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Jayshree Bose
Mumbai, Nov 9: The small scale industry (SSI) sector has made a heightened pitch to the Indian Banks Association (IBA) for facilitating timely and adequate bank credit to this sector. Among the other expectations of this sector are: expansion of the existing SSI specialised branch network, more realistic credit appraisal norms and speedy implementation of the Nayak Committee (1994) and SL Kapur Committee (1998) recommendations.
At a recent interface between a five-member delegation of the Confederation of Indian Industry's (CII's) Small Industry Committee, headed by chairman Dadi E Mistry, and IBA chairman AT Pannir Selvam and other IBA members, the CII Committee spelt out a five-point agenda for improvement of bank credit to the SSI sector. The five recommendations focussed on better training and sensitisation of bank staff to the special needs of this sector, greater clarity about collateral norms, single-window disbursal, computerisation of SSI branches, and the introduction of the SSI credit card systemon the lines of those for agricultural borrowers.
The SSI sector in India, which comprises over 30 lakh units, currently contributes around 37 per cent of the total revenue accruing from excise and sales tax and accounts for 35 per cent of direct exports (this excludes the contribution of SSI contractors and ancillaries catering to the large scale sector). But the share of this sector in net bank credit to industry -- at Rs 31,542 crore on March 31, 1997 -- was 16 per cent of total net bank credit to industry which stood at Rs 189, 684 crore on that date.
According to Rajesh Gangar, convenor, SSI panel, CII, although there has been a marginal increase in bank credit in percentage terms, which has gone up from 14.60 per cent in 1993 to 16 per cent in 1997, this is inadequate if one takes the sector's contribution to the country's economy.
One major reason behind this is the absence of an adequate number of specialised SSI branches, which today stands at 370 units. These cater to the needs of an averageof 70 SSI units each, though the figure varies from 6 to 349 from one branch to another. This implies that the specialised SSI branches are catering to barely 26,000 units, which works out to 0.86 per cent of a total of 30 lakh units approximately. Another crippling factor is that SSI sector spokesmen have been asking for full implementation of the Nayak Committee's recommendation of sanctioning credit limit upto 20 percent of projected turnover (up to a limit of Rs 2 crore), with an additional 20 per cent of the recommended 20 per cent (this works out to 24 per cent) thrown in during periods of recession.
However, they point out that what is happening in reality is that banks follow either the maximum permissible bank finance method or the Nayak committee's recommendations, whichever translates into a lower limit for the SSI borrower.
This is being construed as a regressive step as the Reserve Bank has already accepted 35 out of the the Kapur Committee's 120 recommendations, one of the major ones beingthat the ceiling on the limit based on the 20 per cent of projected turnover norm be hiked from Rs 2 crore to Rs 4 crore. Another proposal thrown up by the industry, which is aimed at bringing down appraisal time from the current 5-6 months and even one year, to one month at the most, has been that the Small Industries Development Bank of India (SIDBI) should tie up with banks to conduct a two-part appraisal process. While balance sheet data and projections could be appraised by SIDBI online, banks could go for onsite appraisal for physical verification of stocks, etc. To make the exercise acceptable to banks, SIDBI could provide a guarantee by charging a guarantee fee.
Bankers concede that while non-performing assets from the SSI sector are more in terms of number of accounts, in terms of absolute quantum the large scale sector naturaly scores hands down -- with actual figures whittled down only by dint of evergreening. A senior SSI spokesman points out that, in fact, delays in SSI's receivables andconsequently in their repayment of bank funds can, in turn, often be traced to delayed payments from the large scale sector. Pesistent representations are now being made to the industries and law ministry to have a bill passed on delayed payments, on the strength of which a large scale unit can be made to forfeit its right to claim that goods purchased from the concerned SSI be treated as expenses, with the result that its tax liability goes up.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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