RPCD.No.PLNFS.BC.21/06.02.31/98-99

8 August, 1998

To

All Commercial Banks (including RRBs)

Dear Sir,

Priority sector advances -Credit deployment to SSI sector

Please refer to our circular RPCD.No.PLNFS.BC.66/06.02.31/97-98 dated 5 January 1998.

2. We advise that consequent upon increase in the limit for tiny units from Rs.5 lakhs to Rs.25 lakhs, the limit for investment in plant and machinery in respect of industry related Small Scale Service/Business Enterprises (SSSBEs) has also been increased to Rs.25 lakhs.

Yours faithfully,

Sd/-

(R. M. JOSHI)

General Manager

RPCD.PLNFS.No.BC.22/06.02.31(ii)/98-99

August 28,1998

CMDs

All Commercial Banks (Including RRBs) Dear Sir

High Level Committee on Credit to SSI

As you are aware, RBI had appointed a one-man High Level Committee headed by Shri S.L. Kapur, (IAS, Retd.), Former Secretary, Government of India, Ministry of Industry to suggest measures for improving the delivery system and simplification of procedures for credit to SSI sector. The Committee has submitted its report to the Governor on 30 June 1998.

2. The Committee has made in all 126 recommendations covering wide range of areas pertaining to financing of SSI sector. We have since examined these recommendations and it has been decided to accept 35 recommendations as indicated in the Annexure for immediate implementation. The Annexure includes the following important recommendations :

i) Delegation of more powers to branch managers to grant ad-hoc limits (6.13),

ii) Simplification of application forms (6.36),

iii) Freedom to banks to decide their own norms for assessment of credit requirements (6.37),

iv) Opening of more specialised SSI branches (6.40),

v) Enhancement in the limit for composite loans to Rs. 5 lakh (6.50),

vi) Strengthening the recovery mechanism (6.61),

vii) Banks to pay more attention to the backward States (6.80),

viii) Special programmes for training branch managers for appraising small projects (6.99),

ix) Banks to make customers grievance machinery more transparent and simplify the procedures for handling complaints and monitoring thereof (6.120,6.121 & 6.123).

3. The remaining recommendations are under examination in consultation with GOI, MOF/MOI, SIDBI, NABARD, etc.

4. In the meantime, we request you to take appropriate action in respect of the recommendations of the Committee as indicated in Annexure for immediate implementation. Please advise us of the action taken by your bank at an early date.

5. Please acknowledge receipt.

Yours faithfully

Sd/-

(C. Harikumar)

