'Banks not implementing loan scheme in true spirit'

The small industries association here has accused financial institutions of not implementing Union Finance ministry's instruction to sanction loans upto Rs 7.5 lakh to Small and Medium Enterprises without security.

The small industries association here has accused financial institutions of not implementing Union Finance ministry's instruction to sanction loans upto Rs 7.5 lakh to Small and Medium Enterprises without security.

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The Coimbatore District Small Industries Association (CODISSIA) president, C Muthusami said that though Union Finance Minister P Chidambaram had announced that loans should be sanctioned upto Rs.7.5 lakh without insisting on security, the financial institutions were not implementing this in the "true spirit".

He demanded that the working capital loans should be liberally sanctioned on the basis of the projected turnover. The credit flow from banks and other financial institutions should be timely, adequate and at affordable rates, he said.

Nationalised Banks should have representatives from small scale industry associations as members in their Advisory Committees, he demanded.

Considering the significant increase in the cost of raw materials, labour, power cuts and resultant increase in the cost of end products, the association requested that SSI exemption limit be increased to Rs three crore. Excise duty may be fixed at 50 per cent of the normal duty for a turnover from Rs.Three crore to Rs.Four crore and 75 per cent duty from Rs four crore to Rs five crore, Muthusami said.

Moreover the lending rates to SSIs were higher than that of larger units, even though they were treated as priority sector. Bank interest rates should be restricted to eight per cent to ensure competitiveness, he said.