Chapter 1

INTRODUCTION
 1.1 INTRODUCTION TO THE STUDY

The Kerala State Financial Enterprises Limited, popularly known as KSFE, Is a

Miscellaneous Non-Banking Finance Company, fully owned by the Government of
Kerala. It is one of the most profit-making public sector undertakings of the State. Formed
with the objective of providing an alternative to the public from the private chit promoters
in order to bring in social control over the chit fund business, so as to save the public from
the clutches of unscrupulous fly-by-night chit fund operators. KSFE has been registering
impressive profits every year, without fail since its inception. This organization study is
carried out at KERALA STATE FINANCIAL ENTERPRISES,Thrissur.This study has
been carried out to get an overview of the structure and functioning of the organization.
The study was undertaken to get an exposure to the functioning of different departments of
the company and it helped to interact with the managers of different departments and to
observe the workers at their work place. This Study also focuses on the implementation of
CSR Activities of the firm and analyze the implementation of CSR governance rules as per
the company act,2013 in the organization.

1.2 OBJECTIVES OF THE STUDY

o To explore the importance of miscellaneous Non Banking Institutions and their

functioning.

o To understand the different financial instruments / products used in a financial

institution and the response of the public on different products

○ To understand / study the organization structure and the roles and responsibility of

each individuals working in the company.

○ To understand the CSR policy of the firm and various activities undertaken by the

firm.

1.3 RESEARCH METHODOLOGY

This is a descriptive study conducted mainly to familiarize with the activities, processes ,
 policies ,programs and procedure followed in the firm through primary and secondary
data. Primary data was collected mainly through observation and interviews with the staff
of the firm. People involved in the CSR activities of the firm gave their feedback as well.
The secondary data collection sources includes materials like , Annual Report of the Firm,
Various research articles ,Newspapers and magazine. Published articles and records in the
firm along with the information available in the company’s website came handy.

1.4 SCOPE OF THE STUDY

The following bulletin points will describe the important “SCOPE” of the project conducted:

➢ The data for this project is collected from internet and from KSFE, Thrissur main
branch.
➢ The report examines the Non Banking Financial Industry development,existence and
growth in domestic environment.
➢ To understand and to describe about the working of a financial company.
➢ This study will elaborate the CSR policy adopted by KSFE and the various activities
carried out by the committee.

1.5 LIMITATION OF THE STUDY

○ Unable to obtain the most recent data.

○ Many of the respondents were busy and they allowed only limited time for the

interview.
○ Inability to obtain confidential data
○ Absence of enough journals and publications about the firm
 CHAPTER 2
INDUSTRIAL ANALYSIS
2.1 INTRODUCTION TO NBFC
NBFCs have been playing a complementary role to the other financial institutions including
banks in meeting the funding needs of the economy. They help fill the gaps in the availability
of financial services that otherwise occur in the unbanked & the underserved areas. NBFCs
account for 12.3% assets of the total financial system. An NBFC is defined in terms of
Section 45I(c) of the RBI Act 1934 as a company registered under the Companies Act 1956
engaged in granting loans/advances or in the acquisition of shares/securities, etc. or hire
purchase finance or insurance business or chit fund activities or lending in any manner
provided the principal business of such a company does not constitute any non-financial
activities such as (a) agricultural operations (b) industrial activity (c) trading in goods (other
than securities) (d) providing services (e) purchase, construction or sale of immovable
property. The NBFC segment has witnessed considerable growth in the last few years and is
now being recognised as complementary to the banking sector due to implementation of
innovative marketing strategies, introduction of tailor-made products, customer-oriented
services, attractive rates of return on deposits and simplified procedures, etc. NBFCs have
been at the forefront of catering to the financial needs and creating livelihood sources of the
so-called unbankable masses in the rural and semi-urban areas. Through strong linkage at the
grassroots level, they have created a medium of reach and communication and are very
effectively serving this segment. Thus, NBFCs have all the key characteristics to enable the
government and regulator to achieve the mission of financial inclusion in the given time.

2.2 Types of NBFI

The extremely diverse set of entities in the Non-Bank Finance Institution (NBFI) universe
and their respective regulators are shown below:

As depicted above, RBI classifies NBFCs into ten categories namely Asset Finance
Companies(AFCs), Loan Companies(LCs), Investment Companies (ICs), Infrastructure
Finance Companies(IFCs), Core Investment Companies(CICs), Infrastructure Debt Funds
(IDF-NBFCs), NBFC-Microfinance Institutions (NBFC-MFIs), Factoring companies(FCs),
Mortgage Guarantee Companies (MGCs) and Residuary Non- Banking Companies(RNBCs).

NBFCs have been classified on the basis of the kind of liabilities they access, the type of
activities they pursue, and of their perceived systemic importance.

Liabilities based classification

Category ‘A’ companies, (NBFCs having public deposits or NBFCs-D),Category ‘B’
companies, (NBFCs not having public deposits or NBFCs-ND).

Activity Based Classification

Loan Companies (LCs),Investment Companies (ICs), Asset Finance Companies (AFCs),
Infrastructure Finance Companies (IFCs) and Systemically Important Core Investment
Companies (CICs-ND-SI).

Size Based Classification

non-deposit taking NBFCs with assets of Rs. 100 crore and above were labelled as
Systemically Important Non-Deposit taking NBFCs (NBFCs-ND-SI), and prudential
regulations such as capital adequacy requirements, exposure norms along with, reporting
requirements were made applicable to them.

