Final Copy (Repaired)

EFFECTIVENESS OF SANCTIONING, DISBURSEMENTS AND RECOVERY OF LOANS TO THE INDUSTRIAL
ESTABLISHMENTS BY KSFC
CHAPTER 1
CHAPTER 1
INTRODUCTION
INTRODUCTION
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1.0 Executive summary

A study on Effectiveness of Sanctioning, Disbursement and Recovery of Loan to The
Industrial Establishments KSFC is undertaken in order to know the Effectiveness of Sanctioning,
Disbursement and Recovery of Loan by the corporation and to assess the Effectiveness of the loan.
Ratio analysis is the tool used as a yardstick for evaluating the effectiveness of the loan.
This research has been conducted to know and understand the effectiveness of loan by the
KSFC. An attempt is made to study the effectiveness and the factors influencing the loans
effectiveness. For a systematic study, tables and graphs were drawn wherever required.
The scope of the study was limited to Bangalore regional office of KSFC. But,
consolidated financial reports of all the divisions in Karnataka were considered for analysis. Inter
branch comparison was not possible. Limitations of past records, time constraints etc, have impact on
the study.
The overall performance of the corporation is satisfactory as its operational efficiency

and managerial efficiency are showing the positive symbol of the growth. The overall
performance of KSFC is satisfactory when compared to the financial year 2005-2006. KSFC
utilizes its available funds effectively. The aggressiveness from past six years of operations
helped it to maximize the earnings.
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1.2 ORIGIN OF THE INDUSTRY

After independence, Indian government realized that industrialization is necessary for
rapid economic growth of the country. Hence, the government gave more preference for the
development of industries in the country. However, during that time one major constraint for
the development of was the absence of institutional arrangements for providing institutional
finance on any significant scale. It was therefore very natural that after independence
government took steps to fill this vacuum and create a number of national and state level
financial institutions in conventional sense, but development banks, which serve as
development agencies not only for lending operations but also for developmental activities
including promoting projects and developments of their clients.
The financial services industry is comprised of a variety of businesses providing
services broadly related to insurance, accounting, banking, brokerage, real estate, risk
analysis, asset management, and investment. Insurance firms either provide insurance
themselves as insurance carries or sell the services of others as insurance brokers. Banks can
be commercial or private, on the global, national, regional, or community level, and offer the
safekeeping and lending of money as their base services. A variety of different financial
institutions may provide asset management and investment services.
Capital is the backbone and nerve center of any industrial organization and
development. Modern industrial enterprises require various types of capital, namely initial
capital, fixed capital, working capital etc. government of India understood the importance of
industrial development in generating employment and also economic development of the
country. Government passed industrial policy act to demarcate the areas of production under
public sector, private sector, co-operative sector and small-scale sector as well as large scale,
medium scale units.
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1.3 Growth and development of the Industry

The Industrial Policy resolution 1948, for the first time government accepted the
importance of small-scale industrial development of the country. It was well realized that
small-scale industries are particularly suited for the utilization of local resources and for
creation of employment opportunities. Small-scale industries were facing the acute problems
of raw materials, capital, skilled labor, marketing act. Since there was no capital, market to
provide long term funds to industries in the country the government understood the
importance of financial institutions to meet the requirement of funds by industries and it
started many financial institutions. The following are the some of the important financial
institutions in India:
1. Industrial development bank of India(IDBI)
2. State financial corporation(SFC)
3. Industrial credit and investment corporation of India(ICICI)
4. Unit trust of India(UTI)
5. State industrial development corporation(SIDC)
6. Industrial reconstruction corporation of India(IRCI)
7. Life insurance corporation of India(LIC)
8. Small industries development bank of India(SIDBI)
9. Industrial reconstruction bank of India(IRBI)
10. Industrial finance corporation of India(IFCI)
11. National small industries corporation(NSCI)
12. Export import bank of India(EXIM)
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All these financial institutions are started to fulfill the requirement of financial needs
of all types of industries. These financial institutions offered short term, medium term and
long term financial assistance to the industries. In the industrial policy resolutions of 1948,
1956, 1977 thrust was given for the development of small-scale and medium scale industries.
In order to bring the balanced regional development in the country and to concentrate towards
the industrially backward areas government of India started the State Financial Corporations
in the states with the help of state governments in order to concentrate on regions, which are
industrially backward.
1.4 State Financial Corporation (SFCs)

Indian government has passed state financial corporation legislation in 28 September 1951.
The legislation empowers the state government to set up SFCs in their respective states. First
state financial corporation came into existence at Punjab in 1953. Now there are 18 SFC is in
India.
State Financial Corporations grant the assistance to medium, small and cottage industries.
The maximum capital allowed for a corporation is Rs.15crores. State government concerned,
IDBI, Commercial banks, insurance companies, Co-operative banks and the investment trusts
contribute the capital of SFCs
The SFCs in different states are as follows:
1. Andhra Pradesh state financial corporation
2. Assam state financial corporation
3. Bihar state financial corporation
4. Delhi financial corporation
5. Gujarat state financial corporation
6. Haryana state financial corporation
7. Himachal Pradesh state financial corporation
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8. Jammu and Kashmir state financial corporation

9. Karnataka state financial corporation
10. Kerala state financial corporation
11. Madhya Pradesh state financial corporation
12. Maharashtra state financial corporation
13. Orissa state financial corporation
14. Punjab state financial corporation
15. Rajasthan state financial corporation
16. Tamilnad state industrial investment corporation
17. Uttar Pradesh state financial corporation
18. West Bengal financial corporation
India's financial services sector will enjoy generally strong growth during coming
years, driven by rising personal incomes, corporate restructuring, financial sector
liberalization and the growth of a more consumer-oriented, credit-oriented culture. This
should lead to increasing demand for financial products, including consumer loans (especially
for cars and homes), as well as for insurance and pension products. India's financial services
sector is expected to enjoy generally strong growth during coming years, driven by rising
personal incomes, corporate restructuring, financial sector liberalization and the growth of a
more consumer-oriented, credit-oriented culture. This is expected to lead to increasing
demand for financial products, including consumer loans (especially for cars and homes), as
well as for insurance and pension products.
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CHAPTER 2
CHAPTER 2
RESEARCH
RESEARCHDESIGN
DESIGN
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2.0 INTRODUCTION:
In this chapter researcher has clearly mentioned the overall research design which done to
analyze the firm data and to interpret the results to meet the objectives of the study. With the
help of complete research methodology and statistical tools.
2.1 TITLE OF THE STUDY:

Effectiveness of sanctioning, disbursements and recovery of loans to the industrial
establishments by KSFC
2.2 STATEMENT OF THE PROBLEM

Every industry has its own uniqueness and contribution to the economy. Industries
depend much on banks and financial institutions for their endeavors. KSFC being one of the
development banks cater the needs of entrepreneurs and industrialists. The main intention of
the study is to know:1) The problem covered in the project study is whether the industries are benefited through
the sanctions provided by the KSFC.
2) The interest rate charged on loans.
3) The financial pattern and method being adopted while sanctioning, disbursements and
recovery of loans.
2.3 REVIEW OF LITERATURE:

KSFC is one of the major sources for the loan sanction for the industrial
establishments in state level, when the KSFC has reviewed for the growth or the performance
of its loans in industrial establishments in the state level corporations, a few studies done in
these areas like loan sanctions, disbursement and recovery in industrial establishments and in
its success are by the articles as follows:
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2.4 SCOPE OF THE STUDY:

The study covers operational jurisdiction of Karnataka State Financial Corporation. The study
is related to the role played by KSFC, and its efficient, effectiveness of sanctioning,
disbursements and recovery of loans to the industrial establishments and other sectors of the
economy.
2.5 OBJECTIVES OF THE STUDY

The following have been set out as the objectives of the study:
1. To analyze the level of assistance provided to the industrial establishment.
2. To analyze the top industrial establishment assisted by KSFC.
3. To obtain the knowledge of sanctions, disbursements and recovery of loans at KSFC.
4. To study the effectiveness of sanctions, disbursements and recovery of loans at KSFC.
5. To offer suggestions and recommendations if any,
2.6 METHODOLOGY:
Methodology is a way to systematically solve the research problem. It may be
understood as a science of studying how research is done scientifically. In it we study the
various steps that are generally adopted by a research in studying his research problem along
with the logic behind them. Methodology refers to methods adopted to carry out the research
and steps adopted to solve the problem by finding solution.
2.7 DATA COLLECTIONPrimary data:

There is no primary data is used.
Secondary data:
The data, which is used for the research, is secondary data. The data which have
already been collected and processed by some agency or person and taken over from there
and used by any other agency for their statistical work are termed as secondary data as far as
second agency is concerned. In other words secondary source is the agency who publishes for
use by others the data, which was not originally collected and processed by it.
Sources of data:
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Secondary data will be collected from the existing records, company manual, published
sources like annual reports, periodicals, statements, journals, etc.
Data analysis will be done on the secondary data includes annual report, financial
report of the company etc.
Analyses and evaluation of the data:
The data collected from various sources has been analyzed interpreted and tabulated.
Appropriate graphs diagrams are used with the assistance of suitable yardstick.
2.8 RESEARCH TOOL ANALYSIS:

Analysis is the process of breaking a complex topic or substance into smaller parts to
gain a better understanding of it. The technique has been applied in the study of mathematics
and logic since before Aristotle. Nowadays analysis is not confined to mathematics; it is
applied in almost all the fields.
An interpretation is an explanation of the meaning of some object of attention. It also
refers to making ideas more understandable, including translation. An interpretation may
express ones' own understanding of things
Ratio analysis is the tool used as a yardstick for evaluating the Effectiveness of
sanctioning, disbursements and recovery of loans to the industrial establishments by
KSFC
Ratio analysis, ratio technique or ratio accounting is an important quantitative technique
used for the analysis and interpretation of financial statements. In fact, it is the most widely
used tool of financial analysis. Before going to study about the financial ratios, one should
know the meaning of the Ratio.
A ratio is defined as the indicated quotient of two mathematical expressions and the
relationship between two or more things.
No doubt, ratios were known and used from time immemorial. But the idea of using the ratios
as a technique for the analysis of the financial statements of business concerns was suggested
for the first time in 1919 by a German scholar Alexander Wall. So he is considered as the
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pioneer of the ratio analysis. It used for assessing the current and long term financial
soundness of a business concern and is also used for analyzing the various aspects of
operational efficiency and the degree of profitability of a concern.
Types of ratio analysis
Static analysis:It is a type of analysis which analyses the single years financial statements.
Dynamic analysis:Dynamic or trend analysis is a type of analysis which analyses the financial statements of
two or more years.
Procedure for ratio analysis
Restructuring, classification, grouping or re-arrangement of the data found in the financial
statements in a form suitable for analysis.
Calculation of required ratios from the restructured or classified data.
Comparison of the computed ratios with the standard established. (The standard may
either be budgetary standard or historical standard).
Interpretation of the comparisons.
Functions of ratio analysis
Ratio analysis measures the firms ability to meet the current obligation.
Analysis shows the proportions of debt and equity in financing the firms assets.
Analyses of ratios reflect the firms efficiency in utilizing the assets.
Ratio analysis measures overall performance and effectiveness of the firm.
It will determine the financial strength in future.
This technique attracts the investors. As the investors are interested on their return on
investment
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Advantages of ratio analysis

It simplifies the understanding of financial statements.
It is a valuable aid o the management in the efficient discharge of its basic function of
forecasting and planning.
It serves as an effective means of communication
It helps the management to have the control over the operations efficiently.
It facilitates inter firm comparison.
It is very useful in establishing the standard costing and budgetary control.
It is useful not only to the insiders but also the outsiders like creditors, investors etc.
Limitations of ratio analysis

Ratios calculated from the data found in the financial statements but the financial
statements suffer from various inaccuracy problems
There is no consistency in the meaning of certain accounting ratios
Ratios become meaningless, if they are detached from the details from which they are
derived.
Ratios alone are not adequate for judging the financial position of a business.
There is a danger of window dressing in ratio analysis.
Ratios are tools for quantitative analysis only. Qualitative factors are totally ignored.
Ratios used for the analysis

Balance sheet ratios or financial ratios
Current ratio: Current ratio is the ratio which expresses the relationship between current
liabilities and current assets i.e., Current assets: Current liabilities. The ideal current ratio
is 2:1.
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Current assets
Cash in hand
Cash at bank
Bills receivables
Sundry debtors
Inventories
Readily marketable securities (short term investments)
Prepaid expenses
O/s income
Current liabilities
Bills payable
Sundry creditors
Bank overdraft
Cash credit
Short term loans and advances
O/s expenses
Incomes received in advance
Provision for income tax
Unclaimed dividend
Proposed dividend
Quick ratio: Quick ratio refers to the relationship between the quick assets (current assets
excluding inventories and prepaid expenses) and quick liabilities (current liabilities
excluding bank over draft and cash credit). The ideal quick ratio is 1:1
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Absolute liquid ratio: It is the ratio which expresses the relationship between absolute
liquid assets and current liabilities. The ideal absolute liquid ratio is 1:2. Here absolute
liquid assets refer to cash in hand, cash at bank and readily marketable securities.
Leverage ratios, capital structure ratios, solvency ratios or long terms solvency ratios
Leverage ratios are the ratios which measures the interests of the owners and creditors in
an enterprise. The principal leverage ratios are as follows: Debt-equity Ratio
Debt-equity ratio is the ratio which expresses the relationship between the long term
liabilities and the owners fund. The ideal ratio is 2:1
Proprietary ratio
The ratio shows the relationship between net worth or equity and total assets (tangible
assets). The ideal ratio is 0.5:1
Solvency ratio
This ratio expresses the relationship between the total assets and total liabilities of a
concern. There is no ideal ratio is established. The higher the ratio, higher is the long term
solvency.
Fixed assets to net worth ratio
This ratio expresses the relationship between the fixed assets and net worth. The ideal
ratio is 2:3
Current assets to net worth ratio
This ratio expresses the relationship between the current assets and net worth. There is no
ideal ratio established.
Current liabilities to net worth ratio
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This ratio expresses the relationship between the current liabilities and net worth. The
ideal ratio is 1:3
Capital gearing ratio
It is the ratio which expresses the relationship between the fixed interest bearing
securities/shares and the equity shares. If fixed return bearing securities are higher than
equity shares then it is said that the concern is highly geared.
Fixed assets ratio
Fixed assets ratio is the ratio between the fixed assets & capital employed. The ideal ratio
is 2:3
Profitability ratios based on capital employed or investments
Return on total assets ratio
This ratio expresses the relationship between the net profit and the total assets. The ideal
ratio is 10%.
Return on investment ratio
It represents the relationship between the profit and the capital employed. There is no
ideal ratio established.
Return on equity ratio/ net profit to net worth ratio
This ratio expresses the relationship between the net profit and all types of share capital
minus losses. The ideal ratio is 13%
Earnings per share
EPS refers to the relationship between the profit available to the equity share holders and
the number of equity shares.
Operating profit ratio
Operating profit ratio is the ratio between the operating profit (EBDIT) and the revenue
from
service. The ideal operating profit ratio is 10%. It is an indicating factor which
represents the operating efficiency of the business.

Gross profit ratio
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Gross profit ratio is the ratio between the gross profit and the net revenue from services.
The ideal gross profit ratio is 25% to30%. The rate of gross profit must be sufficient to
cover all the operating expenses.
Net profit ratio
Net profit ratio is the ratio between the net profit (EAT) and the net revenue from
services. The rate of net profit indicates the profitability of the concern.
2.9 Limitation of the study:
Some of the data which are confidential to the corporation which is not possible to be
used
Ratios are calculated on the past financial statements and thus forecast for the future
This study is done for the limited period of 6 weeks only
Unable to obtain the current status i.e. the current financial years financial details, because
it is being processed yet
2.10 OVERVIEW OF THE REPORT:

The study has been divided into five chapters.
CHAPTER 1: INTRODUCTION.
This chapter includes an introduction to the broad area of the topic.
CHAPTER 2: RESEARCH DESIGN

Review of literature means examining and analyzing the various literatures available in any field
either for references purposes or for further research. Further research can be done by identifying the
areas which have not been studied and in turn undertaking Research to add value to the existing
literature.
CHAPTER 3: PROFILE OF THE COMPANY.
Profile of the company including history, nature of business products and services, organization
structure capital structure,.
CHAPTER 4: ANALYSIS AND INTERPRETATION OF DATA
This chapter includes the data collected for the purpose of research and the interpretation of that
data. Tables and graphs are used wherever necessary.
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Chapter 5: summary of findings, conclusions and recommendations.
BIBLIOGRAPHY
ANNEXURE
CHAPTER 3
CHAPTER 3
COMPANY
COMPANYPROFILE
PROFILE
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3.0 COMPANY PROFILE

A well-organized financial institution is most predominant for the purpose of
promoting the economy of a region. The development banks like IDBI, IFCI etc are
functioning at the national level and were concentrating their assistance for large-scale
industries. There was a big need to assist the small, cottage and tiny industries.
Karnataka State Financial Corporation was established in March 1959 under
section 3(1) of the State Financial Corporations Act, 1951 with the main objectives of
promoting and developing industrial growth in the State of Karnataka by providing financial
assistance in the form of term loans, equity participation, equipment leasing, etc. In the recent
years, the activities have been mainly confined to term lending, catering to small and medium
scale industries. The Corporation, headquartered at Bangalore, with seven Zonal Offices and
30 Branch Offices is headed by a Chairman and the Managing Director nominated by the
State Government, who is assisted by two Executive Directors and six General Managers
Today, while the state economy is making rapid strides in the global market,
KSFC is moving in tandem. As pioneering and responsive financial institution, KSFC is fine
tuned to fulfil the plans and aspirations of the entrepreneurs by extending all possible
assistance.
In the 52 years of its existence, KSFC has contributed most significantly for the
growth of SSIs backward area development and promotion of first generation entrepreneurs.
Its achievement in these areas is unparalleled. Since inception, KSFC has assisted more than
155000 units with cumulative sanctions of over Rs. 7200 crores out of which more than 50%
is towards SSIs.
KSFC, an ISO 9001:2000 certified organization is proud to have played a
major role in the industrial development in the state. It is also the proud privilege of KSFC to
have assisted many industries that are internationally recognized
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3.1 Organization structure:

