The study examines the role of institutional finance in the growth of small-scale industries by virtue of evaluating their role in the changed economic scenario. This study has both micro and macro approaches. The study analyses the impact of financial assistance and the problems faced by the entrepreneurs. Study examines the growth of small-scale industries also examines the position of Commercial Banks of India in the context of their role as vehicles of small sector development. The study evaluates the role of banks in the implementation of the funding schemes formulated by the Reserve Bank of India, identifies the shortcomings and inadequacies of banks provisional in performing their role as institutions designed to attain the goal of accelerated development of small sector and also suggest suitable remedial measures designed to eradicate shortcomings in the policies and operations of commercial baking finances.