RFC

A
PROJECT REPORT
ON
LOAN APPRAISAL
45 Days Summer Project Training With
RAJASTHAN FINANCIAL CORPORATION

Udyog Bhawan, Tilak Marg, Jaipur-302005
2009
Submitted by:
RUPENDRA GUPTA
(MBA SEM. ІІI)
Department of Management Studies

Poornima Institute of Engineering & Technology
ISI-2, RIICO Institutional Area, Sitapura
JAIPUR (RAJASTHAN) 302022.
1
POORNIMA INSTITUTE OF ENGINEERING
& TECHNOLOGY
Certificate
This is to certify that Mr. sandeep Kumar natani, a student of

Poornima institute of engineering & technology has submitted his
report on Loan Appraisal , after successfully completing the summer
practical training at Rajasthan Financial Corporation from 17 June
2010 to 2 august 2010 towards fulfillment of the syllabus requirement
prescribed by Rajasthan Technical University, Kota for MBA Part II
paper.
Amish Dugar
Asst. Dean, Academics, DMS, PGC
2
ACKNOWLEDGEMENT
I acknowledge and express my heartfelt gratitude for the help, guidance, cooperation
and assistance extended to me by different individuals and officials of respective
departments of RFC. This assistance was offered to me in various forms like
dissemination of information: rendering brochures, pamphlets and periodicals, which
proved helpful in completion of the training and also its project report.
I express my heartiest thanks to Shri shi ram las

CMD and Shri Pawan Arora, ED of RFC for granting me an opportunity of
executing summer training at Head Office.
I am thankful to Shri A.Dixit, Shri O.M.Chola ji and Shri Pokharna Ji as they helped
me throughout the training programme and encouraged time to time.
I also thank to all the Managers and the Deputy Managers of various depts, who
helped me in completion of the training.
I also thankful to employees of RFC for cooperation.
A lot of sandeep kumar natani of thanks to Librarian Madam, who allowed us in

library. Thank you very much Mam for your kind support.
Last but not the least I thankful to each and every individual who directly or indirectly
helped me in completion of these 6 weeks Training Programme at RFC.
3
CONTENTS
Table of Contents
Part A
RFC Brief Profile......................................................................................8
 Origin
 Role
 Objectives and functions
 Limitations of study
 Organizational structure
 Various schemes
 Management and administration at RFC
 Various departments
Part B
Project Appraisal...................................................................................45
 An overview
 Detailed appraisal technique
 Modern appraisal technique
recommendations………………………………….. …………………58
Bibliography............................................................................................59
4
EXECUTIVE SUMMARY
The Rajasthan Financial Corporation (RFC) is a state level term lending financial
institution. It was founded under the SFC Act 1951and it came in to the existence on
April 8th 1995 Its main aim is to provide long term financial assistance for setting up
industrial unit in the state at concession rate of interest with special emphasis on small
and medium scale industries. RFC plays a critical role in the Industrialization of the
state through the small and tiny sectors and also assist in development of economy by
reducing the quantum of unemployment and thus the standard of living.
RFC provides loans to Industrial Concerns for the purpose of purchase of Industrial
land, construction of factory building and acquisition of plants and machinery.
Working Capital Bridge Loan is also provided by the corporation. Various schemes
under which RFC provides loan to the industries are-
• Normal term loan scheme
• Special Scheme for Specified Entrepreneur
• Special Scheme for Specified Industries like Loan for Hospital/Nursing
Homes, Loans for Mining Activity, Loan for Show-room and Marketing of
SSI products
• Loans for Transport Vehicles Loans for Commercial Complexes, Show
Rooms & Sales Outlets Loans for Commercial Construction of
Residential Houses/Flats/Housing Complex and many more. Rfc also had
special schemes for good borrower of the corporation.
Project appraisal
Project appraisal is basically an art. Although the extent of depth of appraisal

depends very much upon the size of the project, the basic parameters of
appraisal remain more or less the same. A project is appraised from different
angles namely technical, financial, commercial, economical, managerial and
social. Besides promoter’s background resources and credibility are also
looked into.
Project appraisal at R.F.C follows followings procedures:
To ensure prima-facie
 It is very important for appraising officials to ensure that the case is

eligible for financial assistance and he is required to segregate the non
eligible projects.
Once it has been decided that prima facie the project is eligible for the calculation of
financial assistance from RFC, detailed project appraisal is taken up which can be
classified as follows.
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 Management and organization setup
Usually some of the methods are employed in assessment of managerial attributes like
personnel interview, past performance, confidential records
 Technical feasibility
The technical aspects of a project involve:
• Suitability of location and pollution control.

• Adequacy of land and building.
• Capacity and usefulness of plant and machinery
• Feasibility of technical process
• Arrangement of technical know-how
• Availability of raw materials and other utilities
• Availability of power
 Cost of project
The aim in accessing the cost of project is to ascertain the reasonableness of the
cost estimates and to see that no item which had to be included in the project as a
result of technical appraisal and economic assessment has been left out and no
item which is not required has been included.
 Sources of finance
It includes two sources:
Loans/ debts
Capital and other accruals called equity
It is debt equity ratio which places limits on the sources within above categories
particularly with regard to raising of loans
 Market and scope

 Cost of production and profitability
 Socio economic viability
Nowadays some modern techniques also used for the process of appraisal which
includes:
Payback period method
Average rate of return
Net present value method (NPV)
Internal rate of return (IRR)
So basically that is how the process of appraisal takes place in the RFC.
6
Research Methodology
Title of the Study:

Loan Appraisal
Duration of the Project:

42 days (17june-2august)
Objective of Study:
Objective of this report is to know
• The procedure of appraisal of loan, terms and conditions regarding loan
appraisal.
• The project aims data making and depth study of defaults and the project
appraisal process at RFC
Type of research:
Method I am adopting to accomplish this research is Descriptive.
Scope of study:
Limitation of Study:
• Completely based on secondary data and it may contradict other analyst’s

opinion or so.
• No direct access to company data.
• Time constraint
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RAJASTHAN FINANCIAL CORPORATION A PROFILE
Origin
The Rajasthan Financial Corporation (RFC) is a state level term lending financial
institution. It was founded under the SFC Act 1951and it came in to the existence on
April 8th 1995, as a state development bank under the chairmanship of Shri R.A.
Poddar, Shri B.L. Bhargava, who was its first MD. Its main aim is to provide long
term financial assistance for setting up industrial unit in the state at concession rate of
interest with special emphasis on small and medium scale industries.
ROLE
RFC plays a secretica of that value o critical role in the Industrialization of the state
through the small and tiny sectors and also assist in development of economy by
reducing the quantum of unemployment and thus the standard of living.
The assistance varies from rustic craft man and artisan, ex-service man and first
generation entrepreneurs to professional’s doctors and engineers, large number of
industrial unit as well as in the already established business in small and medium
sectors.
The corporation can consider assistance up-to Rs 20 crores in the case of companies
and co-operative societies.
A major function of financial institutions, whether short-term or long term, is to

provide the maximum financial convenience to the public. This can be done in the
three ways:
1. Promotion of the overall savings in the economy by a deepening &
widening of the financial structure.
2. Purveying the existing savings in a more efficient manner so that those in
greater need, from the social & economic points of view get priority in
allotment.
3. Monetary financial institution assist by creating credit & deposit money &
facilitating transactions in trade, production & distribution in the economy.
OBJECTIVES AND FUNCTIONS

RFC is authorized to carry on and agreement as may be agreed upon:
1. Loan raised by industrial concerns, which are repayable in a period not
exceeding 20 year and floated in the public market.
2. Loans raised by industrial concerns from scheduled banks to state co-operative
banks.
3. Guaranteeing on such terms and conditions as may be agreed upon deferred
payment due from any industrial concern is connection with its purchase of
capital goods within India.
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4. Understanding of the issues of stocks, shares, bonds and debentures issued by
industrial concerns transferring for consideration any instrument relating to
loan and advances granted by it to industrial concerns.
5. Acting as an agent of the state Govt. or the central Govt. or the development
banks or the industrial finance corporation of India for capital investment
subsidy and interest free state tax loan or any other matter connected with or
arising out of grant of loans or advances to an industrial concerns.
6. Receiving in consideration of services mentioned in the preceding clauses
such commission may be agreed upon.
7. Granting loan or advances to subscribe to debentures of an concerns,
repayable within a period not exceeding 20 years from the date on which they
are granted or subscribed to.
8. Subscription to the stock, share, bonds or debentures of a concern out of the
funds representing the capital subscribed in accordance with the provision of
section 4.
9. Doing all such acts as may be incidental for consequential upon the exercise of
its powers or the discharge under this act.
Capital Structure
The authorized capital of the corporation is contributed by the state Govt. 40%,
IDBI
RFC is authorized to carry on and transact any of the following kinds of business do
achieve the objective of RFC:-w
(a) Guaranteeing on such terms and agreements as may be agreed upon:-
(1) According the act of the value of it \Loan raised the industrial
concerns, which are repayable in a period not exceeding 20 years
and floated in the public market.
(2) Loan raised by industrial concerns from scheduled banks so the

state co-operative Banks.
(3) Guaranteeing on such terms and conditions as may be agreed upon,

