RBI panel for higher credit to SSIs

MUMBAI, June 30: The S L Kapur Committee, set up by the Reserve Bank of India on Small Scale Industries (SSI) sector, has recommended a Reco...

MUMBAI, June 30: The S L Kapur Committee, set up by the Reserve Bank of India on Small Scale Industries (SSI) sector, has recommended a Reconstruction Fund and a Rs 500 crore Credit Corporation to enhance the flow of credit to the SSI sector. The committee recommended smooth and increased flow of credit to the small scale industries (SSI) sector, normally at prime lending rates.

The one-man committee headed by the former industry secretary, S L Kapur called for giving Small Industries Development Bank of India (SIDBI) the role and status of a nodal/co-ordinating agency for financing of small industries as is now available to NABARD in the field of agricultural development. The 200-page report was submitted to the RBI Governor, Bimal Jalan here today.

The panel suggested Life Insurance Corporation and General Insurance Corporation and pension funds should lend a part of their funds to SIDBI for on-lending to SSI as in the post-liberalisation era SIDBI finds it difficult to cross subsidise its credit tothe sector. One of the 126 major recommendations says SSIs should get a special treatment in the matter of interest rates. In view of their contribution to the economy, SSI should normally get credit at PLR. The overall interest payable by SSI should remain within the existing parameters fixed by RBI, ie, maximum of PLR plus four per cent.

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SIDBI has been urged to consider launching industry specific venture funds beginning immediately with software venture capital funds. It may set up immediately a few Software Venture Capital Funds in collaboration with Software Professionals Associations or their expert bodies and examine those for food processing and industry related export services.

Primary Lending Institutions seek refinance from SIDBI at a rate which is below the average cost of funds of SIDBI. This calls for SIDBI managing resources at low cost such as increase in its equity capital, floatation of tax free bonds by it, placement by Government with it special dispensation funds, increasedallocation of NIC (LTO) Fund of RBI and Government providing exchange risk cover for SIDBI against its external commercial borrowing, the report said.

It said SIDBI may review the Market Development Assistance Fund with the help of a committee of SSI entrepreneurs. Assistance from the fund should be made available to companies for marketing their products directly or to set up innovative marketing systems like Amway and Avon, it added.