INSTITUTIONAL FINANCE TO ENTERPRENUER S Financial Assistance Finance

INSTITUTIONAL FINANCE TO ENTERPRENUER S

Financial Assistance � Finance being the basic requirement of any enterprise is needed at every stage. � An entrepreneur must know about his financial needs before setting up a unit.

Financial institutions A large variety of financial institutions has come into existence over the years to perform a variety of financial activities. � While some of them operate at all India level and others at state level. � All India financial institutions consists of All-India Development Banks, Specialised Financial Institutions, Investment Institutions and Refinance Institutions. � The state level institute comprise 18 state financial corporations and 26 industrial development corporations. �

� � � The IFCI, IDBI, IRBI were established under different acts of Parliament. The SIDBI was set up for promotion , financing and development of small scale and tiny industries. Specialised Financial Institutions are also operating in in the areas of export import(EXIM Bank 1982), infrastructure(IDFC-1997), tourism(TFCI-1989)and venture capital(IVCF, ICICI Venture). Investment Institution in the business of mutual funds and insurance activity have also played significant roles in the mobilisation of household sector savings. In the agriculture and rural sector and the housing sector , the NABARD and NHB are acting as the chief refinancing institutions.

Industrial Development Bank of India (IDBI) It is one of India's leading public sector banks and 4 th largest Bank in overall ratings. RBI categorised IDBI as an "other public sector bank". It was established in 1964 by an act of Parliament to provide credit and other facilities for the development of the Indian industry. Some of the institutions built by IDBI are the Securities & Exchange Board of India(SEBI), National Stock Exchange of India(NSE), the National Securities Depository Services Ltd(NSDL), the Stock Holding Corporation of India(SHCIL), the Credit Analysis & Research Ltd, the Export-Import Bank of India (Exim Bank).

Industrial Financial Corporation of India(IFCI) The Government of India established the Industrial Finance Corporation of India (IFCI) on July 1, 1948, as the first Development Financial Institution in the country to cater to the long-term finance needs of the industrial sector.

FUNCTIONS � � � To grant medium and long-term loans ranging between Rs. 30 lakhs to Rs. 1 crores to large-sized industrial units which are repayable within a period of 25 years. To underwrite the issue of stocks, shares, debentures or bonds b industrial units but must dispose of such securities within 7 years. To guarantee loans raised by the industrial units which are repayable within a period of 25 years. Subscribing to debentures floated by the industrial concerns. Providing assistance for setting up new industrial projects and also for expansion, diversification and renovation of existing units.

The Industrial Credit and Investment Corporation of India (ICICI) It was established on 5 th January, 1955 to assist industrial units in the private-sector. The main objects of ICICI are as follows: � To assist in the creation, expansion and modernization at industrial units in the private sector. � To encourage the inflow and participation of foreign capital in the private sector industrial units. � To expand the investment market in India � industrial units in the private sector. �

Functions of ICICI � To sponsor and underwrite new issues. � To provide medium and long-term loans to industrial units in the private sector. � To guarantee loans taken from other private sources. � To furnish managerial, technical and administrative advice to industrial units by the private sector. � To purchase the shares and debentures of new companies.

SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA (SIDBI) � It is an independent financial institution aimed to aid the growth and development of micro, small and mediumscale enterprises in India. Set up on April 2, 1990 through an act of parliament for: � Promotion � Financing � Development of small scale industry.

Channels of Assistance : SIDBI’s financial assistance to small scale sector has three major dimensions : i) Direct assistance : The objective behind SIDBI's direct assistance schemes has been to supplement the efforts of PLIs by identifying the gaps in the existing credit delivery mechanism for SSIs. Assistance for setting up of new SSI units, small hotels, hospitals/nursing homes, technology upgradation and modernisation is provided directly through 43 branches of SIDBI.

ii) Indirect assistance : SIDBI's schemes of indirect assistance envisage credit to SSIs through a large network of 913 PLIs spread across the country with a branch network of over 65, 000. The assistance is provided by way of refinance, bills rediscounting and resource support in the form of short term loans/line of credit in lieu of refinance etc.

iii) Development and Support Services : SIDBI extends development and support services in the form of loans and grants to different agencies working for the promotion and development of SSIs and tiny industries. The support is given for enterprise promotion with emphasis on rural industrialisation, HRD development in the SSI sector, technology upgradation, quality management, marketing promotion, information dissemination etc.

National Bank for Agriculture and Rural Development (NABARD) � It is an apex development bank in India having headquarters based in Mumbai (Maharashtra) and other branches are all over the country. It was established on 12 July 1982 by a special act by the parliament and its main focus was to uplift rural India by increasing the credit flow for elevation of agriculture & rural non farm sector and completed its 25 years on 12 July 2007.

