All Scheduled Commercial Banks

Dear Sir,

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 :

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.

Yours faithfullly,

Sd/-

Jt. Chief Officer

Chairman/Managing Director All Public Sector Banks

Dear Sir,

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/-

Joint Chief Officer Encl.: As above.

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 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/-

Ms. I. T. Vaz, ED, RBI, Bombay

All Scheduled Commercial Banks

Dear Sir,

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.

3. Please acknowledge receipt.

Yours faithfully,

Sd/-

Joint Chief Officer

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 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.

All Commercial Banks

Dear Sir,

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 :

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

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).

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.

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.

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

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.

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.

4. Please acknowledge receipt.

Yours faithfully,

Sd/-

General Manager

All Commercial Banks

Dear Sir,

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.

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.

6. Please acknowledge receipt.

Yours faithfully,

Sd/-

General Manager

All Public Sector Banks

Dear Sir,

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 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.

5. Please acknowledge receipt.

Yours faithfully

Sd/-

General Manager

Encls.: As above

Name of the bank..........................
Progress for the month of................

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

d) Outcome of survey

e) Remedial action taken

4.Entrepreneurs sanctioned composite loan (both term-loan and working capital)

A.During the month

All Scheduled Commercial Banks

Dear Sir,

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 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:

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.

5. Please acknowledge receipt.

Yours faithfully,

Sd/-

General Manager

Encl.: Annexure

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.

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.

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

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.

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.

All Scheduled Commercial Banks

Dear Sir,

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.

2. Please acknowledge receipt.

Yours faithfully,

Sd/-

General Manager

Encl.: 1

18th July, 1995

To

1. Secretary (Industries)

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

3. Director, All SISIs

Sir,

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. 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.

Yours faithfully,

Sd/-

Director (SSI Board & Policy)

Copy to :

1. All Directors at Headquarters.

2. Director (Publication)

3. Others as per mailing list.

All Public Sector Banks

Dear Sir,

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.

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.

5. Please acknowledge receipt.

Yours faithfully,

Sd/-

Chief General Manager

Encl.: 1

All Scheduled Commercial Banks

Dear Sir,

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.

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.

Yours faithfully,

Sd/-

General Manager

The Chairman/Managing Director/ Chief Executive Officer All Scheduled Commercial Banks

Dear Sir

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.

2. Please acknowledge receipt.

Yours faithfully

Sd/-

General Manager

20th November, 1996

To,

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 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.

Yours faithfully

Sd/-

Director (SSI Bd. & Policy)

All Scheduled Commercial Banks

Dear Sir,

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.

3. Please acknowledge receipt.

Yours faithfully,

Sd/-

General Manager

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

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.

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

• 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.

• 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.
• 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.

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

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

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

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

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

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

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

• 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.

• 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.

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

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

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.

All Scheduled Commercial Banks

Dear Sir,

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.99/06.02.31/92-93 dated 17 April 1993 remain unchanged.

Yours faithfully,

Sd/-

Chief General Manager

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.

3. Please acknowledge receipt.

Yours faithfully

Sd/-

General Manager)

The Chairman & Managing Director All Scheduled Commercial Banks

Dear Sir,

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 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.

3. Please acknowledge receipt.

Yours faithfully

Sd/-

Chief General Manager

The Chairman,

All Scheduled Commercial Banks

Dear Sir,

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 :

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

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.

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.

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.

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.

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.

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.

Yours faithfully

Sd/-

General Manager

To All Public Sector Banks

Dear Sir,

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.

Yours faithfully,

Sd/-

General Manager

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.

Yours faithfully

Sd/-

General Manager

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

Dear Sir,

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.

4. Please acknowledge receipt.

Yours faithfully

Sd/-

General Manager

Encl.: As above

10th December, 1997

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 thirty days as required under sub-section (3) of section 11B of the said Act;

And whereas no modification in the proposed notification has been suggested by both the Houses of Parliament.

Now, therefore, in exercise of the powers conferred by sub-section (1) of section 11B and subsection (1) of section 29B of the said Act, and in supersession of the notification of the Government of India in the Ministry of Industry (Department of Industrial Development) number S.O.232(E), dated the 2nd April, 1991, the Central Government hereby specifies the following factors on the basis of which an industrial undertaking shall be regarded as a small scale or as an ancillary industrial undertaking for the purposes of the said Act :-

1) Small scale industrial undertaking : An industrial undertaking in which the investment in fixed assets in plant and machinery, whether held on ownership terms or on lease or on hire purchase, does not exceed rupees three crores;

2) Ancillary industrial undertaking : An industrial undertaking which is engaged or is proposed to be engaged in the manufacturing or production of parts, components, sub-assemblies, tooling or intermediaries, or the rendering of services, and undertaking supplies or proposes to supply or renders not more than fifty per cent of its production or services, as the case may be, to one or more other industrial undertakings and whose investment in fixed assets in plant and machinery, whether held on ownership terms or on lease or on hire purchase, does not exceed rupees three crores.

Note 1 : No small scale or ancillary industrial undertaking referred to above shall be subsidiary of, or owned or controlled by any other industrial undertaking.

