“ANALYSIS OF LONG TERM FINANCING IN RIICO’’

A Summer Internship Project/Dissertation

SUBMITTED FOR THE PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE AWARD

OF

Master of Business Administration

SUBMITTED BY

RAUNAK JAIN

ROLL NO.-AUR1001049

UNDER GUIDANCE OF

MS. ARPITA SHARMA

AMITY BUSINESS SCHOOL

AMITY UNIVERSITY RAJASTHAN

2010-2012

Acknowledgement

Achieving A Milestone For Any Person Is Extremely Difficult. However, There Are Motivations Which Come Across The Curvaceous Path Like Twinkling Stars And Make Our Task Easier. An Opportunity Has Been Given To Me By Rajasthan Sate Industrial Development And Investment Corporation Limited. Jaipur For Summer Training In The Field Of Finance For The Period From 6 june 2011 To 21th July 2011 (45 Days)

I Would Also Like To Express My Special Gratitude To Mr. P.M. Jain For Giving His Precious Time For Guiding Me And Help Me In Bringing Out The Work In The Present Shape And Sharing A Valuable Knowledge Which Help Me In Building The Future Edge Of My Career.

Also I would Like To Thanks Mr. A.K Jahalani (Agm –Appraisal), Mr. Suneet Mathur (Osd-Infra/Finance), Mr. V.B.Mathur (Agm-F&R), Mr.A.C. Chhabra(Sr.Dgm-Finance), Mr.R.K.Limba(Dgm-Appraisal),Mr.P.K. Sharma(Dgm),Mr. Vishal Dixit, Anoop Kumar Mathur(Dgm-Pid).

Unger The Supervision Of Sir Krishan Goyal Sipriya (Dgm(Finance)) Thanks To Sir For Giving Valuable Input Time To Time In The Course Of My Training Programme.

My heartiest gratitude extends to my Guide Ms.ARPITA SHARMA who has helped me in every aspect of my work. I would like to express my profound sense of gratitude to the Vice-Chancellor Dr. Raj Sing.

The greatest credit goes to the blessings bestowed upon me by Almighty God without whose yearning; I could not have even moved a step forward and to my parents who are always a constant source of inspiration in all my endeavors.

With Regards

Raunak Jain

PREFACE

Summer training is an integral part of our academic curriculum. During the training a student gets an opportunity to set the practical aspects of theory. Theory makes the concept clear.

I feel great pleasure in submitting this piece of work as my summer training project, taken from

RIICO Ltd (jaipur). I hope that this work will provide lucrative result in the eyes of the reader. It is hence expected that creating of this shall benefit the reader in all aspects. the project deals with nearly all the aspects of industry loan and the essence of appraisal cell. I have tried my best to cover nearly all the aspects related to loan sanction of RIICO (rajasthan state industrial development and investment corporation). The working title of the project is `ANALYSIS THE LONG TERM FINANCING IN RIICO’’´. It is done in a very cordial manner. This research is an attempt to present a report on account of little practical knowledge. In my opinion, the readers will be satisfied with the project in always.

CERTIFICATE FROM FACULTY GUIDE

This to certify that Raunak jain , (Bearing Enrollment No. A20001910002) a student of Master Of Business Administration (MBA-General) , class of 2010-12, Amity Business School, Amity University Rajasthan has done the Summer Internship Project under my guidance for the project Title ” Analysis of long term financing in RIICO”. This project report is prepared in partial fulfillment of Master of Business Administration (MBA) to be awarded by Amity Business School, Amity University Rajasthan.

Date Ms. Arpita sharma

Place jaipur Faculty

Amity Business School

Amity University Rajasthan

|S.No. |Particulars |Page No. |
|1. |Acknowledgement | |
|2. |Preface | |
|3. |Executive summary | |
|4. |Introduction | |
| |Investment opportunity in Rajasthan | |
| |Introduction o RIICO | |
| |Company profile | |
|5. | Main objective of riico | |
| |2.2 Main acitivity at riico | |
| |investment Activities | |
| |Business And Industrial Promotion | |
| |Infrastructure Development Activities | |
| |Financial And Accounting Activities | |
| | | |
| | | |
| |2.3 appraisal cell | |
| |Ratio analysis with help of case | |
| |2.4 project implement and development cell | |
| |2.5 follow up and recovery cell | |
| |2.6 .Industrial Promotion and Infrastructue | |
| |Finance- IPI Cell: | |
| |2.7 audit | |
|6. |Research methodology | |
|7. |Financial assistance by RIICO various schemes | |
|8. |Findings & Facts | |
|9. |Problems in project financing | |
|10. |Recommendations | |
|11. |Suggestion | |
|12. |Conclusion | |
|13. |Various term loan schemes by riico | |
|14. |Bibliography | |

Executive Summary

Industrial loan Industry, which is basically my concern industry around which my project has to be resolved, is really a very complex industry. All the process related to appraisal was complex. Challenges, which I faced while doing this project, were following-

➢ To check project viability on the basis of certain ratios in appraisal cell

➢ Approval process

➢ Correct documentation

➢ Legal documentation

➢ Issue of letter of intent

The research methodology was is based on secondary data analysis includes interview with dgm with every cell, records, journals and magazines etc.the limitations during the project was difficulty in obtain the data,inadequacy of sufficient material, the study is limited to rajasthan only.

Investment opportunity in Rajasthan

Rajasthan is the most preferred destination for investments in major sectors. Easy availability of raw resources makes it the natural choice for agro and minerals based industries. There is vest potential for food processing, solvent extraction and associated industries like cold storage in Rajasthan. The large stock of cattle is an advantage for leather, wool, dairy and meat based units. There is no dearth of project ideas for those interested in capitalizing on the extensive mineral reserves in Rajasthan.

Rajasthan also has a flourishing textile industry. There are opportunities to blend the traditional colourful extravaganza with modern textiles.
Tourism is a thriving and vibrant industry in Rajasthan. The State attracts one third of the tourists coming into India. The State offers opportunities of large investments in a variety of areas ranging from hotels, amusement parks, ropeways, health resorts, transportation and other innovative tourism projects.
The state government is also keen to attract investment in sectors like automobiles, consumer goods and Information Technology (IT).

Introduction Of RIICO

[pic]

Rajasthan State Industrial Development And Investment Corporation Popularly Known As RIICO Is A Premier Agency Of Government Of Rajasthan That Has Played An Important Role In The Industrial Development Of Rajasthan And Has Emerged As A Multi Faceted, Dynamic And Vibrant Institution.

Ricco Is Mainly Engaged In Site Selection And Acquisition Of Land, Financial Assistance To Small, Medium And Large Scale Projects , Equity Participation In Large Projects On Merit, Technical Consultancy For Project Identification And Technical Tie Up , Escort Services , Facilitation Of Government Clearness , Merchant Banking And Financial Tie Ups And Extending Incentives And Concession As Per Policy Of The State Government.

The Corporation Was Incorporated On 28 March ,1969 As Rimdc And Got Irts Present Name On 1 St January , 1980. It Has 26 Offices In Rajasthan And One On Delhi And Has Staff Strength Of 1054.RIICO Has Far Developed 321 Industrial Areas By Acquiring About 59084 Acres Of Land.More Then 26633 Industries Are In Production Within The Industries Areas Developed By RIICO In Rajasthan .

It Keeps Pace With The Industrialization Process By Providing Complete & Innovative Support Services To The Industries I.E. Industrial Infrastructure , Finance , Consultancy And Other Industry Related Assistance.

RIICO Has 26 Regional Unit Offices In Rajasthan, Besides One Unit In Delhi. RIICO Has Played A Catalytic Role In The Industrial Development Of Rajasthan.

