Quick answerRBI consolidated all SSI lending guidelines into a single Master Circular as of February 28, 2005. Key definitions: SSI units with plant & machinery investment up to Rs 1 crore (enhanced to Rs 5 crore for specified items: hosiery, hand tools, drugs pharmaceuticals, stationery items, sports goods), tiny enterprises up to Rs 25 lakh, and SSSBEs up to Rs 10 lakh in fixed assets excluding land and building. Indirect finance includes credit to agencies, SFCs, SIDBI bonds, and KVIC.
What changed
RBI issued a Master Circular consolidating all existing instructions on lending to the Small Scale Industries (SSI) sector up to February 28, 2005. It formalized definitions for SSI units (investment up to Rs 1 crore, enhanced to Rs 5 crore for specified items: hosiery, hand tools, drugs pharmaceuticals, stationery items, sports goods), ancillary units, tiny enterprises (up to Rs 25 lakh), and Small Scale Service & Business Enterprises (SSSBEs) (up to Rs 10 lakh in fixed assets excluding land and building). It also clarified that investments in special bonds issued by SFCs/SIDCs, SIDBI, and NSIC made on or after April 1, 2005, would not qualify as priority sector lending, with existing investments losing eligibility from April 1, 2006.
What it means for you
Banks must use the updated SSI classification thresholds (Rs 1 crore for most SSIs, Rs 5 crore for specified items) for priority sector lending reporting. The circular tightens priority sector eligibility for bonds issued by development finance institutions, phasing out such investments from April 2006. Lenders need to review their SSI loan portfolios to ensure compliance with the consolidated definitions and indirect finance categories.
What you must do
Update internal lending policies to reflect the SSI investment limits: Rs 1 crore (general), enhanced to Rs 5 crore for specified items (hosiery, hand tools, drugs pharmaceuticals, stationery items, sports goods), Rs 25 lakh (tiny enterprises), and Rs 10 lakh in fixed assets excluding land and building (SSSBEs).
Reclassify existing SSI loans and indirect finance (e.g., special bonds to SFCs/SIDBI/NSIC) to align with priority sector eligibility rules, noting the April 2005/2006 cutoffs.
Train credit officers on the illustrative lists of eligible and ineligible SSSBE activities provided in the circular's annexures.
Acknowledge receipt of this Master Circular as requested by RBI.
Who it affects
All scheduled commercial banks including RRBs and LABs, Banks with SSI lending portfolios, Banks investing in special bonds of SFCs, SIDCs, SIDBI, NSIC, and NABARD for non-farm sector
Regulatory timeline
Decoded by BankPulse2026-06-19 21:13 IST
Superseded by — Master Circular DBOD.No.Dir.BC.13/13.03.00/2009-10 dated July 1, 2009 and Master Circular on Priority Sector u
Status change: superseded08 Jul 2026, 13:15 IST
Built from our lineage records — each fact carries its provenance; missing history simply is not shown (never guessed).
What is the investment limit for a unit to be classified as a Small Scale Industry (SSI)?
For most SSI units, the investment in plant and machinery (original cost) must not exceed Rs 1 crore. For specified items like hosiery, hand tools, drugs, pharmaceuticals, stationery, and sports goods, the limit is Rs 5 crore.
Are investments in bonds issued by SIDBI or SFCs still eligible for priority sector classification?
Investments made on or after April 1, 2005, in bonds of SFCs/SIDCs, SIDBI, and NSIC are not eligible for priority sector lending. Investments made up to March 31, 2005, will lose eligibility from April 1, 2006.
What qualifies as indirect finance to the SSI sector?
Indirect finance includes credit to agencies supplying inputs/marketing outputs of artisans, government corporations funding weaker sections, advances to handloom co-operatives, term loans to SIDCs/SFCs, credit to KVIC, rediscounting of SSI bills by SIDBI/SFCs, and subscription to bonds of SIDBI, SFCs, SIDCs, NSIC, and NABARD (non-farm sector).
📜 Read the original circular — full text as issued by RBI
Revised guidelines on rehabilitation of sick SSI units
(based on Kohli Working Group recommendations)
As per the revised definition, a unit is considered
as sick when any of the borrowal account of the unit remains substandard
for more than 6 months or there is erosion in the net worth due to accumulated
cash losses to the extent of 50% of its net worth during the previous
accounting year and the unit has been in commercial production for at
least two years. The revised criteria will enable banks to detect sickness
at an early stage and facilitate corrective action for revival of the
unit. As per the revised guidelines the rehabilitation package should
be fully implemented within six months from the date the unit is declared
as potentially viable/viable. During this six months period of identifying
and implementing rehabilitation package banks/FIs are required to do
"holding operation" which will allow the sick unit to draw
funds from the cash credit account at least to the extent of deposit
of sale proceeds.
