The father of our nation, Mahatma Gandhi, believed that national wealth would be created only by developing and promoting small-scale industries. True to his economic beliefs, the Micro, Small and Medium Enterprises (MSME) sector plays a huge role in offering employment to millions of people and contributing to the GDP of the nation. 

The government of India has launched several initiatives to promote the growth of the MSME sector. One such initiative is the SIDBI (Small Industries Development Bank of India). Here, in this guide, we offer you all that you need to know about the SIDBI – its history, vision, benefits, schemes offered and how to benefit from it and more. 

What is SIDBI? 

The Small Industries Development Bank of India is a wholly-owned subsidiary of IDBI (Industrial Development Bank of India). The SIDBI was established on 2nd April 1990, following a special act in the Indian parliament. It is headquartered in Lucknow, Uttar Pradesh, with various branch offices all across the country. 

The SIDBI acts as the primary financial institution in the country that is responsible for the growth of the MSME sector – by offering financing services. Besides offering finances to qualified MSMEs, it also focuses on clean energy production. It helps MSMEs grow, acquire funds, market their products and invest in R&D. The bank offers various loans that help MSMEs meet their capital requirements. 

Mission and Vision of SIDBI

Mission – SIDBI aims to facilitate and strengthen credit flow to MSMEs. Besides offering financial assistance to MSMEs, SIDBI also provides developmental support to the MSME eco-system. 

Vision – SIDBI aims to emerge as the go-to institution for financing support for MSMEs. 

Functions of SIDBI

Wondering what the actual role of the SIDBI is? Check out the various functions done by the bank. 

  • If an MSME has borrowed from a primary lending institution (PLI), the SIDBI offers refinancing services for the loans availed. 

  • The SIDBI discounts and rediscounts bills of MSMEs. 

  • The SIDBI partners with commercial banks to provide timely working capital and term loans to MSMEs. 

  • SIDBI has several arrangements and partnerships with banks, financial institutions, government bodies and international organisations to help in the holistic development of the MSME sector. 

  • It helps small-scale industries expand their marketing channels, both in India and overseas, as well. 

  • The SIDBI focuses on the development of industries that offer employment, especially in rural and semi-urban areas, thereby creating ample employment opportunities in the country. This also helps in controlling the relocation of a large number of labourers to congested urban centres. 

  • It also offers assistance and guidance for modernisation of small-scale industries. 

  • Apart from offering financial assistance to MSMEs, the SIDBI also provides entrepreneurs and small-scale industrialists with skill enhancement. 

  • The SIDBI also partners with other organisations that help in the growth of MSMEs like the SSI Development Corporations. 

  • It acts as the nodal agency for various government schemes like the CLCSS, TUFS, IDLSS, FPTUFS, TEQUP, etc. 

To phrase it in a nutshell, the SIDBI plays a crucial role in the upliftment and up-gradation of the MSME sector. It helps MSMEs address their unique capital requirements. 

Top 5 Benefits offered by the SIDBI to MSMEs

  • Credits tailored to suit the need of MSMEs – One of the biggest difficulties faced by MSMEs in India is availing the required capital from banks and other lenders. SIDBI offers several loan products that are suited to the specific needs of MSMEs. 

  • Affordable Interest Rates – Since the SIDBI has partnerships with several banks and financial institutions in India and overseas (like the World Bank), it offers loans at attractive interest rates to MSMEs. 

  • Collateral-free Funding – Businesses can avail loans up to Rs. 1 crore from the SIDBI without submitting collateral. 

  • Not just Financial Assistance – Apart from providing loans, SIDBI also helps MSMEs grow by providing valuable entrepreneurial guidance and assistance. 

  • Transparent Loan Process – The loan application process and approval decisions are transparent. Additionally, SIDBI makes the interest rates, processing charges and other fees transparent, with no hidden charges. 