deferred payment due from any industrial concern in connection
with its purchase of capital goods within India.
(b) Under writing of the issued of stocks, shares, bonds and debentures issued by
industrial concerns transferring for considering any instrument relating to loan
and advances granted by it to industrial concerns.
(c) Acting as an agent if the state Govt. or central Govt. or the development banks
or the Industrial Finance Corporation of India for capital investment subsidy
and interest free state tax loan or any other matter connected with or arising
out of the grant of loans or advances so an industrial concern.
9
(d) Receiving in consideration of the services mentioned in the proceeding
clauses, such commission as may be agreed upon.
(e) Granting loans or advances to subscribe to debentures of a concern, repayable

within a period not exceeding 20 years from the date on which they are
granted or subscribe to.
(f) Subscription to the stock, shares, bonds or debentures of an concerns out of

the funds representing the capital subscribed in accordance with the provision
of section 4A.
(g) Doing all such acts as may be incidental so or consequential upon the exercise
of its powers or the discharge of its duties under this Act.
The Corporation also underwrites shares and provides seed capital assistance.
Besides it also functions as an agent of Central & State Government with regard to the
implementation of its schemes of concessions/facilities to industries.
RFC generally provides term loan for setting up industrial units. Under:
I. The Single Window Scheme, Working Capital finance is also considered in
specified cases. RFC also does consortium. Borrowers scheme for short term
assistance &
II. Working Capital term loan to good borrowers was introduced and has
attracted a very favorable response. During their operation since the last
quarter of 2000-2001
Other steps include a direction to ensure disbursement within 24 hours of

completion of valuation and sanction of loans as far as possible within a month of
registration of loan application.
The Corporation has formulated a new policy in 1995-96 for assisting units
having difficulties, but not falling, within RBI Parameters of sickness. The idea was
that assistance at the stage of recipient sickness would be less costly & more likely to
be successful than attempts at revival after a unit has become sick. Even more
important loaning for the purchases of minimizing sickness & creation of non-
performing assets.
Limitations of the study:
Although the project aims data making and depth study of defaults and the project
appraisal process at RFC but there are some practical limitations regarding the
methodology followed & the overall procedure these can be summed up under the
following points-
1 No direct access to company data.

2 Analysis of the single aspect of the appraisal process can be a project so I
might not discuss the every aspect of the appraisal process in detail.
3 Time constraint
4 Lack of expertise in the required area
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5 The circumstances vary with project to project so methodology discussed
and suggested by me may not be the only to appraise the project.
6 The forecasting methods are also not completely reliable as the past trend
may not continue.
OUR SCHEMES AT A GLANCE
Rajasthan Financial Corporation (RFC) was constituted in the year 1955

under the SFCs Act, 1951 with the prime object to extend long term financial
assistance to tiny, small and medium scale industrial units in the state. RFC has come
a long way, adapting and attuning its activities to the changing industrial needs and
demands.
HIGHLIGHTS:
1. Financial assistance ranging from Rs. 20000 to Rs. 200
d
2. Joint project with other FIs, commercial Banks and RIICO.
PURPOSE OF LOAN:
RFC provides loans to Industrial Concerns for the purpose of purchase of Industrial
land, construction of factory building and acquisition of plants and machinery.
Working Capital Bridge Loan is also provided by the corporation.
LOAN LIMIT:
- Proprietary and Partnership units/trusts Up to Rs 8 Crore

- Companies and Co-operative Societies Up to Rs 20 Crore
- Net worth Rs 30 Crore
IMPORTANT PARAMETERS:
* Promoter’s Contribution Min. 33% of the Project Cost

* Debt Equity Ratio Not more than 2:1
* Security Margin
A In General
B On fabricated items, dies &
Moulds, furnace, furniture & fixtures
(In Hotel and Hospital Loan cases) 50%
* Debt Service Coverage Ratio (DSCR) Not less than 1.7:1
INTEREST STRUCTURE:
As applicable from time to time.
PAYMENT PERIOD:
Normally 7-8 years, including moratorium period of 12 to 18 months depending upon
the cash generation of the individual project. Quarterly principle installments are fixed
11
usually after a gestation period of 12-18 months and the interest falls due quarterly on
the first day of every quarter.
LOAN SCHEMES:
A Normal Term Loan Scheme:
The term loan is extended for fixed assets up to Rs 20 Crore for any eligible industrial
activity as defined under SFCs Act.
B Special Scheme for Specified Entrepreneur
1. Assistance to qualified professionals

Assistance under the scheme is extended to qualified professionals in the field of
management, accountancy, medicines, architecture, engineering and law etc. for
setting up their professional practices/consultancy venture for the first time the
maximum cost of the project not exceeding Rs 20 lacks.
2. SEMFEX Scheme for Ex-Servicemen

Soft loan assistance is made available to ex-servicemen on one time basis for projects
not exceeding Rs 15 lacks, including for transport and other eligible service industry,
tourism related activities.
3 Mahila Udhyam Nidhi Scheme

Financial assistance up to Rs 10 lacks is provided for projects in tiny and small scale
sectors, service enterprises (except as route transport operators) promoted and
managed by women entrepreneur having minimum promoters share of 51% financial
assistance to reduce promoters contribution (10% of the project cost) with seed capital
assistance is also granted under the scheme.
4 Assistance to SC/ST entrepreneurs

Financial assistance up to Rs 5 lacks is provided to SC/ST entrepreneurs on liberal
and
Concessional terms for fixed assets, transport, vehicles and construction of hotels etc.,
subject to the applicant producing a certificate of caste from a Tehsildar or First Class
Magistrate.
5 Schemes for Assets Financing

Financial assistance is available for the purchase of the assets of an existing unit for
the prospected sellers who is no more interested to run the unit. The assets
acquired/purchased within a period of 18 months prior to the date of loans
applications may be considered for financial assistance. The assets of sick/closed
units, acquired/ to be acquired on cash down basis either from the corporation of
otherwise would also be covered under the scheme.
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6 Fast Track Loan Scheme
This scheme is for such borrowers who are agreeable to provide collateral security for
the term loan for fixed assets in addition to the security/collateral security otherwise
required as part of specific scheme/existing guidelines.
7 Scheme For Financial Against Assets (Long Term)

Loan from Rs 15 lack to Rs 1000 lack is provided for meeting the industrial financial
requirements against the prime security (Land and Building) of existing industrial
units situated in specified industrial area or any existing commercial complex, Hotel,
Nursing Home, other service sector units/marketable immovable property located
within the municipal limits of any district head quarters. (In deserving case Loan from
Rs 5 lack to 15 lack also be considered)
8 Schemes for Financing against Assets (Short Term)

To cater the short term requirements of entrepreneurs for industrial
commercial/service purpose a short term loan scheme has been introduced vide which
loans amounting to Rs 50 lack and up to Rs 1000 lack are sectioned, repayable in 3
years (including 6 months moratorium period) specified saturated industrial area.
Commercial building situated within municipal limits of district headquarters and land
allotted by govt. authorities, JDA, UIT at prime location in municipal area of the
cities of Jaipur, Jodhpur, Bikaner, Kota, Ajmer, Udaipur for construction of
commercial/residential purpose on commercial basis also eligible
commercial/residential purpose on commercial basis are also eligible under the
scheme.
9 Schemes for Financing Builders/commercial/residential complexes/multiplexes,

Hotels, Hospitals etc. for purchase of land and building.
To fulfill the immediate financial requirements of the entrepreneurs for purchase of
land, building form govt. authorities/private parties for construction of
commercial/residential complexes/multiplexes, Hotels (tourism related activities),
hospital, nursing homes etc. the amount of assistance under the schemes can be
considered ranging from Rs 50 lack to Rs 1000 lack.
C Special Scheme for Specified Industries
1 Loan for Hospital/Nursing Homes

Loan for Hospital/Nursing homes providing facilities for allopathic treatment and
diagnosis to indoor as well as outdoors patients are provided.
2 Loans for Mining Activity

Financial assistance is available for development of mines/mining industry in the
State. Mineral(s) proposed to be mined should be commercially exploitable and
marketable, having reserve of sufficient quantity.
3 Loan for Show-room and Marketing of SSI products

Financial assistance is available for setting up the new sales outlet and/or
renovations/expansion of sales outlets of existing concern for marketing
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predominantly the products of small, cottage and village industries. Assistance under
the scheme is also provided for marketing research, R&D related activities,
advertising, sales promotion, distribution network, development of marketing
infrastructure, etc.
4 Loans for Transport Vehicles

- For General Transport Facilities
Loan under this scheme is granted up to 70% of cost of vehicle, for acquiring
maximum up to 20 vehicles, subject to the loanee furnishing collateral security
equivalent to the loan amount and personal guarantee of one person.
-For Transport Facilities to Educational Institutes
Financial assistance is also provided to schools/educational institutes and also to
individuals for acquisition of transport vehicles for specific purposes, provided the
vehicle is registered as public carrier and the schools/educational institution is
recognized/registered with the deptt of education, Govt. of Rajasthan with a minimum
strength of 250 students.
-Others
Loan is also granted to contractors for purchases of vehicles, equipments required for
development, repairing, maintenance and construction of roads.
5. Loans for Tourism Related Activities

Tourism related activities, including hotels, motels, midways, guesthouses, heritage
hotels, dhabas, amusement parks, paying guest accommodations, drive-in-cinema and
multiplex etc. are eligible for availing loan on liberal terms.
6. Technology Up-gradation Funds (RTUF) Schemes

Financial assistance is also provided to textile, jute and cotton ginning & pressing
units for taking up technology up-gradation and modernization of their production
facilities (at an interest incentives of 5%).
7. Loan for Information Technology

