Speech Delivered by Mrs. Rajwant Sandhu, IAS, Chairperson at the  44th Annual General Meeting of the Himachal Pradesh Financial Corporation held on 29.7.2011

Ladies and Gentlemen,

          It gives me pleasure to present the 44th Annual Report and Accounts of Himachal Pradesh Financial Corporation for the year ended on 31st March,2011. 
         
          The year 2010-11 was a year of great contrasts from macro economic point of view. While the global economic recovery advanced, it remained uneven between advanced nations and emerging markets. India, however, continued to perform as a new growth pole in the world economy. During 2010-11, India’s economic growth improved by 0.5% to 8.5% over the previous year.     Inspite of good growth, inflation continued to remain a major policy concern which prompted RBI to raise its key policy rate (repo rate) eight times from 3.50% to 6.75% as a trade-off between growth and inflation.  The liquidity conditions remained tight for most part of the year with some easing seen during the last quarter of the year. The deposit and lending rates of the commercial banks firmed up sharply after August, 2010.
         
          This was the economic scenario in which the Himachal Pradesh Financial Corporation worked during 2010-11.

Sanctions & Disbursements:
         
          During 2010-11, the Himachal Pradesh Financial Corporation sanctioned loans of Rs.0.17 crore only and made disbursements of Rs.6.33 crore against disbursements of Rs.20.26 crore during the previous year.  Since inception, the Corporation has made total loan disbursements of Rs. 528.98 crore upto 31.3.2011.  At the close of the year, the Corporation had pending commitments of Rs.4.60 crore.  
The State Financial Corporations (SFCs) were initially set up to meet out the loan requirement of small and medium industries in the respective States as no other institutions were giving loans to them. With the passage of time, many institutions and banks came up at the National level as well as at the State level and the entrepreneurs are now approaching them for loans. These institutions and banks are able to provide loans at  very competitive rate of interest because of their low cost of funds which has affected working of the SFCs. The Himachal Pradesh Financial Corporation has been incurring losses continuously since 1998-99 due to which its lending activity has been stopped.

Recoveries:

          During 2010-11, the Himachal Pradesh  Financial Corporation made total recoveries of Rs.36.95 crore against the recoveries of Rs.38.77 crore during the previous year. This does not include recovery of Rs.1.29 crore made  during the year but credited in the previous year due to  purchase   of cheques as per earlier practice  which practice has now been stopped. Now credit is given to the loanee only after realizing the amount of the instrument.  Thus actual recovery of the financial year 2010-11 is Rs.38.24 crore and comparative figure of the previous year is Rs.38.12 crore. At the close of the financial year an  amount of Rs.138.85 crore remained in default which also includes default of Rs 96.28 crore in respect of suit filed cases.

Resources:

          During this year, the Corporation did not receive any equity support from the State Government and therefore,  the paid up capital of the Corporation remained   at previous year’s level of Rs.28.57 crore.  During 2010-11, the Small Industries Development Bank of India (SIDBI)  released  Line of Credit of Rs 4.73 crore to the  Himachal Pradesh Financial Corporation and the HPFC repaid due  amount of Rs.15.71 crore  to SIDBI.  During 2010-11, the Corporation also raised Rs.16.00 crore through Non SLR bonds and redeemed bonds amounting to Rs.16.05 crore.  The total borrowings of HPFC as on 31.3.2011 stood at Rs.172.56 crore which includes liabilities of SIDBI amounting to Rs.69.77 crore, bonds of Rs.93.49 crore and loan from KCCB amounting to  Rs.9.30 crore.

Profit & Loss:
         
          The Corporation switched over to Mercantile System of Accounting from the earlier Cash System of Accounting with effect from 1st April, 2009.  During 2010-11 the Corporation earned total revenue of Rs.11.39 crore against Rs.17.74 crore in the previous year and incurred expenditure of Rs.21.17 crore against Rs.23.80 crore during the previous year. These figures are not comparable as the figures of previous year relate to 15 months due to first time adoption of mercantile system of accounting whereas the figures of the current year cover period of 12 months only.   During this year, additional provisions amounting to Rs.4.85 crore were also made in the books of accounts against NPAs and thus the Corporation booked a loss of Rs.14.65 crore against a loss of Rs.0.79 crore during the previous year.

Future Strategy:

The future strategy of the Corporation is to:

• Sharply focus on recoveries.
• Encourage settlements in doubtful and loss cases for reducing NPAs and improving liquidity.
• Curtail costs and improve efficiency.

Before I conclude, I express my deep appreciation for the valuable cooperation and support extended by my colleagues on the Board.  I also thank the officers and staff of the Corporation for their efforts.

I thank you all for attending this Annual General Meeting and hope the Corporation will continue receiving your cooperation in future also.

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