lending policy 2015

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Karnataka State Financial Corporation

LENDING POLICY 2015

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Ref No KSFC/HO/RMD/CMD/C-4889/2014-15 Dated : 29-01-2015

CIRCULAR No: 991

Sub: Lending Policy 2015

A Note on Lending Policy 2015 was placed before the Board inits meeting held on 8th January 2015. I am happy to inform that theBoard has apporved the Lending Policy 2015. While approving the lendingpolicy, the Board also took note of the changes recommended for theexisting lending policy. The Board observed that the covention centreactivity and the industrial estate and Software Technology Parks, whichwere hither to classified under CRE sector, may be classified underservices & other sector as provided in the RBI guidelines. This lendingpolicy will come into effect immediately. This lending policy will be invogue till new lending policy is introduced.

The lending policy 2015 as approved by the Board is enclosed tothis Circular. Any points of doubts on these guidelines shall be referred toExecutive Director-I, Head Office for clarification.

(Vanditha Sharma)Chairperson & Managing Director

To :All the Branch ManagersDGM’s of Super ‘A’ Grade BO’sAll Principal Officers / Section Heads in HOAll General Managers

Executive DirectorsLibrary

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Sl.No. Contents PageNos.

1 PREAMBLE 51. Objectives of Lending policy 8

2 ELIGIBLE ACTIVITIES FOR FINANCIAL ASSISTANCE 92.1 As listed out in the SFCs Act 102.2 Activities permitted by SIDBI 11

3 DIFFERENT SCHEMES OPERATED IN THECORPORATION 11

4 POLICY ON LINES OF ACTIVITY 124.1 Thrust Sector 144.2 Normal Sector 194.3 Restricted Sector 354.4 Prohibited Sector 39

5 MSMEs DEFINITION 40

6 POLICY ON EXPOSURE LIMITS 41a. Policy on minimum loan size 41b. Policy on upper limit on the loan amount 41 & limit of accommodationc. Group-wise exposure 42

7 POLICY ON SECTOR WISE EXPOSURE 42

8 POLICY ON REPAYMENT PERIOD 43

9 GUIDELINES ON PROMOTERS EQUITY 45AND PROFITABILITY9.1 Debt Equity ratio (DER) 459.2 Debt Service Coverage Ratio (DSCR) 459.3 Maximum Assistance 459.4 Promoter’s contribution 469.5 Interest rate structure 46

10 POLICY ON FORECLOSURES / PRE-PAYMENTS 4610.1 Policy on Time Standard in Processing 47 of Loan Applicatins

11 DELEGATION OF LOAN SANCTIONING POWERS 47

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Sl.No. Contents PageNo.

12. DELEGATION OF DISBURSMENT POWERS 51

13. GUIDELINES ON PROCESSION OF LOAN APPLICATION 57Project Clearance committees at B.Os 58

14 GUIDELINES ON VALUATION OF ASSETS 5914.1 Land 5914.2 Building 6014.3 Plant & Machinery 61

15 GENERAL GUIDELINES 6315.1 Guidelies on valuation of collateral security 63

16. Delegation of powers for relaxation in collateral security 65

17. Other general guidelines 66

18 Details of additional rebate 7118.a Physically Challenged Entrepreneurs 7118.b Financial Assistance to Green Technology 71

19 19.a Financial Assistance to Self Employed Professionals 7319.b Financial Assistance to Purchase of 74 Vehicles to Existing Units

20 Integrated Agri-Business Development 74Policy 2011 of GOK

Sl.No. Contents PageNos.

I Schemes of Assistance 75

II Interest Rate Structure 100

III Industry wise exposure limit proposed 106

IV Assessment of Collateral requirement for 108existing enterpreneurs

V (A) Rating Grades & Credit Rating Models 118

V (B) Credit Rating Models for CRE 150

LIST OF ANNEXURES

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Lending policy 2015

PREAMBLE:

The fast changing economic scenario calls for a vibrant lendingpolicy to respond to the needs of MSMEs and service sector inthe State. Besides, the lending institutions have to evaluate therisk perceptions periodically in the wake of the changes and designthe lending norms judiciously to maintain quality loan portfolio.

Recognizing this need, the Karnataka State Financial Corporationhas been formulating a comprehensive lending policy documentsince 2001-02 and revising the same periodically. This policydocument helps credit dispensing functions to create healthy loanportfolio. The Lending Policy document provides preciseguidelines to the pertinent areas of project guidance, acceptance,appraisals, credit rating and loan sanctioning.

The overall growth of GDP for 2013-14 is placed at 4.9 percentas compared 4.5 percent for 2012-13.The agriculture, industryand service sectors have registered growth rates of 4.6 percent,0.7 percent and 6.9 percent respectively. The Indian Industryended the fiscal year 2013-14 on a negative note. Index ofIndustrial Production (IIP), the official measure of Industrial activityin India, registered a growth of (-) 0.1percent vis-à-vis 1.1 percentduring 2012-13. Manufacturing sector registering a 0.9 percentfall in its output during 2013-14 ended at (-) 0.2 percent growth.The mining sector had growth of (-) 1.9 percent as compared to(-) 2.2 percent during previous year. This was because of 1.6percent fall in output of crude oil. Natural gas production too fellby 9.3 percent. The only main sub-segment of the industry thatreported a growth during 2013-14 is electricity at 6 percent. Thegrowth was driven by 12.4 percent growth in nuclear powergeneration followed by thermal power generation and hydro powergeneration by 5.2 percent and 4.5 percent, respectively.

The Service Sector grew at 6.9 percent during 2013-14 comparedto seven percent during the previous year. However, the real estate

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and business services, financing and insurance growth was 11.2percent compared to previous year’s 10.9 percent.

Vision 2020 for Karnataka seeks to propel a holistic growth bypromoting equitable development of sectors and districts byproviding employment to all sections of people and regions of theState. Development of industrial sector is of vital importance toensure the overall growth of the economy.

Karnataka has been spearheading the growth of Indian Industry,particularly in terms of high-technology industries in the areas ofelectrical and electronics, information and communicationtechnology, biotechnology and more recently nano technology.

The Karnataka’s Gross State Domestic Product (GSDP) reachedRs.3,11,628 crore in 2013-14 (at constant price 2004-05) fromRs.3,03,444 crore in 2012-13.

Despite the drought conditions in the State, the GSDP growthrate of agriculture and allied activities was registered at 3.6%during 2013-14 as against the negative growth of 4.9% in 2012-13. The Industry sector grew at 1.2% during 2013-14 which islower than growth rate of 4.4.% recorded during the previous year.The service sector growth at 7.2% during 2013-14 is lower thanthe growth rate of 8.4% during the previous year.

Total value of exports of Karnataka during 2013-14 wasRs.2,90,418 crore whereas all India export is Rs. 20,70,108 crore.The share of Karnataka’s export in all India export is 14.03%whereas share of software exports is 40%.

MSMEs form an important and growing segment of Karnataka’sindustrial sector. During 2013-14, 25,966 units with a proposedinvestment of Rs.2,850.56 crores and employment potential of1,67,347 persons have been registered .

During the year, the State Level Single Window ClearanceCommittee approved 209 projects with a proposed investment

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of Rs 3,548.21 crores having employment potential to 43,759persons. Projects with an investment of Rs.50 crores and aboveare cleared by the State High Level Clearance Committee(SHLCC). The number of projects cleared by SHLCC during 2013-14 is 46 with a proposed investment of Rs.38,653.38 crore andcreating employment to 1,27,692 persons.

Karnataka is the first State in the country to launch State TextilePolicy. The “Nuthana Javali Neeethi –2013-18” is implementedafter the completion of Suvarna Vastra Neethi – 2008-13. Thenew policy is proposed to attract investments in textile sector tothe tune of Rs.10,000 crore and provide employment to five lakhpersons.

Department of Horticulture had formulated a new scheme forrejuvenation and strengthening of hi-tech floriculture in 2013-14with subsidy for replanting of old plants(variety) with new varietiesgrown in green house, subsidy for replacement of polythene sheetof green house and subsidy for electricity used for cold storage ofhi-tech floriculture.

The Government of Karnataka has accorded administrativeapproval for establishing Rice Technology Park with the State-of-the-Art Technology for processing, grading, packaging, branding,marketing and export of rice in Karatagi of Gangavathi Taluk ofKoppal District.

The new policies released by Government of Karnataka likeKarnataka i4 Policy: IT, ITES, Innovation, Incentives Policy isenvisaged to reposition Bangalore and Karnataka as the preferredGlobal Investment Destination for IT/ITES/BPO Sectors.Bangalore is today the second largest IT cluster on the planetwith about 9 lakh direct and about 27 lakh indirect employmentsecond only to the Silicon valley.

The State Textile Policy is proposed to attract investments in Textilesector to the tune of Rs.10,000 crore and provide employment tofive lakhs persons.

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The Aerospace Policy 2012-2022, highlights the potential ofKarnataka to emerge as an Aerospace Hub for Asia in the next 5years and as one of the top global Aerospace and MRODestinations by 2022.The Aerospace Policy has a mission toattract investments of Rs.60,000 crores over next 10 years,providing additional employment to one lakh (direct & Indirect)persons. One of the strategies of the policy is to assist indeveloping MSME and large scale industries equally in AerospaceSector. Policy also proposes to establish “Aerospace parks” atpotential locations like Mysore, Hubli, Mangalore and Belgaum.These parks will have a comprehensive infrastructure facilitywhich enables the units to operate on “Plug and Play” concept.

The New Industrial Policy 2014-19, New Tourism Policy 2014-19, Solar Policy 2014-2021 are set to boost the industrial vigor inthe State.

Karnataka has robust and vibrant environment for establishmentof new industries and for expansion/ modernization / diversificationof existing units in manufacturing sector, service sector and agri-based sectors. Karnataka State Financial Corporation is invitingthe entrepreneurs to utilize the facilities available in the State byavailing financial assistance from KSFC at the competitive interestrate in a customer friendly environment.

The Lending Policy 2015 attempts to throw light on various areasof operation of KSFC, eligible activities, different schemes,delegation powers for loan sanction and disbursement, interestrate and rebates thereon and other general guidelines.

1. Objectives of the Lending Policy 2015:

The broad objectives of the lending policy of theCorporation are outlined hereunder.

a. To establish a comprehensive credit strategy to fulfil thecorporate mandate as per the SFC Act, 1951, amended from time

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to time, and undertake all such activities directly or indirectly, thatare beneficial to the MSME Sector.

b. To ensure efficient delivery of credit with focus on asset growthand quality coupled with growth in income.

c. To encourage various functionaries to innovate and evolvecompetitive products based on market requirements.

d. To provide indicative guidelines to various policy & functionallevel officers of the Corporation for measures to be taken forimproving the credit delivery and customers satisfaction.

e. To encourage expansion and diversification of credit portfolio,especially through coverage of thrust areas / industries / sectors/ newer areas of business, loan syndication etc. and profitabledeployment of the Corporation’s funds.

f. To strengthen the risk management systems and ensure closemonitoring of the credit portfolio so as to prevent fresh slippagesinto NPAs.

g. To explore new channels of credit delivery for the benefit ofMSMEs.

2. ELIGIBLE ACTIVITIES FOR FINANCIAL ASSISTANCE:

The SFCs Act prescribes broadly the types of activities,which are eligible for financial assistance from the Corporation.The Act also provides for SIDBI to include newer areas of activitiesfor financial assistance from time to time. This apart, theCorporation has also evolved its own schemes under broadguidelines of SFCs Act depending upon market potential. Theactivities which are eligible for financial assistance from theCorporation are grouped into following two broad categories:

(a) Activities as listed out in the SFCs Act;(b) Activities specifically permitted by SIDBI;

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2.1. As listed out in the SFCs Act:-The State Financial Corporation’s (Amendment) Act, 2000,

provides the list of activities which can be covered under the listof industrial concern engaged or to be engaged in :

(i) Manufacture, preservation or processing of goods;(ii) Mining or development of mines;(iii) Hotel industry;(iv) Transport of passengers or goods by road or by water

or by air (or by rope way or by lift);(v) Generation or distribution of electricity or any other form

of power;(vi) Maintenance, repair, testing or servicing of machinery of

any description or vehicles or vessels or motorboats or trailers or tractors;

(vii) Assembling, repairing or packing any article with the aidof machinery or Power:

(viii) Setting up or development of an industrial area orindustrial estate;

(ix) Fishing or providing shore facilities for fishing ormaintenance thereof:

(x) Providing weigh bridge facilities;(xi) Providing engineering, technical, financial management,

marketing of Other services or facilities for industry;(xii) Providing medical, health or other allied services;(xiii) Providing software or hardware services relating to

information technology, telecommunications orelectronics including satellite linkage and audio orvisual cable communication;

(xiv) Setting up or development of tourism related facilitiesincluding amusement parks, convention centres,restaurants, travel and transport (including those atairports), tourist service agencies and guidance andcounselling services to the tourists;

(xv) Construction;(xvi) Development, construction and maintenance of roads;(xvii) Providing commercial complex facilities and community

centres including conference halls;

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(xviii) Floriculture;(xix) Tissue culture, fish culture, poultry farming, breeding and

hatcheries;(xx) Service industry, such as altering, ornamenting,

polishing, finishing, oiling, washing, cleaning orotherwise treating or adapting any article orsubstance with a view to its use, sale transport, deliveryor disposal;

(xxi) Research and development of any concept technology,design, process or product whether in relation to anyof the matter aforesaid, including any a c t i v i t i e sapproved by the Small Industries Bank; or

(xxii) Such other activity as may be approved by the SIDBI;

2.2 Activities permitted by SIDBI:i) Construction / buying of ready-built showrooms and sales

out-lets (only fixed assets are eligible for financing, itemskept for sale are not eligible for financing);

ii) Construction / buying of ready-built area for establishingdepartmental stores and shopping malls (only fixed assetsare eligible for financing, items kept for sale are not eligiblefor financing);

iii) Setting up of Medical Stores (only fixed assets are eligiblefor financing, items kept for sale are not eligible forfinancing);

iv) Setting up of vocational training centres for impartingtechnical knowledge to entrepreneurs for setting up andrunning units efficiently and to produce quality goods;

v) Setting up entertainment industry including production offilms.

vi) Such other activity as may be approved by the SIDBI.

3. DIFFERENT SCHEMES OPERATED IN THECORPORATION:

Based on the activities permitted under the SFCs Act theCorporation has formulated various schemes for extending

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financial assistance.

1. Acquisition of private vehicles;2. Corporate loans;3. Construction activity.4. Acquisition of Existing Assets/ Enterprises.5. Privileged Entrepreneurs Scheme.

6. Assistance to Professional Educational Institutions forInfrastructure shall be covered under the constructionactivity scheme

7. Interest subsidy scheme of Government of Karnataka forSC/ST entrepreneurs.

8. Scheme for Micro Finance activity.9. Line of Credit (LoC) for Raw-material Purchase by

MSMEs from KSSIDC.10. Scheme for financing wind mill power projects.11. Soft Seed Capital Assistance of Govt. Of Karnataka for

SC/ST entrepreneurs.12. Restructured TUF scheme of Govt. Of India13. CLCSS Scheme of Govt. Of India

Brief particulars of various schemes is given at Annexure-I. For more details / procedure in each scheme, correspondingcirculars may be referred.

4. POLICY ON LINES OF ACTIVITY:It is a known fact that saturation, obsolescence, un-viability,

economy of scales, geographical factors, environmental issues,infrastructure, global economy/markets etc., do have a bearingon lines of industrial / business activity to be encouraged forfinancing. Some of these parameters keep changing from timeto time depending upon the external environment and environmentwithin the industry. It is therefore essential to make a periodicalreview of the performance of these activities in order to determinethe policy on supporting any activity in a particular period of timeand at a particular geographical location.

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Keeping these issues in mind, the activities are groupedunder the following four categories:(a) Thrust sector and Focus areas;(b) Normal Sector;(c) Restricted Sector and(d) Prohibited sector.

The “Thrust Sector” represents high priority areas chosenfor lending by the Corporation. Under the thrust sector specificareas are identified to be given special focus. The Corporationwill take-up special publicity, awareness and training drives to givemore thrust to these areas of activities.

The “Normal Sector” represents the activities which maybe traditional ones, but still doing alright by virtue of good demand.

The “Restricted Sector” represents areas, which requiremore careful scrutiny than usual and certain amount of restraint.

The “Prohibited Sector” represents the activities wherenew units are to be discouraged. Both new loan proposals andproposals for expansion and modernisation of the activities underprohibited sector, can be considered with the prior approval of theMD/CMD.

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THRUST SECTORSl

No.Product

CodeLine of Activity Collateral Security on

loan amountA . AGRO AND FOOD BASED INDUSTRIES :

1

2

3

4

0605000

0604000

0604060

0604070

Dhal Mill *

Modern Rice mill **(2TPH & above) / Ricerava & flour

Para Boiled Rice mill **

Rice Mill Drier **

50% on loans other than land& building.

50% on all assets other thanland & building.


50% on all loans other thanland & building.

