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History of Haryana Financial Corporation

BACKGROUND

State Financial Corporations [SFCss] are set up under the SFCs Act, 1951 to provide credit facilities to small and medium scale industries. The SFCs have now emerged as a Premier Development Finance Institution [DFIss] operating at the State level. Their operations have gathered significant momentum & have increased stupendously from the early 70s, with annual sanctions increasing 43 times from Rs.35 crore in 1970-71 to Rs.1,500 crore mark by 1989-90 [source MADA Committee report 1990-91s]. The State Governments have substantial role in the affairs of SFCs by virtue of their Share Capital support & the rights vested in them under the SFCs Act. IDBI has been providing substantial resource support to SFCs by way of share capital as also refinance and subscription to adhoc bonds [New Debts Instrumentss] and formulating in consultation with SFCs their annual business plans. IDBI has been vested with specific powers and responsibilities in the SFCs Act. These relate mainly to appointment of directors on the SFC Board & undertaking of annual performance evaluation studies.

INCORPORATION and BACKDROP

Haryana Financial Corporation [HFCs] came into existence on 1st April, 1967 as a result of reorganisation of erstwhile Punjab Financial Corporation. It is a State Level Financial Institution formed under SFCs Act, 1951. The Corporation is one of leading state level developmental financial institutions promoted by State Government of Haryana. Backed by strong support of State Government and IDBI, the Corporation has been extending term loans against fixed assets to industrial concerns in the State of Haryana. The Corporation has been playing the key role of identifying & developing first generation entrepreneurs in the State of Haryana.

Besides, it has played a pivotol role in development of industries in the State, development of backward area, employment generation etc. It has a ready, continuously increasing base of its clients in the State. The Corporation has financed 8789 projects till March 31st, 1994 in the State with cummulative sanctions & disbursements to the tune of Rs.61,511 lacs & Rs.50,570 lacs respectively. Over a period of five years, the total income of Corporation has increased from 1159 lacs in 1990-91 to 3756 lacs in 1993-94.

MAIN OBJECT OF THE CORPORATION

Haryana Financial Corporation may, subject to the provisions of SFC Act 1951, carry on & transact any of the following kinds of business:

1. Guaranteeing, on such terms & conditions as may be agreed upon.

is] Loans raised by industrial concerns which are repayable within a period not exceeding twenty years, & floated in the public market.

iis] Loans raised by industrial concerns from scheduled banks or State Co-Operative banks or other financial institutions.

2. Guaranteeing, on such terms & conditions as may be agreed upon, deferred payments due from any industrial concern in connection with its purchase of capital goods within India.

3. Underwriting of issue of stock, shares, bonds or debenture by industrial concerns.

4. Transferring for consideration any instruments relating to loans & advances granted by it to industrial concerns.

5. Acting as agent of Central Government or the State Government or the Development Bank or the Industrial Finance Corporation of India established under the Industrial Finance Corporation Act, 1948 [15 of 1948s] or any other financial institution notified in this behalf by the Central Government [in respect of any matter conected with, or arising out of, the grant of loans or advances to an industrial concern, or subscription to debentures of an industral concerns] or relating to be business of the Development Bank, Industrial Finance Corporation of India or financial institution.

6. Subscribing to, or purchasing of, the stock, shares, bonds or debentures of an industrial concern or any other concern with the prior approval of Development Bank [IDBIs].

7. Receiving in consideration of services mentioned in the preceding clauses such commission as may be agreed upon.

8. Retaining as part of its assets any stock, shares, bonds or debentures which it may acquire by subscription or in fulfilment of its underwriting liabilities & disposing of the stock, shares, bonds or debentures so acquired.

9. Granting loans or advances to, or subscribing to debenturns of, an industrial concern, repayable within a period not exceeding twenty years from the date of which they are granted or subscribed to, as the case may be.

10. Accepting or discounting promissory notes & bills of exchange made, drawn, accepted or endorsed by industrial concerns or by any person selling capital goods manufactured by one industrial concern to another industrial concern.

11. Undertaking research & surveys for evaluating or dealing with marketing or investments & undertaking and carrying on techno-economic studies or other activities in connection with the development of any industry.

12. Providing technical & administrative assistance to any industrial concern or any person for promotion, management or expansion of any industry.

