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Thursday, Jul 18, 2002

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Karnataka SSIs plead against monthly payment of interest

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THE Karnataka Small Scale Industries Association (KASSIA) has urged the Reserve Bank of India (RBI) to withdraw the circular which asks banks to calculate interests on SSI units' borrowings on a monthly basis.

This has come as a burden to small-scale units which are already coping with difficulties of industrial slowdown resulting in poor business and severe competition.

KASSIA said `at a time when small industries are passing through a very difficult period, the issue of such a notice insisting on payment of interest on a monthly basis was a severe blow to the sector'. Such monthly notices, when accumulated, are likely to go against the interests of the small entrepreneurs in reconciling of the accounts.

Demanding that the RBI revert to status quo, KASSIA pointed out that the circular would put unnecessary burden on the SSIs, especially when delayed payment was universal from all sectors, and make it even difficult with the units having to depend on receipts from bigger units and establishments.

In a representation to the Central Government, KASSIA has urged for streamlining of the policy of securities credit whereby a high value property is pledged to secure a very small sum of loan and insistence on a fresh collateral security for more funds sought by entrepreneurs for improving the factory modernising even when a wide margin value of already pledged security exists.

The policy should be modified to make the same collateral with enough margin acceptable for raising further fresh funds for modernisation or expansion of business.

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