Of RBI’s policy measures for credit

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: The RBI governor has just announced the mid-term review of monetary and credit policy. We would like to know if there is any implication for small industries. Importantly, small industry has not been able to get much-needed funding, even though it is covered under the priority sector. And with the move by all agencies to club medium enterprises with small ones, would this not mean a further squeeze in funds for the smaller SSIs?
—- Ashwini Mehandru, Greater Noida Industries Association

The mid-term review by RBI contains several important observations and guidelines for banks to increase the flow of funds to the small-scale sector.

The RBI governor has, for the first time, put on record his observation on the perception that there is under-pricing of credit for large corporates, while there could be overpricing of lending to the agriculture sector and to small and medium enterprises (SMEs).

He has questioned the current practice of fixing benchmark prime lending rates (BPLRs) and has indicated that a review of the current system is required to bring in transparent guidelines.

Second, RBI has provided banks with the flexibility to fix their own targets for financing the SME sector.

It has also asked banks to formulate liberal and comprehensive policies for extending loans to SMEs and to rationalise the cost of such loans. The cost of funds is to be linked to credit ratings.

Additionally, an internal working group, chaired by CS Murthy, set up to review the priority sector targets and sub-targets, has brought out a technical paper for wider circulation. This has been placed in the public domain and can be accessed at http://www.rbi.og.in.

Third, RBI has drafted a one-time settlement scheme for recovery of non-performing assets (NPAs) below Rs 10 crore for SME accounts. RBI has also formulated a debt restructuring mechanism for SMEs, in line with the prevailing corporate debt restructuring (CDR) mechanism in the banking sector.

Finally, it has now been clarified that units with investment in plant and machinery in excess of the small-scale industries (SSI) limit (Rs 1 crore in most cases) and up to Rs 10 crore, would be treated as Medium Enterprises (ME).

It has also been clarified that only SSI financing would be included in priority sector lending (not the financing to MEs). This should allay the fears of the smaller segment of SMEs—that entry of medium enterprises would squeeze fund flow earmarked for SSIs.

Besides, RBI has asked banks to make concerted efforts to provide credit cover to at least five new small/medium enterprises per year on an average, at each of their semi-urban/urban branches. It has also advised banks to adopt the cluster-based approach for financing SMEs and to ensure presence of specialised SME bank branches in identified clusters/centres.

RBI has also constituted empowered committees at its regional offices to review and monitor the progress in SME financing as well as the rehabilitation of sick SSI and ME units, to facilitate and ensure smoother flow of credit.

We want to import second-hand generators from Russia. But we have been getting conflicting answers on whether this can be done. Kindly clarify.
— Amit Agarwal, Bhavnagar, Gujarat

Import of second-hand generators was open till recently.

The director-general of foreign trade has now placed this item on a restricted list. This is to bring it on par with capital goods such as photocopiers, laptops, computers and air conditioners, which can be imported only against a licence.

I plan to open a retail provision store in Dehra Dun with an investment of over Rs 50 lakh. I want to know the details of barcoding and stock management, sales & billing and software solutions for such a store. Could you please help?
—-Vinod K Gupta, (guptavinodk@gmail.com)

Barcoding is one of the IT tools used for automatic data capture. As opposed to manual data entry, which is tedious and prone to error, it enables data capture with near 100% accuracy and in micro-seconds. Barcodes are represented through a series of black bars and white spaces and printed as part of the product/consignment packaging (source marking). Barcoded labels (stickers) are generally pasted or attached as tags to items/consignments.

Barcodes can be used to represent information related to product attributes or supplementary ones—batch number, manufacturing/expiry dates, consigner/consignee, etc. When International Numbering Standards are used as symbology, it enables universal and unique identification of companies and their products/consignments. For more details on bar coding and financial assistance available from the DCSSI’s office, you may visit http://www.smenetwork.net/marketing/barcode.htm.