1

Small Enterprises

1.1.1 

Small (manufacturing) Enterprises

Enterprise engaged in the manufacture/production or preservation of goods and whose investment in plant and machinery (original cost excluding land and building and the items specified by the Ministry of Small Scale Industries vide its notification No. S.O. 1722(E) dated October 5, 2006 as furnished in Annexure I) does not exceed Rs. 5 crore

1.1.2

  Small (service) Enterprises

Enterprise engaged in the providing/rendering of services and whose investment in equipment (original cost excluding land and building and furniture, fittings and other not directly related to the service rendered or as may be under the Micro, Small and Medium Enterprises Development, (MSMED), Act 2006) does not exceed Rs. 2 crore.

1.2.1 

   Micro (manufacturing) Enterprises
Enterprise engaged in the manufacture/production or preservation of goods and whose investment in plant and machinery (original cost excluding land and building and such items as in 1.1.1) does not exceed Rs. 25 lakh, irrespective of the location of the unit. 

1.2.2 

Micro (service) Enterprises

Enterprise engaged in the providing/rendering of services and whose investment in equipment (original cost excluding land and building and furniture, fittings and such items as in 1.1.2) does not exceed Rs. 10 lakh.

1.3.1

Medium (manufacturing) Enterprises

Enterprise engaged in the manufacture/production or preservation of goods and whose investment in plant and machinery (original cost excluding land and building and the items specified by the Ministry of Small Scale Industries vide its notification No. S.O. 1722(E) dated October 5, 2006) is more than Rs. 5 crore but does not exceed Rs. 10 crore.

1.3.2

Medium (service) Enterprises

Enterprise engaged in the providing/rendering of services and whose investment in equipment (original cost excluding land and building and furniture, fittings and such items as in 1.1.2) is more than Rs. 2 crore but does not exceed Rs. 5 crore.

The small and micro (service) enterprises shall include small road & water transport operators, small business, professional & self-employed persons and all other service enterprises.

Bank's lending to medium enterprises will not be included for the purpose of reckoning under priority sector.

1.4

Khadi and Village Industries Sector (KVI)

All advances granted to units in the KVI sector, irrespective of their size of operations, location and amount of original investment in plant and machinery. Such advances will be eligible for consideration under the sub-target (60 per cent) of the small enterprises segment within the priority sector.

1.5.1

 Persons involved in assisting the decentralised sector in the supply of inputs and marketing of outputs of artisans, village and cottage industries.

1.5.2

  Advances to cooperatives of producers in the decentralised sector viz.   artisans, village and cottage industries.

1.5.3

 Existing investments as on March 31, 2007, made by banks in special   bonds issued by NABARD with the objective of financing exclusively non- farm sector may be classified as indirect finance to Small Enterprises sector till the date of maturity of such bonds or March 2010, whichever is earlier. Investments in such special bonds made subsequent to March 31, 2007 will, however, not be eligible for such classification.

1.5.4

Deposits placed with SIDBI by foreign banks, having offices in India, on account of non-achievement of priority sector lending targets/sub-targets and outstanding as on April 30, 2007 would be eligible for classification as indirect finance to Small Enterprises sector till the date of maturity of such deposits or March 31, 2010, whichever is earlier. However, fresh deposits placed by banks' on or after April 30, 2007 with SIDBI on account of non-achievement of priority sector lending targets/sub-targets would not be eligible for classification as indirect finance to Small Enterprises Sector.

 1.5.5 

 Loans granted by banks to NBFCs for on-lending to small and micro enterprises (manufacturing as well as service)

 1.
1.1

INVESTMENTS
SECURITIZED ASSETS
Investments made by banks in securitised assets, representing loans to various categories of priority sector, shall be eligible for classification under respective categories of priority sector (direct or indirect) depending on the underlying assets, provided the securitised assets are originated by banks and financial institutions and fulfil the Reserve Bank of India guidelines on securitisation. This would mean that the bank's investments in the above categories of securitised assets shall be eligible for classification under the respective categories of priority sector only if the securitised advances were eligible  to be classified as priority sector advances before their securitisation.

