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Introduction
A Central Industrial Finance corporation was set up under the industrial Finance
corporations Act, 1948 in order to provide medium and long term credit to industrial
undertakings which fall outside normal activities of commercial banks.
The State governments expressed their desire that similar corporations be set up in states to
supplement the work of the Industrial financial corporation. State governments also
expressed that the State corporations be established under a special statue in order to make it
possible to incorporate in the constitutions necessary provisions in regard to majority control
by the government, guaranteed by the 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.
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 only such access which are outside the
perview of industrial fiancé corporation .
The SFC’s mobilize their financial resources from the following sources
In the act Financial corporations are Financial corporations established under section 3 and
includes a Joint Financial Corporation established under section 3 A of the Sate financial
Corporations Act of 1951.
State Financial Corporations also include industries which specialize in “ processing goods “
which includes any art or process for producing , preparing or making an article by
subjecting any material to manual , mechanical , chemical , electrical or any other like
operation .
The SFC’s Provide the following types of assistance to industrial units in their respective
states:
The SFC’s while giving loans to industrial units see 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 scheduled
commercial bank , they also accept personal pledge by the entrepreneur . SFC’s do
not give loans on the basis of second mortgage.
Grant loans or advances to industrial concern repayable within a period not
exceeding 20 years.
Providing guarantee for loans raised by industrial units from commercial banks and
state cooperative banks.
Providing guarantee for deferred payments in cases where industrial units have
purchased capital goods on a deferred payment basis.
To underwrite the issue of shares, bonds and debentures of industrial concerns.
To Subscribe to shares, bonds and debentures of industrial concerns.
Guarantee loans raised by industrial concerns which are re- payable within a period
not exceeding 20 years and which are 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 working
capital requirements in combination with loans for fixed capital.
SFc’s provide loans in foreign currency for the import of machinery and technical
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 any
company having limited liability except for underwriting purposes and granting any
loans or advance on the security of its own shares .
SFC’s - Contributory to development of small scale industries in the Indian
economy:
There are at present 18State financial Corporations and almost every state has a financial
corporation of its own.
During 2000-2001 SFC’s had sanctioned loans aggregating to 2800 crores and disbursed
Rs 2000 crores. Their assistance in the form of loans has declined subsequently due to
the existence of a large amount of Non – Performing assets.
Over 70 % of the total assistance sanctioned and disbursed by all SFC’s is provided to
small scale industries. Attempts are now being made to strengthen the role of SFC’s as
regional development banks.
The SFC’s sanctioned seed capital assistance under the seed capital schemes introduced
and operated by IDBI.
This assistance is available to promoters of small business units. Since June 1989, SFC’s
have also been implementing special schemes of seed capital assistance to women
entrepreneurs.
Assistance is extended in the form of loan or grant or a combination of both to voluntary
agencies working for women in decentralized industries.
INTRODUCTION:
The Tamil Nadu Industrial Investment Corporation Limited (TIIC) was incorporated
as a company under the Companies Act. TIIC is a State Financial Institution
extending financial assistance for the creation of industrial fixed assets for starting
new industrial units as well as for expansion, modernisation and diversification of
existing units.
2. TYPE OF ASISTANCE:
TIIC offers long and medium term financial assistance in the following forms:
a) Term Loas
b) Term Loan and working capital assistance under the Single Window Scheme.
ELIGIBLE ACTIVITIES:
TIIC provides term loan assistance upto maximum of Rs. 800 lakhs. TIIC has 8
Regional Offices and 36 Branches in Tamilnadu. Branch Offices have been
delegated with powers to sanction Loans upto Rs.30. lakhs. Loan above Rs.30.00
lakhs are considered by Head Office.
5.HOW TO APPLY:
For getting financial assistance from TIIC, one has to apply in the Prescribed
application forms available in all the TIIC offices. There are separate application
forms for various schemes.
The appraises the application for the technical feasibility and economic viability
before according sanction. The applicant should satisfy TIIC regarding the
marketability and furnish the details of the cost of production, cash flow etc., during
the loan period to assess the pay back period.
7. RATE OF INTEREST:
The rate of intrest for the term loan is in the range of 12.5% p.a to 16% p.a. based
on the quantum of loan and nature of industries. A rebate of 1% p.a. will be allowed
for prompt payment at the end of every year.
8. FINANCIAL NORMS:
Debt-Equity Ratio:
The maximum debt-equity ratio for both SSI and medium Scale units shall be 2:1.
Promoter’s Contribution:
v) Repayment Period:
SSI are exempted from levy of stamp duty in respect of Mortgage deed.
TIIC is an implementing agency for State Capital Subsidy provided by the Government of
Tamilnadu for its assisted units.It also sanctions subsidy bridge loan along with the term
loan Sanction in order to meet the gap in the means of finance Pending release of subsidy by
the Government after implementation of project/commencement of production. TIIC is also
the implementing agency for the non-assisted medium andlarge scale industries for
providing State Capital Subsidy