BOARD OF DIRECTOR

MANAGING DIRECTOR

Mr.Rajendra Bhanavat

DIRECTORS

Shri Atul Kumar Garg, IAS

Shri Ashok Sampatream, IAS

Shri Ashok Singhvi, IAS

Shri Purushottam Agrawal , IAS

Shri Umesh Agrawal , IAS

Shri Shreemat Pandey, IAS

Shri Rajat Kumar Mishra, IAS

FINANCIAL ADVISER

Ms.Aparna Sahay

SECRETARY

Shri D.K. Sharma

BANKERS

The Bank Of Rajasthan Ltd. (Icici Bank)

State Bank Of Bikaner And Jaipur

Bank Of Baroda

Oriental Bank Of Commerce

Bank Of India

STATUTORY AUDITORS

M/S B.Jain & Associates

Company Profile

As On 30 June, 2010

Authorized Capital 2350 Million

Paid Up Capital 2102 Million

Net Profits

|2002-03 |342.3 Lacks |
|2003-04 |575.9 Lacks |
|2004-05 |2958.4 Lacks |
|2005-06 |6215.5 Lacks |
|2006-07 |9664.2 Lacks |
|2007-08 |18674.1 Lacks |
|2008-10 |13496.5 Lacks |

Term Loan & Equity

|Total Loan Sanction |21345.21 Million |
|Total Loan Disbursed |15453.19 Million |
|Term Loam Sanction |18731 Million |
|Term Loan Disbursed |12932 Million |
|Equity Sanctioned |723 Million |
|Equity Disbursed |709 Million |

|Investment Catalysed | Rs. 60197 Million |
|Employment Generated |98163 Nos. |
|Land Acquired |60394.99 Acre |
|Land Developed |39139.89 Acre |
|Number Of Industrial Area |322 Nos. |
|Growth Centre |5 Nos. |
|Number Of Industries Production In Industrial Areas |27221 Nos. |
|Mini Growth Centers |9 Nos |
|Plots Allotted |50118 Nos. |

Man Power : 1054 Persons

Total Manpower Of RIICO Includes 1054 Persons-As A Financial Institutions Provides A Unique Financial Package To Investors For Small , Medium And Large Industrial Projects Under A Single Roof.

Objective of RIICO

❖ Extending Financial Assistance To Small , Medium And Large Scale Projects.

❖ Making Available Industrial Land

❖ Providing A Variety Of Technical Inputs By Way Of Technological & Managerial Services Like Relevant Technical Information , Projects Briefs , Project Profiles, Project Reports, Techno-Economic Feasibility Reports, Market Surveys, Financial And Managerial Consultancy & Even Diagnostic Studies For Project Rehabilitation.

Main activity at RIICO

The Main Activities Of RIICO As Follows--:

I. Investment Activities

II. Business And Industrial Promotion

III. Infrastructure Development Activities

IV. Financial And Accounting Activities

Loan sanction process at RIICO

Investment Activity

1) Appraisal Cell

In The Appraisal Cell , The Loan Application Is Considered For Its Feasibility.The Purpose Of Loan Can Be Establish A New Project Or To Expand The Existing One.

Every Company , Who Is Applying For Have Two Options For The Land I.E. It Can Either Purchase It From The Private Owner Or It Can Purchased The Land In RIICO Industrial Area.

The Project Is Appraised From The:

❖ Technical Point Of View

❖ The Company/Promoters

❖ Other Financial Institutes / Banks, Which Are Dealing With The Same Loan Applicant Company

❖ Implementation Schedule

❖ Cost Of Project And Means Of Finance

❖ Eligibility Under Incentives Scheme For Good Borrowers

❖ Risk Factors

❖ Sensitivity Analsis

To Check The Project’s Viability , Certain Ratio Are Used Like:

a) Debt To Equity Ratio

b) Debt Service Coverage Ratio (Dscr)

c) Internal Rate Of Return (Irr)

d) Break Even Point

e) Cash Break Even Point

f) Raw Material/Cost Of Sales

g) Consumables/Cost Of Sales

h) Utilities/Cost Of Sales

i) Pbt & Depreciation/Turnover

j) Pbt & Depreciation/Capital Employed

k) Gross Value Added /Capital Employed

l) Gross Value Added Per Worker

m) Current Ratio

Case

M/S Cords Cable Industries Limited

Let Us Take A Case Of Ccil Company To Understand Of Working Of “Appraisal Cell’’

1. The Project Of Ccil Is Manufacturing Of Control And Special Cable With Installed Capacity Of 25000 Km Cable Per Annum.

2. The Cost Of Project Is 8563.27 Lakhs.

3. Repayment Condition

Repayable On 24 Equal Quarterly Installements Commencing From Novenber 15 , 2011.

4 .Thereafter, The Selling Price, Per Cable K., Wages & Salaries , Financial Expenses Certain Ratio Are Considered As They Are The Important Financial Indicater.

5.The Cost Of Expansion Project Is As Under:

. Rs.

(In Lakhs)

Land & Development 1959.77

Building 2040.00

Plant & Machinery 2862.31

Misc Fixed Assets 348.32

Preoperative Expenses 635.45

Provision For Contingencies 217.42

Margin Money For Working Capital 500

Total 8563.27

6. Thereafter Means Of Finance Are Appraised.Like In This Case It Is As Under.

Rs. (In Lakhs)

Share Capital (Ipo) 3015.72

Internal Accruals 337.87

Ecb-Icici Bank 1209.68

Term Loan

RIICO 1640.00

Icici Bank 360.00

Idbi Bank 2000.00

Total 8663.27

7. Then RIICO Do The Technical Assessment In Which A Study Is Made On Technical Arrangements , Manufacturing Process. Location & Site. Raw Material, Input For Production , Procurement Policy, Stocking Facility, Power ,Water, Labour, Implementation Schedule Etc.

8 .After Performing Technical Assessment, Market Assessment Is To Be Done , In This Certain Points Are Considered Such As Demand Outlook, Opportunities In Export Market, Nature Of Indian Cable Industry , Demand Drivers, Power Sector, Potential , Supply Outlook, Government Policy , Market Opportunities, Selling Arrangements Etc.

9 .Financial Assessment of the Project Includes.

I. Project Cost In The Form Of Land, Building, Plant & Machinery , Misc Fixed Assests, Preoperative Expenses, Margin Money Or Working Capital, Contingencies.

II. Means Of Financing Which Includes Shareholder Fund, Borrowed Fund Etc.

III. Sources And Uses Of Fund Is Assessed

IV. Performance Indicators Like Net Sales, Net Profit Etc.

V. Sensitivity Analysis / Risk Analysis.

10. Socio Economic Impact Assessment Includes Economic Social Environment Considerations, Status Of Government Consents.

11. So In This Way Working Of Appraisal Cell Is Carried Out In RIICO.

Analyzing the Appraisal Process

1) Detailed Appraisal:-

In This Course Of Appraisal Of A Project The Team Of Appraisal Cell Has To Look Into Various Important Parameters Like That Cost Of The Project, Promoters Contribution, Employment, Capital Cost Per Person , Debt To Equity Ratio, Security Margin, Debt Service Coverage Ratio , Break Even Point At Installed Capacity And Optimum Capacity, The Cash Break Even Point Is Also Calculated At Installed & Optimum Capacity.

Now The Capital Cost Per Person Is Calculated With Aid Of The Following Formula.

I. Capital Cost Per Person:- =

cost of the project

the number of employee

Ex: Cost Of The Project 156.00 Laks

Employment (Existing) 73 Persons

Employment (Expansion)14 Persons

Capital Cost Per Person (Expansion) = 156 = Rs.11.14 Lakhs.

14

2. Debt To Equity Ratio:- =

Term Loan

Equity (Promoters)

Ex. Term Loan Rs.109 Laks

Promoters Contribution 47 Lakhs

Therefore, Promoters Contribution In %=(47/156)&100=30.13

Debt To Equity = 109/47=2.32:1

It indicates that industry is able to pay his debts.it should always more than 1.5.

