Page 191 - DMGT303_BANKING_AND_INSURANCE

Banking and Insurance

Notes 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 subcommittee of SLIIC looks
into the problems of individual sick SSI unit and submits its recommendations to the forum of
SLIIC for consideration.

Technology Upgradation

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

Cluster Approach

60 clusters have been identified by the Ministry of SSI, Government of India for focused
development of SSIs. All SLBC Convener 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:
(i) in dealing with well-defined and recognized groups;
(ii) availability of appropriate information for risk assessment; and

(iii) monitoring by the lending institutions.
Clusters may be identified based on factors such as trade record, competitiveness and growth
prospects and/or other cluster specific data.

9.9 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 seeds, fertilisers, raw materials, implements, trucks, machinery, etc.

Repayment Schedule

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).

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 installments due under
term loans.

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

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