Credit guarantee fund for SSI sector

By Our Special Correspondent

NEW DELHI, APRIL 5. The new National Credit Guarantee Fund for the SSI sector will ultimately have a corpus of Rs. 2,500 crores. Of this, Rs. 2,000 crores will be given by the Government and Rs. 500 crores by Small Industries Development Bank of India (SIDBI).

This was stated by Mr. D. P. Bagchi, Small Scale Industry Secretary, while inaugurating a seminar on the Credit Guarantee Fund for SSIs organised by the Federation of Indian Chambers of Commerce and Industry (FICCI), the SSI Ministry and UNIDO here today.

Mr. Bagchi said that to begin with, the fund would be set up with a corpus of Rs. 125 crores, of which Rs. 100 crores would come from the Government and Rs. 25 crores from SIDBI. The fund will be operated by the SIDBI as a trust.

On the sidelines of the FICCI meeting, Mr. Bagchi told newspersons that the reason for the failure of the earlier credit guarantee scheme was the blanket guarantee which led to banks extending credit to all without looking into the feasibility of the projects. Care would therefore be taken this time to protect the scheme from such situations.

When asked about the statement of the Commerce Minister that the Government is reviewing the impact of the QR withdrawal on toys, leather and textiles, Mr. Bagchi said it was being discussed at the highest level. He also disclosed that it was at the instance of the SSI Ministry that 198 items reserved for the small scale sector and covered by quantitative restrictions were back loaded. The QRs would be lifted only by next year, he added.

Mr. Bagchi said it was necessary to have public-private partnership in the operation of credit guarantee systems. This would help in mobilising additional resources to this sector. The risk perception of the bankers often cited as an obstacle for extending loans to SSIs, he said, would hopefully change by the introduction of the credit guarantee system.

Mr. Bagchi observed that repayment record of SSI sector was encouraging in this country. The present initiatives taken by the Ministry are meant to equip the SSI sector to grapple with increased competition faced due to withdrawal of QRs and opening up of the economy.

Earlier, Dr. Shailendra Narain, Managing Director of SIDBI, said various types of credit guarantee funds were being tried with the support of UNIDO. He expressed the hope that these arrangements would become popular and more people would access these funds for their requirements. He also urged the private sector to play a crucial role in augmenting resources for the SSI sector.

PTI reports:

Credit rating mooted

The Government is planning to make credit rating of small and medium enterprises (SMEs) by professional credit rating agencies mandatory to improve their credibility and encourage banks to lend more credit to this sector.

``The Small Scale Industry (SSI) Ministry is now holding talks with the Reserve Bank of India and the Banking Department to finalise modalities of making credit rating compulsory for the SMEs,'' Mr. Bagchi, said.

The Ministry was also seeking suggestions from various industrial associations, he said, and added that a committee had been appointed by the Federation of Small Scale Industrial Associations (FASSI) to prepare a report on the impact of making credit rating compulsory for SMEs.

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