2.3 MISCELLANEOUS NON BANKING COMPANIES

KSFE – A Miscellaneous Non Banking Company

Directions by RBI known as the “Miscellaneous Non-Banking Companies (Reserve Bank)

Directions, 2016”.:
(1) Collecting whether as a promoter, foreman, agent or in any other capacity monies in one
lump sum or in instalments by way of contributions or subscriptions or by sale of units,
certificates or other instruments or in any other manner or as membership fees or admission
fees or service charges to or in respect of any savings, mutual benefit, thrift, or any other
scheme or arrangement by whatever name called, and utilising the monies so collected or
any part thereof or the income accruing from investment or other use of such monies for all
or any of the following purposes-
(a) giving or awarding periodically or otherwise to a specified number of subscribers as
determined by lot, draw or in any other manner, prizes or gifts in cash or in kind, whether or
not the recipient of the prize or gift is under a liability to make any further payment in
respect of such scheme or arrangement;
(b) refunding to the subscribers or such of them as have not won any prize or gift, the whole
or part of the subscriptions, contributions or other monies collected, with or without any
bonus, premium, interest or other advantage, howsoever called, on the termination of the
scheme or arrangement, or, on or after the expiry of the period stipulated therein;

(2) managing, conducting or supervising as a promoter, foreman or agent of any transaction

or arrangement by which the company enters into an agreement with a specified number of
subscribers that every one of them shall subscribe a certain sum in instalments over a
definite period and that every one of such subscribers shall in his turn, as determined by lot
or by auction or by tender or in such other manner as may be provided for in the agreement
be entitled to the prize amount;
3) Conducting any other form of chit or kuri which is different from the type of business
referred to in sub-paragraph (2) above;
(4) undertaking or carrying on or engaging in or executing any other business similar to the
business referred to in sub-paragraph (1) to (3).

2.4 PORTER'S 5 FORCES MODEL

Barriers to entry: Low

● Licensing requirement: The licensing requirements of RBI for NBFCs are not that
stringent as compared to the banks. There are already 12159 registered NBFCs while
there are only around 180 banks in India.
Bargaining power of consumers: High
● Many alternatives: The consumers have got many alternatives for availing credit.
● Large number of NBFCs: The consumers have a large spectrum to choose from.
Threat of substitutes: Moderate
● Banks: NBFCs were actually created by the government of India as it felt the need to
provide banking facilities to the poor and underprivileged who could not get access to
banks. Thus banks are a perfect substitute for NBFCs.
● Unorganized money lenders: The unorganized money lenders have a strong presence in
the rural markets. They pose a big threat to the NBFCs in the rural areas.
Bargaining power of suppliers: High
● Many alternatives: The suppliers in this case are the depositors or the NBFC’s funds. The
suppliers have many alternatives at their disposal to invest their money depending on
their risk appetite. Eg: High risk: stocks, low risk: banks
Intensity of rivalry: High
● Undifferentiated services: The service offerings by NBFCs are almost the same. Thus
there is a low level of service differentiation.
● Marketing strategies: Due to the increased rivalry among the NBFCs, there has been use
of aggressive selling & intensive marketing strategies by the companies to gain the
market share.

2.5 KEY GROWTH DRIVERS

1.Growing per capita income
Rural wage growth is increasing, which will rural growth. Also, good monsoons last years
and the current general elections will increase spending in rural areas. This in turn may lead
to growth in vehicle and gold loans from NBFCs.
2 Growing consumer credit market
Consumer credit market is promoted to increase by 67% from 2013 to 2020.
3. Product innovation
NBFCs are building organised pre-owned CV (commercial vehicle) segment, which is largely
untouched by banks. NBFCs also finance more than 80 % of equipment leasing and hire
purchase activities in India. They currently have 70% market share in CV finance.
Another example of product innovation was creation of an Islamic banking NBFC firm in
Kerala last August.
4.Product customization
NBFCs structure monthly instalments while accounting for the seasonality of cash flows in
construction equipment loans.
5.Use for fostering financial inclusion:
Focus of NBFCs is on rural segment, Small and middle enterprises (SMEs) and Microfinance
NBFCs constitute almost 76% of the Rs. 120 billion microfinance industries in India. NBFCs
have a large rural network. The sector has been recognised as complementary of banking
system by introducing diversification in the financial sector, simplified sanction procedures,
flexibility and timeliness in meeting the credit needs.

2.6 IMPACT ANALYSIS

NBFCs are already game changers in areas of financial inclusion, especially micro finance,
affordable housing, second hand vehicle finance, gold loans and infrastructure finance.
NBFCs can play a vital role going forward, in closing the loop as regards financial inclusion
for individuals and MSMEs. As regards individuals, NBFCs can reach various financial
products offered by the securities industry, viz., shares, mutual funds, depository services etc.,
as also insurance products both life and non-life together with their current product offerings.
As regards MSMEs, NBFCs can become game changers by providing factoring and bill
payment service which are of critical importance at the present juncture.However, the new
banks and the invitation of foreign banks into the Indian banking system (by allowing the
wholly-owned subsidiary of foreign banks to acquire domestic private sector banks as well as
set up branches anywhere in the country) will increase competition for NBFCs in rural areas,
where they enjoyed unrivalled dominance.

NBFCs have a special responsibility against the background of the need to improve the
customer service by conducting their operations as per the best practices of corporate
governance. In the ultimate analysis, adhering to best corporate governance and ethical
practices is the only way for gaining the confidence of their customers in particular, and the
society in general. Consequently, the NBFC sector would be able to garner greater trust of
both its customers and the society. That would provide the springboard for increasing their
business levels in the process of fulfilling their role as game changers in the areas mentioned
above. NBFCs becoming true game changers would be a sweetener for financial inclusion
efforts in our country.