13. Planning & assisting in the promotion & development of industries.

As per circular No. FI 8/94-95 dated Oct. 20, 1994 ttte IDBI in pursuance of powers vested with it under the provision of State Financial Corporation Act, 1951, has authorised the State Financial Corporations to undertake the following mentioned activities in addition to those provided under section 25 of Act [Listed aboves], to enable the SFCs to diversify their activities.

is] Providing consultancy & merchant banking services;

iis] acting as the trustee for holders of debentures or other securties;

iiis] leasing, sub-leasing or giving on hire or hire purchase of industrial plant, equipment, machinery or any other asset;

ivs] granting, opening, issuing, confirming or endorsing letters of credit & negotiating or collecting bills and other documents drawn thereunder;

vs] undertaking mutual fund activity including asset management;

vis] providing export related credit;

viis] undertaking money market relating activities;

viiis] factoring; and

ixs] promoting, forming or conducting or associating in the promotion, formation or conduct of companies, subsidiaries, societies, trusts or such other associations of persons, as it may deem fit.

ACTIVITIES

The Corporate mission has been defined as follows:

To be a premier, self sustaining financial institution for catalysing, creating & sustaining viable investments, in the small & medium scale sector of industry & services in the State of Haryana.

The Corporation is providing integrated financial assistance & service to Corporate sector both in the small scale & the medium scale sectors. Financial services are both fund based as well as non-fund based. While the fund based activities are provided within the State of Haryana, the non-fund based activities are being offered on All India basis. The full range of activities of the Corporation can broadly be classified into three major categories as follows:

As] CORPORATE FINANCE:

For development & promotion of Industries in Haryana, the Corporation provides Term Loans to the extent of Rs.150 lacs to a Comp. & Rs.90 lacs to sole-proprietorship/partership concerns. In order to meet financial requirements of different types of borrowers under varying situations, HFC has a number of term lending schemes like; Equipment Refinance Scheme, Modernisation Scheme, Scheme for Financing Hotel Industry, Small Hospitals/Nursing Homes, Assistance to Ex-servicemen, Single Window Scheme, Rehabilitation of sick Units etc. Financial assistance is provided on the basis of Techno-Economic viability of projects, established after appraisal of projects by qualified & experienced staff of the Corporation. The total sanctions & disbursements made by the Corporation stood at Rs.61,511.08 lacs and Rs.50,570.88 lacs respectively as on 31.3.94. The Corporation has played a pivotal rule in development and growth of different types of Industries in Haryana during the last 29 years.

The Industry wise coverage of assistance on a cumulative basis upto 31st March, 1994 is giver below:

S.No. Industry Number of Amount % of Total Project Sanctioned [Rs.in lacss]

1. Metal 1038 10203.60 16.59% 2. Food processing and Agro based. 1410 9749.72 15.85% 3. Textiles 1132 9255.43 15.05% 4. Chemicals/Petroleum & Coal Based 485 5787.04 9.40% 5. Transport 1781 4489.98 7.30% 6. Machinery 487 4249.06 6.91% 7. Paper printing 389 3903.12 6.35% Publishing and Allied Industries 8. Footwear and Leather 239 1792.92 2.91% 9. Plastics, Rubber and Allied Industries 240 1545.02 2.51% 10. Hotel and Tourism 16 800.17 1.30% 11. Miscellaneous 1572 9735.02 15.83%

8789 61511.08 100.00%

Other fund based activities include Equipment Leasing, Car/Vehicle Leasing, Medical Equipment Leasing, Bill Discounting, Bridge Loans upto a limit of Rs.150 lacs. Besides, the Corporation has also started providing Working Capital Finance in a major way to units. The Corporation also provides financial guarailties to its clients & also assists in opening of Foreign Letters of Credit.

Bs] MERCHANT BANKING:

The Corporation is a SEBI registerd Category-I Merchant Banker effective December 1, 1994. The services being provided include Issue Management, Underwriting, Project Counselling & Advisory Services, Loan/Lease syndication, Project appraisals & Capital structuring advice. Due to the liberalization & disintermediation taking place in the financial services sector, the Corporation envisages a vast potential in this area & is in the process of building up a motivated & professionally competent team of Officers in this area.

Cs] INVESTMENT BANKING:

The Corporation has identified Investment Banking as a major thrust area in the years to come. The Corporation is making investment in the equities of units assisted by it. It has applied for membership of OTCEI. The Corporation has already arranged/syndicated a number of bought out deals. It has also participated in some of these bought out deals. In view of its large client base in the Small Scale Sector, & the financial disintermediation taking place in the Indian Economy, the Corporation foresees a major role for itself in this area.

2007

-Haryana Financial Corporation Ltd has nominated Shri. N K Maini, CGM, SIDBI, HO, Lucknow as a Director on the Board of Corporation in place of Shri. U S Lal, DGM, SIDBI [ceased as Director on the Boards].

-Haryana Financial Corporation Ltd has appointed Smt. Neerja Sekher, IAS as Managing Director of Corporation in place of Sh. Ram Niwas, IAS of State Financial Corporations Act, 1951.