Rfc 3a391k

SUMMER TRAING PROJECT REPORT On:“Financial Analysis of RFC”

Rajasthan Financial Corporation [rfc] Udyog Bhawan, Tilak Marg, Jaipur [Raj.] A Govt. Of Rajasthan Undertaking Corporation {SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE AWARD OF THE DEGREE OF MASTER OF BUSINESS ISTRATION OF RAJASTHAN TECHNICAL UNIVERSITY, KOTA}

SUPERVISED BY;-

SUBMITTED BY:-

Mr. D.K. POKHARNA

DEEPAK SHARMA MBA - III SEM

FACULTY SUPERVISOR:Mr. VIKAS SHROTRIYA

SUBMITTED TO DEPARTMENT OF MANAGEMENT STUDIES SWAMI KESHWANAND INSTITUTE OF TECHNOLOGY, MANAGEMENT& GRAMOTHAN, JAIPUR

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2009-2011

AKNOWLEDGEMENT

Projects are teamwork, while my name is one on the cover of this report literally many people have contributed to this report. I am deeply indebted to all my teachers for providing motivation, guidance and supervision and conducive environment for pursuing this study. I wish to express my gratitude to the authorities of RFC for granting their kind permission to carry out my 45 days summer training project work in their esteemed organization. It also gives me great pleasure to extend my grateful thanks to: Mr. Onkarmal [DGM, HRD] Mr. D.K. Pokharna [DM, HRD] Mr. Sushil Gupta [DM, Finance] Mr. Satish Handa [LAW Manger] Mr. V.J. Bhattacharya [Asst. Manager] I am specially grateful to Mr. Vikas Shrotriya (HOD of MBA) in whose guidance I could prepare my project report efficiently. Last but not the least, I wish to express my gratitude to all the staff of the corporation who have lent invaluable assistance for the completion of the Training.

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(DEEPAK SHARMA)

PREFACE RFC was established in Rajasthan to work for the industrialization for the state. I was given a chance to work a trainee in esteemed organization and was given the topic.

“FINANCIAL ANALYSIS OF RFC” Financial Analysis has show the financial position of RFC. It shows that what the present financial position of RFC is. I also tried to find out about the behavioural aspect of RFC officers, whether it was good, bad or worse .I also asked them about which part of total procedure was the suitable and easy for them and if they can suggest for improving the performance of RFC it would be very much welcomed.Then finally after assessing parties and getting the suggestions. I had to give me own view regarding recovery of dues. . I have tried to make suggestions are from all working areas of RFC and I hope so that they will prove useful in future to deal with Borrowers. This training was a great experience for me I came to know about how a firm operates into this competitive environment.

(DEEPAK SHARMA)

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CHAP. NO.

PARTICULARS

Page No

1.

INTRODUCTION OF THE INDUSTRY

2.

INTRODUCTION OF THE ORGANISATION

9-12

2.1 FUNCTIONS OF R.F.C

13-17

2.2 DEPARTMENTS OF RFC

18-28

2.3 VARIOUS SCHEMES OF RFC 2.4 APPLY FOR A LOAN 3.

6-8

29-44 45-49

RESEARCH METHODOLOGY

50

3.1 TITLE OF THE STUDY

51

3.2 TYPES OF RESEARCH

51

3.3 DATA COLLECTION

51-52

4.

ANALYSIS AND INTERPRETATION

53-65

5.

CASE STUDY

66-78

6.

CONCLUSIONS

79

7.

RECOMMENDATIONS

80

8.

BIBLIOGRAPHY

81

CONTENTS

4

5

(CHAP. 1)

INTRODUCTION TO THE INDUSTRY Finance is the most important aspect of any economic system, the importance of finance has been boosted up when demerits of traditional method came into light. Finance is an essence of industrial system as well as finance de factor is the circulatory system of economic development as it directs the flow of economy and facilitates smooth functioning.

STATE FINANCIAL CORPORATION OF INDIA A Central Industrial Finance corporation was set up under the industrial Finance corporations Act, 1948 in order to provide medium and long term credit to industrial undertakings which fall outside normal activities of commercial banks. The State governments expressed their desire that similar corporations be set up in states to supplement the work of the Industrial financial corporation. State governments also expressed that the State corporations be established under a special statue in order to make it possible to incorporate in the constitutions necessary provisions in regard to majority control by the government, guaranteed by the State government in regard to the payment principal. In order to implement the views Expressed by the State governments the State Financial Corporation bill was introduced in the Parliament.

Statement of objects and reasons i. In order to provide medium and long term credit to industrial undertaking, which fall outside the normal activities of commercial banks, a central industrial finance corporation was set up under the industrial Finance Corporations act, 1948. The state governments wished that similar corporations should be set up in their states to supplement the work of industrial financial corporation.

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The intention is that the State corporations will confine to financing medium and small scale industrial and will , as far as possible consider only such access which are outside the perview of industrial fiancé corporation . The main features of the State financial Corporations Act 1951: The bill provides that the state government may, by notification in the official gazette, establish a financial corporation for the state. ii. The share capital shall be fixed by the State government but shall not exceed Rs 2 crores . The issue of the shares to the public will be limited to 25 % of the share capital and the rest will be held by the State Governments, The Reserve Bank, Scheduled Banks, Insurance Companies, Investment Trusts, Co- operative banks and other financial institutions. iii. Shares of the corporation will be guaranteed by the Sate government as to the re – payment of principal and the payment of a minimum dividend to be prescribed in consultation with the central government. iv. The corporation will be authorized to issue bonds and debentures for amounts whichtogether with the contingent liabilities of the corporations shall not exceed five –times the amount of the paid – up share capital and the reserve fund of the corporations. These bonds and debentures will be guaranteed as to payment of the principal and payment of interest at such rate as may be fixed by the State government. v. The corporation may accept deposits from the public repayable after not less than five years, subject to the maximum not exceeding the paid up capital. vi. The corporation will be managed by a board consisting of a majority of Directorsnominated by the State governments , The Reserve banks and the industrial Finance corporation of india. vii. The corporation will be authorized to make long term loans to industrial concerns which are repayable within a period not exceeding 25 years. The Corporation will be further authorized to underwrite the issue of stocks, shares, bonds or debentures by industrial concerns, subject to the provision that the corporation will be required to dispose of and shares etc. Acquired by it in fulfillment its underwriting liability within a period of 7 years.

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viii. Until a reserve fund is created equal to the paid – up share capital of the Corporation and until the State Governments has been repaid all amounts paid by them, if any, in fulfillment of the guarantee liability, the rate of dividend shall not exceed the rate guaranteed by the state government. Under no circumstances shall the dividend exceed 5 % p.a. and surplus profits will be re – payable to the State governments. The corporation will have special privileges in the matter of enforcement of its claims against borrowers. Financial resources of the SFC’s: The SFC’s mobilize their financial resources from the following sources 1. Their own Share capital 2. Income from investment and repayment of loans 3. Sale of bonds 4. Loans from the IDBI ( To some extent ) 5. Borrowings from the Reserve Bank of India 6. Deposits from the Public 7. Loans from State Governments. In the act Financial corporations are Financial corporations established under section 3 and includes a t Financial Corporation established under section 3 A of the Sate financial. Corporations Act of 1951. The act applies to all “ Industrial Concern “ means any concern engaged or to be engaged in a) The manufacturing, preservation or processing of goods. b) The mining or development of mines c) The hotel industry d) The transport of engers or goods by road or by water or by air ( or ropeway or lift ) e) The generation or distribution of electricity or any other form of power. f) The maintenance, repair, testing or servicing of machinery of any descriptionor vehicles or vessels or motor boats or trailers or tractors. g) Assembling , repairing or packaging and article with the aid of machinerary or power

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Project conceptualization and related services, including guidance in relation to selection of projects, preparation of feasibility studies, capital structuring, techno – economic feasibility, financial engineering, project management design etc. Assist in organizational structural changes like : (1) Analysis of operational performance (2) Study of existing organizational structure (3) Study of the existing statures and rules and regulations (4) Market analysis with respect to products (5) Review of domestic and international scenario (6) Valuation of fixed assets and inventory (7) Advising on formation of new entity (8) Preparation of relevant agreements / legal documents.

(CHAP. 2) INTRODUCTION OF THE ORGANISATION RAJASTHAN FINANCIAL CORPORATION • • • •

Organizational Set up Board of Directors Financial Assistance Term Loan Assistance

 The Rajasthan Financial Corporation (RFC) was constituted under a notification of the State Government dtd. 17 January, 1955 under the SFCs Act, 1951, for providing long term financial to tiny, small scale and medium scale industries in the State of Rajasthan. The Corporation is continuing to work as a Catalyst of development for translating into practice the industrial policies and priorities of the Central and the State Governments as also for providing and improving upon immediate assistance in the planned and balanced

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development of industries in the State, particularly in the small and tiny sectors. Since, its very inception, the Rajasthan Financial Corporation has been striving incessantly towards its Goal - that of extending a helping hand to varied entrepreneurial section of society for their financial requirements. A Goal, ultimately aimed at spurring up the process of industrialization of its parent State. For the fulfillment of its prime objective it operates various loan schemes for the tiny, small and medium scale industries, many of them tailor-made for specific entrepreneurial classes. Ever prepared to adopt as well as to adapt itself to the changing industrial needs, RFC has over the period, widened its network, multiplied its numerous schemes and added multifold to its policies and incentives, liberalizing them with the need of the hour. Be a party to the grand task of industrialization of the State of Rajasthan and avail of any of our loan schemes. •

Organizational Set up * The spread * The Services rendered * What is an industrial concern? * Industries Eligible for Assistance

Organizational Set up The general superintendence, direction and management of the affairs and business of the Corporation vests with the Board of Directors, consisting of representatives of the State Government, SIDBI, Public Sector Banks, LIC, Insurance companies and other Institutions owned and controlled by Central Govt./ State Govt. and other genuine share holders. The policies of the Corporation are executed by the Chairman & Managing director aided by Executive Director, General Managers, Dy.General Managers & Departmental heads in HO. Zonal Manager, Dy. General Managers (Region) and Branch Managers in the field. The Spread The Corporation has expanded into 34 territorial Branches and 7 Regional Offices in 32 Districts of the State. These Branches are duly equipped to function as entrepreneurial guidance centers and exercise considerable delegated authority in regard to sanction, documentation and disbursement of financial assistance. The Corporation has established a Business Promotion Cell and an entrepreneur Guidance Cell at HO which provides assistance and guidance to the

10

entrepreneurs. Services Rendered The Corporation grants term loan up to Rs. 2000 lacs to limited companies and Co-operative societies and upto Rs. 800 lacs to proprietary and partnership concerns. Existing industries having Net worth upto Rs. 10.00 Crores (paid up capital + free reserve) are eligible for financial assistance under the provisions of the SFC's Act. The Corporation also provides short term line of credit facilities to good borrowers for acquiring fixed assets and to meet out their working capital requirements. What is an Industrial Concern ? "Industrial concern' means any concern engaged or to be engaged in: * the manufacture, preservation or processing of goods. * Mining or development of mines. * The hotel industry. * The transport of engers or goods by roads or by water or by air, or by ropeway or by lift. * The generation or distribution of electricity or any other form of power. * The maintenance, repair, testing or servicing of machinery of any description of vehicles or vessels or motorboat or trailers or tractors. * Assembling, repairing or packing any article with the aid of machinery or power. * The setting up or development of an industrial area or industrial estate. * Fishing or providing shore facilities for fishing or maintenance thereof. * Providing weighing bridge facilities. * Providing engineering, technical, financial, management, marketing or other services or facilities for industry. * Providing medical, health or other allied services. * Providing software or hardware services relating to information technology, telecommunications or electronics including satellite linkage and audio or visual cable communication. * Setting up or development of tourism related facilities including amusement parks, convention centers, restaurants, travel and transport (including those at airports), tourist services agencies and guidance and counseling services to the tourists. * Construction.

