The Planning Commission has suggested enhancing the capital and equity base of the Small Industries Development Bank of India (Sidbi) and the National Bank for Agricultural and Rural Development (Nabard) through foreign equity or foreign direct investment.
This is among a list of measures aimed at helping small-scale industries. The plan body said such a move would improve the credit flow to the sector. A fixed quota for tiny units under Sidbi has also been recommended.
In a meeting with C P Thakur, minister for small scale industries, the commission has suggested that financial institutions such as Industrial Development Bank of India (IDBI) and IFCI, which are under consideration to be converted into commercial banks, should retain their character of developmental financial institutions with a prominent focus on lending to small scale industries.
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The plan body also said selected state financial corporations (SFCs), which are capable of revival, should be considered for immediate resuscitation. It has also recommended setting up of a committee on sickness in SSI units.
Pointing to the declining share of credit available to SSIs, Planning Commission member S P Gupta asked for the setting up of a high powered task force on measures required for making adequate credit available to the SSI sector.
Over the last three years, credit to SSI as a percentage of net bank credit has come down from 17 per cent to 7 per cent.
The panel also suggested enhancing the limit for providing loans at prime lending rates to tiny units to Rs 25 lakh, fixing a separate target for priority lending by banks and financial institutions to the SSI sector and better implementation of the Delayed Payment Act.
Pointing to the continued insistence of banks on collateral guarantee from tiny units for loans up to Rs 2 lakh, it has said that the Reserve Bank of India guidelines in this respect need to be followed strictly by financial institutions.
The body has also suggested transferring programmes and schemes relating to the leather industry from the department of industrial policy and promotion to the ministry of SSI as more than 80 per cent of the units in the leather sector are small scale units.