Uttar Pradesh Financial Corporation

INTRODUCTION

The Uttar Pradesh Financial Corporation was established on 1^st November 1954 under the state financial corporation Act 1951.Uttar Pradesh financial corporation took a humble step for the industrial development at the state of Uttar Pradesh by providing financial assistance to upcoming small and medium scale industries in the state of Uttar Pradesh and Uttranchal also for modernisation, diversification and expansion of existing

Industrial units.

UPFC plays a vital role in the order to make the financing activities efficient & thereby develops the economy of the state.UPFC has it’s head office at 14/88, Civil Lines, Kanpur.UPFC has 19 Regional Offices that are spread throughout the state of U.P. The objective of Regional Offices is to ensure greater efficiency and providing quicker, faster,and quality services with regard to sanction, disbursement,and recovery of loans. The Regional Offices has been successful to a great extent in achieving their objective of services to their client.

The state government with the consent of IDBI appoints the M.D. of the corporation. He is a whole time officer of the corporation and assisted by a team of officers.

Ø Corporation is funded through:

Ø Loan from State Government

Ø Refinance from IDBI/SIDBI

Ø Bonds (SLR as well as Private Placement Bonds)

Ø Market borrowing viz. bank limits etc.

Ø Income from Non-fund based activity like financial services and consultancy.

Ø Adhoc borrowing from RBI

Ø Share Capital

Ø Internal Cash profits

Function of Uttar Pradesh Financial Corporation

q Provides loans for creation/purchase of fixed assets of the units.

ü Recreation and entertainment

ü Health care

ü Food processing and agro based export oriented units.

ü Automobiles ancillaries

ü Electronics

ü Engineering goods

ü Assist small industries through NEF

q Encourage women entrepreneurs through Mahila Udyam Nidhi.

q Provides financial assistance for working capital under single window and working capital loan schemes.

q It confers the right to provide whole range of services such as issue management ,underwriting,equity,participation,and project certification for raising finance from primary market.

q It undertakes joint financing with Pradeshiya industrial corporation of UP (PICUP)/scheduled banks for service sector like Hotels,Nursinghomes,Information technology projects etc.

Objectives of UPFC

To achieve the objectives of establishing State Finance Corporation in every State of the country. UPFC has made detailed objectives, which are as follows;-

Providing financial assistance by way of fixed asset term loan & working capital loan to small and medium scale industries and service sector units for faster and rapid industrialization of the state.

To develop industrially backward districts of the state.

Foresting growth of SMEs.

Providing seed capital assistance to smaller units and women entrepreneurs under “National Equity Fund” and “Mahila Udyam Nidhi” schemes.

Providing capital investment subsidy to cold storage up to 25% of capital cost of project as per scheme of N.H.B.

To have courtesy and customer friendly approach.

Time bound sanction & disbursement of loan.

Competitive interest rates.

To work an agent of Central/State Government to implement and operate various scheme of the Government.

Frequent interaction with entrepreneurs & associations.

Transparency in operation.

To introduce policies to benefits entrepreneurs.

Large network of 19 Regional Offices with delegated authority to provide service at their doorsteps.

UPFC’S PRIORTIES

1. Synergy with State Industrial Policy to make U.P.an “Udyog Pradesh”.

2. Frequent interaction with Enterpreneurs & Industrial Associations through “Vittiya Bandhu” for problem solving and enable of investments.

3. To accelerate industrial growth rate in the state.

4. Decentralization of operational powers to Regional Offices spread all over the state.

LIMITS OF ACCOMODATION

UPFC provides financing assistance to new/existing units going in fordiversification/modernization/expansion for acquisition of fixed assets such as

ng land,building,plant and machinery.Corporation also provides working capital to

existing units with sound track record and also to new units unde single scheme.The maximum assistance, which UPFC can grant at present, is Rs.2000.00 lakh in case of companies & Rs 800.00 lakh in case of proprietary & partnership firms. The paid up capital and free reserves of assisted concern should not exceed Rs.2000.00 lakh.Earlier, there was a ceiling on total cost of project has now been dispensed with. At present, UPFC can sanction loan to an unit without any upper limits of total cost of project.

LIST OF DIRECTORS ON THE BOARD OF THE

CORPORATION AS ON 30.06.2008

1. Shri V.N.Garg CHAIRMAN

Infrastruction and Industrial

Development Commissioner

2. Shri S.L.Choudhury MEMBER

Chief General Manager,SIDBI

3. Shri Keshav agarwal MEMBER

Zonal Manager,PNB

4. Shri K.D.Gupta MEMBER

IRS (Rtd.) on behalf of SIDBI

5. Shri H.S.B. Sinha MEMBER

Manager, L.I.C.

6. Shri Jagdish Rai MEMBER

Managing Director

Nomination / Election of other 6 directors are to be made Vacant as on 30.06.2009.

ORGANIZATIONAL STRUCTURE OF UPFC

ORGANIZATION CHART OF REGIONAL OFFICE

JURDICTION OF REGIONAL OFFICE OF UPFC

There are 19 Regional Offices of UPFC, which are located in different city of Uttar Pradesh. Names of Regional Offices and district under their jurisdiction are as below:-

S.No.	Name of Regional Office	DISTRICT COVERED
1.	Azamgarh	Azamgarh Mau Ballia Jaunpur
2.	Agra	Agra Firozabad Mathura
3.	Aligarh	Aligarh Etah Hathras
4.	Allahabad	Allahabad Fatehpur Pratapgarh
5.	Bareilly	Bareilly Badaun Pilibhit Shajanpur
6.	Dehradun	Dehradun Chamoli Haridwar Paurigarwal Rudraprya Tehrigarhwal

7.	Etawah	Auraiya Etawah Farrukabad Kannauj Mainpuri
8.	Faizabad	Ambedkar Nagar Bahraich Balrampur Gonda Faizabad Sultanpur Sravasti Nagar
9.	Ghaziabad	Ghaziabad
10.	Haldwani	Almora Haldwani Kashipur Nainital Pithoragarh Udham Sing Nagar Champavat Bageshwar
12.	Jhansi	Banda Hamirpur Jalaun Jhansi Lalitpur Mahoba Orai
13.	Kanpur	Kanpur Nagar Unnao Kanpur Dehat
14.	Lucknow	Barabanki Hardoi Lakhimpur Kheri Lucknow Raebareli Sitapur

15.	Meerut
16.	Muzaffarnagar	Muzaffarnagar Sharanpur
18.	Moradabad	Bijnor Jyotiba Phoole Nagar Mradabad Rampur
18.	Noida	Gautam Buddha Nagar
19.	Varanasi	Bhadohi Chandauli Ghazipur Mirjapur Varanasi

MANPOWER AT UTTAR PRADESH FINANCIAL

CORPORATION

The organizational structure of UPFC is operative under one chairman, one managing Director & one General Manager which is being governed by six zones & nineteen Regional Offices for better performance & quick clearance of financial offers tp be dealt with different parties and & their requirement . the whole network is run by the efficient and competent officers with their under staff of approximate 700 employees.

Though,the department iis meant or feeding financial assistance to the needy industrialists for the development & growth of the industry but the return of the investment does not permit to carry on such large unit with excessive engaged manpower .to overcome the situation every where the computer network is being introduced for smooth functioning with accurate back-up of records as & when required. This will certainly facilitates the organization to control the engagaed manpower with better results & per

FUNCTIONS OF VARIOUS DEPARTMENTS AT HEAD OFFICE

1. Planning & Monitoring Department

This department performs following work:-

Ø Analyze the MIS received from the ROS and put up before authorities with necessary suggestions & feed back every month.

Ø To ensure preparation of data for Annual Reports.

Ø Analyze the Balance Sheet of other State & National level Financial Institutions and put up comparative studies and suggestions after through analysis to improve functioning of the Institution.

Estate Department

The responsibility of this department is to look after the better upkeep of Head office as well Regional Office and assets held by the corporation like residential houses/flats, vehicles, Office furniture’s and other accessories at lowest expenditure.

R.M.A. & M.B.D. Department

This department looks after following works;-

Ø General accounting work,record keeping of RO’s, trial

balances compilation, bank reconciliation, income tax.

Ø Refinance availment from SIDBI, HUDCO and Banks restructuring of accounts, maintenance of bank and cashbook.

Ø Preparation of salary of staff, T.A. bills, Provident fund,Special Scheme Account and Budget allocation.

Ø Preparation of Annual Accounts of the corporation i.e.Balance Sheet and Profit & Loss Account.

Arrangement of funds

Besides this, following activities are also be ensured by this department like Merchant Banking, Sale & Purchase of Shares, lease finance,house building & vehicle advance, correspondence related to State Govt.Ministry of Banking Govt. of India,IDBI,SIDBI,SLR Bonds holder, PP Bonds and coordination with other financial institutions.

Administration Department

This department looks after the work related to personnel and human resource development like:-

Ø Matters relating to appointment, promotion, confirmation, resignation, retirement.

Ø Sanction of various types of leave, disciplinary proceeding, litigation related to service matters.

Ø Pay scales, its fixation, time scale, E.B.,stagnation.

Ø Transfer/posting, maintenance of ACRs, Gen.Administration & HRD work.

Ø Payment of retirement benefits, P.F.,Gratuity, Group Insurance, Leave Encashment, Reimbursement of medical

claim, SC/ST matters etc.

Law Department

Legal matters related to units as well as service matters are being looked after by this department.After receipt of cases for opinion/ filing writ/ caveat/ SLP/ review petition at courts/ tribunal, the matters are examined and action is taken expeditiously.This department is also responsible for timely filing of CA’s in various courts both at HO & in the RO’s.

Internal Audit Department

This department ensures compilation of replies received from zones about audit observation, AG audit & PUC paras, their followup, timely submission to the State Govt. and other authorities. This department also conducts audit of each Regional Office once in a year for better control and submits audit report to Managing Director.

Computer Department

The Computer Department is responsible for the following:-

Ø Proper up-gradation and updating of data pertaining to accounts.

Ø Proper maintenance of computer, UPS, Printers etc.

Ø Net working, e-mailing of information, web site, and proper maintenance of all problems arising at Regional Office level.

Policy Scheme Making Department

A new department for taking initiatives in new policy & scheme formation was created. The department explores niches and draw policies keeping in view the survival of the corporation. This department is very active in providing an effective front before at State/central Govt.,Banks and other Financial Institution .He is also responsible for the formulation of new scheme, change in existing schemes as well as matter related with signing of MOU with the State Govt. & other financial institutions.

Special scheme Department

This department deals with the various schemes of State and Central Govt. like NHFDC , Audhoyik Nivesh Protsahan Yojna, Capital Subsidy to Cold Storage from N.H.B. etc.

Corporation Secretariat Department

This department conducts various meetings like Board of Directors, E.C.I.C, A.G.M., Settlement Committee and also compliance of all Statutory requirements etc.

PROJECT DEPARTMENT

The responsibility of the department were as under:

Ø To keep all the records/files/circular related to sanction of the loan proposals.

Ø To prepare related statements for perusal of authorities on monthly basis related to change of specification / supplier of machines,building specification / site, relaxation in pre-disbursement & during disbursement condition, Reschedulement,change of management/constitution etc.

RECOVERY & REHABILITATION DEPARTMENT

The responsibility of the department were as under:-

Ø To keep all the records/files/circulars to recovery & Rehabilitation of the cases.

Ø To prepare related statements for perusal of authorities on monthly basis related to OTS, Sale, Rehabilitation,Reschedulement,issuance of recovery certificate and notice U/s 29 of SFC’s Act etc.

As per order of M.D. dated 22.07.2009 these 3 departments are not in existence now. The function and working of 3 departments have been merged with the concerned Zones.