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* Development, maintenance and construction of roads. * Providing commercial complex facilities and community centers including conference halls. * Floriculture. * Tissue culture, fish culture, poultry farming, breeding and hatcheries. * Service industry, such as altering, ornamenting, polishing, finishing, oiling, washing, cleaning or otherwise treating or adapting any article or substance with a view to its use, sale, transport delivery or disposal. * Research and development of any process or product in relation to any of the matters aforesaid. * Such other activity as may be approved by the SIDBI. Explanation-I: The expression processing of goods includes any art or process for producing, preparing or making an article by subjecting any material to a manual, mechanical, chemical electrical, or any other like operation. Explanation-II: If any doubt arises as to whether a concern is an industrial concern or not, the same shall be referred to the Development Bank for its decision and the decision of the Development Bank thereon shall be final.

Industries Eligible for Assistance In addition to the activities narrated above, the financial assistance is also made available by the Corporation for the following activities which have been approved by IDBI under the provisions of Section 2(c) (XIII) of the SFC's act. * Acquiring Electro-medical equipment for professional use by medical practitioner. * Hospitals and Nursing Homes. * Hotels, Restaurants and tourism related activities. * Setting up consultancy ventures by qualified professionals. * Quality control facilities. * Service Industries like Washing, Cleaning, Ornamenting etc. * Providing engineering, technical, financial management, marketing or other services or facilities for industry. * Providing medical, health or other allied services. * The research and development of any concept, technology, design process or product. * Development, maintenance and construction of roads. * Construction of commercial complexes, sales outlets and show rooms and community centers (including marriage halls) as a part of the hotel business.

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* All activities related to information technology sector including Cyber Cafe Etelecommunication portal services etc.

Functions of Rajasthan Financial Corporation RFC has played an important role in increasing industrialization in the state. RFC has played a catalytic role in less then 90% industrial Projects established in the state. Since its inception corporation has being striving increasingly towards its goal – that of extending a helpful hand to a varied entrepreneurial section of society for their financial requirements. Main Functions;1. It implements the policies of the Govt. of India & state Govt in regard to industrialization.

2. It

act as an agent of state Govt for providing incentives and concessions announced by state Govt.

3. It provides medium& long term loans for establishing the industrial units.

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4. Loan for expanding, diversification, modernization or revival of industrial units.

5. Underwriting

of the issue of shares , shared bonds and debentures issued by industrial concerns transferring for consideration of any instrument relating to loans and advances guarantee by it to industrial concerns.

6. Subscription

to the stock share bonds or debentures of an industrial concern out of the fund representing the capital subscription in accordance with the provision of sec 4a.

MANAGEMENT AT RAJASTHAN FINANCIAL CORPORATION

*Mr. Atul Kumar Garg, IAS Chairman & Managing Director

*Mr. Kuldeep Ranka, IAS Managing Director, RIICO Ltd.

Mr. Purshottam Agrawal, IAS Secretary(Indurtires), Govt. of Rajasthan, Jaipur

Mr. S.V.G. Nandagopal Chief General Manager, SIDBI, New Delhi

*Mr. R.P. Malik General Manager, SIDBI, Jaipur

Mr. N.K. Padhi General Manager, (C&IB), SBBJ, Jaipur

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Mr. Sanjeev Kumar Sr. Divisional Manager, LIC of India, Jaipur

*Mr. Kamal Mehta Mr. Ramesh Kumar Patni Mr. Sidharth Bhagat Secretary, RFC

*Also the of executive committee

Hierarchy in Rajasthan financial corporation Class-A Board of directors Chairman and managing director Executive director General Managers Dy. General Managers Managers Deputy Managers Assistant managers/ stenographer-I

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Class-B Senior assistant/stenographer-II Assistant /steno typist Junior Assistant/Typist

Class-C Jamadars Drivers Messengers

MANUAL SYSTEM OF RFC The present manual system of RFC can be divided into the following major areas. • LOANS • LAW • FINANCE • S • FOLLOW UP & RECOVERY • MERCHANT BANKING • REHABILITATION

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• AUDIT • COORDINATION & MONITORING • PERSONNEL& PAYROLL • GENERAL ISTRATION

DEPARTMENTS OF RFC  TRAINING & LIBRARY CELL  BUSINESS PROMOTION  SUBSIDY & FINANCE: DISBURSEMENT  MERCHANT BANKING DIVISION  MARKETING DEVELOPMENT DIVISION  LOAN  LAW  PUBLIC RELATION  PLANNING & COORDINATING

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 TECHNICAL  PERSONNEL & ISTRATION  FOLLOW UP & RECOVERY  S & COMPUTERS  REHABILITATION

DEPARTMENTS OF RFC Department of an organization is essential for its smooth functioning. It depends on variety of factors. RFC considers grant of financial assistance to industries in backward and developing areas of Rajasthan by means of granting loans to the promoters, through its various schemes. Departmentation in Rajasthan Financial Corporation is done on a functional basis. The objective of the corporation is achieved by dividing the work to various departments or sections. Each department performs a specific task. The functions of various departments and the procedure followed while the work of granting loans is as follows: 1.

Seeking Financial Assistance: I.

Where to apply: The entrepreneurs can submit their loan application to the nearest branch of the corporation.

II.

How to apply: The application has to be made in the prescribed format that can be obtained from any office of the corporation, and are required to be submitted along with an application fee.

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2

Documents required along with application form: I.

SSI Registration Certificate.

II.

Documents regarding land and building.

III.

Brief description of manufacturing process

IV.

Details of promoters.

V.

Particulars of machinery and other fixed assets.

VI.

Copy of sanction for power and water connection, of balance sheet, Profit and Loss A/c, of memorandum and articles of association and marketing study.

VII. Copy of Income-tax, Wealth-tax returns and assessment orders. VIII.

NOC from pollution control board. (PCB)

IX.

Details of immovable assets.

X.

Project cash flow statement.

VARIOUS DEPARTMENTS Various department of RFC are as follows ⇒

LOAN SECTION:The loan section is virtually responsible for the whole appraisal process. It s application for the loans in the prescribed R-1 A. After registration, the loan cases are assigned to a particular appraisal group. Which examine the case within 10-15 days and prepare a note on key factor (NKF). The appraisal group before the project clearance committee (PCC) puts up this note on key factor. PCC shall consist of: a)

Managing Director

b)

Executive Director

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c)

All General Manager

d)

DGM (A&I), DGM (F&R), DGM (BP) & DGM (LOANS).

e)

Manager (Tech.Cell), Manager (MDD) & Manager (Loans &

tech.). f)

All of appraisal team.

PCC examines the following key issues: 1.

Promoter’s background, experience and financial

standing. 2.

Priority and importance of the project.

3.

Scope of the industry.

4. project.

Overall technical feasibility and economic size of the

5. plant supplier.

Suitability of the location and substitution of the

6. project.

Earlier experience of the corporation with similar

After clearance by PCC and having determined key issues, detailed processing of the case is taken by the appraisal group. A letter is sent to the promoter if some additional information is required. Simultaneous appraisal from bank mentioned by promoter also made regarding Working Capital Finance. After processing is complete and the case is considered worth financing the proposal is finalized by appraisal group in consultation with DGM (loans)/Manager (loans) and put before MD/ED for sanction. Loan is approved and sanctioned from the competent authority and is conveyed to the applicant who has to confirm the and conditions of sanction within 30 days. The loan file is then sent to law section for execution of the documents.

LAW SECTION:It deals with execution of loan documents. It is responsible for performing following two major functions:

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a) Documentation work: - Examination of title documents of the properties as security and getting the documents of loan executed. b) Court Cases and Legal work: - For giving legal opinion in case referred to it by the other cells and branches and attending cases filed by or against corporation. The function of this section is as follows: After issuing loan sanction letter, the loan file is received in the law section where the promoter are required to get the documents executed within 3 months. This cell after receipt of loan file issue a letter to the loaner concerned asking it to submit acceptance of and conditions of sanction letter and also deposit service charges and to comply with the requirement of the letter of sanction. 1.

Title Examination ⇒

After the loaner having deposited the necessary charges, the law section will issue a letter to the State Government or Industrial Development Corporation of the state in case of lease hold land while for freehold land copy of title deeds of land is to be submitted, by the promoter. 2.

Examination of constitution of borrower ⇒

The constitution of borrowing concern i.e. whether it is a partnership firm or a company or a co-operative society is to be examined and then the promoter is asked to submit other documents like power of attorney, board Resolution, Personnel Guarantee, Undertaking, affidavits etc. generally the corporation advances loans by creating equitable mortgage. 3.

Execution of Documents ⇒

Then the loan documents are got executed from the loaner on the prescribed format of loan documents. This section also maintains a progress for making day-today in the . Authorized Signatories on behalf of Corporation Authority in Head Office

Power of Execution Powers of g Litigation papers

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ED/GM-Cum Secretary/ Dy.Gen.Manager(Law)/ Manager(Law)/ Dy.Manager Law)

4.

To sign and Execute Accept equitable mortgage on behalf of corp., Mortgage Deeds and all other Document connected with the authorized business of Corporation.

To Sign plaints, written statement. Vakalatnama, Affidavit and all other Documents and paper related to the legal proceeding by and against the corporation

Safe custody of Documents ⇒

The original documents are kept under lock and key in the custody of the mentioned officer:HEAD OFFICE: Dy. General Manager(law)/Manager(law) BRANCH OFFICE: Manager/Dy. Manager(law) DIC OFFICE: Dy. Manager/Asst. manager (sub office DIC) This cell records a certificate on the loan file that the loaner has compiled with all the formalities of the sanction letter and forwards it to the disbursement of loan to loaner.

FOLLOW UP & RECOVERY SECTION:The activity of follow-up starts immediately after sanction of loan. The object of follow-up section is to see that the assisted units perform will loading to timely recoveries of corporation dues. This cell manages the work of granting loan by performing the following function: 1.

Follow-up a unit for knowing its health through its periodic progress reports, inspection of the unit and obtaining report from nominee Director.

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2.

Recovery of Dues: a)

By timely intimation of amount due and taking action for its recovery.

b)

By taking uitable action in case of defaulting units.

3.

In case of closed units/abandoned projects, action is taken for their revival and rehabilitation.

4.

Subsequent premises and other matters: a)

Grant of charges Pari-u.

b)

Approval of change in constitution of assisted units.

c)

Dealing with any other problem.