The list of products /activities under different sectors is furnishedhereunder. Classification of products/activities not indicated in thelist below shall be decided by the Managing Director.

B. CERAMIC, REFRACTORIES AND MINERAL BASED INDUSTRIES:1

2

3

1905030

1902020

1902010

Hollow Bricks /Concrete Blocks ***

Table Moulded Bricks****

Wirecut Bricks ****

75% for machinery and50% for building75% for machinery and50% for building75% for machinery and50% for building

*** = Only applicable to Ramanagar, Kolar, Tumkur, Bangalore Rural &Urban districts For other districts please refer product codes underNormal sector.

**** = Only applicable to Ramanagar, Kolar, Tumkur, Chikkbalapur,Bangalore Rural & Urban districts. For other districts please refer prod-uct codes under Normal sector.

* = Only in Bidar, Gulbarga, Bijapur & Belgaum Districts. For otherdistricts refer Normal sector.

**= Only in Tumkur, Bellary, Koppal, Raichur, Belgaum, Gulbarga,Davanagere, Dharwad, Yadgiri, Shimoga & Haveri Districts. For otherdistricts refer Normal sector.

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E. DRUGS AND PHARMACEUTICALS :1 1713010 Pharmaceutical formula-

tion of Allopathic Drugs75% on all assets otherthan land & building.

F. ELECTRICAL AND ELECTRONICS INDUSTRIES :1

2

3

4

5

6

7

8

9

3402230

3500000

3402000

3402180

3402190

3402240

2301211

2504000

2504010

AutomotiveElectronics

DG set / MobileGenerator

ElectronicComponents

Electronic MeasuringInstruments

Electronic WeighingSystem

Manufacturing of ElectroMedical Equipment

Mfg. of UPS

Non conventionalenergy – Windmill

Non conventionalenergy – Bio Waste

100% on all assets otherthan land & building.

30% for units & 100% formobile generator.

100% on all assets otherthan land & building




50% on all assets other thanland & building




100% in the form of fixedassets

C. CHEMICAL AND ALLIED INDUSTRIES :1

2

1702000

1703000

Fertilizer Granulation /Mixing

Paints, varnishes,lacquers


50% on all assets otherthan land and building

D. CONSTRUCTION ACTIVITY :1

2

2811000

2812000

Godown / warehouse –other than agri basedproducts

Infrastructure Projects

16

F. ELECTRICAL AND ELECTRONICS INDUSTRIES :10

11

12

2504020

3402550

2302000

Non conventionalenergy – Solar

PCBAssembly

Power generation plant-Hydel


100% on all loans other thanland & building

50% on all assets other thanland & building

SlNo.

ProductCode

Line of Activity Collateral Security onloan amount

G. ENGINEERING, MECHANICAL AND ALLIED PRODUCTS1

2

3

4

5

6

7

8

9

10

2219000

2406000

2406020

3603022

2203220

2107020

2203000

2105000

2406190

2203170

Aerospace RelatedActivity

Automobile Ancillaryunits

Authorised Automobileservicing and calibration/ wheel balancing

Other automobileservicing and calibration/ wheel balancing

CAD/CAM/R & DFacility centers

CNC Centers

Diamond and Carbidetipped tools and dies

Machine Tools

Metal Fasteners – nails,nut, bolts etc.

Mfg. of AutomobileComponents

Precision MachineComponents





100% on intangible assetsand 50% on equipment /machinery.







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SlNo.

ProductCode


H . MISCELLANEOUS INDUSTRIES :1

2

3

1726000

1726010

1726020

Bio-Technology

Bio-Tech Products

Hazardous – Waste / SolidWaste Management



100% on all loans

I. PRINTING INDUSTRIES :

1

2

3

1404000

1401030

1403000

Book Ruling andBinding

Offset Printing

Printing & publishing




J. SERVICE SECTOR :

1

2

3

4

5

6

2712000

2712010

2713000

2713010

2801020

2908000

Diagnostic centerincluding X-ray, Scanningand Laboratory Services

Electro MedicalEquipment for Doctors

Medical Serv ices –Clinics / Medical Stores

Nursing Homes &Hospitals

Event Management /Organising – Function

Ambulance Service


100% on all loans



100% on all loans

100% on all loans

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K.TELECOMMUNICATION AND IT RELATED ACTIVITIES:1

2

3

4

5

6

7

3603021

3600000

3602000

3603020

3603000

3402600

3603030

Business ProcessOutsourcing (BPO)

Computer serviceActivities

Computer & ComputerPeripherals Manufacturing

IT Enabled Services

IT Related Industries

Microwave components& Telecommunication

Software Development& Training








SlNo.

ProductCode


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4.2 NORMAL SECTORA . AGRO AND FOOD BASED INDUSTRIES :

1

2

3

4

5

6

0617000

0608000

608010

0610020

0613120

0613120

Animal and PoultryFeeds

Bakery products

Biscuit / Confectionery – Tieup with Reputed Brand

Brown Sugar (Jaggerypowder)

Coffee Curing *

Coffee Roasting &Grinding


100% for the loan allocatedfor interiors and partitionsand 50% for otherequipment.



100% on all loans otherthan land & building


SlNo.

ProductCode


7

8

9

10

11

12

13

14

612020

0613150

0614050

0605000

0605020

0704000

0612010

0613200

Cold Storage

Decortication ofTamarind seeds

Desiccated CoconutPowder

Dhal Mill

Fried Grams

Fruit Juices

Ice plant

Masala Powder




100% on all loans otherthan land & building.


100% on assets otherthan land & building



20

21

22

23

24

25

26

0604080

0613160

0614030

0604060

0622000

620000

Paddy Harvester

Papads & Pickles

Pepper & Other Spices

Para Boiled Rice mill **

Plates and OtherProducts from ArecanutLeaves –Subject toensuring proper markettie-up.

Poultry Farm *** -[agreement with reputedcompanies like Godrej,Suguna, CP etc.]

100% on all loans





150% on all loan amount

SlNo.

ProductCode


15

16

17

18

19

20

0613000

0609000

0703010

0604000

0616000

0610000

Meat, Fish and theirproducts

Milk Dairy & dairyproducts PRocessing

Mineral Water

Modern Rice mill ** (2TPH& above) / Rice rava & flour

Mushroom

New Sugar Mil l(Composite with Ethanolproduction & Co-generation power )







21

SlNo.

ProductCode


31

32

33

0604070

0607000

0613060

Rice Mill Drier **

Roller Flour Mill

Seed Processing




27

28

29

30

0613030

0613120

0613040

0613110

Processing of Cashewnut

Processing of Coffee &Related Products

Processing of fruits &vegetables

Processing of Tea &Related Products





34

35

0702000

0623000

Soft Drinks

Wine Manufacturing****

100% on assets other thanland & building.


*= Coffee curing unit in Chikmagalore, Hassan & Kodagu Districts, subjectoffering collateral security of urban property acceptable to the Corporation

**= It is in Normal Sector, However in districts like Tumkur, Bellary, Koppal,Raichur, Belgaum, Gulbarga, Davanagere, Dharwad, Yadgiri, Shimoga &Haveri it is in Thrust sector.

***= Only Bellary district & the erstwhile Bangalore Rural Zone offices of theCorporation are permitted to consider the proposals provided there is tieupagreement with Suguna, Godrej etc. In others places Prohibition continues.

**** = Only districts of Nandi valley areas – Bangalore city, Bangalore Ruraland Kolar districts & Krishna Valley areas – Bijapur, Bagalkote and Belgaumdistricts.

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SlNo.

ProductCode


B. CERAMIC, REFRACTORIES AND MINERAL BASED INDUSTRIES:1

2

3

4

5

6

7

8

9

10

11

1907000

1904000

1904010

1905030

1912000

1903040

0201010

1905090

0500000

1905050

1910000

Ceramics and Pottery

Granite Quarrying

Granite Slabs /Products

Hollow bricks / concreteblocks

Lime and LimeProducts

Manufactured sand

Metal Mining

New Cement Plant(above 100 TDP)

Non Metal Mining

PCC & RCC products

Plaster of Paris

100% for all loans

100% for all loans


100% for machinery and50% for building


100% on plant & machineryloan

75% for equipment and 100%for development of mines.


75% of all loans



12

13

14

15

16

17

1908000

1905010

1903020

0400000

1903000

1907050


100% for all loans

100% on all loans

100% for all loans



Refractory Products

Spun Pipes

Stone Crusher *Stone Quarrying

Stone & Stone Products

Stone Ware Pipes

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*= Units coming up in safe zone area only are to be financed.

SlNo.

ProductCode


18

19

20

1902020

1902010

1901000

Table Moulded Bricks

Wirecut Bricks

Vitrified tiles / ClayTiles / Mosaic Tiles




1

2

3

4

5

1707020

1720000

1906050

1704000

1722000

Agarabathi Chemicals

Analysis of Chemicals

Consumer GlassProducts

Dyes and Dyestuffs

Electroplating






C. CHEMICAL AND ALLIED INDUSTRIES :

6

7

8

9

10

11

1713025

1707040

0610040

1710000

1711000

1906020

Enzymes & Vitamins

Essential and AromaticOil

Ethanol

Industrial Alcohol &Alcoholic products

Industrial Gases

Industrial GlassProducts







24

SlNo.

ProductCode


12

13

14

15

16

1714000

1707000

0300000

1705000

1705020

Lubricant Oil & grease

Perfumery & Cosmetics

Petroleum Products /Industrial Solvents

Tamarind – IndustrialStarch

Starch -Maize






D: CONSTRUCTION ACTIVITY:1 2802000 Commercial Complexes

/ Office complexes /Shop-ping complexes / Readybuilt office space

100% for loan allocated forinteriors and partitions and50% for plant &machinery.An exclusive col-lateral security of not lessthan 25% of the loan amountin respect of CRE projectscoming up on JDA basisshall be taken. However,where the freehold rights ofthe entire land (including thelandlord’s share) is mort-gaged to the Corporation, ex-clusive collateral security to-wards building loan need notbe insisted

2

3

4

2208050

3200000

2807000

Earth moving equipment

Industrial Complexes /Estates

Professional EducationalInstitutions Infrastructure

100% of all loan.

75% for loans allocatedfor assets other than land& building.


25

SlNo.

ProductCode


5

6

2813000

2806000

Purchase of Ready BuiltOffice space

Software TechnologyParks / B T Parks

100% for loan allocated forinteriors & partitions and50% for equipment.

100% for loan allocated forinteriors and partitions and50% for plant & machinery

1

2

3

4

5

1713040

1713070

1707050

1715000

1716000

Ayurvedic drugs

Bulk Drugs

Medicinal Cosmetics

Tooth Paste

Soaps & Soap Oil






E. DRUGS AND PHARMACEUTICALS :

1

2

3

4

5

3402030

2304000

2301061

2301180

2816000

Audio , Video & Ad filmProcessing, Editing,Dubbing / recordingstudios

Briquetted Fuel / BioFuel

CFL Lamps

Electrical Transformers& switchgears

Green Technology –Green Building, GreenChemistry

F. ELECTRICAL AND ELECTRONICS INDUSTRIES :150% on all loans otherthan land & building.





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SlNo.

ProductCode


6

7

8

9

10

11

12

13

1304080

2218000

2600000

2602000

2303100

2303110

2303120

2301210

Insulating Materials(used in electricaltransformers and aspacking material ofautomobiles and graniteslabs)

Measuring Instruments

Motion Picture / TVSerial Production

Photo Printing / ColourProcessing Lab

Solar Cookers

Solar Heaters

Solar Lamps / Lights

Storage Battery

F. ELECTRICAL AND ELECTRONICS INDUSTRIES :50% on all loans otherthan land & building


200% on all loan






1

2

3

4

5

1203000

2406030

2003000

2011000

2004030

Aluminum Furniture andFixtures

Automobile Spares

Bar, Wire and Tube Drawing/ Barbed wire fencing

Deep Drawing (Pressedcomponents)

Die Castings






G. ENGINEERING, MACHANICAL AND ALLIED PRODUCTS

27

SlNo.

ProductCode


6

7

8

9

10

11

12

13

14

15

2301030

2301250

2104000

2218010

2406080

2714010

2107000

2008000

2007000

2107051

Electrical Consumergoods

Electrical Furnaces

Galvanising

Gauges and Valves

Gears

General EngineeringWork Shop

Hand tools & otherforged tools

Heat Treatment

Heavy StructuralFabrication

Industrial Abrasives







50% on assets other thanland & building




G. ENGINEERING, MACHANICAL AND ALLIED PRODUCTS

16

17

18

19

20






2107070

2110000

2704000

2107080

2301240

Industrial Chains

Industrial MetalComponents

Jewelry Manufacturing

Locks, Hinges &Latches

Machinery Mfrg. –Medical equipment

28

SlNo.

ProductCode


21

22

23

24

25

26

27

28

29

30











2407000

2200000

2004000

2005000

2009000

2108000

2709000

2001000

1206000

2107030

Manufacture ofAutomobiles

Manufacture of MachineTools

Metal Castings

Metal Forging

Metal Powder Coating

Metal Ware &Utensils – Aluminum,Copper, Brass & Silver

Metallic Arts & CraftsManufaturing

Mini Steel Plant

Modular Furniture /Interiors

Other Metal Products

31

32

33

34

35

2707000

2108050

2301310

2002000

2101000

Pen and StationeryArticles

PP Caps

Repairs and ServicingElectrical Items

Re-Rolling Mills

Sheet Metal Product(Fabrication)






29

36

37

38

39

40

41

42

2108010

1202000

2113000

2112000

2301042

2103000

2401000

Stainless Steel Metalwares and Utensils

Steel Furniture andFixtures

Sponge Iron

Springs

Submersible pumps

Tool Room Activity

Vehicle Body Building



50% on all assets4 otherthan land & building





SlNo.

ProductCode


H. ENTERTAINMENT INDUSTRY:

1 2603000 Cinema Theaters /Multiplexes


1

2

3

4

2808000

2800000

2801010

2801000

Amusement Park / Recr-eation Facility / Food court

Hotel Projects / Tourismrelated activities

Mobile Canteen /Catering

Restaurant & Darshini

I. HOTEL AND TOURISM RELATED ACTIVITIES:

100% on all assets otherthan land, building &equipment such asgenerators and lifts.

100% on all assets otherthan land, building &equipment such asgenerators & lifts.

100% on all loans

100% on interiors &furniture and 30% on loanearmarked for equipment.

30

SlNo.

ProductCode


5

6

7

2804000

2808000

2810000

Resorts

Ropeway Facilities

Travel & transport /Tourist Service Agencies

I. HOTEL AND TOURISM RELATED ACTIVITIES:100% on all assets other thanland, building & equipmentsuch as generators & lifts.


100% on all loans

1

2

3

4

1002010

0901010

0901020

0901030

ComputerisedEmbroidery

Cotton - Ginning

Cotton - Pressing(bailing)

Cotton – Spinning





J . JUTE, TEXTILE & WOOL INDUSTRIES

5

6

7

8

9

10

Cotton ThreadProcessing

Cotton Weaving –Powerloom

Ready Made Garments – aminimum of 50 machines

Ready Made Garments forothers–less than 50 machines

Silk and Art SilkWeaving – Handloom

Silk and Art SilkWeaving – Powerloom

Silk Twisting &Reeling

0901043

0901042

1002000

0902031

0902032

0902010



50% for all loans otherthan land & building.

100% for all loans otherthan land & building.




31

SlNo.

ProductCode


11

12

13

14

Surgical Cotton

Textile ProcessingIndustries

Umbrella

Woven Cloth Articles

0901050

0907000

1003000

1005000





K. MISCELLANEOUS INDUSTRIES1 2701000 Scientific Measuring &

Controlling Instruments100% on all loans otherthan land & building

1

2

3

4

5

6

7

8

9

Corrugated Boxes andBoards

Handmade Paper

Kraft paper / MillBoards

Paper Bags – Other thanrecycled paper / pulp

Paper and Board

Paper Egg Trays

Paper files and Folders – Otherthan recycled paper / pulp

Paper & Paper Products

Paper Tubes

1304020

1303000

1302020

1304010

1301000

1304060

1304050

1304000

1304070










L. PAPER AND PAPER BASED PRODUCTS :

32

6

7

8

Plastic Packing Materials[ Exceeding 40 microns]

Plastic Pipes, Conduits

Plastic Woven Sacks

3710040

3710010

3710041




1

2

3

4

Computer Stationery

Digital & Flexo Printing

Printing Graphics

Xerox, Photo Copying /STD

1301090

1401080

1401050

1405000





N. PRINTING INDUSTRY :

O. RESIDENTIAL ACTIVITY:

1 2805000 Residential Apartments/ Group housing*

Land will be taken as additional secu-rity. An exclusive collateral security ofnot less than of 25% of the loan amountin respect of CRE projects coming upon JDA basis shall be taken. However,

SlNo.

ProductCode


1

2

3

4

5

Fibre Glass Products

Plastic ConsumerGoods

Plastic Films

Plastic Industrial Goods

Plastic Monofilaments

3710070

3710060

3710020

3710050

3710030






M. PLASTIC INDUSTRIES :

33

SlNo.

