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***************************************************** An Interview with Dr. Kshatrapati Shivaji,

Chairman & Managing Director, SIDBI

1. There is always complaint of MSMEs for not getting adequate credit? Your take on that. What is SIDBI doing to address this issue?

The lack of adequate and timely credit has been one of the main bottlenecks for the growth path of MSMEs in India. To mitigate this problem, Government of India has taken a series of

initiatives like MUDRA (to fund the unfunded), Stand-up India (to promote entrepreneurship among SCs / STs and women), Start-up India (to nurture innovations and start-ups), CGTMSE (to facilitate collateral free credit support), various subsidy schemes, etc.

These measures have created a vast scope for banking sector to increase their lending to MSMEs. Reserve Bank of India has also taken certain measures like inclusion of medium sector as a part of Priority Sector Lending, fixing targets for scheduled commercial banks to

achieve in respect of lending to MSEs, setting up of TReDS to overcome the problem of delayed payments of receivables from large corporates, etc. I am sure, these supportive measures

will boost credit flow to the MSME sector.

2016 October 2016 . I (2) Vol. I (2)

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SIDBI on its part is contributing to the growth of MSMEs by way of addressing their credit

needs, especially in niche areas like Risk Capital / equity finance, sustainable finance, receivable finance and service sector finance. The Bank has launched a new scheme named SIDBI Make in India Soft Loan Fund for Micro, Small & Medium Enterprises (SMILE)

with a corpus of `10,000 crore to make available soft loan, in the nature of quasi-equity to meet the required debt-equity ratio and term loan on relatively soft terms for establishment of

new MSMEs, as also for the growth of the existing MSMEs. The India Aspiration Fund (IAF) launched with a corpus of `2,000 crore, has been formulated to give boost to the Start-up Venture Capital eco-system in the country. IAF acts as a Fund of Funds managed by

SIDBI and has contributed `795 crore to 26 MSME focused VCFs so far, which enables them to raise private capital, thus enhancing the flow of equity to start-ups and growth stage MSMEs in the country.

2. Is credit the only answer to the problems of MSMEs? We know, credit is an issue for MSMEs. Equally important are handholding and capacity building of MSMEs. MSMEs should have right information at right time, access to market

linkages, technology up-gradations, skill enhancement and so on. While credit may be a necessary condition but it is not a sufficient condition for a vibrant MSME. Credit has to be

supplemented with various non-credit inputs to make a meaningful impact in the MSME eco-system. SIDBI realized this aspect well in advance and has been supporting this aspect in equal measure.

If one looks at www.standupmitra.in, one can see more than 17,000 handholding agencies across-the-country to help and train the budding entrepreneurs. Similarly, another portal

www.sidbistartupmitra.in enables an entrepreneur to get connected with equity funders, incubators, mentors, angel networks etc. At present, more than 110 incubators have been registered with the portal to help the budding and early stage start-ups. The problems of

MSMEs should be looked up at holistically.

3. How do you see the MSME sector in next 5 years? I see a bright future of MSMEs is the country. The MSME sector is expected to reap rich dividends from recent initiatives of Govt. of India like Make in India, Digital India, Skill

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India and Smart Cities. The implementation of Goods and Service Tax will rationalize indirect tax structure and ensure free flow of goods and services among states, thus further

increasing the scope and opportunities for MSMEs. The various initiatives towards ease of doing business including issuance of Udyog Aadhar, simplification of registration procedures etc. are definitely going to strengthen the MSME sector and propel them to a higher growth

path.

4. Where do you see SIDBI in next 5 years? SIDBI recognizes that the growth of MSMEs is indispensible for the growth of Indian economy. To this end, SIDBI would continue to provide financial and developmental support

to MSMEs in various ways. This would include innovative products, new service models and leveraging technology. Further, greater thrust on start-ups, knowledge-based new age companies, infrastructure, sustainable finance, cluster-centric interventions for both financing

and developmental, etc. would act as guide-posts of the Banks efforts to make our MSME sector stronger, sustainable, more inclusive and globally competitive in the coming years. This is the philosophy of SIDBI, mere numbers have little value for us. Having said that, we always

try to maintain a steady and sustainable growth.