RESPONSIBILITY FOR FOLLOW-UP:The basic responsibility for follow-up and recovery from assisted units is that of the branch. However, in case problem is referred to the General Manager or Manager / Dy. Manager (F & R) in the Head office. Full and effective supervision over F&R work of the branch office is exercised by regional office. Every branch has a follow-up and Recovery committee (FRC) whose primary objective is to review cases requiring special attention and to chalk out plans to deal with them. The functions of the committee are: 1.

To review cases of new defaulting units (if default persist for more than a month).

2.

To review cases of chronic/willful defaulting units.

3.

To review cases of closed units (Specially cases of units where assets are in possession).

4.

To review cases of revival and rehabilitation of sick and closed units.

5.

To review cases of defaulting units paying on monthly basis and of other units in general.

6.

To review cases in which legal action has been initiated.

7.

To monitor, in general progress of recovery and follow-up.

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In cases of units in difficulty, the officer at branch looks into and analyses, whether the difficulty is on of reasons beyond its control or other genuine reasons and then time of action is decided for either postponement, deferred or reschedulement, revival, rehabilitation by providing further assistance, or revival of a closed unit by induction, sale or take over of assets and their disposal.

TECHNICAL SECTION:The main function of this is to analyses the technical soundness of a particular proposal. This section is responsible for the valuation of assets and also for inspection of closed units. The major functions of this cell is to study the technical aspects of a project and following: 1. To find out suitability of location and pollution control. 2. To know about adequacy of land and building. 3. To find out capacity and usefulness of plant and machinery. 4. To know about feasibility of the technical process. 5. To know about availability of raw material and other. 6. To study the working capacity of the project. 7. To look into the availability of power required for the manufacturing. 8. To make arrangements for technical know-how. This section is responsible to carry on valuation of the assets before disbursement. They see that this verification is carried out quickly so that the promoter avails the loan without any loss of time and inconvenience. This is ensured that valuation report submitted within 7 days from the date of receipt of request.

FINANCE SECTION:The finance section of the corporation deals with funds of the corporation. The basic functions of this section are: 1. Mobilization of resources of the corporation. 2. Dispersal of funds: By the way of release of sanction of loans, subsidy, istrative expenses, other payments of statutory liabilities of general establishment.

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3. Project implementation: There is a project-monitoring cell which monitors the performance of the project sanctioned in Rajasthan. 4. Management of subsidy: RFC acts as a agent of the state government for the release of subsidy. This cell manages the release of investment subsidy, interest subsidy. 5. Refinance: RFC receives funds for small-scale projects from SIDBI and for medium scale projects from these at low interest rate. This finance section is responsible for management of finance from these institutions and extending the same to promoters at high interest rate so as make profits. 6. Prepare business plans for the whole year. 7. Prepare a business plan and resource fund (BRPF) in consultation with IDBI and SIDBI, which is financially approved by the Board of Directors. This BRPF is a sort of budget of the corporation for all practical purposes. 8. It also prepares a separate budget which included the expenditure estimates under different heads or sections of the Corporation. It is placed before the Board for approval by the General Manager (Finance). 9. This section is also responsible for management of the bank s. 10.It is the function of this section to handle the cash in such a manner that a minimum balance remains in the current so as to maximize the profit. Inspire of all this, it is the responsibility of finance department to regularly monitor the funds position, the bank statements being sent by the branches to the Head Office. A report about the performance of all the branches in respect of remittance of funds is also prepared, Besides this work relating to floatation of bonds, investment of funds, a ailment of loan from Government and other agencies.

REFINANCE & DISBURSEMENT SECTION:The branches except in t finance cases do the work of disbursement of loans. The disbursement section performs the disbursement

25

of loan function. The major functions of this section in regard to each loan sanctioned are:I.

Disbursement of loan.

II.

Disbursement of subsidy.

III.

Project implementation and monitoring.

1.

Action of Disbursement of Loan :

It is initiated after the execution of document and receipt of loan from Documentation cell which is retained until the final disbursement work is looked after by Dy. Managers. It is the responsibility of this cell to see that the disbursement is made only on the basis of valuation of the assets created or bank intimation received. This cell ensures about compliance of conditions stipulated in loan sanction order and sanction of refinance before release of money against the assets created. Inspection of the unit at least once in six months during the currency of disbursement of loan is also made by this section and inspection report with suggestions wherever possible is prepared. This section also prepares a disbursement note. It also issues a assurance letter directly to the supplier on request of loaner concerned. 2.

Disbursement of Subsidy :

Subsidy is a kind of incentive to be given to industries, which is not recoverable in case unit goes on production. This section is responsible to obtain subsidy application, prepares subsidy is conveyed to the individual concerns and special and conditions mentioned in the sanction letter. It is ensured that subsidy is disbursed together with loan disbursement on the basis of accepted value of assets created by the units.

COMPUTER AND SECTION:The corporation has adopted an integrated computerized ing system. For the purpose of maintaining the s there is a separate

26

s in computer there is a computer section. The corporation follows, “Cash system of ing”. These sections perform the following functions: 1.

It is responsible for filling of the Income-tax returns and dealing with other matters related with Income-tax.

2.

Maintains s for the disbursement purpose and for depositing collection done by branches.

3.

Prepare a Balance-sheet, gets it audited and then submit it to CMD.

4.

Responsible for handling of current s of the corporation with various commercial banks.

5.

It is responsible for performing the work related with checking of vouchers, checking of dividend on shares interest on bonds.

6.

This section also maintains records relating to the pension, salary leave an allowances of a particular employee and for furnishing information regarding these to the personnel and istration section.

7.

Processes the vouchers and other input data sent by the branches.

8.

Submits monthly statement to the CMD.

9.

It is responsible for giving routine reports which include reports for due and receipts, CGS fees, validation amount recovered during the month, amount disbursed during the month etc.

10.

Maintains a record of the cheques received by the corporation.

11.

Draws a bank reconciliation statement.

The corporation has adopted a decentralized system of ing which has been done with an object of providing better and timely services to the loaners. The entrepreneurs receive information regarding his at his doorsteps. By this system reconciliation with the loaners is done at branch level.

REHABILITATION SECTION:The corporation in order to assist its sick units has started a scheme for revival and rehabilitation with the assistance of IDBI and RBI. The primary

27

objective of the scheme is to bring back the sick and closed units to a viable level of production. This scheme covers all small and medium scale industrial units. The major functions of this section are to gather information regarding identification of sick units. It performs the following tasks: 1.

Submits the application for revival/rehabilitation assistance.

2.

s the application.

3.

The branch of the corporation carries out immediately on receipts of the application an inspection of the units concerned. The rehabilitation application and inspection report is sent to the Head Office along with specific and clear recommendations regarding the application.

4.

The application is scrutinized by Dy. Manager at HO. The decision is finalized within 3 months of the receipts of the application.

5.

This section lays the rehabilitation proposal the competent authority for sanction.

6.

After sanction it takes necessary action to implement the decision.

PERSONNEL AND ISTRATION SECTION:The personnel and istration section of the corporation deals with the staff istration and is responsible to maintain a proper linkage between the branches and DICs. One officer of RFC is posted by the HO to function under istrative control of the General Manager of DIC.

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Besides this the P&A section of the branch would review the annual confidential report of this officer. This section is also responsible for dealing with all the personnel matters like: 1.

Appointments

2.

Delegation of Powers

3.

Transfers

4.

Sanction of leave

5.

Tours

6.

Sanction of annual increment

7.

Disciplinary powers

8.

Grade increments

9.

Promotion

10.

Permission for further studies

11.

Staff Welfare

12.

Incentives to staff

13.

Loans to employees

14.

Reimbursement of TA claims

15.

ing of bills.

VARIOUS SCHEMES OF RFC

I. Hospitals/NursingHomes Under the scheme, financial assistance upto a maximum of Rs.20.00 Crores, depending upon the constitution of applicant unit is made available. The Hospitals/Nursing Homes should have minimum of 20 beds. One of the pre-

29

condition for the project under the scheme is that services of at least one expert doctor having post graduate qualifications like MD/MS should be available in Hospital/Nursing Home on full time basis. Hospital/Nursing Home is also required to provide medical assistance at confessional rates to patients from low income group. The financial assistance would cover investment in land, hospital building, electro-medical equipments, instruments, hospital furniture, air- conditioners, small generators etc. Under the Scheme, financial assistance is also extended to existing hospitals for expansion/modernization. Repayment Schedule Keeping in view the fact that the hospital and nursing homes will take time to establish its name and market, the installments of Principal are fixed for lower amount in initial period giving a moratorium of two years as under : Ist and IInd Year Nil(Moratorium period) 3rd Year 5% of the Principal Amount 4th Year 7.5% of the Principal Amount 5th Year 12.5% of the Principal Amount 6th Year 17.5% of the Principal Amount 7th Year 25% of the Principal Amount 8th Year 32.5% of the Principal Amount

II.TOURISM RELATEDACTIVITIES The Corporation has been granting financial assistance for Hotels, Restaurants, Drive-in-Cinemas, Multiplexes and Tourism related activities in Rajasthan. Purpose Assistance under the scheme is available for acquisition of following fixed assets and facilities depending upon the type of activities: a)Land, Building, Kitchen equipments, Office equipments including telecommunication network, air-conditioners, Interior decoration, Furniture & Fixtures, Conference Hall, Health Club, Swimming Pool, Indoor sports facilities, Shopping Arcade, Garden equipments etc. b)In case of restaurants set-up in commercial premises, assistance is available to acquire own premises.

30

Gestation Period/Repayment Schedule Keeping in view the fact that in case of hotel projects, the occupancy generally remains low in the initial period, the installments of principal are fixed for lower amount in initial period giving a moratorium period of two years. Repayment Schedule Ist and IInd Year Nil(Moratorium period) 3rd Year 5% of the Principal Amount 4th Year 7.5% of the Principal Amount 5th Year 12.5% of the Principal Amount 6th Year 17.5% of the Principal Amount 7th Year 25% of the Principal Amount 8th Year 32.5% of the Principal Amount

III.COMPOSITE LOAN SCHEME Rural artisans and craftsmen and all eligible small industrial activities in Villages, Small towns having total credit requirement not exceeding Rs.50,000/- inclusive of working capital are covered under the scheme. IV.SINGLE WINDOW SCHEME The corporation has been operating the scheme especially for small borrowers to ensure adequate finance by providing single window facility for availing of Term Loan for fixed assets and Working Capital finance from one institution only. The salient features of the scheme are as under: - Assistance is available to tiny and small scale industrial units whose cost of project (excluding working capital margin) and total working capital requirement is within Rs.200.00 Lac. - Collateral security to the extent of 150% of term loan for working capital would be required. - Component of working capital normally should not exceed to the term loan for fixed assets. - The loan shall be repayable within a period of not exceeding 10 years with moratorium period of 18 to 36 months. - Designated bank may agree to take over the working capital within three years. In cases where the bank agrees to finance only additional working capital, the corporation may continue the earlier working capital loans against the specified security.