1.2

Outright purchases of any loan asset eligible to be categorised under priority sector, shall be eligible for classification under the respective categories of priority sector (direct or indirect), provided the loans purchased are eligible to be categorised under priority sector; the loan assets are purchased (after due diligence and at fair value) from banks and financial institutions, without any recourse to the seller; and the eligible loan assets are not disposed of, other than by way of repayment, within a period of six months from the date of purchase.

1.3

Investments by banks in Inter Bank Certificates (IBPCs), on a risk sharing basis, shall be eligible for classification under respective categories of priority sector, provided the underlying assets are eligible to be categorised under the respective categories of priority sector and are held for at least 180 days from the date of investment.

Section III

Targets for priority sector lending by DOMESTIC commercial banks (excluding RRBs)

1.

1.1

1.2

1.3

(a)

(b)

2.

2.1.1

Foreign banks are expected to enlarge credit to priority sector and ensure that priority sector advances (which includes the Small Enterprises sector) constitute 32 per cent of Adjusted Net Bank Credit (ANBC) or credit equivalent amount of Off-Balance Sheet Exposure, whichever is higher.

2.1.2

Within the overall target of 32 per cent to be achieved by foreign banks, the advances to small enterprises sector should not be 10 per cent of the adjusted net bank credit (ANBC) or credit equivalent amount of Off-Balance Sheet Exposure, whichever is higher.

2.1.3

(a)

(b)

In order to ensure that credit is available to all segments of the Small Enterprises sector, banks should ensure that :-

40 per cent of the total advances to small enterprises sector should go to micro (manufacturing) enterprises having investment in plant and machinery up to Rs. 5 lakh and micro (service ) enterprises having investment in  equipment up to Rs. 2 lakh;

20 per cent of the total advances to small enterprises sector should go to micro (manufacturing) enterprises with investment in plant and machinery above Rs. 5 lakh and up to Rs. 25 lakh, and micro (service) enterprises with investment in equipment above Rs. 2 lakh and up to Rs. 10 lakh. (Thus 60 per cent of small enterprises advances should go to the micro enterprises)

[The net bank credit should tally with the figures reported in the fortnightly return submitted under section 42(2) of the Reserve Bank of India Act, 1934. Outstanding deposits under the FCNR (B) and NRNR Schemes are excluded from net bank credit for computation of priority sector lending target/ sub-targets. However, as the NRNR scheme has been discontinued, the existing accounts under NRNR account scheme may be continued only up to the date of maturity as advised vide circular DBOD. DIR. BC. 93/13.01.09/2001-02 dated April 29, 2002.]

3.

DEPOSIT by Foreign Banks WITH SIDBI towards shortfall in priority sector lending

3.1

3.2

The foreign banks having shortfall in lending to stipulated priority sector targets /sub-targets will be required to contribute to Small Enterprises Development Fund (SEDF) to be set up by Small Industries Development Bank of India (SIDBI), or for such other purpose as may be stipulated by Reserve bank of India.

For the purpose of such allocation, the achievement level of priority sector lending as on the last reporting Friday of March of the immediately preceding financial year will be taken into account.

3.3

The corpus of SEDF shall be decided by Reserve Bank of India on a year-to-year basis. The tenor of the deposits shall be for a period of three years or as decided by Reserve Bank from time to time. Fifty percent of the corpus shall be contributed by foreign banks having shortfall in lending to priority sector target of 32 per cent of ANBC or credit equivalent amount of Off-Balance Sheet Exposure, whichever is higher, on a pro-rata basis. The balance fifty per cent of the corpus shall be contributed by foreign banks having aggregate shortfall in lending to Small Enterprises sector and export sector of 10 per cent and 12 per cent respectively, of ANBC or credit equivalent amount of Off-Balance Sheet Exposure, whichever is higher, on a pro-rata basis. The contribution required to be made by foreign banks would, however, not be more than the amount of shortfall in priority sector lending target/sub-target of the foreign banks.