Explanation - For the purposes of this note -

A) owned shall have the meaning as derived from the definition of the expression owner specified in clause (f) of section 3 of the said Act;

B) subsidiary shall have the same meaning as in clause (47) of section 2, read with section 4, of the Companies Act, 1956 (1 of 1956);

C) the expression controlled by any other industrial undertaking means as under :

i) where two or more industrial undertakings are set up by the same person as a proprietor, each of such industrial undertakings shall be considered to be controlled by the other industrial undertaking or undertakings.

ii) where two or more industrial undertakings are set up as partnership firms under the Indian Partnership Act, 1932 (1 of 1932) and one or more partners are common partner or partners in such firms, each such undertaking shall be considered to be controlled by the other undertaking or undertakings.

iii) where industrial undertakings are set up by companies under the Companies Act, 1956 (1 of 1956), an industrial undertaking shall be considered to be controlled by other industrial undertaking if :

a) the equity holding by other industrial undertaking in it exceeds twenty four per cent of its total equity; or

b) the management control of an undertaking is passed on to the other industrial undertaking by way of the Managing Director of the first mentioned undertaking being also the Managing Director or Director in the other industrial undertaking or the majority of Directors on the Board of the first mentioned undertaking being the equity holders in the other industrial undertaking in terms of the provisions of the following items (a) and (b) of sub-clause (iv);

iv) the extent of equity participation by other industrial undertaking or undertakings in the undertakings as per sub-clause (iii) above shall be worked out as follows:-

a) the equity participation by other industrial undertaking shall include both foreign and domestic equity;

b) equity participation by other industrial undertaking shall mean total equity held in an industrial undertaking by other industrial undertaking or undertakings, whether small scale or otherwise, put together as well as the equity held by persons who are Directors in any other industrial undertaking or undertakings even if the person concerned is a Director in other Industrial Undertaking or Undertakings;

c) equity held by a person, having special technical qualification and experience, appointed as a Director in a small scale industrial undertaking to the extent of qualification shares, if so provided in the Articles of Association shall not be counted in computing the equity held by other industrial undertaking or undertakings even if the person concerned is a Director in other industrial undertaking or undertakings;

v) where an industrial undertaking is a subsidiary of or is owned or controlled by, any other industrial undertaking or undertakings in terms of sub-clauses (i); (ii); or (iii) and if the total investment in fixed assets in plant and machinery of the first mentioned industrial undertaking and the other industrial undertaking or undertakings clubbed together exceeds the limit of investment specified in paragraphs (1) or (2) of this notification as the case may be, none of these industrial undertakings shall be considered to be a small scale or ancillary industrial undertaking.

Note 2 : a) In calculating the value of plant and machinery for the purposes of paragraphs (1) and (2) of this notification, the original price thereof, irrespective of whether the plant and machinery are new or second hand, shall be taken into account

b) In calculating the value of plant and machinery, the following shall be excluded, namely:-

i) the cost of equipments such as tools, jigs, dies, moulds and spare parts for maintenance and the cost of consumable stores;

ii) the cost of installation of plant and machinery;

iii) the cost of research and development equipment and pollution control equipment;

iv) the cost of generation sets and extra transformer installed by the undertaking as per the regulations of the State Electricity Board;

v) the bank charges and service charges paid to the National Small Industries Corporation or the State Small Industries Corporation;

vi) the cost involved in procurement or installation of cables, wiring, bus bars, electrical control panels (not those mounted on individual machines), oil circuit breakers or miniature circuit breakers which are necessarily to be used for providing electrical power to the plant and machinery or for safety measures;

vii) the cost of gas producer plants;

viii) transportation charges (excluding of sales-tax and excise) for indigenous machinery from the place of manufacturing to the site of the factory;

ix) charges paid for technical know-how for erection of plant and machinery;

x) cost of such storage tanks which store raw materials, finished products only and are not linked with the manufacturing process; and

xi) cost of fire fighting equipments.

c) In the case of imported machinery, the following shall be included in calculating the value, namely :

i) import duty (excluding miscellaneous expenses as transportation from the port to the site of the factory, demurrage paid at the port);

ii) the shipping charges;

iii) customs clearance charges; and iv) sales tax.

Every industrial undertaking which has been issued a certificate of registration under section 10 of the said Act or a license under sections 11, 11A and 13 of the said Act by the Central Government and are covered by the provisions of paragraphs (1) and (2) above relating to the ancillary or small scale industrial undertaking, may be registered, at the discretion of the owner, as such, within a period of one hundred and eighty days from the date of publication of this notification in the Official Gazette.

This notification shall come into force from the date of its publication in the Official Gazette.

Yours faithfully,

Sd/-

Jt. Secretary to the Govt. of India

(File No.10/6/97-IP)

The Chairman/MD/CEO

All Scheduled Commercial Banks (Excluding RRBs)

Dear Sir,

Please refer to our circular RPCD.No.BC.PLNFS.66/06.02.31/97-98 dated 5 January 1998. We advise that Government of India have issued an order revising the limit on investment in plant and machinery in respect of tiny enterprises from Rs.5 lakhs to Rs.25 lakhs. A copy of the Government Order No.12/4/95-SSI(P) dated 24 December 1997 is enclosed.

