State finance corporations

Detailed description about State finance corporations.

1. State Finance Corporations Presentation By: Sanjay

2. State Finance Corporations The State Finance Corporations (SFCs) are the integral part of institutional finance structure in the country. SFC promotes small and medium industries of the states. Besides, SFCs are helpful in ensuring balanced regional development, higher investment, more employment generation and broad ownership of industries. At present there are 18 state finance corporations (out of which 17 SFCs were established under SFC Act 1951). Tamil Nadu Industrial Investment Corporation Ltd. established under Company Act, 1949, is also working as state finance corporation.

3. Organisation and Management: The State Finance Corporations management is vested in a Board of ten directors. The State Government appoints the managing director generally in consultation with the Reserve Bank and nominates three other directors . The insurance companies, scheduled banks, investment trusts, co-operative banks and other financial institutions elect three directors. Thus the majority of the directors are nominated by the government institutions.

4. Functions of State Finance Corporations The SFCs grant loans mainly for acquisition of fixed assets like land, building, plant and machinery. The SFCs provide financial assistance to industrial units whose paid-up capital and reserves do not exceed Rs. 3cr (or such higher limit up to Rs. 30cr as may be specified by the central government ). The SFCs underwrite new stocks, shares, debentures etc., of industrial concerns . The SFCs provide guarantee loans raised in the capital market by scheduled banks, industrial concerns, and state co-operative banks to be repayable within 20 years.

5. Financial Resources Of The Sfc’s The SFC’s mobilize their financial resources from the following sources 1.Their own Share capital. 2.Income from investment and repayment of loans. 3.Sale of bonds. 4.Loans from the IDBI. 5.Borrowings from the Reserve Bank of India. 6.Deposits from the Public. 7.Loans from State Governments.

6. Purpose of SFCs SFCs have been set up with the purpose of catalysing higher investment, engendering greater employment & extending the ownership base of industries. They have also started offering assistance to newer types of business activities like tissue culture , poultry farming, services related to engineering, marketing and commercial complexes .

7. State Financial Corporations (SFCs ) in INDIA In India, there are 18 State Financial Corporations (SFCs ) Andhra Pradesh State Financial Corporation (APSFC) Himachal Pradesh Financial Corporation (HPFC) Madhya Pradesh Financial Corporation (MPFC) North Eastern Development Finance Corporation (NEDFI) Rajasthan Finance Corporation (RFC) Tamil Nadu Industrial Investment Corporation Limited Uttar Pradesh Financial Corporation (UPFC) Delhi Financial Corporation (DFC) Gujarat State Financial Corporation (GSFC) The Economic Development Corporation of Goa (EDC) Haryana Financial Corporation (HFC) Jammu & Kashmir State Financial Corporation (JKSFC) Karnataka State Financial Corporation (KSFC) Kerala Financial Corporation (KFC) Maharashtra State Financial Corporation (MSFC) Odisha State Financial Corporation (OSFC) Punjab Financial Corporation (PFC) West Bengal Financial Corporation (WBFC)

8. Institutions supporting Small Scale Industries

9. Small-scale Industries Board (SSI Board) Constituted in 1954 to facilitate the coordination and inter-institutional linkages for the development of SSI sector Khadi and Village Industries Commission (KVIC) Statutory body created by an act of Parliament Small Industries Development Organization (SIDO) Established in 1954 on recommendation of Ford Foundation National Small Industries Corporation Ltd. (NSIC) Established in 1955 by GOI with the main objectives to promote, aid and foster the growth of SSIs in the country National Science and Technology Entrepreneurship Development Board (NSTEDB) Established in 1982 by GOI, is an institutional mechanism to help promote knowledge-driven and technology-intensive enterprises National Productivity Council (NPC) Autonomous institution functioning under the overall supervision of the Ministry of Industry National Productivity Council (NPC) Autonomous institution functioning under the overall supervision of the Ministry of Industry

10. National Institute for Entrepreneurship and Small Business Development (NIESBUD) NIESBUD is an autonomous body under the administrative control of the Office of the DC(SSI) District Industries Centers (DICs) – In order to extend promotion of small-scale and cottage industries beyond big cities and state capitals to district headquarters State Level Institutions - SFCs State Financial Corporations (SFCs) – Main objectives are to finance and promote small and medium enterprises in their respective states for achieving balanced regional growth, catalyze investment, generate employment and widen ownership base of industry . State Level Institutions – SIDC / SIIC and SSIDC State Industrial Development / Investment Corporation (SIDC/SIIC) – Set up under the Companies Act, 1956, as wholly owned undertakings of the State governments, act as catalysts in respective states.  Other State-level agencies Extending Facilities for SSI Promotion 1.State Infrastructure Development Corporations 2.State Cooperative Banks 3.Regional Rural Banks 4.State Export corporations 5.Agro Industries Corporations 6.Handloom and Handicrafts Corporations Other Agencies National Bank for Agriculture and Rural Development (NABARD) Housing and Urban Development Corporation Ltd. (HUDCO) Technical Consultancy Organizations (TCOs)

11. Drawbacks of SFC Higher rate of interest and hard terms and conditions. Lack of adequate specialized technical and trained staff for efficient working. The financial recourses of the Sfc’s are limited and inadequate. They are facing problems of attracting more funds. State Finance Corporation show bias in favor of financing large scale units rather than to small scale units.

12. CONCLUSION State financial corporations have not been able to become popular due to poor implementation and poor investments that they have undertaken . As they invest in small scale industries the returns will be lower as gestation period for small scale industries is very long . Business decisions must be taken with a purely business perspective in mind and political, emotional factors should not play the major factors while making business decisions.