INSTUTITIONAL SERVICE TO

ENTREPRENEUR
PRESENTED BY

RASHI SINGH (3227)

VISHESH JAIN (3242)
1
GUESS THE FORMER SSI?

 It was started as a VSI, by John Bissell in 1958,

after he left his Job at a consultant.

 Hint 1: John saw a huge Potential for exports

for these indigenous products.

 Hint 2: They opened their first retail store in

GK, in Delhi and now have over 85 retail
outlets under a Franchisee Agreement all
over the world.
THE ANSWER IS……………
 WHAT IS AN SSI?

As per the latest definition which is effective since December 21,

1999, for any industrial unit to be regarded as Small Scale
Industrial unit : -

Investment in fixed assets like plants and equipments either held

on ownership terms on lease or on hire purchase should not be
more than Rs 10 million.

However, the unit in no way can be owned or controlled or

ancillary of any other industrial unit.

THERE ARE MORE THAN 12 MILLION SSI IN INDIA TODAY!!

THE IMPORTANCE OF SMALL SSI:
(1) CONTRIBUTION TO GDP – 7%

(2) EMPLOYS OVER 30 MILLION PEOPLE

(3) ACCOUNTS FOR 45% OF OUR EXPORTS

(4) CONTRIBUTION TO INDUSTRIAL GROSS VALUE

ADDED IS 35 – 40%

(5) AT AN AVERAGE A Rs. 1 MILLION INVESTMENT

GENERATES Rs. 4.62 WORTH OF GOODS AND
SERVICES.
 WHEN ‘SMALL’ MAKES A BIG
DIFFERENCE
SSI OFFER THE FOLLOWING BENEFITS TO AN ENTREPRENEUR:

(.) Large growth opportunities and potential in terms of exports.

(.) Low start up cost, lower capital and investment required.

(.) Extensive Support and assistance by Government.

(.) Lowe Tax Liabilities and greater share in the profits.

(.) Availability of Manpower Low cost of Manpower training

SI(ZE) DOES MATTER!!

MOST SSI FAIL DUE TO THE FOLLOWING REASONS:

(.) FAILURE TO ADEQUATELY MARKET THEMSELVES

(.) FAILURE TO GET ADEQUATE FINANCIAL FUNDS

(.) FAILURE TO FACE STIFF COMPETITION FROM

LARGE SCALE INDUSTRIES

(.) LACK OF ACCESS TO ADVANCE TECHNOLOGY

 I A L R
N C F O
N A N S S
I
F TI EU O R
I TU E N
S T P R DI A
N
I TR E I N
E N I N
Small Industries Development
Bank Of India (SIDBI)
Introduction

Small Industries Development Bank Of India (SIDBI) as

an all India principal independent financial institution
,was set up under the SIDBI act 1989 & commenced
operations from April [Link] was delinked from IDBI
to provide greater autonomy and operational flexibility in
2000
Serves as a Principal Financial
Institution for
 Promotion
 Financing
 Development of industries in small scale sector
 Coordinating the functions of institutions engaged in similar activities
Channels Of SIDBI Assistance
[Link] Finance

By way of refinance and bills rediscounting through 894

primary lending institutions having 65000 outlets across
the country.
[Link] Finance

