PROFILES OF MEMBER CORPORATIONS
 
U.P. FINANCIAL CORPORATION (UPFC) 

The U.P. Financial Corporation was set up in 1954 as instrument of state in pursuance of the State Financial Corporation Act, 1951, to provide medium and long term financial assistance to the private corporate sector for new projects, as well as the expansion and modernization of on-going operations.  

Smt. Rita Menon, IAS is presently, the Managing Director of UPFC. Her profile is given below:  
 

NAME          : Smt. Rita Menon, IAS  

Post held     : Field postings in Agra, Saharanpur, Mathura in different capacities.  

                   General Manager in the U.P. Export Corporation, Kanpur  

                   Govt. of U.P. as Special Secretary Revenue and Director, Land  
                   Acquisition U.P.  

                   Worked in Govt. of India in the Deptt. of Defence & Defence Production  
                   respectively as Under Secretary and Deputy Secretary.  

                   Worked in Govt. of India in the Deptt. of Family Welfare & Health, as  
                   Director & Joint Secretary respectively.  

                   Vice-Chairperson of the Ghaziabad Development Authority and  
                   Hapur-Pilakha Development Authority U.P.  

                   Deptt. of Industrial Development, U.P. as Additional Chief Executive  
                   Officer, Greater Noida Industrial Development Authority.  

                   Managing Director, U.P.F.C., Kanpur.  
 

Activities and performance of the Corporation are as follows :  

Till date the Corporation has financed Rs.2831.23 crores to 39979 units, thus helping to create a wide industrial base and augmenting State's efforts in the area of SME's development.  

Presently, the Corporation is supporting a loan portfolio of Rs.1096.32 crores (18105 units) with a narrow capital base of Rs.118.60 crores.  

For the effective functioning of the corporation, office structure is as follows :-  

There are 4 zonal offices.  

  • Zone-I is situated at the office of Deputy General Manager at B-6, Friends Colony, New Delhi. 
  • Other three zones namely Zone-II, III and IV are situated at UPFC Head Office at 14/88, Civil Lines, Kanpur-208 001. 
  • There are 21 Regional Offices and one Branch Office working under the supervision of Head Office. The Regional Offices are located at Agra, Aligarh, Allahabad, Bareilly, Dehradun, Etawah, Faizabad, Ghaziabad, Greater Noida, Gorakhpur, Haldwani, Jhansi, Kanpur (City), Kanpur (Dehat), Lucknow, Meerut, Moradabad, Muzaffar-Nagar, Noida, Saharanpur &          Varanasi. 

Financial Accommodation :

The maximum extent of limit to sanction the loan is upto Rs. 2.40 crores by UPFC. 

UPFC provides assistance to Industrial and Service concerns for new projects, as well as for their expansion, diversification and modernisation. 

UPFC offers a range of schemes to small and medium scale units whose paid-up capital and free reserves are upto Rs.10 crores and project outlay is upto Rs.5 crores. It undertakes joint financing with PICUP/Scheduled Banks also. UPFC provides terms loans for fixed assets. 

For New Units : The Corporation provides monetary assistance for the purpose of acquisition of fixed assets such as Loan, Building, Plant and Machinery for new units. 

For Existing Units : Provides easy assistance for upgrading and improving production capacity, reducing cost of production and modernising the existing units to increase efficiency. The schemes being operated by the Corporation at present are Equipment Refinance Scheme; Equipment Finance Scheme; Schemes for Young Professionals; Nursing Homes; Marketing Assistance; Working Capital Term Loan; Single Window Scheme; Branch Equity Scheme; National Equity Fund; Mahila Udyam Nidhi and Merchant Banking Services under which the Corporation is extending the following services:- 

(i) Public Issue Management; (ii) Project Certification; (iii) Equity Participation 

Current Rate of Interest :

SSI              : 15.5%     -    16.5% 

NON SSI       : 16.5%     -    17.5% 

Financial Progress in the last four years : 

(Rs. in crores)

Year Loan Sanctioned   Loan Disbursed Loan Recovery Outstanding
1996-97 707.45  423.14 391.50  1254.38
1997-98 360.26 268.89 374.84 1310.81
1998-99 101.83  130.40 329.90 1251.48
1999-2000 72.29 66.80 385.00  1096.32

Operational Improvements :

To improve the operational performance of the Corporation the following steps were initiated :- 

MOU with PNB for working capital

The Corporation has been extending Term Loan for Fixed Assets to small scale entrepreneurs, while working capital is provided by banks. The lack of co-ordination between the two has been one of the reasons for sickness in SSI Sector. Several steps taken in the past to secure better co-ordination between banks and UPFC had only a limited impact. 

In 1994, although the Corporation introduced WCTL scheme, it did not meet with expected success, as the Corporation has no institutional mechanism to oversee the utilisation of the loan. To overcome this deficiency, PNB & UPFC have agreed to have joint appraisal and to meet credit needs of working capital as well as term loan. We are confident that this will give a boost to the industrial development of the state as well as reduce fresh accretion as NPA's. 

Rationalization of Resource Portfolio

The Corporation has decided to prepay the high cost debt so as to reduce the cost of capital and increase its net interest margin (NIM). 

Asset Improvement/NPA Management

Presently, the Corporation is saddled with Rs.756.96 crore of non-performing assets (NPAs). To reverse this trend, the Board approved a two pronged strategy.  

a) Revamping the credit appraisal system in order to avoid prospective NPAs; 
b) Rationalising the existing NPAs settlement policy.  

