The Andhra Pradesh State Financial Corporation (APSFC), Telangana division, is caught in a bind owing to non-resolution of division of assets between the two States and liquidity problems that have cropped up since 2017.
Post-bifurcation of Andhra Pradesh, the division of assets of APSFC between the two States is still pending for lack of a consensus. The corporation has 12 branches in Telangana and 13 branches in Andhra Pradesh. The division of staff was completed on the basis of their declaration at the time of joining, paving way for smooth functioning of both the divisions till 2017.
Issues cropped up in the business of Telangana division after Andhra Pradesh Commissioner of Industries Siddharth Jain took over as Managing Director of APSFC assuming full control of the Board. His refusal to allow the corporation to borrow ₹400 crore, already sanctioned by the banks in 2017, in turn hit the loans promised to the SME borrowers, say sources in Telangana division. The corporation availed bank loans to the tune of ₹650 crore from 2014 to 2017.
From 2017-18 financial year, the Telangana division gradually lost its functional independence to manage funds at its disposal for disbursements to borrowers and repayments to banks. At one stage as Telangana division was unable to pay ₹30 crore to the banks due to lack of fund flow, the APSFC, as the parent corporation, paid the amount in September last year, but still did not agree to let the corporation borrow fresh loans.
As a result, the corporation could not avail the sanctioned loan and it affected the disbursements to borrowers in Telangana division. The Telangana division had been facing liquidity problem since last June and repeated representations to the Board MD to let the corporation borrow evoked no response, said Executive Director of the Telangana division K. Ramesh Reddy.
When the APSFC Board met in February recently, the Telangana division sent a proposal that the corporation itself borrow loans and give it to Telangana division and it would be backed by guarantees from the Telangana government. “But no decision has been taken in this regard,” he said.
Repayment issues
However, it is understood from the sources in the APSFC that the Board directed Telangana division to first repay its share of loans to the banks and then go for fresh disbursements as the division defaulted on its repayments. The liquidity issues started cropping up from December 2018. The board had to centrally manage the funds in the best interests of the borrowers and shareholders and to protect the credit rating of the APSFC. The Board would meet again next week and try to resolve the issues.
Those bearing the brunt are the entrepreneurs in Telangana, who went ahead and placed orders for machinery, or bought land for their units and awaiting disbursement of loans. They were not prepared for the inordinate delay to start their units. Some entrepreneurs are unable to lift the machinery lying in the port without the release of sanctioned loan by the APSFC, Telangana division . There are others who spent money from their pockets for the initial work on their units while awaiting the loan disbursement. The harassed borrowers have now knocked the doors of the judiciary for justice.
The Telangana division has to disburse ₹60 crore which were already sanctioned to the borrowers.