CHAPTER 3
COMPANY PROFILE
 KSFE

TYPE : PUBLIC SECTOR

OWNED BY : GOVT. OF KERALA

FOUNDED : 6TH NOV. 1969

HEAD OFFICE : TRICHUR

NO. OF BRANCHES : ABOVE 415

CHAIRMAN : Adv.PEELIPOSTHOMAS

MANAGING DIRECTOR : A.PURUSHOTHAMAN

INDUSTRY : FINANCE

PAID UP CAPITAL : 100 CRORES COVERED

BUSINESS TURNOVER : 33801 Cr( on sept.2017)

EMPLOYEES : 6782

3.1 ORIGIN
In 1967, The Government of Kerala took a policy decision to the effect that Chitties should
be conducted under state auspices as a means for the collection of small savings. The then
Finance Minister, in his budget speech for the financial year 1967-68 made the following
announcement on the floor of the Kerala Assembly. "I view this decision as a bold step
forward along the path towards socialism, aimed at bringing banks and other financial
institutions under social control" 2. As the follow-up, the Government of Kerala, appointed a
Special Officer in the year 1967, to look into the feasibility and desirability ofstarting Chit
Funds in the public sector and also to prepare a comprehensive scheme for starting Chits
under government control 3. One ofthe objectives ofstarting Chit Funds in the public sector
was to control the mushroom growth of private Chit Funds and to restrain their growth by
offering effective competition. The Special Officer, who presented his Report on 7th October
1967, recommended strongly the entry of the Government into the field of Chits. Though the
recommendation was for conducting Chit as an adjunct of the Registration Department, the
Government took a different view and decided to bring within its purview and control, not
only Chitties or Kuries, but also certain other financial transactions for which socialisation
was felt necessary. Accordingly the Government decided to organise a public sector
undertaking with the name "The Kerala State Financial Enterprises Ltd." (KSFE) for the
purpose of conducting Chits, hire purchase and insurance business under Government
control. This apart, the Government of Kerala had a progressive vision for generating non-
revenue income through such public sector ventures. Thus, KSFE Ltd. was incorporated as a
Government Company on 6th November 1969 with its Head Office at Trichur with the
objective of serving as a discipline factor to private Chit Funds". The first Board of Directors
s was constituted as per G.O. (Rt.) 4876/69/Fin dated 26th November 1969. KSFE comes
under the group of Miscellaneous Non-Banking Financial Intermediaries. KSFE has the
unique status of being the only public sector undertaking in India, which runs Chits and also
one of the few profit making companies owned by the Government of Kerala

3.2 CAPITAL STRUCTURE OF KSFE

The KSFE Ltd. is fully owned by the Government of Kerala. The Company, which started in
a humble manner with a paid up capital of Rs. 2 Lakhs in 1969, has now grown to Rs.300
Lakhs with a capital structure of 3,00,000 shares of Rs.l 00/- each fully subscribed by the
State Government. The other main resources on which the Company finances its various
schemes are:
1. Loans from the Government of Kerala
2. Deposits from the public and
3. Funds ploughed back from profit.

3.3 SCHEMES OF THE COMPANY

Beginning with Chits, the Company has over the years introduced several attractive schemes
to cater to the needs of different classes of people. Itmainly mobilises savings by instruments
like Chits and deposit schemes and channelises them to acquire house and household
durables, motor vehicles, equipment for self-employment and provides finance for
augmenting working capital needs of small traders. The main schemes of the Company as of
now are:
I. Chit scheme 2. Passbook loan 3. New Chitty loan 4. Hire purchase scheme 5. Hire purchase
(House modernisation scheme) 6. Employment oriented hire purchase scheme 7. Gold loan
scheme 8. Trade financing scheme 9. Fixed deposit scheme 10. Sugama deposit scheme 11.
New fixed deposit loan scheme 12. New housing finance scheme 13. Reliable customer loan

3.4 OBJECTIVES OF THE COMPANY

The objectives of the company are listed in the Memorandum of Association of the company.
The important objectives are as follows:

● To start, conduct, promote, manage and carry on the business of chitties in India
or elsewhere.
● To promote, undertake, organize, conduct, manage and carry on the business of
general and miscellaneous insurance of any kind in India or else where
● To start, promote, conduct, operate, carry on and manage the business of dealers,
agents and traders under the hire purchase system of articles, vehicles, machinery,
materials, goods and tools of all capital goods and consumer goods and property
of all nature and description for personal,domestic, office, commercial, industrial
and community use and consumption as a business of the Company or as agents
of the government, state or central or any body or organisation, there-under or of
any other Company..

To start, promote, conduct, operate, carry on and manage the business of dealers, agents and
traders under hire purchase system of articles, vehicles, machinery ,materials goods and tools,
of all capital goods and consumer goods and property of all nature and description for
personal, domestic, office, commercial, industrial and community use and consumption as a
business of the Company or as agents of the Government, State or Central or any body or
organization there under or of any other Company. Besides these objects, there are many
other objects, which is incidental or ancillary to the main objects such as to advance, deposit
with or lend money, securities, property or to receive loans or grants or concession of any
nature or deposits from Banks, Government or Governmental organizations or others.
3.5 VISION OF THE COMPANY
The vision of Kerala State Financial Enterprises is to become a significant player in the
financial services sector by:-
➢ Providing a whole range of quality services and products.
➢ Adopting technology and benchmark standards in customer service and performance.
➢ Spreading our wings beyond the borders of Kerala, on a global level.
➢ Retaining the pre-eminent role in Chitty business.
➢ Continuing focus on extending resources to the Govt. of Kerala.
➢ Sustaining commitment to the weaker sections of society, as the neighborhood
institution for support, trust and security

3.6 MISSION OF THE COMPANY

■ To be leaders in our chosen segments.
■ To be Customer Centric- SERVING the FRONT Line.
■ To build a strong relationship with our employees, our customers and stake holder.
■ To be of service to the community in which we work and live in.
■ Empowerment of women
■ To be a GREAT place to work
■ To be a trusted, respected, nationwide, world class full service MNBC

3.7 FINANCIAL PERFORMANCE

At present KSFE has a urnover of 33801Cr. .Started with a paid up capital of 2 lakh company
has reached to the landmark 100 crorow in a span of 49 years. The growth of the company in
the recent years are consolidated in the below table.
Graphical representations of the data are shown below:
 CHAPTER 4
ORGANIZATION STRUCTURE

4.1 ORGANISATION CHART

The organizational set up is a three-tier system from its very inception. with the Head Office
as the top controlling and coordinating body, the Regions constituting the intermediary level,
coordinating and controlling all the activities of the various branches under them and the
branches at the base level as profit generating centers

Athe Head Office, the activities are grouped on functional as well as product basis under the
control and supervision of the Managing Director.

