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PDF - Compendium of Circulars on Small Scale Industries <BR> (July 1978 - December 1999) (Part 6 of 6) ()
Compendium of Circulars on Small Scale Industries
(July 1978 - December 1999) (Part 6 of 6)
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 staff6.01(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 bankingii)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 alsoiii)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 delegated6.13(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 theii)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 examine6.29Banks 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, the6.30Banks 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 forms6.31Banks 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 should6.32Bank 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 be6.33Banks 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 for6.36Banks 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 bank6.37i) & 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 projectionsiii)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 approval6.38We 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 specialised6.40We 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 should6.42The 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 one6.45We 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 sanctioning6.47We 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 be6.48We 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 are6.49We 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 be6.50We 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)  
    
186.51 i) Only banks should entertain projects6.51We 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 SSI6.56We 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 providing6.58We 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 loan6.59Guidelines 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, the6.61Banks 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 SSI6.68We 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 the6.80We 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 is6.95We 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 have6.99We 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 their6.109We 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 Sector6.110Based 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 bankers6.111Based 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 Banks6.118We 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 customers6.120We 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 complaints6.121We 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 all6.123Banks 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 not6.125Banks 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 Scale6.126Under 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 theirBanks have been advised vide circular RPCD.
Boards, lay down some clear guidelines forNo.PLNFS.BC.73/06.02.31/98-99 dated 1.3.99
computing the working capital limits for variousto provide working capital finance to SSI units
sub-sectors granted to SSI borrowers, particularlyhaving aggregate fund-based working capital
those units where fund based working capitallimits 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 SSIBanks may take measures to increase the flow of
branches entertain loan proposals from the tinycredit 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 fori) 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 mayii) We commend the recommendation for
sanction both the term loan and working capitaladoption 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 changedIt 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 theThe Instructions in this regard have since been
software industry which were issued during 1988modified 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 CommissionerChairman
2.Pr. Secretary, Energy & Petrochemicals Dept.Member
3.Addl.Chief Secretary, Revenue Dept.Member
4.Secretary, Finance DepartmentMember
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/ElectricityMember
 Company 
9.Commissioner, Sales TaxMember
10.Commissioner, Electricity DutyMember
11.Commissioner, LabourMember
12.General Manager of concerned bankMember
13.General Manager, Gujarat IndustrialMember
 Co-operative Bank Limited 
14.General Manager, GITCOMember
15.Representative of GCCI/CII/FSIAMember
16.General Manager, State Bank of IndiaMember
17.General Manager, State Bank of SaurashtraMember
18.General Manager, Dena BankMember
19.General Manager, Bank of BarodaMember
20.General Manager, SIDBIMember
21.General Manager, Reserve Bank of IndiaMember
22.Addl/Jt. Commissioner of IndustriesMember 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 ScaleShortnote
 and Ancillary Industrial Undertakings (Amendment) Act, 1998. 
02 of 19932.In the Interest on Delayed Payments to Small Scale and AncillaryAmendment
 Industrial Undertakings Act, 1993(hereinafter referred to as the principalof 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 1956i) 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 Union1 of 1956
 territory, by whatever name called, being a company registered under the 
 Companies Act, 1956. 
Amendment3 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.  
Substitution4.For section 4 of the principal Act, the following section shall be 
of newsubstituted, namely :- 
section for  
section 4.Where any buyer fails to make payment of the amount to the supplier, 
Date fromas required under section 3, the buyer shall, notwithstanding anything 
which andcontained in any agreement between the buyer and the supplier or in any 
rate atlaw for the time being in force, be liable to pay interest to the supplier on 
whichthat amount from the appointed day or, as the case may be, from the date 
interest isimmediately following the date agreed upon, at one and half time of Prime 
payableLending 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.  
   
Amendment5.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 of6.After section 7 of the principal Act, the following sections shall be 
newinserted, namely :- 
sections 7A,  
7B and 7C 7A. The State Government may, by nolification in the Official Gazatte, 
Establishmentestablish one or more Industry Facilitation Councils at such places 
of Industryexercising such jurisdiction and for such areas, as may by specified in the 
Faciliatationnotification. 
Council  
 7B. 1) The Industry Facilitation Councils shall consist of one or more 
Compositionmembers to be appointed from amongst the following categories:- 
of Industryi) Director of Industries by whatever name called or any other officer 
Facilitationnot 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 GovernmentLaying 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 charge6.39 Banks may take appropriate decisions based
 over fixed assets, they should not ask for cashon the merits of the case where adequate surplus
 margins from SSI borrowers on non-fundof security is available after following the usual
 based facilities, provided there is adequatenorms in this regard.
 surplus of security to cover their exposure. 
 (Para 3.16) 
2.6.46 Banks should undertake research6.46 There is no machinery or organisation which
 activities on credit related policies in relationundertakes research on credit related policies in
 to specific sectors of SSI for a consistentrelation to specific sectors of SSI. The opening of
 medium term policy formulation purposesspecialised 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 lakh6.75 (i) The exemption limit of borrowal accounts
 for exemption of borrowal accounts forfor obtention of collateral security/third party
 obtention of collateral securities isguarantee is raised to Rs.1 lakh from the present
 recommended as against the existing levellevel 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 thirdmortgage instead of registered mortgage should
 party guarantee should be in relation to thebe 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 ofjudgement 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 loansany 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 written6.96 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 line6.114 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 and6.115 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 and6.117 Banks may take necessary action in regard
 monitoring system should be developed byto development of computerised information
 banks for SSI units. There should also be aand 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


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