5. How do you see your transition from bureaucracy to banking field? Ans. The Banking sector is not new to me. I have been associated with SIDBI and a few state financial corporations as well as handled a range of responsibilities in various ministries both

at central and state government level in the field of finance. Leading an apex institution like SIDBI poses new opportunities as well as challenges. I am glad that, the Bank has performed well both in achieving new financial heights as well as coming out with new products and

initiatives and would continue to cater MSMEs in a meaningful way.

6. What are your management mantras for MSMEs? Ans. I would appeal to MSMEs to leverage their resilience and carve out a niche for themselves by constant innovation in products and processes. MSMEs should keep their eyes

and ears open, so that several opportunities which are on the way whether local or global, are encashed. They should also future proof their business by investing in energy efficiency and technological up-gradation, skill development etc. Good corporate governance is equally

important for the growth of MSMEs.

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On April 05, 2016, the Honble Prime Minister had dedicated Standup India (SUI) initiative to the nation, wherein un-served and underserved segments of SC/ST and Women are being supported with loans between `10 lakh to `1 crore for setting up new enterprises by each bank branch. On the same day, Honble Prime Minister also launched a web portal www.standupmitra.in, as a virtual Loan Market managed by SIDBI. The portal is evolving as anywhere / anytime solution provider towards credit plus services both for financial services and non-financial services. The aim of SUI is to set up 2.5 lakh new enterprises credit linked to 1.25 lakh bank branches and 17000+ handholding agencies (offering services for loan application filling, financial/skill training/access to subsidy etc.) creating employment of around 10 lakh. Bankers have started getting access to bankable proposals from aspiring entrepreneurs who are availing handholding support. Multiple sanction offers from banks, healthy competition among banks (one bank rejecting one application yet other sanctions) are expected to ease the credit access. The portal, within few months of its launch, has evinced good response with 6.23 lakh hits, 11272+ registrations, 1714+ online applications and handholding requests (56% requests for application filing and financial training) emanating from even far flung corners of the country.

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Win-Win offering: Millions of youth are knocking the doors of employment every year. They are looking for trusted Access. The JAM beneficiaries are looking up the value chain. Their dreams have to be shaped well. By kindling entrepreneurial appetite, the portal lends impetus to national missions of Skill India , Digital India, Make in India as also Startup India. Credit linked schemes of different central & state institutions are available at click on portal. Twin Portal: Based on feedbacks of stakeholders and taking the resolve further for universal credit access being enabled , www.udyamimitra.in portal endeavours to offer access to varied enterprise loans (enterprise loans for all be it MUDRA, MSME or SUI). The portal(s) envisages significant bottom up impact. By inducing inclusive access, the pillars of SABKA SATH SABKA VIKAS, leveraging demographic dividend and growth with equity and above all emergence of Entrepreneurial India shall get realized. Intensive publicity campaign Special Drive period has commenced from September 15th onwards till October 31st wherein Dept. of Financial Services, Govt. of India shall be laying special thrust and drive on Pradhan Mantri Jan Dhan Yojana (PMJDY), Pradhan Mantri Mudra Yojana (PMMY), Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY), Pradhan Mantri Suraksha Bima Yojana (PMSBY), Atal Pension Yojana (APY) and Stand Up India (SUI). SUI is a priority programme for PM award 2016-17 wherein performance of districts would be evaluated and awarded.