The managing director who is appointed by the state government and managers of
KSFC. The board of directors as per the SFC act 1951, assisted by a managing director and
executives committee, carries out the management of KSFC. The finance commissioner of
the state is the chairman of KSFC. KSFC consists of 12 directors, out of which the state
government nominates 4 directors, 1 by the RBI, 2 by the SIDBI and 4 as per the SFC act of
1951. Apart from this, the state government in consultation with IDBI and the board appoints
the managing director.
The corporation has employed one thousand three hundred and thirty two employees
KSFC network encompassing entire Karnataka. KSFC services every nook and corner of
Karnataka with its network of zonal offices, 3 super A grade branch offices 13 A grade
branch offices and 14 B grade branch offices with an empowered and decentralized
administrative system. It is also the only term lending financial institution in the state of
Karnataka with such a widespread network.
There are 1317 employees in corporation out of them 436 are class an officers, 760
are class B employees and 176 are class C employees. Some are working on deputation from
the state government and other. The corporation has a unique combination of professionals on
its pay rolls charted accountants, MBA, M. com, lawyers, engineers etc. thus the diversity of
its human resources is one of the important assets of the corporation.
3.2 Objectives of KSFC
To provide financial assistance in the form of term loan to tiny, small and medium scale
industries in Karnataka.
To provide equipment leasing, working capital and assistance to research and

development activities.
To encourage dispersal of industries to the backward areas to maintain balanced growth

of industries.
To identify and encourage entrepreneurs in the state.
To provide enterprise development programs to women, engineering and technical

students, professionals and agriculturists in the state.
To develop data rely on industrial opportunities.
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KSFC is a fast track term lending financial institution, which extends lease,
financial assistance and hire purchase assistance for acquisition of machinery. It has a
merchant banking department approved as a category-1 merchant banker by the securities
exchange board of India and it looks after management of public issues, under writing of
shares, project report preparation, deferred payment guarantee, and loan syndication.
3.3 Scope of KSFC:

The scope of operation of KSFC if confined
essentially to small and medium scale
enterprises and it is constructed from granting loans to concern whose paid up capital and
reserves together exceed Rs.12 crores. Their aggregate contingent liabilities arising from
guarantee and underwriting arrangement should not ordinarily exceed twice their paid up
capital and reserves, which can extend up to Rs.12 crores with the prior approval of the
government.
Karnataka state financial corporation provides different types of assistance such as
1. Granting loans and advances for period not exceeding 20 years.
2. Subscribing to debenture payable written 20 years.
KSFC is also authorized to act as the agent of government both a central and state level with
any financial institution like IDBI, IFCI etc, in matter connected with grant of loan or advice
subscription.
3.4 ACHIEVEMENTS:
1. Computerization of head office and branch office for better customer service.
2. Establishing of women entrepreneurs guidance cell for guidance and escort service of
women entrepreneurs.
3. Introduction of loan assistance scheme for getting ISO 9000 certification.
4. Premier position among all SFCs of the country with regard to sanctions, disbursements
and recovery.
5. Sanctions during the year under various schemes touched Rs.368.15 crores covering 1195
cases as against Rs. 424.53 crores covering 1326 cases in 2006-07 and Rs.316.20 crores
covering 1161 cases in 2005-06. Cumulative sanctions reached Rs. 8536.53 crores
covering 159225 cases as on 31.3 2008
3.5 Functions of KSFC:
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1. Granting loans and advances or subscribing debentures of industrial concerns.

2. Subscribing stocks/shares of industrial concerns, underwriting of issue of shares,
bonds and debentures of industrial concerns.
3. Guaranteeing the loans raised by industrial concerns.
4. Providing hire purchase assistance for acquisitions industrial equipment/machinery
and transport vehicles.
5. Providing merchant banking facilities like portfolio management broke ship of issue
of shares, organization of bridge appraisal reports, syndication of bank etc.
6. Providing bill-discounting facility for industrial concerns.
7. Acting as agents of central/state government financial institutions.
3.6 KSFC gives preference to the following projects
Promoted by technical entrepreneurs
Located in growth centre and developing areas
Promoted by entrepreneurs of SC, ST, OBC and weaker sections of the society
Projects having high employment potential
Capable of utilizing the local resources
In tune with national growth priorities.
Operational highlights
The operational, administrative and financial restructuring interventions put in place have
yielded positive results and the corporation recorded credible performance in 2007-2008.
The corporation registered a growth of 35% in sanctions and 51% in disbursements.
Consistent efforts in the improvement of assets quality have yielded positive results with
the non-performing assets declining to 33% from 24% as on 31.3.2008.
A separate department was created for taking up infrastructure development projects with
public/private participation.
Credit risk analysis was introduced to improve the quality of appraisal and thereby curtail
the instances of projects becoming NPAs.
Quality policy:
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KSFC endeavours to create satisfied customer through adequate and timely financial
assistants and guidance. This shall be achieved through professional management and
teamwork
Quality objectives:
To provide quality financial service on a continuous basis to the satisfaction of customers.
To ensure customers satisfaction through teamwork and professional management.
To motivate and involve employees to achieve the set organization growth target.
To effectively identify and assist the entrepreneurs in establishing successful business

enterprises.
To transform the organization to a customer centric institution.
Mission:
KSFC is committed to nurture, develop and service the small medium
enterprise sector through need based product and services
3.7 Financial services profile

KSFC is a financial super market. It extends all types of financial assistance in the
form of long-term loans, short-term loans, lease finance, bills discounting, factoring, venture
capital and financial services etc. KSFCs assistance over almost all types of industrial and
service sectors.
As per SFCs act, the following activities are eligible for finance assistance.
Manufacture, preservation or processing of goods.
Mining or development of mines.
Hotel industries
Acquisition of transport vehicles (passengers or goods)
Generation or distribution of electricity or any other form of power.
Maintenance, repair, testing or servicing of machinery and vehicles.
Assembling, repairing or packing any article with the aid of machinery or power.
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Setting up or development of an industrial area or in industrial estate.

Fishing or providing shore facilities of for fishing or maintenance thereof.
Providing weighbridge facilities.
Providing engineering, technical, financial management, marketing or other services of
facilities for industries.
Providing medical, health or other allied services.
Providing
software
or
hardware
service
relating
to
information
technology,
telecommunications or electronics including satellites linkage, audio or visual cable

commission.
Setting up or development of tourism related facilities including amusement parks,
convention centres, restaurants, travel and transport or tourism service agencies and
guidance and counselling services to the tourists.
Construction activity.
Development, maintenance and construction of roads.
Providing commercial complex facilities and community centre including conference
halls, floriculture.
Tissue culture, fish culture, poultry farming, breeding and hatcheries.
Service industries.
Research and development activities.
Constructions or buying of red built area for establishing departmental stores and
shopping halls.
Setting up of medical stores.
Setting of vocational training centre for imparting technical knowledge of entrepreneurs
for setting up and running units efficiently and to produce quality goods.
Setting up of entertainment industry including production of films.
Such offer activities approved by SIDBI from time to time.
3.8 Functional department of the company:

KSFC has spread wings across provenance starting just one office at 1959-1960.
Today KSFC has 30 branch offices, 7zonal offices and 2 field offices. The branch offices
have been categorized as super A grade and B grade depending upon their authority of
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function the loan. Zonal offices will look after 4 to 5 branch office. This structure has helped
the organization to provide customer services effective monitoring and business throughout
the state.
The corporation has effective system and practice of organization planning and
control. Adequate power has been developed to branch manager. Branches have the authority
of function the loan up to Rs.25 lakhs. The zonal manager is give sufficient freedom to take
decision regarding operations of branch and their customer. The five-year plane will be
prepared by the head office along with annual business plane and resources forecast.
Functional department at KSFC:
Entrepreneur guidance cell (EG):
This department guides the entrepreneur regarding matters.
Business opportunities.
Different schemes available at KSFC.
Procedures to be followed to get loan form KSFC etc.
Credits departments:
His department deals with appraisals, disbursements and monitoring. Once the
application is submitted by, the entrepreneurs after duly filling in the same application will be
scrutinized by the EG department for forwarded to credits department for further processing.
Internal audit department:
The most important function of this department is to examine the financial
statement, records and related operations to determine adherence to generally accepted
accounting principles (GAAP) management policies and statutory regulation. The purpose for
analyzing the operation is to convey the management the results of the audit the problems and
the weaknesses, which have been, identify during auditing as to enable the management to
take appropriate measures.
Legal department:
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This department attends all the legal matters affecting the interest of the
corporation. The basic function of this department is to appraise the projects legally which the
entrepreneurs submit for getting loan.
Finance and accounts department:
This department is responsible for maintaining various accounts, ledger, cashbook
and other books of account, income tax, failing of statutory returns and statements.
Business development and credit research department:
This department undertakes mainly research on marketing aspects based on
various factors. It also helps the management to take suitable decisions with regard to the
policy of sanctions. The activities of the department are as follows:
Performing sect oral study regarding new areas.
Preparation of district profiles.
Identification of sectors with substantial growth potential among the existing portfolio.
Analysis of high default ratio Industries and study the reason for the same.
Evaluation of different schemes of KSFC and suggest changes if necessary.
Publishing the KSFC newsletters.
Industrial Revival Group (erstwhile Sick Units Monitoring Cell)
The cell, which has been formed for rehabilitation of potentiality viable sick units,
conduct in depth, studies regarding cases referred and assesses the eligibility for
rehabilitation assistance.
Information Technology department:
It is aiding the management information department. The main objective of this
department is to provide the information about the latest technology available in hardware
and software in the information industry, to different departments. The in-house software
required by this department.
Personnel department:
RKIMCS, Bangalore
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This department deals with personnel related issues. For any organization to run its
operations smoothly, it needs capable, efficient, initiative and hardworking people who
execute the thoughts and aspirations in a result-oriented manner. The main functions of this
department are recruitment, training, welfare and compensation management.
Hire purchase and leasing department:
This department is in charge of leasing and hire purchase activities of the
corporation. This department was started with the introduction of the scheme Equipment
leasing scheme it is a fund based activities managed at the head office. KSFC is the first
state financial corporation to start this scheme.
Treasury department:
It has been given importance from the year 1990 onwards because of the new
challenges faced by KSFC in mobilizing its funds in the area of liberalization, privatization
and globalization (LPG).The main sources of funds was refinancing from IDBI. The various
function of treasury department is estimation of funds for lowest for possible cost.
Recovery department:
This department will look after the recovery of loan disposed to clients. Once the
full amount of loan is disbursed, the responsibility of recovering of the loan will be
transferred to the recovery department. Managers based on the area in which the industry is
located, take up this recovery department.
Strategies followed by recovery invoice for effective leasing recovery:
1. Visit to the place of business.
2. Visit to the office of other term lending institutions.
3. Frequent correspondence with the default unit.
4. Review meetings.
5. Phase of implementation of the project.
6. Study of financial statements.
7. Repayment position.
RKIMCS, Bangalore
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Page

