Friday, Apr 29, 2005
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Special Correspondent
CHENNAI: The Reserve Bank of India (RBI) has decided to encourage flow of credit to medium industries and at the same time facilitate coordination between branches of commercial banks and the Small Industries Development Bank of India (SIDBI) in the delivery of credit to small scale industries (SSI). The annual policy statement, issued by the Governor of the RBI, Y. V. Reddy, on Thursday said the RBI was reviewing all its guidelines on financing the small scale sector, debt restructuring and nursing of sick units "with a view to consolidating and liberalising them.'' It urged banks to treat the revised guidelines as the "indicative minimum requirement.'' Under a scheme to be drawn up by the RBI, banks will be encouraged to establish mechanisms for better coordination between their branches and branches of SIDBI located in 50 clusters identified by the Union Ministry of Small Scale Industries. Under this "strategic alliance,'' the existing branches of SIDBI, redesignated as "Small Enterprises Financial Centres'' (SEFCs), will take up co-financing of term loan requirements of SSI units along with the bank branches and the working capital needs will be met by the banks. SIDBI's expertise in appraisal of credit needs will be made available to banks on payment of a "nominal fee.'' The services of SEFCs will also be made available to tiny industrial units. "In view of the fast changing market conditions and increasing competitiveness, there is an urgent need to upgrade the technology of small scale industries and their graduation to medium enterprise sector. The Reserve Bank will explore modalities to meet their growing financial needs. A simplified debt restructuring and rehabilitation mechanism is also being considered for the sector,'' the policy statement added.
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