📘 Assessment of Sickness in Small-Scale Industrial (SSI) Units

The classification of a small-scale industrial (SSI) unit as “sick” is based on specific preconditions and symptoms/factors. Recognizing these helps banks, financial institutions, and government bodies take timely corrective measures or extend support.

✅ Preconditions to Assess Sickness in an SSI Unit

These are eligibility conditions that must be met before a unit can be evaluated for sickness:

1. The unit must have been in commercial production for at least two years.

2. The unit must have availed of credit facilities from financial institutions or banks.

3. The unit must not be incurring temporary losses due to seasonal or external short-term factors; instead, the problems should be of a more permanent or structural nature.

4. Assessment is done only for manufacturing units (not for trading or service enterprises, unless classified as MSMEs under relevant guidelines).

5. The unit’s loan account should have become a Non-Performing Asset (NPA) in accordance with RBI norms (i.e., interest or principal overdue for more than 90 days).

🔍 Factors That Suggest an SSI Unit is Sick

Once preconditions are met, the following symptoms/indicators are examined to determine if the unit is sick:

1. Financial Indicators

• Borrowal accounts are substandard or classified as NPA.

• Erosion of net worth due to accumulated losses.

• Continuous cash losses over two financial years or more.

• Inability to repay debts, dues, or statutory liabilities (e.g., PF, ESI, taxes).

• Negative working capital or current ratio below 1.

2. Operational Indicators

• Sharp decline in production or sales.

• Idle or underutilized capacity over a prolonged period.

• Frequent breakdown of machinery or poor maintenance.

• Shortage of working capital affecting operations.

3. Managerial Indicators

• Lack of innovation and technology focus.

• Poor decision-making or absence of proper records.

• Frequent changes in top management or ownership.

4. Market and External Indicators

• Inability to cope up with large market size.

• Direct and indirect competition from foreign players.

• Inability to compete with rivals due to outdated products or poor quality.

• Adverse changes in market conditions or policy environment affecting viability.

5. Human Resource Indicators

• High employee turnover or labor unrest.

• Inability to pay salaries/wages on time.

• Decline in workforce morale and productivity.

📌 Conclusion:

An SSI unit is considered sick when structural, financial, and managerial weaknesses persist and make it unviable without revival support. Timely identification based on these preconditions and indicators is crucial for rehabilitation efforts.