8. Default review committee.

9. Issue of legal notice.
3.9 PRODUCT LIFE CYCLE OF THE COMPANY:

Financial services:
KSFC is a financial supermarket. It extends all types of financial assistance in the form
of long-term loans, in the form of corporate loans to meet shoot terms capital needs, hire
purchase finance, opening of letters of credit to import capital goods etc. merchant banking
and financial services etc. KSFC assistance covers almost all types of industrial and service
sectors.
Other financial services activities:
Strategic alliances entered into with different organizations-UTI, LIC of India, and
IFFCO-Tokyo and IN and FS directed towards fee-based activities to augment income
generation have started yielding results.
UTI mutual fund products
The corporation has tied up with UTI for marketing of its mutual fund
products. Has a result of concerted efforts, the corporation mobilized an impressive
business of Rs. 79.32 crores during the year against the target of Rs.12.75 crores and
earned a commission of Rs. 31.65 lakhs.
Insurance business
The corporation has a strategic tie up with IFFCO/Tokyo and LIC of India for
marketing of their general and life insurance products respectively. During the year, the
corporation got corporate agency license from Insurance Regulatory and Development
Authority (IRDA) for marketing of life insurance products. Insurance training was imparted
to selected staff and corporation mobilized a premium collection of Rs. 1.03 crores during the
RKIMCS, Bangalore
28
Page

year under review. Similarly, the corporation made progress in its general insurance business
and collected a premium of Rs. 2.29 crores and commission 27lakhs.
Monitoring of IPO
The corporation is a recognized financial institution SEBI for acting as monitoring
agency for public issues exceeding Rs. 500 crores. During the year, the corporation took up
the issue monitoring assignments of two more companies a part from the existing the three
companies and earned revenue of Rs. 21 lakhs under this activity
Consulting services
The corporation entered into a MoU with HDMC for providing technical valuation
and certification of the works done by the contractors of HDMC. The corporation
executed the assignments provided by HDMC in this regard and is hopeful of getting
similar assignments from BBMP, MMP etc.
SPV with IL and FS
During the previous year the corporation launched a special purpose vehicle with
IL and FS for taking up services such as project evaluation, business model validation and
similar customer centric financial services. During the year, the corporation completed the
registration of the company with registrar of companies in the name of M/s Karnataka
enterprises solutions Ltd (K-eSol Ltd).
3.10 CITIZENS CHARTER

The Corporation aims at customer satisfaction through Professional Management and
teamwork.
1. THE CORPORATION OFFERS:
Financial assistance for acquiring fixed assets like land, building, plant &machinery and
other miscellaneous assets.
Sanction of Term Loans to new Tiny, Small and Medium enterprises and Services Sector.
Sanction of Term Loans to existing industrial concerns and services sector units for
expansion / modernization / diversification.
RKIMCS, Bangalore
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Sanction of Working Capital Term Loans to meet working capital requirements of

industrial / service enterprises under special schemes.
Operating of Foreign Letter of Credit for import of capital goods.
Rental Discounting and other fee based services.
Provides insurance coverage for assets and other non life insurance products.
Accepts Fixed Deposits for a term of one year and above.
2. FINANCIAL ASSISTANCE - LIMITS OF ACCOMMODATION
Category Maximum loan
1. Proprietary / partnership Rs.200.00 lakhs
2. Corporate bodies (both pvt. & public ltd), registered Co-operative societies Rs.500.00
lakhs
In respect of existing units operating successfully, maximum limit can be extended up to

Rs.800.00 lakhs for category (I).
In respect of category (II), the financial assistance can be sanctioned provided the paid up
capital and free reserves do not exceed Rs.2000.00 lakhs.
If the requirements of the funds for a project are substantial and cannot be extended by
the Corporation alone, then the requirement of loan of such projects can be met in
consortium with other financial institutions.
Minimum loan size is Rs.5.00 lakhs.
3. ACTIVITIES FINANCED BY THE CORPORATION:

1. General Loans are lent for setting up new tiny, small and medium scale enterprises and
service sector units.
2. Hotels / Restaurants.
3. Tourism related facilities (Amusement parks, Convention centre, Restaurants,
Travel & Transport, Tourist service agencies, Mobile canteen / catering).
4. Hospitals / Nursing Homes.
5. Acquiring Electro Medical Equipment, setting up of Medical Stores.
6. Transport Loans (SRTOs & acquisition of private vehicles).
RKIMCS, Bangalore
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7. Industrial Estates, IT Parks, ready built office space, Training Institutions, God owns, and
Warehouses.
8. Group Housing Sector.
9. Construction and purchase of commercial complex.
10. Development / maintenance and construction of road
11. Qualified Professionals (Management, Accounting, Medical Professionals, Architects &
Engineers, Veterinary clinics).
12. Rehabilitation of sick units.
4. AREA OF OPERATION:
The Corporation extends financial assistance for an enterprise in the State of Karnataka
with its network of 29 branches covering all the districts of the State.
KSFC extends loans to industrial units/ services sector established/to be established in
the state of Karnataka industrial concerns having registered office outside the state of
Karnataka can also avail financial assistance provided in the place of business is in Karnataka
and they agree to shift their registered office to the state of Karnataka.
5. APPLICATION FORMS FOR LOAN:
Loan application forms are issued after the proposal is cleared in the Project Clearance
Committee (PCC) meeting. For loans proposals up to Rs.50.00 lakhs Branch Offices will
issue the application forms. For the loans proposals above Rs.50.00 lakhs, loan applications
are issued at Head Office.
6. TIME FRAME FOR PROCESSING SANCTIONS:
New loans up to Rs.35.00 lakhs 21 days Branch office
New loans up to Rs.500.00 lakhs 60 days Head Office
7. A) PRIMARY SECURITY:
The primary security for loan will be the assets financed i.e., land, building & machinery.
RKIMCS, Bangalore
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If working capital loan is provided, the inventories in the form of raw materials, work in
process, finished goods besides bills & book debts are to be pledged / hypothecated.
b) COLLATERAL SECURITY:
All loans are to be backed by collaterals in the form of commercial or residential properties
located in the State of Karnataka or Fixed Deposits or NSCs. Residential properties of third
parties as collateral are discouraged. Assets free of encumbrance charged to the Corporation
will be further charged. In case of corporate loan, in the absence of adequate security in the
form of primary assets, collateral security to the extent of 100% of the loan amount is
insisted in respect of existing units assisted by the Corporation and in respect of other units,
collateral security will be 150% of the loan amount.
Note: The primary & collateral are to be by way of simple mortgage at jurisdictional SRO.
8. DISBURSEMENT OF LOAN:
Loans are disbursed after the promoter brings in stipulated equity / contribution from his
side as stipulated in the terms of sanction & after properties are mortgaged / hypothecated
as per terms of loan & guarantee deeds executed. The extent of disbursement will be in
proportion to the investment made on land, building & machinery. The release towards
machinery will be either after issuing a commitment letter to machinery supplier & after
inspecting machinery & factory site of entrepreneur. Up-front fee is payable at 0.5% of loan
+ applicable service tax, before disbursement.
9. LOAN REPAYMENT:
The loans are normally repayable in 5 to 7 years with a moratorium of 1 to 2 years
depending on DSCR. The repayment will be in monthly / quarterly instalments.
10. PUBLIC GRIEVANCE REDRESSAL:
To redress the grievances of the entrepreneurs, Public Grievance Readdresses Committees
have been set up under the chairmanship of Executive Directors. All grievances will be
heard in 30 days. Acknowledgments however, will be given within 7 days of receipt of the
grievance.
RKIMCS, Bangalore
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11. HELPLINE:
The Corporation has brought out 'Products & Services' brochure. The brochure gives details
of the activities of KSFC, financial services available, various schemes of the Corporation
and procedures for availing the financial assistance. For further information/ details visit
our website
ISO certification
The corporation has obtained the ISO 9001:2000 certifications to the revised
standards from M/s. Bureau of Indian standards (BIS). The head office is following the
quality management system procedures as per the ISO standards. All the documents are
updated, necessary revisions made in the quality system procedures with continual
improvement in all the areas. Quality audits and management review meetings, surveillance
audits are conducted successfully.
Sanctions
Sanctions during the year under various schemes touched Rs.368.15 crores covering 1195
cases as against Rs. 424.53 crores covering 1326 cases in 2006-07 and Rs.316.20 crores
covering 1161 cases in 2005-06. Cumulative sanctions reached Rs. 8536.53 crores covering
159225 cases as on 31.3 2008
SIZEWISE SANCTIONS in 2007-2008
(Amt in lakhs)
SL. NO.
Sanctions
No
Amt
% to the Total
1
2
Sl. No.
3
1
2
Up to Rs.10 lakhs
20
15.32
SIZEWISE SANCTIONS:2008-09
2
(Rs. In crore)
10 lakhs - 45 lakhs
119.29
Sanctions
Amount
66 No.
45 lakhs - 150 lakhs
150 lakhs 300 lakhs

