Some of the financial institutions supporting small scale industries in India are:-

1. State Finance Corporations (SFCs) 2. Commercial Banks 3. Small Industries Development Bank of India (SIDBI) 4. Industrial Finance Corporation of India (IFCI) 5. Industrial Credit and Investment Corporation of India (ICICI Bank)

6. Industrial Development Bank of India (IDBI) 7. Small Industries Development Fund (SIDF) 8. National Small Industries Corporation 9. National Bank for Agriculture and Rural Development (NABARD) 10. Central Government Stores Purchase Programme 11. SIDO and Marketing Assistance to Small Scale Industries

12. Technical Consultancy Organisations (TCOs) 13. Small Industry Development Corporations 14. Industrial Estates 15. Trade Development Authority 16. State Trading Corporation of India 17. Export Consortia and a Few Others.


Additionally, learn about:- 1. Repayment of Loans 2. Comprehensive Promotion Structure of MSME Sector 3. Problems of Financial Institutions in Lending to Small Scale Industries 4. Stock Exchange for Small and Medium Enterprises 5. Credit Rating and Micro, Small, and Medium Enterprises.

Financial Institutions Supporting Small Scale Industries in India: SFCs, ICICI Bank, SIDBI, IFCI, IDBI, SIDF, TCOs and a Few Others

Financial Institutions Supporting and Assisting Small Scale Industries – State Finance Corporations, Commercial Banks and Small Industries Development Bank of India

A network of State Financial Corporations, National Small Industries Corporation, State Small Industries Corporations, Commercial Banks, Cooperative Banks, and Regional Rural Banks provide financial assistance to small scale units. The Small Industries Development Bank of India (SIDBI) provides refinance to the industrial loans advanced by these institutions to the small scale sector.

Financial Institution # 1. State Finance Corporations (SFCs):

These institutions extend term loans for the purchase of land, construction of factory premises and purchase of machinery and equipment for the setting up of new industries or for expansion and modernization of the existing ones. SFCs generally prescribe a margin of 25 per cent and allow an initial holiday of two years for the loan repayment (this period can be increased to five years in backward districts).

National Small Industries Corporation (NSIC) and State Small Industries Corporations (SSICs) provide machinery on hire-purchase basis to small scale and ancillary industries, the value of which would not exceed Rs. 60 lakhs and Rs. 75 lakhs, respectively inclusive of the value of machinery and equipment already installed.


The payment for the machinery and equipment is made directly to the suppliers. The hire-purchase value is generally recovered in 13 half-yearly installments and a rebate of 2 per cent is given if the installments are paid on or before the due date. While NSIC supplies both imported and indigenous machinery. However, SSICs supply only indigenous machinery.

Financial Institution # 2. Commercial Banks:

These mostly provide short term and, in some cases, medium term financial assistance to small scale units. Short term credit facilities are granted for working capital requirements like those for raw materials, goods-in-process, finished products, bills receivables, and book debts.

Medium term loans are granted for the acquisition of land, construction of factory premises, purchase of machinery and equipment, and operative expenses. These loans are generally granted for periods ranging from five to seven years. Banks also establish letters of credit on behalf of their clients favouring suppliers of raw material/machinery (both Indian and foreign) which extend the bankers assurance for payment and thus help their delivery.

Certain transactions, particularly those in contracts of sale to Government departments, may require guarantees being issued in lieu of security/earnest money deposits for release of advance money, supply of raw materials for processing, full payment of bills on assurance of performance, etc. Commercial banks also issue such guarantees.

Financial Institution # 3. Small Industries Development Bank of India (SIDBI):


The Small Industries Development Bank of India—the apex bank for small scale industries—extends assistance to SSI units through various schemes.

The activities of SIDBI are as follows:

i. Refinancing of loans and advance extended by the primary lending institutions to industrial concerns in the small scale sector and also providing resource support to them;

ii. Discounting and rediscounting of bills arising from sale of machinery to, or manufactured by, industrial concerns in the small scale sector;


iii. Extension of seed capital/soft loan assistance under National Equity Fund, Mahila Udyam Nidhi, and Seed Capital Schemes through specified lending agencies;

iv. Granting direct assistance as well as refinancing of loans extended by primary lending institutions for financing export of products manufactured by industrial concerns in the small scale sector;

v. Providing services like factoring, leasing, etc., to industrial concerns in the small scale sector;

vi. Extending financial support to State Small Industries Development Corporations for providing scarce raw materials to small scale units and marketing their end-products ;


vii. Extending financial support to National Small Industries Corporation for providing leasing, hire-purchase, and marketing support to SSI units.

The Immediate thrust of SIDBI is on the following activities:

i. Initiating steps for technological up gradation and modernization of existing units;

ii. Expanding the channels for marketing the products of SSI sector in domestic and overseas markets;


iii. Promotion of employment-oriented industries especially in semi-urban areas to create more employment opportunities and thereby checking migration of population to urban and cosmopolitan areas.

The financial assistance of SIDBI to the small scale units scattered throughout the country is channelized through the existing credit delivery mechanism comprising State Financial Corporations, State Industrial Development Corporations, Commercial Banks, Cooperative Banks, and Regional Rural Banks which have a vast network of branches in the country.

The various schemes of financial assistance for SSI units are listed as follows:

(1) Refinance scheme for industrial loans for small and village industries


(2) Composite loan scheme

(3) Scheme for Scheduled Caste/Scheduled Tribe and Physically Handicapped entrepreneurs

(4) National Equity Fund Scheme

(5) Special scheme of assistance to ex-servicemen

(6) Seed Capital Scheme

(7) Single Window Scheme


(8) Scheme for women entrepreneurs

(9) Mahjila Udyam Nidhi Scheme

(10) Refinance scheme for quality control

(11) Schemes of incentives for exports

(12) Equipment Refinance Scheme

(13) Refinance scheme for Modernization of Small Scale Industries


(14) Assistance to Small Road Transport Operators

(15) Refinance scheme for Rehabilitation of Small Scale Industries

(16) Foreign Currency Refinance Scheme

(17) Refinance Scheme under ADB Line of Credit

(18) Refinance scheme for setting up industrial estates

(19) Bills Rediscounting Scheme.


Single Window Scheme:

The new tiny and SSI units whose project cost does not exceed Rs. 20 lakh and requirements of working capital is up to Rs. 10 lakh are eligible for working capital assistance under the Single Window Scheme of SIDBI.

Sanction and Disbursement of Loan:

Once a project is finalized, the promoters have to submit an application to the financial institution/bank for consideration of term loan along with the following documents:

(i) Project report

(ii) Partnership deed/memorandum and articles of association


(iii) Quotations of plant/machinery

(iv) Possession receipt for land

(v) Income-tax assessment order of partners/directors

(vi) Proposed building plan

(vii) Architect’s estimates for building

(viii) Balance sheet and profit and loss account for previous three years for firms held by promoters.


After the institution has satisfied itself about the authenticity of the documents and the related facts, it sanctions the loan. On receipt of the sanction letter, the promoters have to signify their acceptance of the various terms and conditions of loans. The term loan is then released in suitable tranches depending on progress made by the entrepreneur.