SANCTION PROCEDURE OF LOANS UNDER DIFFERENT SCHEME:

The proposal/applications of the prospective borrower and registered at RegionalOffice upto loan amount of Rs. 50.00 lacs and for loan above Rs. 50.00 lacs at Head Office of the Corporation. The application is processed by concerning Regional Office for loan proposal upto Rs. 1.00 Crore. The loan proposal is processed normally by a team of technical

and a finance officer who examine the proposal after getting required information from borrower. They prepare appraisal memorandum and check technical feasibility and economic viability. Appraisal memorandum mainly covers, location, infrastructure, cost of project,means of financing, profitability indicators like BEP, Cash Flow, IRR, Pay back period,

DSCR etc., marketing aspects like demand supply position of the product, distribution channels and existing capacity etc. The appraisal team also assigned credit rating to the proposal to decide the interest rate depending upon the risk quantified through the credit rating model. The appraisal is prepared as per internal guide-lines, norms issue from time to time. The appraising officers also inspect the site and verify the antecedents of promoters.The appraisal memorandum prepared is checked by appraisal incharge/Regional Manager at R.O. and is sent to Zonal Officer at Head Office. After thorough examination by Zonal

Office, proposal is put-up with the recommendations before concerned sanctioned authorityfor taking decision.The proposals which are under jurisdiction of Executive Committee and Board ofDirectors are put up only after clearance by Advisory Committee. The powers of sanction of

loan mount delegated to various Committees is as under: -

(i) Internal Committee Upto Rs.150 lacs

(ii) Executive Committee Above Rs. 150 lacs

After sanction of loan, sanction advise is issued by R.O./H.O. The comprehensive loan policy giving detail operational guidelines of sanction is available at website of the Corpn.

SUPERVISION & ACCOUNTABILITY:-

For proposal processed at Regional Office: Regional Manager For proposal processed at Head Office: Zonal Manager, Concerned Sanctioning

Authority.

DOCUMENTATION & DISBURSEMENT PROCEDURE:

The Law Officer scrutinizes the title papers and other legal documents as per terms of sanction before disbursement and prepares title report and get the legal agreement signed. The documentation is done by Law Officer at Regional Office. After this legal transfer note is prepared and file is forwarded to disbursement department of R.O. After this Borrower is required to fulfill all other stipulations made by Sanctioning Authority before approaching the disbursement. The disbursement incharge checks the compliance of the terms and conditions of sanction and gets the inspection done . On the basis of the security created and verified the disbursement amount is calculated after taking into account the stipulated margin . The entire disbursement is made through Regional Offices in stages depending upon the creation of the assets / security.

FOLLOW-UP & MONITORING:

To avoid the delay in implementation, the follow up &monitoring of each case is done at the level of Regional office & Head Office. The impediments in implementation of the project either at the level of State Govt. or other agencies are attended to and efforts are made.

SANCTION : LOAN SANCTION NORMS:-

v Debt- equity ratio should not be normally less than 1:1

v Security debt ratio not be normally less than 2:1

v DSCR (debt service coverage ratio) should not be less than 2:1

v Repayment period to be kept normally between %-7 years including gestation period of 12 months.

v Security margin for loans disbursement purpose is not taken less than 20%.

v Proposals for credit rating less than b+ are not considered.

Disbursement: Loan disbursement norms:-

v Security based disbursement

v Normally, Capital raising conditions of 75% to 100% of the promotions contribution is required before disbursements.]

v All assets should be insured.

Recovery:-The norms related to recovery are given below

v Reschedulement

v Rehabilitation norms:rehabilitation package is prepared normally as per norms/guidelines of RBI application to sick / medium scale units.

v Sale under section 29 of SFC’s: scale policy containing norms and rules of sales u/s-29 of SFC’s act.

NORMAL FINANCING SCHEMES/ SERVICES:

· Normal financial scheme for F.A.:-

o Equipment Refinance Scheme(ERS)

o Equipment Finance Scheme(EFC)

o Line of Credit .

· Single Window Scheme :-

o Working Capital Term Loan(WCTL)

o Short Term Loan

o Re-sanction of WCTL in seasonal industries

· Seed Capital Scheme from Central Govt/SIDBI/MUN:-

o National Equity Fund Scheme (NEF)

· Financing to construction activities

· Financing to Entertainment sector

· Financing to technological upgradation of Central Govt/SIDBI/TUPS/Tannery Modemization:

o RTDM Scheme

o Technological Upgradation Scheme for textile units

o Tannery modemization scheme

· Financing Health Care Sector

· Financing to Information Technological Sector

Financing to tourism sector

· Credit link Capital subsidy Scheme for Technical upgradation of SSI units

· Capital Investment of SSI units.

· Capital investment Subsidy.

· Scheme for contruction /expansion/Modernization of add storage for Horticulture produce.

· Financial assistance to Doctors &NEF Scheme

· Abhinav protshahan yojna

· Marketing Infrastructure Scheme

Normal Financing Scheme for F.A.

Term loan for acquisition of land, building, plant & machinery etc. for setting up project normally at Debt Equity of 1.5 : 1 for the existing entrepreneur and at Debt Equity of 1 : 1 for new entrepreneur. This varies according to the project and the person

Special Packages : For financing Plant & Machinery to existing units under ERS/EFS/ISO 9000/LOC

EQUIPMENT REFINANCE SCHEME (ERS)

ELIGIBILITY
All concerns, which have been in existence for 4 years and have earned profit in the last 3 years and which have not defaulted in payment of dues of any financial institution or bank, are eligible for assistance under the scheme.

RATE OF INTEREST
The rate of interest would be 14.00 for A&B + (SSI) and 15% for A&B+ (Other then SSI) as in E.R.S.. The service charge @ 10% sanction of Term Loan shell be payable in live of upfront fee on or before disbursed of loan.

SANCTIONING POWERS

The I.C. is empowered to sanction loans upto 150.00 lacs under the scheme.

DEBT EQUITY RATIO
The debt equity ratio would normally not exceed 2:1 as in E.R.S. cases.

The loan would be sanctioned for the purchase machinery old plant and machinery whether imported or indigenous, would also be eligible for assistance, provided the Corporation has satisfied itself that useful life of plant and machinery proposed to be financed is not less than 10 to 12 years, but definitely not less than the repayment period of the loan. Apart from cost of Equipments other expense like transportation, installation & errection charges, may also be considered for financing.

DIFFERENCE BETWEEN E.R.S. & E.F.S.:

While under E.R.S. refinance would be sought from IDBI/SIDBI, the funds under E.F.S. would come from the Corporation’s own resources. While there is a ceiling on the cost of project in E.R.S., there is no such ceiling on the cost of project under E.F.S. Thus the loans of concerns, with bigger projects, which normally, are not refinancable by IDBI/SIDBI can get the assistance, under Equipment Finance Scheme, on terms as favourable as under the IDBI assisted E.R.S.

EQUIPMENT FINANCE SCHEME

ELIGIBILITY

All concerns, which have been in existence for 4 years and have earned profit in the last 3 years and which have not

defaulted in payment of dues of any financial institution or bank, are eligible for assistance under the scheme.

RATE OF INTEREST

The rate of interest would be 14.00 for A&B + (SSI) and 15% for A&B+ (Other then SSI) as in E.R.S.. The service charge @ 10% sanction of Term Loan shell be payable in live of upfront fee on or before disbursed of loan.

SANCTIONING POWERS

The I.C. is empowered to sanction loans upto 150.00 lacs under the scheme.

DEBT EQUITY RATIO

The debt equity ratio would normally not exceed 2:1 as in E.R.S. cases.

DIFFERENCE BETWEEN E.R.S. & E.F.S.:

LINE OF CREDIT

This scheme helps the entrepreneurs, who have good track record. Under this scheme the maximum limit is Rs. 25.00 lacs and the Corporation sanctions loan for capital goods to the borrowers for their expansion/ diversification /modernization plans without asking for a formal loan application for their further need of fund as & when required within 1 year to be eligible under the scheme borrower unit should meet following eligibility criteria.

1. The borrower should have repaid at least 40% of earlier availed loan and not be in default.

2. In operation for 4 years The unit should be and also in profit during last 2 years after providing depreciation & interest.

Scheme for working capital term loan (WCTL)

This Scheme is meant for small & medium scale industrial units whose net worth is positive and the units which are not financed by UPFC should be in operation preferably for a minimum period of 03 years and should have earned profits in the last financial years.

· Units which has availed working capital loan from the bank would also be eligible.

· Maximum limit of Working Capital Term Loan to a Company/Firm is restricted to Rs. 150.00 lacs.

· Debt Equity Ratio shall normally be less than 1.50 : 1.

Security Debt ratio should not be less than 1.5 : 1.

SCHEME FOR RE-SANCTIONING OF WORKING CAPITAL TERM LOAN IN SEASONAL INDUSTRIES.

The scheme of re-sanction of Working Capital Term Loan was introduced by the Corporation in the year 1995 with a view to help entrepreneurs maintain their working capital level without much problems for smooth running of units. Certain modification were introduced subsequently based on the experience of the Corporation in operation of the scheme. The scheme received very encouraging response from out borrowers. However, entrepreneurs who are

running seasonal industries have requested a different scheme as their working capital funds are required mainly during the season of that particular activity and they have to unnecessary bear interest cost for the fully year making their operations less competitive in market. We have, therefore, devised a scheme for re-sanction of working capital for only seasonal industries, viz; cold storage, rice mills, dall mills etc., where borrowers will have an option to prepay the loan amount (during the off-season) and get in re-sanctioned during season.

1] ELIGIBILITY CRITERIA

(i) The party has been consistently regular in repayment of loans and have not diluted the security already mortgaged to the Corporation.

(ii) Existing Working Capital term Loan has been substantially repaid, but there is some outstanding balance in the account.

(iii) Corporation will have 1^st charge on the prime assets and no pari-passu 2^nd charge will be permissible in favour of any Bank/Institution.

2] QUANTUM OF ASSISTANCE

(i) Working Capital Term Loan can be considered for re-sanction only upto the extent of the amount repaid, ensuring there is no dilution of original Security Debt Ratio. R.M. shall have security verified in order to ensure above.

(ii) If the quantum of assistance is more than the amount already repaid the entire proposal will be treated as a fresh case and shall not be covered under the scheme.

3] PROCEDURE

On a simple application of the borrower, the Regional Office would prepare an appraisal note as per enclosed format on the orders of the R.M. > A.G.M.

4] SANCTIONING AUTHORITY

The Regional Managers / Asstt. General Manager will be the Sanctioning Authority under the scheme. However, if any R.M. /A.G.M. re-sanctions a case in violation of [a] Eligibility Criteria or [b] Quantum of assistance, thery shall be held personally responsible and liable for disciplinary action.

5] CURRENCY OF LOAN

Total Currency of re-sanctioned loan will not exceed the currency period of WCTL sanctioned by the I.C. /S.L.C. a part of which is being re-sanctioned. However, R.M. / A.G.M. can re-sanction as many times as deemed fit within the currency of loan as per terms and condition of the scheme.

6] MAIN TERMS OF THE SCHEME

[i] No processing fee, Legal Fee and Service Charge will be levied.

[ii] Annual Supervision Charges will be levied @ 1% on

amount outstanding on proportionate period on monthly basis.

[iii] Legal Documentation will be done for extension of charge incorporating various terms and conditions on a simple format to be designed by Law Department, H.O..

[iv] As per the Standing Circular, no pre-payment premium shall be applicable in seasonal industries.

7] RECORD KEEPING

[i] After a loan re-sanctioned by the R.M./A.G.M., a copy of the note be sent to the Project Division who in turn will put up the same for information of the I.C./ S.L.C., as the case may be.

[ii] Complete records regarding re-sanction will be maintained by the Regional Office concerned and they will do pasting etc. of original appraisal notes and orders of re-sanction as per norms.

Composite loan scheme

The scheme is for artisan, village & cottage industries and SSI in the tiny sector are eligible.

· Original Investment in Plant & Machinery should not exceed Rs. 25.00 lacs.

· Assistance only upto Rs. 10.00 lacs [Both for fixed assets + Working Capital ].

· Promoter’s contribution upto Rs. 2.00 lacs is nil and above Rs. 2.00 lacs to Rs. 10.00 lacs at Debt Equity Ratio 3 : 1.

· No security upto Rs. 5.00 lacs and above Rs. 5.00 lacs on selective basis depending upon project.

SCHEME FOR FINANCING CINEMA THEATRE/MULTIPLEXES IN THE STATE OF U.P.

The Govt. of U.P. vide its notification no. 1151/77-6-99 dated 22.05.1999 have declared “Cinema Halls and Multiplexes” as industry which would be eligible for all consideration as applicable to industries in the state of U.P..

