Detailed description about State finance corporations.

1. Presentation By:
Sanjay

2. 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. 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.  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. 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. 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.  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)

9. Small-scale Industries Board (SSI Board)
Constitutedin 1954 to facilitatethe coordinationand inter-institutional linkages forthe developmentof
SSI sector
Khadi and Village Industries Commission (KVIC)
Statutory bodycreated by an act of Parliament
Small Industries Development Organization (SIDO)
Establishedin 1954on recommendationof Ford Foundation
National Small Industries Corporation Ltd. (NSIC)
Establishedin 1955by GOI with the main objectivesto promote, aidand foster the growth of SSIsin the
country
National Science and Technology Entrepreneurship Development Board (NSTEDB)
Establishedin 1982by GOI, isan institutionalmechanismto helppromote knowledge-drivenand
technology-intensiveenterprises
National Productivity Council (NPC)
Autonomousinstitutionfunctioningunderthe overallsupervision ofthe Ministryof Industry
National Productivity Council (NPC)
Autonomousinstitutionfunctioningunderthe overallsupervision ofthe Ministryof Industry

10. National Institute for Entrepreneurship and Small Business Development
(NIESBUD)
NIESBUDis an autonomousbody underthe administrativecontrolof the Office of the DC(SSI)District
IndustriesCenters(DICs) – In order to extend promotionof small-scaleand cottageindustriesbeyond
bigcities and state capitalsto districtheadquarters
State Level Institutions - SFCs
State FinancialCorporations(SFCs) – Mainobjectivesare to finance and promotesmalland medium
enterprisesintheirrespective statesfor achievingbalancedregionalgrowth, catalyzeinvestment,
generate employmentand widen ownershipbase of industry.
State Level Institutions – SIDC / SIIC and SSIDC
State IndustrialDevelopment/ InvestmentCorporation(SIDC/SIIC) – Set up underthe CompaniesAct,
1956, as whollyowned undertakingsof the State governments,act as catalystsin respectivestates.
Other State-level agencies Extending Facilities for SSI Promotion
1.State Infrastructure DevelopmentCorporations 2.State CooperativeBanks3.RegionalRuralBanks
4.State Export corporations 5.Agro IndustriesCorporations 6.Handloomand HandicraftsCorporations
Other Agencies
NationalBankforAgricultureand RuralDevelopment(NABARD)
Housingand Urban DevelopmentCorporationLtd. (HUDCO)
TechnicalConsultancyOrganizations (TCOs)

11. 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. 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.