State Financial Corporations Act, 1951 was brought into force LO enable all State Governments (except Jammu and Kashmir) to set up State Financial Corporations as regional development banks. They are to meet the financial requirements of small and medium size industrial units in the respective States. The first State Financial corporation was established in Punjab in 1953. Subsequently Andhra Pradesh and Bihar State Governments took the lead to set up SFCs in 1960 followed by Uttar Pradesh, Karnataka, Gujarat, Maharashtra and Orissa. At present, there are 18
SFCs operating in different States and Union Territories in the country.
Capital structure of an SFC is determined by the concerned State Government with a minimum of Rs. 50 lakh and maximum of Rs. 5 crore. They are also authorised to raise fund,s by issue of share capital, and issue of bonds and debentures guaranteed by State Governments. They can also accept medium and long-term deposits from public. In addition, they can borrow from other financial institutions.
Every SFC is managed by a 12 member Board of Directors. The State Government concerned appoints the-Chairman and the Managing Director, and nominates three directors. lFCl and lDBl nominate one director each. Three directors are elected by financial institutions. The rest will be chosen on the basis of one each from schedule banks, cooperative banks and other financial institutions. One director is elected by non-institutional share holders.
Types of Assistance
SFCs provide the following types of assistance:
1) Granting of long-term loans to industries for the purchase of land, buildings and Machinery.
2) Guaranteeing payment on behalf of the entrepreneur for purchasing machinery on deferred payments from suppliers within India.
3) Underwriting issur of shares, bonds and debentures of industrial concerns.
4) Guaranteeing loans raised by industrial concerns for a period not exceeding 20 years.
5) Guaranteeing loans raised by industries from commercial banks 01. co-operative banks for acquiring fixed assets.
6) Subscribing to debentures of industrial units.
7) Provision of foreign exchange loans to industries under the World Bank line of credit.
8) Special capital assistance upto Rs. 2 lakhs.
9) Loans to industries in collaboration with the central financial institutions like the IDBI, the IFCI and the ICICI, and joint financing of projects along with the SIDCs and the commercial banks.
10) Acting as an agent of the State or Central Government or any other financial institutions notified on tqis behalf by the Central Government.
Industrial concerns under any form of ownership viz., a proprietary concern, join1 Hindu Family, registered qo operative society, private or public limited company engaged in or proposed to engage in one or more of the following activities are eligible for financial assistance.
1) Manufacture of goods
2) Preservation of goods
3) Processing of goods
5) ‘Hotel industry
6) Development of industrial cstates
7) Generation and distribution of electricity or any other form of power
8) Transport industry