SIDBI - Small Industries Development Bank of India

Functions of Small Industries Development Bank of India (SIDBI) 

The Small Industries Development Bank of India (SIDBI) plays a critical function for Micro, Small and Medium Enterprises (MSME) development and growth in India. Its activities include: 

1. Single-Window Support: SIDBI wants to be thought of as a single-window institution – one which can meet MSME needs in both a financial and developmental capacity so that the MSMEs can be competitive in a global marketplace with sound financial and operational efficiency. SIDBI also wants to be a customer-friendly financial institution. 

1. Technology-Based Value Creation: SIDBI wants to enhance operational efficiency and shareholder value by using technology on modern platforms. 

1. Promote & Develop MSMEs: SIDBI’s programmatic activities are to bring about and promote schemes and processes that contribute to the promotion and holistic development of the MSME sector. 

1. International Standing: SIDBI has been assessed and classified under the top 30 Development Bank by The Banker, London continually, thus demonstrating its significant value on a global scale and signifying its position in international development.  

1. Nodal/Implementing Agency: SIDBI also acts as a nodal or implementing agency on behalf of, and for various Ministries of the Government of India including Ministry of MSME, Ministry of Textiles, Ministry of Commerce and Industry, Ministry of Food Processing Industries etc. SIDBI through this role helps in implementing the schemes and policies of the Government to strengthen the MSME ecosystem.  

1. Principle Institution for MSMEs: SIDBI will act as the principal institution for the promotion, financing & development of MSMEs in India; it will liaise and tie up with other institutions to promote synergy in the MSME promotion, financing and development activities. 

Finance Facilities Offered by SIDBI 

SIDBI provides financial services specifically designed for various needs of the MSME sector. The facilities provided can be grouped into 3 categories: 

1. Direct Finance: SIDBI provides direct financial assistance to MSMEs in the form of term loans, working capital loans, foreign currency loans, and equity support. The bank also oversees schemes like energy efficiency loans and support against receivables - both of these help MSMEs save on expenses and gain liquidity! 

1. Indirect Finance: Via the refinance facility, SIDBI improves the ability of Primary Lending Institutions (PLIs) such as commercial banks and State Financial Corporations to lend to MSMEs ultimately resulting in greater credit availability and capacity in the ecosystem for MSMEs across the country. 

1. Micro Finance: SIDBI also offers micro finance to new entrepreneurs and small business owners to help provide access to enter the market and grow a business, with limited financial resources in emerging spaces and in underserved regions. 

Advantages of SIDBI (Small Industries Development Bank of India) 

The benefits of the SIDBI (Small Industries Development Bank of India) are as follows:  

1. Customized Financing: SIDBI customizes its loan products surrounding specific business needs. Even if you require something that is counter to norms, SIDBI can provide you with a funding product that meets your requirements. 

1. Size of Credit: The loan and credit fully reflects the size and type of the MSME. Small and medium enterprises can receive funding customized to their size and operational requirements. 

1. Low Rates of Interest: SIDBI is able to offer loans at lower rates of interest through international partnerships with the World Bank and Japan International Cooperation Agency (JICA), which helps fund cooperative schemes. 

1. Advisory and Support: SIDBI is not just a lending institution, but will offer guidance. Entrepreneurs can work with a dedicated relationship manager throughout the loan selection, application and approval process. 

1. Loan Without Collateral: Entrepreneurs can obtain loans at amounts of up to Rs.100 lakh without collateral, thereby helping startups to gain access to funding. 

1. Increase Capital Without Dilution: SIDBI provides capital support without equity dilution, and provides access to funds while entrepreneurs retain sole ownership. 

1. Equity and Venture Funding: Offers growth capital as equity via venture capital funds focused on MSMEs through its wholly-owned subsidiary SIDBI Venture Capital Limited (SVCL). 

1. Access to Subsidised Schemes: SIDBI provides its enterprises with many schemes with subsidised interest rates, uncomplicated repayment, and helps enterprises choose the right option for their business with expert guidance.  

1. Transparent Processes: SIDBI is very transparent and thorough in the way it deals with applications in terms of loan processing and interest rate structures. Loan terms are clear and concise, there are no hidden or complimentary charges. 

