The central bank has asked all commercial banks, including regional rural banks, to take appropriate action for implementation of the committee's recommendations. These include delegation of more powers to branch managers to grant ad-hoc limits, simplification of application forms, freedom to banks to decide their own norms for assessment of credit requirements and strengthening of the recovery mechanism.

Other recommendations accepted include paying more attention to backward states, special programmes for training branch managers for appraising small projects and making the customer grievance machinery more transparent.

It may be recalled that the RBI had set up the one-man high-level committee headed by SL Kapur, former secretary in the industry ministry, to suggest measures for improving the delivery system and simplification of proceduresfor credit to the SSI sector. The Kapur Committee submitted its report to the RBI on June 30, 1998.

The RBI has asked banks to introduce tri-lingual loan application forms in Hindi, English and the local languages and also asked them to use the application form prescribed for facilities up to Rs 2 lakh, for facilities up to Rs 10 lakh. Application forms prescribed for loan facilities up to Rs 15 lakh may be used for facilities up to Rs 50 lakh and those prescribed for limits of up to Rs 1 crore, for loan facilities beyond Rs 50 lakh and up to Rs 2 crore and beyond.

The RBI has indicated to banks that applications for amounts of up to Rs 25,000 should be disposed of within a fortnight and those for amounts above Rs 25,000 within eight to nine weeks. The central bank has advised banks to adopt a committee approach for sanction of applications and to dispose of the applications in a time-bound manner.

The RBI has asked banks to delegate powers to branch managers to grant ad-hoc facilities to the extent of20 per cent of the limits sanctioned subject to the usual lending discipline, which would ensure that most of the credit proposals are decided at the branch level.

Banks have also been asked, with the approval of their respective boards of directors, to lay down clear guidelines for computing the working capital limits for various sub-sectors granted to SSI borrowers. The RBI has also reiterated its earlier instructions that out of the total funds allocated by banks to the SSI sector, at least 40 per cent should go to units with investment in plant and machinery up to Rs 5 lakh and 20 per cent to units with investments in plant and machinery between Rs 5 lakh and Rs 25 lakh.

Banks have been informed that the flow of credit to SSIs will now be assessed by using data on disbursement rather than outstanding balances. Banks have, therefore, been advised to fix their disbursement targets along with the outstanding balances. The RBI has also asked banks to pay more attention to backward states such as Bihar,Jammu & Kashmir, Madhya Pradesh and the north-eastern states while fixing the lending targets.

The RBI has decided to implement the recommendations of enhancing the limit of composite loans from Rs 2 lakh to Rs 5 lakh so that the entire requirement of such units is met by single documentation. The RBI has agreed with the Kapur Committee's recommendations that for projects having loan requirements in excess of Rs 25 lakh, arrangements should be made by the Small Industries Development Bank of India (Sidbi) with the public sector banks to have a memorandum of understanding signed between the state finance corporation and the selected PSU banks active in different regions of the country for joint financing, whereby both the term loan as well as the working capital should be shared on a pari passu basis.

The RBI has said that the overall interest payable by SSIs should remain within the existing parameters fixed by it, which is the prime lending rate (PLR) plus four per cent. Additional spread over the PLRshould be used as premium for guaranting the repayment of the loan. SSI units with a good track record will, therefore, have to pay lower premiums and would derive advantage out of lower spreads.

RBI has also asked banks to open more specialised branches or convert the existing ones at centres having clusters of SSI units, subject to viability. It has also asked banks to encourage selective specialised branches to innovate and experiment with new products such as factoring services and business credit cards.

In order to make the customer grievance machinery more effective, the RBI has decided to accept the Kapur Committee's recommendations regarding recourse to lok adalats and to appoint or designate special officers exclusively for dealing with recoveries. The RBI has asked banks to appoint special officers or designate existing officers who should exclusively deal with recovery.

The RBI has said that SSIs can have an overseas presence since overseas investments by Indians in joint ventures are alreadyallowed. In order to help SSI units increase exports and upgrade technology, the committee had recommended that small-scale companies, which strive for an overseas presence, should be allowed to invest up to $30,000, based on a simple procedure and banks should assist them in their purpose.