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The SFCs have also been advised to bring down their non-performing assets to less than 10 per cent, along with moves to downsize their staff. The NPAs account for 60 per cent of the total assets.

New Delhi , Aug. 19

IN an effort to revitalise credit flow to the small-scale sector through state financial corporations (SFCs), the Government today unveiled a package that provides for a 200 basis-point reduction of interest on all outstanding loans of SFCs and a rebate of 2 percentage points on future refinance by the Small Industries Development Bank of India (SIDBI).

The package, which was laid in Parliament by the Minister of State For Finance, Mr Anandrao Adsul in the Lok Sabha, also allows for a moratorium of one year for repayment of all existing dues by SFCs.

To balance off the estimated Rs 900-crore impact on SIDBI due to the sops, the Government has decided to defer payment of all interest by SIDBI on SIDBI bonds for a period of 10 years. This will amount to deferment of payment of about Rs 1,740 crore in the ten years.

The SFCs have also been advised to bring down their non-performing assets to less than 10 per cent, along with moves to downsize their staff. NPAs of SFCs account for 60 per cent of the total assets, Mr Adsul said. "In view of the importance of SSI sector and the need for helping the small scale entrepreneur, the Central Government has advised SIDBI to go ahead with this revitalisation package," Mr Adsul said in a statement. SIDBI provides refinance support to 18 state financial institutions.

The Government had earlier constituted the Gupta Committee to look into the functioning of SFCs for their restructuring and revitalisation. The Committee had suggested that the Central Government, the Reserve Bank of India, SIDBI and the Industrial Development Bank of India (IDBI) should contribute Rs 3,600 crore for the recapitalisation of SIDBI and State financial corporations.

However, the Government later took the view that these agencies were not in a position to pool in the huge amount in view of their own financial constraints, Mr Adsul said.

He said that the SSI accounted for almost 95 per cent of the industrial units of the country, providing about 180 lakh jobs and contributing about 35 per cent of the country exports.

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