11

3.1 INDUSTRY PROFILE

NATIONAL LEVEL INSTITUTIONS
A wide variety of financial institutions have been set up at the national level. They
cater to the diverse financial requirements of the entrepreneurs. They include all India
development banks like IDBI, SIDBI, IFCI Ltd, IIBI; specialised financial institutions
like IVCF, ICICI Venture Funds Ltd, TFCI ; investment institutions like LIC, GIC,
UTI; etc.
All-India Development Banks (AIDBs):- Includes those development banks which
provide institutional credit to not only large and medium enterprises but also help in
promotion and development of small scale industrial units.
Industrial Development Bank of India (IDBI)
Industrial Finance Corporation of India Ltd (IFCI Ltd)
Small Industries Development Bank of India (SIDBI)
2. Specialised Financial Institutions (SFIs):- are the institutions which have
been set up to serve the increasing financial needs of commerce and trade in
the area of venture capital, credit rating and leasing, etc.
IFCI Venture Capital Funds Ltd (IVCF)
ICICI Venture Funds Ltd
3. Investment Institutions:- are the most popular form of financial
intermediaries, which particularly catering to the needs of small savers and
investors. They deploy their assets largely in marketable securities.
Life Insurance Corporation of India (LIC)
Unit Trust of India (UTI)
General Insurance Corporation of India (GIC)



12

STATE LEVEL FINANCIAL CORPORATIONS
Several financial institutions have been set up at the
State level which supplement the financial assistance provided by the all India
institutions. They act as a catalyst for promotion of investment and industrial
development in the respective States. They broadly consist of 'State financial
corporations' and 'State industrial development corporations'.
State Financial Corporations (SFCs) :- are the State-level financial
institutions which play a crucial role in the development of small and medium
enterprises in the concerned States. They provide financial assistance in the
form of term loans, direct subscription to equity/debentures, guarantees,
discounting of bills of exchange and seed/ special capital, etc. SFCs have been
set up with the objective of catalysing higher investment, generating greater
employment and widening the ownership base of industries. They have also
started providing assistance to newer types of business activities like
floriculture, tissue culture, poultry farming, commercial complexes and
services related to engineering, marketing, etc. There are 18 State Financial
Corporations (SFCs) in the country

3.2 COMPANY PROFILE
KERALA FINANCIAL CORPORATION
Travancore Cochin Financial Corporation was established on 01.12.1953,
under the State Financial Corporations Act, 1951. This was later renamed as Kerala
Financial Corporation (KFC) consequent to the reorganization of states in 1956. KFC
has its head quarters at Thiruvananthapuram. For nearly 25 years, KFC functioned
only with two district offices at Kozhikode and Ernakulam. The growing volume of
business necessitated opening up of more offices. Now KFC has 16 branch offices in
the entire district. There are Zonal offices of KFC at Kozhikode, Ernakulam and
Thiruvananthapuram. The Corporation is the first PSU in Kerala and first SFC in
India to initiate Corporate Social Responsibility activity. KFC A Developmental
13

Financing Institution and Industrial Facilitator 100% Committed to Kerala for the
Industrial Development.
The provisions of SFCs Act 1951 as amended in 2000 control and guide the
functions of Corporations. The main objective of KFC is the rapid industrialization of
the state by extending financial assistance to Micro, Small and Medium Enterprises in
manufacturing and service sector. SFCs Act empowers KFC to formulate suitable
loan schemes for setting up of new units and for the expansion / modernization /
diversification of existing units in both manufacturing and service sectors since
inception KFC has disbursed over Rs. 3000 Crores to more than 40,000 projects,
spread over the length and breadth of the State.
The Corporation has now emerged as a financial supermarket giving the
customers a wide range of products and services. The Corporation is one of the best
State Financial Corporations in the country with a competent tech savvy team of
professional at the core of services. All along our constant endeavor has been to bring
a sharper focus on the requirements of our customers and to provide the highest levels
of service. KFC now means more than short-term loans. Corporation also provides
Working Capital finance and Short Term Finance apart from schemes focused at the
weaker sections of the society. Modernization schemes for SSIs, Special schemes for
Resorts, Hospitals, and TV Serial Production etc are some of the innovative schemes
introduced to suit changing customer requirements. KFC has also set up KFC
Consultancy Division with a view to render excellent Consultancy Services to our
Clients as a Total Solution provider. KFC has also has made a small beginning to
nurture and develop a new managerial cadre that can dream, envision and create a
new future by starting the KFC Training Division. They offer training programmes,
which are at par, with the programmes offered by any institutions of advanced
learning in India.
3.2.1 ELIGIBLE SECTORS
The Kerala Financial Corporation finance the loan requirements of micro ,small and
medium enterprises. The sectors eligible for corporations support will include
broadly the following

