Small Industries Development Bank of India

Role of SIDBI in the development of MSMEs SIDBI

Presentation by

MSMEs-Backbone of Indian Economy

Constitutes more than 90% of total units (134 lakh) More than 8000 products MSEs Contribute about 45% of manufacturing Contributes around 35% of direct exports. Second largest source of employment, after agriculture (>340 lakh)

Indian MSME Sector MSMED Act, 2006

Concept of Enterprises as against Industries Change of definition

Particulars

Manufacturing Services (Investment in P&M) (Rupees) (Investment in Equipment) (Rupees) Up to 25 Lakh Above 25 Lakh and Up to 5 Crore Above 5 Crore and Up to 10 Crore Up to 10 Lakh Above 10 Lakh and Up to Above Up to 2 Crore 2 Crore and 5 Crore

Micro Enterprises Small Enterprises Medium Enterprises

Sources of Formal Finance

SIDBI Banks U C Bs NABARD

Indian MSME Sector

Traditional
Credit to M S M Es

RRBs

S F Cs

S I D Cs

N B F Cs Equity & Bonds

Modern
Venture Finance Securitization

FDI

Indian MSME Sector Support Structure

Govt. of India Reserve Bank of India
Policy/ Support/Finance/ Regulation

Banks

SIDBI

SLI s

Commercial Banks Regional Rural Banks Cooperative Banks

SFC s

MSME

SIDC s/ SIIC s SSIDC s

MISSION of SIDBI

To empower the Micro, Small and Medium Enterprises (MSME) for economic growth, employment generation and balanced regional development of our country.

SIDBI Products & Services

SIDBI products & broadly grouped groups (i) services are into three

Indirect Assistance

(ii) Direct Assistance (iii) Development & Support Services

Traditional Credit Products

SIDBI/ BANK

Fund Based

Non Fund Based

Term Loan

WC Finance WC limits

INLC LC s

Guarantees

Retail Credit Schemes

Fund based Schemes Micro Enterprise Loan Scheme Direct Credit Scheme Receivable Finance / Invoice Discounting Scheme Working Capital Scheme Scheme for Construction sector Privileged Customer Scheme Equity assistance scheme Non fund based schemes Guarantee Scheme Letters of Credit

Micro Enterprise Loan Scheme

Purpose of Assistance : Need based composite loan to micro enterprises for:
Acquiring capital assets Working capital Marketing related requirements

Amount of assistance : Rs. 50,000 to Rs. 5 lakh

MELSContd.
Eligibility Criteria :
Micro Enterprises, as defined by MSMED Act 2006 Definition of Micro Enterprise: Investment in P&M Up to 25 Lakh in Manufacturing sector and Up to Rs. 10 lakh in service sector. Having a satisfactory track record in respect of loan if availed from, MFIs/ Banks.

Promoters Contribution: At least 10 %

MELS.Contd.
Interest Rate: Prime lending rate of SIDBI Repayment : Maximum 3 years in monthly installments (including moratorium of maximum six months, if needed) Security: First charge on all assets created out
of the loan extended to the borrower and the assets which are directly associated with the business / project for which credit has been extended Personal guarantees of promoter(s)

MELS.Contd.
The unit should be located in Hyderabad or within maximum 25 km (40 km provided the borrowers are in a cluster ) distance from SIDBI (Hyderabad) Office
KYC Compliance of the promoter Bank A/c in any Scheduled commercial Banks Post Dated Cheques (PDC) for repayment Easy Documentation, No processing, Upfront Fees

Direct Credit Scheme

Purpose Form of assistance Tenure Interest rate New unit/ Expansion/ Modernization WC/ Marketing/ R&D Term Loan Up to 8 years Based on Risk Rating [PLR 0.25 % to PLR +1.75%] PLR = 11% Generally less than 2:1 Generally more than 1.5 : 1 1.3 for existing units and 1.4 for new units

DER DSCR Asset Coverage

Receivable Finance Scheme

Purpose Eligible SME vendors Form of assistance Eligibility of Purchaser Assistance against supplies made by SME vendors to large Corporate Manufacturing Units / Service Providers / Transporters / IT Vendors Discounting of Bills of Exchange accepted by purchasers Minimum Net worth : Rs 6 crore Minimum Turnover : Rs 30 crore Profit / Dividend paying track record Need based Upto 120 days

