INTRODUCTION:

North Eastern Development Finance Corporation Ltd. (NEDFi) was

incorporated under Companies Act, 1956, on August 9, 1995 with its
Registered Office at Guwahati, Assam, for the development of
industries, infrastructure, animal husbandry, agri-horticulture
plantation, medicinal plantation the, sericulture plantation,
aquaculture, poultry and dairy in the North Eastern states of India.

NEDFi has been promoted by All India Financial Institutions - Industrial

Development Bank of India, ICICI Ltd., Industrial Finance Corporation of
India, Small Industries Development Bank of India, Insurance
Companies - Life Insurance Corporation of India, General Insurance
Corporation and its subsidiaries, Investment Company - Unit Trust of
India and Bank - State Bank of India.

OBJECTIVES:
• There is a need to target small and mid size agriculturist, self
employed personnel, entrepreneur; not so much as a measure
of poverty alleviation but as a measure of productivity/efficiency
building mechanism to support the greater goal of overall
development of the region.

• Hence, NEDFi would look towards developing & supporting

NGOs/Voluntary Agencies (VA) with good track record for on-
lending to the "needy" for taking up productive activities. The
program would envisage extending financial assistance to
NGOs/VAs for on-lending to the people for self-employment
projects that generate income, allowing them to care for
themselves and the families.

CRITERIA:

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NEDFi offers a wide varied financial assistance options to finance
viable industrial, infrastructure, agro-horticulture, fishery and animal
husbandry projects in the North East of India.

In order to be eligible for NEDFi financing, a project has to meet a

number of NEDFi criteria:

• The project must be located in the North East of India.

• It must be financially and economically viable.
• It must be technically sound.
• It must benefit the local economy.
• It must be environment friendly and socially sound.

A company or entrepreneur, seeking to establish a new venture or

expand an existing enterprise can approach NEDFi by submitting a
Preliminary Project Proposal. After this initial contact and a preliminary
review, NEDFi may proceed by requesting a Detailed Techno-Economic
Feasibility Report or Business Plan to determine whether or not to
appraise the project.

The proposal can be submitted to NEDFi's Branch Offices nearest to

the project location at the respective states or to NEDFi offices in
Guwahati.

Like other private sector investors and commercial lenders, NEDFi:

• Invests in commercially viable projects.

• Seeks profitable returns.
• Prices its Interest rates with the market.

PURPOSE:

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NEDFi are the impetus for North East’s economic growth. From fueling
industrialization, they nurture entrepreneurial spirit and innovation;
helping create a shared vision. They also help the enterprising woman
turn their dreams to reality .They transform situations into
opportunities. They light the spark that turns into the warming fire of
enterprises

MISSION:
Certified as an ISO 9001:2008 Company, NEDFI aims to be a dynamic
and responsive organization to catalyze the economic growth of the
North East. It assists in efficient capital formation and creation of fixed
assets by identifying, financing and nurturing eco-friendly and
commercially viable industrial, infrastructure, agro-horticulture, allied
agriculture, and fishery and animal husbandry projects in the region.

The realization of mission is achievable on the robust foundation of

team NEDFi competencies. These competencies are the foundation of
culture that is centered on mutual trust and our people’s
entrepreneurship potential.

In keeping with commitment to ethical, social, and environmental

responsibilities, all employees are guided by NEDFi professionalism
that has matured over the years.

Every member of team NEDFI is guided by defined mission giving

collective direction, focus and passion. NEDFI unwavering commitment
is to deliver sustainable value to clients. All activities are driven by
mission that makes the preferred development finance institution of
the Northeast region

GOAL:

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The main objectives pursued by NEDFi as per its Memorandum of
Association are: to carry on and transact the business of providing
credit and other facilities for promotion, expansion and modernization
of industrial enterprises and infrastructure projects in North Eastern
region of India, also carry on and transact business of providing credit
and other facilities for promotion of agri-horticulture plantation,
medicinal plantation, sericulture plantation, aquaculture, poultry, dairy
and animal husbandry development in order to initiate large
involvement of rural population in the economic upsurge of the society
and faster economic growth of different parts of the North Eastern
Region.

OFFICES:
The Registered office of NEDFI is situated at Guwahati. There are
various branches of NEDFI which are situated in AGARTALA, AIZWAL,
TINSUKIA, IMPHAL, ITANAGAR, SHILLONG, SIKKIM, and SILCHAR.
Representative offices at TURA, DHARAMNAGAR, UDAIPUR(TRIPURA)&
various districts of Assam.

PRODUCTS UNDER NEDFI:

Nedfi is a financial institution which lends money to the upcoming

entrepreneurs through various schemes and they are:

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 VARIOUS SCHEMES UNDER NEDFI:

NAME OF PROJECT NATURE INTEREST REPAYME

THE COST OF RATE NT
SCHEME ASSISTAN PERIOD
CE

NEEDS Maximum Quasi Service Maximum

of Rs. 25 Equity charge of 7 years
lakh 1% per (including
annum. moratoriu
m up to 3
years)

WORKING 75% of Term loan PLR + Maximum

CAPITAL the weight 3 years
TERM working age of
LOAN capital risk
requireme
nt

EQUIPMEN Minimum: Rupee AT PLR 3 to 6

T FINANCE Rs.25 Term Loan years
lakh
Maximum:
Rs.10
Crore

JEDS Maximum Maximum A Service USUAL

Rs l0.00 Rs l0.00 charge @ NORMS
lakhs lakhs 1%&.AT
PLR

Should Soft loan: A Service

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WEDS not 25%, charge @ 3 -7 years.
exceed 1%&.AT
Rs. 5.00 Term PLR
lakh loan:
60%.