ProductCode


1

2

3

4

5

6

7

Consumer RubberProducts

Industrial RubberProducts / IncludingRubber

Industrial – V Belts andFan Belts

Mixing of Rubber

Rubber Hoses & Pipesetc.

Rubber Foot Wear

Rubberised Coir andFoam Rubber

1607000

1608000

1605000

1611000

1608050

1606000

1609000

50% on machinery excludingthe loan amount earmarkedtowards land & building.







P. RUBBER AND RUBBER PRODUCTS

2 2809000 Residential LayoutDevelopment

here the freehold rights of the entireland (including the landlord’s share) ismortgaged to the Corporation,exclusive collateral security towardsbuilding loan need not be insisted

100% on the loan amount

* All CRE Proposals shall be accepted with the prior approval from the Managing Director/CMD.In respect of other activities specified in the construction such as Infrastructure projects, forma-tion of residential layouts etc., the sanctioning authority continues to be the MD/CMD.

8

9

10

Tread Rubber

Tyres and Tubes

Tyre Retreading

1603000

1601000

1604000




34

R. TELECOMMUNICATIONS & IT RELATED ACTIVITIES:1 3603010 Internet Service Provider 125% on all assets other

than land and building

S. TRANSPORT VEHICLES1

2

3

4

5

6

7

8

2901000

2902000

2903000

2904000

2902000

2909000

2909000

2691000

Buses

Cars,Vans and Tractors*

Goods Carrier (Trucks )

LMVs

Public Carrier

Vehicles to ExistingUnits / Promoters

Vehicles to SelfEmployed Professionals

Helicopter Services

100% on all assets

100% on all assets

100% on all assets

100% on all assets

100% on all assets

30% on all assets

30% on all assets

100% on all loans* Maximum limit for sanction of loan for private vehicles can be Rs.15.00 lakhs.

T. WOOD AND WOOD BASED PRODUCTS :1

2

3

1304030

1104000

1103000

Card Board Boxes

Plywood

Veneers for Plywood




SlNo.

ProductCode


Q. SERVICE SECTION:1

2

3300000

2713040

Consulting Service

Gym/Health Club


100% on loans other thanland & building

35

SlNo.

ProductCode


1

2

3

4

5

6

7

8

9

10

11

Arecanut & ScentedSupari

Floriculture

Green House

Oil Mill [Expellers]

Poha and Cheera Mill

Pulverizing of Grains

Refined Edible Oil

Refined Non Edible Oil

Solvent extraction –Edible Grade

Solvent extraction –Non Edible Grade

Sugar Mills (CompositeMills)

0613100

621010

0621000

0602000

0604040

2711000

0601010

0601060

1706000

1706060

0610000



100% on all loans









A . AGRO AND FOOD BASED INDUSTRIES :4.3 RESTRICTED SECTOR

B. CERAMIC, REFRACTORIES AND MINERAL BASED INDUSTRIES1

2

3

1905060

1909000

1913000

AC Pipes, Sheets andFittings

Quartz PowderCrucibles

Silica Products


100% on assets otherthan land & building.


36

SlNo.

ProductCode


1

2

3

4

5

6

7

8

1719000

1717000

1723000

1707030

1709000

1800000

1804000

1718000









C. CHEMICAL AND ALLIED INDUSTRIES

Alum

Detergent Powder

Enameling

Mosquito Coils

Pesticides

Petroleum products

Pyrolysis oil

Synthetic Resins andOil Adhesives

D. CONSTRUCTION & HOSPITALITY ACTIVITY:1

2

2803000

2804010

Community Hall /Convention Centers

Home Stay –Chikkamagalur, Hassan,Kodagu, Karwar

100% on interior &furniture and 50% on loanamount earmarkedtowards equipment.

100% on all loans

E. ELECTRICALS AND ELECTRONIC INDUSTRIES:

1 2301050 Fluorescent Tubes 100% on assets otherthan land & building.

37

SlNo.

ProductCode


F. ENGINEERING, MECHANICAL AND ALLIED PRODUCTS :1

2

3

2703000

2108060

2109000

Clock and Time Pieces

GI Buckets & TinContainers

Watches & watchcomponents




1

2

3

4

5

Coir Processing & CoirProducts

Cotton weaving -Handloom

Nylon & Polyester Yarn

Wool and WoolenProducts

Zari and Zari Goods

0908010

0901040

0906021

0905000

0904000






G. SILK, TEXTILE AND WOOD INDUSTRIES :

1

2

3

4

5

6

Leather

Leather Footwear’s

Leather Garments andrelated products

Leather Hand Gloves

Leather Sports & OtherGoods

Leather Tanning &Finishing

1500000

1001010

1002000

1004010

1503000

1501000







H. LEATHER BASED PRODUCTS :

38

SlNo.

ProductCode


I. PLASTIC INDUSTRIES1 1001020 Plastic Shoes and

Chappals100% on assets otherthan land & building.

J. TRANSPORT VEHICLES :1 3010000 Cargo Vessel 100% on assets other

than land & building.

1

2

3

4

5

6

7

8

1107000

1109000

1101000

1201000

1110000

1105000

1101000

1102000









K. WOOD AND WOOD BASED INDUSTRIES

Cane and Cork products

Other Wooden Products

Wood Based Industries- Saw Mill, Carving etc.

Wooden Furniture &Fixtures

Wooden Handicrafts

Wooden PackingMaterials

Wood Plaining Industry

Wood Treatment

39

SlNo.

ProductCode

Line of Activity

4.4 PROHIBITED SECTOR

1245678910

170201006131500610020060403006150000620000061200008000000603000

Bone & Fish MealDecortication of other seedsKandasari SugarMini Rice MillMalt ExtractionPoultry FarmSaltTobacco Processing and its ProductsVanaspathi

A . AGRO AND FOOD BASED INDUSTRIES :

1234567

1704020171203007010000703000171202017080001903040

Acid, Base and NaptholsAcid - SlurryAlcoholic BeveragesCarbonated water (Aerated water )Nitro Glycerin Based Industrial ExplosiveSafety Matches and Fire WorksSoap Stone polishing

B. CHEMICAL AND ALLIED INDUSTRIES :

1 2301210 GLS LampsC. ELECTRICAL AND ELECTRONICS INDUSTRIES :

1 2805010 Service ApartmentsD. HOTEL AND TOURISM RELATED ACTIVITIES :

12

09060103710043

Cellulosic & Synthetic FibreJute Bags

E. JUTE AND TEXTILE INDUSTRIES :

12

38010011905090

Borewell RigsMini Cement Plant

F. MISCELLANEOUS INDUSTRIES :

1 2906000 Auto rickshawsG. TRANSPORT VEHICLES :

40

5. MSMEs Definition to be followed:

Definitions of Micro, Small & Medium Enterprises

In accordance with the provisions of Micro, Small & Medium EnterprisesDevelopment (MSMED) Act, 2006, the Micro, Small and MediumEnterprises (MSME) are classified into two Classes:

5.1. Manufacturing Enterprises: The enterprises engaged in themanufacture or production of goods pertaining to any industryspecified in the first schedule to the Industries (Development andRegulation) Act, 1951. The Manufacturing Enterprises are defined interms of investment in Plant & Machinery.

a Micro enterprises where investment in plant andmachinery does not exceedRs.25.00 lakhs.

b Small enterprises where the investment in plant andmachinery is more than Rs.25.00lakhs but not exceeding Rs.5.00 crores.

c Medium enterprises Where the investment in plant andmachinery is more than Rs.5.00 croresbut does not exceed Rs.10.00 crores.

5.2 Service Enterprises: The enterprises engaged in providing orrendering of services are defined in terms of investment in equipment.

a Micro enterprises engaged in providing services where theInvestment in equipment is not morethan Rs.10.00 lakhs.

b Small enterprises engaged in providing services where theInvestment in equipment is more thanRs.10.00 lakhs but does not exceedRs.2.00 crores.

c Medium enterprises Engaged in providing services where theinvestment in equipment is more thanRs.2.00 crores but does not exceedRs.5.00 crores.

41

The definition of MSME as amended from to time shall be adopted.

5.3. The GoK vide notification no. Fd 36 BFC 2010 dtd 25.6.2010 gazattedon 12.8.2012 accorded its approval for enhancing the ceiling on theaggregate of paid up share capital and free reserves from Rs.20.00 croresto Rs. 30.00 crores in respect of any industrial concern to be assisted byKSFC. Based on this GoK’s approval, the Corporation can considerfinancing large scale industrial units where the aggregate of the paid upcapital and free reserve do not exceed Rs.30.00 crores.

6. POLICY ON EXPOSURE LIMITS:

a. Policy on minimum loan size:

The minimum loan size is Rs. 5.00 lakhs which is applicable for allactivities except Medical and Veterinary Doctors where minimum limit isRs.2.00 lakhs.

The minimum size of the loan for others is Rs.2.00 lakhs in case ofexisting units going for expansion / modernisation.

b. Policy on upper limit on the loan amount & limit ofaccommodation:

Maximum limit of loans that can be sanctioned by the Corporation are asfollows:

Category Maximum loan

i) Proprietary / Partnership / Trust *Rs.800.00 lakhsii) Corporate bodies (both private &

public limited), registered co-operativesocieties. *Rs.2000.00 lakhs

SIDBI has permitted the Corporation to provide assistance to individualunit’s upto Rs.1000.00 lakhs in case of a Company or a Co-operativeSociety and Rs.400.00 lakhs in case of a Proprietorship / Partnership /Trusts etc., without seeking prior approval of SIDBI.

In respect of category (ii) the financial assistance can be grantedprovided the paid up capital & free reserves do not exceed Rs.30.00crore.

If the requirements of the funds for a project is substantial and cannotbe extended by the Corporation alone, then the requirement of loan forsuch projects can be met in consortium with other Banks / Financial

42

Institutions subject to the condition that the paid up capital and freereserves of the applicant company does not exceed Rs. 30 crores.

c. Policy on group wise Exposure:

1. The maximum exposure limit is fixed at Rs.50.00 crores inclusive ofall fund based and non fund based assistance for companies and Co-operative societies.

2. For Proprietary, Partnership units and Trusts, the exposure limit isfixed at Rs.20.00 crores of all fund based and non fund basedassistance.

3. Where any of the associate units of the applicant unit/applicant firm/trust is a company, the exposure limit as applicable to the companyshall be applicable.

Guidelines as adopted from Companies Act 2013 be used for identifyingthe Group companies / associate companies.

7. POLICY ON SECTOR WISE EXPOSURE:

Recommended Sector Wise Exposure:

New sector-wise exposure is worked out based on the potential andperformance of units, in each sector. Based on this criteria, the followinglimit on sector-wise exposure is fixed:

Major Sectors

1. CRE Sector2. Hospitality Sector3. Services & others Sector4. Health Sector5. Professional/Technical educational institution6. Micro Finance sector

Exposure Limit(as % age to Total

Outstanding)

16.00%20.00%12.00%5.00%2.00%

Rs 20.00 crores

Industry wise/Product wise exposure is shown in detail in Annexure-III.

The MD/CMD is authorized to cause change to the lending policy’s sectorwise exposure, based on the business proposal, subject to a maximumof 2% over and above the percentage proposed in the policy and theBoard shall be kept informed about the said changes.

43

Based on RBI guidelines, the following activities which are being financedby the Corporation are classified under CRE Sector:

a) Residential Layout development.b) Residential Apartmentsc) Commercial and Office buildingd) Warehouse / godowns prominently used for sub-letting.e) Assistance under rental discounting schemes.

[For more details, please refer Circular no.883 dtd.1.12.2009 and CircularNo.990 dt. 16.1.2015 issued by MD].

However, if the projects mentioned in c & d above are managed by theentrepreneurs on their own and earn the income, the same shall beexcluded from the limit specified for CRE sector.

8. POLICY ON REPAYMENT PERIOD:-Guidelines to be followed while fixing the repayment period:

Type of project Repayment period

a) IT related projects, I.T EnabledServices, Computer trainingcenters, software developmentand related activities

b) IT related projects involvingConstruction of building for theproject

c) Establishment of SoftwareParks involving mainly buildingand other infrastructures

d) Hotel projects, Nursing homes,Conventional halls, Commercialcomplexes/ Office complexes,Industrial estates, constructionof godowns

e) Transport sector (all categories)

f) Modernisation scheme

Not more than 4 years includingmoratorium period upto 12months

Upto 5 years including amoratorium period of 12 – 15monthsUpto 8 years including amoratorium period of upto 24monthsUpto 8 years including amoratorium period of upto 24months

36 to 50 months including amoratorium of 3 months in respectof all categories of vehicles.Upto 5 years including a morato-rium of upto 12 months

44

g) Rehabilitation Scheme:

(i) Period of relief(ii) Repayment of total liability(iii) Overall repayment periodfrom the date of firstdisbursement

h) Corporate Loan Scheme

i)Privileged Entrepreneurs Scheme

j) Construction activity / Propertydevelopment (Build & Sell):-construction of Group Housing,commercial complexes,software technology parks, BTparks.

SSI UNITS MSI UNITS

Upto 5 years Upto 7 years7 to 10 years 7 to 10 yearsUpto 20 years Upto 20 years

Not exceeding 24 monthsexcluding a maximum moratoriumperiod of 6 months

Upto 24 months including a maxi-mum moratorium period upto 6months.

k) Corporate loan for ConstructionActivity :- Infrastructure projectwith road, flyover, bridges..

l) (a) Cinema Theaters /Multiplexes(b) Feature films, TV serials,software for visual mediapublicity

m) All other schemes

Upto 3 years including amoratorium of 6 to 18 months,depending upon the progress inproject implementation period

Up to 3 years including amoratorium of 6 to 18 monthsdepending upon the progress inproject implementation period.Upto 5 years including amoratorium of 24 months.Single repayment in the13th monthor before the release of the featurefilm, TV serials, software for visualmedia publicity whichever is earlier.

Upto 6 years including a morato-rium period varying between 6 to 9months in the case of only machin-ery / equipment and 6 to 18 monthsin case of involvement of buildingconstruction for the project.

While the above gives a broad guideline for fixing the repayments, longerrepayment / moratorium could be given based on the location of the unit, typeof industry, profitability, security available etc., provided there are strongreasons supporting such fixation. Such recommendations should be madevery judiciously.

45

9 GUIDELINES ON PROMOTERS EQUITY, PROFITABILITY & MAXI-MUM ASSISTANCE:9.1 Debt Equity Ratio (DER):-The following DER shall be followed normally while sanctioning the loans:Sl. No. SCHEME RATIOA Rehabilitation Scheme FlexibleB Modernisation Scheme Projects – 4 : 1C Others : Upto a loan of Rs.10.00 lakhs 3 : 1

Above a loan of Rs.10.00 lakhs 2 : 1D Additional Loans Projects – 2 : 1

( within the overall limit) Overall – 2 :1E Residential Apartment Projects 1 : 1F Residential Layout formation 1 : 1

Overall DER 2:1 shall be ensured for additional term loans excludingCRE Projects. However the overall DER for Modernisation Scheme,Transport Loan Schemes and D.G.set Loan scheme may be consideredup to 3:1

9.2. Debt Service Coverage Ratio (DSCR):-The repayment period of loan is fixed with due regard to the cash

generation. For this purpose, an average DSCR ranging between 1.50 :1.00 to 2.00 : 1.00 has been accepted as reasonable. In projects involvingmainly land/building such as commercial complexes, software technologyparks, Industrial estates, etc., with assured income, the DSCR can berelaxed up to 1.25 : 1.00.

9.3 Maximum Assistance:S.No Scheme Maximum

Assistancea Modernisation Scheme 80%b Acquisition of existing assets / Enterprises 70%c Transport Loan Scheme 80%d DG Set Scheme 90%e Entertainment Industry Scheme Including

film production i) Fixed assets 70%ii) Film Production 50%

f Privileged Entrepreneur Loan Scheme 100%g All other Scheme 70% to 75%

46

9.4 Promoter’s contribution:-

The following norm may be followed while sanctioning the loan:

Particulars Minimum percentage on project cost

a) All district / regions 22.5%

b) Rehabilitation scheme Flexible

c) DG Set loan 10%

9.5 INTEREST RATE STRUCTURE:

The present interest rate structure applicable for different categories isgiven at Annexure-II. This is subject to revision from time to time asapproved by the Board.

10. POLICY ON FORECLOSURES / PRE-PAYMENTS:-

Prepayment / foreclosure premium will be charged as follows:

1. In respect of pre-payment of loan instalments upto 02 quarters or06 months in a financial year- no pre-payment penalty shall becharged;

2. In respect of foreclosure of loan accounts where remaininginstalments is more than 2 quarters or six months but less thanone year – foreclosure premium at 1.5% shall be charged on theentire outstanding loan balance as on the date of foreclosure;

3. In respect of loan accounts where remaining instalments is morethan one year – foreclosure premium at 2% shall be charged onthe entire outstanding loan balance as on the date of foreclosure;

Note: In respect of loan accounts where remaining instalments is lessthan 6 months, no foreclosure premium shall be charged. However, thisexemption as well as exemption available as per sub-para 1 above willnot be applicable in respect of foreclosure of cases mentioned at sub-para 2 & 3 above;

However, the policy of foreclosure / pre-payment of the accounts in re-spect of the following category of account without collecting the foreclo-sure / pre-payment premium will continue.