Executive Director

Encl : Annexure

HIGH LEVEL COMMITTEE ON CREDIT TO SSI

RECOMMENDATIONS COMMENDED FOR

IMPLEMENTATION TO BANKS

	RECOMMENDATIONS		DECISION OF RBI
1)	6.01(i) Crash training programmes for the staff	6.01	(i) Sponsor banks/SIDBI may provide
	members of Regional Rural Banks with		crash training programmes for the staff of
	special emphasis on proper motivation,		RRBs.
	development of project appraisal skills,
	monitoring of credit and modern banking	ii)	RRBs may open specialised SSI branches
	procedures etc. should be planned.		subject to viability and availability of
	Availability of adequate funds and human		trained staff.
	resources should be ensured by sponsoring
	banks and NABARD.(ii) RRBs should also	iii)	This part of the recommendation is under
	be permitted to open specialised branches		examination in consulation with the
	on the pattern of sponsoring banks where		SIDBI.
	focus could be on services to SSI. (iii)
	Refinance support could also be provided
	to them by SIDBI for their loans to SSI sector.
	(Para 2.04.01)
2)	6.13 Branch Managers should be delegated	6.13	(i) Banks may delegate powers to branch
	powers to grant ad-hoc facilities to the extent		managers to grant ad-hoc facilities to the
	of 20 per cent of the limits sanctioned. The		extent of 20% of the limits sanctioned
	Managers could also draw upon		subject to the usual lending discipline.
	Reconstruction Fund mentioned in Para
	2.14.01 to provide margin money to the	ii)	Regarding Reconstruction Fund separate
	extent the borrower is not able to provide		instructions would follow.
	for the additional facilities made available.
	If there is a shortfall even after the provision
	of this additional margin money from the
	Reconstruction Fund, the banks should
	permit borrowers to make good the shortfall
	over a period of time out of the future profits
	of the units. (Para 2.14.02)
3)	6.29 Reserve Bank of India should examine	6.29	Banks may meticulously follow the
	the difficulties being experienced by banks		instruction issued by RBI on the subject.
	in implementation of the recommendations		They may also carry out special studies
	of Nayak Committee. Suitable modifications		periodically to ascertain the position
	may be made if deemed appropriate.		regarding implementation of guidelines
	However, there is need for meticulous		issued by RBI in this regard and to
	compliance of the instructions already		introduce measures to ensure compliance.
	issued as a sequel to acceptance of these
	recommendations and the Seven Point
	Action Plan. Banks may be advised to carry
	out special studies periodically to ascertain
	the position regarding implementation of
	guidelines issued by RBI in this regard and
	to introduce measures to ensure
	compliance. (Para 3.13)
4)	6.30 While carrying out inspections, the	6.30	Banks may comply with the recommendation.
	officials of the banks as well as RBI should
	insist and ensure that only the prescribed
	loan application forms are used.
	(Para 3.14.02)
5)	6.31 The filled in application forms	6.31	Banks may comply with the recommendation.
	submitted by the borrowers should always
	be examined by a bank official having
	adequate experience in credit operations
	who should also maintain a check list so that
	he advises the applicant what additional
	information is required to be submitted for
	completion of the application.(Para 3.14.04)
6)	6.32 The controlling offices of banks should	6.32	Bank may prepare a compendium of these
	reiterate their instructions directing branch		instructions and supply them to the
	managers/officials to extend necessary help		branches.
	to applicants in filling up the application
	forms. Adequate number of copies of bank s
	instructions/schemes, RBI instructions and
	literature prepared by SIDBI, NABARD,
	State and Central Government etc. should
	be made available at each branch.
	(Para 3.14.05 & 3.14.07)
7)	6.33 The loan application forms should be	6.33	Banks may introduce loan application
	tri-lingual i.e. in Hindi, English and local		forms in tri-lingual.
	language. (Para 3.14.08)
8)	6.36 The application form prescribed for	6.36	Banks may implement the recommendation.
	facilities upto Rs.2 lakh could straightaway
	be permitted to be used for facilities upto
	Rs. 10 lakh and that prescribed for facilities
	upto Rs.15 lakhs could be used for such
	facilities upto Rs. 50 lakh. Similarly, the form
	for limits upto Rs.1 crore could be prescribed
	for facilities beyond Rs. 50.00 lakh and upto
	Rs. 2 core. The fourth category of proforma
	could be used by any SSI unit requiring
	facilities beyond Rs. 2 crore. (Para 3.14.10)
9)	6.37 i) For the purpose of working out bank	6.37	i) & ii) Banks may keep the recommen-
	finance, in the case of an existing unit, the		darion in mind while processing loan
	bank officials and entrepreneur should work		Proposals of SSI borrowers.
	out an agreed growth rate and projected
	turnover based on the past performance, the
	likely prospects and few other factors.
	ii) For those sectors which are recording
	positive rate of growth and when the
	individual unit has also recorded positive
	rate of growth during the last 2-3 years, it
	may be permitted growth rate of a minimum
	of 15 per cent over the current year s
	turnover to arrive at the projected turnover
	and the working capital limits from banks
	be fixed accordingly.
	iii)In case of new units, the projections	iii)	Banks may implement the recommen-
	accepted by the term lending institutions, for		Dation.
	the first year of operation should normally
	be accepted unless there are specific reasons
	for not doing so. (Para 3.15.02 & 3.15.03)
10)	6.38 The banks should, with the approval	6.38	We commend the recommendation for
	of their Boards, lay down some clear		implementation which may be kept in
	Guidelines for computing the working capital		view while processing loan proposals of
	Limits for various sub sectors granted to SSI		SSI borrowers.
	Borrowers, particularly those units where
	fund based working capital requirements
	Exceed Rs.4 crore. (Para 3.15.04)
11)	6.40 Banks should open more specialised	6.40	We commend the recommendation to
	SSI branches or shift/restructure some of their		banks for opening of more specialied
	existing branches and convert them into		branches or conversion of the existing
	Specialised branches for financing the small		branches at the centres having cluster of
	scale sector. The banking sector within the		SSI units (say more than 500) subject to
	next two years should ensure colletively that		viability. In this connection a reference
	at least one such branch is opened in every		also invited to our Circular RPCD. PLNFS
	district of the country, particularly at those		No. 792/06.02.31/97-98 of 2nd March
	centres where the number of small units is		1998.
	at least 100. These branches should be
	opened by strong banks only. The
	Committee is confident that the number of
	specialised and profit making branches can
	easily increase by 1,000 within the next
	three years. (Para 3.17.01)
12.	6.42 Selective specialised branches should	6.42	The recommendarion is commended for
	be encouraged to innovate and experiment		implementation.
	with new products such as factoring services
	and business credit cards. (Para 3.17.03)
13.	6.45 The Committee was informed that one	6.45	We commend the recommendation
	field officer in a specialised branch is able		which may be kept in view for manning
	to handle about 50 SSI units. The number		the specialised SSI branches.
	of field officers should be sufficient to take
	care of number of accounts entertained by
	a branch. Properly trained and preferably
	technically oriented direct recruits in
	adequate number should be posted in
	specialised SSI branches. (Para 3.17.06)
14)	6.47 Further delegation of sanctioning	6.47	We commend the recommendation for
	powers should be made in respect of		implementation. In this connection, a
	specialised SSI branches in particular and		reference is invited to RBI Cricular No.
	other branches in general for prompt		PLNFS. BC.127/06.02.31/97-98 dated 8th
	disposal of applications. (Para 3.17.08)		June 1998 advising the banks that they
			should delegate enhanced powers to the
			branch managers of specialised SSI
			branches so that most of the credit
			proposals are decided at the branch level.
15)	6.48 Specialised SSI branches should be	6.48	We commend the recommendation for
	linked to national and international data		implementation.
	banks and information centres including
	internet to enable them to provide latest
	information to their clients. (Para 3.17.09)
16)	6.49 Banks and financial institutions are	6.49	We commend the recommendation for
	hesitant to deal with SSI enterprises requiring		implementation. Banks have already
	loans of less than Rs. 5 lakh. The Public		been advised that out of the total funds
	Sector Banks, with resources and expertise		allocated by them to SSI sector, at least
	available at their disposal, should sanction		40% should go to the units with
	loans to SSI enterprises requiring loans upto		investment in plant and machinery up to
	Rs. 5.00 lakh in a big way and SIDBI should		Rs. 5 lakh and 20% should go to the units
	refinance these on attractive terms.		with investment in plant and machinery
	(Para 3.18.01)		between Rs. 5 lakh and Rs.25 lakh vide
			our Circular RPCD No. PLNFS. BC.89/
			06.02.31/97-98 of 19th February 1998.
17)	6.50 The limit of composite loans should be	6.50	We commend the recommendation for
	enhanced from Rs. 2 lakh to Rs. 5.00 lakh		implementation.
	so that the entire requirement of such units
	is met by single documentation and security
	and charge creation process. This facility
	should also be extended to all SSI units
	requiring loans up to Rs.5.00 lakh
	irrespective of their location. (Para 3.18.02)
18	6.51 i) Only banks should entertain projects	6.51	We commend the recommendation for
	both for term loans and working capital of		implementation.
	Borrowers with loan requirement, up to and
	Inclusive of Rs. 5.00 lakh. Only one
	Organisation, either SFC or a bank may
	Sanction both the term loan and working
	Capital for projects requiring institutional
	Credit for more than Rs. 5.00 lakh. and upto
	and inclusive of Rs. 25.00 lakh.
	ii) For Projects having loan requirement in
	Excess of Rs. 25 lakh, arrangements should
	be made by SIDBI with the Public Sector
	Banks to have an MOU signed between the
	SFC and selected Public Sector Banks active
	in different regions of the country for joint
	Financing, whereby both the term loan as
	well as working capital should be shared
	along with sharing of securities on pari passu
	basis. However, the borrowers in this
	category who want to avail such facilities
	from a single agency i.e. bank or SFC, should
	be allowed to exercise their option.
	(Para 3.18.03)
19)	6.56 For ensuring competitiveness of SSI	6.56	We commend the recommendation for
	units, it is necessary to set up units with		implementation.
	optimum size of operations and capital.
	There are a number of agencies in public
	sector engaged in preparing project profiles
	on economic sized units. Project Profile
	work can be undertaken by them also for
	SSIs. We can also depend on technical
	consultants in respect of hi-tech or new
	technology projects. The ultimate decision,
	however, shall have to be taken by the
	controlling offices of banks which should
	periodically advise their branch managers
	accordingly. (Para 3.23)
20)	6.58 Banks should consider providing	6.58	We commend the recommendation for
	SWIFT services in specialised SSI branches		consideration, if feasible.
	catering to big clusters of SSI units engaged
	in export of goods. (Para 3.24.02)
21)	6.59 It is very essential that the loan	6.59	Guidelines to this effect (i.e. Committee
	Applications are sanctioned promptly and		approach and time schedule) have
	Normally within one month. Banks should		already been issued to banks. Loan
	be advised to adopt Committee approach		applications for amounts up to Rs.
	for sanction of the applications.		25,000/- should be disposed of within a
	(Para 3.25.01 and 3.25.02)		fortnight and those for amounts above
			Rs.25,000/- should be disposed of within
			8 to 9 weeks. Banks may meticulously
			follow the guidelines.
22)	6.61 Regarding loans below Rs. 10 lakh, the	6.61	Banks may implement the
	State Government should provide all		recommendation regarding recourse to
	facilities and assistance for the recovery of		Lok Adalats and to appoint or designate
	these loans. Special revenue courts should		special officers exclusively for dealing
	be set up in each State to deal with SSI cases.		with recovery.
	The State Government should also get in
	touch with the respective High Courts and
	get a few Civil Courts (one at every district
	headquarters with proper infrastructure)
	designated as Recovery of Bank Dues
	Courts. These courts should deal with loan
	recovery matters in a summary manner.
	Government can also examine treating such
	loans on the pattern of agricultural loans up
	to Rs.10 lakh as Government dues and
	recover these as arrears of land revenue. The
	banks should take advantage of the Lok
	Adalats and arbitration to settle dues up to
	Rs.10 lakh. The banks should appoint
	special officers or designate existing officers
	having aptitude for work relating to recovery,
	who should exclusively deal with recovery.
	(Para 3.26.03 & 3.26.04)
23)	6.68 The overall interest payable by SSI	6.68	We commend the recommendation for
	should remain within the existing parameters		implementation.
	fixed by RBI i.e. maximum of PLR plus four
	per cent. The PLR should take care of the
	cost of funds incurred by the banks.
	Additional spreads over the PLR will be used
	as premium for guaranteeing the repayment
	of the loan. Naturally, SSI units, with good
	track record will have to pay lower premium
	and can derive some advantage out of lower
	spreads. (Para 4.01.05)
24)	6.80 It would be appropriate to assess the	6.80	We commend the recommendation for
	flow of credit to SSI by using data on		implementation.
	disbursement rather than outstanding
	balances . The Committee feels that it is
	possible for banks to achieve a growth rate
	of 30% p.a. in disbursement terms and
	accordingly, the banks should be advised
	to fix their disbursement target along with
	outstanding balances. Reserve Bank may
	also advise the banks to pay more attention
	to the backward States such as Bihar, J&K,
	M.P. and North Eastern States while fixing
	the lending targets and seek progress in this
	behalf separately. (Para 4.06.07)
25)	6.95 Bankers should publish that it is	6.95	We commend the recommendation for
	borrowers right to get loans from the bank		implementation.
	in case these are merited. The SSI
	entrepreneurs should also bear in mind that
	they can get loans only if their projects are
	viable and they are found to be creditworthy
	by the banks. Borrowers have also to be
	clearly told that while it is their right to get
	the loans, they also have a corresponding
	duty to earnestly implement their projects
	and repay the dues of the bank as per the
	terms agreed to at the time of sanction.
	(Para 5.01.01)
26)	6.99 Some special training courses have	6.99	We commend the recommendation for
	been designed by Entrepreneurship		implementation.
	Development Institute (EDI), Ahmedabad to
	help bank managers and trainers of bank
	staff requiring the requisite skills for
	appraising small projects and the
	Entrepreneurs behind them. RBI may like to
	advise banks to make use of such training
	Programmes and incorporate the same in the
	training courses provided by Bankers
	Training Institutes. (Para 5.03.03)
27)	6.109 SSI branches should help their	6.109	We commend the recommendation for
	customers in the designing of their bank		implementation.
	products and thereby offer a new kind of
	customised and personalised banking
	Service. (Para 5.10.01)
28)	6.110 RBI should ask the Public Sector	6.110	Based on the recommendations of the
	Banks to upgrade skills and training		Nayak Committee, banks have already
	Programmes of the bank staff to enable them		been issued guidelines in this regard. We
	to deal freely with the appraisal of diverse		commend the recommendation for
	SSI projects and their credit related needs.		implementation.
	(Para 5.11.01)
29)	6.111 The aspect of training for the bankers	6.111	Based on the recommendations of the
	Particularly those posted in new SSI		Nayak Committee, banks have already
	branches has to be adequately focussed at		been issued guidelines in this regard. We
	the highest level in the bank. The training		commend the recommendation for
	Programmes should attempt to prepare the		implementation.
	managers for meeting the challenges
	involved in dealing with this vital and
	demanding sector. (Para 5.11.03)
30)	6.118 Public and Private Sector Banks	6.118	We commend the recommendation for
	should take up schemes in respect of		implementation.
	Professionals needing financial assistance for
	meeting their professional requirements
	including their needs of finance to bankroll
	their own businesses. One such area where
	there is requirement for such funds is the
	computer software business set up by
	Professionals. (Para 5.13)
31)	6.120 With a view to redress customers	6.120	We commend the recommendation for
	grievances, time limits and systems prevalent		implementation.
	in banks should be made as transparent as
	possible and well publicised.
	(Para 5.15.11(1))
32)	6.121 The procedures for making complaints	6.121	We commend the recommendation for
	should be simple and as informal as possible.		implementation.
	(Para 5.15.11(2))
33)	6.123 There should be machinery at all	6.123	Banks have already been issued
	Controlling Offices of banks to entertain		guidelines to set up Grievances Redressal
	complaints from the borrowers if the		Cell at Controlling Offices vide our
	branches do not follow the prescribed		Circular RPCD No. PLNFS. 186/06.02.28/
	guidelines. Regional Offices/Controlling		97-98 of 2nd Augusr 1998. We commend
	Offices could periodically verify that these		the recommendation for necesary action.
	guidelines are implemented by branches in
	actual practice. (Para 5.15.11(4))
34)	6.125 Instructions issued by RBI do not	6.125	Banks may ensure that the instructions
	percolate to bank branches and these are		issued by RBI percolate to branches and
	not meticulously followed by them. For		these are meticulously followed by them.
	instance, the borrowers availing of credit
	facilities from a bank find it extremely
	difficult to shift to another bank. RBI should
	look into this aspect and ensure compliance
	by the branches of various instructions/
	guidelines issused by it in this regard.
	(Para 5.16)
35)	6.126 It is recommended that the Small Scale	6.126	Under the existing arrangement overseas
	Companies who want to have overseas		investments by Indians in Joint Ventures
	presence should be allowed to invest up to		are allowed. We commend the
	US$ Twenty thousand based on a simple		recommendation for implementation.
	procedure and the banks should assist them
	for this purpose. This will help SSI units to
	increase exports and upgrade technology.
	(Para 5.17)