SNEHH 25 LAKHS COMPOSIT USUAL PRIME

E LOAN NORMS LENDING
RATE

IDEA UPTO 25 COMPOSIT Service

LAKHS E LOAN charge @ 5 to 7
1.00% p.a. years
on the
Soft Loan
& Interest
@ PLR
p.a. on
the Term
Loan

SANCTION AND DISBURSEMENT PROCESS:

The sanction process is divided into two types of
loans: small loan(less than 5 lakhs) and big loans (above 5
lakhs).NEEDS, JEDS, WEDS, SNEHH and other loans upto 25 lakhs are
covered by MSE department and above 25 lakhs are covered by PF
department. The procedure followed by NEDFi in granting loan is:

(Under small loans):

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1. The applicant files an Application Form
2. Information about the applicant is verified
3. Project Appraisal
4. Corporate Credit Committee for sanctioning.

(Under big loans):

1. The applicant files an Application Form along with DPR.

2. Information about the applicant is verified
3. Screening Committee
4. Project Appraisal
5. Corporate Credit Committee or Director’s Committee for
sanctioning.

5. Project Appraisal
6. Final Agreement

After sanctioning, LETTER OF SANCTION is

issued and agreement is signed along with other formalities.

DISBURSEMENT PROCESS:
When the agreement is signed and formalities are completed, the
funds are disbursed to the applicants. Disbursements may be done
either in single or more than one installment, depending on the nature
of the terms and conditions and requirement of the project.

INVESTMENTS:

NEDFI primarily invests its surplus funds in fixed deposits and debt
funds of Mutual Funds. The funds are invested in different debt
markets so as to gain some income. NEDFI invests in various mutual
funds viz. Reliance Mutual Fund, UTI Mutual Fund, etc so as to earn
some extra income over and above its normal income i.e. interest on
loans. NEDFI also invests in Fixed Deposits of various banks based on

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the fund requirements calculated on the basis of ALM (Asset Liability
Management), prepared periodically.

What is a Mutual Fund?

A mutual fund is just the connecting bridge or a financial intermediary
that allows a group of investors to pool their money together with a
predetermined investment objective. The mutual fund will have a fund
manager who is responsible for investing the gathered money into
specific securities (stocks or bonds). When you invest in a mutual fund,
you are buying units or portions of the mutual fund and thus on
investing becomes a shareholder or unit holder of the fund.
Mutual funds are considered as one of the best available investments
as compare to others they are very cost efficient and also easy to
invest in, thus by pooling money together in a mutual fund, investors
can purchase stocks or bonds with much lower trading costs than if
they tried to do it on their own. But the biggest advantage to mutual
funds is diversification, by minimizing risk & maximizing returns.

Diversification
Diversification is nothing but spreading out your money across
available or different types of investments. By choosing to diversify
respective investment holdings reduces risk tremendously up to
certain extent.
The most basic level of diversification is to buy multiple stocks rather
than just one stock. Mutual funds are set up to buy many stocks.
Beyond that, you can diversify even more by purchasing different kinds
of stocks, then adding bonds, then international, and so on. It could
take you weeks to buy all these investments, but if you purchased a
few mutual funds you could be done in a few hours because mutual
funds automatically diversify in a predetermined category of
investments (i.e. - growth companies, emerging or mid size companies,
low-grade corporate bonds, etc).

Growth of the Mutual Fund Industry

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The mutual fund industry in India started in 1963 with the formation of
Unit Trust of India, at the initiative of the Government of India and
Reserve Bank of India. The history of mutual funds in India can be
broadly divided into four distinct phases

First Phase – 1964-87:

Unit Trust of India (UTI) was established on 1963 by an Act of
Parliament. It was set up by the Reserve Bank of India and functioned
under the Regulatory and administrative control of the Reserve Bank of
India. In 1978 UTI was de-linked from the RBI and the Industrial
Development Bank of India (IDBI) took over the regulatory and
administrative control in place of RBI. The first scheme launched by UTI
was Unit Scheme 1964. At the end of 1988 UTI had Rs.6,700 crores of
assets under management.

Second Phase – 1987-1993 (Entry of Public Sector Funds)

1987 marked the entry of non- UTI, public sector mutual funds set up
by public sector banks and Life Insurance Corporation of India (LIC) and
General Insurance Corporation of India (GIC). SBI Mutual Fund was the
first non- UTI Mutual Fund established in June 1987 followed by
Canbank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund
(Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90),
Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual fund
in June 1989 while GIC had set up its mutual fund in December 1990.
At the end of 1993, the mutual fund industry had assets under
management of Rs.47,004 crores.

Third Phase – 1993-2003 (Entry of Private Sector Funds)

With the entry of private sector funds in 1993, a new era started in the
Indian mutual fund industry, giving the Indian investors a wider choice
of fund families. Also, 1993 was the year in which the first Mutual Fund
Regulations came into being, under which all mutual funds, except UTI
were to be registered and governed. The erstwhile Kothari Pioneer
(now merged with Franklin Templeton) was the first private sector
mutual fund registered in July 1993.

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The 1993 SEBI (Mutual Fund) Regulations were substituted by a more
comprehensive and revised Mutual Fund Regulations in 1996. The
industry now functions under the SEBI (Mutual Fund) Regulations 1996.

The number of mutual fund houses went on increasing, with many

foreign mutual funds setting up funds in India and also the industry has
witnessed several mergers and acquisitions. As at the end of January
2003, there were 33 mutual funds with total assets of Rs. 1,21,805
crores. The Unit Trust of India with Rs.44,541 crores of assets under
management was way ahead of other mutual funds.

