State finance corporation should get 90 % refinance as before

Bonds’ investment limit should be increased

CM writes to union finance minister Mr. Jaitley

cm16.10.15  Bhopal, October 16, 2015 (Ataullah Faizan):  Chief Minister Mr. Shivraj Singh Chouhan has urged Central Government that State Finance Corporation which is earning profit and making regular payments should be given 90 % refinance as before. Besides, investment limit of bonds issued by the corporation should also be increased. The Chief Minister has written a letter in this regard to Union Finance Minister Mr. Arun Jaitley. He said that State Finance Corporation was set up by the state government and Small Industries Development Bank of India (SIDBI) to finance small and medium industries in the state. Since then SIDBI has been providing 90 percent refinance of total need of the corporation for loan transactions. However, SIDBI decided in year 2010 that refinancing of all finance corporations will be abolished from year 2017.

Due to it, refinancing amount of the corporation has decreased very much. The corporation is earning profit and making regular payment of income tax. It has got Credit Rating A and repayment of all loans by it is time-bound and regular. Therefore, it would be proper to direct SIDBI that refinancing should be continued to finance corporations.  Similarly, finance corporations used to get necessary funds through bonds at 9 percent interest rate in the past. But the Union Finance Ministry has directed Provident Fund and other funds on March 2, 2015 that more than 10 percent of regulation fund on bonds issued by the state government on guarantee basis cannot be invested.

It is noteworthy that these funds have already attained limit of 10 percent, which precludes any possibility of investment. Due to it, finance corporations are obtaining loans at 11 percent or more interest rate from commercial banks instead of issuing bonds, which is not proper from point of view of profitability. Therefore, Central Government should make suitable amendments to enhance investment limit of these bonds. Madhya Pradesh government is making intensive efforts to promote new small and medium industries, specially in backward areas of the state.

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