Rationale:

SSI units particularly the first generation of entrepreneurs faced difficulties in accessing bank credit because of their inability to provide adequate collateral security for loans. Considering this, the Government launched the Credit Guarantee Fund Scheme for Small Industries on 30th August, 2000 with a view to alleviating the problem of collateral security and impediment to flow of credit to Small Scale Industries (SSI) sector.

Background:

The Government approved Credit Guarantee Fund Scheme for Small Industries on 19th May, 2000 with the objective of making available credit to SSI units, particularly tiny units, for loans up to Rs. 10 lakhs without collateral/third party guarantees. The Scheme is being operated by the Credit Guarantee Trust Fund for Small Industries (CGTSI) set-up by Government of India and SIDBI. The Trust was incorporated on 27.7.2000. The Scheme has been operationalised with effect from 1st January, 2001. Subsequently, the Government decided to increase the eligibility limit of loans to be guaranteed from Rs. 10 lakhs to Rs. 25 lakhs. Necessary modifications have been carried out in the indenture of the Trust to enable CGTSI to guarantee loans up to Rs. 25 lakhs and to provide for counter guarantees to other institutions.

Salient Features of the Scheme:

1. Eligibility and Coverage

Any collateral free credit facility (both in terms of loan as well as working capital) extended by lending institutions on or after 1st June, 2000 to new as well as existing manufacturing SSI units, including Information Technology and Software Industry, particularly in the tiny sector, with a credit cap of Rs. 25 lakhs per operating unit, can be extended guarantee cover. With effect from September 1, 2003, the credit facilities up to Rs. 25 lakhs sanctioned without collateral security and/or third party guarantee by the lending institutions to the new and existing Small Scale Service and Business (Industry Related) Enterprises ( SSSBEs) have also been made eligible for coverage under the scheme. Any credit facility which has been sanctioned by the lending institution against collateral security and/ or third party guarantee, however, is not eligible for guarantee cover under the scheme. The guarantee cover available is up to 75% of the loans extended by the lending institutions. The Guarantee cap per borrower is Rs. 18.75 lakh. The rate of interest that can be charged to the borrower by the lending institution shall not be more than 3% over the prime lending rate of the lending institution.

2. Guarantee and Annual Service Fee

The lending institutions availing guarantee from the Trust have to pay one time guarantee fee of 2.5% of the credit facility sanctioned and the service charges of 1% per annum on the outstanding loan amount as on 31st March each year.

3. Commencement of guarantee cover

The guarantee cover will commence from the date of payment of guarantee fee and shall run through the agreed tenure of the term credit in respect of term credit/composite credit. Where working capital alone is extended to the eligible borrower, the guarantee cover shall be for a period of 5 years or a block of 5 years, or for such period as may be specified by the Trust in this behalf.

4. Invocation of guarantee

1. The lending institution may invoke the guarantee in respect of eligible credit facility if the following conditions are satisfied:

(i) The guarantee in respect of that credit facility is in force;
(ii) The lock-in period of 24 months from either the date of last disbursement of the loan to the borrower or the date of payment of the guarantee fee in respect of credit facility to the borrower, whichever is later, has elapsed;
(iii) The amount due and payable to the lending institution in respect of the credit facility has not been paid and the dues have been classified by the lending institution as Non Performing Assets. Provided that the lending institution shall not make or be entitled to make any claim on the Trust in respect of the said credit facility if the loss in respect of the said credit facility has occurred owing to action/decisions taken contrary to or in contravention of the guidelines issued by the Trust;
(iv) The loan facility has been recalled and the recovery proceedings have been initiated under due process of law.

2. The trust shall pay 75 per cent of the guaranteed amount on preferring of eligible claim by the lending institution, within 30 days, subject to the claim being otherwise found in order and complete in all respects. The balance 25 per cent of the guaranteed amount will be paid on conclusion of recovery proceedings by the lending institution.

5. Eligible Institutions

All scheduled commercial banks and Regional Rural Banks (categorized under "sustainable viability") or such of those institutions as may be directed by GOI. As on 31tst March 2004, 45 eligible institutions comprising 26 Public Sector Banks, 10 Private Sector Banks, 6 Regional Rural Banks and 3 other institutions viz. National Small Industries Corporation Ltd. (NSIC), North Eastern Development Finance Corporation Ltd. (NEDFi) and Small Industries Development Bank of India (SIDBI) have become Member Lending Institutions (MLIs) of CGTSI for participating under the Credit Guarantee Scheme.

6. Contribution to the Corpus Fund of CGTSI

The Government of India and SIDBI contribute towards the corpus fund of the CGTSI in the ratio of 4: 1. The Trust was set-up with an initial corpus of Rs.125 crore, which was enhanced to Rs. 250 crore by the end of FY 2001-02 and to Rs.427.02 crore by the end of FY 2002-03. The corpus fund was further raised to Rs. 686.19 crore during the FY 2003-04. With a view to augment the corpus so as to make the scheme self-sustaining, a budgetary provision of Rs.196.29 crore has been made by the Government during the current FY 2004-05. At present, the corpus fund is of Rs.767.44 crore.

7. Progress of Credit Guarantee Scheme

As on 31st July, 2004, a total of 16,679 proposals have been approved by CGTSI and guarantee cover provided for credit aggregating Rs.280.18 crore.

Modifications in the Scheme of Integrated Infrastructural Development (IID):

OFFICE OF THE DEVELOPMENT COMMISSIONER (SSI)
Ministry of SSI, Agro & Rural Industries
Govt. of India
Nirman Bhavan (South Wing), 7^th Floor,
Maulana Azad Road, New Delhi 110011

No.18(57)/03-IID Dated, the December 5, 2003.

