Sfcs Need Recap Of Rs 3600 Crore

The 18 state finance corporations (SFCs) in the country require recapitalisation to the tune of Rs 3,600 crore to make their operations sustainable. These SFCs need to be restructured in order to enable them to raise resources on their own.

"SFCs have played a signal role in the development of small scale industries (SSIs) in the country by extending term loans over the last five decades. But now their operations need to be strengthened and streamlined via capital infusion, recovery of non-performing assets and right-sizing," said P B Nimbalkar, chairman and managing director of Small Industries Development Bank of India (Sidbi).

Nimbalkar pointed out that the recommendations of the G P Gupta Committee on the status of SFCs, which are currently being examined by the Union finance ministry, had suggested recapitalisation and revitalisation of state-level financial institutions.

The committee further outlined that once the capital injection exercise is complete, the SFCs will be required to raise their capital adequacy ratio to 11 per cent in three-four years.

If the recommendations of the committee are accepted by the Union finance ministry, then the central government and the Reserve Bank of India will need to chip in with Rs 1,800 crore, while the 18 state governments, the Sidbi and the Industrial Development Bank of India (IDBI) will have to pump in the balance Rs 1,800 crore.

As per the amended SFCs Act, the shareholding of IDBI which amount to around 35 per cent in each SFC, will be transferred to the Sidbi along with the necessary regulatory powers.

The state governments will, however, continue to hold majority stake in their respective SFCs. The SFCs Act was amended in September 2000.