RPCD.PLNFS.BC.No.72/06.02.31/98-99

February 26,1999

The Chairman/Managing Director/ Chief Executive officer All scheduled commercial banks (excluding RRBs)

Dear Sir

SSI Registration to Erstwhile Non-SSI
Units - Waiving of Time Limit for Registration

Please refer to our circular letter RPCD No. PLNFS.BC.66/06.02.31/97-98 dated 5 January 1998 on credit deployment to SSI sector. In terms of the Notification No. S.O. 857(E) dated 10 December 1997 issued by Govenment of India (Department of Industrial Policy and Promotion), New Delhi, the definition of Small Scale Industries was revised with effect from 11 December 1997 as also the time limit of 180 days for registration of the new units which has come within the revised definition of SSI was prescribed. Government of India has since re-examined the matter and decided to do away with the time period for applying for registration.

2. A copy of letter No.4(I)/98-SSI Bd & Pol. dated 11 December 1998 received from the office of the Development Commissioner, SSI, Department of SSI & ARI, Ministry of Industry, Government of India, is enclosed for your information and necessary action.

Yours faithfully

Sd/-

(R. M. JOSHI)

General Manager

Encls : As above

OFFICE OF THE DEVELOPMENT COMMISSIONER
SMALL SCALE INDUSTRIES
Deptt. of SSI/Agro & Rural Industries
Ministry of Industry, Govt. of India,
Nirman Bhawan (South Wing)
Maulana Azad Road, New Delhi-110 011.

No.4(1)/98-SSI BD. & POL.

Dated , the 11-12-98

To

The Secretary (Industries), All States/UTs.

The Director of Industries, All States/ UTs.

SSI Registration to Erstwhile Non-SSI Units-Waiving of Time Limit for.

Sir,

A number of references have been received seeking clarification regarding those units which on account of enhancement of limit from Rs.60/75 lakhs in SSI/Ancillary units to Rs.3 crores have come within the fold of small scale sector but could not avail the SSI registration within 180 days as per the norm prescribed in the Notification No. S.O. 857(E) dated 10.12.97.

The matter has been examined. In view of the liberalised Industrial Policy wherein licensing provissions have substantially been changed. The licensing exemption notification issued on July 25, 1991 introduced the procedure of filling IEM in case of units manufacturing non-licensible items. In other words, the earlier registration schemes with the DGTD have been abolished. This has been stated quite explicitly in the Press Note No.9 of the 1991 series and Circular No.1 of the 1992 Series dated 14.2.1992, both issued by the Department of Industrial Development, Govt. of India.

Hence, in view of the above, the provisions contained in the notification dated 10.12.1997 regarding prescribing a time period for applying for registration is no longer relevant or applicable.

In other words any industrial undertaking, at any time, is eligible to be registered as a small scale/ ancillary industrial undertaking provided it satisfies the definitional criteria.

It is, therefore, clarified that any unit in the small scale in possession of a COB Licence or formerly registered with the DGTD can, at any time, apply for registration as a small scale industrial undertaking. Such units should be registered provided they satisfy the definition criteria, irrespective of the fact that they may have applied after the period of six months from the date of notification No. S.O. 857 (E) dated 10.12.97.

Yours faithfully

Sd/-

(S. N. Sahai)

Director (SSI BD. & POL.)

RPCD.PLNFS.No.BC.73/06.02.31/98-99

March 1, 1999

All Scheduled Commercial Banks

Dear Sir

Flow of Credit to SSI Sector

At present, SSI units having aggregate fund-based working capital limits upto Rs.4 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.127/06.02.31/97-88 dated 8 June 1998. Pursuant to the annoucement made by the Finance Minister in his budget speech on 27 February 1999, it has been decided that the above limit may be raised to Rs. 5 crore. 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.5 crore from the banking system. Other instructions contained in paragraph 3 of our circular No. PLNFS. BC.99/06.02.31/92-93 date 17 April 1993 remain unchanged.

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

3. In the meanwhile, please acknowledge receipt.

Yours faithfully

Sd/-

(R. M. JOSHI)

General Manager

RPCD.PLNFS.No.BC.75/06.02.31(ii)/98-99

March 4, 1999

Chairman and Managing Director All Commercial Banks (Including RRBs)

Dear Sir

High Level Committee on Credit to SSI

Please refer to our circular RPCD.PLNFS.No. BC.22/06.02.31(ii)/98-99 dated 28 August 1998 advising you to implement immediately the 35 recommendations made by the captioned Committee which have been accepted by the Reserve Bank. We have since accepted five more recommendations which are listed in the Annexure. You are advised to take appropriate action in the matter for immediate implementation of the decision.

2. In the meanwhile, please acknowledge receipt.

Yours fathfully

Sd/-

(A. V. Sardesai)

