It is believed that the working capital support extended by commercial banks to small-scale industry is far from adequate. Although the SSI is a part of the priority sector, its share in total priority sector advances of all scheduled commercial banks has been falling consistently from around 39 per cent in 1992 to around 24 per cent in 2004. This paper examines the trends in sectoral allocation of bank credit to the SSI vis-Ã -vis the non-SSI sector in the post-reform period. The paper also makes an attempt to understand the variations in bank credit to the SSI sector across bank groups, and also the influence of the size and performance of banks on credit to the SSI sector. The results indicate that the high incidence of bad loans arising out of SSI advances could be one of the reasons for the declining share of SSI loans of the commercial banks.
