KARNATAKA STATE FINANCIAL CORPORATION

I. INTRODUCTION

Karnataka State Financial Corporation is a state level financial institution established by the State Government in the year 1959 under the State Financial Corporations Act 1951 to meet mainly the long term financial needs of small and medium enterprises (SMEs) in the State of Karnataka.

KSFC has been playing a pivotal role in the development of Micro, Small and Medium scale Enterprises (MSMEs) in the state of Karnataka for the last 57 years of its existence. Since inception, KSFC has assisted 1.71 lakh units with cumulative sanction of more than Rs.14,500 crore out of which about 50% is towards small scale industries. KSFC is the first SFC having IS/ISO-9001-2008 certified Corporation.

In the 57 years of existence, KSFC has contributed most significantly for the growth of MSMEs, backward area development and promotion of first generation, women and scheduled caste & scheduled tribe entrepreneurs.

Amendments to SFCs Act provide wide-ranging scope in financial assistace and operational flexibility. Keeping this in view, KSFC has re-engineered itself to ensure utmost customer satisfaction with new energy, thrust and speed. In line with this, the Corporation has put in place comprehensive, client friendly and need-based policies in the areas of credits and recoveries.

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Apart from setting standards of performance, these policies are driven to achieve the objective of transparent governance.

1. Purpose of Assistance

Financial assistance normally is provided for acquiring/creation of new fixed assets like land, construction of building plant and machinery and other assets required for the project establishment of units as well for expansion, modernization and diversification activities. However, Working Capital in the form of term loan under Single Window scheme for new and existing units and Corporate Loan for existing good units to meet working capital requirement will be provided.

2. Area of Operation

The area of operation covers the entire State of Karnataka. The industrial units / service sectors established or to be established within the state are only eligible for assistance. Besides, industrial concerns having registered office outside the State of Karnataka can also avail financial assistance provided the place of business/project is in Karnataka and they agree to shift their registered office to the State of Karnataka.

3. Network of BOs

KSFC has a good network of offices in the state. Each district has a branch office, in all 32 branch offices spread all over the state besides the Circle Offices and Head Office located at Bangalore.

4. Financial Services

KSFC extends all types of financial assistance in the form of long term loans, working capital term loans, corporate loans to meet short term working capital needs, opening of Letter of Credit to import capital goods and to all types of industrial and service sectors. KSFC also provides general insurance products of United India Insurance Co. Ltd., and Iffco - Tokio General Insurance Co. Ltd.,

5. Limit of Accommodation

The following is the maximum & minimum loan amount that could be availed by the entrepreneurs:

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Category Maximum Loan

i Proprietary / Partnership/Trusts Rs.800.00 lakh

Corporate bodies (both private/public Ltd) and registeredco-operative societies

iiRs.2000.00 lakh

a. Maximum Limit

SIDBI has permitted the Corporation to provide assistance to individual units upto Rs.1000.00 lakh in case of a Company or a Co-operative Society and Rs.400.00 lakh in case of a Proprietorship /Partnership/ Trusts etc., without prior approval of SIDBI.

In respect of category (ii) the financial assistance can be granted provided paid up capital and free reserves do not exceed Rs. 3000.00 lakh.

If the requirements of the funds for the project is substantial and cannot be extended by the Corporation alone, then the requirement of loan for such projects can be met in consortium with other Banks/Financial Institutions subject to condition that the paid up capital and free reserves of the applicant company does not exceed Rs.3000.00 lakh.

b. Minimum loan size

Minimum assistance Rs.5.00 lakh

Medical & Veterinary Doctors Rs.2.00 lakh

6. Sanction & Disbursement Powers

The branch offices of the Corporation are adequately delegated with powers of sanctions and disbursements.

KSFC has a decentralized system of working. Term loans from Rs.5.00 lakh to Rs. 100.00 lakh are processed at branch offices and sanctioned by the Branch Managers/AGMs/DGMs as the case may be. Term loans above Rs.100 lakh are processed at branch offices and sanctioned at the Head Office by the General Managers

Category Minimum Loan

i

ii

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upto Rs.150.00 lakh, Executive Directors upto Rs. 300.00 lakh, Managing Director upto Rs.500.00 lakh, Executive Committee upto Rs. 1000.00 lakh and the Board above Rs.1000.00 lakh.

Branch Offices are also empowered to disburse loans at the Branch levels.

