CA WORKSHOP/MEET- ICAI Agra Branch Presentation on Special Schemes of SIDBI including SMILE INDIAN MSME SECTOR
Established on April 2, 1990 Principal Development Financial Institution for : Promotion Financing & Development of MSME sector Co-ordination of Institutions involved in similar activities
Business Domain of SIDBI The business domain of SIDBI consists of Micro, Small and Medium Enterprises (MSMEs), which contribute significantly to the national economy in terms of production, employment and exports. MSME sector is an important pillar of Indian economy as it contributes greatly to the growth of Indian economy with a vast network of around 5.1 crore units, creating employment of about 11.7 crore, manufacturing more than 6,000 products, contributing about 45% to manufacturing output and about 40% of exports in terms of value, about 37% of GDP.
MSME as defined in MSMED Act 2006 Particulars Manufacturing Services (Investment in P&M) (Investment in Equipment) Micro Enterprises Up to 25 lakh Up to 10 lakh Small Enterprises Above 25 lakh and up to 5 crore Above 10 lakh and up to 2 crore Medium Enterprises Above 5 crore and up to 10 crore Above 2 crore and up to 5 crore • The Union Cabinet chaired by Prime Minister Narendra Modi on 07/02/2018 approved change in the basis of classifying Micro, Small and Medium enterprises from ‘investment in plant & machinery/equipment’ to ‘annual turnover’ • As per the proposed classifications, enterprises having annual turnover less than Rs 5 crore will fall under the 'micro' category. • Units having turnover between Rs 5 crore to Rs 75 crore will be classified as small enterprises, • whereas those having turnover between Rs 75 crore and Rs 250 crore will be classified as medium enterprises
MSME sector in India 5 Source : MSME Ministry Annual Report
Current Gaps in the MSME Sector Source: Recent IFC Intellicap study 6
MSME Financing Gap • IFC Intellicap study on MSMEs has estimated: Creditworthy Debt Gap – ` 4.8 lakh crore (Demand ` 11.3 lakh crore & Supply ` 6.5 lakh crore) Short term Debt accounts for 60% of the total debt demand, Gap in services sector estimated at ` 1.6 lakh crore (Demand ` 4.5 lakh crore & Supply ` 2.9 lakh crore). Micro enterprise account for > 80% of Debt Gap – too large for micro finance, too small for large banks, Equity gap from the formal sector ` 2.47 lakh crore (Demand ` 2.5 lakh crore & formal availability ` 0.03 lakh crore), 7
SIDBI : Snap Shot • Apex Financial Institution for MSMEs • Impact initiatives o CGTMSE • collateral free loans upto Rs.2 crore (> 1million guarantees) • Operates through all banks o Promotion of venture capital / risk capital Industry • Corpus support to VCFs/ AIFs • MSME Risk Capital fund/ India Opportunities Venture Fund o MSME Exclusive SME rating agency o Resource support to NBFCs/ SFCs/ Banks o Micro Finance Initiative • Direct Finance Practice o Traditional products o Risk capital products o Sustainable finance
SIDBI’s – New Delivery Model One Stop Solution for MSME sector Institutional solutions Credit Beyond credit Enterprise promotion/ skill SVCL- Venture Capital Indirect Finance development Management SMERA- SME Rating Direct Finance Development CGTMSE – Collateral Free Lending Cluster Development Micro finance ISTSL-Technology Transfer Marketing Support ISARC – Asset Reconstruction Policy advocacy MUDRA – Micro Units Dev. Agency Credit Advisory 9
New Business Model of SIDBI Addressing financial gaps and non-financial gaps with the purpose of facilitating higher credit flow to the MSME sector and to make the sector strong, vibrant and internationally competitive.
SIDBI’s Role for Financing The Gaps
SIDBI’s Role for Financing The Gaps
Special Schemes SIDBI Make in India Soft Loan Fund for Micro Small & Medium Enterprises (SMILE) 13 13
SIDBI Make in India Soft Loan Fund for Micro Small & Medium Enterprises (SMILE) Objective : To provide soft loan, in the nature of quasi-equity, and term loan on relatively soft terms to MSMEs to meet the required debt-equity ratio for establishment of an MSME as also for pursuing opportunities for growth for existing MSMEs. Target MSME Sectors : All the identified 25 sectors or other sectors as may be added, in the Make In India Programme. Deserving proposals from any other sector can also be assisted on merits.
Make in India’ Sectors Automobiles Automobile Components Aviation Biotechnology Chemicals Construction Defence Manufacturing Electrical machinery Electronic systems Food Processing IT and BPM Leather Media and entertainment Mining Oil and Gas Pharmaceuticals Ports Railways Renewable Energy Roads and Highways Space Textile and Garments Thermal Power Tourism and Hospitality Wellness
SIDBI Make in India Soft Loan Fund for Micro Small & Medium Enterprises (SMILE) Eligible Enterprises New enterprises in the manufacturing as well as services sector. Existing enterprises undertaking expansion, modernization, technology upgradation or other projects for growing their business will also be covered. Loans extended under the scheme cannot be used for repayment of earlier loans.
SIDBI Make in India Soft Loan Fund for Micro Small & Medium Enterprises (SMILE) Project Cost: • All MSMEs as per MSMED Act 2006, with the emphasis on financing smaller enterprises within MSME. Minimum Promoter’s Contribution: • 15% of project cost for projects up to Rs.1 crore and 20% for the rest.
SIDBI Make in India Soft Loan Fund for Micro Small & Medium Enterprises (SMILE) Term Loan: • 75% of the project cost Soft Loan: • 10% of the project cost subject to a maximum of Rs.20 lakh. • Up to 15% of the project cost for the enterprises promoted by Scheduled Caste (SC) / Scheduled Tribe (ST) / Persons with Disabilities (PwD) and women, subject to a maximum of Rs.30 lakh.
SIDBI Make in India Soft Loan Fund for Micro Small & Medium Enterprises (SMILE) Rate of Interest Rating wise matrix for Uniform Effective Rate [UER] Loan Tenure (Months) 60 72 84 Moratorium (Months)/ Rating upto 12 13-18 upto 12 13-18 upto 12 13-18 C1 7.84 7.87 8.33 8.36 8.65 8.68 C2 7.86 7.89 8.36 8.39 8.69 8.71 C3 7.89 7.92 8.4 8.44 8.74 8.77 C4 7.99 8.02 8.48 8.51 8.84 8.87 C5 8.04 8.07 8.55 8.59 8.93 8.96 C6 8.09 8.12 8.63 8.66 9.02 9.06
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