Products offered under SIDBI

1. EXPRESS (Machinery Loan) 

The EXPRESS scheme is tailored for MSMEs that require immediate funding to purchase new machinery without extensive paperwork. It leverages digital verification using GST, ITR, and CIBIL data, ensuring a seamless and swift approval process. It is ideal for stable businesses seeking quick machinery upgrades or replacements. 

Key Features: 

1. Loan amount up to Rs. 3 crore with 100% machinery financing 

1. Based on simplified digital processing (GST, ITR, bank statement, CIBIL) 

1. 25% of loan amount to be parked as fixed deposit collateral 

1. Tenure: Up to 60 months (5 years) 

1. Processing fee: 0.5% of loan amount + applicable GST 

1. Quick turnaround time with minimal documentation 

Eligibility: 

1. Business must be in operation for at least 3 years 

1. Must be registered under Udyam and GST 

1. Should have a clean credit history with no defaults to any bank or FI 

1. Consistent financial records and compliant tax filings required 

2. SPEED (Machinery Loan) 

SPEED offers financing to purchase new machinery for both existing and new SIDBI clients. It allows for up to 100% funding and offers flexible repayment terms with a short moratorium period. It caters to MSMEs looking to scale or modernise their production facilities efficiently. 

Key Features: 

1. Loan limit: Rs. 1 crore (new clients) and Rs. 2 crore (existing clients) 

1. Up to 100% financing of machinery cost 

1. Tenure ranges from 2 to 5 years 

1. Moratorium of 3 to 6 months available depending on business needs 

1. Fast-track approval process for eligible businesses 

Eligibility: 

1. At least 3 years of operational history required 

1. Stable sales performance and cash profits over the past 2 years 

1. Applicant should have a satisfactory credit track record 

1. Must be an MSME registered entity 

3. ARISE (Project Funding) 

ARISE is a large-ticket funding scheme focused on the expansion and modernisation of MSMEs. It supports investments in infrastructure such as new buildings, machinery, and sustainable energy systems. Designed to help already-established enterprises take the next leap in their growth journey. 

Key Features: 

1. Loan amount up to Rs. 50 crore 

1. Financing covers up to 80% of the total project cost 

1. Applicable for infrastructure, plant, machinery, or solar installations 

1. Repayment tenure up to 7 years with a 2-year moratorium 

1. Encourages sustainable and capacity-enhancing investments 

Eligibility: 

1. Minimum of 2 years of audited operations 

1. The business should have reported cash profit in the latest financial year 

1. No overdue loans or defaults with any financial institution 

1. Must be a viable project with sound projections 

4. STHAPAN (New Unit Project Funding) 

This scheme supports the setting up of greenfield (new) manufacturing or service units. It enables new entrepreneurs with sectoral experience to access structured, long-term financing to build from the ground up. 

Key Features: 

1. Loan amount of up to Rs. 50 crore 

1. Maximum 75% of project cost financed by SIDBI 

1. Loan tenure of up to 7 years with a moratorium of 2 years 

1. Structured to support new ventures with proven promoter experience 

Eligibility: 

1. Promoter must have 3 to 5 years of industry-relevant experience 

1. Minimum 25% promoter contribution to project cost is required 

1. No previous loan defaults or adverse credit behaviour 

1. The unit must be a greenfield project (not expansion of an existing unit) 

5. Ubharte Sitaare (Export-Oriented Support) 

This specialised scheme identifies and supports MSMEs with strong export potential, providing both financial assistance and technical expertise. It aims to create globally competitive enterprises through debt, equity, and concessional incentives. 

Key Features: 

1. Covers up to 80% of the project cost 

1. Provides term loans in INR or foreign currency 

1. Interest rate incentives of up to 25 basis points 

1. Access to equity infusion and capacity-building assistance 

1. Strategic support to enhance global competitiveness 

Eligibility: 

1. New or existing MSMEs with a focus on exports 

1. Preference given to promoters with prior export sector experience 

1. No existing defaults or irregularities with banking/financial partners 

1. Viable export strategy and business plan required 

6. Green Finance Scheme (4E – End-to-End Energy Efficiency) 

GFS promotes sustainability by funding energy-efficient, waste-reducing, and low-emission technologies. It's suitable for MSMEs or service providers aiming to adopt clean technology practices aligned with climate goals. 