3.4

3.5

The concerned foreign banks will be called upon by SIDBI/or such other institution as may be decided by Reserve Bank, as and when funds are required by them, after giving one month's notice.

The interest rates on foreign banks' contribution, period of deposits, etc. shall be fixed by Reserve Bank of India from time to time.

3.6.

Non-achievement of priority sector targets and sub-targets will be taken into account while granting regulatory clearances/approvals for various purposes.

[ANBC or credit equivalent of Off-Balance Sheet Exposures (as defined by Department of Banking Operations and Development of Reserve Bank of India from time to time) will be computed with reference to the outstanding as on March 31 of the previous year. For this purpose, outstanding FCNR (B) and NRNR deposits balances will no longer be deducted for computation of ANBC for priority sector lending purposes For the purpose of priority sector lending, ANBC denotes NBC plus investments made by banks in non-SLR bonds held in HTM category. Investments made by banks in the Recapitalisation Bonds floated by Government of India will not be taken into account for the purpose of calculation of ANBC. Existing investments, as on the date of circular RPCD.No.Plan. BC.84/04.09.01/2006-07 dated April 30, 2007, made by banks in non-SLR bonds held in HTM category will not be taken into account for calculation of ANBC, up to March 31, 2010. However, fresh. investments by banks in non-SLR bonds held in HTM category will be taken into account for the purpose. Deposits placed with NABARD/SIDBI, as the case may be, in lieu of non-achievement of priority sector lending targets/sub-targets, though shown under Schedule 8 –'Investments' in the Balance Sheet at item I (vi)- 'Others', will not be treated as investment in non-SLR bonds held under HTM category. For the purpose of calculation of credit equivalent of off-balance sheet exposures, banks may use current exposure method. Inter-bank exposures will not be taken into account for the purpose of priority sector lending targets/sub-targets.]

1

.Disposal of ApplicationsAll loan applications for SSI up to a credit limit of Rs. 25,000/- should be disposed of within 2 weeks and those up to Rs. 5 lakh within 4 weeks provided the loan applications are complete in all respects and accompanied by a 'check list'.

2

3.

4.

Specialised SME branches

Public sector banks have been advised to open at least one Specialised branch in each district. Further banks have been permitted to categorise their SME general banking branches having 60% or more of their advances to MSME sector in order to encourage them to open more specialised SME branches for providing better service to this sector as a whole. As per the policy package announced by the Government of India for stepping up credit to MSME sector, the public sector banks will ensure specialized SME branches in identified clusters/centres with preponderance of small enterprises to enable the entrepreneurs to have easy access to the bank credit and to equip bank personnel to develop requisite expertise. The existing specialised SSI branches may be also be redesignated as SME branches. Though their core competence will be utilized for extending finance and other services to MSME sector, they will have operational flexibility to extend finance/render other services to other sectors/borrowers

5.

After the enactment of the Micro, Small and Medium Enterprises Development (MSMED), Act 2006, the existing provisions of the Interest on Delayed Payment Act, 1998 to Small Scale and Ancillary Industrial Undertakings, have been strengthened as under:

(i)The buyer to make payment on or before the date agreed on between him and the supplier in writing or, in case of no agreement before the appointed day. The agreement between seller and buyer shall not exceed more than 45 days.

(ii)The buyer fails to make payment of the amount to the supplier, he shall be  liable to pay compound interest with monthly rests to the supplier on the amount from the appointed day or, on the date agreed on, at three times of the Bank Rate notified by Reserve Bank.

(iii)For any goods supplied or services rendered by the supplier, the buyer shall be liable to pay the interest as advised at (ii) above.

(iv)In case of dispute with regard to any amount due, a reference shall be made to the Micro and Small Enterprises Facilitation Council, constituted by the respective State Government.

