Lending to small scale industry; A N Z Grindlays Bank plc

Abstract

The Small Scale Industry Sector is a very vibrant sector of the economy and contributes more than 35 % of the total industrial’ production. It has a major presence in exports. There is an acute shortage of Working. Capital finance to SSI sector. The gap between requirement and availability of bank credit is wide. Reserve Bank of India is very serious ‘about commercial banks, both Indian and foreign, meeting their priority sector targets, especially towards lending to Small Scale Industry. Time and again, it has threatened banks with “bank specific penal measures" on non-achievement of these targets. The priority sector target for foreign banks is 32 % of their Net Bank Credit. There are sub targets of 10 % each for SSI and export lending. In case of not meeting the targets, banks have to deposit the balance with SIDBI at 10% pa. Almost all the foreign banks are facing difficulties in meeting Priority Sector targets. In June” 1993, they had defaulted to the tune of Rs. 549 Crores and deposited the same with SIDBI. Most of the foreign banks are targeting on exports to meet their priority sector targets. For SSI sub target, discounting the supply bills of small-scale suppliers to large scale industry is the most popular method with the foreign banks.