Mr. Mani Lal Chaudhary | sidbi schemes of financial assistance

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SIDBI Schemes of Financial AssistanceSIDBI Schemes of Financial Assistance

Mani Lal Chaudhary

Asst. Gen ManagerSIDBI, Ahmedabad

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SMEs – Classification as per MSMED ACT 2006

Manufacturing enterprises defined in terms of investment in Machinery and Equipment (excluding land and building) classified into

a.Micro enterprises - investment upto ` 25 lakhs,

b.Small enterprises - investment above ` 25 lakhs and upto ` 5 crore

c.Medium enterprises - Investment above ` 5 crores and upto ` 10 crores


MSMEs – Classification as per MSMED ACT 2006

Service enterprises defined in terms of their investment in equipment (excluding land and building) classified into

• Micro enterprises-investment upto ` 10 lakhs

• Small enterprises-investment above ` 10 lakhs and upto ` 2 crore

• Medium enterprises-investment above ` 2 crores and upto ` 5 crores


SIDBI - BackgroundEstablished in 1990 under an Act of Indian Parliament.

Objective: Promotion, Financing & Development of MSMEs and Co-ordinating Functions of institutions engaged in similar activities. Ownership : Public sector banks/FIs/Insurance Cos owned or controlled by the Government of India.

Structural Linkage: With Ministry of Finance and Ministry of SSI.

Nodal Agency : For SME Schemes of GoI.


SIDBI : Sphere of activities• Direct Finance Operations : MSMEs, Service sector,

Infrastructure, etc.

• Indirect Finance : Resource support to Banks, NBFCs, SFCs, other State & central financing/ development agencies.

• Micro Credit operations : Pioneers in micro credit movement in the country. Developed several leading MFIs.

• Associate Institutions : SIDBI Venture Capital Ltd, MSME Rating Agency, ISTSL & Credit Guarantee Fund.

• Nodal Agency : For several GoI schemes like TUFS, CLCSS and IDLSS, Food Processing and Devp. Of Integrated Infrastructure Development (IID) Projects.


SIDBI : Focus Segments

• ManufacturingMicro : Invst. in plant & machinery upto ` 25 lacs.

Small : Gross Machinery Investment upto ` 5 crore.Medium : Gross Machinery Invst. <= ` 10 crore

• Service sector

Healthcare, Hospitality, leisure, entertainment, IT/IT enabled businesses, etc. (Project cost limit upto ` 250 crore)

• Infrastructure sectorPower, Roads, Ports, Telecom, MSME infrastructure, etc.


SIDBI : Direct Schemes for MSME segment A.Term Loans for MSME units and Service sector entities

Eligible projects : • New projects; expansion / modernisation / diversification projects,

marketing requirements, working capital margin, etc. of well run MSME units.

• land acquisition and construction of factory building with or without additional plant and machinery, for units relocating to industrial areas.

Assistance : Need based Interest : Competitive (PLR -1 to + 2.5) – depending on the rating

of the customer – Current PLR – 12.75% Security : Flexible, including collateral free lending for loans upto

` 100 lakh under CGTMSE. Other Benefits : Dovetailing with GoI sponsored schemes such as

CLCSS, TUFS, IDLSS and Food Processing subsidy based on eligibility.


SIDBI : Direct Schemes for MSME segment B. Receivable finance scheme (RFS):

Discounting of bills arising out of sale of components/intermediates manufactured by MSME to large / medium scale units. Eligibility - (i) Purchasers wise limit : The purchaser should – have been in commercial production for five years. – be a corporate entity with good track record & no statutory

arrears / defaults. (ii) Sellers wise limit / Invoice discounting facility also available

Clean Limit to Large Corporations with good track record and sound financial position can be considered.

C. Invoice Discounting Scheme : Market friendly receivable management scheme (without bills

of exchange) for SME sellers / service providers to established Corporates

D. Assistance against future lease rentals of movable assets


SIDBI : Direct Schemes for MSME segment

E. Working Capital : Under MoU with IDBI Bank Objective : Meeting working capital requirements of SMEs and

service sector unitsEligibility - All new or existing SME and service sector units and Government recognised Export / Trading HousesEligibility Paramters – Eligible SME or service sector units TOL / TNW not to exceed 4 : 1Current Ratio – 1.33 : 1Minimum Interest Coverage of 1.5 timesMargin on stock / WIP / Finished Goods / Receivables, etc. : 30%Rate of Interest : as per Credit Rating; Floating Rate linked to PLRProcessing Fee : 0.50% of the limit sanctioned

0.25% of the limit at the time of each renewal


SIDBI : Direct Schemes for MSME segmentF. Fee based services Guarantee Scheme:

Both Financial and Performance Guarantee and Deferred Payment GuaranteeEligibility - (i) Existing customers of SIDBI in MSE sector and eligible service sector units with track record (ii) New customers in need of both fund based and non fund based limits(iii) Stand alone facility (i.e. without debt) not to be consideredMedium Scale Units as of now are not eligible.