14

Manufacturing sector
All manufacturing activities including processing and preservation .
Service sector
Transport, Marketing, IT Parks, Hospitals, Pathological Laboratories Medical
Equipments ,Professional like Doctors And Architects ,Etc
Hospitality sector
Hotels, Lodges, Restaurants, Convention Center/Seminar Hall, Tourist
Resort,Amusement Park, Etc., as the need for this sector is being incresingly
felt as a promotional support for state industrial /business growth
Marketing
Commercial Complex, Construction Of Godown, Input Suppliers/Venders,
Stockist: as they provide important backward and forward linkage
Micro-finance institution
Well run MFIs : as funding them in an indirect mode of assisting self help
groups and promoting finance inclusion
Infrastructure
Basic requirment that form the engines of economic growth (inspire the setting
up or development of industrial area , industrial estate,IT park, Roads,etc.
Training institute etc
Power sector
Power genaraation/distribution including alternate sources of power like
windmills and solar energy as they provide pollution- free addisanal powers
as also help tax-saving plans
TABLE 3.1 MAXIMUM FINANCIL ASSISTANCE GIVEN TO A UNIT





particulars

cap(Rs.in crores
for a
unit
for
group
private/public Limited companies/corporation/
co-operative socity
20

30
partnership firm/proprietary concerns and trusts 8 12
15


3.2.2 VARIOUS LOANS SCHEMES IN KERALA FINANCIAL
CORPORATION
3.2.2.1 Loan Schemes
The Corporation would endeavor to extend comprehensive services including
term loan, working capital and special schemes that may be required for benefit of the
SME sector. The Interest and principal are to be paid in monthly rests for all schemes.
The extent of financing is based on the type of the project and credit rating. There are
32 schemes, each of these applicable according to the nature and financial
requirement of concerned project. Interest rates, extent of financing and maximum
period of loans are given below
Sl.N
o.
Sche
me
Code
Name of
scheme
Promoter
contributi
on
Debt
Equit
y
Ratio
(DE
R)
for
the
proje
ct
Intere
st rate
gross
linked
to
PLR+
+
Rebate
for
promp
t
payme
nt
Interest
reducti
on
based
on
credit
rating
Effecti
ve rate
after
rebate
and
deducti
on
1 TL Scheme for
Term Loan
for
industrial
activities

a) General 33.34% 2:1 15.50
%
2.00% 1.00% 12.50%
b1)
Small/Medi
33.34% 2:1 15.50
%
3.50% 1.00% 11.00%
16

um
enterprises
in
Manufactur
ing Sector
(existing
loans)
b2)
Small/Medi
um
enterprises
in
Manufactur
ing Sector
(First
disburseme
nt on or
after
1/10/11)
33.34% 2:1 15.50
%
2.00% 1.00% 12.50%
c)
Small/Medi
um
enterprises
in Service
Sector
33.34% 2:1 15.50
%
2.00% 1.00% 12.50%
d1) Micro
enterprises
in
Manufactur
ing Sector
(existing
loans)
25.00% 3:1 13.50
%
4.50% 1.00% 8.00%
17

d2) Micro
enterprises
in
Manufactur
ing Sector
(First
disburseme
nt on or
after
1/10/11)
25.00% 3:1 15.50
%
2.00% 1.00% 12.50%
e) Micro
enterprises
in Service
Sector
25.00% 3:1 15.50
%
2.00% 1.00% 12.50%
f) NRKs 9%
(fixed
)

g) Women
& SC/ST
Enterprises
*

h) Energy
Saving
Projects
25.00% 3:1 14.50
%
8.50% 1.00% 5.00%
2 Single
Window
Scheme**
33.34%
of project
cost
25% of
working
capital
requirem
ent
- 15.50
%
2.00% 1.00% 12.50%
18

