SSI ministry officials said that access to finance remained a problem for SSI units and measures like these would help them compete better.
Small Scale Industries Minister CP Thakur hauled up eight banks recently that had not shown significant progress on disbursements under the credit guarantee trust scheme, and asked them to push disbursements.
Officials said banks had been advised to focus on funding units in industrial clusters and also work in close liaison with industry associations.
They added that most banks had agreed to increase funding under the scheme, which had seen advances to the tune of Rs 100 crore in the three years since it was established.
Officials said the government was perturbed over the declining trend in advances to the small scale sector with banks scaling down loans that accounted for 40 per cent of the industrial production for five consecutive years.
Credit to the sector was estimated at Rs 55,000 crore at the end of 2002-03, accounting for 11 per cent of the total bank credit.
The sources added the government, based on suggestions from banks, had also decided to modify some aspects of the schemes.
"The details are to be worked out but the cost of funds and management of the scheme need to be reworked," an official said.
Finance Minister Jaswant Singh had also announced measures to reduce the cost of funds recently and deferred payment of all interest by Small Industries Development Bank of India (Sidbi) on its bonds for 10 years.
The step is expected to help Sidbi implement a restructuring package for the small scale sector which would cost the institution about Rs 900 crore.
Interest payment on Sidbi bonds of Rs 174 crore a year, totalling to Rs 1,750 crore in 10 years, will be deferred.