To promote setting up Cinema Halls/Multiplexes, the Govt. had already declared following concessions/rebates:-

1. The entertainment tax has been reduced from 125% to 100%.

2. To encourage multiplexes which is the latest concept in technologicallyadvance system of film exhibition, it has been decided to promote construction of such Multiplexes which have atleast 3 Cinema Halls.

The state will provide 100% exemption of entertainment tax in the Ist year and 75% exemption for the Iind and IIIrd year to Multiplexes having

investment above Rs. 1.5 Crore.

3. For the revival of closed Cinema Halls, the entertainment tax the entertainment tax exemption upto an extent of 30% for 3 years will be made available to those Cinema Halls which are re-opened.

4. To encourage upgradation of existing Cinema Halls by installing Modern Sound System, Air Conditioning, Major entertainment tax collection over and above the previous year tax collection upto a limit of 50% of the investment made in upgradation of Cinema Halls.

5.    For encouraging setting up of New Cinema Halls in smaller towns of
            population of 3 lakhs, the owner is permitted.
            to retain 50% of the entertainment tax collection for a period of 3 yeears.

6.     The local urban authorities would earmark land in prime locations for future
            development of Multiplexes and Cinema
            Cinema Halls.

Upto 30% of the covered area of the land would be allowed to be used for
commercial purpose provided Cinema Hall is constructed first.

7. Power produced by captive plants will be exempted form electricity duty.

8. As for industry, if a Cinema Hall utilizes as MCG in a few month, then they
would be billd for actual energy consumptions for the remaining month.

SAILIENT FEAUTRES OF THE SCHEME

1. ELIGIBILITY:

a) Any person who is willing to set-up Cinema House/Multiplexes in
the state of U.P. having sufficient means.

b) Any Cinema owner who intends to revive/upgrade it.

c) The location would be in municipal limit.

2. TERM OF ASSISTANCE

a) The amount of assistance shall not exceed to 100.00 lacs per project.

b) The D.E. be kept at 1:1.

c) The Security margin on tangible assets shall not be less than 25%.

d) The loan shall be repayable in 5 to 7 years in quarterly instalments
including gestation period of 18 months.

e) Land for the project will be fully paid-up.

3. SECURITY

a) The UPFC shall hold exclusive charge on the prime security.

b) Security debt on prime assets and collateral security should not be less
than 2:1.

c) Tripertite agreement between UPFC/Party/ Entertainment Deptt. for
watching the intere3st of Corporation incase of any

eventuality.

4. SANCTIONING AUTHORITY Internal Committee.

5. MANDATORY CONDITION

100% initial investment condition to be imposed.

RTDM SCHEME

i) The main objective of the scheme is to encourage industrial units in SSI Sector to modernize their production activities and adopt improved and updated technology. Provided ;

j) Assistance is available to unit in operation for a minimum period of 03 years and not in default with any financial institution/Bank.

There is a ceiling of cost of project at Rs. 100.00 lacs per unit and the minimum promoter contribution should not be less than 20%.Technology Upgradation Scheme For Textile Units

To provide encouragement to textile industrial in SSI sector. The Govt. of India has launched. Technology Up gradation fund scheme[TUFS] for jute & Textiles Industries for a period of 5 years w.e.f. Ist April ‘1999. The activities covered are :-

i) Cotton Zinning & pressing.

ii)Textiles industries covering :

· Silk Reeling Industries,

· Wools Scouring and combing,

· Synthetic filament yarn textrising, crimping and twisting,

· Spinning.

· Viscose Filament Yarn

· Weaving knitting including non woven yarn.

· Fabric embroidery and Technical Textiles.

· Garment/Made-up manufacturing

· Processing of fibres, fabric yarn, fabrics, garments & Made-ups.

· Captive power generating in the sector.

The scheme envisages 5% incentive on interest availed by SSI units for technology up-gradation modernization, Eligibility only for the cases in which refinance is sanctioned by SIDBI.

TANNERY MODERNISATION SCHEMES

OBJECTIVE

To support existing tanneries for undertaking modernization programme for positive environmental impact, becoming competitive, effecting better capacity utilization, achieving productivity gains, and reducing wastage etc.

ELIGIBILITY CRITERIA

All existing tannery units undertaking viable modernization programme will be eligible for assistance. “modernization” will include the following:

- measures for technology upradation and productivity improvement.

- Measures for machinery/ facilities upgradation.

- Measures, at individual tannery stage, for adoption of wasta treatment technologies including primary treatment of waste.

Modernisation programmes funded by IDBI/SIDBI/SICs/Banks(eligible for refinance from SIDBI/IDBI) as well as those undertaken by existing tanneries from their own resources will be eligible for assistance.

Financial assistance under the Scheme shall be available only for such prlojects in which the loan by the Bank/Financial Institution has been sanctioned on or after the date of notifying the Scheme. In the case of self-financed modernization undertaken by the units, financial assistance under this Scheme shall be available only for such projects where the order for purchase of machinery has been placed on or after the date of notifying this scheme and subject to necessary documents being field while making the application for assistance under this Scheme.

The project should need to:

· Demonstrable increase in unit value realization and/or

· Increase in production capacities and/or.

· Better compliance of pollution control norms.

PURPOSE

Financial assistance would be available for undertakes following activities:-

· Replacement of pit technology,

· Installation of controls and float recycles,

· Layout and re-organisation of tanneries,

· Installation of instrument process control systems,

· Acquiring in-house chrome recovery and reuse facilities,

· Upgrading of finishing facilities,

· Non-conventional energy applications,

· Creation if in-house R& D and testing facilities,

· Automation of process and Control systems,

· Replacement of obsolete machines,

· Any other activities as decided by the Steering committee

Existing tannery units have option to go for single multiple activities.

QUANTUM OF ASSISTANCE

The assistance will be limited to 30 percent of cost machines in case of Small Scale Units and 20 percent for small scale units.

The cost of machines will include:

· Bill value of machines

· Transportation and transit insurance cost

· Custom duty

Installation cost and expenses for foundation and construction will not be included for the above purposes.

The upper calling or assistance to an industrial unit will be limited to Rs. 28.00 lakhs and Rs. 35.00 lakhs for small scale and non-small scale units respectively.

TERMS OF ASSISTANCE

· An agreement will have to be executed prior to disbursements,

· Assistance will be released after arrival of machines at site and at every stage it will be limited to 20 percent or 30 percent of the cost of machines, as the case may be.

· Industrial unit will be required to submit operational and performance details upto two years from the date fo completion to the designated agency.

· Assistance released would be adjusted towards loan component earmarked for the machines required for the modernization programme.

PROCEDURES FOR SANCTION AND DISBURSEENT

· The implementing agency would be project Management Unit of national Leather Development Programme (PMU-NLDP)

· The nodal agency for release of assistance, monitoring and interface and coordination with FIs, Banks and the Government would be SIDBI.

· In case of loan availed by an industrial unit for modernization programme, in, in industrial unit will apply for the assistance in a prescribed application form to the concerned FI/SFC/Bank. They will be forwarding the application along with recommendation and letter for sanction to programme Management Unit of NLDP for consideration of sanction of assistance by a Steering Committee constituted for the purpose.

· The Steering Committee will comprise of:

Nominee of SIDBI

Nominee of CLRI Representative of DIPP (leather)

Representative of DCSSI

Representative of Finance Wing of DIPP

National Programme Manager of SIDE-NLDP (Convener)

· In case of programme involving no loan component, the industrial unit will be required to apply in prescribed application form to SIDBI directly and they would be forwarding it to PMU sof SIDE-NLDP for sanction by the Steering Committee.

· After sanction of the assistance, FI's/Banks will get

an agreement executed by concerned industrial unit on behalf of Govt. of India.

In case of Non-Small Scale Units going to avail assistance from IDBI application fro assistance will be submitted to SIDBI only who will get required formalities completed from IDBI/All Indai Financial Institutions and will be sending the same to PMU-NLDP for consideration of steering Committee.

Scheme for Healthcare sector

The Corporation provide assistance for setting up Nursing Home and various equipments for Doctors

Scheme for financing to Tourism Sector.

With an aim of giving a fillip to the burgeoning tourism industry in Uttar Pradesh. UPFC provides easy financial aid for establishment of hotels, motels, restaurants, traveling agencies, amusement parks etc. Assistance is also within arms reach for the expansion and refurnishing of existing facilities in the tourism sector.

Scheme for financing to Information Technology Sector.

The Scheme provides the assistance to the following :-

· Cyber Café,Internet Service Provider (ISP) Software/Hardware Development Call Centers. Medical Transcription.

Designing & Development of wide area Net work. Participating in Software Technology Park. Units having proven track record with rising turnover and profits.

Minimum 33% promoter’s contribution and Debt Equity Ratio is 2 : 1.

· Collateral Security is required to the extent of 100% term loan in form of Immovable property against the cost of hardware & software.

· The financing would be done under structural/ obligatory route whereby the borrower shall open an escrow account wherein all proceeds received from the customer would be deposited.

· The repayment period shall not be more than 5 years and the repayment will be in the shape of monthly installments.

· For loans upto of Rs. 100.00 lacs, no financing on land & building shall be provided.

· For loan above Rs. 100.00 lacs shall be financed to private/public Ltd. and the cost of land & building shall be included for the purpose of financing.

Loan sanctioned above Rs. 100.00 lacs shall be released only after receipt of
confirmed orders to the extent of 10 to 15% of projected turnover

Credit Linked Capital Subsidy Scheme for Technology Upgradation of the Small Scale Industries [CLCSS]

1. Purpose

The scheme aims to facilitate technology up-gradation of SSI units in the specified products / sub-sectors by providing 12% capital subsidy for induction of proven technologies approved under the scheme.

2. Scope of the Scheme

To begin with, the scheme would cover the following products / sub-sectors in the SSI:-

(i) Leather and Leather products including footwear and garments;

(ii) Food Processing (including Ice-cream manufacturing);

(iii) Information Technology (hardware);

(iv) Drugs and pharmaceutical;

(v) Auto parts and components;

(vi) Electronic Industry particularly relating to design and measuring;

(vii) Glass and Ceramic items including tiles;

(viii) Dyes and intermediates;

(ix) Toys;

(x) Tyres;

(xi) Hand Tools;

(xii) Bicycle parts;

(xiii) Foundries-Ferrous and Cast Iron and

(xiv) Stone Industry (including Marble Mining industry)

As the scheme progresses, the above list of products/sub-sectors may be expanded with the approval of the Governing and Technology Approval Board [GTAB] constituted under this scheme.

3. Eligible Primary Lending Institutions (PLIs)

Eligible scheduled commercial banks, National Small Industries Corporation (NSIC) and State Financial Corporations (SFCs)

4. Eligible Borrowers

Sole Proprietorships, Partnerships, Cooperative Societies, Private and Public Limited Companies in SSI Sectors.

5. Type of units to be covered under the scheme

(i) Existing SSI units registered with the State Director5ate of Industries which upgrade with

the state-of-the-art technology, with or without expansion.

(ii) New SSI units which are registered with the State Directorate of Industries and which set up their facilities only with the appropriate eligible and proven technology duly approved by the GTAB. As regards Marble mining industry PLIs may decide on the appropriate technology for upgradation so long as the units remain within the ambit of SSI.

6. Eligibility Criteria

(i) Capital subsidy under the scheme shall be available only for such projects where term loans have been sanctioned by the eligible PLIs [eligible Scheduled Commercial Banks, NSIC and SFCs] on or after October 1, 2000.

(ii) Cases covered under Refinance Scheme for Technology Modernisation Fund [RTDM] of SIDBI sre also eligible for capital subsidy under the proposed scheme subject to the project also conforming to the norms stipulated under CLCSS.

7. Definition of Technology Upgradation

(i) Technology upgradation would ordinarily mean induction of state-of the – art or near state-of-the-art technology. In the varying mosaic of technology obtaining in more than 7500 products in the India small scale sector, technology upgradation would mean a

significant step up from the present technology level to a substantially higher one involving improved productivity, or /and improvement in the quality of products or/ and improved environmental conditions including work environment for the unit. It would also include installation of improved environmental conditions including work environment for the unit. It would also include installation of improved packaging techniques as well as anti-pollution measures and energy conservation machinery. As regards the appropriate technology for upgradation of marble mining industry, the eligible PLIs may decide the same so long as the init remains within the ambit of the SSI definition and is eligible for financial assistance under CLCSS. Further, Lubricants manufacturing units in need of introducing facilities for in-house testing and on-line quality control and equipment for the purpose would quality for assistance, as the same is a case of technology upgradation. A list of proven technologies is furnished in Appendix – I.