Following are broad parameters for grant of relief
and concessions for revival of potentially viable sick SSI units:
(i) Interest on Working Capital Interest 1.5%
below the prevailing fixed / prime lending rate,
wherever applicable
(ii) Funded Interest Term Loan Interest Free
(iii) Working Capital Term Loan Interest
to be charged 1.5% below the prevailing fixed /
prime lending rate, wherever applicable
(iv) Term Loan Concessions in
the interest to be given not more than 2 % (not
more than 3 % in the case of tiny / decentralised
sector units) below the document rate.
(v) Contingency Loan Assistance The
Concessional rate allowed for Working Capital Assistance.
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2004-05/380 · issued 01 Mar 2005. The plain-English explanation above is BankPulse’s own independent summary.
Test yourself
Quick self-check built only from the facts already on this page — tap a question to reveal the answer.
Q1. In one line, what does this circular do?
RBI consolidated all SSI lending guidelines into a single Master Circular as of February 28, 2005. Key definitions: SSI units with plant & machinery investment up to Rs 1 crore (enhanced to Rs 5 crore for specified items: hosiery, hand tools, drugs pharmaceuticals, stationery items, sports goods), tiny enterprises up to Rs 25 lakh, and SSSBEs up to Rs 10 lakh in fixed assets excluding land and building. Indirect finance includes credit to agencies, SFCs, SIDBI bonds, and KVIC.
Q2. Who does this circular apply to?
All scheduled commercial banks including RRBs and LABs, Banks with SSI lending portfolios, Banks investing in special bonds of SFCs, SIDCs, SIDBI, NSIC, and NABARD for non-farm sector
Q3. What is the first thing you should do about it?
Update internal lending policies to reflect the SSI investment limits: Rs 1 crore (general), enhanced to Rs 5 crore for specified items (hosiery, hand tools, drugs pharmaceuticals, stationery items, sports goods), Rs 25 lakh (tiny enterprises), and Rs 10 lakh in fixed assets excluding land and building (SSSBEs).
Related circulars · Financial Inclusion & Priority Sector
Update internal lending policies to reflect the SSI investment limits: Rs 1 crore (general), enhanced to Rs 5 crore for specified items (hosiery, hand tools, drugs pharmaceuticals, stationery items, sports goods), Rs 25 lakh (tiny enterprises), and Rs 10 lakh in fixed assets excluding land and building (SSSBEs).
Reclassify existing SSI loans and indirect finance (e.g., special bonds to SFCs/SIDBI/NSIC) to align with priority sector eligibility rules, noting the April 2005/2006 cutoffs.
Train credit officers on the illustrative lists of eligible and ineligible SSSBE activities provided in the circular's annexures.
Acknowledge receipt of this Master Circular as requested by RBI.
Grouped from the action items above — a single circular may involve more than one team.
Worked example & action-note template
Example: if you are a Compliance officer at a bank this circular applies to (All scheduled commercial banks including RRBs and LABs, Banks with SSI lending portfolios, Banks investing in special bonds of SFCs, SIDCs, SIDBI, NSIC, and NABARD for non-farm sector), your first concrete step on “Master Circular on Lending to SSI Sector (2005)” is: “Update internal lending policies to reflect the SSI investment limits: Rs 1 crore (general), enhanced to Rs 5 crore for specified items (hosiery, hand tools, drugs pharmaceuticals, stationery items, sports goods), Rs 25 lakh (tiny enterprises), and Rs 10 lakh in fixed assets excluding land and building (SSSBEs).” (RBI issued this 01 Mar 2005).
Circular: RBI/2004-05/380 -- Master Circular on Lending to SSI Sector (2005)
Issued: 01 Mar 2005
Action required: Update internal lending policies to reflect the SSI investment limits: Rs 1 crore (general), enhanced to Rs 5 crore for specified items (hosiery, hand tools, drugs pharmaceuticals, stationery items, sports goods), Rs 25 lakh (tiny enterprises), and Rs 10 lakh in fixed assets excluding land and building (SSSBEs).
Action required: Reclassify existing SSI loans and indirect finance (e.g., special bonds to SFCs/SIDBI/NSIC) to align with priority sector eligibility rules, noting the April 2005/2006 cutoffs.
Action required: Train credit officers on the illustrative lists of eligible and ineligible SSSBE activities provided in the circular's annexures.
Action required: Acknowledge receipt of this Master Circular as requested by RBI.
Owner: ____________ Target date: ____________
Board/committee approval needed? Y / N
Evidence filed in compliance register on: ____________
Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.
AI-drafted · AI fact-check pending · under the editorial review of our expert review panel · decoded & published by BankPulse · 21 Jun 2026, 09:51 IST
Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=2143&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert review panel. Independent platform, not affiliated with the Reserve Bank of India; never reproduces RBI text verbatim.
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