3. Security Margin =

Fixed Assets-Term Loan

Fixed Assets

Ex. Fixed Assets = 250 Lakhs

Term Loan = 109 Lakhs

Security Margin = 250-109 *100= 56.4 %

250

The Term Loan Of Rs 109 Laks Would Be Secured By Fixed Assets Of 250 Laks Providing Security Margin Of 56.4 %..

It should always more than 25%.below this project can not approved.

4. Break Even Point=

(Fixed Cost/Contribution)*100

Now While Calculating The Bep At Optimum Capacity RIICO Has The Criteria That 70 % Is The Utilization Of The Unit.

5. Cash Break Even Point = (Fixed Assets-Depreciation)

Contribution

6 .Debt Service Coverage Ratio =

Pat+Depreciation+Intrest On Long Term Loan

Interest On Term Loan + Principal Term Loan

Ex. Pat = 40.57 Lakhs

Depreciation = 387.60 Lakhs

Interest On Term Loan @ 13.5 %

Term Loan = 109 Lakhs

Interest On Term Loan = (13.5*109)/100=14.715 Lakhs

DSCR = (40.57+387.60+14.715)

(14.715+109)

= 3.58:1

The Dscr I.E.3.58:1 Ensure The Debt Serviceability Of The Project. This Ratio Is Calculated In Order To See That The Profit & Other Non Cash Items & Also Interest Are How Many Time Of Expenses Which Include (Loan Amount Along With Interest Accrued On The Laon Amount). At RIICO 1.5:1 Considered As The Standard Ratio Which A Project Must Have .This 3.58 DSCR Indicates That The Funds Required To Cover The Debts Are 3.58 Times Of Debt.

2. Project Implementation and Development Cell

In Appraisal Cell, There Is Consideration On Various Technical, Financial Markets, Socio Economic Aspects For The Assessment.

When The Loan Is Approved A Letter Of Intent Is Sent By RIICO To The Loan Applicant Company.

The Letter On Intent Is To Inform The Applicant That Its Loan Can Be Sanctioned If It Fulfills Certain Terms & Condition Of RIICO.

Various Terms & Conditions Like:

i. The Promoters Shall Raise Entire Promoters Condition As Par The Policy Of The Corporation.

ii. The Interest On The Proposed Loan Shall Be Charged At The Rate Of 12.5 % P.A.( After Reducing 1 % From The Normal Lending Rate Of 13.5 % As The Case Is Eligible Under Incentive Scheme For Good Borrowers) On Quarterly Compounding Basis. Liquidated Damages At 2 % P.A.Shall Be Charged Over And Above The Normal Term Lending Rate On The Amount In Default For The Period Default Continues. The Company Shall Also Be Eligible For Timely Payment Rebate as Per The Policy Of The Corporation.

iii. The Term Loan Shall Be Secured By Providing Personal Guarantee Of Promoters.

iv. The Term Loan Shall Be Repayable In Twenty Four Quarterly Installments.

v. The Promoters Shall Raise Additional Funds From Their Own Sources In The Form Acceptable To The Corporation In Case Of Over Run In The Cost Of The Project And / Or Shortfall In The Mean Of Finance.

vi. The Company, Its Promoters & Guarantors Would Give Their Consent & Authorize RIICO To Disclose Their Names, With Amount Of Defaults , To The Banks/Fis & Public At Large By Way Of Publishing In The Newspaper & Through Electronic Media In The Event Of Default In Repayment Of Loan & Interest.

vii. The Promoters / Directors Would Give An Undertaking To Seek Written Permission From The Corporation, In The Case The Company Goes For Expansion Or Takes Up A New Project. In The Event Of Failure To Do So, The Corporation Will Have The Right To Seek Prepayment Or To Recall The Loan.

viii. Subsequent Disbursements:

ix. After Site Visit And Verification Of Deployment Of Funds

x. [pic]

Conclusion:-

this graphs represents the amount which was disbursed between year 2005 to 2010. It shows the increasing trend of disbursing the term loan till year 2007 the achievements excedded the targets but in successive years it got reduced due to delegation of powers for disbursing the term loan and unable to recover the loan amount.

3.Follow Up & Recovery Cell

Function Of F& R Cell:-

❖ Recovery Of Term Loan And Interest

❖ Re Structuring Of Liabilities Through Re Schedulement, Re Fixation , Determents , Waiver & Funding

❖ Disposal /Sale Of Fixed Assets Of The Units Taken Over By The Corporation Under Section 29 Of Sfc Act.

❖ Preparation of Proposal for Settlement of Term Loan Dues of Npa’s Through One Time Settlement.

There Are A Total Of 8 Defaults That Can Be Attempted By Entrepreneur I.E

4 Interests Default On Quarterly Basis: 15 Jan, 15 April, 15 July, 15 October

4 Installments Default On Quarterly Basis : 15 Feb , 15 May, 15 August, 15 November..

Each Industrial Area Is Provided With Power, Street Light, Water Supply, Road Linkages And Also With Basic Social Infrastructure.

❖ Nearly Rs. 8000 Million Have Been Spent On Pooling Infrastructure Services In These Industrial Areas By RIICO

❖ It Provides Total Infrastructure Support To Industrial Projects In Rajasthan By Way Of Developing Industrial Areas And Townships.

❖ RIICO Accords Priority To Development To Development Of Social And Industrial Infrastructure In And Around Industrial Areas.

Social Infrastructure Includes Educational Institutions, Parks, Post Offices, Banks, Shopping Complexes, Housing, Etc.

Follow Up And Recovery Cell

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Conclusion:-

this table represents targets and achievements by RIICO.in year 2009-10 RIICO recovery of term loan was more than targets as compare to other previous years.

Term Loan Outstanding:-

[pic]

Conclusion:- it reveals that term loan which was outstanding by industrialist.

Special purpose parks

RIICO Has Also Embarked Upon Creation Of Special Purpose Industrial Parks With Excellent Infrastructure Facilities For A Particular Type Of Industry.

The Locations For These Industry-Specific Areas Are Carefully Selected After Assessing The Availability Of Related Resources Such As Raw Material, Labour Etc. Some Of The Important Parks Are:

• Special Economic Zones For Gems & Jewellery (Sez Phase I And Ii At Sitapura, Jaipur)

• Special Economic Zones For Handicrafts (Shilpgram, Boranada, Jodhpur)

• Special Economic Zones For Handicrafts (Shilpgram, Jaisalmer)

• Agro Food Parks

(Ranpur, Kota),

(Boranada, Jodhpur),

(Sri Ganganagar),

(Mia, Alwar),

✓ Honda Siel Cars India Ltd. (Honda, Japan)

✓ Genpact (Ge Capital, Usa)

✓ Ericsson Telecommunication Ltd. (Lm Ericsson, Sweden)

✓ Gillette India Ltd. (Gillette, Usa)

✓ Bosch & Lomb Eye Care Pvt. Ltd. (Bosch & Lomb Inc., Usa)

✓ Climate Systems Ltd. (Ford Motor Co., Usa)

✓ Sicpa (India) Ltd. (Sicpa, Sweden)

✓ Motor Industries Co. Lte. (Mico) (Bosch, Germany)

✓ Aksh India Ltd. (Rosendaul, Austria)

✓ Sakata Inx (India) Ltd. (Sakata, Japan)

✓ Electrolux Kelvinator Ltd. (Ab Electrolux, Sweden)

✓ Ocap Chassis Parts Pvt. Ltd. (Ocap Spa, Ltaly)

✓ Cooper Automobile Products Ltd. (Champion, Usa)

✓ Nission Brake India Pvt. Ltd. (Nission, Japan)

✓ Otsuka Chemical (India) Pvt. Ltd. (Otsuka Chemical Co., Japan)

(III) Infrastructure development Activities:

❖ RIICO Has 26 Regional Offices All Over Rajasthan Which Administer The Development Of Land Related Infrastructure For Industrialization.

❖ RIICO Is Acquiring About 60395 Acres Of Land And Developed 322 Industrial Areas Spread All Over The State, Of Which Around 98 Industrial Areas Are Located Either On Golden Quadrilateral Corridor Of On East~West Corridor Or On North~South Corridor Or On National Highways. It Is Continuously Acquiring And Developing More Land.

