SupportBiz explored the Small Industries Development Bank of India’s (SIDBI) take on the budget announcements in an interaction with TR Bajalia, Dy. Managing Director, SIDBI. Bajalia also highlighted the features of this budget from the perspective of Indian SMEs.
How would the announcement of the increase in SIDBI’s refinancing capability impact Indian SMEs?
Enhancing the refinancing capability of SIDBI from the current level of Rs. 5,000 crore to Rs. 10,000 crore per year would be very helpful for Indian SMEs. This will make it possible for SIDBI to provide credit facilities to micro and small enterprises at affordable rates through banks and SFCs. This will benefit over 3.5 lakh micro and small enterprises. The budget has been quite progressive for the growth of the MSME sector in India.
Micro finance is also an important area for SIDBI. How do you rate the Finance Minister’s announcement on this front?
SIDBI set up the India Microfinance Equity Fund in 2011-12 with a budgetary support of Rs. 100 crore to provide equity and quasi-equity to micro finance institutions. An amount of Rs. 104 crore has already been committed to 37 MFIs. Keeping in view the unmet demand and the need for improving the capital base of small and medium-sized MFIs to enable them to raise additional funding, the Finance Minister has provided an amount of Rs. 100 crore in the Union Budget as the IME Fund. This is expected to expand reach to 60-70 additional MFIs, benefiting more than 12 lakh additional clients, mostly women.
How will the announcement regarding non-tax benefits for SMEs impact them?
The Finance Minister emphasized in his budget speech that many SMEs do not graduate to a higher category for fear of losing the benefits associated with staying small/medium. To encourage them to grow, this budget has proposed the continuum of benefits enjoyed by them for up to three years after they grow out of the category in they obtained the benefit. A beginning in this direction is proposed to be made by extending the non-tax benefits to the eligible units for three years after they graduate to a higher category.
The manufacturing segment is struggling due to tough economic conditions worldwide. At this juncture, what impact would the budget have on Indian SMEs in the manufacturing domain?
Last year, the Factoring Regulation Act was enacted to pave the way for orderly growth of factoring services in the country. However, the volumes and coverage of factoring are yet to witness any perceptible growth. In order to promote the use of financing for the benefit of small suppliers, the budget has proposed a corpus of Rs. 500 crore for SIDBI to set up a Credit Guarantee Fund to extend guarantee cover for facilitating factoring transactions in respect of SMEs. The corpus shall help in leveraging the volume of factored debts at a much higher scale of up to Rs.10,000 crore per annum.
What are the other key attractions of this budget for SMEs?
There were some very good announcements in the Union Budget 2013-14. For instance, assistance of Rs. 2,200 crore during the 12th Plan period for setting up 15 tool rooms and technology development centres by the Ministry of MSME, Rs. 2,400 crore under the Technology Upgradation Fund Scheme for the textile sector, setting up of apparel parks under the Scheme for Integrated Textile Parks, implementation of a new scheme called the Integrated Processing Development Scheme with an outlay of Rs. 500 crore to address the environmental concerns of the textile industry, and availability of working capital and term loans at a concessional interest to handloom weavers. All these measures will have a strong positive impact on SMEs in India.