II. ELIGIBLE ACTIVITIES FOR FINANCIAL ASSISTANCE

Financial Assistance from KSFC is available to activities to be undertaken by industrial concerns as defined under the State Financial Corporations Act 1951 in addition to some activities permitted by SIDBI and schemes formulated by the Corporation based on the activities permitted under the SFCs Act. Following activities are eligible for financial assistance as of now:

Industrial concerns engaged/to be engaged in the manufacture, preservation and processing of goods; mining; power generation, transportation; industrial estates; hotels and restaurants; research and development of any product or process connected to industry; weigh bridge facilities; providing drilling rig facilities; mining equipments; cranes, earth moving equipments and other similar equipments; doctors / hospitals/ nursing homes, medical stores; tourism related activities like amusement parks, convention centres, travel and transport/tourist service agencies; construction of roads; entertainment activities like cinema theatres, multiplexes, short movies, television serials, feature films; acquiring ISO certification; software and hardware services relating to information technology, telecommunications and electronics including satellite linkage and audio or video cable communication; micro finance activities; opening LoC for purchase of raw materials from KSSIDC; diesel generators; mobile generators; software technology parks; purchase of vehicles; construction activity; godown and warehouse construction; commercial complexes; market related activities; training institutes; office automation; service industry; biotech industries; qualified professionals to set up business enterprise in their line of expertise; wineries; wind mills; solar projects, etc.,

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1. General Scheme

The Corporation extends financial assistance for establishment of new MSMEs and for expansion, modernisation, diversification of existing units to meet cost of land, building, plant & machinery and other fixed assets.

a. Assistance to Hotels / Restaurants

Medium and Star category standard hotels proposed in State capital, district and taluk headquarters and important tourist centres within the State are eligible for financial assistance. The existing hotels going in for expansion/renovation are also eligible for assistance. The hotel should have boarding, lodging and restaurant facilities and building plans approved by the local authorities. Hotels proposed as per the specification of Tourism Department, Government of Karnataka, are eligible for incentives as per the Tourism Policy of State/Central governments. Mobile canteen / catering units for running a mobile canteen/catering service can avail assistance subject to providing adequate collateral security as per the lending policy of Corporation for acquisition of vehicles, kitchen equipments, catering equipments, cutlery etc.

b. Assistance to Tourism Related activities

Activities under tourism sector like development of amusement parks, setting up of convention centres, restaurants, travel & transport, tourist service agencies are eligible for financial assistance.

c. Assistance to Medical practitioners / Health care services

(i) Doctors / Qualified Medical practitioners

Doctors / medical practitioners with a bachelor's degree in any branch of medicine from recognised institute /

III. LOAN SCHEMES OPERATED BY KSFC

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university for setting up of c l inic . People holding b a c h e l o r d e g r e e i n radiology, bio-physics and bio-technology with at least 5 years experience and a certificate of practice from a relevant authority. Qualified Veterinary doctors are also

eligible for assistance. The promoters should be income tax payees for last 2 years. Purchase of premises / renovation of the existing premises, acquiring fixed assets like furniture, computers, office automation, ambulance, car / van, interiors and medicare related equipments required for a clinic are eligible under this scheme.

(ii) Assistance to Nursing Homes / Hospitals

New Hospitals and nursing homes and expansion / modernization of existing ones are eligible for financial assistance from KSFC. The project must be backed by expert services of atleast one postgraduate doctor on full time basis. Assistance is available for acquiring land, building and equipments for diagnosis, monitoring and therapeutic use and air conditioners (for operation theatres and intensive care units), ambulance etc., Assistance is also extended to acquire ready built shop or for construction of medical stores subject to conditions.

(iii) Assistance for acquiring Electro Medical equipments

Hospitals & Nursing Homes which are in existence and Medical practitioners with relevant qualifications in general medicine, dentistry, radiology etc are eligible for assistance for acquiring new C.T. scanners, x-ray, endoscopy, gastroscopy and other electro medical equipments required by medical practitioners and hospitals.

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d. Assistance to Infrastructure projects

Establishment of Industrial estates, acquisition of ready built office spaces, construction / p u r c h a s e o f c o m m e r c i a l complexes, IT Software Parks, Construction / buying of ready built show rooms and sales outlets, Development / maintenance and

construction of roads, Assistance to infrastructure for professional educational institutions, training institutions, godowns, warehouses, development of layouts, establishing infrastructure projects like roads, flyovers, bridges etc.

e. Assistance to Entertainment Industry

Financial assistance from KSFC is available for construction / purchase of cinema halls, multiplexes, production of short TV serials, software for visual media publicity and production of feature films to be set up/produced/filmed within Karnataka. In case of Cinema Halls and Multiplexes maximum of 70% of cost of fixed assets and in case of Feature Films, TV serials and Software for visual media publicity 50% of total production and post production cost will be considered for financial.

f. Line of Credit for purchase of raw materials from KSSIDC

The objective of the scheme is to provide timely and adequate working capital assistance in the form of Working Capital Term loan to MSMEs for purchase of raw materials from KSSIDC. Upto 80% of the cost of raw materials proposed for purchase from KSSIDC within the LoC sanctioned limit will be considered for financial assistance.

