The Reserve Bank of India (RBI), in its revised set of guidelines to the commercial banks for the rehabilitation of small-scale industrial (SSI) units, has said that an SSI should be considered as 'sick' if the borrowal account remains sub-standard for more than six months or there is a 50 per cent erosion in its net worth due to accumulated cash losses in the previous accounting year.
Additionally, for a unit to be considered as a 'sick' unit, it should have been in commercial production for at least two years, the RBI said.
The RBI has placed an increased onus on the promoters of identified sick units to bring in additional capital, half of which should be brought in within six months.
More From This Section
In addition to defining a sick company, the RBI said a units should be considered potentially viable if it can survive without crutches at the end of a 5-year rehabilitation period. The repayment period for restructured (past) debts should not exceed seven years from the date of implementation of the package.
The rate of interest on term loans may be reduced, where considered necessary, by not more than three percentage points in the case of tiny/decentralised sector units and by not more than two percentage points for other SSIs below the contracted rate.
Interest on working capital may be charged at 1.5 percentage points below the prevailing fixed/PLR while additional working capital limits may be extended at a rate not exceeding PLR.
The branch officials who are familiar with the day-to-day operations in the borrowal accounts should be under obligation to identify the early warning signals and initiate corrective steps promptly.