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RBI/2004-05/380 RPCD.PLNFS. BC. No.83/ 06.02.31/ 2004-05, DT. 01/03/2005

MASTER CIRCULAR - LENDING TO SMALL SCALE INDUSTRIES SECTOR

As you are aware, the Reserve Bank of India has, from time to time, issued a number of guidelines/instructions/directives to banks in regard to matters relating to lending to Small Scale Industries Sector. To enable the banks to have current instructions at one place, a Master Circular incorporating the existing guidelines/instructions/directives on the subject has been prepared and is appended. This Master Circular consolidates the instructions issued by the RBI up to February 28, 2005, which are listed in the Appendix, to the extent they deal with the SSI sector lending by commercial banks.

Please acknowledge receipt.

Yours faithfully,

(G.Srinivasan)
Chief General Manager

LENDING TO SSI SECTOR

SECTION-I

1 Small Scale Industries
1.1.Small Scale and Ancillary Industries Small scale industrial units are those engaged in the manufacture, processing or preservation of goods and whose investment in plant and machinery (original cost) does not exceed Rs. 1 crore. These would, inter alia, include units engaged in mining or quarrying, servicing and repairing of machinery. In the case of ancillary units, the investment in plant and machinery (original cost) should also not exceed Rs. 1 crore to be classified under small-scale industry.The investment limit of Rs.1 crore for classification as SSI has been enhanced to Rs.5 crore in respect of certain specified items under hosiery, hand tools, drugs pharmaceuticals and stationery items & sports goods by the Government of India.

1.2 Tiny Enterprises
The status of ‘Tiny Enterprises’ may be given to all small scale units whose investment in plant & machinery is up to Rs. 25 lakh, irrespective of the location of the unit.

1.3 Small Scale Service & Business Enterprises (SSSBEs)

1.4 Indirect finance in the small-scale industrial sector will include credit to:

1.4.1

1.4.2

1.4.3

1.4.4

1.4.5

1.4.6

1.4.7

1.4.8

1.4.9

1.4.10

1.4.11

1.5 Industrial Estates
Loans for setting up industrial estates.

1.6 KVI Sector
All advances to KVI sector, irrespective of their size of operations, location and investment in plant and machinery, will be covered under priority sector advances and will also be eligible for consideration under the sub-target (60 percent) of the SSI segment within the priority sector.

1.7 Manufacture of common salt through any process including manual operation (involving solar evaporation) may be considered as an industrial activity and credit provided by banks to units engaged in the manufacture of common salt which satisfy the norms of SSI unit may be classified under advances to SSI.

1.8 Units engaged in ship breaking/dismantling are composite ones which also undertake the processing of scrap thus obtained and hence the entire activity can be covered under processing. Therefore, all small scale industrial units with original cost of plant and machinery not exceeding Rs. 1 crore and engaged in ship breaking/dismantling activity may be considered as small scale industrial undertaking and bank advances to such units reckoned as priority sector advances.

1.9 Bank loans to bought leaf factories manufacturing tea are to be reckoned as priority sector lending to small scale industry, provided the investment in plant and machinery (original cost) does not exceed the prescribed limits.

1.10 Water mills (Gharat) has been recognised as an industrial activity and shall be eligible for registration as small scale industry.

2. Food and Agro-based Processing SectorThe following items within the food and agro-based processing sector would be eligible for classification as priority sector for lending by banks:

Fruit and vegetable processing industry
Food grain milling industry
Dairy products
Processing of poultry and eggs, meat products
Fish processing
Bread, oilseeds, meals (edible), breakfast foods, biscuits, confectionery (including cocoa processing and chocolate), malt extract, protein isolate, high protein food, weaning food and extruded/ other ready to eat food products
Aerated water/ soft drinks and other processed foods
Special packaging for food processing industries
Technical assistance and advice to food processing industry

With regard to the size of the units within this sector, it is clarified that food and agro-based processing units of small and medium size with investment in plant and machinery up to Rs 5 crore would be included under priority sector lending.While loans to units satisfying SSI definition may be shown under advances to SSI, loans to other units should be shown separately in the half-yearly statements on priority sector lending.

2.1 Software Industry
Loans to software industry with credit limit upto Rs. 1 crore from the banking industry to be included under this item.

2.2 Venture Capital
Investment in Venture Capital will be eligible for inclusion in priority sector, subject to the condition that the venture capital funds/companies are registered with SEBI.

SECTION II
CERTAIN TYPES OF funds deployment eligible as priority sector advances

1. Investments in Special Bonds

1.1 Investments made by the banks in special bonds issued by the specified institutions could be reckoned as part of priority sector advances, subject to the following conditions:

(i) State Financial Corporations (SFCs)/State Industrial Development Corporations (SIDCs)
(a) Subscription to bonds exclusively floated by SFCs & SIDCs for financing SSI units will be eligible for inclusion under priority sector as indirect finance to SSI.

(b) List of institutions in various states which are notified as SIDCs is given in Annexure II1.

(ii) NABARD
Subscription to bonds issued by NABARD with the objective of financing exclusively agriculture/allied activities and the non-farm sector will be eligible for inclusion under the priority sector as indirect finance to SSI, as the case may be.

(iii) Small Industries Development Bank of India (SIDBI)
Subscriptions to bonds exclusively floated by SIDBI for financing of SSI units will be eligible for inclusion under priority sector as indirect finance to SSIs.

(iv) The National Small Industries Corporation Ltd. (NSIC)
Subscription to bonds issued by NSIC exclusively for financing of SSI units will be eligible for inclusion under priority sector as indirect finance to SSIs.

