The Hindu Business Line : ‘SSI share in bank credit falling’

The share of credit flow to small scale industries from public sector banks have been steadily declining since early nineties. Lending to SSI sector accounted for 16.1 per cent of bank credit in 1991 and has declined to 8.5 per cent in 2006, according to a report on Access to Finance, Raw Material and Marketing prepared by the National Commission for Enterprises in the Unorganised Sector (NCEUS).

According to the report that studies bank credit trends over the past few decades, “in the sixties and seventies the SSI sector was a preferred route of financing for the commercial banks. However, since 1992, there had been a steady and drastic fall in the share of bank credit to small scale industries.”

‘Diluted’ Priority

This, the report says, is mainly on account of a dilution of the priority sector lending programmes of the banks.

It further points out that during fiscal 2005-06, the total credit disbursement by all the scheduled commercial banks was Rs 14,45,837 crore.

Out of this, 31.73 per cent amounting to Rs 4,58,818 crore were credit extended to large industries that account for 50 per cent of total industrial production.

On the other hand, credit to small scale industries that account for the other 50 per cent of total industrial production was a meagre 6.24 per cent amounting to Rs 90,239 crore.

The report also points out that total priority sector lending (agriculture, SSI, housing and transport operations) during 2005-06 by all the scheduled commercial banks stood at 35.27 per cent as against the stipulated 40 per cent.