On the basis of the recommendations of the Committee it has been decided as under : A

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RPCD.No.PLNFS.BC.16/06.06.12/94-95

July 28, 1994 Sravana 6, 1916 All Scheduled Commercial Banks

Dear Sir,

Bank Credit to Khadi and Village Industries (KVI) Sector

Please refer to our circulars RPCD.No.PLNFS.BC.10/C.464(A)-Spl.KVIC-91/92 dated 17 July 1991 and RPCD.No.PLNFS.BC.84/06.06.12/93-94 dated 7 January 1994 advising you regarding the steps to be taken to ensure smooth flow of credit to KVI sector.

2. A meeting of the representatives of KVIC, banks, SIDBI, NABARD was held under the Chairmanship of Shri. D. R. Mehta, Deputy Governor, Reserve Bank of India, on 13 December 1993 to review the flow of institutional credit to the KVI sector, whereat it was decided to constitute a Committee (under the Chairmanship of Shri. S. K. Kalia, Managing Director, National Bank for Agriculture and Rural Development), to study the working of the KVIC Interest Subsidy Scheme, financing of KVI institutions and related issues and to recommend suitable action. On the basis of the recommendations of the Committee it has been decided as under :

A. Calculation of credit requirements of Khadi Institutions

In our circular No.PLNFS.BC.10/C.464(A) Spl.KVIC-91/92 dated 17 July 1991, it was indicated that the KVIC assesses the credit requirements of its implementing agencies after taking into account various relevant aspects including the assistance provided by the Commission itself, and, as such, it should be possible for the banks to be guided by the assessment of the KVIC. While there is no change in the methodology of assessment of the working capital adopted by KVIC and the banks, the following measures should be taken to enable the khadi institutions to raise adequate working capital.

i) Along with the Interest Subsidy Eligibility Certificate, KVIC will furnish the work sheet indicating the details of assessment of working capital requirements of the units.

ii) KVIC s assessment may be accepted if it does not exceed the assessment made by the banks by more than 10%.

iii) In case the KVIC s assessment of working capital exceeds the bank s assessment by more than 10%, the quantum of working capital may be arrived at by mutual dialogue between the institutions/KVIC and the financing banks.

iv) In case of sharp differences between the peak level and lean season credit requirements, additional credit limits may be sanctioned by the banks; KVIC will indicate such peak level credit requirements also in the Interest Subsidy Eligibility Certificates.

B. In view of the fact that the KVI sector is playing an important role in creating employment opportunities for poor people in rural areas, it has been decided to do away with the limits prescribed in our circular RPCD.No.PLNFS.BC.84/06.06.12/93-94 dated 7 January 1994, in regard to population, credit requirement and investment in plant and machinery for classifying the advance under the priority sector. Henceforth, all advances to the KVI sector, irrespective of their size of operations and location will be covered under priority sector advances and will also be eligible for consideration under the sub-target (40%) of the SSI segment within the priority sector.

3. We shall be glad if you will please issue instructions in this regard immediately to all your branches and controlling offices under advice to us.

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Yours faithfullly, Sd/-

(AVINASH MISRA) Jt. Chief Officer

RPCD.No.PLNFS.1531/06.02.31/94-95

March 30, 1995 Chairman/Managing Director All Public Sector Banks

Dear Sir,

Action plan for improving the flow of credit to SSI sector

As your aware, the Finance Minister while presenting the Central Government s budget for 1995-96 has announced a Seven Point Action Plan for improving the flow of credit to the small scale sector. In this connection, we forward herewith a copy of letter F No.2(2)/95-IF.II dated 21 March 1995 received by us from Ministry of Finance, contents of which are self-explanatory.

2. It will be observed from the letter that a key feature of the plan is the setting up to 100

dedicated specialised bank branches during 1995-96 to serve the needs of small scale units in 85 districts with high concentration of SSI units. (62 of these districts have been allotted to

commercial banks and remaining 23 to SFCs to function as principal financing agency in their respective allotted districts).

3. In this connection, we may add that most of the points are covered in our circular

RPCD.No.PLNFS.BC.99/06.02.31/92-93 dated 17 April 1993 and subsequent circulars issued on the implementation of Nayak Committee recommendations.

4. In view of the foregoing, we shall be glad if you will please take appropriate action for effective implementation of these points. You are also requested to ensure that progress in the implementation of the plan is placed before the Board of Directors for their review and advice. A copy of the note put up to the Board alongwith their observations may also please be sent to us for our information.

5. Please acknowledge receipt.

Yours faithfully, Sd/-

(A. M. KHAN)

Joint Chief Officer Encl.: As above.

F. No.2(2)/1/95-IF.II MINISTRY OF FINANCE Department of Economic Affairs (Banking Division) "Jeevan Deep"

Parliament Street, New Delhi March 21, 1995 Dear Ms. Vaz,

While presenting the Central Government s Budget for 1995-96 the Finance Minister has announced the following with regard to improving the flow of credit to the SSI Sector.

Para 18 : Adequate availability of credit from the banking system is critical for the small scale sector. The Government, in consultation with banks, has formulated a Seven Point Action Plan for improving the flow of credit to this sector. A key feature of the Plan is the setting up of sepcialized bank branches to serve the needs of small scale units in 85 identified districts, each

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with more than 2,000 registered small scale units. The public sector banks will ensure that 100 such dedicated branches are operational before the end of 1995-96.

The 7 Point Action Plan consists of the following :

i) The customer service in specialised SSI branches is generally much better as compared to services provided by normal branches, timebound action needs to be taken by banks for setting up of specialised SSI branches in 85 identified districts each with more than 2000 registered SSI units. These branches should have adequate infrastructure and be manned by officials having the necessary background and skills and possessing the right attitude. These branches should

generally be headed by Chief Managers. For this purpose, banks should be empowered to create additional posts of Chief Managers, if necessary, with the approval of their respective Boards.

ii) With a view to facilities timely sanction of adequate credit facilities to SSI it is essential that branch managers are vested with sufficient discretionary powers so that most of the credit decisions are taken at the branch or the regional level itself. For this purpose banks should review the existing delegation of powers at the branch and regional levels.

iii) The banks should undertake sample surveys of their performing SSI accounts with a view to find out whether they are getting adequate credit.

iv) Steps should be taken to ensure that as far as possible composite lending (covering both term loans for fixed assets and working capital facility simultaneously) are sanctioned by commercial banks to SSI entrepreneurs. In case of loans sanctioned by State Financial Corporations, banks should appraise projects jointly or simultaneously with SFCs.

v) Banks should have regular meetings at zonal and regional levels with the SSIs entrepreneurs in order to understand their problems and provide them counselling and guidance.

vi) There is a need to sensitise bank managers and increase their awareness regarding working of the SSI sector. The problem faced by SSI sector in regard to bank finance to a large extent could be solved if branch level officials have the right attitude, skills and orientation. In understanding their role the branch level officials should be made aware of the importance of the SSI sector from the point of view of creation of additional employment opportunities, exports, etc. A healthy growth of this sector will facilitate the smooth loan recovery in the SSI borrowal accounts. Further, timely assistance will prevent these accounts from becoming sticky. The aforesaid aspects should therefore from part of the inputs in training imparted to bank staff.

vii) The banks should also take steps to review the procedural formalities (including cumbersome and lengthy application forms) with a view to ensuring that procedures are simplified and are reduced to a minimum in the case of SSI entrepreneurs.

