Small Scale Industries highly contribute to a country’s GDP making it tremendously beneficial for the economy. The Indian government has many schemes in the favour of these SSI Units. However, many SSI units fail to succeed and are categorised as sick units. This is where the Rehabilitation of Sick Units Scheme comes into the picture.
The Rehabilitation of Sick Units Scheme is an attempt to help revive sick SSI units before they become irrecoverable. This scheme provides timely loans that can help a sick unit meet its payment obligations and enables banks to take action at an early stage for revival of these units.
How does a Sick Industrial Unit benefit from this scheme?
A Sick Industrial Unit benefits from this scheme in the following ways:
- The scheme provides term loan for purchase of fixed assets and loan for working capital* through a single agency. (The total working capital requirement of such units is inclusive of all fund-based facilities. This has to be taken into account while determining the working capital facility that is eligible for refinance.)
- No interest on the interest amount for up to three years from the date of commencement of implementation of the rehabilitation programme.
- Reduction in rate of interest in term loans up to 3% in the case of tiny/decentralised sector units and by not more than 2% for other SSI units.
- Principal dues may be treated as irregular to the extent of its drawing power. This amount may be funded as Working Capital Term Loan (WCTL) with a repayment schedule not exceeding 5 years.
- The rate of interest applicable may be 1.50% to 3% points below the prevailing fixed rate or prime lending rate, wherever applicable, to all sick SSI units including tiny and decentralised units.
- Cash losses are likely to be incurred in the initial stages of the rehabilitation programme till the unit reaches the break-even level.
- Interest may be charged on the funded amount at the rates prescribed by SIDBI under its scheme for rehabilitation assistance.
- Interest on working capital may be charged at 1.5% below the prevailing fixed or prime lending rate wherever applicable. Additional working capital limits may be extended at a rate not exceeding the prime lending rate.
- For meeting escalations in capital expenditure to be incurred under the rehabilitation programme, banks/financial institutions may provide, where considered necessary, appropriate additional financial assistance up to 15% of the estimated cost of rehabilitation by way of contingency loan assistance.
- Interest on this contingency assistance may be charged at the concessional rate allowed for working capital assistance.
- Banks may provide the loan for start-up expenses, while margin money assistance may either come from SIDBI under its Refinance Scheme for Rehabilitation or should be provided by State Government where it is operating a Margin Money Scheme.
- Interest on fresh rehabilitation term loan may be charged at a rate 1.5% below the prevailing fixed or prime lending rate wherever applicable or asby SIDBI / NABARD where refinance is obtained from it for the purpose.
- Promoter’s contribution towards the rehabilitation package is fixed at a minimum of 10% of the additional long-term requirements under the rehabilitation package in the case of tiny sector units and at 20% of such requirements for other units. In the case of units in the decentralized sector, promoter’s contribution may not be insisted upon.
- At least 50% of the above promoters’ contribution should be brought in immediately and the balance within six months.
- Banks should incorporate a ‘Right of Recompense’ clause in the sanction letter and other documents to the effect that when such units turn the corner and rehabilitation is successfully completed, the sacrifices undertaken by the financial institutions and banks should be recouped from the units out of their future profits/ cash accruals.
What is the eligibility criteria for this scheme?
A Sick Unit is eligible for this scheme if it falls in the following categories:
- The SSI unit should be a “sick” unit as per RBI definition. Please refer to this link for the complete definition.
- It is based on the bank’s conviction that the unit is capable of being restored to normal health within a reasonable time.
How can Sick units apply to this scheme?
SSI units can apply for this scheme by visiting the website of the individual banks and financial institutions for the required application forms.
For instance, the form to be filled for applying to Andhra Pradesh State Financial Corporation can be availed by clicking here.
What are the documents required to apply for this scheme?
The documents and forms which needs to be submitted by the applicant is listed on the websites of the respective bank/financial institute.
List of participating institutions
List of institutions offering the scheme are as follows:
State Financial Corporations
- Andhra Pradesh State Financial Corporation
- Assam Financial Corporation
- Bihar State Financial Corporation
- Delhi Financial Corporation
- Gujarat State Financial Corporation
- Maharashtra State Financial Corporation
- Haryana State Financial Corporation
- Himachal Pradesh Financial Corporation
- Jammu and Kashmir State Financial Corporation
- Karnataka State Financial Corporation
- Kerala Financial Corporation
- Madhya Pradesh Financial Corporation
- Orissa State Financial Corporation
- Punjab Financial Corporation
- Rajasthan Financial Corporation
- Tamil Nadu Industrial Investment Corporation Limited
- Uttar Pradesh Financial Corporation
- West Bengal Financial Corporation
State Industrial Development Corporations / State Industrial Investment Corporations
- Andaman and Nicobar Islands Integrated Development Corporation Ltd.
- Andhra Pradesh Industrial Development Corporation Ltd
- Arunachal Pradesh Industrial Development and Financial Corporation Ltd
- Assam Industrial Development Corporation Ltd
- Bihar State Credit and Investment Corporation Ltd
- Economic Development Corporation of Goa, Daman and Diu Ltd.