Loan under the scheme is granted for all activities to the information technology
sectors, including cyber café, e-commerce facility such as software (may also include
off shores packages/services for export purpose), hardware networking including
telecommunication, portal services, activities like data processing, consultancy, turn-
key projects etc. on merit basis. Assistance is also extended for setting up of
vocational training centers, other than educational/training institutes (school/colleges),
for imparting technical knowledge to the entrepreneur is setting up and running the
unit efficiently.
8 Loans for Commercial Complexes, Show Rooms & Sales Outlets

Financial assistance is provided for construction of commercial complex, showrooms
and sales outlets coming up at prime location/main market centers.
9 Loans for Commercial Construction of Residential Houses/Flats/Housing

Complex
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Financial assistance is provided for commercial contraction activities for the
development of residential houses/flats/housing complexes at prime location of cities,
including those at district headquarters having adequate scopes.
SCHEMES FOR GOOD BORROWERS OF THE CORPORATION

For the past four decades the Rajasthan Financial Corporation (RFC) has been
relentlessly serving the small and medium entrepreneurial section of the state of
Rajasthan and has been instrumental in transforming as essentially agrarian state into
an industrial active one.
Alike a smart marketer assessing and attuning itself to the prevalent market trends,
RFC launched some new loan schemes exclusively in appreciation and
encouragement of its exemplary repayers. Categorized as a Good Borrowers such
loanees of the corporation are given a definite preferential treatment under the
schemes designed specifically for their requirements.
Subject to fulfilling the basic eligibility criteria, RFC does not go into the minute
appraisal of projects promoted by such Good Borrowers. The disbursement procedure
is simplified is above all a rebated unto 2% in the rate of interest is also given on
timely repayment.
The corporation has gone a step further by identifying even the potential Good
Borrowers, covering almost similar criteria’s, under a separate scheme. The highlights
of all the schemes tabulated here in are applicable exclusively for the Good Borrowers
and the term unit where so ever it appears shall imply units promoted by such loanees
only.
In addition, the corporation introduced a scheme to provide working capital term loan
to meet out the gap in their working capital requirement and the available limit. Under
this scheme unit assisted by other financial institution/bank or even self financed units
are considered for financial assistance provided prescribed eligibility criteria are
fulfilled.
D Special Scheme for Specified Purpose

1 Composite Term Loan
Rural artisans and craftsmen and all eligible small industrial activities in the villages
and small towns, having total credit requirements not exceeding of Rs 50000,
(inclusive of working capital) are eligible under the scheme.
2 Single Window Schemes

All SSI/Tiny Units falling within the ceiling specified on cost of project would be
eligible for term loan as well as for working capital. The cost of project (excluding
working capital margin) as well as total working capital requirement at the normal
level of operation should not exceed Rs 200 lack.
15
3 Working Capital Term Loan with facility of Deposits and Withdrawal
through Pass-book.
Working capital term loan is made available up to Rs 200 lack (quantum of WCTL
not exceeding the term loan on fixed assets) under single window scheme, with the
facility of withdrawal and deposit. However, if the loan account is regular, the facility
of replenishment two times before LDR shall also be provided.
4 Equipment refinance scheme
Loan is provided for purchase of plant and machinery/ acquisition of equipments for
the purpose of modernization expansion, balancing, energy saving pollution control
etc. which are directly related to any specific project.
5 Acquisition of ISO 9000/14001 series certification by SSI units
Financial assistance is available for meeting out the expenses incurred on equipment
and consultancy charges for acquiring ISO 9000/14001 series certification by the SSI
units having a good record of past performance and a sound financial position.
6 scheme for working capital bridge loan
New/ existing tiny any ssi units eligible for term loan the corporation can avail bride
for meeting out their working capital requirement until such time the same is made
available to them by the bank on regular basis.
7 Switch over loan scheme
Entrepreneurs who have taken a loan from any other F1 / bank and wish to transfer/
switch-over their account to RFC are also assisted under the scheme on merit basis.
8 DG set loan
For purchase of mew diesel generating sets to all eligible units in order to meet
adequate power requirement.
9 Scheme for financing pollution control equipments
Financial assistance to RFC assisted units is provided for purchase of pollution

control equipments to meet the requirements of pollution control board.
10 Scheme for private bus/ taxi stand
Under this scheme financial assistance is granted to the tour operators and travel
agencies for setting up private bus stand/ taxi stand with all facilities of dining,
accommodation, gifts shop, cyber café, workshop and office etc. with a view to
11 Other schemes
Loan for revival and rehabilitations of sick units
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Loan for restarting of closed units.
PROCEDURAL PARAMETERS
APPLICATION FEE
While accepting the loan application fee as mentioned below is required to be

deposited:
Loan applied for Application fee
-Up to Rs. 25000 Rs. 25
-Composite loan (25000 to 50000) Rs. 75
-Exceeding Rs. 50000 but not exceeding
Rs. 2.00 lack Rs. 200
-Exceeding Rs 2.00 lack but not exceeding Rs.
5.00 lack Rs. 400
- Exceeding Rs 5.00 lack 0.1% for every
lack
Every lack or part
thereof the amount
applied (i.e. Rs.
100 for every lack
or part thereof)
Note: Application fee shall be 50% in the following cases if the loan is sought under
the exclusive specified schemes:
-Mahila Udhayam Nidhi for loans up to Rs 5.00 lack
-Physically disabled persons for loans up to Rs 5.00 lack
-SC/ST Entrepreneurs for loans up to Rs 5.00 lack
Note: Services Tax & Education Cess shall be charged extra as per the norms
prescribed by Govt.
APPLICATIONS: PROCESSED & SANCTIONED

Loan application would be registered with the concerned Branch Office/Head Office
and the loans sanctioned as per the delegated powers:
AUTHORITY AMOUNT
Dy. Manager (In charge) Loans up to Rs.15.00 lack
Branch manager Loans up to Rs 25.00 lack
Dy. Gen. Manager (R) Loans up to Rs.40.00 lack
General Manager (WZ) Jodhpur Loans up to Rs.75.00 lack
General Manager (Loans) Loans up to Rs 75.00 lack
Executive Director Loans up to Rs 150.00 lack
Chairman & Managing Director Loans up to Rs 500.00 lack
Executive Committee Loans up to Rs. 5.00Crore
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And up to Rs. 20.00 Crore
QUICK PRINCIPLE CLEARANCE

From the date of receipt of loan application, principle clearance in 7 days is given,
looking to the merit of the case. Endeavors are made to finally dispose off the
application within a month’s time. However, quick an early disposal also depends
upon the response and co-operative in furnishing the required documents and replying
to queries by the promoter.
ORGANISATIONAL STRUCTURE
RFC is a very big concern. Its Organization and structure relates for the proper
functioning. Hierarchy in RFC is divided into three classes viz. Class A, Class B,
Class C.
HIERARCHY IN RFC
CLASS ‘A’
BOARD OF DIRECTORS
↓
CHAIRMAN AND MANAGING DIRECTOR
↓
EXECUTIVE DIRECTOR
↓
GENERAL MANAGER
↓
DY. GENERAL MANAGER
↓
MANAGER
↓
DEPUTY MANAGER
↓
ASSISTANT MANAGERS/STENOGRAPHER-I
CLASS ‘B’
SR. ASSISTANT/STENOGRAPHER-II
↓
ASSISTANT/STENOTYPIST
↓
JR.ASSISTANT/TYPIST
CLASS ‘C’
ZAMADARS
↓
DRIVERS
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↓
MESSENGERS
MANAGEMENT AND ADMINISTRATION OF RFC
Management of RFC
The general superintendence, direction and management of the affairs and

business of the financial corporation vests in the Board of Directors, with the
assistance of an Executive Committee and a managing director who my exercise all
the powers and discharge all the functions which may be exercised or discharged by
the Financial Corporation.
The supreme authority as far as decision making is concerned, is the Board of

Directors. The corporation acts through the Board. The Board takes major policy
decisions. The board is responsible for effective management of the corporation.
Constitution of Board of Directors
The board is constituted as given below:-
I. Four directors nominated by the State Government of whom one director

shall be a person having special knowledge or experience in the field of
small-scale industries. They include Managing Directors of RIICO Ltd.
Secretary Finance, government of Rajasthan; Secretary Industries,
Government of Rajasthan Chairman and Managing Director of RFC.
II. One Director nominated by the Reserve Bank.
III. Two Directors nominated by the Development Bank of India.
IV. Three Directors elected in the prescribed manner, one of whom shall be
elected to represent scheduled Banks and the third to represent other
Financial Institutions.
V. One director elected in the prescribed manner from among themselves by

the parties who are shareholders of the Corporation.
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VI. A managing director appointed by the State Government in consultation
with and after obtaining the advice of the Development Bank and except in
the case of first appointment also with the board, provided that the
directors other than the Managing Director shall retire at the end of the
first year.
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.
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.
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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
LOAN SECTION
The loan section is virtually responsible for the whole appraisal process. It
registers application for the loans in the prescribed register 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 NKF.
PCC shall consist of:
a) Managing Director
b) Executive Director
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 members 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. Overall technical feasibility and economic size of the

project.
5. Suitability of the location and substitution of the plant

supplier.
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6. Earlier experience of the corporation with similar project.
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 terms 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:
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 promoters are required to get the documents executed within 3 months.
This cell after receipt of loan file issue a letter to the loanee concerned asking
it to submit acceptance of terms 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 loanee 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 ⇒
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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 loanee on the
prescribed format of loan documents. This section also maintains a progress for
making day-today in the register.
Authorized Signatories on behalf of Corporation
Authority in Head Office Power of Execution Powers of Signing Litigation