Finance Facilities offered by SIDBI 

MSMEs can avail the following four categories of finances from SIDBI:

  1. Direct Financing 

This includes term loans, working capital loans, loans against receivable, foreign currency loans, energy-saving schemes and more. The major categories of direct loans include:

 Loan Type  Purpose    Loan Amount  Repayment Tenure

I nterest Rate

 SMILE (SIDBI Make in India Soft Loan Fund for MSME)  It focuses on providing capital to new enterprises in the manufacturing or services sector  Minimum Rs. 10 lakhs for equipment finance

 Minimum Rs. 25 lakhs for other purposes
 Maximum up to 10 years

 Competitive inter est rates

 SEF (SMILE Equipment Finance)  This loan product is exclusively for MSMEs that want to purchase equipment  Starts from Rs. 10 lakhs  Maximum up to 72 months (6 years)

 As per SMILE

 Loans under Partnership with Original Equipment Manufacturer  It helps MSMEs purchase equipment and machinery from OEMs  Maximum up to Rs. 1 crore  Maximum up to 60 months (5 years)

 As per SMILE

 STFS (SIDBI Trader Finance Scheme)  This loan is exclusively for retailers, wholesalers and traders who have been running a business for at least three years  Minimum: Rs. 10 lakhs;

 Maximum: Rs. 1 crore;
 Depends on the cash flow of the borrower’s business

 Competitive interest rates

 SPEED (Loan for Purchase of Equipment for Enterprise’s Development)  This loan scheme is available for both new and existing customers of SIDBI. The business must be in operation for a minimum of 3 years  Up to Rs. 1 crore for new customers;

 Up to Rs. 2 crores for existing customers;
 2 to 5 years

 9.25% to 10% per annum

 SPEED Plus  This loan product offers up to 100% financing for high-end machinery  Up to 100% of the machinery cost
Maximum up to Rs. 2 crores for new customers

 Up to Rs. 3 crores for existing customers
 2 to 5 years

 8.5% to 10.5% per annum

 TULIP (Top-Up Loan for Immediate Purposes)  Existing borrowers can top-up their loans, with quick sanction of just 7 days  30% of existing exposure or 20% of net sales  Maximum of 5 years

 10% to 11% per annum

 STAR  This loan product helps MSMEs reduce their power bills by investing in sustainable energy sources like solar power  Minimum – Rs. 10 lakhs

 Maximum – Rs. 2.5 crores


  1. Indirect Finance 

Besides offering direct loans to MSMEs, SIDBI also offers indirect assistance like:

  • Refinancing loans borrowed from PLIs (banks and other NBFCs). This helps to increase the cash flow of PLIs, which, in turn, increases further lending to MSMEs. 

  • Indirect financing by offering assistance to banks, NBFCs and SFBs (Small Finance Banks) for lending to MSMEs. 

  1. Micro-Lending 

SIDBI offers micro-lending to entrepreneurs and small businessmen under the following schemes:

  • Micro-lending to women entrepreneurs 

  • Responsible finance initiatives to support banks and other NBFCs that offer micro-lending

  • Help entrepreneurs move from microfinance to bigger loans

  1. Venture Capital 

SIDBI has a wholly-owned subsidiary, the SIDBI Venture Capital Ltd, that offers growth capital to MSMEs via VC funds. Some of the funding offered by this subsidiary includes India Aspiration Fund, Aspire Fund, Funds of Funds for Start-ups and more. 

How to apply for a loan from SIDBI?

Interested borrowers can apply online using the site udyamimitra dot in. This is the official digital portal of SIDBI and makes it easy for MSMEs to apply for any type of enterprise loan. Here are the steps to be followed. 

  • Step 1: Visit the site udyamimitra dot in. Click on Apply Here. 
  • Step 2: Register 
    • The loan application process has the following four steps: Register, Choose Hand Holding Support, and Fill in the application form and Apply to the Lender. 
    • Enter the expected loan amount and choose your preferred scheme. Make sure to check your eligibility for various schemes. Enter the registration details like applicant name, address, contact number, email address, location of the business, etc. 
  • Step 3: Complete the Application Form
  • Once you provide all the required details, that application form is accepted and a confirmation email will be sent to your registered mail id. The team from SIDBI will get in touch with you to confirm your eligibility and to help you with the loan application. 

EndNote: Grow your MSME with the Right Financial Support

SIDBI offers several highly beneficial financing products for MSMEs. If you’re an entrepreneur or a small business owner, you can avail the right loan product that meets your financial requirements and take your MSME to the next level. For any further help on MSME funding, get in touch with our team at CreditMantri.