1. Meeting of COSIDICI delegation with the CMD, SIDBI, at Lucknow :

Pursuing one of its avowed objectives to liaise with and to represent to the Central and State Governments, the term-lending and other financial institutions on the common problems and issues of the Member Corporations, COSIDICI took up certain issues with the Small Industries  Development Bank of India, for resolution. A meeting of COSIDICI delegation comprising Shri K.K. Pandey, Vice-President COSIDICI, Shri V.K. Gupta, Vice-President COSIDICI, Dr. J.C. Mohanty, EC Member and Shri K.K. Mudgil, was held with Dr. Sailendra Narain, CMD, SIDBI, in SIDBI’s office at Lucknow, on 13th July, 2000, to discuss the problems faced by State Financial Corporations.  The COSIDICI delegation pleaded in the meeting for providing a level-playing field to SFCs as a result of economic reforms and stressed the need for re-capitalization of weak SFCs, in the absence of which, relaxations proposed to be provided in the Amendment Bill could hardly be of any use.  The delegation also pleaded for relaxation in prudential norms being applied to SFCs by IDBI.  Dr. Sailendra Narain agreed with the views of COSIDICI that the weak SFCs whose own funds had been reduced to negative, as also those SFCs which were unable to maintain capital adequacy ratio of 8% and above, must be taken up for financial re-structuring and re-capitalization.  He mentioned that these weak corporations would require an amount of Rs.2,500 crore for their re-structuring plan and that the state government and IDBI, being joint owners of SFCs, should own this moral responsibility and provide additional capital to the SFCs on the lines of commercial banks and RRBs where Govt. of India had inducted heavy doses of share capital (Rs.21,000 crore for commercial banks and Rs.1,800 crore for RRBs).  Regarding providing cheap resources to SFCs to enable them to compete with commercial banks, CMD SIDBI stated that SIDBI would certainly provide some relief in the refinance rate as and when its cost of funds goes down.  He also suggested that COSIDICI may seek a meeting with the Union Finance Minister where the Governor, RBI should also be invited and in the proposed meeting the need for providing level-playing field to SFCs along with commercial banks and other all-India financial institutions should be discussed.  Dr. Sailendra Narain also appreciated the views of COSIDICI regarding upgradation of conceptual and operational skills of the officers of state-level institutions and suggested that COSIDICI should take initiative and arrange training programmes for the officers either on its own or in collaboration with some training institute.  He also agreed in principle to reimburse 50% of the cost of training incurred by COSIDICI.  Following important decisions were taken in the meeting :- 

(a) It was pointed out to CMD, SIDBI that the conditions prescribed by SIDBI regarding reduction in the interest rates in respect of high interest bearing advances granted to SSI units between October 1994 and March 1996, ranging between 17% and 19.5% and allowing premature repayment of refinance instalments  by SFCs were found to be impracticable and hence none of the SFCs had approached SIDBI for getting relief on the above Scheme.  It was pleaded that SIDBI should consider granting across-the board reduction in the interest rate of refinance in respect of loans carrying high rate of interest and that SIDBI may agree to reduce the rate of interest on existing refinance accounts upto 13% on an understanding that SFCs, in turn, undertake to bear a loss of spread by charging maximum interest of 15.5% to their constituents.   Further, it was also pleaded that SFCs may be allowed to prematurely repay the instalments relating to the non-performing borrowal accounts, as no interest was being received from them.   The CMD, SIDBI appreciated the problems faced in this regard by SFCs and agreed to make necessary changes in the instructions already issued in this regard.   He, however, advised that COSIDICI should write to him with reference to the discussion held in the meeting for bringing about the desired changes in the scheme to suit the requirement of SFCs.  Secretary General, COSIDICI has since taken up these problems of SFCs with CMD, SIDBI in his communication dated July 21, 2000 and has urged upon him to treat the matter as of high priority, since an early decision in the matter will go a long way in providing much needed relief to the SFCs.

(b) The CMD, SIDBI indicated that the status of SIDBI regarding interpretation of SFCs Act and its developmental role would become clear after the Act was amended.   He however, appreciated the views of SFCs that the different set of prudential norms was required for SFCs keeping in view their strategic role in lending to high risk areas.

(c) The CMD, SIDBI agreed to enhance the overall limit of refinance from 55% to 70% and indicated that the formal instructions would be issued after the proposal was approved by the Board of Directors of SIDBI.   

(d) In response to the demand of SFCs to reduce the rate of refinance on the lines of IDBI, it was indicated by the CMD, SIDBI that the reduction in the rate of refinance was under their active consideration.   He also stated that detailed guidelines for financing under Working Capital / Term Loans would be issued by SIDBI in due course.

(e) The CMD, SIDBI also announced in the meeting following decisions subject to approval by the Board of Directors of SIDBI :-

  • Suitable modification of the Scheme of Financing under Handicapped Category to cover the retail activity for refinance upto Rs.2 Lakh and relaxation of the definition of ‘Activity’.
  • Providing 100% refinance under the aforesaid category upto Rs.2 lakh, reduce rate of interest to be charged under this scheme to 6 to 8% upto Rs.2 lakh and 10% beyond Rs.2 lakh within the loan limit.
  • Providing 100% refinance to J&K SFC upto the aggregate of Rs.25 crore of lending.  It was pleaded that this facility may be provided to other similarly placed weak SFCs on a uniform scale.
  • The CMD, SIDBI stated that SIDBI is only the implementing agency  on “Tannery Modernisation Scheme Under Indian Leather Development Programme”  which was sponsored by the Government of India.   He advised  COSIDICI to approach the Government of India, Ministry of Commerce and Industry in  regard to the eligibility norms for extension  of finance to the leather units. 
The Summary Record of Discussions held with the CMD, SIDBI on July 13, 2000 was circulated among all the SFCs. 

