The Hindu Business Line : Separate PLR for small units mooted

THE Confederation of Southern Small Industries Association (Conssia) has called for introduction of a separate prime lending rate (PLR) for the small and tiny sectors.

Mr A. Selvaraj, President, Conssia, in a statement here welcomed the decision of the State Bank of India's reduction to reduce the lending rates for short-term loans up to one year. However, he said the attempt might not really satisfy the SSI entrepreneurs.

Though the SSI sector contributed 7 per cent to the GDP and the sector came under priority sector lending by banks, he has pointed out that the quantum of credit given to this sector is far below the actual needs.

It is estimated that the total advances given to the sector is Rs 49,700 crore for the annual SSI production value of Rs 6,90,522 crore.

However, the percentage of bank credit to production has been 7, whereas the credit given to non-SSI sector has been Rs 3,47,200 crore.

He has further said that the cost of credit in India is quite high compared to other Asian countries. Even in China, the rate of interest varied from 4 per cent to 8 per cent.

SSI Associations in the country have been demanding that the Reserve Bank of India (RBI) and the Union Finance Ministry should earmark a sub-allocation of 20 per cent for SSI sector, in the priority sector lending of 40 per cent.

Currently most of the export packing credit has been added by commercial banks into the priority sector lending to fulfil 40 per cent limit without extending the real benefit to majority of the SSI units who are non-exporters.

He has demanded that the RBI announce a separate PLR for SSI units, which can be at 7 per cent to 8 per cent. The tiny sector units should however be given 2 per cent less than the PLR, to help the growth of SSI sector.

He has further pointed out that most of the commercial banks shied away from lending to small- scale units. In this connection, the RBI should give immediate relief to SSI units by announcing effective credit delivery system.

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