Professional Documents
Culture Documents
INTRODUCTION
In a labour abundant and capital scarce country like India, small-scale industries
occupy a significant position in the industrialization of the economy. Most small scale
industries have low capital intensity and high potential for employment generation. It
contributes to the socio-economic goals such as decentralization and dispersal of
manufacturing activities from the metropolitan to the non-metropolitan and rural areas,
reduction of regional economic imbalances within the country and the diffusion of
entrepreneurial skills as well as technology throughout the country.
Finance is a basic requirement for all kinds of business activities. It is the master key
which provides access to all other resources that are employed in the production and
marketing of goods and services. It guides and regulates investment decisions and
expenditure. However, efficient functioning of every business is dependent, not only on
the mere availability of finance, but also in the efficient utilization of finance.
POST LIBERALISATIION
The small scale industries in India have been experiencing a major turnaround in the
post liberalization period with the growth rate hovering at 15% which is much higher
than the large scale industries in the past twelve years, despite constraints like
infrastructure, finance, market trends and technology.
Recently, it has also ventured into servicing activities such as health care, educational,
transport, tourism and hospitality services In the light of the important role that small
scale units play for the development of entrepreneurs and entrepreneurship, it is rightly
referred to as the seedbed of entrepreneurship. Small scale industries have greatly
contributed for the growth of any economy in the world. Presently, the small scale sector
contributes to about 40% GDP of our country.
OPERATIONAL DEFINITION
An industrial undertaking in which the investment in fixed assets in plant and machinery,
whether held on ownership terms or by hire purchase, does not exceed Rs 100 lakhs as on
March 31, 2001 is to be treated as a small scale industrial unit.
accounts for 95% of the countrys factory ownership, contributes nearly 45% of the total
industrial production and exports from this sector accounts for 45% of the total Indian
exports. Apart from direct exports, products of a large number of small scale enterprises
are also exported directly and indirectly through merchant exporters, export houses and
other channels.
In addition to providing direct and indirect employment opportunities, this sector is
engaged in providing technical, commercial training to a large segment of rural and
urban population who either cannot afford to seek higher education on pecuniary
grounds or because they cannot find a berth in a highly competitive employment
situation. It substantially draws its human resources from the weaker sections of the
society and is close enough to rural areas to appreciate and contribute to the needs of this
region. Most importantly it is a belief of entrepreneurial growth and its sustained
development.
Small scale sector plays an active role in providing considerable range of products and
services to the medium and large scale sectors. Over the years the small scale sector has
reasonably mastered the expertise to produce a large range of traditional and nontraditional finished goods in the form of consumables, consumer durables and industrial
products. Besides, the small scale industries have already established impressive records
of performance from the point of view of a progressive quantum of earnings and
introduction of additional product range. This sector isalso the core sector for artistic
products. Creativity and artistic excellence are the hallmark of small scale enterprises.
Financial aspects
Capital investment is small.
The fixed assets form the biggest component of investment.
Most of the funds come from the entrepreneur's savings.
Financial discipline is very weak and rules and regulations are not adhered
The general tendency is to avoid paying taxes.
Due to over dependency on large industries many small units suffer from lack of
workload.
The setting up of the unit and starting of production requires a small gestation period
of only 2 to 6 months and the layout can be designed as per convenience.
It is possible both to save and earn foreign exchange by producing and exporting
Contribution to exports.
Optimization of capital.
Unsuitable location:
Inadequate infrastructure
Poor project planning
Competition from large scale units
Lack of research and development
This policy provided for a strengthened role for this sector by considerably expanding the list
ofproducts reserved for small scale industry. Itsmain objective was thatanything that can be
produced by small and cottage industries must be produced only by them.
Raising the limit of composite loans from Rs. 10 lakhs to Rs. 25 lakhs.
'
12
The dimension of finance has undergone phenomenal transformation during the last few
decades. Until the recent past business finance was considered as an economic activity,
concerned with procurement of funds for business.
Small Scale Industries normally suffer from capital inadequacy, working capital
requirements, capital needs for implementing technological changes, expansion and
diversification besides there is a competition from large scale industries, inability to keep the
cost low, poor marketing opportunity all lead to financial crisis. Hence, there is a need for
financial assistance to be provided to small scale industries.
'
13
INTERNAL
Paid up capital
Ordinary shares
Preference shares
Deferred shares
Forfeited shares
Reserves
Provisions
'
14
EXTERNAL
Sundry creditors.
Miscellaneous.