• Export Promotion Industrial Parks (Epip) (Jaipur, Boranada (Dodhpur) And Neemrana)

• Information Technology Parks (Jaipur, Jodhpur, Kota And Udaipur)

• Textile City (Bhilwara)

• Leather Complex (Manpur Macheri, Jaipur)

• Ceramics Complex (Khara, Bikaner)

• Bio-Tech Parks (Sitapura-Jaipur And Chopanki-Bhiwadi)

• Apparel (Mahal, Jaipur)

• Stone Park Mandore At Jodhpur,

Dholpur (Bharatpur)

• More Than 27364 Industries Are In Production Within The Industrial Areas Developed By RIICO In Rajasthan.

(Iv) Financial and Accounting:

(I) Corporate Accounts Cell:-

• Annual Budget And Balance Sheet.

• Audits: Statutory, Ag's

• Issue Of Utilization Certificates Of Grants/Subsidies.

(

Ii) Taxation Cell:-

• Corporate Tax Planning, Wealth Tax, Service Tax, Tax Audit Etc;

• Matter Relating To Section 801 Of Income Tax Act.

(Iii) Corporate Planning:-

• Reporting To Government And Management:

• Updating Of Cmi's Websites- Major Projects Of State/Central Government;

• Compliance Of Budget Speech, Governor's Speech, Cm's Speech Adn Assurances As Well As Election Manifesto, Achievements Of Present Government.

4.Industrial Promotion and Infrastructue Finance- IPI Cell:

there are a total of 27 branch offices and the in charge of various unit labels is a senior regional manager and he manages development of infrastructure of industries which are under him.

Explanation :- the power of rate fixation in with managing director. But if land which are under 10,000 sqm, the allotment can be done by regional manager.they can do :

• Make layout plan

• Do survey by site visits

• Go to town planning section there are different industries in terms of plot recognition.now deputy manager planned the plot and then fixes the rate.

• There must be minimum 2 account at branch level like :deposite account and operating account.

Deposite account:- it is in form of cash whether it is cash realization, all must be deposite in this account.

Operating account:-all miscellaneous expenditure, development, maintenance all must be deposite in its account . this account is operated on the basis of cash flow statement, it consist of expenditure, assessment, projection of rest of projects which is send to head office at 7th of every month by regional manager after then realization of money takes place.

Both accounts are jointly operated.

• Remittances Of Funds, Compilation Of Budget And Balance Sheet Of Unit Offices;

• Issue Of Administrative Sanctions, Scrutiny Of Tenders And Concurrence.

5. Audit:

Audit means identifying the deviation from the set rules and regulation, norms, procedures and guideline in organization. The deviation can be of two type:

✓ Bonafied

✓ Melafide (intentially)

Types of audit in organization :

• Statutory audit

This audit is done by any chartered accountant’s firm, this is necessarily be important because , papers of this audit is submitted in income tax department.this audit is done in any company whether it is public or private.

In RIICO, statutory audit is done in may last week.

• Internal audit

This audit is not compulsory for any firm, but if it is done them it helps the management in a way whether company follows its set rules and regulations or not.also on the basis of internal’s audit’s report statutory report is made.

It can be half yearly, annually or on daily basis.anyone within the organization or outside the organization can do this audit.

• Accountant general audit. Government of india established as a officer which is called CAG (comptroller and audit general of india) in new delhi, under there are many AG’s deputy AG’s every state has its own AG office.

The public undertaking committee ( PUC ) of government of rajasthan examines whether proprietaryship is proper or not. All bureaucrats have fear of this audit as public money is invested in it

(Vi) Corporate accounts and taxation cell

All payments and voucher of any types are made under this cell

All books of account, ledger, journal, subsidiary ledger ae maintained by this cell.

Other working includes in this cell are:

• Preparation of monthly trial balance

• Preparation of quarterly financial statements

• Preparation of annual balance sheets.

• Internal audit of accounts

• Preparation of budget

• Monitoring of budget.

• Filling of various returns of RBI.

(Vii) Fund Management:

• Bank Loans, Investment Of Surplus Funds, Withdrawal From Public Deposit Account, Establishment Matters Of Finance Division.

Research Methodology

Objective of the research

General objective:-

➢ To understand the loan sanction of RIICO

Specific Objectives:

➢ To become well acquainted & familiarized with the basics of industry financing & the mechanics of the market.

➢ To study in detail the various terms, conditions and terminologies used in RIICO

➢ To understand the application of knowledge, legal background of financial procedure while taking loan. ➢ To understand about detailed analysis appraisal with the help of case

➢ To understand the role of project implementation and development cell

➢ To understand about various schemes offered by RIICO for term loan

➢ To understand about role of RIICO in development of Indian economy

➢ To understand the financial assistance by RIICO

Limitations of the study

➢ Difficulty in collection in data ➢ Reliability of data

➢ Difficulty to reach definite conclusion: ➢ Inadequacy of sufficient material such as ca.certification certificate, means of finance of project,letter of intent etc. ➢ This study is limited to Rajasthan only

Source of collection data:-

The Project Has Been Prepared With The Help Of Secondary Data Available From RIICO (H.O). Another Steps Has Been Data Collection From Secondary Sources Such As Websites, Financial Journals, Magazines, Newspaper,Books, Literatures Etc.The use Of Secondary Data Has A Numbers Of Benefits.

✓ Time Conservation

✓ Better Quality Of Material Due To Expert People Involvement.

✓ Easy To Compare

Also Some Projects Have Been Appraised Have Been Used As A Case Study In Order To Understand The Appraisal System At RIICO And Also To Understand Its Financial Nuiances.

Significance/importance of study

A loan proposal system is by far the heart procedure, which is security, is given.

In this aspect basically the valid extract are taken from the report and the data enables any credit officer to take decision regarding finalization of loan proposal. Credit appraisal system is summary of extracted records. Regarding verification made towards the profile of the applicant. It is presentation of report in suitable format.

While easily reflect the eligibility of loan procedure via tenor eligibility E.M.I. (equated monthly installment)

The appraisal is done for different purpose they are as follows:

1) To check the financial and technical feasibility of project

2).To knows the customers financial assistance & experience.

3) To know that whether he is taking the loan from other bank or non-banking

Financial institution and whether he is able to paying timely to pay installment to

Satisfy their loan amount taken by particular reasons

Thus the appraisal of credit appraisal is very much important for the disbursement of loan and advances

Financial assistance by RIICO:

RIICO Is A Premier Term Lending Institution In The State. It Provides Term Loan, Working Capital Term Loan, Etc Under Various Schemes For Industrial, Infrastructure And Commercial Projects. RIICO's Assistance To 945 Projects So Far, Has Catalyzed Investment To The Tune Of Rs. 60,108 Million And Generated Employment For Over 98,089 Persons.

A) Schemes And Eligible Projects:-

RIICO Various Financial Schemes To Its Borrowers, They Are:

(A) Scheme 1: Project Loan (Annexure A)

(B) Scheme 2: Equipment Finance Scheme

(C) Scheme 3: Working Capital Term Loan

(D) Scheme 4: Medium Term Multi Purpose Loan

(E) Scheme 5: Hotels & Tourism Related Projects

(F) Scheme 6: Flexi Loans For Hotels & Hospitals

(G) Scheme 7: Credit Schemes For Builders

(H) Scheme 8: Medium Term Loan Against Securitiza- Tion Of Fixed Assets

(I) Scheme 9: Short Term Loan To Existing Good Borrower

RIICO Provides Term Loan Assistance To Industrial And Commercial Projects. Assistance Is Also Provided For Expansion, Modernization, Diversification, Etc.

❖ Infrastructure Projects Such As Bridges, Roads, Flyovers, Power Plants, Etc Are Considered, On Merits.

