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Plan panel to consider measures to enhance credit flow to SSI
New Delhi, Dec 05: Concerned over a sharp decline in the allocation of bank credit to small scale sector, Planning Commission has convened a meeting next week to explore measures to modify the existing policy including setting up of a venture capital fund and expanding the capital base of SIDBI.
New Delhi, Dec 05: Concerned over a sharp decline in the allocation of bank credit to small scale sector, Planning Commission has convened a meeting next week to explore measures to modify the existing policy including setting up of a venture capital fund and expanding the capital base of SIDBI.
"There has been a sharp decline in the allocation of bank credit to the SSI sector. In the last quarter the allocation declined to a mere two per cent as against four per cent in the previous fiscal," commission officials told reporters here.
Officials said the meeting, which was expected to be attended by senior banking officials including officials from the Prime Minister's Office, labour, SSI and rural development ministries would review flow of credit to SSI sector and explore policy measures to be taken to improve the credit flow.
There is at present close to seven per cent differential in the interest rate being charged to the large units vis-a-vis the small units.
"While the average rate of interest for the large industries is between 7-8 per cent, the rate of interest charged to the SSI units is as much as 15-16 per cent," they said adding that banks were also hesitant to lend to the SSI units without collateral.
A possible option being considered was to cross subsidise the interest rate by asking banks to charge higher interest rate from the large units to subsidise a lower rate being charged to the SSI units, they said.
Another option is to enhance the capital base of the Small Industries Development Bank of India (SIDBI) or reduce its interest as at present the high interest being charged by SIDBI was acting as a deterrent, officials said. Bureau Report
Officials said the meeting, which was expected to be attended by senior banking officials including officials from the Prime Minister's Office, labour, SSI and rural development ministries would review flow of credit to SSI sector and explore policy measures to be taken to improve the credit flow.
There is at present close to seven per cent differential in the interest rate being charged to the large units vis-a-vis the small units.
"While the average rate of interest for the large industries is between 7-8 per cent, the rate of interest charged to the SSI units is as much as 15-16 per cent," they said adding that banks were also hesitant to lend to the SSI units without collateral.
A possible option being considered was to cross subsidise the interest rate by asking banks to charge higher interest rate from the large units to subsidise a lower rate being charged to the SSI units, they said.
Another option is to enhance the capital base of the Small Industries Development Bank of India (SIDBI) or reduce its interest as at present the high interest being charged by SIDBI was acting as a deterrent, officials said. Bureau Report