Fourth Phase – since February 2003

In February 2003, following the repeal of the Unit Trust of India Act
1963 UTI was bifurcated into two separate entities. One is the
Specified Undertaking of the Unit Trust of India with assets under
management of Rs.29,835 crores as at the end of January 2003,
representing broadly, the assets of US 64 scheme, assured return and
certain other schemes. The Specified Undertaking of Unit Trust of India,
functioning under an administrator and under the rules framed by
Government of India and does not come under the purview of the
Mutual Fund Regulations.

The second is the UTI Mutual Fund, sponsored by SBI, PNB, BOB and
LIC. It is registered with SEBI and functions under the Mutual Fund
Regulations. With the bifurcation of the erstwhile UTI which had in
March 2000 more than Rs.76,000 crores of assets under management
and with the setting up of a UTI Mutual Fund, conforming to the SEBI
Mutual Fund Regulations, and with recent mergers taking place among
different private sector funds, the mutual fund industry has entered its
current phase of consolidation and growth.

The graph indicates the growth of assets over the years.

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Working of Mutual Fund

P a g e | 11
Types of Mutual Funds Schemes in India

Wide variety of Mutual Fund Schemes exists to cater to the needs such
as financial position, risk tolerance and return expectations etc. thus
mutual funds has Variety of flavors, Being a collection of many stocks,
an investors can go for picking a mutual fund might be easy. There are
over hundreds of mutual funds scheme to choose from. It is easier to
think of mutual funds in categories, mentioned below.
Overview of existing schemes existed in mutual fund category: BY
STRUCTURE

1. Open - Ended Schemes:

An open-end fund is one that is available for subscription all
through the year. These do not have a fixed maturity. Investors
can conveniently buy and sell units at Net Asset Value ("NAV")
related prices. The key feature of open-end schemes is liquidity.
2. Close - Ended Schemes:
These schemes have a pre-specified maturity period. One can invest
directly in the scheme at the time of the initial issue. Depending on
the structure of the scheme there are two exit options available to
an investor after the initial offer period closes. Investors can
transact (buy or sell) the units of the scheme on the stock
exchanges where they are listed. The market price at the stock

P a g e | 12
 exchanges could vary from the net asset value (NAV) of the scheme
on account of demand and supply situation, expectations of
unitholder and other market factors. Alternatively some close-ended
schemes provide an additional option of selling the units directly to
the Mutual Fund through periodic repurchase at the schemes NAV;
however one cannot buy units and can only sell units during the
liquidity window. SEBI Regulations ensure that at least one of the
two exit routes is provided to the investor.
3. Interval Schemes:
Interval Schemes are that scheme, which combines the features of
open-ended and close-ended schemes. The units may be traded on
the stock exchange or may be open for sale or redemption during
pre-determined intervals at NAV related prices.

The risk return trade-off indicates that if investor is willing to take

higher risk then correspondingly he can expect higher returns and vise
versa if he pertains to lower risk instruments, which would be satisfied

P a g e | 13
by lower returns. For example, if an investors opt for bank FD, which
provide moderate return with minimal risk. But as he moves ahead to
invest in capital protected funds and the profit-bonds that give out
more return which is slightly higher as compared to the bank deposits
but the risk involved also increases in the same proportion.
Thus investors choose mutual funds as their primary means of
investing, as Mutual funds provide professional management,
diversification, convenience and liquidity. That doesn’t mean mutual
fund investments risk free. This is because the money that is pooled in
are not invested only in debts funds which are less riskier but are also
invested in the stock markets which involves a higher risk but can
expect higher returns. Hedge fund involves a very high risk since it is
mostly traded in the derivatives market which is considered very
volatile.

Overview of existing schemes existed in mutual fund category: BY

NATURE

1. Equity fund:
2. These funds invest a maximum part of their corpus into equities
holdings. The structure of the fund may vary different for
different schemes and the fund manager’s outlook on different
stocks. The Equity Funds are sub-classified depending upon their
investment objective, as follows:
3. Diversified Equity Funds
4. Mid-Cap Funds
5. Sector Specific Funds
6. Tax Savings Funds (ELSS)
7. Equity investments are meant for a longer time horizon, thus
Equity funds rank high on the risk-return matrix.

2. Debt funds:

The objective of these Funds is to invest in debt papers. Government

authorities, private companies, banks and financial institutions are
some of the major issuers of debt papers. By investing in debt
instruments, these funds ensure low risk and provide stable income to
the investors. Debt funds are further classified as:

P a g e | 14
Gilt Funds: Invest their corpus in securities issued by Government,
popularly known as Government of India debt papers. These Funds
carry zero Default risk but are associated with Interest Rate risk. These
schemes are safer as they invest in papers backed by Government.
Income Funds: Invest a major portion into various debt instruments
such as bonds, corporate debentures and Government securities.
MIPs: Invests maximum of their total corpus in debt instruments while
they take minimum exposure in equities. It gets benefit of both equity
and debt market. These scheme ranks slightly high on the risk-return
matrix when compared with other debt schemes.

Short Term Plans (STPs): Meant for investment horizon for three to six
months. These funds primarily invest in short term papers like
Certificate of Deposits (CDs) and Commercial Papers (CPs). Some
portion of the corpus is also invested in corporate debentures.
Liquid Funds: Also known as Money Market Schemes, These funds
provides easy liquidity and preservation of capital. These schemes
invest in short-term instruments like Treasury Bills, inter-bank call
money market, CPs and CDs. These funds are meant for short-term
cash management of corporate houses and are meant for an
investment horizon of 1day to 3 months. These schemes rank low on
risk-return matrix and are considered to be the safest amongst all
categories of mutual funds.
3. Balanced funds: As the name suggest they, are a mix of both
equity and debt funds. They invest in both equities and fixed
income securities, which are in line with pre-defined investment
objective of the scheme. These schemes aim to provide investors
with the best of both the worlds. Equity part provides growth and
the debt part provides stability in returns.
Further the mutual funds can be broadly classified on the basis of
investment parameter viz,
Each category of funds is backed by an investment philosophy,
which is pre-defined in the objectives of the fund. The investor
can align his own investment needs with the funds objective and
invest accordingly.