2. Changes in Personnel of COSIDICI 

Shri D.R. Gangopadhyay, a senior Central and commercial banker, who served IFCI, New Delhi, as Chief General Manager on being deputed by Reserve Bank of India, joined the services of COSIDICI as Additional Secretary with effect from 10th July, 2000, after his retirement from IFCI & RBI.  S/Shri G.N. Sharma, Joint Secretary COSIDICI, and J.C. Khanna, Associate Editor, vacated their offices after having served COSIDICI for a long stint.

3. Highlights of Seminar on Globalisation, Liberalisation and Developing Countries held on 10.08.2000 at New Delhi, under the auspices of FICCI:  

The Seminar on ‘Globalisation, Liberalisation and Developing Countries’ was organised by FICCI jointly with the Embassy of the Federal Republic of Germany and Deutsche Bank on August 10, 2000, at Federation House, Tansen Marg, New Delhi.  Prof. N. Walter was the Key Note Speaker.  Secretary General, COSIDICI, accompanied by the Addl. Secretary COSIDICI attended the Seminar.

The topic of the Seminar ‘Globalisation, Liberalisation and Developing Countires’ is very thought-provoking and relevant to the present juncture.  Prof. Walter, Managing Director of Deutsche Bank Research, Germany, made a very interesting presentation on the various aspects of globalisation including its definition, process, causes and consequences, etc. In his view, globalisation connotes growing inter-dependence of markets and production in different countries due to trade and transfer of capital and technology as also fragmentation of production due to market integration. He traced the causes of globalisation as under : 

  • Liberalisation of goods and financial markets.
  • Reduction of transportation cost.
  • Trade becomes easier thanks to technological progress. 
  • Establishment of global communication and networks. 
  • Homogenisation of demand structure 
  • Political opening. 
The globalisation has impacted on world trade by way of increasing global foreign trade, growing variety of products, and shift from raw-materials to consumer products and highly specialised industrial goods, besides shift from triod to Regional trade blocks. Further, due to globalisation there is a massive increase in FDI and strategic alliance since 1980s.  

FDI has also increased in emerging countries. The consequences of globalisation are characterised by global competition between companies and between regions besides rise in new markets and industries particularly in I.T. Sector, Health care system and Education system.  Further, according to Prof. Walter, globalisation may usher in decentralisation in production and organisation and disparities within societies and between regions.

After the Key Note address of Prof. Walter, the floor was made open for interactive discussions and many issues were raised and deliberated during the discussions.

4. Annual General Body Meeting and the Executive Committee Meeting of COSIDICI :

The Annual General Meeting of COSIDICI for 1999-2000 will be held on 22nd September, 2000, at Tagore Chamber, Scope Convention Centre, Scope Complex, Lodhi Road, New Delhi, to consider and approve, among others, the Annual Report of the Executive Committee, Audited Statement of Accounts for the year 1999-2000, election of President, Vice-Presidents and Members of the Executive Committee and a proposal to amend the Memorandum of Association of COSIDICI. On the same day, the Executive Committee will meet before the Annual General Body Meeting, to consider and approve the Agendas placed before it.

5. Essay Competition :

It was resolved in the Executive Committee meeting held on May 19, 2000 at Kodaikanal to hold Essay Competition under the aegis of ‘COSIDICI COURIER’ on the subject entitled “Financial Sector Reforms and the Role of Development Banking in the Small and Medium Sector”.  The competition was open to all employees of member corporations and the members of their families. On critical evaluation of the seventeen Essays received, it was held by the Editorial Board that no essay was found to be of the required standard that could merit award of the first prize. The Editorial Board after having deliberations decided that the essays contributed by Shri C.R. Rengaswamy, Deputy manager, Kerala Financial Corporation, Trivandrum and by Shri Uday Sankar Majumdar, Officer (Finance), Tamil Nadu Industrial Investment Corporation, Chennai, should be awarded second prize of Rs. 5,000/- each.   It was also decided that these essays would be published in the ‘COSIDICI COURIER’.
SFC Act, 1951, Amended, Govt. of India appoints HIgh level committee

COSIDICI is pleased to inform that the State Financial Corporations (Amendment) Act, 2000 has been passed by the Parliament and has come into force w.e.f. September 12, 2000 after receiving assent of the President of India. The Amendment of SFCs Act removed the legal hurdles in bringing about desired reforms in the working of SFCs. Government of India have also constituted a 9 Member high level Committee under the Chairmanship of Shri G. P. Gupta, Chairman of IDBI, on September 05, 2000 to look into the functions of the SFCs and to make recommendations for their restructuring and revitalisation. Both these steps of the Government of India are positive acknowledgements of COSIDICI’s relentless efforts.