47

(a) Closure of accounts on OTS.

(b) NPAs under SWS / SRTO loans and Composite loans.

(c) Doubtful accounts.

(d) Prepayment / fore-closure by sale of secured / personal propertiesincluding cases of commercial complexes / residential apartmentwhere pre-payment is out of saleproceeds of the premises financed.

(e) NPAs in respect of loans sanctioned up to Rs.2.00 lakhs.

(f) Privileged Entrepreneur loan and corporate loan.

(g) Prepayment/foreclosure on account of repayments received throughadjustment of subsidies such as investment subsidy, CLCSS,MOFPI,NHB,interest subsidies etc.

Concerned Branch Manager can approve the pre-closure / fore closuressubject to collection of premium as mentioned above.

10.1 POLICY ON TIME STANDARD IN PROCESSING OF LOANAPPLICATION:

The appraisal section shall finalise the credit appraisal within 10 days inrespect of cases where the project cost is below Rs.100.00 lakhs andwithin 20 days in respect of cases where the project cost is aboveRs.100.00 lakhs and submit the loan memorandum for sanction to theappropriate sanctioning authority through proper channel.

The appropriate loan sanctioning authority should decide on the loanmemorandum within three days in respect of cases where the projectcost is upto Rs.100.00 lakhs and within seven days in respect of caseswhere the project cost is above Rs.100.00 lakhs. However, the abovetime limit in respect of cases placed before the Board and EC shall besubject to relaxation based on the date of meeting of Board / EC.

11.A. DELEGATION OF LOAN SANCTIONING POWERS (GENERAL):

[Delegation of loan sanction and disbursement powers as per circularno. 950 dtd 31.3.2012 issued by Managing Director is incorporated].

48

Corporate LoanRs.10.00 lakhswithin overall limit ofRs.50.00 lakhsRs.10.00 lakhswithin overall limit ofRs.75.00 lakhsRs.25.00 lakhswithin overall limit ofRs.100.00 lakhsRs.50.00 lakhswithin overall limit ofRs.150.00 lakhsRs.100.00 lakhswithin overall limit ofRs.300.00 lakhsRs.250.00 lakhswithin overall limit ofRs.500.00 lakhsRs.500.00 lakhswithin overall limit ofRs.1000.00 lakhsRs.500.00 lakhswithin overall limit ofRs.2000.00 lakhs

Additional LoanWithin overall limit ofRs.50.00 lakhs

Within overall limit ofRs.75.00 lakhs






Above Rs.1000.00lakhs

New LoanRs.50.00lakhs

Rs.75.00lakhs

Rs.100.00lakhs

Rs.150.00lakhs

Rs.300.00lakhs

Rs.500.00lakhs

Rs.1000.00lakhs

AboveRs.1000.00lakhs

Sanctioning Authority

BMs of ‘B’ GradeBranch Offices

AGMs of ‘A’ GradeBranch Offices

DGMs of Super ‘A’Grade BranchOfficesGeneral Managers

Executive Directors

Managing Director

ExecutiveCommittee

Board

Sl. No1

2

3

4

5

6

7

8

Sanctioning powers (Maximum Amount)

B. DELEGATION OF LOAN SANCTIONING POWERS FOR EXISTINGGOOD CUSTOMERS:Sl. Sanctioning Authority Sanctioning powers (Maximum Amount)

Corporate Loan Privileged Entrepreneur Loan1 BMs of ‘B’ Grade

Branch Offices Rs.10.00 lakhs Rs.10.00 lakhs2 AGMs of ‘A’ Grade

Branch Offices Rs.20.00 lakhs Rs.20.00 lakhs3 DGMs of Super ‘A’

Grade Branch Offices Rs.35.00 lakhs Rs.35.00 lakhs4 General Managers Rs.50.00 lakhs Rs.50.00 lakhs5 Executive Directors Rs.100.00 lakhs Rs.100.00 lakhs6 Managing Director Rs.250.00 lakhs Rs200.00 lakhs7 Executive Committee Rs.500.00 lakhs —

49

Note:

Eligibility Criteria of Existing Good Customers:

1. The units should have availed loan of Rs10 lakhs or more fromKSFC in the past and should have a good track record for at least3 years.

2. The account should have been in standard category during the last3 years.

3. In respect of rescheduled cases and cases covered under DRS-RSR, the account should be regular and in standard category forthe previous 3 years.

4. The unit should be working on profitable lines i.e., the units shouldhave earned net profits at least during the last 3 years as evidencedby the audited financial statements.

5. Where the loan accounts are closed more than 3 years back, theproposals should be treated as a proposal from a new customer.

In respect of these categories of borrowers, the respective sanc-tioning authority can sanction corporate / PE loan as detailed abovewithout linking to the overall limit of term loans and WCTL. How-ever, if the project for which latest loan sanctioned is under imple-mentation, the sanctioning of corporate / PE loan in such casesshall fall within the delegated powers of the earlier loan sanctioningauthority. Further, the corporate loan and PE loans shall not ex-ceed 150% of the aggregate loan amount disbursed of live accountsand of the term loan accounts closed in the last 3 years (excludingthe proposed loan).

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C. DELEGATION OF LOAN SANCTIONING POWERS FOR WORKINGCAPITAL TERM LOAN UNDER SINGLE WINDOW SCHEME / WORK-ING CAPITAL TERM LOAN:Sl. Sanctioning Authority Sanctioning powers1

2

3

4

5

6

7

BMs of ‘B’ GradeBranch Offices

AGMs of ‘A’ GradeBranch Offices

DGMs of Super ‘A’Grade Branch Offices

General Managers

Executive Directors

Managing Director

Executive Committee

Up to Rs.10.00 lakhs within overall limit ofRs.50.00 lakhs




Up to Rs.100.00 lakhs within overall limitof Rs.300.00 lakhs



D. DELEGATION OF LOAN SANCTIONING POWER OF LOC FORPURCHASE OF RAW MATERIALS BY MSMEs FROM KSSIDC:Sl. Sanctioning Authority Sanctioning powers1

2

3

4

BMs of ‘B’ Grade Branch Offices

AGMs of ‘A’ Grade Branch Offices

DGMs of Super ‘A’ Grade Branch Offices

General Managers

Rs.30.00 lakhs

Rs.50.00 lakhs

Rs.60.00 lakhs

Rs.100.00 lakhs

E. DELEGATION OF LOAN SANCTIONING POWERS FOR MICROFINANCE ACTIVITY:Sl. Sanctioning Authority Sanctioning powers1

2

Managing Director

Executive Committee

Upto Rs.200.00 lakhs

More Than Rs.200.00 lakhs andUpto Rs.500.00 lakhs

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All proposals under the Micro finance activity scheme which meets theeligibility criteria, shall be processed after obtaining “in principle clearance”from the Managing Director/CMD. The Corporate limit on micro financingexposure is fixed at Rs.20 crores. The exposure of the Corporation toa micro finance institution shall not exceed 15% of its (MFI) totaldebts.

Note: The sanctioning powers indicated at Table B & D are exclusivepowers and loans can be sanctioned in addition to overall limits indicatedat Table-A. However, the additional and corporate loans in Table-A andworking capital loan indicated at Table-C should be within the overallmaximum limit indicated for the respective sanctioning authorities in Table-A.

12. DELEGATION OF DISBURSEMENT POWERS:

12.1 LOAN DISBURSEMENT:

a. Branch Managers:

The Branch Managers are empowered to disburse loans in respect ofsanctions done by various authorities up to Rs.5.00 crore at a time afterensuring the compliance of terms and conditions of loan sanction.However, the BMs are empowered to relax minor conditions like nonreceipt of copy of IT returns, renewed license, WC arrangements andappointment of skilled persons. This does not apply to conditionsspecifically laid down by higher / sanctioning authorities.

Further, all these conditions shall be complied before release of last 35%of the term loan amount. Further, the Branch Managers are authorizedto release the moneys directly to KIADB for purchase of KIADB land bythe promoters assisted by KSFC after obtaining interim documents of allthe promoters / PG holders, loan agreement and undertaking letter etc.However, the BM shall ensure that the guidelines issued vide circularno.919 dated 17.09.2010 is complied with.

b. General Managers:

General Managers are empowered to disburse loans sanctioned by variousauthorities irrespective of the quantum of loan amount to be disbursed.Further, they may use their discretion to defer compliance of minorconditions like non-receipt of copy of IT returns, renewed licence, workingcapital arrangements and appointment of skilled persons till release of65% of sanctioned loan amount except those conditions which have beenspecifically imposed by the higher/ sanctioning authorities.

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In the event of non availability of the above Officers next higher authorityis authorized to cause disbursement as above.

12.2. RELAXATION OF FIRST INVESTMENT CLAUSE (FIC):

Sl. Particularsa Branch Managers can relax FIC up to 15%b General Managers can relax FIC up to 30%c Executive Directors can relax FIC up to 40%d Managing Director can relax FIC up to 50%e Relaxation in FIC in excess of 50% be placed before the

Executive CommitteeNote:

a) However, in respect of existing MSMEs working on profitable lines fora minimum period of last three years and if the loan is sanctioned towardsacquisition of land / shed from KIADB / KSSIDC, the FIC may be relaxedsubject to a maximum of 75% by the concerned Branch Managers.

b) In respect of existing MSMEs working on profitable lines, FIC may berelaxed by the Branch Managers while releasing the loan amount towardsacquisition of plant and machinery by ensuring proportionate contributionbrought in by the promoters. However, in such cases the BM shallensure that the delay / non-acquisition of remaining machinery would notaffect the viability of the project for the amount disbursed.

12.3 ADHOC RELEASE:

Sl. Particularsa Branch Managers are authorized to release term loan on adhoc

basis subject to temporary relaxation of security margin up to10% (Primary security only). However this shall be made goodbefore the next release

b General Managers are empowered to relax security margin (PS)up to 15%. However this shall be made good before consideringthe next release.

c Executive Directors are empowered to relax security margin up to25%. However this shall be made good before considering nextrelease.

d Managing Director is empowered to relax security margin up to50%. However this shall be made good before considering nextrelease.

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12.4 CHANGE OF MACHINERY:

a) Change in Machinery Supplier:

Branch Managers are authorized to approve change of machinerysupplier in respect of all cases. However, they should ensure that themachinery supplier should be of reputed / well established track record.The approving authority should ensure that the overall nature of the projectand purpose of loan is not altered materially.

b) Change in machinery:

Branch Managers are authorized to approve the changes in machinery inrespect of cases where the loan is extended to the existing units whichare working on profitable lines. However, in respect of new units, theBranch Managers can approve the change in machinery up to 25% oftotal estimated cost of plant and machinery. If the change in machineryis beyond 25% of total estimated cost of plant and machinery, the GeneralManagers are empowered to approve the same.

However, the BMs/GMs shall ensure that the promoters shall meetthe additional cost, if any, out of their own funds due to the above changesand not approach the Corporation for additional funding and also ensurethat the quality, cost, service network etc., are comparable or of betterstandards.

12.5 CHANGE IN MANAGEMENT / CONSTITUTION / PROMOTERS /SHARE-HOLDING PATTERNS ETC., DURING IMPLEMENTAION:

For all limited companies and partnership firms changes in share holdingpattern with original promoters retaining share holding up to 51%, theapproving authority will be Branch Managers subject to the condition thatthere is no dilution of security, networth and release of personal guaranteesconsequent to change.

Beyond 51% change in the share holding pattern of the promoters / changein management, constitution, promoters and share holding pattern etc.,during implementation, the Managing Director/CMD shall be the approvingauthority in respect of cases sanctioned by EC / Board. In respect of allother cases, the respective sanctioning authority shall be the approvingauthority.

While processing the files for the above said matters, the concernedOfficers should exercise due diligence and ensure that at no point, thecomforts available to the Corporation are diluted in the form of securities/ guarantees. The changes as above should invariably be beneficial to

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the Corporation and the same shall be explicitly explained and stated onthe relevant case file.

12.6 CHANGES IN COLLATERAL SECURITIES AND PG:Substitution of collateral security and PGs in respect of Board /EC sanctioned cases, the approving authority is the ManagingDirector/CMD.In respect of cases sanctioned by Managing Director /CMD/Executive Directors / Sanction Committee, Executive Directorsare authorized to approve substitutions of collateral securityand Pgs.In respect of cases sanctioned by General Managers / SanctionCommittee and cases sanctioned by erstwhile Zonal Managers,the General Managers are authorized to approve substitutions ofcollateral security and PGs.In respect of cases sanctioned by Branch Managers / SanctioningCommittee headed by BMs, the Branch Managers are authorizedto approve.However, while considering the substitution of collateral securityand PGs, the approving authorities shall exercise due diligencesas also comply with the following points:

a. Ensure that the account is not in default.b. The quality of collateral security in terms of locational importance,saleability value etc., is not compromised. Similarly, the PG proposedto be replaced shall possess equal or better networth compared to theearlier PG.12.7 REVALIDATION OF LOANS

Last release

Within 2 yearsof loan sanction

Within 2 yearsof loan sanction

Within 6 monthsof loan sanctionWithin 6 monthsof loan sanction

First release

Within 6 months of loansanctions

Within 6 months fromthe date of projectimplementation

Within 3 months of loansanction

Within 3 months of loansanction

LoansTerm loans /additionalterm loans

a. WCTL - SWS

b. Only WCTL

Corporate loan /PE loan

Sl. No

1

2

3

55

In case any major amount stands un-disbursed even after the expiry ofthe validity period of two years from the date of sanction, the validityperiod may be extended subject to the condition that the promoter uti-lizes the un-disbursed amount and completes the project without seek-ing additional loan. This revalidation can be done by the Branch Manag-ers subject to reconfirming the viability of the project. For such revalida-tion, the prescribed upfront fee has to be collected afresh and the rate ofinterest as applicable as on the date of revalidation or the earlier contractrate, whichever is higher, shall be made applicable for the revalidatedamount. However, the revalidated period shall be reasonable so as toallow the promoter to complete the project.

Revalidation of un-disbursed term loan / additional term loan canbe done only up to a maximum period of 3 years from the date of loansanction.

12.8 RE-ALLOCATION OF FUNDS: The reallocation of savings from one head to other and also frommachinery to civil works or from civil works to machinery can be consid-ered subject to:

a. If the unit has already acquired major part of machineryb. The savings are identified clearlyc. Justification for diversiond. No further financial commitment from the Corporation for completing

the implementation of the project.

The Branch Managers are authorized to approve the changes inreallocation of savings in respect of all the cases

However, the reallocation of funds from building to machineryshall be approved by the respective sanctioning authority and ManagingDirector in respect of loans sanctioned by EC/Board, if the security in-sisted for the loan is less than 100% or under relaxed terms.

12.9 .CANCELLATION / LIMITATION OF LOAN:Cancellation:

The Branch Managers are authorized to cancel the loans sanctioned bythem if the first disbursement is not effected within six months from thedate of loan sanction.

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In respect of other cases, the General Managers are authorized to can-cel the loan if the first disbursement is not effected within six monthsfrom the date of loan sanction.Limitation:

The Branch Managers are authorized to limit the loan to theextent drawn, cancel the balance un-disbursed amount and to refix theinstallments in respect of the amount drawn, if the amount to be can-celled is less than 20% of the amount sanctioned subject to the condi-tion that the unit is in a position to generate sufficient cash surplus. Incase the project is abandoned, action shall be initiated to recover theloan amount disbursed. Further, any portion of the loan remaining un-drawn after a period of two years from the date of loan sanction shalllapse automatically.

In respect of partly disbursed cases where the amount to becancelled is more than 20% of the amount sanctioned, the respectiveloan sanctioning authority is authorized to limit / cancel the loan. How-ever, in respect of cases where loan is sanctioned by Board / EC /CMD/MD, the CMD/Managing Director is authorized to approve the same.Further action shall be taken to refix the instalment commensurate withgeneration of income within the overall repayment period.

12.10 REFIXATION OF INSTALMENT DURING IMPLEMENTATION:The Branch Managers are authorized to refix the repayment

instalments for one time during the implementation of the project, if thereis a delay in the implementation of the project, in respect of cases sanc-tioned upto level of Executive Directors. However, the overall repaymentperiod should not exceed more than 12 months to the original repaymentperiod and the promoters shall be regular in payment of interest dues. Inrespect of the cases sanctioned by MD/CMD, EC, Board and Proposalsinvolving extension of repayments beyond 12 months, such proposalsshall be approved by the CMD/ Managing Director.

12.11 ISSUE OF NOC / RELEASE OF CHARGES:The Branch Managers are authorized to issue NOC / release of

charges for residential flats, apartments and commercial complex. How-ever, this is subject to the condition that the promoter pays proportionateloan amount plus 25% of the proportionate loan amount thereon. Thereshould not be any interest overdue and the validity period for NOC shouldnot exceed the overall repayment period fixed for repayment of term loan.