2. Single Window Scheme- for new units

The scheme provides assistance in the form of Term Loan/Working Capital term loan to new MSMEs engaged in manufacturing activities and whose project cost (including total

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working capital requirement) does not exceed Rs.100 lakh. Minimum assistance is Rs.2.00 lakh and the maximum assistance is Rs.30.00 lakh.

3. Working Capital Term Loan scheme for existing units

Existing MSMEs engaged in manufacturing activities are eligible. The units who have availed financial assistance earlier from the Corporation are also eligible for minimum loan of Rs.2.00 lakh and maximum loan of Rs.100.00 lakh.

4. Scheme for Small Road Transport Operators (SRTOs)

Small road transport operators are eligible under this scheme to meet expenditure towards cost of chassis, body building etc., Each operator is eligible for maximum of 20 vehicles (including existing vehicles).

5. Privileged Entrepreneurs Scheme

The objective of the scheme is to help existing units which have availed loan from KSFC and which are in standard category to meet short term funds requirements. The units should have availed loan of Rs.10 lakh and more from KSFC in the past and should have a good track record for at least three years. Minimum loan is Rs.5 lakh and maximum Rs.200 lakh with a repayment period not exceeding 24 months including moratorium period of 6 months.

6. Scheme for Qualified professionals

Professionals in the field of management, accounting, medical including veterinary, engineering & architecture with at least 5 years experience in relevant line are eligible to avail financial assistance for setting up of business enterprises, private practice and consultancy services in their line of expertise. The cost of project shall not exceed Rs.20.00 lakh.

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7. Interest Subsidy Scheme for the first generation entrepreneurs

The objective of the scheme is to provide access to large number of first generation entrepreneurs to cheaper finance for establishment

of micro & small enterprises. Projects with cost upto Rs.100.00 lakh established by a person / individual / partnership firm / c o m p a n y r e g i s t e r e d u n d e r companies Act for the first time are eligible for financial assistance under this scheme at an interest

subsidy of 6% resulting in effective rate of interest at 8% p.a. (present rate).

8. Interest Subsidy Scheme for Women Entrepreneurs

The objective of the scheme for which KSFC is the nodal agent, is to encourage woman entrepreneurs to set up SMEs in manufacturing and service sector and for expansion/ modernization of existing units. Minimum assistance (excluding Medical and Veterinary doctors for whom minimum assistance is Rs.2.00 lakh) under the scheme is Rs.5.00 lakh and maximum is Rs.50.00 lakh. The ownership of the eligible unit should rest with woman entrepreneur. In case of partnership firm and companies woman entrepreneur/s should possess 51% of the share. The effective rate of interest is 4%. Karnataka State Women Development Corporation will reimburse the difference between the normal lending rate of KSFC and effective interest rate of 4%. The units will be eligible for interest subsidy for a period of five years only from the date of first disbursement of the loan including the moratorium period.

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9. Interest Subsidy Scheme of Government of Karnataka for SC/ST Entrepreneurs

In order to encourage SC/ST entrepreneurs to establish micro and small scale industrial/services/business units and to existing units for their expansion/diversification and modernization, the GoK has extended the interest subsidy on term loans to SC/ST entrepreneurs being sanctioned by KSFC. The units shall be fully owned by SC/ST entrepreneurs. Under this scheme, the entrepreneurs are eligible for a minimum loan amount of Rs.20.00 lakh and for a maximum loan of Rs.10.00 crore including term loan and one time working capital upto a maximum of Rs.50.00 lakh.

The repayment period is 8 years including moratorium in case of loan upto Rs. 5.00 crore and upto 10 years in case of loan above Rs.5.00 crore but below Rs. 10.00 crore.

The effective rate of interest is 4%. The difference between the normal lending rate of KSFC and effective interest rate of 4% will be reimbursed by GoK. The units will be eligible for interest subsidy for a period of eight years from the date of first disbursement of the loan including the moratorium period.

