The small scale sector (SSI) has received a working capital amounting to a mere 6-7 per cent of output during 1996-97, S L Kapur, chairman of the RBI expert committee on credit to the small scale sector has said.
Addressing the Indian Merchants Chamber here, Kapur said while the P R Nayak committee on SSIs had recommended a minimum 20 per cent level of working capital, the trend has been, on the contrary, moving downward from 8 per cent in 1992, Kapur said.
Kapur, who is also a member of the Board for Industrial and Financial Reconstruction, said 300-odd special branches were set up in tune with the committees recommendations, but to no avail.
There is no focused service to this sector, nor is the staff technically qualified to assess credit needs, he said.
Various schemes floated by Sidbi and other institutions to provide adequate and timely credit on a normative basis to this sector have failed to take off, he said.
The credit guarantee scheme had also failed as banks had lost confidence and were pulling out, Kapur added.
Citing the example of the United States, he suggested the setting up of a sinking fund, with contributions from the government and industry associations to absorb non-performing assets. He also suggested a credit guarantee fund to set up the chambers based on the Italian model.
An amount of Rs 33 crore had been extended as credit to the SSIs, but the tiny sector was still ignored, he said adding that 90 per cent of the SSIs were in this category.
Kapur urged the chamber to work out a proposal to address the issue and stated that the lobbying powers of SSIs were weak. He asked the chamber to create a body for small and medium enterprises.
Chamber president Ram Gandhi felt local area banks could become the storehouses on credit risk of investment in small enterprises in their region.
Gandhi said there should be no distinction between term lending institutions and working capital institutions and called for a greater role of state financial institutions in making composite loans available to the sector.