We shall be grateful if necessary directions to banks are issued on the Action Plan announced by the Finance Minister. The implementation of the Action Plan would need to be monitored by the Board of Directors of each public sector bank. RBI may also kindly evolve a system to review the progress periodically under the Plan.

With regards, Yours Sincerely, Sd/-

(P. BOLINA)

Ms. I. T. Vaz, ED, RBI, Bombay RPCD.PLNFS.1613/06.02.31/94-95

18 April, 1995 28 Chaitra, 1917 (Saka) All Scheduled Commercial Banks

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Dear Sir,

Violation of the Policy of Reservation

As you are aware, one of the measures of support for promoting the Small Scale Industries is the policy of reservation of certain items for exclusive manufacture in the small scale sector. At present 836 items are reserved for this sector. Of late, Ministry of Industry, Government of India have been receiving complaints about the violation of the policy of reservation by the medium and large scale undertakings. These complaints mainly pertain to the manufacture of consumer goods like bread, biscuits, tooth-paste, tooth-powder, ice-cream etc. A number of Parliamentary Questions regarding violation of this policy have also been received by the Government.

2. The basic conditions of reservation policy and the circumstances under which medium/large scale undertakings can manufacture reserved items as advised by the Government of India, are given in the Annexure. As a measure of check, we advise that while accepting the loan proposals for medium and large industries, please ensure that these units do not violate the reservation policy. A copy of your advice to your controlling offices/branches may please be sent to us for our information.

(A. M. KHAN) Joint Chief Officer

ANNEXURE

BASIC CONDITIONS OF RESERVATION POLICY AND THE CIRCUMSTANCES UNDER WHICH MEDIUM/LARGE SCALE UNDERTAKINGS CAN MANUFACTURE

RESERVED ITEMS

The present policy of encouraging growth of small industries because of their inherent

advantages like labour intensity and adaptability to semi-urban and rural environment is based on several promotional measures, one of which is reservation of industries for exclusive

manufacture in the small scale sector. This policy was initiated in 1967 with 47 items in the list.

Since then there have been additions to and deletions from the list including change in

nomenclature. As on date, 836 items are reserved for exclusive manufacture in the small scale sector. The industries (Development and Regulation) Act was amended in March 84

empowering the Government to reserve items for small scale sector with statutory backing. With a view to determine the nature of any article or class of article that may be reserved for

production by the small scale or ancillary industrial undertakings, Government has constituted an Advisory Committee on Reservation in March, 1984.

2. Circumstances under which medium/large scale units can manufacture reserved items i) Where existing medium/large industrial undertakings are manufacturing reserved items, they have to obtain a Carry-on-Business (COB) licence to continue manufacture such reserved items.

The capacity in the COB licence is, however, pegged at the best production level achieved by such undertakings in the three years preceding the date of reservation of the item.

ii) When small scale industrial undertakings graduate into medium/large scale undertakings, such undertakings have also to obtain a COB licence to enable them to continue manufacturing of reserved items. In such cases also, their capacity is pegged with respect to the date on which it became incumbent on the undertaking to apply for and obtain a COB licence.

iii) In case large industrial undertakings wish to take up manufacture of items reserved for small

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scale sector their applications can be considered if they undertake an export obligation of a minimum of 75% of new or additional production to be achieved within a maximum period of three years.

iv) Where an industrial licence has already been issued to medium/large scale undertakings to manufacture items prior to the date of reservation, such undertakings can continue to

manufacture the reserved items upto the licensed capacity endorsed on the licences.

3. Marketing of Reserved items by medium/large scale units. Marketing of products reserved for exclusive manufacture in the small scale sector by large scale units does not constitute violation of the reservation policy.

RPCD.PLNFS.BC.No.165/06.03.01/94-95

6 June, 1995 16 Jyestha 1915 (Saka) All Commercial Banks

Dear Sir,

Scheme for Financing Primary Weavers Co-operative Societies by Commercial Banks

In his budget speech on March 15, 1995 the Finance Minister referred to the proposal to extend concessional refinance from NABARD to the Primary Weavers Co-operative Societies (PWCs) through the commercial banks, besides the present system of routing the same through the cooperative banks. In para 14(k) of Governor s circular No.CPC.BC.144/07.01.279/94-95 dated April 17, 1995 while announcing the scheme it was indicated that operating instructions are being issued separately.

2. In pursuance of the above, we give below the outline of the modalities for financing PWCs by commercial banks :

i) Coverage

Refinance by NABARD to commercial banks will be available for financing the Primary Weavers Co-operative Societies for production-cum-marketing activities.

ii) Selection of Primary Weavers Co-operative Societies

The list of societies to be financed by the commercial banks will be identified by the Directorate of Handlooms in each of the States with the approval of the concerned Registrars of Co-

operative Societies. At the district level, a committee will be constituted consisting of representatives of NABARD, District Central Co-operative Bank and Lead Bank who will scrutinise and approve the list of societies. The extension of finance by commercial banks will be on the basis of their respective Service Area obligations. The implementation of the Scheme will be monitored by the District Level Consultative Committee (DLCC).

iii) Criteria for Selection

a) The scheme of financing PWCS for their production and marketing activities will be confined to areas where District Central Co-operative Banks are weak and have not been able to provide adequate credit support to such societies.

b) The societies to be financed will be required to have a satisfactory working record, reasonable level of financial strength and managerial efficiency together with the capacity to provide margin for their borrowings.

c) The societies should be viable or potentially viable and should have paid managers.

d) The audit classification of the society should be atleast B . e) The societies should not be indebted to the DCCB.

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iv) Norms for financing

The norms for financing on the basis of cash credit against hypothecation of stocks will be similar to those prescribed for the financing by the co-operative banks.

v) Margin

The commercial banks may maintain a margin of 10 per cent for their lendings.

vi) Interest Rate on Refinance/Advances

The scheme could be operated under the condition that the State Government provides a subsidy of 2.5 per cent. Where such a subsidy is available, NABARD will make available a line of credit to commercial banks at 9.5 per cent per annum and the commercial banks will onland to

handloom co-operatives at the same rate i.e. 9.5 per cent.

vii) Refinance

Refinance may be drawn by the commercial banks from NABARD through their designated branches on a quarterly basis as in the case of co-operative banks. Each drawal from the limit will be allowed for a period of 12 months and the commercial banks will have to maintain non- overdue cover in respect thereof.

viii) The advances made by commercial banks to handloom co-operatives will be reckoned as indirect finance to the small scale industries (SSI) sector and form part of their priority sector lendings.

3. We are advising NABARD to forward to you detailed instructions including the refinance facility available.

(A. M. KHAN) General Manager

RPCD.PLNFS.BC.No.171/06.03.01/94-95

17 June, 1995 27 Jyestha 1915 (Saka) All Commercial Banks

Dear Sir,

Financing of Handloom Sector

As you are aware, handloom sector is one of the most decentralised industrial sectors of the country providing employment to millions of people. It is estimated that there are about 38.9 lakh handlooms in the country. However, of the total number of full-time weavers only 20 per cent have been brought under the fold of co-operatives. With a view to increasing the coverage of weavers under the co-operative fold to 50 per cent and provide continuous employment to them the Government of India has recently launched an ambitious programme of setting up of 3000 Handloom Development Centres and 500 modern dyeing units in various States during the VIII Five Year Plan. This indicates that there will be growing demand for institutional credit from the handloom sector.

