Which options from the following combine to suggest that a small-scale industrial unit is sick?

A. Borrowal Accounts of the unit remain substandard
B. Erosion of the net worth due to accumulated losses
C. The unit has been in commercial production for at least two years
D. Lack of commitment from the management part
E. Competitors are flourishing

Choose the correct answer from the options given below:

Correct option is A

Introduction:
The RBI defines a sick small-scale industrial (SSI) unit based on the Kohli Committee's recommendations, focusing on financial distress indicators like substandard borrowal accounts, net worth erosion, and a minimum commercial production period. Correct answer:  A, B, and C only.

Information Booster:

• A. Borrowal Accounts of the unit remain substandard: This is a core criterion where any borrowal account classified as substandard (NPA for more than six months) signals potential sickness, allowing early detection by banks for rehabilitation under RBI guidelines.

• B. Erosion of the net worth due to accumulated losses: A unit qualifies as sick if accumulated losses equal or exceed 50% of its net worth at the end of the previous accounting year, reflecting severe financial imbalance as per revised RBI norms post-Kohli Committee.

• C. The unit has been in commercial production for at least two years: This ensures only established units are classified as sick, excluding nascent ventures; it mandates at least two years of commercial operation to assess sustained performance viability.
  These three form the formal RBI pillars for SSI sickness identification, enabling timely corrective actions like rehabilitation packages.

Additional Knowledge:

• D. Lack of commitment from the management part: This is a common cause of sickness (e.g., poor governance), but not a formal RBI criterion; RBI focuses on objective financial metrics, not subjective management intent, to avoid discretionary misuse.

• E. Competitors are flourishing: This represents an external market factor, irrelevant to RBI's internal financial benchmarks like net worth or account status; sickness is unit-specific, not comparative to industry peers.
  Key misconception: Options D and E are symptoms or causes, while A, B, and C are the precise, adopted RBI thresholds from Kohli guidelines.