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Transcript of Karanataka State Financial Corporation1
KARANATAKA STATE FINANCIAL CORPORATION,
BANGALORE
INDUSTRY PROFILE
M.S.RAMAIAH COLLEGE OF ARTS, SCIENCE & COMMERCE, BANGLORE 1
KARANATAKA STATE FINANCIAL CORPORATION,
BANGALORE
INTRODUCTION ABOUT FINANCIAL INSTITUTIONS: The financial institutions are also known as ‘Development Banks’.
Development banks are those financial institutions, which provide term finance, promote
entrepreneur, and enhance organizational effectiveness and upgrade know-how and do-
how. They provide either loan or equity capital or both, as also advisory, promotional and
entrepreneurial services.
The first development bank was the Industrial Development Bank of Japan
established in 1902. Initially, it provided ship mortgage loans. After 1927, it started
financing small-scale industries. But it was after the Second World War, it started
functioning as a development bank in the modern sense of the term. Development Banks
were also started in a number of developed and developing countries in the post-war era.
The Asian Development Bank came into existence in 1967. The first development bank
in India was the Industrial Finance Corporation (IFC) established in 1946.
DEVELOPMENT BANK IN INDIA: There are three types of development banks in India. Firstly, there are
Development Banks for agriculture at local, state and national level. They are Primary
Land Development Banks, state / Central Land Development Banks and NABARD.
Secondly, there are Development Banks for industry at the National and State
level. At the national level are included -
Industrial Development Bank of India (IDBI),
Industrial Credit and Investment Corporation of India (ICICI),
Small Industries Development Bank of India (SIDBI),
Industrial Reconstruction Bank of India (IRBI),
Risk Capital and Technology Finance Corporation (RCTFC),
Technology Development and Information Company of India (TDICI),
Shipping Credit and Investment Corporation of India (SCICI) and
Tourism Finance Corporation of India (TFCI).
At the same level are
‘State Financial Corporations (SFCs) and
State Industrial Development Corporations (SIDCI).
M.S.RAMAIAH COLLEGE OF ARTS, SCIENCE & COMMERCE, BANGLORE 2
KARANATAKA STATE FINANCIAL CORPORATION,
BANGALORE Thirdly, there is the Export-Import (EXIM) Bank of India for the foreign sector.
STATE FINANCIAL CORPORATION (SFCs) State Financial Corporations are the state level development banks for the
development of small and medium scale industries in 18 states of India. They aim at
bringing about balanced regional development by wider dispersal of industries,
promoting greater investment and generating larger employment opportunities. Besides
their paid-up capital, State Financial Corporations augment their funds by borrowings
from Governments, RBI, SIDBI and Banks and by way of Bonds / Debentures, by
accepting Deposits and sale of Investment in shares and debentures of industrial
concerns.
FUNCTIONS:
State Financial Corporations perform the following functions:
1) They provide financial assistance to industries by way of term loans, direct
subscription to equity / debentures, discounting of bills of exchange and providing
guarantees.
2) They meet the term loan requirement of small and medium scale industries for
acquisition of fixed assets like land, building, machinery and equipment.
3) They provide loans for setting up new industrial units as well as for expansion
and modernization of the existing units.
4) They also promote the development of medium and small-scale industries in
backward areas of the country.
5) Under the special capital scheme, SFCs provide equity type support up to Rs.4
lakhs on short terms to entrepreneurs for bridging the gap in equity or promoters
contribution, entrepreneurs with viable projects but lacking adequate own funds
are assisted under the scheme.
6) SFCs operate a number of schemes on behalf of the SIDBI. These include
schemes for women entrepreneurs, modernization scheme, equipment finance
M.S.RAMAIAH COLLEGE OF ARTS, SCIENCE & COMMERCE, BANGLORE 3
KARANATAKA STATE FINANCIAL CORPORATION,
BANGALORE scheme, schemes for hospitals and nursing homes, scheme for ex-servicemen,
single window scheme and special capital/seed capital schemes, etc.
NUMBER OF STATE FINANCIAL CORPORATIONS: At present there are 18 SFCs in the country, 17 of which were set up under the SFCs Act 1951.Tamil Nadu Industrial Investment Corporation Ltd. Set up in 1949 under the Companies Act as Madras Industrial Investment Corporation also functions as a full-fledged SFC.
1) Andhra Pradesh State Financial Corporation
2) Assam Financial Corporation
3) Bihar State Financial Corporation
4) Delhi Financial Corporation
5) Gujarat State Financial Corporation
6) Haryana Financial Corporation
7 Himachal Pradesh Financial Corporations
8) Jammu & Kashmir State Financial Corporation
9) Karnataka State Financial Corporation
10) Kerala Financial Corporation
11) Madhya Pradesh Financial Corporation
12) Maharashtra State Financial Corporation
13) Orissa State Financial Corporation
14) Punjab Financial Corporation
15) Rajasthan Financial Corporation
16) Tamil Nadu Industrial Investment Corporation Ltd.
17) Uttar Pradesh Financial Corporation
18) West Bengal Financial Corporation
M.S.RAMAIAH COLLEGE OF ARTS, SCIENCE & COMMERCE, BANGLORE 4
KARANATAKA STATE FINANCIAL CORPORATION,
BANGALORE
COMPANY PROFILE:- Introduction:- Karnataka state financial corporation is a state level financial institution
established by the State Government. Today, while the state economy is making rapid
M.S.RAMAIAH COLLEGE OF ARTS, SCIENCE & COMMERCE, BANGLORE 5
KARANATAKA STATE FINANCIAL CORPORATION,
BANGALORE strides in the global market, KSFC is moving in tandem. As a pioneering and
responsive financial institution, KSFC is fine tuned to fulfill the plans and aspirations
of entrepreneurs by extending all possible assistance.
Amendments to the State Financial Corporation Act provide for wide ranging
scope of assistance and operational flexibility. Keeping this in view, KSFC has
reengineered itself to ensure utmost customer satisfaction with new energy, thrust and
speed.
In the 47 year of existence, KSFC has contributed most significantly for the
growth of Small-Scale Industries, backward area development and promotion of first
generation entrepreneurs. Its achievement in these areas is unparalleled.
KSFC, as ISO 9001:2000 certified organization is proud to have played a
major role in the industrial development of the state. It is also the proud privilege of
KSFC to have assisted many industries that are internationally recognized like the
INFOSYS, BIOCON, etc.
Origin and Growth:- KSFC was established by the Karnataka State Government in the year 1959
under State Financial Corporation Act 1951 for extending the financial assistance for
setting up of tiny, small and medium scale industrial units in the state. Since then it has
been working as a regional industrial development Bank of Karnataka.
KSFC has a decentralized system of working. Term loan up to Rs.50.00 lakhs
are sanctioned at branch offices and loans over Rs.50.00 lakhs are processed and
sanctioned at the Head office.
KSFC has branches all over the state. Each district has a branch office. In all,
KSFC has 7 zonal offices, 3 supers A grade branch offices, 12 A grade branch offices
and 14 B grade branch offices.
KSFC extends term loans to new units up to Rs.500.00 lakhs for corporate
bodies and registered co-operative societies. Term loans up to a maximum of Rs.200.00
lakhs are sanctioned to propriety, partnership and Joint Hindu Family concerns. KSFC
gives term loans jointly with Karnataka State Industrial Investment Development
Corporation (KSIIDC) and commercial banks for projects up to RS.20.00 Crore.
M.S.RAMAIAH COLLEGE OF ARTS, SCIENCE & COMMERCE, BANGLORE 6
KARANATAKA STATE FINANCIAL CORPORATION,
BANGALORE SCOPE OF KSFC:-
The scope of operation of Karnataka State Financial Corporation is confined
essentially to small and medium scale enterprises and it is constrained from granting
loans to concerns whose paid up capital and reserves together exceeds Rs.20 crore.
Their aggregate contingent liabilities arising from guarantee and under writing
arrangements should not ordinarily exceed twice their paid up capital and reserves, which
can extend up to Rs.12 Crores with the prior approval of the Government. Moreover,
KSFC holding company’s share capital should not exceed 30% of the subscribed capital
of their company or 10% of its own paid capital and reserves whichever is less. It is also
prohibited from financing a concern in which its directors have interest.
KSFC is also authorized to act as the agent of Government both at central and
state level, with any financial institutions like Industrial Development Bank of India
(IDBI), Industrial Financial Corporation of India (IFCI) etc, in matters connected with
grant of advances or subscription.
CORPORATE MISSION:-
KSFC’s corporate plan strategy for resource raising and creating competitive
advantage revolves around an organization mission is based on a clear identification and
perception of KSFC’s core competencies. They are:
1) Reach and cover the entire state of Karnataka.
2) Knowledge of suitability for each region in the state in terms of infrastructure
and natural resources, existing level of industrialization and entrepreneurship.
3) Building a body of multi disciplinary professionals.
4) Specialization in the appraisal, monitoring and recovery of loans of SSI/MSI
and other new fund based and fee based activities. A deep routed commitment
to the development of entrepreneurs and SSI’s.
M.S.RAMAIAH COLLEGE OF ARTS, SCIENCE & COMMERCE, BANGLORE 7
KARANATAKA STATE FINANCIAL CORPORATION,
BANGALORE
MISSION:- “To be a premier, self sustained financial institution for catalyzing, creating and
sustaining viable investment in the small scale and medium sector of industry and
services and the financial sector in the state of Karnataka”.
VISION:-
Vision of KSFC is to be a premier financial institution in the country, by
providing effective and efficient service to all sectors of people under one roof. Its vision
is “ALL FOR ONE AND ONE FOR ALL”.
GOAL:-
‘OVERALL DEVELOPMENT OF SMALL SCALE AND MEDIUM SCALE INDUSTRIES’
QUALITY POLICY:- KSFC endeavors to create satisfied customers through
adequate and timely financial assistance and guidance. This aim is achieved through
professional management and teamwork.
QUALITY OBJECTIVES:
1) To ensure satisfaction through teamwork and professional management.
2) To extend effective guidance through entrepreneurs for successful
accomplishments of their business.
3) To provide good quality of service on a continued basis to the satisfaction of the
customer.
4) To attain specified level of performance every year and to ensure compliance with
statutory and regularly requirements.
M.S.RAMAIAH COLLEGE OF ARTS, SCIENCE & COMMERCE, BANGLORE 8
KARANATAKA STATE FINANCIAL CORPORATION,
BANGALORE 5) To encourage everyone in the organization to upgrade and enhance their skill and
knowledge with appropriate training for improving quality of service to the
entrepreneur.
PURPOSE OF ASSISTANCE:-
The corporation extends financial assistance for acquiring fixed assets like land,
building, plant and machinery and miscellaneous assets required for the project.
