CM accuses Centre of stifling financial institutions

Chief Minister Pinarayi Vijayan has accused the Centre of stifling the functioning of State financial institutions such as the Kerala Financial Corporation (KFC) and offered due protection and support for its latest initiatives.

Launching the revised lending policy, rates and a slew of schemes for start-ups under the title ‘KFC to new horizon’ here on Wednesday, Mr. Vijayan said the State Finance Corporation (SFC) Act that enabled the functioning of financial institutions like the KFC had not been amended for the past 18 years. Hence, it could not mobilise deposits from the public and also not provide working capital to entrepreneurs.

The higher lending limit for an individual continues to be ₹8 crore and for a company ₹20 crore. The Small Industries Development Bank was not refinancing the KFC. The Reserve Bank of India had not accorded permission for the KFC to function as a small bank, he said.

While the rate of non-performing assets of banks had been estimated at 15%, it was only 7% for the KFC, still it had not been given operational freedom. The Centre’s aim was to close down such institutions and hence the State government intervened with an allocation of ₹150 crore, he said. The latest bid to capture new horizon by fixing a base interest rate of 9.5% and the venture debt scheme for start-ups and the initiative to provide loans within 30 days after a professional appraisal to applicants after gauging their repayment capacity were are laudable ventures. But the management should not forget its past of indiscriminately sanctioning loans without a professional review, he said. Finance Minister T.M. Thomas Isaac, who chaired the session, said the KFC would not just be a lending agency but one that monitored the functioning of those who availed themselves of loans and would support them in the event of a crisis. If the Centre failed to amend the SFC Act, it would function as non-banking finance company. Mr. Vijayan presented awards to successful entrepreneurs. Chairman and managing director Sanjeev Kaushik welcomed the gathering.