Analysis of Credit Linked Capital Subsidy Scheme

Small Industries Development Bank of India

Under the supervision of Mr. K Ravindra Pai

(Assistant General Manager)

Summer Training presentation by: Syed Asad Husain Zaidi (10-MBA-25) Shayan Khan (10-MBA-37)

SIDBI: An Introduction
Established on April 2,1990.

Established through a charter known as Small Industries Development bank of India Act, 1989. Principal Development Financial Institution for :
-- Promotion -- Financing -- Development of Industries in the small scale sector and -- Co-ordinating the functions of other institutions engaged in similar activities.

SIBDI: Mission & Vision

Mission To empower the Micro, Small and Medium Enterprises (MSME) sector with a view to contributing to the process of economic growth, employment generation and balanced regional development.

Vision To emerge as a single window for meeting the financial and developmental needs of the MSME sector to make it strong, vibrant and globally competitive, to position SIDBI Brand as the preferred and customer friendly institution and for enhancement of share - holder wealth and highest corporate values through modern technology platform.

SIDBI: Shareholding
The entire issued capital of Rs.450 crore has been divided
into 45 crore shares of Rs.10 each. Of the total Rs.450 crore subscribed by IDBI, while setting up of SIDBI, 19.21% has been retained by it and balance 80.79% has been transferred, divested in favour of banks, institutions, insurance companies owned and controlled by the Central Government.

SIDBI: Mandatory Objectives

Financing Promotion Development Coordination

What is MSME?
It is defined in two sectors: 1. For Manufacturing sector:

MSME Cont.
2. For Service Sector

Credit Linked Capital Subsidy Scheme

A Scheme for technology up gradation of the Small Scale
Industries(SSI) by the Ministry of Small Scale Industries. It provides upfront capital subsidy to SSI units including tiny, khadi, village and coir industrial units, on credit availed by them for modernization of production equipment's and techniques. It provides credit on the cost of Plant & machinery. Initially before amendment provided 12% capital subsidy to SSI

units, for induction of well established and improved technology in

the selected sub-sectors/products under the scheme.

CLCSS: Cont.
The eligible amount of subsidy calculated under the prerevised scheme was based on the actual loan amount not exceeding Rs. 40 Lakh.

In the FY 2004-2005, the CLCSS scheme was amended as a

large percentage of SSI units continued with outdated technology and Plant & Machinery.

CLCSS: After Amendment

The ceiling on loans under the scheme has been raised from Rs.
40 lakh to Rs. 1 crore. The rate of subsidy has been enhanced from 12 percent to 15 percent. The capital subsidy is to be calculated with reference to purchase price of plant & machinery, instead of term loan disbursed to the unit.

The categorization of SSI units in different investment slabs on

the basis of present investment has been removed. The above amendments are effective from September 29, 2005.

CLCSS: Basic Sectors/ Sub-Sectors

It is basically classified into 45 broad categories of industries. Some of them are: Bio-Tech industry. Common Effluent Treatment Plant. Corrugated Boxes. Drugs & Pharmaceuticals. Dyes & Intermediates. Industry based on Medicinal and Aromatic Plants. Locks. Cosmetics. Readymade garments. Etc.

CLCSS: Nodal Agencies

SIDBI and NABARD continue to act as nodal agencies for the

implementation of this scheme.

After February 17, 2006 the following nine Public Sector banks have been inducted: State Bank of India Canara Bank Bank of Baroda Punjab National Bank Bank of India Andhra Bank State Bank of Bikaner & Jaipur Tamil Nadu Industrial Investment Corporation The National Small Industries Corporation