MODULE - 3

INSTITUTIONS SUPPORTING ENTREPRENEURS

 CONTENTS

 Introduction
Small industry financing development countries
Brief overview of financial institutions in India
Central and state level institutions
Indian institute of entrepreneurship
Latest industrial policy of government of india
 Introduction– Micro, Small and Medium Enterprises

• With around 63.4 million units throughout the geographical

expansions it has contributed 6.11% of the manufacturing GDP
• Total India’s manufacturing output is around 33.4%
• The major MSME of 55% are in UP, Maharashtra, TN ,WB,
Karnataka and AP
• Major Sectors – Food product (19%),Textiles(14%),Metals related
(15%),Chemical related (8%).
Major issues in MSME

 Credit facilities
 Production and marketing
 Labour
 Taxation
 Infrastructure , Technology and skill
 Competition in the market.
 Small Industries financing in developing countries

• The development of small scale industries is primarily the responsibility

of the state government with the help of the central government such as
planning and coordinating the basic development.
• Small Industries Development Organization (SIDO) is head by development
commissioner and function in coordinating with central ministries and with the
Planning commission, State Governments.
• They provide technical ,managerial ,economic and marketing assistance to the
small scale units.
• The main function of SIDO include coordination , industrial development and
industrial Extension service
• The small scale industries are supports and renders specialized services in
Marketing , Infrastructure , Technology upgradation, Financing and
Entrepreneurship development through Government institutions.
 Lets talk abt the Overview of Financial
Institution
A financial institution is a company engaged in the business of dealing with financial
and monetary transactions such as deposits, loans, investments, and currency
exchange
• Financial sector plays an important and crucial role in the
overall development of a country.
• It acts as a agent for the transfer of resources from net savers
to net borrowers. . (that is, from those who spend less than
their earnings to those who spend more than their earnings).
• This financial institutions have traditionally been the major
source of long-term funds for the economy.(In the time of 1900 to
2000 this institutions were the only place where long trem funds were provided and
were responcible for the growth of the economy)
• The most important Element of this sector is the financial
institutions.
 Continued..
• Provide assistance to new enterprises, small and medium firms as
well as to the industries established in backward areas.
• They help in reducing regional variance by inducing widespread
industrial development.
• The Government of India, in order to provide adequate supply of
credit to various sectors of the economy, has evolved a well
developed structure of financial institutions in the country.
• They can even control and manipulate the money flow in an
economic market.
• Usually recognized as specialized institution, they are also
recognized as "Development Bank" or Term Lending Institution or
"Special Development Financial Institution
• They can be operated at several scales from local community credit
union to International Investments bank
Financial institutions are categorised into 2 depending
upon the geographical coverage of their operations

• Central level institutions

• State level institutions
Central Level:

 They provide long and medium term loans at

reasonable rates of interest. They subscribe to the
debenture issues of companies, underwrite public issue
of shares, guarantee loans and deferred payments, etc.

State Level:
 The State level institutions are mainly concerned with the
development of medium and small scale enterprises, but they
provide the same type of financial assistance as the national level
institutions.
They act as a spark for promotion of investment and
industrial development in the respective States
 Central Level Institutions
A breif overview of the instition is given a detailed explainatio will be done in the
further sides

Financial Aid (they Provide Finaincial support)

•SIDBI – Small Industries Development Bank of India
•NABARD – National Bank for Agriculture & Rural Development
•IDBI - Industrial Development Bank of India
•SIDO - Small Industries Development Organization
Non-Financial Aid
•IIE - Indian Institute if Entrepreneurship
•NISIET - National Institute of Small Industry Extension & Training
•EDII - Entrepreneurship Development Institute of India
•NIESBUD – National Institute of Entrepreneurship and Small Business
Development
 State level Institutions:
Financial Aid
•SFC - State Finance Corporation,
•SIDC/SIIC – State Industrial Development/Investment Corporation
•SSIDC - State Small Industrial Development Corporation
•SIDBI – Small Industries Development Bank of India

Non-Financial Aid
•DI - Directorate of Industries,
•DIC – District Industries Centre
Other then Cental and state level other institions are
Fund-Based Institutions :

• Small Industries Development Bank of India (SIDBI)

• Commercial Banks  State Financial
• Corporations (SFCs)
Small Industry Development Organization
(SIDO)

• Constituted in 1954
• To render required support for the development of ancillary units
• To evolve a national policy for the development of small-scale industries
• To reserve items for production for SSI
• To render marketing assistance to small-scale industries to effectively sell
their products
 Services of SIDO
1. Entrepreneurship training & Man power Development
2. Extension service
3. Marketing support
4. Testing
5. Technology trends and trade reports
6. Prototype Development and Training Centre
National Small Industries Corporation
(NSIC)

