There could be various reasons why a loanee player doesn't feature in the host club's squad, although I accept "not quite good enough" might be one of them.
These recent quotes from the Reading manaager (below) would tend to suggest he has too many players vying for the same position, but he still rates Sims highly. So, if anything, it sounds like he was loaned out to the wrong club - he should have gone to a club where they were light in Sim's position.
The bottom line is we can't definitively conclude that Sims "isn't good enough" simply on the basis that he's not featured more regularly at Reading. Ok, yes, I accept that if he was a world beater then it would be a tad odd if he was being left out of a poor Championship side, but no-one is saying he's a superstar, just that it's not an impossibility that he could still flourish under a different manager and/or different system.
https://www.football.london/reading-fc/reading-fc-manager-paul-clement-15390123