Tap foreign funds to revive SFCs -- Plan panel

Tap foreign funds to revive SFCs -- Plan panel
PRESS TRUST OF INDIA

NEW DELHI, MARCH 26: The Planning Commission has asked state governments to restructure State Finance Corporations (SFCs) including tapping international funds to meet an estimated Rs 2,000 crore required for reviving these ailing corporations.

"SFCs are in urgent need of financial restructuring to clean up their balance sheet and, if necessary, international channels could be tapped for mobilising funds with sovereign guarantee," a sub-group headed by banking secretary Devi Dayal said in its draft report.

The respective state government and industrial Development Bank of India (IDBI) would have to play a major role in revamping the SFCs in their states, it said adding "as per an estimate about Rs 2,000 crore is required for restructuring of weak SFCs."

Stating that expedient action must be taken for recapitalisation and restructuring of these corporations, it said funds for SFCs could also be raised by state governments from the Centre and adjusted out of the state's share in the Central pool of revenues.

"SFCs would have to ensure significant structural and organisational changes in a holistic manner, which among other things, calls for broad-basing of share holding pattern and strengthening of management set-up," it said.

The report said banks could also be requested to take the lead by setting up specialised branches in those districts which had been earmarked for SFCs.

Stating that SFCs had played an important role in the development of small scale industries, the report said due to various reasons most of the corporations had become financially weak and "were not in a position to perform their tasks properly".

"As a pilot programme in a state, a public sector bank might adopt the concerned SFC," it said adding major shareholding in an SFC in that particular case could be of the sponsoring bank.

While the sponsoring bank could have a 48 per cent stake, the state government and the Small Industries Development Bank of India could hold 26 per cent stake each in the SFC, the report suggested. This would help meet the various problems of credit and impart professional management in SFCS, it said.