Financial Institutions

SIDC

Currently, there are 28 SIDC that are present in India. The full form of SIDC states industrial development corporation. The main objective of establishing SIDC was to increase the process of industrialization in India. Also, it is considered as one of a financial institution to be established in India.

SIDC

SIDC

Establishment

SIIC or SIDCA came on to scene much after the SFCs. Thus, they were entirely set up by the state governments. Along with finance, they also provide a variety of functions like arranging power, lands, roads, licenses, etc. Also, they provide sponsoring of units, moreover in the backward areas.

Out of their total finance, one-third is provided in the form of underwriting or direct subscriptions. While the remaining two-thirds is done in the form of term loans.

The corporation was first established in 1995. Since then the total amount sanctioned by them is Rs. 9800 crores. While the disbursed amount is close to Rs. 7000 crores. The significant part of the sanctioned amount goes to the public sector and joint sector.

So, the rest amount goes to the private sector. These funds are raised using means like reserves, share capital, etc. Furthermore, they take borrowings from the state government, IDBI, banks, and bonds, and debentures. Like other institutes, these ones also suffer from problems like the inexperienced staff, inadequate staff, defaults, and organizational deficiencies.

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Functions

The SIDC is set up by the various states governments. Also, these governments fully own the corporation. SIDC is more than a financial institution. Thus, they act as an instrument to speed up the process of industrialization in the respective states.

So, to achieve this process, they provide loans, guarantees, subscription of shares, etc to the companies. Besides loans to the respective industries, SIDC undertakes various promotional programs like project identification, techno-economic surveys, preparation of feasibility studies, and entrepreneurial training.

Also, they provide financial assistance by means like loans, underwriting or direct subscriptions to debentures and shares, guarantees, etc. Furthermore, they promote joint sector projects along with private promoters. In these types of projects, SIDC has a 26% share, private co-promoter takes 25%, and the rest goes to the investing public.

Also, SIDC takes the construction of sheds, development of industrial areas, and provision of various infrastructure facilities. Also, they take care of the development of various new growth centers. They also undertake various incentive schemes for state governments. For refinancing, IDBI helps it. They provide it using the term loans.

Furthermore, SIDC uses bonds to borrow the amount. They also accept the deposits to fund their resources.

Practice Questions on SIDC

Q. Which of the following options are considered as the elements of good corporate governance?

1. Investor education

2. Controlling access to the company’s management

3. Promoting shareholders’ right

4. Promoting shareholders’ responsibilities

A. Option 1 and 2

B. Options 1, 3, and 4

C. Options 2 and 4

D. All of the options

Answer: B. Options 1, 3, and 4

Q. Currently, how many SIDCs are present in India?

A. 30

B. 28

C.26

D.32

Answer: B. 28

Q. What is the full form of SIDC?

A. State institutional development corporation

B. Small industrial development corporation

C. Small institutional development corporation

D. State industrial development corporation

Answer: D. State industrial development corporation

 

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