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Journalism of Courage
MUMBAI, June 1: The decision to delink Small Industries Development Bank of India (SIDBI) from Industrial Development Bank of India (IDBI) will bring more focus to financing of small scale industries sector. The Union budget for 1998-99 has announced the transfer of IDBI stake in SIDBI to Reserve Bank of India, along with a score of other measures meant to boost SSI sector.
This was also one of the key recommendations made by the Khan committee for harmonising the role and operations of DFIs and banks. The committee had recommended the transfer of IDBI stake in SIDBI to RBI and mould the latter in the role of a nodal agency for SSI sector, similar to the role played by National Bank of Agriculture and rural development (NABARD) for agricultural credit.
The budget has also endorsed the other recommendation made by Khan committee regarding the transfer of IDBI’s stake in various state finance corporations.
The committee had recommended the "transfer of IDBI stakes in various state lending institutions toSIDBI and give nodal/co-ordinating agency status to the latter for financing of small and medium industries". On the future ownership, role and status of SIDBI, the committee had said: "Since the credit requirements of small-scale industries are being taken care of by SIDBI, it would be desirable to transfer the present share holding of IDBI in state lending institutions to SIDBI. It should be vested with the overall responsibility for enacting policy and procedural guidelines with regard to the operations of SFCs," the report says.
It said that SIDBI should be accorded the status of a nodal agency for financing of small scale industries along the lines of Nabard in the field of agricultural development. As a corollary to this, the committee has recommended that the ownership of SIDBI should also be transferred to RBI. At present, SIDBI is a wholly-owned subsidiary of IDBI.
"SIDBI’s role in state level institutions should be as stake holder as well as resource provider. For this purpose, SIDBI should haveaccess to assured sources of concessional funding from RBI," the report said. The budget, however, was silent on some of the other major suggestions on SSI sector made by Khan committee like public listing of stronger state financial corporations and merger of various state level lending institutions.
Another recommendation, which did not find a place in the budget announcement, is to bring state lending institutions under the supervisory ambit of RBI.