However, the corporation also extends working capital under Single Window Scheme to
new units and corporate loan to the existing good units to meet short-term gap in working
capitals requirements.
LIMIT OF ACCCOMODATION:-
The following are the maximum limits of loans that could be availed by entrepreneurs:
Category Maximum loan
01 – Proprietary/partnership Rs.200 lakhs
02 - Corporate bodies (private/public limited)
& registered Co-operative societies Rs.500 lakhs
Note:
In respect of both the categories mentioned above, the minimum loan that could
be sanctioned by the Corporation is Rs.5.00 lakhs. Loan below Rs.5.00 lakhs is
not sanctioned by the Corporation excepting transport loans.
In respect of existing units (category 02 only) operating successfully, maximum
limit can be extended to Rs.1000.00 lakhs depending on the merits of the case
with prior approval of the Small Industries Development Bank of India (SIDBI)
In respect of category 02, the financial assistance can be granted provided the
paid- up capital and free reserves does not exceed Rs.20.00 crore.
M.S.RAMAIAH COLLEGE OF ARTS, SCIENCE & COMMERCE, BANGLORE 9
KARANATAKA STATE FINANCIAL CORPORATION,
BANGALORE If the requirement of funds for a project is substantial & cannot be extended by
the Corporation singly, then the requirement of loan of such projects can be made
in consortium with Karnataka State Industrial Investment Development
Corporation (KSIIDC) / BANKS.
LENDING POLICY OF THE CORPORATION:-
The Corporation formulates lending policy at the beginning of the each year.
The loans are given based on the lending policy of the Corporation. The lending policy
covers various aspects like exposure to the group, thrust sectors, sectors in the negative
list (loans are not granted to such sectors). The industrial policy of the state and central
government is taken into account while formulating the lending policy of the
Corporation.
SCHEMES:-
Today, the Karnataka state financial corporation is one of the leading State
Financial Corporations in the country. With a branch network of 29 offices spread
throughout the state of Karnataka. KSFC is a fine tuned, well known organization to meet
the demanding challenges of entrepreneurs, both big and small.
Though, the performance indicators of the corporation have shown a small
slump in the recent years, it is more on account of the bearish forces of the Indian
economy. However with the unprecedented growth in the services and the IT sectors, and
the state of Karnataka advantageously placed in these sectors, the corporation is making
good headway and has potential for a steady growth.
KSFC has evolved loan schemes for extending financial assistance to suit
almost all kinds of industrialist's entrepreneurs and technocrats. KSFC has also evolved
loan schemes for extending financial assistance to service sectors like Hotel and Tourism
related Industry, Industrial Estates, Hospitals, Nursing homes etc.
SERVICE NETWORK:- KSFC services the nook and corner of Karnataka with its extensive network of 7 Zonal offices, 3 super “A” Grade Branch offices, 12 “A” Grade Branch offices and 14 “B” Grade Branch offices with an empowered and decentralized administrative system.
M.S.RAMAIAH COLLEGE OF ARTS, SCIENCE & COMMERCE, BANGLORE 10
KARANATAKA STATE FINANCIAL CORPORATION,
BANGALORE
ZONAL OFFICES: 1) Bangalore Rural Zone 5) Belgaum
2) Mysore 6) Davangere
3) Mangalore 7) Dharwad
4) Gulbarga
SUPER ‘A’ GRADE BRANCH OFFICES
1) Bangalore M.G. Road Branch
2) Bangalore Jayanagar Branch
3) Bangalore Rajajinagar Branch
‘A’ GRADE BRANCH OFFICES:
1) Bangalore Rural 7) Mangalore
2) Belgaum 8) Hassan
3) Dharwad 9) Mandya
4) Mysore 10) Kolar
5) Gulbarga 11) Bellary
6) Tumkur 12) Udupi
‘B’ GRADE BRANCH OFFICES:1) Shimoga 8) Madikeri
2) Chitradurga 9) Haveri
3) Bijapur 10) Bagalkot
4) Raichur 11) Davangere
5) Bidar 12) Gadag
6) Karwar 13) Chamarajnagar
7) Chikmagalur 14) Koppal
AREA OF OPERTION:-
M.S.RAMAIAH COLLEGE OF ARTS, SCIENCE & COMMERCE, BANGLORE 11
KARANATAKA STATE FINANCIAL CORPORATION,
BANGALORE The area of operation covers the entire state of Karnataka. KSFC has branches
in all the district headquarters. The industrial units / service sectors established or to be
established within the state only are eligible for assistance. The branch offices of the
corporation are adequately delegated with powers of sanction and disbursements.
Requirements of financial assistance up to Rs.50.00 lakhs are handled by the concerned
branch office. If the requirement of loan is more than Rs.50.00 lakhs, entrepreneurs will
have to approach the head office.
The schemes formulation by the corporation:
Bridge loan against state subsidy (highly restricted )
Acquisition of private vehicles.
Corporate loans
Equipments Lease Financial and Hire Purchase (ELF & HP)
Merchant Banking and Financial services
Rental Discounting scheme
Acquisition of Existing Assets/ Enterprises
Financial Assistance to Entertainment Industry
SERVICE NETWORK IN KARNATAKA:
M.S.RAMAIAH COLLEGE OF ARTS, SCIENCE & COMMERCE, BANGLORE 12
KARANATAKA STATE FINANCIAL CORPORATION,
BANGALORE
PEOPLE : The prime asset of KSFC
M.S.RAMAIAH COLLEGE OF ARTS, SCIENCE & COMMERCE, BANGLORE 13
KARANATAKA STATE FINANCIAL CORPORATION,
BANGALORE KSFC has professional team of experts drawn from various disciplines lead by
illustrious leadership of senior IAS officer. The personnel of KSFC are top rated
Managers, Engineers, Financial Analysts, Market Researchers, Statisticians, Economists
and Information Technologists. It is this team of professional wizards, which is the
backbone of this mighty organization.
FINANCIAL SERVICES:-
KSFC is a financial super market. It extends all types of financial assistance in
the form of long-term loans, short term loans (in the form of corporate loans), Lease
finance, Hire purchase finance, Merchant Banking and financial services etc. KSFC’s
assistance covers almost all types of industrial and service sectors.
KSFC is a category one merchant banker as approved by Securities and
Exchange Board of India (SEBI). The Merchant Banking Division takes up management
of public issues, DPG, Syndication of loans, Bills Discounting etc. The other activities
are subscription to the non-convertible debentures and factoring services.
AWARDS AND RECOGNITION
ISO CERTIFICATION:
During the year, the corporation obtained the ISO 9001:2000 recertification’s to
the revised standards from M/s Bureau of Indian standards for a further period of 3 years.
Plans are on the avail to extend ISO certification to branch offices in a phased
manner. In the first phase, super ‘A’ grade branch offices are proposed to be taken up in
the ensuring year.
INSURANCE ACTIVITY:
M.S.RAMAIAH COLLEGE OF ARTS, SCIENCE & COMMERCE, BANGLORE 14
KARANATAKA STATE FINANCIAL CORPORATION,
BANGALORE The corporation has taken corporate agency with IFFCO-TOKIO General
Insurance limited for distribution of Non- life insurance products.
IFFCO-TOKIO has awarded KSFC the certification of excellence for
outstanding performances as a service provider in the year 2004-05.
The corporation insured assets in respect of 4,831 cases and mobilized a
premium of Rs.166.39 lakh under general insurance up to March 2007.
BUDGETARY PROVISION: The Government of Karnataka has consented and committed to fund simple
interest in respect of small loans upto Rs. 10.00 lakh which have become Non-
Performing Assets as on 01-04-2006. A budgetary provision of Rs.54.00 crore has been
made for the financial year 2007-08. Provision regarding NPA is considered after taking
credit for this amount.
ACTIVITIES OF KSFC:
KSFC PARTICIPATION IN VISION 2006 INDUSTRIAL EXHIBITION
Small Industries Service Institute (SISI) Bangalore, Indian Lighting Engineers
(ISLE) Bangalore and Karnataka Small Scale Industries Associations (KASSIA)
Bangalore had jointly organized VISION 2006 Lighting & Allied Electrical Products
Industrial Exhibition cum Vendor Development Programme at SISI Campus, Rajajinagar
Industrial Estate. Bangalore from 9th to 11th December 2005.
The objective of the programme was to showcase the potential of small and
medium enterprises and focus the needs of large-scale industries, government
departments, public sector undertakings etc for lighting and allied electrical products,
automobile and solar lightings etc.
M.S.RAMAIAH COLLEGE OF ARTS, SCIENCE & COMMERCE, BANGLORE 15
KARANATAKA STATE FINANCIAL CORPORATION,
BANGALORE About 20 industries engaged in the manufacturing /trading of lighting and
allied electrical products and solar lighting participated in the exhibitions. Karnataka
State financial Corporation took up a stall in the exhibition. KSFC participated in the
exhibition and actively propagated its products and services.
PARTICIPATION IN THE 5 TH INTERNATIONAL RICE TECH EXPO
RICE TECH EXPO- Bangalore, the 5th International Exhibition and conference
on Rice Processing Technology was organized by Shiny Trade Expositions (Rice mill
reporter publications Group, Vijay Wada) at Palace Grounds, Bangalore from 9th to 11th
December 2005.The main theme of the exhibition was to create awareness on new
processing and marketing strategies among the rice industry entrepreneurs.
More than 60 industries are engaged in the manufacture of rice milling
machinery. Karnataka State Financial Corporation participated in the exhibition and
actively exhibited its products and services. There were large number of visitors from
Karnataka and neighboring States.
WORKSHOP ON ‘ACCESSS TO FINANCE FOR WOMEN ENTERPRENEURS’:
AWAKE & FICCI Ladies Organization have jointly organized a two day
Workshop on ‘Access to finance for women entrepreneurs’ at Hotel Atria, Bangalore on
2nd and 3rd December 2005.
Nearly 70 entrepreneurs and 34 executives from different banks and financial
institutions participated in the workshop. The workshop was organized with the
objectives;
To improve access to finance for women entrepreneurs
Awareness on the various schemes and policies.
M.S.RAMAIAH COLLEGE OF ARTS, SCIENCE & COMMERCE, BANGLORE 16
KARANATAKA STATE FINANCIAL CORPORATION,
BANGALORE To bring about better understanding between bankers and women entrepreneurs.
In this workshop Mr. Ratna Ravikumar represented the KSFC
Seminar on Development of Women Entrepreneurs in the State of Karnataka .
