PROFILES  OF  MEMBER CORPORATIONS

JAMMU & KASHMIR STATE FINANCIAL CORPORATION (J&K SFC) 

The J&K State Financial Corporation was incorporated under State Financial Corporations’ Act, 1951 on December 02, 1959.  The financial corporation established under SFCs Act, 1951 has been primarily conceived as Regional Development Bank for accelerating industrial growth in the State by providing financial assistance mainly to small and smaller of the medium scale industries. 

Management  

The general superintendance and management of the affairs and business of the Corporation vests with the Board of Directors assisted by an executive committee and the Managing Director who is appointed by the State Government. 

The Chairman of the Board of Directors is one of the senior most Directors nominated by the State Government who shall hold office for two years or until his successor is appointed. 

Shri Vinod Gupta is the Managing Director of the Corporation since September 1997.  Prior to this appointment  he was Managing Director, J&K Small Industries Development Corporation, Dy. Commissioner Sales Tax & Jt. Director, Industries.   He has sufficient experience of both administration as well as of the Industries.   During his tenure as Managing Director he has carved out a place for J&K SFC in introducing for the first time some of the unique schemes like : 

 1. One Time Settlement Scheme. 
 2. Rehabilitation-cum-Settlement Scheme. 
 3. Special Rehabilitation-cum-Settlement Scheme. 
 4. Amnesty/Exit Policy. 

By introducing such measures the Non-Performing portfolio of the Corporation has shown a considerable decrease from 54% to 16% as on 31.03.1999.   It was during his time as Managing Director that the loaning was restarted after a gap of 7 years and for the first time after a gap of 8 years the Corporation has been able to earn a profit of Rs. 1.60 crores. 

During his tenure he has introduced special schemes like Composite Loan Schemes; Transport Financing under Special category and for various types of vehicles introduced in the market.   In addition he got certain areas of the State declared as industrially backward by Small Industries Development Bank of India so that the Corporation can provide loans at reduced margins.  Further, various offices of the Corporation were upgraded and powers were delegated to the senior officers by decentralizing the same. 

During his period the Corporation launched its own Website and E-mail.

Organisational set-up  

The Head Office of the Corporation works at Srinagar and Jammu and functions under the control of the  Managing Director. The Corporation has its Branch Offices in all the 14 districts of the State.   

All applications for financial assistance are received and processed at respective branch offices.   The follow up of the units including disbursement is initiated in these offices. The recovery of loans is also monitored by these offices.

Sources of Funds 

The main sources for funding the business of the Corporation consistitute Share Capital, Refinance from IDBI / SIDBI, floatation of Public bonds, raising of deposits from public, raising of adhoc borrowings from RBI payable within a period of one year and internal generation of the Corporation in the form of recoveries of principle and interest.

Sanctions/Disbursements 

The Corporation played a pioneering role in boosting industrial climate in the State and provided financial assistance under various schemes as formulated by the State Government, IDBI / SIDBI from time to time. The Corporation contributed its due share towards proliferation of industrial investment. The sanctions and disbursements prior to 1992-93 were target based which has adversely affected the financial health of the Corporation.  

The planned growth aspirations can be achieved by the Corporation only if it is backed by adequate financial support. The Corporation is conscious of its obligations but the entire business of the Corporation cannot be met only out of internal generations. The commitment in respect of repayment of borrowings and payment of interest on borrowings increased. On the other hand the lower generations resulted in losses. Confronted with such a position the management addressed  itself to the task of pulling the institution out of this crisis. New strategies were chalked out aimed at maximising recoveries and making payments towards clearance of liabilities in order to restore the confidence of creditors. Towards achieving these goals following measures were initiated :

  • Purposeful recovery drive.
  • Daily monitoring of recoveries.
  • Refixation of targets of recoveries in respect of various offices of the corporation and its periodical monitoring.
  • Review of working of branch offices of the Corporation in fortnightly meetings.
  • Effective daily monitoring of cash management.
  • Review of default portfolio of the Corporation with special attention on recovery from chronic defaulters. 
  • Initiating action under section 29 of the SFCs Act, 1951 against defaulted units.
  • Initiating measures for instilling financial and inservice disciplines.
  • Internal system development.
  • Undertaking of internal audit.
  • Personal inspection by Managing Director of the various offices of the Corporation and units under implementation.
  • Effective follow-up of suits filed in the courts and its periodical review in weekly meetings.
  • Mobilisation of resources by taking up issue with IDBI/SIDBI for fixation of limit of refinance and;
  • Adherance to decisions of the Board of Directors.
These measures yielded desired results and improvement trend was witnessed in recoveries to some extent. The Corporation started clearing the liabilities on ongoing basis along with meeting undisbursed commitments entirely out of its own recoveries. The entire principle and interest payments to IDBI have been cleared. Entire interest on outstanding refinance from SIDBI has been paid. Interest on bonds has been paid. There is no default at present on this account. The Corporation has not been able to repay principle refinance to SIDBI in full and the Corporation has requested them to rephase the repayment over a period of 4 years. 

The Corporation like commercial banks is required to classify its loans outstanding into various categories viz. standard, sub-standard, doubtful and loss assets and make necessary provisioning therefor based on shortfall in sanctions. This classification forms part of balance sheet from the year 1993-1994.

The Corporation was carrying its operations smoothly by mobilising its resources from various sources. The state government provided financial support by increased subscription to share capital. The financial assistance provided by the Corporation to various industrial units helped many un-employed youth to engage themselves in self-employment. The assistance provided by the corporation so far helped in generating employment to 2 lakh persons.   

The improved trend in the operations of the corporation suffered a set back as a result of disturbed conditions in the valley. This left its mark on the operations of the corporation affecting all sectors of trade and industry. Hotel industry in Kashmir suffered a set-back and SSI sector was equally faced with great problems because of frequent bandhs and hartals. The movement of goods also suffered consequently affecting the transport sector. These factors contributed to default by the constituents of the Corporation in the repayment of their dues resulting in lower generations. 

Reliefs / Schemes introduced by the Corporation

a. One Time Settlement Scheme :

In order to give benefit relief to the borrowers who had suffered during turmoil and also to encourage those borrowers seeking fresh loans, the Corporation introduced “One Time Settlement Scheme” in September, 1997. This scheme remained in operation upto May, 1998. Under the scheme the Corporation was able to settle 716 loan accounts and the benefit by way of waiver of compound interest etc. passed to the loanees was to the extent of Rs. 7.42 crores. The Corporation recovered an amount of Rs. 11.12 crores under the scheme. 

b. Rehabilitation-cum-settlement scheme :

On the persistent requests of the borrowers / associations and in order to give further relief to the borrowers who intend to settle their loan accounts in the interest charged by the Corporation from April, 1988 onwards, the Corporation introduced “Rehabilitation-cum-settlement Scheme” in June, 1998 which is still in operation. Under this scheme the corporation has so far re-scheduled 1247 loan accounts and the benefit given to these borrowers is of the order of Rs. 26.56 crores. The scheme provides waiver of penal interest, compound interest and additional interest charged in the loan account from April 1988 onwards. The Corporation recoveres only 50% simple interest charged in the loan account together with principle outstanding.

c. Amnesty Scheme / Exit Policy :

This scheme has been introduced recently by the Corporation in respect of SSI Units/ Hotels which have remained closed right from their inception or left halfway and / or the established units which could not commence production due to non-availability of working capital, damages due to calamities etc.

Under this scheme the applicant borrower will get benefit of waiver of entire interest outstanding provided the applicant will clear the entire principle outstanding with other monies before March 2000 subject to the condition that the applicant furnishes documentary evidence of eligibility under the scheme.