4.2 MANAGEMENT OF THE COMPANY

 The management of the Company has been vested in the Board of Directors constituted by
the Governor from time to time. The number of Directors shall not be less than two and shall
not be more than fifteen. The Governor may from time to time appoint two Directors, other
than the Managing Director as Chairman and Vice-Chairman of the Board and determine the
period for which either of them will hold his respective office. The Board of Directors as on
November 2002 includes the Chairman, Managing Director and three other Directors holding
the office as Additional Secretary (Taxes), Joint Secretary (Finance) and Inspector General of
Registration
 CHAPTER 5
DEPARTMENT PROFILE
A) The different departments of the Head Office are the following:
i. Business Department:-

This is headed by General Manager (Business) who is responsible for all business
activities of the Company.

ii. Finance Department:-

This department is headed by the General Manager (Finance). The main functions
of this department are planning, budgeting and control, compilation of accounts,
reconciliation and preparation of annual accounts, and controlling Deposit Schemes of the
Company etc.

iii. Administration Department:-

This is headed by the DGM P& HR to be in charge of personnel administration ,

salary, industrial relations, man power planning etc.

iv. Secretarial Department:-

This department is headed by the Company Secretary who is responsible for the
functions conferred on him by the Company’s Act, 1956.

v. General Administration Department:-

This department is headed by one of the senior officers of the Company who will be
responsible for the General Administration including purchase, printing etc.

vi. Legal Department :-

This department is headed by AGM (Legal) who is responsible for all day to day legal
matters.

vii. Internal Audit Department :-

This department is headed by the DGM (IA&V) assisted by seventeen audit teams to
exercise internal check and control.
All the above Department Heads report directly to the Managing Director.

(B) The different departments of the Regional Office

 The activities of the Regional Managers are grouped functionally as well as scheme
wise. They are mainly responsible for the proper and also healthy functioning of the Branches
and to be in charge of the overall growth and development of the Branches
under their jurisdiction. The Regional Managers report directly to the General Manager
Business and the General Manager Finance for the respective functions and to the Managing
Director relating to the other functions. The functional departments of the
Regional Office are Business, Accounts, and default; which corresponds to respective
departments with focus on operational aspects

C) The different departments at Units level

At the base level the Units are graded into three categories viz.

(i) Major Branches having a chitty sala of Rs.70 lakhs and above.
(ii) Medium Branches having a chitty sala of Rs.40 lakhs and above and
(iii) Small Branches having a chitty sala of below Rs.40 lakhs.

A Unit Head viz, the Manager; heads each Unit and its activities are grouped
under Assistant Manager(s)/ Deputy Manager(s). The Unit Heads report directly to the
Regional Manager and to the Departmental Heads in the Head Office on matters pertaining to
the departments concerned. In exceptional circumstances the Unit Heads can report directly
to the General Manager (Business)/ General Manager (Finance) and Managing Director.
The different departments in the unit are as follows:

1) Collection Department

Assistant manager (collection)

Assistant (cash)
Assistant (FD/STD)
Assistant (Sugama)
Assistant (Auction)

Important functions of collection department are

● Receive money from customers
● Give receipt to customers
● Ensuring proper document for every receipt
● Entry of transactions in the books.
● Internal checking
● Maintain effective coordination with accounting department
● Preparing periodic collection report
● Sending collection agents to collect money.
● To arrange for the preparation of chitty balance sheets and its filing.

An assistant manager will be the head of this department. She/he monitors all activities
relating to receipt of cash and has the responsibility of ensuring that there are no mistakes or
frauds committed during transactions. Major decisions relating to the receipts of funds are
taken by the AM Collection. All staff in the collection department should report to him/her.
She/he delegates responsibility to the staff under him/her.
 2) Accounts Department

Assistant manager (Accounts)

Assistant (Loans / chitty price money
payments)
Assistant (book keeping)

Important functions of accounts department are

● To be responsible for the remittance of daily cash collection (including the Money
Order collection) and cheques in to the bank on the date of collection itself or latest by
the next working day.
● To ensure once in every fifteen days that the cheques sent for collection are either
realized or dishonored and the entries in the Cheque Sent for Collection Register are
complete in every respect.
● To ensure the writing up of the Main Cash Book, to sign it and to check the postings
of General Ledger and to be responsible for the accuracy of the postings.
● To examine all the documents concerned with the payment of prize amount and other
● Payments and ensure that they are generally in order and in particular ensure that all
the amounts mentioned in the documents are accurate.
● To ensure satisfactory maintenance of accounts in the branch, arrange the preparation
of all statements/ schedules relating to the accounts and to render all returns relating
to Accounts to the Head Office/ Regional Office.
● To ensure timely completion of annual accounts and related statements.

3) General Administration Department

 Assistant Manager (general)
Assistant (Loans / chitty price money payments)
Assistant (New chitty registration)
Assistant (collection agents)

Important functions of general administration department are

● To initiate action for the starting of chitties in the Branch and to arrange the release of
Advertisements.
● To assist the Manager in canvassing subscribers as and when necessary
● To issue variolas (application form for joining chitty) to the canvassing agents of the
Branch, maintain the Agents Register and verify the claims for commission received
from agents.
● To take steps for the payment of prize money to the prized subscriber on the due date,
if the subscriber has furnished adequate security for the payment of future
subscriptions, and to intimate the fact to the prized subscribers.
● To verify the genuineness/ liability of the subscribers/ sureties.
● To be responsible for the entire personnel administration of the Branch for the proper
maintenance of Attendance Register, Casual Leave Register and other leave accounts,
personal files, service records/ books , provident fund records, loans, advances and
its repayment etc

4)

Assistant Manager (Default)

Assistant (Current default)
Assistant (Chronic default)
 Default follow up Department

Important functions of default follow up department are

● Monitoring of default on a current basis in all schemes of the company.