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The Honble Union Finance Minister, in the Union Budget 2015-16, announced setting up of Micro Units Development and Refinance Agency (MUDRA) Bank for funding the unfunded micro enterprises in the country. MUDRA Ltd was launched on April 08, 2015 by the Honble Prime Minister as a wholly owned subsidiary of SIDBI. A sum of `20,000 crore was allocated to the MUDRA Bank from shortfalls of Priority Sector Lending for creating a Refinance Fund to provide refinance to the Last Mile Financers. The present authorised capital of MUDRA is at `5,000 crore with a paid up capital of `1,675.93 crore. Lending under MUDRA loans will focus on the unfunded segments of the Micro Enterprises by granting the loans in the following 3 segments so that they can significantly contribute to the nations GDP: Loans upto `50,000 (Shishu) Loans above `50,000 and upto `5 lakh (Kishore) Loans above `5 lakh and upto `10 lakh (Tarun) Till mid-September 2016, MUDRA had provided refinance assistance of `4,167 crore. The refinance support is channellised through its partner agencies like banks, RRBs, Co-operative Banks, MFIs and NBFCs. Pradhan Mantri Mudra Yojana (PMMY) During the launching of MUDRA Ltd on April 08, 2015, the Honble Prime Minister had also launched a Pradhan Mantri Mudra Yojana (PMMY), which envisages lending upto `10 lakh to micro enterprises irrespective of they get refinance from MUDRA or not. However, MUDRA will provide credit guarantee support under the Yojana, to all the eligible loans. A target of `1,80,000 crore has been set under PMMY for FY 2016-17 for banks and MFIs. Over Draft (OD) facility upto `5,000 in Prime Minister

MUDRA - A Giant Step towards Financial Inclusion

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Jan Dhan Yojana (PMJDY) has been covered under PMMY. MUDRA Card MUDRA card facilitates hassle-free credit to small borrowers allowing loan withdrawal on demand with flexibility in operations. It is a co-branded card by MUDRA and the issuing bank, issued directly or in association with an MFI. This Debit card is issued on RuPay platform of National Payment Corporation of India (NPCI) and is operable on all ATMs and POS machines. So far, all the PSBs, 3 private sector banks and 25 RRBs have launched MUDRA Cards. MUDRA provides refinance against loans granted under MUDRA Card. As of mid-September 2016, about 5.83 lakh cards for `1,923 crore have been issued.

Pass Through Certificate MUDRA also participated in investment in Pass Through Certificate of assets originated by M/s. Janlaxmi Financial Ltd., Esskey Auto Finance Pvt Ltd. and Satin Creditcare Network Ltd. for `203.88 crore. MUDRA Credit Guarantee As announced by the Honble Finance Minister in the Union Budget for FY 2015-16, a separate credit Guarantee fund was created for MUDRA Loans, with an initial corpus of `3,000 crore. The National Credit Guarantee Trustee Company Ltd (NCGTC) shall be the implementing agency for MUDRA Credit Guarantee scheme. So far, `2,000 crore has been received as corpus. Till mid-September 2016, 136 Member Lending Institutions (MLIs) have been intimated for enrolling as partners, out of which 33 MLIs have registered.

Progress under Pradhan Mantri Mudra Yojana

Scheme

16 , 2016 Cumulative Assistance as on September 16, 2016 ( ) No. of Accounts (lakhs)

(` ) Amount sanctioned (` in crores)

(` ) Amount disbursed (` in crores)

SHISHU 445.54 88,386.22 87,047.42

KISHORE 28.09 56,917.31 54,058.70

TARUN 5.30 40,777.27 38,624.98

TOTAL 478.93 1,86,080.80 1,79,098.59

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All start-ups have been made eligible to get exemption from the prior experience criteria in public procurement. The move will provide a level playing field to startups in the manufacturing sector vis--vis the established companies and enable startups to participate in such tenders with relaxed eligibility conditions.