• Set-up in 1955
• For promoting, aiding and fostering the growth of small scale industries
• Marketing Support Program
• Technology Upgradation support
• To provide professional skills to all the employees
• Enhancing competition
 District Industries Centres (DICs)

• Established in 1978
• Promotion of cottage and small scale industries in rural areas
and small towns
• Industrialization process in the district
• Raw material and Technical support
• Guides and assists Entrepreneurs
 Services of DIC

• Economic investigation of local resources

• Supply of Machinery & Equipment
• Provision of raw materials
• Arrangement for credit facilities
• Marketing
• Quality inputs
• Consultancy & extension services
Small Industries Development Bank of India
(SIDBI)
• Established in 1990
• Direct and Indirect assistance
• Discounts bills
• Promotion
• Development of Industry in the small scale sector
• Co-coordinating the functions of other institutions engaged in similar
activities
 Scheme of SIDBI
• Scheme of Cottage, village & tiny industries.
• Equipment's refinance schemes
• Scheme for small road transport operators
• Scheme for Marketing Activities
• Scheme for Medical Professional
• Scheme for tourism related activities
• Scheme for women entrepreneurs
• Special scheme for assistance to Ex-service men
• Line of credit against PCFCs loans of commercial banks
NABARD- NATIONAL BANK
FOR AGRICULTURE AND
RURAL DEVELOPMENT
Founded: 12 July 1982
HQ: Mumbai
Purpose: Development assistance and
poverty reduction

Started with authorized share capital of Rs.500cr. RBI contributed 50% of the
share capital while remaining 50% was contributed by government.

As per the recent updates the paid up capital is Rs.6700cr with the
government holding Rs 6700cr (100% share ) and the authorised capital is
Rs.30000cr
 FUNCTIONS OF NABARD
• Short term , medium term and long term credits

• Long term loans- state government to subscribe share capitals

• Give loans to approved institutions -invest in securities- contribute -engage

agricultural and rural development

• Co-ordinate the activities of central and state governments and other all India
and state level institutions

• Inspect- Co-operative Banks, RRB and Co-operative societies

• Promote research in agriculture and rural development

• Serve as a refinancing agency for the institutions providing finance to rural and
agricultural development
 SCHEMES OF ASSISTANCE
• Short Term Credits: Agricultural operations or marketing of crafts,-Marketing and distribution of inputs
necessary for agriculture and RD - promotion - Bonafide commercial or trading transactions,-Production
of marketing activities of artisans, small scale industries, industries in the tiny and decentralized sectors,
villages and cottage industries or of those engaged in the fields of handicrafts and other rural crafts.

• Medium Term Credit: 18 months and 7 years for agriculture and rural development purposes.

• Long Term Credit: long term loans & advances by way of refinance through financial institutions like
loans development banks and RRB , scheduled banks and OFI -25 years.- advances to state governments -
20 years -to subscribe directly or indirectly to the share capital of co-operative credit societies.

• Conversions/Rescheduling facilities: convert short term loans granted to commercial banks and RRB
into medium term loans

• Financing of cottage/village industries: refinance assistance for rural development activity, including - to
production of goods and services, promotion of cottage industries and other rural crafts.
PROBLEM

• Over dues of loans

• 35% of loans were over due

SOLUTION
• Created volunteer groups - consisting of those
people - improved their living through bank
assistance.
• Educating the borrowers about the proper use of
bank loans and the timely repayment of such loans.

* Self Help Groups – 75 lakh by 2022- provide fund for

their livelihood missions
 IDBI – INDUSTRIAL DEVELOPMENT
BANK OF INDIA
1ST JULY 1964 –HQ :MAHARASTRA
Purpose of Establishment

apex institution ,co-ordinating an agency to provide

activities of OFI- long term direct financial finance
to institution assistance to industry

It was subordinate to RBI, however from 16th feb 1976, it was

delinked from RBI and designated as principal financial institution.
 PRINCIPAL SOURCES OF FUND

• Share capital
• Reserves
• Repayment of past assistance
• Borrowing from RBI, LIC, Govt of India
• Deposits from companies
• Sale of investments
 FUNCTIONS OF IDBI

DIRECT INDIRECT EXPORT FINANCE PROMOTIONAL

ASSISTANCE ASSISTANCE ACTIVITIES
* Providing export
*Industrial concern *Refinancing of finance - direct * Includes
in the form of industrial loans loans and bringing widely
-loans-underwriting granted by financial guarantees to defused, yet
*Soft loan institutions exporters in viable process of
assistance for *Rediscounting the participation with industrialization
modernization bill arising from sale banks, refinancing
*Loan under of machinery on a of medium term
technical deferred payment export credit
development fund system granted by banks
and Rehabilitation *Subscribing to the and overseas
*Assistance for sick shares and bonds. buyers credit.
units .
• IDBI functions to extend the provisions of financial assistance
to industrial concern
• It undertakes various activities like marketing and investment
research and survey, carries out techno economic studies.
• It is expected to play a positive role in the progress of
industrialisation through planning, promoting and
development of new industries to fill gaps in industrial
structure of the country .
It is the biggest and important financial institution providing long term
finance to industries.
IDBI gives RE-FINANCING only to SSI.
 INDIAN INSTITUE OF ENTREPRENEURSHIP