(v) Housing & Urban Development Corporation (HUDCO)
Investment in special bonds issued by HUDCO for on-lending to artisans, handloom weavers, etc. under tiny sector will be classified as indirect lending to SSI (Tiny) sector.

The investments made by banks on or after April 1, 2005 in the bonds issued by the specified institutions (except NABARD), i.e. REC, SFCs/SIDCs, SIDBI, NSIC, NHB and HUDCO shall not be eligible for classification under priority sector lending.

The investments, which have already been made/to be made by banks up to March 31, 2005, in the special bonds issued by the above specified institutions (except NABARD), shall not be eligible for classification under priority sector lending with effect from April 1, 2006.

The investments in the special bonds issued by NABARD shall not be eligible for classification under priority sector lending with effect from April 1, 2007.

1.1.1 The issue of bonds should be accompanied by a declaration from the issuing institution that the proceeds would be utilised for financing of borrowers under the priority sector as detailed above and no refinance would be availed of against such loans to the ultimate borrowers from any other agency.

1.1.2 The rate of interest and maturity period of bonds may be settled by banks with the respective institutions.

1.1.3 While reporting to the RBI, the quantum of investment in bonds (as they would appear under investments in the Balance Sheet) should be shown separately under the appropriate sub-head in the priority sector returns.

1.2 Investments made by banks in securitized assets representing direct lending to the SSI sector would be treated as their direct lending to SSI sector under priority sector, provided it satisfies the following conditions:

i) The pooled assets represent direct loans to SSI sector which are reckoned under priority sector; and
ii) The securitized loans are originated by banks/financial institutions

2. Other Investments
Investment by banks in venture capital will be eligible for inclusion in priority sector lending. This is subject to the condition that venture capital funds/companies are registered with SEBI.

3. Lines of Credit

3.1 Banks may consider on merit, proposals received from State Industrial Development Corporations (SIDCs) and State Financial Corporations (SFCs) for sanction of term finance/loans in the form of lines of credit.

3.2 Such term finance/loans to the extent granted for/to the Small Scale Industrial (SSI) units, will be treated as priority sector lending, subject to the observance of following conditions:
(i) SFC/SIDC should maintain separate and distinct accounts of fresh disbursements made to SSI units and outstanding amounts there against.
(ii) Periodical statements to be obtained from SFC/SIDC to monitor the position.
(iii) Annually, a certificate issued by SFC/SIDC statutory auditors certifying that the outstanding borrowings from banks were fully covered by the non-overdue loans outstanding in respect of fresh disbursements made to SSI units from out of term finance/lines of credit granted by banks.
(iv) The rate of interest to be charged by banks on such term finance/ loans/ lines of credit will be in conformity with the directives on interest rates issued by the Reserve Bank from time to time.

3.3 In order to ensure adequate credit to this sector, the credit requirements of village industries, tiny industries and other SSI units having aggregate fund-based working capital limits upto Rs. 5 crores from the banking system, will be computed on the basis of a minimum of 20 percent of their projected annual turnover for new as well as existing units.

4. Bills Rediscounting

4.1 Funds provided by commercial banks to SIDBI by way of rediscounting of bills of SSIs which are originally discounted by a commercial bank and rediscounted by SIDBI will be eligible for inclusion under the priority sector as indirect finance to SSI.
4.2 Funds provided by commercial banks to State Financial Corporations (SFCs) by way of rediscounting of bills of SSIs earlier discounted by the SFCs will be eligible for inclusion under the priority sector as indirect finance to SSI.

5. LEASING AND HIRE PURCHASE

Para-banking activities such as leasing and hire purchase financing undertaken departmentally by banks will be classified as priority sector advances, provided the ultimate beneficiary satisfies the criteria laid down by RBI for treating such advances as advances to priority sector.

SECTION III

targets for priority sector lending by scheduled commercial banks (excluding RRBs)

1. Main Targets for All Scheduled Commercial Banks excluding Foreign Banks

1.1 The scheduled commercial banks are expected to enlarge credit to priority sector and ensure that priority sector advances (which includes the SSI sector) constitute 40 per cent of net bank credit.
1.2 While there is no sub-target fixed for lending to SSI sector banks may fix self set target for growth in advances to SSI sector over the previous year’s achievement and overall trends in growth of net bank credit.
1.3 In order to ensure that credit is available to all segments of the SSI sector, banks should ensure that -

2. Targets for Foreign Banks

2.1.1 Within the overall target of 32 per cent to be achieved by foreign banks, the advances to small scale industries sector should not be less than 10 per cent of the net bank credit and the export credit should not be less than 12 per cent of the net bank credit.
[The net bank credit should tally with the figures reported in the fortnightly return submitted under section 42(2) of the Reserve Bank of India Act, 1934. Outstanding deposits under the FCNR (B) and NRNR Schemes are excluded from net bank credit for computation of priority sector lending target/ sub-targets. However, as the NRNR scheme has been discontinued, the existing accounts under NRNR account scheme may be continued only up to the date of maturity as advised vide circular DBOD. DIR. BC. 93/13.01.09/2001-02 dated April 29, 2002.]

3. DEPOSIT by Foreign Banks WITH SIDBI towards shortfall in priority sector lending

3.1 In the event of failure to attain the stipulated targets and sub-targets, the foreign banks will be required to make good the shortfall in the achievement of the targets / sub-targets by depositing, an amount equivalent to the shortfall with the Small Industries Development Bank of India (SIDBI).