10. Soft Seed Capital Fund Scheme of Government of Karnataka for SC/ST entrepreneurs

The soft seed capital amount as may be required to meet the gap in the equity as per the prescribed debt equity norms, after taking into account promoters contribution subject to a maximum of 25% of the project cost. However, the soft seed capital assistance shall not exceed the promoter's equity. All new units and existing units u n d e r t a k i n g e x p a n s i o n / modernization / technology up-

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gradation / diversification etc by SC/ST entrepreneurs, partnership firms, trust, society and corporate bodies where all the partners / members / directors belong to SC/ST category are eligible for assistance under this scheme. No interest shall be charged on the soft seed capital, but 1% p.a. service charge shall be levied.

11. Interest Subsidy scheme from Government of Karnataka to encourageestablishment of Warehouses and Cold Storages around villages and towns

The objective of the scheme is to provide the farming community with facilities for scientific storage so that the wastage and produce deterioration are avoided and also to enable it to meet its credit requi rement wi thout be ing compelled to sell the produce at a t ime when pr ices a re low.

Proprietory concern, partnership firms, farmers and interested parties belonging to farmers/farmer associations/ self help groups/ co-operative societies/ agriculture produce/marketing committees/farmer federations/NGOs are eligible for assistance under the scheme. Interest subsidy of 10% from GoK is available under the scheme.

12. Scheme for Acquisition of existing assets & enterprises

The objective of the scheme is to extend financial assistance for taking over of existing assets / enterprise. Plant & Machinery of a reputed make with a minimum residual life of 10 years as assessed by the technical officers of the Corporation supported by Chartered Engineer certificate, land & Building of industrial / commercial properties located at prominent places within municipal limits with a minimum of 20 years residual life. The building should be of good quality and assistance will be subject to certification by the officers of the Corporation.

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13. Revised Restructured Scheme of Technology for Textile Upgradation Fund (RRTUFS):

The objective of the scheme is to catalyze investment in all the sub-sectors of textiles and jute industry for technology upgradation of the machinery. New and existing units with an investment of Rs.100 lakh are eligible for maximum of 6% interest reimbursement or 30% margin money subsidy. More details are available at www.texindia.gov.in

14. Credit Linked Capital Subsidy Scheme (CLCSS)

The objective of the scheme is to facilitate technology upgradation of small scale units or small scale units graduating to medium scale in specified products/sub-sectors by providing 15% capital subsidy on the loan given for machinery. The machinery has to be as per the schedule for induction of proven technologies as approved under the scheme. The maximum subsidy available under the scheme is Rs.15.00 lakh and the ceiling on the investment is Rs.100.00 lakh.

15. Technology Development & Modernisation Fund Scheme (TDMF)

The objective of the scheme is for providing finance to existing SSI units for technology upgradation / modernization. The scheme envisages existing industrial units to modernize their production facilities and adopt improved and updated technology so as to strengthen their export capabilities. Existing units who are in operation for atleast 3 years and who are not in default to institutions / banks in repayment, units graduating from SSI to MSI sector and service sector are eligible. For availing loan under TDMF, the project cost shall not exceed Rs.100 lakh and scheme envisages reimbursement of 4% interest per annum.

16. Refinance Scheme for acquisition of ISO 9000 series certification

The purpose of assistance under this scheme is to facilitate existing industrial concerns in the MSME sector having good track record, past performance and sound financial position, to meet expenses

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on consultancy, documentation, audit, certification fee for obtaining ISO certification. Equipment and calibrating instruments required would be taken into account for determining the loan requirement. The concerns should have been in operation for a period of at least two years.

17. Scheme for financing Windmill power projects

Financial assistance to wind mill projects shall be extended under the scheme where upto 75% of the cost of fixed assets is financed, subject to meeting debt equity ratio and debt service coverage ratio norms. Sole proprietorships, pa r tne r sh ips , co -ope ra t ive societies, private / public limited companies who are already in business and running with net profit for the past three consecutive years are eligible under the scheme.

18. Scheme for Solar Power Generation projects

The objective of the scheme is to extend financial assistance in the form of term loan to solar power generation projects set up by proprietory concerns, partnership

firms, private and public limited companies. Technical endorsement for the project and site will be decided on the basis of guidelines issued by Ministry of New & Renewable Energy (MNRE) /KREDL. Financial assistance will be 75% on the cost of project. Cost of transmission lines may be considered subject to viability.

19. Scheme for Micro Finance Activity

The Constitution of the Micro Finance Institution (MFI) should be Registered Non-Banking Financial Company (NBFC). It should be in existence for at least five years and / or should have a demonstrated track record of running a successful micro-credit programme at least for the last 3 years.

