The Telegraph
Since 1st March, 1999
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Sidbi gets a breather

New Delhi, Aug 19: The government today announced that it was deferring payment of all interest by the Small Industries Development Bank of India (Sidbi) on bonds issued by it for a period of 10 years. It also announced a package on SSI loan refinance which could bring down lending rates to the sector by 2 per cent.

This deferment, which totals Rs 1,740 crore, will help Sidbi implement a restructuring of finances of the state financial corporations (SFCs) that have run up huge non-performing assets while lending to the small-scale sector, minister of state for finance Anandrao Adsul said in the Lok Sabha today.

The government also announced Sidbi will reduce outstanding loans of SFCs by 2 per cent as well as the rate of interest on future loans by 2 per cent. It has also agreed to a moratorium of one year on repayment of existing dues from SFCs.

The benefits of these measures calculated at Rs 900 crore will be used to help restructure SFCs as well as be passed on to future small-scale borrowers. Loans to SSI units can now be expected to come down by 2 per cent, said top finance ministry officials.

SFCs have also been advised to bring down their NPAs to less than 10 per cent and to downsize — both the recommendations may be tough for state governments, who run the SFCs, to implement.

However, officials admitted that an earlier expert committee set up to study sickness in SFCs had suggested that some Rs 3,600 crore be pumped into the sector by the government and the current package fell far short of that.

“It is a political move which could help the SSIs by reducing their financing costs but may not really reviatlise SFC,” officials admitted.

The government is keen to give a set of sops to the SSI sector ahead of elections this winter as it is under pressure to dereserve 30-40 more sectors currently reserved for the small-scale industries by next year’s budget.

The government has been trying to stall on dereservation ever since the Sangh parivar ideologues and BJP MPs started pointing out that quick dereservation could create industrial wastelands in northern India, BJP’s political support base.

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