At a meeting with the Reserve Bank of India, Khadi and Village Industries Commission (KVIC) last week in Mumbai, banks have agreed to increase its credit to the khadi and village industries, commission chairman, Mahesh Sharma told PTI.

This is about 33.33 per cent higher than the credit of Rs 450 crore offered by the banks last year to these industries.

Sharma said bank credit to the sector, which has been dwindling, has picked up in the last couple of years.

The need for credit to the sector was also discussed at last week's meeting of Khadi Village Industries Board (KVIB), which was recently reconstituted after a gap of five years.

KVIC was hopeful that khadi and village industries would be part of the Rs 25,000 crore technology upgradation fund (TUF) for the textile sector, the KVIC chairman said.

A high powered committeegoing into TUF also asked the textiles ministry to accomodate the sector.

There was an urgent need to modernise the equipment used in the sector, which would require about Rs 1,000 crore, he said.

Sharma said KVIC had asked the Planning Commission for funds to the tune of Rs 5,600 crore during the Ninth Plan period, of which about Rs 1,993 crore has been sanctioned.

He said the government's recent decision to set up 100 rural clusters every year under the national programme for rural industrialisation (NPRI) has given a boost to rural industrialisation process.

KVIC is also planning to use the marketing outlets of khadi village industries in the process of implementation of NPRI.

He said the margin money scheme introduced by the KVIC for financing viable village industries projects would give added thrust to the rural industries projects for meeting their financial requirements.

According to the margin money scheme, introduced in 1995-96, KVIC and KVIB takes up implementation of projects up to aninvestment limit of Rs 25 lakhs.

Under this scheme, projects up to Rs 10 lakhs, including one cycle of working capital, 25 per cent of the project cost is provided as margin money.

For projects exceeding Rs 10 lakhs and less than Rs 25 lakhs the margin money is provied at the rate of 25 per cent for first Rs 10 lakhs and for the balance amount of the project cost, a margin money grant of 10 per cent is provided.