Add. Chief General Manager

Encls : Annexure

High Level Committee on Credit to SSI

Recommendations commended for implementation to Banks

Recommendation		Decision of RBI
(1)		(2)
6.38
The banks should, with the Approval of their		Banks have been advised vide circular RPCD.
Boards, lay down some clear guidelines for		No.PLNFS.BC.73/06.02.31/98-99 dated 1.3.99
computing the working capital limits for various		to provide working capital finance to SSI units
sub-sectors granted to SSI borrowers, particularly		having aggregate fund-based working capital
those units where fund based working capital		limits upto Rs. 5 crore computed on the basis of
requirements exceed Rs. 4 crore. (Para 3.15.04)		20% of their projected annual turnover. As
		regards working capital limits above Rs.5 crores,
		banks have been given freedom to decide their
		own norms in respect of credit appraisal and
		assessment of working capital requirements of the
		borrower vide circular IECD No. 23/08.12.01/96-
		97 dated 15.4.97. Banks may follow the
		instructions contained in the above two circulars.
6.41
The banks should ensure that specialised SSI		Banks may take measures to increase the flow of
branches entertain loan proposals from the tiny		credit to tiny sector to the stipulated level of
sector and village industries units unhesitatingly.		percentage i.e. 40% of the allocation made to
Each such branch may look after upto 200 units,		SSI sector.
out of which a minimun of 150 should be from
the tiny sector with loans less than Rs.10.00 lakh.
This ratio should preferably be maintained is case
the number of such units at a branch is less than
200 (Para 3.17.02)
6.51
i) Only banks should entertain projects both for		i) We commend the recommendation.
term loans and working capital of borrowers with
loan requirement upto and inclusive of Rs. 5.00
lakh.
ii) Only one organisation, either bank may		ii) We commend the recommendation for
sanction both the term loan and working capital		adoption to the extent feasible.
for projects requiring institutional credit for more
than Rs. 5.00 lakh and upto and inclusive of Rs.
25.00 lakh for projects having loan requirement
in excess of Rs. 25 lakh, arrangements should
be made by SIDBI with the Public Sector Banks
to have an MOU signed between the SFCs and
selected public Sector Banks active in different
regions of the country for joint finacing, whereby
both the term loan as well as working capital
should be shared alongwith sharing of securities
on pari-passu basis. However, the borrowers in
this category who want to avail such facilities
from a single agency i.e. bank or SFC, should be
allowed to exercise their option. (Para 3.18.02)
6.62
The definition of sick SSI unit may be changed		It is not considerd necessary to modify the existing
to read as under :		definition of sick SSI unit. However, as advised
		earlier, with a view to arresting tendency of
a)	If any one of the borrowal accounts of the
		sickness, banks may pick up the early warning
	unit remains sub-standard for six months i.e.
		signals and detect sickness at the incipient stage
	principal or interest in respect of any of its
		itself and initiate corrective steps promptly even
	borrowal accounts has remained overdue
		before the unit is classified as `sick .
	for a period exceeding one year.
b)	There is erosion in the net worth due to
	accumulated losses to the extent of
	minimum 50% of peak net worth during the
	previous accounting year, and
c)	The unit has been in commercial production
	for at least three years. (Para 3.27.02)
6.100
RBI should update its instructions relating to the		The Instructions in this regard have since been
software industry which were issued during 1988		modified vide circular IECD. No. 6/08.12.01/98-
(Para 5.04)		99 dated 8.8.98. Banks may follow these
		instructions.

RPCD.PLNFS.No.BC.87/06.04.01/98-99

April 5,1999

All Scheduled Commercial Banks

Dear Sir

Rehabilitation of Sick Small Scale Industrial Units-Gujarat
Board for Industrial & Financial Recostruction (GBIFR)

Please refer to our Circular RPCD.No.PLNFS.BC.64/06.04.01/97-98 dated 30 December 1997 regarding rehabilitation of potentially viable sick small scale industrial units in the country.

2. We forward herewith a copy of the Government of Gujarat s Resolution No. SIU 1098-668 CH. dated 13 August 1998, constituting Gujarat Board for Industrial & Financial Reconstruction (GBIFR) for the purpose of speedy rehabilitation of sick SSI units in Gujarat. As may be seen from the said Resolution, the scheme will be applicable to SSI units/ancillary units in the manufacturing sector whose total investment in plant and machinery exceeds Rs. 5.00 lakh. The scheme envisage substantial concession/relief from the State Government in the form of electricity rates, sales tax, water charges, etc. The GBIFR is adequately represented by banks as well. The banks have the option to refuse to participate on the proposed rehabilitation package of any unit by giving cogent reasons. It is felt that GBIFR will help the banks to rehabilitate sick SSI units in Gujarat to a substantial extent.

3. You may, therefore, please issue suitable instructions to the concerned officials of Controlling Offices and branches in the State of Gujarat so as to ensure that your bank takes prompt and adequate measures in rehabilitating all viable sick SSI units (which are eligible under the Scheme) through GBIFR.

4. Please acknowledge receipt and advise us the action taken by you in this regard.

Yours faithfully

Sd/-

(R. M. JOSHI)

General Manager

Encl.: A copy of the Scheme

Government of Gujarat
Industries and Mines Department
Government Resolution No.SIU-1098-668-CH

Sachivalaya, Gandhinagar
Dated the 13th August, 1998

Read : IM&ED Resolution No. SIU-1091/3224-CH dated 20th June 1991

RESOLUTION

PREAMBLE

Industrial sickness causes unemployment, non-payment of State and Central Government dues, blocking of institutional finance and non-utilization of productive assets. There are various factors that can be identified as being responsible for causing sickness. These can be broadly categorized into internal and external factors. The internal factors include a) technical causes such as obsolete technology and non-availability of skilled labour, b)financial causes such as poor resource management, diversion of funds and deficiency of working capital and other funds, and c) managerial causes such as lack of entrepreneurship lack of professionalism and marketing problems. The external factors include a)economic causes such as high cost of inputs, uneconomic size of the project, over estimation of demand and high break even point, and, b) socio-political causes such as government controls and its fiscal policies such as taxation and non-payment of subsidies and incentives in time, and, lack of physical and social infrastructure.

2.0.Industrial sickness is an inherent part of the process of development. However, concerted efforts are to be initiated by the Govt and other concerned agencies for timely detection of sickness at its incipient stage. There is need for a body of experts to expeditiously determine the preventive, ameliorative and remedial measures that need to be put into force for the rehabilitation of viable sick industrial units, and, enforce the measures considered appropriate for the rehabilitation. At the same time, it needs to take active measures for expeditious winding up of non-viable sick industrial units.

3.0.To facilitate the revival of viable sick industrial units as also the winding-up of non-viable sick units, Government of India have set up a statutory board viz. Board for Industrial and Financial Reconstrution (BIFR) under the Sick Industrial Companies (Special Provisions) Act, 1985. Small Scale Industries do not, however, come under the purview of BIFR. Government of Gujarat had, therefore, introduced a Scheme for rehabilitation of SSI and non-BIFR sick industries vide Government of Gujarat IM&ED Resolution No. SIU-1091/3224-CH dated 20th June 1991. The Scheme has been in operation for nearly seven years. As the impact of the Scheme in tackling the problem of sickness in the SSI sector was not found satisfactory, the State Government have reviewed the Scheme and decided to modify it suitably for effective rehabilitaion of Small Scale and non-BIFR Sick Industries.

4.0.In a meeting with the bankers held on 22nd May 98 by Hon. Chief Minister, the issue of revival and rehabilitation of the SSI units was discussed in detail. The bankers unanimously agreed about the imperative need to initiate proactive measures in this direction and assured the State of their total commitment in view the RBI guidelines. Two important decisions that were arrived at in this meeting were :

a) A State level body would be set up on the lines of BIFR and the bankers agreed to comply with its recommendations regarding financial sacrifices for the rehabilitation of the sick unit.

b) RBI also expressed its commitment to comply with the recommendations of this state level body for effective revival of non -BIFR viable sick industrial units.

Further, the Hon. Minister, Industries held a series of consultative meetings with the members of trade and industry and experts in the field to understand the reasons for sickness and policy that needs to be adopted for addressing these concerns. Accordingly, the State Government has decided to approve the following Scheme in supercession of IM&ED Resolution No.SIU-1091/ 3224-CH dated 20th June 1991.

5.0 Title : This Scheme shall be known as "Scheme for Rehabilitation of Small Scale and non-BIFR Sick Viable Industries".

i) Operative Period : This Scheme shall come into operation with effect from the date of issuse of this order.

ii) Applicability of the Scheme : The Scheme shall be applicable only to Small Scale industrial units/ancillary units in the manufacturing sector whose total investment in plant and machinery exceeds Rs. 5 lacs. The Scheme would not be applicable to Small Scale Service/Business Enterprises with investment upto Rs. 5 lacs in fixed assest excluding land and building as defined by the Ministry of Industry, Government of India.