2. Commercial banks, ordinarily cover the non-members of the weavers co-operative societies who work individually or under master weavers and extend finance mainly for purchase of loom, construction of workshed and for meeting the working capital requirements. Commercial banks are also assisting handloom weavers through poverty alleviation and employment generation schemes like IRDP, DRI, SUME, etc.

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3. The Rajya Sabha has set up a Committee on petitions praying for improvement in the living conditions of the handloom weavers and for protection and promotion of handloom industry. The Committee had discussions with the representatives of State Governments, NABARD and banks on financing the handloom weavers during their visit to Andhra Pradesh, Karnataka, Tamil Nadu and Uttar Pradesh. Thereafter on 28 February 1995 the Committee had oral evidence of the Finance Secretary, Government of India on this subject. During the evidence, the Committee had mentioned about the plight of weavers community in the above States and felt that the credit support for the banking system did not reach them to the desired extent. It was, therefore,

suggested in the meeting to impress upon the commercial banks to ensure that adequate financial assistance is provided to the individual weavers. In the areas where there was concentration of weavers, banks should make special efforts to cover them.

4. As regards primary weavers co-operative societies, the commercial banks have so far not financed their production-cum-marketing activities. Recently we have taken a decision to allow the commercial banks also to provide working capital requirements to the primary weavers co- operative societies and a detailed circular No.RPCD.PLNFS.BC.No.165/06.03.01/94-95 dated 6 June 1995 on the subject has already been issued.

5.In view of the foregoing, we shall be glad if you will please take suitable action to increase the flow of credit to the individual weavers as also identify the PWCS for extending necessary credit support at the earliest. For this purpose please ensure that the programme finalised by the

handloom sector gets dovetailed in the Annual Action Plan in each district and the progress of implementation of the Annual Action Plan is regularly monitored at the district level meetings where the representatives of handloom sector also participate.

(A. M. KHAN) General Manager

RPCD.PLNFS.No.473/06.02.31/95-96

October 13, 1995 All Public Sector Banks

Dear Sir,

Review by Prime Minister of Seven Point Action Plan

Please refer to our circular letter RPCD.PLNFS.No.1531/06.02.31/94-95 dated 30 March 1995 advising you about the Seven Point Action Plan for improving the flow of credit to the small scale sector announced by the Finance Minister while presenting the Central Government s Budget for 1995-96. You were also advised to take appropriate action for effective

implementation of these points.

2. You have been keeping us informed of the progress by submitting to us copies of your notes on the progress in implementation of these points placed before the Board of Directors for their review and advice, besides reporting to us every month the progress in operationalisation of specialised SSI branches.

3. We have now been advised by the Ministry of Industry, Government of India that Industry Ministry will be reviewing the progress on 10th every month and will be apprising the Prime Minister of the position. In addition, Prime Minister will also be reviewing himself the progress on regular basis. In this connection, Ministry of Industry has devised a proforma which should reach them latest by 5th of every month covering latest information/status up to the end of

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preceding month. A copy of the proforma is enclosed and you are requested to ensure that the duly completed latest details in the prescribed format are forwarded to us on an ongoing basis well in time to reach us on the 3rd of every month. First such return for the month of October should reach us not later than 3.11.1995.

4. It is observed from the particulars furnished by the banks that by the end of September 1995 only 48 branches have been operationalised during the current year of which 35 were in 30 identified districts. List of 85 identified districts has already been forwarded to you in Annexure- II to our circular letter RPCD.No.PLNFS.373/06.02.31(i)/95-96 dated 19 September 1995. You are advised to ensure that in each of these 85 districts for which your bank is the lead bank atleast one specialised SSI branch is set up. If no other bank comes forward to set up such branch in any particular district then it would be lead bank s responsibility to set up a specialised branch.

In this connection, our Governor in his letter No.CPC.BC.145/07.01.279/95-96 dated 29 September 1995 while outlining the Monetary and Credit policy has already urged the banks to bestow their special attention to ensure that 100 specialised branches are set up in 85 identified districts to meet the requirements of small scale industries.

Yours faithfully Sd/-

(AVINASH MISHRA) General Manager Encls.: As above

PROFORMA

Review by Prime Minister of the Seven Point Action Plan for improving the flow of credit to SSI sector

Name of the bank...

Progress for the month of...

1. Number of SSI branches operationalised.

District Opened Converted

During Upto the end of During Upto the end of

the month in the the month in the

month current year month current year

1 2 3 4 5

2. Circulars/guidelines issued regarding delegation of powers (enclose two copies of each circular)

Circular No. & Date Brief description

3. Surveys undertaken to find out whether performing accounts are getting adequate credit (working capital) a) Number of Surveys b) Number of performing accounts surveyed c) Working capital made available as a percentage of projected annual turnover

Turnover slabs No. of cases

0 - 5 5 - 10 10 - 15

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15 - 20 above 20 d) Outcome of survey

e) Remedial action taken

4.Entrepreneurs sanctioned composite loan (both term-loan and working capital) A.During the month

(Rs. in lakhs)

Sanctioned Amount disbursed

No. Amount No. Amount

B. Cumulative upto the end of month in the current financial year.

Sanctioned Amount disbursed

No. Amount No. Amount

C. Cases of composite loan as a percentage of total number of SSI cases sanctioned.

D. Amount of composite loan sanctioned as percentage of total loan to SSI.

5. Meetings held with SSI entrepreneurs.

a) Number of meetings held Regional Zonal

level level

b) Action taken thereon by the bank.

6. Reorientation training/programme/activities conducted during the month for bank managers in finance needs of SSI sector.

i) Number ii) Participants

7. New steps taken to simplify procedural formulaties for SSI entrepreneurs.

RPCD.No.PLNFS.BC.90/06.04.01/95-96

13 February, 1996 24 Magha, 1917 (Saka) All Scheduled Commercial Banks

Dear Sir,

Rehabilitation of Sick Small Scale Industrial Units

Please refer to our circulars RPCD.No.PLNFS.BC.48/SIU-20-87 dated 6 February 1987,

RPCD.No.PLNFS.BC.122/SIU-20/88-89 dated 8 June 1989 and PLNFS.BC.134/06.02.31/93-94 dated 3 May, 1994 prescribing parameters for the grant of reliefs/concessions by banks as per the packages evolved for rehabilitation of potentially viable sick small scale industrial units.

2. With the abolition of the minimum lending rates, banks are free to fix their lending rates

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individually, for credit limits over Rs.2.00 lakhs. Accordingly, it has become necessary to revise the parameters by linking the different concessive rates of interest for sick industries to the revised lending rates. The interest rates under rehabilitation packages that will be applicable are indicated in the Annexure.

3. The stages of applicability of interest rates under rehabilitation packages, will be as under:

Stages of Scheme Applicability of interest rates a) Where sanctioned packages are already under

implementation

Interest rates as committed in the package may continue subject to annual review.

b) Where sanctioned packages are yet to be implemented.

Interest rates as committed in the package may continue subject to annual review.

c) Where packages are yet to be prepared Revised RBI parameters on interest rates may be made applicable subject to annual review.

All interest rate concessions would be subject to annual review depending on the performance of the units.

4. All other operative instructions/guidelines on rehabilitation of sick SSI units mentioned in our circulars indicated in paragraph 1 (of this circular) above, including those for interest dues on cash credit and term loan, unadjusted interest dues, principal dues, cash losses, promoters contribution, guarantee fee etc., remain unchanged.