6.

Guidelines on rehabilitation of sick SSI units (based on Kohli Working Group recommendations)

As per the definition, a unit is considered as sick when any of the borrowal account of the unit remains substandard for more than 6 months or there is erosion in the net worth due to accumulated cash losses to the extent of 50% of its net worth during the previous accounting year and the unit has been in commercial production for at least two years.  The criteria will enable banks to detect sickness at an early stage and facilitate corrective action for revival of the unit.  As per the guidelines, the rehabilitation package should be fully implemented within six months from the date the unit is declared as potentially viable/viable.  During this six months period of identifying and implementing rehabilitation package banks/FIs are required to do “holding operation” which will allow the sick unit to draw funds from the cash credit account at least to the extent of deposit of sale proceeds

Following are broad parameters for grant of relief and concessions for revival of potentially viable sick SSI units:

(i)  Interest on Working Capital - Interest 1.5% below the prevailing fixed/ prime lending rate, wherever applicable

(ii)  Funded Interest Term Loan - Interest Free

(iii) Working Capital Term Loan - Interest to be charged 1.5% below the prevailing fixed / prime lending rate, wherever applicable

(iv) Term Loan - Concessions in the interest to be given not more than 2 % (not more than 3 % in the case  of tiny / decentralised sector units) below the document rate.
(v) Contingency Loan Assistance - The Concessional rate allowed for Working Capital Assistance

7.

State Level Inter Institutional Committee

In order to deal with the problems of co-ordination for rehabilitation of sick small scale units, State Level Inter-Institutional Committees (SLIICs) have been set up in all the States.  The meetings of these Committees are convened by Regional Offices of RBI and presided over by the Secretary, Industry of the concerned State Government.  It provides a useful forum for adequate interfacing between the State Government Officials and State Level Institutions on the one side and the term lending institutions and banks on the other.  It closely monitors timely sanction of working capital to units which have been provided term loans by SFCs, implementation of special schemes such as Margin Money Scheme of State Government, National Equity Fund Scheme of SIDBI, and reviews general problems faced by industries and sickness in SSI sector based on the data furnished by banks.  Among others, the representatives of the local state level SSI associations are invited to the meetings of SLIIC which are held quarterly.  A sub-committee of SLIIC looks into the problems of individual sick SSI unit and submits its recommendations to the forum of SLIIC for consideration.

8.

 Empowered Committee on MSMEs

As part of the  announcement made by the Union Finance Minister,  at the Regional Offices of Reserve Bank of India, Empowered Committees on MSMEs have been constituted under the Chairmanship of the Regional Directors with the representatives of SLBC Convenor, senior level officers from two banks having predominant share in MSME financing in the state, representative of SIDBI Regional Office, the Director of Industries of the State Government, one or two senior level representatives from the MSME/SSI Associations in the state, and a senior level officer from SFC/SIDC as members. The Committee will meet periodically and review the progress in MSME financing as also rehabilitation of sick Micro Small and ME units. It will also coordinate with other banks/financial institutions and the state government in removing bottlenecks, if any, to ensure smooth flow of credit to the sector. The committees may decide the need to have similar committees at cluster/district levels.

9.

Debt Restructuring Mechanism for MSMEs

 As part of announcement made by the Hon'ble Finance Minister for stepping up credit to small and medium enterprises, a debt restructuring mechanism for units in MSME sector has been formulated by Department of Banking Operations & Development of Reserve Bank of India and advised all commercial banks vide circular DBOD. BP. BC. No. 34 / 21.04.132/ 2005-06 dated September 8, 2005. These detailed guidelines have been issued to ensure restructuring of debt of all eligible small and medium enterprises. These guidelines would be applicable to the following entities, which are viable or potentially viable:

a) All non-corporate MSMEs irrespective of the level of dues to banks.