• IIE is an autonomous organisation under the ministry of

skill development and entrepreneurship
• The main aim of the institution is to provide training
research and consultancy activities in small enterprise
• IIE was setup in the year 1993in Guwahati
• The institute began operating from April 1994
 Objectives

 To promote and develop entrepreneurship

 To organise and conduct training for
entrepreneurship development
 To identify training needs and offer training
programmes to government and non government
organisations
 To identify design and conduct training
programmes for existing entrepreneurs
 AREAS OF CONSULTANCY

• Enterprise planning
• Enterprise management
• Enterprise expansion
• Diversification and growth
 Providers of finance for industrial
projects in India

• Industrial finance corporation of India

• Industrial credit and investment corporation in
India (ICICI)
• Industrial development bank of India (IDBI)
• Life insurance corporation of India (LIC)
• Industrial reconstruction corporation of India
• National small scale industries corporation ltd
(NSIC)
 INDUSTRIAL FINANCE CORPORATION OF
INDIA

• Established in the year 1948

• Provides assistance to public limited companies ,public
sector under takings co operative societies
• Grants both long term and short term loans
• Play vital roles in financing projects in less developed
areas
• It receives applications for assistance exceeding 30
lakhs
 INDUSTRIAL CREDIT INVESTMENT
CORPORATION OF INDIA

• Established in the year 1955

• The nature of ICICI - financial assistance is in the form
of long term and medium short term loans
• No restrictions on the size of enterprise
• No minimum and maximum limit in the investment
 INDUSTRIAL DEVELOPMENT BANK OF
INDIA

• Setup in the year 1964

• Provides credit facilities and other facilities for
development of an industry
• Can finance to all types industries
• Concentrates on large scale industries which
involve huge capital
 LIFE INSURANCE CORPORATION OF
INDIA

• LIC was setup in the year 1956

• Engaged in life insurance business
• Financial assistance provided by LIC is in the
nature of granting term loans subscription or
underwriting new share
• Maintains close relationship with the other
financial institutions
 STATE FINANCIAL CORPORATION

• State financial corporation act 1951

• Maximum amount of single assistance to single unit is
Rs. 30 lakhs in case of limited companies
• Rs. 15 LAKHS in other cases
• Provides working capital loans and provides short term
loans
• Lending rate of SFC may vary between 8.5 to14.5
depends upon borrower profile (percentage keeps
changing from time to time)
• Issues less rate of interest if it is in rural and if it is a
small scale industry
National Small Scale Industries Corporation

• NSIC was established in the year 1995

• Aim is to provide financial assistance to small scale
industries
• It does not provide the direct financial assistance it hires
purchase scheme
• Rate of interest charged under this scheme depends on
the total investment
 Single Window System

Definition:

A facility that allows parties involved in trade and

transport to lodge standardized information &
documents with a single entry point to fulfill all
import, export, and transit re-laid regulatory
requirements.
 Features of Single Window System

• It is a trade facilitation idea

• It allows a user to get sufficient information from one single
sources
• There are usually customs declarations application for
import and export permits etc.
• It enables international (cross boundaries)traders to submit
regulatory documents at a single location.
Ex - world customs organisation.
New Industrial
Policy
 Meaning

Industrial policy means rules, regulations, principles, policies

and procedures laid down by government for regulating,
developing and controlling industrial undertakings in the
country.
 Latest Industrial Policy

1st industrial Policy resolution by India was in the year

1948, and subsequent resolution were -

•Industrial Policy resolution 1956

•Industrial Policy resolution 1973
•Industrial Policy resolution 1977
•Industrial Policy resolution 1980
•Industrial Policy resolution 1991
 Industrial Policy 1991

On July 24,1991 government of India announced its latest

industrial policy with the main aim of,
1.Increase industrial efficiency to international level
2.To accelerate industrial growth
 Objectives of Industrial Policy
• Rapid industrial development
• Balanced industrial structure
• Balanced regional growth
 Salient features

• Government Monopoly- in industries such as railways,

minerals ,coal etc.
• Industrial licensing policy were abolished
• Foreign investment & capital
• Foreign technology agreements
• Amendments to MRTP act
• National renewal fund to provide safety net for labourers
• Reservation for small scale industries
Thank You