Small Industries Development Bank of India (SIDBI) was established in October 1989 and commenced its operation from April 1990 with its Head Office at Lucknow as a development bank, exclusively for the small scale industries. It is a central government undertaking. The prime aim of SIDBI is to promote and develop small industries by providing them the valuable factor of production finance. Many institutions and commercial banks supply finance, both long-term and short-term, to small entrepreneurs. SIDBI coordinates the work of all of them.

Functions of Small Industries Development Bank of India (SIDBI):

Over the years, the scope of promotional and developmental activities of SIDBI has been enlarged to encompass several new activities. It performs a series of functions in collaboration with voluntary organisations, non-governmental organisations, consultancy firms and multinational agencies to enhance the overall performance of the small scale sector. The important functions of SIDBI are discussed as follows:

(i) Initiates steps for technology adoption, technology exchange, transfer and upgradation and modernisation of existing units.

(ii) SIDBI participates in the equity type of loans on soft terms, term loan, working capital both in rupee and foreign currencies, venture capital support, and different forms of resource support to banks and other institutions.


(iii) SIDBI facilitates timely flow of credit for both term loans and working capital to SSI in collaboration with commercial banks.

(iv) SIDBI enlarges marketing capabilities of the products of SSIs in both domestic and international markets.

(v) SIDB1 directly discounts and rediscounts bills with a view to encourage bills culture and helping the SSI units to realise their sale proceeds of capital goods / equipments and components etc.

(vi) SIDBI promotes employment oriented industries especially in semi-urban areas to create more employment opportunities so that rural-urban migration of people can be checked.

Financial Assistance Scheme of SIDBI

It is the general observation that the main obstacles and problems in the growth of industrial units are the paucity of primary infrastructure, unavailability of suitable market for selling the products, working capital requirement and difficulties arising out of the delays in receiving the bills. Looking to the above problems SIDBI has included many provisions into its various schemes.


1. Loan assistance to the institutions providing market or marketing avenues to the small entrepreneurs.

2. Loan to ancillary units and also for modernisation and upgrading technology.

3. Loan to institutions providing primary services and infrastructure and developing the growth centres.


4. Loan assistance to NSIC.

Apart from the above loan assistance, SIDBI also serves the following:

(a) Refinance to SSIDCs which supply raw material to small units and provide them market avenues.

(b) Bill discounting facility


(c) Refinance for loan given by state level institutions and banks under the single window system for fixed and working capital.

(d) Refinance of loan given to certified professionals and self-employed people for business like small clinics and hospitals, nursing homes, development of tourism etc.

5. Refinance for loan given by banks and concerned institutions for new projects, expansion and modernisation of existing units, quality improvement and rehabilitation of the units.

Similarly, SIDBI provides assistance to women entrepreneurs and ex-servicemen under its various schemes. So in the above way SIDBI makes a good platform for the budding entrepreneurs.