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Our Bureau

Hyderabad , Nov. 15

AIMED at reviving the financial health of 18 State Financial Corporations (SFCs) across the country, the Union Finance Minister, Mr P. Chidambaram, has advised them to tap the capital markets and raise funds.

According to Mr Chidambaram, capital markets are better judges of the performance of SMEs. "Let the better performing SFCs be rewarded and the bad ones lose," he said.

In his `Plain Speaking on SFCs' at the golden jubilee celebrations of the Andhra Pradesh State Financial Corporation (APSFC) here on Tuesday, the Finance Minister said most of the SFCs in the country lost their track to become more like charitable organisations and turned sick.

Observing that the non-performing assets (NPAs) of SFCs were ten times more than the NPAs of the public sector banks (PSBs), he asked the SFCs to improve their prudential fiscal norms and adopt stringent appraisal of borrowers to avoid slippages.

According to Mr Chidambaram, the SME sector, despite its significant contribution to the country's industrial production and exports, was deprived of institutional credit support. At present, only five per cent of the SMEs are in a position to access institutional credit.

Stressing the need to substantially step up credit to SME sector, he said the aim of the Union Government was to ensure that at least 25 per cent of the SMEs get institutional credit in the next five years. The Government proposes to take steps towards increasing the credit flow to SMEs by 20 per cent every year so that the total credit flow the sector doubles in the next five years, Mr Chidambaram said.

The Finance Minister said the Government has evolved a scheme of credit rating for SMEs, wherein the Government would extend subsidy for availing credit rating. The idea was to enable the better-rated SMEs get institutional loans at a cheaper interest rates. Towards this, the Government is holding a meeting of PSBs this week, he said.

He felt that the Government interference in day-to-day activities of the SFCs, especially in directing lending, had contributed to their current plight. He favoured total financial and managerial autonomy to SFCs for their better health and in turn for the improved lending to SMEs.

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