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The MFI should have been rated by mainstream rating agencies such as CRISIL/CARE/ICRA/M-CRIL etc. With acceptable investment grade rating. The rating should be valid.It should have been extended term loan by SIDBI.

The MFI should have been making cash profits for at least last two years and have only women members as its clientele.The MFI should have achieved minimum outreach of 3000 members and should have maintained a satisfactory and transparent accounting, MIS and internal audit system.The existing loan portfolio of the MFI should be a relatively low risk portfolio and have its accounts audited by a Chartered Accountant firm.It should have a separate system of accounts and monitoring for its micro finance operations.

The MFI should be showing consistent growth in its loan portfolio/members and networth strength and have plans to broad-base its resource base further.It should possess competent and adequate staff for proper appraisal, intensive supervision and monitoring.

The term loan extended by the Corporation should be utilised within Karnataka for non-farm activities.The total exposure from the Corporation to an individual MFI not to exceed Rs.500 lakh at any point of time.

20. Scheme for financing of Wine manufacturing industries

To promote wine manufacturing units in MSME sector in the State of Karnataka by providing financial assistance and thereby helping the farmers to get better market price for their products. The unit should be located in the jurisdiction of Nandi valley of Chickba l lapur d i s t r i c t and Krishna Valley of Vijayapura district proposed by Government of Karnataka.

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21. Rental Discounting Scheme

The objective of the scheme is to provide financial assistance on the strength of the rent earned by non-residential properties located within the city and municipal limits of Bengaluru, Mangaluru, Hubballi, Dharwad, Kalaburagi, Shivamogga, Bhadravathi, Mysuru and Belagavi and earning gross rent of not less than Rs.25,000/- per month from eligible tenants of the premises. The properties located outside the Bangalore City Corporation limits will also be considered on case to case basis depending on the location and infrastructural advantages enjoyed and rent earned.

22. Venture Capital Assistance(VCA)scheme of Small Farmers Agribusiness Consortium(SFAC)

The project qualifying for Venture Capital Assistance would be one which is dependent upon agriculture or allied sector or related to agricultural services. Poultry and dairy projects will also be covered under the Scheme. Provides, assured market to farmers/producer groups and encourage farmers to diversify into high value crops aimed to increase farm incomes and accepted by the Notified Financial Institution for grant of project term loans after satisfactory techno-commercial feasibility.

The quantum of SFAC venture capital assistance will depend on the project cost and will be 26% of the promoter's equity or Rs.50.00 lakh, whichever is lower.

23. Scheme for rehabilitation of sick industrial units (RSR)

The RSR scheme envisages for providing reliefs / concessions or extending assistance for rehabilitation of potentially viable sick units. Potentially viable MSME units excluding CRE sectors conforming to definition of sick MSME units as prescribed in RBI guidelines. The assistance is meant for sick units for which proper rehabilitation packages have been drawn up. Units eligible for rehabilitation assistance should be capable of being restored to normal health within a reasonable time.

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24. Assistance for Marketing Related Activities Scheme (AMARA)

Existing small and medium units (atleast for two years) with good track record (no default to any financial institutions / bank and asset classified as 'standard' by bank) and sound financial position are eligible for financial assistance of minimum of Rs.5.00 lakh and upto a maximum of Rs.50.00 lakh to undertake various activities necessary to increase their sales in domestic and foreign markets and to create physical marketing infrastructure.

25. Corporate Loan Scheme

The objective of the scheme is to extend short-term loans to the existing successful units who require urgent working capital funds either to meet the gap in the working capital requirements or funds required for executing the rush of orders, developing / expanding new markets, for meeting statutory dues to the Government like payment of Income Tax, Sales Tax, Excise Duty etc., and opening LC for purchase of new equipment till a term loan is sanctioned and released by the financial institution. Repayment period is 24 months including moratorium period of 6 months. Corporate Loan is restricted to industries.

(i) Corporate Loan for construction activity

The objective of the scheme is to provide financial assistance to developers, civil contractors, construction companies and firms for taking up construction of group housing, commercial complexes, software parks and infrastructure projects like roads, flyovers, bridges etc., An extent of loan up to Rs.200 lakh in case of proprietary and partnership concerns and up to Rs.500 lakh in case of private and public limited companies is available under the scheme. However, the loan amount shall not exceed 30% of the estimated investment in the project on hand.

