The Small Industries development bank of India commonly known as SIDBI has embarked on an aggressive digitization journey to address the huge credit gap that still exists in the MSME sector.
SIDBI which has primarily been a refinance institution to banks and NBFCs is now looking to significantly enhance its direct lending portfolio to MSMEs.
Currently direct lending contributes a marginal 10-15% of its business whereas 85-90% of its business comes from indirect finance to banks and NBFCs(non-banking finance corporations).
As of FY 22 SIDBI’s direct finance was in the range of Rs 15000-16000 cores. ‘We want this number to substantially increase in the next 3-5 years and probably be in the range of 20%’ said Mr V Satya Venkata Rao, Deputy Managing Director, SIDBI in an exclusive interview to Vizag Industrial Scan. SIDBI is the principal financial institution set up under an Act of Parliament for promotion, financing and development of the Micro, Small and Medium Enterprise (MSME) sector.
‘As our focus is MSMEs we want to address their most pertinent need i.e. need for credit’ said the deputy MD.
The parliamentary standing committee on finance too has asked SIDBI to broaden its footprint in the direct lending sector to MSMEs.
And in order to quickly achieve scale the development bank for MSMEs has opted to aggrandize its digital footprint rather than go the brick and mortar way.
With digitization the bank is looking to streamline and simplify its internal operations to provide a quicker turnaround.
‘With the digitization process our turnaround time will fall from 15 days to just 3-5 days. This will in turn push up the number of proposals too’ said the deputy MD.
As part of the digitization process, it is also executing a herculean task of formalisation of micro enterprises wherein the government of India through the ministry of MSME has appointed SIDBI as the implementing agency to register (in the Udyam Assist platform) the plethora of micro enterprises present across the country and bring them in the formal sector.
Getting MSMEs to go Green
In addition the bank is also advising MSMEs on lowering their carbon footprint and helping them move towards more greener pastures.
SIDBI is consulting clients on removing old and outdated machinery while stressing on adopting solar and other energy efficient means of power utilization.
Getting MSMEs Online
SIDBI is also a stakeholder in the much talked about ONDC platform which aims to provide micro, small artisans an online platform to sell their products.
ONDC (Open Network for Digital Commerce) is a first-of-its-kind initiative to democratise the country’s ecommerce ecosystem. ONDC and SIDBI had last year signed a MoU to change the landscape of small industries by bringing them into the ONDC network and accelerating their participation.
SIDBI in AP
Out of the 80-90 branches across India SIDBI currently has 2 branches in AP and 1 in Hyderabad. ‘We would be keen on expanding our operations in AP’ said Mr Rao.
The bank also lends to state governments helping them build soft and hard infrastructure. State governments can directly apply to them to avail finance.
Udyam Assist Platform (UAP) aims to register informal micro enterprises and bring them into the formal sector to reap benefits under priority sector lending of banks.
It is a formalisation project by the MSME ministry with SIDBI as its implementing agency to
complement the Udyam registration portal of the ministry for MSMEs.