MICROCAPITAL BRIEF: Small Industries Development Bank of India (SIDBI) Chairman Sushil Munhot Discusses Financing Small- and Medium-Sized Enterprises (SMEs), Hold On New Lending to Microfinance Institutions (MFIs)

Mr Sushil Munhot, chairman and managing director of the government-owned Small Industries Development Bank of India (SIDBI), recently argued in an interview with Indian newspaper The Economic Times that SIDBI complements commercial banks while also offering the added value of providing equity funding to small- and medium-sized enterprises (SMEs). SIDBI is also reportedly working closely with India’s National Stock Exchange to create SME exchanges wherein a venture capitalist can both buy equity in SMEs and access exit options for those investments.

Mr Munhot notes that SIDBI has placed all new lending activity with MFIs on hold, but that it is restructuring outstanding loans to MFIs. Going forward, due to the negative environment for Indian microfinance, SIDBI plans to only finance MFIs whose operations are aligned with the guidelines recommended in the Malegam report regarding, amongst others, caps on interest rates and margin levels. The guidelines that are scheduled to be issued soon, Mr Munhot said “We will see to it that only those MFIs get financed, who follow the guidelines completely.” In addition, SIDBI has set up seven branches that will offer retail loans in amounts between INR 50,000 (USD 1,120) and INR 100,000 (USD 2,250) to increase the availability of loans one step larger than those often considered to be in the “micro” range. SIDBI reports having facilitated total financial assistance equivalent to USD 397 million during the fiscal year ending March 2009.

By Jacqueline Foelster, Research Associate

About Small Industries Development Bank of India (SIDBI): The Small Industries Development Bank of India (SIDBI) was established by the Indian Parliament in 1990. It provides credit to large- and medium-scale microfinance institutions (MFIs) and individual borrowers. SIDBI reports having facilitated total financial assistance equivalent to USD 397 million during the fiscal year ending March 2009. This amount includes term loans, equity support and capacity building grants to MFIs. SIDBI is listed on, but does not report data to, US-based nonprofit data provider Microfinance Information Exchange (MIX).

Source and Additional Resources:

[1] The Economic Times, May 2, 2011, “We’ll fund microfinance companies that follow RBI norms: Sushil Munhot”, http://economictimes.indiatimes.com/opinion/interviews/well-fund-microfinance-companies-that-follow-rbi-norms-sushil-munhot/articleshow/8139408.cms

MicroCapital.org Brief, March 15, 2011, “Indian Budget Plans Include Partnering with Small Industries Development Bank of India (SIDBI) to Create $22m India Microfinance Equity Fund”, https://www.microcapital.org/microcapital-brief-indian-budget-plans-include-partnering-with-small-industries-development-bank-of-india-sidbi-to-create-22m-india-microfinance-equity-fund/

MicroCapital.org Brief, October 18, 2011, “Small Industries Development Bank of India (SIDBI) Sets Up a “Lenders’ Forum” to Promote Responsible Practices Among Indian Microfinance Institutions”, https://www.microcapital.org/microcapital-brief-small-industries-development-bank-of-india-sidbi-sets-up-a-lenders-forum-to-promote-responsible-practices-among-indian-microfinance-institutions/

MicroCapital Universe Profile: Small Industries Development Bank of India (SIDBI), https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Small+Industries+Development+Bank+of+India+%28SIDBI%29

Browse the MicroCapital Universe and add your entry to the wiki at https://www.microcapital.org/microfinanceuniverse/

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