STATE FINANCIAL CORPORATIONS (SFCs) RESTRUCTURING COMMITTEE 
(Constituted by Ministry of Finance, Government of India)

Comments & Suggestions Invited / Order
 
 
 
 

COMMENTS AND SUGGESTIONS INVITED

The activities, coverage and overall performance of State Financial Corporations (SFCs) have expanded considerably over the years.  However, with the passage of time, their operations have thrown up several problems connected with the organisation, management, resource mobilisation, operational efficiency and overall financial health.  Some of the SFCs have eroded their networth and their operations have become moribund.  With the introduction of financial sector reforms, the business environment of SFCs alongwith other financial institutions is becoming increasingly competitive.  To enable SFCs to adapt themselves to the emerging environment and promote the growth of the small scale and tiny industries sector in the desired manner, Government has recently enacted amendments to State Financial Corporations Act, 1951 with a view to enlarge their shareholders base, provide them with greater functional autonomy and operational flexibility and consequent ability to respond to the needs of the changing financial system. Along with the amendments to SFCs Act, 1951 a need has also been felt to restructure the SFCs for strengthening and revitalising them. Accordingly, a high-level Committee has been set up under the Chairmanship of  Shri G.P.Gupta, Chairman and Managing Director of IDBI for looking into the functioning of SFCs and to make recommendations for their restructuring and revitalisation.

The terms of reference of the Committee are as under :-

  • Identification of the role and status of SFCs in the emerging Indian Financial System;
  • Suggestions for operational, financial and organisational restructuring of SFCs to provide them with greater functional autonomy and operational flexibility;
  • Composition and adequacy of capital structure particularly with reference to capital adequacy ratio of SFCs; 
  • Financial restructuring, recapitalisation and revitalisation of SFCs;
  • Identification of sources through which restructuring and recapitalisation shall be funded;
  • The desirability and feasibility of potential mergers and amalgamation of various state level financial institutions;
  • Measures for containment of non-performing assets;
  • Profile of business and change of business-mix;
  • To make any other recommendation as may be appropriate to enable SFCs to develop a proper strategy and plan of action that will go towards improving their viability and competitive position in the emerging financial system.


The Committee is required to furnish its report to the Government of India within a period of 3 months.

 For this purpose, comments/suggestions are invited from individuals, professionals, SSI units, extension agencies, organisations, industry associations, etc.  by 15th November, 2000 at the following address:

Shri Viney Kumar
General Manager
(Committee Secretariat),
Industrial Development Bank of India, 
IDBI Tower, WTC Complex,
Cuffe Parade,
Mumbai - 400 005.

Phone :   218 3120
Fax  :   218 3185/218 2135
Email  :  v.kumar@idbi.co.in
Website :   www.idbi.com
 
 


 

ORDER

F.No.6(7)2000-IF.II
Government of India
Ministry of Finance
(Banking Division)

New Delhi, the 5th September, 2000.

The activities, coverage and overall performance of State Financial Corporations (SFCs) have expanded considerably over the years.  However, with the passage of time, their operations have thrown up several problems connected with the organization, management, resource mobilization, operational efficiency and overall financial health.  Some of the SFCs have eroded their net worth and their operations have become moribund.  With the introduction of financial sector reforms, the business environment of SFCs alongwith other financial institutions becoming increasingly competitive.  To enable SFCs to adapt themselves to the emerging environment and promote the growth of the small scale and tiny industries sector in the desired manner, Government has recently enacted amendments to State Financial Corporations Act, 1951 with a view to enlarge their shareholders base, provide them with greater functional autonomy and operational flexibility and consequent ability to respond to the needs of the changing financial system.  Along with the amendments to SFCs Act, 1951 a need has also been felt to restructure the SFCs for strengthening and revitalising them.

Considering the above facts and circumstances, the Government has decided to set up a Committee under the Chairmanship of Shri G.P. Gupta, Chairman & Managing Director, Industrial Development of Bank of India to look into the functioning of State Financial Corporations (SFCs) and to make recommendations for their restructuring and revitalisation.  The Committee shall consist of the following :

1. Shri G.P. Gupta, CMD, IDBI       -     Chairman of the Committee

2. Shri S.S. Kohli, CMD, SIDBI      -      Member

3. Shri S.K. Tuteja, Development
   Commissioner (SSI)                   -       Member

4. Shri I.D. Aggarwal, ED, RBI        -       Member

5. Shri V. Trivedi, MD, MPFC         -        Member

6. Shri P.V. Rajaraman, Principal 
   Secretary(Finance), Tamil Nadu  -        Member

7.Shri B.D. Jethra, Adviser, 
   Planning Commission                -        Member

8.Shri A.K.D. Jadhav, M.D.SICOM 
   Limited (Maharashtra)               -         Member

 9 Dr. Amitava Mukherjee, Ph.D    -         Member
    Ex-Banker & Management Consultant
 
 

The terms of reference of the Committee are as under :

1) Identification of the role and status of SFCs in the emerging Indian Financial System;

2) Suggestions for operational, financial and organisational restructuring of SFCs to provide them with greater functional autonomy and operational flexibility;

3) Composition and adequacy of capital structure particularly with reference to capital adequacy ratio of SFCs;

4) Financial restructuring, recapitalisation and revitalisation of SFCs;

5) Identification of sources through which restructuring and recapitalisation shall be funded;

6) The desirability and feasibility of potential mergers and amalgamation of various state level financial institutions;

7) Measures for containment of non-performing assets;

8) Profile of business and change of business mix;

9) To make any other recommendation as may be appropriate to enable SFCs to develop a proper strategy and plan of action that will go towards improving their viability and competitive position in the emerging financial system.

4. The Committee shall submit its report to the Government within a period of three months.
 

(SHEKHAR AGARWAL)
JOINT SECRETARY TO THE GOVERNMENT OF INDIA

 

Copy forwarded for information to Managing Directors of all State Financial Corporations.

Copy to: Secretary-General, COSIDICI, New Delhi