6.0 Definitions

i) Sick Unit : A unit is considered sick when any of its borrowal accounts has become a doubtful advance as defined by Reserve Bank of India i.e. principal or interest in respect of any of its borrowal accounts has remained overdue for a period exceeding two and a half years and there is an erosion in the net worth due to accumulated cash losses to the extent of 50% or more of its peak net worth in the preceding two accounting years.

ii) Net Worth : In case of a limited company net worth means the sum total of paid up capital and free reserves. In case of a partnership/proprietary concern net worth means the sum total of partners /proprietor s capital and free reserves.

iii) Free Reserves : Means all reserves created out of profit and share premium account but dose not include reserves created out of revaluation of assets, written back depreciation under amalgamation provisions.

iv) Bank : Means any public sector bank, District Co-operative Bank, Urban Co-operative Bank and any other bank which is a scheduled bank in terms of the second Schedule to the Reserve Bank of India Act.

v) Financial Institution : Means Industrial Developmet Bank of India, Industrial Finance Corporation of India, Industrial Credit and Investment Corporation of India, Industrial Investment Bank of India, Small Industries Development Banks of India, Gujarat Industrial Development Corporation, Gujarat Industrial Investment Corporation Ltd., Gujarat State Financial Corporation or any other institution which is authorized under any law to advance term loans to industrial units.

vi) Viable Sick Unit : Means a small scale or ancillary unit in the manufacturing sector with investment in plant and machinery over Rs. 5 lacs that would be in a position, after the implementation of rehabilitation package spread over a period not exceeding five years, to repay the restructured loans and interest fully to the banks/finanical institutions as well as the dues of the State Govt./ Central Govt. and Gujarat Electricity Board/Electricity Company etc. within a period of ten years from the date of implementation of the package.

vii) Dues Payable : Means amounts outstanding as dues to all statutory authorities like Commissioner of Sales Tax, Collector of Customs and Central Excise, Commissioner of Electricity Duty, Commissioner of Income Tax, Regional Provident Fund Commissioner, Gujarat Electricity Board or such other authorities which have legal claims to receive payment from the unit.

viii) GITCO : Means Gujarat Industrial and Technical Consultancy Organization Ltd.

ix) State Government : Means Government of Gujarat.

x) Special Call : Means a cell specially created by the Industries Commissioner for purpose of operation of Scheme.

xi) Urban Land Ceiling Act : Means the Urban Land (Ceiling and Regulation) Act, 1976 (Act No. 33 of 1976) enacted by the Government of India as amended from time to time.

xii) Gujarat Board for Industrial and Finacial Reconstruction (GBIFR) : Means the board appointed by the State Government for the implementation of this scheme.

xiii) Eligible Assets : Means the assets created during the period of two years from the date of sanction of the rehabilitation package subject to limit of additional investment as approved by GBIFR for rehabilitation of the sick unit. No assets acquired, created and/or paid for after the period as mentioned above shall be considered eligible.

xiv) Eligible Fixed Capital Investment : Means investment in :

a) Land : The actual price paid for the land to the extent needed for the industrial unit excluding land development charges but including expansion and modernization within the period of and as part of the project for rehabilitation.

b) New Building : Means additional building constructed to accommodate additional machinery acquired for the purpose of balancing, expansion and modernization within the period of and as part of the project for rehabilitation.

c) Other Construction : Means other civil work required for installing plant and machinery or required for effluent treatment plant.

d) Plant and Machinery : Means new plant and machinery and imported second hand mechinery and installation expenditure capitalized for plant and machinery, capital interest during construction cost not exceeding 5% of the total fixed capital investment.

e) Technical Know-how Fee : Technical know-how fees or drawing fees paid in lump sum to foreign suppliers as approved by Govt. of India in accordance with the policy in force from time to time or paid to laboratories recognized by the State Govt. or Central Govt.

f) The amount spent on rationalization and other dues of workers.

g) Amount spent on plant for pollution control measures including facility for collection and treatment of effluents and hazardous wastes.

h) Amount spent on captive power generating sets for the connected load including the connected load for original plant.

i) Assets acquired under DPG scheme, Hire Purchase Scheme or Instalment System would be considered eligible excluding the cost of interest subject to condition that the industrial unit give a specific legal undertaking that within the eligibility period the unit shall not return the said assets to the organization from whom it was acquired, failing which the amount of subsidy and sales tax deferment amount becomes refundable and recoverable with penal interst at 24% p.a. within one month from the date of discontinuation of agreement under DPG, Hire Purchase Scheme or Instalment System.

j) Items specifically excluded : Working capital (whether raised through Bank or otherwise and including working capital margin), goodwill fees, engineering fees, commissioning fees, commissioning expenses, royalties (capitalized or otherwise), pre-operative expenses, expenditure on trucks, cars, vans, trailers, tractors and transport vehicles and catalysts will not be considered as eligible fixed investment for the purpose of this Scheme. Plant and machinery used or installed anywhere in India and shifted purchased, leased, hired, licensed or transferred in any manner will not be considered as fixed capital investment eligible for these incentives.

7.0 Reliefs and Concessions

The State Government has accepted in principle that the parameters applicable to medium and large-scale units for the purpose of BIFR would also apply to small-scale or ancillary sick industrial units while formulating rehabilitation package. Accordingly, the following reliefs and concessions are being made available.

7.1 Non - Fiscal

1) Relaxation from power cuts vide Govt. Notification : E&PD No. GHH/92/ELC/1492/494(1)/ K1 dated 16-10-1992.

2) Grant of permission to mortgage surplus land that has been exempted under Sec.20 of Urban Land Ceiling Act in favour of banks/financial institutions.

3) State Government shall not insist upon bank guarantees against arrears due to it.

4) Labour Department would take proactive action for amicable settlement of disputes between management and representatives of labour so as to ensure success of the rehabilitation package with the co-operation of the workers.

7.2.0 Fiscal Concessions

Eligible units under the Scheme will be entitled to the following reliefs and concessions from vairous Departments/agencies of the State Govt.

7.2.1 Reliefs in Payment of Sales Tax

a) Deferment of Arrears : Arrears of payment of purchase tax, sales tax and interest towards non-payment of sales tax, shall be deferred for two years from the date of grant of revival package. The amount so deferred will be recovered in four equal half-yearly instalments and will carry interest at 12% p.a. from the date of deferment till the date of final paymant of the deferred amount.

b) Sales Tax Deferment : Recovery of sales tax collected by the unit on sale of goods manufactured by it including intermediate products, by-products and scrap generated as incidental to manufacturing activities shall be deferred for a period of two years from the date of santion of the rehabilitation package. This relief/concession may be extended after a review for a further period of two years and for one more year after another review by the GBIFR.

The amount so deferred will be recovered in six to ten equal half-yearly instalments beginning from the financial year subsequent to the year in which the relevant period expires. This is in line with the guidelines of BIFR for rehabilitation of sick industrial companies under SICA. The deferred amount will attract interest at 12% if repaid as per the above schedule. However, in case of default, interest at 24% p.a. will be charged.

In order to obviate the adverse effects of Section 43-B of the Income Tax Act, (whereby the deferred amount of sales tax is included in the taxable income of the respective unit), the units which are granted deferment of Sales Tax dues shall be eligible for interest free deemed loan in lieu of sales tax deferment, through GIIC or GSFC on the same lines as indicated in Industries & Mines Department G.R.No.INC-1087-143-I dated the 21st March, 1988 as amended from time to time.

7.2.2Reliefs from the Energy Department

Electricity duty payable by the unit in respect of energy consumed will be deferred for a period of two years from the date of sanction of the rehabilitation package. This relief/concession may be extended after a review for a further period of two years and for one more year after another review by the GBIFR. The amount so deferred will be recovered in six to ten equal half-yearly instalments beginning from the financial year subsequent to the year in which the relevant period of two years expires. The deferred amount will not attract interest if repaid as per the above schedule. However in case of default, interest at 24% p.a. will be charged.

7.2.3Reliefs from G.E.B./ Electricity Company

1) An eligible unit under the scheme would be granted the following reliefs by GEB/Electricity Company.

2) Minimum charges would be exempted during the closure period. However, there shall not be any refund of minimum charge if the unit has already paid it.

3) In cases where power has been disconnected due to non-payment of bills or the agreement being terminated ex-parte, no fresh security deposit would be insisted upon.

7.2.4Continuation of Incentives sanctioned earlier

A unit which has been closed due to sickness during the pendency of the Incentive Scheme of the State Government normally faces recovery of the incentives enjoyed by it. However the GBIFR may waive the recovery and consider rehabilitation package under this Scheme provided the unit resume production for at least 5 years and the remaining period of incentives under the Incentive Scheme is built into the rehabilitation package with or without modification .

7.2.5Additional Concessions

In addition to the above fiscal concessions, the GBIFR may recommend to the concerned authorities for granting of following additional concessions.

i) Deferment of arrears of water charges either by Irrigation Department or Gujarat Water Supply and Sewerage Board. However, the current dues are required to be paid in time as a part of the rehabilitation package.

ii) Reduction of interest on delayed payment be Gujarat Electricity Board/Electricity Company to 12% and waiver of extra service charges for reconnection of power supply.