(AVINASH MISRA) General Manager Encl.: Annexure ANNEXURE

Reliefs/Concessions under the revised interest rates which can be extended by banks to potentially viable Sick SSI units under rehabilitation

i) Term Loans :

The rate of interest on term loan may be reduced, where considered necessary, by not more than 3% in the case of tiny/decentralised sector units and not more than 2% for other SSI units, below the document rate.

ii) Working Capital Term Loan (WCTL)

In respect of WCTL, the rate of interest applicable may be 1.5 to 3.0 percentage points below the prevailing fixed rate/prime lending rate, wherever applicable, to all sick SSI units, including tiny/

decentralised sector units.

iii) Working Capital

Interest on working capital may be charged at 1.5% below the prevailing fixed/prime lending rate, wherever applicable.

iv) Funds for start up expenses and margin for working capital

Interest on fresh rehabilitation term loan may be charged at a rate 1.5% below the prevailing fixed/prime lending rate wherever applicable of as prescribed by SIDBI/NABARD where refinance is obtained from it for the purpose.

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v) Contingency loan assistance

Interest on contingency loan assistance may be charged at the concessional rate allowed for working capital assistance.

Note : Instructions/guidelines (existing) for interest dues on cash credit and term loan, un- adjusted interest dues, principal dues, cash losses remain uncharged.

RPCD.PLNFS.BC.141/06.01.08/95-96

May 22, 1996 Jyestha 1, 1918 All Scheduled Commercial Banks

Dear Sir,

Publication or publishing units as SSI

Office of the Development Commissioner, Small Scale Industries, SSI Board & Policy Division, Ministry of Industry, Government of India, New Delhi has decided in terms of its letter

No.2(3)/91-SSI Bd. (3) dated July 18, 1995 (copy enclosed) that Publication or publishing units engaged in the production & publication of books and related reading material is an industrial activity and is registrable as Tiny/SSI/Ancillary, as the case may be, depending on the

investment limit and nature of sales as SSI under SIDO registration scheme. They will therefore be eligible to avail all the incentives and facilities given to small scale industries.

(AVINASH MISRA) General Manager Encl.: 1

No.2(3)/91-SSI Bd.(3) GOVERNMENT OF INDIA MINISTRY OF INDUSTRY OFFICE OF THE DEVELOPMENT COMMISSIONER

SMALL SCALE INDUSTRIES SSI BOARD & POLICY DIVISION

Nirman Bhavan, New Delhi.

18th July, 1995 To

1. Secretary (Industries)

2. Director (Industries) All States/U. Ts.

3. Director, All SISIs Sir,

Publication or Publishing Units as SSI.

Publication Units or Publishing units are typically engaged in the publication of books and related reading material. Depending on the size of such units, the layout, design and processing of the books and their printing is either carried out in house, or is done on job work basis. In either case, for the entire production activity, the working capital is generally engaged by the publication unit.

The production and publication of books is an important activity that needs to be encouraged.

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Printing presses have already been recognised as SSI activity. It has now been decided that Publication or publishing units engaged in the production and publication of books, and relating reading material is an industrial activity and is registrable as Tiny/SSI/Ancillary, as the case may be, depending on the investment limit and nature of sales as SSI under the SIDO registration scheme. They will, therefore, be eligible to avail all the incentives and facilities given to small scale industries.

This may be brought to the notice of all registering authorities and others concerned.

(RAJU SHARMA)

Director (SSI Board & Policy) Copy to :

1. All Directors at Headquarters.

2. Director (Publication) 3. Others as per mailing list.

RPCD.No.227/06.02.31/96-97

16 August 1996 All Public Sector Banks

Dear Sir,

Opening of specialised SSI branches to cater to the needs of SSI

As you are aware, banks were advised to operationalise 100 specialised SSI branches during the year 1995-96 in 85 identified districts (vide our circular RPCD.No.PLNFS.BC.1/06.02.31/92-93 dated 3 July 1993). We now find from the data received from banks that 136 specialised

branches have been operationalised in these districts by 31 March 1996 and 33 specialised branches in other districts. As these branches have been in existence for some time now, it is necessary to assess their performance with regard to their lendings to SSI units. We shall, therefore, be glad if you will please furnish us information/data as on 30.6.1996 in the enclosed proforma in respect of each of the specialised SSI branch operationalised by your bank within a period of fortnight.

2. Considering the importance of the SSI segment in our economy, particularly its large employment potential, contribution to exports, diversified development, etc. it is necessary to ensure timely and adequate flow of credit to the SSI sector. With a view to continuing the tempo of opening more specialised SSI branches, it has been decided that commercial banks should operationalise 100 more specialised branches (either by opening new branches or by converting some of the existing general branches into specialised SSI branch/es wherever there is potential) during the year 1996-97. For this purpose, you may please conduct necessary surveys and select the centres accordingly, keeping in view, the potential for financing SSIs, commercial viability, etc. It has also been decided that Lead Bank in each district should co-ordinate the work in this regard. Needless to emphasise that these specialised branches should be staffed by senior

officials having requisite delegated powers and sensitising them to deal with the problems of the sector with empathy.

3. A list of branches proposed to be operationlised by your bank indicating the location (place, district and state) and the probable time by which the branch will be operationalised, may please be sent to us within a period of one month.

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4. You may also please advise us the system evolved and put in place by your bank to redress the grievances of SSI borrowers at the branch/zonal/head office levels.

(R. RAMANUJAM) Chief General Manager Encl.: 1

PROFORMA Name of the bank :

Statement showing the particulars of specialised SSI branches operationalised by the bank

(Rs. in lakhs) Sr. Name of the Whether Date of Total advances Of the col. 5 No. branch (place, Newly opened opening/ outstanding as advances to

district & or converted conversion on 30.6.1996 SSI outstanding

state) --- & % to total

No. of Balance advances accounts outstan-

ding (i) (ii)

1 2 3 4 5 6

RPCD.No.PLNFS.BC.39/06.06.12/96-97

1 October, 1996 9 Ashwina, 1918 (Saka) All Scheduled Commercial Banks

Dear Sir,

Bank Credit to Khadi and Village Industries (KVI) Sector

As you are aware, a consortium of banks has been set up during 1995 to extend a line of credit to Khadi and Village Industries Commission (KVIC) for the purpose of financing viable Khadi and Village Industrial units either directly or through State level Khadi and Village Industries Boards (KVIBs). This arrangement envisages provision of a line of credit of Rs.1000 crore by a

consortium of banks. The rate of interest applicable to the line of credit has been linked to the average prime lending rates of five major banks in the consortium.

2. In this connection banks are advised that apart from lending by way of the consortium

arrangement, they may also extend credit facilities directly, on merits, to KVI units approaching them at the stipulated rates of interest. A reference is invited in this connection to our circular RPCD.No.PLNFS.BC.16/06.06.12/94-95 dated 28 July 1994 wherein the measures to be taken on the basis of the Kalia Committee recommendations, have been mentioned. As indicated therein, banks are requested to keep in view, while assessing the working capital requirements of the Khadi institutions/KVI units, the following aspects so as to enable the khadi institutions to raise adequate working capital.

i) Along with the proposal for working capital requirements. KVIC/KVI units will furnish the work sheet indicating the details of assessment of working capital requirements of the units.

