Finance Minister's Speech

Small Scale Industry

The SSI sector plays a vital role in industrial production, employment generation and exports. In the context of growing domestic and international competition, our strategy is to support this sector through promotional policies of credit and technology. For improving credit flow to SSI units, I propose the following:

The requirement of providing collateral security is a major bottleneck to the flow of bank credit to very small units. RBI has recently issued instructions to dispense with the collateral requirement for loans up to Rs.1 lakh. The limit is being further increased for the tiny sector from Rs.1 lakh to Rs.5 lakh.

The existing composite loan scheme of SIDBI and banks helps small borrowers by providing working capital and term loans through a single window. To promote credit flow to small borrowers, the composite loan limit is being increased from Rs.5 lakh to Rs.10 lakh.

I am asking the public sector banks to accelerate their programme of SSI branches to ensure that every district and SSI clusters within districts are served by at least one specialised SSI bank branch. Furthermore, to improve the quality of banking services, SSI branches are being asked to obtain ISO certification.

Last year, I had announced that a credit guarantee scheme for SSI will be launched. I am glad to inform the House that a new Central Scheme for this purpose has been formulated and a provision for Rs.100 crore has been made in the budget. The Scheme will be implemented through SIDBI and will cover loans upto Rs.10 lakhs from the banking sector. The guaranteed loans will be securitised and will be tradeable in the secondary debt market.

SIDBI operates the National Equity Fund Scheme under which equity support is provided for projects up to Rs.15 lakh. To further help SSI entrepreneurs, this limit will be raised from Rs.15 lakh to 25 lakh.

SIDBI is presently administering the Technology Development Modernisation Fund Scheme for assisting technology development and modernisation of SSI units. The Scheme has certain concessional features including interest at prime lending rate for direct assistance and refinancing at 2% below prime rate for indirect finance. The operation of this scheme is being extended by another 3 years.