(ii) Replacement of existing equipment / technology with the same equipment technology will not quality for this scheme, nor would the scheme be applicable to units upgrading with second hand machinery.

8. Duration of the Scheme

The scheme will be in operation for a period of five years from October 1, 2000 to September 30, 2005,

or till the time sanctions of capital subsidy by the Nodal Agency reach Rs. 600 crore, whichever i is earlier.

9. Nodal Agency

Small Industries Development Bank of India (SIDBI) WILL ACT AS THE nodal agency.

10. Cap on amount of Subsidy

i) The financial assistance by the eligible PLIs for technology upgradation will be need based. However, the 12% capital subsidy support would be limited to the loan amount indicated below:

S.No.	Existing Investment Limit	Maximum calling of loan eligible for support *	Maximum subsidy available under the scheme
1.	Tiny units with investment in plant & machinery less than Rs. 10 lakh	Rs. 8 lakh	Rs. 0.96 lakh
2.	Tiny units with Investment in plant & machinery between Rs. 10 lakh to Rs. 25 lakh	Rs. 20 lakh	Rs. 2.40 lakh
3.	Small units with investment in plant & machinery above Rs. 25 lakh	Rs. 40 lakh	Rs. 4.80 lakh

[* the eligible subsidy would be calculated on the actual loan amount or maximum ceiling on loan eligible for subsidy, whichever is lower.]

ii) Value of Plant & Machinery being acquired under the scheme will be determined by its purchase price.

iii) Capital subsidy under this scheme will not be admissible for loan amount exceeding the limits indicated above.

11. Working Capital Requirements

Since success of the technology upgradation scheme, to a large extent, depends upon the availability of adequate working capital, lending institutions would like to be assured that the borrowing units have made adequate arrangements for meeting the working capital requirements. Commercial banks should also accord priority in providing adequate working capital support to the assisted units.

12. Other conditions for loans

(i) Promoters’ contribution, security, debt-equity ratio, up-front fee, etc will be determined by the lending agency as per its existing norms.

(ii) Entrepreneurs availing credit linked capital subsidy for technology upgradation shall not avail any other benefit including interest Subsidy, under any other schemes of the Central Government.

(iii) Units in the North-Eastern Region which are availing financial incentives/ subsidy from the Government in the Region would, however, be eligible for subsidy under CLCSS.

(iv) One of the main requirements for sanction of assistance under the technology upgradation scheme will be availability of competent management to the unit concerned to carry out the upgradation programme and to manage the operation of the unit efficiently. Towards this end, the lending agencies may stipulate conditions as may be considered necessary.

13. Procedural Aspects

i) All the eligible PLIs [except NSIC] will have to execute a General Agreement for availing capital subsidy under the scheme, irrespective of the fact whether refinance is availed by them or not. However, it may be clarified that NSIC may avail capital subsidy under the scheme on the basis of execution a separate General Agreement.

ii) After sanction of the assistance, eligible PLIs will get an agreement executed by SSI unit concerned on behalf of Government of India. A copy of the draft agreement to be executed by the eligible PLIs with the SSI unit is furnished in Annexure –III.

iii) The eligible PLIs would obtain application for assistance under CLCSS in the prescribed form [Appendix- II].

iv) The eligible PLIs shall furnish subsidy forecast on quarterly basis, through their HO, which will act as a nodal office, to RO/BO of SIDBI located in the region. The subsidy forecast information for every quarter on or before 1^st March for April-June quarter, on or before 1^st June for July-September quarter, on or before 1^st September for October-December quarter and on or before 1st December for January-March quarter, may be furnished as per prescribed format [Appendix –III]

v) The eligible PLIs would release the subsidy amount to the beneficiary unit along with the first disbursement of loan sanctioned for Technology Upgradation under the scheme.

vi) The eligible PLIs shall furnish details of release of subsidy to the beneficiary units, together with the request for replenishing advance money placed with PLIs for release of subsidy, on quarterly basis on March 1, June 1, September 1 and December 1, PLIs request for replenishment of advance money for subsidy, however, would be entertained by SIDBI only on receipt of complete details of subsidy released to the beneficiary units, as per Appendix –IV & IV –A.

vii) The eligible PLIs shall be responsible for ensuring eligibility for sanction of subsidy to the SSI units in terms of Gol guidelines under the scheme, disbursal and monitoring of the assisted units.

14. Other Parmeters

i) The Governmental assistance cannot be utilized for the purposes other than for which it has been sanctioned. The eligible PLIs shall have to strictly follow this norm and no deviation would be permitted.

ii) In case, it is found that capital subsidy from the Government has been availed on the basis of any false information, the industrial unit shall be liable to refund the Government capital subsidy availed, along with interest to be charged from the date of disbursal to the date of refund. The rate of interest shall be the prime lending rate of PLIs concerned at the time of invoking this penal clause.

iii) The eligible PLIs shall, therefore, incorporate suitable conditions in respect of points at (ii) above in theirsecurity documents entered into with the init, which would give necessary authorization to proceed legally in such eventualities.

iv) The credit risk under the scheme will be borne by the eligible PLIs and as such they will have to make their own commercial judgement while appraising the project. The credit decision of the eligible PLIs will be final.

v) There shell not be any binding obligation on the part of SIDBI to obtain sanction from Gol for the governmental financial assistance in respect of the proposals which are covered under CLCSS.

vi) SIDBI shall have the right to inspect the books of eligible PLIs and the loan accounts irrespective of whether refinance is availed or not from SIDBI under the Scheme and /or call for any other information as may be

required by Gol from time to time.

vii) SIDBI shall have the right to recall from the eligible PLIs the entire amount of the Government capital subsidy in respect of their assisted units whether or not the eligible PLIs have recovered the said subsidy from their units, if SIDBI comes to the conclusion that any of the acclunts do not conform to the policies, procedures and guidelines laid down by SIDBI/Gol under CLECSS, from time to time.

15. Monitoring of the scheme

The scheme will be monitored by a Governing and Technology Approval Board [GTAB]. The Secretary (SSI & ARI) will be the Chairperson of the Board and the Development Commissioner (SSI) will be its Member Secretary. The GTAB would also periodically review the functioning of the scheme

SCHEME FOR FINANCIAL ASSISTANCE TO DOCTORS UNDER NEF

On review of portfolio of the Corporation it has been observed that performance of the nursing home and diagnostic centers financed by the Corporation, has been exceptionally good. With banks flush with liquidity and offering competitive rate of interest, its is imperative for the Corporation to offer comparable rate of interest to this category of borrowers to retain and attract good business. Since the loan will be sanctioned under NEF, effective rate of interest shall be about 11.5%, which may be highlighted to attract the business under this scheme.

ELIGIBILITY CRITERIA

New or Established Nursing Home & Diagnostic Centers/ Clinics for purchase of Diagnostic Equipments, Medical Equipments for the treatment of ENT diseases, Establishment & Expansion of Dental Clinics, General Surgical Clinics, Pathology Lab etc. with sound track record and market reputation. Loan under this scheme shall be provided to concern promoted/had been promoted by essentially experienced and qualified professional Doctors. (All University Degree Holder in various Branches of Medical Science shall be eligible under this scheme).

PURPOSE

1. The loan shall be granted for setting up new nursing home with minimum 20 beds/ expansion of existing nursing home. However, Nursing Homes below 20 beds capacity will also be covered in the scheme and shall be allowed as Clinic with a few beds for emergency patients. In such cases, cost per bed may be standardized for convenience & uniformity.

2. The loan shall be granted for setting up new diagnostic center/expansion of existing activities, Pathology Lab, Dental Clinics, General Surgical Clinic, ENT Clinics, Eye Treatment Clinics, General Clinics etc.

2. For purchase of electro medical equipments by practicing Doctors/new doctors as mentioned for activities under para-2.

QUANTUM OF ASSISTANCE

· For fresh Doctors/ Doctors having experience up to 02 years, maximum assistance shall be restricted to Rs. 2.00 lacs for setting up clinic and

purchase of Electro Medical Equipment.

· Maximum assistance that can be sanctioned to new/existing nursing home / diagnostic centers and purchase of equipment as mentioned in para-2 above shall be restricted to Rs. 10.00 lacs including NEF assistance, if is this been / had been promoted by qualified doctor having experienced between 02 to 05 years.

· Maximum assistance that can be sanctioned to new/existing nursing home/diagnostic centers and purchase of equipments as mentioned in para-2 above shall be restricted to Rs. 25.00 lacs including NEF assistance, if it has been .had been promoted by qualified doctor having experienced between 05 years to 10 years.

· Maximum assistance that can be sanctioned to new/existing nursing home/diagnostic centers and purchase of equipments as mentioned in para-2 above shall be restricted to Rs. 32.50 lacs including NEF assistance, if it has been / had been promoted by qualified doctor having experienced above 10 years.

· Soft Loan Component under NEF shall be 25 % of the capital cost in case of service sector.

COST OF PROJECT

Since the assistance under the scheme shall be granted under NEF scheme, the total cost, of project should not exceed Rs.50.00 Lacs.

LIMIT OF ASSISTANCE

· The maximum amount of assistance that shall be sanctioned as per guidelines given in above

clause for each category of borrower

PROMOTERS’ CONTRIBUTION

· Minimum 10% of the cost of project as per NEF scheme.

DEBT EQUITY RATIO

·      Debt Equity Ratio of 1.857 :a be maintained as prescribed in the
                   scheme, However, interest bearing unsecured loans to the extent of
                   15% of the cost of project may be insisted upon to improve promoter’s
                   contribution.

SECURITY

· The basic security for the assistance under this scheme shall be Ist/ Ist pari-passu charge existing /proposed fixed assets of the concern. And hypothecation of existing and proposed plant & machinery by way of Ist charge.

· 5% of the cost of project as Liquid Collateral Security as per norms, which is mandatory.

· Personal Guarantee of the promoters/ directors.

COLLATERAL SECURITY

In the case of Nursing Home/Clinics, where Land and Building are abailable as prime Security, Collateral security to the extent of loan amount minus the value of land, building and 50% of value of plant & machinery and other fixed assets.

CLINICS

Collateral Security in Clinics, which are on rent:- Loan amount minus 50% of plant machinery and other fixed assets.

The total Collateral Security will include 5% Collateral Security of Liquid assets.

Third party guarantee of a person of repute may be accepted in case Collateral Security as mentioned above is not available. i) A practicing Doctor having an established practice.

ii) UPFC Loanee having regular account with us (Existing or Past Loanee).

iii) Any other person of repute having net worth not less than total exposure, i.e. loan amount plus N.E.F. amount.

MORATORIUM PERIOD

· Upto 03 years for NEF components and Maximum 02 years for FATL.

REPAYMENT PERIOD

· The repayments shall be made on Equated Monthly Instalment basis(EMI).

PROCESSING FEE

· Borrower Company shall have to pay processing fees as per prevailing
structure of fees depending upon loan amount.

SANCTIONING AUTHORITY

· Loan proposals shall be processed at R.O. and shall be placed before Competent Sanctioning Authority which is Small Loan Committee / Internal Committee.

INTEREST RATE

· As per prevailing interest rate structure for FATL AND 5% service charge p.a. for NEF Component.

PENAL INTEREST

·        In the event of default in payment of installment interest etc. a penal
                    interest @ 3 ½% per month shall be charged on defaulted amount for
                    defaulted period.

· In the event of default in payment of installment/interest etc. of soft loan component under N.E.F. rate of interest as per prevailing structure for FATL shall be applicable on NEF component.

SERVICE CHARGE

· As per prevailing norms.

OTHER TERMS & CONDITIONS:

Since the assistance shall be granted under NEF scheme, all terms and conditions of NEF other than mentioned shall also be applicable.

