MPFC grants assistance to "Industrial Concerns" as defined
in clause (c) of section 2 of "State Financial Corporations
Act. 1951", which are located in the state of Madhya
Pradesh.
However fee based services can be extended to units
located in any part of the country.
In the definition, almost
every type of manufacturing and/or process activity and
related operations are covered. In addition to it, MPFC also
provides assistance to activities in the service sector, as
approved by the Industrial Development Bank of India (IDBI).
As per the provisions of the "State Financial Corporation
Act. 1951", MPFC can grant assistance to only those concerns
whose paid-up capital and fee reserves taken together do not
exceed Rs. 20.00 crores. This limit is not applicable to non-
fund based activities.
Subject to the limits prescribed under the various
schemes, MPFC's total exposure to a single concern under all
the schemes taken together shall not exceed Rs. 200.00 lacs in
case of partnership and proprietary concerns, and Rs. 500.00
lacs in case of corporate entities.
MPFC grants loan against security only.
The primary security
for the loan is usually a first charge on land, building,
plant and machinery etc. acquired/proposed to be acquired. In
case of loan under consortium arrangements, pari-passu charge
is accepted along with the other participating institutions.
Generally MPFC takes collateral security of land and/or
building of the borrower or any third party in addition to
primary security.
MPFC also has a floating charge on all the
remaining assets of the borrower, subject to the charge in
favour of the bankers for working capital.
Margin is the difference between the value of assets offered as
prime security and the amount of loan.
The margins prescribed for loans under various categories are as under:
|
Category
|
Backward
Districts
|
Other
Districts
|
|
| Small Scale Industries |
20% |
25% |
| Medium Scale Industries |
25% |
40% |
| Hotel Industry |
50% |
50% |
| Tiny Sector |
10% |
15% |
| Composite Loan |
NIL |
NIL |
The minimum promotor's contribution envisaged in the
project is worked out on the basis of Debt-Equity norm and
the security margin norm applicable at the time of sanction
of the loan. The debt equity ratio is the ratio of loan
component and the equity contribution in the total project
cost. The maximum amount of assistance shall be lower of the
two amounts worked out on the basis of Debt-Equity norm and
the security margin norm. The normal lending norm for debt-
equity is 1.5:1, however in some specific schemes this norm
may be flexible.
The entire promoter's contribution envisaged in the
project is desired to be raised by way of capital before
first disbursement of the loan installment. However in case
the promoters are short of own capital, some amount may be
raised as unsecured loans in the form of quasi-capital. The
quantum is ascertained during the appraisal of loan proposal.
The period of repayment of loan is decided on the merits of
each case, which generally ranges between 5 to 8 years.
The principal amount of loan is payable normally in half yearly
installments with an initial moratorium period of 6 months to
two years depending upon the size of the project & stage of
the implementation.
Interest is also normally charged on half
yearly basis and the months of payment of interest &
principal are kept different to even out the liability of the
borrowers.
The assets offered as a security of the loan should be kept
insured for their full value during the currency of the loan.
The risk normally covered under the insurance are those
relating to fire, riots etc., and the specific risks
attributable to a specific project which the corporation may
specify.
The insurance policy should be taken in the joint
names of the corporation and the borrower - with the usual
mortgage clause. The first insurance policy and the
subsequent renewals of the same should be sent to MPFC as
soon as they are effected. In case the same is not sent in
time. MPFC has a right to get the same insured on the cost &
risk of the borrower unit.
-
Application for financial assistance duly filled-up and
signed be submitted to concerned field office of MPFC in the
prescribed form alongwith all necessary details and
enclosures as specified in the said application form.
Application is to be made in duplicate/triplicate as may be
required by the concerned field office.
-
The proprietor/partners should not draw any remunerations,
interest on capital, or any other payment and in case of
corporate bodies no dividend should be declared till the
project commences operations or any installment or interest
is in default towards the corporation.
-
The capital and unsecured loans stipulated & raised as per
the terms and conditions of sanction should not be withdrawn
during the currency of the loan.
-
An undertaking should be given by the promoters that in
case of any short fall in the resources due to 'over-run' in
the project cost or for any other reasons like non-receipt or
delay in receipt of capital subsidy etc. the same shall be
met by them from their own sources.
-
The promoters of the concern should give a declaration that
no inquiry has been instituted against them/him and/or is
pending against them/him or any of them for economic offenses
by the Central or State Govt. and they/be shall under take no
to do any thing which may constitute such an economic
offense.
-
In case the documentation is not done within one year from
the date of sanction letter, the sanction loan is
automatically canceled.
-
In case full sanctioned amount is not availed within a
period of 18 months from the date of sanction, the balance
loan is automatically canceled.
-
MPFC has a right to appoint director/directors on the
company's board of directors who shall not be required to
hold qualification shares and shall also not be liable to
retire by rotation.
-
MPFC has a right to inspect the factories, offices,
godowns, other business places and also have a right to see
all the books of account, voucher and related records etc.
and can get the same audited, investigated etc.
-
The concern/company shall not do the following acts, without the
prior approval:
-
Undertaking expansion or implementing other scheme
involving capital expenditure other then the one for which
loan is sanctioned.
-
Change in constitution and/or management.
-
Giving on lease, hire, license the land, building,
machineries or any part thereof, or creating any change on
the properties mortgaged/hypothecated.
-
Transfer of disposal of the share holdings by the
promoter/directors.
-
Change in the scheme approved like in building
specification/suppliers of machineries etc.
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