Pre-Disbursement Formalities:

For the pre-disbursement formalities the following documents need to be submitted:

1. Chartered Account’s certificates for expenditure incurred on project and the means of finance and for capital structure of the company

2. Architect’s certificate for money spent on building

3. An approved building plant

4. Insurance policy for plant, building, and machinery

5. Income-tax clearance for mortgage of factory

6. Execution of mortgage.

Repayment of Loans:

Banks and financial institutions are extremely cautious while selecting prospective borrowers (entrepreneurs) and ascertaining their credit worthiness before sanctioning loans.

The owner of a small scale enterprise is permitted to repay the loan amount on installment basis spread over a period of 8 to 10 years, taking into account the cash generation and profitability aspects of the project. The quantum of installments should be in consonance with the expected flow of income to the entrepreneur and should not exceed 50 per cent on the incremental income accruing to the borrower.

Normally banks and financial institutions insist on repayment of the loan amount along with interest charges by the borrower as per the repayment schedule formulated in respect of the project. The moratorium period normally permitted for repaying the installments of the principal amount varies from 12 months to 24 months from the date of the release of the first tranche loan.

Before fixing the moratorium period, the entrepreneur should impress upon the banker the actual gestation period involved in respect of his project before commencing repayments. Banks and financial institutions normally permit enhancement of the repayment holiday only in exceptional cases.

Comprehensive Promotion Structure of MSME Sector:

The Government of India established comprehensive structure to promote the micro, small and medium scale industries in the country. By focusing SIDBI as the centre of activities in promoting this sector, number of other institutions too were established to promote this sector directly and indirectly.

Problems of Financial Institutions in Lending to Small Scale Industries:

Although it is the small entrepreneurs who face problems in getting adequate funds, financial institutions too face problems while providing loans to small entrepreneurs. This is because there is always a gap between the expected financial requirements of the entrepreneurs and actual amount of funds sanctioned or released by the financial institutions.

The entrepreneurs on their part feel that the problem lies with the financial institutions, which point out that many a time the borrowers are not well versed with the financial aspects of small industry.

Some of the common problems faced by financial institutions while disbursing loans are as follows:

i. The small entrepreneurs do not have perfect knowledge about the financial aspects of the small industry.

ii. The small entrepreneur is not involved in preparing the project and estimation of financial requirements,

iii. Financial assessment of the project does not reflect the real picture of the project.

iv. The small entrepreneurs do not provide full information to substantiate their claims for required funds for the project.

v. Most of the small entrepreneurs are not able to bring good projects for financial assistance.

vi. The small entrepreneurs underestimate the banks while expecting loans.

vii. The small entrepreneurs take a lot of time from the idea stage to project preparation to submitting the project to the bank. During this time estimates and the actual requirements undergo a lot of change, which may not reflect real costs of the projects.

Stock Exchange for Small and Medium Enterprises:

In view of the limited financial accessibility for small enterprises, on 5 November 2008, the SEBI came out with a framework for recognition and supervision of Stock Exchanges/ platform of stock exchanges for small and medium enterprises. This is mainly to have dedicated stock exchanges for the small and medium enterprises sector.

Stock exchanges can be set up after obtaining due recognition under the Securities Contracts (Regulation) Act, 1956. As per SEBI, even the existing exchanges too can set up a platform for the SME Sector with a different set of rules, regulations, and bye laws. In other words, regulator wanted specific set of prescribed norms for the operations related while dealing in scrips of small and medium enterprises.

Credit Rating and Micro, Small, and Medium Enterprises:

In the changed global economic environment, enough opportunities and many more challenges emerged before micro and small enterprises in India. To take the advantage of benefits, they have to face problems and obligations to improve their competence in terms of technology, management, and financial strength.

Therefore, there is a need to create awareness amongst micro and small enterprises about the strengths and weaknesses to the extent possible to assess themselves. For all these issues, small and medium scale enterprises unfortunately have limited access to institutional finance.

The simple reason is that institutions are reluctant to finance them because of more risky proposition. To supplement the existing policy framework to finance this sector, the Government of India came out with a credit rating system.

It is expected that the rating scheme would encourage micro and small enterprise sector in improving its contribution to the economy by way of increasing their productivity, since a good rating would enhance their acceptability in the market and also make access to credit quicker and cheaper and thus help in economizing the cost of credit.

The number of SMEs applying for the rating scheme is increasing because the Government is subsidizing the cost of the rating. The credit rating scheme of the Government for micro and small enterprises (MSEs) is steadily working. NSIC is the nodal agency for implementing the scheme.

The units rating shall be a combination of performance and creditworthiness of the unit. The Rating Agencies should be empanelled with NSIC Head Office. According to the National Small Industries Corporation (NSIC), in the first half of the fiscal 2009, about 3,487 enterprises availed themselves of the scheme.

For the whole of 2008-09 fiscal, 5,011 enterprises had got themselves rated. Credit disbursement too increased at a steady pace, as banks are more willing to lend to enterprises that have been evaluated on a standardized basis by independent agencies. Credit Analysis and Research Ltd. (CARE), CRISIL, ICRA, Dun and Bradstreet (D&B), etc., are actively involved in rating small and medium enterprises.

As of today, all loans above Rs. 10 crore will need to be rated. Rating agencies typically charge between Rs. 50,000 and Rs. 2 lakh for rating a small-scale unit that has bank limits of between Rs. 10 crore and Rs. 20 crore. It is expected that the RBI would bring down the threshold exposure for rating to Rs. 5 crore.

When that happens, the demand for rating the enterprises would be substantially higher. For small entrepreneurs, it is too costly to go for rating. For rating agencies this is not at all viable. However, small and medium entrepreneurs are willing to get rated their enterprises because they get 75 per cent rating fee subsidy from the Government of India.

The Government subsidy is only for the first year. The entrepreneurs come back and spend their own money, show that companies are seeing benefit in these schemes. Since, it is in the nascent stage, there are enough doubts and optimism about the same. Some financial institutions say that the quality of work done by the rating agencies is doubtful.

Some rating agencies say their rating help the entrepreneurs to get more financial help from the banks. Again the role of stock brokers in supporting the idea of a separate exchange for small and medium enterprises.

Financial Institutions Supporting and Assisting Small Scale Industries in India – Industrial Finance Corporation of India, Small Industries Development Fund and a Few Others

In order to meet the financial needs of small-scale industries, the Government has created a network of financial and developmental institutions.

These institutions may be classified as follows:

1. All India Financial Institutions:

(i) Industrial Finance Corporation of India (IFCI),

(ii) Industrial Credit and Investment Corporation of India (ICICI),

(iii) Industrial Development Bank of India (IDBI),

(iv) Export Import Bank of India (Exim Bank),

(v) National Small Industries Corporation (NSIC), and

(vi) Small Industries Development Bank of India (SIDBI).

2. State Level Institutions:

(i) State Financial Corporations (SFCs),

(ii) State Industrial Development Corporations (SIDCs), and

(iii) State Small Industries Development Corporations (SSIDCCs).

