The Hindu Business Line : RBI proposes `cluster approach' on SSI credit

WITH a view to enhance flow of credit to the SSI sector, the Reserve Bank of India has asked banks to adopt a "cluster-based" approach to cater to the diverse needs of small and medium enterprises.

A full-service approach to meet the needs of this sector may be achieved by extending banking services to recognised clusters by adopting a 4-C approach, namely, customer focus, cost control, cross-sell and contain risk, the apex bank said in a circular to the chiefs of all commercial banks.

Based on the recommendations of the working group on the flow of credit to the SSI sector, under the chairmanship of Dr A.S. Ganguly, the RBI has said a cluster-based approach to lending may be more beneficial in dealing with well-defined and recognised groups and will improve availability of information for risk assessment and monitoring by lending institutions. Clusters should be identified based on factors such as trade record, competitiveness and growth prospects and or other cluster-specific data. Apart from the 60 clusters identified by the Government for focused development of SSIs, banks must identify new ones.

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