Union Budget 1999-2000 Govt. of India Ministry of Finance

Budget Speech


Yashwant Sinha

Speech of Shri Yashwant Sinha
Finance Minister, Government of India
27th February, 1999

but.gif (597 bytes) 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.





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