Sr. No.	Shortfall in lending to Priority Sector Target (32%)/ Sub-Targets for SSI-(10%)and Export credit(12%) to Net Bank Credit whichever is higher.	Rate of interest on the entire deposit to be made with SIDBI
		(Per cent per annum)
1	Less than 2 percentage points	Bank Rate (6% at present)
2	2 and above, but less than 5 percentage points	Bank Rate minus 1 percentage point
3	5 and above, but less than 9 percentage points	Bank Rate minus 2 percentage points
4	9 percentage points and above	Bank Rate minus 3 percentage points

c) SIDBI will pass on the lower interest rates to the borrowers.

N.B. Above instructions would be made effective from the financial year 2005-06.

3.2 The shortfall in achieving the priority sector lending target and the sub-targets should be computed as on the last reporting Friday of March every year and made good by placing a deposit with SIDBI as stated above. The deposits should be placed before the end of April of that year.

3.3 In regard to the above, it is to be clarified that in the event of failure on the part of foreign banks to achieve any of the stipulated sub-targets in respect of advances to SSI sector and export credit, even if they achieve the overall target of 32 per cent, the shortfall should be made good by placing with SIDBI a deposit of an amount equivalent to the shortfall in each of the sub-targets. Also, in the event of failure on the part of banks to achieve one of the sub-targets or both the sub-targets, and also the overall target of 32 per cent, the shortfall in achieving the sub-targets and the overall target should be made good by placing with SIDBI a deposit of an amount equivalent to (i) aggregate shortfall in the sub-targets, or (ii) the shortfall in the overall target, whichever shortfall is higher. In case the shortfall is in achievement of the overall target only and not in the sub-target, banks should make good the shortfall in achieving the overall target.

3.4 The outstanding balances of these deposits placed with SIDBI may be reckoned as part of their priority sector advances during the currency of the deposits, as indirect finance to SSI. The amount of deposits should, however, be shown separately in the returns on priority sector advances submitted to RBI.

SECTION IV
common guidelines/ INSTRUCTIONS for LENDING TO SSI sector

1. Based on the recommendations made by the Working Groups and High Powered Committees, appointed by the Government of India and the Reserve Bank of India, a set of comprehensive guidelines to be followed for advances to all categories of borrowers in the SSI sector were evolved.

2. Processing of Applications

2.1 Issue of Acknowledgement of Loan Applications

Banks should give acknowledgement for loan applications received from the borrowers towards this purpose, while getting fresh stocks of application forms printed, it may be ensured that these forms have perforated portion for acknowledgement to be completed and issued by the receiving branch. Each branch may affix on the main application form as well as the corresponding portion for acknowledgement, a running serial number. While using the existing stock of application forms till then, an acknowledgement (separately prepared) should be given for each application, care being taken to ensure that the serial number given on the acknowledgement is also recorded on the main application.

2.2 Disposal of Applications

All loan applications for SSI up to a credit limit of Rs. 25,000/- should be disposed of within 2 weeks and those up to Rs. 5 lakh within 4 weeks provided the loan applications are complete in all respects and accompanied by a 'check list'.

2.3 Register of Rejected Applications

A register should be maintained at branch wherein the date of receipt, sanction/rejection/disbursement with reasons therefor etc., should be recorded. The register should be made available to all inspecting agencies.

2.3.1
i) Rejection of applications for fresh limits/enhancement of existing limits should not be done without the approval of the next higher authority.
ii) Sanction of reduced limits should be reported to the next higher authority immediately with full details for review and confirmation.

2.4 Collaterals

The limit for all SSI borrowal accounts for obtention of collateral security is Rs 5 lakh. Banks may on the basis of good track record and financial position of the SSI units, increase the limit of dispensation of collateral requirement for loans up to Rs.25 lakh (with the approval of the appropriate authority).

2.5 Composite loan

A composite loan limit of Rs.1crore can be sanctioned by banks to enable the SSI entrepreneurs to avail of their working capital and term loan requirement through Single Window.

2.6 Specialised SSI branches

Banks have been advised to open at least one Specialised SSI branch in each district. Further banks have been permitted to categorise their general banking branches having 60% or more of their advances to SSI sector as specialised SSI branches in order to encourage them to open more specialised SSI branches for providing better service to this sector as a whole.

2.7 Delayed Payment

Under the Amendment Act, 1998 of Interest on Delayed Payment to Small Scale and Ancillary Industrial Undertakings, penal provisions have been incorporated to take care of delayed payments to SSI units which inter-alia stipulates a) agreement between seller and buyer shall not exceed more than 120 days b) 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. Further, banks have been advised to fix sub-limits within the overall working capital limits to the large borrowers specifically for meeting the payment obligation in respect of purchases from SSI.

2.8 Revised guidelines on rehabilitation of sick SSI units (based on Kohli Working Group recommendations)

As per the revised definition, a unit is considered as sick when any of the borrowal account of the unit remains substandard for more than 6 months or there is erosion in the net worth due to accumulated cash losses to the extent of 50% of its net worth during the previous accounting year and the unit has been in commercial production for at least two years. The revised criteria will enable banks to detect sickness at an early stage and facilitate corrective action for revival of the unit. As per the revised guidelines the rehabilitation package should be fully implemented within six months from the date the unit is declared as potentially viable/viable. During this six months period of identifying and implementing rehabilitation package banks/FIs are required to do "holding operation" which will allow the sick unit to draw funds from the cash credit account at least to the extent of deposit of sale proceeds.

Following are broad parameters for grant of relief and concessions for revival of potentially viable sick SSI units:

(i) Interest on Working Capital Interest 1.5% below the prevailing fixed / prime lending rate, wherever applicable

(ii) Funded Interest Term Loan Interest Free

(iii) Working Capital Term Loan Interest to be charged 1.5% below the prevailing fixed / prime lending rate, wherever applicable

(iv) Term Loan Concessions in the interest to be given not more than 2 % (not more than 3 % in the case of tiny / decentralised sector units) below the document rate.

