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Financial Institutions and Services

Notes almost all the requirements of small scale industries which fall into a wide spectrum constituting
modern and technologically superior units at one end and traditional units at the other.

The major issues confronting SSIs are identified to be:
1. Technology Obsolescence
2. Managerial Inadequacies
3. Delayed Payments
4. Poor Quality

5. Incidence of Sickness
6. Lack of Appropriate Infrastructure and
7. Lack of Marketing Network.

There can be many more similar issues hindering the orderly growth of SSIs.
Over the years, SIDBI has put in place financing schemes either through its direct financing
mechanism or through indirect assistance mechanism and special focus programmes under its
P&D initiatives. In its approach, SIDBI has struck a good balance between financing and providing
other support services.

7.6.2 Operational Policies

The Small Industries Development Bank of India (SIDBI), was conceived as the principal financial
institution at the apex level for promotion, financing and development of industry in the small,
tiny and cottage sectors.

SIDBI has an overall responsibility for enacting policy and procedural guidelines with regard to
the operations of SFCs. SIDBI has since been de-linked from IDBI after the SIDBI Act was amended
last year and as a result, 51% holding of IDBI shares in SIDBI are in the process of being transferred
to commercial banks and all-India financial institutions. Further, IDBI's share-holding in SFCs
would also be transferred to SIDBI under the SFCs (Amendment) Act, 2000. All the discretionary
powers hitherto vested with IDBI in the principal Act, now vest with SIDBI under the amended
Act. SIDBI under the new dispensation has been entrusted with the overall responsibility to look
after the interests of SFCs, including provision of adequate refinance facilities. The success of the
reforms brought about by the amendments in the SFCs Act, as also the recommendations of the
High Level Committee, would largely depend upon the responsiveness of SIDBI to the needs
and aspirations of SFCs. This, undoubtedly, calls for strengthening SIDBI organisationally and
financially to cope with this responsibility and meet the genuine refinance requirements of
SFCs.
The operational limits prescribed under various provisions of the amended Act could be increased
by the State Governments on the recommendations of SIDBI keeping in view the business
requirements of SFCs. These limits relate to augmentation of share-capital base, borrowings
from outside agencies, including floatation of bonds and debentures, limit of accommodation to
industrial units, eligibility of industrial units to borrow from SFCs in terms of owned-funds, etc.
Since limit of accommodation to individual units has been increased to 5 crores and 2 crores
in the case of companies and individuals respectively with a provision to increase it further to
20 crores and 5 crores respectively on the recommendations of SIDBI, the SFCs were now in a
position to finance comparatively bigger industrial units having large credit requirements.
Consequently, the refinance requirements of SFCs have gone up substantially and they have
started approaching SIDBI for meeting their requirements. In terms of the Act, SFCs cannot
finance industrial units whose owned-funds exceed 10 crores. This limit could be increased to

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