For revamping the credit appraisal system, the Corporation has retained the services of SSI Caps, who would review the existing credit system and recommend suitable structural and systematic changes. The Corporation staff would be trained in the new appraisal techniques. This would help in improving the quality at entry and reduce the percentage of prospective NPAs. SBI Caps would also structure an Early Intervention & Resolution Mechanism (SEIR) and Management Information System (MIS) for the Corporation. Out of 21 ROs 16 ROs have been linked with Headquarters by E-mail connections. 

NPA Management 

        To manage the stock of Rs.756.96 crore of NPAs, the Board approved the new settlement  
        policy. The salient features of the New Settlement Policy are :  
  • Transparency & Objectivity : The new policy takes away the discretion and lays down firm categorization and formulation or OTS amount payable, which would be uniform to all.
  • De-linking with valuation for entire UP except Noida & Greater Noida (area under Development Authorities), Ghaziabad Distt. and city limit of Agra, Varanasi, Kanpur, Lucknow & Dehradun.
  • Further, categorization of D-II assets as their life span varies from 4 to 20/25 years.
  • Liberal treatment of Loss Assets (Total portfolio - Rs.98.65 crore).

Review of Interest rate structure

To keep itself competitive, the Corporation has reduced its interest rate by 1.5% for SSI and 1% for other than SSI units in all the lending segments and by 50 basis points in Equipment Finance Scheme. Further, the penal interest has been reduced from 7.5% to 2.5%. 

To encourage the entrepreneurs to be regular in their accounts, the Board also introduced a new scheme "Terminal Interest Benefit Scheme". In this a rebate of 1% would be given to an entrepreneur, who remains regular in repayments with the Corporation throughout the currency of the loan. 

Computerisation :

UPFC has made all out efforts to avail benefits of fast changing information technology. Electronic Mail and Internet facilities are available throughout all Regional Offices of the Corporation. The Corporation has also been striving to modernise its working operations through Web Enabling Accounting System on Internet which will facilitate the entrepreneurs to operate their accounts on Internet. 

The Corporation has its in-house existing computerisation system. For advancement in communication infrastructure, upfc also purchased latest pentium-III PC's. For all regional offices having Internet facilities which can be used for e-mail and other capabilities of Internet.  

The Corporation has created a website on Internet. Facilities to entire account statements, units available for sale and some general information about UPFC is available on the same. This will also facilitate data compilation at the head office sent by regional offices through internet.  

Software programmes for new policy of OTS calculation, overdues analysis and recovery follow-up, on-line customer receipt issue programmes were developed in this financial year.  

Improvement of Relationsip with Borrowers :  

With a view to improve co-ordination with borrowers and attract good business, the Corporation has initiated the following steps :-  

Terminal Interest Rebate Benefit  

Till now UPFC has been charging default interest on default amount for defaulted period and there was no incentive to keep the account regular. With a view to encourage the entrepreneurs to remain regular with the Corporation, it has been decided with effect from 01.04.1999 that at the time of final payment in a loan account, UPFC shall allow TIRB equal to 1% p.a. to entrepreneurs who remained regular throughout the currency of loan. Thus good borrowers will be benefited with comparatively lower interest and will be effectively charged interest lower by 1% p.a. in comparision to the normal interest rate applicable.  

Reduction in Default Interest  

As per prevailing policy, the Corporation was charging default interest at a rate of 7.5% on default of all the principal instalments for the period of default and amount of default. With effect from 01.04.1999 the Corporation decided to reduce it 2.5%.  

Reduction in service charges  

Earlier a borrower had to pay legal service charge before legal documentation, up-front fee of 1% of the sanctioned amount at the time of the first disbursement and incidental charges of 1/2% at the time of each disbursements. All these three charges amounted to almost 2% of the sanctioned amount. With effect from April 1999 it has been decided to club all these charges and reduce them to 1%. Now service charge of 1% will be recovered at the time of first disbursement from the borrower instead of 3 different charges.  

Formation of Sectoral Task Forces :  

The Corporation has decided to have sectoral task forces (STFs) comprising of the officers of the Corporation with the objective of improving appraisal standard and containment of non-performing assets (NPAs).  

Further to be more vigilant and to assure an aggresive monitoring function both for the recovery as well as for liquidating the liabilities of the Corporation the monitoring system of recovery at H.O. has been streamlined into the specific task forces and cells which have been constituted are 
(i) Assets Management Cell; 
(ii) Chronic Account Monitoring Cell; 
(iii)Assets Disposal Cell; 
(iv) R.C./P.R.C. Cell; WCTL/Lease Cell; 
(v) N.P.A. Cell; 
(vii) Settlement Committee Cell; 
(viii) Statistical Cell. 
 
To hold `Vittya Bandhu' meeting every month in every Regional Office :  

In order to have better interaction with various industrial associations, the Corporation has decided to hold regular meetings with them. These meetings would be called as `Vittiya Bandhu' meetings. These meetings would be held in every month in every R.O. under the Chairmanship of Zonal Manager. The R.M. would call atleast 2 or 3 industrial associations, operating in their areas, for these meetings. The idea behind the meetings is that there should be cordial atmosphere between the Corporation and various industrial associations/member of Industry so that each could work for the best benefit of the entrepreneurs.