Scheme to spur bank link-ups with Sidbi

ANNUAL POLICY 2005-06/ STRUCTURAL ISSUES & CREDIT DELIVERY

The Reserve Bank of India (RBI) today directed banks to increase their co-ordination with the Small Industries Development Bank of India (Sidbi) to enhance the flow of credit to small scale industries (SSIs).

It has formulated a scheme to encourage such co-ordination. Initially, this scheme will be extended to 50 clusters that have been identified by the Ministry of Small Scale Industries.

Under this "strategic alliance" scheme, the existing branches of Sidbi redesignated as Small Enterprises Financial Centres (SEFC) will take up co-financing of term loan requirements of SSI units along with the bank branches and the working capital requirements of these units will be met by the banks.

Bank branches could also avail of Sidbi expertise for credit appraisals of SSI units by payment of a nominal fee.

The RBI has proposed that the working of the scheme may be monitored and modified to suit the local conditions by the State Level Bankers' Committee (SLBC).

Credit Information Bureau of India Ltd. (CIBIL) is also working out a solution that would provide comprehensive credit reports on SSIs. This report will assist banks in credit appraisals.

In addition to this the central bank is also formulating a simplified debt restructuring and rehabilitation mechanism for the sector.

To further enhance the flow of credit to this sector the central bank is is reviewing all its existing guidelines on financing the small scale sector, debt restructuring and nursing of sick units with a view to rationalising, consolidating and liberalising them.

The regulator has also urged banks to take the revised guidelines as indicative minimum requirement and has asked bank boards to formulate more liberal schemes as appropriate.