It has asked banks to take appropriate action on the recommendations of the S L Kapur Committee relating to delegation of more powers to branch managers to grant ad hoc limits, simplification of norms for assessment of credit requirements, opening of more specialised SSI branches, enhancement in the limit for composite loans to Rs five lakh, strengthening the recovery mechanism, paying more attention to backward states and special programme for training branch managers for appraising small projects.

The directive to banks following RBI's acceptance of the report submitted on June 30, 1998, also relates to making customer grievance machinery more transparent and simplification of procedures for handling complaints and their monitoring. The committee's 128 recommendations cover wide range of areaspertaining to financing of SSI sector.

The RBI has said banks should introduce tri-lingual loan application forms (Hindi, English and local language) and also to straightaway use the application forms prescribed for facilities upto varying amounts. It has also advised banks to adopt committee approach for sanction of applications and to dispose of loan applications in a time bound manner. It has indicated that applications for amounts upto Rs 25,000 should be disposed of within a fortnight and those for amounts above Rs 25,000 within eight to nine weeks.

It further asked banks to delegate powers to branch managers to grant ad hoc facilities to the extent of 20 per cent of the limits sanctions subject to the usual lending discipline. This would ensure that most of the credit proposals are decided at the branch level, it said.

The central bank has asked banks to lay down with the approval of their boards some clear guidelines for computing the working capital limits for various sub-sectors granted to SSIborrowers, particularly those units where fund-based working capital requirements exceed Rs four crore.

Banks have been told to normally accept, in case of new units, the projections accepted by the term lending institutions, for the first year of operation unless there are specific reasons for not doing so.

The RBI has also reiterated its earlier instructions that of the total funds allocated by banks to SSI sector, at least 40 per cent should go to the units with investment in plant and machinery upto Rs five lakh and 20 per cent to units with investment between Rs five lakh and Rs 25 lakh. The central bank has informed banks that now the flow of credit to SSI would be assessed by using data on disbursement rather than `outstanding balances'. The banks have, therefore, been advised to fix their disbursement targets alongwith outstanding balances.

It has also decided to implement the recommendations of enhancing the limit of composite loans from Rs two lakh to Rs five lakh so that the entirerequirement of such units is met by single documentation and security and charge creation process. This facility would also be extended to all SSI units requiring loans upto Rs five lakh irrespective of their location.

It has agreed with Kapur committee's recommendation that for projects having loan requirement in excess of Rs 25 lakh, arrangements should be made by SIDBI with public sector banks to have a memorandum of understanding signed.