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Finance ministry asks SIDBI, PSU banks to expedite TUF scheme for SSIs
Arbind Gupta - Mumbai

The Union finance ministry has asked all the public sector banks co-opted by the Small Industries Development Bank of India (SIDBI) to take all necessary measures to enhance the acceptance/reach of the Technology Upgradation Fund Scheme (TUFS) in the SSI sector.

In a communique to all the PSU banks and SIDBI (the nodal agency for the SSI sector), the ministry has emphasised that banks involved in the process should give a greater attention to financing of small textile units for technology upgradation. The banks have been asked to apprise to the ministry the required action taken by them in this direction.

“It has been observed that though the commercial banks have a wider reach through their branch network, the credit off take under the TUF scheme is reportedly not very encouraging particularly in respect of SSI units,” says the official communique from the Department of Economic Affairs (Banking Division), ministry of finance.

“We have been taking steps to popularise the scheme. Our efforts towards streamlining the whole lending mechanism are on. Over the months, we have implemented quite a few measures to expedite the whole process by eliminating undue interferences,” said Mr Brij Mohan, executive director, SIDBI.

Commenting on the lukewarm response invoked by the SSI sector, Mr Mohan stated, “Things of late are looking up. But any attempt to activate the scheme to the desired level will call for demonstration of success by a few units. Only when, units see the positive impacts of the scheme, they will come forward for upgradation.”

Meanwhile, the technical advisory-cum-monitoring committee has brought about further changes in financing and technical norms to gear up the scheme. Besides allowing transfer of TUFS loan accounts between the banks/institutions as also offering greater freedom to the co-opted PLIs to have their own prudential norms for lending, the committee has approved TUFS proposals to become eligible under the deferred payment guarantee (DPG) scheme to facilitate purchase of capital equipment from machinery suppliers. The DPG in respect of rupee loan only will be covered under TUFS with effect from March 23, 2002. The margin money in case of equipment exclusively under DPG will be assumed as 20 per cent for the purpose of interest subsidy under the TUFS. However, in respect of cases involving both DPG and term loan, margin money can be taken based on the project cost excluding the DPG component.

The intending purchaser-user of indigenous/imported machinery in case not in a position to offer immediate full cash payment can approach the machinery manufacturer/local agent of foreign supplier seeking deferred payment facility.

SIDBI and its co-opted PLIs have so far disbursed around Rs 317.13 crore out of the total sanctioned amount of Rs 410.86 crore.