ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

A+| A| A-

Bank Credit to Small Industry


In 'Bank Credit and the Economy' (Money Market, September 23) there is reference to the steady decline in the share of small-scale industries in total non-food bank credit. While banks no longer display the same zeal and commitment as used to be evident in the 70s and 80s in lending to SSI and no doubt the overall share of SSI is coming down in the aggregate credit profile of banks for various reasons, EPW failed to mention the impact of frequent changes made by the political dispensation in the definition of SSI on the credit growth reported by banks to SSI. For example, there were two changes in the course of the past three years. When the definition was changed to include industries with investment in plant and machinery up to Rs 3 crore, there was a sharp increase in the amount of assistance by banks to SSI. This was because many industries which were classified as medium earlier were now shown as SSI. This was around 1996. When the cap on investment was brought down to Rs 1 crore towards the end of the last fiscal year, banks reported lower growth of credit to small industry, as many of the medium industries categorised as SSI post-1996 suddenly found themselves reclassified as medium industries again. The point I wanted to make is that unless one goes into these aspects, namely, the changing definition of SSI and how the banks classify their industry customers, and the integrity of the figures reported by banks is validated, it is very difficult to draw any precise conclusions.

M P Muralidharan

Dear Reader,

To continue reading, become a subscriber.

Explore our attractive subscription offers.

Click here

Back to Top