b) All corporate MSMEs, which are enjoying banking facilities from a single bank, irrespective of the level of dues to the bank.

c) All corporate MSMEs, which have funded and non-funded outstanding up to Rs.10 crore under multiple/ consortium banking arrangement.

d) Accounts involving wilful default, fraud and malfeasance will not be eligible for restructuring under these guidelines.

f) Accounts classified by banks as “Loss Assets” will not be
eligible for restructuring.
For all corporate MSMEs, which have funded and non-funded outstanding of Rs.10 crore and above, Department of Banking Operations & Development has issued separate guidelines vide circular DBOD. No.BP. BC.45/ 21.04. 132/2005-06 dated November 10, 2005.

 10

Cluster Approach

60 clusters have been identified by the Ministry of Micro, Small and Medium Enterprises, Government of India for focused development of Small Enterprises sector. All SLBC Convenor banks have been advised to incorporate in their Annual Credit Plans, the credit requirement in the clusters identified by the  Ministry of Micro, Small and Medium Enterprises, Government of India.

As per Ganguly Committee recommendations banks have been advised that a full-service approach to cater to the diverse needs of the SSI sector may be achieved through extending banking services to recognized SME clusters by adopting a 4-C approach   namely, Customer focus, Cost control, Cross sell and Contain risk. A cluster  based approach  to lending may be more beneficial:

i. in dealing with well-defined and recognized groups;

ii. availability of appropriate information for risk assessment and

iii. monitoring by the lending institutions.  

Clusters may be identified based on factors such as trade record, competitiveness and growth prospects and/or other cluster specific data.

11

Government of India, Ministry of Micro, Small and Medium Enterprises has conveyed their approval for continuation of the Credit Linked Capital Subsidy Scheme(CLCSS) for Technology Upgradation of Micro and Small Enterprises from X Plan to XI Plan (2007-12) subject to the following terms and conditions:

i. Ceiling on the loan under the scheme is Rs. 1  crore.

ii. The rate of subsidy is 15% for all units of micro and small enterprises upto loan ceiling at Sr. No. (i) above.

iii. Calculation of admissible subsidy will be done with reference to the purchase price of plant and machinery instead of the term loan disbursed to the beneficiary unit.

iv. SIDBI and NABARD will continue to be the implementing agencies for the scheme

Policy Package for stepping up credit to Small and Medium Enterprises

The small-scale industries (SSI) produce about 8000 products, contribute 40% of the industrial output and offer the largest employment after agriculture. The sector, therefore, presents an opportunity to the nation to harness local competitive advantages for achieving global dominance. In recognition of these aspects, the National Common Minimum Programme makes the following declarations for accelerating  the development of small-scale sector.
“Household and artisanal manufacturing will be given greater technological, investment and marketing support. Small–scale industry will be freed from Inspector Raj and given full credit, technological and marketing support. Infrastructure upgradation in major industrial clusters will receive urgent attention.”

2. From SSI to SME: Defining the New Paradigm

2.1 Government policy as well as credit policy has so far concentrated on manufacturing units in the small-scale sector. The lowering of trade barriers across the globe has increased the minimum viable scale of enterprises. The size of the unit and technology employed for firms to be globally competitive is now of a higher order. The definition of small-scale sector needs to be revisited and the policy should consider inclusion of services and trade sectors within its ambit. In keeping with global practice,. there is also a need to broaden the current concept of the sector and include the medium enterprises in a composite sector of Small and Medium Enterprises (SMEs). A comprehensive legislation, which would enable the paradigm shift from small-scale industry to small and medium enterprises under consideration of Parliament. The Reserve Bank of India, had meanwhile set up an Internal Group which has recommended:

“Current SSI/tiny industries definition may continue. Units with investment in plant and machinery in excess of SSI limit and up to Rs.10 crore may be treated as Medium Enterprises (ME). The definition may be reviewed after enactment of the Small and Medium Enterprises Development Bill. Only SSI financing will be included in Priority Sector.”
2.2 It is proposed to accept the recommendation with regard to the credit facilities being offered by the banking sector and accordingly request the Reserve Bank  of India to advise the banks to frame a policy for enhancing the flow of credit to both small and  medium enterprises, within the overall framework of credit policy of banks to small and medium enterprises.