By investment objective:

P a g e | 15
Growth Schemes: Growth Schemes are also known as equity schemes.
The aim of these schemes is to provide capital appreciation over
medium to long term. These schemes normally invest a major part of
their fund in equities and are willing to bear short-term decline in value
for possible future appreciation.

Income Schemes:Income Schemes are also known as debt schemes.

The aim of these schemes is to provide regular and steady income to
investors. These schemes generally invest in fixed income securities
such as bonds and corporate debentures. Capital appreciation in such
schemes may be limited.

Balanced Schemes: Balanced Schemes aim to provide both growth and

income by periodically distributing a part of the income and capital
gains they earn. These schemes invest in both shares and fixed income
securities, in the proportion indicated in their offer documents
(normally 50:50).

Money Market Schemes: Money Market Schemes aim to provide easy

liquidity, preservation of capital and moderate income. These schemes
generally invest in safer, short-term instruments, such as treasury bills,
certificates of deposit, commercial paper and inter-bank call money.

Other schemes
Tax Saving Schemes:
Tax-saving schemes offer tax rebates to the investors under tax laws
prescribed from time to time. Under Sec.88 of the Income Tax Act,
contributions made to any Equity Linked Savings Scheme (ELSS) are
eligible for rebate.
Index Schemes:
Index schemes attempt to replicate the performance of a particular
index such as the BSE Sensex or the NSE 50. The portfolio of these
schemes will consist of only those stocks that constitute the index. The
percentage of each stock to the total holding will be identical to the
stocks index weightage. And hence, the returns from such schemes
would be more or less equivalent to those of the Index.
Sector Specific Schemes:
These are the funds/schemes which invest in the securities of only
those sectors or industries as specified in the offer documents. e.g.

P a g e | 16
Pharmaceuticals, Software, Fast Moving Consumer Goods (FMCG),
Petroleum stocks, etc. The returns in these funds are dependent on the
performance of the respective sectors/industries. While these funds
may give higher returns, they are more risky compared to diversified
funds. Investors need to keep a watch on the performance of those
sectors/industries and must exit at an appropriate time.

Types of returns

There are three ways, where the total returns provided by mutual
funds can be enjoyed by investors:

Income is earned from dividends on stocks and interest on bonds. A

fund pays out nearly all income it receives over the year to fund
owners in the form of a distribution.

If the fund sells securities that have increased in price, the fund has a
capital gain. Most funds also pass on these gains to investors in a
distribution.

If fund holdings increase in price but are not sold by the fund manager,
the fund's shares increase in price. You can then sell your mutual fund
shares for a profit. Funds will also usually give you a choice either to
receive a check for distributions or to reinvest the earnings and get
more shares.

Pros & cons of investing in mutual funds:

For investments in mutual fund, one must keep in mind about the Pros
and cons of investments in mutual fund.

Advantages of Investing Mutual Funds:

1. Professional Management - The basic advantage of funds is that,

they are professional managed, by well qualified professional.
Investors purchase funds because they do not have the time or
the expertise to manage their own portfolio. A mutual fund is
considered to be relatively less expensive way to make and
monitor their investments.

P a g e | 17
 2. 2. Diversification - Purchasing units in a mutual fund instead of
buying individual stocks or bonds, the investors risk is spread out
and minimized up to certain extent. The idea behind
diversification is to invest in a large number of assets so that a
loss in any particular investment is minimized by gains in others.
3. 3. Economies of Scale - Mutual fund buy and sell large amounts of
securities at a time, thus help to reducing transaction costs, and
help to bring down the average cost of the unit for their investors.

4. Liquidity - Just like an individual stock, mutual fund also allows

investors to liquidate their holdings as and when they want.

5. 5. Simplicity - Investments in mutual fund is considered to be

easy, compare to other available instruments in the market, and
the minimum investment is small. Most AMC also have automatic
purchase plans whereby as little as Rs. 2000, where SIP start with
just Rs.50 per month basis

Disadvantages of Investing Mutual Funds:

1. Professional Management- Some funds doesn’t perform in neither

the market, as their management is not dynamic enough to
explore the available opportunity in the market, thus many
investors debate over whether or not the so-called professionals
are any better than mutual fund or investor him self, for picking
up stocks.

2. Costs – The biggest source of AMC income, is generally from the

entry & exit load which they charge from an investors, at the time of
purchase. The mutual fund industries are thus charging extra cost
under layers of jargon.

3. Dilution - Because funds have small holdings across different

companies, high returns from a few investments often don't make
much difference on the overall return. Dilution is also the result of a
successful fund getting too big. When money pours into funds that
have had strong success, the manager often has trouble finding a good
investment for all the new money.