❖ Commercial Projects Such As Multiplexes, Commercial/ Residential Complexes, Cinema Halls, Shopping Malls, Hotels, Motels, Schools, Colleges, Hospitals, Amusement Parks, Etc. Are Considered, On Merits.

Apart From Project Finance, The Corporation Provides Loans Under The Following Schemes:

Equipment Finance Scheme

Working Capital Term Loan Scheme

Medium Term Multipurpose Loan Scheme

Credit Scheme For Builders/Commercial/Residential Complexes

Short Term Loan

B) Rate Of Interest:

▪ Present Rate Of Interest - 13.5% P.A. In General Except For Real Estate Projects Which Is 15.5% P.A.

▪ Rebate For Timely Repayment Of Loan In General @ 2.00% For Real Estate Cases @ 0.50%

▪ Additional 1% Rebate To Good Borrowers (Except Real Estate Cases)

C) Application And Fees:

The Corporation Is Levying Processing Fee, Service Charges And Upfront Fees As Per Details Below:

|S.No. |Category |Rate Of Fee/Charges |
|1 |Processing Fee |0.1% Of The Term Loan Applied For (In Case Of Good Borrowers As Well As New |
| | |Borrowers) |
|2 |Service Charges In Lieu Of Legal Charges &|For Good Borrowers |
| |Reimbursement Of Expenses On Inspection, |0.05% Of The Sanctioned Term Loan Subject To A Maximum Of Rs. 4.00 Lakhs. |
| |Etc. |For New Borrowers |
| | |Seeking Assistance Of Above Rs. 1.00 Crores, 0.40% Of The Sanctioned Term |
| | |Loan Subject To A Maximum Of Rs. 4.00 Lakhs. |
|3 |Upfront Fee |For Good Borrowers |
| | |0.10% Of The Sanctioned Term Loan Subject To A Maximum Of Rs. 4.00 Lakhs. |
| | |For New Borrowers |
| | |Seeking Assistance Of Above Rs. 1.00 Crores @ 0.50% Of The Sanctioned Term |
| | |Loan Subject To A Maximum Of Rs. 4.00 Lakhs. |

*Service Tax And The Cess Thereon, As Levied By Government And Applicable From Time To Time, Shall Be Extra.

The Corporation Is Also Levying Service Charges And Up- Front Fee. The Details Are As Per Table As Under.

Details Of Processing Fee, Upfront Fee And Services Charges

In Case Of Fresh Starters Seeking Loan Assistance Up To Rs. 1.00 Crores, Processing Charges, Service Charges And Upfront Fee Shall Be Charged At 0.10%, 0.15% And 0.25%, Respectively On The Loan Amount.

Note: Composite Fee @ 0.25% Would Be Levied On The Term Loan Swapped By The Corporation (I.E-, 0.1% As Processing Fee, 0.05% As Service Charge & 0.1% As Upfront Fee) Shall Be Charged Provided The Applicant Meets The Criterion Of Good Borrowers Scheme Of The Corporation.

• Applicants Desirous Of Availing Financial Assistance From The Corporation May Submit Application In Prescribed Format Along With Processing/Application Fee To The General Manager (Appraisal), RIICO Ltd., Udyog Bhawan, Tilak Marg, Jaipur-302005 Or Any Of The 26 Unit Offices Of The Corporation In The State Or The New Delhi Office. The Printed Application Forms Are Available At The Head Office Of The Corporation At Jaipur, Delhi Office At Bikaner House And Unit Offices In Rajasthan On Payment Of Rs. 100/-. The Application Form Is Also Available On RIICO's Website I.E. Http://Www.RIICO.Co.In/Loanapp.Htm

• In Case Application Is Submitted On Downloaded Application Form, It Should Be Accompanied By Dd Of Rs. 100/- In Favour Of ' RIICO Ltd.

D) Repayment Reriod:

❖ The Term Loans Are Repayable In Six To Eight Years, Including Moratorium, Depending On Cash Flow Of The Project.

❖ For Schemes Other Than Project Finance, As Given Above, The Loans Are Repayable In Five Years Period Including Moratorium Of 6~12 Months.

❖ Short Term Loans Are Repayable In 18 Months.

It Provides Incentive Scheme For The Good Borrowers, Which Can Be Understand Through The Following Details:

|S.No. |Name Of The Scheme |Incentive Scheme For Good Borrowers |
|1 |Purpose Of Loan |Fresh Loan Sanctioned By The Corporation For Meeting Various Financial Needs|
| | |Of The Borrowers. |
|2 |Eligibility Criteria |I. Existing Good Borrowers Of RIICO As Well As Other Financial Institutions |
| | |Classified As Standard Assets As On Close Of The Financial Year. |
| | |Ii. Borrowers Having Net Worth Of At Least Rs. 1.00 Crore And Annual Turn |
| | |Over Of Rs. 1.00 Crore As Per The Last Audited Annual Accounts. |
| | |Iii. The Borrower Should Have Three Years Track Record Of Consistent |
| | |Turnover And Cash Profits With Good Financial Position. |
| | |Iv. The Borrower Should Have Three Years Satisfactory Repayment Record With |
| | |The Financial Institutions/ Banks. |
| | |V. The Portion Of Plant And Machinery And Miscellaneous Fixed Assets Shall |
| | |Be Secured Additionally By Collateral Security, The Value Of Which Shall Be |
| | |In The Same Ratio In Which The Term Loan Is Being Considered For Financing |
| | |The Project. |
| | |Or |
| | |The Promoters' Contribution In The Proposed Project Should Be Minimum 30% Of|
| | |The Project Cost. |
| | |Or |
| | |The Overall Debt To Equity Ratio Of The Company/Firm Should Not Exceed |
| | |1.25:1 |
|3 |Loan Limit |Not Less Than Rs. 50.00 Lacks. |
|4 |Interest Rate |1% Less Than The Prevailing Rate Of Interest (Excluding Real Estate |
| | |Projects). |
|5 |Rebate On Timely Payment |As Per Prevailing Policy- 2% Weft 16.07.2009. |

Notes:

1. Existing Borrowers Having Loan Account (S) With The Corporation Can Avail Incentive Under This Scheme Provided The Loan Account (S) Is Classified In The Standard Assets Category And Repayment Of At Least 8 Quarterly Principal Installments Including The Moratorium Period Or Completion Of 3 Years From The Date Of First Payment Of Quarterly Interest, Whichever Is Later.

2. Existing Borrowers Availing Rebate Under Graded Interest Rebate Scheme (Gars) Shall Have Option To Switch Over To This Scheme, If Otherwise Eligible. Combined Benefit Shall, In No Case, Be More Than The Benefit Available Under This Scheme.

D) Procedure For Sanction Of Financial Assistance:

▪ Receipt Of Application And Formation Of Appraisal Team.

▪ Consideration Of Proposal By Ipcc To Prima Facie Decide Acceptance Or Otherwise And Broad Parameters.

▪ Detailed Appraisal Of Loan Application By The Appraisal Team.

▪ Appraisal Memo Put Up To The Financial Assistance Approval Committee.

Appraisal Memo Submitted To The Competent Authority With The Recommendation Of Fac For Consideration And Sanction Of Financial Assistance.

Appraisal Cell

Sanctioning Authority

Delegation Of Powers

(I) For All Projects In General:

Managing Director Term Loan Upto Rs. 10.00 Crore

Ers (Equipment Refinane Scheme) Rs. 4.00 Crore

Industrial Committee Term Loan Exceeding Rs.10.00 Crore

But Not Exceeding Rs. 15.00 Crores

Board Of Directors Term Loan Exceeding Rs. 15.00 Crores

(Ii) For Construction/ Real Estate Projects:

Managing Director Term Loan Upto Rs. 10.00 Crore

Ers (Equipment Refinane Scheme) Rs. 4.00 Crore

Industrial Committee Term Loan Above Rs. 10.00 Crore

Board Of Directors

Sanctions

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Conclusion:-

Every year RIICO decides targets for disbursement of loan. In the past RIICO could not achieve the targets of loan decided by it, but slowly and gradually RIICO could be able to minimize the differences between target decided for disbursement of loan and actual amount disbursed. When the recession hit the Indian economy in 2008-09 ,growth in each and every sector started declining. Indians are known in the worlds for their saving habits which helped India getting recovered from the recession in the early stage of it. That’s why RIICO was able to meets its targets in year 2009-10.

