Speech Delivered by Mrs Asha Swarup, IAS, Chairperson at the 41st  Annual General Meeting of Himachal Pradesh Financial Corporation held on 30.07.2008

Ladies and Gentlemen,

        I extend a warm welcome to all of you to the 41st  Annual General Meeting of the Shareholders of Himachal Pradesh Financial Corporation. The Annual Report of the Board of Directors on the working of Himachal Pradesh Financial Corporation and the Audited Statement of Accounts for the year 2007-08 has already been sent to you. I hope, by now, all of you have gone through them.

        During 2007-08, Indian economy recorded 9% growth with growth of 4.5% in  Agriculture, 8.5% in industry and 10.8% in services. The current growth phase of the economy is powered by the capital investments. Inflation emerged as the major macro risk toward the close of financial year. On year–to-year basis, it stood at 7.4% at the end of March 2008 against 5.9% a year ago. High prices of food grains, fruits, vegetables, edible oils, crude oil and metals remained the major contributor to inflation.   During 2007-08, global financial markets witnessed turbulent conditions due to slow down of U S economy,  but Indian financial markets remained largely orderly except equity market which witnessed great volatility.

        During 2007-08, Indian banks consolidated their stability further and increased their financial strength with the objective to become an industry of international standard, but hardening of interest rate scenario and occasional tight liquidity caused concern to the banking industry. 

        This was the scenario in which the Himachal Pradesh Financial Corporation performed during 2007-08. The activities of Himachal Pradesh Financial Corporation during the year have been given in detail in the report of the Board of Directors. I would, however, like to highlight a few of them.

                                 
Sanctions

        During 2007-08, the Himachal Pradesh Financial Corporation sanctioned total loans of Rupees 11 crore, 27 lakh and 2 thousand against Rupees 42 crore, 60 lakh and 7 thousand during the previous year and recorded negative growth. Sanctions were low because of uncertainty in resource support from SIDBI  due to HPFC’s negative networth. Last year SIDBI stopped refinance facility to all the negative networth SFCs in India including HPFC so long as the respective State Governments come forward for their recapitalization to bring their networth positive in a time bound manner.   It was only after the assurance of the State Government for recapitalization of the Corporation that SIDBI restored refinance facility at the close of the financial year during February, 2008. Due to uncertainty in getting resources from SIDBI, the Corporation had to scale down its operations, hence fewer loans were sanctioned.  During 2007-08, the Corporation also cancelled loans of Rupees 4 crore, 94 lakh and 41 thousand on case to case basis which were lying idle since long and were unlikely to fructify. The Small Scale Industrial units were sanctioned loans of Rupees 11 crore, 1 lakh and 8 thousand and account for 97.7% of the total loan sanctions during the year against 70.17% during the previous year.

       Disbursements

The Himachal Pradesh Financial Corporation disbursed total loans of Rupees 15 crore, 16 lakh and 11 thousand during 2007-08 against Rupees 41 crore, 96 lakh and 59 thousand during the previous year and thus recorded negative growth in respect of loan disbursement also. Since the Corporation scaled down loan sanctions because of uncertainty in getting refinance from SIDBI, fresh commitments were low and resulted in less disbursement.  Since inception, the Corporation has made total loan disbursements of Rupees 497 crore, 80 lakh and 83 thousand upto 31st march, 2008.

        Recoveries

        During 2007-08, the Himachal Pradesh Financial Corporation made recovery of Rupees 49 crore, 87 lakh and 12 thousand against Rupees 50 crore, 63 lakh and 62 thousand during the previous year. Recovery figure declined marginally during the year mainly because of less disbursements and shrinkage of total loan asset portfolio from Rupees 190 crores and 7 lakh in March, 2007 to Rupees 172 crores and 12 lakh in March, 2008.  After accounting for reliefs given to various units facing difficulties, 342 borrowers remained in default to the extent of Rupees 47 crore, 10 lakh and 40 thousand (excluding suit-filed cases) in March, 2008.

        Resources

During this year, the paid-up capital of the Corporation remained at last year’s level of Rupees 28 crores, 57 lakh and 11 thousand. The Corporation availed refinance of Rupees 10 crore, 82 lakh and 26 thousand from SIDBI and made payments of Rupees 8 crore, 86 lakh and 48 thousand. During 2007-08, the Corporation raised bonds of rupees 7 crore and 70 lakh and redeemed bonds of Rupees 9 crore and 8 lakh. There was no default with SIDBI or any other bank/institution.

        Profit & Loss

        During 2007-08, the Corporation earned total revenue of Rupees 19 crore, 11 lakh and 87 thousand against Rupees 15 crore, 75 lakh and 19 thousand in the previous year and incurred expenditure of rupees 20 crore, 97 lakh and 4 thousand against rupees 20 crore, 30 lakh and 75 thousand in the previous year and thus suffered business loss of Rupees 1 crore, 85 lakh and 17 thousand against Rupees 4 crore, 55 lakh and 56 thousand during the previous year. Due to recovery in NPA accounts, provisions of Rs 8 crore, 58 lakh and 87 thousand were reversed and thus there is book profit of rupees 6 crore, 73 lakh and 71 thousand for the year.

                                               
        Management of NPAs

        The Corporation followed up all the cases for recovery and made efforts to maintain net NPAs below 10% level as per commitment made in the MOU signed with SIDBI and the State Government on 24th June, 2004. During this year, net NPAs increased marginally from 6.18% in March 2007 to 6.82% in March 2008. This happened mainly because of decline in total loan asset base from Rupees 190 crores and 7 lakh in March, 2007 to Rupees 172 crores and 12 lakh in March, 2008 as a result of less sanctions and less disbursements.  

        Future Strategy

        The future strategy of the Corporation is:

Before I conclude, I express my deep appreciation for the valuable co-operation and support extended by my colleagues on the Board. I also thank the officers and staff of the Corporation for their sincere efforts.

        Ladies & Gentlemen, I thank you all for attending this Annual General Meeting and hope, the Corporation will continue receiving your co-operation in future also.