P a g e | 18
4. Taxes - when making decisions about your money, fund managers
don't consider your personal tax situation. For example, when a fund
manager sells a security, a capital-gain tax is triggered, which affects
how profitable the individual is from the sale. It might have been more
advantageous for the individual to defer the capital gains liability.
Investments in Mutual Fund
Mutual Funds over the years have gained immensely in their
popularity. Apart from the many advantages that investing in mutual
funds provide like diversification, professional management, the ease
of investment process has proved to be a major enabling factor.
However, with the introduction of innovative products, the world of
mutual funds nowadays has a lot to offer to its investors. With the
introduction of diverse options, investors needs to choose a mutual
fund that meets his risk acceptance and his risk capacity levels and
has similar investment objectives as the investor.
With the plethora of schemes available in the Indian markets, an
investors needs to evaluate and consider various factors before
making an investment decision. Since not everyone has the time or
inclination to invest and do the analysis himself, the job is best left to a
professional. Since Indian economy is no more a closed market, and
has started integrating with the world markets, external factors which
are complex in nature affect us too. Factors such as an increase in
short-term US interest rates, the hike in crude prices, or any major
happening in Asian market have a deep impact on the Indian stock
market. Although it is not possible for an individual investor to
understand Indian companies and investing in such an environment,
the process can become fairly time consuming. Mutual funds (whose
fund managers are paid to understand these issues and whose Asset
Management Company invests in research) provide an option of
investing without getting lost in the complexities.
Most importantly, mutual funds provide risk diversification:
diversification of a portfolio is amongst the primary tenets of portfolio
structuring, and a necessary one to reduce the level of risk assumed
by the portfolio holder. Most of us are not necessarily well qualified to
apply the theories of portfolio structuring to our holdings and hence
would be better off leaving that to a professional. Mutual funds
represent one such option.
Lastly, Evaluate past performance, look for stability and although past
performance is no guarantee of future performance, it is a useful way

P a g e | 19
to assess how well or badly a fund has performed in comparison to its
stated objectives and peer group. A good way to do this would be to
identify the five best performing funds (within your selected
investment objectives) over various periods, say 3 months, 6 months,
one year, two years and three years. Shortlist funds that appear in the
top 5 in each of these time horizons as they would have thus
demonstrated their ability to be not only good but also, consistent
performers.

An investor can choose the fund on various criteria according to his

investment objective, to name a few:
Thorough analysis of fund performance of schemes over the last few
years managed by the fund house and its consistent return in the
volatile market.
The fund house should be professional, with efficient management and
administration.
The corpus the fund is holding in its scheme over the period of time.
Proper adequacies of disclosures have to seen and also make a note of
any hidden charges carried by them.
The price at which you can enter/exit (i.e. entry load / exit load) the
scheme and its impact on overall return.

Regulatory Authorities

To protect the interest of the investors, SEBI formulates policies and

regulates the mutual funds. It notified regulations in 1993 (fully revised
in 1996) and issues guidelines from time to time. MF either promoted
by public or by private sector entities including one promoted by
foreign entities is governed by these Regulations.

SEBI approved Asset Management Company (AMC) manages the funds

by making investments in various types of securities. Custodian,
registered with SEBI, holds the securities of various schemes of the
fund in its custody.

According to SEBI Regulations, two thirds of the directors of Trustee

Company or board of trustees must be independent.

P a g e | 20
The Association of Mutual Funds in India (AMFI) reassures the investors
in units of mutual funds that the mutual funds function within the strict
regulatory framework. Its objective is to increase public awareness of
the mutual fund industry.
AMFI also is engaged in upgrading professional standards and in
promoting best industry practices in diverse areas such as valuation,
disclosure, transparency etc.

OTHER INSTRUMENTS:

Treasury Bills:
Short-term instruments issued by the Treasury or RBI to mobilize short
term funds for the Govt. They have a tenor like 14 to 364 days & sold
at a discount & redeemed at par on auction basis by GOI. They have nil
credit risk & negligible price risk.

Certificate of Deposits (CD):

These are transferable short term deposits issued by Banks & FIs. It
has a maturity of 91 – 365 days & are issued at a discount & redeemed
at par. They offer higher rate if interest than T Bills & Term deposits.

Commercial Paper (CP):

They are short-term unsecured promissory note issued by financially
strong forms. It has a maturity of 90 – 180 days & are issued at a
discount & redeemed at par.

FIXED DEPOSIT:

P a g e | 21
A fixed deposit is best suited for those investors who want to invest a
lump sum of money at a low risk and are comfortable committing it for
a fixed period of time, and earn a rate of interest on the same

The most unusual characteristic of a fixed deposit is that the funds

cannot be withdrawn for a specified period of time. Individuals,
corporate entities, and even non-profit organizations that wish to set
aside funds and limit their access to the funds for a period of time
often find that fixed deposits are a simple way to accomplish this goal.
As an added benefit, the monies in the account will earn a fixed rate of
interest regardless of any fluctuations in interest rates that apply to
other types of accounts.

However, both these benefits can also turn into disadvantages under
certain circumstances. Because the money cannot be withdrawn until
the duration is complete, the funds cannot be used even in emergency
situations. Changes in the going interest rate may also rise to a point
above and beyond the interest rate applied to existing deposits. This
means account holders are actually earning less interest with fixed
deposits than with other types of loans and accounts.

While the interest rate on fixed deposits cannot be changed, there is

sometimes a way to work around the issue of obtaining use of funds in
an emergency situation. At times, the lending institution where the
fixed deposit is placed may be willing to extend a separate loan to the
account holder, using the fixed account as collateral. While not ideal,
this can at least make it possible to deal with the current financial
crunch.