It is now mandatory for the micro, small and medium enterprises (MSMEs) to furnish the

information relating to their enterprise online to the Central Government in the MSME data bank. The information required could be furnished online at www.msmedatabank.in. Under the Micro, Small and Medium Enterprises Development (Furnishing of Information) Rules, 2016, all micro, small and medium enterprises shall furnish the information relating to their enterprise to the Government in the prescribed Form. The details that need to be furnished include - Aadhaar Number; Udyog Aadhaar Number; PAN Number; Enterprise Name; Category Unit Size; Organization Type; Major Activity; State etc.

The Reserve Bank of India (RBI) has made it mandatory for all credit information agencies to provide a full credit report free of cost on request once in a calendar year to individuals whose credit history is available. This will come into force from January 01, 2017.

The Reserve Bank of India (RBI) issued new licensing guidelines that seek to encourage non-

banking finance companies (NBFCs) to turn themselves into full-fledged banks, restrict the country's conglomerates to a 10% stake in new lenders and bar state-run companies and large industrial houses. Previously, those wanting to set up banks had to apply as and when the RBI invited applications. Now individuals, private sector entities and NBFCs are free to apply whenever they feel ready. The minimum paid-up capital has been kept at `500 crore with the foreign investment limit pegged at 74%.

The Reserve Bank of India announced a package of measures for the development of fixed income

and currency markets. Accepting many of the recommendations of the Khan Committee to develop the corporate bond market, RBI agreed to enhance the aggregate limit of partial credit enhancement (PCE) provided by banks, permit brokers in corporate bond repos, authorise the platform for Repo in corporate bonds and encourage credit supply for large borrowers through market mechanism.

To further encourage the overseas Rupee bond market, banks have been permitted to issue Rupee bonds overseas (Masala Bonds) for their capital requirements and for financing infrastructure and affordable housing.

MSME Policies

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National Small Industries Corporation (NSIC) has launched its first Online Finance

Facilitation Centre in Jalandhar. Online Finance Facilitation portal www.nsicffconline.in would enable digital facilitation of loan proposals of MSMEs with the banks. The corporation is launching finance facilitation centres in different parts of the country which will facilitate in aggregating various credit requirements of MSMEs and after validation by NSIC officials, will be submitted online to banks selected by MSME units for speedy disposal of their credit proposals.

India's financial condition and market environment showed a healthy improvement in the quarter to June, according to industry body CII and Indian Bank Association's latest Financial Conditions Index. The reading shows that a majority of respondent banks and financial institutions reported improvement in the overall conditions of economy. It also shows that the overall financial conditions for the Indian economy are favourably poised, as banks and financial institutions see significant improvement in the cost of credit and funding liquidity in the banking system with external financial linkages and economic activities witnessing relatively moderate improvement.

RBIs Consumer Confidence Survey for the period July to September 2016 revealed: The optimism regarding future economic conditions has consistently been higher than that pertaining to the current economic conditions.

Current income perceptions remain consistently lower as compared to those on future income and the gap between the two has widened over the quarters.

The sentiment on non-essential items has gradually improved during the last four quarters except in Q4:2015-16

Inflation is not expected to come down significantly in different quarters of 2016-17 from the corresponding quarter of 2015-16.

The Bihar Government has given green signal to Bihar Industrial Investment Promotion Policy

(BIIPP) 2016, which has food processing and tourism as priority sectors among others. Apart from this, the new policy has small machine manufacturing, IT, textile, plastic and rubber industry, renewable energy, health care, leather and technical education in the priority sectors. According to the new policy, 10 per cent of the interest of the loan given to MSMEs will be borne by the Bihar government and there are other incentives also for women and SC / ST entrepreneurs.

MSME News

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National Small Industries Corporation Ltd (NSIC) has signed a Memorandum of understanding (MoU) with online financial assistance marketplace Rubique to render integrated support to micro, small and medium enterprises (MSMEs). The recently signed MoU will link Rubique to 33 public and private sector banks and financial institutions (FIs) that have tie-ups with NSIC. While Rubique has already partnered with more than 60 Financial Institutions, the online interface born out of this agreement will help match more lenders to borrowers. This is expected to reduce the unpredictability that has so far challenged MSME financial aid applicants.

