Chairman Speech
CHAIRMAN AND MANAGING DIRECTOR
AND MANAGING DIRECTOR'S STATEMENT
Small Industries Development Bank of India (SIDBI) has been consistently involved with
promotion, financing and development of the MSME sector since its inception in 1990. Apart
from acting as a Refinancing Institution, the Bank has also been providing direct finance
through its 103 branches to bridge the gaps in financing through niche, innovative
financial products.
Some such innovative products of SIDBI are special financing scheme for energy
efficiency / environment protection, providing equity / risk capital to start-ups and high
growth MSMEs, receivable finance to improve the working capital cycle of MSMEs, 'Missing
Middle' (from Rs. 50,000 to Rs. 10 lakh loan size) through 'Upscaling' and 'Downscaling'
techniques, etc.
Further, SIDBI as the Principal Financial Institution for the MSME sector, has
developed the Micro Finance Institutions (MFIs) sector with a view to target
bottom-of-the-pyramid segment while promoting responsible financing. It has created a
Lenders' Forum to promote cooperation among MFI lenders to promote transparency and
reasonable interest rates, developed Code of Conduct assessment tools, etc.
Going beyond finance, SIDBI has adopted a 'Credit Plus' approach for promotion and
capacity building of the MSME sector. Its flagship programme 'Rural Industries
Development' in 120 districts have resulted in setting up of 37,000 micro enterprises in
rural areas, thereby providing employment to more than 1 lakh persons. SIDBI also supports
various entrepreneurship development and skill development programmes.
Cluster Development is another thrust area of the Bank. So far, the Bank has supported
more than 100 Cluster Development Programmes (CDPs) in the areas of marketing support, IT
training, skill development, regulatory compliance, awareness programmes, testing
facilities, business information and Counselling Centres for micro enterprises, promotion
of energy efficiency measures, etc. For the first time in India, on a larger scale,
SIDBI's cluster development is delivered through private business development services
(BDS) providers with the over-arching philosophy of 'Making the Market Work', rather than
subsidy based approach hitherto been followed. SIDBI also developed an on-line portal
called www.msmementor.in to match-make the demand for and supply of expert services to the
MSME sector.
SIDBI's endeavour towards holistic development of the MSME sector is greatly supported
by Government of India for providing special refinance support of Rs. 4,000 crore in FY
2011. With the support of Government of India, Reserve Bank of India, foreign partners and
more importantly, the dedicated staff, SIDBI could achieve 21% growth in its credit
outstanding to MSME sector. With a cumulative credit disbursement of Rs. 2,03,126 crore,
SIDBI has benefited more than 320 lakh persons in the MSME sector. The dedicated services
of SIDBI towards the Nation at large and the MSME sector in particular was also
facilitated by its subsidiaries and associates.
Venture Capital
SIDBI Venture Capital Ltd.
(SVCL), a wholly owned subsidiary of SIDBI set up in
July 1999, is providing venture capital to emerging sectors, such as, life sciences,
biotechnology, pharmaceuticals, engineering, information technology, etc. At present, it
manages two SEBI registered venture capital funds, viz. the National Venture Fund for
Software and Information Technology Industry (NFSIT) with a corpus of Rs. 100 crore and
the SME Growth Fund (SGF) with a corpus of Rs. 500 crore. As on March 31, 2011, SVCL has
committed Rs. 542 crore to innovative enterprises. SVCL has made partial/full exit in 33
companies and distributed aggregate amount of Rs. 263.8 crore to its contributors.
Credit Guarantee
Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) was set up in July
2000 by Government of India and SIDBI, to provide credit guarantee support to enable
collateral free / third-party guarantee free loans upto Rs. 100 lakh being extended by
banks and FIs for micro and small enterprises (MSEs). CGTMSE achieved 2.54 lakh guarantee
approvals amounting to Rs. 12,589 crore during FY 2010-11, registering a growth of 68% in
terms of number of accounts covered and 83% in terms of amount guaranteed over the
previous financial year. Cumulatively, as on March 31, 2011, guarantee approvals were
extended by CGTMSE to 5.52 lakh proposals covering credit assistance of around Rs. 23,846
crore.