TAX IMPLICATIONS ON MUTUAL FUNDS:

Like shares of any stock, selling mutual fund shares may cause to
realize a capital gain or loss. It is often a bad idea to buy a mutual fund
just before the distribution date, since part of the investment will be
immediately returned as a taxable distribution, resulting in paying

P a g e | 22
taxes much earlier. Different types of mutual funds attract different
type of taxes and are shown below:

(TAX Rates as applicable for A.Y. 2010-2011)

Tax implication on Dividends:

Individual / HUF Corporate NRI
Equity Schemes Tax Free Tax Free Tax Free
Debt Schemes Tax Free Tax Free Tax Free

Dividend Distribution Tax (as payable by the scheme):

Individual / HUF Corporate NRI

Equity Schemes NIL NIL NIL
Debt Schemes 12.5% + 7.5% 20% + 7.5% 12.5% + 7.5%
(Surcharge) + 3% (Surcharge) + 3% (Surcharge) + 3%
(Education Cess) (Education Cess) (Education Cess)
= 13.841% = 22.145% = 13.841%
Money Market & 25% + 7.5% 25% + 7.5% 25% + 7.5%
Liquid Schemes (Surcharge) + 3% (Surcharge) + 3% (Surcharge) + 3%
(Education Cess) (Education Cess) (Education Cess)
= 27.681% = 27.681% = 27.681%

Capital Gain Taxation:

Long Term Capital Gain (If held for more than 12 months)
Individual / HUF Corporate NRI
Equity Schemes NIL NIL NIL
Debt Schemes 10% without 10% without 10% without
indexation or 20% indexation or 20% indexation or 20%
with indexation with indexation with indexation
(whichever is less) + (whichever is less) + (whichever is less) +
3% (Education Cess) 7.5% (Surcharge) + 3% (Education Cess)
3% (Education Cess)
Without Indexation 10.3005% 11.073% 10.300%
With Indexation 20.60% 22.145% 20.60%

P a g e | 23
 Short Term Capital Gains (Units held for 12 months or less)
Equity Schemes 15%+3%(Cess) 15%+7.5% 15%+3%(Cess)
=15.450% (Surcharge) +3% =15.450%
(Cess)
=16.609%
Debt Schemes 30%+3% (Cess) 30%+7.5% 30%+3% (Cess)
=30.900% (Surcharge)+3% =30.900%
(Cess)
=33.218%

These rates are subject to enactment of the Finance Bill

2010.The rates are for the Financial Year 2010-11.

Tax Deducted at Source (Applicable only to NRI

Investors)
Short term Long term
Equity 15.450% NIL
Debt 30.900% 20.600%#
#after providing for indexation

TAX RATE OF FIXED DEPOSIT:

The current tax rate in Fixed Deposit is 33.99%. The diminishing

popularity of fixed deposits due to constant decrease in fixed deposit
interest rates, got a boost when the Indian government announced in
2006 that, bank fixed deposits booked by an individual/HUF for 5 years
and up to Rs. One Lac or Rs. 100,000/- will be eligible for exemption.
This exemption would be under section 80C of the income tax act
1961, provided the investor makes necessary declarations. This is the
same section where we take exemption for life insurance policies,
Mutual Funds, etc. The fixed deposits which were giving interest rates
up to 14% or more a decade back have recently slump to around 10%.

P a g e | 24
However, as soon as the announcement from income tax department
came, fixed deposit again became the hot cake for the investors.

NEDFI’S INVESTMENT FIGURES:

The investment of NEDFi in the year 2008 was 62.57crores and 47.
9crores in 2009 .The schedule of investment is shown under:

SCHEDULE OF INVESTMENT IN THE YEAR 2008-

2009: (‘000’)
2009 2008
Other Investments:
A. In Fully Paid up Shares-Non Trade
Quoted 20 ,00 20 ,00
Premier Cryogenics Ltd.
Quoted at Cost' (Fair value Rs.61,18/- Not traded
-2008-09)
(2,00,000 shares of Rs. 10/- each)
Unquoted 25, 00 25, 00
Gauhati Neurological Research Centre Ltd
(Unquoted at cost 250000 shares @ 10/- per
share, fair value Rs.42,83/- per share)
Konoklota Mahila Urban Co-Op Bank Ltd 5,00 5,00
(Unquoted at cost 5000 shares @ 100/- per
share, fair value Rs.7,43/-)
Exotic Juices Ltd. 10,00 10,00
(Formerly: Good Samaritan Social Service

P a g e | 25
Association)
(Unquoted at cost 100000 shares @ 10/- per 10,00 10,00
share
Less: Provision for diminution in value of
investments
DSS eContact Ltd. 66,00 66,00
(Unquoted 6, 60,000 Equity Shares of Rs.10/-
each) 66,00 66,00
Less : Provision for diminution in value of
investments
B. In units of Bonds
IDBI Omni Bonds (TEDF) 10,00 10,00,
(100 bonds @ Rs.10.00.000/- per bond, ,00 00
FY 2008-09 Not traded)
IDBI Omni Bonds 2005A 5, 00, 00 5, 00, 00
(50 bonds @ Rs.10,00,000/- per bond,
FY 2008-09 Not traded)
C. In units of Mutual Funds
UTI Mutual Fund - MIS 0 25,00
(250000 units, Value as on 31.03.2008
Rs.38,31/-)
UTI - Floating Rate Fund 0 19,18
(1632.0037 units, Value as on 31.03.2008
Rs.21,27/-)
UTI -Treasury Advantage Fund (Others) 22,42,63 0
(192268.339 units, Value as on 31.03.2009
Rs.22,63,38/-)
UTI G-Sec (STP) 0 25,00
(250000 units, Value as on 31.03.2008
Rs.31,17/-)
UTI-FMP 0 30,00,00
(30000000 units, Value as on 31.03.2008
Rs.30,27,48)
UTI –FMP 0 5,00,00
(5000000 units, Value as on 31.03.2008
Rs.5,14,76)
SBIMF- FMP 0 5,00,00
(500000 units, Value as on 31.03.2008

