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Govt seeks to amend SIDBI Act: delink from IDBI, capital recast mooted

The Union Cabinet has approved the proposal to introduce a bill to amend various provisions of the Small Industries Development Bank of India Act, 1989.

SIDBI is wholly owned by Industrial Development Bank of India.

Finance Minister Yashwant Sinha in his budget speech for 1998-99 had talked of delinking SIDBI from IDBI to equip the former to play its apex role in small scale industries credit provision more effectively. IDBI shareholding in state finance corporations will be transferred to SIDBI.

The delinking would involve changes in capital structure, composition of board of directors and related consequential and incidental amendments to various provisions of the SIDBI Act, 1989.

In addition, certain other changes with a view to provide greater functional autonomy and operational flexibility to SIDBI have also been proposed.

SIDBI's authorised capital at present stands at Rs 5 billion. Its paid-up capital is Rs 4.5 billion which is wholly subscribed by IDBI. It is proposed to enhance the upper limit of authorised capital to Rs 10 billion consisting of Rs 7.5 billion as equity share capital and Rs 2.5 billion as redeemable preference share capital.

There will also be enabling provision for an increase in the authorised share capital of SIDBI upto Rs 20 billion.

Under the existing provisions of the SIDBI Act, SIDBI may invest its funds in the securities of the Central government or any state government or in deposits with any scheduled bank. This provision enables SIDBI to deploy its surplus funds only in restricted securities at lower rates, thereby affecting its profitability.

In order to provide freedom to SIDBI with regard to investment of funds, it is proposed that SIDBI may invest its funds in such manner and in such securities as its board may decide from time to time.

UNI

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