SISI (Small Industries Service Institute), Bangalore in association with SIDBI
and AWAKE has organized a seminar on Development of Women Entrepreneurs in
Karnataka at the SISI campus on 3-1-2006. Besides members of AWAKE and other
women entrepreneurs the meet was attended by representatives of Government
Departments and agencies like Industries and Commerce, Women and Child welfare,
KCTU, TECSOK, CEDOK, NABARD, KSFC,KVIB, KVIC etc. Sri. S. Prabhu, Asst.
General Manager (BD & CR) represented KSFC in the meet and addressed the
participants.
M.S.RAMAIAH COLLEGE OF ARTS, SCIENCE & COMMERCE, BANGLORE 17
KARANATAKA STATE FINANCIAL CORPORATION,
BANGALORE
SERVICES OFFERED BY KSFC
EQUIPMENT LEASE FINANCE :
M.S.RAMAIAH COLLEGE OF ARTS, SCIENCE & COMMERCE, BANGLORE 18
KARANATAKA STATE FINANCIAL CORPORATION,
BANGALORE Industrial units working profitably can avail services of plant and machinery on
lease without making investment or incurring debt obligation and become more
competitive and efficient. The minimum assistance under the service is Rs. 5 lakhs. The
applying unit should be in production for the last 2 years, earning profits and regular in
repayment to financial institutions.
HIRE PURCHASE :
This scheme provides for a fast, easy alternative to ready cash. Industrial
concerns in commercial production for 2 years and earned profits and are regular in their
repayments to financial institutions can avail the assistance.
MERCHANT BANKING SERVICES:
KSFC has been approved as a category 1 merchant banker by the Security
Exchange Board of India (SEBI) and takes up management of public issues, under
writing of shares, deferred payment guarantees project report preparations, syndication of
loans, pre-issue appraisals, opening foreign letter of credit.
MUTUAL FUND ACTIVITIES:
During the year of 2006-07 the Corporation entered into MoU (Memorandum
of Understanding) with UTI for marketing of Mutual Fund products of UTI. Though, this
activity was started in the last quarter of 2006-07, mutual fund products of Rs. 138.49
lakh were marketed.
CONSULTANCY SERVICES:
M.S.RAMAIAH COLLEGE OF ARTS, SCIENCE & COMMERCE, BANGLORE 19
KARANATAKA STATE FINANCIAL CORPORATION,
BANGALORE The Corporation is also hopeful of earning sizeable income by undertaking the
consultancy services of various works of Municipal Corporations like BBMP, HDFC,
MMP, etc.
DIFFERENT TYPES OF INDUSTRIES COVERED BY KSFC:
Basic Metal
Beverages
Chemical and Chemical products
Coal
Electric machinery
Electric, gas and steam
Fishing
Food excluding Beverages
Footwear and other wearing apparel and made up textile
goods
Furniture and Fixtures
Hotels
Houseboats
Industrial Estates
Leather, leather and furniture products
Machinery excluding electric machinery
Manufacture of textiles
Transport
Various Sectors Covered by KSFC:
Public Sector
M.S.RAMAIAH COLLEGE OF ARTS, SCIENCE & COMMERCE, BANGLORE 20
KARANATAKA STATE FINANCIAL CORPORATION,
BANGALORE Partnership Firms
Co-operative Sector
Private Sector
Joint Hindu Family
Proprietary Concern
From the above, it’s clear that a very important role is played by KSFC. Similar to
the commercial banks, if the State Financial Corporations too had oriented and limited
themselves to bigger and profitable undertaking established by the second and third
generation entrepreneurs, then the bulk of the Small and Medium Enterprises (SME)
segment had to fend for itself with deleterious economic and social consequence.
SCHEMES OF THE CORPORATION:
General scheme:
The corporation extends financial assistance for new enterprise to establish
SSIs / MSIs/ service units for expansion, modernization, diversification etc., by the
existing units to meet a part of cost of land, building, plant and machinery and other fixed
assets.
National Equity Fund Scheme (NEFS):
This scheme provides equity type of assistance (soft seed capital) upto RS.10.00
lakhs to small entrepreneurs for existing and new projects in the tiny, small scale, service
M.S.RAMAIAH COLLEGE OF ARTS, SCIENCE & COMMERCE, BANGLORE 21
KARANATAKA STATE FINANCIAL CORPORATION,
BANGALORE sectors and for rehabilitation of potentially viable sick SSI units. The ceiling on project
cost is Rs.50.00 lakhs and the promoter's contribution is 10% of the project cost
(including working capital margin). While the equity type of assistance (SSC) carries
interest at 5% p.a. the term loan carries normal rate of interest. A net interest rate works
out to 9.69% for loans below Rs.25 lakhs and 10.35% for loans above Rs.25 lakhs.
Mahila Udyam Nidihi Scheme (MUNS):
This scheme is meant for extending financial assistance for first generation
women entrepreneurs to set up SSI units. The scheme provides equity type assistance
(soft seed capital) along with term loan for existing and new projects. The ceiling on the
project cost is Rs.10 lakhs and the minimum equity assistances Rs.2.50 lakhs, which
attracts 1% service charge only p.m. The term loan component carries normal rate of
interest. The women entrepreneurs who seek assistance under this scheme should possess
managerial and necessary skill to run the unit and shall be the chief promoters of the
proposed unit.
Scheme for Technology Upgradation for Textile Industries (TUFs):
The objective of the scheme is to provide encouragement for Textile Industries
(including cotton ginning pressing units) in the small scale industrial sector for
technology upgrading and to modernize their production facilities. The scheme covers
projects costing Rs.5 lakhs to Rs. 50 lakhs. New and existing units are eligible for this
assistance. The prevailing of interest as applicable to SSI is charged. The present lending
rates are 11.00% p.a. and 11.50% p.a. for loans below Rs. 25.00 lakh and above Rs.25.00
lakh respectively.
Credit Linked Capital Subsidy Scheme (CLCSS):
The objective of scheme is to facilitate technology upgradation of SSI units or
SSI units graduating to MSI in specified products / sub-sectors by providing 15% with
maximum subsidy amount of Rs.15.00 lakhs and investment limit to Rs.100 lakhs on the
M.S.RAMAIAH COLLEGE OF ARTS, SCIENCE & COMMERCE, BANGLORE 22
KARANATAKA STATE FINANCIAL CORPORATION,
BANGALORE loan given for machinery. Existing SSI units registered with the State Directorate of
Industries who upgrade with the state of art technology, with or without expansion are
eligible.
Technology Development and Modernization Fund Scheme (TDMF):
To encourage small and medium scale entrepreneurs and to upgrade the
technology and modernise their existing production facilities the Government of
Karnataka has come up with an interest subsidy scheme. The scheme is applicable to the
units financed by KSFC and KSSIIDC only. Existing units who are in operation for at
least 3 years and who are not default to institutions/ banks in payment. Units graduating
from SSI to MSI sector and service sector are also eligible. For availing loan under
TDMF, the project cost shall not exceed Rs.100.00 lakhs. The scheme envisages
reimbursement of 4% interest p.a. as a interest subsidy on the term loan availed from the
Government of Karnataka.
Single Window Scheme (SWS):
This loan scheme is for providing assistance to new tiny and small units whose
project cost (excluding working capital margin) does not exceed Rs.50.00 lakhs and the
total working capital requirement at the normal level of operation is up to Rs.20.00 lakhs.
Term loan on fixed assets and term for working capital is sanctioned based on the debt
equity ratio of 2:1 for loan above Rs.10.00 lakhs and 3:1 for loan up to Rs.10.00 lakhs.
Corporate Loan Scheme (SLS):
The objective of the scheme is to extend short – term loans to the existing
successful units who require urgent working capital funds either to meet the gap in the
working capital requirement or funds required for developing / expanding new market
and opening Letter of Credit for purchase of new equipment till term loan is sanctioned
M.S.RAMAIAH COLLEGE OF ARTS, SCIENCE & COMMERCE, BANGLORE 23
KARANATAKA STATE FINANCIAL CORPORATION,
BANGALORE and released. The repayment period does not exceed 30 month including moratorium
period of 6 months. The corporate loan is restricted normally to the manufacturing sector.
Rental Discounting Scheme:
The objective of the scheme is to provide financial assistance on the strength of
future rental to be earned by non residential proportion located within the city and
municipality limits of Bangalore, Mangalore, Hubli- Dharwad, Gulbarga, Shimoga -
Bhadravathi, Mysore and Belgum subject to gross rent earning of not less than Rs.
25000/- per month.
Foreign Letter of Credit (FLC):
KSFC has been operating the scheme of opening Foreign Letter of Credit for
importing the capital goods through commercial bank exclusively for our borrowers since
1995. The scheme is operated in the Hire Purchase and Financial Service department of
head office.
INSURANCE :
KSFC has entered into a strategic alliance with IFFCO-TOKIO General
Insurance Company to market the Non Life Insurance Products. This would enable the
clients of KSFC to have credit and the insurance under one roof. The premium tariffs
applicable are same as the other insurance companies and at no extra service charges. An
exclusive Insurance Cell with well-trained staff is in operation at Head office. The details
of the general perils covered are:
Fire, Earth quake, Burglary, Machinery breakdown
Marine, Household insurance, Cash safe / transit
Fidelity guarantee, Bankers indemnity, Vehicle insurance
Medical insurance, Personal accident cover
Electronic equipment, Trade and office
M.S.RAMAIAH COLLEGE OF ARTS, SCIENCE & COMMERCE, BANGLORE 24
KARANATAKA STATE FINANCIAL CORPORATION,
BANGALORE Life Insurance Corporation:
An MoU (Memorandum of Understanding) was signed with Life Insurance
Corporation of India in March 2007 for marketing of LIC products.
INFRASTRUCTURE DEVELOPMENT ACTIVITY: Infrastructure is an integral part of the services sector and plays a crucial role in
the industrial development. The services sector has emerged as one of the major
contributors to the country’s GDP growth rate. Inadequacy in infrastructure stunts
economic development. There is now a wide spread consensus that exclusive dependence
on government for provision of all infrastructure services is not feasible and private
public participation is essential for realising optimal outcomes in the sector. Recognizing
this, the Corporation has taken up infrastructure development projects with public /
private participation. The Corporation’s initial focus is to identify valuable vacant lands
in the prime localities in and around the Bangalore city, owned by various government
departments / agencies / registered societies / trusts, etc., including SEZs and explore
joint development ventures.
M.S.RAMAIAH COLLEGE OF ARTS, SCIENCE & COMMERCE, BANGLORE 25
KARANATAKA STATE FINANCIAL CORPORATION,
BANGALORE
ORGANIZATIONAL STRUCTURE:
KSFC has extensive network office encompassing entire Karnataka. KSFC
serves every nook and corner of Karnataka with its network of 7 zonal offices, 3 super A
grade branch offices, 12 A grade branch offices and 14 B grade branch offices with an
empowered and decentralized administrative system. It is the only term lending financial
institution in the Karnataka with such a widespread network.