● Initiating necessary follow up action including RR, in cases of chronic default
● Timely preparations of default statements

5) Special Gold Loan Department

Assistant Manager (Gold loan)

Assistant
Appraiser

Important functions of special gold loan department are

● Speedy and efficient disbursal of Gold Loan

● Safe custody of ornaments pledged.
● Default monitoring of the Gold Loan scheme
● Initiating auction steps in cases of chronic default.
 ● Preparation of periodic schedules.

6) Systems Department

Assistant Manager
Implementer

KSFE is passing through the infancy stages of its computerization process. The unit
level systems department is now formed on an ad-hoc basis. There is no exclusive
assistant manager provided for this function. Generally any one of the assistant
managers who is in charge of Collection/ Accounts/ Default is given additional responsibility
to supervise this function. Generally, he is required to look after issues related to software /
hardware / data entry errors etc and at the same time extent a helping hand to other general
activities of the branch.
Important functions of systems department are

● Ensure smooth functioning of all the computer systems.

● Reporting software errors/bugs to Head Office.
● Timely reporting of hardware failures to the Vendor/AMC Company.
● Taking data back ups at the prescribed intervals.
● Providing information and assistance to other employees in matters related to system.
 CHAPTER 6

CSR ACTIVITIES OF THE FIRM

6.1 INTRODUCTION TO CSR

According to EU commission (2002)CSR is a concept where by companies integrate social

and environmental concerns in their business operations and in their interaction with the
stakeholders on a voluntary basis. CSR is a concept with different views all around the world.
Many definitions prevail and it has unclarified boundaries. Even though there are people who
believe that business organizations have nothing to do with social responsibility, leading trend
is the other way.64% of CEOs worldwide say that “corporate social responsibility (CSR) is
core to their business rather than being a stand-alone program”. They care about building
trust with consumers, partners, governments, and their employees( (19th Annual Global CEO
Survey, 2016)). India stands out from the rest of the world being the only country with
legislated CSR. The new companies Act 2013 that came into effect from April 1, 2014,
mandates that all companies, including foreign firms, with a minimum net worth of Rs 500
cr, turnover of Rs 1,000 crore and net profit of at least Rs 5 crore, spend at least 2% of their
profit on CSR.Thus has been made mandatory under the new regulation and there are
provisions of penalties, in case of failure. Also, CSR disclosures is a major component
analyzed in the IRBI(India Responsible Business Index) and in 2012 SEBI made the
submission of these disclosures mandatory for the top 100 companies listed in BSE. Indian
reports shows an increase of 11% on the amount of money spent on CSR activities during
current year when compared to the previous. The average spending per company has also
increased by 15%. (KPMG, 2016)This points to 2 facts, one: Indian companies are getting
more familiar to the act. Two: the concept of CSR and its impacts are gaining more
importance.

This study concentrates on the CSR Policy of KSFE and the various CSR Activities initiated
by them are analysed.CSR Reports of the company published in the annual report is studied
for the year 2014-15 and 2015-16.The Kerala State Financial Enterprises Limited, popularly
known as KSFE, Is a Miscellaneous Non-Banking Finance Company, fully owned by the
Government of Kerala. It is one of the most profit-making public sector undertaking of the
State.Formed with the objective of providing an alternative to the public from the private chit
promoters in order to bring in social control over the chit fund business, so as to save the
public from the clutches of unscrupulous fly-by-night chit fund operators. KSFE been
registering impressive profits every year, without fail since its inception.

6.2 Legal Mandate for CSR in India

Corporate Social Responsibility (CSR) assumes significance as it permits companies to

engage in projects or programs related to activities related to social welfare and improvement
enlisted under the terms of Companies Act, 2013. There is an element of flexibility in
company activities by allowing them to select their preferred CSR engagements that are in
agreement with the overall CSR policy of the company.

As per section 135. Corporate Social Responsibility

(1) Every company having net worth of rupees five hundred crore or more, or

turnover of rupees one thousand crore or more or a net profit of rupees five crore or
more
during any financial year shall constitute a Corporate Social Responsibility
 Committee of the
Board consisting of three or more directors, out of which at least one director shall be
an
independent director.
(2) The Board's report under sub-section (3) of section 134 shall disclose the
composition of the Corporate Social Responsibility Committee.
(3) The Corporate Social Responsibility Committee shall,—
(a) formulate and recommend to the Board, a Corporate Social Responsibility
Policy which shall indicate the activities to be undertaken by the company as
specified in Schedule VII;
(b) recommend the amount of expenditure to be incurred on the activities
referred
to in clause (a); and
(c) monitor the Corporate Social Responsibility Policy of the company from
time
to time.
(4) The Board of every company referred to in sub-section (1) shall,—
(a) after taking into account the recommendations made by the Corporate
Social
Responsibility Committee, approve the Corporate Social Responsibility Policy
for the
company and disclose contents of such Policy in its report and also place it on
the
company's website, if any, in such manner as may be prescribed; and
(b) ensure that the activities as are included in Corporate Social Responsibility
Policy of the company are undertaken by the company.
(5) The Board of every company referred to in sub-section (1), shall ensure that the
company spends, in every financial year, at least two per cent. of the average net
profits of the company made during the three immediately preceding financial years,
in pursuance of its Corporate Social Responsibility Policy:Provided that the company
shall give preference to the local area and areas around itwhere it operates, for
spending the amount earmarked for Corporate Social Responsibility activities:
Provided further that if the company fails to spend such amount, the Board shall, in its
report made under clause (o) of sub-section (3) of section 134, specify the reasons for
not
spending the amount.
Explanation.—For the purposes of this section “average net profit” shall be calculated
in accordance with the provisions of section 198.

