1.

The Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGS)

This scheme is run by the government of India in collaboration with SIDBI (Small Industries Development Bank of India) to give unsecured loans to
businesses. You can borrow up to Rs.100 Lakh in term loans or working capital loans as per your eligibility and feasibility.

2. The MUDRA Loan Scheme

MUDRA stands for Micro Units Development and Refinance Agency Ltd. It is an agency launched by the government of India to facilitate corporate term
loans to entrepreneurs. Take a look at its featuresin this table below:

3. Stand Up India Scheme

The Stand Up India scheme is a special scheme started by the government of India to financially empower SC/ST and women entrepreneurs. You can borrow
between Rs. 10 lakh and Rs. 1 CR to start a manufacturing, trading or service unit, which is to be repaid in 7 years.

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STATE FINANCIAL CORPORATION OF INDIA

Introduction

A Central Industrial Finance corporation was set up under the industrial Financec o r p o r a t i o n s A c t , 1 9 4 8 i n o r d e r t o p r o v i d e m e d i u m a n d l o n g
term credit to industrialundertakings which fall outside normal activities of commercial banks.The State governments
ex pressed their desire that similar corporations be set up in states tosupplement the work of the Industrial financial
corporation. State governments alsoexpressed that the State corporations be established under a special statue in order to
m a k e i t possible to incorporate in the constitutions necessary provisions in regard to majority control b y t h e g o v e r n m e n t , g u a r a n t e e d b y t h e
State government in regard to the payment principal. In order to implement the views Expressed by the State governments
the State Financial Corporation bill was introduced in the Parliament.

Statement of objects and reasons

In order to provide medium and long term credit to industrial undertaking, which fall outside the normal activities of
commercial banks, a central industrial finance corporation was set up under the industrial Finance Corporations act,
1948.The state governments wished that similar corporations should be set up in their states to supplement the work
of industrial financial corporation. The intention is that the State corporations will confine to financing medium and
small scale industrial and will , as far as possible consider onl y such access which are outside the per view of industrial
fiancé corporation .The main features of the State financial Corporations Act 1951:

i. T h e b i l l p r o v i d e s t h a t t h e s t a t e g o v e r n m e n t m a y , b y n o t i f i c a t i o n i n t h e o f f i c i a l gazette, establish a
financial corporation for the state.
ii. i i . T h e s h a r e c a p i t a l s h a l l b e f i x e d b y t h e S t a t e g o v e r n m e n t b u t s h a l l n o t e x c e e d R s 2 crores . The issue
of the shares to the public will be limited to 25 % of the share capital and the rest will be held by the
 State Governments, The Reserve Bank,Scheduled Banks, Insurance Companies, Investment Trusts, Co - operative
banks andother financial institutions
iii. S h a r e s o f t h e c o r p o r a t i o n w i l l b e g u a r a n t e e d b y t h e S a t e g o v e r n m e n t a s t o t h e r e – p a ym e n t o f
p r i n c i p a l a n d t h e p a ym e n t o f a m i n i m u m d i v i d e n d t o b e p r e s c r i b e d i n c o n s u l t a t i o n w i t h t h e c e n t r a l g o v e r n m e n t .
iv. T h e c o r p o r a t i o n w i l l b e a u t h o r i z e d t o i s s u e b o n d s a n d d e b e n t u r e s f o r a m o u n t s w h i c h together with the
contingent liabilities of the corporations shall not exceed five – t i m e s t h e a m o u n t o f t h e p a i d – u p s h a r e c a p i t a l a n d t h e r e s e r v e
f u n d o f t h e c o r p o r a t i o n s . T h e s e b o n d s a n d d e b e n t u r e s w i l l b e g u a r a n t e e d a s t o p a ym e n t o f t h e p r i n c i p a l a n d
p a ym e n t o f i n t e r e s t a t s u c h r a t e a s m a y b e f i x e d b y t h e S t a t e g o v e r n m e n t .
v. T h e c o r p o r a t i o n m a y a c c e p t d e p o s i t s f r o m t h e p u b l i c r e p a y a b l e a f t e r n o t l e s s t h a n f i v e ye a r s , s u b j e c t t o
the maximum not exceeding the paid up capital.
vi. T h e c o r p o r a t i o n w i l l b e m a n a g e d b y a b o a r d c o n s i s t i n g o f a m a j o r i t y o f D i r e c t o r s nominated by the Sate
governments, The Reserve banks and the industrial Finance corporation of India .
v i i . Th e c or po r at i on wi l l b e aut ho ri z ed t o m ak e l o n g t er m l o ans t o i nd ust ri al co nc e r ns wh i c h a r e r e pa ya bl e wi t hi n a p eri od
n o t ex c e e di n g 25 ye ar s. Th e C o r po r at i on wi l l be f ur t h e r a ut ho ri z ed t o und e r wr i t e t h e i s s u e of s t oc ks , s h a r es , bo nd s
o r d eb en t u r es b y i n dust ri al co nc e rn s, s ubj e ct t o t h e p rov i s i on t h at t h e co rp or a t i on w i l l b e r eq ui re d t o di s pos e o f a nd
s h ar es et c. A cq ui r ed b y i t i n f ul fi l l m e nt i t s und e r wr i t i n g l i a bi l i t y w i t hi n a p e ri o d o f 7 ye a r s .
v i i i . U n t i l a r e s e r v e f u n d i s c r e a t e d e q u a l t o t h e p a i d – u p s h a r e c a p i t a l o f t h e C o r p o r a t i o n and until the State
Governments has been repaid all amounts paid by them, if any, in fulfillment of the guarantee liability, the rate of dividend sh all
not exceed the rate gu a ra nt e ed b y t h e st at e gov e rn m e nt . Und e r no ci r cu m s t an c es s h al l t h e di vi d en d e x ce ed 5 % p. a . an d
s ur pl us pr o fi t s w i l l be r e – p a ya b l e t o t he S t at e gov e rn m e nt s.
ix. T h e c o r p o r a t i o n w i l l h a v e s p e c i a l p r i v i l e g e s i n t h e m a t t e r o f e n f o r c e m e n t o f i t s cl ai m s a ga i ns t bo r ro w er s .