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ii) KVIC s assessment may be accepted if it does not exceed the assessment made by the banks by more than 10%.

iii) In case the KVIC s assessment of working capital exceeds the bank s assessment by more than 10%, the quantum of working capital may be arrived at by mutual dialogue between the institutions/KVIC and the financing banks.

iv) In case of sharp differences between the peak level and lean season credit requirements, additional credit limits may be sanctioned by banks; KVIC will indicate such peak level credit requirements also in the credit proposals.

3. We shall be glad if you will please issue necessary instructions in this regard to all your branches and controlling offices.

(R. M. JOSHI) General Manager

RPCD.No.BC.90/06.15.01/96-97

January 3, 1997 The Chairman/Managing Director/ Chief Executive Officer All Scheduled Commercial Banks Dear Sir

Registration of units manufacturing or processing tea

We enclose for your information, a copy of circular letter No.5(18)92.SSI.Bd. & Policy dated 20 November 1996 on the above subject received from Office of the Development Commissioner (SSI), S.S.I. Board and Policy Division, Department of SSI and ARI, Ministry of Industry, Government of India, New Delhi. It will be observed therefrom that all units engaged in the processing or manufacture of tea are eligible for registration as small scale units under the SIDO registration scheme. This, however, does not include the activity of growing tea.

Government of India Ministry of Industry

Office of the Development Commissioner (Small Scale Industries)

Nirman Bhavan, New Delhi

20th November, 1996 To,

1 Commissioner/Director of Industries All States/Uts

2 Secretary (Industries) All States/Uts

Ref: This office Circular No.5 (18)/92-SSI.Bd.Dated 5th August 1993 regarding registration of units manufacturing or processsing tea.

Sir,

Reference is invited to the Office Circular referred to above wherein it has been stated that small

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scale units engaged in the manufacture of packet tea or engaged in the activity of blending, processing, packaging or repackaging of made tea are registrable as small scale units under the SIDO Scheme. Further, units engaged in manufacture of made tea from green leaves from their own tea estates or green leaves procured from other sources will not be eligible for registration of SSI units under the SIDO registration scheme.

This issue has been reconsidered in the light of representations received from various industrial units, industry associations and discussions with the concerned State Governments.

Accordingly, it has now been decided as follows :

All units engaged in the processing or manufacture of tea are eligible for registration as small scale units under the SIDO registration scheme. This, however, does not include the activity of growing tea.

Accordingly the earlier office circular No.5(18)92 dated 5th August, 1993 stands superseded.

You are requested to bring these facts to the notice of all registering authorities and related agencies.

(RAJU SHARMA)

Director (SSI Bd. & Policy) PLNFS.BC.99/06.03.01/96-97

5th February, 1997 16 Madh, 1918 (Saka) All Scheduled Commercial Banks

Dear Sir,

Credit flow to Handlooms and Handicrafts Sectors

As you are aware, Handlooms and Handicrafts sectors rank next only to agriculture in

employment and millions of people in the country are dependent on it for their livelihood. These sectors accounted for 15% and 62% of the total production of cloth and traditional industries respectively during the year 1995-96. In spite of their significant share in production and exports, these two sectors have not received adequate support and attention in credit flow as well as extension. The position in regard to credit flow to the Handlooms and Handicrafts Sectors was recently reviewed by the Hon ble Union Minister for Textiles. It was felt that considering existence of large potential for these sectors, the actual credit flow to the sectors was very low and needed to be improved. For that purpose, the Ministry has identified 94 and 78 districts having concentration and potential for Handlooms and Handicrafts respectively. In the

circumstances, we shall be glad if you will please issue necessary instructions to your controlling offices and branches for increasing credit flow to these sectors particularly in the identified districts. It is further advised that review of the progress made in extending credit to these sectors may be undertaken regularly in district level meetings where the representatives of these sectors also participate.

2. A list each of identified districts and of schemes evolved by NABARD for these sectors are enclosed in Annexure I and II respectively.

(R. M. JOSHI)

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General Manager

ANNEXURE I

Office of the Development Commissioner (Handicrafts) (Planning & Research Division)

List of State-wise Craft Concentration District in India Name of State District Estimated No. Major Crafts

of artisans

(1) (2) (3) (4)

Andhra Pradesh Hyderabad 6,696 Zari & Embroidary, Agarbathi Artistic Bangles, Basketry, Bamboo basket, wood carving, Brass, Applique, Stone, cane etc.

West 59,668 Crochet lace, Woollen Carpet coir,

Godavari wooden Toys, leather puppets, Tie

& Dye, Paper Machie.

Arunachal Pradesh Bomdila 5000 Cane & Bamboo, Straw etc.

Assam Nalbari 14,000 Cane & Bamboo, Straw,

Sibsagar 15,350 Artistic Textiles.

Bihar Ranchi 26,505 Carpet & Durries, Hand Printing Madhubani 33,150 Artistic Textiles, Ceramic &

Patna 18,915 Pottery Cane & bomboo, straw etc.

Goa North Goa 4610 Lace & Embroidery, Zari

Gujarat Kutch 11,000 Hand Printing, Artistic Textiles, Ahmedabad 3,300 Lace & Embroidery Woodwares,

Surat 3,400 Metalwares.

Banaskantha 5,700

Valsad 2,100

Haryana Rewari 21,200 Carpet & Durries, Hand Printing, Gurgoan 22,500 Gem & Jewellery Ceramic &

Panipat 73,200 Pottery.

Himachal Pradesh Kullu, Mandi 39,466 Artistic Textiles

Jammu & Kashmir Jammu 15,166 Carpet & Durries, Artistic

Baramulla 1,09,600 Textiles, Lace & Embroidery, Zari Srinagar 2,90,000 Woodware, Artistic leather

Anantnag 99,500 paper mache.

224

Karnataka Mysore 1,05,940 Cane & Bamboo Woodwares,Misc.

Bangalore (R) 56,729 Lace, Embroidery & Zari, Ceramic Uttar 29,000 & Pottery, Artistic Leather.

Kannada

Kerala Trivandrum 3011 Lace & Embroidery, Zari Woodwares Gem & Jewellery.

Madhya Pradesh Mandsaur 25,400 Carpet & Durries, Hand Printing,

Indore 15,800 Artistic Textiles.

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Maharashtra Kolhapur 50,422 Artistic Leather, Artistic Textiles,

Thane 49,039 Gem & Jewellery Woodwares.

Mumbai 32,400

Sholapur 33,128

Manipur Imphal 70,890 Artistic Textiles, Lace

&Embroidery,

Ukhrul 43,938 Zari Ceramic (Pottery, Cane &

Senapati 37,895 Bamboo, Straw etc.)

Chura 36,413

Chandpur

Meghalaya East Khasi Hills 41,055 Cane & Bamboo Artistic West Garo Hills 26,720 Textiles.

Mizoram Aizawl 3401 Artistic Textiles, Woodwares.

Nagaland Tuensang 60,000 Artistic Textiles,

Kohima 22,500 Cane & Bamboo Woodwares.

Orissa Sambalpur 20,780 Artistic Textiles

Ganjam 13,975 Hand Printing

Punjab Hoshiarpur 3,000 Lacquerware Lace and Embroidery Rajasthan Jaipur 2,03,550 Artistic leather

Jodhpur 59,800 Hand Printing

Barmer 11,710 Stoneware,

Ajmer 12,400 Gem & Jewellery

Sikkim East 5,300 Carpet & Woodware

Tamilnadu Trichy 21,975 Gem & Jewellery & Cane &

Kanyakumari 18,083 Bomboo, Lace Embroidery Cane &

Bamboo

Tripura North 53,000 Artistic Textiles

South 43,900 Lace & Embroidery

West 39,700 Cane & Bamboo & Straw etc.