Board of Directors of KSFC is headed by the Chairman and the Managing
Director is appointed by state Government. The head offices of the organization have
divisional structures. It has 15 divisions. To assist Managing Director, KSFC has 2
executive director (Finance and Operation) and 6 General Managers-Corporate planning,
M.S.RAMAIAH COLLEGE OF ARTS, SCIENCE & COMMERCE, BANGLORE 26
KARANATAKA STATE FINANCIAL CORPORATION,
BANGALORE Credits, Recovery, Zonal offices, Administration and Asset Reconstruction. At the senior
management level DGMs, AGMs with a legal Advisor and 2 Additional Legal Advisor
are functioning. Managers and Deputy Managers are executing the policies at the middle
level.
Zonal offices and Super A grade branches are headed by DGMs, grade
branches are headed by AGMs. Managers head all B grade branches.
ABBREVIATIONS:ED - Executive DirectorEA - Executive AssistantMD - Managing DirectorGM - General ManagerDGM - Deputy General ManagerAGM - Assistant General ManagerZM - Zonal ManagerBM - Branch Manager
ORGANIZATION STRUCTURE OF THE COMPANY:
M.S.RAMAIAH COLLEGE OF ARTS, SCIENCE & COMMERCE, BANGLORE 27
Managing Director
Executive Director (Finance)(
Executive Director (Operation)
DGM Internal Audit
GM(Admins..)
DGM(Controller)
DGMCredit
GM (AR)
AGM IT
AGMHP/ Le
DGM
(Zones)
AGM(Treasury)
AGM
Credit
DGM
(AR)
AGMSUMD
Manager Personnel
DGM(HP& Le)
DGM
BD & CR
AGM
(AR)
AGM(R)
AGM MIS
AGMBD & CR
GM (R)
General Manager (Cr)
AGM(EG)
WEGC
DGM (R)
DGMLegal
AGM Legal
Library Records
AGM Bangalore
AGM Mysore
AGM Dharwad
AGM Raichur
Manager PGC
Manager Disciplinary
Manager Administration
Manager Construction
Manager ISO Cell
GM Corporate Plan
ZonalManagers
GM (Zones)
AGM (Zones)
BranchManagers
DGM FSD
DGM IDD
HP&Le-Hire Purchase& LeasingIT - Information TechnologyMIS – Management Information ServiceAR - Asset ReconstructionBD&CR-Business Development & Credit ResearchEG – Entrepreneurial GuidanceWEGC- Women Entrepreneurial Guidance CellSUMD- Sick Units/ Monitoring DepartmentR – RecoveryPGC- Public Grievances CellFSD-Financial Service DepartmentIDD-Infrastructure Development Dept
KARANATAKA STATE FINANCIAL CORPORATION,
BANGALORE
SHARE HOLDING PATTERN
SL.NO PARTICULARS
NO.OF SHARES(in Units)
PERCENTAGE OF HOLDING
1. STATE GOVERNMENT U/S 4(3) (a)U/S 4(5)Special capital issued U/S 4A
51,73,000
5,37,38811,27,500
69.88%
2. IDBI:U/S 4(3) (a)Special capital issued U/S 4A
22,92,692 6,27,500
29.84%
3. Insurance Companies InvestmentTrusts, Other Financial Institutions.U/S 4(3) (c)
16,090 0.16%
M.S.RAMAIAH COLLEGE OF ARTS, SCIENCE & COMMERCE, BANGLORE 28
KARANATAKA STATE FINANCIAL CORPORATION,
BANGALORE
4. Public Sector Banks U/S 4(3) (c) 7,900 0.08%
5. Other Parties. U/S 4(3) (c) 2,475 0.03%
TOTAL 97,84,545 100.00
(All Shares have cost of Rs. 100 each)
BOARD OF DIRECTORS:-
SlNo
Name of the Directors
Period
Under section of SFC’s Act-2000
From To1
Sri.N.Gokulram,IAS Chairman21.12.2005 08-04-2007 10(a)
2 a) Sri.V.Umesh,IAS Managing Directorb) Sri.V.Umesh,IAS, Chairman & Managing Director
23.06.2006
09.04.2007
08.04.2007 10(f) 10(a)
3 Sri.M.R.Kamble,IAS 21.04.2007 10(a)
4 Sri.Mohamed Sanaulla, IASSri .Rajakumar Khatri,IAS
09.11.200516.08.2006
15.08.2006 10(b)
5 Sri.O.S.Vinod 10.10.2005 16.05.2006 10(c)
M.S.RAMAIAH COLLEGE OF ARTS, SCIENCE & COMMERCE, BANGLORE 29
KARANATAKA STATE FINANCIAL CORPORATION,
BANGALORE
Sri.Ramesh.G.Dharmaji 17.05.2006
6 Smt.Bhama Krishnamurthy 10.02.2006 10(c)
7 Sri.R.K.AbrolSri.H.Suresh Prabhu
24.11.200311.10.2006
10.10.2006 10(d)
8 Sri.P.K.GuptaSri.S.R.Hanchinamani
05.07.200431.05.2007
30.05.2007 10(d)
9 Sri.S.Nagaraju 15.05.2006 10(e)
10 Sri.G.S.Doreswamaiah24.11.2003
10(e)
11 Sri.S.AnanthanSri.Nataraj.V.Angadi
26.11.200527.03.2007
10(e)10(e)
12 Sri. B. R. Jayaramaraje Urs, IAS, MD 05.01.2005 22.06.2006 10(f)
FUNCTIONAL DEPARMENTS OF KSFC
ENTREPRENEUR GUIDANCE CELL:
The function of the department is to guide the entrepreneur regarding matters
like business opportunities, different schemes available, and procedure to be followed to
get the loan, etc. This is the department through which new client come in contact with
Karnataka State Finance Corporation.
PERSONNEL DEPARTMENT:
This department is in charge of recruitment, promotion, job rotation, transfer of
employees, discipline, welfare and industrial relations and pay rolls. In addition, the
department has a human resources department cell, which carries out training and
development work.
M.S.RAMAIAH COLLEGE OF ARTS, SCIENCE & COMMERCE, BANGLORE 30
KARANATAKA STATE FINANCIAL CORPORATION,
BANGALORE LEGAL DEPARTMENT:
This department attends to all the legal matters affecting the interest of the
corporations. The basic function of this department is to appraise the project legally
which the entrepreneurs submit for getting the loan.
SICK AND MONITORING CELL:
The cell, which has been formed for rehabilitation of potentially viable sick units,
conduct in depth studies regarding cases referred and assess the eligibility for
rehabilitation assistance,
BUSINESS DEVELOPMENT AND CREDIT RESEARCH DEPARTMENT:
This department conducts research based on several factors and helps the
management to take decisions.
The following are few activities:
Preparation of district profiles with substantial growth potential among the
existing port folio.
Analysis of high default schemes of KSFC and suggest improvement for the
same.
Evaluation of different scheme of KSFC and suggest changes if necessary.
Publishing the KFSC news letters – KSFC NEWS, MAHITI.
HIRE PURCHASE AND LEASING DEPARTMENT:
This department is incharge of leasing and hire purchase activities of
corporation. This department was started with the introduction of the equipment of
leasing finance scheme. KSFC is the first SFC to start this scheme.
M.S.RAMAIAH COLLEGE OF ARTS, SCIENCE & COMMERCE, BANGLORE 31
KARANATAKA STATE FINANCIAL CORPORATION,
BANGALORE
MERCHANT BANKING DEPARTMENT:
The activities of this department are broadly categorized into fund based and
non fund based services like deferred payment guarantees, public issues, under writing of
shares, project report preparation, syndication of loans, bills discounting etc., are carried
on.
TREASURY DEPARTMENT:
Treasury Department is given important from these recent years onwards
because of the new challenges faced by KSFC in mobilizing its funds in the era of
liberalization. The main function of treasury department is estimation of funds for lower
possible cost.
CREDIT DEPARTMENT:
The main function of the credit department are appraising the projects,
disbursement of funds and monitoring progress during the implementation of the project
and to keep check on cost overruns and to ensure that funds are utilized for the purpose
intended.
RECOVERY DEPARTMENT :
Recovery of loans sanctioned by the corporation and all other related functions
like rescheduling of loan, effective changes in management of assisted companies,
effective take over of default in units and insisting recovery proceedings are the main
functions of recovery department.
MANAGEMENT INFORMATION SYSTEMS DEPATMENT:
This department is solely responsible for providing up-to-date statistical
information of all the branches, departments etc., required by the management.
M.S.RAMAIAH COLLEGE OF ARTS, SCIENCE & COMMERCE, BANGLORE 32
KARANATAKA STATE FINANCIAL CORPORATION,
BANGALORE
INFORMATION TECHNOLOY DEPARTMENT:
This department was formed to computerize all the records and documents of
KSFC with large-scale computerization. The corporation aims to function as a paperless
office. This department is incharge of developing and managing the Letter Of Credit
(LOC) etc.,
ASSET RECONSTRUCTION DEPARTMENT:
The asset reconstruction department at the head office is formed to review the
chronic section 29 cases, DC referred cases and suit filed cases. This department verifies
all the cases under review and occupies defaulting units and takes steps to recover the
loan by step to step by selling the units.
APPRAISAL, DISBURSEMENT AND MONITORING DEPARTMENT:
The main functions of this department are to appraise the projects,
disbursement of funds to the loans and to monitor progress during the implementation of
the project and to keep a check on cost over runs and to ensure that funds are utilized for
the purpose intended.
FINANCE AND ACCOUNTS DEPARTMENT: This department is responsible for maintaining various accounts, ledger,
cashbook and other books of accounts, income tax filling of statutory returns and
statements.
INTERNAL AUDIT DEPARTMENT: Auditing of books of accounts, verifying title deeds of properties offered as
securities, business adhered to follow up for compliance of
observations/recommendations made in reports of Statutory Authority and SIDBI’s
inspection report will be verified by this department.
M.S.RAMAIAH COLLEGE OF ARTS, SCIENCE & COMMERCE, BANGLORE 33
KARANATAKA STATE FINANCIAL CORPORATION,
BANGALORE INFRASRUCTURE DEVELOPMENT DEPARTMENT:
This department has started from this year. It is a separate and fully
operational department. The department has already initiated realizable joint venture
projects like IT Park, the Shopping Mall, Commercial Complex, or SEZ etc. for
implementation in the near future.
