Previous Year Question

SIDBI (Small Industries Development Bank of India) is not a commercial bank; it is a Development Financial Institution. RBI classifies SIDBI, along with NABARD, NHB and EXIM Bank, as an All-India Financial Institution and refinancing institution in its regulatory records. In contrast, SBI, ICICI Bank and HSBC form part of the commercial banking system.

SIDBI was established on 2 April 1990 under an Act of Parliament. According to SIDBI's official description, it is the Principal Financial Institution for the promotion, financing and development of the Micro, Small and Medium Enterprises (MSME) sector and also coordinates the functions of institutions engaged in activities related to the MSME sector.

Therefore, SIDBI's primary purpose is not to provide ordinary retail banking services such as savings/current accounts to the general public like a typical commercial bank, but to support MSME financing, refinancing, development and the credit ecosystem. This is why, despite having the word “Bank” in its name, it is not treated as a commercial bank in this question. RBI also places SIDBI in a separate category as a specialised financial institution.