31

V. SCHEME FOR QUALIFIED PROFESSIONALS Under the scheme, assistance is granted to qualified professionals for setting up their first consultancy venture. Eligibility Assistance under the scheme is granted to qualified professionals in the field of management, ancy, medicine, architecture, engineering, law etc. for setting up professional practice/consultancy ventures for the first time. Assistance to a limited extent for acquiring additional equipments for their practice could also be considered under the scheme in case of the existing established professional firms. Cost of Project The cost of the project should be need-based and not exceeding Rs.20.00 Lac. It may include cost of land, building, furniture, fixtures and equipment related to the profession. The cost of land and building should not exceed 50% of the total outlay. Repayment Period Five years including initial moratorium not exceeding one year Other & conditions The applicant should devote his direct and full attention towards his proposed profession /self-employment venture. The premises acquired under the scheme should be used exclusively for professional purposes and not as residence-office. VI. SCHEME FOR TEXTILE INDUSTRY UNDER TECHNOLOGY UPGRADATION FUND(RTUF) Objective To provide encouragement to textile industrial units in the small scale/medium scale sector for taking up technology up gradation and to modernize their production facilities. Incentive The scheme envisages interest incentive of 5% points on the loans availed by small scale/medium scale units for under taking technology up gradation / modernization, however, for the spinning machinery the reimbursement will be four percentage points only.

1

The scheme will continue to provide a reimbursement of five percentage points on the interest charged by the lending agency on a project of technology up gradation in conformity with the Scheme. However, for the spinning machinery

32

2 3

4

5 6

7 8

9

10

11

12

the reimbursement will be four percentage points only. The scheme will continue to provide cover for foreign exchange rate fluctuation not exceeding 5%. However, for the spinning machinery the coverage will be 4%. The Scheme will now provide an additional option to the power-looms units to avail of 20% Margin Money Subsidy under TUFS in lieu of 5% interest reimbursement on investment in TUF compatible specified machinery subject to a capital ceiling of Rs. 200.00 lakh and ceiling on margin money subsidy Rs. 20.00 lakh. A minimum of 15% equity contribution from beneficiaries will be ensured. The Scheme will now provide 15% Margin Money Subsidy for SSI textile and jute sector in lieu of 5% interest reimbursement on investment in TUF compatible specified machinery subject to a capital ceiling of Rs. 200.00 lakh and ceiling on margin money subsidy Rs. 15.00 lakh. A minimum of 15% equity contribution from beneficiaries will be ensured. The Scheme will continue to provide 5% interest reimbursement plus 10% capital subsidy for specified processing machinery. The Scheme will now provide 5% interest reimbursement plus 10% capital subsidy for specified machinery required in manufacture of technical textiles and garmenting machineries. (However, the units which have taken the sanction prior to 31.03.2007 but not started the commercial production, to be certified by Chartered Engineer and Chartered ant, will be covered under the modified Scheme). The Scheme will now provide interest subsidy/ capital subsidy/ Margin Money subsidy on the basic value of the machineries and exclude the tax component for the purpose of valuation in view of the decision for non- subsidizing the taxes. The Scheme will provide 25% capital subsidy on purchase of the new machinery and equipments for the pre-loom and post-loom operations, handlooms/ upgradation of handlooms and testing & Quality Control equipments, for handloom production units. Certain imported second hand machinery have been permitted. The entire range of imported second hand machinery will now be ineligible under the Scheme for any benefit except automatic shuttle less looms with the value cap of Rs. 8.00 lakh per machine and 10 years vintage and with a residual life of minimum 10 years. Other investments such as energy saving devices, effluent treatment plant, inhouse R&D, IT including ERP, TQM including adoption of ISO/ BIS standards, P etc. ( including non-conventional sources) as mentioned in Para 3.3(2) of the existing Scheme will now be eligible for benefits of the Scheme only upto 25% of the cost of machinery. For a specific thrust to garmenting, machineries for CAD, CAM and design studios and likes will be included in the separate heading of the guidelines of the scheme with a financial cap to be determined by the Inter Ministerial steering Committee (IMSC) under the Chairmanship of Secretary(Textiles). Investments like land, factory building, pre-operative expenses and margin money for working capital will now be ineligible for benefit of reimbursement under the scheme except meant for apparel sector and handloom with existing 50% cap. In case apparel unit is engaged in other activity, the eligible investment under this head will only be related to plant and machinery eligible for manufacturing of apparel.

33

13

The applicability of the modified provisions of the Scheme will be reckoned with the date from sanction of bank loan or commercial production, whichever is later. The date of indenting of machineries or procurement or import or delivery shall be immaterial to decide the applicability of the Scheme.

Scope of the Scheme The following activities will be covered under RTUF: i) Cotton Ginning and Pressing. ii) Wool scouring combing & carpet industry. iii) Silk reeling and twisting. iv) Synthetic filament yarn text rising, crimping and twisting. v) Spinning . vi) Viscose filament yarn. vii) Weaving, knitting including non-woven fabric embroidery. viii) Garment/Made up manufacturing . ix) Processing of fibers, yarns, fabrics, garments and made ups. x) Technical Textiles including non woven. Operating period of the scheme The scheme would be in operation from 01.11.2007 to 31-03.2012 Promoter's Contribution Minimum 33% of the project cost Rate of Interest The Corporation shall charge interest rate as applicable from time to time under the scheme.

VII. ASSISTANCE FOR ACQUISITION OF ISO-9000 SERIES Objective

34

This scheme has been introduced to promote & encourage adoption of quality management system in SSI units with a view to strengthen their marketing ability and to enable them to acquire export capabilities. SSI units which have proven record of past performance are eligible for assistance, if they: - Have been in operation for a period of at least two years. - Have earned profit and/or declared dividend during the proceeding two financial years. - Not be in default to institutions/banks in payment of their dues.

Purpose Expenses on consultancy, documentation, audit, certification fees, equipments and calibrating instruments required would be taken in to for determining the loan requirement.

Period of Repayment normally not exceeding 5 years including moratorium upto one year. VIII.SCHEME FOR FINANCIAL ASSISTANCE FOR COMMERCIAL COMPLEXES, SHOW ROOMS AND SALES OUTLETS Objective To provide financial assistance for construction of commercial complexes, showrooms and sales outlets independent of hotel business.

Eligible Activities Construction of Commercial complexes, showroom(s) & sales outlets providing infrastructure facilities like Electricity, Water, Sanitary ware, Telephones, Internet, E-Commerce, Lift, Air-conditioners and Cooling, Parking, Storage etc.

35

Amount of Loan Amount of loan would be need based within the normal financing ceiling of the corporation, which is presently up to Rs. 2000.00 Lac.

Promoter's Contribution Minimum 40% of the project cost Rate of Interest As applicable from time to time Other and conditions 1. The commercial complex, show-room/sales outlets must be established at prime location/main market centers. 2. Map of commercial complexes etc. shall be got approved from the local authority as per norms. 3. The commercial complexes after construction may be disposed of/leased out in part. However, at least 25% of the area of the complex is to be retained by the borrower with clear demarcation and it would neither be disposed of nor shall be leased out. The borrower may, however, carry out any of his commercial activity in such retained area. The area, retained, as such shall be in addition to the common facilities. The retained area should have easy and proper access to the common facilities like lift, stair cases, utilities etc. the borrower may, retain more than 25% area of the complex, if he so desires and found it viable. NOTE: In case the borrower intends to carry any commercial activity in the retained area like setting up of Cyber cafe, Photostat Machine, STD/ISD/PCO, Restaurants etc. which are eligible for financing as per norms of the Corporation, the same may also be considered for financing in the respective scheme. 4. In case of leasing out of any part of the commercial complex, the same will be leased out with the condition that the lease/tenant will directly deposit the rent/lease money with the Rajasthan Financial Corporation as

36

and when the rent/lease money is demanded by Rajasthan Financial Corporation. 5. In case of selling out any area of commercial complex the loaner/borrowers who are regular in meeting their obligation shall require to deposit the amount equal to the average rate of construction per Sq. Ft. considered in the project/scheme appropriating investment proposed to be made in the common facilities, plant and machinery and MFA etc. IX.SCHEME FOR FINANCIAL ASSISTANCE FOR INFORMATION TECHNOLOGY Objective To promote all type of projects/activities related to Information Technology. However, Educational/Training Institutes shall be outside the purview. Eligible Activities a) All activities related to Information Technology Sector including Cyber Cafe, Internet, E-commerce, Software development etc. except that of the Educational/Training Institutes (School/colleges etc. ) Software Development may be off shore packages. Off shore services to cater the export sector. The activities like Data Processing, Consultancy, Turnkey projects, Product & Package etc. and also any other activity related to this sector may be considered on their merits. b) Assistance may also be given under the scheme for development of infrastructure related to the Information Technology.

Promoter's Contribution Minimum 40% of the project cost Repayment for Loan The amount shall be repayable within 6 years including moratorium period of 12 months. Margin of Security 30% - Land and Building

37

- Plant & Machinery i.e. Hardware, Software and 40% other equipments - Registration fee 50% Rate of Interest As applicable from time to time under the Scheme . Collateral Security Collateral Security against plant and machinery (hardware & software) and also against fee etc. shall be required. X.SCHEME FOR FINANCING TO MINING EQUIPMENT/INDUSTRY Objective To provide adequate loans to mine owners for faster and better development of mineral properties. Eligibility a) The entrepreneurs, who are having valid mining lease for a sufficient area in the name of the promoters/firm. b) There should be proven mineral reserves of sufficient quantity and acceptable quality in the area where mining lease rights have been obtained. Purpose For purchase of basic mining equipments, handling equipments, complimentary and ancillary equipments. Security Besides primary security by way of hypothecation of plant and equipments, collateral security to the extent of 100% of loan amount and mortgaging of mining lease deed, if any. Promoter's Contribution Not less than 40%. Margin of Security

38

40%. For Mining equipments For civil construction (like woods, drainage, removal of 50% over-burden and quarry improvement etc. ). Interest Rate As applicable from time to time under the scheme.

XI. SCHEME FOR WORKING CAPITAL BRIDGE LOAN Objective To provide Bridge loan facilities to the units to meet out their working capital requirement at the initial stages of production, till such time working capital facilities are made available to it by any bank on regular basis. Eligible Units New/Existing tiny and small scale units, which are considered by the Corporation for term loan and whose venture outlay i.e. aggregate cost of project(excluding working capital margin ) and total working capital requirement does not exceed Rs.200.00 Lac. Nature and Amount of Assistance The term loan under this scheme shall be in the form of Bridge loan for a maximum period of one year from the date of implementation of the project/date of disbursement of first installment of bridge loan as within this period, the unit is expected to arrange the working capital facilities from any bank to meet out its regular working capital requirement. The amount of bridge loan would be need based, subject to maximum of 10% of the projected turn over of the first year envisaged in the scheme. However, it would not be more than the quantum of term loan proposed to be extended against the fixed assets.

Promoter's Contribution Minimum 33% of the project cost (including working capital requirement), however, in cases where higher promoter's contribution has been specified, the same would continue to apply.

