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                               INDEX
CHAPTER                          TOPIC                  PG NO

     1                   INTRODUCTION
                1.1 SSI sector
                1.2 Post World War II Scenario           1-16
                1.3 Technology

     2            DEVELOPMENT BANKING
                2.1 What is Development Banking?
                2.2 Overview Of Development              17-25
                Banking in India
                2.3 Technological Problems in the
                Modern Process
     3                           SIDBI
                3.1 History and Business Domain
                3.2 Promotional & Development            26-49
                Initiatives
                3.3 Objectives
                3.4 Products
                3.5 Channels of Assistance
                3.6 Schemes
                3.7 Subsidiaries
                3.8 Interpretation of Manager‟s View

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CHAPTER                        TOPIC           PG NO


     4                 SIDBI’S FINDINGS
                4.1 Questionnaire.              50-51
     5            FINDINGS, SUGGESTIONS,
                         CONCLUSION.
                5.1 Findings                    52-54
                5.2 Suggestions
                5.3 Conclusion
                        REFERENCES




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                  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.




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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.




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     CHAPTER 1-INTRODUCTION




                Chapter 1- INTRODUCTION
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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 lakh units spread all over the country.




MEANING OF SSI


      The Government of India grouped small-scale industrial
undertaking into 2 categories- those 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 lakhs. The ownership and management in small
enterprises is predominantly proprietary with individual ownership or
partnership.




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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.




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    ESSENTIAL FEATURES OF THE SSI POLICY 1991



 SI         OBJECTIVES                    MAJOR FEATURES
NO
1     To meet the emerging            Emphasis to shift from cheap
      demand for credit.                credit to adequate credit.
                                      Equity participation by other
                                        undertakings domestic foreign
                                        upto 24%.
2     To     strengthen      small    Introduction of factoring service
      industry marketing.               through Banks.
                                      Marketing of mass consumption
                                        goods    under      common    brand
                                        name.
                                      Setting       up       subcontracting
                                        exchanges.
3     To    upgrade    technology     Technology         developmental   in
      and                  promote      SIDO.
      modernization.                  Quality counseling and testing
                                        technology information centre.
                                      Technology          Up     gradation
                                        programmes.




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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.



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           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



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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 government‟s desire to maintain employment in the
banking system and were often drawn into troublesome loans in order
to further the government‟s social goals.




The major issues confronting SSI‟s are identified to be:

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




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      There can be many more similar issues hindering the orderly
growth of SSI‟s.


Over the years, SIDBI has put in place financing schemes either
through its direct financing mechanism or through indirect assistance
mechanism and special focus programmes under its P&D initiatives. In
its approach, SIDBI has struck a good balance between financing and
providing other support services.




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                      1.3   TECHNOLOGY



   In the process of industrialization in general and development of
SSI‟s 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 SSI‟s 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 SSI‟s, 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 SSI‟s 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 he small scale
sector to modernize their production facilities and adopt improved and
updated technology.


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   Assistance under this scheme is being provided at SIDBI‟s 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 sub-sector within SSI‟s.


   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 SSI‟s and
       Export promotion.


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     CHAPTER 2- DEVELOPMENT
                BANKING




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       2.1 WHAT 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 world‟s 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.


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      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 moduled 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




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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.




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       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.




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  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 DFI‟s operating at state and
  national level.




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 2.2 OVERVIEW 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 sectoral 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.




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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




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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 country‟s technological skills develop.
Appropriate technology is primarily meant for SSI‟s 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.




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      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.




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                CHAPTER 3- SIDBI




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          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
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.


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.




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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 SSI‟s 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.

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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.
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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 Bank‟s 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.

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


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BOARD OF DIRECTORS (As on July 09, 2010)

 Shri Rakesh Rewari        Deputy Managing Director

 Shri Madhav Lal           Additional Secretary & DC (MSME),
                           Ministry of MSME, Government of
                           India

 Smt. Ravneet Kaur         Joint Secretary, Department of
                           Financial Services, Ministry of
                           Finance, Government of India

 Shri Janki Ballabh        Former Chairman, State Bank of India

 Shri M. Balachandran
                           Former Chairman & Managing
                           Director, Bank of India

 Shri S.K. Tuteja          Former Secretary, Government of
                           India
 Shri S.S. Chattopadhyay   Chairman, West Bengal Financial
                           Corporation
 Shri K. Sitaramam
                           Former Deputy Managing Director
                           State Bank of India

 Shri T. R. Bajalia        Executive Director, IDBI Bank Ltd.