papers
ED/GM-Cum Secretary/ To sign and Execute To Sign plaints, written

Dy.Gen.Manager(Law)/ Accept equitable mortgage statement. Vakalatnama,
Manager(Law)/Dy.Manager on behalf of corp., Affidavit and all other
(Law) Mortgage Deeds and all Documents and paper related
other Document connected to the legal proceeding by
with the authorized and against the corporation
business of Corporation.
4. 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 loanee has compiled with
all the formalities of the sanction letter and forwards it to the disbursement of loan to
loanee.
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 are 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.
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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,

administrative expenses, and other payments of statutory liabilities of general
establishment.
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 placked before the
Board for approval by the General Manager (Finance).
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9. This section is also responsible for management of the bank accounts.
10. It is the function of this section to handle the cash in such a manner that a
minimum balance remains in the current account so as to maximize the profit.
In spite 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, availment of loan from Government and other agencies.
Refinance & Disbursement Section
The branches except in joint finance cases do the work of disbursement of

loans. The disbursement section performs the disbursement 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 DUSBURSEMENT 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 loanee concerned.
2. DISBURSEMENT OF SUBSIDY:
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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 terms 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.
Follow-up and 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.
2. Recovery of Dues:
a) By timely intimation of amount due and taking action for its

recovery.
b) By taking suitable 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-Passu.
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 support and effective
supervision over F&R work of the branch office is exercised by regional office.
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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.
In cases of units in difficulty, the officer at branch looks into and analyze,
whether the difficulty is on account of reasons beyond its control or other genjuine
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.
Computer and Accounts Section:
The corporation has adopted an integrated computerized accounting system. For the
purpose of maintaining the accounts there is a separate accounts in computer there is a
computer section. The corporation follows, “Cash system of Accounting”. This
section performs 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 accounts 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 accounts of the corporation with

various commercial banks.
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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 administration 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 accounting which has been
done with an object of providing better and timely services to the loanees. The
entrepreneurs receive information regarding his account at his doorsteps. By this
system reconciliation with the loanees account 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 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. Registers the application.
3. The branch of the corporation carries out immediately on receipts of the

application an inspection of the units concerned. The rehabilitation
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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 Administration Section
The personnel and administration section of the corporation deals with the staff
administration 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 administrative
control of the General Manager of DIC.
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
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13. Loans to employees
14. Reimbursement of TA claims
15. Passing of bills.
@INTRODUCTION TO TERM LENDING INSTITUTION@

Before getting to the term lending institutions. I would like to present a synopsis of
terms loans and its features.
TERM LOANS:
Debt capital of a company may consist of either debentures or bonds which are issued
to public for subscription or terms loans which are obtained directly from the banks
and financial institutions. Terms loans are sources of long terms debt. In, India they
are generally obtained for financing for financing large expansion, modernization or
diversification projects. Therefore, this method of; financing is also called projects
financing.
FEATURES OF TERMS LOANS:
Terms loans represent long term debt with a maturity of more than one year. They are
obtained from banks and specially created finically institution in India by private
placement rather than a public subscription as in the case with most debentures issues.
The purpose of term loan is mostly to finance the company’s capital expenditure.
Term loans have number of basic features, they include the following:
a) Maturity:
Financial Institution provides term loans generally for a period of 6 to 10 years. In

some cases, a grace period (moratorium) of 1 to 2 years is also granted. This is the
period during which the company has not made any payment. Commercial banks
advances term loans for a period of 3 to 5 years.
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b) Direct Negotiation:
A firm negotiates terms for project finances directly with a bank or financial
institutions. Thus term loans are a private placement. Sometimes debentures may also
be privately placked to financial institution, but most debentures issues are placked
for public subscription. The advantages of the private placement are the case of
negotiation and low cost of raising loans. Unlike in the case of public issue, the firm
needs not to underwrite term loans. Thus it avoids undertaking commission and other
floatation cost.
c) Security
Term loans are always secured. They are secured specifically by the assets required
using term loans funds. this is called primary security. Terms loans are generally
secured by the company’s current and future assets. This is called secondary or
collateral security. Also, the lender may create either fixed or floating charge against
the firm’s assets. Fixed charge means legal mortgage of specific assets, for creating a
fixed charge, the firm has to pay a heavy stamp duty which may be equal to ½ % of
the amount of loans. Floating charges is a general mortgage (equitable mortgage)
covering all assets In this case stamp duty is only ½ %.
d) Restrictive Covenants
In addition to the asset security, lender would like to protect it self further. Therefore,
financial institutions add a number of restrictive covenants. A financially weak firm
attracts stringent terms of loans from lenders. The borrowing firm has generally to
keep the lenders informed by furnishing financial statement and other information
periodically, the restrictive covenants may be categorized as follow:
(I) Assets Related Covenants
Lender would like the firm to maintain its minimum asset base. Therefore, restriction
may include maintaining minimum working capital position in terms of minimum
current ratio and not selling fixed assets without the lenders approval.
(II) Liability Related Covenants:
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The firm may be restrained from incurring additional debt or repay existing loan. It
may be allowed to do so with the concurrence of the lender. The firm may also be
required to reduce its debt-equity ratio buy issuing additional equity and performance
capital.
(III) Cash flow Related Covenants:
Lenders may restrain the firm cash outflow by restricting cash dividends, capital
expenditure, salaries and perks of managerial staff etc.
(IV) Control Related Covenants
Lenders expect that the firm’s management will be competent enough to manage its
operation. They may therefore provide for the effective organizational set-up and
appointments of suitable staff and the board base board of directors. One special
feature of term loans in this regard could be the provision for the appointments of
nominee directors by financial institutions. Term loans in this regard could be the
provision for the appointments of nominee directors by financial institutions.
CONVERTIBILITY
Financial institutions in India provides huge amount of loan assistance to the

companies. Because of the substantial financial stake of these institutions, in the past
they had the option to convert a part of the Rupee into Equity. Financial Institutions in
India no more have the option of converting loans into equity.
Finance is an integral part of every economic system and an essence of an industrial

system as well finance, is the circulatory system of economic development as it
determines and directs the flow of economy and facilities smooth functioning. The
importance of finance has been geared up since the recognition of evils of traditional
method of money lending.
ROLE OF INSTITUTIONAL FINANCE
Institutional finance forms an important source of bridging the gap in capital market
by supplying medium and long term financial assistance to industries so as to
accelerate the pace of industrial development and meet the regional imbalance, which
will result in achieving balanced regional growth. Therefore, to offset the limitation of
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personal finance, the need for establishing state financial institution has been
understood in the right perspective.
Thus a number of financial corporations have been created to achieve the above
mentioned objective. It will be prudence to see the difference between Development
Corporation and financial corporation.
Development corporations take initiative in the creation, direction, operation,

promotion, supervision and control of an undertaken where as financial institutions
are engaged in providing loans assistance to a specified category of productive units
by guaranteeing or granting term finance.
State Financial Corporation
State Financial Corporation Act, 1951, was enacted by the Govt. of India, which came
into force on August 1st, 1952.
The pre amble of the Act merely states that it is an act to provide for the establishment
of state financial corporation. It caters to medium and small scale industries. The SFC
Act 1951 was enacted to enable the state Govt. to establish development banks for
their respective states. The Act makes elaborate provision on the scope, objectives,
functions and nature of assistance that the financial corporation can give and the
restriction on their lending corporation.
Role of FRC in the State Economy
In order to strengthen the economy of the Rajasthan and to achieve the target goal for
rapid Industrialization, the Rajasthan Financial Corporation, the leading financial
institution is obviously determined to walk with Govt. plans, policies and programs to
ensure balanced and augmented Industrialization.
RFC has successfully completed 53 years of services to the Industries. It extends term
loan as well as working capital capacities. As a matter of fact, about 90% of its total
assistance have been shared by the small an tiny sector industries which is a land-
mark among developed financial institution in the country.
the corporation has been operating through 11 regional offices and 41 branch offices,
one Zonal office- western zone at Jodhpur-Rajasthan, headed by one General
Manager, is also to effectively monitor and supervise the regional offices of Pali,
Jodhpur and Bikaner.
The Rajasthan Financial Corporation commenced its function in the year of 1955
under the SFCs Act, 1951, in the first year of its establishment i.e. 1955-56 the
corporation has sanctioned financial assistance to Rs. 2177.52 Crore. The corporation
33
has not only confined its activity to industrial are but has also approached and reached
towns, rural and remote areas of the state with a view to provide financial assistance
to artisans and entrepreneurs for the speedy and balanced Industrialization of the
State.
DOCUMENTATION
After sanction of the loan, the party has to take following steps for documentation:
- To deposit processing charges
- To convey acceptance of the terms and conditions within 30 days of
conveying loan sanction.
- To execute the required loan documents.
LOAN DISBURSEMENT
After loan documentation, investment of own contribution by the promoters and on
completion of required condition, the process of disbursement of loan begins.
Eligible disbursement is released within 24 hours from the date of submission
valuation report, subject to completion of required formalities.
To facilitate the entrepreneurs, power for execution of documents and disbursement of
loan are delegated to our field offices. However, in case of joint financed units in
association with RIICO or other financial institutions, documentation & disbursement
is made at HO of the corporation.
LOAN AVAIMENT
From Application to Disbursement
o Constitute the firm/company and get it registered with the concerned

authority.
o Identify/select the eligible industrial project
o Acquire a piece of land, after selecting the site, from RIICO or other
concerned agency. In case of agriculture land, obtain conversation order for
industrial purpose from the competent authority.
o Prepare project report.
o File the application for loan in the prescribed format along with requisite
fee/information/documents as detailed therein.
o Attend the IPC/P&CC meeting convened almost every week, usually on