39

Rate of Interest The rate of interest on working capital bridge loan shall be as applicable from time to time for general term loans. Security i) Primary Security First charge as hypothecation on the current assets. ii) Additional Security First charge on the fixed assets financed by the Corporation. iii) Collateral security to the extent of 150% of the working capital bridge loan. In collateral security besides immovable properties, the securities of NSC/FDRs/IVPs etc. on their face value and not on the maturity value may also be considered. XII. SCHEME FOR DHABA Purpose of Loan a. For purchase of land, renovation/alteration of existing buildings and construction of new buildings few (2-3) rooms for staying. b. For Kitchen equipments & other equipments like Deep Freezer, Utensils, Fans, Coolers, Gas Burners and Furniture etc. Financial Assistance Loan up to Rs.10.00 Lac will be considered. Interest Rate As applicable from time to time. Other Requirements - Land should be converted for hotel purpose. Approval of building plan and NOC from Local Authority are pre-requisite. If land is not converted, financial assistance only for equipment and furniture may be considered

40

against collateral security. No financing in rented premises shall be considered. i) ii)

iii)

Financing upto a term loan amount of Rs. 15.00 lacs may be considered as per existing norms with the condition that marketable and mortgage able collateral security of at least 25% of the loan amount shall be furnished. For the loan amount exceeding Rs. 15.00 lacs, the Corporation may continue to finance as per existing norms with need based marketable and mortgage able collateral security.

XIII. SCHEME FOR ASSETS FINANCING The scheme envisages to provide financial assistance to the businessman/entrepreneurs who are interested to purchase the assets of an existing unit from the prospective seller who is no more interested in running the unit what so ever the reason may be. Eligibility A Company incorporated under Companies Act/A partnership firm/Proprietorship concern will be eligible to avail financial assistance under this scheme. ii) If the main promoter/concern had already availed any financial assistance from any bank/financial institution, should have satisfactory track record of payment. Its s should have been classified as standard assets with the financial institution/Bank. iii) Weight age would be given to the promoter(s) who are already engaged in the same/related industrial/trading activities. (iv) The assets acquired/purchased within a period of 18 months prior to the date of loan application may be considered for financial assistance.

Purpose of Assistance A. For purchase of fixed assets as under:(i) Land : Only industrially converted land or land located in RIICO

41

Industrial Area or land which has been approved by local authorities for commercial purposes. (i) Building: Should be in good condition. (ii) P&M and MFA: Should be in good condition and residual life not less than 10 years. Note: The assets of sick/closed units acquired/to be acquired on cash down basis either from the Corporation or otherwise would also be covered. B. For addition of fixed assets to make the unit viable. C. Working Capital - If the case fulfills the criteria of Single Window Scheme. Amount of Assistance From Rs. 2 lakhs to Rs.2000 lakhs (Rs.2000 lakhs in the cases of Companies and Rs. 800 lakhs in case of proprietorship, firm). Margin (1) 50% on the acceptable value or purchase consideration of assets whichever is less. (2) Usual margin on additional fixed assets as per norms of financing. Moratorium period Since the loan is available against existing assets, the moratorium period shall not exceed to 12 months in any case. Repayment period The repayment period shall be 5 years from the date of expiry of moratorium period. The unit shall furnish 20 post dated payee cheques favoring RFC for repayment of loan in EQI with additional cheques for the interest of moratorium period. Security The requirement of security shall be two times of the financial assistance, the loan shall be secured by the following securities:i)First charge over the fixed assets proposed to be purchased. ii) Personal guarantee of all directors. iii) In case loan required for additional fixed assets/working capital the concern will be required to furnish security/collateral security as per norms of usual financing by the Corporation.

42

Basis for calculation of acceptable value The acceptable value of assets proposed to be financed shall be considered as under:LAND & BUILDING: For determining the value of land and buildings the purchase price as per ed document can be taken into consideration. PLANT & MACHINERY - Written down value or purchasing price/MRV whichever is less. Promoter's Contribution Overall promoter’s contribution shall be over 40% Rate of Interest As applicable from time to time under the scheme. Viability of the project The financing of the assets acquired/proposed to be acquired would be considered only if it is for a part of the project and is found technically feasible and economically viable in of norms and guidelines made applicable under general loan scheme. XIV. SCHEME FOR FINANCIAL ASSISTANCE TO INDUSTRIAL CONCERNS INVOLVED IN COMMERCIAL CONSTRUCTION ACTIVITIES FOR DEVELOPMENT OF RESIDENTIAL HOUSES/FLATS/HOUSING COMPLEX OBJECTIVES To provide financial assistance on commercial basis for construction of housing complex and residential houses/flats either independently or part of commercial complex. ELIGIBLE BORROWERS The borrowers may be a concern having constitution as proprietor, a partnership firm, a company, a ed public trust or a ed Cooperative society constituted to run the venture on commercial lines as builders. ELIGIBLE ACTIVITIES Construction of houses, flats, apartments and housing complexes providing basic infrastructure facilities like electricity, water, sanitation, telephones, lift, air conditioners and cooling, parking, storage etc. The financial assistance would be provided for construction activities for the sale on commercial basis.

43

PURPOSE OF LOAN The assistance may be granted to eligible borrowers for: (a) Cost of land. (b) For construction of building for housing complexes/apartments(commercial cum residential complex). (c) For acquisition of required plant and machinery/equipment, like lifts, air conditioning plant and fire fighting equipments, other safety devices and also other plants and equipments required for modern type of housing complexes. (d) Furnishing of houses/flats XV.SCHEME FOR FINANCING AGAINST ASSETS Introduction: In this scheme the Corporation shall provide financial assistance to prospective borrower for meeting their industrial financial requirements provided the prime security is mortgaged to the Corporation under first charge free from all encumbrances. The salient features of the scheme are as under: I. Eligibility Criteria: The following marketable and mortgage able fixed assets are eligible for availing financial assistance under this scheme: (a) Existing industrial units situated in industrial area saturated and having potential ready to mortgage their prime security with the Corporation under first charge. (b) Existing commercial complexes, hotels, nursing homes and other service sector situated in Municipal limit of district headquarters ready to mortgage their mortgage able security with the Corporation. (c) Any other borrowers ready to mortgage their marketable immovable property situated in Municipal limit of district headquarters. (d) CMD is authorized to consider term loan against the immovable property i.e. land and building only (marketable & mortgage able) situated at Municipal limits of the district head quarters of the State other than Rajasthan in deserving cases with the proviso that the fixed assets of unit located in Rajasthan in which such assistance will be utilized shall also be mortgaged/ pledged with the Corporation. (e) Switch over cases financed by banks/ FIs shall also be considered for financial assistance under the Scheme after repayment of outstanding loan of banks/ FIs simultaneously on transfer of title documents to the Corporation.

44

(f) Further term loan assistance to existing assisted running units of the corporation having balance outstanding term loan amount may be considered on the difference of the amount issible under the scheme and the term loan outstanding in existing assisted running units. II. Coverage: (a) Property situated in Municipal limit of each district headquarter. (b) Immovable property (Land and Building) situated in fast moving industrial areas shall also be considered eligible for mortgage finance. III. Security: (a) The security i.e. Land and building shall be under first charge of the Corporation by way of equitable mortgage. (b) Personal guarantee of proprietor/partners/directors for securing repayment of loan and interest thereon. IV. Security Debt Ratio: The minimum security debt ratio of 2:1 shall be maintained. V. Amount of Assistance: Rs. 5.00 lac to Rs. 1000.00 lacs only. In case of residential property loan below Rs. 25.00 lacs shall not be considered. VI. Repayment Period: The total loan shall be repayable in 3 ½ years including 6 months moratorium period. VII. Rate of Interest: The Corporation shall charge prevailing rate of interest as on date of Ist disbursement of loan under the scheme. VIII. Financial assistance is also available against immovable properties which is rented/leased out to Corporate bodies/Banks/Financial Institutions/Insurance Companies.

HOW TO APPLY FOR A LOAN To have financial assistance from a state financial corporation the application has to be made in the prescribed loan from which can be obtained from any of the office of corporation .It may be ascertained as to which loan

45

application form is prescribed for the amount of loan, which is sought from the corporation.

Information to be kept ready For filing up the loan application form the following information is required to be finished: 1) Proposed name of industrial concern: 2) Address and telephone numbers of: • • • •

ed office (in case of corporate bodies only) Head office Factory(proposed & existing) Address for correspondence.

3) Constitution of the loaner: Whether the proprietary/partnership firm/private ltd./public ltd. Company or cooperative society. • Date of incorporation/registration/commencement of business. • Name of business house/group to which the concern belongs & the name of other concerns in same group. 4) Industry • Names of the product manufactured/to be manufactured and their uses. • Details of by products, if any, and their uses. • Whether it is a small-scale industry, if so, details of registration. 5) Management Biodata of the promoter including about name, address ,age, education qualification, past industrial business experience, experience in the particular industry etc.copies of income tax returns of the promoters along with copies of assessment orders for the last 3 years. 6) Is the MRTP act applicable to the co.? if so ,whether necessary clearance obtained from the government.

46

7) Copy of agreement entered into to the almost the promoters. 8) In case of ltd.company, certified copies of memorandum & articles of association, audited balance sheet and profit and loss for the last two years. 9) Tails of proposed production-year wise. 10) Technical know-how arrangements made for the project including guarantee. 11) Name & address of bank with two applicants has dealing. 12) List of shareholders 13) Particulars of the project for which financial assistance is required including whether it relates to expansion,modernizsation,and diversification or for setting up a new plant and specifications of major products, nature of loan required. 14) List of directors/partners along with complete list of concerns with which they are connected as directors, partners, proprietors 15) Details of employment to be given to technical, istrative, supervisory, skilled & unskilled workers. 16) Area of land required and its uses for the factory, building ancillary, open storage space, housing colony, if required. 17) Location importance with reference to proximity to sources of raw materials, market, fuel, water, transport, labour etc. 18) Site plan & map of building. 19) Particulars of indigenous plant & machinery. 20) Brief particulars of manufacturing process. 21) Required of water, fuel, with nature thereof, whether coal, gas, oil etc. Steam and compressed air with sources from which he requirement will be met.

47

22) Arrangement proposed for obtaining the raw materials, names of the suppliers & if any agreement is made with suppliers, copy of same. 23) Details of annual requirement and cost of various raw materials.

