The Hindu Business Line : SIDBI asks Centre to `redefine' SMEs

THE Small Industries Development Bank of India has recommended to the Government a definition of `medium enterprise' and a revised definition of `small enterprise', the SIDBI Chairman and Managing Director, Mr V.K. Chopra, told Business Line today.

The recommendations regarding definition of SMEs assume significance in the context of the Finance Minister Mr Jaswant Singh's statement that banks should lend to the small and medium enterprises at two percentage points below their prime lending rate. So, if the banks have to lend to SMEs at `PLR minus 2 per cent', what is an SME?

Mr Chopra did not want to disclose what SIDBI had recommended to the Government, as "it is yet to be approved."

At present, there is no definition of a `medium enterprise'. A small-scale unit is defined as one that has invested less than Rs 1 crore in plant and machinery. Some special units, such as export oriented ones, also come under the definition of `small-scale', if their investment in plant and machinery is less than Rs 5 crore.

However, the small-scale industry is not impressed either with the possible changes in definition of what a small unit is, or the inflow of cheaper funds into SIDBI's coffers.

"The point is not availability of money, but the willingness to lend," says Mr DE Ramakrishnan, President, Industrial and Financial Reconstruction Association for Small and Tiny Enterprises (INFRASTE), a body that represents the SSI sector.

A definition may bring in more units under the ambit of `small scale industry'. But the "PLR minus two per cent" directive from the Finance Minister anyway applies only for loans up to Rs 50,000, which is too small an amount to make a meaningful difference.

Small scale units still pay "usurious rates" for their loans, Mr Ramakrishnan said. Even the best of units pay as high as 12 per cent on their long-term loans.

"Bringing more units under the definition of small industries or earmarking funds for lending to them does not mean milk and honey for the SSIs," says Mr Ramakrishnan.

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