3 Working
Capital
Term Loan
25.00% 3:1 15.50
%
2.00% 0.00% 13.50%
4 Working
Capital
Revolving
Fund Loan
25.00% 3:1 15.50
%
1.00% 0.00% 14.50%
5 Constructio
n Activities
and
Housing
Project
40% 1.5:1 16.50
%
2.00% 1.00% 13.50%
6 Takeover of
loans from
Banks/FIs
33.34% 2:1 15.50
%
2.00% 1.00% 12.50%
7 Short Term
Loan
Scheme
10% 9:1 15.50
%
1.00% 0.00% 14.50%
8 Special
Working
Capital
Assistance
to Hotels
0% for
Bar
licence
25% for
working
capital
- 16.50
%
1.00% 0.00% 15.50%
9 Assistance
to Micro
Finance
Institutions
- - 13.50
%
0.00% 0.00% 13.50%
10 Scheme for
Financial
Assistance
to Civil
25% 3:1 16.50
%
1.00% 0.00% 15.50%
19

TABLE 3.2



Limits of financial assistance:
Registered companies (private or public) and co-operative societies can be
given loans up to Rs 20 crores and others (partnership or proprietor) up to Rs 8 crores
The Corporation can give financial assistance to all types of industries for
manufacturing/service activities the unit (existing/new) should necessarily be in
Kerala.
Contractors
11 Scheme for
Financial
Assistance
for
producing
Films and
TV serials
50 1:1 15.50
%
0.00% 0.00% 15.50%
20

3.2.2.2 Micro finance

The micro credit programme of the Corporation is aimed at delivering credit to Self
Help Groups (SHGs) through Micro Finance Institutions (MFIs). The guidelines for
assistance under this scheme are as follows:
Eligibility
i) the MFI has been in existence for at least five years and/or it has a demonstrated
track record of running a successful micro-credit programme at least for the last three
years. However, any new MFI desirous of initiating a micro credit programme may
also be considered for assistance if it has been promoted and managed by experienced
micro finance professionals with experience of at least three years in micro credit;
ii) the MFI has achieved minimum outreach of 3000 poor members (through
individual lending/SHGs/partner NGOs or MFIs) or demonstrates the capability to
reach this scale within a period of next twelve months or so;
iii) it should choose clients irrespective of class, creed and religion and its activities
should be secular in nature;
iv) it maintains a satisfactory and transparent accounting, MIS and internal audit
system or is willing to adopt such practices with KFC assistance;
v) it has a relatively low risk portfolio or has a definite plan to further improve its
recovery performance.
Types of eligible intermediaries
i) Societies registered under Societies Act, 1860 or similar State Acts; ii) Trusts
Registered under Public Trust Act, 1920 or similar Acts; iii) Companies registered
under the Companies Act, 1956 including Section 25 Companies; iv) Non Banking
Finance Companies providing financial services to the poor; v) Specialized and other
Co-operatives such as Mutually Aided Co-Operative Societies etc.; vi) Any other type
of institutions that offer micro finance and related services may be considered on
21

merit.
Lending channels
MFIs may on-lend directly to SHGs/individuals or route their assistance through their
partner NGOs and MFIs. They may also adopt any other lending channel so as to
effectively reach financial assistance to the poor clients.
Eligible activities
The loans to ultimate borrowers is to be utilized for financing micro enterprises and
non-farm activities including agri-allied income generating activities.
Frequency and quantum of loan
i) Annual or need based repeat assistance.
ii) Loan assistance per MFI for on-lending is subject to a minimum of Rs.10 lakh and
maximum of Rs.5.00 Crore.
iii) Maximum amount lent by the MFIs to an individual borrower/ member in general
may not exceed Rs.50,000/-.
Rate of interest
Loans are available to MFIs @12.5% p.a. (subject to revision). MFIs, in turn, may
determine the interest rates for on-lending keeping in view the cost of operation and in
consultation with their partners/SHGs/clients. 2% penal interest will be charged for
the defaulted period.
Repayment period
MFIs are required to repay the loan to KFC generally within a period of 4 years on
quarterly basis including an initial moratorium on the principal of 6-12 months from
the date of first disbursement. Interest payments and principal repayments are
required to be made on quarterly or monthly basis on March 01, June 01, September
01 and December 01 of each year.
22


Security
Term Deposit Receipts (TDRs) equivalent to 10% of the loan amount together
with interest accrued thereon, are required to be pledged as security. The
TDRs should be for a minimum duration of 4 years or currency of the loan,
whichever is later.
Assets created, if any, out of the assistance are held in trust by MFI on behalf
of KFC.
Other conditions
The assistance will be subject to satisfactory Capacity Assessment Rating of the MFI
by an accredited rating agencies like CRISIL, M-CRIL, SMERA etc. prior to each
assistance above Rs.50 lakhs. The cost of such rating expenses will be borne by the
MFI.