Requirements required to be submitted  SSI registration certificate.  Documents regarding land/building authority.  Detailed building cost estimate  Details of promoters  Brief description of manufacturing process  Copy of building plan approved by competent  Particulars of machinery other fixed assets  Copy of sanction for power connection  Raw materials agreement  Copy of sanction for water connection  Distribution agreement  Copy of marketing study(if any)  Projected profitability statement  Projected cash flow statement  Copy of balance sheet & profit and loss  Copy of memorandum &articles of association  NOC from pollution control board

48

 Photography of promoters/partners should be submitted. PROCESS OF GETTING LOAN FROM RFC Constitute the firm/company and get it ed with concerned authority. • Identify/Select the project. • Acquire a piece of land after selecting the site from RIICO or other concerned agency. If the land is agriculture, conversion order for industrial purpose may be obtained from the competent authority. • Prepare project report. • File the application for loan in the prescribed format along with requisite fee and required information/documents as detailed in the application form. The application may be obtained from Branch offices situated throughout Rajasthan, HO at Jaipur, Public Relation Office, Bikaner House, Delhi. • Attend the PC&CC /IPC meeting on receipt of information from the Corporation. This meeting is convened almost every week preferably on Wednesday. • Principle clearance on loan proposal is given within a week’s time during discussions in the PC&CC/IPC. • Detailed appraisal is taken up by the appraisal team quickly after principle clearance of the case from PC&CC/IPC and loan is sanctioned normally within one month’s time. However, Co-operation from the entrepreneur with regard to furnishing the information/documents is expected for quick appraisal. • After appraisal, the case is sanctioned and sanction is conveyed after deposition of service charges. • Comply with the conditions stipulated in the sanction letter and complete the formalities for execution of loan documents. • After execution of loan documents, disbursement of token amount and loan against land is released. • Disbursement of loan would be released in instalments on creation of fixed assets and after ing the investment made; by the Technical Officer of the Corporation. •

Note: The entrepreneur/promoter may personally represent the case or otherwise may authorize any person/consultant to represent the case on behalf of promoter by furnishing power of Attorney in the prescribed format. However, presence of promoter in person is required while discussing important issues and finalising the case in the project clearance and consultative committee (PC&CC) and while executing the documents.

49

LOAN APPLICATION FORMS Form for Loans upto Rs. 2.00 Lakhs

Cost Rs. 50/[To be paid along with filled up form while submitting the Application]

Form for Loans above Rs. 2.00 Lakhs

Cost Rs. 100/[To be paid along with filled up form while submitting the Application]

Form for Short Term Loan to Good Borrowers

Cost Rs. 200/[To be paid along with filled up form while submitting the Application]

Form for Getting Listed In Rs. 1000/RFC Yellow Pages To be paid along with Registration form as fees for enlisting in Yellow Pages

(CHAP. 3) 50

RESEARCH

METHODOLOGY

51

RESEARCH METHODOLOGY

TITLE OF THE STUDY: FINANCIAL ANALYSIS OF RFC Data Collection:Keeping into consideration the requirement the data was collected through both the secondary and primary sources. Secondary Sources:-

a) Internal: - Data was collected from Annual Report official Documents & Various Organizational magazines.

b) External:

- Through personal books, newspaper, magazines and previous reports.

Primary Sources:-

a) Information about Company: - Through regular talks with employer as HRD Department during the orientation period.

b) Data

Collection for the Project: - Through objective based questionnaire, cross talk and observation with the staff member of HRD Department.

Type of Question’s Asked:- The questionnaire consist of open-ended, close ended and dichotomous forms used, how ever most question were closed ended. Type of Language Collection Methods:- English for Manager, Officers and Hindi for workers.

52

Information Collection Methods:- The need for adequate and reliable data as even increasing for making decision in different fields of human activities and Business is no exception. Hence, There are two ways of which information can be collected and they are:(i) (ii)

Census Methods Sampling Methods

Information Collection Methods Used:- In this research study, sampling methods has been used. Types of Sampling Used in the Study:- Simple random sampling has been used where in 5th person in the lift of Manager, Officers, Workers were selected for interviewing.

53

(CHAP. 4)

ANALYSIS AND INTERPRETATION Financial ratio analysis Ratio analysis is a principle technique so far knows to judge the conditions portrayed by the financial statements. It is a multifarious tool for analysis the capital structure. It is used for evaluating and assessing the efficiency and affective ness of a concern in various areas of operation. Ratios are useful as they can be used to summaries briefly relationship and results which are significant to an appreciation of critical business indicators of performance. Ratios are also useful for the purpose of comparing performance from year to year.

A)

Liquidity Ratio: Liquidity or short term solvency ratios measure the companies’ ability to meet the short term obligation as and when they fall due. These ratios reveal the short term solvency of a concern. Current Ratio : Meaning- those ratios reveals the relationships between current assets and current liabilities. Objective- The main object is to measure the ability of a concern to meet its short term obligation and to depict the short term financial soundness of a concern. (54)

Computation: Current Ratio = Current Ratio/Current Liabilities The current ratios for last 4 year are as follows: Year ended on 31 March

Current Ratio Charts Year

Current Assets

Current Liablities

2007

1457346932

1748429677.00 0.83

Current Ratio

54

2008 2009 2010

948989569 1169317014 1450772388

1819551834 2191984717 2349045636

0.52 0.53 0.62

0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0

2007

2008

2009

2010

Year (55)

Quick ratio or Acid test ratio: Meaning- This ratio reveals the relationship between quick assets and liabilities Objectives- The main objective of computing this ratio is to measure the ability of the firm to meet its short term obligation when due without relying upon the realization of stock.

ComputationQuick ratio= Quick Assets/Quick Liabilities Ideal ratio is 1:1 Components:

55

Quick assets are those assets that can be converted into cash with in a short notice without any loss i.e. Quick assets = Current assets-(closing stock + prepaid expenses).

Interpretation: This ratio shows the liquidity position of a firm. Generally a quick ratio is to be 1:1. A concern having a quick ratio of less than `1 may not be meeting its short term obligation in time if it is greater than 1 may be able to meet its short etrm obligation in time. It’s very effective in inventory management. Cash Ratio- Cash ratio shows the cash position of the business. Cash is the most liquid asset. Cash reservoir is constituted of cash at bank. Cash ratio is found by dividing cash reservoir by current liabilities. (56)

Cash ratio = Cash reservoir/current liabilities The cash ratios for last 4 year are as follows-

Cash Ratio Year ended Cash Current Liabilities 31st march Rs.(in lakhs) 2007 2008 2009 2010

958.51 473.51 454.57 748.46

Cash Ratio

1748.43 1819.55 2119.98 2349.04

0.54 0.26 0.21 0.32

56

Cash Ratio Charts 0.6 0.5 0.4 0.3 0.2 0.1 0

2007

2008

2009

2010

Year Since cash is the, most liquid asses a financial analyst may examine the ratio of cash and its equivalent to current liabilities. Here, in RFC this ratio has a decreasing trend and only in year 2008 it is more than 10. And in remaining years it is less than I which indicates that the cash held by RFC is not increasing in the same proportion as its current liabilities. In general, it is not good to have very high cash position. That may keep cash reservoir either idle or low yielding. On the other hand, cash reservoir should not be too low. Too low cash position may create cash crisis and effect day to day operations. The cash position is Maintained according to the requirement by the finance department. (57)

Capital Structure or Leverage Ratios:

57

Leverage or Capital Structure ratios are calculated to judge the long term financial position of the firm. These reveal the funds provided by owners and outsiders. These ratios show how much amount is introduced by the owner in business. Generally these ratios are beneficial to the long term creditors like debenture holders, financial institutions, etc, Leverage ratios are calculated to measure the financial risk and the concerns ability of using debt for the benefit of shareholder. Usually the following ratios are calculated to judge the long term financial solvency of the firm.

(i)

Debt Equity Ratio-

(a) Meaning- This ratio indicates the relationship between long term debts and shareholders fund. (b) Objective- The objective of calculating this ratio is to measure the relative proportion of debt and equity in financing the assets of a firm. (c) Components- There are two components of this ratio which are as under: -: Outsiders fund- This means long term loan (whether secured or unsecured) e.g. debentures, bonds, loans from financial institutions. -: Shareholders fund- Which means equity share plus preference share capital plus reserves and surplus minus fictitious assets. (d) expressed as :

Computation- In the form of formulate this ratio can be Debt Equity Ratio = Outsiders fund/Shareholders fund.

1. Interpretation- A high D/E ratio shows that the claims of creditors are greater then those of owners. A very high ratio is unfavorable from the owner’s point of view. This causes hindrances in the firms operations due to the increasing pressure and interference of creditor in management. A low D/E ratio shoes greater claims of owners than creditors. From the creditors point of view it represents a larger margin of safety since owners equity is treated as margin of safety by creditors. As per the guidelines framed under Capital issues (control) Act 1947. 2:1 D/E ratio norm was suggested. But regarding RFC this ratio is 9.17:1 which is much more then 2 that means leader have contributed more funds then owners. Leaders contribution is 9.17 times of owners contribution so the risk is higher, which is also called financial risk & RFC has high liabilities to pay interest out of profit. 2. Proprietary Ratio this ratio also know as Net Worth to Total Assets Ratio or Share Holder equities ratio.

58

(A) Meaning-this ratio established a relation between net worth and total tangible assets. (B) Computations- this ratio can be expressed as: Proprietary ratio= proprietor fund/total tangible assets Explanation(a) Proprietor fund – equity share capital+ preference share capital+ reserve & surplus-fictitious assets. (b) Total tangible assets-total assets excluding fictitious assets Interpretation- this ratio show that how much capital is introduced by the owner in business. Higher ratio means a sound position of business, because it shows the organization is not run through out side funds which mean less interference and pressure of outsider. 3. Solvency ratio- this ratio is used to measure long term solvency of business. This ratio is beneficial for future investor. This ratio indicates that there are the funds of the company sufficient to meet its total liabilities this ratio examines capital structure of business. Higher solvency ratio is unfavorable to creditors. This ratio is calculated asSolvency ratio= total outsider’s liability/ total tangible assets This ratio in RFC indicates that the funds of the company are sufficient to meet its total liabilities. 4. Total debt ratio- this ratio is computed to know the proportion of interest bearing debt in the capital structure. Total debt ratio= total debt/ capital employed Capital employed equal net assets which consist of fixed assets plus current assets minus current liabilities. Alternatively it is net worth plus total debt. Interpretations:This ratio shows the extent to which debt financing has been used in the business. A high ratio shows that claims of creditor are greater than those of owners. A high debt company is able to borrow funds on very restrictive and creditors.

(c)

Profitability ratio: The main aim of every company is to earn profits because profits are necessary survive and grow over a long period of time. Profit is the ultimate

59

output of a company, and will have no future if it fails to make sufficient profits. (i)Return on Investments: The term return on investment may refer to total assets (at) or net assets (Na): The funds employed in not assets are known as capital employed. Return on investment may be computed by dividing earning before interest and tax edit by either net assets or total assets. ROI (ROTA) =EBIT/TA ROI (RONA) =EBIT/NA If the investment is lower than the cost of borrowing then the corporation may suffer from cash losses. (ii) Return on proprietors’ fundFrom this ratio the net profit and interest are distributed among the shareholders. Common shareholders are entitled to residual profit. The rate of common dividend is not fixed, the earnings may be distributed to them or return. A return on shareholders equity is calculated to see the profitability of owner’s investment. ROE=Profit after taxes/Net worth ROE indicates how well the firm has used the resourced of owners. This ratio is thus of great interest to the present as well as prospective of maximizing the owners welfare. Thus we see that return on equity for RFC is quite low. It is showing a decreasing trend. (iii) Earning per share-Meaning- This ratio determines the earning available to on per equity share -Objective- The objective of determining this ratio is to measure the profitability of the firm on equity shares. -Computation- This ratio is calculated as under: Earning per share= Net Profit after Tax/Number of equity shares

60

31st March

PAT

No. of

EPS

Shares Rs.(in lakhs) 46822495 103532929.00 105354152.00 54943091

2007 2008 2009 2010

6503125 7557148 7897612 7962767

7.2 13.7 13.34 6.9

Earning per Shares Charts 14

12

10

8

6

4

2

0 2007

2008

2009

2010

Year

61

Interpretation- Higher the figure the more earnings per share, i.e., better is the performance and prospects of the company. The increasing trend in EPS increases the possibility of more divided and a bonus share which finally has a favourable effect on the market value of share. EPS of 2006 is better than all other years.

