toattainthe creditavailable.

Refinance Assistance

SIDBI has remained the premier refinancing institute for the promotion and development of

small and medium enterprises. The mechanism used by SIDBI is it lends to Primary Lending

Institutions (PLIs) and they deliver the credit facility to existing entrepreneurs and first

generation entrepreneurs. In this figure reveals the total sanctions and disbursement under

refinancing assistance.


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The aggregate sanctions and disbursements under refinance schemes during 2004-05 were

Rs. 4419.19 crore and Rs. 2693.60 crore respectively. It shows the net growth of 3.98 %

increase in Sanctions and impressively 56.69 % increase in disbursement. This is the result

of the extra efforts in policy making and aggressive help provided by the bank for theoverall welfare of the small scale industries.

Receivable Financing Scheme

Purpose

To enable SSI / SME / Eligible Service sector units (including construction / small road

transport operators) selling components, parts, sub-assemblies, services, etc. to Medium &

Large scale units realise their sale proceeds quickly

Eligibile Borrowers

Limits are sanctioned by SIDBI to well established industrial units using components / parts

/ sub-assemblies / accessories / services manufactured / provided by by SSI / SME / Eligible

Service sector units. Either seller or Purchaser need to qualify as SSI / SME / Service Sector

unit


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Norms

Unexpired usance - Not more than 90 days

Others

Facility without bills of exchange / LC backed receivables can also be considered on the

basis of merit.

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 upgradation 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.

SMALL and MEDIUM enterprises (SMEs) play a catalytic role in the development of any

country. They are the engines of growth in developing and transition economies. In India

they account for a significant proportion in manufacturing, exports and employment, and

are major contributors to GDP.

SIDBI (small industrial development bank of India) was started with the motto ofrefinancing as the sole business. RBI considers SIDBI and NABARD as two refinancing

institutions. As the main focus always has been this rather than direct financing, the brand

image of SIDBI has not changed in so many years. In the banking sector as a whole, there

are too many middle level banks that come in direct contact with the customer and this has

been the main reason SIDBI is considered as the last resort for financing. SIDBI almost had


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a monopoly in refinancing the small scale units but now there have been competition form

other commercial banks as well that have started initializing the SME finance like ICICI and

SBI. SIDBI has also started tying up with other nationalized and commercial banks in this

regard that can help it gain some more visibility and selling the products that need

aggressive marketing.SIDBI has a special corporate status because it has got an expertise since 1964 and has

been an agent in government schemes and finance is provided considering all expenses

related to the project from conceptualization of the project to the successful execution of

the project. They target the SME as they are serving the niche market. It is also synonym to

developmental banking as they have soft corner for the SMEs and for this section of

industry they have liberal policies, promote and develop small scale industries. Helping

entrepreneur is also one of the functions and duties of SIDBI. Thus its broad functions are

promotion, financing and development of Industries in the small scale sector and Co-

ordinating the functions of other institutions engaged in similar activities. SIDBI was

established on April 2, 1990. The Charter establishing it, The Small Industries Development

Bank of India Act, 1989 envisaged SIDBI to be "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 and financing or

developing industry in the small scale sector and for matters connected therewith or

incidental thereto.

The business domain of SIDBI consists of small scale industrial units, which contribute

significantly to the national economy in terms of production, employment and exports.

Small scale industries are the industrial units in which the investment in plant 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.

SIDBI retained its position in the top 30 Development Banks of the World in the latest

ranking of The Banker, London. As quoted in the May 2001 issue of The Banker, London,

SIDBI ranked 25th both in terms ofCapital and Assets.

State-owned SIDBI provides financial assistance to units in the small-scale sector. SIDBI

provides refinance against term loans granted by banks to SSIs, equity assistance, bills

financing, project financing and resource support to institutions that are engaged in the

development of SSIs.


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It provides assistance to wide-range of industrial sectors including transport, health care,

hotel and tourism and infrastructure.

It also provides funds to the professional and self-employed persons setting up small-sized

professional ventures.