Financial resources of the SFC’s

:Th e S FC ’s m o bi l i z e t h ei r fi na n ci al r eso ur c es f ro m t he fol l o wi n g s ou r c es

1.Their own Share capital

2.Income from investment and repayment of loans

3 . S a l e o f b o n d s

4.Loans from the IDBI ( To some extent )

5.Borrowings from the Reserve Bank of India

6.Deposits from the Public

7 . L o a n s f r o m S t a t e G o v e r n m e n t s . In t h e ac t Fi na n ci a l c or po r at i ons a r e F i na n ci al co rp o ra t i o n s e s t abl i s h ed un d er s e ct i on 3
an d includes a Joint Financial Corporation established under section 3 A of the Sate financial C o rp or at i o ns Ac t o f 19 51 . T he a c t ap pl i es
t o al l i . “ I n d u s t r i a l C o n c e r n “ m e a n s a n y c o n c e r n e n g a g e d o r t o b e e n g a g e d i n a ) T h e m a n u f a c t u r i n g ,
preservation or processing of goods. b ) T h e m i n i n g o r d e v e l o p m e n t o f m i n e s c ) T h e h o t e l i n d u s t r y d)The
t r a n s p o r t o f p a s s e n g e r s o r g o o d s b y r o a d o r b y w a t e r o r b y a i r ( o r rop e wa y o r l i ft ) e ) T h e g e n e r a t i o n o r d i s t r i b u t i o n
of electricity or any other form of power ,f)The maintenance, repair, testing or servicing of machinery of any
d e s c r i p t i o n or v ehi cl es o r v es s el s o r m ot o r bo at s o r t r ai l e r s or t ra ct o rs. g ) A s s e m b l i n g , r e p a i r i n g o r p a c k a g i n g a n d a r t i c l e
w i t h t h e a i d o f m a c h i n e r a r y o r po w e r

h)

Th e s et t i n g up o r d e vel opm e nt of an i n d ust ri al a r ea i n du st ri al e st at e

i)

Fi s hi n g o r p r ovi di n g s ho r e fa c i l i t i es fo r fi s hi n g or m ai n t e n an c e t h er e of j ) P r o v i d i n g w e i g h t b r i d g e f a c i l i t i e s

k)

P ro vi di n g e n gi n e eri n g, t ec hn i c al , fi na n ci al , m an a ge m e nt , m a rk et i n g o r ot h e r services or facilities for industry.

