Abstract

RECOVERY MANAGEMENT OF COMMERCIAL BANK LOANS TO SMALL SCALE

INDUSTRIES
Parameshwara Dr. Raghurama
Assistant professor Professor

Department of Commerce, Mangalore University, Mangalagangotri-574199
dpa74rediffmail.com


Commercial banks are playing a pivotal role in meeting the financial requirements of the small
scale industries (SSIs). They act as a mediator between the government and SSIs. However it has
been observed that most of the SSIs are not able to repay the loans granted by the commercial
banks in time. This may be due to various reasons, like siphoning off of funds or diversion of
funds to more profitable units, recession, willful default, and delay in recovery of accounts
caused deliberately the unit to become sick. Commercial banks are facing the problem of
recovery even though there are debt recovery mechanisms. Due to delayed court decision, the
assets mortgaged for the loan become out dated and scrap will not reali:e the full amount due.
Hence the debt due cannot be recovered. Securiti:ation Act is also not effective in recovering the
due from small scale sector. But at the same time promotion of small scale industry is very much
essential to solve the mafor problems of our country and also for the balanced development of
the region. Hence small scale industries should not be neglected and they must not be made to
lag behind fust for the reason of non availability of adequate finance and various reasons for
sickness. The directed incremental lending to priority sector especially to SSIs has brought with
it the problem of recovery. The bankers have provided loan facilities without exercising
reasonable care while conducting proper scrutiny of the loan application and without assessing
the purpose of loan. So it is felt that the commercial banks have to come forward to identify the
reasons for the non repayment of loans and also develop the suitable strategies to recover the
loan granted to SSIs

This paper is based on the data published in the RBI bulletin, which tries to explain the extent of
nonperforming assets in public and private sector banks in India, various recovery mechanisms
followed by the banks and preventive measures to reduce nonpayment of SSI loans

Key words: Small Scale Industries, Nonperforming Assets, debt and recovery mechanisms,