Sick Industries

Submitted by:
Monisha Jhamb
Pearl Gupta
Tushar Aggarwal
Saurav Lamba

Section C (2015-18)
 Introduction

A sick unit is that which incurred cash losses for 1 year and
is likely to continue incurring cash losses for the current
year as well as for the following year and the unit has
imbalance in the financial structure.
 Sick Industrial Companies Act, 1985

SICA, also known as The Sick Industrial Companies

(Special Provisions) Act, 1985, defined a sick
industrial unit as one that had existed for at least five
years and had incurred accumulated losses equal to
or exceeding its entire net worth at the end of any
financial year.
 Difference (SICA, 1985 and 2013 act)

• Scope
• Determination of a Sick Company
• Time period of repayment of debt
 Symptoms

• Shortage of liquid funds to meet short term financial

obligation
• Decreasing rate of return
• Underutilization of capacity
• Accumulation of excessive inventories
 Causes of Industrial Sickness

Causes of born sickness

1-Wrong location
2- Technological factors
3-Inexperienced promoters
4-Investment in unproductive
capital assets Causes of achieved sickness
5-Long gestation period *Internal causes
*External causes
External Causes
EXTE

• Fault at the planning and construction stage

• Financial problem
• Defective plant and machinery
• Entrepreneurial incompetence
• Management problem
• Labour problem
INTERNAL CAUSES

• Power cuts
• Erratic supply of inputs
• Demand and credit restraints
• Government policy
 Consequences
• Set – back to employment
• Fear to industrial unrest
• Wastage of resources
• Adverse impact on related units
• Adverse effects on investors and
entrepreneurs
• Losses to banks and financial institutions
• Loss of revenue to government
 Remedial Measures

1.Steps taken by banks.

- giving adequate working capital when there is a shortage.
- recovery of interest reduced rate
- defining the special cell in the RBI
- arrange the special committee of state level in the local
branch for link between financial institution and
government agency.
2. Policy framework of the government
2

- according the guideline that are lying on the october 1981

that monitor the sickness of industry .
- Swot analysis of industry
- liberalization on sick industries
3.Consessions by government

- giving high facilities to large industry who take over the

small sector for revival
- high liberalizations in terms of financial rather than
intervention.
-Introduce the scheme for sick industry

4. Steps for detecting sickness early

- corrective action taken by the RBI
5. The industrial investment bank of India

- set up the IRCI (industrial reconstruction corporation

of India )
- convert IRCI into IRBI in March 20 ,1985
- convert IRBI into IIBI in march 27, 1997
Thank You