These institutions provide both fixed capital and working capital finance. In addition, they provide refinance assistance for rehabilitation of sick small units and modernisation of small scale industries.

1. Industrial Finance Corporation of India (IFCI):

IFCI was set up as a statutory corporation in July 1948. With effect from July 1, 1993 it has been converted into a company.


The purpose of the IFCI is “to make medium and long-term credits more readily available to industrial concerns in India, particularly in circumstances where normal banking accommodation is inappropriate or recourse to capital issue methods is impracticable.” The corporation provides financial assistance for the setting up of new ventures as well as for the modernisation and expansion of existing enterprises. The IFCI gives priority to dispersal of industry, development of backward areas, growth of industries in the co-operative sector, etc.

It pays special attention to the following types of projects:

(i) Projects located in backward regions,

(ii) Projects promoted by new entrepreneurs and technocrats,

(iii) Projects based on indigenous technology,

(iv) Projects having potential for exports and import substitution,

(v) Projects likely to meet growing demand for essential commodities,

(vi) Projects that provide machinery, fertilisers, pesticides and other inputs for agriculture.

Forms of Assistance:

IFCI provides financial assistance in the forms of loans, guarantees, underwriting, direct subscription to shares and debentures, etc. It also offers equipment leasing, buyers’ and suppliers’ credit, finance to leasing and hire-purchase firms and merchant banking services.

Criteria for Assistance:

While granting assistance, the IFCI takes into consideration the following factors – (i) importance of the industry, (ii) feasibility of the project, (iii) demand and supply of the product, (iv) availability of raw materials and technical know-how, (v) cost of the project, (vi) resources of the concern, (vii) managerial competence and experience, and (viii) security offered.

Progress and Review:

There has been a spectacular rise in the financial assistance provided to small- scale units and new entrepreneurs. IFCI generally finances up to half of the total cost of setting up/ modernisation/expansion of an industrial unit.

Despite impressive performance, IFCI has been criticised on the following grounds:

(i) IFCI has favoured large and well-established concerns to the disadvantage of small-scale units and new entrepreneurs.

(ii) There are long delays in the sanctions and disbursement of assistance.

(iii) IFCI has failed to exercise effective control over the defaulting borrowers.

2. Industrial Credit and Investment Corporation of India (ICICI Bank):

ICICI was set up as a public limited company on January 5, 1955.


To – (i) assist in the promotion, expansion and modernisation of industrial enterprises in the private sector; (ii) encourage and promote the participation of private capital, both Indian and foreign, in such enterprises; and (iii) encourage and promote private ownership of industrial investment and expansion of investment markets.

Forms of Assistance:

ICICI provides assistance in the form of loans, guarantees, direct subscription to shares and debentures, sponsoring and underwriting issues, making funds available for reinvestment, securing and furnishing technical and managerial advice. It also provides equipment leasing, suppliers’ credit, merchant banking and venture capital services.

Eligibility for Assistance:

ICICI provides assistance to companies in private sector and joint sector. It can also assist co-operative societies. It is authorised to provide foreign currency loans to proprietary and partnership firms. Ordinarily assistance exceeding Rs. 5 lakh is provided. Loans are given for buying capital assets. ICICI helps in the promotion of new enterprises as well as in the expansion and modernisation of existing concerns.

Criteria for Assistance:

While granting assistance, ICICI takes into account the basic soundness of the project, competence and experience of management, sources of finance and contribution of the promoters, nature of security, reasonableness of cost estimates, repaying capacity of the borrower, etc.

Progress and Review:

Over the years, ICICI has emerged as the leading supplier of foreign currency loans and as a pioneer in the field of underwriting. However, it is not a significant source of finance for small-scale industries. It is now more a commercial bank than a development financial institution.

3. Industrial Development Bank of India (IDBI):

IDBI was set up on July 1, 1964 as an apex institution in the field of industrial finance.


The objectives of the IDBI are to – (i) co-ordinate, regulate and supervise the activities of all financial institutions providing term finance to industry; (ii) enlarge the usefulness of these institutions by supplementing their resources and by widening the scope of their assistance; (iii) provide direct finance to industry to bridge the gap between demand and supply of long-term and medium-term finance of industrial concerns in both public and private sectors; (iv) locate and fill up gaps in the industrial structure of the country; (v) adopt and enforce a system of priorities so as to diversify and speed up the process of industrial growth.

The Bank has been conceived of as a development agency that will ultimately be concerned with all questions or problems relating to industrial finance in the country.

IDBI provides assistance to small-scale units indirectly through its refinance and bills rediscounting schemes. It is not possible for IDBI to reach large number of small industrial units scattered all over the country directly. Therefore, IDBI provides refinance of loans granted by banks and State financial Corporations to small-scale units.

Refinance Assistance:

IDBI replenishes the loans provided by commercial banks, co-operative banks, regional rural banks, SFCs, SIDCs, SIICs to small Scale sector. IDBT has imposed selling on rates of interest to be charged by primary lenders so that the benefit goes ultimately to the borrowing units.

Some of the important details of the scheme are as follows:

(i) Promoter’s contribution normally varies from 10% to 22.5%.

(ii) Refinance is provided at concessional rates of interest in respect of loans to specified types of borrowers.

(iii) The period of repayment is fixed by the lending institution after taking into account profitability and debt servicing capacity of the assisted units, suspect to a maximum of 10 years.

(iv) A debt equity ratio up to 3:1 is permitted except for projects involving seed/special capital assistance wherein a ratio of 2:1 is applicable.

(v) A rebate of 0.5 per cent is allowed to small industries which obtain ISI mark for all their products.

(vi) Refinance is also provided for rehabilitation of sick units. Rehabilitation assistance might include margin money for additional working capital, payment of statutory liabilities, cash losses during nursing, margin capital expenditure for restarting the units towards viability.

(vii) Refinance for modernisation is provided to help small units to improve/update technology with a view to improve productivity and quality.

Automatic Refinance Scheme:

The objective of this scheme is to avoid delays in the flow of finance to small-scale industries. Loans up to Rs. 7.5 lakh are fully refinanced and assistance is sanctioned within days. Under the scheme concessional interest rate is charged from SC/ST, women, and physically handicapped entrepreneurs up to Rs. 50,000.

No minimum promoter contribution is insisted upon from such entrepreneurs. A new scheme to subsidies the cost of training for women entrepreneurs and consultancy services, up to the stage of implementation has been launched.

Composite Loan Scheme:

Since January, 1979 the automatic refinance scheme also covers composite loans given to artisans, small and cottage industries in villages and small towns with a population not exceeding 5,00,000. Loans up to Rs. 50,000 are given under this scheme. The loan can be utilised for equipment finance or working capital or both. Loan is provided at a concessional rate of 10% in backward areas and 12% in other areas. No margin contribution on the part of the beneficiary is required.

Single Window Scheme:

This scheme is designed to provide working capital assistance to small- scale units. New small-scale and tiny units with project cost up to Rs. 5 lakh and working capital requirement up to Rs. 2-5 lakh are eligible under the scheme. Both term loan and working capital has to be sanctioned by a single institution.