- Gujarat Industrial Investment Corporation Ltd
- Haryana State Industrial Development Corporation Ltd.
- Himachal Pradesh State Industrial Development Corporation Ltd
- Industrial Promotion and Investment Corporation of Orissa Ltd.
- Jammu & Kashmir State Industrial Development Corporation Ltd.
- Karnataka State Industrial Investment Corporation Ltd.
- Kerala State Industrial Development Corporation Ltd.
- Madhya Pradesh State Industrial Development Corporation Ltd.
- Manipur Industrial Development Corporation Ltd.
- Meghalaya Industrial Development Corporation Ltd.
- Nagaland Industrial Development Corporation Ltd.
- Omnibus Industrial Development Corporation of Daman & Diu and Dadra and Nagar Haveli Ltd. [OIDC]
- Pondicherry Industrial Promotion and Investment Corporation Ltd.
- Pradeshya Industrial and Investment Corporation of Uttar Pradesh Ltd.
- Punjab State Industrial Development Corporation Ltd
- Rajasthan State Industrial Development and Investment Corporation Ltd
- Sikkim Industrial Development & Investment Corporation Ltd.
- State Industrial and Investment Corporation of Maharashtra Ltd
- State Industries Promotion Corporation of Tamil Nadu Ltd.
- Tripura Industrial Development Corporation Ltd.
- West Bengal Industrial Development Corporation Ltd
- Mizoram Industrial Development Corporation Ltd.
- Alegemene Bank Nederland N.V.
- Allahabad Bank
- American Express International Banking Corporation
- Andhra Bank
- Bank of America
- Banque Indosuez
- Bank of Bahrain and Kuwait B.S.C.
- Banque National De Paris
- Bank of Baroda
- Bareilly Corporation Bank Ltd.
- Bank of India
- Benaras State Bank Ltd.
- Bank of Madura Ltd.
- Bharat Overseas Bank Ltd.
- Bank of Maharashtra
- British Bank of the Middle East
- Bank of Nova Scotia
- Canara Bank
- Bank of Rajasthan Ltd.
- Catholic Syrian Bank Ltd.
- Bank of Tokyo Ltd.
- Central Bank of India
- Corporation Bank
- Dena Bank
- Deutche Bank
- Dhanalakshmi Bank Ltd.
- Emirates Commercial Bank Ltd.
- Federal Bank Ltd.
- Grindlays Bank
- Hongkong and Shanghai Banking Corporation
- Indian Bank
- Indian Overseas Bank
- Jammu and Kashmir Bank Ltd
- Karnataka Bank Ltd
- KarurVysya Bank Ltd.
- Kumbakonam City Union Bank Ltd
- Lakshmi Vilas Bank Ltd.
- Lord Krishna Bank Ltd.
- Mitsui Bank Ltd.
- Andhra Pradesh State Co-operative Bank Ltd
- Bihar State Co-operative Bank Ltd.
- Gujarat State Co-operative Bank Ltd.
- Karnataka State Co-operative Bank Ltd.
- Kerala State Co-operative Bank Ltd.
- Maharashtra State Co-operative Bank Ltd.
- Madhya Pradesh RajyaSahakari Bank Maryadit
- Manipur State Co-operative Bank Ltd.
- Meghalaya Co-operative Apex Bank Ltd.
- Orissa State Co-operative Bank Ltd.
- Punjab State Co-operative Bank Ltd.
- Rajasthan State Co-operative Bank Ltd.
- Tamil Nadu State Co-operative Bank Ltd.
- Uttar Pradesh Co-operative Bank Ltd.
- West Bengal State Co-operative Bank Ltd.
- Delhi State Co-operative Bank Ltd.
- Apex Co-operative Bank of Urban Banks of Maharshtra & Goa Ltd.
- Himachal Pradesh State Co-operative Bank Ltd
Other Scheduled Co-operative Banks:
- Abhyudaya Co-operative Bank Ltd.
- Bombay Mercantile Co-operative Bank Ltd.
- Cosmos Co-operative Bank Ltd.
- Kalupur Commercial Co-operative Bank Ltd.
- Rajkot Nagrik Sahakri Bank Ltd.
- Rupee Co-operative Bank Ltd.
- Sangli Urban Co-operative Bank Ltd.
- Saraswat Co-operative Bank Ltd.
- Surat Peoples Co-operative Bank Ltd.
- Shamrao Vithal Co-operative Bank Ltd.
- P. Mahesh Urban Co-operative Bank Ltd.
- The Ahmedabad Mercantile Co-op Bank Ltd.
- Akola Urban Co-operative Bank Ltd.
- The Akola Janata Commercial Co-operative Bank Ltd.
- The Khamgaon Urban Co-operative Bank Ltd.
- Nagpur Nagarik Sahakari Bank Ltd.
- Shikshak Sahakari Bank Ltd
For further details on this scheme, please click here.