Sidbi's loan schemes fail to attract entrepreneurs in state

Though the Small Industries Development Bank of India (Sidbi) has sanctioned loans of Rs 10,900 crore and disbursed more than Rs 6,700 crore throughout the country in the last financial year, the bank's schemes have not found much favour with the entrepreneurs in Gujarat.

Industrialists in this sector feel that Sidbi's schemes have not reached to the entrepreneurs because of the bank's small network.

"Sidbi has only a few number of branches in the state. The minimum loan amount offered is Rs 25 lakh and the margin money the entrepreneur is required to pay is 33 per cent, which is very high," said Magan H Patel, president, Gujarat State Small Industries Federation (GSSIF).

The federation, in association with Sidbi, is planning to hold various awareness programmes to attract the entrepreneurs in the state to the financing schemes of the bank, Patel said.

Sidbi was set up in 1990 under an Act of the Indian parliament as a wholly owned subsidiary of the Industrial Development Bank of India (IDBI) with a view to developing the small scale industries in the country.

Sidbi gives out loans starting from Rs 25 lakh depending upon the size of the project to the small scale industrial unit, where as an SSI unit is defined on the parameters of its investment in plant and machinery, which can not exceed Rs one crore.

By the Sidbi Act, 1989, Sidbi has been delinked from IDBI with effect from March 27, 2000.

The amended Act has changed the provisions relating to the capital structure, share holding, management, business and borrowings.

As per the amended Act, 51 per cent stake of Sidbi would be held by IDBI, LIC, GIC, public sector banks and other institutions owned or controlled by the government and the rest by the public.

At present, Sidbi serves as the principal institution for promotion, financing, development of the industry in the small scale sector and co-ordinate the functions of other institutions engaged in similar activities.

Sidbi is currently among the top 50 development banks of the world, as per the latest ranking of the Banker, London, sources said.

"Sidbi offers direct credit scheme for SSI and the service sector. The unit should generally be a private limited firm. However partnership firms, sole proprietorship concerns, societies and trusts are also considered on a case-to-case basis. Sidbi generally offers term loans, while other forms of assistance including working capital is also given," said a Sidbi source.

Loans from the bank are given for setting up a new SSI unit or service sector unit, expansion, diversification, modernisation, , technical upgradation and quality certification, undertaking various marketing-related activities, acquisition of additional machinery and equipment.

The norms also stipulate that The debt equity ratio should not exceed 2:1 for the company as a whole, while the minimum promoter's contribution should be at least 33 per cent.

The loan can be availed for a minimum tenure of six months to a maximum of 10 years for a term loan, including moratorium of not exceeding 18 months.