Seed Capital Scheme:

The scheme aims at assisting new entrepreneurs who lack adequate resources of their own to set up small-scale units. The assistance is given in the form of interest-free soft loans to proprietary and partnership firms up to Rs. 15 lakh. The assistance is repayable over a period of 10 years with a moratorium of 5 years. The scheme is operated through SFCs and SIDCs.

Special Scheme for Ex-Servicemen:

Under this scheme, ex-Servicemen (including widows of ex-Servicemen) and disabled service personnel are provided assistance by IDBI in collaboration with Director General of Resettlement. They are provided equity support to the extent of Rs. 1, 80,000 per project for starting small-scale units. Projects costing up to Rs. 12 lakh are eligible for assistance.

The promoter is required to contribute at least 10% of the project cost. A nominal interest at the rate of 1 per cent is charged. The assistance is repayable within a period of 10 years, including an initial moratorium of 5 years.

In case of transport operators the repayment period is 5 years including grace period of 3 years.

4. Small Industries Development Fund (SIDF):

In May, 1986 the IDBI created this fund. The objective was to step up the flow of assistance to small-scale sector and to provide a focal point for coordinating at the apex level the availability of financial and non-financial assistance from various organisations. The fund was used to provide refinance, seed capital assistance, direct assistance to NSIC, bills rediscounting, and support to promotional and extension services. The Fund was transferred to SIDBI.

National Equity Fund:

This scheme was launched in August 1987 to provide equity support to small and tiny units.

The eligibility conditions under the scheme are as follows:

(i) The project should be a new and for manufacture, preservation or processing of goods or an existing unit which has become sick.

(ii) The project should be located in a village or town with a population of not more than 5 lakh (15 lakh in case of sick units).

(iii) The capital cost of the project should not exceed Rs. 5 lakh.

(iv) The unit should have SSI registration with Directorate of Industries.

The assistance is given in the form of a loan to meet the gap in equity after taking into account the promoter’s contribution which must at least be 10 per cent of the total cost.

The scheme is now administered by SIDBI.

Bills Rediscounting Scheme:

Under the scheme, suppliers of indigenous machinery can discount their bills and promissory notes with banks and other financial institutions. These can in turn avail of rediscount facilities from the IDBI. This facility is available for purchase of machinery for modernisation, expansion and diversification. An advance or down payment of 15% (10% in case of commercial vehicles and textile machinery) is generally insisted upon.

Credit Guarantee Scheme:

IDBI provides guarantees to banks and other financial institutions for loans made to small-scale units. The guarantee extends to 75 per cent of the amount in default or the amount guaranteed whichever is lower.

IDBI also provides assistance to NSIC for the supply of machinery on hire-purchase basis.

Export Finance:

IDBI operates three schemes to encourage exports from small-scale sector:

(a) Refinancing of medium term export credit granted by approved banks

(b) Direct credit to exporters

(c) Overseas buyers’ credit.

Small Industries Development Bank of India (SIDBI):

In view of the increasing need for financial assistance to small-scale industries, a specialised financial institution exclusively for the small-scale sector became necessary. Accordingly, the SIDBI was set up as a subsidiary of the IDBI. It commenced operations on April 2, 1990. SIDBI took over the Small Industries Development Fund and the National Equity Fund set up earlier in IDBI.

SIDBI has been assigned the role of apex financial institution for the promotion, financing and development of small-scale sector and for coordinating the activities of other institutions engaged in providing assistance to small scale units.

The main functions of SIDBI are as follows:

(a) Refinancing of term loans granted by SFCs, SIDCs/banks and other eligible financial institutions;

(b) Direct discounting and rediscounting of bills arising out of sale of machinery/capital equipment by small-scale manufacturers on deferred credit and rediscounting of short- term trade bills arising out of sale of products of the small-scale sector;

(c) Providing assistance for development of marketing infrastructure, creating new marketing channels for the products of small-scale units in domestic and foreign markets;

(d) Direct assistance for development of industrial estates/areas with requisite infrastructural facilities;

(e) Resource support to National Small Industries Corporation and State Small Industries Development Corporations for their raw material supply and marketing of products as well as their hire-purchase and leasing activities;

(f) Extending technical and related support services;

(g) Providing equity type of assistance to special target groups like new promoters, women and ex-servicemen under national Equity Fund, Mahila Udyam Nidhi and Self Employment Scheme for Ex-Servicemen;

(h) Providing resource support for the promotion of factoring companies, to mitigate the difficulties faced by small-scale units on account of delayed payment;

(i) Direct assistance to help widen the supply base of small-scale ancillary units and encouraging the existing units to undertake technology up gradation/modernisation for improving the quality and competitiveness of their products;

(j) Promoting employment-oriented industries in semi-urban areas so as to check unhealthy migration to urban areas.

SIDBI has done commendable work to assist the small-scale sector. A special scheme for acquisition of computers and accessories was introduced in 1991-92 to improve productivity and operational efficiency of small-scale units. SIDBI introduced two new schemes during 1992-93; equipment finance scheme for providing direct finance to existing well-run small-scale units taking up technology up gradation/modernisation and refinance for resettlement of voluntarily retired workers of NTC.

The other new scheme launched was venture capital fund exclusively for small- scale units, with an initial corpus of Rs. 10 crores. It enrolled itself as an institutional member of the OTC Exchange of India (OTCEI). SIDBI also provides financial support to National Small Industries Corporation for providing leasing, hire-purchase and marketing support to the industrial units in the small-scale sector.

There has been a continuous increase in the assistance provided by SIDBI to the small-scale sector.

5. National Small Industries Corporation:

NSIC provides finance to small scale units by way of supply of machinery on hire-purchase basis. The corporation takes upon itself the entire purchase responsibility beginning from locating competent suppliers to delivery of machines. Minimum assistance provided is Rs. 25,000 and an entrepreneur is required to pay 30% earnest money. Special concessions are given to tiny units, units in backwards areas, technocrats, SC/ST, physically handicapped and ex-Servicemen.

6. National Bank for Agriculture and Rural Development (NABARD):

NABARD provides industrial finance byway of refinance for artisans, village and cottage industries and other allied activities. It provides accommodation to State Co-operative banks for financing apex regional weaver’s societies in marketing or working capital for procurement of cloth. Refinance facility is also provided for financing working capital requirements of wire making co-operatives in Kerala. NABARD provides refinance to financial institutions under the Integrated Rural Development Programme (IRDP). It also provides refinance to banks against their term lending for semi-agricultural activities comprising cultivation, rearing of cocoons and purchase of appliances. NABARD also has a Soft Loan Assistance Fund Scheme to provide margin money to the prospective entrepreneurs.

7. State Financial Corporations (SFCs):

IFCI caters largely to the needs of large-scale and medium-scale enterprises. To cater to the needs of small scale industries, the State Finance Corporations Act, 1951 was passed. Under this Act, a financial Corporation has been set up in every State and Union Territory.

