Bank credit to SSIs drop as NPAs pile up

Banks' credit growth rate to small scale industries (SSIs) have fallen during March-September, a Reserve Bank of India data said. Loans to the sector grew 6.15 per cent in September compared with 16.05 per cent in March.

The slowdown in bank credit to the sector was owing to high level of bad loans, the RBI said after reviewing the flow of credit to sector.

The net non-performing assets ranged between 16.4 per cent and 19.5 per cent among various banks, RBI said.

Also, the growing incidence of the SSIs turning sick has added to the slowdown in credit flow to the sector, the central bank said.

Loans to SSIs, as a percentage to net bank credit, has also fallen to 8.26 per cent in September from 9.43 per cent in March.

Besides, the rising retail loan demand has also resulted in the slowdown of credit flow to the SSI units, a senior RBI official said.

"SMEs (small and medium enterprises) should get themselves rated. This would lead to risk mitigation and the SME can avail credit at a lower rate," said A. Ramesh Kumar, chief general manager, heading SME division in State Bank of India.