Through SIDBI’s own 38 offices by means of several

tailor-made schemes to reach the assistance to specific
target groups.
Promotional and developmental
activities
Involving accredited non governmental organizations,
scientific and research institutions, technology
institutions, management institutions etc
Since inception, sanctions and disbursements of SIDBI
aggregated 66,229 crores and 46,392 crores
respectively.
Besides financing,SIDBI provides developmental and support
services to the SSI sector. These initiatives of the bank aim at
improving the inherent strength of the SSI units on one hand
and employment generation, economic rehabilitation of rural
poor on the other.
Over the years,SIDBI’s promotional and development initiatives
have crystallized into 5 thrust areas:
[Link] promotion
(a) rural industries programme
(b) Mahila Vikas Nidhi
(c) mass media
[Link] resource development
[Link] upgradation
[Link] and quality management
[Link] dissemination
The bank has striven in the last 8 years to meet the objectives for
which it has been set up. The assistance provided by SIDBI
has evolved over the years meet almost all the requirements of
SSI’s covering a wide spectrum of units from “hi-tech” state
of the art units to traditional units
Thus SIDBI is poised to play its apex rule more effectively while
serving the SSI sector with the required financial and support
services.
Financial Assistance to Medium
Scale Units
 The medium scale units are also eligible for concessional
interest of 12.50% / p.a. for units located in any
industrially backward areas. However in respect of units
located in non backward areas, the applicable rate of
interest shall be 14% p.a.
 The debt equity ratio allowed to msu, the repayment
schedule of msu shall also be determined after taking into
consideration their profitability and debt servicing
capacity, subject to the condition that the maximum
repayment period doesn't exceed 10 yrs from the date of
sanction.
Modernization Assistance To
SSU And MSU
 The primary objective of this scheme is to encourage industrial units
overcome backlog of modernization and to adopt improved and updated
technology and methods of production and prevent mechanical and
technological obsolescence.
 The modernization programmes should primarily aim at:
 Upgradation of process, technology and product
 Export orientation
 Import substitution
 Energy savings
 Anti pollution measures
 Improvements in material handling
 Improvement in capacity utilization
 Conservation of scarce resource
 Irrespective of the location of the unit, interest rate of 11.5% p.a. shall be
charged on all rupee loans for modernization purposes
Rehabilitation Assistance To
SSU And MSU
 The scheme for rehabilitation covers all smu and msu’s
and units in cottage and village industries which have
been assisted by the SFCs and SIDS or are self financed
and which are classified as sick. Rehabilitation loans are
extended by commercial banks to such units will also be
eligible for refinance under the scheme.
Financing Of Industrial
Estates
 Financial institutions have commenced extending direct
assistance for financing of industrial estates. such ventures
costing up to 300 lacs and not less than 15 acres are
covered under the IDBI refinance scheme where primary
lending is effected through the SFCs,SIDS and
commercial banks,
 The main aspect considered in proposal for setting up of
industrial estates are the suitability of the location,
availability of power,water,raw material, skilled and
unskilled labour,transport and communication. Significant
emphasis is therefore laid on physical survey of the size
and proper designing..
Repayment Schedule

 In respect to loans being refinanced by IDBI a repayment

period of 10 years including an initial moratorium of 2-3
years is prescribed. The period may be extended up to 12
years in exceptional cases.
SMALL AND MEDIUM ENTERPRISE
DEVELOPMENT ORGANIZATION
(SMEDO)
SIDO(Small Industries Development
Organization)*
Introduction
 It is the apex level organization set up for the
policy-making, coordinating and monitoring
agency for the development of [Link] maintains
a close liaison with government, financial
institutions and other agencies which are involved
in the promotion and development of [Link]
SIDO functions through a network of 27
offices,31 sisi,37 extension centres,3 product cum
process development centre's.
 The SIDO covers all SSI except those falling
within the specialized boards and agencies like
KVIC,COI boards, central silk board etc.
Functions of SIDO
Functions Relating To
Coordination
 Evolution of a national policy for the development of SSI
 Coordination of the various policies and programmes
introduced by the state govt.
 Maintaining liaison with relevant central ministries,
planning commission etc
 Coordination of the programme for the development of
industrial estates
Functions Relating To
Industrial Development
 Securing items reserved for production by ssi
 Assessing the requirements of indigenous and imported
raw materials and components for the small scale sector
 Preparing model schemes, project reports and other
technical literature for prospective entrepreneurs
 Rendering support for the development of ancillaries
Functions Relating To
Extension Services
 Provision of technical services for improved technical
process, product planning, selection of machinery,
preparation of factory layout and design.
 Provision for consultancy and training to strengthen the
competitiveness of ssi
 Provision for marketing assistance to small industries to
market their products
 Provision for economic investigation.
National Small Industries
Corporation (NSIC)
Introduction

 NSIC was set up in 1955 as a public undertaking.

It is engaged in promoting and developing SSI in
the country. Supply of machinery on hire
purchase basis has been the most important
activity of NSIC.
Functions
 Supplying machinery on hire purchase basis
 Procuring govt orders for SSI
 Importing and distributing scarce raw material,
components and parts among actual users in small
scale sector
 Undertaking the construction of industrial estates
 Providing training in selected trades
 Developing and upgrading technology
particularly for projects based o n wastes
 Cooperating with the developing countries in
setting up SSI projects on turnkey basis
(KVIC)
32
 KVIC was established in 1956 under the KVIC Act
 It aims to plan organize and implement
programmes for the development of Khadi and
Village Industries as specified in the schedule of
KVIC Act, 1956
 Initially, only 10 village industries were listed in the
schedule but later 16 more industries were added
in the schedule