P a g e | 26
Rs.5,05,55)
SBIMF - Capital Protection Oriented Fund 25, 00 25, 00
(250000 units, Value as on 31.03.2009 Rs.24,50)
UTI Mutual Fund - Bond Fund (TEDF) 52, 42 52, 42
(289283.4832 units, Value as on 31.03.2009
Rs.72,68/-)
UTI Mutual Fund - Capital Protection Fund (TEDF) 50,00 50,00
(500000 units, Value as on 31.03.2009
Rs.55,02/-)
Reliance Mutual Fund - Liquidity Fund 0 5,11,35
(4211241.5071 units, Value as on 31.03.2008
Rs.5,12,10/-)
Reliance Mutual Fund - Money Manager Fund 87,028 0
(Others)
(77581.041 units, Value as on 31.03.2009
Rs.9,25,93/
TOTAL: 47,90,3 62,57,95
2

SOME SUCCESSFUL PROJECTS OF NEDFI-

NAME OF PROMOTERS PROJECT SITE PROJECT TERM

THE PROJECT COST LOAN
(in Rs. (in Rs.
Lakhs) Lakhs)
M/S PRABHAT SAWYAN BARAPANI, 488.00 254.00
SERENITY AND LALPARLIANI SHILLONG
PREMIER ABHIJIT BAROOAH LOKHRA 1005.00 260.0
CRYOGENICS CHARIALI 0

B.N.INDUSTR SANDEEP&BIMAL KALAPAHAR 129.00 75.00

IES PVT.LTD. NAHATA

P a g e | 27
EXCELLENT PRASANTA KALAPAHAR 342.00 134.00
GRAVURE ,SUSANTA&
INDUSTRIES BALRAM
LTD. CHODHURY
PRITHVI PRAMOD KEDIA PALASBARI 589.00 354.00
DAIRY PVT ,ASSAM
LTD.

ANJAYBEE NAYANJYOTI ULUBARI 144.00 86.00

INFOTECH BHATACHARYA
PVT LTD

UPCOMING PROJECTS: (2010)

NAME OF THE PROJECT DEALS IN PROJECT TERM LOAN

COST (in Rs.
(in Rs. Lakhs)
Lakhs)
KIRANSREE SWEETS SWEETS AND 3.00 180 LAKHS
CONFECTIONARI CRORES
ES

GREENWOOD RESORTS RESORT 2.13 150 LAKHS

CRORES
FABRIC PLUS PVT LTD SILK 2.87 175 LAKHS
MANUFACTURIN CRORES

P a g e | 28
 G

ANALYSIS OF PERFORMANCE(in FY 08-09)

NEDFi as a development bank has been able to hold its own and has
made steady and significant Progress:

• Loan outstanding has increased to Rs.425.71 cr. Over previous

year’s level of Rs 330.03 cr., thereby registering a growth of 29%,
• The net worth of the Corporation has grown by 9.6% to Rs.
308.08 cr. from Rs.281.21 cr.
• NEDFi delivered record net profits of Rs. 29.68 cr. in comparison
to previous year’s Rs. 24.34 cr
• Total assets of the Corporation have also increased from Rs.
491.91 cr. to Rs. 608.12 cr. during the financial year 2008-09 with
new highs in most key parameters.
• NEDFI sanctioned to 173 projects , amount touched Rs.266.89 cr.
and disbursements stood at Rs.184.09 cr.
• Total income was at an all-time high of Rs.52.83 cr. as compared
to Rs. 36.58cr in 2007-08
• While the gross NPAs were reduced to 17.42% from the previous
year’s 20.56%, the net NPA Was pegged at 3.73%.

NEDFi over the last 14 years has grown manifold and its cumulative
sanctions as on 31.03.2009 stood at Rs. 1294.31 cr. From an average
lending of Rs. 35 cr. in the initial years, NEDFi has leapfrogged to an
average annual lending of more than Rs. 200 cr. in the past 4 years.
The Corporation is now a dividend paying company. During the last two
years dividend aggregating Rs. 6.00 cr. has been paid and the total
payout with dividend tax has been Rs. 7.02 cr. After enjoying a tax
holiday for ten years, upto 2004- 05, NEDFi has given back to the
exchequer by way of taxes an amount of Rs. 17.89 cr. During the last
two years. (rs.22.87 cr. in four years)

P a g e | 29
 In the period from April 2007 to March 2009 i.e., after the
announcement of NEIIPP-2007, around 140 Nos. of Expression of
Interests (EOIs) and Industrial Entrepreneurs Memorandums (IEMs)
registered in the States of the North East Region indicate a proposed
investment of around Rs.16, 798 cr. Even if only 20% of the aggregate
debt requirement of this proposed investment is targeted, NEDFi fund
requirement in next five years would be about Rs.2000 cr
(as on 08-09)

TOTAL NO. OF PROJECTS 1796

CUMULATIVE
DISBURSEMENTS RS.792.37 CRORES
CUMULATIVE SANCTIONS RS. 1294.31 CRORES

PERFORMANCE HIGHLIGHTS:
Total Sanctions, Disbursements and Number of Projects
Sanctioned (As on March 31, 2009)

STATE 03- 04-05 05-06 06-07 07-08 08-09 GRAND

04 TOTAL

ARUNACHAL 942 762 1593 780 1230 1254 6697

PRADESH

ASSAM 2639 4084 7053 8545 16588 21351 53661

MANIPUR 76 65 50 109 519 540 1418

MEGHALAYA 4607 3458 2874 3122 8510 1994 26679

P a g e | 30
MIZORAM 152 40 102 362 350 88 1208

NAGALAND 102 63 167 258 195 432 1237

SIKKIM 97 358 75 389 159 713 1791

TRIPURA 355 102 1218 307 394 318 3154

TOTAL 8970 8932 13132 13872 27945 26690 95845

Cumulative Scheme-wise sanctions and disbursements (as on March 31, 2009)