Industrial Reconstruction Bank of India (IRBI) It was set up in April 1971, as a joint stock company to provide reconstruction and rehablitition mainly to the ‘sick’units. � The functions of IRBI is modernisation, rehablitition and expansion of sick units, it gives consultancy services, gives loans and advances, underwrites stocks shares and bonds, provides infrastructural facilities and raw material. �

Technology Development and Information Company of India LTD: � TDICI is technology venture finance company set up in 1989, to sanction project finance to new technology ventures. � Till March 2000, TDICI had assisted nearly 350 companies to the extent of Rs. 500 crores.

Indian Investment Center (IIC) It provides information and guidance on the Indian government's investment procedures, policies, incentives, infrastructure facilities, and investment opportunities. � The services that IIC provides are all free. The location of the head office of Indian Investment Center (IIC) is New Delhi. � Indian Investment Center also had offices in London, Singapore, New York, Tokyo, and Abu Dhabi. � Indian Investment Center (IIC) was able to bring investments worth around 1, 275 crore during 1981 and 1990. �

STATE FINANCIAL CORPORATIONS (SFCs) The SFCs were set up under the state financial corp. act, 1951. The Act authorises each state to establish a SFC. The principal object of the SFC is to provide medium and long term financial assistance to small and medium industries, particularly when normal banking accommodation is not available. • There are 18 SFCs functioning in different states of India. • The area of operations of an SFC is normally confined to one state, but the activities of some of the SFCs cover the neighboring states/ UTs which don’t have SFCs of their own. SFCs have also opened a no. of regional branch offices. • • •

ELIGIBILITY FOR ASSISTANCE The SFCs are established to help small and medium sized industrial concerns which include public limited companies, private limited companies, partnership and proprietary concerns. Resources The authorised capital of SFC is fixed by the state govt. within the minimum and maximum limits of Rs. 50 lakhs and Rs. 5 crores respectively. Under the provisions of SFCs Act 1951, SFCs are authorised to raise resources by the issue of share capital taken by the respective state govt. , the RBI, scheduled banks, cooperative banks and other financial institutions such as insurance companies, investment trust and private parties.

SCOPE OF BUSINESS According to section 2(C) of the SFCs Act 1951, the SFCs can assist an industrial concern engaged or to be engaged, in any of the following activities: a) Manufacture, preservation or processing of goods b) Mining c) Hotel industry d) Road transport e) Generation or distribution of electricity or any other form of power f) Development of any area of land as an industrial estate g) Fishing or providing shore facilities for fishing or the manufacture therefore.

TERMS OF ASSISTANCE � � � FINANCIAL The SFCs provide medium and long term loans to small and medium scale industries. Normally, loans are given for acquiring capital assets like land, building etc. Loans are given to the new and existing industries as well. Amount of loan varies from Rs. 5000 to Rs. 90 lakhs. The loans are repayable in equal installments spread over a period of 10 to 12 years and are secured by the first charge on the fixed assets of the borrowers.

FUNCTIONS The SFCs are permitted to provide assistance to industrial concerns by: i. Granting loans or advances, or subscribing to the debentures of industrial concerns; loans to be repayable within 20 years ii. Guaranteeing deferred payments of the industrial concern which purchases capital goods within India iii. Underwriting the issue of stocks, bonds or debentures of industrial concern, subject to their being disposed off in the market within 7 years iv. Providing for discounting of bills of exchange

PUNJAB FINANCIAL CORPORATIONS (PFC) The Punjab Financial Corp. has been established under state financial corp. � Act, 191 for providing medium and long term loans to small and medium scale industrial undertaking in the state of punjab. � It generally grants term loans for creation/ acquisition of fixed assets like land, building, plant and machinery, provides guarantee against deferred payments for the purchase of capital goods and offer underwriting facility of issue of stocks and shares of companies. �

STATE INDUSTRIES DEVELOPMENT CORPORATIONS (SIDCs) SIDC is set up mainly to give financial assistance to entrepreneurs and help backward region. SIDCs have been incorporated either as limited liability companies under the Indian Companies Act or as autonomous corp. under state specific Acts. These acts are wholly owned by state govt. SIDC was set up in various states in different years. In Punjab, it was set up in 1966. Some of the SIDCs also function as SFCs and provide financial support to small sector. The primary objectives of SIDCs is to foster industrial growth in the state by undertaking developmental, promotional and financial functions.