Up to Rs. 10.00 lakhs
500 lakhs
Above300
Rs. lakhs
10.00lakhs
to Rs. 45.00 lakhs
Above 500 lakhs
109.43
32.86
26 424
4
29
23.55
712
No.
Amt
16.90
4.16
55.23
% to the total
32.40
23.77
No.
Amt.
32.75
2.43
29.86
5.80
164.28
0.67
50.14
29.06
29.72
8.93
6.40
67.70
1.00
18.39
368.15
100.00
100.00
RKIMCS, Bangalore
33
12
11
95
Page

Above Rs. 45.00 lakhs to Rs. 150.00 lakhs
237
169.63
16.69
30.01
Above Rs. 150.00 lakhs to Rs. 300.00

lakhs
28
62.41
1.97
11.04
Above Rs. 300.00 lakhs to Rs. 500.00

lakhs
10
42.79
0.70
7.57
93.38
0.64
16.52
1420
565.24
100.00
100.00
Above Rs. 500.00 lakhs
6
Total
SIZEWISE SANCTIONS:2009-2010
(Rs. In crore)
Sl. No.
Sanctions
NO.
Amount
% to the total
No.
Amt.
Up to Rs. 10.00 lakhs
203
15.61
13.89
2.47
Above Rs. 10.00 lakhs to
557
102.80
38.13
16.28
552
216.77
37.78
1
2
Rs. 45.00 lakhs
3
34.33
Rs. 150.00 lakhs
91
126.54
6.23
20.04
43
97.83
2.94
15.49
15
71.94
1.03
11.39
4
Rs. 300.00 lakhs
5
Rs. 500.00 lakhs
Above Rs. 500.00 lakhs
6
1461
Total
631.49
100.00
100.00
SECTOR WISE CLASSIFICATION OF LOANS In 2007-2008 (Amt Rs. In lakhs)
RKIMCS, Bangalore
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Page

SL
Sanctions (effective)
Disbursements
No.
Sector
2007-08
Since inception up to 31-12-
2007-08
2008
Since inception up
to
31-12-2008
No.
Amt
No.
Amt
Amt
Amt
SRTOs
26
172.85
37234
66205.31
154.87
64357.95
SS sectors
759
16270.67
90909
377199.46
16572.84
374676.56
a. Tiny sector
600
9884.57
55220
126844.83
9791.43
126781.97
b. Ancillaries
48.50
384
2312.47
0.00
1940.06
c. Other SSIs
157
6337.60
35305
248042.16
6781.41
245954.53
Others
360
18904.25
11433
214077.59
13584.91
194251.63
Total
1145
35347.77
139576
657482.36
30312.62
633286.14
SECTOR WISE CLASSIFICATION OF LOANS in 2008-2009

(Amt Rs. In lakhs)
SL.NO
Sector
2008-09
Since inception up to 31-3-2009
2008-09
Since inception
up
to 31-3-2009
No.
Amt
No.
Amt
Amt
Amt
SRTOs
28
192.70
37257
66360.10
154.87
64524.69
SS sectors
896
25583.13
91736
399621.10
16572.84
392486.24
a. Tiny sector
680
12590.47
55927
135613.92
9791.43
134236.41
b. Ancillaries
328.00
388
2607.97
0.00
1986.56
c. Other SSIs
211
12664.66
35421
261399.21
6781.41
256263.27
Others
455
28936.28
11854
23459.21
13584.91
214666.78
Total
1379
54712.09
140847
705440.41
30312.62
671677.69
SECTOR WISE CLASSIFICATION OF LOANS In 2009-2010

(Amt Rs. In lakhs)
RKIMCS, Bangalore
35
Page

SLNO
Sector
2009-10
Since inception up to31-3-2010
2009-10
Since inception
up to31-3-2010
No.
Amt
No.
Amt
Amt
Amt
SRTOs
66
573.54
37319
66914.17
420.65
64945.34
SS sectors
860
27280.55
92529
423054.15
21960.10
414446.34
a. Tiny sector
664
14822.67.67
56542
148496.77
11643.47
145879.88
b. Ancillaries
328.00
388
2355.47
13.50
2000.06
c. Other SSIs
194
12440.38
35599
272201.91
10303.13
266566.40
Others
478
30452.83
12293
263903.95
21057.77
235724.53
Total
1404
58306.92
142141
753872.27
43438.52
715116.21
INDUSTRYWISE SANCTIONS in 2007-2008
INDUSTRY
Hotel/ restaurant
Food
Non-metallic products
Engineering
Miscellaneous mfg
Printing and publishing
Industrial estate
Chemicals
Textiles and readymade
161.54
59.07
31.84
27.27
21.55
18.42
8.82
8.2
7.37
43.88
16.04
8.65
7.41
5.85
5
2.4
2.23
2
Transport
Others
Total
6.45
17.62
368.15
1.75
4.79
10
RKIMCS, Bangalore
36
Rs. In crores
Amount
% to the
total
Page

INDUSTRYWISE SANCTIONS-2008-09
(Rs. in crore)
Sl. No.
Industry
Amount
Hotels / Construction Activities
244.11
43.19
Engineering
40.14
7.10
Food
101.73
18.00
Miscellaneous manufacturing
36.90
6.53
Non-metallic Products
56.98
10.08
Textiles & Readymade Garments
12.84
2.27
Printing & Publishing
9.13
1.61
Chemicals
8.48
1.50
Industrial Estate
2.22
0.39
10
Transport / Tpt equipment
13.15
2.33
11
Others
39.56
7.00
565.24
100.00
Total
RKIMCS, Bangalore
37
% to the total
Page

INDUSTRYWISE SANCTIONS in 2009-2010

Sl No.
Industry
Amount
% to The total
Hotels / Construction Activities
286.38
45.35
Food
95.14
15.07
Engineering
68.71
10.88
Non-Metallic Products
43.79
6.93
Miscellaneous Manufacturing
43.61
6.90
Basic Metal
21.05
3.33
Printing & Publishing
15.73
2.49
Textiles & Readymade Garments
14.25
2.26
Paper and Paper Products
5.04
0.80
10
Chemicals
4.43
0.70
11
Transport / Tpt. equipment
14.32
2.27
19.04
3.02
631.49
100.00
12
Others
Tota
RKIMCS, Bangalore
38
Page

Sanctions:
Sanctions of loans during the year 2009-10, under various schemes touched Rs. 631.49 crore
covering 1,461 cases as against Rs. 565.24 crore covering 1,420 cases during 2008-09.
Cumulative sanctions reached Rs. 9,733.26 crore covering 1, 62,106 cases as on 31-03-2010.
Disbursement:
Disbursements made during the year touched Rs. 434.39 crore as against Rs. 383.92 crore
during the year 2008-09. Cumulative disbursements reached Rs. 7,647.84 crore as on
31.03.2010.
Recovery:
The total recovery during the year stood at Rs. 554.94 crore as compared to Rs. 501.22 crore
made in the previous year. Recovery in respect of term loans was Rs. 544.01 crore, leasing
0.21crore and Rs. 10.72 crore in respect of financial services.
New industrial policy GOK (2001-06)
The new industrial policy of the government of Karnataka for a period of 5yrs has come
into force with effect from 1-4-2001 and will be in force till 31-3-2006. For details,
entrepreneurs are advised to refer to the booklet on new industrial policy brought out by the
department of industries and commerce, government of Karnataka.
For the purpose of incentives concessions on new investment made in Industrial sector
or after 1-4-2001, year state has been classified in to 4 zones, namely
RKIMCS, Bangalore
39
Page