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12.12 ISSUE OF NOC FOR CEDING 2ND CHARGE / 3RD CHARGE TOBANKS AND FINANCIAL INSTITUTIONS:

During the course of disbursement if the promoter comes upwith a request for ceding 2nd charge / 3rd charge in favour of banks andother financial institutions, the Branch Managers are authorized to issueNOC for ceding 2nd charge / 3rd charge in favour of Banks and other Finan-cial Institutions, subject to prevailing guidelines and circulars.

12.13 GENERAL GUIDELINES FOR DISBURSEMENT:

(a) The disbursement officer shall exercise due diligence while causingdisbursement and shall act purely in the interest of the Corporation;

(b) The action of the disbursing officer shall be subject to audit, if so,ordered by the CMD/ Managing Director / Executive Directors;

(c) The present guidelines on concurrent audit shall continue to be invogue for all loans;

(d) The interpretation of the guidelines by the CMD/ Managing Directorshall be final.

13. GUIDELINES ON PROCESSING OF LOAN APPLICATIONS:-The Branch Managers, after placing proposal before Branch PCC

can issue and accept loan applications in respect of proposals fallingwithin their sanctioning powers. In respect of other proposals, the samemay be placed before respective PCC. However in respect of all CREproposals ‘ in principle ‘ clearance from the Managing Director/CMD shallbe obtained. The loan application so accepted shall be processed at BOand the loan memorandum shall be submitted to the appropriate loansanctioning authority for sanction.

The Branch shall obtain credit rating from approved external rat-ing agency in case of all new proposals of Rs.150.00 lakhs and aboveexcluding CRE Projects. The RMD [Risk Management Department atHead office] shall carryout in-house rating of proposals involving a loanamount Rs.150.00 lakhs and above. The Credit Risk Rating as assessedby the Risk Management Dept., shall prevail over other ratings. Propos-als involving a loan amount of more than Rs. 500.00 lakhs shall be placedbefore the CRMC [Credit Risk Management Committee at Head office]for clearance.

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The Project Clearance Committee shall be constituted as follows:

a. ‘B’ Grade Branch Offices:The Project Clearance Committee for new loans up to Rs.50.00 lakhs:

Sl. Project Clearance Committee Members Members1 Branch Manager Chairman

2 Manager[Tech] / Dy. Manager[Tech] Member

3 Manager[Legal] / Dy. Manager[legal] Member

4 Manager[F&A] / Dy. Manager [ F&A] Member

5 Manager[EG] / Dy. Manager [EG] Member / Convener

Sl. Project Clearance Committee Members Members1 Asst. Gen. Manager Chairman





b. ‘A’ Grade Branch Offices:The Project Clearance Committee for new loan up to Rs.75.00 lakhs:

c. Super ‘A’ Grade Branch Offices:The Project Clearance Committee for new loan upto Rs.100.00 lakhs:

Sl. Project Clearance Committee Members Members1 Dy. Gen. Manager Chairman

2 Asst. Gen. Manager Member





General Manager [Concerned Circle] shall chair the PCC for all casesother than the above up to a loan amount of Rs.1000.00 lakhs.

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Executive Director [Concerned] shall chair the PCC for all cases abovea loan amount of Rs.1000.00 lakhs.

14. GUIDELINES ON VALUATION OF ASSETS: (ONLY FORSANCTIONS)

A realistic valuation of assets assumes a great importance intaking credit decisions in the Corporation. The following broad guidelinesmay be adopted:-

14.1. Land:-

(a) Branch office shall collect the list of minimum value fixed by the Sub-Registrar for registering the properties in the respective areas. Thisinformation will be available either in the jurisdictional Sub-Registraroffice or with the District Registrar.

(b) While computing the value of land, the minimum registration valueshould be taken as the base value. In addition, the officers shallmake efforts to find out the recent registrations that have taken placewithin one year time in and around the property being valued from theoffice of the Sub-Registrar.

(c) Efforts should also be made to know the fair market value of theproperty in the locality through local enquiries keeping saleabilityin view

(d) Value of the land shall be finally determined based on these threevalues with proper justifications. It may please be noted that if thefair market value is less than the value fixed by the Sub-Registraroffice, then the minimum value fixed by the Sub-registrar should betaken for the purpose of valuation.

All the above information shall be given under the column provided invaluation report for this purpose.

(e) The Branch should, in addition to the extract of the SR guidancevalue list, also furnish the extract of the general guidelines issued by theoffice of the respective Sub Registrar for determining guidance value asan enclosure to the valuation report.

(f) The following details should be furnished in the valuation report:

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1. Address of the property as per legal documents and ownersname;

2. Layout plan: - A copy of the layout plan approved by theconcerned authority should be enclosed. If it is not available,the inspecting officer shall prepare a layout sketch and attestthe same.

3. Schedule of property shall be given;4. Extent of the land i.e., site (L X B) and total area;5. Surface condition of the land;6. Basis on which the valuation has been made. If the land is

situated in the area of KIADB/ KSSIDC developed area then thepresent allotment price of KIADB / KSSIDC should be indicated.

7. Approach road to the land from the public road should beindicated;

8. Any beneficial advantages of the land which will enhance itsmarket value should be indicated. Similarly if there are negativeaspects which would reduce the value also must be mentioned.

14.2. Building:-

(a) The value of the building should be estimated on the basis of thecurrent cost of construction of various structures.

(b) From the current cost of construction, depreciation at a rate consideredto be appropriate should be deducted to arrive at market value.

(c) As it is not possible to lay down a standard rate of depreciation, theofficer valuing the building should indicate the reasons why a particularrate of depreciation has been adopted. There may be necessity toadopt different rates of depreciation for different structures. Adepreciation of 2% to 5% is considered acceptable in a wellmaintained building.

(d) The valuation report should contain the following details:

1.The details of different structures, their measurement in terms ofL X B and the type of construction of each of the structures, presentstatus etc.;

2. The valuation of individual items of building and the rate taken perSq. Mtrs. and the type of construction of each of the structures;

3. The rate of depreciation in respect of each item of structure andthe justification for the rate of depreciation adopted;

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4.The present condition of the building, the nature of structures andthe material used in the construction, age, saleability, balance lifeetc.,

5. The opinion of the officer valuing, on the saleability of the building,if put for sale.

6. Type of building whether industrial / commercial / residential /others.

7. Items which are not considered for valuation if found unsuitable,with Specific reasons.

14.3. Plant and Machinery:

a. The plant and machinery should be valued based on current price.

b. From the current price of the machinery, depreciation at an appropriaterate has to be deducted for the number of years the machinery wasin usage.

c. While deciding the rate of depreciation, factors such as maintenanceof the plant and machinery, its present condition, number ofyears it was used etc., should be taken into consideration andthe officer valuing the plant and machinery should give thejustification for the rate of depreciation he has adopted. Adepreciation of 5% to 15% is generally found acceptable undernormal circumstances.

d. To the extent possible the current price of machinery should be arrivedat based on the quotation(s) from supplier (s) for the same or similarmachinery if it is not possible to obtain quotation(s) within a reasonabletime period, then the current price shall be arrived at based onenquiries at supplier(s) or sales agents supplying the same or similarmachinery and the name(s) of the suppliers/sales agents so enquiredat, shall be mentioned in the valuation report.

e. Details of valuation of individual machinery should be given separatelyand the rate of depreciation may also vary from item to item. However,in respect of small miscellaneous items, a lump sum value may begiven.

f. The list of machinery inspected in the unit, in detail specificallyindicating the attachments to the machines, electrical etc., make of

62

machine, sl. no. of the machine, model etc., if these details areavailable on the machine, the same shall be mentioned againsteach item / equipment;

g. General condition of the machinery: – erected / dismantled etc.

h. General comments on the maintenance of the machine, technologyobsolescence, saleability etc., which forms basis for valuation shouldbe specifically mentioned apart from the value arrived at after applyingdepreciation.

i. There shall be no change in valuation of buildings and machinery.However there is cap on machinery to be treated as collateral onlyto the extent of 50% subject to the following:

1. Machinery should be of reputed make with residual life of notless than 10 years.2. Inspection of the machinery is made by the Branch Managerwith a Technical Officer.3. This relaxation can be shown with the approval of GM(Concerned Circles).

j. A 50% of the collateral requirement should be in the form of landedproperty / F.D., NSC, surrender value of LIC. The remaining 50% canbe of the value of 50% of the present market value of brandedmachinery with residual life of 10 years. Care should be taken toobtain the original invoice of the machinery and also No-lien from theconcerned Banker of the unit and proof of having paid entire moneyas per invoice and also repayment of loan if loan taken on this.

k. Whereas in the case of the Food Processing Industry, the machineryshall not to be older than 5 years.

l. In other type of Processing Industry like Paint and Chemical, it shouldnot be older than 3 years.

m. For computer related industries the existing plant and machinerywhich are in the form of computer shall not be considered for thepurpose of consideration of collateral security because of its quickobsolesce.

n. While considering the existing machinery as collateral security careshould be taken to ensure that there is no contingent statutory liabilitylike EPCG, Canvas, customs etc. It was also suggested that inorder to qualify for taking equipment as collateral security, the originalvalue of the machines with accessories should not be less than

63

Rs.5.00 lakhs. In case where duty concession is availed, the collateralrequirement would be 100% of the duty concession which is notcovered by bank guarantee. This is in addition to normal collateralsecurity indicated in respect of products codes.

o. Existing vehicles and such of those equipments, which are mobile innature shall not be considered for collateral security requirements.

p. A chartered engineer certificate to be obtained regarding theconditions and residual life.

15. GENERAL GUIDELINES ON COLLATERAL SECURITY:

15.1 GUIDELINES ON VALUATION OF COLLATERAL SECURITY:

As far as possible, the collateral security shall be urban propertieslocated within the State of Karnataka. Wherever the rural properties (non-agricultural) are to be taken, due diligence should be done by theconcerned Branch Managers who shall be held accountable. The SRvalue shall be the guiding factor for finalising the value. It should be ensuredthat the property is abutting the public road. The valuation report shouldclearly highlight the suitability of the location for project and acceptabilityfrom the angle of marketability and proper approach from public road.

The following guidelines shall be kept in mind while valuing the properties:

a) In respect of units where building and plant & machinery are financedand the land is not financed, the value of land can be taken towards thecollateral security requirement and however this should be taken as primarysecurity in the appraisal report as well as in documentation.b) Further, with regard to the industries located at rural areas, where landis not financed the same can be taken towards collateral securityrequirement based on the weightage of SR and market value as perprevailing guidelines.c) However, as mentioned in the lending policy, wherever rural properties(non-agricultural) are to be taken, due diligence should done by theconcerned BMs shall be held accountable.

15.2 Following are details about valuation of assets:

General Guidelines: In respect of all properties viz: industrial, commercialand residential etc., the value of the land based on the SR value & fairmarket value shall be indicated in the valuation report. For final valuationof land in respect of BDA, Bangalore Urban, Bangalore Central, BBMP,

64

BMRD, BIAPA, Corporation / Municipal areas and town limit areas of allcities / towns, an average of 50:50 on SR and market value respectivelyshall be adopted. In all other rural areas, the SR value shall be theguideline factor in finalising the value.

a. If absolute sale deed is executed by KSSIDC/KIADB in favour of theallot tee, in such cases weighted average of 50:50 on market valueand the present allotment rate (KSSIDC land)/ lease premium(KIADB land) shall be adopted. If the present allotment rate for anindustrial estate/ area is not available, then the present allotmentrate (KSSIDC land)/ lease premium (KIADB land) prevailing in thesurrounding area shall be taken.

b. In case of industrially converted land, SR value is arrived at as per theguidance value. In case guidance value is not available, the followingmethod shall be adopted to arrive at the SR value:(i) If the property is located within the urban and semi-urban limits,

50% of the guidance value of residential property shall be taken;(ii) If the property is located in rural area, 150% of the guidance

value of agricultural land, on acre basis, prevailing in that areashall be taken. However, if the property is adjoining the NationalHighway/State Highway, 200%/175% respectively of the guidancevalue of agricultural land shall be taken. It should be ensuredthat the property is abutting the public road. Further, the valuationreport should clearly highlight the suitability of the location forproject and acceptability from the angle of marketability and properapproach from public road.

All areas coming under BBMP, BMRDA, BIAPA, all city corporations, alldistrict headquarters, all town municipal corporations and all areas comingunder taluka head quarters are treated as urban areas. Further areasfalling within 25 Kms from outer limits of BBMP, 10 Kms from the outerlimits of the other city corporations and 5 Kms from the outer limits ofCity/ Town Municipal Councils shall be treated as semi urban areas. Allother areas are treated as rural areas.c. In case of commercial property within the city/town limits, guidance

value shall be taken. In case guidance value is not available, 40%more than residential property rates [guidance value] shall be taken.

d. In case of valuation for residentially converted undeveloped land(without infrastructure work & amenities), value of agriculturalland as per guidance value plus 50% extra towards conversion shallbe taken [if guidance value is not available]. If guidance value isavailable, the same shall be taken.

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e. In case of valuation for residentially converted developed withinfrastructure and amenities properly, guidance value shall be takenand arrived at the value as per the norms i.e. 50:50 ratio basis.

f. If the area of land is more than 10 guntas the valuation shall betaken on acre basis and upto 10 guntas it may be taken on Sq. Ft.basis. In case the rate has to be taken on Sq. Ft. basis for landabove 10 guntas in exceptional cases for only in respect of propertieslocated in urban area limit. This shall be done so with the priorapproval of the concerned General Managers with properjustifications and the same shall be brought out in the loanmemorandum.

g. The corporation can revalue the assets if there is change in sub-registrar rate/market rate at the time of considering loan applicationfor any additional facilities. If it is to be re-valued within oneyear approval of concerned General Managers shall be taken byfurnishing proper justifications.

h. In case of KIADB land, the same can also be considered for financialassistance if it is purchased within a period of 2 years.

16 DELEGATION OF POWERS FOR RELAXATION IN COLLATERALSECURITY:

The relaxation in collateral security norms should be generallyavoided. However, in respect of cases where the credit risk analysis asper circular No.KSFC/MD/168/2006-07 dated 19.12.2006 carries the scoreof 80% or above, the required collateral security may be relaxed as below:

1. Upto 10% : Branch Managers / AGMs of ‘A’ Grade BranchOffices in respect of cases sanctioned by them.

2. Upto 20% : DGMs of Super ‘A’ Grade Branch offices – inrespect of cases sanctioned by them.

3. Upto 30 : GM [Circles] – in respect of cases sanctionedby them and cases sanctioned by BMs /AGMs/ DGMs of Super ‘A’ Grade BranchOffices coming under respective jurisdiction.

[For example, if the collateral security requirement is 30% as per lendingpolicy for a loan of Rs.10 lakhs i.e., Rs.3 lakhs, the BM can relax thecollateral security upto Rs.0.30 lakh]

However, the above authorities shall do due diligence beforeapproving the relaxation in collateral security requirement norms and they

66

shall be held accountable for the decision. All other proposals for relaxingcollateral security requirements shall be submitted to Managing Director/CMD for a decision.

17 OTHER GENERAL GUIDELINES:

1. Where the unit is located in a leased premises:

a.An unregistered lease deed for 11 months be obtained for loans up toRs.25.00 lakhs.

b. A registered lease deed for a period of 1 ½ times the repayment periodor 10 years whichever is less be obtained for loans of Rs.25.00 lakhs andabove with an assignment clause in the lease deed.

c. The collateral security requirement will be as per the product coderequirement where the lease deed is obtained as per the requirement ofthe Corporation. Where the borrowers are unable to offer the lease deedas per the requirement of the Corporation, the loans should be securedby 100% collateral security irrespective of the product.

2. Intangible assets like technical know-how, design, drawings, softwareand franchisee fees are not normally considered for finance. If such itemsare considered under special circumstances, the loan amount earmarkedtowards these items should be supported by 100% collateral securityirrespective of product codes and schemes.

3. The MD / CMD is empowered to consider relaxation in collateral securityrequirements up to 25% of the requirements as per lending policy, basedon the merits of the case. Proposal seeking relaxation higher than 25%of the collateral security norms shall be placed before the EC. The EC isempowered to approve such requests on merits.(refer Circular No.778dtd.1.2.2007 issued by MD)

4. Both new loan proposals and proposals for expansion andmodernisation of the activities under prohibited sector, can be consideredwith the prior approval of the MD/CMD

5 (a) If the loanee / partner / director had settled their account underOTS (including cases settled under GOK OTS Scheme) on less than SIor involving write off, then these persons, their spouses and /or theirassociate concerns are not entitled to avail further assistance from theCorporation.

5(b) Financial assistance for the units whose account were settledunder OTS on simple interest basis and above can be considered on the

67

merits of each proposal with specific approval of next higher sanctioningauthority. Further, where the promoters have closed the account underGoK OTS scheme, in order to be eligible for further financial assistance,they should pay the amount claimed from Government of Karnataka [GoK]for the settlement of their account with KSFC.

5 (c). No fresh loan shall be considered in respect of those promoters,their spouses / their associate concerns for a minimum period of threeyears from the date of closure of their account on OTS basis.