Project Implementation & Disbursement Cell:

▪ Role Of Pid Cell After Issue Of Sanction Letter (Loi)

▪ Loan Disbursement After Ensuring Requisite Formalities.

▪ 20% Disbursement Upon Ca's Certification.

▪ Letter Of Comfort (Loc) Is Issued For Opening Of Foreign Letter Of Credit (Flc).

▪ 100% Disbursement To Good Borrowers Under Wctl, Mtmpl And Short Term Loan Schemes.

▪ Site Visit By Professional Team For Verification Of Physical And Financial Progress.

Follow-Up & Recovery Cell:-

▪ Recovery Of Term Loan And Interest

▪ Re-Schedulement And Re-Fixation Of Principal Term Loan.

▪ Rehabilitation Of Assisted Sick Units Including Those Units Registered With Bifr/Aaifr.

▪ Disposal/Sale Of Fixed Assets Of The Units Under The Sfc Sct & Sarfaesi Act

▪ Preparation Of Proposals For Settlement Of Term Loan Dues Of Npa's Through One Time Settlement.

▪ Maintenance Of Investment Accounts & Seed Capital Accounts

▪ Audit Of Investment Accounts

Sector-Wise Investment Portfolio 2009-10 in various industry

[pic]

Conclusion:-

In the development of indian economy RIICO has made contribution to a great extent. There are Various sectors like real estate. Textile, tourism, electronics, steel, engg & many more,which get loan from RIICO.Textile sector(40%) is the leader in getting loan from RIICO follwed by real state(34% )

Status Of Sick/Taken Over Units:-

|S.No. |Particulars |No. Of Units |
|1 |Units Pending With Bifr/Aaifr |12 |
|2 |Units Under Possession Of Ol/Dri/Recommended For Winding Up |17 |
|3 |Units In Possession Of RIICO |14 |
|4 |Units In Possession Of Rfc & Others |1 |

Issues To Be Addressed:-

▪ Upgrading The Existing Infrastructure Of Computerized Investment Accounts To Contemporary Platforms Of Data Base Management Systems (Dbms) For An Efficient And Effective Management Of Investment Accounts.

▪ Enhancement In Delegation Of Powers In Case Of Sale Of Assets.

Interest Free Sales Tax Loan:-

Schemes: Term Loan Assisted Units Were Sanctioned Interest Free Sale Tax Loan.

Actvities

▪ Recovery Of Interest Free Sales Tax Loan And Interst.

▪ Handing Court Cases Pertaining To Interest Free Sales Tax Loan.

Financial Status (Rs. In Crore)

|No. Of Cases |Amt. Released |Amt. Recovered |Amount Outstanding |
|344 |65.11 |60.15 |4.96 |

State Investment Subsidy:-

Schemes: Manufacturing Units Were Sanctioned State Capital

Investment Subsidy up To Rs. 15.00 Lakhs By State Govt. To Catalyze Industrialization

Activities:-

▪ Recovery Of State Investment Subsidy From Term Loan Assisted Units Which Have Violated Laid Down Conditions.

▪ Recovery Of Dues Of Interest On Advances Made Against State Investment Subsidy.

▪ Handing Of Court Cases Pertaining To Subsidy.

Infrastructure Development

Expenditure On Infrastructure Activities (Rs In Crores)

|Year |Target |Comp. Of Ia |Dev. Of Ind. Areas* |Maint. Exp. Of Ind. |Total Exp. |
| | | | |Areas | |
|2005-06 |121.93 |14.56 |38.62 |17.78 |70.96 |
|2006-07 |358.98 |228.31 |74.08 |23.50 |325.89 |
|2007-08 |412.77 |220.15 |127.24 |40.24 |387.63 |
|2008-09 |853.74 |670.57 |122.88 |31.80 |825.25 |
|2009-10 (31.10.2009) |371.95 |49.95 |56.29 |15.36 |121.59 |

*Expenditure On Civil Works E.G. Road, Drains, Wss, Power Supply Etc.

Now Let Us Understand Through Following:

|Sectors |Number Of Units |
|Steel |4 |
|Textiles |27 |
|Engineering |3 |
|Hotels & Services |(1+1) 2 |
|Real Estate |6 |
|Miscellaneous |1 |
|Total Units Appraised In 2007-08 |43 |

Table: Number Of Units Appraised In Different Sectors In The Year 2008-09

In The Financial Year 20008-09, A Total Of 43 Unit Were Appraised Out Of Which 27 Units Of The Textile Sector Were Appraised And The Percentage Composition For The Same Was The Highest With 63%. And For The Same The Total Term Loan Sanctioned For This Sector Was Rs. 4283.2 Lakhs And The Total Sanctioned Project Cost Amounted To Rs. 5643.5 Lakhs. The Second Sector Where The Loan Sanctioned Was Highest Next To Textiles Is The Real Estate Sector With 14% Following The Real Estate Sector Is The Steel Sector With 9%. Whereas Engineering, Hotels & Services, Miscellaneous Comprised Of 7%, 5% And 2% Respectively.

Figure: Sanctioned Project Cost And Term Loan Sanctioned For The Year 2007-08

The figures Shows The Amount Of Loans Sanctioned For The Different Sectors And The Amount Of Sanctioned Project Cost For The Different Sectors In Which The Appraisal Had Been Done At RIICO By The Appraisal Cell In The Year 2007~08. The Real Estate Sector Shows The Highest Figures In Which The Amount Of Term Loan Sanctioned Was Rs. 5937.6 Lakhs And The Total Sanctioned Project Cost For This Sector Was Rs. 11920.41 Lakhs. The Huge Amount Of Loan Sanctioned In This Sector Is Owed To The Fact That Most Of These Projects Were For The Commercial Sector Which Involves Huge Cost.

Figure: Sectoral Analysis Of Loan Sanctioned For The Year 2009-10

|Sectors |Number Of Units |
|Textiles |17 |
|Real Estate |5 |
|Flour Mill |1 |
|Hotels, Hospitals & Services |2+1+1=4 |
|Engineering |1 |
|Furniture |1 |
|Auto |1 |
|Total Units Appraised In 2007-08 |30 |

Table: No. Of Units Appraised In Diferent Sectors In The Year 2008-09

Figure: Sanctioned Project Cost And Term Loan Sanctioned For The Year 2008-09

The Above Figures Shows The Amount Of Loans Sanctioned For The Different Sectors And The Amount Of Sanctioned Project Cost For The Different Sectors In Which The Appraisal Had Been Done At RIICO By The Appraisal Cell In The Year 2008~09. In Comparison To 2007~08, The Amount Sanctioned To Be Real Estate Sector Is Only Rs. 1000 Lakhs And The Total Sanctioned Project Cost For This Sector Was Rs. 2863.5 Lakhs. Textile Sector Is The One This Year Which Has Been Sanctioned The Highest Term Loan (Total Of Rs. 2169 Lakhs). The Fall In The Amount Of Term Loan Sanctioned In The Real Estate Sector Can Be Attributed To The Slowdown In The Economic Sector & In Comparison To The Other Sectors; Real Estate Sector Is The One Which Has Been Badly Affected.

SWOT Analysis Of Term Loan Of RIICO

Strengths:

• Carrying On Yet Another Important Activity Of Industrial Areas, Making Available Land And All Other Necessary Infrastructure To Industrial At One Point.

• Spread Of Network Through Out Of Rajasthan Having Its Units At One Point.

• RIICO Being Industrial Catalyst Has Very Good Contact With Industrialist And In Industrial Houses.

