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SIDBI: Guide – Schemes, Functions, Full Form, Steps to Apply for Loan

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12 min read

SIDBI -Schemes, Functions, Objectives, Full Form

SIDBI – What is it about?

Established in the year 1990, Small Industries and Development Bank of India-SIDBI aims at enhancing cash flow in the MSME Sector – to promote and develop this sector thus benefitting the society and the economy of the nation. This Bank thrives on promoting, commercialising, and marketing new ideas, innovative start-ups, and developing small scale industries by providing funds and customising loan schemes to enhance the working of MSMEs to meet the demands of people by encouraging their own working and supply.

Read More – Small Scale Industries in India – Types, Registration, Etc

Mission and Vision of SIDBI

The vision and mission of SIDBI, which was set up on 2nd April 1990, is to facilitate cash flow to MSMEs and fill in their financial and growth gaps. It emerges as a single window for meeting financial needs of MSMEs making them globally competitive and customer-friendly organisations enhancing wealth creation, coordinating operations, and functions of the businesses and technological advancements of enterprises.

Objectives of SIDBI

The focus of SIDBI is to follow these four main objectives and goals:

  • Development of the MSME Sector
  • Promotion of customer service and workability of the sector
  • Coordination and Control
  • Financing and Providing various kinds of customised loans to give monetary assistance to MSMEs to grow and deliver.

Benefits of SIDBI

There are many advantages associated with SIDBI like:

  1. Customised as per the loan requirements of the business in the right way.
  2. Loans and credits are provided depending on the size of the business.
  3. With profitable collaborations with banks and many other financial institutions like the world bank and the Japan International Cooperation Agency, SIDBI offers concessional and enticing rates of interest.
  4. Besides providing monetary assistance, it also provides assistance in loan process and necessary advice on the financial condition of MSMEs.
  5. There is a contingency to offer loans without security up to a limit of Rs. 100 lakhs
  6. Helps in the holistic and capital growth and development of firms.
  7. SIDBI Venture Funding is a subsidiary that focuses on the growth of MSMEs through capital as equity and through venture capital funds.
  8. Offers various schemes at comfortable terms and discounted interest rates to help the MSMEs financially and in decision making.
  9. There are no hidden charges and the entire process is quite transparent.

Functions of SIDBI

  • SIDBI offers loans and monetary assistance to MSMEs, service sectors, and other small-scale industries (SSI)
  • SIDBI offers Finance Schemes for Sustainable Development. This includes cleaner production and energy efficiency in MSMEs
  • Receivable Finance Scheme
  • SIDBI offers Finance for Upgradation or Modernisation
  • SIDBI Revolving Fund for TIFAC – Technology Information Forecasting and Assessment Council
  • It provides loan options through regularised banks, SFCs – State Finance Corporations, NBFCs – Non-Banking Financial Companies, and other financial institutions
  • It strengthens credit flows across MSMEs and promotes skill development
  • It also aids commercial banks and cooperation to ensure financial health across industries.
  • It carries out marketing and advertising initiatives on a large scale.
  •  Offers venture funding
  •  Promotes employment by offering multiple job opportunities and updating recruitment deliverables and the advent and up gradation of technology within the sector.
  •  Offers loans for development, growth, maintenance, restructuring, renovation, working capital etc.
  • Ensures stringent and holistic financial health of various business sectors, thus enhancing and strengthening the economy of the state and the nation and eventually upgrading the individual standard of living.

SCHEMES offered by SIDBI

Direct Loans:

SIDBI offers the following Direct Loans which are prevalent in the market to MSMEs which

  • SIDBI Make in India Soft Loan Fund for Micro Small & Medium Enterprises (SMILE)
  • Loans under Partnership with OEM
  • Smile Equipment Finance (SEF)
  • Working Capital (Cash Credit)
  • Loan for Purchase of Equipment for Enterprise’s Development (SPEED)
  • SIDBI Trader Finance Scheme (STFS)
  • SIDBI – Loan for Purchase of Equipment for Enterprise’s Development PLUS (SPEED PLUS
  • Top-up Loan for Immediate Purposes (TULIP)
  • SIDBI – Retail Loan Scheme for Trade Finance (RLS)
  • SIDBI Term-loan Assistance for Rooftop Solar PV Plants (STAR)
  • SIDBI Assistance to Facilitate Emergency Response Against Coronavirus Plus (SAFE PLUS)
  • SIDBI Assistance to Facilitate Emergency Response Against Coronavirus (SAFE)

Understanding these products in detail:

  1. SMILE – SIDBI Make in India Soft Loan Fund – offers loans for new enterprises for manufacturing or services with a minimum loan amount of Rs. 10 lakhs for financing equipment and Rs. 25 lakhs for other reasons. Repayment is 10 years which includes the moratorium period of 36 months.
  2. SEF – SMILE Equipment Finance offers competitive rates of interest which comes with a repayment schedule of 72 months and the minimum amount is Rs. 10 Lakhs for the procurement of new equipment.
  3. Loans under Partnership with OEM – Original Equipment Manufacturer where the scheme can help MSMEs attaining machines and equipment from OEMs with a loan amount of up to Rs. 1 crore. Minimum tenure required for the running business in 3 years and repayment of the loan period is 60 months.
  4. Offers Working Capital or Cash Credit to MSMEs as per their requirements.
  5. STFS – SIDBI Trader Finance Scheme is for MSMEs with a minimum tenure of 3 years with a satisfactory business performance (min – Rs. 10 lakhs and max – Rs. 1 crore) with a maximum repayment tenure of 60 months.
  6. SPEED – Loans for Purchasing Equipment for Enterprise Development wherein SIDBI provides 100% financing options of Rs. 1 crore to new businesses and Rs. 2 crores to existing ones provided they have a minimum working tenure of 3 years. Repayment of these loans is from 2 to 5 years which also includes 3-6 months as moratorium period. Annual Rate of Interest varies from 9.25 – 10%.

Other kinds of Finance and Loan Option Schemes provided by SIDBI – Venture Capital:

Additional Loan Products from SIDBI

SIDBI’s Indirect Finance

SIDBI’s Micro-Lending

SIDBI provides start-up lifecycle loans through banks, NBFCs, SFBs etc.

 

Indirect Finance is provided to Banks, NBFCs, SFBs and MSMEs

Micro-Lending Development:  financial assistance to economically weak people, including women

Alternate Investment Funds (AIFs) as launched by the government of India to support Funds of Funds for Start-ups.

NBFCs which include the loan companies registered with RBI which provide loans to the MSME sector

Responsible Finance Initiatives

Aspire Fund: especially for those MSMEs which are into manufacturing and services start-ups.

Refinance Schemes

Beyond Microfinance through which the loans help to graduate from microfinance to a higher ticket size at a reasonable rate

India Aspiration Fund as regulated by RBI, this is to promote equity and equity-based investments in the MSME sector and to promote start-ups

Assistance to SFBs- Small Finance Banks to strengthen their equity and resource base.

Other kinds of Finance and Loan Option Schemes provided by SIDBI – Indirect Finance:

Under this there are Indirect Financial schemes, to provide financial assistance to NBFCS, Banks, MSMEs, and SFBs. NBFCs which include companies registered with RBI provide financial help to MSMEs and refinance schemes are made available to banks. It also focuses to refinance and strengthen the SFBs building their resource and equity base.

Other kinds of Finance and Loan Option Schemes provided by SIDBI – Micro-Lending:

Under this, there are three schemes:

  • Micro Lending Development Department: Financial assistance to monetarily weak people and women.
  • Responsible Finance Initiatives: Provides financial support to Banks and other financial Institutions.
  • Beyond Microfinance – This scheme of loan helps the businesses to elevate to a higher ticket size from micro finance at affordable rates.

We will discuss the following schemes in detail:

Loan Scheme

Tenure of the Loan

Loan Amount

Eligibility Criteria

SIDBI Assistance to Facilitate Emergency Response Against Coronavirus (SAFE)

5 years plus a moratorium

 

Up to Rs.50 lakh

2 years of cash profits and account not in SMA1/2 category for new customers.

 

Cash profits in the last audited balance sheet not in the SMA1/2 category for Existing customers

SIDBI Assistance to Facilitate Emergency Response Against Coronavirus Plus (SAFE PLUS)

4-month cycle

up to Rs.1 crore (Linked to unit turnover)

2 years of cash profits and account not in SMA1/2 category for new customers.

 

Cash profits in the last audited balance sheet not in the SMA1/2 category for Existing customers

SIDBI Make in India Soft Loan Fund for MSME (SMILE)

10 years, plus a 3-year moratorium

Rs.10 lakh – Rs.25 lakh

New or existing institutions

Small Equipment Finance (SEF)

72 months

Minimum Rs.10 lakh

3 years’ experience in business

Loans under a partnership with OEM (Original Equipment Manufacturer)

5 years plus a moratorium

 

Rs.1 crore

3 years’ experience in business

Working Capital (Cash Credit)

As specified

Depends on the applicant

customers of SIBDI and other banks

SIDBI Trader Finance Scheme (STFS)

5 years plus a moratorium

 

Rs.10 lakh – Rs.1 crore

3 years’ experience in business

SIDBI – Loan for Purchase of Equipment for Enterprise’s Development (SPEED)

5 years plus moratorium of 6 months

New customers: Rs.1 crore Existing customers:  Rs.2 crore

3 years’ experience in business; making profits for 2 years

SIDBI-Loan for Purchase of Equipment for Enterprise’s Development Plus (SPEED PLUS)

5 years plus moratorium for 6 months

New customers: Rs.2 crore Existing customers: Rs.3 crore

5 years’ experience in business; making profits for 3 years

SIDBI – retail loan scheme for trade finance (RLS)

5 years plus a 3-month moratorium

 

Rs.1 crore

3 years’ experience in business

Top up loan for immediate purposes (TULIP)

5 years

Maximum of Rs.2 crores –

The applicant must have satisfactory financials and one year of availing a SIDBI loan.