6. Units / associated units of promoters whose names appear in the RBI/ CIBIL defaulter’s list will not be encouraged for assistance. Further, asper CIBIL report, if any of the account / credit card dues of the promotersare settled with write-off/waiver, in such cases based on the merits of thecase, the loan proposal may be considered by taking prior approval ofthe next higher authorities. However, cases sanctioned by EC shallcontinue to be decided upon by the EC. Wilful defaulters are thoseentrepreneurs / promoters of companies where the bank has identifiedsiphoning / diversion of funds, mis-representation, falsification of accountsand fraudulent transactions.”

7.The minimum promoter’s contribution and the DER norms shall be asper the norms and guide lines issued by SIDBI from time to time.

8. A relaxation of 25% in the requirement of minimum collateral securityupto a loan amount of Rs.100.00 lakhs, be considered in the case ofentrepreneurs belonging to SC/ST. However, for loans more than Rs.100.00lakhs, the collateral security requirement shall be as applicable to generalcategory.

9. The cost of land and existing building of the unit can be accounted forcollateral requirements, if these are not considered for financing. However,this property shall be treated as primary security and be secured in thatmanner. It may be narrated in the memorandum that the value of theexisting land building is considered towards collateral securityrequirements.

10. Mortgage through registration may be limited to only one loan/firstloan. In case of further mortgage of the same property for additional loans,equitable mortgage may be sufficient. If additional loans are proposed tobe secured by new properties, the mortgage would be by way of registeredmortgage. However, the registration with CERSAI is compulsory for allequitable mortgage cases.

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11 (a). Technical officer while inspecting the primary / collateral securityat the time of appraisal should verify the boundaries physically andcompare the same with the boundaries mentioned in the title deeds. Itshall be ensured that the physical boundaries perfectly match with theboundaries mentioned in the title deeds.

11 (b). Technical officers during their inspection shall further ensure thatthe primary / collateral security properties have proper and distinct publicapproach roads. They should also ensure that the approach roads areclearly indicated in the title deeds and in the Maps (sketch) of theproperties and that there is perfect match with the approach roadmentioned in the inspection report. The technical officer should specificallycertify in the inspection report that the properties have the proper approachroads.

11 (c). The Legal Officer at the time of documentation shall once againverify the boundaries of the title deeds with that of the boundaries mentionedin the inspection report of the technical officer and ensure that theyperfectly match with each other. The legal officer shall also ensure thatthe property has public approach road as per the title deeds and map(sketch).

11 (d). After sanction of loan and before first release, the Technical Officershall ensure during inspection that the building financed by the Corporationis located within the boundaries of the land (primary security) mortgagedto the Corporation. He shall also certify to this effect in the note sheetwhile putting up the file for first release.

11 (e). The original title deeds such as sale deed, khata, EC etc., of theprimary / collateral security shall be verified by the Manager (Legal) withthe concerned Government Department to ensure that the documentsare genuine.

12. RBI had issued guidelines to commercial banks & all non-bankingfinancial companies to follow certain customer’s identification procedurefor opening of account and monitoring transaction of a suspicious naturefor the purpose of reporting to appropriate authority. This ‘Know YourCustomer (KYC)’ guideline have been revisited in the context of therecommendations made by the Financial Action Task Force (FATF) onAnti Money Laundering (AML) standards on Combating Financing of

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Terrorism (CFT). Based on these guidelines, SIDBI has compiled thepolicy guidelines for KYC norms and AML standards for information andnecessary compliance by SFCs. SIDBI also felt that SFCs should alsocomply with the RBI guidelines in this regard. Based on these guidelinesissued by the SIDBI, a note was placed before the Board in the meetingheld on 18.09.2007 for implementation of KYC norms and AML standardsin the Corporation. The Board accorded its approval for implementation ofKYC norms and AML standards in KSFC. Therefore, it is advised to allthe BOs to comply all KYC norms, AML standard and CFT standardsduring processes of loan application for loan sanctions as per the circularno 797 dtd.28.09.2007 issued by Managing Director and Circular no.KSFC/HO/MD/24/2008-09 dtd.21.06.2008 issued by the ManagingDirector. This is mandatory to collect and mention all required informationmentioned in the said circulars in the appraisal memorandum beforeplacing the proposal for loan sanction before concerned sanctioningauthority.

13.(a) In respect of fixed assets in the form of residential house offeredas collateral security, the same should be owned by the borrower orborrower’s parents or children, brothers or sisters, brothers-in-law orsisters-in-law, spouse’s parents, spouse’s brothers, spouse’s sisters.Further the fixed assets other than residential house / buildings ownedby friends and relatives can be taken.

13 (b) In case of FD receipts, LIC’s policy, NSCs it could belong to theborrower’s friends or relatives.

13(c) The multiple charges should not be created on assets taken ascollateral security for several loans by different borrowers without commonrelationship. In other situations such as creation of charge for loan/ssanctioned to an associate concern on the assets belong to anotherconcern of the same group is allowed.

(d)The following can be taken towards collateral security requirements:i) FD with KSFC / Scheduled Banks. However, FD with Co-

operative Banks, Non Scheduled Banks & NBFCs should not beaccepted under any circumstances.

ii) LIC policy [Surrender value]iii) NSCs, Infrastructure Bonds.iv) Non-agriculture land, building, industrial estate [Absolute sale

deed].

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v) KIADB/ KSSIDC allotted plots where NOC is issued for mortgagingthe same towards the loan being sanctioned by KSFC.

14. The Credit rating by External Agency is compulsory for all newproposals of Rs.150.00 lakhs and above, other than CRE cases. CreditRating from external agency is not required for CRE projects.

15.(a)In respect of SSI units, the proposals with NSIC ratings of SE 1A,SE 1B, SE 2A, SE 2B,SE 3A, and SE 3B are bankable proposals andthe rest are non-bankable.

15(b) In respect of units rated on SME scale,where the proposals arerated on a scale of eight grades, the proposals falling in the top fourgrades are bankable proposals and the rest are non-bankable.Forexample, the SME ratings of SME 1, SME 2, SME 3 and SME 4 ofCRISIL are bankable proposal and SME 5, SME 6, SME 7 and SME 8rating are non-bankable proposals. The above holds good for equivalentratings by other agencies.

15(c) Proposals rated on bank loan rating scale (BLR Scale): When theproposals are rated on BLR scale, the bench mark for acceptance of aproposal is ‘BBB’. It is clarified that ‘BBB’ is a composite rate whichalso includes ‘BBB’ - . The proposals with ‘BBB’ – grade are alsoacceptable.

16. The Corporation extends an interest concession of 0.5% for loansup to Rs.1.00 Crores and 1% for loans above Rs.1.00 Crore, where theproposals are credit rated by an external credit rating agency (empannelledwith the Corporation) and is graded as SE-1A, & SE 2A (or equivalentratings) on NSIC scale, SME1 & SME 2 (or equivalent ratings) onSME scale and ‘AAA’ & ‘AA’ (or equivalent ratings) on BLR scale. Inaddition to the above, the following conditions must be fulfilled to beeligible for the above interest concession.

a) The applicant unit or its associate units should have been working fora minimum period of three years and earning profits as evidenced byaudited financial statements. Further, a unit is considered as an associateunit where the promoters common in both the units hold either individuallyor jointly more than 50 % share holding in both the units.

b) The proposal should score a minimum of 70% marks in the inhousecredit rating.

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The above interest concession shall not be applicable for Tourism relatedactivities like amusement parks, Restaurants, Travel & Transport, TouristService Agency, Hotels & Restaurants, Mobile Canteens/Catering,Resorts, Service Apartments, CRE projects, Corporate Loans and PELoans.

18. ADDITIONAL REBATE SCHEMES:

An additional rebate of 1% is available on assistance to physicallychallenged entrepreneurs and to green technology products and services.

18.a Physically Challenged Entrepreneurs :The Physically Challenged Entrepreneurs suffering from hard of hearing,impaired vision and having Orthopedic disability should compulsorilyobtain and produce a BSER(Brain Stem Evoked Response ) Audiometryreport from NIMHANS/ Manipal Hospital/ Government Speech and HearingInstitutes. Physical disability ranging above 40% on Orthopedics disabilityshould produce a Medical certificate issued by competent Doctor of anyGovernment Hospital located in the State of Karnataka.

An additional rebate of 1% in prevailing rate of interest shall be extendedto physically challenged entrepreneurs subject to producing physicaldisability certificate from the competent authority.

18.b. Financial assistance to Green Technology products andservices:Green technology is the future of this society. It’s main goal is to findways to produce technology in ways that do not damage or deplete theEarth’s natural resources. In addition to not depleting natural resources,green technology is meant as an alternative source of technology thatreduces fossile fuels and demonstrates less damage to human, animal,and plant health, as well as damage to the world, in general. Next, greentechnology is so that products can be re- used and recycled.

The use of green technology (clean technology) is supposed to reducethe amount of waste and pollution that is created during production andconsumption. Global warming has been evident in today’s scenario. Theincreasing amount of carbon emissions being deposited in the atmospherefrom burning of fossil fuels has led to the greenhouse effect that is warmingup the planet and causing drastic changes in the weather. Worldwideendeavours in finding alternative energy sources and employing green

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technology are underway for decades and have proven to be more efficientwith the advancement of technology and modern innovations. The adventof green technology has paved way for more responsible eco-friendlydesigns in architecture, household items and gadgetry. More and morecompanies have dedicated their efforts in manufacturing and designingtheir products so that they contribute to the worldwide effort to encouragesustainability and conserving our planet.Following are types of Green technology:

i. Green building : (also known as green construction or sustainablebuilding) refers to a structure and using process that is environmentallyresponsible and resource-efficient throughout a building’s life-cycle: Fromsitting to design, construction, operation, maintenance, renovation, anddemolition. This practice expands and complements the classical buildingdesign concerns of economy, utility, durability, and comfort.

Although new technologies are constantly being developed to complementcurrent practices in creating greener structures, the common objective isthat green buildings are designed to reduce the overall impact of the builtenvironment on human health and the natural environment.

While the practices, or technologies, employed in green building areconstantly evolving and may differ from region to region, there arefundamental principles that persist from which the method is derived:Sitting and Structure Design Efficiency, Energy Efficiency, WaterEff iciency, Materials Efficiency, Indoor Env ironmental QualityEnhancement, Operations and Maintenance Optimization, and Wasteand Toxics Reduction. The essence of green building is an optimizationof one or more of these principles. Also, with the proper synergistic design,individual green building technologies may work together to produce agreater cumulative effect.

ii. Green energy :is the provision of energy that meets the needs of thepresent without compromising the ability of future generations to meettheir needs. Sustainable energy sources are most often regarded asincluding all renewable energy sources, such as hydroelectricity, solarenergy, wind energy, wave power, geothermal energy, bio-energy, andtidal power. It usually also includes technologies that improve energyefficiency.

iii. Green chemistry: also called sustainable chemistry, is a philosophyof chemical research and engineering that encourages the design ofproducts and processes that minimize the use and generation of

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hazardous substances. Whereas environmental chemistry is the chemistryof the natural environment, and of pollutant chemicals in nature, greenchemistry seeks to reduce and prevent pollution at its source.

As a chemical philosophy, green chemistry applies to organic chemistry,inorganic chemistry, biochemistry, analytical chemistry, and even physicalchemistry. While green chemistry seems to focus on industrialapplications, it does apply to any chemistry choice. Click chemistry isoften cited as a style of chemical synthesis that is consistent with thegoals of green chemistry. The focus is on minimizing the hazard andmaximizing the efficiency of any chemical choice. It is distinct fromenvironmental chemistry which focuses on chemical phenomena in theenvironment.

iv. Green Purchasing: it generally refers to buying products and serviceswith reduced effects on human health and the environment. Also called“Affirmative Procurement,” “Environmentally Preferable purchasing,” and“Green Purchasing,” this approach means integrating environmental factorsinto procurement policies, usually using the following tools and/ormethods:

Pollution Prevention: From the start of a process orprocedure, reducing or eliminating toxicity, air and wateremissions.

Life-Cycle Perspective: Looking beyond purchase price.Consider costs and environmental impacts over the lifetime ofa product or service (manufacturing, packaging, transport,energy consumption, maintenance, and disposal).

Natural Resource Protection: Giving preference tosustainable, reusable content, and recycled materials overvirgin materials, as well as to conserving water and energy

To extend financial assistance to green technology products and servicesby extending special rebate of 1% p.a., provided 51% of the project shouldbe adopted green technology viz., green building, equipment, energy andother purchasing required for the project. Further, it is desired that the maximum rebate / concession in interestshall not exceed 3% p.a. in respect of ( 18.a ) and ( 18.b ) above.

19a. Financial assistance to Self Employed Professionals: [ Medical& Dental Professionals, All Engineers, Chartered Accountants &

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Architects] for purchase of private vehicle with a maximum ceiling limitof Rs.15.00 lakhs under the existing scheme provided they are selfemployed professionals & should have been registered with concernedcompetent authority and they should be Income Tax Assessee for pastthree years. To extend financial assistance to self-employed professionalsfor purchase of private vehicles with a maximum ceiling limit of Rs.15.00lakhs subject to collateral security of 30%. Interest subsidy scheme forSC/ST entrepreneurs is not applicable under this scheme.

19.b. Financial assistance to Purchase vehicles to existing units /promoters : Existing customers who are managing the unit for minimumthree years and availed loan of Rs.25.00 lakhs and above shall be eligiblefor purchase of private vehicle with a maximum financial assistance ofRs.15.00 lakhs under the existing scheme provided the loan account isunder standard category for last three years. To extend financial assistancefor purchase of private vehicles to the existing units / promoters with amaximum ceiling limit of Rs. 15.00 lakhs at a concessional interest rateof 12% p.a. (net of rebate) subject to collateral security of 30%. In caseof SC/ST entrepreneurs, Interest subsidy scheme for SC/ST entrepreneursis not applicable under this scheme.

20. Integrated Agri-business Development policy of GoK : In thispolicy various Agro Industrial units are contemplated in the State ofKarnataka to harness the varied agro climatic condition, raw-material,resources, skill sets of the region and domestic & export marketopportunities. The Corporation can consider financing these industrialactivities highlighted in the policy as per the norms of the lending policy.For financing those activities which are not included in the lending policy,separate approval from the concerned General Manager can be obtained.

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ANNEXURE - ISCHEMES OF ASSISTANCE

Sl.No. PARTICULARS1.

a.

b.

c.

d.

Privileged Entrepreneurs Scheme:

Reference Circular Nos 784 dtd.26.02.2007 issued by MD,Circular No.784(A) dtd.10.04.07 issued byCMD,Circular No. 812 dtd 11.6.08, Circular No.816 dtd 22.7.08 ,ION:MD/ED(F) 816 / 2008-09 dtd 26.8.09,Circular No.829, dtd 27.8.08 issued by MD, Circular No.866, dtd 13.7.09 issued by MD

Eligible Borrowers: Proprietary concern, partnership firm, private and public limited companies

Purpose: To meet short term funds requirements of the existing units which are in standard category

Remarks: The Borrowing unit should satisfy the following criteria:

a) The units should have availed loan of Rs.10 lakhs and more from KSFC in the past and should have agood track records for at least 3 years.b) The accounts should have been in standard category during the last three years.c) In respect of rescheduled cases and cases covered under DRS-RSR, the loan can be extended, if theaccount is regular and continues to be in standard category for the last three years.d) The unit should be working on profitable lines i.e. the units should have earned net profits at leastduring the last three years as evidenced by the audited financial statements. Loan Limits: Minimum Rs. 5.00 lakhs; Maximum Rs.200.00 lakhs. Repayment of Loan: The loan shall be repaid in 24 months including moratorium period of 6 months. Security / Collateral Security : The loans shall be secured by 100% collateral security

76

Sl.No. PARTICULARS2

a.

b.

c.

Interest Subsidy Scheme of GOK for SC/ST Entrepreneurs:

Reference : (I) Circular No. 908 dated 11.06.2010 issued by CMD(ii) Circular No. 908 (A) dated13.04.2011 issued by MD

Eligible Borrowers:

The unit shall be fully owned i.e., 100% by SC / ST entrepreneurs. The ownership /share holding ofunits even in part by other than Scheduled Caste / Schedules Tribes are not eligible for interestsubsidy. But all partners / entrepreneurs either can be SCs/STs or both.

Under this scheme the entrepreneurs are eligible to avail only the term loan benefit upto Rs.2.00crores either for fresh unit or expansion / diversification and modernisation of existing units formore than one occasion / time [ as per Circular No. 908(A)].

The units which have availed the interest subsidy under any other scheme of GoK / GoI are noteligible for interest subsidy under this scheme.

To be eligible for interest incentives under the scheme, the units should not be in default inpayment to KSFC.

Purpose: In order to encourage SC/ST entrepreneurs to establish micro and small scale industrial /services / business units, the GoK vide GO No. SWD 76 SLP 2008, Bangalore, dated 22.05.2010 hasextended the revised interest subsidy scheme on term loans to SC/ST entrepreneurs being sanctionedby KSFC.

77

Sl.No. PARTICULARSd.