Uttar Pradesh Varanasi 2,39,400 Carpet & Durries.

Mirzapur 1,24,660 Carpet & Durries.

Agra 1,16,224 Carpet & Durries and Stone Lucknow 65,575 Artistic Textiles, Lace Embroidery

and Zari.

Saharanpur 87,640 Woodware

Moradabad 42,180 Metal

Carpet

Lace Embroidery, Hand Print.

Carpet

Aligarh 20,215 Carpet, Metal Jewellery

Carpet

Barabanki 13,382 Carpet, Lace

Carpet

Almora 10,997 Metal

Ferozabad 14,418 Bangles and Beads

Hand Print

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Metal & Print Metal & Wood

Bijnor 7,263 Wood

West Bengal Burdwan 2,22,455 Artistic Textiles

Cooch Behar 66,415 Lace & Embroidery, Hand Printing.

North Dinajpur 36,015 Flax & Fibre Darjeeling 24,255 Gem & Jewellery Jalpaiguri 17,400 Artistic Textiles.

Artistic Textiles, Lace &

Embroidery and Zari, Metal, Gem&

Jewellery.

Andaman & Andaman 434 Conch Shell

Nicobar Islands Nicobar 150 Woodwares, Cane & Bamboo Pondicherry Pondicherry 1373 Cane & Bamboo Straw, Artistic

Textiles.

Delhi East 30,000 Woodwares, Lace & Embroidery &

West 20,000 Straw Hand Printing.

South 10,000

North 10,000

ANNEXURE II

NABARD S REFINANCE SCHEMES FOR HANDLOOM/

POWERLOOM/HANDICRAFTS SECTORS I) INVESTMENT CREDIT

i) Automatic Refinance Facility (ARF) (For all agencies) A) Composite Loan Scheme :

Refinance/Loan up to Rs.50,000/- per borrower for financing block capital and/or working capital.

B) Integrated Loan Scheme :

Maximum refinance up to Rs.10.00 lakhs per unit with project outlay up to Rs.20.00 lakhs for Commercial Banks and Rs.15.00 lakhs for other agencies.

ii) Pre-Sanction Procedure

Schemes beyond ARF limit and upto SSI limit are eligible for refinance. The facilities mentioned under (i) & (ii) above are broadly classified as under :

a) Schemes for Handloom Sector :

• For modernisation/acquisition of looms and construction of work sheds (through all agencies)

• Financial assistance for opening/renovation of marketing outlets - through Commercial Banks (Other agencies up to ARF limits)

• Financial assistance for opening/renovation of emporia by Apex Weavers Society through Commercial Banks and State Co-operative Banks.

b) Schemes for Powerloom Sector :

• Financial assistance for acquisition of Powerlooms by individuals/powerloom weavers societies (through all agencies up to ARF limit).

• Commercial Banks (CBs) and State Co-operative Banks (SCBs) can finance up to SSI limit under pre-sanction project finance.

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• Modernisation of Powerlooms - GOI scheme formulated by Manmade Taxtile Research Association (MANTRA) through all agencies.

• Assistance to banks for financing acquisition of old Powerlooms from National Textile Corporation (NTC) by the workers of NTC opting for VRS.

c) Scheme for Sericulture :

For financing integrated development of mulberry and non-mulberry activities through all agencies.

d) Term Loan assistance to industrial co-operatives :

Assistance for setting up of units up to SSI limit through SCBs under prior sanction Project finance.

e) Margin Money Scheme :

Assistance for meeting the shortfall in the margin money requirements stipulated under various schemes subject to certain ceilings through all agencies.

f) Scheme for Project formulation & consultancy services :

Assistance up to Rs10,000/- is available to the units covered under Integrated Loan Scheme (ILS) in addition to the limits prescribed thereunder.

g) Scheme for Infrastructural and Promotional Support through Commercial Banks and implemented by promotional agencies :

Assistance for construction of Workshed, raw material depot, godown, transport vehicle etc.

h) Financing of Mobiles Sales Van :

For purchase of mobile sales van fitted with counter/shelves etc. for improving the marketing of Non-Farm products.

i) Financing of mobile/static sales carts & kiosks :

For purchase of such units for marketing Non-Farm products where the Bank loan does not exceed Rs.50,000/-

j) Promotional Schemes :

• Promotion linked credit scheme for ancillarisation and sub-contracting/support to Mother Units.

For providing centralised support system for various types of infrastructural and linkage support to decentralised or a cluster of ancillary units (both loan and grant) through CBs and SCBs.

• Promotion linked credit support scheme for small, tiny, cottage and village industries in clusters : For providing centralised support system for various types of need based common facilities to a cluster of rural non-farm producing units (both loan and grant) through CBs and SCBs.

• Assistance to Rural Women In Non-Farm Development (ARWIND) : Exclusive women oriented scheme comprising both loan and grant component through all agencies.

k) Refinance facilities under Govt. sponsored schemes :

• Industry, Service and Business - ISB component of IRDP.

• SC/ST Action plan out side IRDP.

• SEMFEX-II : Assistance for setting up of non-farm units in rural areas by Ex-servicmen/

widows of Ex-servicemen, disabled servicemen through all agencies.

II) MEDIUM TERM CREDIT FACILITIES :

Assistance is provided to the grower members for purchase of shares in various processing societies through SCBs/DCCBs.

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III) SHORT TERM CREDIT FACILITIES : a) SCBs/DCCBs :

• Short term refinance assistance for production and marketing assistance to the Primary Weavers Co-operative Societies.

• Short term refinance assistance for purchase and sale of yarn.

• Short term refinance assistance for production and marketing activities of cottage and small scale industries.

• Short term refinance assistance for financing rural artisans through PACS.

b) Regional Rural Banks :

Short term credit to Regional Rural Banks for financing working capital/marketing credit to non- farm units.

