Updated on: December 17th, 2019 5:04 PM

Financing Schemes for Sustainable Development

Sustainable development of the MSME sector is one of the core agendas in SIDBI’s vision, and it has been promoting this through a series of schemes which not only provide adequate and affordable energy efficiency / green finance but also enhancing awareness of benefits of climate control amongst MSE clusters. SIDBI’s focused lending schemes promote investment in clean production and energy efficient technologies/production processes under respective lines of credit from international agencies such as JICA, AFD and KfW. In this article, we will look at the Financing Schemes for Sustainable Development in detail.

Objective of the Financing Schemes

The principal aim of the financing schemes for sustainable development is to provide financial products that enable climate and environment-friendly investments:

• To promote energy saving in MSMEs in India
• Reduce the emission of greenhouse gases, especially Carbon Dioxide (CO2) to contribute towards climate change mitigation and to achieve a reduction or avoidance of emissions and pollution through the introduction of financial products
• Support MSMEs towards development, up-scaling, demonstration and commercialisation of the innovative technology-based project

Purpose of the Financing Schemes

The use of the Financing Schemes for Sustainable Development is explained in detail below:

• For implementing Energy Efficiency (EE) measures on end to end basis.
• For meeting the part cost of capital expenditure including for the purchase of equipment, machinery, installation, civil works and commissioning, For implementing the Energy Efficiency measures as recommended in the DPR,
• For meeting part cost, any other related expenditure required by the unit provided it is not more than 50% of the above mentioned.
• Financing of second-hand machinery or equipment; purchase of land and construction of the building (except minor civil works) will not be taken up under the Financing Schemes.

Eligible Borrower

• MSME units in the manufacturing or services sectors are eligible for financing Schemes for Sustainable Development.
• Applicant unit should be in operation for three years and should have earned cash profits in the last two years of operations and should not be in the default to any bank or FI.
• The proposal should be in the range of C1-C8.
• The firm should have undergone the process of the Detailed Energy Audit (DEA) through a technical agency or consultants having the BEE certified Energy Auditors.
• EEC of SIDBI should have vetted the Detailed Project Reports (DPR) prepared by the technical agencies or consultants.
• The unit should not have availed the Performance Linked Grant under the WB-GEF Projects for the proposed EE Projects.
• The proposed unit should be in compliance with the environment and Social Management Framework.

Loan Amount

The loan amount and tenure for the Financing Schemes for Sustainable Development is upto 90% of the unit project cost with minimum loan amount of 10 lakh and maximum loan amount not to exceed 150 lakh per eligible borrower

Tenure

The repayment period including the initial moratorium period of upto six months, will not be more than three years for loans upto 50 lakh and 60 months for loans beyond 50 lakh.

Promoters’ Contribution

The minimum promoter’s contribution to the Financing Schemes for Sustainable Development of 10% of the project cost.

Interest Rate

The interest rate for a loan under the financing schemes for sustainable development will be based on the internal rating

Security Details

Hypothecation of assets created under the proposed project including those belonging to the enterprises and not been charged to any other lenders Collateral security, where-ever necessary for adequate asset coverages. CGTMSE cover may be taken, if available

Application Procedure for Financing Schemes for Sustainable Development

After the Detailed Energy Audit (DEA), the prospective borrower will submit the Detailed Project Report (DPR) to the SIDBI for its vetting by EEC. The firm seeking financial assistance for the implementation of its business idea is required to prepare a Project Report covering certain important aspects of the project as detailed below:

• Promoters background/experience
• Product with the capacity to be built up and processes involved
• Cost of the Project and Means of financing thereof
• Technical arrangements
• Availability of utilities
• Project location
• Market Prospects and Selling arrangements
• Profitability projections and Cash flows for the entire
• Environmental aspects repayment period of financial assistance

If needed the sample format of the DPR will be made available by EEC. The Borrower will have to submit the application to SIDBI BOs along with a copy of the DPR vetted by EEC. Eligible amount of capital subsidy under the CLCSS, TEQUP, etc. shall also be sanctioned along with the loan as per the prevalent guidelines. The loan disbursement will be made after compliance of terms and conditions of the sanction stipulated in the LOI and documentation as per the extant guidelines for DCS.