Though Budget 1998-99 does not spell out measures or revival of sick units directly, there are measures announced in the Budget aimed at the overall growth of SSI sector which, inter-alia, will be instrumental in combating the incidence of sickness. It is a fact that inadequacy and delay in credit to SSI sector ultimately renders the SSI units sick. In 1998-99 Budget, a number of initiatives have been proposed to overcome credit problems such as:-
- Working capital limit enhanced to Rs. 5 crores
- Enhanced powers to bank managers of specialised bank branches
- Delinking SIDBI from IDBI
- Strengthening the mechanism for discounting bills
- Amendment to The Interest on Delayed Payments Act
These measures would accelerate the flow of credit and keep a check on the incidence of sickness.
RBI had set up a one man Committee under the Chairmanship of Shri. S.L.Kapur, former Secretary (SSI&ARI), to look into various problems, germane to credit flow to SSI sector and suggest appropriate measures for their redressal. The Committee in is report submitted to RBI had, inter-alia, recommended the following so that sick SSIs are rehabilitated quickly :-
- The definition of sick SSI unit may be changed to read as under:-
- If any one of the borrowal accounts of the unit remains sub- standard for six months i.e. principal or interest in respect of any of its borrowal accounts has remained overdue for a period exceeding one year
- There is erosion in the net worth due to accumulated losses to the extent of minimum 50% of peak net worth during the previous accounting year and
- The unit has been in commercial production for at least three years.
- Branches/benches of SLIICs could be established in Districts having large concentration of SSIs. Besides, potentially viable sick units should be dealt with by separate specialised branches as far as possible for the purpose of rehabilitation.
- To encourage banks to take up rehabilitation of potentially viable sick SSIs some relaxation in Income Recognition and Asset Classification norms should be provided. A period of one year both for the additional exposure as well as old outstanding advances, to such SSI units should be permitted and these facilities treated as standard advanced for a period of one year whereafter the classification should be changed depending upon the record of recovery.The recommendations are under examination by RBI.