Forms of Assistance:

SFCs provide assistance in the following forms:

(a) Advancing long-term and medium-term loans to small-scale and medium-scale units organized as proprietorships, partnerships, companies and co-operative societies.

(b) Guaranteeing loans raised by small-scale units in the capital market.

(c) Guaranteeing deferred payments.

(d) Underwriting the issues of shares, debentures and bonds of industrial concerns.

(e) Subscribing to debentures of industrial concerns.

(f) Operating refinance schemes of IDBI.

(g) Disbursing loans as agents of State Governments.

Limits of Assistance:

The maximum assistance is Rs. 30 lakh for proprietorships and partnerships and 60 lakh for companies and co-operative societies. Industrial undertakings with a paid up capital plus fee reserves of more them Rs. 1 crore are not eligible for assistance. The assistance is generally repayable within a period of 10 years. Small-Scale units located in backward areas are provided assistance at a concessional rate of interest.

SFCs operate special schemes for women entrepreneurs, ex-Servicemen, SC/ST entrepreneurs, handicapped entrepreneurs, road transport operators, hotels, tourism, hospitals and nursing homes. Under the Composite Loan Scheme both term loan and working capital is provided.

SFCs assistance has two noteworthy features. First, assistance to units located in backward areas has been increasing rapidly and accounts for more than 40 per cent of the total assistance. Secondly, the share of small-scale units in the total assistance has increased steeply to 90% per cent.

Financial Institutions Supporting and Assisting Small Scale Industries in India – 25 Top Financial Institutions Supporting Small Scale Industries in India

1. Central Government Stores Purchase Programme:

The Government is the single largest buyer of a variety of goods from the small scale sector. With a view to increasing the share of purchases from the small scale sector, the Central Government Stores Purchase Programme was launched in 1955-56. The Programme is operated by the Director-General of Supplies and Disposals (DGS&D) for which the National Small Industries Corporation (NSIC) provides liaison services.

The Central Government Stores Purchase Programme provided an outlet for the products of industrial units in the country. Under the programme, DGS&D is responsible for arranging the purchase and delivery of all the stores required by the Central Government, except certain specified items excluded from the scope of this department.

2. SIDO and Marketing Assistance to Small Scale Industries:

The Small Industries Development Organization (SIDO) continues to be the nerve centre of the small industry development programme in the country. Although the actual marketing of small industry products remains outside its scope, SIDO’s work with regard to indirect marketing assistance to small scale units is akin to that of a friend, philosopher, and guide – it is the only institution which regularly collects and assimilates a wealth of useful statistics about small scale industries through a series of surveys and studies.

This includes industry outlook reports; industry prospect sheets; area surveys; and market surveys. In fact, the report on various surveys undertaken by the economic investigation division of the organization is the only source of organized market information available to small scale units. SIDO, through its network of Small Industries Service Institutes (SISIs), provides consultancy and training services in marketing management.

3. National Small Industries Corporation:

In line with the fast changing scenario of the small scale sector in the context of liberalization, National Small Industries Corporation (NSIC) has been reorienting its strategies for developing competitive ability in small scale units. In sharp contrast to specialized financial institutions, NSIC offers an integrated package of financial services of long range interest to the small scale sector.

In view of the importance of NSIC at the national level and the significant initiatives it has taken in the post liberalization period, it is planned to highlight the innovative approaches adopted by the corporation in the recent years, as part of the review of the working of the corporation for the 1991-97 period.

Contribution of innovative changes introduced in recent years is still small quantitatively, but the focus is on the direction of helping existing small scale units to strengthen their efforts at technological up gradation, adoption of new processes and technologies, diversification and improvement of R & D capabilities apart from export orientation.

The sequence of review is given here – changing role and 40 anniversary celebrations, software technology park, Techmart India, Udyog expo, technology transfer centre, strategic alliance of NSIC, CSIR, and APCTT for technology acquisition and modernization, technology up gradation and new technologies developed, international cooperation and project exports, product exports, industrial design centre, financial services scheme, enterprise building programme, hire purchase, equipment leasing and modernization, raw material assistance, marketing support programme, government stores purchase programme, review of operations and recognition gained by the corporation from various quarters.

The National Small Industries Corporation Ltd. (NSIC) was established by the Union Ministry of Industry in 1955 to promote, aid, and foster the growth of small scale industries in the country. NSIC continues to remain in the forefront of industrial development throughout the country with its multifaceted programmes and projects to assist the SSI sector.

On 19 April, 1995, NSIC celebrated its 40th anniversary. As the small scale sector continues to be an important instrument for enterprise building, dispersal of industries and employment generation, NSIC continues to perform its assigned role successfully in this endeavour.

Due to the changed industrial scenario and gradual globalization of the economy, small scale sector has to face stiff competition as the insulated and protected market conditions are no longer likely to be available. To enable SSI sector to meet this challenge, NSIC has been reorienting its policies and programmes. The NSIC is committed to strengthen the SSI sector to play a dominant role in the post liberalization period.

4. Small Industries Development Bank of India (SIDBI):

The Small Industries Development Bank of India (SIDBI), set up as a wholly owned subsidiary of the Industrial Development Bank of India (IDBI) in 1990, is the principal development financial institution. It co-ordinates the functions of other institutions engaged in similar activities.

SIDBI’s activities include refinancing of term loans granted by SFCs/ SIDCs, commercial banks and other eligible financial institutions and direct discounting/ rediscounting of bills arising out of sale of machinery/capital equipment/components by manufacturers in the small scale sector. It also provides term loans and equipment finance to existing well-run small scale units taking up technology up gradation/modernization.

SIDBI provides pre-shipment credit in foreign currency to SSIs, direct equity investment in SSIs, and financial assistance to enable well-run export-oriented units to acquire ISO 9000 series certification. Besides it provides assistance for infrastructure development, creation of marketing channels, and development of industrial areas.

Under schemes like seed capital, National Equity Fund (NEF), Mahila Udyam Nidhi (MUN), Self-employment Schemes for Ex-servicemen (SEMFEX), Self-employment Scheme under Prime Minister’s Rozgar Yojana (PMRY), Micro-Credit Scheme (MCS), and Rural Industries Programme (RIP), SIDBI provides equity type assistance to special target groups like new promoters, women, ex-servicemen, etc.

The extent of refinance on loans under these schemes has been increased from 75 per cent to 100 per cent in respect of term loan and working capital components. It also provides short term working capital loans, venture capital support, and different forms of resource support to banks and other institutions, support for credit rating, quality certification, and vendor development.

Technical and related support services are also provided to the small scale sector. Promotional and developmental activities of SIDBI have increased manifold in recent years.

5. Industrial Development Bank of India:

The Industrial Development Bank of India (IDBI) was established on 1 July, 1964 as an Apex National Development Bank in the field of industrial finance in India. For the first 12 years it functioned as a wholly owned subsidiary of the Reserve Bank of India. Subsequently, as a result of an increase in its activities and its diverse responsibilities, a legislation was enacted in 1975 for reconstituting IDBI as a wholly owned undertaking of the Union Government.