(v) Contingency Loan Assistance The Concessional rate allowed for Working Capital Assistance.

2.8.1 State Level Inter Institutional Committee

In order to deal with the problems of co-ordination for rehabilitation of sick small scale units, State Level Inter-Institutional Committees (SLIICs) have been set up in all the States. The meetings of these Committees are convened by Regional Offices of RBI and presided over by the Secretary, Industry of the concerned State Government. It provides a useful forum for adequate interfacing between the State Government Officials and State Level Institutions on the one side and the term lending institutions and banks on the other. It closely monitors timely sanction of working capital to units which have been provided term loans by SFCs, implementation of special schemes such as Margin Money Scheme of State Government, National Equity Fund Scheme of SIDBI, and reviews general problems faced by industries and sickness in SSI sector based on the data furnished by banks. Among others, the representatives of the local state level SSI associations are invited to the meetings of SLIIC which are held quarterly. A sub-committee of SLIIC looks into the problems of individual sick SSI unit and submits its recommendations to the forum of SLIIC for consideration.

2.9 Technology upgradation

Banks have been advised to develop schemes to encourage investment by SSI units in technology up-gradation. Government of India has also introduced the scheme of Credit Linked Capital Subsidy for the up-gradation of the Small Scale Industries.

2.10 Cluster Approach

60 clusters have been identified by the Ministry of SSI, Government of India for focused development of SSIs. All SLBC Convenor banks have been advised to incorporate in their Annual Credit Plans, the credit requirement in the clusters identified by the Ministry of SSI, Government of India.

As per Ganguly Committee recommendations banks have been advised that a full-service approach to cater to the diverse needs of the SSI sector may be achieved through extending banking services to recognized SME clusters by adopting a 4-C approach namely, Customer focus, Cost control, Cross sell and Contain risk. A cluster based approach to lending may be more beneficial:

Clusters may be identified based on factors such as trade record, competitiveness and growth prospects and/or other cluster specific data.

3. Mode of Disbursement of Loan

As far as possible, disbursement of loan amounts sanctioned should be made directly to the suppliers of inputs such as raw materials, implements, machinery, etc. However, banks may continue the practice of obtaining receipts from borrowers.

4. Repayment Schedule

4.1 Repayment programme should be fixed taking into account the sustenance requirements, surplus generating capacity, the break-even point, the life of the asset, etc., and not in an "ad hoc" manner. In respect of composite loan up to Rs. 50,000/- to artisans, village and cottage industries, repayment schedule may be fixed for term loan component only (subject to SIDBI's requirements being fulfilled).

4.2 In the case of other borrowers affected by natural calamities, banks may convert drawings in excess of the value of security into a term loan repayable over a reasonable period of time and provide further working capital and extend/re-phase the instalments due under term loans.

5 Rates of Interest

As per extant guidelines the banks are required to fix their own prime lending rates (PLRs) and the maximum band over the PLR. The interest rates on loans up to Rs.2 lakh should not exceed the PLR and that beyond Rs.2 lakh is left to the discretion of the banks subject to PLR and the maximum bands. The banks have been advised to accord SSI units with a good track record the benefit of lower spreads over the PLR. Banks have been advised to set the interest rate on advances keeping in view prevailing general southward movement in interest rates. The banks have been further advised to fix at least 3 slabs for advances to SSI sector.

6. Penal Interest

6.1.1 The issue of charging penal interests that should be levied for reasons such as default in repayment, non-submission of financial statements etc. has been left to the Board of each bank. Banks have been advised to formulate policy for charging such penal interest with the approval of their Boards, to be governed by well accepted principles of transparency, fairness, incentive to service the debt and due regard to difficulties of customers.

6.1.2 No penal interest should be charged by banks for loans under priority sector up to Rs 25,000 as hitherto. However, banks will be free to levy penal interest for loans exceeding Rs 25,000, in terms of the above guidelines.

7. SERVICE CHARGES / INSPECTION CHARGES

7.1.1 No service charges/inspection charges should be levied on priority sector loans up to Rs. 25,000/-.

7.1.2 For loans above Rs. 25,000/- banks will be free to prescribe service charges with the prior approval of their Boards in terms of circular No. DBOD.Dir.BC.86/03.01.00/99-2000 dated September 7, 1999.

8. Insurance against Fire and Other Risks

8.1 Banks may waive insurance of assets financed by bank credit in the following cases:

No.	Category	Type of Risk	Type of Assets
(a)	All categories of priority sector advances upto and inclusive of Rs. 10,000/-	Fire & other risks	Equipment and current assets
(b)	Advances to SSI sector upto and inclusive of Rs. 25,000/- by way of -
	Composite loans to artisans, village and cottage industries	Fire	Equipment and current assets
	All term loans	Fire	Equipment
	Working capital where these are against non-hazardous goods	Fire	Current Assets

9. Photographs of Borrowers

While there is no objection to taking photographs of the borrowers, for purposes of identification, banks themselves should make arrangements for the photographs and also bear the cost of photographs of borrowers falling in the category of Weaker Sections. It should also be ensured that the procedure does not involve any delay in loan disbursement.

10. Discretionary Powers

All Branch Managers of banks should be vested with discretionary powers to sanction proposals from weaker sections without reference to any higher authority. If there are difficulties in extending such discretionary powers to all the Branch Managers, such powers should exist at least at the district level and arrangements be ensured that credit proposals on weaker sections are cleared promptly.

11. Machinery to look into Complaints

11.1.1 There should be a machinery at the regional offices to entertain complaints from the borrowers if the branches do not follow these guidelines, and o verify periodically that these guidelines are implemented by the branches in actual practice.

