<b>XIII LOK SABHA DEBATES, <i> Session II (Winter Session) </i> </b>
XIII LOK SABHA DEBATES, Session II (Winter Session) Wednesday, December 22, 1999/Pausa 1, 1921 (Saka )

Title: Discussion on the Small Industries Development Bank of India (Amendment) Bill, 1999. (Bill passed).

1852 hours


"That the Bill to amend the Small Industries Development Bank of India Act, 1989, be taken into consideration."

This Bill is neither a surprise nor is it complicated. It is a very simple Bill. I had promised in my Budget speech of 1998-99 in this House that SIDBI will be delinked from IDBI and make it an independent body. This Bill contains a provision to delink SIDBI from IDBI. The main features of the proposed amendments are:

Enhance the authorised capital of SIDBI from existing Rs.250 crore to Rs.1,000 crore with an enabling provision for further increase up to Rs.2,000 crore.

Enlarge the shareholders base of SIDBI by enabling IDBI to transfer at least 51 per cent of equity share capital of SIDBI held by IDBI to public sector banks, insurance companies and such other institutions owned or controlled by the Central Government.

Enable SIDBI to offer up to 49 per cent of its shareholding to public

Restructure the Board of Directors and empower the Board of Directors of SIDBI to exercise the powers relating to borrowings, acceptance of deposits and investment of surplus funds.

Empower the General Body of shareholders for appointment of Auditors, approval of rate of dividend and approval of annual accounts.

Empower SIDBI to reduce its share capital with prior approval of Central Government and to issue redeemable preference shares and/or to convert part of its existing share capital into redeemable preference shares.

Enable SIDBI to meet the entire refinance requirements of State Financial Corporations and State Industrial Development Corporations.

These are the provisions which have been included in the Bill. I submit that this Bill be taken up for consideration.

MR. SPEAKER : Motion moved:

"That the Bill to amend the Small Industries Development Bank of India Act, 1989, be taken into consideration."

SHRI MOINUL HASSAN (MURSHIDABAD): Mr. Speaker Sir, there was a principle when financial institutions like that of SIDBI was established. I would like to recollect that principle of the Small Industries Development Bank of India. I would like to quote:

"....for the purpose of promoting, financing and development of industrial concerns in the small scale sector and for coordinating the functions of the institutions engaged in promoting, financing or developing the industrial concerns and for matters connected therewith."

In this situation, I would like to say, to some extent, that the performance of SIDBI is not up to the mark today. The hon. Finance Minister has already mentioned in his Budget speech that SIDBI would be delinked from IDBI. Delinking of SIDBI from IDBI is a long pending demand from different quarters. Everybody wants to look SIDBI as an independent financial institution in our country because it should play a more effective role in the overall development of small scale industries in our country. I suppose this independent position of SIDBI would raise resources in a big way in the domestic as well as international markets.

I have gone through the Bill. There is a new provision to strengthen the small scale industries through SIDBI. The hon. Finance Minister has also told in a similar way.

I would like to say something about the small scale industries based on a report submitted by the SIDBI. I suppose the hon. Finance Minister had published that report. That report claims that SSI in our country is expected to grow by 8.5 per cent by 1999-2000, employment is expected to grow by 4.5 per cent by March, 2000 and it will be 18.30 millions within this stipulated period. I think this is very ambitious. But it may come true or may not become true because everybody knows about the recession which is going on in the Indian industry for the last two years. What is the position of unemployment in the country? There are nearly four crores of registered unemployed youth. Small scale industries and employment generation are closely linked. Everybody knows the present situation about employment market. What is going on in that market? Traditional PSUs are closing down day-by-day and large number of employees who are working in the PSUs are becoming unemployed. They, alongwith other unemployed people, are standing in queue in front of employment exchanges.

19.00 hrs.

In this situation, the setting up of a new SSI, through the SIDBI, to provide some relief is very much required. I suppose the SIDBI will do this in a proper manner. It will take into account the grave situation of unemployment faced by the Indian youth. It will also take into account those who are becoming unemployed every day. We find only a long queue which is becoming bigger and bigger every day in front of the Employment Exchanges. The SIDBI should take the initiative to invest the SSI with powers and it should promote the SSIs wherein the unemployed youth can take up some jobs throughout the country. The SIDBI should take the initiative through direct investment. It should also take the initiative through refinancing. So far as the SSIs are concerned, they are covering the sectors of textiles, food processing, printing, engineering and these types of SSIs are suffering from shortage of resources. In this situation, I would like to request the hon. Finance Minister to help them. The SIDBI should take into consideration certain things. It should promote this sector properly in a big way.

I would like to go through the performance that the SIDBI has performed during the last couple of years. So far as refinance is concerned, it is an important sector. The SIDBI refinances banks, State Financial Corporations, SIDC and so on. I would like to raise this point because, I suppose, there is a lacuna. There is a difference between sanction and disbursement.

