Insolvent SFCs stop looking at RBI
RBI GENERAL manager A R Khan said here on Friday that the state financial corporations (SFCs) which are on the road to insolvency must stop looking for any financial support from the Reserve Bank of India (RBI).india Updated: May 27, 2006 01:32 IST
RBI GENERAL manager A R Khan said here on Friday that the state financial corporations (SFCs) which are on the road to insolvency must stop looking for any financial support from the Reserve Bank of India (RBI).
Participating in an interactive session of a seminar on ‘Access to Equity and Credit for SMEs’ organised by the Confederation of Indian Industry (CII), Northern Region at Hotel Taj Residency, Khan commented: “We would recommend the SFCs either to close down if they are unable to compete with the scheduled commercial banks in their lending operations or urge the respective state governments to offer financial assistance for their revival.”
Reacting to Khan’s statement on SFCs, D K Dheer, general manager, Uttar Pradesh Financial Corporation (UPFC), Kanpur, said that a majority of credit offered by the scheduled commercial banks had gone to large industrial houses.
“We must pay attention to the credit needs of the SMEs which generate much massive employment than the plants run by large industrial houses are all automated and need a very few workmen on the controls,” he said.
The RBI should financially support SFCs as they were the only institutions in the country infusing fresh capital into the market through credit offered to the SMEs. “The scheduled commercial banks had been merely shuffling each other’s loan portfolios while making no lending with infusion of fresh capital into their credit operations,” he said.
Harish Gurbux, executive director (Vigilance), Small Industries Development Bank of India (SIDBI) said that the owners of Small and Medium Enterprises (SMEs) could certainly expect loans at a lower rate of interest if they had already acquired a ‘credit rating’ for their establishments. “A time would soon come when credit rating of a firm would become mandatory to apply for term loans with any financial institution in the country,” he said.