11.1.2 The names and addresses of the officer with whom complaints can be lodged should be displayed on the notice board of every branch.

12. Amendments

These guidelines are subject to any instructions that may be issued by the RBI from time to time.

13. Committees on flow of Credit to SSI sector

13.1 Report of the Committee to Examine the Adequacy of Institutional Credit to SSI Sector and Related Aspects (Nayak Committee)

The Committee was constituted by Reserve Bank of India in December 1991 under the Chairmanship of Shri P. R. Nayak, the then Deputy Governor to examine the issues confronting SSIs in the matter of obtaining finance. The Committee submitted its report in 1992. All the major recommendations of the Committee have been accepted and the banks have been inter-alia advised to:

i) give preference to village industries, tiny industries and other small scale units in that order, while meeting the credit requirements of the small scale sector;

ii) grant working capital credit limits to SSI units computed on the basis of minimum 20% of their estimated annual turnover whose credit limit in individual cases is upto Rs.2 crore [ since raised to Rs.5 crore ];

iii) prepare annual credit budget on the `bottom-up’ basis to ensure that the legitimate requirements of SSI sector are met in full;

iv) extend ‘Single Window Scheme’ of SIDBI to all districts to meet the financial requirements (both working capital and term loan) of SSIs;

v) ensure that there should not be any delay in sanctioning and disbursal of credit. In case of rejection/curtailment of credit limit of the loan proposal, a reference to higher authorities should be made;

vi) not to insist on compulsory deposit as a `quid pro-quo’ for sanctioning the credit;

vii) open specialised SSI bank branches or convert those branches which have a fairly large number of SSI borrowal accounts, into specialised SSI branches;

viii) identify sick SSI units and take urgent action to put them on nursing programmes;

ix) standardise loan application forms for SSI borrowers; and

x) impart training to staff working at specialised branches to bring about attitudinal change in them..

13.2 Report of the High Level Committee on Credit to SSI (Kapur Committee)

Reserve Bank of India 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 made 126 recommendations covering wide range of areas pertaining to financing of SSI sector. These recommendations have been examined by the RBI and it has been decided to accept 88 recommendations which include the following important recommendations:

i) Delegation of more powers to branch managers to grant ad-hoc limits;

ii) Simplification of application forms;

iii) Freedom to banks to decide their own norms for assessment of credit requirements;

iv) Opening of more specialised SSI branches;

v) Enhancement in the limit for composite loans to Rs. 5 lakh.(since enhanced to Rs.1 crore);

vi) Strengthening the recovery mechanism;

vii) Banks to pay more attention to the backward states;

viii) Special programmes for training branch managers for appraising small projects;

ix) Banks to make customers grievance machinery more transparent and simplify the procedures for handling complaints and monitoring thereof.

13.3 Report of the Working Group on Flow of Credit to SSI Sector (Ganguly Committee)

As per the announcement made by the Governor, Reserve Bank of India, in the Mid-Term Review of the Monetary and Credit Policy 2003-2004, a "Working Group on Flow of Credit to SSI sector" was constituted under the Chairmanship of Dr.A.S.Ganguly

The Committee made 31 recommendations covering wide range of areas pertaining to financing of SSI sector. The recommendations pertaining to RBI and banks have been examined and has accepted 8 recommendations so far and commended to banks for implementation which are as under:

i) adoption of cluster based approach for financing SME sector;

ii) sponsoring specific projects as well as widely publicising successful working models of NGOs by Lead Banks which service small and tiny industries and individual entrepreneurs;

iii) sanctioning of higher working capital limits by banks operating in the North East region to SSIs, based on their commercial judgement due to the peculiar situation of hilly terrain and frequent floods causing hindrance in the transportation system;

iv) exploring new instruments by banks for promoting rural industry and to improve the flow of credit to rural artisans, rural industries and rural entrepreneurs, and

v) revision of tenure as also interest rate structure of deposits kept by foreign banks with SIDBI for their shortfall in priority sector lending.

Annexure I

Master Circular

GENERAL GUIDELINES ON SSI SECTOR LENDING

Illustrative List of Small Scale Service Business (Industry Related) Enterprises (SSSBEs)

(Vide paragraph 2.3.2 of Section I)

[As per circular issued by the Ministry of SSI, Government of India]

(1) Advertising Agencies

(2) Marketing Consultancy

(3) Industrial Consultancy

(4) Equipment Rental & Leasing

(5) Typing Centres

(6) Photocopying centres (Xeroxing)

(7) Industrial Photography

(8) Industrial R&D Labs

(9) Industrial Testing Labs

(10) Desk Top Publishing

(11) Internet Browsing/ Setting up of Cyber Cafes

(12) Auto Repair, Services and Garages

(13) Documentary Films on themes like family planning, social forestry, energy conservation and commercial advertising

(14) Laboratories engaged in testing of raw materials, finished products

(15) ‘Servicing Industry’ Undertakings engaged in maintenance, repair, testing or servicing of all types of vehicles & machinery of any description including electronic/electrical equipment/instruments, i.e., measuring/control instruments, televisions, tape recorders, VCRs, radios, transformers, motors, watches, etc.

(16) Laundry & Dry-cleaning

(17) X-Ray Clinic

(18) Tailoring

(19) Servicing of Agricultural Farm equipment, e.g., Tractor, Pump, Rig, Boring Machines, etc.