Letter of credit

SIDBI opens letter of credit for import of capital equipment units as well as for import of raw material for its customers under MSE sector


SIDBI : Direct Schemes for MSME segmentG. Equity Assistance Scheme: • Objective : To provide equity support to well run

MSMEs to enable them to scale up their operations• Eligibility –

(i) Company eligible under SIDBI schemes having good potential for scale up of operations and following / Willing to adopt corporate structure

(ii) Existing customers of SIDBI or willing to avail debt from SIDBI

• Sectoral Coverage – Focus on Auto components, engineering, pharma, textiles, software, IT / IT enabled services, EoUs Deal Size – Generally upto ` 5-10 crore


SIDBI : Direct Schemes for MSME segment

G. Equity Assistance Scheme (contd):

Purpose – Expansion, modernisation and diversificationNew Businesses, preferably in the same lineMarketing, R&D, Product Development ExpensesWorking Capital Requirement Acquisitions in India and abroadAny other expenditure required for growth of the companyInstruments Equity capital or Equity linked Instruments – Conv Pref Shares or Conv Debt.Investment Tenure : Horizon of about 5 yearsExit : Trade sale or listing / Buyback


Government Subsidy schemes

Technology and Quality Upgradation Support to MSME- Under National Manufacturing Competitiveness Programme (NMCP) of Ministry of MSME, GoI.-25% of the P&M cost for implementation of Energy Efficient Technologies (EET) or Rs.10 lakh, whichever is lower.

Credit Linked Capital Subsidy Scheme (CLCSS): Capital subsidy of 15% of cost of plant & machinery or Rs.15 lakh, whichever is lower for adoption of proven technologies for approved products / sub-sectors.


Government Subsidy schemes

Technology Upgradation Fund Scheme (TUFS) for Textile & Jute Industries: Interest subsidy of 5% plus additional capital subsidy of 10% or capital subsidy of 15% under CLCS - TUFS.

Integrated Development of Leather Sector Scheme : Scheme for existing units in leather and leather products. GoI provides grant upto 30% of cost of plant and machinery for SSIs and 20% for non SSIs subject to a ceiling of ` 50 lakh.

Technology Upgradation / Setting up / Modernisation / Expansion of Food Processing Industries25% of the cost of eligible P&M and technical civil works subject to a maximum of ` 50 lakh in general areas and 33.33% up to ` 75 lakh in Difficult areas.


An overview of India’s Enery Scenario vis a vis MSMEs

India is the fourth-largest energy consumer in the world, India is the fourth-largest energy consumer in the world, after the United States, China, and Russia. after the United States, China, and Russia.

MSME sector consumes almost half of the total energy MSME sector consumes almost half of the total energy consumption by industrial sector.consumption by industrial sector.

Many MSMEs are highly energy inefficient. Energy cost, Many MSMEs are highly energy inefficient. Energy cost, as also profits constitute 5% of total sales. as also profits constitute 5% of total sales.

Scope to reduce energy uses almost 25%Scope to reduce energy uses almost 25%

Thus, EE can increase profit by 25%.Thus, EE can increase profit by 25%.

ENERGY MISUSED CAN NOT BE EXCUSED


Issues and Constraints

High energy consumption due to obsolete technology / High energy consumption due to obsolete technology / processesprocesses

Lack of awareness / information on Energy Efficiency (EE) / Lack of awareness / information on Energy Efficiency (EE) / EE best practices / EE technologiesEE best practices / EE technologies

Inadequate focus on EE / clean tech / renewable energy Inadequate focus on EE / clean tech / renewable energy financing by the banks financing by the banks

Lack of sufficient expertise in banks to assess EE loansLack of sufficient expertise in banks to assess EE loans

• Eg. ESCOs not taking off in India, but most successful in Eg. ESCOs not taking off in India, but most successful in

EuropeEurope

CONSERVE TO PRESERVE


EE Investment Potential

CONSERVATION - DOES NOT COST IT SAVES

Aggregate investment potential in EE sector in India amounts to USD 9.8 Billion (Rs. 58,800 crore approx.)

Industrial sector, largest energy consuming (Approx. 46%) and available potential energy saving opportunities is around 6.99%

EE Investment potential in Industrial sector including MSME sector is USD 3.0 Billion (Rs. 18,000 crore approx.) with energy saving opportunity of 49 Billion kWh of energy per annum.

Recognizing the need for promoting EE / CP and sustainable development in the MSME sector for their survival and growth in long run, SIDBI has taken initiatives to promote Energy Efficiency & Cleaner Production in the MSME sector through loan products and promotional activities.


SIDBI’s Sustainable Financial Support Financing Energy Efficiency investments,

equipments, green building, cooling equipments etc.