DISTRICTS WITH A CONCENTRATION OF 5000 OR MORE COMMERCIAL HANDLOOMS

I. UTTAR PRADESH

Name of Districts No. of Commercial Looms

Aligarh 5240

Azamgarh 26112

Barabanki 13610

Basti 9048

Bijnor 20618

Etawah 5282

Faizabad 7363

Gorakhpur 5724

Meerut 5180

Mirzapur 5670

Moradabad 13984

Sitapur 10085

Varanasi 60837

II. BIHAR

Bhagalpur 14148

Ranchi 6469

Madhubani 10401

III. TAMIL NADU

Kanyakumari 14150

Periyar 50988

Chengalpattu 47129

Salem 76167

South Arcot 25300

Tiruchirapalli 32946

North Arcot 39866

Anna 10967

Coimbatore 24343

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Thanjavur 15979

Kamrajar 25992

Tirunelveli 17453

Madurai 28462

IV. HARYANA

Karnal 14686

V. JAMMU & KASHMIR

Pulwama 6100

Srinagar 6027

VI. WEST BENGAL

North 24 Parganas 19526

South Parganas 8239

Hooghly 20610

Burdwan 28619

Bankura 13518

Midnapore 61593

Birbhum 10185

Murshidabad 31805

Nadia 70424

Malda 14288

West Dinajpur 34441

Cooch Behar 8780

VII. TRIPURA

West Tripura 17177

VIII. MIZORAM

Aizwal 6124

IX. PONDICHERRY

Pondicherry 5243

X. ANDHRA PRADESH

East Godavari 17017

West Godavari 8080

Krishna 9182

Guntur 14055

Prakasam 19177

Nellore 13524

Chittoor 8262

Cuddapah 35662

Anantapur 22415

Mehboob Nagar 13454

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Nalgonda 12507

Karimnagar 12152

XI. ASSAM

Cachar 55136

Karimganj 22586

Kamrup 50248

Nagaon 14550

XII. NAGALAND

Kohima 10030

Mon 5852

XIII. MANIPUR

Senapati 21635

Ukhrul 11385

Imphal 50353

Bishenpur 21189

Thoubal 16494

XIV. KERALA

Cannanore 13040

Trivandrum 15900

XV. KARNATAKA Bangalore (U)

Bangalore (R) 8225

Belgaum 5127

Bijapur 26206

Dharwad 9985

Tumkur 7218

XVI. DELHI

Delhi 9336

XVII. ORISSA

Balasore 6675

Bolangir 23996

Cuttack 20139

Ganjam 9339

XVIII. RAJASTHAN

Jodhpur 4457

Jaipur 3555

XIX. MAHARASHTRA

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Nagpur 36173

Sholapur 17638

XX. HIMACHAL PRADESH

Kullu 10631

Mandi 5746

XXI. MEGHALAYA

West Garo Hills 5189

XXII. GUJARAT

Surendar Nagar 5005

Ahemdabad 8807

XXIII. MADHYA PRADESH

Raipur 5234

Bilaspur 4979

C) Commercial Banks :

Short term credit for financing the production and marketing needs of the Primary Handloom Weavers Co-operative Societies in areas, where co-operative credit structure is weak.

IV) OTHER PROMOTIONAL SCHEMES :

- Assistance is made available to the NGOs/VAs selectively for :

• conducting REDPs/Training to Master Craftsman, Trainers Training Programme

• setting up Training cum Production Centres, Artisans guilds

• for promoting Mother Units/Common Service Centres/Assistance for Rural Women in Non- Farm Development.

- Assistance is also made available to RRBs and Co-operative Banks for setting up of Technical Monitoring and Evaluation Cells and Women Development Cells.

RPCD.No.PLNFS.BC.128/06.02.31/96-97

22 April, 1997 All Scheduled Commercial Banks

Dear Sir,

Flow of Credit to SSI Sector

Please refer to paragraph 17(h) (a) of Governor s letter No.CPC.BC.162/07.02279/96-97 dated 15 April, 1997 announcing Monetary and Credit policy for the first half of the year 1997-98.

2. At present village industries, tiny industries and other SSI units having aggregate fund based working capital limits upto Rs.1 crore from the banking system are to be provided working capital finance computed on the basis of 20% of their projected annual turnover (c.f. item (iii) of enclosure to our circular IECD.No.19/08.13.09/93-94 dated 28 October 1993). It has now been decided that henceforth for the credit requirements of village industries, tiny industries and other SSI units (new as well as existing) having aggregate fund based working capital limit upto Rs.2 crore from the banking system may be provided working capital limits computed on the basis of a minimum of 20 per cent of their projected annual turnover.

3. The other instructions contained in paragraph 3 of our circular No.PLNFS.BC.99/06.02.31/92-

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93 dated 17 April 1993 remain unchanged.

(R. RAMANUJAM) Chief General Manager

RPCD.No.PLNFS.BC.148/06.04.01/96-97

5 June, 1997 15 Jyestha 1919 (Saka) All Scheduled Commercial Banks

Dear Sir,

Please refer to our circular letter RPCD.No.PLNFS.BC.69/SIU.20-90/91 dated 8 January 1991 on the above subject in terms of which the requirement of prior approval by the Reserve Bank of India for extending reliefs/concessions beyond the prescribed parameters was withdrawn.

However, banks were advised to furnish to us the information about the individual packages involving reliefs/ concessions beyond the prescribed parameters, on half-yearly basis. As adequate time has since elapsed, the banks would have acquired considerable experience in the matter. It has, therefore, been decided to withdraw, with immediate effect, the requirement of submission of the aforesaid half-yearly returns to the Reserve Bank of India. However, as indicated in our aforesaid circular, only in exceptional cases, concessions/reliefs beyond the parameters indicated in our guidelines, should be considered.

2. All other instructions of the circular under reference remain unchanged.

(R. M. JOSHI) General Manager)

RPCD.No.PLNFS.186/06.02.28-97/98

2 August, 1997 The Chairman & Managing Director All Scheduled Commercial Banks

Dear Sir,

Financing of SSIs

As you may be aware, a special meeting of High powered Standing Advisory Committee to review the flow of credit to SSI sector was held on 7.6.97 at Coimbatore. The meeting was presided over by the Governor and attended by the representatives of Ministry of Industry. Govt.

of India, bankers, economists, financial institutions and SSI associations. The status relating to the flow of credit to SSI sector was reviewed at the meeting and the Committee was appreciative of the increased flow of credit to the sector. However, during the deliberations the members voiced difficulties in securing adequate finance from banks and delays in sanction/enhancement of limits despite guidelines issued by Reserve Bank in this regard. We furnish below the

important conclusions emerged out of the deliberations for your information and necessary action.

i) The simplified procedure of sanctioning working capital limits upto Rs.2 crores on the basis of 20% of the projected annual turnover in the case of small scale units need to be followed by

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banks in right earnest.

ii) The prescribed time schedule for disposal of loan applications (2 weeks for loans upto Rs.25,000/- and 8 to 9 weeks for loans above Rs.25,000/-) should be adhered.

iii) Banks should look into the modalities for taking credit decisions quickly and put in place a monitoring mechanism to ensure the same. It is equally necessary that decisions taken are communicated to the SSI units promptly.

iv) The specialised SSI branches set up by banks need to be equipped with appropriate personnel having adequate discretionary powers to sanction credit. Attention need to be bestowed on aspects such as attitudinal change in the mindset of staff, training etc. with a view to bring about perceptible improvement in the functioning of the specialised branches.

v) Grievances redressal machinery at the controlling offices should be reactivated. It should play the expected role effectively which will go a long way in improving customer relations and customer satisfaction.

2. We shall be glad if you will please make a comprehensive review of the position obtaining in your bank and take necessary measures urgently in regard to the aspects mentioned above.

(R. RAMANUJAM) Chief General Manager

RPCD.No.PLNFS.BC.13/06.06.12(D)/97-98

28 July, 1997 The Chairman,

All Scheduled Commercial Banks Dear Sir,

Rural Employment Generation Programme of KVIC

A High Powered Committee on Khadi and Village Industries headed by the then Prime Minister recommended in May, 1994, among other things, accelerated growth of rural employment generation programmes. Accordingly, KVIC has since formulated a Scheme for financing projects with investment limits upto Rs.25 lakhs for rural industrialisation and employment generation. Under the scheme, 25 per cent of the project cost is being provided as Margin

Money by way of subsidy. The scheme was discussed in the Conference of Industry Ministers of States in August 1996. It was decided to implement the scheme throughout the country.

2. Details relating to the Margin Money Scheme are being furnished to you by KVIC, the salient features thereof are given below :

i) Eligible projects

The scheme is applicable to all viable village industry projects set up in rural areas.

ii) Eligible borrowers

The eligible agencies under the scheme are individuals (rural artisans/entrepreneurs) for projects upto Rs.10 lakhs and institutions, Co-operative Societies, Trusts registered with KVIC/ KVIB for projects upto Rs.25 lakhs.

iii) Margin Money

25 per cent of the project cost upto Rs10.00 lakhs will be provided by KVIC as Margin money by way of subsidy. For projects above Rs.10.00 lakhs and upto Rs.25.00 lakhs rate of margin money will be 25 per cent of Rs.10.00 lakhs plus 10 per cent of the remaining cost of the project.