FINANCIAL SERVICES DEPARTMENT: This department has also started from this year. In order to augment income
generation, the corporation initiated several measures directed towards fee-based
activities. As part of restructuring, fee based activities like stamp vending, marketing of
Life and General Insurance products, marketing of UTI mutual fund products, etc have
been taken up by this department.
OBJECTIVES OF KSFC:
The corporation has been established with the basic objective of promoting
industrial development in Karnataka. The KSFC was desired to particularly emphasis to
specialized institution government.
To provide financial assistance in the form of term loans to tiny and small scale
industries, ancillary industries and medium scale industries in Karnataka.
To encourage dispersal of industries to the backward areas to maintain balanced
growth of industries.
To provide equipment leasing, Hire Purchase, working capital and assistance to
Research & Development activities.
To identify entrepreneurs throughout the state.
M.S.RAMAIAH COLLEGE OF ARTS, SCIENCE & COMMERCE, BANGLORE 34
KARANATAKA STATE FINANCIAL CORPORATION,
BANGALORE To provide enterprise development programs to women engineering and technical
professionals and agriculturists.
To conduct district level industrial seminars.
To provide special assistance to tiny and small scale industries.
To identify new projects and help local people to set up industries.
To develop data bank on industrial units.
M.S.RAMAIAH COLLEGE OF ARTS, SCIENCE & COMMERCE, BANGLORE 35
KARANATAKA STATE FINANCIAL CORPORATION,
BANGALORE
ACTIVITES OF KSFC
Assistance to Hotels / Restaurants:
Medium and star category standard hotels proposed in state capital, district and
taluk head quarters and important tourist centers within the state are eligible for financial
assistance. The existing hotels going in for expansion/renovation are eligible for
assistance. The hotel should have boarding, lodging and restaurant facilities and building
plans approved by the local authorities. Hotels proposed as per the specification of
tourism department, government of Karnataka are eligible for incentives as per the
tourism policy of state/central governments.
Mobile canteens/catering units are also considered for assistance subject to
eligible and providing adequate collateral security as per the prevailing lending policy.
Assistance to the Doctors /Hospitals /Nursing Homes:
M.S.RAMAIAH COLLEGE OF ARTS, SCIENCE & COMMERCE, BANGLORE 36
KARANATAKA STATE FINANCIAL CORPORATION,
BANGALORE Hospitals and nursing homes are eligible for financial assistance from KSFC
must be backed by expert services of at least one postgraduate doctor. Assistance is
available for acquiring land, building and equipments for diagnosis monitoring and
therapeutic use and air conditions (for operation theatres and intensive care units)
ambulance etc. Assistance is also extended to acquire ready built shop or for construction
of medical stores subject to conditions. Medical practitioners with relevant qualifications
in general medicine, dentistry, radiology etc are eligible for assistance for acquiring C.T
scanners, X-rays, endoscope and other electronic medical equipments required by
medical practitioners and hospitals. Medical professionals having Bachelor’s degree in
and branch of medicine from recognized university are eligible for financial assistance
for setting up Clinics.
Assistance to Construction activities and Infrastructure Projects:
Commercial complexes are an important infrastructure for the growth of Small
and Medium Enterprise and service units, marketing outlets and for small business.
Assistance under the scheme is provided for construction of building, Interior decoration,
air conditioning, lift and communication facilities etc. The commercial complexes
constructed can be either leased or sold on out right basis with the prior approval of the
corporation. Residential apartments/group housing, industrial estates, IT parks, training
institutions, godown, warehouses and development of layouts are provided financial
assistance. With a view to facilitate the development of infrastructure financial assistance
is also provided for establishing infrastructure projects like roads, flyovers, bridges etc.
Assistance to Tourism related activities:
The corporation provides financial assistance for tourism related activities like
development of amusement parks, setting up of conventional/cultural centers, restaurants,
travel and transport and tourism service agencies.
M.S.RAMAIAH COLLEGE OF ARTS, SCIENCE & COMMERCE, BANGLORE 37
KARANATAKA STATE FINANCIAL CORPORATION,
BANGALORE Assistance to Entertainment Industry:
KSFC provides financial assistance for the construction/purchase of cinema
halls and multiplexes, production of short TV serials and feature films/filmed a within
Karnataka. Maximum financial assistance is up to 70% of the cost of the proposed fixed
assets in the case of cinema halls and multiplexes and 50% of the total production and
postproduction cost in the case of features films, TV serial and software for visual media.
Procedure for availing Financial Assistance:
Entrepreneurial guidance (EG) section headed by the Assistant General
Manager at the head office and branch managers will guide the entrepreneurs on various
schemes, loan facilities available etc.
Project clearance committee: A brief project profile along with supporting papers/documents will have to
be given by the promoters, which will be scrutinized by EG (Entrepreneur Guidance)
department as the case may be. The proposal will be placed before the Project Clearance
Committee (PCC) chaired by the Managing Director at Head Office and Zonal
Managers/Branch Managers at Branches. Details are to given as per the checklist. The
promoters are also required to give bio-data and net wroth details as per the format.
On receipt of the project profile and other detail, the main promoters are
called for discussion before the PCC. After discussions, if the project is found support
worthy, loan application form is issued on the spot (a set of three applications). The duly
filled in applications have to be submitted in duplicate along with other documents, as per
the checklist along with applicable processing fee.
Processing fee & other fees:
The following are the processing fee structure prevailing at present:
Application processing fee: ½% of the loan amount.
M.S.RAMAIAH COLLEGE OF ARTS, SCIENCE & COMMERCE, BANGLORE 38
KARANATAKA STATE FINANCIAL CORPORATION,
BANGALORE
Up-front fee:
SSI and others: ½% of the loan amount.
Medium scale industries: 1% of the loan amount.
The up-front loan fee will have to be paid the time of legal documentation or before
availing the first disbursement of the loan amount.
The application processing fee and up-front fee are non refundable. However, in
case the loan application is rejected, refund up to maximum of 75% of loan processing
fees paid is allowed on a case to case basis after deducting handling charges.
Legal fee:
In addition to the above, documentation fee for legal scrutiny of the title deeds,
execution of hypothecation and mortgage deed etc. at 0.1% of loan amount is being
charged.
Promoter’s contribution: The promoter’s contribution varies between 12.5% and 25% depending on the
location of the project, category, line of activity etc.
Debt equity ratio (DER):(i) For loans up to Rs.10 lakhs 3:1 (ii) For loans above 10 lakhs 2:1
The corporation adopts the norms of promoter’s contribution and debt equity
ratio as per the guidance issued by the SIDBI from time to time.
Debit services coverage ratio (DSCR):
M.S.RAMAIAH COLLEGE OF ARTS, SCIENCE & COMMERCE, BANGLORE 39
KARANATAKA STATE FINANCIAL CORPORATION,
BANGALORE
The repayment period of loan is fixed by the corporation with due regard to
the cash generation and profitability of the project. For this purpose, average DSCR
ranging between 1.5:1 and 2: 1 is accepted as reasonable.
The DCSR indicates the ability of the project to services to services the debts
during the currency of the loans.
Repayment of the loan:
The repayment of the term loan varies between 5 to 7 years with a moratorium
of 1 to 2 years depending on the period of implementation. In respect of corporate loan
the maximum repayment period is 30 months including six months moratorium.
Security:
1. Primary Security:
The primary security for loan will be the assets financed i.e. land, building and
machinery. If working capital loan is provided the inventories in the form of raw
materials, work in process and finished goods, besides; bill and book debts, are to be
pledged/hypothecated.
2. Collateral Security:
All loans are to be backed by collaterals in the form of commercial or residential
properties located in the state of Karnataka. Fixed deposits, NSCs (National Saving
Certificates), etc and residential properties of third parties to the corporation will be
further charged.
In case of corporate loan, in the absence of adequate security in the form of
primary assets, collateral security to the extent of 100% of the loan amount is insisted in
M.S.RAMAIAH COLLEGE OF ARTS, SCIENCE & COMMERCE, BANGLORE 40
KARANATAKA STATE FINANCIAL CORPORATION,
BANGALORE respect of existing units assisted by the corporation and in respect of other units collateral
security will by 150% of the loan amount.
NOTE: The primary and collateral are to be by way of simple mortgage at jurisdictional
SRO (Sub Registrar Office).
Sanction and disbursement of loan:
After the proposal is cleared by the project clearance committee the EG
department scrutinizes the application and the enclosures submitted, collects the
processing fee and forwards the papers to the credits department. The credit department
appraises the projects and places them memorandum of sanction before the appropriate
authority for sanction approval. Branch offices also follow the similar procedure.
Legal scrutiny and documentation:
Legal officers in credit department at head office and in branch offices will take
up the legal scrutiny of documents after the sanction of loan. They ensure acceptance of
terms and conditions by promoters and complete legal documentation process.
Thereafter, credit department at HO/ branch office monitors the projects
implementation and disburse the funds based on the securities created and after ensuring
that the promoters have brought in the stipulated equity/contribution to the project is
completed and final disbursement is made. The above is the procedure in brief for
availing financial assistance from the corporation.
For further clarification/ details promoters may contact the General Manager
(credits) or Asst.General manager (EG) at the head offices or the branch managers of the
nearest branch offices.
M.S.RAMAIAH COLLEGE OF ARTS, SCIENCE & COMMERCE, BANGLORE 41
KARANATAKA STATE FINANCIAL CORPORATION,
BANGALORE
M.S.RAMAIAH COLLEGE OF ARTS, SCIENCE & COMMERCE, BANGLORE 42
KARANATAKA STATE FINANCIAL CORPORATION,
BANGALORE
STRUCTURE:
The Human Resource Management Department called as Personnel
Department, which is headed by Senior Manager and coming under General Manager of
Administration.
The manpower strength of the Corporation stood at 1,266 at the end of 31 st
March 2007 as against 1,281 at the end of 31st March 2006. out of them.
402 are class A employees
721 are class B employees
143 are class C employees
Class A employees consist of Executives, Directors, Deputy General Manager, Assistant
General Manager, Senior Managers, Manager, Deputy Manager.
Class B employees consists of Assistant Managers, Assistants, Stenographers, Typists
and Clerks.
M.S.RAMAIAH COLLEGE OF ARTS, SCIENCE & COMMERCE, BANGLORE 43
KARANATAKA STATE FINANCIAL CORPORATION,
BANGALORE Class C employees consist of Drivers, Daffedars, and peons etc.
The Corporation have a unique combination of professionals on its pay rolls - C
As, ICWAs, MBA, MCom, MA, MSc, MTech, LL.M., LL.B, BE etc. Thus, the diversity
in its human resource is one of the great assets of the corporation.
RECRUITMENT AND INCENTIVES:
There is a separate cadre recruitment rule, which governs the appointment of both
direct recruitment and promotions.