(20) Weigh Bridge

(21) Photographic Lab

(22) Blue printing and enlargement of drawing/designs facilities

(23) ISD/STD Booths

(24) Teleprinter/FAX services

(25) Sub-contracting Exchanges (SCXs) established by Industry Associations

(26) EDP Institutes established by Voluntary Associations/ Non-Government Organisations

(27) Coloured, and Black and White Studios equipped with processing laboratory

(28) Ropeways in hilly areas

(29) Installation and operation of Cable TV Network

(30) Operating EPABX under franchises

(31) Beauty Parlours and Creches

[Computerised Design and Drafting, Creation of Databases suitable for foreign/ Indian markets and Computer Software Development which were hitherto being registered as SSSBE, have since been deleted from the list as Computer Software Development and Software Services (including computer graphics, engineering design, computerised design and drafting) have since been recognised as industrial activity eligible for registration as Small Scale Industries]

Annexure II
Master Circular

GENERAL GUIDELINES ON SSI SECTOR LENDING

Illustrative List of Activities which are not Recognised as SSSBE's

(Vide paragraph 2.3.2 of the Chapter 1)

[As per circular issued by the Ministry of SSI, Government of India]

Illustrative List of Activities which are not recognised as Small Scale Industry/Business (Industry Related) Enterprises i.e. SSSBEs

1. Transportation

2. Storage (except cold storage which is recognised as SSI)

3. Retail/Wholesale Trade Establishments

4. General Merchandise Stores

5. Sales Outlets for Industrial Components

6. Health Services including Pathological Laboratories

7. Legal Services

8. Educational Services

9. Social Services

10.Hotels

Annexure III
Master Circular

SSI SECTOR LENDING TARGETS

List of Notified Financial Institutions under IDBI Act (SIDCs)

[Vide paragraph 1.1 (i) (b of Chapter II]

1.	Assam Industrial Development Corporation Ltd., R.G. Baruah Road, Guwahati 731 024.	15.	Andhra Pradesh Industrial Development Corporation Ltd., Parishrama Bhavanam, 5 9 50/B, Fateh Maidan Road, Hyderabad 500 029.
2.	Bihar State Credit & Investment Corpn. Ltd., Udyog Vikas Bhavan, 4th flr.,Ram Charitra Path, Near Railway Crossing on Baily Road, Patna 800 001.	16.	Economic Development Corporation of Goa, Daman & Diu Ltd., EDC House, Dr. Atmaram Borkar Road, Panaji, P.B. No. 225, Goa 403 001.
3.	Gujarat Industrial Investment Corporation Ltd., Chunibhai Chambers, Behind Deepali Cinema, Ashram Road, P. B. No. 4003/4004, Ahmedabad 390 009.	17.	Haryana State Industrial Development Corpn. Ltd., S.C.O. 40 41 Sector 17 A,Post Box No. 22, Chandigarh 160 017.
4.	Himachal Pradesh State Industrial Development Corporation Ltd., New Himrus Bldg., 3rd & 4th flr, Cart Road, Shimla - 171 001.	18.	Industrial Promotion & Investment Corporation of Orissa Ltd., IPICOL House, Janpath, Bhubaneswar-751 007.
5.	Jammu & Kashmir State Industrial Development Corporation Ltd., Drabu House, Ram Bagh, Post Box No. 26, Srinagar, Kashmir.	19.	Karnatak State Industrial Investment & Development Corporation Ltd., MSIL House, 36, Cunningham Rd., Bangalore - 560 052.
6.	Kerala State Industrial Development Corpn. Ltd., Keston Rd., T. C. 10/402, Kawdiar, Thiruvanantapuram 695 003.	20.	Madhya Pradesh Audyogik Vikas Nigam Ltd., Panchanan, 2nd floor, Malviya Nagar, Bhopal-462 003.
7.	Meghalaya Industrial Development Corpn. Ltd., Kismat, Upland Road, Laitumkhrah, Post Box 9, Shillong - 793 003.	21.	Nagaland Industrial Development Corporation Ltd., IDC House, P.B.No. 5, Dimapur-797 112.
8.	Pondicherry Industrial Promotion Development & Investment Corp. Ltd., 38, Romain Rolland Street, Pondicherry - 605 001.	22.	Pradeshiya Industrial &Investment Corpn. Of Uttar Pradesh Ltd., PICUP Bhawan, Gomti Nagar, Lucknow-226 021.
9.	Punjab State Industrial Development Corpn. Ltd., SCO 54, 55 6:56, Sector 17 A, Chandigarh-160 017.	23.	Sikkim Industrial Development & Investment Corpn. Ltd., Bhanupath, Tashiling Gongtok, Sikkim-737 101.
10.	Rajasthan State Industrial Development and Investment Corporation Ltd.,Udyog Bhawan, Tilak Marg, Jaipur-372 005.	24.	State Industrial & Investment Corporation of Maharashtra Ltd., Nirmal Building, 1st floor,P. B. No. 11571, Nariman Point, Bombay-400 021.
11.	State Industrial Promotion Corporation of Tamil Nadu Ltd.,No. 19 - A, Marshalls Road,Egmore, P. B. No. 7223,Madras-600 000.	25.	West Bengal Industrial Development Corpn. Ltd., 5-Council House Street,2nd & 3rd floor, P. B. No. 649 Calcutta-700 001.
12.	Arunachal Pradesh Industrial Development Financial Corporation Ltd.,Itanagar, Naharlagun,Arunachal Pradesh 791 110.	26.	Tripura Industrial Development Corpn. Ltd., Pandit Nehru Complex, Kunjaban,Agartala-799 006. (Tripura)
13.	Mizoram Industrial Development Corpn. Ltd., Upper Khatla, Aizawal,Mizoram - 796 007.	27.	Manipur Industrial Development Corpn. Ltd., Type C 11, Industrial Estate,Takyelpat, P. B. No. 46, Imphal-795 001, (Manipur)
14.	The Andaman and Nicobar Islands Integrated Development Corporation Ltd., New Marine Dry Dock/Workshop Complex, P. B. No. 180, Port Blair - 744 101.	28.	Delhi State Industrial Development Corpn. Ltd.,4th floor, Mohan Singh Palace,Connaught Palace,New Delhi-110 001.