6. Technical Consultancy Organisations (TCOs):

National financial institutions IDBI, IFCI and ICICI have promoted state Technical Consultancy Organisation (TCOs) to facilitate availability of consultancy services and counselling to small scale entrepreneurs in particular for preparation of techno-economic feasibility reports, market survey, modernization, and diversification programmes, revival of sick units and preparing applications for financial institutions and banks. TCOs provide these services at reasonable rates.

TCOs also operate special schemes subsidizing the costs of preparing techno-economic feasibility report declared by institutions like IFCI as given below:

i. Schemes facilitating modernization of tiny small scale and ancillary units.

ii. Schemes to control pollution impact of small scale units.

iii. Schemes to aid women entrepreneurs

Subsidy ranging from 50 per cent to 75 per cent of the TCOs fees subject to certain ceilings is provided by IFCI to TCOs for passing it on to the beneficiary units. The schemes facilitate small scale and ancillary units to put together modernization packages and adopt improved and updated technology and methods of production.

Small scale and medium scale units with project cost up to Rs. 3 crore are also aided in devising measures for control of air, water, or soil pollution suited to their specific industrial activities to conform to the regulations imposed by bodies such as – Pollution Control Boards. Over 16 TCOs are currently functioning in different parts of the country.

7. Small Industry Development Corporations:

Small Industry Development Corporations were set up in most states to promote the small scale industrial units.

They perform the following functions:

i. Distribution of raw materials

ii. Provide marketing assistance

iii. Operate industrial estates and develop industrial plots

iv. Supply machinery on hire-purchase basis

v. Manage units taken over by the government

vi. Grant financial assistance.

Almost all the corporations now in operation undertake all these functions. Basically they procure and distribute raw materials, provide marketing support and supply machinery under hire-purchase arrangements.

The Andhra Pradesh Small Scale Industries Development Corporation has pioneered support to technocrats and craftsmen through hire-purchase industrial estates and provision of equity finance on joint venture basis.

8. Industrial Estates:

The programme of establishing industrial estates started in 1955 with the objective of encouraging and promoting small scale industries in India. Industrial estates provide built- in factory sheds, power and water facilities, roads, godowns, common facility services and workshops.

Other facilities are subsidy on rent for factory accommodation, allotment of sheds on hire-purchase basis or outright sale, concessional tariff for water and power supply, transport subsidy, etc. These facilities are exclusive of general facilities available to small scale industries.

Precisely, an industrial estate is a group of factories, constructed on an economic scale in suitable sites with facilities of water, transport, electricity, steam, bank, post office, canteen, watch and ward, and first-aid; and provided with special arrangements for technical guidance and common service facilities.

9. Trade Development Authority:

The Trade Development Authority (TDA) was established in 1970 as an autonomous non-profit society to assist export promotion. Since, it is a non-profit organization; it does not participate in direct commercial transactions but plays the role of a catalyst. The emphasis of TDA is on specific products, specific exporters, specific markets, and specific buyers, following the concept of selectivity.

TDA’s assistance to small scale sector is in the form of technical guidance through product adaptation and product development, import of samples, trade fairs, buyers-sellers meets, etc. In addition, TDA undertakes maker studies on its range of products in selected markets. TDA also compiles and brings out country bulletins conveying information generally required by exporters.

10. State Trading Corporation of India:

State Trading Corporation (STC), a fully Government-owned organization, is India’s premier international trading house. The STC assists the small scale industries in organizing themselves into viable groups to develop a reliable supply base for increasing their exports.

In addition, STC assists in upgrading the quality of their products, technical expertise, supply of equipment, and machinery at low interest rates. STC also introduced a few innovations aimed at specific product group export expansions through promotion of small manufacturers’ consortia and even common brand names.

11. Export Consortia:

Export Consortia formation was introduced in 1981 for providing strength to potential small scale units which might otherwise not be able to consider exporting their products. An export consortium of small industries can be formed by ten or more small scale units coming together under a common umbrella for developing exports of selected items/ products manufactured by them.

Individual units do not have to worry about the problems from combined or centralized operations. The consortia provides a focal point for organizing export marketing efforts of member units, negotiate and obtain orders, establish distribution channels, and organize common programmes for market and sales promotion.

Government of India extends all the facilities available to export houses to consortia of small units also which satisfy criteria relating to export performance membership and organization.

12. National Federation of Industrial Cooperatives:

The National Federation of Industrial Cooperatives Ltd. was established in 1966 to function as a catalyst for the promotion and strengthening of industrial cooperatives and to act as an apex agency to help industrial cooperatives market the product of their member cooperative societies.

NFIC’s marketing assistance role can be broadly summarized in the following points:

i. Opening branches, establishing godowns, and sales depots;

ii. Undertaking publicity programmes to promote salability of the products of members;

iii. Organizing/participating in exhibitions;

iv. Establishing liaison with prospective customers both within and outside the country;

v. Conducting/commissioning market research/surveys and studies and disseminating market information to its members.

13. Indian Institute of Foreign Trade (IIFT):

Indian Institute of Foreign Trade established in 1963 as an autonomous organization to promote small industry exports. During the last 25 years, the Indian Institute of Foreign Trade has been rendering valuable service to the cause of international trade in the field of both training and research; it has taken special interest in organizing research studies and publication of interest to the small scale sector.

Its recent innovative services like the preparation of film documentary a success story of a small manufacturer-exporter-training kits/packs to facilitate standard training practices for in-service personnel are of great value to both small-manufacturer-exporters and Indian institutions engaged in training of export marketing professional.

Export Credit Guarantee Corporation (ECGC) is an export promotion company that works under the command of the Department of Commerce, Ministry of Commerce 6c Industry, and Government of India. This organization is under the management of Board of Directors. The board consists of representatives of the Reserve Bank of India, Government, insurance, banking, and exporting community.

In terms of coverage of national exports, Export Credit Guarantee Corporation is the fifth leading credit insurer across the globe. ECGC offers covers of credit risk insurance to the exporters. It also provides assurance to the financial institutions for the benefit of the exporters For investing in the joint ventures abroad it offers overseas investment insurance to the companies of India. The investment is done in the form of loan or equity.

Export Credit Guarantee Corporation of India Ltd. helps the exporters in various ways.

Some of them include:

i. Offering insurance protection to exporters against payment risks

ii. Making it easy to obtain export finance from banks/financial institutions

iii. Providing information on credit-worthiness of overseas buyers

iv. Assisting exporters in recovering bad debts

v. Offering assistance in export-related actions

vi. Making information available on different countries with its own credit ratings.

Export credit insurance is necessary to avoid the risk factors of the exporters. It protects the exporters from the risks of payment and facilitates them to inflate their abroad trade with no fear of loss. Export Credit Guarantee Corporation of India Ltd. offers various services and products to the people.

There are several credit insurance policies, guarantees to banks, and special schemes as well. Standard policies, small exporters’ policy, buyer exposure policy, software project policy, IT- enabled services, construction work policy, and service policy are some of the credit insurance policies offered.