• RIICO Being Industrial Enterprises Command Whole Hearted With Industrialists And Industrial Houses.

• RIICO Being State Enterprises Command Whole Hearted With Industrial List And In Industrial Houses.

• RIICO Being State Enterprises Command Whole Hearted Administrative And Financial Support Of The State Government For Implementation Of Various Schemes For Industrialization Of The State, Which In Turn Improves Liquidity Of RIICO And Its Connection With Industrialist's Community. RIICO Is A Nodal Agency For Aside Scheme Of The Central Government. It Get Funds For Development Of Growth Centers, Integrated Industrial Development Centers Etc.

• The Quality Of The Personnel Employed By RIICO Is Par Excellence And Capable Of Meeting Out Challenges Posed By Business Competition And Changing Economic Environment.

• A Team Of Sr. Ias Officers Manages RIICO, Which Helps It In Improving Productivity At All Levels, Getting Better Bargain From Commercial Banks Or Other Lending Institutions And Desired Support From Government Functionaries.

Weaknesses:

• RIICO Being State Enterprises Is More Prone To Interfere By State Government, Which Curtail Its Autonomy And Freedom Of Decision Making.

• Sr. Ias Officers Appointed By State Government Manage It, Which Are Frequently Transferred Leading To A Situation Of Unstable Management, Lack Of Vision And Uniform Administrative Directives.

• RIICO Has No Financial Professional On Its Board Or As Chief Executive Officers Of Finance. The Post Of Financial Advisor Is Held By A Person Of Rajasthan Accounts Services On Deputation From State Government, Who Cannot Regard A Finance Professional From Any Count.

• Area Of Operation Of RIICO Is Confined To State Of Rajasthan, This Restricts The Volume Of Business And As Per Commercial Prudence Low Volume Low Profit.

• RIICO Having Legacy Of Government Functioning Has High Overhead Rate. Excessive Manpower Is In Place. There Is No Adequate Control Over Use Of Items Of Stationary, Electricity, Water Telephone Etc.

Opportunities:

RIICO Is The Sole Agency In The Rajasthan Making Available Industrial Land Fully Developed With All Necessary Infrastructure Such As Roads, Street, Light, Water, Power, Drains, Common Facilities, Bank Building, Police Check Post, Post Office Building, Trade Centre, Local Market Etc This Gives An Opportunity To RIICO To Have Dipper Relation With Entrepreneurs Likely To Turn Borrower.

• RIICO Has Well Neat Network Spread Throughout Rajasthan To Administer Its Industrial Areas. These Offices Can Be Utilized To Mobilize The Demand Of Finance And Servicing Of Borrower Without Any Additional Costs.

• RIICO Is A Premier Institution Of The State And Command A Very Good Status In The State, This Commanding Position Can Be Capitalized By Developing Confidence Of The Business Community In The RIICO.

• Sr. IAS Officers Manages RIICO, This Situation Can Be Still Better Exploited, For Bargaining Better Deals From Landing Institutions Of State/Central Government.

• Finance Professionals Can Easily Be Recruited To Head Its Term Loan Activities Which Shall Help RIICO To A Great Extent In Building Its Business, Meeting Challenges Adopting Changes Devising Module Of Achievement, Marketing Of Lending In Competitive Environment.

Threats:

• Many Players' Commercial Banks As Well As Private Parties Who Were Hitherto Extending Short Term Finance Have Come Up In The Lower Cost Of Funds As Compared To RIICO.

• RIICO Is Dependent On Banks For Meeting Out Its Fund Requirement. Hence Flexibility At RIICO End Is Restricted To A Large Extent.

• Average Age Of RIICO Employed Has Touched 50 Years With Restriction On New Recruitment It May Render RIICO An Absolute Organization In A Short Span Of Time. Young Blood With More Energy And New Ideas Is Must To Sustain And Progress.

Problems In Project Financing:

Non Performing Assets:-

RIICO Has The Social Responsibility Of Bringing Balanced Industrial Development Of Entire Rajasthan. This Makes It Imperative For RIICO To Acquire Land In Even Those Areas Where The Economic, Social And Political Climate Is Not Conductive For Industrial Development. The Land In The Ncr And Adjoining Regions Have Only Been Profitable But Those In The Remote And Under Developed Areas Like Badmer, Jaisalmer, Have Failed To Yield The Desired Result. Though The Plots Have Developed But The Disposal Processes Of These Plots Have Stagnated Because Of Reluctance Of The Industrialist To Buy Them. These Plots Have Added To The List Of Dead Stock.

Also In Its Investment, Activity When The Borrower Defaults In The Repayments Of Principal And Interest It Becomes Non Performing Assets For RIICO.

Industrial Sickness:-

RIICO Is Focused On Industrial Development Of Rajasthan Region But Rajasthan As A State Which Has Not Been Able To Lure Foreign Investment and This Has Impeded The Process Of Industrialization In The State. The Slack In The Economic Growth Has Further Compounded The Problem. It Has Made The Investors Shy Away From The Process Of Investment And Absence Of Investment Has Blocked The Option Of Project Financing.

Competition With The Banks:-

The Process Of Project Financing By RIICO Have Been Thwarted By The Banks, Which Have Lower Interest Rates. As A Result The Industrial Communities Have Resorted To Banks For Financing Their Project Rather Than RIICO Finance Through Banks Suits More To Entrepreneur As Working Capital Need Is Also Met By Banks.

Incomplete Documentation:-

Many Time Complete Documents Are Not Furnished By The Applicants. The Past Experience Of RIICO Has Brought To Light Many Cases Where The Guarantors Could Not Be Traced Due To Incomplete Information. As Such If The Venture Fails The Huge Burden Of Bad Debts Falls On RIICO.

Effect Of Globalization And Liberalization:

With The Opening Up Of Indian Economy Globally, Trade Competition Has Become Very Stiff. This Has Largely Affected Industries Of Rajasthan Being Prominent Industrial Centers On Western Side Stands As Barriers For Industrial Progress Of The State.

Changes In Government Policies:

Many Industrial Units Particularly In The Field Of Cement, Chemical, Pharmacy And Copper And Its Allied Products Set Up In Rajasthan Have Gone Sick Due To Government Policies. Opening Up Of Free Imports, Reductions In Excise And Custom Duties Have Turned The Operations Of Unit's Unviable Against The Foreign Material Available In Indian Market.

Political Reasons:-

Many A Decision Bears The Political Pressure India And Rajasthan Cannot Be An Exception Thereof. Investment Decisions Of RIICO Are Also Sometimes Taken In Political Pressure Which Ultimately Turns Into Npa

Lack Of Professional Management:-

RIICO Is Managed By Non Professionals At Decision Making Level. Ceo Is From Ias Who Cannot Be Expected To Understand The Depth Of Industrial Financing.

Recommendations

• RIICO has to build proper planning for the human resources for the coming years as major portion its experienced employees are retiring. RIICO’s HR has to plan for requirement and qualification of the employees as it the major problem of RIICO.

• Experienced employee may train if employment generation fulfills early and proper schedule for training should introduce.

• RIICO should introduce the centralized data software like ERP, SAP, IBM, TIVOLI , so as to reach information to the destination easily. Effectively and timely

• RIICO should have to minimize the file and paper work as it is hectic to handle.

• Professional manpower needs to be engaged for effective marketing of its facilities and schemes.

• As RIICO NPA is around 4.5 % so RIICO have to improve or strengthen the follow up and recovery cell to reduce the NPA.

• RIICO work should be make transparent and hassle free so as to attract to new entrepreneur.

▪ The board of RIICO needs to be made broad based.number of people from IAS cadre nominated by state government should e cut and in their place more and more people from business and professional community and person having wide industrial background should be introduced. They will certainly contribute towards achieving new heights by RIICO in its operation

▪ Awareness Of The Facilities And The Schemes Provided By RIICO Should Be Created Among Local As Well As Business Community.