To

The Secretary (Industries),

All States/UTs

Subject: Integrated Infrastructural Development (IID) Scheme for the Development of Small Scale and Tiny Units.

Sir,

With a view to streamline the implementation of IID scheme, this Office gathers feedback from the Implementing Agencies of various State Governments. On the basis of the information received, we carry out review of the scheme as and when required. Recently, Development Commissioner (SSI) reviewed the implementation of the scheme with the Senior Officers of the SIDBI. After a detailed discussion on various issues, the following decisions were taken to facilitate the setting up of IID centers:

1. Appraisal Fee - SIDBI, being the only authorized agency to conduct techno-economic appraisal of the proposals, is authorized to charge half per cent of the cost as appraisal fee. Some of the Implementing Agencies had requested that this fee should be limited to the model estimated project cost of Rs. 5 crores. SIDBI has agreed to charge half per cent of the project cost as appraisal fee limited to maximum of rupees two and a half lakhs for a project.


2. Time Frame for appraisal of the Proposals - Some of the Implementing Agencies had reported that SIDBI takes a long time to complete appraisal and submission of the report to the Office of the DC(SSI). It has now been decided that SIDBI will complete the appraisal work in a period of two months. In cases where the IID proposals are found deficient in some respect, the Implementing Agencies shall be informed immediately and the Office of the DC(SSI) shall be kept informed.

You may kindly note the above decisions and bring it to the notice of all concerned.
 

OFFICE OF THE DEVELOPMENT COMMISSIONER (SSI)
Ministry of SSI, Agro & Rural Industries
Govt. of India
Nirman Bhavan (South Wing), 7^th Floor,
Maulana Azad Road, New Delhi 110011

No.18(57)/2003-IID Dated, the 24th November, 2003

To

All Secretary (Industries),

All States/Uts.

Subject: Implementation of the Integrated Infrastructural Development (IID) Scheme - reg.

Sir,

You may be aware that IID Scheme for small scale industries is in operation since 1994. Under the Scheme an IID Centre is estimated to cost Rs.5.00 crores (excluding cost of land), the Central Government provides grant upto Rs.2.00 crores (upto Rs.4.00 crores in case of North-East, J&K, Himachal Pradesh and Uttranchal) and the remaining amount may be obtained as loan from SIDBI, equity from State Governmnet or the internal funds of the Implementing Agencies. SIDBI has been provided imprest money to release grant and loan in the ratio of 2:3. This provision created an impression that the loan portion has to come only from SIDBI and not from other banks/financial institutions. The High Powered Committee in its meeting held on 06-10-03 considered the matter and clarified that the loan portion may be obtained from any bank/financial institutions, as considered feasible by the Implementing Agencies. SIDBI will, however, continue to provide loan to the Implementing Agencies which opt for this kind of funding pattern. It has also been clarified by the H.P.C. that once the project is declared as feasible, the SIDBI will not insist on the guarantee from the State Governments.

2. You are requested to note the above and formulate the proposals for setting up IID Centres in your State accordingly.

(K.S. Ludu)

Addl. Development Commissioner

*************

State-wise list of IID centres:

1. Scheme in brief:
   
   In pursuance to the Industrial Policy measures for promoting and strengthening small and tiny village enterprises announced on 6th August, 1991, the Integrated Infrastructural Development (IID) Scheme was launched in 1994. The Scheme covers districts which are not covered under the Growth Centres Scheme. The aim of the IID Scheme is to provide developed sites with infrastructural facilities like power distribution network, water, telecommunication, drainage and pollution control facilities, roads, banks, raw materials, storage and marketing outlets, common service facilities and technological back up services etc. The Scheme covers rural as well as urban areas with a provision of 50% reservation for rural areas and 50% industrial plots are to be reserved for tiny sector.The Scheme also provides for upgradation/strengthening of the infrastructural facilities in the existing old industrial estates.
   
   Under the Scheme, concerned State/ Union Territory Governments or a good NGO having a sound financial position are required to select suitable sites, firm up the project proposals and get the project appraised from SIDBI. The High Powered Committee under the Scheme in the Ministry of SSI & ARI, Govt. of India considers the proposals only after recommendation of SIDBI becomes available.
   
   The estimated cost to set up an IID Centre is Rs. 5.00 crores (excluding cost of land). Central Government provides 40% to a maximum of Rs.2.00 crores as grant and remaining amount could be loan from SIDBI/Banks/Financial Institutions or the State funds.



2. Special dispensation for NE Region (including Sikkim), J&K, H.P and Uttaranchal :
   
   With a view to give a fillip to the growth of small industries in the North East Region, Govt. of India relaxed the funding pattern of this Scheme for North East Region (including Sikkim) J&K, H.P. and Uttaranchal . As per revised funding pattern Govt. of India provides central grant up to 80% to a maximum of Rs.4.00 crores and the remaining amount could be loan from SIDBI/ Banks/ financial institutions or the State funds. Such agencies should have good track record and sound financial position.


3. Progress:
   
   Till the 30.06.2004, the Central Government has approved the setting up of 92 Centres in various States including 13 for upgradation of old industrial estates central grant of Rs. 73.25 crores has been released (in full or a part) to 57 Centres up to 30.06.2004. The budget allotted for the Scheme for 2004-2005 is Rs.15.45 crores.

STATE-WISE LIST OF IID CENTRES as on 30.06.2004