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26. Scheme for Construction activity

The objective of the scheme is to promote property developments, construction of Group housing, Commercial Complexes, Software Parks and infrastructure projects like roads, bridges, flyovers, etc., Property developers, construction companies and firms are eligible to avail financial assistance under this scheme.

27. OTHERS

Diesel Generator sets for supplementing power supply for an SME or by a group of SMEs located in a closed proximity for collective use.

Mobile Generators for purpose of hiring vehicles, trailers, DG sets and accessories can avail assistance.

Office Automation for acquiring items like PCs, printer, copier, fax machine, telephone etc.

Training Institutions: Existing units with successful track record are eligible for assistance for setting up in-house training facility for their exclusive training facility including construction of building, acquisition of furniture, equipment etc.,

IV. PROCEDURE FOR AVAILING FINANCIAL ASSISTANCE

Entrepreneurial Guidance officer or the Branch Manager at the concerned Branch Office will guide the entrepreneurs on various schemes, loan facilities available, subsidies available from government departments etc. The documents submitted by the entrepreneurs as per the checklist stipulated by the Corporation (along with KYC documents) will be scrutinized by the concerned technical and legal officer. Later the proposals are placed before the Project Clearance Committee (PCC) meeting chaired by the concerned Branch Manager/Asst. General Manager/ Dy. Gen. Manager for loan applications in respect of proposals falling within their sanctioning powers. General Manager (concerned Circle) chairs the PCC for all cases above Rs.100 lakh upto Rs.1000 lakh. Executive Director (concerned) chairs the PCC for

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V. OTHER DETAILS

Sl.No. Item Fees (Rs)

1 Application Form 100/-

2 Processing Fee on Term Loan 0.50%+ Service Tax

3 Processing Fee on Corporate Loan 0.50% + Service Tax

4 Processing Fee on PE Loan 0.25% + Service Tax

5 One time Disbursement Fee on Term Loan 0.50% + Service Tax

6 One time Disbursement Fee on Corporate Loan 0.50% + Service Tax

7 One time Disbursement Fee on PE Loan 0.25% + Service Tax

1. Processing Fees and Other Costs:

2. Promoter's Contribution

Minimum promoter's contribution as the percentage of the total project cost prescribed in various schemes varies between 10% and 22.5% depending on the location of the project, various schemes of SIDBI operated by the Corporation, line of activity, class of entrepreneur etc.,

3. Debt Equity Ratio (DER)

The Corporation adopts the norms for Debt Equity Ratio as per the guidelines issued by the Small Industries Development Bank of India from time to time.

all loan proposals above a loan amount of Rs.1000 lakh. If the project is found support worthy, loan application form will be issued on the spot. The duly filled in applications have to be submitted in duplicate along with other documents as per the checklist along with application processing fee. The loan application so accepted will be processed/appraised and submitted to the appropriate loan sanctioning authority for sanction.

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The Present norms are:

Sl.No. Scheme D.E.R.1 RSR Scheme Flexible2

Modernisation SchemeProjects : 4:1Overall : 2:1

3 Others:Upto Rs. 10.00 lakhAbove Rs. 10.00 lakh

3:12:1

4 Additional Loans (within overall limit)

Projects : 2:1Overall : 2:1

5 Residential Apartment Projects 1:1

6 Residential Layout formulations 1:1

4. Debt Service Coverage Ratio (DSCR)

The repayment period of loan is fixed by the Corporation with due regard to the cash generation & profitability of the project. For this purpose, average DSCR ranging between 1.5:1 to 2:1 has been accepted as reasonable. In projects involving mainly land / building such as commercial complexes, software technology parks, industrial estates, hotels etc., with assured income, the DSCR can be relaxed upto 1.25 : 1.00. The DSCR indicates the ability of the project to service the debts during the currency of the loan.

5. Maximum assistance:

Sl.No. SchemeMaximum Assistance

1 Modernisation Scheme 80%2 Acquisition of existing

assets/Enterprises 70%

3 Transport Loan scheme 80%4 DG set scheme 90%5 Entertainment Industry scheme

including film productioni) Fixed assetsii) Film Production

70%80%

6 All other schemes 70% to 75%

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The Parameters of the Scheme may change from time to time depending upon the guidelines of the Government and the Corporation.

For further clarifications / details, please contact the nearest Branch Office / Branch Manager or log on to www.ksfc.in

6. Repayment Period: Repayment period of the term loan varies between 3 to 8 years including moratorium period of maximum 2 years depending on the period of implementation. In respect of Corporate Loan, the maximum repayment period is 24 months excluding six months moratorium. In respect of Privileged Entrepreneurs (PE) loan, the maximum repayment period is 24 months including six months moratorium.