SIDBIs objective was to help the masses and the industry that is the base of all

development, i.e. small scale industries. Thus came up the idea of financing these industries

directly and on 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.

Considering the level of competition in banking business due to globalized environment,

SIDBI has now started spreading its wings either by way of diversifying its product portfolio

or entering into the strategic alliance with other leading private sector banks, public sector

banks and Non Banking Financial Institutions in order to achieve market development of its

existing portfolio of services. It aims to provide all the services a Small and Medium

Enterprise needs under one roof. Secondly, with the adoption of cluster development as the

key strategy to develop manufacturing sectors competitiveness, SIDBI has envisaged to

adopt the cluster financing method to assist SMEs. Finally, the bank is planning to get into

the business of commercial banking in a bid to serve the banking needs of the existing

customers since they have to approach commercial bank for daily routine transactions.

However, considering the quantum of competition in commercial banking business in India,

SIDBI is not aiming to enter into commercial banking business in haste.

SIDBI has floated an excellent programme to meet gap in prescribed minimum promoters'

contribution and/or in equity considering the practical constraints faced by the promoters.

For instance, an entrepreneur visualizes an outstanding project on biotechnology which

requires Rs. 10 Lacs as an initial investment. Suppose, he approaches to a commercial bank

for financial assistance. The first question he faces is how much he (an entrepreneur) is

contributing towards the project. Now, assume that banks conventional practice is that a

loan applicant must contribute at least 25 % of the total project cost. He has to contribute

at least Rs 2.5 lacs as a promoters contribution in the above example. He may not able to

initiate the project unless he has the amount stated above (i.e. < 2.5 lacs) howsoever


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innovative, profitable and unique his proposition is. SIDBI has started National Equity Fund

Scheme in a bid to impart financial assistance for gap in promoters contribution.

INDUSTRIAL SICKNESS IN INDIA

Industrial sickness specially in small-scale Industry has been always a demerit for the

Indian economy, because more and more industries like cotton, Jute, Sugar, Textile small

steel and engineering industries are being affected by this sickness problem.

As per an estimate 300 units in the medium and large scale sector were either closed or

were on the stage of closing in the year 1976. About 10% of 4 lakhs unit were also

reported to be ailing. And this position also remain same in the next decades. At the end

of year 1986, the member of sick units in the portfolio of scheduled commercial banks stood

at 1.47,740 involving an out standing bank credit of Rs. 4874 crores.

* Where the total number of large Industries which are sick were 637 units at the end of

year 1985 increased to 714 units in the end of next year 1986.

* Likewise on the other hand the number of sick small scale units were also increased 1.18

lacks at the end of 1985 to 1.46 lakhs at the end of 1986.

* The bank amount which was outstanding in case of large industries for the same period

also increased from Rs.2,900 crores to Rs. 3287 crores at the end of year 1986

* Dues of Small Scale sector also increased from Rs.1071 crores to Rs.1306 at the end of

the year 1986.

* Of the 147, 740 sick industrial units which contains large medium as well as small scale

involving the total bank loan (credit) of Rs. 4874 at the end of the year 1986.

CAUSES OF SICKNESS OF SSI'S

Most of the Indian authors and researchers have classified the different types of industrial

sickness under two important categories. They are :

1) Internal Cause for sickness


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We can say pertaining to the factors which are within the control of management. This

sickness arises due to internal disorder in the areas justified as following:

a) Lack of Finance: This including weak equity base, poor utilization of assets, inefficient

working capital management, absence of costing & pricing, absence of planning andbudgeting and inappropriate utilization or diversion of funds.

b) Bad Production Policies : The another very important reason for sickness is wrong

selection of site which is related to production, inappropriate plant & machinery, bad

maintenance of Plant & Machinery, lack of quality control, lack of standard research &

development and so on.

c) Marketing and Sickness : This is another part which always affects the health of any

sector as well as SSI. This including wrong demand forecasting, selection of inappropriate

product mix, absence of product planning, wrong market research methods, and bad sales

promotions.

d)Inappropriate PersonnelManagement: The another internal reason for the sickness

of SSIs is inappropriate personnel management policies which includes bad wages and

salary administration, bad labour relations, lack of behavioural approach causes

dissatisfaction among the employees and workers.

e) Ineffective CorporateManagement: Another reason for the sickness of SSIs is

ineffective or bad corporate management which includes improper corporate planning, lack

of integrity in top management, lack of coordination and control etc.

