Sidbi stops funds to state corporations

Small Industries Development Bank of India (SIDBI) has stopped providing refinance facility to three financial corporations of Punjab, Haryana and Himachal Pradesh due to their negative capital adequacy ratio (CAR).

"Following the recent guidelines issued by the Reserve Bank of India, directing that no refinance should be provided to state financial corporations unless they improve their capital adequacy ratio, we have discontinued the refinance facility to the Haryana Financial Corporation (HFC), the Himachal Pradesh Financial Corporation (HPFC) and the Punjab Financial Corporation (PFC)," a senior SIDBI official told PTI here.

The capital adequacy ratio is a measure of a bank's capital and is expressed as a percentage of the lender's risk weighted credit exposures. It is a critical barometer to check financial soundness. The CAR of the PFC, HPFC and HFC for the year 2006 stood at -150.22 per cent, -30 per cent and -33.24 per cent respectively, the official said.

SIDBI provides refinance to state-level financial corporations against their loans granted to small-scale industries for setting up their industrial projects.

The total outstanding amount of refinance towards the HPFC, PFC and HFC are at Rs 83 crore, 135 crore and Rs 168 crore respectively.

The NPA (non-performing assets) level of these three state financial corporations also indicates their dismal performance. The NPA of the HPFC, PFC and HFC worked out at 39 per cent, 95 per cent and 64 per cent respectively.

"Among these three financial corporations, the NPA level of the PFC is quite high, indicating that the 95 per cent of loans are becoming unrecoverable," the official pointed out.