Wednesday, on receipt of intimation from the corporation.
o Principle clearance of loan proposal is given within a week’s time during

discussion in the PC&CC/IPC.
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o Detailed appraisal is taken up by the appraisal team soon after principal
clearance of the case.
o After appraisal, if the case is sanctioned, the intention is conveyed to the

promoter, advising him to deposit processing charges.
o On deposition of processing charges, sanction is conveyed.
o Convey consent of acceptance of the terms and condition of loan sanction.
o Comply with the condition stipulated in sanction letter and compete the
formalities for execution of loan documents.
o Disbursement of the eligible amount is released after execution of loan

documents and creation of fixed assets and after verification of the investment
by the officer of the corporation.
 The rates of interest applicable are subject to change as per the guidelines
received fro IDBI/SIDBI from time to time.
 The information detailed herein is of general nature and should not be taken as
the norms/rules of the corporation for grant of loan and is subject to change
without prior notice.
SCHEMES COVERED HEREIN
(WITH THEIR ABBREVIATED FORMS)
STL: Short Term Loan

WCTL: Working Capital Term Loan
SPWCTL: Special Purposes Working Capital Term Loan
UPGB: Units Promoted By Good Borrowers
GC: Gold Card
WCTL to NAU: Working Capital Term Loan to Non Assisted Units
Pc: Platinum card
STL
1. Purpose of Loan: Speedy sanction and disbursement for expansion,

modernization, replacement and purchase of balancing equipments.
2. Eligibility Criteria: An existing assisted unit:
a) In production for the past 3 preceding years and classified as standard
assets.
b) Having repaid 30% of the disbursed loan
c) Having positive cash generation in 2 years out of the 3 years.
35
d) Not having availed any benefit by way of waiver of panel interest
and/or re-schedulement in these years.
3. Loan Limit: Above Rs. 2 lacks to Rs 200 lacks.
4. Maximum Loan Limit: 4 times of the Loan repaid.
5. Security Margin: 10%
6. Promoters Contribution: 10%
7. Security Debt Ratio: 1.5:1
8. Debt Equity Ratio: 2:1
9. Application Fee: 0.1%
10. Documentation Fee: 1%
11. Interest Rate: PR
12. Services Charges: -
13. Liquidated Damages: 5.25%
14. Repayment (Incl. Moratorium): 8 Years
15. Frequency of Payment: Monthly
16. Mode of payment: PDC
17. Rebate on timely Payment: 2%
• PR: Prevailing Rate
• PDC: Post Dated Cheques
WCTL:
1. Purpose of Loan: For providing working capital term loan to meet out the gap
in their working capital requirement and the available bank limit.
2. Eligibility Criteria: An existing assisted units:
e) In production for the past 3 preceding years and classified as standard
assets
f) Having repaid 30% of the disbursed loan.
g) Having positive cash generation in 2 years out of the 3 years.
h) Not having availed any benefit by way of waiver of panel interest
and/or reschedulement in these years.
3. Loan limit: Above Rs 2lack to Rs. 100 lacks

4. Maximum Loan Limit: 100 Lack
6. Promoter’s Contribution: 25%
12. Service Charges: 1%
14. Repayment (Incl. Moratorium): 4.5 years
15. Frequency of payment: Quarterly
16. Mode of Payment: TDC
36
WCTL to NAU
1. Purpose of Loan: for providing working capital term loan to meet out the gap
in their working capital requirement and the available bank limit.
a) Should have proven track record with financial institution/bank
regarding payment and no adverse reporting, if assisted by them.
b) in production during last 3years and should reveal positive cash
generation in two years out of the 3 years including cash generation in
immediate preceding years.
c) having classified as standard assets with bank/financial institution in
last 3 years from the date of clearance of final amount with Bank/F.I.
d) not having availed concession relief by way of rebate/waiver of penal
intt. With bank/F.I.
3. Loan Limit: up to Rs. 100 lacks
4. Maximum Loan Limit: Rs 100 Lacks
6. Promoters’ contribution: 25%
7. Security Debt Ratio: 2:1
14. Repayment (Incl. Moratorium): 4.5 years
16. Mode of Payment: PDC
SPWCTL:
1. Purpose of Loan:
a) For acquisition of diamond blades and/or segments.
b) Back-up roll, work-roll & bearings
c) Replacement of carding cloth.
2. Eligibility Criteria: For assisted & non- assisted existing units:

a) in production for the past 2 preceding years and classified as ‘standard’
assets.
b) showing positive cash generation in the immediate preceding years.
3. Loan Limit: Cost of consumable at 30% margin

4. Maximum Loan Limit: amount of loan repaid
6. Promoters’ contribution: NA
7. Security Debt Ratio: NA
37
14. Repayment (Incl. Moratorium): 3 years
UPGB
1. Purpose of Loan: for expansion, modernization, diversification and purchase

of balancing equipments.
2. Eligibility Criteria: same criteria as in STL scheme for:

a. the existing non-assisted units, but having proved track record with
other Banks/Financial institutions;
b. the new units promoted by the existing good borrowers.
3. Loan Limit: Above Rs. 2.00 lacks to Rs. 500.00 lacks

4. Maximum Loan Limit: 4 times of the loan repaid
5. Security Margin: …..
6. Promoters’ contribution: 30%
12. Service Charges: ….
GOLD CARD
1. Purpose of Loan:
Speedy sanction and disbursement of loan for meeting out immediately working
capital requirement and/or acquisition of fixed assets.

38
a. in operation for the past 4 years
b. having debt equity ratio of 1.5:1
c. Classified as ‘standard assets’ as well as showing satisfactory financial
performance in the past 3 years.
d. Not having availed any relief by way of waiver of penal interest and/or
reschedulement in these years.
3. Loan Limit: NA
4. Maximum Loan Limit: equal to loan repaid
5. Security Margin: NA
6. Promoters’ contribution: NA
7. Security Debt Ratio: 2:1
8. Debt Equity Ratio: 1.5:1
11. Interest Rate: 1% below PR
12. Service Charges: ….
16. Mode of Payment: ….
17. Rebate on timely Payment: ….
1. Short term assistance to good borrowers:
Under this scheme short term financial assistance above Rs. 5.00 lacks to Rs. 10.00
lacks (Subject to 2 times of amount repaid against principal) is provided to existing
good borrowers for acquiring fixed for expansion, modernization, purchase of
balancing equipment and for replacement of fixed assets and also transport vehicle as
public carrier/private vehicle for use of the unit with the proposed project. The loan
shall be repayable in 48 equated monthly installments with interest. The required
security debt ratio is 1.5:1.
2. Working Capital Term loan Assistance to Good Borrowers:
Under this scheme, working capital term loan above Rs. 5.00 lacks to Rs. 100.00
lacks are provided to existing good borrowers. The loan shall be repayable in 16
equated quarterly installment with interest. The required security debt ratio is 1.5:1.
3. Financial assistance to existing non assisted units with proven track

record and new units promoted by good borrowers of the corporation.
Under this scheme, the corporation can provide term loan financial assistance from Rs
20.00 lack to Rs. 240.00 lacks as per maximum financing limit of RFC subject to
maximum of 4 times principal repaid. The loan is repayable in maximum 8 years
including moratorium period. The promoters’ contribution is 30%. The financial
39
assistance is provided to existing non-assisted units of the corporation having proven
track record assisted by a bank or other financial institution and new units promoted
by good borrowers of the corporation.
4. Mode of Repayment:
The repayment under above schemes should be paid in through advance past dated
cheques.
5. Rebate for timely payment:
The corporation provided special incentive in the form of rebate in rate of interest for
timely repayment of installment of principal and interest as under:-
1) Hotels & tourism related activities and loan under good borrower scheme 2%.
2) Other loan scheme 1%
Platinum card:-
Purpose:
Providing of financial assistance to the existing good borrowers of the Corporation
availing loan facilities under GB Schemes, with satisfactory repayment behavior, to
meet out their immediate requirement, either for working capital limit or to acquire
fixed assets or both.
Eligible Units:
- Existing gold card holders with proven track record of repayment of two years under
Gold Card Scheme.
OR
- Existing gold card holders with proven track record of repayment of one year under
Gold Card Scheme and two years in other Good Borrowers Schemes.
Note: This facility would not be available in joint finance cases.
Eligible Units:
- Existing gold card holders with proven track record of repayment of two years under
Gold Card Scheme.
or
- Existing gold card holders with proven track record of repayment of one year under
Gold Card Scheme and two years in other Good Borrowers Schemes.
Note: This facility would not be available in joint finance cases.
Eligibility criteria:
- The existing debt equity ratio of the unit is not more than 1.5:1 as per balance sheet
of the last financial year.
OR
- On considering the proposed platinum card limit, the debt equity ratio would not
exceed 2:1.
- Working results and financial performance of the unit should have been satisfactory
in the last 4 financial year and it should have revealed positive cash generation at least
for 2 years in the last 3 years.
- There should be no overdue in sister/associate/ family concern of the unit and also
40
no benefit of waiver of penal interest should have been granted during last three years.
- The working result of the concerns should justify repayment of existing and
proposed loan.
Eligible amount:
The eligibility of loan shall be assessed by the Corporation, which shall not be more
than 1.25 times of the loan repaid against principal in term loan, including UPGB and
short term loan under GB scheme (loan repaid in WCTL/Silver Card/Gold Card loan
account shall also be considered).
- The eligible amount under Platinum Card Scheme would be considered in two
segments i.e. Fixed limit and floating limit.
- The floating limit would be equal to 10% to 35% of total platinum card loan
admissible, subject to maximum of Rs.10.00 lac.
- Platinum card would be considered only in the cases where admissible loan
under this scheme is Rs.10 lac or above.
How to avail loan from the Corporation:
• Constitute the firm/company and get it registered with concerned authority.

