The Role of SIDBI in developing the MSMEs in India


The growth of Indian Economy came into place with the significant role of Micro, Small and Medium Enterprises or MSMEs. Moreover, MSMEs have been playing a crucial part in the upliftment of the country’s socioeconomic arena. Their chief goals have been low investment, mass employment generation, and capacity to develop indigenous technology, labor intensive mode of production, import substitution and export earnings. This sector is highly discrete, diverse and mostly unorganized.

According to Quick Results of 4th, All India Census held between 2006 and 2007, the active count of MSMEs in the country, in the registered and unregistered categories, is 1.55 million and 24.55 million respectively. Holding the hand of Micro, Small and Medium Enterprises Development or MSMED Act, 2006, entrepreneurs have found the choice that the filing of Memorandum to establish an MSME is optional and not obligatory. This article is an attempt to elucidate The Role of SIDBI in developing the MSMEs in India and its recent trends. It will also incorporate an outline of few latest SIDBI schemes.

Brief idea on SIDBI

Under a SIDBI Act, 1989 passed in Parliament, the Small Industries Development Bank of India was established on 2nd April 1990. The charter setting up SIDBI, foresee SIDBI to be the major financial body for the marketing, financing, and development of micro, small and medium-scale enterprises or MSMEs in India. Besides playing a developmental role to micro finance bodies, it has also floated with numerous other units like SIDBI Venture Capital Ltd, Credit Guarantee Fund Trust for Micro and Small Enterprises and more.

The field of actions of SIDBI

On behalf of the orderly growth of the small scale industries, SIDBI follows four basic objectives. Those are promotion, financing, development, and coordination. The field of actions of SIDBI includes:

  • Besides Infrastructures, direct finance processes to SSI, MSMEs and Service Sectors.
  • Indirect finance via resource holds for the banks, NBFCs, SFCs and other central financing institutions.
  • Endorsement of other associated institutions like Asset Reconstruction Company, Rating Agency, Venture Capital, Credit Guarantee Fund and more.
  • Nodal Agency for Indian Government MSME schemes like Credit Linked Capital Subsidy Scheme or CLCSS, Technology Up gradation Fund Scheme or TUFS and others.

Position of SIDBI & Importance of MSMEs

In the latest ranking of the bankers, London, Small Industries Development Bank of India maintained its position in the top 30 development banks of the world. RBI has allowed the bank to raise its finances up to Rs. 2730 Cr. MSMEs, part of the business domain of SIDBI, contribute extensively to the national economy in terms of employment, production, and exports. Creating employment of about 7 Cr. MSME sector has been turned to be an important pillar of Indian economy. This sector has even assisted in developing over 6000 products, contributing about 45% of exports and about 49% of gross value output.

In many cases, the MSMEs find significant issues that lead to hindrance in their growth and development. Lack of technology, deferred payments, lack of suitable infrastructure and lack of marketing system are the chief reasons behind this. But, for its long term profitable growth, these enterprises need to be nurtured and provided strong support services. The sector is still abandoned by the banks and financial entities in the private segment. SIDBI is trying to create equilibrium between financing and providing the hold on services for the enlargement and progress of MSMEs. SIDBI focuses on the gaps through innovative solutions that include sustaining skill development institutes, loan syndication, consultative services and more. These developmental schemes would not only direct the rising needs of the sector, but also will generate employment openings in this dynamic sector of the economy.

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