14. Export Promotion Councils:

Export Promotion Councils are an important source for locating foreign importers by providing products and prospective countries where goods can be exported. Small scale units can register with the respective export promotion councils by paying a registration fee at a substantially lower rate than applicable for units in the large scale sector.

Export Promotion Councils, TDA, and IIFT are regularly engaged in collection of data through various surveys and bridging the information and communication gap pertaining to overseas demand, price trends, consumer preference, change in design and fashion, competitions, tender and trade enquires, etc.

15. Export-Import Bank:

EXIM Bank was established in January 1982 with a view to providing financial assistance to exporters and importers and functioning as a nodal body for coordinating the work of the institutions engaged in financing export-import of goods and services with a view to promoting the country’s international trade.

The powers of Exim bank are summarized in the following points:

i. Grant loans and advances to commercial banks or other eligible financial institutions by way of refinance of export-import loans.

ii. Underwriting security issues of any company engaged in export or import.

iii. Accept, collect, discount, rediscount, purchase, sell or negotiate within or outside India, bills or promissory notes relating to export or import.

iv. Open, grant, issue, and confirm letters of credit and collect bills and other documents thereunder.

v. Undertake development and merchant banking activities related to export-oriented units.

vi. Provide investment finance to Indian exporters for equity participation in joint ventures abroad.

vii. Other activities related to foreign trade like buying, selling, or dealing in foreign exchange.

Through its innovative packages of financial assistance it has successfully promoted Indian exports. It has established an Export Development Fund for the purpose of research, training, survey, and market intelligence in connection with the country’s international trade.

EXIM Banks export financing schemes comprise of the following:

i. Direct financial assistance to Indian exporters to enable them to extend term credit to overseas importers of eligible Indian goods.

ii. Pre-shipment credit to Indian exporters to enable them to buy raw materials to facilitate production for export.

iii. Lines of credit facility to enable overseas financial institutions, foreign governments, etc. to lend term-loans to foreign importers to finance import of Indian goods.

iv. Refinance of export credit to commercial banks authorized to deal in foreign exchange,

v. Export bills rediscounting scheme of the bank enables commercial banks in India to fund post shipment export credit to Indian exporters.

In 1984, EXIM introduced a new financial programme to support deemed exports in India. Deemed exports occur in case of specified transactions within India which result in foreign exchange earning or savings of foreign exchange. For example, supplies made by Indian manufacturers to units in Free Trade Zones and 100 per cent export units qualify as deemed exports. The Bank offers deferred credit at an internationally competitive rate to eligible deemed exports either through the supplier or directly to the buyer.

16. Industrial Reconstruction Bank of India (IRBI):

Industrial Reconstruction Bank of India (IRBI) was established in 1971 to tackle the problems of industrial sickness especially in the small scale sector arising out of rapid industrialization of the economy. In 1986 the corporation reconstituted as the Industrial Reconstruction Bank of India.

IRBI acts as a principal credit and reconstruction agency for industrial revival and coordinates work of other institutions engaged in similar work. IRBI undertakes revival of sick units by modernization, expansion reorganization, diversification or rationalization of industries.

IRBI’s primary responsibility is to provide financial and technical assistance and guidance to sick industrial units which are not in a position to get assistance from normal banking channels. It grants reconstruction loans and guarantees on soft terms. Assistance may be in the form of term-loans, equipment leasing, hire-purchase, line of credit to small scale units, and promotional financing.

An equipment leasing scheme was introduced in 1982 so that industrial units could replace and acquire necessary capital equipment on lease basis spread over a number of years. IRBI extends financial assistance up to Rs. 5 lakh to sick small scale units whose individual requirements are Rs. 10 lakh or less under its lien of credit scheme which operates through State level institutions.

17. Industrial Finance Corporation of India (IFCI):

Industrial Finance Corporation of India (IFCI) is the first national level Development Bank set up in 1948, soon after Independence by an Act of Parliament with the objective of providing medium and long term finance to eligible industrial concerns in the country.

IFCI’s activities may be broadly classified into:

i. Project Financing Operations and

ii. Promotional Activities.

i. Project Financing Operations:

Project Financing Operations benefit medium-large and large sized industrial projects organized in co-operative or corporate sector. IFCI provides support measures to improve productivity of human and material resources and accelerate the process of industrialization.

As part of its promotional activities, it participates with IDBI and ICICI to provide a range of services.

IFCI has also its own promotional schemes with the following objectives:

(a) Fill in gaps in promotion and growth of industries in rural, tiny, and small scale sector.

(b) Provide needed guidance in modernization, market surveys, marketing assistance, quality control, etc., and also in identification, formulation, implementation, and operation of industrial projects in rural, tiny, and small/medium scale sectors.

(c) Improve productivity of material and human resources.

ii. Promotional Schemes:

These are broadly sub-divided into the following three categories:

a. Consultancy Fee Subsidy Schemes:

Subsidy under these schemes is routed through technical consultancy.

Subsidy is available for following specific purposes under distinct schemes:

(1) Scheme of subsidy for meeting cost of feasibility studies to small entrepreneurs in rural, cottage, tiny and small scale sector,

(2) Scheme of subsidy for promotion of ancillary and small scale industries,

(3) Scheme of subsidy to new entrepreneurs for meeting cost of market research/surveys.

(4) Scheme of subsidy for providing marketing assistance to small scale units.

(5) Scheme of subsidy for revival of sick units in tiny and small scale sectors,

(6) Subsidy scheme for implementing modernization programme of small scale sector.

(7) Scheme of subsidy for control of pollution in small and medium scale units.

b. Interests’ Subsidy Schemes:

Subsidy is available for following specific purposes under distinct schemes:

(1) Interest subsidy for Self-Development and Self-employment of Unemployed Young Persons.

(2) Scheme of interest subsidy to women entrepreneurs,

(3) Interest subsidy for encouraging adoption of indigenous technology.

(4) Scheme of interest subsidy for encouraging quality control measures in the small scale sector.

c. Assistance Schemes:

These include:

Schemes of assistance for encouraging quality control measures in small scale sector.

18. Industrial Credit and Investment Corporation of India Limited (ICICI):

ICICI as a development bank set up in 1955 to encourage and assist industrial development and investment in India at the initiative of World Bank, Government of India, and representatives of industry. (ICICI Bank was established in 1994 for banking operations.)

Its main objectives are as follows:

i. To encourage and assist industrial investment in the private sector.

ii. To provide scarce foreign currency loans.

iii. Encourage and promote expansion of capital markets.

Forms of Assistance:

i. Underwriting of public and private issues of securities

ii. Direct subscription

iii. Rupee loans repayable over a maximum of 15 years

iv. Foreign currency loans for importing capital equipment and technology

v. Guaranteeing payments for credits given by Indian and foreign sources

vi. Credit facilities to indigenous manufacturers for promoting sale of industrial equipment on deferred payment

vii. Equipment leasing facility

viii. Merchant banking services

ix. Project counselling for non-resident Indians.

In addition to direct finance, ICICI offers a variety of services intended to promote industrial development.