Transfer of Technology
India SME Technology Services Limited (ISTSL) provides a platform for MSMEs for
technology matchmaking, technology transfer, carbon credit, etc. in the MSME sector.
During the year ended March 31, 2011, ISTSL conducted Peer review of Detailed Project
Reports (DPRs) on behalf of Bureau of Energy Efficiency on identified energy efficient
measures in 25 selected MSME clusters. The company is also engaged in a CDM project in
Jodhpur foundry cluster.
Credit Rating
SME Rating Agency of India Ltd. (SMERA) was set up in September 2005 by SIDBI, some
public, private and foreign banks and Dun & Bradstreet Information Services India
Private Limited (D&B) as an MSME dedicated third-party rating agency to provide
comprehensive, transparent and reliable ratings and risk profiling. SMERA has achieved
considerable success in rating about 11,000 MSMEs, of which Micro and Small Enterprises
constitute more than 97%, as on March 31, 2011.
Asset Reconstruction
India SME Asset Reconstruction Company Ltd. (ISARC), another associate of SIDBI, is the
country's first MSME focused Asset Reconstruction Company striving for speedier resolution
of non-performing assets (NPA) by unlocking the idle NPAs for productive purposes which
would facilitate greater and easier flow of credit from the banking sector to the MSMEs.
During FY 2011, ISARC has acquired 70 NPAs from 9 banks for an aggregate principal
outstanding of Rs. 96.56 crore, through both portfolio sale processes as well as bilateral
sale by banks.
Future Strategy
SIDBI will continue to fill in the existing gaps in credit delivery to the MSME sector.
Provision of higher venture capital / risk capital to enhance the leveraging capacity of
MSMEs will be a thrust area of the Bank. In this direction, SIDBI and SVCL will partner
with various Ministries of Government of India and launch 'India Opportunity Fund' during
the FY 2012. The Bank, along with NSE, would launch an SME Exchange and take steps towards
market making for the exchange listings.
Further, in order to synergize various MSME dedicated schemes of different ministries
to achieve optimal results, the Bank would proactively take the initiative to operate
these MSME dedicated schemes.
In order to augment credit flow to the MSME sector, SIDBI would fully utilize Rs. 5,000
crore refinance support announced by the Government of India for the MSE sector and start
channelising Rs. 100 crore 'India Micro Finance Equity Fund' to provide equity support to
smaller MFIs.
SIDBI also proposes to launch a knowledge-based e-platform to provide information to
potential entrepreneurs on how to set up new units and also improve the operational
efficiency of existing MSMEs.
Going forward, SIDBI proposes to continue identifying gaps in MSME financing ecosystem
and coordinate governmental efforts to address the same. It will empower the MSME sector
to take on the world.
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Directors Reports
DIRECTORS
FY 2013-14
The Board of Directors of the Bank takes pleasure in presenting its Report on the
business and operations of your Bank for the financial year ended March 31, 2014.
Your Bank was set up in 1990 under an Act of the Parliament as the principal financial
institution for the promotion, financing and development of the MSME sector in India. This
sector, which has been growing strongly in the recent years, contributes immensely to the
economic growth, entrepreneurship development, regional dispersions, financial inclusion
and employment creation in the country. Nevertheless, the sector is beset with a number of
challenges like lack of availability of adequate and timely credit, high cost of credit,
limited access to equity capital, delayed payments of receivables, procurement of raw
materials at a competitive cost, lack of access to global markets, inadequate
infrastructure facilities, low level of technology modernization, lack of skilled
manpower, etc.
SIDBI’s business strategy is oriented towards filling up the financial and
non-financial gaps in the MSME eco-system. Some of the niche financial gaps being
addressed by your Bank are risk capital / equity assistance, sustainable finance, i.e.,
promoting energy efficiency and clean production technologies, reverse factoring, services
sector financing, etc. The direct finance to these niche areas by SIDBI is supplementing
and complementing the efforts of the banks to meet the varied credit needs of the MSMEs.