2.3. The challenges being faced by the small and medium scale sector may be briefly set out as follows-
a. Small and Medium Enterprises (SME), particularly the tiny segment of the small enterprises have inadequate access to finance due to lack of financial information and non-formal business practices. SMEs also lack access to private equity and venture capital and have a very limited access to secondary market instruments.
b.SMEs face fragmented markets in respect of their inputs as well as products and are vulnerable to market fluctuations.
c.SMEs lack easy access to inter-state and international markets.
d.The access of SMEs to technology and product innovations is also limited. There is lack of awareness of global best practices.
e.SMEs face considerable delays in the settlement of dues/payment of bills by the large scale buyers.
With the deregulation of the financial sector, the ability of the banks to service the credit requirements of the SME sector depends on the underlying transaction costs, efficient recovery processes and available security. There is an immediate need for the banking sector to focus on credit and finance requirements of SMEs.

3. Measures to increase the quantum of credit to SMEs at the right price

3.1Public Sector Banks will be advised to fix their own  targets for funding SMEs in order  to achieve a minimum 20% year on year growth in credit to SMEs. The objective isto double the flow of credit from Rs.67,600 crore in 2004-05 to Rs.135,200 crore to the SME sector by 2009-10, i.e. within a period of 5 years.

3.2 Public Sector Banks will be advised to follow a transparent rating system with cost of credit being linked to the credit rating of the enterprise.

3.3 SIDBI in association with Credit Information Bureau(India) Ltd. (CIBIL)will expedite setting up a credit rating agency.

3.4 SIDBI in association with Indian Banks’ Association (IBA) would collect and pool common data on risk in each identified cluster and develop an IT-enabled application, appraisal and monitoring system for small (including tiny) enterprises. This would help reduce transaction cost as well as improve credit flow to small (including tiny) enterprises in the clusters.  

3.5 The National Small Industries Corporation has recently introduced a Credit Rating Scheme for encouraging SSI units to get themselves credit rated by reputed credit rating agencies. Public Sector Banks will be advised to consider these ratings appropriately and as per availability, and structure their rates suitably. 

3.6 SIDBI has developed a Credit Appraisal & Rating Tool (CART) as well as a Risk Assessment Model (RAM) and a comprehensive rating model for risk assessment of credit proposals for SMEs. Public sector banks will be  advised to take advantage of these models as appropriate and reduce their transaction costs.

4. Outreach of Formal Credit: Opening of New Accounts
The commercial banks (including regional rural banks) with over 67,000 branches, will make concerted efforts to provide credit cover on an average to at least 5 new tiny,small and medium enterprises at each of their semi urban/urban branches per year.

5. Nursing the Sick Units Back to Health: Debt Restructuring

Reserve Bank will issue detailed guidelines relating to debt restructuring mechanism so as to ensure restructuring of debt of  all eligible small and medium enterprises at terms which are not less favourable than the Corporate Debt Restructuring(CDR) mechanism in the banking sector. The restructuring would follow upona request to that effect from the borrowing unit. All accounts, except those classified as ‘loss assets’ will be eligible for restructuring, provided the industrial units are viable or potentially viable.

Based on the Reserve Bank’s guidelines, banks may formulate, with the approval of their Boards of Directors, more liberal policies relating to restructuring of accounts. Until the banks formulate their own policies, Reserve Bank’s guidelines will be operative. 

A one-time settlement scheme to apply to small-scale NPA accounts in the books of the banks as on March 31, 2004 will be introduced.The scheme will be in force upto March 31, 2006.

