The Confederation of Indian Pharmaceutical Industries (CIPI) has sent proposals to the central government, Reserve Bank of India and the Small Industries Development Bank of India (SIDBI), requesting them to simplify the procedures followed by the banks before sanctioning the upgradation fund instituted by the government to the SSI's.

CIPI in their proposal has requested for easing certain procedures practiced by the banks while granting the loan to the SSI's, such as asking for additional collateral security, furnishing of balance sheet of the previous two years etc. They have also requested them to increase the moratorium period from 6 months to two years and rise the repayment period to 10 years similar to that of housing loans.

As Pharmabiz had reported earlier, the government had sanctioned an up gradation fund of around Rs 500 crore for the development of SSI's and initially SIDBI was designated as the nodal agency for the disbursal of the amount. But later the government had stated that any bank could give the loan and SIDBI would reimburse the amount at a later stage.

But now owing to the stringent procedures followed by the banks it had become difficult for the SSI's to approach the banks for loans and upgrade their units. Stating that only 2 per cent of the total up gradation fund of Rs 500 crore has been utilized by the SSI's, chairman of CIPI, T S Jaishankar said that the reason for this was the procedures followed by the banks for granting loans.

"The banks are asking the SSI people to provide additional collateral security for sanctioning the loans. But this is difficult for the SSI's, as they have already invested a lot into the additional equipments. Secondly, they are asking for the balance sheets of the past two years and obviously they show poor figures due to the expenditure in Schedule M implementation. Hence most of the SSI's are finding it hard to obtain the money," said Jaishankar.

He said that now since some of the companies have become Schedule M compliant, it would be easy for them to expand in a big level, as more orders would pour in. And hence he wanted the government to consider this as an advantage and not sanction loans based on the previous year's balance sheet or with any additional collateral security.

Speaking about the moratorium period and the repayment period he said, "When they give 10 years time for the repayment of housing loan why can't they adopt a similar stand towards the SSI too. After all it is for the development of the industry. And we also need the moratorium period to be raised from 6 months to two years as the time given now is very short."

He said that some banks including SIDBI have shown interest in considering the proposals and he hoped that the government and the other banks too follow the same approach.