Q.Explain the functions of the Small Industries Development Bank of India (SIDBI).

MSMEs need a specialised financier because ordinary commercial banks often find their loan sizes too small and their collateral too thin to prioritise.

The Small Industries Development Bank of India (SIDBI) was set up as the principal financial institution for the promotion, financing and development of the MSME sector, and to coordinate the functions of institutions engaged in similar activities. Its main functions include:

1. Refinancing — providing funds to banks, state financial corporations, and other lending institutions so that they, in turn, can extend credit to MSMEs.
2. Direct lending — extending term loans and working-capital assistance directly to eligible MSME units, particularly for technology upgradation and expansion.
3. Venture capital and equity support — supporting MSME growth through venture-capital funds aimed at innovative and technology-driven small enterprises.
4. Micro-finance support — channelling funds to micro-finance institutions that serve very small and micro borrowers who may not otherwise access formal credit.
5. Promotional and developmental role — supporting marketing, technology upgradation and skill-development initiatives for the sector alongside its financing role. …