SIDBI term-loan assistance for rooftop solar PV plants (STAR)

5 years plus moratorium of 6 months

Rs.2.5 crore

satisfactory financial records with 2 years of profits in business

Funds of Funds for start-ups

According to the loan amount and financial profile of the applicant

Depends on the financials of the applicant

Start-ups

Aspire, Fund,

6 years

Depends on the financials of the applicant

Businesses under SIDBI that can support AIF’s

India Aspiration Fund

Depends

Depends on the financials of the applicant

Varies

Assistance to NBFCs

2 to 5 and a half years

 

Depends on the financials of the applicant

 

The company should be registered with RBI and running for 5 years.

 

Refinance Scheme

5 years.

Depends on the financials of the applicant

3 years’ experience in business; making profits for 2 years with a strong balance sheet

Assistance to Small Finance Banks (SFBs)

As specified

Depends on the financials of the applicant

Licensed by RBI and profitable entity for last 2-3 years

Steps to apply for a loan from SIDBI

The application process of SIDBI loan can be done by following these simple steps: –

STEP 1: The applicant needs to visit the official website of SIDBI – https://www.sidbi.in/ or https://www.udyamimitra.in/

STEP 2: There is a tab which says, “Borrower’s corner”, the applicant needs to click on that.

Step 3: The applicant needs to fill in his username and password into the given spaces

STEP 4: The applicant must choose the scheme and enter the loan amount which he is looking for

STEP 5: The applicant needs to fill in his personal and business-related details like name, email if, contact details, date of birth, district, pin code, type of business etc. and click on Register. STEP 6: The account verification email will be sent out, which needs to be verified by the applicant. The loan procedure begins from here.

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SIDBI Loan Scheme FAQs:

1. What is SIDBI loan and is it a nationalised Bank?

Small Industries Development Bank of India (SIDBI) provides financial loans to MSMEs and helps them in the promotion, development and maintenance of their business in India. No, SIDBI is not a nationalised bank but is a subsidiary of IDBI (Industrial Development Bank of India) it can be called a development bank.

2. What is the maximum loan amount and maximum repayment tenure offered under SIDBI loan?

The maximum loan offered under SIDBI loan is up to Rs. 2 crores and the maximum tenure for repayment of SIDBI loan is 10 years..

3. Who is the owner of SIDBI?

SIDBI was initially owned by the Industrial Development Bank of India (IDBI), but now it’s an independent body.

4. Does SIDBI offer MUDRA loans?

yes, MUDRA loans are one of their products.

5. What are the documents that should be submitted to apply for a SIDBI direct loan?

After filling the loan application for the loan, the applicant must furnish documents like identity proof and proof of address like Aadhar Card, PAN card (for business) etc.

6. Is credit score required to provide a loan under SIDBI?

No, the credit rating of the applicant or the company is not taken into consideration.

7. What is the Purpose of SIDBI?

The main purpose of SIDBI is to manage Development and Equity Funds which were previously handled by IDBI maintaining an economic balance between customers and lenders. It is a single platform to provide business solutions for MSMEs and other financial institutions.

8. What is the role of SIDBI as a Nodal Agency for Governemtn Schemes?

To implement modernisation and upgradation of technology, protecting the manufacturing units within MSMEs, SIDBI offers Nodal Agency services to the Indian Government which is further sponsored by various ministries. This includes: • CLCSS – Credit Linked Capital Subsidy Scheme • TUFS – Technology Upgradation Fund Scheme for Textile Industry • IDLSS – Integrated Development of Leather Sector Scheme • FPTUFS – Ministry of Food Processing Industries • TEQUP – Scheme for Technology and Quality Upgradation Programme

9. Which are the Subsidiary Associates of SIDBI?

The Subsidiary Associates are: 1. SVCL – SIDBI Venture Capital Ltd. 2. CGTMSE – Credit Guarantee Fund Trust for Micro and Small Enterprises 3. SMERA – SME Rating Agency of India Ltd. 4. ISTSL – India SME Technology Services Limited 5. ISARC – India SME Asset Reconstruction Company Ltd.

10. What have the been key initiates of SIDBI over the past 25 years?

SIDBI has taken many initiatives for the past 25 years for the growth of the economy: • By providing financial assistance to MSMEs • Huge network of branches and offices in the whole country (1.25 lakh branches) • Loans, equity and quasi-equity services to the disadvantaged MSMEs and women. • Nurturing more than 100 MFIs • Creating subsidiaries and building institutions • Immense Job creation


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