Besides, SIDBI channelises indirect finance to the MSME sector through commercial banks,
SFCs, NBFCs, MFIs and other sustainable intermediaries.
Business Performance
Your Bank’s total disbursement increased from Rs.40,520 crore in FY 2012-13 to
Rs.52,191 crore in FY 2013- 14; recording a growth of 29%. Outstanding portfolio of the
Bank increased by 9.3% to Rs.61,271 crore as on March 31, 2014 from Rs.56,060 crore during
the same period. The cumulative disbursements as on March 31, 2014 stood at Rs.3.37 lakh
crore, benefiting more than 340 lakh units/persons.
The total income of the Bank during the year was higher at Rs.5,808 crore as compared
to Rs.5,401 crore during the previous year, due to growth in the overall portfolio. The
total expenditure during the corresponding period was higher at Rs.3,646 crore as compared
to Rs.3,361 crore during the previous year. The Profit before Tax for the year was
Rs.1,539 crore, compared to Rs.1,196 crore in the previous year. The net profit after tax
and Deferred Tax Adjustment for the year was Rs.1,118 crore as against Rs.837 crore in the
previous year. Your Bank has declared a dividend of 25% for the year and continues its
uninterrupted dividend payment record since inception.
Business Initiatives
Some of the niche financial gaps being addressed by your Bank are risk capital / equity
assistance, sustainable finance, receivable finance, services sector financing, etc. These
are the requirements of MSMEs which are not generally catered to by the banking system.
Simultaneously, your Bank acts as a nursery for new financial products, which can
eventually get mainstreamed in the banking industry.
Risk Capital: In order to address the gap in equity funding, SIDBI started
providing risk capital / quasi equity to MSMEs through a specialized product called Growth
Capital & Equity Assistance Scheme for MSMEs (GEMS). Under this scheme, SIDBI provides
risk capital assistance to MSMEs by way of equity, preference capital, subordinated debt,
optionally convertible debentures, optionally convertible debt, etc.
A "National Innovation Finance Programme" has been initiated by the Bank to
meet the financing and other needs of the early stage and start-up enterprises. It will be
a unique national collaborative programme for creating an enabling environment for
innovation financing in the country.
Sustainable Finance: Recognizing the need for promoting Energy Efficiency (EE) and
sustainable development in the MSME sector for their sustained growth in the long run,
SIDBI has taken a number of initiatives to promote Energy Efficiency / Cleaner Production
in the MSME sector through specialized loan products and promotional activities.
SIDBI has been operating focused concessional lending schemes for EE out of Lines of
Credit (LoC) from various multi-lateral agencies, viz. Japan International Cooperation
Agency (JICA), Agence Francaise de Developpement (AFD) and Kreditanstalt fur Wiederaufbau
(KfW). The main objective of these schemes is to enhance energy efficiency and reduce CO2
emissions by the Indian MSMEs. SIDBI has contracted LoCs aggregating to an amount of EUR
53.74 million from KfW for promoting investment in cleaner production options in the MSME
sector.
Receivable Finance : Delayed payments is another concern of the MSME sector. In
order to help the MSMEs in quicker realization of their receivables, your Bank has
designed a scheme called Receivable Finance Scheme (RFS) under which, exposure limits are
approved for well-performing purchaser companies and MSME bills are discounted.
During the FY 2013-14, a new refinance facility of Rs.5,000 crore was extended by the
Reserve Bank of India effective from November 14, 2013 for a period of one year. The
facility aimed at providing liquidity support against the receivables of MSMEs directly
and through select intermediaries like Banks, Non Banking Finance Companies (NBFCs) and
State Financial Corporations (SFCs), was implemented with effect from December 2013. In a
short span from the implementation, the Bank fully utilized and drew the facility amount
of Rs.5,000 crore from the RBI. A cumulative number of 9,718 MSMEs had been covered upto
March 31, 2014 under the facility and out of the total assistance, 89% share had been
deployed in micro and small enterprises.