2) External causes for sickness:

a) Personnel Constraint: The first for most important reason for the sickness of small

scale industries are non availability of skilled labour or manpower wages disparity in similar

industry and general labour invested in the area.

b) Marketing Constraints: The second cause for the sickness is related to marketing. The

sickness arrives due to liberal licensing policies, restrain of purchase by bulk purchasers,

changes in global marketing scenario, excessive tax policies by govt. and market recession.


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c) Production Constraints: This is another reason for the sickness which comes under

external cause of sickness. This arises due to shortage of raw material, shortage of power,

fuel and high prices, import-export restrictions.

d) Finance Constraints: The another external cause for the sickness of SSIs is lack of

finance. This arises due to credit restrains policy, delay in disbursement of loan by govt.,

unfavorable investments, fear of nationalization.

MICROFINANCE AND SIDBI

In recent years, micro finance has gained growing recognition as an effective tool in

improving the quality of life and living standards of very poor people. This recognition has

given rise to a movement that now has a global outreach and has penetrated in the remote

rural areas, besides slums and towns.Micro Finance programmes extend small loans to poor people for their varied needs such as

consumption, shelter, income generation and self-employment, etc. In some cases, micro fi

nance programmes offer a combination of several services to their clients, in addition to

credit. These include linkages with savings and insurance avenues, skill development

training and marketing network. Micro credit programmes, thus, assume significance since

they facilitate poverty reduction through promotion of sustainable livelihoods and bring

about women empowerment through social and collective action at the grassroots. In

addition, micro finance interventions lead to increased social interaction for poor women

within their households and in the community, besides, greater mobility that increases their

self-worth and self-assertion in the social circle.

In India, the micro finance movement has almost assumed the shape of an industry,

embracing thousands of NGOs/MFIs, community-based self-help groups and their

federations, co-operatives in their varied forms, credit unions, public and private banks.

During the last decade, the sector has witnessed a sharp growth with the emergence of a

number of Micro Finance Institutions (MFIs) that are providing financial and non-financial

support to the poor in an effort to lift them out of poverty. The MFI channel of credit

delivery, coupled with the national level programme of SHG-Bank Linkage, today, reaches

out to millions of poor across the country.

In view of its large-scale intervention in the micro finance sector, SIDBI had, in 2001,

commissioned an Impact Assessment Study of its micro finance programme vis--vis

objectively verifi able socio-economic indicators. The seven-year longitudinal study was

conducted in two stages during the period 2001-2007 by independent research agencies


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with a view to assessing the impact of its micro credit programme on the ultimate benefi

ciaries/clients and improving the practices by understanding the process of MFI

intervention.

BANK CREDIT TO SMALL SCALE SECTOR

The commercial and rural regional banks as well as co-operative banks have been regular

finance provides for the small scale sector. The interest charged to the small scale units

located in backward have to pay the rate of interest @12.5% p.a. Where the units which

are situated in developed areas they can get finances at rate of 13.50% p.a. interest on the

loan amount up to Rs.25 lakhs and @ 14% if they are taking the loan more than 25 lakhs.

SIDBI with the mode of its refinance and rediscount provided and providing financial

assistance to the sector. The Bank SIDBI through SFC's , SIDC's and other RRB"s providing

finance to the developing sector. The small scale sector specially the small scale units are

getting refinance facility through SIDBI & its subsidiaries more than 85%.