ABHINAV PROTSAHAN YOJNA

This scheme is meant for entrepreneurs who have availed loan from banks under PMRY, are regular and repaid at least 50% of the loan amount availed under PMRY. The loan shall be granted for creation/acquisition of fixed assets for activities covered under NEF scheme. Promoter contribution shall be 10% at the minimum & Debt equity ratio shall be 1.857:1. In cases where prime security is available, Collateral security to the extent of loan amount minus value of land building & 50% value of plant & machinery and other fixed assets shall be provided. In cases where unit is in on rent Collateral security to the extent of loan amount minus value of 50% value of plant & machinery and other fixed assets shall be provided. Collateral security shall also include 5% liquid security at least. Soft loan component at 5% service charge shall be provided @ 25% of capital cost subject to maximum of Rs. 10.00 lac. The effective rate of interest under the scheme works out approximately to 11.5%.Term Loan scheme for marketing infrastructure development/Construction activities

ELIGIBILITY CRITERIA

Private Builders, developers are eligible for loan assistance for construction of housing and commercial projects for sale to general public, industrial units and corporate entities for their own use. The builders with proven sound financial and marketing track record of atleast 03 years with rising turn over and profits would be eligible.

PROMOTER’S CONTRIBUTION

50% of the cost of project which will include cost of land, cost of land development, building construction with all internal services capitalized, interest on investment during construction period. The debt equity ratio is to be maintained at a maximum of 1:1.

SECURITY

i] The Corporation shall hold Ist charge on all the tangible assets/collateral security.

ii] All promoter director shall have to give their personal guarantee for repayment of loan to the entire satisfaction of the Corporation.

iii] Any shortfall in security debt ratio shall be met by obtaining adequate collateral security in shape of immovable assets of urban area/liquid security.

iv] The loan is to be secured by way of legal mortgage of land and super structure, collateral security and personal guarantee of all promoters. Security devt ratio is to be maintained above 2.5:1. The financing would be done under obligatory rule, whereby the borrower should open an Escrow account, wherein all proceeds received from the customer would be deposited. UPFC would be paid agreed amount out of this Escrow a/c. towards repayment of term loan and interest thereon. At the time of sale of apartments, NOC from UPFC will be mandatory.

REPAYMENT PERIOD:

Total repayment period would be between 36 months to 60 months with gestation period of 12 months. The repayment will be in the shape of quarterly

installments.

EXTENT OF LOAN:

Up to Rs. 100.00 lacs to proprietor, partnership concern having adequate experience of construction activities and up to Rs. 300.0 lacs to Private Limited, Public Limited Company being promoted by existing reputed builders with proven tranck record. Trust. Cooperative societies and other entities not mentioned above shall not be eligible.

INTEREST RATE:

The interest rate under the scheme will be 16% or as may be revisied from time to time. In case of default the borrower would be required to pay penal interest @ 3.5% p.a. on defaulted amount for defaulted period.

PROCESSING FEE AND SERVICE CHARGES:

As applicable in normal cases of FATL & WCTL will be applicable in this scheme also.

OTHER MANDATORY CONDITIONS

Before release of the Ist loan installment the borrower, the bank [Escrow account Agent] & UPFC will sign an Escrow Account agreement in the form and substance satisfactory to the UPFC.

2. The promoter will not be allowed to appropriate or use any receipts in the project funded by UPFC for any other purpose till UPFC loan with interest thereon and

other dues are fully paid.

3. The approved building plan from the local authorities shall be required before legal documentation.

4. The precise & location proximity to the community facilities and amenities viz. shop, educational and health facilities recreation, entertainment etc. shall be the major requirement for consideration under the said scheme.

5. All statutory approval like site development, land use, layout, building design, provision of essential services i.e. water supply, electricity, sewage disposal system, fire fighting equipments and clearance from civil aviation authorities shall be required from the competent authorities before documentation.

6. The project wherein the construction work has already commenced prior to 12 months shall be considered only on merits.

7. Only those proposals shall be considered in which builder submits the revenue model for guaranteed cash inflow by getting assigned the rent of existing buildings owned by builder or inflow from sal of existing unit of building/complex etc. to ensure the repayment of loan under this scheme.

Initially the Corporation shall finance the project under this scheme in the following areas:-

Agra, Bareilly, Ghaziabad, Kanpur, Lucknow & areas falling under the
   jurisdiction of Noida & Gr.Noida. The scheme shall be operative only
   after getting approval of the same from SIDBI to ensure refinance.

Balance sheet as at 31st march 2007

Profits and Loss accounts for the year ended 31st march,2007

amount			amount
2006	Expenditure		2007
633,261,599	interest on deposit,bonds debenture and borrowing		421,303,190
208,581,819	personnel expenses		166,614,812
42,991,503	other expenses		42,491,499
4,528,406	depreciation on fixed assets		4,341,441
3,059,573	fringe benefits, service tax & trade tax		2,911,976
22,989,602	bad debt written off		16,240,448
18,450,747	Net profit carried down		601,005,441
933,863,249		Total	1,254,908,807

9,096,349,567	Balance as per last balance sheet		9,077,898,820
amount	Income		amount
2006			2007
586,296,241	interest on loan and advances		371,920,154
25,229,192	other income		20,980,210
17,844,603	lease rent income		15,900,559
493,031	bad debt recovered		137,750
	interest provisioning written back		542,643,284
304,000,182	NPA provisioning written back		303,326,850
933,863,249		Total	1,254,908,807
18,450,747	Net Profit carried over		601,005,441
9,077,898,820	balance carried over to balance sheet		8,476,893,379

REASONS OF LOSSES

The major loans were given to first generation entrepreneur on which chances of sickness is very high. Due to this reason the number of industrial units became sick and the recovery out of these units became very difficult.

The state of U.P. is a land locked state where entrepreneurs are required to incurred heavy cost for bringing raw-material and to sell out finished goods in comparison to coastal area, Hence, the industrial set up earlier in the U.P. have much cost and they were required to face stiff competition.

High cost of borrowings:-

The corporation had borrowed fund on higher rates during the period 1991 onwards. The corporation had floated SLR bonds on as high as 14% rate of interest and also borrowed refinance from SIDBI at a rate of 16 to 17% between the years 1995-1997.

Improper appraisal done by the corporation.

The corporation did not open branch offices in every district to have better and efficient recovery .

Political & Govt. priorities in sanctioning and disbursement of loan in industrial backwards district, ( more than 50%), having poor infrastructure facility such as power, Road, Labour, Law and order, transport etc. resulting failure of unit. Thus major number of industries did not pay the dues of the corporation.

No sharing in losses either by State Govt. or SIDBI / IDBI.

Strengths :-

The corporation has a large network of 19 Regional Office with delegated authority provide services to its customers.

The corporation office have a wide range of financial assistance to its borrowers.

Weakness :-

The corporation has a large amount of Non-Performing Assets (NPA’s).

The process of recovery of dues is not so smooth.

Opportunities:-

The Industrial production has gone gone up by 8% is expected to favour the corporation.

The growth in industrial production may reduce the NPA’s & could result in the increase of recovery of dues.

Threats:-

Increased competition from banks, which have begun to foray into financial services segment, will pase a threat to the corporation’s function/objectives.

Most of the borrowers have no intention to replay their dues in time, which deteriorate the corporation’s financial position & working results.

NON PERFORMING ASSETS (N.P.A.)

The profitability of the financial institution largely depends on the level of income through optimum use of assets after paying the cost of funds for acquiring them and other administrative cost involved there. Once the assets ceased to contribute to the income they are turn as NON PERFORMING ASSETS (N.P.A.) which not have only cost of fund involved but also required to be provided as per prudential norm.

According to the income recognition assets classification and provisioning norms (IRAC) of RBI, which were introduced in 1992-1993. A non-performing assets (N.PA.) is defined as a credit facility in respect of which interest or principal has remained unpaid for a period of two quarters during the year ended 31^st March 1995. According of these norm incomes from non-performing assets (N.P.A.) is recognized on accrual basis but is booked as only when it as actually received.

CATEGORY OF N.P.A.

To find out N.P.A. status for different types of credit facilities according to the definition of N.P.A’s another yardstick know as out of order concept is used. This is how the loans are classified as N.P.A’s in different category:-

TERM LOANS:-

For the year ended 31^st March 1999 and onwards a loan will be treated as NPA if interest or installment of principal past due for two quarters or more.

CASH CREDIT AND OVERDRAFT:-

A cash credit or overdraft account will be treated a NPA if the account remains out of order for a period of two quarter during the year ended 31^st March 1995 and onwards, Thus an account should be beated as out of order if

The outstanding balance remains continuously in exam of the sanctioned limit / drawing power.

In case where the outstanding balance in the principal operating account in less than the sanctioned limit / drawing power, but there are no credits continuously for six months as on the date of balance sheet or credits are not enough to cover the interest debited during the same period.

BILLS PURCHASED & DISCOUNTED:-

The bills purchased / discounted account should be treated as NPA if the bill remains overdue and unpaid of two quarters during the year ended 31^st March 1995 and onwards. However, overdue interest should not be charged and taken to income account in respect of overdue bills it is realized.

OTHER ACCOUNT:-

Any other facility should be treated as NPA if any amount to be received in respect of that facility remains past due for a period of two quarters during the year ended 31^st March and onwards.

CLASSIFICATION OF ASSETS AS NPA BY R.B.I.:-

To find out whether on assets in NPA or not and to make provision, rules and norms of recovery, RBI has classified the assets of banks and financial institutions as:-

1. Standard assets

2. Sub-standard assets

3. Doubtful assets

4. Loss assets

(A) STANDARD ASSETS:-

Standard assets is one, which does not disclose any problem and which does not carry more than normal risk attached to the business.

(B) SUB-STANDARD ASSETS:-

Sub-standard assets is one, which has been classified as NPA for a period not exceeding two years. This period has now been reduced to 18 Months.

(C) DOUBTFUL ASSETS:-

A doubtful assets is one which has remained NPA for a period exceeding two years (now reduced to 18 Months).

(D) LOSS ASSETS:-

A loss is one where loss has been identified by the bank or internal or external auditors or the RBI inspection but the amount has not been written off, wholly or partly. In other words, such an assets is considered uncollectible and of such little value that its continuance as a bankable assets is not warranted although there may be salvage or recovery value.

R.B.I.GUIDELINES ON ASSET CLASSIFICATION IN 2001 :-

As refer to our circular earlier issued in 1999 the RBI revised all the asset classification guidelines in 2001 there is no change in 1999 circular.

In continuation to our annual closing for FY 2007-08 dated 29.04.2008 vide which the assets classification circular NO. F1-03 issued by SIDBI was sent for necessary classification.

ASSET CLASSIFICATION NORMS AS PER SIDBI’s GUIDELINES

STANDERED ASSETS	Default in installment of interest / principal for 3 months
SUB-STANDERED ASSETS	Default in payment of interest / principal for more than 3 months and less than 18 months .
DOUBTFUL-1	Default in installment of interest / principal for more than 18 months less than 54 months.
DOUBTFUL-2	Default in installment of interest / principal for more than 30 months less than 54 months
DOUBTFUL-3	Default in installment of interest / principal for more than 54 months.
LOSS	A loss asset is one where loss has been identified but the amount has not been written-off totally or party .in other words such an assets is considered uncollectible.

SALIENT FEATURES:-

As per recent circular of SIDBI

1)- The cases have been divided according to the category of NPAs .

Separate matrix for calculation of OTS amount.

a) Sub- standard -- Default upto 18 month

b) Doubtful-I -- Above 18 – 30 month

c) Doubtful-II -- Above 30-54 month

d) Loss asset -- In case

2) - The cases have been further classified & divided into areas

a) Fast Moving Area

b) Slow Moving Area

c) Very Slow Moving Areas

ELIGIBILITY CRITERIA:-

1) The corporation will settle all those accounts which have become NPAs. The seen capital margin money loan and other assistances given by corporation.

2) The cut off dates consideration of the category of borrower’s account.(SS, D-1, D-2 and loss assets). RMs will keep close watch to prevent the borrower to slip into the lower category in order to get more waiver benefits.

PROCESS OF O.T.S.:-

CLASSIFICATION OF ASSETS:-

Classification of NPA on the basis of category of borrower’s accounts (SS, D-1, D-2 and Assets)

1. SUB CLASSIFICATION OF NPA:-

The account of NPAs have been further classified depending upon the age of loan. For the purpose of determining the age of loan, the date of last disbursement will be taken into consideration for deciding the eligibility of matrix.

2.ACCOUNTING PROCEDURE FOR DETERMINING THE OTS AMOUNT:-

For the purpose of calculation of OTS amount, the outstanding liabilities as on previous quarter of interest on which the sanctioning authority sanction the OTS proposal referred by RO will be taken into consideration up to 20^th March or 15^th April as the case may be taken into account.

