A Study on the Performance of SIDBI – Portal of MSME

 

Dr. S. Kamalaveni

Assistant Professor and HOD, Department of Commerce with Information Technology, Dr. N.G.P. Arts and Science College, Coimbatore – 48

 

ABSTRACT:

SIDBI  is one of the four All India Financial Institutions regulated and supervised by the Reserve Bank. It has offered direct finance to MSME by introducing new schemes lime SMILE, SMILE Equipment Finance (Soft loan to MSME) , Trader Finance, Working Capital, SPEED Plus and RLS. The shares of SIDBI are held by GOI and 29 other institutions, banking sector and insurance companies owned and controlled by the central government.   This schemes provides 100% finance with sanction and disbursements, with no additional collateral and flexible repayment period. It provides micro fiancé in the form of equity and quasi equity and terms loans. SIDBI ahs playing the role of market maker to enhance corporate governance and operational efficiency of Micro Finance Impact, enabling smooth flow of credit to promote micro industries. It also have conceptualized SIDBI Vision 2.0, which underpins continued and renewed focus on the sector, www.udamimitra.in, has been created as promotion venture, which is loan market place where anyone can apply and any lender can pick up those applications without additional cost.

 

 

 

INTRODUCTION:

Small Industries Development Bank of India (SIDBI) was established in  April 1990 under an Act of Indian Parliament as a wholly-owned subsidiary of Industrial Development Bank of India (IDBI).  SIDBI has since completed 25 years of service to the small scale sector. The entire issued capital of Rs.534 crore has been divided into 53 crore shares of Rs.10 each. Of the total Rs.534 crore subscribed by IDBI, while setting up of SIDBI, 19.21% has been retained by it and balance 80.79% has been transferred / divested in favour of banks / institutions / insurance companies owned and controlled by the Central Government.

 

OBJECTIVES OF SIDBI

Four basic objectives are Financing, Promotion, Development and Co-ordination. For orderly growth of industry in the small scale sector. The Charter has provided SIDBI considerable flexibility in adopting appropriate operational strategies to meet these objectives. The activities of SIDBI, as they have evolved over the period of time, now meet almost all the requirements of small scale industries which fall into a wide spectrum constituting modern and technologically superior units at one end and traditional units at the other.

 

BUSINESS DOMAIN OF SIDBI

The business domain of SIDBI consists of small scale industrial units, which contribute significantly to the national economy in terms of production, employment and exports. Small scale industries are the industrial units in which the investment in plant and machinery does not exceed Rs.10 million. About 3.1 million such units, employing 17.2 million persons account for a share of 36 per cent of India's exports and 40 per cent of industrial manufacture. In addition, SIDBI's assistance flows to the transport, health care and tourism sectors and also to the professional and self-employed persons setting up small-sized professional ventures.

 

OBJECTIVES OF THE STUDY

To study the growth of SIDBI during the study period.

To study the factors influencing the profitability.

To predict the values of deposits, loans and net profit.

 

METHODOLOGY

This study is based on secondary data. The required data were collected from the Capital Line Plus and annual reports of SIDBI.

 

Period of Study

The study period covers five years form 2013-14 to 2017-18.

 

Tools used

For the purpose of this analysis statistical techniques have been used. The statistical techniques used are, annual compound growth rate, multiple regression and trend analysis.

 

ANNUAL COMPOUND GROWTH RATE

Annual Compound Growth Rate is used to find out the compounded growth of the variable computed per annum. In this study an attempt is made to measure the growth of the SIDBI during the study period of five years from 2013-14 TO 2017-18.

               

The following variables are taken for the study of growth:

 

Net Profit.

Net Worth.

Loans.

Deposits.

 

The following formula is used to compute the Annual Compound Growth Rate:

 

R= n(√(Pn/Po)-1)*100

Where,

R= Annual Compound Growth Rate.

n = Number of years.

Pn = Value of the current year.

Po = Value of the base year.

The following table shows the annual compound growth rate of SIDBI.

 

Table 1 Annual Compound Growth Rate              (Rs.in Crores)

YEAR	NET PROFIT	NETWORTH	LOANS	DEPOSITS
2013-14	1118.27	1972.92	61270.70	17428.26
2014-15	1417.13	2138.84	55342.59	13446.81
2015-16	1177.46	1184.49	65632.09	15575.12
2016-17	1120.18	3589.68	68289.63	15861.92
2017-18	1577.01	6286.96	105346.75	55374.61
Annual Compound Growth Rate (in Percentage)	7.12	26.09	11.45	26.01

(Source: Annual Reports of SIDBI)

 

 

The above table 1 shows the net profit of the bank stood at Rs.1118.27 crores in 2013-14 and had a fluctuating trend during the study period with the annual compound growth rate of  7.12 percent.

 

Net worth of the bank stood at 1972.92 crores in 2013-14 and had an increasing trend during the study period, at the compound growth rate of 26.096 percent.

 

Loans of the bank stood at 61270.70 crores in 2013-14 and had a fluctuating trend during the study period with the annual compound growth rate of 11.45 percent.

 

Deposits of the bank stood at 17428.26 crores in 2013-14 and had a fluctuating trend during the study period with the compound growth rate of 26.01 percent.