'
15
'
16
INTRODUCTION
The Karnataka State Financial Corporation is a state level Institution established by the State
Government in 1959 under the State Financial Corporation Act 1951 to mainly to meet the long
term financial needs of small and medium enterprises in the state of Karnataka. It has assisted over
1,69,244 units amounting to nearly Rs 13,811 crores over the last 56 years in the state of
Karnataka.
Today, while the state economy is making rapid strides in the global market, Karnataka State
Financial Corporation is moving in tandem as a pioneering and responsive financial institution, it
is fine tuned to fulfil the plans and aspirations of the entrepreneurs by extending all possible
financial assistance. It has contributed significantly for the growth of small scale sectors, backward
area development and promotion of first generation entrepreneurs. Its achievements in these areas
are unparalleled.
'
17
EVOLUTION
A well-organized financial institution is most essential for the purpose of promoting the
economy of a region. The development banks like SIDBI, IFCI, and ICICI functioning at the
national level provided their assistance mainly for large-scale industries. There was a huge
requirement for financial institutions to assist the small scale, cottage and tiny industries at the
state level. Hence, the central government passed the State Financial Corporation Act in 1951 as
a result of which the Karnataka state financial corporation was established in 1959 for
promoting industrial activities and to develop balanced industrial growth in the state, giving
special attention to small-scale industries
OBJECTIVES
To provide financial assistance in the form of term loans to small scale industries in
Karnataka.
To provide quality financial and related services on a continuous basis.
To continually upgrade its products and services.
To encourage the dispersal of industries in backward areas, to maintain balanced regional
growth of the industries.
To develop data bank on industrial information.
To provide equipment leasing, working capital and assistance to research and development
activities.
To identify the entrepreneurs throughout the state.
To conduct district level industrial seminars.
To conduct special survey for industrial information.
To provide enterprise development programs to women, engineering students, technical,
professional and agriculturists.
MISSION STATEMENT
KSFC is committed to nurture, develop and service the Small and Medium scale sector through
need based products and services.
MANAGEMENT
The management of Karnataka state financial corporation is carried out by the Board of directors
consisting of 12 directors, out of which 4 directors are nominated by the state government, 1 by the
RBI, 2 by the SIDBI, and 4 as per the SFC Act 1951. The Chairman is appointed by the state
government who is assisted by a Managing director and Executive Committee
AREAS OF OPERATION:
Karnataka state financial corporation services the nook and comer of Karnataka with its extensive
network of 7 zonal office, 3 super A grade branch offices, 12 A grade branches and 14 B grade
branch offices with an empowered and decentralized administrative system. It is the only term
lending financial institution in the state of Karnataka with such a widespread network.
The area of operation covers the entire state of Karnataka. It has its branches in all the district
headquarters. The industrial units which are to be established within the state are only eligible for
assistance. The branch officers of the corporation are delegates with powers of sanctioning
disbursement requirements of financial assistance up to Rs.50 lakhs which is handled by the
concerned branch office itself. If the requirement of loan is more than Rs.50 lakh, entrepreneurs
will have to approach the head office.
Foreign Lending.
ACHEIVEMENTS OF KSFC
entrepreneurs.
Introduction of 21 types of loan schemes for extending assistance to all sections of the
society.
FINANCIAL SERVICES
As per the State financial corporation Act, the following activities are eligible for financial
assistance.
Promoted
by
entrepreneurs
belonging
to
scheduled
caste
DOCUMENTS REQUIRED
Bio-Data and net worth of major promoters.
List of share holding pattern.
Location and land details.
List of indigenous plant and machinery.
Profitability statement.
and
scheduled
Hire Purchase.
Hire Purchase Scheme.
Non-Convertible Debentures.
General Scheme.
Factoring Scheme.
Foreign Letter of Credit [FLC] Scheme.
Rental Discounting Scheme.
Insurance.
CHAPTER IV
CONCLUSION
Finance is the lifeblood of any business activity. Small scale industries require credit support
not only for establishing the enterprise and operational requirements but also for
diversification, modernization of facilities, capacity expansion etc. In respect of the small
scale industries, the problem of credit becomes more critical if any episodic event occurs
such as a large order, rejection of consignment, delay in payment etc.
Hence timely financial assistance is a pre-requisite for accelerating the development of small
scale industries. In order to provide financial assistance to the small scale industrialists many
financial institutions have come forward among which Karnataka state financial corporation
has played a significant role by framing its policies in such a way that all the small scale
industrialists who are in need of financial assistance are provided with their requirements.
Therefore, since 56 years of its inception, it has significantly contributed for the growth of
small scale industries and development of backward areas in the state by extending financial
assistance to cottage industries, artisans, scheduled caste and scheduled tribe entrepreneurs
and other economically weaker sections of the society in the state of Karnataka.