Key Features: 

1. Loan amount up to Rs. 50 crore, with max 75% of project cost 

1. Repayment period of up to 10 years 

1. Moratorium period up to 18 months 

1. Sectors covered: energy efficiency, e-mobility, water conservation, waste management 

1. Covered under CGTMSE and PRSF schemes for credit enhancement 

Eligibility: 

1. MSMEs, RESCOs, ESCOs, and clean-tech service providers 

1. Must be involved in eligible green/clean technology projects 

1. No repayment defaults or adverse credit history 

1. Must meet energy-saving benchmarks and impact metrics 

7. Working Capital Scheme 

A comprehensive solution for MSMEs needing working capital to manage operations or take over existing WC loans from other banks. It integrates with SIDBI’s term loans and provides access to partner banks for seamless disbursal. 

Key Features: 

1. Partner banks: IDBI, Yes Bank, City Union Bank 

1. MCLR-linked interest rates with competitive terms 

1. Integration with SIDBI’s term loan facility 

1. Simplified and digitised documentation process 

Eligibility: 

1. MSMEs with no existing working capital facility from another lender 

1. Businesses requiring WC for operations or order execution 

1. Loan takeovers allowed as per SIDBI norms 

1. Must have a good credit history and repayment behaviour 

8. SWIFT (Overdraft Facility) 

SWIFT offers a flexible and paperless overdraft facility to MSMEs needing short-term liquidity. It is ideal for businesses with fluctuating cash cycles that require quick access to working capital. 

Key Features: 

1. Instant in-principle sanction with minimal documentation 

1. Overdraft limit up to Rs. 3 crore 

1. No monthly or quarterly compliance reporting needed 

1. Low processing fees: 0.25% + 0.10% of sanctioned amount 

Eligibility: 

1. MSMEs operational for a minimum of 3 years 

1. Must not have existing OD/WC limits from other lenders 

1. Clean credit history with no past defaults 

1. Sound business cash flow management preferred 

9. STEP (Short-Term Working Capital Loan) 

STEP provides MSMEs with short-term working capital to manage order execution or liquidity gaps. It suits businesses with urgent short-term needs and confirmed order backlogs. 

Key Features: 

1. Loan amount up to Rs. 3 crore (existing customers), Rs. 2 crore (new customers) 

1. Repayment tenure up to 3 years 

1. 6-month moratorium on principal repayment 

1. Structured as a term loan for liquidity infusion or order execution 

Eligibility: 

1. Minimum 3 years of business operations (2 years for SIDBI clients) 

1. Operating profit recorded in the past 2 years (or 1 year for SIDBI clients) 

1. No defaults or overdue loans with any bank or NBFC 

1. Suitable for firms with seasonal or project-based cash flow gaps 

5 Steps to Apply for a Loan from SIDBI 

Applicants should follow the steps mentioned below to apply for a loan from SIBDI: 

1. Step 1: Document preparation 

The process of seeking funding begins with preparing a Basic Information Memorandum (BIM).  It outlines what your business requires in terms of funding. This is the responsibility of the SIDBI-approved consultants who will collect the operational and financial information required to correctly prepare the BIM.   

1. Step 2: Submission and approval 

Once the MSME entrepreneur has reviewed the BIM and signed off on it accurately, the consultant will submit it to SIDBI. After this, SIDBI will initiate the preliminary assessment of the proposal and begin to process it internally. 

1. Step 3: Credit rating  

If deemed appropriate, SIDBI may ensure the proposal is rated, from a credit perspective, and can recommend the right credit rating agency to complete this. SIDBI will ensure this agency is recognised by the Reserve Bank of India. The credit rating report will help evaluate the business’s ability to service the debt and identify the risk position before the lender makes further assessments. 

1. Step 4: Direct proposal evaluation by SIDBI 

SIDBI will manage directly all proposals with growth-stage enterprises, service sector businesses, or any businesses focusing on sustainability and energy efficiency. All these proposals will be processed internally without any references from a lender. 

1. Step 5: To bank (if applicable) 

Where the proposal does not fall into one of the categories described in step 4, SIDBI will refer the proposal to a public sector bank. SIDBI has formal agreements with some public sector banks to enable the bank to disburse loan commitments, while SIDBI continues to act as a support mechanism for the borrower through the loan process. 

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