 Shri B. Manivannan
                           Executive Director (IT-BPR)
                           Life Insurance Corporation of India




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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 lakhs 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.
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                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. 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.


      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


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       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.




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 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 lakh and Rs 92 lakh
respectively.




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           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.




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                     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.

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                           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.




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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
SSI‟s.


Minimum loan amount

        Generally Rs.50 lakhs for setting up new unit and Rs.25 lakhs for
         other purposes.

In respect of well-run existing SSI units, the minimum loan could be
Rs. 10 lakhs.




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                  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.




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               3.5 CHANNELS OF ASSISTANCE

SIDBI‟s 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 SSI‟s. 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 SSI‟s
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


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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 SSI‟s 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.




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                            3.6 SCHEMES


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




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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
(SRTO’S):
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 promoter‟s 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.


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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 SFC‟s 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.




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                         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.




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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.




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     3.8 INTERPRETATION OF MANAGER’S 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.




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           3.9 SIDBI’S FINANCIAL HIGHLIGHT




  5000
  4500
  4000
  3500
  3000
  2500
                                                           Income Of SIDBI
  2000
  1500
  1000
   500
     0
          1990-91    1999-00    2001-04    2006-09


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.




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   CHAPTER 4- SIDBI’S FINDINGS




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                   4.1 QUESTIONNAIRE
Questions asked to manager
Q1) What role SIDBI plays in Small Scale Industries Sector?




Q2) What are the objectives of SIDBI?




Q3) How do you analyze that the applicant company has the
capacity for replacement of loan?




Q4) What things are taken into consideration while financing a
new project or a new industry?




Q5) Do you think SIDBI faces competition?




Q6) What is the interest rate charged?




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Q7) How much time is taken for finalizing or rejecting a
certain project?




Q8) What types of securities are preferred by bank while
financing a project? Do the same securities apply for a new
project or an industry?




Q9) What are the opportunities and threats you face?




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  CHAPTER 5- FINDINGS, SUGGESTIONS
                AND CONCLUSION




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                            5.1 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 SIDBI”s 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.




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                        5.2 SUGGESTIONS


With the opening of the Indian economy due to liberalization and
globalization this vital sector of the economy is facing huge challenges
and competitions from of the domestic as well as multinational
corporations. In view of the above, it is necessary to expeditiously
consider issues relating to flow of credit to the sector, restructuring of
borrowal accounts of SSI and Medium Enterprises, etc.


The Small-scale Industrial Sector has to be made more competitive to
face the challenges of globalization and also to enhance its contribution
to the national GDP. Accordingly the manpower policy should be
formulated.


Lack of knowledge is an important reason for financial exclusion.
Financial Education is required to ensure large section of population in
urban and rural areas that do not have access to formal banking and
financial services are educated of the following advantages of coming
into the fold of such services. It would help in building informed
customers and would result in a win-win situation for all. Setting up
Credit Counseling Centre by banks which would advise public on
gaining access to the financial system, would help in this regard.




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                        5.3- CONCLUSION


As an apex institution, the bank was expected to play more proactive
role in reaching out financial and support services to SSI‟s with the
help of existing credit delivery structure and support service agencies
besides promoting new intermediaries and strengthening the existing
network of institutions engaged in development of small scale sector.


From a predominantly refinancing institution, SIDBI has emerged as a
major purveyor of a wide variety of financial services to the small scale
sector. At present, financial assistance term loan both in rupee and
foreign currencies, working capital term-loan, bill discounting for
equipments and component, factoring services, venture capital.


SIDBI Foundation for Micro Credit launched in January 1999, SIDBI
received the coveted „Asian Banking Awards 1999‟ by ADFIAP for its
Micro Credit Scheme in the Development Finance Products/
programme category. The awards are associated by the Asian Banking
Association and the Association of Development Financing Institutions
in Asia and Pacific.




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