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In the case of weaker section beneficiary viz. SC/ST/OBC/Women/Physically Handicapped/ Ex- servicemen and Minority Community beneficiary/Institutions and for Hill, Border and Tribal Areas, North Eastern Region, Sikkim, Andaman & Nicobar Islands, Lakshadweep, Margin Money grant will be at the rate of 30 per cent of the project cost upto Rs.10.00 lakhs.

iv) Borrower s Contribution

Under the Scheme, the borrower is required to provide his own contribution of at least 10 per cent of the project cost. In case of SC/ST and other weaker section borrowers, the contribution will be 5 per cent of the project cost.

v) Quantum of loan

Banks will sanction 90 per cent of the project cost in case of general category of borrowers and 95 per cent of the project cost in case of Weaker Section beneficiary/institutions and disburse full amount of the loan.

vi) Adjustment of Margin Money

KVIC will place a lump-sum deposit of Margin Money in advance with the Corporate office of each bank, which will be available for adjustment by banks to the borrowers loan account after a period of two years from the date of disbursement of loan. Banks should furnish quarterly

progress report of adjustment of margin money directly to KVIC.

3. Kindly issue suitable instructions to the controlling offices/branches immediately for implementation of the scheme.

RPCD.No.277/06.02.31/97-98

28 August, 1997 To All Public Sector Banks

Dear Sir,

Credit Flow to SSI Sector

We advise that a study made by Govt. of India, Department of SSI & Agro & Rural Industries, Ministry of Industry has revealed that the credit flow to SSI sector has not been commensurate with the increased output of that sector. While banks have increased the flow of credit to SSI sector during the recent period, the gap between the requirements of working capital and the limits granted is increasing. In order to improve the position, you are advised to ensure adherance to the simplified procedure of providing working capital limits on the basis of a minimum of 20 per cent of the projected annual turnover for new as well as existing units, having working capital limits upto Rs.2 crores from the banking system. We may add that there should not be any arbitrary denials of/reductions in limits sanctioned.

2. We also advise you to operationalise more specialised branches at centres where there is potential for financing many SSI borrowers. Banks are also advised to equip such branches with adequate skilled and experienced personnel so that the problems of SSI units are considered sympathetically. Please let us know as soon as possible, say before 30 September 1997, your programme for operationalising more specialised branches during the year and the names of such centres.

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RPCD.No.PLNFS.BC.64/06.04.01/97-98

30 December, 1997 All Scheduled Commercial Banks

Dear Sir,

Please refer to our Circular RPCD.No.PLNFS.BC.90/06.04.01/95-96 dated 13 February 1998 regarding parameters for the grant of reliefs/concessions by banks as per the packages involved for rehabilitation of potentially viable sick small scale industrial units.

2. It has been observed from the data relating to SSI sick units as at the end of March 1996 that out of 2,62,376 sick SSI units with outstanding bank credit of Rs.3721.94 crores, 2,40,168 units with outstanding amount of Rs.2943.65 crores were classified as non-viable.

In the SSI sector, particularly among the tiny and decentralised sector as well as those assisted under schemes like SEEUY, a number of units financed by banks, are no longer in existence or are not traceable and/or have no assets left, etc. We wonder whether such units have also been included in the above data reported by banks. We shall be glad if you will please ensure to treat such units as a category distinct from sick SSI units and report separately, as per extant

instructions.

3. As you are aware, Reserve Bank has been placing emphasis on a systematic approach to the detection of symptoms leading to sickness and ensure that sickness is arrested at the incipient stage itself. The branch officials and other functionaries at field level should be alert in

monitoring day-today operations in the borrowal accounts so as to facilitate identification of the early warning signals and initiate corrective steps promptly. Such steps may include providing timely financial assistance depending on established needs, sorting out difficulties which are non-financial in nature and require assistance from outside agencies, etc. Banks should take a sympathetic attitude and strive for rehabilitation, in respect of units in the SSI sector, particularly wherever the sickness is on account of circumstances beyond the control of entrepreneurs. Since SSI financing is part of priority sector lending, every possible effort should be made to see that SSI sector thrives on healthy lines. The emphasis of the rehabilitation effort in the case of SSI units, will, therefore have to be on adequate and timely intensive relief measures and their speedy application rather than giving a long span of time to the units for rehabilitation. In cases of units which are not capable of revival, banks should try for a settlement and/or to resort to other recovery measures, very expeditiously.

4. You may issue suitable instructions to the concerned officials of controlling offices and branches so as to ensure that prompt and adequate measures are taken in rehabilitating all viable sick SSI units so that number of non-viable sick SSI units become minimal.

You are also requested to review the existing position of sick SSI units in your bank and take urgent remedial steps to complete the viability studies of the units expeditiously.

5. Please acknowledge receipt and advise us the action taken by your bank in implementing the above.

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RPCD.No.PLNFS.BC.66/06.02.31/97-98

5 January, 1998 The Chairman/Managing Director/ Chief Executive Officer All Scheduled Commercial Banks (excluding RRBs)

Dear Sir,

Priority sector advances -Credit deployment to SSI sector Please refer to para 17(h)(ii)(b) of our Credit Planning Cell circular

Ref.No.CPC.BC.162/07.01.279/ 96-97 dated April 15, 1997 regarding Monetary and Credit policy measures for the first half of the year 1997-98.

2. We advise that Govt. of India have since issued a notification revising the definition of Small Scale Industries (SSI) with effect from 11 December 1997. Copy of Gazette notification

No.S.O.857(E) dated December 10, 1997 is enclosed. As may be seen therefrom, the ceiling on investment in plant and machinery of SSI/ancillary units has been raised to Rs.3 crore from the existing limits of Rs.60 lakhs and Rs.75 lakhs for SSI and ancillary units respectively. You may accordingly reckon the bank advances to SSI units for the purpose of classification under the priority sector.

3. In order to ensure that credit is available to all segments of the SSI sector, it has been decided that out of the funds available to SSI sector under priority sector advances, banks should ensure that 40% will be made available for units with investment in plant and machinery upto Rs.5 lakhs, 20% for units with investment between Rs.5 lakhs and Rs.25 lakhs and the remaining 40%

for other SSI units.

(R. M. JOSHI) General Manager Encl.: As above

(TO BE PUBLISHED IN PART II, SECTION 3, SUB-SECTION (ii) OF THE EXTRAORDINARY GAZETTE OF INDIA)

GOVERNMNET OF INDIA MINISTRY OF INDUSTRY

(Department of Industrial Policy and Promotion) New Delhi

10th December, 1997

ORDER

S.O.857(E) Whereas the Central Government considers it necessary with a view to ascertain which ancillary and small scale industrial undertakings need supportive measures, exemption or other favourable treatment under the Industries (Development and Regulation) Act, 1951 (65 of 1951) (herein after referred to as the said Act) to enable them to maintain their viability and strength so as to be effective in-a) promoting in a harmonious manner the industrial economy of the country and easing the problem of unemployment, and b) securing that the ownership and control of the material resources of the community are so distributed as best to subserve the common good;

And whereas the draft notification was laid before each House of Parliament for a period of