Kerala Financial Corporation (KFC) has more than doubled its loan sanctions in 2018-19 compared to the previous year in what has been a ‘controlled phase of growth.’ As per the provisional figures available as on March 31, 2019, sanctions had touched Rs 1,640 crore, a growth of 127 per cent over the Rs 724 crore in 2017-18.

MILESTONE YEAR

Sanjeev Kaushik, Chairman and Managing Director, said that 2018-19 was a milestone year and the final numbers demonstrate that it may perhaps be the most successful year that KFC has ever had. He attributed this to a series of policy initiatives undertaken by the corporation with an aim to doubling its loan portfolio in three years time. The interest rate structure was brought down from the existing 14.5 per cent PLR to a competitive base rate of 9.5 per cent, the first time ever when a state financial corporation had implemented it.

Secondly, the credit policy was revamped to streamline the process of sanctions and disbursement, which ended the practice of indiscriminate lending at historical high costs. “We got more careful and choosy about sanctions. This helped us to mark a break with the past where we would get only bad businesses. We’re now focusing on competitive, good businesses.” KFC also moved in aggressively to the vacuum created by the exit of erstwhile State Bank of Travancore (SBT) after the merger of Associate Banks with State Bank of India.

Rich dividends

Kaushik told BusinessLine that KFC matched its wits with NBFCs to help out customers who were left in the lurch by the sudden exit of erstwhile SBT from the scene. This capped a series of aggressive moves combined with a customer-friendly approach that paid rich dividends evidenced best in the creation of a portfolio of high-quality sanctions. Sanctioning power were lowered at the branch-level following several instances of indiscriminate lending with a focus on only collateralised loans.

Appraisal systems were strengthened by centralising the process at the zonal offices. Projects are appraised with respect to business prospects, and funds are disbursed based on specific milestones. For the first time ever, KFC has set up a marketing vertical, which has yielded its results and brought in a good number of new clients. “The new contractor loan scheme has been a big hit and 145 new government contractors were extended a line of credit to the tune of Rs 650 crore for undertaking various infrastructure activities in the state”, said Kaushik.

Lower cost of funds

The disbursement of loans grew 36 per cent year on year, with total recoveries touching Rs 900 crore. The loan portfolio has grown by 10 per cent. The loan settlement adalath conducted last year helped to settle legacy bad loans, yielding Rs 75 crore, helping improve NPA position and income. The ‘controlled growth’ initiative was helped in no small measure by the smart and prudent moves to lower cost of funds even as KFC diversified the sources of borrowing.

In this connection, Kaushik pointed to a successful domestic float anchored by the KFC during the year under reference at 8.69 per cent, which was unprecedented for a state financial corporation. It also managed to low-cost refinance from India Infrastructure Finance Company Ltd (IIFCL) and has also recently got a rating upgrade for its bonds and bank loans.

With sector-leading financial strength, low NPA levels and high loan portfolio growth, KFC expects to attract an upgraded this year also, which would enhance its competitiveness. “In first quarter of the new financial year (2019-20), the focus will be on IT infrastructure and technology upgrade and skill enhancement of employees to equip them to deal with challenges ahead in an evolving business scenario,” said Kaushik.

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