Financing Cleaner Production

Financial assistance to NBFCs, PLIs, ESCOs – Energy Service Companies etc.

Financing on Renewable Energy –solar, hydro, bio mass, wind power etc.

LOVE YOUR MOTHER EARTH


Scheme for Financing Energy Efficiency projects in MSME Sector

Parameter Norms

Purpose Investment in energy saving capital equipments / production processes improvements/technologies.

Minimum Assistance Generally not less than ` 10 lakh

Overall DER 2 : 1

Interest Rate As per Credit Rating and 0.75% below the Normal Lending Rate.

Asset coverage Minimum 1.3 for manufacturing units / 1.75 for service sector units.

Repayment period Need based. Normally, should not exceed 7 years.

Eligibility Criteria 1. New / Existing MSME unit

2. Have a satisfactory track record of past performance and sound financial position; and

3. Score above the minimum investment grade raring as per SIDBI’s Extant Loan Policy

Any other incentive TEQUP/CLCSS/TUFS or any other Government Scheme benefit shall be available, if eligible.


Scheme for Financing Cleaner Production projects in MSME Sector

Parameter Norms

Purpose To support investment in Emission Reduction measures, waste management and waste recycling and CETP facilities.

Minimum Assistance Generally not less than ` 10 lakh

Overall DER 2 : 1

Interest Rate As per Credit Rating and 0.75% below the Normal Lending Rate.

Asset coverage Minimum 1.3 for manufacturing units / 1.75 for service sector units.

Repayment period Need based. Normally, should not exceed 7 years.

Eligibility Criteria 1. New / Existing MSME unit

2. Have a satisfactory track record of past performance and sound financial position; and

3. Score above the minimum investment grade raring as per SIDBI’s Extant Loan Policy

Any other incentive TEQUP/CLCSS/TUFS or any other Government Scheme benefit shall be available, if eligible.


Some Special Cases

CNG Taxi Financing, Mumbai – Collateral free loans provided to 838 taxi drivers in Mumbai to phase out their old taxis under a structured arrangement with Taxi drivers Association and Maruti Suzuki.

Chandigarh Auto Loan Financing- SIDBI has financed number of auto for substituting petrol with LPG based system.

Solar Lanterns in Manipur – Micro loans to the ultimate beneficiaries in Manipur for purchasing 50,000 solar lamps.

Channel Financing - Partnered with NBFCs, to provide loans to MSMEs to acquire energy efficient equipments/CNG&LPG vehicles under a simplified credit delivery mechanism without any collateral security.

Structured Arrangement- Tied with up Chanderpur Works Ltd. for installing husk based gasifiers for boilers in industries.

ESCO based financing for installing variable frequency drives in various industries for energy efficiency has been provided with a revolving limit.

Green buildings with ECBC, LEED or Griha rating are financed at Faridabad, Indore, Mumbai, New Delhi, etc.

THING THAT BURNS NEVER RETURNS


SIDBI : USP for MSME segment

• Competitive rate of Interest : Market maker for MSME segment.

• Flexible approach for key aspects like security, financial parameters, based on unit standing.

• Simple Business processes : Credit Appraisal & Rating Tool (CART). SIDBI appraisal techniques recognised across the banking sector. Loans up to Rs 2 crore to be appraised on this tool.

• Fast Track Schemes for existing regular accounts – Privileged Customer Scheme, Top up assistance.

• Quick Decision making : Effective integration of technology.

• Qualified & professional manpower


SMERA • India’s first dedicated rating agency for SME segment.

• Joint initiative of SIDBI, Dun & Bradstreet and CIBIL along with leading PSU, Private and foreign Banks.

• Rating cost substantially reduced in case of coverage of eligible SSI units under NSIC Subsidy Scheme

• Already done > than 8350 ratings.

• Incentives for SMERA Rating for SIDBI’s Customers– Nominal Rating fees. – Reduction in rate of interest by 0.50% p.a. on existing loans if the

customer is rated in the first three grades– Would facilitate approval of applications for fresh loans in future

www.smera.in


Credit Guarantee Scheme of CGTMSE – Main Features

• Facilitates availment of credit by MSE and units in IT based activities from banking channel.

• Maximum loan guaranteed is ` 100 lakh per unit.

• Guarantee cover upto 75% of loan amount, i.e. ` 37.50 lakh per borrower (80% for loans upto ` 5 lakhs advanced to micro enterprises/women entrepreneurs and units in North East). For loans upto ` 5 lakh and , fee and annual service fee reduced to 1% and 0.5% respectively.

• Swift and simple settlement process fully backed by IT.

• Guarantee issued – > 242000 Amount guaranteed – ` 7820 crore

www.cgtsi.org.in


Thank You

Please Visit:www.sidbi.in

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Mr. Mani Lal Chaudhary | sidbi schemes of financial assistance

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