There is also staff regulation and rules, which governs the conduct of the employees.
In KSFC there are number of incentives given to the employees in the form of
reimbursement of convenience & medical expenses and advances at concessional
rates to employees such as house building advance, children education advance,
Motor car advance, Consumer durable advance, etc.
There is a cordial relationship between the management and employees.
There are Officers Association, SC/ST employees union and Employees union which
reddress the grievances of the employees.
KSFC has also introduced various schemes for the employees like Voluntary
Retirement Scheme (VRS) where employees can opt for retirement voluntarily.
The performance of the employees is to be assessed yearly. And separate confidential
report of a particular employee will be obtained from the Section head/Department
head.
M.S.RAMAIAH COLLEGE OF ARTS, SCIENCE & COMMERCE, BANGLORE 44
KARANATAKA STATE FINANCIAL CORPORATION,
BANGALORE In appraisal the employee’s overall performance is assessed for the fitness of his/her
promotion.
There is a reservation to SC/ST category for recruitment and promotion.
8 in-house need based training programmes were conducted covering 221 employees
during the year of 2006-07
79 employees were deputed to external training programmes during the year of 2006-
07.
M.S.RAMAIAH COLLEGE OF ARTS, SCIENCE & COMMERCE, BANGLORE 45
KARANATAKA STATE FINANCIAL CORPORATION,
BANGALORE
STRUCTURE: The Accounting and Financial Management includes Finance and accounts
department, Treasury department and Legal department. The Finance and Account
department is responsible for maintaining various accounts, ledger, cashbook and other
books of accounts, income tax filling of statutory returns and statements. The function of
Treasury department is estimation of funds for lower possible cost. The basic function of
Legal department is to appraise the project legally which the entrepreneurs submit for
getting the loan.
These departments are headed by one Executive Director, Deputy General
Manager of Controller, Senior Manager of Treasury and Assistant Manager of Legal.
SIGNIFICANT ACCOUNTING POLICIES
M.S.RAMAIAH COLLEGE OF ARTS, SCIENCE & COMMERCE, BANGLORE 46
KARANATAKA STATE FINANCIAL CORPORATION,
BANGALORE
FOLLOWED BY KSFC
1. As required by IDBI wide circular dated 26th April 1994. The corporation follows
cash systems of accounting for recognition of income and expenditure. Further,
all expenses including interest, which is accrued and fallen due, is accounted
irrespective of its payment excepting for guaranteed dividend liability up to 1999-
2000, which is accounted on receipt of subvention money from government of
Karnataka and charged off in the year of profit.
2. Memorandum loan accounts are maintained on mercantile basis for the purpose of
management information system and asset classification.
3. Provisions against Non-Performing Assets have been made as per applicable
guidelines issued by IDBI and SIDBI.
4. Cheques are accounted on receipt basis. Consequential changes, if any, are
effected in the books on the date of knowing their status
5. The corporation has taken a policy under Group Gratuity Scheme with Life
Insurance Corporation of India for payment of gratuity to its employees and
premium there of has been charged to profit and loss account.
6. The guidance note on “ accounting for lease” issued by the Institute of Chartered
Accountants of India (ICAI) has been adopted in respect of assets on lease and the
lease equalization/terminal adjustment is provided on the basis of schedule of
lease rentals due over the period of lease transactions carried out up to 31-3-2001.
Accounting standard 19 issued by ICAI has been adopted I respect of assets given
on lease and hire purchase after 01-04-2001.
M.S.RAMAIAH COLLEGE OF ARTS, SCIENCE & COMMERCE, BANGLORE 47
KARANATAKA STATE FINANCIAL CORPORATION,
BANGALORE
7. The corporation has own Provident Fund Regulations and contributions to the
fund is accounted for.
8. The income from bills discounting and DPG commission are accounted upfront.
9. The allocation logic adopted by the Corporation for repayment of loan made by
the borrower is to first adjust towards other debits, thereafter to adjust interest
dues and lastly the remaining amount towards repayment of principal. In case of
one time settlement and appropriation of sale proceeds of assets taken over under
sec29 of the State Financial Corporation’s act 1951, the allocation logic is to first
adjust towards principal thereafter towards interest accounted under mercantile
system till the year 1983, then towards other debits and lastly the balance, if any,
towards interest due subsequent to 1983.
10. Sale consideration on the sale of assets offered as security to the corporation on
deferred payment bases is accounted in the year of sale where the borrower’s
accounts were written off in earlier years, and in the other cases the income is
accounted on actual receipt of deferred payment installment.
11. Appropriation of amounts received on account on One Time Settlement is made
on approval by the D.R.C/Board.
12. In terms of R.B.I circular dated 4th may 2001 effective from 31-03-2001
Investments are classified as “Available for sale” and provisioning for net
depreciation in the value of investments is made.
13.
M.S.RAMAIAH COLLEGE OF ARTS, SCIENCE & COMMERCE, BANGLORE 48
KARANATAKA STATE FINANCIAL CORPORATION,
BANGALORE a) Depreciation is provided on straight line method at the following rates:-
Depreciation Rate table:1. Building 04%
2. Furniture and Fixture 10%
3. Fans and Electrical Fittings. Internal
Telephone and Equipment
15%
4. Motors cars, bicycles, computers and
motor cycles
20%
b) Fixed assets have been carried at historical cost less depreciation and
include all lease assets acquire up to 31-03-2001.
c) Depreciation on all the leased assets upto 31.03.2001 is provided on straight-
line method over the primary period of lease.
INTEREST RATE TABLE [Term Loans] w.e.f. 01-08-2005 ( Rates in % age)
SL NO
Article I.
CATEGORY OF BORROWERS
EXISTING INTEREST
RATES [as per circular No. ED
(F) 755]
NEW INTEREST RATE
GROSS NET GROSS NET REBATE
I RATE OF INTEREST FOR GENERAL CATEGORIES OF BORROWERS
1 TERM LOAN [INCLUDING WCTL] OVER RS.50000/- UP TO RS.200000 /- TO SSIs , [INCLUDING TDMF & RTUF SCHEMES] AND RTOS -
a] General rate 11.75 10.75 11.75 10.25 1.50
b] Under RSR 10.75 9.75 10.75 9.25 1.50
c] NEF/MUN /SEMFEX [TL] 12.25 11.75 12.25 11.00 1.25
M.S.RAMAIAH COLLEGE OF ARTS, SCIENCE & COMMERCE, BANGLORE 49
KARANATAKA STATE FINANCIAL CORPORATION,
BANGALORE
2 TERM LOAN [INCLUDING WCTL] OVER RS.200000/- AND UP TO RS.25,00,000/- TO SSIs , [INCLUDING TDMF & RTUF SCHEMES] AND RTOS
a] General rate 12.00 11.00 12.00 10.50 1.50
b] Under RSR 11.50 10.50 11.50 10.00 1.50
c] NEF/MUN /SEMFEX [TL] 13.00 12.50 13.00 11.50 1.50
3 TERM LOAN [INCL.WCTL] OVER RS .25,00,000/- TO SSI s, [INCLUDING TDMF & RTUF SCHEMES] AND RTO S -
a] General rate 12.50 11.50 12.50 11.00 1.50
b] Under RSR 12.00 11.00 12.00 10.50 1.50
c] NEF/MUN/SEMFEX [TL] - [for Project Cost Rs.50 lakhs & below]
13.50 13.00 13.50 12.00 1.50
II RATE OF INTEREST FOR NON-SSI & MSI CATEGORIES 1 TERM LOAN TO NON-SSI s, MSIs & AMARA SCHEME
a] General rate 13.50 12.50 13.50 11.00 2.50
b] Under RSR 13.00 12.00 13.00 10.50 2.50
c] NEF/MUN/SEMFEX [TL] – [ Excluding MSIs & Amara Scheme]
13.50 13.00 13.50 12.00 1.50
2 (a) LOAN ASSISTNCE FOR COMMERCIAL
COMPLEX -
(b) [not eligible under NEF/MUN/RSR scheme]
13.50
12.50 13.50
11.00 2.50
II RATE OF INTEREST FOR OTHER CATEGORIES OF BORROWERS
1 Section I.02 LOANS SANCTIONED OUT OF CORPORATION'S OWN FUNDS SUCH AS BRIDGE LOAN AGAINST INVESTMENT SUBSIDY, FINANCING EXISTING ASSETS AND ENTERPRISES etc.,
14.00 13.00 14.00 12.00 2.00
2 LOANS UNDER CORPORATE LOAN SCHEMELOANS UNDER CORPORATE LOAN SCHEME
- AAA rated entrepreneurs/units 12.50 12.50 12.50 12.00 0.50
- AA rated entrepreneurs/units 13.00 12.50 13.00 12.00 1.00
- Others 13.50 12.50 13.50 12.00 1.50
PROVISIONS RELATING TO INCOME TAX AND SUPER TAX:-
For the purposes of the Income Tax act, 1961(43 of 194) the financial
corporation shall be deemed to be a company within the meaning of that act and shall be
liable to Income Tax and super tax accordingly on its income, profits and gains:
Provided that any sum paid by the state government under the guarantee given
in pursuance of (sec7 or sec8) shall not be treated as the income profits and gains of the
M.S.RAMAIAH COLLEGE OF ARTS, SCIENCE & COMMERCE, BANGLORE 50
KARANATAKA STATE FINANCIAL CORPORATION,
BANGALORE financial corporation and any interest on debentures, (bonds or depreciation) paid by the
financial corporation out of such sum shall not be treated as expenses incurred by it.
Provided further that in the case of any shareholders such portion of a dividend
as has been paid out of any such sum advanced by the state government shall be deemed
to be income from “interest on securities”. (And the income tax shall be payable there on
as if it were interest receivable on any security of a state government issued income tax
free) within the meaning of Section 8 of that act.
Financial Appraisal :- The purpose of financial appraisal is to find out the financial viability of
the project. The financial appraisal is to find out the finance the projects are concerned
with the successful operation of unit. For this they should be convinced that the project
generates enough cash surplus to meet all the contractual obligations. Further,
institutions will have certain ratios like debt-equity ratio, debt service coverage ratio, etc
against which they examine the project.
Financial appraisal includes profitability estimates, cash flow estimates
and projected balance sheet. They are inter-related and prepared on the basis of cost of
the projects, source of finance and various assumptions of profitability estimates.
FINANCIAL RESULTS:
During the year under review, the corporation generated gross revenue of
Rs.195.71 crore on cash basis as against Rs.210.16 crore in 2005-06. Working of the
corporation for the year resulted in an operating profit of Rs.17.32 crore as against
operating profit of Rs.8.56 crore in 2005-06.