Security Tenure

Direct Risk Capital Scheme for MSMEs

Purpose Eligible Customers Form of assistance Purpose Deal size Tenure
To provide risk capital to deserving MSMEs for their growth where available promoters funds and bank loans are not sufficient . Units planning to avail debt assistance from SIDBI along with risk capital Satisfactory rating Mezzanine instruments (OCCPS, OCDS, OCSD, Subordinated Debt) Equity Capital For Scaling up Expansion / Modernization / Diversification Rs.1 Crore to Rs.10 Crore Upto 7 years

SIDBI Financing Scheme for Energy Savings Projects in MSME Sector

Objective

The Japan International Cooperation Agency (JICA) has extended a Line of Credit to SIDBI for financing Energy Saving projects in MSME Sector. The main objective of the scheme is to encourage MSME units to undertake energy saving investments in plant & machinery / production process to reduce energy consumption, enhance energy efficiency, reduce CO2 emissions and improve the profitability in the long run. The financial assistance to MSMEs will be through SIDBI, as well as through refinance to banks / State Finance Corporations (SFCs) and Non Banking financial Companies (NBFCs).

SIDBI Financing Scheme for Energy Savings Projects in MSME Sector (contd..)
Eligibility Criteria for Units (Direct Assistance)

New / existing MSME units, as per the definition of MSMED Act. 2006. However, Units graduating out of medium scale will not be eligible for assistance. Existing units should have satisfactory track record of past performance and sound financial position. Energy saving projects will be screened as per the Energy Saving list, which is available on SIDBI website. Units should have minimum investment grade rating of SIDBI. Sectors such as the arms industry, narcotics industry or any unlawful businesses are not eligible. Similarly, such projects which may result in larger negative social and environmental impact are also not eligible under this scheme.

SIDBI Financing Scheme for Energy Saving Projects in MSME Sector Financial Parameters
Minimum Assistance Minimum promoters contribution Debt Equity Ratio Interest rate Rs. 10 lakh 25% for existing units 33% for new units Maximum 2.5 : 1 The interest rate is based on internal risk rating within the band given below: Fixed rate : 9.5 10% p.a. Floating rate : 9.75 10.5% p.a. First charge over assets acquired under the scheme; first/second charge over existing assets and collateral security as may be deemed necessary.

Security

SIDBI Financing Scheme for Energy Saving Projects in MSME Sector Financial Parameters (contd..)
Asset coverage Repayment period Minimum Asset Coverage should be 1.4 : 1 for new units and 1.3 : 1 for existing units. Need based. Normally, the repayment period does not exceed beyond 7 years. However, longer repayment period of more than 7 years can be considered under the Line if considered necessary.

SIDBI - Purveyor of Government Schemes

Credit Linked Capital Subsidy for Technology Upgradation of MSEs TUFs for Textiles Integrated Scheme Development of Leather Sector

Scheme of Technology Processing Industry

Upgradation

of

Food

SIDBI - Purveyor of Government Schemes

Credit Linked Capital Subsidy Scheme (CLCSS): 15% Capital Subsidy for adoption of proven technologies for approved products/sub-sectors. Subsidy limited to 15% of the purchase price (basic price) of Plant and Machinery with a ceiling on loan under the Scheme of Rs.1 Crore. Technology Upgradation Fund Scheme (TUFS): Interest Subsidy of 5% or Upfront Capital Subsidy of 15% under CLCS TUFS. For processing units additional 10% capital subsidy on eligible machinery. Integrated Development of Leather Sector Scheme : Scheme for existing units in leather and leather products. GoI PROVIDES GRANT UPTO 30 % of cost of plant and machinery for SSIs and 20% for non SSIs subject to a ceiling of Rs.50 Lakh. Food Processing Industries: Scheme for new units as well as existing units undertaking modernisation/expansion with eligible machinery. 25% of the cost of eligible plant and machinery and technical civil works with a cap of Rs.50 lakh. Higher Subsidy is available to units being set up in difficult areas e.g. J & K, HP, North East, Uttarkhand, etc., The limit is 33% of the cost of Plant and Machinery and technical civil work with a cap of Rs.75 Lakh.

