SIDBI – Key Functions, Benefits, and Loan Schemes Explained

SIDBI – What is it about?

Established in the year 1990, the 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, commercializing, and marketing new ideas, innovative start-ups, and developing small-scale industries by providing loans to enhance the working of MSMEs to meet the demands of people by encouraging their working and supply.

Mission and Vision of SIDBI

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

Benefits of SIDBI

There are many advantages associated with SIDBI:

• Loans and credits are customised based on the size of the business and specific loan requirements of the business, ensuring a perfect fit for its financial needs. 
• 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.
• Besides providing monetary assistance, it also provides assistance in the loan process and necessary advice on the financial condition of MSMEs.
• There is a contingency to offer loans without security up to a limit of Rs. 100 lakhs
• Helps in the holistic and capital growth and development of firms.
• SIDBI Venture Funding is a subsidiary that focuses on the growth of MSMEs through capital as equity and venture capital funds.
• Offers various schemes at comfortable terms and discounted interest rates to help the MSMEs financially and in decision-making.
• 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, 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)
• SIDBI Assistance to Healthcare Sector in War Against Second Wave of COVID-19 (SHWAS)
• SIDBI Assistance to MSMEs for Recovery & Organic Growth During COVID-1- Pandemic (AROG)
• Timely Working Capital Assistance to Revitalise Industries in Times of Corona Crisis (TWARIT)
• SIBDI Assistance and Aid for Thematic Support to MSMEs Promoted by SC/STs (SAATH)
• A Special Dispensation for Nurturing Enterprises Run by Women Entrepreneurs (ARJANA)

Understanding these Products in Detail:

• 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.
• 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.
• Loans under Partnership with OEM – Original Equipment Manufacturer where the scheme can help MSMEs attain machines and equipment from OEMs with a loan amount of up to Rs. 1 crore. The minimum tenure required for the running business is 3 years and repayment of the loan period is 60 months. It offers Working Capital or Cash Credit to MSMEs as per their requirements.
• STFS – SIDBI Trader Finance Scheme is for MSMEs with a minimum tenure of 3 years with satisfactory business performance (min – Rs. 10 lakhs and max – Rs. 1 crore) with a maximum repayment tenure of 60 months.
• SPEED – Loans for Purchasing Equipment for Enterprise Development wherein SIDBI provides 100% financing options of Rs. 1 crore to new businesses and Rs. 2 crore 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 a moratorium period starting from 1.25% per month.
• SHWAS: The Small Industries Development Bank of India introduced SHWAS to provide financial relief to the healthcare sector during the COVID-19 pandemic. The scheme focuses on funding businesses involved in producing essential healthcare supplies like oxygen cylinders, ventilators, and PPE kits. With 100% finance and a competitive SIDBI loan interest rate, businesses can secure up to Rs. 2 lakh through a streamlined process. The objective of SIDBI through SHWAS is to support critical healthcare infrastructure during emergencies. 
• AROG: AROG is one of the key schemes of SIDBI, aimed at helping MSMEs recover from financial losses caused by the pandemic. It offers 100% finance with minimal collateral requirements and a maximum loan amount of Rs. 2 lakhs. This SIDBI MSME loan is backed by competitive interest rates and fast processing. AROG enables resilience and organic growth in the MSME sector. Entrepreneurs can apply for AROG using the SIDBI loan application process, which ensures quick approvals. 
• TWARIT: TWARIT provides much-needed liquidity for industries struggling with working capital during crises. With an interest rate of 8.25% per annum, a repayment tenure of up to 48 months, and easy access to funds, this scheme ensures businesses remain operational. The important features of SIDBI under TWARIT include quick loan disbursal and industry-specific support. Businesses seeking urgent funding can leverage this SIDBI loan scheme through SIDBI loan agents or avail them directly. 
• SAATH: SAATH is a flagship program under the SIDBI schemes for the MSME sector, targeting SC/ST entrepreneurs. It offers loans between Rs. 25 lakh and Rs. 3 crore to assist in establishing new greenfield units or modernising existing ones. With low SIDBI loan interest rates, 50% of the credit guarantee fee is borne by SIDBI. The scheme prioritises borrowers with a positive repayment track record, promoting inclusivity in the MSME ecosystem. This loan ensures fast sanctioning, low processing fees, and zero repayment charges.

