ACTIVITIES OF COSIDICI

Executive Committee Meeting:

The Executive Committee meeting of COSIDICI was held at Chandigarh on December 19, 2002 and was well attended by representatives of 12 Member Corporations. The Members expressed serious concern about the future role of SFCs in the context of the non-implementation of the Gupta Committee report. After due delebration on the problems being faced by the SFCs the members issued a press release which endorsed the views of all the delegates. The context of the press release is given below :

The main theme of discussions at the meeting was focused on revival of SFCs/SLFIs which are facing a lot of problems. It was agreed that SFCs have performed useful role for industrialisation in the country in the past and they are still performing well functions which cannot be performed by any other institution. This includes creation of first generation entrepreneurs, industrialising the backward areas and venturing as venture capital. Therefore, the relevance of SFCs in the future is also going to continue. 

It was agreed that the basic problems being faced by SFCs today are the high cost of debt and competition from banks which have lower cost of funds and which are able to lend at much lower rates than SFCs. However, it was also agreed that banks cannot provide term finances to small scale industries and tiny sector like SFCs and the experience of even all India Financial Institutions like SIDBI, IDBI in term financing had been bad.

The members expressed their concern at the non-implementation of the G.P. Gupta Committee report pending with Govt. of India which has suggested capital restructuring for revival of SFCs on the same lines as has been done for nationalised banks, regional rural banks etc. COSIDICI has been pursuing this matter and it was decided that a delegation of COSIDICI may again meet the Banking Secretary in the Union Finance Ministry and the Governor, RBI to impress upon them the need to help SFCs to come out of this debt trap.

Besides the proposed capital restructuring recommended by G.P. Gupta Committee, some suggestions by members were put up to the committee regarding debt restructuring which will revive retiring high cost debt with lower cost. It was pointed out that such arrangements should have been made effective for SFCs on all India level. It was also pointed out that the RBI has come out with a CDR Scheme involving corporates in which financial institutions and banks can sit with the corporates and provide them relief on documented rates as well as overdue interest to make them viable. Similarly, it was also pointed out that RBI has from time to time issued directions for rehabilitation of SSIs and tiny industry which have either become sick or are about to face sickness. The last rehabilitation circular of RBI was on 11th April, 2002. It is being adopted by SFCs to help in reviving its sick units. Therefore, it was agreed that RBI may be requested to extend CDR scheme to SFCs and provide for reschedulement of SIDBI refinance and bank subscription of SLR bonds to bring down the cost of funds to SFCs. Various options for debt restructuring/reschedulement were put up before the Committee and it has been decided to discuss these options for revival/rehabilitation of SFCs with RBI on the same lines as for sick industrial undertakings.

It was generally felt that the useful role played by SFCs has not been fully appreciated at the decision making level in the State government, Union government and RBI. SIDBI which is supposed to be the guardian of SFCs has also not been making any positive move in this direction and in fact rather than strengthening the SFCs it is putting funds meant for the help of SSI in deposits with banks. Therefore, it was also decided to take up these issues with RBI, Deptt. of Banking, Govt. of India and also at political level. There was a general consensus that if debt restructuring, as is being done by Govt. of India for its borrowings or by State Governments as well as the help to Corporates by the GoI through FIIs or DFIs is made accessible to SFCs, the latter can be turned around in five years' time. Capital restructuring from Govt. of India as envisaged by G.P. Gupta Committee can also come down if debt restructuring is allowed. A judicious mixture of debt restructuring and capital restructuring is definitely needed to make SFCs viable again. If no such help is provided, then banks and SIDBI are going to have huge NPAs on their hands through exposure to SFCs which has not happened in the past for most of the SFCs.

Finally, it was decided that the help of Industries Chambers, Members of Parliament, Chief Ministers of States should be taken to impress upon RBI and Union Government to extend the required help and for this purpose COSIDICI would be organising seminars/meetings in delegation with the concerned offices and make presentations before the political executives.

Follow-up action on all the above decisions of the Executive Committee is being taken up vigorously by COSIDICI and a delegation is expected to meet the Governor, RBI in the near future. 

Training Programme :

A proposal was received from Kerala Financial Corporation, Thiruvananthapuram that the College of Agricultural Banking (CAB), RBI, Pune may arrange training programme for their officers on-site at Thiruvananthapuram sometime in the month of January, 2003. The matter was discussed with the Principal of the College. As per the information received from the College, the programme which is in the process of being finalised is likely to take off in the middle of January, 2003. Once this on-site training programme materialises at KFC and is successful, similar programmes may be held at the head quarters of other corporations as well on specific request received from them. The Member Corporations would be advised in this regard separately. 
 
 

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