TOTAL BANK CREDIT

(Rs. INCRORES)

YEAR CREDIT TO

INDUSTRY

CREDIT TO SSI"s % SHARE OF SSI's

1991 61576 17118 14.72

1992 65240 17830 14.47

1993 78662 20026 13.17

1994 80482 22620 13.75

1995 102953 27612 13.05

1996 124937 31726 12.49

1997 138548 34113 12.25

1998 161038 43508 13.43

1999 178799 48483 17.88


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ASSISTANCE BY SIDBI TO SSI'S

The apex financial institution in the field of development of small scale sector The bank

(SIDBI) by the mode of refinance discounting and rediscounting as well as financial

assistance through indirect & direct functions encouraging the rural India.

Rs. In Crores

YEAR SANCTIONED DISBURSMENT

1990-91 2408.7 1838.5

1991-92 2846.0 2027.4

1992-93 2909.2 2146.3

1993-94 3356.3 2672.7

1994-95 4706.3 3389.8

1995-96 6065.6 4800.8

1996-97 6485.3 4584.7

1997-98 7484.2 5240.7

1998-99 8879.0 6285.2

1999-2000 10265.0 6964.2

2000-01 10821.0 6441.0

At the end of year 2001 March, SIDBI has sanctioned Rs.66299 crores and disbursed

Rs.46,392 crores by the various mode of its services like Refinance, Bills rediscounting,

other scheme and direct finance. With its refinance scheme the name has sanctioned

Rs.22792.3 crores and disbursed Rs.17225.2 crores.

With bill discounting facility the bank has sanctioned Rs.2260.8 crores and Rs.1622.9 crores

disbursed to the sector. With its direct finance scheme SIDBI has sanctioned Rs. 12,975.6

crores for the SSI's and disbursed Rs. 9948.6 crores. From its other various schemes bank

has sanctioned Rs. 7115.1 crores and disbursed Rs. 4190.3 crores for the development of

SSI's till year 2001.

SSIs AND FIVE YEAR PLANS

When the First Five Year Plan introduced the industrial base of India was not so good and

was very limited. Generally, the industrial development based on consumer goods


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producing industries. Some important industries of that period were cotton industry, paper

industry, salt industry, sugar industry, soap industry and leather industry which were facing

a lot of financial and technological problems and fighting for their survival.

When the Government of India had introduced Second Five Year plan it was given first

priority to the industrialization in rural, semi-urban and areas of our country. That was a

good decision. But, it is sad to say that the government has given priority to all the large

scale and heavy industries and neglected the small scale sector which cause the sickness in

small scale industries.

After neglecting in 3rd, 4th, 5th, 6th, 7th, and 8thFive Year plans, we can say more than 25-30

years the government realized its mistake and then they had taken actions for rehabilitation

of small sick industries by technological reform with sufficient credit facilities and various

training programs for the workers engaged in small scale sector. The industries like

powerlooms, handlooms , coir, sericulture and silk, handicrafts and other similar industries

got affected due to the negligence of the government which results sickness in small scale

sector.

If we go through the business area of SIDBI we find that SIDBI governs small scale

industrial units which contribute significantly to the national economy in terms of production

employment and exports via rural development through rural industrialization.


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CONCLUSION

In conclusion we can say that the SIDBI, by the mode of refinancing, discounting and

rediscounting as well as financial assistance through indirect functions regarding lending to

primary institutions, through its direct assistance to small units and through its various

developmental and supporting services, encouraging small scale sector in Rural India.

SIDBI obviously engaged in the business of reforming SSIs with its different Rural

Industrialization Programs (RIP) with the following aims:

* Expansion of small scale sector and increase its share in industrial output.

* Development of rural areas where more than 70% of the population resides.

* Increase the efficiency of SSIs.

* Increase the contribution of SSIs in export.* More employment generation in rural areas of rural India.

By keeping in mind the optimistic approach, we can say that SIDBI will provide better and

essential services for the betterment of SSIs with its rehabilitation programs and Rural

Industrialization Programs (RIP) and then the quoted quote will prove true that "Wheel is

the symbol of development".

References:

Economic Survey of India-2008

Economic Survey of India-2007

Employment News, Publication Division , Govt of India.

Yojana (Magazine) Publication Division , Govt of India

Kurukshetra (Magazine) Publication Division , Govt of India

www.sidbi.com

entrepreneurs and sidbi

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