3

a.

b.

Remarks: The units will be eligible for interest subsidy for a period of five years from the date of first

disbursement of the loan. The minimum loan size of Rs.5.00 lakhs for all activities except existing units going for expan-

sion / diversification / modernisation. In case of medical and veterinary doctors the minimumlimit is Rs.2.00 lakhs only.

The KSFC is at liberty to consider any amount of Project cost. However, the interest subsidy isrestricted to Rs.2.00 crores of the loan. The interest amount on the balance loan amountbeyond Rs.2.00 crores is required to be borne by the entrepreneurs.

KSFC may sanction loans with normal applicable rates of interest. The effective interest rate tobe paid by the beneficiary / borrower in all cases is 4%. The difference between the normallending rate of KSFC and effective interest rate of 4% will be reimbursed by GoK.

A) Re-structured Technology Up-gradation Fund Scheme for Textile Industries (RTUFS)

Reference: Circular No. 896 dtd.18.7.2011 issued by MD. Refer website: - www.texindia.gov.inEligible Borrowers: Activities as mentioned in the Ministry of Textile resolution no.6/5/2011:TUFSdtd. 28.4.2011

Purpose: As in the Ministry of Textile resolution no.6/5/2011:TUFS dtd. 28.4.2011

B) Credit Linked Capital Subsidy Scheme (CLCSS) for Technology Up gradation of MSEs

78

Sl.No. PARTICULARSa.

b.

c.

4

a.

b.

c.

Reference: circular No.803 dtd. 07-02-2002 / 884 dtd.18.08.2008 issued by ED[O]

Eligible Activities and plant and machinery: As per the guidelines issued by DC, MSME, GOI, NewDelhi from time to time.

Purpose: To facilitate technology up gradation of SSI units in the specified products / sub-sectors byproviding 15 percent capital subsidy with a ceiling on loan to Rs.1.00 Crore for induction of proventechnologies approved under the Scheme. To begin with the Scheme would cover 14 products / sub-sectors and the list may be expanded with approval of Governing and Technology Approval Board (GTAB)constituted under the Scheme.

Refinance Scheme for Acquisition of ISO 9000 Series Certification (ISO 9000)

Reference: circular No.615 dt. 02-12-1996 and No.738 dated 28-06-1999 Circular No. 829 dtd.27.8.08

Eligible Borrowers: Existing industrial concerns in the MSME sector having good track record of pastperformance and sound financial position. The concerns should:

a) have been in operation for a period of atleast two years;b) have earned profit and / or declared dividend during the preceding two financial years; andc) not be in default to institutions / banks in payment of their dues.

Purpose:To meet expenses on consultancy, documentation, audit, certification fees. Equipment andcalibrating instruments required would be taken into account for determining the loan requirement.

79

Sl.No. PARTICULARS5

a.

b.

c.

d.

a.

b.

c.

d.

i) Scheme for small road transport operators (SRTOs):

Reference : circular No.721 dt.11-03-1999 issued by ED[O]

Eligible Borrowers: Small road transport operators

Purpose: To meet expenditure towards cost of chassis, body building, initial taxes, insurance etc.

Remarks: Loan limit - need based (20 vehicles per operator including existing vehicles) Secondhand vehicles are not eligible for assistance

ii) Acquisition of private vehicles

Reference: Circular No.754 dt.17-01-2000 issued by ED[O]) & No.708 dated 18-01-2001 issued byED[F].

Eligible Borrowers: Individuals , firms & companies. In respect of individuals, they should be ITassesses and paid a minimum of Rs.5,000/- income tax p.a. in the previous three years

Purpose: To extend financial assistance for acquisition of vehicles like Cars, vans, omni buses,tractors etc.,

Remarks: Maximum loan Rs15.00 lakhs

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Sl.No. PARTICULARS6

a.

b.

c.

d.

a.

b.

c.

d.

i) Single Window Scheme – for New units

Reference: circular No.817 dtd 31.07.2008 issued by MD

Eligible Borrowers: All new MSMEs to be engaged in the manufacture or production, processing orpreservation of goods i.e. manufacturing enterprises where the total venture outlay ( including the totalworking capital requirement) does not exceed Rs.100 lakhsPurpose: For other details please refer Circular 817 dtd.31.07.2008

Remarks: Minimum assistance - Rs.2.00 lakhs Maximum assistance -Rs.30.00 lakhs

ii) Working Capital Term Loan - for Existing units

Reference: Circular No.817 dtd 31.07.2008 issued by MD

Eligible Borrowers: Existing MSMEs engaged in the manufacture or production, processing or preser-vation of goods i.e. manufacturing enterprises. The units who have availed term loans earlier from theCorporation are also eligible for additional WCTL. Availing of a term loan is not a pre-conditions forgranting eligible WCTL under this scheme.

Purpose:For other details please refer Circular 817 dtd.31.07.2008

Remarks : Minimum assistance - Rs.2.00 lakhs Maximum assistance -Rs.100.00 lakhs

81

Sl.No. PARTICULARS7

a.

b.

8

a.

b.

Scheme for Rehabilitation of Sick Industrial Units (RSR)

Eligible Borrowers: Potentially viable MSME units excluding CRE sectors confirming to definition ofsick MSME units as prescribed in RBI guidelines. The assistance is meant for sick units for which properrehabilitation packages have been drawn up. Units eligible for rehabilitation assistance should be capableof being restored to normal health within a reasonable time.

Purpose: For providing reliefs / concessions or extending assistance for rehabilitation of potentiallyviable sick units

I) Finance for Tourism Related Activities

Reference: Circular Nos: 487 dt.31-1-94 / No.487B dt.5-5-94 ‘ No.196 dt.3-6-89 / No.239 dt.6-11-89 / No.248 dt.26-12-89

Eligible Borrowers: Sole proprietor-ships, partnerships, co-operative societies, private / public limitedcompanies.

i) Amusement Parks: Assistance will be extended for providing facilities such as toy trains, boatclubs, giant wheels, merry go-rounds, roller coasters, pony rides, mini zoos, small restaurantother assets like conveyors and rope-ways etc.

ii) Convention Centers: Convention and cultural centers used for conducting cultural programs aswell as conferences, seminars, exhibition etc. Audio-visual aids like overhead projectors, film andslide projectors and sound systems will be considered for assistance.

82

Sl.No. PARTICULARSiii) Resturants: Assistance is available for restaurants in tourist locations like pilgrimage centers,

historical places, beaches, ports, wildlife sanctuaries and picnic spots. Restaurants which arelocated on highways and small towns which cater to the needs of tourists will also be consideredfor assistance. The restaurant should have a minimum area of 50 Sq.Mtrs. (500 Sq.ft.)

iv) Travel & Transport: Financial proposals of travel agencies with a fleet of cars and / or vans willbe considered. Such travel facilities should be at or in the vicinity of leading hotels, airports,railway or bus stations, amusement parks, cultural and convention centers. Mini buses, full-fledged buses and taxis which satisfy the norms of tourism development & Government. Theminimum number of vehicles, cars / vans has to be three. The transport operator / agency shouldhave a tie-up with a leading hotel / amusement park.

v) Tourist Service Agencies: The agency should provide services like booking air, road and railtickets, hiring taxis, booking hotels and tourist guides. These agencies should operate frommajor cities and must have a network of their own. In the case of tour operators, travel; agentsand excursion agents, it is necessary that they obtain recognition from the Department of Tour-ism. Office buildings, including facilities such as telephone, telex, fax, photocopier, office equip-ment, personal computers etc., will also be considered for assistance.

vi) Hotels & Restaurants: Reference: Circular No.336 dt. 01.06.1991

vii) Mobile Canteen / Catering: Reference: Circular No.658 dt. 23.10.1997

Purpose: Assistance for running a mobile canteen / catering service for acquisition of vehicles, kitchenequipments, catering equipments, grocery, cutlery, linen etc. Assistance for running a mobile canteen /catering service for acquisition of vehicles, kitchen equipments, catering equipments, grocery, cutlery,linen etc.

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Sl.No. PARTICULARS9

a.

b.

c.

a.

b.

Assistance to Medical Practitioners / Health Care Services

I) Assistance to Doctors / Qualified Medical Practitioners

Reference: Circular no. 865 dtd. 6.12.2005 issued by ED(O)

Eligible Borrowers: Doctors / medical practitioners with a bachelor’s degree in any branch ofmedicine from recognised institute / university for setting up of clinic. People holding bachelor degreein radiology , bio-physics and bio-technology with at least 5 years experience and a certificate ofpractice from a relevant authority . Qualified veterinary doctors are also eligible for assistance. Thepromoters should be an income tax payee for last 2 years.

Purpose: Purchase of the premises / renovation of the existing premises, acquiring fixed assets likefurniture, computers, office automation, ambulance, car / van, interiors and Medicare related equip-ment required for a clinic.

ii) Assistance of Nursing Home / Hospitals:

Eligible Borrowers: Establishment of new and expansion / modernisation of existing nursinghomes and hospital. Qualified medical practitioners or entrepreneurs employing qualifieddoctors to run the hospital / nursing homes are eligible for assistance. The project must bebacked by expert of a post graduate doctor on full time basis

Purpose: Loan available for land, building and equipment for diagnostic, monitoring thetherapeutic use, air conditioners ( for operation theaters & intensive care units) ambulanceetc.

84

Sl.No. PARTICULARSiii)Assistance for Acquiring Electro Medical Equipment

Eligible Borrowers: Hospital, Nursing homes and medical practitioners with relevant qualification ingeneral medicine, dentistry, radiology etc and entrepreneurs employing qualified doctors are eligible forassistance for acquiring electro medical equipment for their professional use.

Purpose : For procurement of new electro-medical and related equipment with accessories like C.T.Scanners, Endoscopy, gastroscopy, X-ray etc. Loan is also available for diagnostic laboratories.

Assistance to infrastructure :

i. Industrial Estates:

Eligible Borrowers: Proprietary, Partnership, Private Limited, Public Limited Companies andCo-operative Societies

Purpose: Financing of fixed assets for establishment of industrial estates

Remarks:a) There should be adequate demand and scope for expansion at a later stage;b) The construction cost should ensure that the rent charged is reasonable;c) Basic facilities like roads, power, water, drainage, etc., as required by the occupants of the shedsmust be ensured;

In case of companies & co-operative societies promoting industrial estates, it is desirable thatall the buyers of sheds should become shareholders of the company or society.

a.

b.

10

a.

b.

c.

85

Sl.No. PARTICULARS

a.

b.

c.

d.

a.

b.

c.

ii. Financing of Ready Built Office Space -

Reference: Circular No.658 dt. 23.10.1997

Eligible Borrowers: All forms of constitutions who have been in operation for atleast 5 yearswith successful track record for preceding 3 years .

Purpose: To extend financial assistance for acquisition of land & construction of office build-ing thereon & for furnishing the office to its requirements. Loan can also be extended formulti-storied complex and for furnishing the same.

Remarks: *should be located in big cities / district head quarters

iii)Construction / Purchase of Commercial Complexes

Reference: circular No.682 dated 05-06-98 & 682/A dated 22-08-98

Eligible Borrowers: All forms of constitutions

Purpose: The assistance under the scheme is provided for construction of building Interior decorating, air conditioning Providing lift & communication facility etc. Any other facility connected with commercial complexes

86

Sl.No. PARTICULARSRemarks:

The commercial complexes so constructed can be either leased or sold on outright basis withthe prior approval of the Corporation.

Minimum Loan Rs.10.00 lakhs Shall be located at taluk head quarters / town municipality, district head quarters & city.

iv) IT Software Parks

Reference: circular No.711 dt.07-12-1998


Purpose: Financing of fixed assets for IT software parks

v) Construction / buying of ready built show rooms & sales outlets

1. Construction / buying ready built areas for establishing departmental stores and & shoppingmalls.

2. Setting up of vocational training centers for imparting technical know-how to entrepreneurs forsetting up of running units efficiently to produce quality goods

Reference circular No.749 dt. 2-11-1999


Purpose: Assistance for land , construction / buying building, acquisition of equipments etc.,

Remarks: * Items displayed or kept for sale in show rooms, sales outlets, departmental stores,shopping malls etc., are not eligible for financing

d.

a.

b.

c.

a.

b.

c.

d.

87

Sl.No. PARTICULARS

a.

b.

c.

a.

b.

c.

11

vi) Assistance for the development / maintenance and construction of roads.

Reference: circular No.326 dt. 05-03-91 & No.585 dt. 17-06-96

Eligible Borrowers: Any reputed civil contractors / firms / companies or any person havingtie up with class-1 contractors / reputed construction companies

Purpose: For acquiring capital goods, equipment including road rollers, asphaulting units,concrete mixtures, tippers, excavators, surveying and other supporting equipment

vii) Assistance to infrastructure for Education Institutions under construction activity scheme

Reference: circular nos. 682 dt. 05.06.1998 / 682/A dt. 22.08.1998 No. 749 dt. 12.11.1999 &No. 880A dt. 26.6.08 issued by ED(O)

Eligible Borrowers: individual, firms, companies, co-operative societies.

Purpose: Construction of building, interior decoration etc.

Assistance to Qualified Professionals:

I) Management Professionals - ACA/ICWA/ACS/CFS/MBA/M.Com GraduatesII) Accounting Professionals - ACA/AICWA/Certificate of practice issued by

Commissioner of Income Tax/Sales Tax

88

Sl.No. PARTICULARSIII) Medical Professionals - Bachelor Degree in any branch of MedicineIV) Architects and Engineers - Bachelor Degree in any branch of EngineeringV) Veterinary Clinic - Qualified Veterinary Doctor

Reference: Circular Nos: 352 dt.19.8.91 / 352-A dt.10.9.91 / 404 dt.16.9.1992 / 623 dt.16.9.1997 /651 dt.30.9.1997 & 658 dt.23.10.1998

Purpose: For setting up of business enterprises, private practice and consultancy services intheir line of expertise.

Remarks: The Cost of Project should not exceed Rs.20.00 lakhs Partnership firm will be eligible if all the partners are qualified professionals and at least

50% of them have therequisite experience. 5 years experience in relevant line . Cost of Land and building should not exceed 50% of the project cost. Any relaxation shall

have the prior approval of SIDBI Vehicles are not permitted under this scheme.

OTHERS:1) Financing of DG setsReference : Circular No.574 dt. 24.11.1995Eligible Borrowers: SMEs who want to supplement their power supply with a generatorPurpose: Assistance is available for acquisition and installation .

a.

b.

c.

12

a. b. c.

89


a.

b.

c.

a.

b.

c.

a.

b.

Remarks: They have to obtain clearance from KPCTL / local authorities; Diesel generator projects may be established by a group of SMEs located in a closed

proximity for collective use.

2) Mobile Generators

Reference: circular No.658 dt. 23-10-1997


Purpose: Assistance for acquisition of generators for purpose of hiring vehicles, trailers,DG Sets & accessories can also be covered under the scheme.

3) Office Automation


Eligible Borrowers: Existing firms & companies & proprietary concerns provided they havesuccessful profit record of preceding 3 years

Purpose : Assistance for automation of offices for acquiring items like PCs, printer, copier, faxmachine, telephone etc.

4)Training Institutions


Eligible Borrowers: Existing companies with a successful track record

90

Sl.No. PARTICULARSPurpose: Assistance to reputed companies for setting up in-house training facility for their exclusivetraining facility including construction of building, acquisition of furniture, equipment etc.,

A.M.A.R.A.

Reference : circular No.683 dated 06-06-1998 issued by ED[O]

Eligible Borrowers: Existing units (at least for 2 years) with good tack record (no default to anyfinancial institutions/ banks); and sound financial position and has positive networth & earnedprofits in last two years

Purpose: To provide financial assistance to small & medium scale units to undertake variousactivities necessary to increase their sales in the domestic & foreign markets and to createphysical marketing infrastructures.

Remarks:

Minimum Rs.5.00 lakhs Maximum Rs.50.00 lakhs

Acquisition of Existing Assets and Enterprises

Reference: Circular No.783 dated 23-03-2001

Eligible Borrowers: Individuals, partnership firms, private & public limited companies, co-operativesocieties etc., engaged in the respective activities eligible for assistance from the Corporation and inexistence for minimum period of 2 years with good track record.

c.

13

a.

b.

c.

d.

14

a.

b.

91

Sl.No. PARTICULARSc.

d.

15

a.

b.

c.

Purpose:

To assist for taking over of existing assets / enterprises

Plant and machinery of reputed make with minimum residual life of 10 years as assessed bytechnical officer of the Corporation & supported by a certificate by Chartered Engineer

Land and building : industrial / commercial properties located at prominent places within munici-pal limits with a minimum 20 years residual life. The building should be of good quality andassistance will be subject to certification by the officers of the Corporation.

