Management Notes

Reference Notes for Management

SIDBI was set up as a subsidiary of_________.

SIDBI was set up as a subsidiary of_________.



The Correct Answer Is:

  • A. IDBI.

The correct answer is A. IDBI (Industrial Development Bank of India). To understand why this is the correct answer and why the other options are not, we need to delve into the history and establishment of SIDBI (Small Industries Development Bank of India) and its relationship with the organizations mentioned in the options.

IDBI (Industrial Development Bank of India):

SIDBI was indeed set up as a subsidiary of IDBI. The Industrial Development Bank of India (IDBI) was established in 1964 under an Act of Parliament as a wholly-owned subsidiary of the Reserve Bank of India (RBI).

Its primary objective was to promote and develop industries in India by providing financial assistance and other support. IDBI played a crucial role in financing and fostering industrial growth in the country.

IFCI (Industrial Finance Corporation of India):

IFCI was established in 1948 as the first development financial institution in India. While IFCI played a significant role in providing financial assistance to industrial projects, it was not the parent organization responsible for the creation of SIDBI. Therefore, option B is incorrect.

ICICI (Industrial Credit and Investment Corporation of India):

ICICI is a prominent financial institution in India, but it was not involved in the establishment of SIDBI. ICICI primarily focused on commercial banking and financial services. Therefore, option C is incorrect.

SFC (State Financial Corporation):

State Financial Corporations (SFCs) are state-level development financial institutions in India that provide financial assistance to small and medium-sized enterprises (SMEs) within their respective states. While SFCs are vital for SME development, they are not responsible for setting up SIDBI. Therefore, option D is incorrect.

To provide further context, it’s important to understand the need for the creation of SIDBI and its role in the development of small-scale industries in India.

The Role and Establishment of SIDBI:

SIDBI was established on April 2, 1990, under the Small Industries Development Bank of India Act, 1989. The need for SIDBI arose due to the recognition of the importance of small-scale industries in India’s economic development. Small-scale industries play a significant role in generating employment, promoting entrepreneurship, and fostering regional development.

The establishment of SIDBI was a strategic move to channelize financial resources and provide specialized support to the small-scale sector, which often faced challenges in accessing credit and other necessary resources. SIDBI’s primary mission was to facilitate the growth of small enterprises by offering various financial and non-financial services.

SIDBI operates as a development financial institution that supports and promotes the growth of micro, small, and medium-sized enterprises (MSMEs) across India.

Its activities include providing loans and credit facilities, offering technical assistance and training, and fostering innovations in the MSME sector. SIDBI acts as a catalyst for the growth of small businesses and plays a crucial role in the economic development of India.

In conclusion, the correct answer to the question is A. IDBI, as SIDBI was established as a subsidiary of the Industrial Development Bank of India to focus specifically on the development and support of small-scale industries.

The other options (B. IFCI, C. ICICI, and D. SFC) are incorrect because these organizations had different objectives and were not involved in the formation of SIDBI. The creation of SIDBI has been instrumental in promoting the growth and sustainability of small and medium-sized enterprises in India, contributing significantly to the country’s economic development.

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