6. Facilitative Measures
 Reserve Bank had issued a detailed master circular on March 2005 on the time to be taken for disposing of loan applications of SSI units, the limit up to which banks are obliged to grant collateral-free and composite loans, norms for computation of working capital credit limits to SSI units, opening of atleast one specialized SSI branch in each district, etc. Taking these guidelines as indicative minimum, banks will formulate a comprehensive and more liberal policy relating to advances to SME sector. Untill the banks formulate such a policy, the extant instructions of Reserve Bank will be applicable to advances granted or to be granted by banks to SME units.

7. Credit Guarantee Fund Trust Scheme for Small Industries(CGTSI)
At present, Member Lending Institutions (MLIs), like banks, are provided guarantee cover of 75% of the amount of default by CGTSI,I respect of term loan and/or working capital facilities up to Rs.25 lakh extended by the MLIs to new and existing SSI units/IT/software units/small scale service business enterprises (SSSBEs), without collateral security and/or third party guarantee. One-time guarantee fee of 2.5% and annual service fee of 0.75% of the credit facility sanctioned are currently charged by CGTSI from the MLIs. In order to reduce the cost of guarantee to the weaker segments of the borrowers, particularly tiny units, the CGTSI will be advised to reduce the one-time guarantee fee from 2.5% to 1.5% for all (i) loans up to Rs.2 lakh, (ii) eligible women entrepreneurs, and (iii) eligible borrowers located in the North Eastern regions (Sikkim) and Jammu & Kashmir. Further, public sector banks will be encouraged to absorb the annual service fee in excess of 0.25% in respect of guarantee for all (i) loans up to Rs.2 lakh, (ii)eligible women entrepreneurs, and (iii) eligible borrowers located in the North Eastern regions(Sikkim) and Jammu & Kashmir. 

8. Cluster based approach
Cluster based approach for financing SME sector offers possibilities of reduction of transaction costs and mitigation of risk. About 388 clusters have already been identified. Cluster based approach  now be treated as a thrust area. Banks will increasingly adopt the cluster-based approach for SME financing. To broaden the financing options for infrastructure development in clusters through public private partnership, SIDBI will formulate a scheme in consultation with the stakeholders.

SIDBI has already initiated the process of establishing Small Enterprises Financial Centres in select clusters. Risk profile of each cluster would be studied by a professional credit rating agency and such risk profile reports would be made available to commercial banks. Each lead bank of a district will consider adoption of atleast one cluster.

9. Setting up of Watchdogs: Monitoring and Review
The following supervisory arrangements will be ensured:

a. The existing institutional arrangements for review of credit to SSI sector like the Standing Advisory Committee in Reserve Bank of India and cells at the banks’ head office level as well as at important regional centres will be made more rigorous and regular. They will also  review the flow of credit to small (SSI) and medium enterprises.

b. At the Regional offices, the Reserve Bank will constitute empowered committees with the Regional Director of the Reserve Bank as the Chairman to review the progress in SME financing and rehabilitation of sick small (SSI) and medium units and to coordinate with other banks/financial institutions and the state governments in removing bottlenecks, if any, to ensure smooth flow of credit to the sector. The said Regional level committees may decide on the need to have similar committees at cluster/district levels.

c. The banks will ensure specialized SME branches in identified clusters/centres with preponderance of small enterprises to enable the entrepreneurs to have easy access to the bank credit and to equip bank personnel to develop requisite expertise. The existing specialised SSI branches may be also be redesignated as SME branches.

d. Boards of banks will be advised to review the progress in achieving the self-set targets as also rehabilitation and restructuring of SME accounts on a quarterly basis to ensure that the required emphasis is given to this sector.
e.For wider dissemination and easy accessibility, the policy guidelines formulated by Boards of banks as well as instructions/guidelines issued by Reserve Bank will be displayed on the respective websites of Public Sector Banks as well as website of SIDBI. The banks would also be advised to prominently display all the facilities/schemes offered by them to the small entrepreneurs at each of their branches.