• ARJANA: ARJANA is one of the notable SIDBI loans which provides term loans to MSMEs owned by women entrepreneurs. Loan amounts range from Rs. 25 to Rs. 3 crore. It supports both new projects and expansions. With MCLR-based interest rates, low processing fees, and prompt disbursal, it eliminates barriers for women entrepreneurs. A minimum of 51% ownership by women in the enterprise is required to qualify. The scheme’s inclusive features align with the important features of SIDBI venture capital, fostering gender equality in entrepreneurship.

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

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 loans helps the businesses to elevate to a higher ticket size from microfinance at affordable rates.

We will discuss the following schemes in detail:

Required Documents for SIDBI Loan

To apply for SIDBI loans for startups or existing businesses, applicants must provide the following:

• A duly filled SIDBI application form.
• KYC documents for the applicant and co-applicants.
• Business profile and project report.
• Audited financial statements for the past three years.
• Provisional financial statements for the current year. 
• Bank statements from the last six months. 
• Copy of Udyog Aadhaar Memorandum (UAM).
• GST registration certificate (if applicable).
• Consent for establishment from the Pollution Control Board (if applicable).
• Sanction letters from other lenders (if any).
• Proforma invoice or quotation for SIBDI MSME loan purposes. 
• Any additional documents required by schemes of SIDBI Venture Capital Limited. 

Steps to apply for a loan from SIDBI

The application process for a 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 that says, “Borrower’s corner”, the applicant needs to click on that.

Step 3: The applicant needs to fill in his username and password in 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.

Conclusion

SIDBI plays a pivotal role in empowering MSMEs and startups with tailored financial products. Whether it is aiding MSMEs through working capital loans or supporting entrepreneurs through collateral-free schemes, SUIDBU ensures business growth with its strategic initiatives. For businesses looking for comprehensive financing, Lendingkart complements such efforts by simplifying access to capital and bridging the gap for emerging enterprises. 

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SIDBI News

SIDBI Expands Express Loan Scheme for MSMEs, Enhances Loan Limits and Accessibility

Kolkata: Deputy MD Sudatta Mandal of Sidbi revealed intentions to expand the company’s digitally based Express Loan for MSMEs at the Bengal Chamber of Commerce’s Financial Awareness Conclave. First offered for machinery purchases with a ticket size of Rs 1 crore, Express Loans provide 10-minute loan clearance. Mandal claims that the maximum loan amount for existing clients has been increased to Rs 3 crore, and that once the portfolio matures, the limit would be extended to include all lending products. He emphasised how important it is to accurately assess MSME creditworthiness, pointing out that credit rating agencies’ current methodologies are biassed against smaller companies. Very few MSMEs receive AAA ratings as a result of this bias, which drives up their borrowing costs.

News Updated Date: 26th June 2024

SIDBI launches mission EVOLVE in association with NITI Aayog, World Bank, and others for loans to EV MSMEs

On Monday, SIDBI (Small Industries Development Bank of India) embarked mission EVOLVE (Electric Vehicle Operations and Lending for Vibrant Ecosystem) in association with World Bank, NITI Aayog, Korean Economic Development Cooperation Fund (EDCF), and Korean-World Bank to finance MSMEs (Micro, Small and Medium Enterprises) in the EV space.

SIDBI, the principal MSME financial institution in India, declared that this initiative would provide MSMEs with the key to inexpensive commercial financing for EV loans, containing hosting of telematics, that could support and deliver data for other financial benefits and lessen financing expenses.

This mission helps SIDBI to stimulate India’s target for EV30@30 or 30% EV penetration by 2023. SIDBI declared that mission EVOLVE deals with the challenges of high-interest rates and restricted availability of financing in the EV sector and unlocks access to reasonable commercial funding for EV Loans.

S Ramann, CMD in SIDBI, emphasized creating an EV ecosystem database to understand and extend the life of EVs. The data would allow policymakers to know the gaps and further strengthen the EV ecosystem. 

SIDBI had also announced a pilot scheme Mission 50,000-EV4ECO in April 2023 under the guidance of NITI Aayog to fund MSMEs finding it challenging to get access to loans for purchasing EVs, including two, three and four-wheelers, for their everyday operations and commercial use. This mission aimed to finance 50,000 EVs. 