                                                                                                                  

 

MULTIPLE REGRESSION ANALYSIS

Multiple regression analysis represents a logical extension of two variable regression analyses. Instead of a single independent variable, two or more independent variables are used to estimate the values of a dependent variable. The multiple regression equation describes the average relationship between these variables. The following is the formula for calculating Multiple Regression.

 

Y = a+b1x1+b2x2+b3x3

Y= Net Profit (dependent variable); X1 = Salaries.; X2 = Administration Expenses.;

X3 = Interest Spread; a  = Constant;  b1 to b5 are regression coefficient.

 

Table 2 Independent variables   (Rs. in Crores)

YEAR	NET PROFIT	SALARIES	ADM. EXPENSES	INTSPREAD
2013-14	1118.27	190.24	119.13	2281.89
2014-15	1417.13	321.64	127.87	2123.33
2015-16	1177.46	281.15	139.76	2039.75
2016-17	1120.18	407.09	125.57	2024.47
2017-18	1577.01	379.44	131.26	2097.07

(Source: Annual Reports of SIDBI)

 

Table 3 Co-efficient

           a. Dependent Variable: NETPROFI

 

Table 4  Regression Analysis

 

Table 3 shows that ‘t’ value of Salaries, Administration Expenses  and Interest Spread shows the negative effect on Net Profit. The salary has the highest contribution to Net Profit having a beta-coefficient of 3.726.

 

Table 4 reveals the multiple regression between Net Profit and other independent variables i.e Salaries, Administration Expenses and Interest Spread found to be 0.410(R) with R Square 0.169. It means that all the independent variable has contributed 16.9% on dependent variable of Net Profit.

 

TREND ANALYSIS UNDER THE METHOD OF LEAST SQUARE

The method of least square is most widely used in practice to predict the future trend. This method may be used either to fit a straight line trend or a parabolic trend.

               

The straight line trend is presented by the equation.

                                 

Yc= a+bx

a = ∑Y / N    b = ∑XY / N 

 

Yc = Trend value ; a = constant ; b = rate of change; N = number of years ;

X = unit of time

 

The following table shows the Trend analysis for deposits by using methods of least square from 2013-14 to 2017-18 and prediction for the year 2022

 

Table 5 Trend Analysis for Deposits  (Rs.in Crores)

 (Source : Annual Reports of SIDBI)

a = ∑Y / N  ;  b = ∑XY / N ;  a = 23537.34   ; b = 15661.56

 

 

From the above equation, the projected trend value for any year can be obtained by substituting the appropriate value of ‘x’ in the trend equation. The projected value of deposits for the year 2022 can be calculated with the value of x as 6.

 

The deposits in the year 2022 will be Rs. 117506.7 crores.

The following table shows the Trend analysis for loans by using methods of least square

from 2013-14 to 2017-18 and prediction for the year 2022. The straight line trend is presented by the equation.

Yc= a+bx

 

Table 6 Trend  Analysis for  Loans           (Rs.in Crores)

 (Source: Annual Reports of SIDBI)

a = ∑Y / N  ;    b = ∑XY / N  ; a= 71176.35 ; b = 20219.83

 

From the above equation, the projected trend value for any year can be obtained by substituting the appropriate value of ‘x’ in the trend equation. The projected value of loans for the year 2022 can be calculated with the value of x as 6.

 

The loans in the year 2022 will be Rs. 192495.3 crores.

 

The following table shows the Trend analysis for net profit by using methods of least square from 2013-14 to 2017-18 and prediction for the year 2022.

 

The straight line trend is presented by the equation.

Yc=a+bx

 

Table 7 Trend Analysis for Net Profit                                      (Rs.in Crores)

(Source: Annual Reports of SIDBI)

a = ∑Y / N; b = ∑XY / N  ; a = 1282.01 ; b =  124.106

 

 

From the above equation, the projected trend value for any year can be obtained by substituting the appropriate value of ‘x’ in the trend equation. The projected value of loans for the year 2022 can be calculated with the value of x as 6.

 

The Net Profit in the year 2022 will be Rs. 2026.65 crores.

 

CONCLUSION:

SIDBI has concentrates on refinance to various SFC’s and SSIDC’s to promote Small Scale Industries in India. It does not give more importance on deposits. The interest spread has the highest contribution to Net Profit.  The SIDBI had highest growth in net worth; loans followed by net profit, since major share of net profits are transferred to general reserve. All the independent variable has contributed 16.9 % on dependent variable of Net Profit. Deposits and loans will have an increasing trend of 117506.7 crores and 192495.3 crores respectively. The net profit will have a decreasing trend of 2026.65 crores. T he profitability of SIDBI has been increased in future if the outstanding is decreased. Even though SIDBI plays vital role in development of SSI’s in India.

 

REFERENCES:

1.      Annual Reports of SIDBI.

2.      Agarwal. N.P, “Analysis of Financial Statements”, “National Publishing House, New Delhi, 1981.

 

Websites:

1.      http://www.indiansources.com

2.      http://www.sidbi.com

 

 

 

 

 

Received on 21.09.2019            Modified on 11.10.2019

Accepted on 14.11.2019           ©A&V Publications All right reserved