Appendix
Master Circular

SSI SECTOR LENDING

List of Circulars consolidated by the Master Circular

No.	Circular No.	Date	Subject	Paragraph No.
1.	RPCD.PLNFS.BC.72/06.02.31/ 2004-05	12.01.2005	Enhancement in investment limit in respect of Sports Goods	I. 1.1
2.	RPCD. Plan. BC. 64/04.09.01/ 2004-05	15.12.2004	Priority Sector Lending-Investment in Special Bonds issued by Specified Institutions	I.1.47,1.48,1.4.11,II.1
2.	RPCD.PLNFS.BC.61/06.02.31(WG)/ 2004-05	08.12.2004	Working Group on Flow of Credit to SSI Sector-Interest rates on with SIDBI-in lieu of shortfall in priority sector obligations	III.3.1
3.	RPCD. PLNFS. BC. 43/06.02.31/ 2004-05	26.10.2004	Investment by banks in securitized assets pertaining to SSI sector	II 1.2
4.	RPCD. Plan. BC. 42/06.02.31/ 2004-05	26.10.2004	Credit Facilities to SSIs- Enhancement of Composite Loan Limits	IV. 2.5
5.	RPCD.PLNFS.BC.28/06.02.31(WG)/ 2004-05	04.09.2004	Working Group on Flow of Credit to SSI sector	IV. 13.3
6.	RPCD. Plan. BC. 41/04.09.01/ 2003-04	03.11.2003	Priority sector lending-Deposit of shortfall with SIDBI	III. 3.1
7.	RPCD. PLNFS. BC. 40/06.02.31/ 2003-04	03.11.2003	Credit facilities for SSIs-Lending by banks to NBFCs for the purpose of on-lending to SSIs	I. 1.4.9
8.	RPCD. PLNFS. BC. 39/06.02.80/ 2003-04	03.11.2003	Credit facilities for SSIs-Collateral Free Loans	IV 2.4
9.	RPCD. PLNFS No.620/06.02.28(i)/ 2002-03	11.09.2003	Sac meeting Implementation of Action Points- Interest rate- Slab basis	IV 5
10.	RPCD. PLNFS. BC. 7/06.02.31/ 2003-04	14.07.2003	Enhancement in SSI investment limit for specified items of the stationery sector and drugs & pharmaceuticals sector	I. 1.1
11.	RPCD. PLNFS.1 /06.02.28(i))/ 2003-04	01.07.2003	Sac meeting Implementation of Action Points- Identification of Clusters	IV.2.10 IV13.3
12.	RPCD. PLNFS. 2292/06.02. 28(i))/ 2003-04	13.06.2003	Sac meeting Implementation of Action Points- Self Set target for SSI	III.1.2
13.	RPCD. Plan. BC. 53/04.09.01/ 2002-03	20.102002	Levying of service charges and inspection charges by banks in respect of priority sector loans	IV. 7.1.1, 7.1.2
14.	RPCD. PLNFS. BC. 24/06.02.77/ 2002-03	04.10.2002	Flow of credit to SSIs-Time schedule for disposal of loan applications	IV. 2.2
15.	RPCD. PLNFS. BC. 94/ 06.02.31/ 2001-02	23.05.2002	Inclusion of leasing and hire purchase assets under priority sector	II.5
16.	RPCD. PLNFS. BC. 77/ 06.02.31/ 2001-02	15.04.2002	Credit deployment to SSI sector - Revised list of SSSBEs	I.1.3.2
17.	DBOD.No,BL.BC.74/22.01.001/2002	11.03.2002	Conversion of General Banking Branches to Specialised SSI Branches	IV 2.6
18.	RPCD. PLNFS. BC.58/ 06.02.80/ 2001-02	23.01.2002	Collateral free loans- SSIs	IV 2.4
19.	RPCD. PLNFS. BC.57/ 06.04.01/ 2001-02	16.01.2002	Guidelines for rehabilitation of Sick Small Scale Industrial Units	IV 2.8
20.	RPCD. PLNFS. BC. 41/ 06.02.31/ 2001-01	26.11.2001	Enhancement of SSI investment limit for specified hosiery/ hand tools items	I.1.1
22.	RPCD. Plan. BC. 16/ 04.09.01/ 2001-02	29.08.2001	Priority sector lending - Loans to food and agro based processing sector	I. 2
23.	RPCD. Plan. BC. 15/ 04.09.01/ 2001-02	17.08.2001	Charging of penal interest by banks on priority sector loans	IV.6
24.	RPCD. PLNFS. BC. 8/ 06.02.31/ 2000-01	10.07.2001	Recognition of water mills (gharat) as small scale industry	I.1.10
25.	IECD.No.5/08.12.01/2000-01	16.10.2000	Flow of Credit to SSI Sector- Decision of the Group of Ministers	IV 2.7
26.	RPCD. PLNFS. BC. 21/ 06.02.31/ 2000-01	03.10.2000	Credit Linked Capital Subsidy Scheme for Technology Upgradation of SSIs	IV.2.9
27.	RPCD. PLNFS. BC. 21/ 06.02.31/ 2000-01	03.10.2000	Priority sector advances-Credit deployment to SSI sector- Revised definition of SSSBEs	I. 1.3.1
