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Contents
• SSI as a Sector
• Introduction to SIDBI
• History
• Objectives
• Mission
SSI as a Sector
It has been said in the past that SSI has outperformed the overall industrial
sector. As per the estimates available in third census of SSIs, the production
in the SSI sector, at current prices is estimated to have increased to
Rs.3,48,059 crore during FY2004 from Rs.3,11,993 crore in the previous year,
thus recording a growth of 11.5 per cent in output at current prices, as
compared to growth of 6.6 per cent registered in the industrial sector and 7.1
per cent growth in the manufacturing sector. Employment in the sector is
estimated at the level of 273.97 lakhs at end-March 2004 as compared with
261.38 lakhs at end-March 2003. SSI exports increased from Rs.71,244 crore
in FY2002 to Rs.86,013 FY2003. The share of SSIs in output was 39 percent
and in exports it was 34 percent during the year.
7000
1990-91
6000
1991-92
5000 1992-93
1993-94
4000 1994-95
1995-96
3000
1996-97
2000 1997-98
1000
0
Sanction Disbursement
(i) Tiny Units - about 89.2 per cent of the number of projects
assisted under Refinance Scheme during 1996-97 were tiny, receiving
assistance upto Rs. 5 lakh per project. The sanctions for such projects
accounted for 39.6% of the total amount of sanctions in 1996-97 as
against 36.0% during the previous year.
(ii) Women entrepreneurs - under various schemes assistance
amounting to Rs. 19.07 crores was given to 1067 women entrepreneurs
during 1996- 1997
(iii) Backward areas - during 1996-97, projects enanating from backward
areas received assistance to the tune of Rs. 775 crores of sanction, which
accounted for 37% of total assistance under Refinance Scheme of SIDBI.
Subsidiaries
The operations and functions of the subsidiaries of SIDBI viz., SIDBI Venture
Capital Limited, SIDBI Trustee Company Ltd., Technology Bureau for Small
Enterprises and Associate organization, Credit Guarantee Fund Trust for Small
Industries were satisfactory during FY2004. I am also very pleased to inform
our shareholders that the Bank has initiated steps in the direction of setting
up of a Technology Services Bank for the small and medium enterprises sector
and I am hopeful that the same will commence operation during FY2005.
History
Established in April 2,1990
Provision of Charter
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.
• 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.
Development Outlook
The major issues confronting SSIs are identified to be:
• Technology obsolescence
• Managerial inadequacies
• Delayed Payments
• Poor Quality
• Incidence of Sickness
• Lack of Appropriate Infrastructure and
• Lack of Marketing Network
There can be many more similar issues hindering the orderly growth of SSIs.
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.
Co-ordination and Understanding
As an apex institution, SIDBI makes use of the network of the banks and state
level financial institutions, which have retail outlets. SIDBI supplements the
efforts of existing institutions through its direct assistance schemes to reach
financial assistance to the ultimate borrowers in the small-scale sector.
Refinancing, bills rediscounting, lines of credit and resource support
mechanisms have evolved over the period of time to route SIDBI's assistance
through the network of other retail institutions in the financial system.
MOU
SIDBI has entered into Memoranda of Understanding with many banks,
governmental agencies, international agencies, research & development
institutions and industry associations to facilitate a co-ordinated approach in
dealing with the issues for development of small-scale industries.
SIDBI's MOUs
Banks-(18)
Swiss Agency for Development and Co-operation
Small Industries Development Organization
Auto Components Manufactures Association
Asia and Pacific Centre for Transfer of Technology
Council for Scientific and Industrial Research
United Nations Industrial Development Organization
Confederation of Indian Industry
National Research Development Organization
Government of India for channelising TREAD assistance
Operation Emphasis
SIDBI, in its operational strategy, emphasizes:
It has been a matter of policy in SIDBI to identify the areas of gaps in credit
delivery system and fill them through devising appropriate new schemes and
implementing them. In the last 9 years, 26 new schemes have been
introduced.
• Equity
• Term loan (domestic and foreign currency)
• Working capital
o For inventory
o For raw material
o Through finance against bills receivables and for intangibles.
The purposes for which SIDBI's assistance is provided include new projects,
expansion, diversification, technology upgradation, modernization, quality
improvement, environmental management, marketing (domestic and
international) and rehabilitation of sick SSIs.
Promotional Orientation
Besides financing, SIDBI provides developmental and support services to SSIs
under its Promotional and Developmental (P&D) schemes. The focus of such
assistance is to ensure:
• Enterprise Promotion
• Human Resource Development
• Technology Upgradation
• Environmental and quality management
• Information Dissemination and
• Market Promotion
The P&D initiatives of SIDBI have crystallized over the years and are now
oriented to serve rural entrepreneurs and youth, particularly women through
programmes to empower them and motivate them to undertake
entrepreneurial ventures
Future challenges
The coming years would be crucial for SIDBI mainly on account of the
accelerated pace of deregulation of financial sector, softer interest rate and
expected decline in availment of refinance by banks which, hitherto formed
major part of the Bank's business. SIDBI is aware of the challenges and has
been taking steps to address these issues. Direct financing to the SME (small
and medium enterprises) and service sector would be a major focus area for
the Bank. The support infrastructure like industrial areas, power, roads,
telecommunications, etc. are essential for growth and smooth functioning of
each and every economic activity. As such the Bank would also give thrust on
financing of infrastructure, which will directly or indirectly benefit the sector as
also marketing and technology upgradation related activities undertaken in
the sector. Containment of NPAs and monitoring the health of SFCs (State
Financing Corporations) are the other areas receiving our attention
Products and Services
Main Schemes of SIDBI:
A brief summary of the Schemes available with SIDBI.