P a g e | 31
Cumulative State-wise sanctions and disbursements (as on March 31, 2009)

P a g e | 32
Micro Finance (as on March 31, 2009)

(Amount in Rs.
Lakhs)

P a g e | 33
 FY 07-08 FY 08-09 CUM AS ON
31 MAR 09
Amount Sanctioned 1261.00 1510.00 5073.00
Amount Disbursed 673.00 1229.00 3860.00
No. of Projects 11.00 20.00 373.00
Assisted
No. of Groups/SHG/JLGs 3285.00 3147.00 10177.00
No. of Beneficaries 20868.00 23638.00 83367.00
No. of Women 17056.00 21253.00 60247.00
Beneficaries
No. of SC/ST 6920.00 6825.00 28990.00
Beneficaries

FINANCIAL HIGHLIGHTS:

YEARWISE 2007-08 2008-09 % CHANGE

LOAN OUTSATNDING 33003 42571 29
INTEREST ON LOANS 2304 2995 30
TOTAL INCOME 3658 5283 44
NON INTEREST INCOME 1354 2299 70
PBT 3042 4187 38
PAT 2434 2968 22
NET WORTH 28121 30808 10

P a g e | 34
OPERATING RESULTS 2007- 2008-
2008 2009
Interest income as percentage to average 7.08% 8.43%
working funds

Non-interest income as percentage to 0.96% 2.27%

average working funds

Operating profit as a percentage to average 5.78% 8.48%

working funds

Return on average assets 5.66% 5.78%

Return on average assets (Rs. In Crores) 0.35 0.38

CONCLUSIONS:

P a g e | 35
 NEDFI has so far been investing in risk free instruments,
guarantying reasonable returns vis-à-vis the risk taker. However, the return
can be optimized by investing in both primary as well as secondary debt
market, provided an active treasury is developed. Various banks and
institutions have been able to generate good returns by actively trading in
the debt market through their treasuries. The primary markets are where
investors can get first crack at a new security issuance. The issuing company
or group receives cash proceeds from the sale, which is then used to fund
operations or expand the business. Exchanges have varying levels of
requirements which must be met before a security can be sold. Once the
initial sale is complete, further trading is said to conduct on the secondary
market, which is where the bulk of exchange trading occurs each day.
Primary markets can see increased volatility over secondary markets
because it is difficult to accurately gauge investor demand for a new security
until several days of trading have occurred. Primary markets are facilitated
by underwriting groups, which consist of investment banks that will set a
beginning price range for a given security and then oversee its sale directly
to investors.

THERE ARE FOUR INSTRUMENTS OF PRIMARY MARKET WHERE THE

INVESTORS CAN INVEST THEIR MONEY. THEY ARE:

 COMMERCIAL PAPER
 CERTIFICATE OF DEPOSIT
 TREASURY BILLS
 NON CONVERTIBLE DEBENTURES

COMMERCIAL PAPER:

It is a money market security sold by banks and corporations. NEDFI

can invest in these short-term unsecured promissory notes issued by
corporations and foreign governments for many large, creditworthy
issuers. Commercial paper is a low-cost alternative to bank loans. It is

P a g e | 36
a very safe investment and can be used for inventory purchases or
working capital.
Use of commercial paper can efficiently raise large amounts of funds
quickly and without expensive SEC registration by selling paper, either
directly or through independent dealers, to a large and varied pool of
institutional buyers. Competitive, market-determined yields in notes,
whose maturity and amounts can be tailored to specific needs, can be
earned by investing in commercial paper. The essential qualities of this
type of investment are short-term maturity (typically three to six
months), an automatic or self-liquidating nature, and non-speculative
ness in origin and purpose of use.

The two main methods of issuing commercial paper are selling them
directly to an investor, or selling them to a dealer who then sells them
in the market.

CERTIFICATE OF DEPOSIT:

A certificate of deposit or CD is a time deposit, a financial product commonly offered to

consumers by banks, thrift institutions, and credit unions.

CDs are similar to savings accounts in that they are insured and thus virtually risk-free; they are
"money in the bank" They are different from savings accounts in that the CD has a specific, fixed
term (often three months, six months, or one to five years), and, usually, a fixed interest rate. It is
intended that the CD be held until maturity, at which time the money may be withdrawn together
with the accrued interest. In exchange for keeping the money on deposit for the agreed-on term,
institutions usually grant higher interest rates than they do on accounts from which money may
be withdrawn on demand, although this may not be the case in an inverted yield curve situation.
Fixed rates are common, but some institutions offer CDs with various forms of variable rates. ".

TREASURY BILLS:

P a g e | 37
It is a short-term instruments issued by the Treasury or RBI to mobilize short term funds
for the Govt. They have a tenor like 14 to 364 days & sold at a discount & redeemed at
par on auction basis by GOI. They have nil credit risk & negligible price risk. These are
discounted securities and thus are issued at a discount to face value. The
return to the investor is the difference between the maturity value and issue
price

Benefits of t- bills:

No tax deducted at source

Zero default risk being sovereign paper
Highly liquid money market instrument
Better returns especially in the short term
Transparency
Simplified settlement
High degree of tradability and active secondary market facilitates meeting unplanned fund
requirements.

NON CONVERTIBLE DEBENTURES:

IT is a type of debt instrument that is issued for fixed time period and
in which no part of the debenture is convertible into equity. The face
value of the debenture is redeemed in one installment (a bullet
payment) or in trenches. Normally they can be bought from and sold to
the issuer company. The ones that are not traded on the exchange
come with a put or call option. In case of listed debentures, they can
be traded like equity shares on the exchange. The interest rates have
a direct bearing on the market price of these debentures.

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