Small Scale Industry
29. Last year, I had announced a number of initiatives to improve the
availability of credit to the SSI Sector. Credit delivery to this sector continues to pose
challenges to our banking sector. I propose the following initiatives to improve the
delivery system for credit to SSI units:
The composite loan scheme of SIDBI and commercial banks is designed
to ease operational difficulties of the small borrowers by providing term loan and working
capital through a single window. The limit for composite loans is currently Rs.2 lakh. I
propose to increase this limit to Rs.5 lakh.
To simplify the computation of working capital limits of SSI units,
last year I had announced that for SSI units having an aggregate turn over of Rs.4 crore,
working capital limit would be fixed at 20% of the annual turnover. I propose to increase
this limit to Rs.5 crore.
In line with the recommendations of a high powered committee
appointed by it, RBI had advised banks to delegate more powers to branch managers to grant
ad hoc limits, to simplify application forms, to fix their own norms for assessment of
credit requirement and open more SSI branches. These measures should ease the flow of bank
credit to SSI units.
To increase the outreach of banks to the tiny sector, lending by
banks to non banking finance companies or other financial intermediaries for purposes of
on-lending to the tiny sector is being included within the definition of priority sector
for bank lending.
- Inability to provide adequate security to banks
and low recovery are often cited as a major constraint in flow of investment credit to SSI
units. The problem is more acute for export oriented and tiny sector enterprises. To
alleviate this problem, a new credit insurance scheme will be launched.