HEAD OFFICE AND BRANCH OFFICE SANCTIONS:
M.S.RAMAIAH COLLEGE OF ARTS, SCIENCE & COMMERCE, BANGLORE 51
KARANATAKA STATE FINANCIAL CORPORATION,
BANGALORE During the year, loan sanctioned by the head office amounted to Rs.
184.57 crore to 73 cases compared to the previous year’s sanctions of 100.27 crore to 65
cases. Loans sanctioned by the branch offices amounted to Rs. 239.96 crore to 1253 cases
compared to Rs. 215.93 crore to 1096 cases in the previous year.
DISBURSEMENTS:
Disbursements made during the year touched Rs.310.39 crore as against
Rs.199.86 crore disbursed during the year 2005-06. Cumulative disbursements reached
Rs.6526.40 crore as on 31.03.2007.
RECOVERY:
The total recovery during the year stood at Rs.502.74 crore as compared to
Rs.555.06 crore made in the previous year. Recovery in respect of loan was Rs.478.78
crore and Rs.1.38 crore in respect of Hire purchase, Rs.1.48 crore in respect of Leasing
and Rs.21.10 crore in respect of financial services.
TREASURY ACTIVITY:
Treasury department headed by Senior Manager and coming under Deputy
General Manager of Controller.
While the year 2005-06 was considered as a milestone year in restructuring
high cost bond obligations of the Corporation. During the year under report utilization
of Rs. 300.00 crore private placement bond proceeds was completed for swapping the
earlier high cost bonds.
During the year corporation availed a refinance of Rs.150.00 crore, while
repaid the principal of amount Rs.212.00 crore to SIDBI, including a pre-payment of Rs
100.00 crore. The line of credit out standing of SIDBI, which was at Rs.937.69 crore as
M.S.RAMAIAH COLLEGE OF ARTS, SCIENCE & COMMERCE, BANGLORE 52
KARANATAKA STATE FINANCIAL CORPORATION,
BANGALORE on 31.03.2006 came down to Rs 875.68 crore at 31.03.2007. The interest cost on
account of line of credit also came down from Rs.90.73 crore for the year 2005-06 to
Rs.78.49 crore for the year 2006-07. The corporation availed a rebate of Rs.2.92 crore
from SIDBI, for the prompt payment of principal and interest installments. The interest
cost on account of bonds reduced from 67.10 crore for the year 2005-06 to Rs.57.55
crore for the year 2006-07.
The Corporation maintained its track record, since inception, of being
prompt in meeting all its payment obligations i.e., to the SIDBI, the bondholders, fixed
deposit holders and all other financiers.
ASSET RECONSTRUCTION: The Asset reconstruction department at Head Office continued to tackle the
chronic Non-Performing Assets. The action basically involved disposal of units under
sec.29, follow up of miscellaneous cases filed against guarantors for decree, execution
of decrees, recovery of dues from MR portfolio etc.
During the year, assets of 30 units were sold involving a sale price of Rs.
427.73 lakh. One time settlement of dues was extended to 16 units involving a
settlement amount of Rs. 925.00 lakh. The AR department also contributed amount of
Rs. 150.00 lakh of interest recovery. The recovery from MR portfolio was Rs. 242.00
lakh, which also contributed to the income of the Corporation.
BALANCE SHEET AS ON 31st MARCH 2006-07 (Rs.in.lakhs)
Sl.No
Particulars Schedule As on31-03-2007
As on31-03-2006
A Capital and Liabilities:
M.S.RAMAIAH COLLEGE OF ARTS, SCIENCE & COMMERCE, BANGLORE 53
KARANATAKA STATE FINANCIAL CORPORATION,
BANGALORE
1.2.
3.
4.5.
Share capitalLoan pending conversationTo Share capitalReserve fund and other resourcesTerm borrowingsCurrent liabilities and provisions
AB
C
DE
12467.55917.69
425.00
164985.107816.77
12467.55917.69
425.00
17808.8312434.02
TOTAL 186612.11 203053.09B
1.2.3.4.5.6.
Property and Assets:
Cash and bank balancesInvestments (at cost)Loans and advancesFixed assetsCurrent assetsProfit and loss accounts balance
FGHIJ
4817.07369.91
105790.61748.21
14741.0760091.24
11563.87456.86
106924.43821.85
22970.1660315.92
TOTAL 186612.11 203053.09
PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31stMARCH, 2007 (Rs.in lakhs)
Particulars Schedule As at31-03-2007
As at31-03-2006
INCOME:Interest incomeOther income
KL
16721.70 2849.70
17394.873621.19
TOTAL 19571.40 21016.06
M.S.RAMAIAH COLLEGE OF ARTS, SCIENCE & COMMERCE, BANGLORE 54
KARANATAKA STATE FINANCIAL CORPORATION,
BANGALORE
EXPENDITURE:Interest and Other Financial ExpensesPersonal ExpensesAdministrative expensesDepreciationBad Debt Written Off
M
NOI
14110.66
2856.76 827.89 80.72 355.81
16780.62
2581.67758.22174.57155.81
TOTAL 18231.84 20450.89Profit Before TaxLess: provision for fringe Benefit TaxCurrent yearPrevious year
1339.56 _
41.00 3.19
565.17 39.00
Profit after TaxLess: Adjusted towards Dividend deficit Account Dividend provisionLess: brought forward loss from Previous YearSurplus/Deficit carried to Balance Sheet
1295.37247.05
823.64-60315.92
-60091.24
526.17526.17
-60315.92
-60315.92
Notes &Significant Accounting Policies forming part of Accounts
P
OPERATIONS AT A GLANCE: (Amount Rs. in crore)
Particulars 2004-05 2005-06 2006-07Since inception up to 31.03.2007
Paid up capital at the
year end
Gross Sanctions:
97.84 97.84 97.84 -
M.S.RAMAIAH COLLEGE OF ARTS, SCIENCE & COMMERCE, BANGLORE 55
KARANATAKA STATE FINANCIAL CORPORATION,
BANGALORE
a. Number
b. Amount
Assistance to SSIs
Disbursements
Loan out standings
Recoveries
Percentage of NPA
Income
Expenditure
Operating Profit
1,244
242.87
131.79
240.34
1,504.83
582.17
51
217.95
217.16
7.76
1,161
316.20
165.00
199.86
1,342.28
555.06
46
210.16
204.50
8.56
1,326
424.53
178.53
310.39
1,320.71
502.74
33
195.71
182.31
17.32
1,58,030
8,168.38
4,286.37
6,526.40
-
-
-
-
-
-
M.S.RAMAIAH COLLEGE OF ARTS, SCIENCE & COMMERCE, BANGLORE 56
KARANATAKA STATE FINANCIAL CORPORATION,
BANGALORE
STRUCTURE:
The Management Information System Department is headed by Assistant
General Manager and coming under General Manager of Corporate Planning.
MANAGEMENT INFORMATION SYSTEMS (MIS)
The present reporting system is oriented primarily to statistics .A formal MIS
covering profitability, liquidity, disbursement recoveries and costs is necessary for
monitoring of performance by top management.
M.S.RAMAIAH COLLEGE OF ARTS, SCIENCE & COMMERCE, BANGLORE 57
KARANATAKA STATE FINANCIAL CORPORATION,
BANGALORE
We suggest the following regular reports as parts of MIS for top management.
1. LIQUITIDTY:-
Eligible refinance for disbursement already made—weekly.
Variance analysis of cash flow (month) actual v/s budget,
reimbursements, recoveries, refinance, interest and experience.
2. PROFITABILITY:-
Segment wise profitability (quarterly)
Branches wise profitability(half yearly)
3. PORT FOLIO ANALYSIS:
Distribution of loans by size – quarterly.
Recovery analysis-quarterly.
Age wise analysis of area’s-quarterly.
Loan size wise arrears analysis-quarterly.
Branch wise analysis of recovery and arrears.
ABC analysis of arrears (To cover 75% of the arrears of interest
and principal).
4.COST OF BORROWING –QUARTERLY:
5. INTEREST ON LOANS- QUARTERLY:
6. SANCTIONED LOANS AWAITING DISBURSEMENT –QUARTERLY:
In the design of a computerized system of accounting and statistics collection
using concepts such as those of relation database. Extreme care is necessary describe
loans given/taken as comprehensively as possible. In this, it is better to as on the side of
M.S.RAMAIAH COLLEGE OF ARTS, SCIENCE & COMMERCE, BANGLORE 58
KARANATAKA STATE FINANCIAL CORPORATION,
BANGALORE caution rather than assisted units functioning in leased premises. This can be easily
extracted from the database if it forms part of the original files on assisted units. The
relevance of all the data/information available on an assisted unit may not always be
apparent at the time of data collection /entry. But the inclusion of all possible information
when building a file enables collation of data and reporting in complex cross—
classification and matrices at any time of future.
FUNCTIONS OF MIS IN KSFC:-
MIS generates weekly, monthly reports and submits it to the management for
taking appropriate policy decisions for follow up of branches/operational
departments.
The information regarding sanctions, disbursement recovery, and interest
recovery, performance of all 29 branches are given to the zonal offices later.
In turn the MIS department collects information from these zonal offices.
MIS department furnishes information to its board of directors at monthly
intervals.
MIS department furnishes information to SIDBI, government departments,
industry and commerce, financial department etc.
MIS department prepares operational statistics every year.
MIS department organizes branch zonal managers meeting every quarterly,
half yearly etc.
MIS department helps in fixation of targets.
MIS department prepares the annual corporate budget
M.S.RAMAIAH COLLEGE OF ARTS, SCIENCE & COMMERCE, BANGLORE 59
KARANATAKA STATE FINANCIAL CORPORATION,
BANGALORE
STRUCURE: This department has started from this year. In order to augment income
generation, the corporation initiated several measures directed towards fee-based
activities. As part of restructuring, fee based activities like stamp vending, marketing of
Life and General Insurance products, marketing of UTI mutual fund products, etc have
M.S.RAMAIAH COLLEGE OF ARTS, SCIENCE & COMMERCE, BANGLORE 60
KARANATAKA STATE FINANCIAL CORPORATION,
BANGALORE been taken up by this department. This department is headed by Deputy General Manager
and which comes under Executive Director of Finance.
MARKETING ACTIVITIES OF KSFC:
MUTUAL FUND ACTIVITIES: During the year of 2006-07 the Corporation entered into MoU (Memorandum of
Understanding) with UTI for marketing of its Mutual Fund products of UTI. Though this
activity was started in the last quarter of 2006-07, mutual fund products of Rs. 138.49
lakh were marketed.
INSURANCE BUSINESS:
An MoU was signed with Life Insurance Corporation of India in March 2007
for marketing of LIC products. The Corporation insured assets in respect of 4,831 cases
and mobilized a premium of Rs. 166.39 lakh.