SIDBI stated it handed sanction letters under Mission 50,000-EV4ECO to various companies, such as Mufin Green Finance, Aristo Securities, Techsofin, EV Motors, etc., to get around 5,000 two and three-wheeler EVs on the road shortly. It also said that proposals for another 25,000 EVs are in the pipeline.

Sudhendu Sinha, Adviser (Infra & e-mobility) in NITI Aayog, stated that the SIDBI’s Mission 50,000-EV4ECO scheme is a step in the right direction to support India’s commitment to EV30@30. It will enable access to affordable financing for EVs. 

EV sales in India surpassed the 1 million mark in the financial year 2022-23, with 11,52,021 units sold, up to 58% from 7,26,861 units sold in FY22, as per the Society of Manufacturers of Electric Vehicles (SMEV). Two-wheelers had the highest share of 62%, with 7,26,976 units sold in FY23.

News Updated Date: 12th June 2023

SIBDI grants loans to MSMEs for buying electric vehicles

The main financial institution for MSMEs in India, SIDBI, will now offer to finance directly to MSMEs who are having trouble getting loans to buy electric vehicles (EVs) for their daily operations and commercial use. SIDBI has stated that it will directly provide loans to eligible MSMEs (including EV fleet operators, EV leasing companies, and aggregators) to purchase EVs, including two-wheelers, three-wheelers, and four-wheelers, as well as to develop charging infrastructure, including battery swapping, as per a pilot program Mission 50,000-EV4ECO announced under guidance from NITI Aayog.

According to SIDBI, a thorough engagement with stakeholders highlighted that one of the challenges MSMEs and NBFCs serving the EV ecosystem have is access to sufficient financing, including a competitive rate of interest.

Supporting the purchase of two- and three-wheelers is essential due to their affordability. The switch to EVs is a crucial cornerstone for the decarbonization of the transportation industry. According to the Society of Manufacturers of Electric Vehicles (SMEV), EV sales in India reached 1 million units in FY23 with 11,52,021 units sold, an increase of 58% over the 7,26,861 units sold in FY22. With 7,26,976 units sold, two-wheelers had the greatest share (62%) in FY23.

News Updated Date: 15th May 2023

SIDBI Establishes Office in Hosur to Support MSMEs

Small and medium-sized enterprises (SMEs) play a vital role in India’s economy, contributing significantly to the country’s employment and gross domestic product (GDP). To ensure these businesses have the resources they need to thrive, the Small Industries Development Bank of India (SIDBI) recently opened a new branch office in Hosur. This office is dedicated to serving micro, small, and medium enterprises in the region.

SIDBI also created a Cluster Development Fund with the support of the Reserve Bank of India. This fund provides term loans at concessional rates to state governments for projects that develop MSME ecosystems. SIDBI Chairman and Managing Director Sivasubramanian Ramann said that this financial support will help create a better environment for MSMEs.

In addition, SIDBI has launched other initiatives to increase access to credit for MSMEs. These initiatives will provide much-needed capital to businesses in the region so they can expand and create more jobs. 

By setting up an office in Hosur and providing financial support through the Cluster Development Fund, SIDBI is helping MSMEs grow and prosper. This is a great example of how organizations can work together with government bodies and local communities to create positive change for businesses.

News Updated Date: 07th March 2023

The SIDBI’s 59-min Loan Scheme

As of November 1, 2022, SIDBI’s 59-minute loan approval program for micro, small, and medium-sized businesses (MSMEs), PSB Loans in 59 Minutes, had only seen a 3.2% increase in loan applications sanctioned over the same period in the previous year. According to official data from the MSME Ministry’s dashboard, banks approved 2,43,140 loans totaling Rs 82,962 crore as of November 1, 2022, compared to 2,35,511 loans totaling Rs 78,738 crore approved as of November 1, 2021. 

The program, which enables MSMEs to receive working capital loans or term loans without collateral ranging from Rs 1 lakh to Rs 5 crore with in-principle bank clearance in 59 minutes, was introduced in November 2018. The borrower’s details and supporting papers determine how quickly the loan will be disbursed.

The borrower may be able to get a loan under the CGTMSE plan even if there is no collateral; however, this is at the lender’s discretion, and collateral may be required as per the guidelines. To apply for a loan, borrowers must provide information about their firm ownership, bank statements, and GST and income tax filings.

News Updated Date: 14th November 2022