33
KVIC -OPERATES STATE-LEVEL

34
 Khadi and Village Industries Boards, Registered
Institutions and C0-operative Societies and has
collectively employed 0.84 million individuals at
end-March 2000.
 The KVI programme covers 0.26 million villages
in the country.
 They operational strategy of KVIC includes :
 To promote rural employment
 To intensify industries in rural areas
 To standardize and exercise quality control
 To provide sales promotion assistance
 To promote export incentives for design and
development

35
 Functions Of KVIC:
 The KVIC is charged with the planning, promotion, organisation and
implementation of programs for the development of Khadi and other
village industries in the rural areas in coordination with other agencies
engaged in rural development wherever necessary.

Its functions also comprise building up of a reserve of raw materials and

implements for supply to producers, creation of common service facilities
for processing of raw materials as semi-finished goods and provisions of
facilities for marketing of KVI products apart from organization of training
of artisans engaged in these industries and encouragement of co-operative
efforts amongst them.

The KVIC is also charged with the responsibility of encouraging and

promoting research in the production techniques and equipment employed
in the Khadi and Village Industries sector and providing facilities for the
study of the problems relating to it, including the use of non-conventional
energy and electric power with a view to increasing productivity,
eliminating drudgery and otherwise enhancing their competitive capacity.
36
(SFCs) State Financing
Corporations
Introduction
 A Central Industrial Finance corporation was set up under the
industrial Finance corporations Act, 1948 in order to provide
medium and long term credit to industrial undertakings which fall
outside normal activities of commercial banks.
The State governments expressed their desire that similar
corporations be set up in states to supplement the work of the
Industrial financial corporation. State governments also expressed
that the State corporations be established under a special statue in
order to make it possible to incorporate in the constitutions
necessary provisions in regard to majority control by the
government, guaranteed by the State government in regard to the
payment principal.
In order to implement the views Expressed by the State
governments the State Financial Corporation bill was introduced
in the Parliament.
 Features
 The bill provides that the state government may, by notification in the official gazette, establish a
financial corporation for the state.
 The share capital shall be fixed by the State government but shall not exceed Rs 2 crores . The issue
of the shares to the public will be limited to 25 % of the share capital and the rest will be held by
the State Governments, The Reserve Bank, Scheduled Banks, Insurance Companies, Investment
Trusts, Co- operative banks and
other financial institutions.
 Shares of the corporation will be guaranteed by the Sate government as to the re – payment of
principal and the payment of a minimum dividend to be prescribed in consultation with the central
government.
 The corporation will be authorized to issue bonds and debentures for amounts which together with
the contingent liabilities of the corporations shall not exceed five – times the amount of the paid –
up share capital and the reserve fund of the corporations. These bonds and debentures will be
guaranteed as to payment of the principal and payment of interest at such rate as may be fixed by
the State government.
 The corporation may accept deposits from the public repayable after not less than five years,
subject to the maximum not exceeding the paid up capital.
 The corporation will be managed by a board consisting of a majority of Directors nominated by the
Sate governments , The Reserve banks and the industrial Finance corporation of India
financial resources of SFCs

The SFCs mobilize their financial resources from the

following sources are :
1. Their own Share capital
2. Income from investment and repayment of loans
3. Sale of bonds
4. Loans from the IDBI ( To some extent )
5. Borrowings from the Reserve Bank of India
6. Deposits from the Public
7. Loans from State Governments.
 broad functions of State
Financial Corporations:
 Project advisory and Finance
 AS a catalyst in small scale industrial growth the SFCs provide the following services:
 a) Investment appraisal
 Project conceptualization and related services, including guidance in relation selection of projects, preparation
of feasibility studies, capital structuring, techno –economic feasibility, financial engineering, project
management design etc.
 Credit Syndication including assistance in legal documentation etc.
 Documentation of various project documents
 Placement of debt – equity including design of the structure of instruments,
 placement of instruments with financial institutions, bank etc.
 Assist in organizational structural changes like :
(1) Analysis of operational performance
(2) Study of existing organizational structure
(3) Study of the existing statures and rules and regulations
(4) Market analysis with respect to products
(5) Review of domestic and international scenario
(6) Valuation of fixed assets and inventory
(7) Advising on formation of new entity
(8) Preparation of relevant agreements / legal documents.
•Industry Research / Information Services
A dedicated research team looking at both macro – level issues as well as sector –
specific, industry research. The expertise of the professional research team and a
large diversified data base enables SFC to provide erudite research reports to the
corporate world.