MONITORING OF IPOs: During the year, the Corporation took up the Issue Monitoring (Initial Public
Offerings) assignments in respect of two companies and earned a revenue of Rs. 40.00
lakhs.
STAMP VENDING ACTIVITY: The Corporation has submitted a proposal to the State Government seeking
permission for taking up the Stamp Vending activity. The proposal is pending with the
Government.
CUSTOMERS OF KSFC:
News line printers Private Ltd
Reliance Engineers Ltd.
Sky Top Builders Private Ltd
M.S.RAMAIAH COLLEGE OF ARTS, SCIENCE & COMMERCE, BANGLORE 61
KARANATAKA STATE FINANCIAL CORPORATION,
BANGALORE
Akka Mahadevi Agro Foods Private Ltd
Jai Auto Cables Private Ltd
Ajantha Computarised Colour lab
Anand Bhavan Properties Private Ltd
Chandra Plaze
Deepthi Electronics and Electro Optics Private Ltd
Balaji Warehousing company Private Ltd
Dev Kiran Paper Mills Private Ltd
Diamond Plastics
Arun Digi Audio
Bharani Laboratories Private Ltd
Captronics Private Ltd
.
M.S.RAMAIAH COLLEGE OF ARTS, SCIENCE & COMMERCE, BANGLORE 62
KARANATAKA STATE FINANCIAL CORPORATION,
BANGALORE
STRENGTHS OF KSFC:
Well qualified employees.
Network touching the whole of Karnataka.
Internal strength in financing small sectors.
Well laid down policies and procedures.
Operating and surviving in a highly industrialized state.
Attractive schemes.
All financial services under one roof i.e., availability.
The corporation has highly motivated employees.
Flexible repayment period.
M.S.RAMAIAH COLLEGE OF ARTS, SCIENCE & COMMERCE, BANGLORE 63
KARANATAKA STATE FINANCIAL CORPORATION,
BANGALORE Company’s image, reputation, quality of service, information availability is the
key to success in their performance level.
Company’s leadership, dedication and skill of workers, entrepreneurial
orientation, flexibility and adaptability of changes in the work, ability to respond
to changing conditions are strengthen their vision which influenced more on their
performance level at higher rate.
WEAKNESS OF KSFC:
The corporation is not adopting harsh recovery measures and helping the clients
during their difficult periods due to continued economic recession.
A statutory corporation with lots of government control.
Could not raise resources at low cost in the open market
Net worth and borrowing powers are affected adversely.
The corporation is heavily dependence on outsider’s funds.
No flexibility in interest rates / promoter’s margin / security norms, when
compared to delegation given to Commercial Banks.
OPPORTUNITIES OF KSFC:
Infrastructural development is what the companies are asking can be financed to
large extent.
Knowledge Process Outsourcing (KPO), Buzz word, business can be given
importance and financed.
If implement dedicated connectivity between all their branches which can reduce
the processing time and increase their customer base.
Growing population their lifestyle trends, level of education, provides an
opportunities to innovate new products and services to serve them.
M.S.RAMAIAH COLLEGE OF ARTS, SCIENCE & COMMERCE, BANGLORE 64
KARANATAKA STATE FINANCIAL CORPORATION,
BANGALORE Per capita income, the rate of growth of economy also provides an opportunity to
extend the financial assistance at an increasing trend.
Regulation in the competitive practices, Government controls and legislation
regulating business also an opportunity to improve the business.
Number of competitors is some what less which is an opportunity to increase the
performance level.
THREATS OF KSFC:
Private Banks like ICICI, HDFC are aggressive in financing loans by reducing
their processing time in their corporate financing.
IDBI, SIDBI, Corporative banks are gearing up for term loan finance to SME’s.
FINDINGS AND SUGGESTION:
FINDINGS:-
1) All the schemes that can be availed by the local entrepreneur are operated at branch
level.
2) Prior to providing assistance to a new unit an intensive study is done on the technical
feasibility and financial liability of the proposed project by appropriate expertise in
the field.
M.S.RAMAIAH COLLEGE OF ARTS, SCIENCE & COMMERCE, BANGLORE 65
KARANATAKA STATE FINANCIAL CORPORATION,
BANGALORE
3) The need for a guarantor/security for sanctioning a loan depends on the nature of
the proposed project. If the proposed project involves high risk and then the need
for security also increases. If the borrower is a regular customer, then his credit
worthiness becomes vital.
4) KSFC has norms to decide the repayment period for a loan. Apart from this cash
generation capacity of the proposed project is considered to fix up actual repayment
period.
5) KSFC provides guidance to the borrowers, and supervise/monitor the progress of a
project and follows up of loans.
6) A Borrower can avail loans under more than one scheme and can take additional loan
before repaying the previous loan. But this depends upon the exiting loan transactions
with the corporation.
7) In case of defaults in repayment of loan, KSFC follows the following steps to
recover.
First, reminder letters are sent to the defaulting customer requesting him/her to
make the payment.
In case of failure to get the response, Show cause notices are sent to the
defaulting customer stating the consequences of non-payment.
Then a compromising process will be carried on for arriving at an agreeable
solution between the defaulting borrower and KSFC.
If none of the above methods prove to be fruitful then the security provided by
the borrower will be confiscated and the amount realized from that will be
setoff against the amount due from him. The amount that is not realizable will
be written off finally after exhausting all the available remedies under the law.
M.S.RAMAIAH COLLEGE OF ARTS, SCIENCE & COMMERCE, BANGLORE 66
KARANATAKA STATE FINANCIAL CORPORATION,
BANGALORE
1) Normally, the lead-time between application of loans and sanctioning of loans is up to
proposal received by the branch having been processed within a period of 3 months.
In some rare cases they period taken has been up to 6 months. But the respondents
have revealed that, the delay was on account of their inability to comply with the
formalities and provide required documents.
2) The officers in charge of appraisal are found to face certain problems while
discharging their functions, some of which are listed below:-
Lack of information about the net worth.
Over-invoicing of the cost of plant and the machineries.
Change in government policies.
Genuineness of the legal documents.
Diversions and miss-utilizations of Funds.
Suppressions of material information about experience, past track record,
relationship with bankers etc..
Extraneous pressure for sanction of assistance.
Inclusion of persons with dubious reputation, dummy names, woman family
members to get subsidy.
3) To over come the above problems and appraise the proposals effectively, KSFC has
been taking a number of strategies:-
Constant review and up-gradation of systems and practices.
Close co-ordination with allied Government agencies, banks and financial
institutions.
Through investigation into the applicant’s profile and confirmation of
facts and claims.
Objective analysis of different elements of the project.
Periodical interaction with applicant’s bankers.
M.S.RAMAIAH COLLEGE OF ARTS, SCIENCE & COMMERCE, BANGLORE 67
KARANATAKA STATE FINANCIAL CORPORATION,
BANGALORE
SUGGETIONS:
On the basis of analysis and interpretation of data and finding, the
following point is put forward for the effective working of various loan schemes and
project appraisal followed.
1) KSFC plays an important role in the development of small-scale industries in
Karnataka State. KSFC has to take steps to provide additional financial schemes
concentrating more on the small-scale industries sector.
2) KSFC has to maintain quality clients so that it can maintain quality portfolio. The
corporation should take measures to sanction financial assistance by taking less
processing time to give better services and to retain good cliental base.
3) The appraisal department has to consider more parameters in the Area of technical
analysis, financial analysis, and marketability of the product while sanctioning the
financial assistance to the project.
4) KSFC has to keep continues contact with the clients, which will help the clients,
which will help the corporation in quick disbursement and improves customer
relationship. The corporation has to conduct meetings with the clients and try to
solve the problems faced by the unit frequently.
5) The corporation should concentrate on recovery of over dues and bad debts so as to
bring down the loan outstanding of the corporation.
6) Targets should be set to the recovery officers and special incentives should be
provided to those officers who achieve their objective.
M.S.RAMAIAH COLLEGE OF ARTS, SCIENCE & COMMERCE, BANGLORE 68
KARANATAKA STATE FINANCIAL CORPORATION,
BANGALORE 7) KSFC should conduct “customer meeting” once in every month and should discuss
the actual problems faced by the unit. The corporation with the help of its expert
team should solve the problem and this will ensure smooth functioning of the
assisted unit and recovery of the loan will also be ensured.
8) The concentration of SSI units in and around Bangalore is more. Most of them are
proprietary concerns and private limited companies. So KSFC has to add new
schemes for providing financial assistance to SSI units by charging lesser rate of
interest. This will attract new customers to KSFC.
9) The organization structure should be modified and surplus staff should be removed
and should implement fully computerization, so that the overhead expenses should
be reduced.
10) Frequent policy reviews regarding quantum of loan and terms of repayment could be
in tune with the change in the economy and recessionary trend in the industry.
11) A higher target could be attempted for achievement in respect of all schemes. This
will benefit more people and Institution.
CONCLUSION :
KSFC is the largest state owned term lending institution in Karnataka. But the
changing economic scenario, financial sector reforms coupled with WTO provisions and
declining interest rate regime has had adverse effect on KSFC’s functioning particularly
during 1999 to 2002 years. Both internal and external factors and market competition
offered particularly by the banking sector have worsened the position of KSFC during the
said period.
M.S.RAMAIAH COLLEGE OF ARTS, SCIENCE & COMMERCE, BANGLORE 69
KARANATAKA STATE FINANCIAL CORPORATION,
BANGALORE To conclude, it is observed that KSFC is a very good financial institution
that has different branches all over Karnataka with helping hand to the needy small-scale
entrepreneurs. Further KSFC is also entering into marketing fee based activities such as
insurance products, mutual funds, infrastructure development activities and other
emerging fields where the financial assistance is needed.
BIBLIOGRAPHY:
ORGANIZATIONAL BEHAVIOR -Stephen Robbins FINANCIAL MANAGEMENT -I.M.Pandey NON-BANKING FINANCIAL
COMPANIES -Dr. J.C.Verma
Company’s Reports:
KSFC Circulars.
M.S.RAMAIAH COLLEGE OF ARTS, SCIENCE & COMMERCE, BANGLORE 70
KARANATAKA STATE FINANCIAL CORPORATION,
BANGALORE
KSFC Director’s Report. KSFC Manual Report. Project Appraisal Manual. Annual Report of KSFC 2006-07 Operation Statistics 2006-07 Auditors Report.
Websites:
WWW.ksfc.kar.nic.in WWW.google.com www.financeindia.org
M.S.RAMAIAH COLLEGE OF ARTS, SCIENCE & COMMERCE, BANGLORE 71