2. It has been decided that out of the funds available to SSI sector allocation should be made as under :

3. Please acknowledge receipt.

Yours faithfully,

Sd/-

General Manager)

Encl.: 1

24th December, 1997

To

The Secretary/Commissioner Industries Director of Industries All States and Union Territories

Sir,

The Central Government in exercise of the powers conferred by Sub-section (i) of Section 11(B) and Sub-section (i) of Section 19(B) of the industries (Development & Regulation) Act, 1951 has notified vide its notification No.857(E) dated 10.12.97 that an industrial undertaking having investment in fixed assets in plant and machinery upto Rs.300 lakhs, will be accorded the status of a small scale industrial undertaking. Such investment limit in respect of TINY ENTERPRISES now stands increased from the present level of Rs.5 lakhs to Rs.25 lakhs, irrespective of the location of the unit.

All existing guidelines with regard to registration etc. for tiny units with the enhanced limit of Rs.25 lakhs will remain unchanged.

Yours faithfully,

Sd/-

Director

All Public Sector Banks

Dear Sir

Please refer to para 4 of our circular RPCD.No.PLNFS.BC.1/06.02.31/93-94 dated 3 July 1993 regarding opening of specialised SSI branches and the various instructions issued by us on the subject from time to time.

2. It has been observed that although the banks have operationalised as many as 353 specialised SSI branches by the end of March 1997, there are still 80 districts/centres in which there are more than 1000 registered SSI units, where no specialised SSI branch has been operationalised so far. We, therefore, advise that while identifying centres for opening more specialised SSI branches, centres in such 80 districts (list enclosed for ready recerence) may be selected as this will go a long way in providing focused attention and service to the SSI sector.

3. In the meanwhile, please acknowledge receipt.

Yours faithfully

Sd/-

General Manager

Encl : 1 List

The Chairman

All Scheduled Commercial Banks

Dear Sir

Please refer to our circular RPCD.PLNFS.No.BC.13/06.06.12(D)/97-98 dated 28 July 1997 on the captioned subject.

2. We advise that the paragraph 2(ii) relating to eligible borrowers mentioned in our circular referred to above may be amended to read as under :

The eligible agencies under the schemes are individuals (rural artisans/ entreprenurs) for projects upto Rs.10 lakhs and Institutions, Co-operative Societies, Trusts for projects upto Rs. 25 lakhs.

Consequently, registration for Institutions, Co-operative Societies,Trusts with KVIC/KVIB is not a precondition for eligibility under the scheme.

3. Please issue suitable instructions to the controlling offices/branches of your bank.

4. Please acknowledge receipt.

Yours faithfully

Sd/-

General Manager

All Scheduled Commercial Banks Dear Sir

Pursuant to announcement made by the Finance Minister in his budget speech on 1st June 1998, the following measures are being taken in regard to easing the flow of bank credit to SSI units.

2. At present, SSI units having aggregate fund based working capital limits up to Rs.2 crore from the banking system are to be provided working capital finance computed on the basis of 20% of their projected annual turnover vide our Circular RPCD.No.PLNFS.BC.128/06.02.31/96-97 dated 22nd April 1997. It has now been decided that this facility may be doubled to Rs. 4 crores. Banks should, therefore, adopt henceforth the simplified procedure of sanctioning working capital limits on the basis of 20% of the projected annual turnover to all SSI units (new as well as existing) requiring aggregate fund based working capital limits upto Rs. 4 crores from the banking system. Other instructions contained in paragraph 3 of our circular RPCD No. PLNFS. BC.99/06.02.31/92-93 dated 17 April 1993 remain unchanged.

3. Further, in order to take expeditious decisions on credit proposals of SSI units, it has been decided that banks should delegate enhanced powers to the branch managers of the specialised SSI branches so that most of the credit proposals are decided at the branch level.

4. With a view to moderating the cost of credit to SSI units, banks are advised to accord SSI units with a good track record the benefit of lower spreads over the Prime Lending Rate.

5. We shall be glad if you will issue necessary instructions to all your controlling offices/branches in the matter.

6. In the meanwhile. please acknowledge receipt.

Yours faithfully.

Sd/-

General Manager

The Chairman

All Regional Rural Banks

Dear Sir,

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 formulated a Scheme for financing projects with investment limits up to 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 also discussed in the Conference of Industry Ministers of States. 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:

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

The eligible agencies under the Scheme are individuals (rural artisans/entrepreneurs) for projects up to Rs.10 lakhs and Institutions, Co-operative Societies, Trusts for projects up to Rs.25 lakhs.

25 per cent of the project cost up to Rs.10.00 lakhs will be provided by KVIC as Margin money by way of subsidy. For projects above Rs.10.00 lakhs and up to 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.

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 up to Rs.10.00 lakhs.

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 weaker section borrowers, the contribution will be 5 per cent of the project cost.

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.

KVIC shall disburse Margin Money on receipt of claims from each bank.

3. Kindly issue suitable instructions to your branches immediately for implementation of the Scheme.

Yours faithfully,

Sd/-

General Manager