•Legal Advisory Services

A full – fledged legal cell , comprising of experienced professional with expertise
in handling cases of diverse nature ,offer legal help services . The services
rendered by this unit comprise investigations and preparations of title reports ,
besides advisory services in respect of matters under dispute where an independent
consultant view is required .
Specific Functions Of SFCs:

 The SFCs while giving loans to industrial units see to it that loans are secured by a PLEDGE,
MORTAGAGE, HYPOTHECATION of movable and immovable property or other tangible assets
or guarantee by the state government or scheduled commercial bank , they also accept personal
pledge by the entrepreneur . SFCs do not give loans on the basis of second mortgage.
 Grant loans or advances to industrial concern repayable within a period not exceeding 20 years.
 Providing guarantee for loans raised by industrial units from commercial banks and state
cooperative banks.
 Providing guarantee for deferred payments in cases where industrial units have purchased capital
goods on a deferred payment basis.
 To underwrite the issue of shares, bonds and debentures of industrial concerns.
 To Subscribe to shares, bonds and debentures of industrial concerns.
 Guarantee loans raised by industrial concerns which are re- payable within a period not exceeding
20 years and which are floated in the public market
 SFCs grant loans to industrial units for the purchase of fixed capital assets like land, machinery. In
some exceptional cases, some SFCs also provide loans for working capital requirements in
combination with loans for fixed capital.
 SFCs provide loans in foreign currency for the import of machinery and technical know – how,
under the IDA (International development association) and world bank tie up.
 SFCs however are prohibited from subscribing directly to the shares or stock of any company
having limited liability except for underwriting purposes and granting any loans or advance on the
security of its own shares .
SFCs - Contributory to development of
small scale industries in the Indian
 There are at present 18State financial Corporations and almost every
economy
state has a financial corporation of its own.
 During 2000-2001 SFCs had sanctioned loans aggregating to 2800
crores and disburse Rs 2000 crores. Their assistance in the form of
loans has declined subsequently due to the existence of a large amount
of Non – Performing assets.
 Over 70 % of the total assistance sanctioned and disbursed by all SFCs
is provided to small scale industries. Attempts are now being made to
strengthen the role of SFCs as regional development banks.
 The SFCs sanctioned seed capital assistance under the seed capital
schemes introduced and operated by IDBI.
This assistance is available to promoters of small business units. Since
June 1989, SFCs have also been implementing special schemes of seed
capital assistance to women entrepreneurs.
 Assistance is extended in the form of loan or grant or a combination of
both to voluntary agencies working for women in decentralized
industries.
List Of 18 State Financing
Corporations In India.
Assam Financial Corporation
Andhra Pradesh State Financial Corporation
Bihar State Financial Corporation
Delhi Financial Corporation
Gujarat State Financial Corporation
The Economic Development Corporation of Goa
Haryana Financial Corporation
Himachal Pradesh Financial Corporation
Jammu & Kashmir State Financial Corporation
Karnataka State Financial Corporation
Kerala Financial Corporation
Madhya Pradesh Financial Corporation
Maharashtra State Financial Corporation
Orissa State Financial Corporation
Punjab Financial Corporation
Rajasthan Financial Corporation
Tamil Nadu Industrial Development Corporation Ltd.
Uttar Pradesh Financial Corporation
West Bengal Financial Corporation
THE CURIOUS CASE OF SURABHI INDUSTRIES!
While joining a Masters degree program in Manufacturing Technology in VIT
University during June 2003, Vendhan had a dream of starting his own business
instead of taking up a job. He wanted to be in his own village and wanted to help his
villagers by becoming a job provider.

He worked with a company for four years to gain hands on experience in the field of
‘Mill Boards’ made from recycled waste paper and then prepared a business plan
and applied to the SFC for financial assistance and technical assistance. This is
widely used in packaging, textile industry and in stationery making sectors. The
business depends on the ability to source the waste paper at low cost, providing
product variants and ensuring optimal efficiency using local manpower by sharing
skills to them.

He started his Company in 2006 and his first factory came into operation in 2007 and
was called Surabhi Industries. He current employs over 50 people in his factory and
earns over Rs. 5 Lakhs every year.

Vendhan is grateful to the SFC for providing him with loans, subsidized incentives
and technical assistance under TePP.