Services Sector Financing : The services sector occupies a dominant position in
India’s national economy by accounting for more than 60% of GDP. The sector was also
the fastest growing segment of the economy during the last decade. In view of the growing
share and importance of services sector in the national income and its limited access to
finance, SIDBI has increasingly focused on this sector in its business. In FY 2013-14, the
existing products were modified and certain tailor-made new products introduced for the
sector. A Scheme was also devised, aimed at timely payment to MSME suppliers in
construction sector.
Micro Finance : Micro finance, which promotes inclusive growth, has been a thrust
area of your Bank. The cumulative assistance including loans, equity and quasi-equity,
sanctioned under SIDBI’s micro finance initiatives upto March 31, 2014 aggregated
Rs.9,308.01 crore, while cumulative disbursements aggregated Rs.8,121.57 crore. The
outstanding micro credit portfolio of the Bank stood at Rs.1,170 crore as on March 31,
2014. The assistance through SIDBI has cumulatively benefited around 326 lakh
disadvantaged persons, most of them being women.
Addressing Non-financial Gaps
Your Bank has also taken strategic initiatives for addressing various non-financial
gaps for capacity building of the MSME sector, as well as for bankers.
Information Dissemination : With a view to address the information gap by ensuring
availability of relevant information to MSMEs,your Bank set up a website www.smallB.in to
handhold and guide new entrepreneurs on how to set up a business, access to finance, avail
benefits under government schemes, etc.
Credit Advisory Centres : With a view to mitigate the various challenges faced by
MSMEs in Obtaining credit, SIDBI has set up Credit Advisory Centres (CACs) guiding new /
existing entrepreneurs regarding availability of schemes of commercial banks, government
subsidies / benefits, provide borrowers with debt counselling, answering queries raised by
banks etc. The CACs have been servicing 306 clusters across the country in partnership
with Industry Associations. The number of clusters covered would be increased over a
period. For manning the CACs, SIDBI has appointed Knowledge Partners (KPs) who are retired
Bank officials, suitably trained for the purpose. So far more than 8200 MSMEs have
benefited through CACs.
Loan Syndication Services : SIDBI has launched the Loan Syndication Services (LSS)
with the objective of setting up an ecosystem in partnership with Banks, Rating Agencies
and Accredited Consultants to ensure timely and adequate credit flow to the MSMEs by
generating complete, rated and validated proposals to be offered to banks / FIs for
consideration of assistance. The LSS has referred over 160 proposals to SIDBI and MoU
Banks during the FY 2014.
Poorest State Inclusive Growth (PSIG): The PSIG programme, being implemented by
SIDBI with financial support from DFID, UK, is a seven year programme which aims to
enhance the income and employment opportunities of poor women and men in the 4 low income
states (Bihar, Odisha, Madhya Pradesh and Uttar Pradesh) by enabling them to participate
and benefit from wider economic growth.
Entrepreneurship Development : In its endeavour towards promotion and development
of the MSME sector, SIDBI adopts a twin approach of creation of enterprises and
strengthening of existing enterprises. The Bank has also reoriented its promotional
activities towards entrepreneurship development, rural industrialisation, skill
upgradation, cluster development, which have benefitted the MSME sector by way of setting
up of new enterprises, generation of employment and income in rural areas for lower strata
of the society.
Resources Management
Your Bank raised resources aggregating Rs.32,281 crore (Rs. 31,156 crore domestic and
Rs. 1,125 crore foreign) during FY 2014.
During FY 2014, Credit Analysis and Research Ltd. (CARE) retained ‘CARE AAA’
(Triple A) rating in respect of outstanding debt issues of your Bank , the Fixed Deposit
Programme of Rs.3,000 crore and ‘CARE A1+’ (A One Plus) rating for the CP / CD
Programme of Rs.6,000 crore . Similarly, CRISIL also retained ‘CRISIL
AAA/Stable’ rating in respect of outstanding bonds and ‘FAAA/stable’ rating
for the Fixed Deposit Programme. During the year, your Bank had raised Rs.2,530 crore by
way of bonds using the above ratings assigned by CRISIL/ CARE. Instruments carrying the
above ratings are considered to be of the best quality and carrying negligible investment
risk.
