MINISTER OF STATE IN THE MINISTRY OF FINANCE (SHRI NAMO NARAIN MEENA)
(a) No, Sir. However, the Gol, in September 2000, had set up a Committee headed by
Shri GP. Gupta, the then Chairman & Managing Director, Industrial Development Bank of
India (IDBI) for looking into the functioning of SFCs and making recommendations for
their restructuring and revitalization.
(b) The recommendations made by Gupta Committee in its report were broadly for
infusion of funds to revitalize and strengthen SFCs and to improve the performance
of SFCs.
(c) Gol suggested to the State Governments that they might consider recapitalizing the
SFCs on the lines of Gupta Committee recommendations after establishing its long term
viability and relevance. To help revival of SFCs, the Gol in August 2003 announced a
package and in line with the package, 11 SFCs and their respective State Governments
entered into tripartite MoU with SIDBl.
The MoU envisaged specific obligations on the part of State Governments
concerned, like continued support to the SFCs by way of contribution to the share
capital for facilitating higher levels of borrowing and achieving required capital
adequacy; conversion of outstanding loan in lieu of capital (LILC) into capital;
extending guarantee for market borrowing etc.
The MoU also stipulated a number of operational milestones to be achieved
by the SFCs, like achieving targeted recovery of not less than 90% in respect of
standard assets; bringing down the level of non performing assets (NPAs) to less
than 10% during the course of first 5 year phase of MoU; ensuring containment of
NPA out of fresh sanctions at less than 5%; taking effective steps to curtail the
administrative and establishment expenditure in a phased manner; rationalising
staff strength; putting in place second line of management; etc. Ten of the eleven
SFCs (expect UPFC) could implement the MoU.
SIDBI had agreed to provide the following benefits to SFCs under MoU mechanism:-
# Reduction in interest rate on outstanding refinance/ LOC by 2%;
# Rebate of 2% on fresh lending after April 1, 2003 (which was subsequently
restricted for the disbursements made during FY 2004 as the rate of interest was
brought down to 7.50% p.a., which provided for the rebate upfront, w.e.f April
01, 2004);
# Re-schedulement of refinance outstanding with an elongated repayment
period of 10 years including an initial moratorium of one year; and
# Organize need-based training programmes, as a measure of capacity
building of SFCs.
(d) & (e): The Government of Maharashtra has not made any request for
restructuring the Maharashtra State Finance Corporation so far.