ELIGIBILITY CRITERIA � q q q q PFCs finances those who are engaged in: Manufacture, processing and preservation of goods Mining or development of mines Hotel industry Transport of passengers or goods by road or by water or by ropeways or by lift Generation or distribution of power The setting up of an industrial area or industrial estates Providing weigh bridge facilities

FUNCTIONS Promotional activities such as identification of project ideas, selection and training of entrepreneurs ii. Promotion and management of business iii. Granting financial assistance to industrial units by way of loans, guarantees lease financing and also technical and managerial assistance during the project implementation stage iv. Acting as agent of the state and central govt. in operating their schemes for the provision of special incentives to industrial units coming up in less developed regions. i.

PUNJAB STATE INDUSTRIES DEVELOPMENT CORPORATION PSIDC- An overview The Punjab State Industrial Development Corporation Limited (PSIDC) was incorporated in 1966, as an undertaking of the State Govt. , to act as a catalyst for the development of large and medium scale industries in the State of Punjab. Since then, PSIDC has been acting as the prime mover in the State for promotion of industrial ventures and thus, playing the role of an ‘ institutional entrepreneur’

PSIDC- as an industrial catalyst PSIDC as a developmental institution has played a pivotal role and promoted a number of projects in public sector and also facilitated emergence of many projects, through private initiative in the medium and large scale industrial sectors, by way of financial and/ or technical collaboration with leading entrepreneurs/industrial houses in joint and assistance sectors.

PSIDC - As a Merchant Banker PSIDC extends financial assistance under the aegis of IDBI and provides term loan upto Rs. 25 million of new industrial projects with capital cost of Rs. 100 million. � Under Equipment Refinance Scheme, industrial companies with good track record and sound financial position are provided term loans upto Rs. 50 million for purchase of equipment for expansion/diversification/ modernization activities. �

PSIDC - As a Single Source Energy PSIDC provides a host of services to entrepreneurs/ companies, right from inception of projects to their smooth implementation, which includes extending cooperation in obtaining all approval from state and central govt. � Thus, PSIDC virtually acts as a single source for entrepreneurs/companies for successfully establishing industrial ventures in the state. �

THE TAMILNADU INDUSTRIAL INVESTMENT CORPORATION (TIIC) TIIC is wholly owned by govt. of Tamil Nadu and is the first State level financial institution in the country. It involves the following activities: i. Provision of long term loans for acquisition of land, building, plant and machinery to tiny, small and medium scale industries ii. Sanctioning term loans for modernisation, expansion and diversification of existing units on easy terms iii. Designing special schemes for economically weaker sections, scheduled castes/tribes entrepreneurs, physically handicapped persons iv. Underwriting of shares

KARNATAKA STATE SMALL INDUSTRIES DEVELOPMENT CORPORATION LTD. (KSSIDC) KSSIDC- Government of Karnataka Undertaking- was established for providing basic infrastructural facilities for the upliftment of small scale industries in the state of Karnataka. � The corporation gives preference to those entrepreneurs who deal in high technology, export – oriented and import substitution products. � The sheds include factory accommodation, toilet facilities, storage space, open area outside the shed. �

AIMS AND THE OBJECTIVES OF THE COUNCIL OF STATE INDUSTRIAL DEVELOPMENT AND INVESTMENT CORPORATION OF INDIA(COSIDICI) The objective of the COSIDICI are to: q Provide and arrange means and facilities for dissemination of knowledge and information relation to promotion and development of industries, for exchange of views and ideas on subjects of common interest to all member corporation q Promote, protect and develop common interest of the various member corporation q Promote co-ordination, collaboration, joint participation and general understanding among the member corporation q Sponsor studies, surveys, research& development project pertaining to industries q Do all such other things as may be incidental or conducive to the attainment of all above objectives.

NATIONAL BANK FOR AGRICULTURE AND RURAL DEVELOPMENT (NABARD) In the field of rural credit and agricultural development, establishment of NABARD is a major event. � The NABARD provides credit to rural sector through cooperative banks, commercial banks, regional rural banks and other financial institutions set upto to finance rural development. � The bank ensures co-ordination in operations of various institutions engaged in the field of rural credit. �

KHADI AND VILLAGE INDUSTRIES COMMISSION The KVIC was established in 1956 under the KVIC Act. It aims to plan, organize and implement programs for the development of khadi and village industries as specified in the schedule of KVIC Act 1956. � Initially, only 10 village industries were listed in the schedule but later 16 more industries were added in the schedule. � The operational strategy of KVIC includes: i. To promote rural employment ii. To intensify industries in rural areas iii. To standardize and exercise quality control iv. To provide sale promotion assistance v. To promote export incentives for design and development. � �