Now, I would like to mention here only two or three data so far as the State Financial Corporations are concerned. In 1996-97, sanction was Rs.1310.03 crore and the disbursement was Rs.883.69 crore. So far as 1997-98 is concerned, Rs.1158.05 crore was the sanctioned amount and the disbursement was only Rs.835.57 crore. The point is that the disbursement is on the lower side. Sanction is on the higher side. Of course, disbursement also increased but it is on the lower side. I would like to say here that suitable policies must be framed to meet the demands of the primary lending institutions. Refinance availed by the banks, SFCs and the SIDC is not up to the mark. So, the SIDBI should take care of it.

There is another point. It is about the development of the backward areas. SIDBI should do a lot to develop the backward areas throughout the country. I do not want to go into the details of what type of backward areas are in our country. I would like to say that the loan sanctions and disbursements should improve in order to help the backward areas. It is now declining so far as the percentage is concerned. In 1997-98, it was 33.8 per cent of the total amount sanctioned by the SIDBI. In 1996-97, it was 37 per cent. In absolute terms, the amount has increased but percentage-wise it is declining. The Government should look into the matter properly.

Another important section of SIDBI is the resource support to the institution. I suppose the resource support institutions are engaged in promotion and development of small-scale industries in our country. What is the performance of SIDBI in this area? In 1996-97, the amount sanctioned was Rs. 1,406.06 crore and only Rs. 660.53 crore were disbursed. In 1997-98, the amount sanctioned was Rs. 1,447.70 crore and Rs. 677.70 crore were disbursed. It is marginally high. I request the hon. Minister of Finance to take care of this situation.

There is ample scope to do it in a big way for further development of small-scale industries. It is an important sector where SIDBI should provide resource support for the institutions, that is, those institutions which are engaged in promotion and development of the small-scale industries. That is the Project Finance Scheme. I have seen the Report. The Project Finance Scheme has declined. I do not know the reasons but it is declining. It was 28.8 per cent in 1997-98 and 13.8 per cent during 1996-97. Both under `sanctioned' and `disbursement' heads, it is declining.

I will not take much time of the House. But I would like to say that there is ample scope to strengthen the State Financial Corporations on behalf of the SIDBI. There is also an ample scope to strengthen SIDBI. Hon. Minister of Finance has already announced it in his speech also. So, I would like to conclude my speech by supporting this Bill.

SHRI V.P. SINGH BADNORE (BHILWARA): Sir, I rise to support the Bill. I think, it is a welcome Bill that SIDBI gets an entity of its own. It should have been done quite a few years ago. There are only two or three points that I want to put on record. Number one is that there are a lot of sick industries in the small-scale sector. It was required that some sort of an agency, that is, of the type of BIFR should be there to look after, revamp, reorganise and rehabilitate them. That was missing for a long time. I do not know if the hon. Minister will make SIDBI also responsible to be an agency to look after the sick small-scale industries.

The other thing is that a lot of small industries, which come up in the rural areas are by the side of the highways. It may be National Highways. It might also be big district roads. You know that environment problem comes in. The National Highways are already over-polluted with the industries coming up next to them. That is another problem. You have been travelling abroad. You must have noticed that one does not see any industry on the `freeways'. They are all put quite a few kilometres away. You go to Jaipur or you go from Baroda to Ahmedabad. The industries are on both sides of the highways. Why should a small industry be on the roadside of the National Highways polluting the already polluted National Highways and big roads.

I hope this would also be considered. I would request the hon. Minister to consider having two Members of Parliament as Directors of SIDBI also.

Thank you very much.

SHRI P.H. PANDIYAN (TIRUNELVELI): Hon. Speaker Sir, I submit my views on the Small Industries Development Bank of India (Amendment) Bill, 1999.

Sir, the enhancement of authorised capital of SIDBI from Rs.250 crore to Rs.1000 crore with an enabling provision for further increase to Rs.2,000 crore. In clause 45, there is a protection accorded under this Act.

"45. No suit or other legal proceeding shall lie against the Small Industries Bank, Chairman or any Director or any officer or other employee of such Bank or any other person authorised by that Bank to discharge any functions under this Act for any loss or damage caused..."

How will we know whether he acted in good faith or bad faith. Rs.2000 crore, without any accountability, if this House is voting to establish a new bank, it is quite unheard of. There should be a controlling provision to control the Chairman or Director.

The Finance Minister knows how the nationalised banks are in a mess. Are we able to recover the dues? Now, here the small industries obtain loans, start a small industry and they do not repay. They resort to State Financial Corporation Act. They file a petition. It is being dragged and they do not pay, normally... (Interruptions)

SHRI M.V.V.S. MURTHI (VISAKHAPATNAM): You have to think about their sickness.

SHRI P.H. PANDIYAN : Who is healthy? Normally, they go by sickness. After getting the money, they become sick. Before getting the money, they healthy. There are so many small industries which have received loans and have not repaid. So, if this amount of Rs.2000 crore, even sums drawn from General Insurance Corporation of India and LIC, etc. that is intended for social projects for rural sector, is appropriated by the Small Industries Development Bank of India without any penal provision, without any restraint or constraint, will the Finance Minister move this Bill? How is he going to help the development of small industries?