l)

P ro vi di n g m edi c al , he al t h or ot h er al l i e d s e rvi c es

Providing software or hardware services relating to information technology ,telecommunication or electronics including
satellite linkage

n)

Setting up or development of tourism related facilities including amusement parks , conventions centers , restaurants
travel and transport , tourist servicesagencies and guidance counseling services to touristso ) C o n s t r u c t i o n

p)
Development , maintenance and construction of roads

q)

Providing commercial complex facilities and community centers includingconference halls r ) F l o r i c u l t u r e

s)

Tissue culture, fish culture , poultry farming , breeding and hatcheries

t)

Service industry, such as altering. ornamentation , polishing , finishing , o i l i n g , w a s h i n g , c l e a n i n g o r o t h e r w i s e t r e a t i n g o r

adapting and article or substance with a view to its use , sale transport , delivery or disposal .

u)

Research and development of any concept , technology , design process or product , whether in relation to any of the
matters aforesaid including a n ya c t i v i t i e s a p p r o v e d b y t h e S m a l l I n d u s t r i e s B a n k S t a t e F i n a n c i a l C o r p o r a t i o n s a l s o i n c l u d e
industries which specialize in “ processing goods “which includes any art or process for producing , preparing or making
a n a r t i c l e b ys u b j e c t i n g a n y material to manual , mecha nical , chemical , electrical or any other likeoperation .

Broad functions of State Financial Corporations

Project advisory and F i n a n c e AS a catalyst in small scale industrial growth the SFC’s provide the
followings e r v i c e s : a ) I n v e s t m e n t a p p r a i s a l

Project conceptualization and related services, including guidance in relation toselection of projects, preparation
of feasibility studies, capital structuring, techno – economic feasibility, financial engineering, project management
design etc.

•
C r e d i t S yn d i c a t i o n i n c l u d i n g a s s i s t a n c e i n l e g a l d o c u m e n t a t i o n e t c .

Documentation of various project documents

P l a c e m e n t o f d e b t – e q u i t y i n c l u d i n g d e s i g n o f t h e s t r u c t u r e o f i n s t r u m e n t s , placement of instruments with financial institutions,

bank etc.

Assist in organizational structural changes like :( 1 ) A n a l y s i s of operational p e r f o r m a n c e (2)Study of

existing organizational structure(3)Study of the existing statures and rules and regulations( 4 ) M a r k e t a n a l y s i s w i t h
respect to p r o d u c t s (5)Review of domestic and international scenario(6)Valuation of fixed assets
and inventory( 7 ) A d v i s i n g o n f o r m a t i o n o f n e w e n t i t y (8)Preparation of relevant agreements / legal documents.

Industry Research / Information ServicesA dedicated research team looking at both macro – level issues as well as sector
– specific, industry research. The expertise of the professional research team and a

large diversified data base enables SFC to provide erudite research reports to thecorporate world.

Legal Advisory ServicesA full – fledged legal cell , comprising of experienced professional with expertise inhandling
c a s e s o f d i v e r s e n a t u r e , o f f e r l e g a l h e l p s e r v i c e s . T h e s e r v i c e s r e n d e r e d b yt h i s u n i t c o m p r i s e i n v e s t i g a t i o n s a n d
p r e p a r t i o n s o f t i t l e r e p o r t s , b e s i d e s a d v i s o r ys e r v i c e s i n r e s p e c t o f m a t t e r s u n d e r d i s p u t e w h e r e a n i n d e p e n d e n t
consultuntantview is required .

Specific functions of SFC’s

:The SFC’s Provide the following types of assistance to industrial units in their respective s t a t e s :
The SFC’s while giving loans to industrial units s ee to it that loans are secured by a

PLEDGE, MORTAGAGE, HYPOTHECATION

of movable and immovable property or other tangible assets or guarantee by the state government or scheduledcommercial
bank , they also accept personal pledge by the entrepreneur . SFC’s donot give loans on the basis of second mortgage.

G r a n t l o a n s o r a d v a n c e s t o i n d u s t r i a l c o n c e r n r e p a ya b l e w i t h i n a p e r i o d n o t e x c e e d i n g 2 0 ye a r s .

Providing guarantee for loans raised by industrial units from commercial banks andstate cooperative banks.