The following activities can be performed by a company to accomplish its CSR obligations:

● Eradicating extreme hunger and poverty

● Promotion of education
 ● Promoting gender equality and empowering women
● Reducing child mortality
● Improving maternal health
● Combating human immunodeficiency virus, acquired, immune deficiency syndrome,
malaria and other diseases
● Ensuring environmental sustainability,
● Employment enhancing vocational skills, social business projects
● Contribution to the Prime Minister’s National Relief Fund or any other fund set up by
the Central Government or the State Governments for socio-economic development,
and
● Relief and funds for the welfare of the Scheduled Castes, the Scheduled Tribes, other
backward classes, minorities and women and such other matters as may be prescribed.

Under the terms of Companies Act, preference must be given by companies in its CSR
activities to local areas and the areas where the company operates. Company may possibly
also choose to link with 2 or more companies for fulfilling the CSR activities provided that
they are competent to report individually. The CSR Committee will also prepare the CSR
Policy in which it includes the projects and programmes which is to be undertaken, organize
a list of projects and programmes which a company plans to embark on during the execution
year and also focus on integrating business models with social and environmental priorities
and process for the reason of creating share value. The company can in addition make the
annual report of CSR activities in which they declare the average net profit for the 3 financial
years and also approved CSR expenditure but if the company is not capable to spend the
minimum required expenditure the company has to provide the reasons in the Board Report
for non-compliance so that there are no related penal provisions.

6.3 CSR POLICY OF KSFE

A) AIMS & OBJECTIVES OF CSR COMMITTEE

(i) To develop a long-term vision and strategy for KSFE’s CSR objectives.

(ii) Establish relevance of potential CSR activities to KSFE’s core business and create an
overview of activities to be undertaken, in line with Schedule VII of the Companies Act,
2013.

(iii)KSFE shall promote projects that are : (a) Sustainable and create a long term change; (b)
Have specific and measurable goals in alignment with KSFE philosophy; (c) Address the
most deserving cause or beneficiaries.

(iv) To establish process and mechanism for the implementation and monitoring of the CSR
activities for KSFE.
B) The CSR Team have the following responsibilities:

(i) Formulate and recommend to the Board the CSR activities/programs to be undertaken by
KSFE.

(ii) Recommend the CSR Expenditure to be incurred on the CSR activities/programs.

(iii) Institute a transparent mechanism for implementation of the CSR projects and activities.
Effectively monitor the execution of the CSR activities.

(iv) Prepare an annual report of the CSR activities undertaken for KSFE and submit such
report to the Board

C) Responsibility of Board.

(i) Approve the CSR Policy and the CSR Expenditure after taking into consideration the
recommendations made by the CSR committee.

(ii) Ensure the CSR spending every financial year of at least 2% of average net profits made
during immediately preceding 3 financial years, in pursuance with the Policy.

(iii) Ensure that CSR activities included in the CSR Policy are undertaken by KSFE and that
such activities are related to the activities specified in Schedule VII of the Companies Act.

(iv) Ensure disclosure of the contents of the CSR Policy on the KSFE website.

(v) Directors’ Report for FY 2014-15 onwards to include: (a) Contents of the CSR Policy and
Composition of the CSR committee; (b) An annual report on the CSR in the prescribed
format as per Appendix- 3; (c) Reasons for failure (if any) to spend required amount on CSR
activities.

(vi) KSFE shall undertake the CSR activities directly. The Board may, in the future, decide to
undertake and implement its CSR activities through a registered trust or registered society or
a Section 8 company (Non-profit entity) established by the KSFE Group. In case the trust,
society or a Section 8 company is not established by the company or its holding or subsidiary
or associate company, then such an entity will need to have a 3 years track record of
undertaking similar projects or programmes.

D) CSRExpenditure

(i) In every financial year, KSFE shall spend a minimum of 2% of its average Net Profits in
the immediately preceding three (3) financial years. Average Net profits shall mean the net
profits of the Company as per the Profit & Loss Statement prepared in accordance with the
Companies Act, 2013; Net Profits shall exclude dividend received from other companies in
India.

(ii) CSR Expenditure shall mean all expenditure incurred in respect of specific projects/programs
relating to the approved CSR activities.

(iii) CSR Expenditure shall not include expenditure on an item not in conformity or not in line with
activities which fall within the purview of the CSR activities listed in Schedule VII.

(iv) CSR Expenditure shall not include Projects or programs or activities undertaken outside India.

(v) The surplus arising out of the CSR activities or projects shall not form part of the business profit
of KSFE.

(vi) Contributions by other KSFE affiliates or employees may also be received and utilized in respect
of the CSR activities undertaken.

E) CSR Proects undertaken

(1) KSFE shall promote CSR activities/Projects in the field of :

(i) Making available safe drinking water in schools, colleges, hospitals, selected villages etc.
by installing tanks and pipelines, digging bore wells etc.

(ii) Ambulances to hospitals, providing modern medical equipments and Gensets to hospitals
and palliative care centres.

(iii) Providing wheel chairs, tricycle, scooters and supporting equipments to differently abled
people.

(iv) Setting up old age homes and support to orphaned / blind students requirements. (v)
Promoting gender equality empowering women etc. setting up e-library for the benefit of
students and others.

(vi) Taking measures for ensuring environment sustainability and conservation of natural
resources.

(vii) Promotion of sports and support to national/international level players to participate in

such events.