Developed area
Zone-A
Developing areas
Zone-B
Backward areas
Zone-C
Growth centres &main growth Zone-D

centres,
specialized
industrial
parks and some taluks

Investment subsidy:
The government provides subsidy to all new tiny/small scale sector industries except
in zone-A. The investment subsidy for tiny industries will be 10% of the value of fixed assets
subject to a maximum of Rs.5.00 lakhs in zone-B. In zone C the investment subsidy for tiny
industries will be 20% of the value of fixed assets subject to a maximum of Rs.10.00 lakhs. In
these zones, only tiny industries are eligible for investment of the subsidies. In zone-D both
tiny and SSI are eligible for subsidy to an extent of 25% of the value of fixed assets subject to
a maximum of Rs.12.50 lakhs.
Committee approach
The committee approach for decision making was continued ensuring efficiency and
transparency in working systems. Various committees set up for project clearance, sanction,
disbursement and recovery of loans functioned well during the year.
The Project Clearance Committee
Comprising of Senior Executives of the Corporation and chaired by the Managing Director
met 19 times and cleared 122 proposals during the year under review.
One Time Settlement
Proposals were screened in an open and transparent environment through committee
approach. During the year 2007-08, 347 proposals of branch offices cases were screened of
which 165 cases cleared and 135 proposals of head office cases were screened of which 63
proposals were cleared recommending suitable settlement packa
RKIMCS, Bangalore
40
Page

CHAPTER 4
CHAPTER 4
ANALYSIS
ANALYSISAND
AND
INTERPRETATION
INTERPRETATION
RKIMCS, Bangalore
41
Page

4.1 TABLE SHOWING SANCTIONS PATTERN DURING THE LAST EIGHT YEARS
Amt in lakhs
YEAR
SANCTIONS
1.
2002-03
33303.98
2.
2003-04
29969.76
3.
2004-05
24175.95
4.
2005-06
31620.50
5.
2006-07
42452.94
6.
2007-08
36815.00
7.
2008-09
56524.00
8.
2009-10
63149.00
RKIMCS, Bangalore
42
Page

4.2 TABLE SHOWING DISBURSEMENTS PATTERN DURING THE

LAST EIGHT YEARS
Amt in lakhs
SL.NO
YEAR
DISBURSEMENTS
1.
2002-03
26124.91
2.
2003-04
24286.44
3.
2004-05
23983.49
4.
2005-06
19985.66
5.
2006-07
31039.30
6.
2007-08
30319.30
7.
2008-09
38319.00
8.
2009-10
43439.00
RKIMCS, Bangalore
43
Page

4.3 TABLE SHOWING RECOVERY PATTERN DURING THE LAST

EIGHT YEARS
Amt in lakhs
SL.NO
YEAR
RECOVERY
1.
2002-03
46695.10
2.
2003-04
52822.52
3.
2004-05
55894.67
4.
2005-06
53420.65
5.
2006-07
50274.00
6.
2007-08
56114.00
7.
2008-09
50122.00
8.
2009-10
55494.00
4.4 CURRENT RATIO
RKIMCS, Bangalore
44
Page

CURRENT RATIO= CURRENT ASSETS / CURRENT LIABILITIES

Amt in lakhs.
Years
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
C. assets
15419.72
17544.8
23509.44
34517.42
19612.14
22937.62
17214.15
C.liabilities
16518.47
11219.28
18577.85
12417.41
7571.07
18900.97
9292.14
9453.41
0.9335
1.5638
1.2654
2.7799
2.590
1.21356
1.8525
1.2388
Ratio
RKIMCS, Bangalore
45
2008-09
2009-10
11710.90
Page

Inference:
According to this analysis there is fluctuation in the ratios year by year. This resulted in the
simultaneous variations in the proportion of current liabilities and current assets. In the year
2005-06and 2006-07, the ratios are up to the ideal level. But again it is reduced. KSFC has to
increase its efficiency to meet its current obligations out of its current assets.
RKIMCS, Bangalore
46
Page

4.5 DEBT-EQUITY RATIO

DEBT-EQUITY RATIO = DEBT/ EQUITY
Amt in lakhs.
Years
2002-03
2003-04
2004-05
2005-06
2006-07
Debt capital
197621.43
183410.48
176086.89
177726.52
Equity capital
12892.55
12892.55
12892.55
Ratio
15.3283
14.226
13.658
RKIMCS, Bangalore
47
2007-08
2008-2009
2009-2010
166147.80
157059.88
157059.88
166147.80
12892.55
12892.55
33108.24
58054.77
70737.82
13.7852
12.887
4.743
2.705
2.348
Page

Inference:
The debt-equity ratio is not at all in the ideal position. The ratio is far off from the ideal
position. It is largely depending on the term borrowings so, its long term solvency rate is
risky. The concern is to offer the return only to the fixed extent as equity dividend is
negligible due to its part in the overall capital. But during the previous year it is coming down
RKIMCS, Bangalore
48
Page

4.6 RETURN ON TOTAL ASSETS RATIO

RETURN ON TOTAL ASSETS RATIO = (NET PROFIT / TOTAL
REALIZABLE ASSETS)*100
Amt in lakhs
Years
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-2009
2009-2010
Net profit
-13774.34
87.31
274.37
526.17
1295.37
6216.74
-3984.09
29615
Total assets
166354.86
146932.03
147241.37
142720.56
126520.87
155194.58
166541.87
197551.8
Ratios
-8.28%
0.06%
0.2%
0.37%
1.02%
4.005%
-2.9422
14.9910
RKIMCS, Bangalore
49
Page

Interference:
The above ratio is one of the predominant ratios to measure the profitable capacity or its
potentiality to make profit with the input of its fixed assets. It is considered as the magic eye
for the management. The concern failed to achieve the ideal ratio for seven years. Only in the
previous year it is nearer to the ideal ratio i.e., 14%
RKIMCS, Bangalore
50
Page

4.7 RETURN ON INVESTMENT RATIO:RETURN ON INVESTMENT RATIO = (PROFIT / CAPITAL EMPLOYED)*100
Amt in lakhs.
Years
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
Profit
-9297.79
-101.03
79.40
565.17
1339.56
6329.70
-3917.34
301.61
Capital employed
210088.98
195878.03
188554.44
190194.07
178615.34
184527.43
157249.73
188098.39
Ratio
-4.42
-0.052
0.042
0.3
0.75
3.43
-2.300
0.160
RKIMCS, Bangalore
51
Page

Inference:
After analysing the return on the capital employed it is found out that even though the
concern was in loss in the beginning (2002-03), it started earning profit later. As there is no
standard ratio, in this (2007-2008) earning cannot be said as ideal ratio because the rate of
earning on this criteria is only 3.43%
RKIMCS, Bangalore
52
Page

4.8 RETURN ON EQUITY RATIO

RETURN ON EQUITY RATIO = (NET PROFIT / NET WORTH)*100
Amt in lakhs
Years
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-2009
2009-2010
Net Profit
-13774.34
87.31
274.37
526.17
1295.37
6216.74
-3984.09
2961.50
Net worth
12892.55
12892.55
12892.55
12892.55
12892.55
33108.24
58054.77
70737.82
Ratio
-106
0.677
2.128
4.08
10.05
18.77
-0.6862
0.04186
RKIMCS, Bangalore
53
Page

Inference:
This ratio is indicating the productivity of the share holders fund. In the year 2002-03, there
was a huge loss but later the loss ratio was reduced by increasing the operational efficiency
and better managerial efficiency.
RKIMCS, Bangalore
54
Page

4.9 SANCTIONS TO CAPITAL EMPLOYED RATIO

SANCTIONS TO CAPITAL EMPLOYED= SANCTIONS/ CAPITAL EMPLOYED
(In lakhs)
YEAR
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
SANCTIONS
33303.98
29969.76
24175.95
31620.50
42452.94
36815.00
56524.00
63149
CAPITAL
210088.98
195878.03
188554.44
190194.07
178615.34
184527.43
157249.73
188098.39
0.15852
0.153002
0.1282
0.1662
0.2377
0.19950
0.3594
0.3357
EMPLOYED
RATIOS
RKIMCS, Bangalore
55
Page

Inference:
The sanction to capital employed ratio in the year 2002-03, 2003-04 indicates that long term
capital have been utilized well it also indicates there is neither over capitalization nor under
capitalization. It serves as a guide in the proper administration of capital. In the later year
2006-07 here, the ratio between sanction and disbursement is directly correlated.2008-09 and
2009-2010 sanction to capital employed ratio is respectively 0.394 and 0.3357.
RKIMCS, Bangalore
56
Page

4.10 DISBURSEMENT TO SANCTION RATIO

DISBURSEMENT TO SANCTION=DISBURSEMENT/SANCTION
(In lakhs)
YEAR
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
DISBURSEMENTS
26124.91
24286.44
23983.49
19985.66
31039.30
30313.00
50122.00
43439.00
SANCTION
33303.98
29969.76
24175.95
31620.50
42452.94
36815.00
56524.00
63149.00
0.9920
0.6320
0.7311
0.8233
0.8867
0.6878
RATIOS
0.7844
0.8103
RKIMCS, Bangalore
57
Page

Inference:
During the year 2002-03, 2003-04 the ratio is neither to ideal state. In the year 2004-05 it is
ideal but in latter stages it is declined but in 2007-08,2008-09 ideal stag againbut in 20092010, It declined and it shows the outflow of fund through sanction is good.
RKIMCS, Bangalore
58
Page

4.11 RECOVERY TO SANCTION RATIO

RECOVERY TO SANCTION=RECOVERY/SANCTION
(In lakhs)
YEAR
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
RECOVERY
46695.10
52822.52
55894.67
53420.65
50274.00
56114.00
38392.00
55494.00
SANCTION
33303.98
29969.76
24175.95
31620.50
42452.94
36815.00
56524.00
63149.00
RATIOS
1.4201
1.7625
2.312
1.6894
1.1842
1.5242
0.67921
0.87877
RKIMCS, Bangalore
59
Page