7. Security: In addition to the primary security i.e., assets financed by the Corporation, collateral security as per the lending policy of the Corporation is insisted. The collateral security requirement depends upon the type of projects, location, sector, quality of primary assets etc.,

Primary Security: The primary security for loan will be the assets financed i.e., land, building and machinery. If working capital term loan is provided the inventory in the form of raw-materials, work in progress and finished goods besides, bill and book debts, are to be pledged/hypothecated.

Collateral Security: All loans are to be backed by collaterals in the form of commercial or residential properties located in the State of Karnataka or fixed deposits or NSCs. Residential properties of third parties as collateral are discouraged. Assets free of encumbrance will be mortgaged to the corporation.

In case of corporate loan, in the absence of adequate security in the form of primary assets, collateral security to the extent of 100% of the loan amount is insisted in respect of existing units assisted by the Corporation and in respect of other units collateral security will be 150% of the loan amount.

Note: The primary and collateral securities are to be secured by way of simple mortgage at jurisdictional SRO.

Disclaimer

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KARNATAKA STATE FINANCIAL CORPORATIONInterest Rate Table (Term Loa ns) effective from 29-03-2016

Sl. No.

Category of borrowers/loansInterest Rate

( %)

1

a. All Term Loans (including WCTL) to Micro, Small and Medium Industries,b. Acquisition of ISO accreditation,c. SRTOs and Acquisition of private vehicles,d. Tourism related activities: Amusement parks, Restaurants, Travel and Transport, Tourist Service Agency, Hotels & Restaurants, Mobile Canteen/Catering, Resorts, Service Apartments,e. Health Care Services*: Assistance to Doctors/Qualified Medical Practitioners, Nursing Homes/Hospitals, and Electro Medical Equipment.f. Assistance to qualified professionals: Management Professionals, Medical Professionals, Accounting Professionals, Architects and Engineers, Veterinary Clinics.g. DG Sets, Mobile Generators,h. Godown / Warehouse and Convention centers.i. Office Automationj. Training Institutions.k. Industrial Estates, IT Software Parks,* Irrespective of the amount of investment in plant and

machinery, the applicable rate of interest for loans under Health care Services will be on par with loans to MSMEs

14.00

1A

Pricing of credit rated loans to Micro, Small and Medium Industrial units.

a) External ratings of SE1A & SE2A on NSIC scale, SME1 & SME2 on non-NSIC scale, AAA, AA or equivalent rating by other agencies andb) Minimum 70% marks in in-house credit rating

Loans from Rs 50 lakh to Rs 100 lakh 13.50

Loans above Rs 100 lakh 13.00

1B

Rate of interest for loans below Rs 50 lakhs to Large Scale Industries, graduating from Medium Scale Industries, without External rating

14.50

Pricing of credit rated loans to Large Scale Industrial units.

a) External ratings of AAA, AA or equivalent ratings andb) Minimum 70% marks in in-house credit rating

Loans from Rs 50 lakh to Rs 100 lakh

14.00

Loans above Rs 100 lakh

13.50

The pricing of credit rated loans mentioned at Sl No (1A) and (1B) shall not be applicable to any of the category of borrowers/loans from (b) to (j) at Sl No (1) and any of the category of borrowers/loans at Sl No (2) to (7) in the interest rate table

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Sl. No.

Category of borrowers/loansInterest Rate

( %)

2

a. Construction / Buying Commercial Complexes,b. Construction activities like Residential Apartments, Villas, Group housing, Lay out formation/Property Developmentc. Shopping Complexes,d. Ready built office space, Construction/Buying Ready built show rooms and Sales outlets, Development, Maintenance and Construction of Roads/Infrastructure Projects.e. Professional Education Institutes.f. Corporate loans to above activities (under Sl No. 2)

16.50

3

a. Corporate loans, (excluding Corporate loans to activities at Sl No. 2), AMARA scheme, Bridge loans , Finance to existing assets,b. Entertainment industry (including Cinema Theatre/Multiplex, Production of feature films, TV serials, Dubbing/ Recording, Software for visual mediac. Rental discounting scheme

16.00

4 Privileged Entrepreneurs Scheme 15.50

5 Micro Finance Activity 14.00**

6 Purchase of private vehicles by existing firms / promoters 12.00**

7a) Wind Mill Power Generation Projectsb) Solar Power Generation Projects

13.00**

** No rebate/concession of any kind will be available

NOTES TO THE INTEREST RATE STRUCTURE: I REBATES AND CONCESSIONS:A 1 REBATE

i) A rebate of 0.50% will be allowed for all loans for prompt payment.

ii) (a) Additional rebate for prompt payment for loans from Rs 100 lakh and below Rs 300 lakh, to existing customers for 3 years or more, given for tangible asset based projects with in-house credit rating score of 70% and above.