Remarks:

No lien certificate from banks /financial institutions Minimum Loan Rs.10.00 lakhs Sanctioning powers vested with MD/CMD

1) CORPORATE LOAN:

Reference Circular Nos: 525 dt. 29-08-94, 709 dt. 07-12-98, 752 dt. 28-12-99 & 760 dt. 23-02 2000

Eligible Borrowers: Existing units eligible for financial assistance from KSFC under the SFCs Act

Purpose: To extend short term loan to the existing successful units who require urgent working capitalfunds either to meet the gap in the working capital requirements, funds required for executing the rush oforders, developing / expanding new markets, for meeting statutory dues to the Government like pay-ment of Income Tax, Sales Tax, Excise Duty etc., and opening LC for purchase of new equipment till aterm loan is sanctioned and released by the financial institution.

92

Sl.No. PARTICULARS2) Corporate Loan (construction Activity)

Eligible Borrowers: Proprietary concerns/Partnership firms and companies who are involved in con-struction and related activities

Extent of loan : up to Rs.200.00 lakhs in case of proprietary and partnership concerns and Rs.500.00lakhs in case of private and public limited companies. However, the loan amount shall not exceed 30%of the estimated investment in the project on hand.

Purpose: To provide financial assistance to developers, civil contractors, construction companies andfirms for taking up construction of group housing, commercial complexes, software parks and infrastruc-ture projects like; roads, flyovers, bridges etc.

Remarks:

They should have completed atleast two projects with a proven sales turn over of Rs.500.00 lakhseach for the past 3 years & should have atleast one project under implementation proposed withan investment of atleast Rs.500.00 lakhs

They should be an income tax payee for the last 3 years. They should have satisfactory track record and should not be defaulter to bank / financial

institutions Corporate loan and term loan should not be sanctioned to a same concern for thesame project.

a.

b.

c.

d.

93

Sl.No. PARTICULARS16

a.

b.

c.

17

a.

b.

c.

18

a.

b.

Scheme for Construction activity :

Reference: Circular No. 829 dtd.15.05.2003 issued by ED(O)

Eligible Borrowers: Property developers, Construction companies and firms

Purpose: Property developments, Construction of Group housing, Commercial Complexes, SoftwareParks and infrastructure Projects like Roads, Fly overs, Bridges, School building.

Financial Assistance to Entertainment Industry including Films

Reference:: Circular No. 836 dtd. 10.09.2003 issued by ED(O)

Eligible Borrowers: Proprietary concerns, partnership firms, Co-operative Societies, Private & PublicLimited Companies.

Purpose: Construction / purchase of Cinema Halls, Multiplexes, Production of short TV serials, Soft-ware for Visual media publicity and feature films.

Rental Discounting Scheme

Reference: Circular No. 706 dtd.15.01.2001 issued by ED[O]

Eligible Borrowers: Proprietary concerns, partnership firms, private / public limited companies, trustand co-operative societies are eligible for assistance under the scheme. Non- residential propertieslocated within the city and municipal corporation limits of Bangalore, Mangalore, Hubli, Dharwad, Gulbarga,Shimoga, Bhadravathi, Mysore and Belgaum and earning an aggregate minimum gross rent of not lessthan Rs.25,000/- per month from eligible tenants of the premises are only eligible for the assistance.Properties located outside the Bangalore, however be considered depending upon the location of theproperty and infrastructural advantage enjoyed by them.

94

Sl.No. PARTICULARSThe eligible tenants may be one or any of the following:i. All India Financial Institutionsii. Nationalised and Private Sector Banksiii. Public and Private Sector Insurance Companiesiv. Domestic and International Airlinesv. Profit making public sector / private sector companies which are in existence for a minimum period

of 5 years and earning profits for the last 2 yearsvi. Reputed multi national companies where the foreign holding is not less than 25% of the paid up

capital.vii. Any subsidiary or associate company or concerns of the above institutions.

Scheme for Micro Finance Activity

Reference: Circular No. 890 dtd 21.7.2009 issued by ED[O] & ii) ION dtd 82/2012 issued by ED[F]

Eligible Borrowers:

The Constitution of the MFI should be Registered Non-Banking Financial Company (NBFC). It should bein existence for at least five years and / or should have a demonstrated track record of running a success-ful micro-credit pro gramme at least for the last 3 years

The MFI should have been rated by mainstream rating agencies such as CRISIL / CARE / ICRA / M-CRILetc. 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.The MFI should have only women members as its clientele.

19

a.

b.

95

Sl.No. PARTICULARS

c.

d.

The MFI should have achieved minimum outreach of 3000 membersThe MFI 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.The MFI should 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.It should have plans to broad-base its resource base further.It should possess competent and adequate staff for proper appraisal, intensive supervision and monitoringThe 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 oftime.

RBI vide its notification no. DNBS.PD No. 234/CGM(US)-2011 dtd 02.12.2011 has issued directionsrelating to certain requirement tobe complied with by NBFC-MFI to be engaged in Micro Finance Activity.These guidelines are issued vide ION No.82/2012. This shall be ensured.

Purpose: To create a national network of strong, viable and sustainable Micro Finance Institutions(MFIs) from the informal and formal financial sector to provide micro finance services to the poor, especiallywomen.

Remarks:

The minimum assistance will be Rs. 25.00 lakhs and maximum exposure should not exceed Rs.500.00 lakhs at a time.

96

Sl.No. PARTICULARSAll proposals under the scheme which meets the eligibility criteria, shall be processed after obtaining“ in principle clearance” from the Managing Director. The loan sanctioning authority will be theManaging Director / EC / Board depending on the quantum of loan amount. The loan amount from theCorporation shall not 15% of total debt of MFI.

Scheme for Financing of Wine Manufacturing Industries

Reference: Circular No. 875 dtd: 29.08.09 issued by MD

Eligible Borrowers: Sole Proprietor ships, Partnerships, Co-operative Societies, Private and PublicLimited Companies etc.,

Purpose: The overall objective of the scheme is to promote wine manufacturing units in MSME sector inthe State of Karnataka by providing financial assistance and thereby helping the farmers to get bettermarket / price for their products.

Remarks: The unit should be located in the jurisdiction of Nandi / Krishna Valley proposed bythe GOK.

Line of Credit (LoC) for purchase of raw materials from KSSIDC

Reference: Circular No. 867 dtd: 24.07.09 issued by MD

Eligible Borrowers: Sole Proprietorship, Partnerships, Cooperative Societies, Private and Public Lim-ited Companies etc., engaged in the manufacture / production, processing or preservation of goods .

Purpose: The objective of the scheme is to provide timely and and adequate working capital assistancein the form of WCTL to MSMEs for purchase of raw materials from KSSIDC

20

a.

b.

c.

d.

21

a.

b.

c.

97


22

a.

b.

c.

d.

Remarks: Minimum LoC amount - Rs. 5.00 lakhs ; Maximum Rs. 100.00 lakhs. The LoC sanctioned isvalid for a period of 12 months from the date of sanction.

Extent of finance ; Upto 80% of the cost of raw materials proposed for purchase from KSSIDC,within the LoC sanctioned limit.

Scheme for Financing Wind Mill Power Projects .

Reference: Circular No. 912 dtd.07.07.2010 and 912(A) dtd.27.7.2010

Eligible Borrowers: Proprietary concerns, Partnership firms, Societies / Co-operative Societies, Pri-vate and Public Limited companies, who are already in business and running with net profit for the pastthree consecutive years.

Purpose: Financial Assistance to Wind Mill Projects shall be extended under this scheme, where upto75% of the cost of fixed assets is financed, subject to meeting DER / DSCR norms.

Remarks: Applicable rate of interest will be .50% p.a lesser than the regular rate of interest. Arebate of 0.50% will be allowed for prompt payment. An additional rebate of 0.50% will beallowed for loans of Rs.3.00 crores and above to existing customers, for prompt payment, Noseparate interest concession for credit rating shall be extended. All other special condition ofcircular no. 912 dtd 7.7.2010

98

Sl.No. PARTICULARSSoft Seed Capital Fund Scheme of Government of Karnataka for SC/ST entrepreneurs:Reference : Circular No.923 dtd. 28.3.2010 issued by ED[F]Eligible Borrowers:i) Proprietary concerns promoted by SC/ST entrepreneurs, partnership firms, trust society and corporatebodies where all the partners/members/directors belong to SC/ST category;ii) New projects in micro, small enterprise for manufacture, preservation and processing of goods;iii) Existing micro, small enterprises, undertaking expansion/ modernisation/technology up-gradation /diversification etc.;iv) All new and existing service enterprises. However, assistance would be made available only for acqui-sition of fixed assets.Purpose: The soft seed capital amount as may be required to meet the gap in the equity as per theprescribed debt equity norms, after taking into account promoters contribution subject to a maximum of25% of the project cost and to a maximum of Rs.25.00 lakhs [Rupees twenty five lakhs only]. However,the soft seed capital assistance shall not exceed the promoters equity.Remarks:a) Interest : No interest shall be charged on the Soft Seed Capital. However, a service charge of 1% p.a.Shall levied by the lending institution.b) Repayment period : Normally 7 [seven] years [including moratorium up to three years] shall be given forthe repayment of soft seed capital; the repayment period thereof should however, be co-terminus with therepayment period of normal term loan for the project. The financial institution shall arrange to remit therecovered soft seed capital amount due to the State Government.

23a.b.

c.

d.

99

Sl.No. PARTICULARS

c) Wherever borrowers are making repayments / pre- payments of the principal/for the term loan alone,the financial institution shall deduct the amount of soft seed capital assistance due, proportionately andremit to the Government.

d) Security : Second charge on the assets offered as security to the term loan and personal guarantee ofthe promoters.

e) Conditions applicable to term loan are also applicable mutates mutandis to the assistance under thescheme in addition to the above conditions.

f) In case of postponement /reschedulement of term loan component, the soft seed capital component indefault may also be postponed / rescheduled with such schedule being co-terminus with the term loan.

100

Annexures IIRef No KSFC/HO/TRY/EDII/CMD/367/2014-15 29-01-2015

CIRCULAR No: 992Sub: Interest rate for Industrial Estates and InformationTechnology Software Parks.

Ref: Previous interest rate Circular No 973 KSFC/HO/TRY/ED II/MD/53 /2013-14 / C-4053 dated 25-11-2013

While deliberating on the Lending Policy, the issue relating to classifica-tion of activities under Commercial Real Estate(CRE) was discussed inthe Board meeting held on 08-01-2015. It was decided that IndustrialEstates and Information Technology Software Parks, which were hithertoclassified under CRE sector, may be classified under Service Sector,since they are infrastructure activities and interest rate as applicable toMSME sector may be charged.

The above changes have been incorporated in interest rate table andshall be effective for loans sanctioned on or after 8th January 2015.The updated interest rate structure, along with the terms and conditions,is enclosed. The IT Department shall incorporate the applicable rate ofinterest in the system.

Except for the above changes, all other terms and conditions, rebatesand incentives mentioned in the previous Circular referred above, shallremain unaltered.

The contents of this circular shall be brought to the notice of all theconcerned in your Office/Department.

Chairperson and Managing DirectorTo:All Departmental/Principal Officers/Section HeadsAll Branch Offices /IA CellsGeneral Managers – at Head OfficeLibraryCC to:Executive Director I }Executive Director II } for informationEA to the CMD

101

KARNATAKA STATE FINANCIAL CORPORATIONHEAD OFFICE: BANGALORE.

Annexure to Circular No ED II 992Interest Rate Table (Term Loans) effective from 08-01-2015

(Earlier interest Circular No ED II 973 dated 25-11-2013)

SlNo

Category of borrowers/loans InterestRate (%)

a. All Term Loans (including WCTL) toMicro, 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 toDoctors/Qualified Medical Practitioners,Nursing Homes/Hospitals, and ElectroMedical Equipment.

f. Assistance to qualified professionals:Management Professionals, MedicalProfessionals, Accounting Professionals,Architects and Engineers, VeterinaryClinics.

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, theapplicable rate of interest for loansunder Health care Services will be onpar with loans to MSMEs

1

14.00

102

SlNo


Pricing of credit rated loans to Micro, Small andMedium Industrial units

1A

a) External ratings of SE1A &SE2A on NSIC scale, SME1& SME2 on non-NSIC scale,AAA, AA or equivalent ratingby other agencies

and

b) Minimum 70% marks inin-house credit rating

Loans fromRs 50 lakhs toRs 100 lakhs

Loans aboveRs 100 lakhs

13.50

13.00

Pricing of credit rated loans for Large ScaleIndustrial units.

1B

a) External ratings ofAAA, AA or equivalentratingsand

b) Minimum 70% marksin in-house credit rating

Loans fromRs 50 lakhs toRs 100 lakhs

Loans aboveRs 100 lakhs

15.50

15.00

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

a. Construction / Buying Commercial Complexes,b. Construction activ ities l ike Residential

Apartments, Villas, Group housing, Lay outformation/Property Development

c. Shopping Complexes,d. Ready built office space, Construction/Buying

Ready built show rooms and Sales outlets,Development, Maintenance and Constructionof Roads/Infrastructure Projects.

e. Professional Education Institutes.f. Corporate loans to above activities (under Sl

No. 2)

2

16.50

103

SlNo


a. Corporate loans, (excluding Corporate loans toactivities at Sl No. 2), AMARA scheme, Bridgeloans , Finance to existing assets,

b. Entertainment industry (including Cinema The-atre/Multiplex, Production of feature films, TV seri-als, Dubbing/ Recording, Software for visual mediapublicity).

c. Rental discounting scheme.

Privileged Entrepreneurs Scheme

Micro Finance Activity

Purchase of private vehicles by existing firms / pro-moters

Wind mill power projects

3

4

5

6

7

16.00

15.50

14.00**

12.00**

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) An additional rebate of 0.50% will be allowed only for loans of Rs 300lakhs and above to existing customers, for prompt payment. The rebateshall 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 outstationcheques will not be eligible for this rebate.

b) The system of giving grace period of three days for prompt paymenthas been discontinued for all loans, including the existing loans.

c) If the due date for payment happens to be a holiday, the immediatenext working day shall be considered as due date and for reckoning theprompt payment

No rebate for prompt payment is available to Micro Finance Activity,Purchase of private vehicles by existing firms / promoters and Windmill power projects

104

iii) 1.00% special rebate is extended to physically challengedentrepreneurs subject to producing physical disability certificate fromthe competent authority

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

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

B. INTEREST RATE FOR SC/ST ENTREPRENEURS

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

II PENAL INTEREST

For new loans disbursed on or after 01-02-2010, the penal interest of2.00% p.a. over and above the applicable interest will be charged in caseof default, on the defaulted amount for defaulted period to all categoriesof borrowers.

III LOAN OUTSTANDING TO DETERMINE INTEREST RATE

While applying the interest rate, the total loan outstanding (i.e existingand proposed loan) will be the criteria for deciding the rate of interest.

IV DEFERRED PAYMENT IN CASE OF SALE U/S 29 of SFCs ACT

The rate of interest for deferred payment liability in case of sale of assetswill be the highest current rate of interest rate under 1 and 2 of interestrate table.

V TRANSFER OF LOAN LIABILITY

The original contract rate of interest will continue to apply in case oftransfer of loan liability.

105

VI For the activities which are eligible for refinance from SIDBI, but SIDBIis not providing refinance because of the exposure exceeding the limitspecified in the SFCs Act, the rate of interest as per the prevailing interestrate structure of the Corporation shall be applied

However, for the activities which are not eligible for refinance from SIDBI,including Large Scale Industries/Service Enterprises, except the HealthCare Services [indicated at Sl No 1(e) in the interest rate table], theinterest rate as applicable to advances out of own funds (Sl No 3 in theinterest rate Table) shall be applied.

106

ANNEXURE – III

KARNATAKA STATE FINANCIAL CORPORATIONBANGALORE

INDUSTRY WISE EXPOSURE LIMIT

SlNo

IndustryProposed

Exposure Limit% to OS

COMMERCIAL REAL ESTATEHOSPITALITYSERVICES & OTHER SECTORSHEALTH SECTORPROFESSIONAL/TECHNICAL EDUCATIONAL INSTITUTIONSFOOD MANUFACTURING INDUSTRYNON-METALLIC MINERAL PRODUCTSMETAL PRODUCTSTEXTILESCHEMICALS & CHEMICAL PRODUCTSHEALTHMACHINERY MANUFACTURINGPRINTING & PUBLISHINGPLASTIC GOODSMISC. MANUFACTURINGRUBBER & RUBBER PRODUCTSBASIC METALCOMPUTER & COMPUTER ACCESSORIESTRANSPORT EQUIPMENTTRANSPORT INDUSTRYFOOT WEAR & OTHERSPAPER & PAPER PRODUCTSELECTRICALOTHER INDUSTRIESWOOD & CORK

12345

6789

10111213141516171819202122232425

16201252

1812855555333222222222

107

SlNo

IndustryProposed

Exposure Limit% to OS

BEVERAGE INDUSTRYELECTRONIC EQUIPMENTFURNITURE & FIXTURESMOTION PICTURES/CINEMA THEATRESSTONE/CLAY QUARRYINGCONSULTANCY SERVICEELECTRICITY & GASMETAL MININGLEATHER PRODUCTSOTHER NON-METALLIC MININGPETROLEUM PRODUCTSGENERATORSCRUDE PETROLEUM & NATURAL GASFISHINGTOBACCO

262728293031323334353637383940

222111111111111

lending policy 2015

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