FOR CALCULATION OF O.T.S. AMOUNT AS PER MATRIX FOLLOWING PROCEDURE WOULD BE ADOPTED.

a) Last day of the financial year i.e.31^st March would be consideration as the date on which an account has become N.P.A during even if as per guidelines the account has become NPA during the financial year itself. For example, in case an account had become NPA on 30.09.2001 for the purpose of OTS calculation.

b) Total interest (S.I+D.I+C.I.) debited till the date a/c had turned into NPA (e.g. 31.09.2001) for the purpose of OTS calculation.

c) Simple interest @ 13.5% or documented rate of interest whichever is less would be calculated from the date account has become NPA (1.4.2001 in above cases) till last quarter.

d) The amount deposited by the partly towards interest during the period mentioned at © would be deduced before arriving at the figure of O.S.I.

e) This total O.T.S. amount would comprise of OSP+Expenses+Total Interest debited till the account has become NPA+(Simple interest @ 13.5%) from the date of NPA till last quarter- Amount paid towards interest during this period.

2. SETTLEMENT OF AMOUNT DETERMINED:-

For simplicity of the accounting, the amount of OTS will be settled in the next nearest Rs.100/-

VALUATION OF BOTH PRIMARY AND COLLATERAL SECURITY MARTGAGED: (For purpose of OTS)

a. In all cases, irrespective of the outstanding principal, location and sub category of NPAs, the admissible OTS amount will be linked to the Realistic Realizable value (RRV) of mortgaged security in market pluck net worth of promoters/ guarantors and also as per the amount determined by the matrix. The higher of the two will be admissible amount for OTS purpose.

b. In those cases where outstanding principal is up to Rs.50.00lacs, the valuation will be done by a team of at least two officers headed by invariably Regional Manager. For cases, having outstanding principal of above Rs.50.00lacs, the valuation will be done by officials as mentioned above, as well as outside Govt. approved values. In case of difference in valuations, the average of the two would be considered for the purpose of calculation of admissible OTS amount.

c. To ascertain the reasonable realizable value of assets in the market, the existing

guidelines valuation will be applicable.

INDUSTRIAL SICKNESS

The companies act 1956 defined Sick Industrial Company and Net worth as follows:-

Section 2(46AA)

“Sick Industrial Company” means an industrial company which has :-

a) The accumulated losses in any financial year equal to 50% or more of its average net worth during four year immediately preceding such financial year.

b) Failed to repay its debts with any three consecutive quarters on demand made in writing for its repayments by a creditor or creditors of such company

Section 2(29A)

“ Net worth” means sum total of the paid up capital and free reserves after deducting the provision or expenses may be prescribed .

RBI’s definition

Sick industrial company means an industrial company ( being a company registered for not less than five years ) which has at the end of any financial year accumulated losses equal to or exceeding its entire net worth .

Causes of Industrial Sickness

Reasons and Sickness for NPA

A]- A large percentage of non-performing assets (NPA) in portfolio has been a matter of great concern. A large part of loan portfolio is blocked as NPA.

B]- Poor loan portfolio quality had led to higher percentage of NPA’s.

C]- There is little focus on restructuring NPA’s

D]- The parties are not provided the proper marketing assistance which lead to their inefficient performance and turning into NPA.

E]- Unequal lending policy (some very slow moving areas where champs of becoming NPA is high they are much major borrowers, like food, chemical etc.)

F]- Poor quality of credit appraisal and mad equate so provision and weak system of recovery.

G]- Corporation landing rate is high and the commercial bank rate is low them the corporation.

H]- Sometimes political Environments are effecting the recovery procedure.

I]- Sometimes poor forecasting effected the recovery procedure and the result is corporation assets goes to NPA.

J]- Lack of Professionalization effected the recovery procedure.

K]- Large scale industries have been closed and they affected the small scale industries

Eg. LML was closed which affected the GoodWill automotive which is party of UPFC.

L]-The corporation has disbursed more than 50% amount in backward

district.

Faulty appraisal.

M]-The corporation did not open branch offices in every district to have better and efficient recovery

N]-Improper appraisal done by the corporation

O]-No sharing in losses either by State Govt. or SIDBI / IDBI

The parties fail to pay the installment to UPFC because:

A. Poor electricity supply of city

B. Improper follow-up of their project.

C. Shortage of working capital.

D. Closing down of Large scale industries.

E. Improper distribution of product in market.

To get rid of NPA, there are few policies which followed by UPFC which turn the all NPA in liquidation form.

SALE POLICY

1. INTRODUCTION- Sale Policy -2005

The Guidelines and procedures for sale of assets under section 29 of SFCs Act was

considered and approved by the Board of Directors in its meeting held on 15-09-2001. Based

on above a detailed circular No.36/2001-02 dated 12th October, 2001 was issued to all the

Regional Managers.

Keeping in view the Udyog Bandhu directives, the Corporation had

recently issued certain policy guidelines with regard to taking over of units u/s

29. It has been made mandatory to consult industrial associations prior to taking

drastic action against the unit.

In order to streamline the working of the Corporation four Zones have

been created in the Head Office with Asstt. General Manager as Zonal Incharge.

Incharge Zones would look-after different Regional Offices. In our revised

draft OTS Policy we have delegated some powers to Dy. General

Manager/General Manager with a view to expedite the decision making. It was,

therefore, thought prudent to look into the Sale Policy-2001 a fresh and give

certain delegation to operating staff, so that decision making becomes faster.

Certain changes have also been incorporated in Sale Policy-2005 in view

the feed back we have been receiving from the field functionaries from time to

time .

2. METHODOLOGY OF RECOVERY OF DUES OF THE

CORPORATION

There were following two methods being adopted by the Corporation for

the recovery from chronic defaulting units:-

i) Recovery as arrears of land Revenue by issuing RC/PRC against the

defaulting units/borrowers. The dues are realized by Revenue

Authorities through auction proceedings and then remitted to the

Corporation.

ii) Recovery by way of sale of assets mortgaged to the Corporation u/s 29

of SFCs Act. The dues are realized by the Corporation through sale of

mortgaged assets (Prime and/or collateral security).

2. realize maximum amount of dues through open sale/bid and

negotiations. While transferring the unit to the new management it is

also seen whether the party would pay deferred amount by running the

unit or through other resources. After the assets are sold, balance dues

are realized through PRC etc. These guidelines have been issued for

uniformity of system to all Regional Offices.

3. SALE OF ASSETS U/S 29.

The brief procedure for sale of assets u/s 29 would be as under:-

(i) Issue of Notice U/S. 29

After persistent persuasion by way of personal contacts, letters and

subsequent reminders, if borrower does not take tangible steps to regularize the

account he may be given a final chance by calling him alongwith member of

local industrial association as a last attempt. Thereafter notice u/s 29 would be

issued by the Regional Manager giving time of 30 days (instead of 15 days

earlier proposed) for clearance of overdues of the Corporation. However, in

running unit, initially notice u/s 29 may not be sent to the Bank. The copy of the

same shall be sent to the Bank for information if party does not respond within

the notice period. This has been done so that a running unit does not suffer

heavily on this score. As far as possible notice U/s 29 shall be issued after default

(of principal and/or interest) of minimum 2 quarters and maximum 3 quarters and

the borrowers are reluctant to make the payment and/or accounts slip to NPA.

Notice U/s.29 would be issued for prime as well as collateral security. Under

exceptional circumstances if there is need to issue notice under section 29 even

before default of 2/3 quarters or the account slips to SS categories, the same

shall be issued with prior approval of Dy. G.M. In case the RM feels that Notice

u/s 29 should not be issued even after default of 3 quarters, then he will record

the reasons in the file for not doing so and inform concerned Incharge Zone at the

(iii) Release of Advertisement and Publicity

In the revised policy it is proposed that the Regional Manager would release

advertisements for the unit under sale upto sanctioned loan amount of Rs.50.00 lac.

Advertisements in other cases would be released by the Head Office. Following aspects are

kept in mind, while releasing advertisement for sale :-

i) Total advertisement expenses in a case should not be more than 5% of OSP

subject to maximum of Rs.50,000/-

ii) Normally the units having valuation upto Rs.50.00 lac should not be advertised

in Economic Times/Financial Express/Other National level papers to curtail the

expenses and to keep them within the aforesaid limit.

iii) Permission of DGM/MD would be required if expenses on advertisement are

crossing the above limit.

iv) Apart from the details of assets, advertisement will also contain the name of

borrowers/promoter/directors/guarantors, date and time of opening the offer,

time of negotiation and notice to the borrower to bring the offer or present on

the date of negotiation etc.

v) Negotiations should be conducted within one week of the opening of

offers.

vi) All the offers received by RO shall be negotiated and copy of minutes be

invariably sent to concerned Zones.

vii) RM should select the news papers normally which have largest circulation in

the area of prospective buyers. Second advertisement will be released in case

no proper response is received against the Ist advertisement. The gap between

the two advertisements will be decided by the RM on case to case basis.

Normally RM will release atleast 2 advertisements before finalizing a sale if

there is no urgency and circumstances so permit.

viii) If the unit is not to be advertised after 3 months from the date of issuance of

notice u/s 29, then RM should record reasons of not doing so.

ix) Repeated advertisements in expensive newspapers should be avoided in small

loan cases. Common prudence should be applied to reduce advertisement cost

as far as possible.

x) Publicity for sale of units/assets may also be done through other methods viz.

circulation of information of sale on Notice Board, Factory Gate, Industrial

Associations etc. and list of all such cases should be referred to Head Office for

posting at web site of the Corporation. It should be updated monthly.

Information in this regard should be sent in standard formats.

xi) The work relating to advertisement of units u/s 29 from the Head Office would

be looked after by Incharge Zone-I who is also looking after the work of Public

Relation.

money giving 10 days time. This should be done prior to putting up the

proposal before the competent authority for final approval.

iii) In order to follow best tradition and transparency in operation it is proposed that

highest negotiated offer would also be intimated to the borrower under

registered post so that the borrower may be aware of the fact as at what value

his property is being sold.

(xiii) Period of Balance Payment

i) The purchaser would not be charged any interest for two months from the date

of issue of sale letter/possession , whichever is earlier.

ii) After the gestation period of two months interest @ 13 ½% would be charged

from the purchaser, as per the prevailing system..

iii) The maximum period of two years is given to the purchaser for depositing the

balance sale proceeds in equal monthly/quarterly instalments.

iv) The additional interest of 3 ½% would be charged in case the purchaser defaults

in payment of sale proceeds.\

v) In all cases where the possession of the unit is held up due to litigation/IT

clearance etc, hindrance matter may be referred to the Head Office for further

interest free period. All such matters will be decided by the Managing Director.

vi) If the initial down payment has not been deposited by the purchaser in time, the

sale approval would be withdrawn and earnest money deposited would be

forfeited. The power for revival of sale would rest with concerned approving

authority.

(xiv) Legal Agreement

i) After receipt of initial down payment the RO will execute agreement to sell/sale

deed among participating institution and the purchaser would be handedover the

possession immediately.

4. Sharing of Sale Proceeds with other departments:-

i) UPSEB: No sharing is to be done with UPPCL, in respect of past Electricity

dues.

ii) D.I.C. In those cases where DICs have first charge on pari-passu basis with the

Corporation, the sale proceeds will be shared on pro-rata basis to principal

+expenses.

are to be transferred in the name of blood relation or husband/wife, then the matter will

be decided by the approving authority.

b) IN CASE OF THE COMPANIES.

If the offerer (s) is a director(s) of the company having major shareholding

(more than 50%) or has paid in full the sale consideration then the transfer can

also be done in the name of the company by the approving authority.

d) In case there is complete change in the constitution or person(s) permission can

be given only after receipt of 100% down payment. Such cases will be decided

by the Managing Director.

f) All other cases shall be referred to the Managing Director for approval.

Bifurcation of Sale Consideration

i) If there are two purchasers one for the land and building and other for plant &

machinery, two separate letters would be issued by the Regional Manager.

ii) If there is only one buyer for the entire assets i.e. land, building and plant &

machinery and the approved sale amount is more or less equal to the valuation

of the assets, two separate sale letters are required to be issued for plant &

machinery and land & building at the insistence of the borrower. In all such

cases the bifurcation of sale amount shall be calculated on pro-rata to valuation

of assets considered at the time of sale.

