The SIDBI banks being an important nerve of modern organized society can play an important role in the SSIs transformation. They provide the infrastructure on which agriculture; industries and trade of nation depend. They can allocate available resources by mobilizing deposits and advancing credit into the best possible uses according to national priorities. By opening branches in unbanked and under-banked areas, the banks can spread magnetization, thereby introducing a larger market economy in place of natural economy. By providing loans to agriculture and small-scale sector they can solve the acute problems of unemployment and under employment. Hence banks can rightly be called the nation’s agents of economic development. But in developing countries like India the role of SIDBI is not confined to accepting deposits and advancing loans. They also accept, the accelerating flow of credit in accordance with the needs of SSI development. They have shifted from restricted old conservative policies to modern banking with lots of new techniques, which brings dynamism and innovation in their functioning. The Government of India and the State government have been pursuing a policy of protecting and promoting small-scale industries for a long time. Small scale industries have been accorded pride of place in the planned industrialisation process of the Indian economy, which is characterized by among other factors low productivity in the SSIs abundant labour and scarcity of capital. The Government of India felt that in spite of various incentives provided for backward areas by both the central and state governments industrial growth in backward areas has not been satisfactory mainly because of inadequacy of infrastructure. It therefore felt the need to have an institutional framework for expeditious improvement of existing infrastructural facilities and creation of new infrastructural facilities where there are not any