Comparative Statement Analysis

A simply method of tracing periodic changes in the financial performance of a company is to prepare comparative statements. Comparative Financial statements contain items of at least two periods. Aggregate changes (Increase and Decrease) in income statement and balance sheet over period can be indicated by drawing special columns for aggregate amount or percentage. An investigation of the comparative financial statements helps to highlight the significant facts and points the items which need further analysis. The published balance sheets and profit and loss s of ts stock companies in India are presented in two year comparative forms. Some of the companies also report to shareholders condensed comparative statements covering an extended period of years. Comparative balance sheet and profit and loss s of RFC of last two years are as follows:

62

Comparative Profit & Loss A/c Particulars [1] Income:Interest on Loans Other Operating Income Bad Debts Recovered [1] Total [2] Expenditure:Interest and Fin. Charges Personnel & . Exp. Other Expenses Dep. & Amortisation Bad Debts Written Off Rebate Allowed

Rs. In lakhs % of Increase/ Decrease

31st March 2010

31st March 2009

Increase/ Decrease Amount

1169.53 77.13

1991.09 84.42

-821.56 -7.29

-41.26 -8.63

22.41

25.56

-3.15

-12.32

1269.07

2101.07

-832

-39.6

672.97

731.17

-58.2

-7.96

276.78

263.07

13.71

5.21

36.93 3.78 4.99

31.66 6.47 35.9

5.27 -2.69 -30.91

16.64 -41.57 86.1

156.14

920.26

-764.12

-83.03

1068.28

-72.83

-6.82

113.53

3.96

3.49

60

6

54

900

1

1

1.4 0.14

1 0.17

0.4 -0.03

40 -17.65

8.17

54.37

665.48

105.35

-50.41

-47.85

[2] 995.45 Total [3] Profit Before Provision And Taxations [1-2] 117.49 [4] Less :Provision For Bad Debts Provision For Taxation Fridge Benefit Tax Wealth Tax

[4] 62.54

-

0

Total [5] Net Profit [3-4]

54.94

63

Common Size statements Analysis:Relative or proportional changes in the income statement and balance sheet are shown by recording percentage calculated in relation to a common base in special columns. For example, in the case of profit and loss statement total income is assumed to be a common base and all other items are expressed as percentage of total income. Similarly, the balance sheet items are expressed as percentage of funds or total assets. The financial statements prepared in of common base percentage are called common size statements. This kind of analysis is called vertical analysis and it indicates static relationship since relative changes are studied at a specific date. Common size profit and loss and balance sheet of RFC of Current year is follows:

Common-size Balance Sheet As on 31st March, 2010 Particulars

31st March 31st March Increase/ 2010 2009 Decrease Amount

% Of Increase/ Decrease

Liabilities: Share Capital Equity Loan Reserves Bonds & Debentures Borrowings Other Liabilities Provision Total

865.24 392.02 587.02 1381.75 5758.78 1399.97 949.06

815.24 392.02 546.52 1571.75 5547.75 1302.91 889.06

50 0 40.5 -190 211.03 97.06 60

-41.26 0 7.41 -12.09 3.8 7.45 6.75

11333.86

11065.27

268.59

2.43

748.46 10.6 9298.33 34.66 702.31 539.49

454.56 10.6 9296.1 34.81 714.74 554.43

293.9 0 2.23 -0.15 -12.43 -14.94

64.65 0 0.02 -0.43 -1.74 -2.69

11333.86

11065.27

268.59

2.43

Assets: Cash & Bank Investments Loan & Advances Fixed Assets Other Assets Profit & Loss A/c Total

64

BALANCE SHEET Rs. In Lakhs

Liabilities:Share Capital Equity Loan Reserves Bonds & Debentures Borrowings Other Liabilities Provisions

865.24 392.02 587.02 1381.76 5758.77 1399.98 949.07 TOTAL 11333.86

7.63 3.46 5.18 12.19 50.81 12.35 8.38

748.46 10.6 9298.33 34.66 702.31 539.49

6.6 0.09 82.04 0.31 6.2 4.76

11333.86

100

100

Assets:Cash & Bank Investments Loans & Advances Fixed Assets Other Assets Profit & Loss A/c ash

TOTAL

65

Common-size Profit & Loss A/c For the year ended on 31st March, 2010 Rs. In Lakhs

Particulars

Amount

% Of Total

[1] Income:Interest on Loans & Advances Other Operating Income Bad Debts Recovered [1] TOTAL

1169.52 77.13 22.41

92.16 6.08 1.76

1269.07

100

672.97 276.78 36.93 3.77 4.99 156.13

58.44 24.04 3.21 0.33 0.43 13.55

1151.57

100

117.5

100

60 1 1.4 0.14

95.94 1.6 2.24 0.22

62.54

100

54.95

100

[2] Expenditure:Interest And Financial Charges Personnel & .Expenses Other Expenses Depreciations Bad Debts Written Off Rebate Allowed [2] TOTAL [3] Profit Before Prov. & Tax [1-2] [4] Less:Provision For Bad Debts Provision For Taxation Fridge Benefit Tax Wealth Tax [4] TOTAL

[5] Net Profit [3-4]

(CHAP. 5)

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CASE STUDY:RAJASTHAN FINANCIAL CORPORATION (GOOD BORROWER DIVISION) Udyog Bhawan Tilak Marg Jaipur-302005 File No. GBD/GCL-556

Proposal for sanction of limit under Gold Card scheme for Rs. 34.25 lac as under: Fixed Limit Rs. 30.80 lac Floating Limit Rs. 3.45 lac Rs.34.25lac

To M/s Pungalia Marbles (P) Ltd. Chittorghar 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13.

Name of Unit Address Work Address Date of receipt of proposal from BO Amount of Gold Card app. Line of product Year of Commencement of production Date of formation Size of Unit Constitution Name of Promoter Debt Equity Ratio: Existing After availing proposed loan Security Debt Ratio:

M/s Pungalia Marble (P) Ltd. f-30, RIICO Ind. Area, Chittorghar -Do30/may/2008 (reopened) Rs. 40.00 lac Marbles, Slabs & Tiles. 07.03.1997 22.11.1994 SSI17/09/005206/Dt.04.01.1996 Pvt. Ltd. Sh. Nalin Pungalia Sh. Girish Pungalia 0.25:1 0.56:1 1.75:1

67

M/S PUNGALIA MARBLES (P) LTD., CHITTORGARH 1. INTRODUCTION We have received a loan proposal from, Chittorgarh BO for sanction of Gold card limit of Rs. 40.00 lacs to M/s Pungalia Marbles (p) Ltd. Chittorgarh. The branch has forwarded audited copies of B/S and P&L s for the last three years (up to 2006-07). The data sheet indicates that the company is fulfilling all eligibility criteria of the Gold card scheme. Earlier, the company had availed loan of Rs. 37.86 lacs which has been repaid fully. Now, the company has applied for Gold Card loan limit. In view of above we may consider a gold card limit of Rs. 34.25 lacs as issible in favour of M/s Pungalia Marbles (P) Ltd., Chittorgarh having fixed limit of Rs. 30.80 lac and floating limit of Rs. 34.45 lacs. M/s Pungalia (P) Ltd., Chittorgarh is a private limited company and the present directors are: Sh. Nalin Pungalia Sh. Girish Pungalia At the time of sanction of original term loan of Rs. 40 lacs there were two directors namely Sh. Prahalad Pungalia & Shri Nalin Pungalia. Later on Sh. Girish Pugalia was appointed on Board of Directors on 16.8.04 and Sh. Prahalad Pungalia retired on 20.8.04. The BO forwarded loan on 13.3.08 for a Gold Card loan of Rs. 40 lacs however, the share holding of the remaining director Sh. Nalin Pungalia & his family was less then 51% therefore, the case was closed on 25.3.08. Now, the company has submitted revised share holding pattern as on 30.4.08 duly certified CA according to which the share holding of Sh. Nalin Pungalia and his wife is 51% therefore, case is eligible under the Gold Card scheme and the same was reopened on 30.5.08 by the competent authority.

2. ELIGIBILITY CRITERIA: a. The existing debt equity ratio is less then 1.5:1 as per latest audited B/S b. The unit is an operation for last 4 years. c. The of the unit is classified as standard assets in last 3 years before squaring up the . d. The unit has not availed benefit of waiver of penal interest/interest or grant of reschedulement

YES YES YES YES

68

in last 3 financial years. e. Is there is any overdue in sister/associate company and also whether any benefit or waiver of penal interest have been granted during the last 3 years.

YES

3. COMMENTS OF BRANCH ON: a. b. c. d.

Reputation of promoters within the society Integrity Means of promoters Whether any legal proceeding have been initiated

Reputed Satisfactory Adequate No

4. REPAYMENT BEHAVIOUR: The Corporation has considered following loans to the unit: S.No. 1.

Loan Sanctioned Date Amount 24.3.95 40.00 TL Total 40.00

Loan Loan disbursed repaid 37.86.00 37.86.0 0 37.86.00 37.86.0 0

Loan O/s -

Over due -

The company had avail loan amounting to Rs. 37.86 lacs from the corporation and same has been repaid fully. The repayment behavior of the company remained satisfactory and its s was classified as standard assets in last 3 years. Further no benefit by way of waiver of penal interest and re schedulement was consider in last 3 years as informed by BO, in Data Sheet.

69

11)

FINANCIAL PERFORMANCE:

The financial performance of the unit for the last 3 years is as under: (Rs. In lac) 2004-05 2005-06 2006-07 Sales and other income Net profit Cash profit Net worth

110.44 4.47 8.36 47.71

105.78 1.45 5.38 49.16

111.01 3.47 7.76 52.64

The turnover of the company decreased during the year 2005-06 however the same increased in the year 2006-07. The company is earning net as well as cash profits during three preceding years. The net worth of the company has also increased during last three years. 6. SISTER CONCERN: 12)

NA SECURITY:

The calculation of security as sent by BO is as under:

Land Building P&M & MFA Total :

Book Value of fixed assets as on 31.3.2007 0.16 3.54 28.17 31.87

(Rs. In lac) Acceptable Value

MRV 20.90 10.90 28.17 59.97

20.90 10.90 28.17 59.97

SECURITY DEBT RATIO: (Rs. In lac) 59.97

Total Security Existing : Proposed :

Total debt: 34.25

34.25

Security debt ratio: 1.75:1

70

13)

CALCULATION OF ELIGIBLE AMOUNT:

(Lowest of the following) (Rs. In lac)

a. b. c.

d.

e.

