Page 189 - DMGT303_BANKING_AND_INSURANCE

Banking and Insurance

Notes (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.
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).

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Caution All loan applications up to a credit limit of Rs. 25,000 should be disposed of within
a fortnight and those for over Rs. 25,000 up to Rs. 5 lakh, within 8 to 9 weeks provided the
loan applications are complete in all respects and accompanied by a 'check list'.
Composite loan: A composite loan limit of Rs. 1 crore can be sanctioned by banks to enable the
SSI entrepreneurs to avail of their working capital and term loan requirement through Single
Window.

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.
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.

9.7 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.

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