Providing guarantee for deferred payments in cases where industrial units have purchased capital goods on a deferred
p a ym e n t b a s i s .

To underwrite the issue of shares, bonds and debentures of industrial concerns.

To Subscribe to shares, bonds and debentures of industrial concerns.

G u a r a n t e e l o a n s r a i s e d b y i n d u s t r i a l c o n c e r n s w h i c h a r e r e - p a ya b l e w i t h i n a p e r i o d n o t e x c e e d i n g 2 0 ye a r s a n d w h i c h a r e
floated in the public market

SFc’s grant loans to industrial units for the purchase of fixed capital assets like land,machinery. In some exceptional cases, some SFc’s
also provide loans for workingc a p i t a l r e q u i r e m e n t s i n c o m b i n a t i o n w i t h l o a n s f o r f i x e d c a p i t a l .
S F c ’ s p r o v i d e l o a n s i n f o r e i g n c u r r e n c y f o r t h e i m p o r t o f m a c h i n e r y a n d t e c h n i c a l know – how, under the IDA (International
development association) and world bank tie up.

SFc’s however are prohibited from subscribing directly to the shares or stock of anycompany having limited
l i a b i l i t y e x c e p t f o r u n d e r w r i t i n g p u r p o s e s a n d g r a n t i n g a n y loans or advance on the security of its own shares .

S FC ’s - C on tr i b u t o ry t o d ev el op me n t of s mal l s ca l e i n d u st ri es i n th e In d i an e con o my

:Th er e a r e at p r es en t 1 8S t at e fi na n ci al C or po r at i o ns and al m ost ev er y s t at e ha s a fi na n ci al co rp or a t i on o f i t s o wn . During 2000-

2001 SFC’s had sanctioned loans aggregating to 2800 crores and disbursed R s 2 000 c r or es . Th ei r as s i s t an c e i n t he fo rm o f l o an s
ha s d e cl i n ed s u bs eq ue nt l y d u e t ot h e ex i st en c e o f a l a r ge a m oun t of N on – P e rf o rm i n g as s et s . Over 70 % of the total assistance
sanctioned and disbursed by all SFC’s is provided to sm al l s c al e i ndu st ri es. At t em pt s a r e no w b ei n g m a de t o s t r e n gt he n t h e rol e o f
S FC ’s as r e gi on al de ve l op m ent ba nk s .Th e S FC ’s s an ct i on ed s e ed c ap i t al as s i s t an c e u nd e r t he s ee d c api t a l s ch em es
i nt rod u ce d and o p er a t ed b y ID B I. This assistance is available to promoters of small business units. Since June 1989, SFC’s h av e al s o b ee n
i m pl em ent i n g s p ec i al s ch em es o f se e d c api t al ass i st an c e t o wom en e nt re p re n e urs . As s i s t an c e i s ex t en d ed i n t h e f or m of l o an or
gr an t o r a com bi n at i on of b ot h t o v ol u nt a r ya ge n ci e s wo rki n g fo r wom e n i n de c e nt r al i z e d i ndu s t ri es .

CONCLUSION:

STATE FINACIAL CORPORATIONS HAVE NOT BEEN ABLE TO BECOME POPULAR DUE TO POOR IMPLEMENTATION AND
POOR INVESTMENTS THAT THEY HAVEUNDERTAKEN.AS THEY INVEST IN SMALL SCALE INDUSTRIES THE RETURNS WILL
BE LOWER AS GESTATION PERIOD FOR SMALL SCALE INDUSTRIES IS VERY LONG. LOSSESARE BOUND OCCUR BUT AS A
BUSINESS AND FINACIAL ORANISATION THEGOVERNMENT AND THE STATE MUST FIND WAYS OF MINIMISING
THEIR LOSSES AND EARNING A MODERATE PROFIT WHICH CAN BE RECYCLED BACK T O P R OM OT E S FC ’S . BUSINEES
DECISIONS MUST BE TAKEN WITH A PURELY BUSINESS PERSPECTIVEIN MIND AND POLITICAL, EMOTIONAL FACTORS
SHOULD NOT PLAY THEMAJOR FACTORS WHILE MAKING BUSINESS DECISIONS. AS ONLY THEN CANTHERE AND WILL
THERE EXIST A DIFFRENCE BETWEEN WHAT IS VIABLE AND WHAT IS NOT.