SIDBI A ONE - STOP WINDOW

I . Subsidiaries Venture Capital - SIDBI Venture Capital Ltd. (SVCL) II. Associates Credit Guarantee o Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) Credit Rating o SME Rating Agency of India Ltd. (SMERA) Technology Transfer o India SME Technology Services Ltd. (ISTSL) Asset Reconstruction o India SME Asset Reconstruction Company Ltd. (ISARC) III Co-promoted Institutions Factoring Companies - Canbank Factors, SBI Factors NEDFi - Guwahati Indian Institute of Entrepreneurship - Guwahati

Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) Settled by Ministry of MSME, GoI and SIDBI Corpus Fund contribution in the ratio of 4:1 from GOI & SIDBI Present Corpus Rs.1737 crore 81 lending institutions registered as Member Lending Institutions with CGTMSE

Cardinal Principles
Lender should extend credit without any collateral / third party guarantee Borrower to avail credit from a single lending institution (an assisted unit of SFC / SIDBI/ NEDFi/ NSIC can, however, get bank finance and be covered under the scheme) Interest rate should be levied in accordance with the RBI or Government guidelines.

Credit Guarantee Scheme of CGTMSE Main Features

Facilitates availment of credit by Micro and Small Enterprises and units engaged in IT based activities from formal banking channel. Maximum loan guaranteed by CGTMSE is Rs.100 lakh per unit . CGTMSE provides guarantee cover up to 75% of the amount in default subject to a maximum of Rs.62.50 lakh Guarantee Cover for loans upto Rs. 5 lakh enhanced to 85% of the loan amount to micro enterprises. Swift and simple settlement process.

Eligible Institutions
Scheduled Commercial Banks RRB s (Sustainable viable category) As approved by the Ministry of SSI, GoI (NSIC, NEDFi, SIDBI)

Eligible units
All types of firms / companies or other legally constituted bodies, individual borrowers, small businesses

Eligible Loans

Both Term Loan and Working Capital can be

covered. Working Capital can also be covered at the time of renewal. Existing units can be covered for additional loan, without extending earlier collaterals. Loans above Rs.100 lakh can also be covered. Non-fund based activities also made eligible.

Cost of Guarantee cover

One time Guarantee fee of 1.5% of the credit facility sanctioned Annual Service fee of 0.75% of credit facility guaranteed Both Guarantee fee / service fee are collected from MLIs

SIDBI : Operational Highlights

Particulars (Rs. Crore) Sanction Disbursement Resources Raised Total Income Profit before tax Net Profit Earning per share Net worth % of Gross NPA to outstanding portfolio % of Net NPA to net portfolio outstanding FY 2008 16164 15087 5100 1638 336 198 4.41 4713 1.40 0.25 FY 2009 29188 28298 15800 2082 829 299 6.65 5342 0.10 0.08 % Growth 81% 88% 210% 27% 147% 51% 51% 13% (89%) (47%)

International Development Partners

Japan Bank for International Cooperation, Japan World Bank Kreditanstalt fur Wiederaufbau (KfW), Germany Department for International Development (DFID), UK and International Fund for Agriculture Development (IFAD), Rome Asian Development Bank

SIDBI Fixed Deposit Scheme

SIDBI is also accepting fixed deposits for tenures more than one year and upto five years.
Tenure (Months) 12-13 14-36 37-60 Existing rate * ( % p.a.) 6.75 7.25 7.75 Revised rate * ( % p.a.) 6.5 7 7.5

* For senior citizens additional 50 bps may be allowed. * For staff members, additional 100 bps may be allowed. * For Bulk Deposits of Rs.1 crore and above, the applicable interest will be less by 100 bps.

Contact
Hyderabad Branch Hyderabad Micro Finance Branch

Shri Siva Prasad Aduri

Manager, 101, Hermitage Complex, 1st floor, Saifabad, Hyderabad- 500004, Telephone-040-23234445

Shri R.V.R.Prasad
Manager 101, Hermitage Complex, 1st floor, Saifabad, Hyderabad- 500004, Telephone-040-23210247

Thank You