8.0 GUJARAT BOARD FOR INDUSTRIAL AND FINANCIL RECONSTRUCTION (GBIFR)

Government of Gujarat is pleased to constitute the Gujarat Board for Industrial and Financial Reconstruction for rehabilitation of SSI and non-BIFR viable sick units with the following membership :

1.	Industries Commissioner	Chairman
2.	Pr. Secretary, Energy & Petrochemicals Dept.	Member
3.	Addl.Chief Secretary, Revenue Dept.	Member
4.	Secretary, Finance Department	Member
5.	Managing Director, G.I.I.C. Limited,	Member
6.	Managing Director, G.I.D.C.	Member
7.	Managing Director, G.S.F.C.	Member
8.	Member (Finance) GEB/Electricity	Member
	Company
9.	Commissioner, Sales Tax	Member
10.	Commissioner, Electricity Duty	Member
11.	Commissioner, Labour	Member
12.	General Manager of concerned bank	Member
13.	General Manager, Gujarat Industrial	Member
	Co-operative Bank Limited
14.	General Manager, GITCO	Member
15.	Representative of GCCI/CII/FSIA	Member
16.	General Manager, State Bank of India	Member
17.	General Manager, State Bank of Saurashtra	Member
18.	General Manager, Dena Bank	Member
19.	General Manager, Bank of Baroda	Member
20.	General Manager, SIDBI	Member
21.	General Manager, Reserve Bank of India	Member
22.	Addl/Jt. Commissioner of Industries	Member Secretary

 

8.1 The Chairman, GBIFR, may co-opt. additional members as deemed necessary. The GBIFR shall have a minimum quorum of seven members, which shall include the following :

1. Industries Commissioner

2. Secretary, Finance Department

3. General Manager, Reserve Bank of India

4. General Manager, GITCO

5.General Manager(s) of the concerned Bank(s) and/or Managing Director(s) of State Level Financial Institution(s) and /or General Manager, SIDBI.

9.0 PROCEDURE

i) Application for Registration

a) Financial institutions or banks desirous of rehabilitating a sick unit financed by them may apply to the Special Cell in the Industries Commissionerate in the prescribed format for availing of reliefs and concessions.

b) Any sick non-BIFR/SSI unit can also approach the Special Cell directly by applying in the prescribed format.

Such applications should be accompanied by a proposed rehabilitation scheme that envisages full repayment of loans and interest to the banks/financial institutions as well as dues of the State Govt./GEB/Electricity Company. Further the application should also be accompanied by the audited accounts of the unit for the preceding two years. The auditors remarks accompanying the accounts have to be fully dealt and complied with.

ii)Preliminary Scrutiny

The Special Cell at the Industries Commissionerate will carry out a preliminary scrutiny mainly on the following aspects :

a) Is the applicant unit eligible for grant of reliefs under this Scheme in terms of para 5 (ii)?

b) Is the application unit actually sick as defined in Para 6(i)herein?

c) Is the application accompanied by a proposed rehabilitation scheme?

d) Is the application accompanied by the unit s audited accounts for preceding two years?

e) Are the auditor s remarks dealt and complied with fully and satisfactorily?

The answers to the above questions are in the affirmative, the Special Cell shall register the application and give a registration number. Such a scrutiny will have to be completed within a period of three working days.

iii) Whether a deserving case

After registering the unit s application, details thereof shall be circulated amongst the concerned members of the GBIFR who will be requested to give their views, within a period of fifteen days, mainly on the following aspects.

a) whether in their opinion, the unit deserves nursing assistance?

b) If not, what are the concrete reasons for having such a view, say siphoning off of funds by the promoter, mismanagement and so on.

c) In case of sickness due to mismanagement, does the concerned member have any alternative management in mind?

The views of the concerned members as well as other relevant issues should be discussed in the subsequent meeting of GBIFR following the date of registration.

iv) Reference to GITCO/Other Consultants

If the financing bank and/or financial institution and the various State Government agencies agree that the unit deserves to be given reliefs and concessions with or without any change in management, the case would be referred to GITCO or to other consultants in the Directory of Industrial Consultants published by I.D.B.I.to:

a) study if the unit in question is a viable sick unit as defined in para 6(v), and

b) If yes, prepare a rehabilitation package for the unit under broad parameters,which should be decided upon by GBIFR. The package should also incorporate the reliefs and concessions to be granted by the various agencies and sacrifices to be borne by each of them, which should also be quantified.

GITCO/consultant should complete its study within sixty days and submit its report to the Special Cell. While half of the cost of the study shall be paid in advance by the unit, the rest will be borne by the State Govt. through special budgetary provisions.

v) Circulation amongst the members of GBIFR

The Special Cell would examine the report of GITCO to ensure that it conforms to the guidelines laid down by the GBIFR. Thereafter the report would be circulated amongst its members.

vi) Sanctions by the concerned agencies

After receipt of the report from the Special Cell, the concerned agencies (other than the Departments of the State Govt. and its agencies) shall grant their consent for the reliefs and concessions/sacrifices as envisaged, within a period of thirty days.In case they are not in a position to grant their consent within this time period, they should advise GBIFR accordingly, giving cogent reasons for non-grant of the reliefs and concessions as envisaged.

Decisions of GBIFR would be binding on all the Departments of the State Government. If however any Department wishes to get any decision reconsidered, a proposal to that effect must be moved for the consideration of the State Government through the Industries & Mines Department. In case the financing bank and/or financial institution are not agreeable to sanction rehabilitation assistance to the unit, they shall have to state cogent reasons for the consideration of GBIFR.

vii) Sanction by GBIFR.

At the end of the aforesaid period of thirty days, GBIFR shall discuss the unit s case in a meeting where a final decision on the GBIFR package would be taken.

viii) Time frame for issuance of orders

The respective Departments of the State Government or its agencies participating in the rehabilitation programme of sick unit shall sanction the reliefs as decided by the GBIFR under the provisions of the respective Act/Rules, policy or provisions. They shall issue final orders sanctioning reliefs/concessions to the unit within one week of the receipt of the minutes of the meeting of the GBIFR wherein the decision to grant relief to the concerned sick unit has been taken, failing which these shall be deemed to have been given.

10.0. QUANTUM OF FINANCIAL SACRIFICE

While working out the rehabilitation package, it should be ensured that the amount of financial sacrifice to be borne by the State Govt./GEB/Electricity Company DOES NOT exceed the sacrifices envisaged from the banks/financial institutions. This condition shall not apply in case of a unit that has not availed of any finance from any bank/financial institution on the date it approaches the State Government for assistance under the present package. The amount of financial sacrifice shall be computed as follows.

i) A unit that has been granted reliefs/instalments in the payments of arrears of State Government dues with 12% rate of interest. The State Government normally recovers arrears with a penal rate of interest at 24% p.a. The difference in the rates of interest between the two i.e. interest at 12% p.a. will therefore be considered as the financial sacrifice from the State Government.

ii) A unit that has been granted deferment of current dues of State Government, if paid during the stipulated period of the rehabilitation package. In such cases, the amount of concession in the interest recovered on the deferred amount 15% p.a. less 12% p.a. on the deferred dues from the date of deferment till the stipulated date of final payment may be considered as the amount of financial sacrifice from the State Government.

iii) Reliefs and concessions from GEB/Electricity Company may be in the form of exemption from payment of

a) fresh security deposit in case power has been disconnected due to non-payment of bills or due to ex-parte termination of agreement by the energy supplier and

b) minimum charges during closure period

In such cases the amount of security deposit/minimum charges so exempted together with interest at 15% p.a. from the stipulated date of payment of the deposit till the date of termination of the rehabilitation package may be considered as the amount of sacrifice.

11.0 TERMS AND CONDITIONS FOR GRANT OF RELIEFS

1) GBIFR should carry out periodical reviews, apart from annual review of the performance of the unit under rehabilitation. During the period of rehabilitation the unit shall arrange for auditing of its accounts by a firm of chartered accountants as approved by GBIFR.

2) The unit which avails of reliefs under this Scheme shall neither declare dividend or nor pay interest on the deposits put up by the promoters during the currency of the rehabilitation package.

3. The industrial unit availing of the incentives under this Scheme shall instal and effectively operate and maintain pollution control measures as per standards prescribed and approved by competent authority is this regard.

4. The industrial unit shall have to remain in production continuously, at least, till the expiry of the rehabilitation period granted by GBIFR.

5. The industrial unit shall furnish details regarding production, employment or any other information which the State Government and GBIFR may require from time to time.

6. The unit that avails of incentives under the Scheme shall have to employ local persons to the extent of 85% of all employees. The unit will be required to produce to the competent authorities a list of persons recruited for satisfying the condition of employment of local persons. The above mentioned employment percentages shall have to be maintained by the industrial unit during the period of availment of such incentives. In case the unit fails to fulfill this condition, the amount of incentives will be liable to be recovered as arrears of land revenue.

7. Units opting for sales tax deferment shall be required to furnish secruity to sales tax authorities against the deferred amount of sales tax by way of pari passu charge, second charge or personal guarantee in the form of security bond as perscribed under this Department s GR No. INC/1087/2138/I dated 1st August 1990.