• National Equity Fund Scheme, which provides equity
support to small entrepreneurs setting up projects in Tiny Sector.
• Technology Development & Modernization Fund Scheme
for providing finance to existing SSI units for technology
upgradation/modernization.
• Single Window Scheme to provide both term loans for fixed
assets and loan for working capital through the same agency.
• Composite Loan Scheme for equipment and/or working
capital and also for work sheds to artisans, village and cottage
industries in Tiny Sector.
• Mahila Udyam Nidhi (MUN) Scheme provides equity support
to women entrepreneurs for setting up projects in Tiny Sector.
• Scheme for financing activities relating to marketing of SSI
products which provides assistance for undertaking various marketing
related activities such as marketing research, R&D, product
upgradation, participation in trade fairs and exhibitions, advertising
branding, establishing distribution networks including show room, retail
outlet, wears-housing facility, etc.
• Equipment Finance Scheme for acquisition of
machinery/equipment including Diesel Generator Sets, which are not
related to any specific project.
• Venture Capital Scheme to encourage SSI ventures/sub-
contracting units to acquire capital equipment, as also requisite
technology for building up of export capabilities/import substitution
including cost of total quality management and acquisition of ISO-9000
certification and for expansion of capacity.
• ISO 9000 Scheme to meet the expenses on consultancy,
documentation, audit, certification fee, equipment and calibrating
instruments required for obtaining ISO 9000 certification.
• Micro Credit Scheme to meet the requirement of well
managed Voluntary Agencies that are in existence for at least 5 years;
have a good track record and have established network and experience
in small savings-cum-credit programmes with Self Help Groups (SHGs)
individuals.
New Schemes
(i) To enhance the export capabilities of SSI units.
Major schemes
Technology Development & Modernization Fund
SIDBI has set up Technology Development & Modernization Fund (TDMF)
scheme for direct assistance of small sale industries to encourage existing
industrial units in the sector, to modernize their production facilities and adopt
improved and updated technology so as to strengthen their export
capabilities. Assistance under the scheme is available for meeting the
expenditure on purchase of capital equipment acquisition of technical know-
how, upgradation of process technology and products with thrust on quality
improvement, improvement in packaging and cost of TQM and acquisition of
ISO-9000 series certification.
SIDBI in July 1996 had permitted SFCs and promotional banks to grant loans
for modernization projects costing upto Rs. 50 lakhs. The Coverage of the
TDMF scheme has been enlarged w.e.f. 1.9.1997. Non-exporting units and
units which are graduating out of SSI sector are now eligible to avail
assistance under this scheme.
National Equity Fund
National Equity Fund (NEF) under Small Industries Development Bank of India
(SIDBI) provides equity type assistance to SSI units, tiny units at one per
cent service charges. The scope of this scheme was widened in 1995-96 to
cover all areas excepting Metropolitan areas, raising the limit of loan from Rs.
1.5 lakhs to Rs. 2.5 lakhs and covering both existing as well as new units:
(a) The following are eligible for assistance under the scheme:-
(b) Project cost (including margin money for working capital) should not
exceed Rs. 10 lakhs in the case of new projects in the case of existing units
and service enterprises, the outlay on expansion/modernization/technology
upgradation or diversification or rehabilitation should not exceed Rs. 10
lakh per project.
The Indian Toy Industry is dominated by SMEs and micro enterprises even
though toy majors such as Fun School and Mattel are also present. The
domestic industry has been in existence for over 50 years and has
considerable reach through an extensive distribution network. Innovation in
the form of IP creation has, however, been extremely poor. With generational
change occurring in the industry, businesses have started becoming open to
new ideas.
With the liberalization of the economy, since the late 1980s there was a
sudden increase in the number of automobiles being offered to Indian
consumers. This, in turn, inspired some toy manufacturers to start producing
plastic miniatures of automobiles being introduced in the market. Much like
MatchBox Cars, these manufacturers faithfully reproduced the shape of every
new car they saw on the road. Over the years a large number of models
became available and coupled with extensive reach their miniatures were soon
available across the length and breadth of the country.
Keeping in mind the low awareness of IP related issues amongst the SME
Sector in the country, the Small Industry Development Organization (SIDO) -
the SME Development Agency of the country - working under the Ministry of
Small Scale Industries had embarked upon a series of workshops and
sensitization programmes on IPR for SMEs. One such workshop was devoted
exclusively to the toy industry. One of the prominent manufacturers of these
miniature cars happened to attend this workshop.
After the workshop, he met some of the Resource Persons and confessed that
it was the first time that he understood the implications of IP to his business.
He understood that if a design was protected then he, as an entrepreneur,
could not escape liability for passing off through the defense of
miniaturization. He also understood that he could legally copy the design of
certain automobiles by doing so intelligently. For instance, he could do a
design search at the design office and determine which designs were over 15
years old and hence no longer protected. He could now also assess which
were the designs where the company in question beyond the initial 10 years
or such cases had not extended protection where a foreign company had
never obtained design protection in India. This, itself, gave him a substantial
number of models to miniaturize.