ONE TIME SETTLEMENT (O.T.S.)

The policy of one time settlement of Non-performing assets has been approved by the board on dated 25-05-2006.

INTRODUCTION:-

The corporation has been providing financial assistance to small and medium scale unit while sufficient precautions is being taken at the time of appraisal of projects, disbursement of loan and follow up yet some projects fail to generate adequate resources to repay dues and lead to default and subsequently turned into NPA.

OTS POLICY- AN OVERVIEW:-

One time settlement policy was approved by the Board of Director of UPFC in March 1999. The main purpose of the policy was to liquidate NPA’s in time bound manner, which has grown to Rs.597crore and constituted 45.56% of the total loan outstanding of corporation. This OTS policy was considered from revision and it was approved by the Board of Director in its meeting held on 15^th September 2001.

For the polygon was redesigned with the concept of OSA, this was effective from 31.05.2005.

SR.NO.	YEAR	NO.OF CASES SETLLE D	AMOUNT OF OTS	AMOUNT WRITTEN OFF	AMOUNT WAIVED	AVERAGE AMOUNT WAIVED PER OTS	AVERAGE AMOUNT WRITTEN OF PER OTS
1	1999- 00	689	8272.12	79.27	13658.92	19.82	0.11
2	2000-01	568	7930.00	106.93	13954.86	24.57	0.18
3	2001-02	577	10462.41	149.65	21618.10	37.47	0.26
4	2002- 03	432	6430.72	391.15	16115.77	42.52	1.03
5	2003-04	282	3733.31	239.70	11198.30	39.71	0.85
6	2004- 05	177	2980.08	67.20	6881.65	38.88	0.21
7	2005- 06	428	8292.41	229.90	41848.98	97.77	0.52
8	2006- 07	365	8098.77	104.79	50698.73	138.90	0.28
	TOTAL	3518	1091978.41	1368.59	175975.31	439.64	3.44

THE AVERGE OTS AMOUNT PER CASE IS RS. 14.50 LACS.

NOTE: The corporation has approved 194 number of OTS amounting to

Rs.21.00 crores in 2004-05 (including cancelled cases again revived / approved)

NPA of Uttar Pradesh Financial Corporation as on 31-mar-2008 has been categorized below as per RBI guideline:-

SR.NO.	Category of assets	Secured	Unsecured	Total Amount

1	Standard	-	-	438539995
2	Sub- standard	-	-	162608477
3	Doubtful-1	55602666	858499	56461165
4	Doubtful-2	110313427	10130970	120444397
5	Doubtful-3	1942116261	464356410	2406472671
6	Loss			1647895431

Provision of NPA is being made in following way by UPFC

SR.NO.	Category of assets	%age of secured	%age of unsecured

1	Standard	0.25%	-
2	Sub- standard	10%	-
3	Doubtful-1	20%	100%
4	Doubtful-2	30%	100%
5	Doubtful-3	100%	100%
6	Loss	-	-

OBJECTIVES OF NEW OTS POLICY -2005

1)- The revised policy is designed to provide an effective framework to tackle old and more chronic cases of D-2 and loss assets categories which have been the growing causes of the corporation.

2)- The total NPAs in D-1, D-2 and loss assets categories are Rs 589.13 Cror target of setting cases of Rs.150 crore per year for next three year.

3)- The critical / basis of calculation is D-1, D-2 assets categories.

4)- The policy will effective tool to settle large no. of cases. OTS with special emphasis in setting cases which are in possession of the corporation for more than 5 years.

5)- The operational procedure have been streamlined to remove unnecessary hassles and delay cases.

REVISED RESCHEDULEMENT POLICY -2005

The Policy for Reschedulement of dues of the defaulting units was put up in the

Settlement Committee meeting held on 15-02-2003. After the approval of the Settlement

Committee, the policy was put up before the Executive Committee meeting held on 29-

03-2003. After approval of the Executive Committee a Circular No. 05/2003-04 dated 5-

5-2003 was issued by the Corporation. A copy of this Circular is placed at Annexure-I.

The Reschedulement Policy per se has been quite exhaustive and the Corporation

has been able to cover most of the cases under this policy. Following changes are

proposed in the extant reschedulement policy in order to make it more beneficial to

borrowers.

1. It has been felt that the rate of interest being charged on outstanding principal and

funded interest both in FATL and WCTL @ 16.5% & 17% respectively has been quite

high. This needed downward correction. It is proposed that the rate of interest on

outstanding principal and funded interest in FATL cases would be 13 ½% and in WCTL

cases it would be 15%.

REHABILITATION:-

In order to address the problems of the SSI Sector and help the SSI units which have become sick but are potentially viable, a comprehensive policy of rehabilitation package based on RBI gui-elines have been framed. The promoter approaches the R.O. when unit become sick as per definition of RBI guidelines. The R.O. prepares the rehabilitation package, if unit is potentially viable and recommends relief's and concession as per RBI guidelines to turn around the sick unit. The rehabilitation package prepared is sent to H.O. and Zonal Office at H.O. examines the package and put up the same to competent authority

for approval. The gist of relief's and concessions which can be granted to potentially viable sick SSI units is available at Head Office/Regional Office.

RECOVERY:

If unit makes two consecutive defaults in payment of principal and or interest, Corporation can issue notice under section 29 for taking over the physical possession of the unit. The physical possession is taken only after taking into confidence the local chamber / association when all other avenues of recovery are exhausted. The Corporation has other

option of recovery under U.P. Public Money Act to recover the loan outstanding as an arrears of land revenue by issuing recovery certificate. Managing Director is only authorized to issue recovery certificate, whereas notice under section 29 can be issued by Regional Manager and

Sr. Officers of the rank of Dy. General Manager and above depending upon the quantum of the loan amount.

FINAL SHOOTOUT OF NPA’s

INTRODUCTION

It is a known fact that the bank and financial institution in India face the problem of swelling non performing assets and is becoming more and more unmanageable In order to bring the situation under control, some steps have been taken recent. The Securitization and Reconstruction of financial assets and enforcement of Security Interest Act 2002 was passed by parliament, which is an important step towards elimination or reduction.

INDIAN ECONOMY AND NPA:

The Indian economy has been much affected due to high fiscal deficit, sticky legal, cutting of exposure markets by FIs, etc.

Further, international rating agencies like standard & poor lowered India’s credit rating to sub-investment grade. Such negative aspects are often weighted positives such as increasing forex reserves and a manageable inflation rate.

Under such a situation, it goes without saying the banks are no exception and are bound to face heat of a global downturn . One would be surprised to know that the banks and financial institution in India hold non performing assets worth Rs.110000 crores . Bankers have realized that unless the level of NPA is reduced drastically, they will find it difficult to survive.

GLOBAL DEVELOPMENT AND NPA:-

The core banking business is of mobilizing the deposit and utilizing it for landing to industry. Lending business is generally encouraged because it has the effect of funds being transferred from the system to productive purpose,

which result into economic growth.

However landing also carries credit risk which arises from the failure of borrower to fulfill its contractual obligation either during the course of transaction or on a future obligation.

A question that arises is how much risk can a bank afford to take? Recent happenings in the business world Enron, WorldCom, Xerox, and Global crossing do not give much confidence to banks. In case after case these giant corporate became bankrupt and failed to provide investors with clearer and more complete information there by introducing a degree of risk that many investors could neither anticipate nor welcome.

The history of financial institutions also reveals the fact that the biggest banking failure was due to credit risk.

Due to this bank are restricting their lending operations to secured avenues only with adequate collateral on which to fall back upon in situation of default.

WHY NPA HAS BECOME AN ISSUE FOR BANKS AND FINANCIAL INSTITUTIONS:-

To start with performance in terms of profitability is benchmark for any business enterprises the banking industry. However increasing NPA have a direct impact on banks profitability as legally banks are not allowed to book income on such accounts and at the same time banks are forced to make provision on such assets as per the Reserve Bank of India (RBI) guidelines.

Also with increasing deposits made by the public in the banking system the bank industry cannot afford defaults by borrower since NPA affects the repayments capacity of banks.

Further, Reserve Bank of India (RBI) successfully creates liquidity in the system through various rate cutes and banks fail to utilize this benefit to its advantage due to the fear of burgeoning non performing assets.

CREDIT RISK AND NPA:-

Quite often credit risk management (CRM) is confused with managing non performing assets. However there is an appreciable difference between the two NPA’s are result of past action whose effects are realized in the present i.e. they represent credit risk that has already materialized and default already.

On the other hand managing credit risk is much more forward looking approach and is mainly concerned with managing the quality of credit portfolio before takes place.

In other words an attempt is made to avoid possible default by properly managing credit risk. Considering the current global recession and unreliable information in financial statements, there is high credit risk models for the purpose of credit management.

HOW IMPORTANT IS CREDIT RATING IN ASSESSING THE RISK OF DEFAULT FOR LENDERS:

Fundamentally Credit Rating implies evaluating the credit worthiness of a borrower by an independent rating agency. Here objective is to evaluate the probability of default. As such Credit Rating does not predict loss but it predicts the likelihood of payment problems.

Banks do rely on Credit Rating agencies to measure and assign a probability of default. T edit risk and is also reviewed periodically associated with each risk bucket is the probability of default that is derived from historical observations for default behavior in each risk bucket. However Credit Rating

is not fool proof, in fact Enron was rated investment grade till as late as a month prior to its filling for chapter bankruptcy when it was assigned as in default status by the rating agencies. It depends on the information available to the Credit Rating agencies. Besides there may be conflict of interest which a Credit Rating agency may not be able to resolve in the interest of investors an lenders.

Stock prices are important (but not the sole) indicator of the credit risk involved. Stock prices are much more forward looking in assessing the creditworthiness of a business enterprise. Historical data proved that stock prices of companies such as Enron and WorldCom had started showing a falling trend many months prior to it being downgraded by Credit Rating agencies.

PROCEDURE OF LIQUIDITION OF NPA

Sales of prime assets and collateral securities by applying sec 29 of SFC Act.

By way of one time settlement with the sale of audit of mortgage property by way of RC|’s.

GUIDELINES|AND PROCEDURE FOR SALE OF ASSET UNDER SECTION 29 OF SFC ACT.

1- INTRODUCTION- Sale Policy 2005.

The guidelines and procedures for sale of asset under section 29 of SFC’s act was considered and approved by the Board of Director.

METHODOLOGY OF RECOVERY OF DUES OF THE CORPORATION

There are following two methods.

1}- Recovery as arrears of land Revenue by issuing RC/PRC against the defaulting unit/ borrower, the dues are realized by Revenue Authorities through auction proceeding and then remitted to the corporation.

2}- Recovery by sales of asset mortgaged to the corporation under sec 29 of SFC act.

SALE OF ASSETS U/S 29

THE BRIEF PROCEDURE FOR SELL OF ASSETS:-

ISSUE OF NOTICE U/S 29 GIVING 30 DAYS TIME

After persistent per season by way of personal Contract letter’s and subsequent reminders the notice is issued by the Regional Manager giving of 30 days (instead of 15 days earlier proposed) for clearance of our dues of the corporation. It notice is issued of minimum 2 quarter’s and maximum 3 quarter’s and the borrower’s are reluctant to make the payment or account slip to NPA. Notice is issued for the prime or collateral securities, After default of 3 quarter’s than he will record the reasons in the life for not doing so and inform cowered incharge Zone at the Head Office.

2- POSSION OF THE ASSETS:-

After passion of the units U/S 29 would be taken only with the prior approval of the Managing Director the possession of the unit would be taken over by the RM after the expiry of notice period.

3- ADVERTISEMENT AND PUBLICITY:-

The RM would release advertisement for the unit under sale up to sanction loan amount of Rs.50.00 lack advertisement in other cases would be released by the Head Office.

RELEASE OF ADVERTISEMENT TO INVITIES OFFER.

The Regional Manager would release advertisement for Unit under

sale up to sanctioned loan amount of Rs.50.00 lac, following aspects kept in mind while releasing advertisement for sale.

(i) Total advertisement expenses is not more than 5% of OSP subject to maximum of Rs.50,000/-.

(ii) Normal units valuation up to 50 lac should not be advertised in Economy Times/ Financial. Express/other National level news paper.