This issues with the concurrence of

i) Finance Department dated 19.7.98

ii) Revenue Department dated 22.6.98

iii) Energy & Petrochemicals Department dated 14.8.98

iv) Labouar & Employment Department dated 6.6.98

By order and in the name of the Governor of Gujarat

P. H. Vasava

Deputy Secretary to Government,
Industries and Mines Department

To

The Principal Secretary to Governor of Gujarat

The Principal Secretary to Chief Minister

The Registrar, Gujarat High Court, Ahmedabad

The Secretary, Gujarat Vigilance Commission, Gandhinagar

The Secretary, Gujarat Public Service Commission, Ahmedabad

All Personal Secretaries to Ministers/State level Ministers/Deputy Ministers

All Members of GBIFR

Finance Department, Sachivalaya, Gandhinagar

Energy & Petrochemicals Deptt. Sechivalaya, Gandhinagar

Revenue Department, Sachivalaya, Gandhinagar

Labour and Employment Department, Sachivalaya, Gandhinagar

All Department of Secretariat

The Industries Commissioner, Udyog Bhavan, Gandhinagar

The Commissioner of Sales Tax, Gujarat State, Ahmedabad

The Commissioner of Electricity Duty, Gujarat State, Udyog Bhavan, Gandhinagar

The Labour Commissioner, Gujarat State, Ahmedabad

General Manager, Gujarat Electricity Board, Vadodara

Accountant General, Gujarat, Ahmedabad/Rajkot

The Registrar, Board for Industrial and Financial Reconstruction, Ansal Chamber, Bhikaji Cama Palace, New Delhi

All leading Financial Institutions/Banks

Managing Director, Gujarat Industrial Investment Corporation, Ahmedabad

The Managing Director, Gujarat State Financial Corporation, Ahmedabad

All Heads of Departments under IMD

All Boards/Corporations under IMD

All District Industries Centres

All Officers of IMD/All Branches of IMD

Select file.

RPCD.PLNFS.No.BC.104/06.02.31(ii)/98-99

June 8, 1999

Chairmen/Managing Directors All commercial banks (including RRBs)

Dear Sir

High Level Committee on Credit to SSI - Recommendation of

Please refer to our circulars RPCD.PLNFS.No.BC.22 and 75/06.02.31(ii) 98-99 dated 28 August 1998 and 4 March 1999 respectively on the captioned subject advising the banks to implement the recommendation of the committee . In this connection, we clarify as under:

1) Recommendation No. 6.41

The stipulated level of percentage of credit to tiny sector recommended may be read as 60 per cent as against 40 per cent indicated therein.

2) Recommendation No. 6.68

It has been decided that the overall interest rate payable by SSI should remain within the parameters fixed by RBI i.e. maximum of PLR plus the maximum spread over PLR announced by the banks with the approval of their respective Boards. In other words, it has been left to the banks to decide the spread-over PLR and the band of 4 percentage points above PLR as indicated in the circular stands modified to that extent.

2. Please acknowledge receipt.

Yours faithfully

Sd/-

(R. M. JOSHI)

General Manager

RPCD.No.PLNFS.BC.108/06.02.31/98-99

June 14, 1999

Chairmen/Managing Directors All Commercial Banks (including RRBs)

Dear Sir

Interest on Delayed Payment to Small Scale and Ancillary
Industrial Undertakings Amendment Act, 1998

Please refer to our Circular RPCD.No.PLNFS.BC.44/06.03.01/92-93 dated December 3,1992 forwarding a copy of the Interest on delayed payment to Small Scale and Ancillary undertaking Ordinance, 1992 . The Govt. of India has amended the above Act which came into effect from 11th August, 1998. In the present amendment the important changes introduced include :

1. Agreement between seller and buyer shall not exceed more than 120 days.

2. State Govts. have been empowered to establish Industry Facilitation Councils (IFCs) for the settement of disputes.

3. Payment of interest by the buyers at the rate of one and a half times the Prime Lending Rate (PLR) of SBI for any delay beyond the agreed period not exceeding 120 days.

We are enclosing a copy of the amendment which has been published in the Gazette of India, Extraordinary, part II, Section 1 on 11th August 1998 and shall be glad if your branches/controlling offices are advised to bring the contents thereof to the notice of the SSI units financed by your bank.

Yours faithfully

Sd/-

(R. M. JOSHI)

General Manager

Encl : sheets 2

2 THE GAZETTE OF INDIA EXTRAORDINARY

Part II-Section I

MINISTRY OF LAW, JUSTICE AND COMPANY AFFAIRS
(Legislative Department)

New Delhi, the 11th August,1998/Shravana 20,1820(Saka)
The following Act of Parliament received the assent of the President on the
10th August, 1998, and is hereby published for general information :-

THE INTEREST ON DELAYED PAYMENTS TO SMALL SCALE AND ANCILLARY

INDUSTRIAL UNDERTAKINGS

(AMENDMENT) ACT,1998
No.23 OF 1998

(10th August, 1998.) An Act to amend the Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993.

Be it enacted by parliament in the Forty-ninth Year of the Republic of India as follows:-

	1.This Act may be called the Interest on Delayed Payments to Small Scale	Shortnote
	and Ancillary Industrial Undertakings (Amendment) Act, 1998.
02 of 1993	2.In the Interest on Delayed Payments to Small Scale and Ancillary	Amendment
	Industrial Undertakings Act, 1993(hereinafter referred to as the principal	of section 2
	Act), in section 2, in clause (f), for the words or Union territory . the
	following shall be substituted, namely :-
	Or Union territory and includes, -
1 of 1956	i) the National Small Industries Corporation, being a company, registered
	under the Companies Act,1956 ;
	ii) the Small Industries Development Corporation of a State or a Union	1 of 1956
	territory, by whatever name called, being a company registered under the
	Companies Act, 1956.
Amendment	3 In section 3 of the principal Act,the following proviso shall be inserted,
of section 3.	namely :-
	Provided that in no case the period agreed upon between the supplier
	and the buyer in writing shall exceed one hundred and twenty days from
	the day of acceptance or the day of deemed acceptance.
Substitution	4.For section 4 of the principal Act, the following section shall be
of new	substituted, namely :-
section for
section 4.	Where any buyer fails to make payment of the amount to the supplier,
Date from	as required under section 3, the buyer shall, notwithstanding anything
which and	contained in any agreement between the buyer and the supplier or in any
rate at	law for the time being in force, be liable to pay interest to the supplier on
which	that amount from the appointed day or, as the case may be, from the date
interest is	immediately following the date agreed upon, at one and half time of Prime
payable	Lending Rate charged by the State Bank of India.
	Explanation - For the purposes of this section, Prime Lending Rate . means
	the Prime Lending Rate of the State Bank of India which is available to the
	best borrowers of the bank.
Amendment	5.Section 6 of the principal Act shall be renumbered as sub-section (1)
of section 6.	thereof and after sub-section (1) as so renumbered, the following sub-section
	shall be inserted, namely :-
	2. Notwithstanding anything contained in sub-section (1), any party
	to a dispute may make a reference to the Industry Facilitation Council for
	acting as an arbitrator or conciliator in respect of the matters referred to in	26 of 1996
	that sub-section and the provision of the Arbitration and Conciliation Act,
	1996 shall apply to such dispute as if the arbitration or concillation were
	pursuant to an arbitration agreement referred to in sub-section(1) of section
	7 of that Act.
Insertion of	6.After section 7 of the principal Act, the following sections shall be
new	inserted, namely :-
sections 7A,
7B and 7C	7A. The State Government may, by nolification in the Official Gazatte,
Establishment	establish one or more Industry Facilitation Councils at such places
of Industry	exercising such jurisdiction and for such areas, as may by specified in the
Faciliatation	notification.
Council
	7B. 1) The Industry Facilitation Councils shall consist of one or more
Composition	members to be appointed from amongst the following categories:-
of Industry	i) Director of Industries by whatever name called or any other officer
Facilitation	not below the rank of such Director, of the State Government:
Council
	ii) representatives of banks and financial institutions :
	iii) Office-bearers of representatives of State Industry Associations and
	iv) persons having special knowledge in the field of Industry, Finance,
	Law, Trade and Commerce.
	2) The person appointed under clause (1) of sub-section (i) shall be the
	Chair person of the Industry Facilitation Council.
	3) The composition of the Industry Facilitation Council, the manner of
	filling vacancies among, and the procedure to be followed in the discharge
	of their functions by the members shall be such as may be presecibed by
	rules by the State Government
	7C. Every notification issued and every rule made by the State Government	Laying of
	under this Act shall be laid, as soon as may be after it is issued or made,	rules before
	before the State Legislature.	State legislature

RAGHBIR SINGH,

Secy. to the Govt. of India.