Some of them are as follows:

a. Export development

b. Leasing

c. Project promotion

d. Backward area development

e. Rural development

f. Entrepreneurship Development Institute of India

g. Financing of Industrial Export Products under IBRD Act.

19. Export Credit Guarantee Corporation (ECGC):

With a view to enabling the small scale sector to participate to a greater extent in the export activities of the country, the Export Credit Guarantee Corporation provides special facilities to small scale exporters by offering a higher percentage of cover and procedural relaxations under its policies and programmers.

The ECGC offers guarantees to financial institutions against commercial risk and political risks involved in exporting the products to enable the exporters to obtain finance at pre-shipment and post-shipment stages.

20. Marketing Development Assistance (MDA):

The marketing development assistance is administered by a committee under the chairmanship of the union commerce secretary and is utilized for the following purposes:

i. Product promotion/commodity development to cover expenditure on Cash Compensatory Support (CCS) for various export products as well as transport subsidy on goods for export purposes;

ii. Cash Compensatory Support for deemed exports, supplementary CCS in lien for duty drawbacks for deemed exports;

iii. Export credit facilities to pay subsidy of 1.5 per cent towards interest charges on export finance provided by the banks to exporters (this scheme is administered by RBI, Mumbai);

iv. To protect exporters against exchange fluctuations on deferred payments up to 15 years;

v. To pay grant-in-aid to export promotion councils;

vi. To pay grant-in-aid to approved organizations, export houses, consultancy organizations and individual exporters, and undertake the following –

a. Market research, commodity research, area survey, etc.

b. Export publicity and dissemination of information;

c. Trade delegations and study teams;

d. Participation in trade fairs and exhibitions;

e. Establishment of office and branches in countries abroad;

f. Research and development schemes, etc;

g. Any other scheme that would promote the development of market for Indian goods abroad.

The grants to Export Promotion Councils on their administrative expenditure are given at a uniform rate of 60 per cent and grants to them on their export promotional expenditure range from 25 per cent to 60 per cent depending upon the nature of promotional activity.

21. Andhra Pradesh State Trading Corporation (APSTC):

Established in 1970, APSTC has been helping the skilled artisans with facilities for marketing their products within and outside the country.

Its main objectives and functions include the following:

i. Promotion of exports from the state.

ii. Import of various-materials required by the industry particularly in the small scale sector in the state.

iii. Undertake internal trading in selected goods identified from time to time.

The corporation has various emporia and showrooms in various places such as – New Delhi, Rajamundry, Vijayawada, Visakhapatnam, Hyderabad, Tirupati, Warangal, and Anantapur for the marketing of goods manufactured by small entrepreneurs The corporation, a registered Export House, has also been engaged in the export of various items, viz., handlooms, engineering goods, chemicals, forest products, etc.

It also serves as a term lending institution in the state, which provides adequate and timely financial assistance to entrepreneurs in order to promote industrial development in the state. The Corporation sanctions loans on the security of primary as well as collateral security.

A brochure containing the check list as to the various papers required for completion of legal formalities for securing the loan sanctioned by the Corporation is brought for the convenience of the entrepreneurs. After receipt of the sanction letter, the entrepreneur has to complete the legal formalities securing the loan sanctioned as stipulated in the sanction letter. After completion of legal formalities, funds will be released as per eligibility.

Andhra Pradesh State Financial Corporation (APSFC) also extends financial assistance for setting up industrial units in small and medium scale sector, and service enterprises in the state. The Corporation extends finance basically through two products – term loans and working capital term loans.

22. Entrepreneurship Development Institute of India:

The Entrepreneurship Development Institute of India (EDII) is a national organization promoted by All India Financial Institutions such as – IDBI, ICICI, IFCI, and SBI and actively supported by the government of Gujarat. Established in 1983, EDII has been actively accelerating entrepreneurship development activities in the country. Its main task now is to ensure the effectiveness of entrepreneurship development programmes designed by it.

Acting as a national resource centre of expertize and know-how, EDII has taken EDPs to less developed states and remote backward areas where the need to identify indigenous expertize, to locate and develop entrepreneurs is not available. EDII has stepped into fill the gap. The catalytic and supportive roles of EDII for the nation-wide coverage of EDP awareness as also the design of its programmes with innovations have met with considerable appreciation.

23. Integrated Rural Development Programme (IRDP):

In spite of planned intervention and poverty alleviation measures taken by the Government, the problem of rural poverty and unemployment is increasing day by day. Keeping with this in view, the Government introduced a new programme called the Integrated Rural Development Programme (IRDP) aimed at solving the twin problems of poverty and unemployment to a large extent.

The principal objectives of IRDP are elimination of unemployment and underemploy­ment and eradication of poverty. While substantial additional employment opportunities can be created through agriculture and allied programmes, it may be realized that the primary sector alone may not be able to cope with the burning problem of unemployment.

As such under IRDP special attention has been paid on the development of secondary and tertiary sectors so as to generate employment opportunities for rural masses. In this context, village and small scale industry is such a sector, which if developed and given proper attention can solve the problem of rural unemployment to a great extent. Realizing these facts the Government included the development of village and small industries under IRDP.

Under the programme, the planning strategy for the rural industries sector aims at providing reasonable income to rural artisans and substantial increase in employment opportunities. Measures have to be taken to improve the income of existing artisans, and the same time new artisans and entrepreneurs have to be brought into the fold of self- employed people.

This calls for an integration of the welfare-oriented schemes with the planning process that may be drawn up after taking the resource endowments of the area into account. IRDP has already been extended to cover all the blocks in the country.

24. Seed Capital:

To bridge the gap in financial resources of professional promoters, seed capital assistance is provided up to 20 per cent of the cost of a project of Rs. 2 lakh whichever is less to small/medium scale units. Seed capital scheme assistance up to Rs. 15 lakh is provided to eligible entrepreneurs whose requirement exceeds Rs. 2 lakh.

In case of proprietorship and partnership concerns it is in the form of loan at the nominal rate of one per cent for medium and large scale products. If the project’s cost ranges from Rs. 20 lakh to Rs. 200 lakhs, seed capital assistance is a big way of subscription to equity preference shares in case of public limited companies, and preference shall be in case of private limited companies. Irrespective of the constitution of the unit, this assistance is available in the form of soft loan.

25. District Industries Centre:

The concept of District Industries Centres was developed during the Janata Government in 1977. DICs provide a focal point at the district level for promotion of small, tiny, village, and cottage industries, widely spread in rural and semi-urban areas.

They aim at providing all essential services and all possible practical support at pre-investment, investment, and post-investment stages of enterprise development. The main thrust of this programme is on the development of such industrial units in rural areas and small towns for creation of large employment opportunities.

The DICs function as the nodal agencies for providing requisite support services to village and small entrepreneurs under a single roof. They cover all aspects like availability of resources, supply of machinery and equipment, and raw materials, effective arrangement of credit facilities, market assistance and quality control, research and training.

The DICs are also concerned with the sanction for setting up of units in rural areas and ensuring their continuous viable operation by provision of facilities. They are also developing close linkage between rural development blocks and specialized development institutions.