Govt mulls measures to boost credit to SSIs

The government and Reserve Bank of India are considering a series of measures to enhance credit flow to the
small scale industry at prime lending rates and on collateral security, while considering legislations for delayed payments and factoring services.

"Reserve Bank has been asked to look into the issues including reduction of lending rates to SSIs at prime lending
rate and come up with concrete suggestions by January 2003," Deputy Chairman Planning Commission K C Pant said after a meeting with officials of the finance ministry, small scale ministry, RBI and leading bankers.

RBI Deputy Governor Vepa Kamesam agreed that though there was a soft interest rate regime, there was a case for further softening of interest rates for the SSI sector.

Although in absolute terms, credit to SSI increased to Rs 49,500 crore (Rs 495 billion) from Rs 25,000 crore (Rs 250 billion) in 1995, Kamesam said when compared to large corporates, the credit to SSIs has come down.

"It is a matter of concern," he added. "Interest rate is largely market determined. Top corporates get credit at prime lending rate. But there is a need to look at the rates and spreads for SSIs and agriculture sector also," Kamesan said.

Asked whether credit to SSIs at PLR would be feasible, State Bank of India chairman A K Purwar said, "RBI is working on it. It has to be examined."

Punjab National Bank CMD S S Kohli said each bank should work on a policy for giving credit to SSIs at a cheaper rate.

To speed up creidt disbursal to SSIs, Kamesam said RBI has directed banks to give loans upto Rs 25,000 within two weeks and upto Rs 25 lakhs (Rs 2.5 million) within four weeks.