Procurement of Funds for Small Scale Industries in Rajasthan from Banks: Study of Nationalized Banks and Private Sector Banks

The Small-Scale Industries (SSI) gathered momentum along with industrialization and economic growth in India. It started growing due to the vision of our late Prime Minister Jawaharlal Nehru who sought to develop core industry and have a sustaining sector in the form of small-scale enterprises. Being a labor-intensive sector, they offer a higher productivity of capital than capital-intensive enterprises due to low investment per worker. The SSI today constitutes a very important segment of the Indian economy as they help in dispersal of industries, rural development, and the decentralization of economic power.Micro, Small and Medium enterprises (MSME) constitute the dominant form of business organization worldwide. For instance, 99% of enterprises in European Union and about 80% in USA were small enterprises. In India too, SSIs share is as high as 97%. Out of 42.12 million non-farm enterprises, 0.58 million are factory units. It is estimated that out of 5.8 lakh factory units, about 5 lakh are factory Small Scale Industries and Medium Enterprises as per the new definition of Micro Small and Medium Enterprises adopted by the Government of India in June 2006. During the pre reform period there was 10.56 times increase in the number of sick SSI units in the country. After the liberalization period the number of sick units has decreased to 0.68 times. India’s obligation as a member of WTO to bring down tariff and non-tariff barriers gave another competitive environment for SSI. Thus after reform SSI has been exposed to intense competition both in domestic and international levels. The SSI, which was not able to withstand competition, has gradually become sick. According to the report of RBI (3rd census of SSI) the criteria to measure sickness were: delay in repayment of loan over one year; decline in net worth by 50%; and decline in output during the last three years.