(viii) Contribute to the Prime Minister’s National Relief Fund or any other fund set up by the
Central Government for socio-economic development and relief. (2) KSFE may also
undertake other CSR activities in line with Schedule VII. (3) The CSR activities shall be
undertaken in locations within India. KSFE shall give preference to the local areas and the
areas around which KSFE operates while considering the activities to be undertaken and
spending the amount earmarked for CSR activities

F)Implementing CSR Activities

(i) The day to day implementation and execution of the CSR activities/projects shall be
carried out through a team constituted for the purpose and headed by the designated Officer.
 (ii) KSFE shall undertake the CSR activities directly and also through various implementing
agencies such as, NGO’s, non-profit organizations, etc. Such implementing agencies shall
have an established track record as prescribed under the law.

(iii) Some of the initiatives taken up by KSFE will facilitate the involvement of KSFE
employees as volunteers in ongoing projects and events, giving them an opportunity to
engage in socially meaningful activities, thus, enabling them to realize their full potential and
role as socially responsible citizens (Employee Volunteer Programs).

(iv) The initiatives undertaken may be communicated to the employees through specific
awareness campaigns, so as to enable maximum participation.

(v)KSFE may also collaborate or pool resources with other companies to undertake CSR
activities in such a manner that each companies are in a position to report separately on such
CSR projects

(vi) The following activities do not qualify as CSR Activities under the Companies Act,
2013: (a) Projects or activities not falling within Schedule VII (Appendix 1); (b) Activities
undertaken in pursuance of normal course of business; (c) Projects or programs or activities
that benefit only the employees of KSFE and their families (d) Direct or indirect contribution
to any political party.

G) KSFE-CSR Team Capabilities

KSFE may build and enhance the CSR capabilities and skills of its own personnel through
institutions with established track record of minimum three financial years. The expenditure
shall not exceed 5% of the total CSR expenditure of KSFE in one financial year

H) CSR Reporting

The Board in its Annual Report shall include the details of the CSR activities undertaken in
the Financial Year. The CSR Committee shall provide a responsibility statement on the
implementation and monitoring of the CSR Policy and that it is in compliance with CSR
objectives of KSFE, which statement shall form part of the Boards’ Report.

I) Review and Audit

The CSR committee shall be apprised on the implementation of the CSR activities and the
progress shall be monitored on a quarterly basis. KSFE shall through its internal controls,
monitoring and evaluation systems implement, assess, document and report the impact of its
CSR activities/projects. Records relating to the CSR activities and the CSR Expenditure shall
be meticulously maintained. The Records shall be submitted for reporting and audit. The
financial audits of the implementing agencies (wherever applicable) shall also be done
through periodic audits. In this regard, KSFE may appoint independent external consultants
for carrying out such audits. 14. AMENDMENTS The Policy may be reviewed and amended
from time to time by the Board subject to the provisions of Companies Act 2013.

)CSR Analysis for past 2 years

Particular 2014-15 2015-16

Average Net Profit of the company for the last three financial years 73.67 crores 168 crores
Prescribed CSR Expenditure(2% of above amount) 1.47 crores 3.34
Amount outlay for CSR Activities 12429944 37746256
Amount spent in financial year 99840 42355505

2014-15

For the year 2014-15 more than 50 % of the fund was allocated to the uplifment and
betterment of health facilities of the state.The least amount o f fund is allocated to the
environment related activities in the firm.Although the number of projects included in the
education sector is high compared to the others, the amount allocated is 20.56% of the total
fund.

2015-2016

Fund allocation for various sector in the 2015-16 budget of CSR Activities.
2014-15 The number of projects taken to promte different sectors through CSR Activiites.
Projects under Health includes:

Rural development and health care.

Ambulances to hospitals, providing modern medical equipments and Gensets to hospitals and
palliative care centres.

Promoting preventive health care and sanitation

2015-16 The number of projects taken to promte different sectors through CSR Activiites.
Projects under Rehabilitation includes:

Setting up old age homes and support to orphaned / blind students requirements. (v) Promoting
gender equality empowering women etc. setting up e-library for the benefit of students and others

Projects under Environment includes:

(i) Making available safe drinking water in schools, colleges, hospitals, selected villages etc. by
installing tanks and pipelines, digging bore wells etc.
 CHAPTER 7
SWOT ANALYSIS
 SWOT ANALYSIS

Strength
1. Support, Trust and Security
2. Product Variety
3. Pre-eminent Role in Chitty Business
4. Extending Resources to the Govt. of Kerala
5. Quality Services and Products
6. Strong Customer Base
7. Adopting Technology and Benchmark Standards

