The Small Industries Development Bank of India Act, 1989

The Small Industries Development Bank of India Act, 1989 (Act no. 49 of 1989) was enacted with the view to provide for establishment of a principal financial institution as Small Industries Development Bank of India for the promoting and financing the development of industry in the small-scale sector. The Act also to provide for coordinate functioning of the institutions engaged in the same business of promoting, etc. The Act has received assent on 25th October, 1989 and was extended to the whole of India.

So far as the establishment of the aforesaid bank is concerned, the provisions are contemplated under second chapter of the Act. Section 3 whereof, says that the Central Government should notify the establishment of the corporate body which is termed as the Small Industries Development Bank of India. The Act says that, the head officer of said Bank should be at Lukhnow or even at the place where the Central Government thinks fit. Moreover, there is a provision regarding establishment of branches, agencies, etc. of the Bank both inland and outside India. Section 4 and other related subsequent provisions make authorized capital provisions for the said Bank.

The next Chapter contains provisions regarding management of the aforesaid bank. The Board of Directors are authorised for general superintendence, direction and management, etc. over the Bank. Such Board should be headed by the Central Government appointed Chairman and other Managing directors and also other Directors. The provisions regarding service conditions, tenure, vacancies, disqualifications, etc. are also contemplated in the Act. Section 12 of the Act is dealing with constitution of Executive and other committees by the Board.

The Act in its fourth Chapter provides for the business of the aforesaid Bank. The Bank should be treated as apex financial institution dealing with promotion, financing, etc. of Industrial concerns in the small scale sector and should also provide for coordinative support to the institutions dealing with same function. All the other functions of the Bank are enlisted under the clauses of section 13, including advancing loans to state financial corporation or state industrial development corporation or even to the state small industries corporations etc. which are approved by the Board; accepting, discounting or rediscounting bills of exchange and promissory notes made, etc. by the industrial concerns in the small-scale sector, etc. Another important provisions is relating to the one where the concerned Bank is empowered to grant loans in foreign currency to the borrowers, however, while granting such loans the Bank should have previous consent to the transaction from the Central Government. the last provision under this Chapter is connected with the receipt of grants, donations, gifts, etc. by the Bank which will be made from the Government or even from any other source.

It is specified in the next chapter i.e. Chapter IV-A to the Act, that the equity shares in the concerned Bank should be freely transferable except by the Development Bank, the public sector banks, the General Insurance or Life Insurance Corporation and any other institutions which are owned or have control of the Central Government, when such transfer is to result in reducing equity shares held in aggregate to less than 51% of issued equity share capital of the Bank. Other provisions relating to the shares and relevant matters therein are explained under subsequent provisions. The next chapter i.e. Chapter IV-B speaks of annual meetings of the concerned Bank, the matters which are to be taken for discussion in the meetings and also procedure thereof.

The said Bank is required to establish and maintain the fund being special which is named under this Act as Small Industrial Development Assistance Fund, for the Central Government approved purposes. Such fund to be credited with the amounts specified under section 22 of the Act, including the one which is received from the Government or any other source as gift, donations, etc as aforesaid; received as recovery against loans advanced by such Bank, etc. And such funds to be utilized by the concerned Bank for the Central Government specified purposes. Next chapter is dealing with general funds and also with accounts and audit by the Bank.

The Act further makes provisions as to transfer of assets, liabilities, privileges, rights, etc. of the Development Bank to the Small Industries Bank. The provisions also have been made for the staffs, etc. of the Bank. A number of officers or other employees can be appointed by the Small Industries Bank which are deemed necessary or desirable for efficient performance of its functions. Moreover, the Directors or committees constituted under this Act, can be delegated with the powers by the Board. The last chapter contains several important provisions including the authority of delegation of powers. Some of the those provisions, are including the applicability of certain enactments in relation to the concerned Bank including the Banker’s Books Evidence Act, 1891 (Act no. 18 of 1891); provisions of section 34A and 36AD of the Banking Regulation Act, 1949. The Central Government is vested with power to make rules for carrying out the provisions of this Act and on other matters provided therein. Also there is a power to make regulations vested with the Board. Further, there is a provision relating to amendments in the Act as provided under several parts mentioned under the Schedule annexed with the Act.

In pursuance with the provisions of this Act, the Small Industries Development Bank of India was set up on 2nd April, 1990. There was an amendment in the Act, by the Act of 2000. And recently, there is an another amendment sought to be brought in this Act in the year 2012 by The Small Industries Development Bank of India (Amendment) Bill, 2012 presented before Lok Sabh on 16th February, 2013.

by Faim Khalilkhan Pathan.