Inference:
The corporation recovery performance is excellent year by year in 2004-05 it is more
improved up to the mark. The inflow of cash in this year is too good; if NPA is neglected in
the recovery the inflow is good. In the year 2005-06 and 2006-07 again it decreased then
slowly it start increased in the year 2007-08 and decreased in the year 2008-09 but later it
increased in the year 2009-2010 due to the sanctions made.
RKIMCS, Bangalore
60
Page

4.12 GROSS PROFIT TO PROPRIETORS FUND RATIO

GROSS PROFIT TO PROPRIETORS FUND=GROSS PROFIT/PROPRIETORS
YEAR
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
GROSS PROFIT
-9297.79
-101.03
79.40
564.17
1339.56
6329.70
-3917.34
301.61
PROPRIETORS FUND
12892.55
12892.55
12892.55
12892.55
12892.55
12892.55
12892.55
12892.55
RATIOS
-0.7211
-0.0078
-0.0061
0.0437
0.1039
0.4909
-0.30384
0.0233
RKIMCS, Bangalore
61
Page

RKIMCS, Bangalore
62
Page

CHAPTER 5
CHAPTER 5
FINDINGS,
FINDINGS,SUGGESTION
SUGGESTIONAND
AND
CONCLUSIONS
CONCLUSIONS
RKIMCS, Bangalore
63
Page
EFFECTIVENESS OF SANCTIONING, DISBURSEMENTS AND RECOVERY OF LOANS TO THE INDUSTRIAL ESTABLISHMENTS BY KSFC
FINDINGS ( Summary of ratios analyzed)

Years
SL
Ratios
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
No.
1
Current ratio
0.9335
1.5638
1.2654
2.7799
2.590
1.4779
1.8525
1.2388
Debt-Equity ratio
15.3283
14.226
13.658
13.7852
12.887
4.743
2.705
2.348
Return on total assets ratio
-8.28
0.06
0.2
0.37
1.02
4.005
-2.9422
14.9910
Return on investments ratio
-4.42
-0.052
0.042
0.3
0.75
3.43
-2.300
0.160
Return on equity ratio
-106
0.677
2.128
4.08
10.05
18.77
-0.6262
0.04186
Sanction to capital
0.15852
0.153002
0.1282
0.1662
0.2377
0.19950
0.3594
0.3357
0.7844
0.8103
0.9920
0.6320
0.7311
0.8233
0.8867
0.6878
employed ratio
7
Disbursement to sanction
ratio
Recovery to sanction ratio
1.4201
1.7625
2.312
1.6894
1.1842
1.5242
0.6792
0.87877
Gross proprietors fund
-0.7211
-0.0078
-0.0061
0.0437
0.1039
0.4909
-0.30384
0.0233
ratio
RKIMCS, Bangalore
Page 64

Summary of Findings
During the years 2002-03, 03-04 and 04-05 KSFC failed to maintain the standard ratio
level i.e., 2:1 but later the corporation started stabilizing it.
The financial structure of the corporation is weak as the stake of the long term creditors is
too high. It is running mainly in the borrowed funds.
There is a poor return on capital employed at any point of time. It is incurring losses
during the years 2002-03, 03-04. But later there is a development but it is not up to the
mark.
Recently during the years 2006-07 and 07-08 the corporation started earning the profit to
the considerable level when compared to preceding years. Now the corporation is
reaching the ideal level.
In 2003-2004 The disbursements is reduced, the recovery was good during this year. The
outstanding receivable was decrees during the year. The NPA % has reduced, which is
desirable for the company.
The gap between the sanctioned limits of loans and the extent of utilization are
minimized.
The bank is planning properly to recover the over dues, as this is the first step towards
rehabilitation.
No loans are given without securities and securities. The securities received by the
customers are properly valued before lending any loans.
The sanctioned loans to the borrowers are disbursed to them in at least 2-3 instalments so
that they do not appeal for additional loans.
RKIMCS, Bangalore
65
Page

SUGGESTIONS:
The corporation has to take steps to cut down its cost of recovery and other related
expenditures during the operations
KSFC can implement new strategies to develop its operational efficiency.
The long term solvency position of the corporation is under severe threat. It has to keep
construct its fixed assets to have hold on the future uncertainties.
KSFC can enlarge its financial assistance to the fast growing and high earning industries
and business establishments as it reduces the bad debts.
The short term liquidity position is excellent so, the corporation can utilize that for the
short term assistance. It improves the fund rotation and cash cycle.
The managerial efficiency is up to the required standard but the strategic level programs
and policies need to be changed slightly in such a way to increase the earning by
decreasing the bad debts and operating costs.
RKIMCS, Bangalore
66
Page

CONCLUSION:
Various ratios have been analyzed; this helps to know the current financial status of the
corporation. With this information, it is possible to predict the future of the concern in
some crucial criteria.
The concern is providing financial services to various business establishments. The

recovery strategy is better when compared to other similar institutions in the state.
Karnataka State Financial Corporation has made favourable progress during the preceding
three years i.e., 2005 to 2007
The overall performance of the corporation is satisfactory as its operational efficiency and
managerial efficiency are showing the positive symbol of the growth.
To conclude, it can be stated that the corporation is bound to have very prosperous years
in future as it is keep developing and growing frequently even in the current recession
period.
RKIMCS, Bangalore
67
Page

BIBLIOGRAPHY
BIBLIOGRAPHY
RKIMCS, Bangalore
68
Page

BIBLIOGRAPHY
AUTHOR
TITLE OF THE BOOKS
PUBLICATION
YEAR OFPUBLISHED
EDITION
Prasanna Chandra
Financial management
Himalaya publication
2008
6th
I M Pandey
Tata mc Graw hill
2008
9th
B.S.Raman
Management accounting
Himalaya publication
2006
6th
Khan jain
Tata mc Graw hill
2005
4th
R.M.Srivastava
Himalaya publishing
1998
2nd
policy
house
NEWS PAPERS:
The Hindu
Times of India
Deccan Herald
WEBSITES:
www.ksfc.in
www.indiastat.com
ARTICLE, REPORT:
Commercial, Industrial Loans Up $7.9B.

Source: American Banker; 1/29/2007
Appraisal of a rural co-operative with the thrust on rural development

(Loan Recovery): an empirical study.
Authors: Chakrabarty, Amit K. Ghosh, Krishnamay
Source: International Journal of Social Economics 2009
In the Shadows of India's Loan Boom.
Source: Wall Street Journal - Eastern Edition; 1/8/2008
Authors: Engineer, Tariq Bellman, Eric
Financing of urban services in India: a case for appropriate pricing and
Cost recovery
Authors:Mehta,Dinesh,Pathak, Pushpa Source: Habitat International; Dec1998
RKIMCS, Bangalore
69
Page

ANNEXURE
ANNEXURE
RKIMCS, Bangalore
70
Page

OPERATIONS AT A GLANCE
(Amt in crores)
Particulars
2004-05
2005-06
2006-07
2007-08
Since
inception
Paid up capital at the year end.
97.84
97.84
97.84
97.84
1244
1161
1326
1195
159225
242.87
316.20
424.53
368.15
8536.53
779
788
795
103595
131.79
165.00
178.53
173.05
4459.42
240.34
199.86
310.39
303.13
6829.53
Loans outstanding
1455.74
1342.28
1320.71
1264.58
Recoveries
582.17
555.06
502.74
561.14
Percentage of NPA
37%
46%
33%
24%
Income
217.95
210.50
195.71
265.21
Expenditure
217.16
204.50
182.31
201.92
Operating profit
7.76
8.56
17.32
31.66
Gross sanctions:
a. Number
b. Amount
Assistance to SSIs
a. Number
b. Amount
Disbursements
RKIMCS, Bangalore
71
875
Page

KARNATAKA STATE FINANCIAL CORPORATION

Balance sheet
(Rs. In lakhs)
Particulars
Schedule
As on
As on
As on
As on
As on
31-3-2010
31-3-2009
31-03-2008
31-03-2007
31-03-2006
CAPITAL AND LIABILITIES
Share capital
65240.09
52488.06
27467.55
12467.55
12467.55
Loan pending conversion to
0.00
917.69
917.69
917.69
917.69
5492.73
5566.71
5640.69
425.00
425.00
166586.60
161945.34
156142.19
165230.10
176808.83
9453.41
9292.14
18900.97
7571.77
12417.41
246772.83
230209.94
209069.08
186612.11
203036.48
4995.99
4871.07
11563.87
6979.35
6498.37
52879.37
35271072
15371.17
369.91
331.86
111629.19
107268.86
105734.63
105790.61
107049.43
6011.58
6094.41
6155.17
748.21
821.85
11710.90
17214.15
22937.62
14741.07
22953.55
57562.44
57858.59
53874.50
60091.24
60315.92
246772.83
230209.94
209069.08
186612.11
203036.48
capital
Reserve
fund
and
other
reserves
Term borrowings
current
liabilities
and
provisions
TOTAL
PROPERTIES ND ASSETS
Cash and bank balances
Investments
Loans and advances
Fixed assets
Current assets
F
G
H
I
J
P/L Account balance
TOTAL
RKIMCS, Bangalore
72
Page