• Identification/selection of the project
• To acquire piece of land after selecting the site from RIICO or other
concerned agency. If the land is agricultural, 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
requisites information/documents as detailed in the application form and
project report. The application may be obtained from Branch Office situated
throughout the Rajasthan, HO Jaipur, and Public Relation Office, Bikaner
house, Delhi and Rajasthan Business center.
• Attend the PCC meeting on receipt of information from the corporation. The
meeting is covered almost every week.
• Principle clearance on loan proposal is given within a week time during
discussion in the PCC.
• Detailed appraisal is taken up the appraisal team quickly, after the principle
clearance the case from PCC and normally loan is sanctioned within one
month’s time. However documents are expected for quick appraisal.
• After appraisal the case is sanctioned is conveyed.
• Convey consent for acceptance of the terms and conditions of the sanction of
the loan and deposit service charges and up front fee.
• Compliance of conditions stipulated in sanction letter and completes the
formalities for execution of loan document.
• After execution of loan document, disbursement of token amount and against
land is released.
• Disbursement of loan would be released in installments on creation of fixed
assets and after verifying the investment made by the technical officer of the
corporation.
RESEARCH METHODOLOGY
41
Research Methodology
It is way to systematically solve the research problem. It may be understood as
a science of studying how research is done scientifically.
Introduction to the specific Research

This project report is an outcome of an integrated approach of blending the
primary data along with secondary data collected through their respective sources and
through various finding, an analysis of it has been made. After analyzing the
numerous observations completely and developing an insight into the various
operating schemes of the corporation specifically “Good Borrowers Scheme”.
Implementation of Research Process
The research process can be divided into five subsequent stages namely
1. Define the problem and research objectives
2. Develop the research plan.
3. Collect the information.
4. Analyze the information.
5. Present the findings.
Balance sheet of the RFC
As per the accounting policy of the corporation, the financial statements

have been prepared on cash receipts and disbursement basis. The audited
balance sheet of RFC for the past five years is given below.
Assets 2003-04 2004-05 2005-06 2006-07 2007-08

Cash in hand& 5720.17 9585.14 4735.11 4545.69 9491.7
bank
Loans & 77364.71 82591.41 90649.53 92961.08 92983.38
advances
Debit balance of 7151.45 6883.22 6247.89 5544.35 5394.92
p&l
investment 6 6 6 106 106
Other investment 8181.95 8242.28 7891.08 7530.67 7369.70
Total assets 98424.28 107308.2 109529.6 110687.08 114423.24
Liabilities 2003-04 2004-05 2005-06 2006-07 2007-08

Paid up capital 6752.45 6752.45 8152.45 8152.45 8652.45
Reserve & 4515.27 4515.27 5115.27 5465.27 5870.25
surplus
Share application 0 1400 0 0 0
money
Provision for bed 8739.68 8724.68 8824.68 8890.68 9490.68
and doubtful
debts
Provision of 6 6 6 106 106
42
diminution in
value of
investment
Equity loan 2355.2 2355.2 2355.2 2355.2 3920.20
Bonds and 28305 26405 21052 15717 13817.5
debentures
Borrowings
From SIDBI 31545.35 40523.1 45431.65 46625.32 47713.77
From state 2780 1865 1815 1765 1500
government
From UTI bank 1017 998.01 1000.08 993.92 0
ltd.
From the bank of 0 2083.06 3650.05 5158.06 6824.99
Rajasthan
Other liabilities 12408.33 11440.43 12126.73 15458.19 13999.77
Total liabilities 98424.28 107068.2 109529.1 110687.1 114423.21
as we can see in balance sheet that the cash at hand has been decreasing over the years
and the loan advances has been increasing which can been in the graph also. This
shows that the corporation is serving incessantly towards it, is goal that is providing
financial assistance to the SSI and SME sector. The graph below depicts the
increasing loan and advances amount:
100000
90000
80000
70000
60000
loans & advances
50000
year
40000
30000
20000
10000
0
1 2 3 4 5 6
43
Performance of RFC over the years
Since its inception, RFC has been working continuously its goal. The data table given
below shows performance of RFC. And this is the result of such high constant
performance that RFC stands at second placke amongst the all 19 SFC. The table of
the sanctions, disbursement and recovery is shown below.
year Sanctions disbursement Recovery (Rs. In crore)

Target achievement Target Achievement Target Achievements
1994-95 160 177.55 115 120.72 155 156.17
1995-96 150 163.44 125 131.66 175 176.58
1996-97 190 167.45 140 122.09 200 194.78
1997-98 205 165.14 130 127.67 225 195.98
1998-99 100 93.33 100 95.67 205 206.14
1999-00 150 204.56 125 127.93 210 211.93
2000-01 180 196.29 145 146.13 210 212.10
2001-02 170 174.38 130 128.78 210 223.06
2002-03 190 202.8 140 139.93 215 224.46
2003-04 230 241.17 160 168.64 230 252.27
2004-05 300 301.6 200 198.43 250 255.15
2005-06 330 344.27 220 265.94 260 296.75
2006-07 360 368.44 280 261.53 350 353.76
2007-08 400 438.21 300 266.92 375 377.61
Project definition and basic characteristics:

Project is a unique, non-repetitive, time bound an purposive investment plan it
involves resources commitment for a long term and does not permit easy withdrawal
44
correction modification or migration the benefits accrued due to the project are spread
out and spread over a long period of time.
The basic characteristics of a project are as follows:
 Project have defined objectives:
First projects have defined objectives for example constructing a 12 story

apartment complex by January 1.
 A beginning and an end

Since there is a specified objective projects have a defined end point. This is
contrary to the ongoing duties and responsibilities of traditional jobs.
 Involves several professionals:

Projects typically require the combined efforts of a variety of specialist instead
of working in separate offices under separate managers projects participants
work closely together under the guidance of a project manager to complete the
project.
 Specific time and cost performance :

Finally specific time, cost and performance requirements bind project projects
are evaluated according to what they accomplished at what cost and how much
time they took.
Typically a project has life cycle divided into 4 phases:
1 defining 2 planning
3 executing 4 delivering
Project appraisal an overview

Project appraisal is basically an art. Although the extent of depth of appraisal
depends very much upon the size of the project, the basic parameters of
appraisal remain more or less the same. A project is appraised from different
angles namely technical, financial, commercial, economical, managerial and
social. Besides promoter’s background resources and credibility are also
looked into.
Project appraisal at R.F.C follows followings procedures:
To ensure prima-facie
45
 It is very important for appraising officials to ensure that the case is
eligible for financial assistance and he is required to segregate the non
eligible projects.
The appraisal officer should first satisfy himself that:

• Whether the applicant is an industrial concern and defined
under section 2 (c) of the sfc act.
• Whether the applicant in any way attracts restrictive provisions
of corporations financing.
• Whether the project is eligible for refinance.
 What is and industrial concern:

Section 2 (c ) of the SFC’s act defines the industrial concern as given
below:
• The manufacturer/preservation or processing of foods.
• Mining or development of mines.
• The hotel industry.
• The transport of passengers or goods by rail or air or lift.
• The generation or distribution of electricity or any other form
of power.
• The maintenance, repair testing or servicing of machinery and
description of vehicles of vehicles or motor boats or tractors or
trailers.
• Assembling, repairing, or packaging any article with the aid of
machinery or power
• The setting up of or development of an industrial estate.
• Providing weight bridge facilities.
• Such other activity as may be approved by the development
bank.
Detailed appraisal
Once it has been decided that prima facie the project is eligible for the calculation of
financial assistance from RFC, detailed project appraisal is taken up which can be
classified as follows.
 Management and organization setup

 Technical feasibility
 Cost of project
 Sources of finance
 Market and scope
 Cost of production and profitability
 Socio economic viability
46
Management and organization setup
Usually following methods are employed in assessment of managerial attributes:
1) Personal interview
Personal interview or discussion with the promoter gives adequate

Material to access the resourcefulness the managerial capacity,
Integrity and above all the extent of interest of the promoter in the
Project. His outlook, his attitude towards risk taking, his
Temperament initiative drive and adaptability, his knowledge and
Experience and his personality would also throw light on his
Chances of successfully implementing the project.
2) Past performance
The following documents should be collected from the

Entrepreneurs:
• Balance sheet and p&l account of the concern in which promoters are
interested.
• Balance sheet and p&l account of the applicant concern.
• Income tax and wealth tax assessment orders of the promoters and prsons
who propose to contribute to the capital.
• Details of investible funds of the promotes.
• Affidavit on financial assistance obtained by the promoters from other
financial institutions.
• Details of immovable properties acquired by the promoters alone with
copied of legally admissible documents of the title on the basis of which
ownership has been claimed.
3) Confidential records
Confidential reports on the past dealings of the promoters with the bankers are
widely used and are very useful. For an entrepreneurwho proposed to take a
project for the first time, bankers report may not be forthcoming in such cases
report from the good borrowers of the corporation or concern considered
respectable can be relied upon.
47
In case the promoters have any association with any of the concerns assisted
by the corporation the performance of this concern and its dealings with the
corporation must be looked into invariably.
4) Organizational setup
In the context of the present day management it is not only the competence of
the promoters but also the quality and setup of the organization that plays an
important role in successfully promoters have necessary technical background
and experience in the line. If not arrangement made for recruitment of
technical personal having experience in the line are inquired int.
Technical appraisal
The technical aspects of a project involve:

• Suitability of location and pollution control.
• Adequacy of land and building.
• Capacity and usefulness of plant and machinery
• Feasibility of technical process
• Arrangement of technical know-how
• Availability of raw materials and other utilities
• Availability of power
1) location and pollution control
The location
The location of the project should be suitable in relation to the source sound
availability of raw material, water, power, transport and communication
facilities and skilled labour and also in relation to the markets served by the
projects.
The pollution control
At the time of appraisal an in depth study of the pollution possibilities and

measures taken to prevent it is taken. Rajasthan board for prevention and
control of pollution is the agency responsible for checking should be followed
strictly at the time of appraisal.
48
• The unit has to submit an noc from rpcb in any case before the
disbursement of the last 10% of the sanctioned loan.
• In cities and towns like balotra, jodhpur, pali, beawar, there is complete
ban on establishment of water pollution units.
• In 48 industries like atta-chukkies toys ice-cream, minerals water etc,
no NOC is required from RPCB.
• No needs of NOC from rpcb for those units which have already
invested rs. 5.00 lacks on land & machinery and are located outside
10km. area of municipality council having population of more than
50,000.
2) Land and building
The availability of land has to be examined keeping in view reasonable

requirement of building with allowance for future probable expansion and
also the site development requirements. Soil test and the load bearing capacity
are also ascertained in the case of heavy industries. It is also examined that
the factory building is appropriate for the layout plans for machinery and
godowns are suitable for the stocks to be maintained. Amenities for the
laborers as per factory act should also be provided for and reasonable
requirement for office building should also be considered.
Land according to its location is divided into 3 categories:
1 Land situated in RIICO industrial area.

2 Converted land or land situated in other than industrial area.
3 Freehold lands at the time of appraisal specific documents are asked
for inspection depending upon the category.
3) Plant and machinery
The basis for the selection of machine with due regard for the prices and
quality their capacity and the availability of spare parts and the delivery
schedule is considered before a decision is taken to finance the project.
To ensure the authenticity of the supplier and check his reputation the
following documents can be asked form him and examined:
• Should have proper sale tax number

• Proper manufacturing facilities.
• Technical knowledge to manufacture a particular machine.
• Well established and should provide exhaustive list of past customers.
• Performance letter from the suppliers past clients should be obtained.
• Catalogues and technical leaflets of the machine can be asked for.
Quotations with all possible technical specification can be called for. If these
basic requirement are fulfilled by the new supplier. Then an inspection is
49
conducted by the RFC at his manufacturing site. If the technical officer give a
satisfactory report, the name of the supplier for the particular is considered on
the condition that the first disbursement will be made after 3 to 6 months
functioning of the supplied machine.
4) Manufacturing process
In order to examine the suitability of the selected process an examination has

to be made of the alternative process and their relative efficiency. It has to be
ensured that the technology adopted is modern. An absolute technique will not
only affect the profitability of the project but may render the entire investment
ineffective.
5) Technical know-how
When the promoter of the enterprise is not well qualified in the line some
arrangements for the technical know how become necessary, especially where
the process involved is sophisticated. The agreements for securing the
necessary expertise are provided for the production of the specified quality and
also for penalty in case of failure.
6) Miscellaneous fixed assets
In examining the requirement of other assets, special attention is given to the

facilities for the disposal of the effluents besides the equipment required for
water, power, workshop laboratory fire fighting etc.
7) Implementation schedule
Precise project scheduling is a must to make realistic assessment of the project

cost. The preliminary and preoperative expenses depend on the time taken in
implementing the project the schedule is prepared keeping in view the delivery
schedule of machinery, time to be taken in construction release of power and
water connection etc.
8) Raw materials
The quality and quantity of raw material required for the particular project,
sources of their availability.
9) Power
In the present context of power cuts this aspect has assumed great importance
power intensive industries are being discouraged and where the requirement of
power is more provision for dg set is made in the project.
50
Cost of project
The aim in accessing the cost of project is to ascertain the reasonableness of the cost
estimates and to see that no item which had to be included in the project as a result of
technical appraisal and economic assessment has been left out and no item which is
not required has been included. The comparison of the cost estimates with the cost of
the similar project financed in the recent past and the reason for the market variations
would enable to come to conclusion for arriving at the final figures. For the sake of
convenience the total cost of the project is generally brocket down into the following
sub-heads:
Fixed assets
• Light and sight development
• Building and other civil work
• Plant and machinery
• Technical know how
• Miscellaneous fixed assets
• Furniture and fixtures
• Preliminary & preoperative expenses
• Contingencies
Working capital margin

• Raw material= qty for stipulated period*rate.
• Goods in process= finished good-o/expenses for 300 days repairs and
maintenance
• Finished goods= cost of production-depreciation-interest
• Receivables= total sales per annum
• Cash in hand= if consumables and packing are financed by the bank this
amount should not be considered on the contrary, if the bank is not financing
these item then, cash in hand+ utilities +salaried and wages+ overhead
expenses.
• 25% margin shall be considered for item 1 to 4 and 100 % for 5.
Cost comparison
With the wide coverage of the corporation in the grant of financial assistance to a
number of units in Rajasthan, important data particularly with regard to cost of
project are generally available with the corporation itself. Comparison of the cost
of project of the unit under consideration with similar units finance in the recent
past not only helps that assessing officer in making the self appraisal of the project
cost estimation but also helps to a great extent in arriving at the reasonable cost
estimate of the project of similar units finance by the corporation in recent past are
available cost comparison is to be made invariably and reason of variation are to
be explained.
51
Source of finance
The nest important aspect in the project appraisal is to decide the source of finance to
be raised to finance the project cost as arrived at above.
Broadly speaking there are only two sources of finance,

• Loans/ debts
• Capital and other accruals called equity
It is dept equity ratio which plackes limits on the sources within above categories
particularly with regard to raising of loans.
Debt/ equity ratio
This ratio explains the relationship between the borrowing of long term nature and
capital raised by way of equity. The norms prescribed the IDBI for acceptable
debt/equity ratio for different types are as under:
• Medium scale industry 2:1

• Ssi units 2.2:1
• Cooperative estates and small estates where the total capital investment does
not exceed rs. 10 lack 2.5:1
• Other cases including those sponsored by corporate bodies like state
infrastructure Development Corporation.
Capital
The just obvious source of financing the project is the capital contributed by the
persons promoting it. Generally the promoter’s contribution and the capital may be
the same but it is not always true, particularly for the companies- going for the public
issues, as in such and the contributors made by the financial institution. Thus the
appraising officer has to ensure that the promoter brings in his contribution to the
extent specified in the norms.
Underwriting
The corporation can also underwrite shares, stocks, bonds or debentures issued by the
industrial concern while examining request for underwriting also, the norms of
appraisal etc. are the same as primarily it is the feasibility of the project which decides
whether the corporation enter into underwriting agreement. The guarantee
commission is calculated @ 2.5% of the face value of shares for which the under
writing has been done.
Seed capital
52
Seed capital is the capital extended by the corporation to fill the gap between the
required promoters contribution as per to the project cost the capability of the
promoter to bring in the funds. Seed capital assistance is available to the eligible
entrepreneurs who propose to put the industrial project for the first time. As the seed
capital assistance is as source of financing the project, proposal for seed capital is to
be finalized together with the loan proposal and put up before the sanctioning
authority simultaneously.
Internal accruals
There is no norm in accepting this source but the appraising officers has to examine
thoroughly that cash surplus in infect available as shown in the financial statement for
this purpose the help of current ratio is taken to determine whether the generations
could be utilized towards the implementation of the assumed that the surplus
transferred to general reserve has been used for working capital and will thus not be
available for the deployment in capital assets of expansion scheme.
Secured term loan

For all practical purpose term loan now occupied the most important placket in the
project financing. These loans can be classified into two categories i.e. secured and
unsecured. Secured loans which also include loans from the RFC are those which are
granted by having a charge over all fixed assets of the industrial concern. Following
aspects are to be considered:
• The value of acceptable security

• The margin to be retained in security
• The requirement of concern
Deferred payment
• Deferred payment ad the term indicated is the payment deferred for the
acquisition of assets. These payments include.
• Installment payable to RIICO against land on lease or shed on hire purchase.
• Amount payable of NSICetc. Machine acquired on hire purchase.
• Technical know how fees if payable to collaborators in installments
• Amount payable to RFC against of an industrial concern acquired under
section 29 of SFC’s act & sold to the concern.
Deferred payment guarantee
The corporation can also guarantee deferred payment for the machinery purchased in
India by industrial concern. The request for guarantee can be considered along with
53
term loan or in isolation. Following points should be considered for the processing of
such requests:
• Guarantees for deferred payment is available only for machinery purchased in
India
• Usual margin of security is to be retained for working out guarantee
admissible on the lines of term loan.
• Period of guarantee should not generally exceed 5 years
• Guarantee commission is to be calculated @ 15 % on the amount outstanding
at the beginning of each year and should be recovered in advance.
Market and scope
• Under this head the following aspects are to be examined:

• Actual consumption
• Supply situation
• Potential supply in the market
• Sales forecast
• Marketing plan
• Distribution arrangements.
Market analysis, therefore is necessary to study scope of the proposed project. Data
available in the market are generally old and therefore information available are to be
updated from the industries and business association and from regular feed back from
follow up and recovery section and marketing data development cell of the
corporation. In order to have a demand and supply idea the no. of units already
working in the field their capacity and capacity utilization etc. have to be considered.
In case corporation had already financed such units their working results and dealing
with the corporation are considered.
When demand and scope are established the arrangement for marketing the products
is examined. At times the concern enters into selling arrangements the commission
payable to the selling agents are sister concern of the borrowings units and
commission proved for is rather high.
Cost of production and profitability
This includes:
• Estimates of cost of production.
• Preparation of the statement of cost of production and cash flow.
• Fixing the repayment period.
54
1. Cost of production
While estimating cost of production, every constituent of cost is to be taken

care of & provision made for the basis of prevailing market rates. With deeper
inquiry for those items constituting major part in the cost f production of a
product, the study of profit & loss a/c of similar concern proves to be good
help in estimating the cost. Similarly, in assessing the selling price,
fluctuations & trends in the market rates & element or competition is carefully
watched.
2. Statement of cost of production & profitability
Particulars 1 2 3 4 5 6 7
a. installed capacity
b. production envisaged
c. efficiency
d. manufacturing expenses
• Raw material
• Utilities
• Consumables
• Packing material
• Salary & wages
• Administrative expenses
• Repairs & maintenance
• Interest
• Depreciation
e. cost of production
f. sales realization
g. operating profit
h. taxation
i. profit after tax
j. gross cash accruals
3. Repayment scheduling
As term is to be repaid our of cash generation and internal accruals of the

project the repayment period of the term loans are so fixed that adequate cash
accruals would be there in any year with sufficient cushion. For this purpose
debt service coverage ration which indicates the relationship between cash
generated by the unit & term loan is worked out.
55
The formula for calculating DSCR is:
DSCR= cash generated/debt
Where cash generation means
Net profit after tax
+ Interest on term loan
+ Depreciation
+ Development rebate
+ Initial depreciation
Debt means
Interest on term loans+ term loan to be repaid
If the initial preparation of cash flow & profitability statements the DSCR is
not within the above limits the statement is revised by increasing or decreasing
the period of repayment of term loans.
Socio economic viability
It is not sufficient to examine the project only from the point of view of
technical, and commercial viability. A project should also stand the test from
the point of economic and social priorities. In this context the contribution
which a project would make to a particular sector economy by way of import
substitution, export promotion employment generation or development of a
backward area etc. is studied. Economic justification can be obtained by
assessing how best the scare resources namely the capital and the foreign
exchange can be put to use. The international rate of return and the exchange
rate of the project are also applied in this connection where the interest sought
is substantial.
Modern appraisal technique
a project should earn sufficient return which should be at least equal to cash of the
fund invested in it. To make a complete study of return of various proposals investor
should analyze about the safety of investment through the following techniques:
Pay back period method
The pay back period method is the traditional method of capital budgeting.
It is the simplest and the quantitative method for appraising capital expenditure
decisions pay back measures the numbers of years required for the cash flow after tax
to pay back the original outlay required in an investment proposal.
Pb= investment/ constant annual cash flow
56
Average rate of return
The average rate of return method of evaluating proposed capital expenditure is also
known as the accounting rate of return method.
These are number of alternatives methods for calculating ARR.
The most common use of the average rate of return expressed in is as follows:-
ARR= average annual profit after tax

___________________________ * 100
Average investment over the life of the project
With the help of ARR, the financial decision can be taken by the financial decision
maker whether to accept or reject the investment.
Net present value method (NPV)
Net present value method may be defined as the situation of the present value of the
cash proceeds (CFAT).
In each year minus the summations of present value of the net cash outflow in each
year.
The decision rule for a project under NPV is to accept the project if NPV is positive,
otherwise project will be rejected.
Internal rate of return (IRR)
IRR technique is also known as yield on investment marginal efficiency of capital,

time adjusted rate of return. The IRR on the other hand is based on the fact, which is
internal to the proposal. The discount rate which equated the present value of the net
cash flow (CFAT) with the aggregate present value of the cash outflow of the project.
57
Recommendations
1. As Rajasthan financial corporation is working for socio economic welfare,

state government is the major share holder in Rajasthan financial corporation;
state government should provide free funds for financial restructuring.
2. Corporation must strive to get international sources of financing with the help
of national level of institution like IDBI and SIDBI.
3. The corporation should insist on higher promoter’s commitment in the project

and ensuring adequate security cover.
4. The corporation’s margin is under pressure due to higher cost of funds, which
is required to be reduced. State government can also help out by providing
more funds at less cost.
5. Financial analysis is primarily based on the future cash flow projections;

however, these estimates cannot be predicted with a great degree of reliability.
Therefore, proper consideration should be given to the sensitivity analysis to
judge the impact of key variable on the financial performance. The same has
been introduced as an integral part of appraisal process since last year.
6. cash flow should be adequately discounted and the present value of the cash
flow should be calculated by the application of appropriate discount rate. This
helps in judging the true worth and revenue generation capacity unit.
58
7. To ensure the timely repayment of dues sales forecasting is of absolute
importance. Instead of relying on sales figure presented by the promoter
advance statistical techniques should be used sales projection. Proper impact
of the cyclic fluctuation and demand patterns should be analyzed.
8. Variance analysis should be conducted in case of a major difference between

the actual and budgeted figures of operations revised estimates and cash flows
should be worked out. This should be made part of the quarterly information
statements submitted by the assisted units.
9. Management information system should be restructured. This is essential to

help various department of work in close cooperation and coordination with
each other. This would help in achieving synergies in performance because of
the over lapping nature of activities. It is felt that the upper time for policy
making and strategic review.
10. There is a need for greater computerization to increase the efficiency. The
manager should have online access to the critical information and also the
delays caused by the manual file movement system could be avoided through
different concerned authorities could be made possible.
11. for efficient project monitoring and implementation it is essential that projects
where assistance exceeds Rs. 20 lacks are put under charge of separate nodal
officer so that constant follow up is made possible.
Bibliography
Sfc’s act 1951
 Procedures and guidelines(RFC)

 Brochures and printed material of the corporation
Internet
www.rfconline.org
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RAJASTHAN FINANCIAL CORPORATION

Department of Management Studies

This is to certify that Mr. sandeep Kumar natani, a student of

I express my heartiest thanks to Shri shi ram las

I also thankful to employees of RFC for cooperation.

A lot of sandeep kumar natani of thanks to Librarian Madam, who allowed us in

Project appraisal is basically an art. Although the extent of depth of appraisal

Project appraisal at R.F.C follows followings procedures:

 It is very important for appraising officials to ensure that the case is

The technical aspects of a project involve:

• Suitability of location and pollution control.

 Market and scope

Title of the Study:

Duration of the Project:

• Completely based on secondary data and it may contradict other analyst’s

A major function of financial institutions, whether short-term or long term, is to

OBJECTIVES AND FUNCTIONS

(a) Guaranteeing on such terms and agreements as may be agreed upon:-

(2) Loan raised by industrial concerns from scheduled banks so the

(3) Guaranteeing on such terms and conditions as may be agreed upon,

(e) Granting loans or advances to subscribe to debentures of a concern, repayable

(f) Subscription to the stock, shares, bonds or debentures of an concerns out of

Other steps include a direction to ensure disbursement within 24 hours of

Limitations of the study:

1 No direct access to company data.

Rajasthan Financial Corporation (RFC) was constituted in the year 1955

1. Financial assistance ranging from Rs. 20000 to Rs. 200

- Proprietary and Partnership units/trusts Up to Rs 8 Crore

* Promoter’s Contribution Min. 33% of the Project Cost

A Normal Term Loan Scheme:

B Special Scheme for Specified Entrepreneur

1. Assistance to qualified professionals

2. SEMFEX Scheme for Ex-Servicemen

3 Mahila Udhyam Nidhi Scheme

4 Assistance to SC/ST entrepreneurs

5 Schemes for Assets Financing

7 Scheme For Financial Against Assets (Long Term)

8 Schemes for Financing against Assets (Short Term)

9 Schemes for Financing Builders/commercial/residential complexes/multiplexes,

C Special Scheme for Specified Industries

1 Loan for Hospital/Nursing Homes

2 Loans for Mining Activity

3 Loan for Show-room and Marketing of SSI products

4 Loans for Transport Vehicles

5. Loans for Tourism Related Activities

6. Technology Up-gradation Funds (RTUF) Schemes

7. Loan for Information Technology

8 Loans for Commercial Complexes, Show Rooms & Sales Outlets

9 Loans for Commercial Construction of Residential Houses/Flats/Housing

SCHEMES FOR GOOD BORROWERS OF THE CORPORATION

D Special Scheme for Specified Purpose

2 Single Window Schemes

4 Equipment refinance scheme

5 Acquisition of ISO 9000/14001 series certification by SSI units

6 scheme for working capital bridge loan

7 Switch over loan scheme

9 Scheme for financing pollution control equipments

Financial assistance to RFC assisted units is provided for purchase of pollution

10 Scheme for private bus/ taxi stand

Loan for revival and rehabilitations of sick units

While accepting the loan application fee as mentioned below is required to be