There are banks. Now, every bank is empty and he is going to start another bank. This is also going to be empty. So I appeal to the hon. Finance Minister to reconsider this. I would like to know whether this bank is necessary at this juncture. Maybe for small industries it is drafted well because it is being drafted by the Law Department. But, will it achieve a purpose?... (Interruptions)

SHRI M.V.V.S. MURTHI : Sir, he should not condemn it as a whole.

SHRI P.H. PANDIYAN : The object sought to be achieved will not be achieved. So, I appeal the hon. Finance Minister, at least, to screen the borrowers. There should be a provision before this clause 45 and there should be a Screening Committee as to whom the loan should be given and the antecedents of the borrowers are to be verified. Now, he has said about `good faith'. Here he says, `whether the officials have acted in good faith?'

In clause 45 it is stated:

"...to discharge any functions under this Act for any loss or damage caused or likely to be caused by anything which is in good faith done or intended to be done in pursuance of this Act or any other law or provision having the force of law."

Now, whether the borrower acted in good faith while applying for loan, in receiving the money or in repaying the money, there should be a clause. Let there be an amendment moved by the hon. Minister to correct it.

I support the idea but not the contents.

SHRI M.V.V.S. MURTHI (VISAKHAPATNAM): Mr. Speaker, Sir, though it is belated, it is one of the best things that the Finance Minister is doing in this Session. I congratulate him for having considered the development of the small scale industries in India.

Today, the Indian economy is mostly dependent on small scale industries and agriculture. Nobody can deny that. All the big industries have gone to the hands of the multinational companies. They are not in our hands. Whatever little number of big industries that we are having, most of them are in default. One big industry defaults Rs.1,000 crore, and another big industry defaults Rs.2,000 crore. We have to look into that aspect. Compared to that, the risk factor in respect of small scale industries is very much limited. Even if somebody defaults, the loss to the bank is only a few crores of rupees. But when you reap good things, you will have good fruits out of the small scale industries. So, I suggest that the Minister can increase the share capital to Rs.5,000 crore and not limit it to Rs.2,000 crore by making a provision for going up to Rs.5,000 crore. So, initially it can subscribe to Rs.1,000 crore. Afterwards, the Minister need not come again for making it to Rs.5,000 crore.

A few crores of small scale industries are there all over India. In every State, there are a few lakhs of small scale industries. Why are they becoming sick today? I can tell you that it is because they have not been provided in time either with the share capital or the working capital or the term loan.

I beg to differ with my previous speaker, Shri P.H. Pandiyan on one thing. There is a difference between the other banks and SIDBI. This is a development bank, a share-capital issue bank. This is a bank which promotes the industry; whereas the other banks give only the working capital. If that working capital is not being properly utilised, then there is no further limit. Either they have to pay or close the industry. That is why, many of the small scale industries located in Tamil Nadu, Andhra Pradesh or in other parts of the country are being closed down. So, the distinction between a development bank and a commercial bank has been drawn very carefully by the hon. Finance Minister here. So, the risk factor here is scattered. More beneficiaries are going to be benefited. The country is going to depend ultimately on the small scale industries only.

Technology-wise, ours is a developing country. India is not a developed country. A developing country has to depend on the small scale industries and not on the large industries. The large industries are only in the hands of the multinationals.

So, I support this Bill. I would like to tell the hon. Finance Minister one thing that in the last Budget he has promised to give some sops to the small scale industries which are located in the rural areas. I think, that is yet to come. Again, next Budget is coming. I am sure that the rural small scale industries are looking forward to the Finance Minister and hope that he would give some concessions in Central Excise and Sales Tax matters. Sales tax is a State subject. As far as the Central Excise is concerned, they are hoping that some sops would be provided to rural small scale industries. I am sure that the hon. Finance Minister will fulfil his promise along with the passing of this Bill.

With these few words, I congratulate the hon. Finance Minister and I fully support this Bill.

THE MINISTER OF FINANCE (SHRI YASHWANT SINHA): Mr. Speaker, Sir, I am grateful to the hon. Members for the all-round support that this Bill has received from this House.

MR. SPEAKER: Now, you have to thank them.

SHRI YASHWANT SINHA: Sir, as was rightly mentioned by the hon. Members, the basic purpose of this Bill is to ensure that the small scale industries in this country prosper. SIDBI has a major refinance role. Therefore, we are increasing the capital base of SIDBI four-fold with a further provision that we can further have one hundred per cent increase from Rs.1,000 crore to Rs.2,000 crore, if that were to become necessary.

Now, a few specific points have been raised. This is found general acceptance from all sections of the House. The basic purpose of the Bill is not in question. One or two issues have been raised by hon. Members. One is in regard to sanctions and disbursements. I find from the figures that I have that in 1998-99, as far as sanctions are concerned, the growth was 18.6 per cent; and as far as disbursements are concerned, the growth was 19.9 per cent. These are quite impressive growths despite the fact that there were recessionary conditions and the economy was in a slow down phase in 1998-99, but small scale industries were doing well.