Core Values of the Firm ,which includes: Integrity – work ethics Teamwork- One Team - One Dream
Operational & Execution Excellence Passionate Ownership & Taking accountability Customer
Centricity .Trust is the differentiator!
The organisation is mainly indulged in chit business. Being a public sector enterprise, unlike other
private players in the chit business, KSFE is transparent and trustworthy Establishment
of KSFE in
1969 was to save common people from the clutches of unscrupulous fly-by-night chit fund
operators with all these years KSFE has grown in to a financial super market openening
doors to all classes of people of society. KSFE is also working on products to attract youth
and all segments of society including NRKs(Non Residential Keralites) with in Chitty Fund
Act (CFA) 1982 and Foreign Exchange Management Act (FEMA). As per KSFE MD,oshy
paul "We are also on this path of growth and all of our branches will be connected by Core
Banking solution—Centralized Accounting Software for Business Application (CASBA)
within six months (181 branches are already connected). E-Collection, Net-through payment
are already established in top locations. We are also on the way of providing the facility of
on-line auction in chits so that a customer can participate in chit auction from anywhere in the
world. The concept of virtual branch is also under consideration." KSFE has many products
designed to meet the financial needs of all sort of society. KSFE achieved and exceeded its
business budget through branded Chits. For the current financial year also, KSFE launched
branded Chit named “PONNONA CHITTIKAL 2016” for ONAM festival season.Sugama
Deposit scheme Doesn not have disturbing amount of Non Performing Asset since its dues
enjoy the status of a revenue recovery, being an arm of the State Government. Tie up with
insurance and western union money helps to attract more customers.
Weakness
The business performance of the Company highlights the need for achieving still higher
growth rate in future. Although the Company has been making profits throughout the period,
the profitability ratio shows fluctuations and the expense ratio shows that only a small margin
is left after meeting the expenses. The default record is high and revenue recovery
performance is not satisfactory. The outreach of the Company's services to the rural masses
seems not satisfactory as shown by the lesser proportion of rural branchs. The analysis of the
performance of KSFE on the basis of various parameters reveals its viability and areas of its
success and failures. Some of the objectives of the Company at the time of its incorporation
are yet to be achieved. The continued presence of the informal and unregistered Chit Fund
sector pinpoints the need for more dynamic growth for KSFE and wider market outreach.
The scarcity of rural branches, the dearth of innovative schemes, diversification of existing
schemes, lack of public awareness on the special privileges enjoyed by KSFE, insufficient
customer care and comparatively poor quality in the delivery of services pose threats to the
reputation of the Company.
Hierarchical structure of administration causes delay in decision-making and affects the
speedy operation. Insufficient customer service and delay in the payment of prize money
tarnishes the image and reputation of the Company, despite its safety aspect. Absence of
computerisation creates operational difficulties.

Opportunities
1.RBI Rule allowing NBFIs to Roll out white-label ATMs.If establsihed in all major urban
and semi-urban branches would definitely increase its reach in the state.
2.Service offerings by NBFCs are almost the same. KSFE has the Trust factor as
differentiator. As the company is doing more CSR Activities and follows a sound CSR Policy.
It can be used as a differentiating factor.
3.Growing consumer credit market
4. Rural wage growth is increasing.This in turn may lead to growth in vehicle and gold loans
from NBFCs
5.Product innovation and Product customization.The more research is done in making
innovative products the more will be the success of the firm.
6.Advanced Credit Scoring models that incorporate non traditional data have the potential to
extend lending to India;s creditworthy yet financially excluded population.
7.Investing in technology and analytics to achive the full goal of financial inclusion.
8.Ground-level understanding of their customers’ profi le and their credit needs gives them an
edge, as does their ability to innovate and customise products as per their clients’ needs.
9.Ongoing stress in the public sector banks due to mounting bad debt.Inavailability of lending
for rural areas.
10.Digital disruption, especially for micro, small and medium enterprises (MSMEs) and
small and medium enterprises (SMEs)
11.Increased consumption,rise in income,rise in middle class.
Threats
1. The continued presence of the informal and unregistered Chit Fund sector.
2. Low Barriers to Entry in to the Industry.
3. Bargaining Power of consumers is high.
4. Introduction of new schemes has been delayed due to the interference of strong labour
unions
5. Threats of Substitutes,Unorganised Money lenders and other private fiannce firms
going digital providing better service.
6. Aggressive selling & intensive marketing strategies by other companies to gain the
market share.
7. Product innovation by other companies.eg Islamic banking NBFC firm.

CHAPTER 8
FINDINGS AND SUGGESSIONS
 FINDINGS AND SUGGESTIONS

FINDINGS

This study has analysed the firm and have done its SWOT analysis.Indeed the
firm has many strengths and opportunities in its way to increase its growth in
the coming years.Apart from that,the study on CSR activities of the firm
draws out various findings that is summarised here. KSFE has well
implemented the CSR policy as per the Company’s act,2013.Company have
formulated a CSR committee for carrying out the csr activities of the
firm.Company has recorded properly the recorded the CSR activities of the
firm in the annual report in well defined manner .Company is unable to spent
the exact amount as per the budget for the financial year although it is
compensated in the consecutive year.Company spends the entire amount
directly to the cause,with out the help of any 3rd parties.

SUGGESTIONS

Suggestions from this study is to improve the performance of the firm by

concentrating on the strength and opportunities of the firm.Also overcoming
the weekness and preparing intelligently for the threats would help the
company gain more leaps.Apart from this,from the study of CSR activities
of the firm,the following suggestions are listed down to improve the
performance of the activities.

Clubbing with NGO’s and other socio help groups would increase the reach
of the projects.Involvement of Employees and customers of the firm will
increase the credibility of the Activities of the firmCompany should find and
take up more regional projects to help the society in real sense.Projects
related to environment and pollution should be taken up more seriously as it
is a burning issue and affect the weaker part of the society the
more.Involvement of school and college students will also increase
awareness and do help for the betterment of the society in future.
CHAPTER 9
CONCLUSION
 CONCLUSION
BFCs have been playing a complementary role to the other financial institutions including
banks in meeting the funding needs of the economy.The Kerala State Financial Enterprises
Limited, popularly known as KSFE, Is a Miscellaneous Non-Banking Finance Company,
fully owned by the Government of Kerala.It has a good profit making record with large
market share in Kerala.Also the statistics shows the increase in profit throughout the
years.The organizational set up in KSFE is a three-tier system from its very inception. with
the Head Office as the top controlling and coordinating body, the Regions constituting the
intermediary level, coordinating and controlling all the activities of the various branches
under them and the branches at the base level as profit generating centers.The management of
the Company has been vested in the Board of Directors constituted by the Governor from
time to time.There are different departments in Head office,regional office and unit level
offices of the firm.KSFE has implemented CSR policy as per the legal requirements in the
country and carries out decent amount of CSR activities. This study has pointed out the
strength ,weakness opportunities and threats related to the firm.The management should
focus on the strength and opportunities of the firm along with overcoming its weakness and
threats.
 CHAPTER 10
BIBLIOGRAPHY
 BIBLIOGRAPHY

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