Question

The primary focus of SMILE loan of SIDBI is to

• A. Upgrade their machinery with state-of-the-art equipment
• B. To meet the debt-equity ratio of a unit or to help in its growth and expansion
• C. For technology upgradation and expansion
• D. One-time non-recurring loan for start ups

Answer 1

The Correct Option is B

The question pertains to the SMILE loan scheme facilitated by the Small Industries Development Bank of India (SIDBI). Understanding the objective and focus areas of the SMILE scheme is crucial to answering this question correctly. SMILE stands for "SIDBI Make in India Loan for Enterprises," a support mechanism to bolster the “Make in India” initiative launched by the Indian government.

The primary focus of the SMILE loan is to provide financial assistance to SMEs (Small and Medium Enterprises) with a focus on the following aspects:

1. Debt-Equity Ratio and Growth: The scheme targets improving the debt-equity ratio, which is the proportion of a company's total debt to its equity capital. A balanced debt-equity ratio ensures that a company operates efficiently without over-leveraging. By improving this ratio, the SMILE loan aids SMEs in maintaining financial health and robustness, supporting their growth and expansion efforts.
2. Expansion and Development: Allowing units to expand their operations or upgrade their technologies by availing financial support. This expansion or upgradation is integral to the growth of enterprises under the “Make in India” initiative.

Now, let's analyze the options:

• Option 1: "Upgrade their machinery with state-of-the-art equipment" - While technology upgradation is a facet of many financial schemes, the core aim of SMILE is not just equipment but broader financial health.
• Option 2 (Correct Answer): "To meet the debt-equity ratio of a unit or to help in its growth and expansion" - This is the correct option. The essence of the SMILE loan is to balance the financial ratio to promote growth and aid in the expansion of business operations.
• Option 3: "For technology upgradation and expansion" - Though related, it lacks the specific focus on the debt-equity ratio, which is a key aspect of the SMILE loan.
• Option 4: "One-time non-recurring loan for startups" - This is misleading as the SMILE loan targets all SMEs, not just startups, and is more comprehensive than a one-time grant.

Given these points, the correct answer is that the primary focus of the SMILE loan of SIDBI is "To meet the debt-equity ratio of a unit or to help in its growth and expansion."