The Asian Development Bank (ADB) has approved a $631-million loan for construction of industrial corridor between Visakhapatnam and Chennai, part of India's first coastal industrial corridor running from West Bengal to Tuticorin in Tamil Nadu.

India has improved its ranking by 15 spots to 66th position from 81st as in 2015 as per the Annual Global Innovation Index (GII) released by France-based international business school INSEAD and World Intellectual Property Organisation (WIPO), a specialized agency of the United Nations. Key Facts in Indias better performance in the 2016 GII rankings were its strengths in tertiary education, corporate Research & Development, software export and market sophistication.

India achieved rapid improvement in Global Competitiveness Index by jumping 32 places in 2

years as reported by World Economic Forum from 71st rank in 2014-15 to 39th rank in 2016-17. The major improvements were seen in the areas as indicated in Box 1.

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A conclave on Small Micro Finance Institutions was held on August 26, 2016 at New Delhi. The Conclave was a joint initiative of SIDBI, MUDRA and DFID organized under the aegis of Poorest States Inclusive Programme (PSIG). Dr. Kshatrapati Shivaji, CMD, SIDBI delivered the key note address. Present on the dice (L-R) Shri S Ramakrishnan, CGM, SFMC, SIDBI, Shri Jiji Mammen, CEO, MUDRA, Shri Kshatrapati Shivaji, CMD, SIDBI and Shri P Satish, Executive Director, Sa-Dhan- an industry association of MFIs, Shri Manoj Mittal, DMD, SIDBI.

The second conclave on Small Finance Banks was held in Mumbai on July 18, 2016. Representatives of various stakeholders including International agencies such as The World Bank Group, KfW, GiZ as also CRISIL, National Payments Corporation of India (NPCI), National Credit Guarantee Trustee Company Ltd. (NCGTC) and MUDRA Ltd. participated in the Conclave. Seen in the photograph are (from left to right): Shri Manoj Mittal, Dy. Managing Director, SIDBI, Shri N. S. Vishwanathan, Dy. Governor, Reserve Bank of India, Dr. Kshatrapati Shivaji, CMD, SIDBI and Shri Ajay Kumar Kapur, Dy. Managing Director, SIDBI.

Sa-Dhan, the association of community development finance institutions, organised a two day National Conference on September 14 - 15, 2016 at New Delhi. The theme of the conference was Financial Inclusion on Path to Sustainable Development Goals. During the event, "Bharat Microfinance Report - 2016" was released during the event jointly by the hands of Dr. Kshatrapati Shivaji, CMD, SIDBI, Shri U. S. Paliwal, ED, RBI, Ms. Jayshree Vyas, Chairperson, Sa-Dhan and Shri P. Satish, ED, Sa-Dhan. In picture from left to right : Shri P Satish, ED, Sa-Dhan, Dr Kshatrapati Shivaji, CMD, SIDBI,Shri U S Paliwal, ED, RBI, Ms Jayshree Vyas, Chairperson, Sa-Dhan

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As a precursor to the proposed BRICS Summit to be held

during October in India, IBA along with Dept. of Financial

Services, Min. of Finance organized one-day workshop on

Financial Inclusion involving BRICS Nations at Mumbai on

19th Sept. Dr. Kshatrapati Shivaji, CMD, SIDBI attended the

workshop as a Moderator in the panel discussion on

Financial Inclusion Leading to Social Inclusion.

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SIDBI, Ludhiana organised a Sensitization Program on Stand Up India Scheme for handholding Agencies and bank Branches on September 07, 2016. The programme was attended by officials from Lead District Manager, DDM, NABARD, Director MSME-DI, officials from Banks, District Informatics Centre, FLC appointed by banks, Representative of DICCI and other Handholding agencies attended the program. Shri Anand Srivastava, Regional Head, SIDBI interacted with the banks and Hand holding agencies regarding the importance of the Stand Up India.