(iii) Permission of AGM/MD would be required.

(iv) A parts from the details of assets, advertisement will also contain the name of borrower, director / guarantors, date time of opening of offer.

(v) Negotiation should conducted with in one week of the opening of offers.

(vi) All the offers received by RO shall be negotiated and copy of minutes be invariable sent to concerned Zones.

4:- VALUATION OF PRIME AND COLLATERAL SECURIRIES

(i) The prime security Disbursed amount is up to 50 lac. By (Team of officers Tech + Fin) normally headed by RM sale policy of 2005.

(ii) The prime security Disbursed amount is more than 50 lac. As above beside valuation may also be done by Govt. approved value as per Policy of 2005.

5:- NEGOTIATION OF OFFER INTENDING PURCHASE:-

(i) In case of Disbursed amount is up to Rs.50.00 lac. The Regional Negotiation Committee. This is constitution of Regional Manager. Senior technical/ Finance of low officer. Incharge recovery and Route officer will negotiate.

(ii) In all other financing cases. The head office of Negotiation Committee which is constitute of General Manager /All I/c Zones CM(F). CM (P&M) will negotiate.

6:- SENDING THE PROPOSAL OF SALE TO HO FOR APPROVAL

(i) AGM up to 25.00 lac.

(ii) Managing Director – Cases above Rs.25 lac and up to 1.00 crore is covered.

(iii) Settlement Committee.

7:- APPROVED OF THE COMPLAINT AUTHORITY

Managing Director issue the complaint Authority for the approval.

8:- ISSUE OF SALE LETTER:-

In favour of the purchaser when one getting the approval from the Head Office.The personal Regional Manager issued a letter of sale through the prescribed format as per sale policy.

9:- DEPOSITE OF SALE PROCEEDS

Sales letter may define the deposit amount the purchase deposit the sale proceeds the legal department take action for a recursion of salaried/legal agreement to hand over the passion.

10:- EXECUTIVE OF SALES DEED OR LEGAL AGREEMENT

Sale to agreement/salaried agreement is has taken 50% salaried agreement is 100%. When the money amount left it recovery by the balance by given Notice or RC.

METHODOLOGY OF VALUATION:-

The valuation of the asset would be carried out as per the valuation guidelines. Realistic realized value (RRU) of the asset would be worked out as per valuation guidelines.

RECEIPT OF EARNEST MONEY

The offer of the unit should be accompanied with earnest money by way of Demand Draft / Pay order .

As Per Sales Policy of 2001		As Per Sales Policy of 2005
Loan Amount Rs.(in Lack	Amt. Of earnest Money(in Rupees)	Amount(Rs.in lac)	Amount of earnest Money(in Rupees)
0 to 2.00	10,000/-
2 to 5.00	25,000/-
5 to 10.00	50,000/-	NO CHANGE
10 to 50.00	1,00,000/-
50 to 100	2,50,000/-
100 and above

At the time of negation the full bio-data , financial resources, details of movable and immovable property of the purchaser should be asked along with earnest money .

- Refund / for teiture of earnest money.

- Taking over the possession of the unit .

- Nothing down inventory of the time of possession the unit

- Handing over the physical possession of the unit to original borrower.

Negotiation with the prospective Buyer’s.

QUESTIONAIRE FOR NPA AND LIQUIDATION

A. Name of the party with complete address.

B. Name of the proprietor/partners/director.

C. Constitution:- Pvt. Ltd/ partnership.

D. Items to be manufactured.

E. Nature of the industry.

F. Loan amount sanction

G. Legal agreement made on

H. Cost of the project.

I. Means of the financing

J. Loan amount disburse/release

K. First instalment due on.

L. NPA became on

M. Account position as on became NPA.

N. Recall notice issued on

O. Recovery certificate issued on

P. Recovery Action start on notice under section 29

Party representation if any.

R. Advertisement release for sale of assets.

S. One time settlement (OTS) request.

T. OTS request approved by UPFC.

U. Not ownering OTS further recovery proposed financing

V. Institution notice U/S 29. are by way of recovery certificate incase of removal assests.

CASES OF U.P.F.C.

CASE OF ANNAPURNA POLYPACKERS

A.Name of the party with complete address.

Ans:- Annapurna polymaker, Add:- 41-B, Azad nagar, Kalyanpur.

B.Name of the proprietor/partners/director.

Ans:- Partner: Shri Lalu Ram Chaturvedi

Smt Annapurna Chaturvedi.

Shri Neeraj Chaturvedi

C.Constitution:- Pvt. Ltd/ partnership.

Ans:- Partnership.

D.Items to be manufactured.

Ans:- Polythene Bag.

E.Nature of the industry.

Ans:- Small Scale Industries.

F.Loan amount sanction

Ans:- 2.24 Lac.

G.Legal agreement made on

Ans:- 26-nov-1989.

H.Cost of the project.

Ans:- 3,19,000 Rs.

I.Means of the financing

Ans:- 3,19,000 Rs.

K.Loan amount disburse/release

Ans;- 2,00,000 Rs.

L.First installment due on.

Ans;- Defaulter since first installment.

M.NPA became on

Ans:- Dec.1992

Interest due.- 1,01,000 Rs.

N.Account position as on became NPA.

Ans:- Interest- 1,11,733

Principle – 66,000Rs.

O.Recall notice issued on

Ans:- 12-mar-1993

P.Recovery certificate issued on

Ans:- no certificate issue reason being political environment

Q.Recovery Action start on notice under section 29

Ans:- No recovery action has been started Yet because of political matter

R.Party representation if any.

Ans:- there were not any party representation

S.Advertisement release for sale of assets.

Ans:- 5-Nov-2003 ( Last advertisement issued date)

T.One time settlement (OTS) request by UPFC.

Ans:- 6,41,000 Rs. By U.P.F.C included interest.

U.OTS request approved by state government.

Ans:- 5,27,000 Rs.

Payment Made by Party

89,000 Rs.

Remaining amount:- 4,38,000 Rs.

V.Not ownering OTS further recovery proposed financing

W.Institution notice U/S 29. are by way of recovery certificate incase of removal assets.

X. Assets held in U.P.F.C. from the Party as a security

Ans:- Govt. Security- 2,41,000 Rs. ( valued at 1989)

Present Market Value- 11,54,000 Rs.

APPLICATION TO A.G.M. FOR U.P.F.C. QUERIES

To,

The Assistant General Manager,

Uttar Pradesh Financial Corporation,

Kanpur.

Subject:- our views on Annapurna polymakers Ltd. Case.

About Case:- This case is about Annapurna Polypackers Ltd. Add:- 41-B, Azad nagar, Kalyanpur,

Partner: Shri Lalu Ram Chaturvedi

Smt Annapurna Chaturvedi.

Shri Neeraj Chaturvedi ( Politician)

Annapurna Polypackers had begged loan from U.P.F.C. of Rs. 2,00,000 to run their business, they held their government security valued 2,41,000 Rs. as a security to U.P.F.C. They were manufacturing polythene bag and sold it in open market. The party proved defaulter since of their first installment. The party became NPA for U.P.F.C. in Dec.1992.

Now present time the value of security held by U.P.F.C. is 11,54,000 Rs.

But government did not sold their security to recover his landed amount due to political reason.

U.P.F.C. offered the company to settle their account of Rs. 5,27,000 in One Time Request. But party made payment of Rs. 89,000 out of 5,27,000.

And remaining part of money 4,38,000 Rs. is still unpaid.

U.P.F.C. is not able to recover their balance after long period of time being a political environment.

Our views:-

It has been suggested from our side that you can serve a notice to them followed by two further notice of warning that to sell their security.

If they would not reply in the time specified the security should be sold off to recover the amount.

Management trainee Under guidance of regional officer Mr. SUNIL MALHOTRA

SHIVAM TIWARI

CASE OF SURYA TRANSFARMER LTD.

A.Name of the party with complete address.

Ans:- Surya Transformer Ltd. Plot no.23 to 27 and 37 to 40 village, Uriara Hamirpur road, Bidhnu, kanpur

B.Name of the proprietor/partners/director.

Ans:- director:- Shri Madhukar Shukla

Add:- W-190, Keshav Nagar Kanpur.

C.Constitution:- Pvt. Ltd/ partnership.

And:- Ltd. Company.

D.Items to be manufactured.

And:- Repair of Tranformer

E.Nature of the industry.

And:- Small scale industry

F.Loan amount sanction

And:- 90lac in 15-nov-1994

G.Legal agreement made on

H.Cost of the project.

Ans:- 151 lac.

I.Means of the financing

Ans:- Term Loan 90 lac.

Share capital 45 lac

Unsecured loan 16 lac.

J.Loan amount disburse/release

Ans:- 81 lac.

K.First instalment due on.

Ans:-

L.NPA became on

Ans: did not become NPA

M.Account position as on became NPA.

Ans:- did not have.

N.Recall notice issued on

Ans:- 18-oct-2002.

O.Recovery certificate issued on

Ans:- did not issue

P.Recovery Action start on notice under section 29

Q.Party representation if any.

R.Advertisement release for sale of assets.

Ans:- 22-dec-99 and 13-sep-01

S.One time settlement (OTS) request.

Ans:- 27-march-2002, 70.25 lac and waiver off 3.22 lac.

payment by party in OTS

10.50 lac. And overdue Amt. 59.75lac

T.OTS request approved by UPFC.

Ans:- 70.25 lac

U.Not ownering OTS,further recovery proposed financing

V.Institution notice U/S 29. are by way of recovery certificate incase of removal assests.

W,securities have been mortgaged by UPFC.

Ans:- Value of security in (24-oct-1996) value in 31-mar-2002

Land------------- 3.71 lac 3.71 lac

Building--------- 48.25 lac 31 lac

Plant & machinery--- 46.65 lac 26.68 lac

Furniture-------------- 4.56 lac nil

X. rate of interest Charge

Ans:- 17%

X.Reason for Default.

Ans:- due to not sanction of working capital, due to black listed from UPPCL. Only repairing activities are being done.

Y.Re-schedulement

Ans|:- Apr.1998

CONCLUSION

Through this short study of 6 weeks duration we can conclude that in the 52 years of it working the corporation had faced several up and down.

The corporation financial crisis is not sudden happening because severe systematic deficiency had occurred some times now. The poor loan portfolio quality has led to a large percentage of NPA, negative profit. The poor performance has occurred due to some reasons which are given in findings. The procedure of recovery in the corporation is complex.

The Indian financial system made a program in functionally and geographical coverage. There are many areas as resale and other business or semi business tended to enjoy the credit policies to the determined of the priority sectors. Due to this the financial institution on SFC’s are established and in this come UPFC provides credits and sometimes due to some reasons these assistance provide nothing.

When financial institutions and the assisted units combined their inefficiencies and created a bobble that eventually best leading to panic. This necessitated the fallow up of steps, which could liquidate the blocked loan amount in the sick units.

Emphasis should be on minimizing the risk of their increasing their NPA’s by keeping stringent control unit the internal factors.

Now the situation is changing day by day. And management is getting success to control the decreasing rate of recovery. In the following years it is expected that with the help of the government policies and continuous efforts of financial institution it would become easy to fight the age old problem of NPA’s

BIBLIOGRAPHY

1}-Brochure of UPFC

2}-Forms and other paper of UPFC

3}-Annual report of UPFC (2008- 2009)

4}-Financial Management- I. M. Pandey

5}-Financial Management-Khan & Jain

6}-Financial Management-Ravi M. Kishore

7}-Company Cases

WEBSITES:-

A}-Www. Upfcindia.com

B}-Www. Google com

C}-Www.Rbi.org

D}-Www.altravista.com

E}-Www.Hindugroupnet.com

F}-Www.Answer.com

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PROJECTS

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Uttar Pradesh Financial Corporation

Function of Uttar Pradesh Financial Corporation

Objectives of UPFC

1. Synergy with State Industrial Policy to make U.P.an “Udyog Pradesh”.

2. Frequent interaction with Enterpreneurs & Industrial Associations through “Vittiya Bandhu” for problem solving and enable of investments.

LIMITS OF ACCOMODATION

1. Shri V.N.Garg CHAIRMAN

MANPOWER AT UTTAR PRADESH FINANCIAL

CORPORATION

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Administration Department

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Computer Department

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