Human Resources
As on March 31, 2014, Your Bank had on its rolls 1043 active full time staff comprising
880 officers, 99 Class III staff and 64 Subordinate staff. The strength of women employees
is 224. Training of employees has always been pivotal for upgrading the quality of
manpower and to cope with the changing business environment. During the year under review,
your Bank made 1,578 nominations for various inland, in-house and international training
programmes, organized in-house or by renowned training / academic institutions.
Associates and Subsidiaries
Your Bank has been constantly working on building various institutional mechanisms to
cater to the emerging needs of the MSME sector and has set up various subsidiaries /
associates. The operations of the your Bank’s subsidiaries and associates have been
satisfactory during the year under review.
Venture Capital Support: SIDBI Venture Capital Limited (SVCL) is an asset
management company. It was established in 1999 with the Rs.100 crore National Venture Fund
for Software and IT Industry (NFSIT). In 2004, the Rs.500 crore SME Growth Fund was set-up
and the Rs.671 crore India Opportunities Fund was set-up in the year 2012. During the
year, Samridhi Fund with a focus on fostering inclusive growth in the 8 poorer states of
India viz. Bihar, Madhya Pradesh, Odisha, Uttar Pradesh, Rajasthan, Jharkhand,
Chhattisgarh and West Bengal commenced operations.
Credit Guarantee : SIDBI, along with Govt. of India, set up Credit Guarantee Fund
Trust for Micro and Small Enterprises in year 2000 to provide credit guarantee coverage to
collateral free / third-party guarantee free loans up to Rs.100 lakh extended by banks /
FIs to micro and small enterprises. Under Credit Gurantee Scheme (CGS), cumulatively, as
on March 31, 2014, 14.20 lakh guarantees (69% for loans below Rs.25 lakh) for an amount of
Rs.70,026 crore have been approved.
SME Ratings : SIDBI, along with few public sector banks and Dun & Bradstreet
(D&B), set up SMERA Rating Limited in September 2005 a MSME dedicated third-party
rating agency to provide comprehensive, transparent and reliable ratings and risk
profiling. Cumulatively as on March 31, 2014, SMERA has assigned ratings to more than
27,000 MSME units, out of which MSEs constituted 98%.
Asset Reconstruction : SIDBI has also set up, India SME Asset Reconstruction
Company Ltd. (ISARC), country’s first MSME focused ARC striving for speedier
resolution of non-performing assets (NPA) by unlocking the idle NPAs for productive
purposes which would facilitate greater and easier flow of credit from the banking sector
to the MSMEs. It started operations in April 2009. As on March 31, 2014, ISARC has assets
under management of around Rs.385 crore.
Awards
During the year 2013-14, the Bank received the "Vigilance Excellence Award"
in the Banking Sector category instituted by Institute of Public Enterprises, Hyderabad.
The award came as a recognition of the good work done by SIDBI in the field of Vigilance
Administration. Your Bank also bagged a consolation prize from the Reserve Bank of India
for excellence in the field of Official Language implementation in the region
‘C’ classification for the purpose.
Acknowledgements
The Board of Directors of your Bank acknowledges the valuable support received from the
Government of India and the Reserve Bank of India. The Board is also thankful to the World
Bank Group; Japan International Co-operation Agency (JICA), Japan; Department for
International Development (DfID), U.K.; Kreditanstalt fur Wiederaufbau (KfW), Germany; The
Deutsche Gesellschaft fur Internationale Zusammenarbeit (GIZ) Germany; International Fund
for Agricultural Development (IFAD), Rome; Agence Franaise de Dveloppement (AFD),
France and Asian Development Bank for their continued resource support and technical
co-operation. The Board places on record its appreciation for the co-operation extended to
SIDBI by banks, state level institutions, industry associations and other stakeholders
engaged in the promotion and development of the MSME sector.
The Bank also thanks all its clients and investors for their co-operation and looks
forward to their continued support in the years to come. The Board places on record its
appreciation for the services of SIDBI staff, at all levels, who showed strong commitment,
integrity and dedication to take the Bank on to a higher growth path.
(N. K. Maini)
Deputy Managing Director
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