0.25%

(b) Additional rebate for prompt payment for loans of Rs 300 lakh and above, to existing customers for 3 years or more, given for tangible asset based projects with in-house credit rating score of 70% and above.

0.50%

For ii(a) customers total rebate will be 0.75% and for ii( b) customers it will be 1.00%

The customers who were earlier with KSFC for 3 years or more closed their accounts and come again for loans with a break, may be extended the rebate applicable to existing customers provided the in-house credit rating score is 70% and above.

In house credit rating is to be carried out by the Risk Management Department in respect of all loan proposals referred under ii(a) and ii(b) pertaining to additional rebate for prompt payment. The above rebate shall be allowed

The above rebate shall be allowed subject to the following,a) Payments shall be made on or before the due date through ECS /RTGS /NEFT /DD /Cash

/Local Cheques. Repayment through outstation cheques will not be eligible for this rebate.b) If the due date for payment happens to be a holiday, the immediate next working day shall be

considered as due date and for reckoning the prompt payment

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No rebate for prompt payment is available to Micro Finance Activity, Purchase of private vehicles by existing firms / promoters, Wind Mill Power Generation Projects and Solar Power Generation Projects

iii) 1.00% special rebate is extended to physically challenged entrepreneurs subject to producing physical disability certificate from the competent authority

iv) 1.00% special rebate is extended to green technology products and services provided, 51% of the project cost comprises of green technology, viz, green building, equipment, energy and other purchasing required for the project

2. Maximum Rebate/Concession extended to any unit under different categories shall not exceed 3.00% including benefits mentioned at Sl No (1A) and (1B) in the interest rate Table.

B. INTEREST RATES FOR GOVERNMENT OF KARNATAKA INTEREST SUBSIDY SCHEMES

a) INTEREST RATE FOR SC/ST ENTREPRENEURS: The term loans to Scheduled Caste and Scheduled Tribe entrepreneurs will be

sanctioned at the above applicable rates. However, effective rate to these entrepreneurs will be 4% p.a. The difference between KSFC lending rate and effective rate of 4% to the borrower will be met through the interest subsidy by GoK as per the KSFC - Circular No ED (F) 786 dated 30-03-2007 and Circular No ED (F) 868 dated 28-07-2009 respectively. Further the guidelines issued at Circular No 887 dated 17-12-2009 may also be noted.

b) INTEREST RATE FOR FIRST GENERATION ENTREPRENEURS: The term loans to First Generation entrepreneurs under Government of Karnataka

Interest Subsidy Scheme will be sectioned at the above applicable rates. However, interest will be subsidised over and above the 8.00% p.a, subject to a maximum of 6.00% p.a. as per Circular No. ED-I 913 dated 01-06-2015.

c) INTEREST RATE FOR WOMEN ENTREPRENEURS: The term loans to Women entrepreneurs will be sanctioned at the above applicable rates.

However, effective rate to these entrepreneurs will be 4% p.a. The difference between KSFC lending rate and effective rate of 4% to the borrower will be met through the interest subsidy by GoK as per the guidelines of KSFC - Circular No ED-I 920 dated14-01-2016. The rate of interest now applicable to this scheme may be indicated at 14% p.a. gross and 4% net, after subsidy of 10% from the Government of Karnataka, without any rebate and concession.

d) INTEREST RATE FOR WAREHOUSES AND COLD STROAGE: The term loans to warehouses and cold storage units will be sanctioned at the above

applicable rates. However, effective rate to these entrepreneurs will be 4% p.a. The difference between KSFC lending rate and effective rate of 4% to the borrower will be met through the interest subsidy by GoK as per the guidelines of KSFC ION No./KSFC/HO/ED-II/20145-15 / C4345 dated 27-12-2014. The rate of interest now applicable to this scheme may be indicated at 14% p.a. gross and 4% net, after subsidy of 10% from the Government of Karnataka, without any rebate and concession.

II PENAL INTEREST A penal interest of 2.00% p.a. over and above the applicable interest will be charged in case of

default, on the defaulted amount for defaulted period to all categories of borrowers.

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