On the bases of loan repaid (37.86x1) On the bases of security debt ratio (1.75:1) Less : Outstanding On the basis of cash profit (7.76x5) Less : Outstanding (5 times of cash profit as per PG No.10.4 dt. 20.12.03 as the security debt is less than 2:1) On the basis of debt equity (2:1) Existing Capital 26.10 Maximum Equity Reserve & 26.54 issible Surplus Loan Unsecured (47.38x2) loan (IF) 55.87 108.51 Existing RFC loan - Less : O/s Debt O/s Debt ICICI Bank 16.71 HSFC Bank 7.27 SBH Bank 2.83 Unsecured NIL Loan (IB) 26.81

Loan applied

37.86 34.26 38.80 -

34.26 38.80

217.02

26.81

_____ 190.21

20.00

14)

RATE OF INTEREST:

(i)

The rate of interest on proposed limit shall be fixed rate of interest as applicable under general term loan scheme. Presently, prevailing rate of interest under general term loan scheme is 14.50% as such interest is chargeable @ 14.50% p.a. (ii)The borrower shall also be eligible for rebate for timely repayment as per policy of the Corporation from time to time for the loan sanctioned under the scheme. Presently it is 1% p.a.

71

15)

REPAYMENT PERIOD:

Fixed Limit-

(i)

The fixed limit of loan shall be repayable in 5 year inclusive of 6 months moratorium period in quarterly installment through 18 PDCs of principle amount. The first installment shall fall due on 1st day of month falling immediately after expiry of 6 month from the date of first disbursement. (ii) The Company shall make the payment of interest on 1st day of each quarter i.e. March, June, September, and December separately. Floating limitThe floating limit (if availed) can be repaid in a manner convenient to gold card holder but in any case the repayment of floating limit would be co-terminus with the LDR of fixed limit. However, interest on floating limit shall be paid quarterly i.e. 1st day of March, June, September and December.

11. RECOMANDATIONS: (i)The unit is good borrower of Corporation, having satisfactory repayment behavior, adequate level of security is available and fulfilling eligibility criteria of Gold Card scheme, we may consider Gold Card limit of Rs.34.25 lac in favor of the company. Out of Rs. 34.25 lacs Gold Card limit Rs. 3.25 lacs will be floating limit and Rs. 30.80 lacs will be fixed limit. 16) The file may be transferred to BO, Chittorgarh for documentation and disbursement after sanction. (iii)The Gold Card may be issued in favor of Sh. Nalin Pungalia. 17) The loan may be sanctioned on fixed rate of interest.

72

AND CONDITIONS ATTACHED WITH SANCTION OF GOLD CARD LIMIT TO M/S PUNGALIA MARBLES (P) LTD. CHITTORGARH

1. AMOUNT OF LIMIT:

Rs. 30.80 lac Fixed limit Rs. 3.45 lac Floating limit

2. PURPOSE: The limit granted by Corporation shall be utilized for working capital requirement or creation of fixed assets. 3. DISBUREMENT:

18)

Fixed limit: The fixed limit can be availed within 6month from the date of communication of intention of sanction and disbursement will be availed in maximum three installments. (ii) Floating limit: The floating limit can be availed by the person in whose name the Gold Card would be issued from any of our Branch Office including Delhi Office by surrendering the Gold Card and submitting the request for release in prescribed format 4. REPAYMENT PERIOD: (i) Fixed limit: The fixed limit of loan shall be repayable in 5 year inclusive of 6 months moratorium period in quarterly installment through 18 PDCs of principle amount. The first installment shall fall due on 1st day of month falling immediately after expiry of 6 month from the date of first disbursement. The unit may take prepayment without attracting of interest on 1st day of each quarter i.e. March, June, September and December separately.

(ii)Floating limit:

73

Gold Card holder but in any case the repayment of floating limit would be co-terminus with the LDR of fixed limit. However, interest on floating Limit shall be made on 1st day of each quarter i.e. March, June, September and December

5. SECURITY: (i) (ii) (iii)

The Gold Card limit shall be secured by extension of first charge on all the exiting/future fixed assets situated at F-30, RICCO inds, Area, Chittorgarh. Personal guarantee of all the directors for repayment of loan & interest thereon. Any other security kept in past shall continue to be under the charge of Corporation for repayment of proposed loan.

6. RATE OF INTEREST: (i)

The rate of interest on proposed limit shall be fixed rate of interest as applicable under general term loan scheme. Presently, prevailing rate of interest under general loan scheme is 14.50% as such interest is chargeable @ 14.50% The Borrower shall be eligible @ for rebate for timely repayment as per policy of the Corporation from time to time for the loan sanctioned under the scheme. Presently it is 1.00% p.a.

(ii)

7. LIQUIDATED DAMAGES: (i) (ii) (iii)

No default in principle & interest shall be allowed. In case of default following action shall be initiated Action u/s 138(b) of NI Act The card, if any, issued to such borrower may stand cancelled. The Corporation shall charge liquidated damages @ 2% p.a. on the amount in default for the period of default from day one.

8. VALIDITY OF SANCTOIN: a) Fixed limit: The sanctioned amount is valid for a period of 6month from the date of communication of intention of sanction. The party can avail sanctioned amount within 6 month. The disbursement will be released in maximum 3 installments. b) Floating Limit: Any time during currency of loan but payable on or before last of repayment of fixed limit.

74

9. INSURANCE: The unit shall cost

keep

insured

its

fixed

assets

10. ANNUAL CARD FEE: Rs. 500 shall be charged an annual card fee every

at

its own

year

11. The company shall not increase debt equity ratio above 2:1 during currency of loan. 12. The company shall maintain minimum security debt ratio 1:75:1 for gold card loan and 1:5:1 for term loan during currency of loan. 13. The Borrower will have the facility of prepayment of gold card limit (principle not due) without any prepayment and withdraw the same at his convenience on deposition of 1% processing charges on the amount so withdrawn from the Corporation maintaining the of Gold Card loan. 14. The promoter/company shall submit its consent to the corporation that during the currency of loan, the corporation may obtain/provide any credit information related to it from/to the credit information Bureau of India Limited.

75

OTHER AND CONDITIONS Generals: 1. The unit shall clear the over dues if any in existing loan and also in loan s of sister/associate concern if any before documents and before each disbursement. 2. That the Corporation shall have a right of physicals inspection of the unit and verification of the stock and fixed assets and may call for any information including books of s as may be required from time to time during currency of loan. 3. The unit shall not appropriate the profits unless it has cleared or made a provision for clearance of over dues that may exist in the corporation’s loan and interest thereon. 4. That the Corporation shall be at liberty to appoint a concurrent auditor to get examined the books of of the borrowing company and company will render all help and produce all books of s as may be required and fees of the chartered ant shall be payable by the firm. 5. Without formal consent of the Corporation, the borrowers will not increase further debts liabilities to be secured by the fixed/current assets of the limit. 6. The interest free unsecured loan if any shall not be withdrawn till the currency of Gold Card limit. 7. There will be no change in constitution/management without prior approval of the Corporation. 8. In case of loss/theft/damage of Gold Card issued by Rajasthan Financial Corporation in favor of proprietor/partner/director of the concern/company, the unit/Gold Card holder be responsible to make good all losses to the Corporation and will indemnify the RFC in respect of all losses or charges incurred by the Corporation due to it. 9. The company shall give undertaking that it shall not undertake any change in management & share holding during currency of loan of the Corporation without prior approval of the Corporation.

76

QUESTIONNAIRE

BRANCH OFFICE: DATED: Study sheet for the Unit assisted by corporation under GB Scheme. 1. Name of the unit and address :2. Type of product :3. Details of loan availed under General Term Loan Scheme:S.NO

Loan Loan Sanctioned Disbursed

Amount O/D

Amount O/S

Amount Repaid

1. 2. 3.

4. Details of Loan sanctioned under Good Borrower Scheme:S.NO

Loan Loan Sanctioned Disbursed

Amount O/D

Amount O/S

Amount Repaid

1. 2. 3.

5. Your comments on the following for sanction & disbursement of loan (please tick)

77

A) Follow up for sanction: limited b) Time period for sanction:

required/not required/required but quiet high / high/ nominal

Disbursement:

quiet high / high/ nominal

Documentation:

quiet high/high/nominal

c) Procedure for sanction:

quiet high / high/ nominal

Disbursement:

quiet high / high/ nominal

Documentation:

quiet high / high/ nominal

D) Behavioral treatment: satisfactory / not satisfactory / good Of officers of RFC During the course of Appraisal /disbursement etc 6) Whether good borrower scheme have been beneficial to the party for improving the overall health & profitability: Not at all / to some extent / to great extent 7) Analysis of turnover & profitability of 3 years Before sanction of Loan under GB scheme

after sanction of Loan under GB scheme

8) The best procedural part of the GB Scheme in your opinion: • About sanction • About documentation • About disbursement 9) The specific clause/provision of scheme, which you think, is not required: • About sanction

78

• About documentation • About disbursement 10) Your comments /opinion about the GB Scheme & any modification or addition if needed to improve the flexibility & operation of the scheme 11) Overall observations of student trainee about: • Good borrower scheme • Good borrowers • Recovery of dues

Signature Name of trainee

79

(CHAP. 6)

CONCLUSIONS Financial Analysis provides the financial position of RFC and success to some extent as it has given recognition to its existing customers & has also motivated the rest of customers to deal with RFC in a better way.

10)

As RFC carries a very lengthy procedure to sanctioning a

Loan. . 2) Some schemes should be prepared & disbursed on the Sanction basis. Because all documentation is not required Again & again. 3) As RFC takes a very long time or has a very lengthy Procedure for checking the Documents who applies for a Loan. 4) Interest rate of RFC is quite high. 5) Rebate on timely payment is low. 6) The details of s not available on time. 7) More relaxation should be there, if required to the concerned Officers & must be given clear guidelines to take proper Decisions. 8) Unnecessary formalities are there. 9) Excess staff is big problem as it increases the cost of Services. 10) More emphasis should be given on recovery of loan, as it

80

Constitute a big share of amount which doesn’t come back & Increase the burden on rests ones.

(CHAP. 7)

RECOMMENDATIONS Following are some suggestions to improve the overall efficiency of the esteemed organization:

1) RFC must be reduced the lengthy procedure of sanctioning a Loan. 2) RFC must be reduced a very lengthy Procedure for checking the documents who applies for a Loan. 3) Interest rate of RFC should be reduced. 4) Rebate on timely payment is should be increased. 5) The details of s should be available on time. 6) More relaxation should be there, if required to the concerned Officers & must be given clear guidelines to take proper Decisions. 7) Unnecessary formalities must be curtailed. 8) Total computerization must be done & all the departments must be interconnected so as to serve better to the customer. 9) Adequate & timely funds should be provided by State Govt. for financial restructuring. 10) Proper Training should be provided to officers working in Different departments as to make them more efficient & Competent.

81

(CHAP. 8)

BIBLIOGRAPHY 1) 53rd Annual Report 2007-08 2) RIICO newsletters 3) RFC newsletters 4) Procedures & Guidelines, RFC 5) Brochures & Literatures of RFC 7) Website: rfconline.org

82

83