KARNATAKA FINANCIAL CORPORATION

Balance sheet
(Rs. In lakhs)
Particulars
Schedule
As on
As on
As on
31-03-2005
31-03-2004
31-03-2003
CAPITAL AND LIABILITIES
Share capital
12467.55
12467.55
12467.55
Loan pending conversion to capital
917.69
917.69
917.69
Reserve fund and other reserves
425.00
425.00
425.00
Term borrowings
175169.20
182492.79
196703.74
current liabilities and provisions
18577.85
11219.28
16518.47
207557.29
207522.31
12401.70
4655.88
3131.35
444.06
515.50
793.21
122265.73
127505.27
147942.17
Current assets
1022.14
1366.46
2199.76
P/L Account balance
11107.74
12888.92
12288.37
60315.91
60590.28
60677.59
TOTAL
227032.45
PROPERTIES ND ASSETS
Cash and bank balances

Investments
Loans and advances
Fixed assets
TOTAL
207557.28
207522.31
227032.45

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH, 2008(IN LAKHS)
RKIMCS, Bangalore
73
Page

PARTICULARS

Schedule
Year ended
Year ended
Year ended
31-3-2010
INCOME
Interest income
Other income
K
L
TOTAL
18214.48
2685.55
20900.03
Year ended
Year ended
31-03-2006
31-3-2009
31-03-2008
31-03-2007
16923.76
5560.90
18984.75
7536.72
16721.70
2849.70
22484.66
28621.47
18671.40
17394.87
3621.19
21016.06
EXPENDITURE
Interest and other financial
expanse.
13706.49
16384.22
13634.01
14110.66
16780.62
4152.50
4027.95
3383.73
2856.76
2581.67
Personnel expenses
880.53
889.29
808.97
827.89
758.22
1050.96
219.34
413.39
355.81
155.81
621
358.04
1875.56
0.00
0.00
186.94
148.33
76.11
80.72
174.57
0.00
2O181.77
18231.84
20450.89
1339.56
44.19
0.00
0.00
247.05
823.64
565.17
39.00
0.00
0.00
157.82
368.35
Administrative expenses
Bad debts written off
Provisions towards
Contingencies
Depreciation
TOTAL
Profit before tax

Less: provision for fringe
benefits
Less: provision for wealth
tax
Less: provision for income
tax prior yrs
Profit after tax

Less: adjusted towards
dividend deficit account
Less: Dividend payable to
GOK
Less: brought forward loss
from previous year
Deficit carried to Balance
sheet
20598.42
4374.8
26402.05
301.61
-3917.39
41.00
4.96
0.00
8.50
1.92
0.00
58.0
8.70
0.00
8.50
63.466329.7
0.00
0.00
--6031592
296.15
-57858.59
-57562.4
-3984.09
53874.50
-60091.21
6216.74
-60315.92
1295.37
526.17
57858.59
-53784.50
-60091.24
-60315.92
PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH, 2008(Amt in lakhs)
RKIMCS, Bangalore
74
Page

PARTICULARS
Schedule
Year ended
Year ended
Year ended
31-03-2005
31-03-2004
31-03-2003
INCOME
Interest income
20531.47
20798.22
18104.98
Other income
1264.50
2399.55
1833.68
TOTAL
21795.97
23197.77
19938.66
Interest and other financial expanse.
17670.37
18740.43
23889.30
Personnel expenses
2584.28
2280.32
2532.31
Administrative expenses
764.85
766.49
784.40
340.80
792.35
1193.32
EXPENDITURE
Bad debts written off

Provisions towards contingencies
0.00
0.00
0.00
Depreciation
356.28
719.21
837.12
21716.58
23298.80
29236.45
79.40
-101.03
-9297.79
0.00
0.00
0.00
17.93
0.00
0.00
0.00
0.00
0.00
177.04
188.34
-4476.55
274.37
87.31
--13774.34
0.00
0.00
0.00
0.00
0.00
0.00
- 60590.28
-60677.59
-46903.25
TOTAL
Profit before tax
Less: provision for fringe benefits
Less: provision for wealth tax
Less: provision for income tax prior yrs
Add: last years excess provision
Profit after tax

Less: adjusted towards dividend deficit account
Less: Dividend payable to GOK
Less: brought forward loss from previous year
Deficit carried to Balance sheet
-60315.91
RKIMCS, Bangalore
75
-60590.28
-60677.59
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EFFECTIVENESS OF SANCTIONING, DISBURSEMENTS AND RECOVERY OF LOANS TO THE INDUSTRIAL

EFFECTIVENESS OF SANCTIONING, DISBURSEMENTS AND RECOVERY OF LOANS TO THE INDUSTRIAL

1.0 Executive summary

The overall performance of the corporation is satisfactory as its operational efficiency

EFFECTIVENESS OF SANCTIONING, DISBURSEMENTS AND RECOVERY OF LOANS TO THE INDUSTRIAL

1.2 ORIGIN OF THE INDUSTRY

EFFECTIVENESS OF SANCTIONING, DISBURSEMENTS AND RECOVERY OF LOANS TO THE INDUSTRIAL

1.3 Growth and development of the Industry

EFFECTIVENESS OF SANCTIONING, DISBURSEMENTS AND RECOVERY OF LOANS TO THE INDUSTRIAL

1.4 State Financial Corporation (SFCs)

EFFECTIVENESS OF SANCTIONING, DISBURSEMENTS AND RECOVERY OF LOANS TO THE INDUSTRIAL

8. Jammu and Kashmir state financial corporation

EFFECTIVENESS OF SANCTIONING, DISBURSEMENTS AND RECOVERY OF LOANS TO THE INDUSTRIAL

EFFECTIVENESS OF SANCTIONING, DISBURSEMENTS AND RECOVERY OF LOANS TO THE INDUSTRIAL

EFFECTIVENESS OF SANCTIONING, DISBURSEMENTS AND RECOVERY OF LOANS TO THE INDUSTRIAL

2.1 TITLE OF THE STUDY:

2.2 STATEMENT OF THE PROBLEM

2.3 REVIEW OF LITERATURE:

EFFECTIVENESS OF SANCTIONING, DISBURSEMENTS AND RECOVERY OF LOANS TO THE INDUSTRIAL

2.4 SCOPE OF THE STUDY:

2.5 OBJECTIVES OF THE STUDY

2.7 DATA COLLECTIONPrimary data:

EFFECTIVENESS OF SANCTIONING, DISBURSEMENTS AND RECOVERY OF LOANS TO THE INDUSTRIAL

2.8 RESEARCH TOOL ANALYSIS:

EFFECTIVENESS OF SANCTIONING, DISBURSEMENTS AND RECOVERY OF LOANS TO THE INDUSTRIAL

EFFECTIVENESS OF SANCTIONING, DISBURSEMENTS AND RECOVERY OF LOANS TO THE INDUSTRIAL

Advantages of ratio analysis

Limitations of ratio analysis

Ratios used for the analysis

EFFECTIVENESS OF SANCTIONING, DISBURSEMENTS AND RECOVERY OF LOANS TO THE INDUSTRIAL

EFFECTIVENESS OF SANCTIONING, DISBURSEMENTS AND RECOVERY OF LOANS TO THE INDUSTRIAL

EFFECTIVENESS OF SANCTIONING, DISBURSEMENTS AND RECOVERY OF LOANS TO THE INDUSTRIAL

represents the operating efficiency of the business.

EFFECTIVENESS OF SANCTIONING, DISBURSEMENTS AND RECOVERY OF LOANS TO THE INDUSTRIAL

2.9 Limitation of the study:

This study is done for the limited period of 6 weeks only

2.10 OVERVIEW OF THE REPORT:

CHAPTER 2: RESEARCH DESIGN

EFFECTIVENESS OF SANCTIONING, DISBURSEMENTS AND RECOVERY OF LOANS TO THE INDUSTRIAL

Chapter 5: summary of findings, conclusions and recommendations.

EFFECTIVENESS OF SANCTIONING, DISBURSEMENTS AND RECOVERY OF LOANS TO THE INDUSTRIAL

3.0 COMPANY PROFILE

EFFECTIVENESS OF SANCTIONING, DISBURSEMENTS AND RECOVERY OF LOANS TO THE INDUSTRIAL

3.1 Organization structure:

3.2 Objectives of KSFC

To provide equipment leasing, working capital and assistance to research and

To encourage dispersal of industries to the backward areas to maintain balanced growth

To identify and encourage entrepreneurs in the state.

To provide enterprise development programs to women, engineering and technical

To develop data rely on industrial opportunities.

EFFECTIVENESS OF SANCTIONING, DISBURSEMENTS AND RECOVERY OF LOANS TO THE INDUSTRIAL

3.3 Scope of KSFC:

essentially to small and medium scale

3.5 Functions of KSFC:

EFFECTIVENESS OF SANCTIONING, DISBURSEMENTS AND RECOVERY OF LOANS TO THE INDUSTRIAL

1. Granting loans and advances or subscribing debentures of industrial concerns.

3.6 KSFC gives preference to the following projects

Promoted by technical entrepreneurs

Located in growth centre and developing areas

Projects having high employment potential

Capable of utilizing the local resources

In tune with national growth priorities.

The corporation registered a growth of 35% in sanctions and 51% in disbursements.