SIDBI attended a Round Table Discussion on Emerging Trends in Food Processing Industry on August 06, 2016 at Kolhapur, which was organised by the Southern Maharashtra Zonal Council of Confederation of Indian Industry (CII). The programme was attended by approx. 150 MSME entrepreneurs, industry experts, academia, etc. Shri Bhagwan Chandnani, Asst. General Manager, SIDBI, Kanpur Branch participated in the technical session on availability of finance and Government schemes along with representatives of NABARD, Bank of India and DIC. Shri P. Raveendra Kumar, Manager gave a detailed presentation on various schemes of SIDBI. for the sector with a special focus on SMILE scheme.

A seminar on MSME Development & Financing was organised by Meerut in association with Meerut Industrial Development Forum (MIDFO) on August 05, 2016. Various SIDBI schemes, with emphasis on SMILE along with Other SIDBI initiatives viz. MUDRA, Stand-up India, Start-up India, Make in India programs were also highlighted. Further, the program also focused on drawing attention of entrepreneurs / industrialists as to how SIDBIs role in serving MSMEs has an edge over other banks / financial institutions.

A State Level workshop on Stand-up India Scheme of Govt. of India was held on September 01, 2016 for senior bank officials of commercial banks in NABARD, Hyderabad. 50 senior level officers of various banks, RBI and NABARD have attended the workshop. Shri G. Sampath Kumar, General Manager, SIDBI, in his address indicated the MSMEs contribution to GDP is substantial and highlighted the various constraints faced by budding entrepreneurs in setting up of an MSME unit.

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Who Became Big From Small

(P. S. Dear All, our intention is not to test your knowledge, but to tell you that please treat each failure as an opportunity to learn and use this desire to learn to excel in life. The answers will be given in the next issue.) Answer to Who Became Big From Small (September 2016 issue) : Sunil Bharati Mittal, Bharati Group; Azim Premji, Wipro Group; Boiko Borisov, former Prime Minister of Bulgaria; Fred Smith; Soichiro Honda; Mark Cuban.

The Indian IT company was set up as a manufacturer of vegetable and refined oil in Mumbai, India.

One of the first items sold on this American e-commerce website was a broken laser pointer. Astonished, the founder contacted the winning bidder to ask if he understood that the laser pointer was broken. In

his responding email, the buyer explained: "I'm a collector of broken laser pointers."

The Indian classified advertising platform was known as Kijiji India.

The business tycoon, founder and CEO of a Chinese e-commerce company, failed the Chinese university entrance exam three times. He started to study English at a young age and practiced English daily by

conversing with English-speakers at a hotel near his home. He would give them tours around the city for free to improve his English.

The founder and CEO of a global fast food chain, was born to a young unmarried woman he never knew, was adopted at six weeks. He, as an adult became a well-known advocate for adoption. After his

adoptive mother's death when he was 5, his father moved around the country seeking work, while he spent his early childhood with his grandmother, who he credited with teaching him the importance of service and treating others well and with respect, lessons that helped him in his future business life.

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Editorial Committee

Chief Editor Shri Rabindra Kumar Das, Chief General Manager, SIDBI Editors Smt. Chitra Alai, General Manager, SIDBI

Shri Rahul Priyadarshi, General Manager, SIDBI Shri Subhranshu Sekhar Acharya, General Manager, SIDBI

Disclaimer The views, news, comments, information, articles and opinions contained herein are mainly based on

collation of different news/ views available from sources, such as, online, in person and printed resources

both globally and nationally, and thereof are not necessarily the views of the Small Industries

Development Bank of India (SIDBI). While every effort has been made to avoid any mistake or omission,

SIDBI would not be, in any way, liable for the authenticity of data, views, opinions, comments, etc. and

for any mistake / omission or commission in this publication or any nature, whatsoever.

Permission to Reproduction No published article or part thereof should be reproduced in any form without prior permission of the author(s).

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