Small Industries Development Bank of India (SIDBI) was established as wholly owned subsidiary of Industrial Development Bank of India (IDBI) under the small Industries Development of India Act 1989. It is the principal institution for promotion, financing and development of industries in the small-scale sector. It also coordinates the functions of institutions engaged in similar activities. For this purpose, SIDBI has taken over the responsibility of administrating Small Industries Development Fund and National Equity Fund from IDBI.

Capital. SIDBI started its operations from April 1990 with an initial authorised capital of Rs. 250 crore, which could be increased to Rs. 1000 crore. It also took over the outstanding portfolio of IDBI relating to small scale sector held under Small Industries Development Fund as on March 31,1990 worth over Rs. 4000 crore.

What are the objectives of SIDBI?

In the setting up of SIDBI, the main purpose of the government was to ensure larger flow of assistance to the small-scale units. To meet this objective, the immediate thrust of the SIDBI was on the following measures:

(i) initiating steps for technological upgradation and modernisation of existing units;


(ii) expanding the channels for marketing the products of the small scale sector; and

(iii) promotion of employment-oriented industries, especially in semi- urban areas to create more employ­ment opportunities and thereby checking migration of population to urban areas.

What are the functions of SIDBI?

SIDBI provides assistance to the small-scale industries sector in the country through the existing banking and other financial institutions, such as, State Financial Corporations, State Industrial Development Corporations, commercial banks, cooperative banks and RRBs. etc. The major functions of SIDBI are given below:

(i) It refinances loans and advances provided by the existing lending institutions to the small-scale units.


(ii) It discounts and rediscounts bills arising from sale of machinery to and manufactured by small-scale industrial units.

(iii) It extends seed capital/soft loan assistance under National Equity Fund, Mahila Udyam Nidhi and Mahila Vikas Nidhi and seed capital schemes.

(iv) It grants direct assistance and refinance loans extended by primary lending institutions for financing exports of products manufactured by small-scale units.

(v) It provides services like factoring, leasing, etc. to small units.


(vi) It extends financial support to State Small Industries Corporations for providing scarce raw materials to and marketing the products of the small-scale units.

(vii) It provides financial support to National Small Industries Corporation for providing; leasing, hire pur­chase and marketing help to the small-scale units.