RPCD.PLNFS.No.BC.109/06.02.31/98-99

June 14,1999

All Scheduled commercial banks

Dear Sir

Flow of Credit to SSI

As you are aware, instructions have been issued to banks from time to time for providing timely and need-based finance and other assistance to SSI units. These guidelines, interalia, cover aspects relating to timely and adequate sanction of working capital limits, rehabilitation of sick small scale units, coordination between commercial banks and State Financial Corporations in meeting the credit requirements of these units, implementation of the various recommendations of the High Level committee on credit to SSI (Kapur Committee) and other related aspects. We, are, however, receiving several representations from the industry that banks are not following the guidelines issued by RBI in this regard besides complaining about non-availability of adequate credit in various fora. We shall, therefore, be glad if you please issue necessary instructions to your controlling offices and branches for meeting the genuine credit needs of the SSI sector keeping in view the guidelines issued by RBI from time to time.

2. Please acknowledge receipt and advise us of the action taken by you in this regard.

Yours faithfully

Sd/-

(R. M. JOSHI)

General Manager

RPCD.PLNFS.No.BC.110/06.02.31/98-99

June 28,1999

The Chairman/Managing Director All Scheduled Commercial Banks (Including RRBs)

Dear sir

Flow of Credit to SSI Sector-Recommendations of the SSI Board

The Following recommendations regarding sickness, credit/finance for SSI sector have been made in the 44th SSI Board meeting held on 30 August 1997.

i) The manufacturing and non-manufacturing enterprises amongst the sick units should be differentiated. The share of non-manufacturing sick units is substantial and affects the flow of credit to the manufacturing units.

ii) The under utilisation of installed capacity in small-scale sector for various items is a grey area. Institutional initiative involving State Directorate of Industries and Financial Institutions will facilitate in improving capacity untilisation leading to better returns and productive use of investment. The banks will particularly be required to support small industries on their increased working capital requirements with the improvement in the capacity utilisation.

2. You are requested to advise the above recommendations for implementation to your branches/ controlling offices under advice to us.

3. In the meanwhile, please acknowledge receipt.

Yours faithfully

Sd/-

(R. M. JOSHI)

General Manager

RPCD.PLNFS.BC.No.29/06.02.31(ii)/99-2000

October 5, 1999

Chairman & Managing Director All Scheduled commercial Banks (including RRBs)

Dear sir

High Level Committee on Credit to SSI - (Shri S. L. Kapur Committee)

Please refer to our circular RPCD.PLNFS.BC.No.22 and 75/06.02.31(ii)/98-99 dated 28 August 1998 and 4 March 1999 advising you to implement 35 and 5 recommendations respectively of the captioned Committee which have been accepted by the Reserve Bank. We have further accepted eight more recommendations as listed in the Annexure. You are requested to take appropriate action for immediate implementation of these recommendations and advise us of the action taken by you at an early date.

2. In the meanwhile, please acknwoledge receipt.

Yours faithfully

Sd/-

(A.V. Sardesai)

Chief General Manager

Encls : Annexure

ANNEXURE

High Level Committee on Credit to SSI

(Kapur Committee)

Recommendations commended to banks for implementation

	Recommendation	Comments
	(1)	(2)
1.	6.39 Where the banks have a first charge	6.39 Banks may take appropriate decisions based
	over fixed assets, they should not ask for cash	on the merits of the case where adequate surplus
	margins from SSI borrowers on non-fund	of security is available after following the usual
	based facilities, provided there is adequate	norms in this regard.
	surplus of security to cover their exposure.
	(Para 3.16)
2.	6.46 Banks should undertake research	6.46 There is no machinery or organisation which
	activities on credit related policies in relation	undertakes research on credit related policies in
	to specific sectors of SSI for a consistent	relation to specific sectors of SSI. The opening of
	medium term policy formulation purposes	specialised branches has offered a forum to the
	(Para 3.17.07)	banks to take up such activities on their own and
		use such information to devise new products and
		norms for different sub-sectors of the SSI. The
		banks may use this opportunity to start some
		research projects and studies on the subject.
3.	6.54 Special term loans for meeting per-	6.54 Bank may take appropriate decisions based
	operative expenses, technical fee,	on the merits of the case.
	collaboration costs, marketing expenses and
	investment in research and development
	facilities, where no tangible primary security
	is being created, may be permitted to be
	extended by banks/SFCs on liberal terms of
	margin and repayment period provided
	existing securities are adequate to cover such
	term loans also. (Para 3.21)
4.	6.75(i) A revised floor level of Rs. 2.00 lakh	6.75 (i) The exemption limit of borrowal accounts
	for exemption of borrowal accounts for	for obtention of collateral security/third party
	obtention of collateral securities is	guarantee is raised to Rs.1 lakh from the present
	recommended as against the existing level	level of Rs. 25,000/-. Other policy guidelines on
	of Rs. 25000/-. In respect of other accounts,	the subject i.e. wherever feasible, equitable
	the the collateral security including third	mortgage instead of registered mortgage should
	party guarantee should be in relation to the	be taken, all viable proposals should be
	risk undertaken.	considered on merits even though no collateral
		secuity by way of immovable properties or third
		party guarantee is offered in cases where primary
		security is inadequate or for other valid reasons
		and proposals otherwise viable should not be
		turned down merely for want of such collaterals,
		may continue to be observed.
	ii) The Committee also suggests that for	(ii) & (iii) It has been left to the commercial
	loans upto Rs. 10.00 lakh, the value of	judgement of banks.
	collateral security or the net means of third
	party guarantee should not be more than
	50% of the fund and non-fund based
	exposure of the bank/financing institution.
	iii) Beyond loans of Rs. 10.00 lakh, the
	banks may exercise their commercial
	judgement in determining the level of
	collateral or third party guarantee. However,
	in no case a bank should obtain a collateral
	security or third party guarantee which is in
	excess of the loan amout.
	iv) Reserve Bank of India may also	(iv) It is not considered necessary to prescribe
	prescribe that at least 10% of the SSI loans	any limit in this regard.
	sanctioned by a bank branch should be
	without collateral guarantees. (Para 4.05.03)
5.	6.96 Banks should develop a set of written	6.96 The recommendation may be implemented.
	loan policies. Such policies should, inter
	alia, specify explicitly customer and group
	exposure limits, standards for
	documentation, sectoral exposure limits
	and delegation of powers. The smallest
	customer should expect and receive the
	courtesy and sevice reserved today for the
	biggest company. The prescribed
	comprehensive code of Banking Practices
	should be drawn up expeditiously outlining
	standards for disclosure of information about
	the bank s services and available products
	and the rights and obligations of its
	customers. (Para 5.01.02)
6.	6.114 While fixing accountability a line	6.114 The recommendation may be implemented.
	should be drawn to separate malafide
	decisions from normal bonafide credit
	decisions in order to keep the morale of the
	staff high. (Para 5.11.08)
7.	6.115 To instill confidence in the staff and	6.115 The recommendation may be implemented.
	encourage them to make decision including
	some bonafide mistakes, there is a need to
	evolve in Public Sector Banks a sysem of
	maintaining a Balanced Score Card for
	assessing of performance of each officer in
	taking credit decisions. (Para 5.11.09)
8.	6.117 Computerised information and	6.117 Banks may take necessary action in regard
	monitoring system should be developed by	to development of computerised information
	banks for SSI units. There should also be a	and monitoring system for SSI units.
	provision for inputs from the individual
	industrial units themselves either directly or
	through the SSI association. SIDBI should be
	the nodal institution for this task of furnishing
	client input for inclusion in the information
	system. (Para 5.12)

 

PLNFS.BC.38/06.02.31/99-2000

29th Nov. 1999

The Chairman and Managing Director All Public Sector Banks

Dear Sir

Flow of Credit to SSI Sector-Opening of Specialised SSI Branches

Please refer to our Circular RPCD.PLNFS.No.792/06.02.31/97-98 dated 2nd March1998 advising you to consider opening of specialised SSI branches at the centres indicated in the Annexure attached thereto. It is observed from the data obtained by us in this regard that the banks have not made much progress in operationalisation of specialised SSI branches in the identified centres. In this connection, your attention is also invited to recommendation 6.40 of the Kapur Committee on SSI commended to banks for implementation vide our circular RPCD.PLNFS.No.BC.22/06.02.31(ii)/98-99 dated 28 August 1998 for opening of more specialised branches or conversion of the existing branches at the centres having cluster of SSI units (say more than 500) subject to viability. You are therfore requested to make concerted efforts to conduct necessary survey and to operationalise specialised SSI branches at these identified centres.

2. In the meanwhile, please acknowledge receipt.

Yours faithfully

Sd/-

(R. M. JOSHI)

General Manager