28.	RPCD.PLNFS.BC.No.57/06.02.31/ 99-2000	02.02.2000	Priority Sector Advances-Credit Deployment to SSI Sector	I. 1.1
29.	RPCD.No.PLNFS.BC.89/06.02.31-98/99	14.06.1999	Interest on Delayed Payment to Small Scale and Ancillary Industrial Undertakings Act, 1998	IV 2.7
30.	RPCD.No.Plan.BC.95/04.09.01/98-99	24.04.1999	Priority Sector Lending-Investment in Venture Capital	I. 2.2
31.	RPCD.No.Plan.BC.82/04.09.01/98-99	12.03.1999	Priority Sector Lending - Flow of Credit to Food & Agro-based Processing, Forestry and Tiny Sector	I. 2
32.	RPCD.No.PLNFS.BC.89/06.02.31-98/99	01.03.1999	Flow of Credit to SSI sector-Computation of Working Capital limits	II 3.3
33.	RPCD.No.Plan.BC.60/04.09.01/98-99	28.01.1999	Priority Sector Lending - Loans to Food and Agro-based Processing Sector	I. 2
34.	RPCD.No.Plan.BC.32/04.09.01/98-99	26.10.1998	Priority Sector Lending - Loans to Software Industry	I. 2.1
35.	RPCD.No.PLNFS.BC.22/06.02.31	(ii) -98/9928.08.1998	High Level Committee on SSI- Kapur Committee- Implementation of recommendations	IV.13.2
36.	RPCD.No.PLNFS.BC.127/06.02. 31/97/98	08.06.1998	Flow of Credit to SSI Sector	IV 5
37.	RPCD.PLNFS.No.792/06.02.31/97/98	02.03.1998	Flow of Credit to SSI Sector-Opening of Specialised SSI Branches	IV 2.6
38.	RPCD.No.PLNFS.BC.89/06.02.31-97/98	19.02.1998	Priority Sector Advances - Credit Deployment to SSI Sector	I 2.2, III 2.2
39.	RPCD.No.PLNFS.BC.66/06.02.31-97/98	05.01.1998	Priority Sector Advances - Credit Deployment to SSI Sector	III 2.2
40.	RPCD.No.Plan.1103/04.09.01/96-97	23.04.1997	Priority Sector Lending-Subscription to Special Bonds Issued by SIDCs	II 1.1 (i)
41.	RPCD.No.Plan.BC.109/04.09.01/96-97	03.03.1997	Priority Sector Lending - Investment in Special Bonds	II 1.1 (ii) to 1.3
42.	RPCD.No.Plan.BC.74/04.09.01/96-97	11.12.1996	Priority Sector Lending - Shortfall in Achievement of Target	III 4.1-4.4
43.	RPCD.No.Plan.BC.67/04.09.01/96-97	22.11.1996	Priority Sector Lending - Investment in Special Bonds	II 1.1 to 1.3
44.	RPCD.No.Plan.BC.59/04.09.09/96-97	04.11.1996	Bank Credit to Priority Sector	III 3.3
45.	RPCD.No.Plan.BC.60/04.09.01/95-96	20.11.1995	Indirect Finance to SSIs - Rediscounting of Bills	II 4.2
46.	RPCD.No.Plan.BC.112/04.09.01/ 94-95	21.01.1995	Indirect Finance to SSIs - Rediscounting of SIDBI Bills	II 4.1
47.	RPCD.No.PLNFS.BC.23/06.06.12/94-95	01.09.1995	Bank Credit to KVI Sector	I 1.6
48.	IECD.No.23/08.12.01/94-95	09.11.1994	Loans to SIDCs / SFCs	II 3
49.	RPCD.No.DIR.BC.51/07.38.02/94-95	17.10.1994	Interest Rates on Advances	IV 5
50.	RPCD.No.Plan.BC.38/04.09.09/94-95	22.09.1994	Lending to Priority Sector by foreign banks	III 4.1-4.3
51.	RPCD.No.PLNFS.BC.16/06.06.12/94-95	28.07.1994	Bank Credit to KVI Sector	I 1.6
52.	RPCD.No.PLNFS.BC.84/06.06.12/93-94	07.01.1994	Bank Credit to KVI Sector - Priority Sector Advances	I 1.6
53.	RPCD.No.Plan.BC.55/04.09.01/93-94	21.10.1993	Priority Sector Advances	III 2.1.1
54.	RPCD.No.Plan.BC.127/04.09.09/ 92-93	23.06.1993	Bank Credit to Priority Sector	III 3
55.	RPCD.No.Plan.BC.103/04.09.09/ 92-93	19.04.1993	Bank Credit to Priority Sector	III 3
56.	RPCD.No.PLNFS.BC.99/06.0231/92-93	17.04.1993	Report of the Committee to examine the adequacy of institutional credit to SSI sector and related aspects- Nayak Committee	IV 13.2
57.	RPCD.No.PLNFS.BC.65/06.03.01/92-93	21.01.1993	Small Scale Services and Business (Industry Related) Enterprises (SSSBEs)	I 1.3
58.	RPCD.No.PLFS.BC.52/PS.72/88-89	09.12.1988	Inclusion of Salt Industry under Priority Sector	I 1.7
59.	RPCD.No.PLNFS.BC.45/PS.72/86	20.01.1986	Financing of Bought Leaf Factories for Manufacturing	I 1.9
60.	RPCD.No.PLNFS.BC.44/PS.72/86	17.01.1986	Bank Finance to Ship-breaking Industry	I 1.8
61.	RPCD.No.CP.NFS.BC.20/PS.72-85/86	08.10.1985	Revision in the Definition of SSI	I 1.1

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