3.2.2.3 Credit Guarantee Fund Trust Scheme for MSE
KFC has become a member of the Credit Guarantee Fund Trust for Micro & Small
Enterprises (CGTMSE). With this, KFC can now provide credit facility upto Rs.50
lakh without collaterals and third-party-guarantees, to Micro and Small Enterprises
(MSEs). The objective is to provide credit facility to MSEs purely on the primary
security of the assets financed based on viability of a project.
The guarantee cover available under the scheme is to the extent of
(i) 85% of the sanctioned amount for credit upto Rs.5 lakh
(ii) 80% for MSEs operated and / or owned by woman
(iii) 75% for credit above Rs.5 lakh
One time guarantee fee of 1% in the case of loans upto Rs.5 lakh and 1.5% in the case
of loans above Rs.5 lakh is payable by the borrower. There will also be annual service
23

3.2.2.5 Special package for Women Entrepreneur
KFC offers special scheme to Women Entrepreneurs of the state. The salient features
of the scheme are as follows:
An additional interest reduction of 1% shall be given. Subject to the condition
that the effective rate of interest is not less than 12.5%. All other parameters
have to be complied with.
Ceiling of financial assistance under this scheme will be Rs. 50 lakhs.
Only enterprises owned and administered by woman entrepreneur/
entrepreneurs having 100% financial interest shall be eligible under this
scheme.

fee at 0.50% for loans upto Rs.5 lakh and 0.75% for loans above Rs.5 lakh on the
facility sanctioned.
3.2.2.4 Special Package to NRKs
KFC offers special package to NRKs returning home jobless due to the ongoing
economic recession for permanent set up on or after 1.7.2007..
NRKs can choose from any of our loan schemes based on their area of interest
and expertise.
Maximum ceiling of financial assistance is Rs.50 lakhs.
A special rate of interest of 9% will be offered for the entire loan period.
Only 50% of the processing fee will be charged for loan processing.
This package will be applicable to NRKs returning home jobless for
permanent set up on or after July 01, 2007.
Applications will be accepted till March 31, 2012.
Fast track system for clearing the loan proposals made at all branches.
Necessary help and guidance will be given by our team in matters like legal
scrutiny, project preparation etc.


24

3.2.3 KERALA FINANCIAL CORPORATION SPCIAL SCHEMES
3.2.3.1 Scheme of Energy Saving Projects
In view of the growing need for energy saving and importance of
conservation, the Corporation has formulated a special scheme to promote
energy saving measures in SMEs by providing financial assistance for the
implementation of energy saving device /projects . As per the scheme Energy
Management Centre (EMC) has to recommended the proposal for
consideration. The effective interest rate under the scheme is kept at 5% P.A
and no processing fee will be charged. An upper loan limit of Rs 200 lakh has
been fixed for such support


3.2.3.2 Assistance to Micro Enterprises
The corporation supports Micro Enterprise mainly to help the first generation
enterprise with confessional rates of interest of 7%. The upper limit for
finance is Rs 25 lakhs

3.2.3.3 Credit Delivery In Cluster
The MSME sector in Kerala is highly diversified in terms of industry
segments and geological terrain. A large segment of MSMEs operate in cluster
which have developed at a certain different geographical location due to
various factors like historical availability of certain skill craftsmanship in the
location, proximity of raw material or customer, etc . MSME located in the
clusters have similar characteristics and face similar challenges. Corporation
credit linked interventions involve providing financial assistance to MSME
units in clusters through special dispensation using customised products and
process keeping view their needs and requirements



25

3.2.3.4 Customer Relation and Consultancy Service
Business Development Department and Consultancy Division offers arrange
of services to the customers who are interested in setting up units in different
parts of Kerala . Guidance in the form of Assistance in Project planning,
Liaison with other organisation ,etc are provided . Customer Relation
Managers, at the Branch and the Head office, provide the client with excellent
escort services making the process simple and hassle free .
KFC also take up agency services for mutual fund, insurance, credit rating etc
through SBI Mutual Fund, LIC Mutual Fund, New India Assurance Company
Ltd , CRISIL & SMERA