▪ Special Schemes Should Be Instituted To Attract The Nri Community For Investment.

▪ Interest Rate Should Be Made More Competitive.

▪ Rebate On Interest Rate On Timely Repayment Should Be Continued. Flexibility In Interest Rate Can Be Achieved Through Floating Rate Or Negotiable Interest Rates, Which Will Motivate Entrepreneurs To Take And Repay Loans.

▪ Availability Of Adequate Resources Is Same-Quo-Non For Satisfactory Rate Of Industrialization. RIICO In The Present Circumstances Should Try To Improve The Position Of Its Internal Funds By Realization Of Accrued Income. Further, It Has Made A Good Amount Of Investment In The Share Capital Of Projects, Which If Disinvested Intelligently And Timely, May Become A Good Source For Recycling Of Funds For Attracting New Projects.

▪ The appraisal team should see that the project budget is not overrun.

Suggestions To Project Appraisal Section:

❖ Strengthen Its Project Appraisal System So As To Avoid/Minimize Possible Risk Of Default In Repayments By The Borrowers.

❖ Evolve A System Of Closely Monitoring Assisted Units To Ensure Timely Payment & Speedy Recovery Of Its Dues.

❖ Adopt Risk Management Techniques To Minimize Various Kinds Of Risks Involved In Its Business.

❖ The Appraisal Team Should See That The Project Budget Is Not Over Run.

❖ It Should Also See That The Project Completion Time Is Not Over Run.

Suggestions For Overall System

1) To Increase Awareness In Local As Well As National Or International Level To Attract Global Market.

2) Special Schemes To Attract Different Customer Segments.

3) More Flexible In Interest Rate Changes Like Private Financial Institutions.

4) More Stringent Method For Recovery Of Loan & To Reduce Npa's .

5) Improve Credit & Risk Management.

6) Audit & Control Should Make Independent To Correct The Policies & Directions

7) Use Of Expertise In Appraisal & Recovery.

Conclusion:-

For any country role of finance sector plays a great role after liberalization india economy opened doors for outside company for foreign company also which made Indian economy which became key factor for the growth of Indian economy . there is a positive relationship between industry growth and development of economy . there are many financial insitution which disburses loan foe development of industry. Riico Has Made Remarkable Achievements Since Its Inception Towards Fostering Industrialization In The Rajasthan In Many Facets Like Infrastructure Development, Providing Financial Assistance And Providing Consultancy And Allied Services, But Now With The Emergence Of Ppp(Public Private Partnership) Theme, It Has To Compete With The Private Sector As Well As To Keep Pace With The Rising Competitiveness And To Prove Its Worthiness In Fostering Industrialization In The Changed Scenario riico which is a rajasthan state government owned industry development and investment corporation which disburses loan to various sectors like textile, real estate,marble tourism, etc.in this whole research, researcher has worked on understanding the steps and process of sanctioning the loan.earlier process of sanctioning the loan was very cumbersome in riico. after the Evolution In the IT INDUSTRY time spent on loan sanction process has become very less .earlier it was 45 days now it has come down to 10-15 days .in the appraisal cell application for loan is checked on financial and technical feasibility with the help of help of various parameter such as ratio.it was more then idol then application goes on project implementation and development cell.then verifies each bills with the help of CA. after verifying the all the document such as (bills, means of finance etc.this cell disburses the loan as per the need of the applicant.then IPI cell (infrastructure promotion and development cell) takes care of condition of road or area effected by the organization. this cell helps in development of the area by putting road or street light,etp etc.), if the organization unable to pay the loan amount.then application goes in follow up and recovery cell.this cell appoints board such as (bifr,aaifr) to create rehabilitation programme .

It has been found that RIICO has gone a long way in bringing a huge change and diversification in the growth of rajasthan and bring a industrial revolution here in almost all sectors.in the process it has confronted with various hurdles like non-repayment, mounting NPAs etc.but instead of this RIICO has shown a strong edge to overcome these hurdles and still carrying on this activity and in true sense playing role of “industrial catalyist” RIICO and NBFC has governing powers in hand of government of rajasthan so revenue generated by it goes in welfare of people of rajasthan.

Annexure A

|1 |Name Of The Scheme |Project Loan |
|2 |Purpose Of Loan |For Setting Up Of New Project(S)/Expansion/Modernization/Diversification. |
| | |Investment In Land, Buildings, Plant & Machinery, Misc. Fixed Assets, Margin Money For |
| | |Working Capital, Etc. |
|3 |Eligibility Criteria |Minimum Project Cost Of Rs. 1.00 Crore For New Industrial, Commercial & Infrastructural |
| | |Project(S). |
|4 |Loan Limit |Rs. 4.00 Crores; Loan Of Higher Amount Considered On Selective Basis On Merits. |
|5 |Security Margin |Minimum 25% |
|6 |Promoter's Contribution |Minimum 35% |
|7 |Debt Equity Ratio |1.5:1 |
|8 |Interest Rate |Prevailing Interest Rate. |
|9 |Repayment Period |7-8 Years In Quarterly Installments Including Moratorium Of 1 Year, Depending On Cash Flow |
| | |Of The Project. |
|10 |Rebate On Timely Payment |As Per Prevailing Policy- 2 % Wef 16.07.2009 |

Annexure B

|1 |Name Of The Scheme |Equipment Finance Scheme (Efs) |
|2 |Purpose Of Loan |Providing Quick Finance To Well Establish Industrial Units For Acquisition Of Capital |
| | |Goods/Equipments Not Related To Any Specific Project Both Indigenous And Imported. |
|3 |Eligibility Criteria |Existing Industrial Concern(S) Having Good Track Record And Sound Financial Position. |
| | |The Unit Concerned Should; |
| | |Have Been In Operation For At Least 4 Years. |
| | |Have Earned Cash Profits And/Or Have Declared Dividend On Equity Shares During Preceding|
| | |2 Financial Years. |
| | |Not In Default To Financial |
| | |Institution(S)/Bank(S) In The Payment Of Its Dues. |
|4 |Loan Limit |Maximum Of Rs. 4.00 Crores Under Efs. |
|5 |Security Margin |Minimum 25% |
|6 |Promoter's Contribution |Minimum 22.5% |
|7 |Debt Equity Ratio |1.5:1 |
|8 |Interest Rate |Prevailing Interest Rate. |
|9 |Repayment Period |5 Years In Quarterly Installments Including Moratorium Of 6-12 Months, Depending On |
| | |Repayment Capacity. |

Annexure C

|1 |Name Of The Scheme |Workign Capital Term Loan |
|2 |Purpose Of Loan |To Provide Medium Term Loan For Meeting Working Capital Needs Of A Manufacturing |
| | |Company. |
|3 |Eligibility Criteria |Profitable And Financially Sound Companies Hiving Good Track Record And Satisfying The |
| | |Following Conditions: |
| | |The Company Should Have Paid At Least 30% Of The Principal Amount Of Term Loan |
| | |Disbursed. |
| | |The Company Should Be In Production For The Last 3 Years Having Earned Cash Profits In |
| | |The Last 2 Years. |
|4 |Loan Limit |Maximum Of Rs. 2.00 Crores Subject To Ceiling Of Aggregate Term Loan Of Rs. 4.00 Crores.|
| | |Loan Amount Should Not Exceed The Amount Of Term Loan Repaid By The Company. |
|5 |Security Margin |Minimum 25% |
|6 |Promoter's Contribution |Na |
|7 |Debt Equity Ratio |1.5:1 |
|8 |Interest Rate |Prevailing Interest Rate. |
|9 |Repayment Period |5 Years In Quarterly Installments Including Moratorium Not Exceeding 6 Months. However,|
| | |The Corporation Will Have An Option Of Accelerated Repayments In Initial Years Depending|
| | |Upon The Repayment Capacity Of The Borrowers. |
|10 |Mode Of Payment |Post Dated Cheques Of Principal & Interest. |
|11 |Rebate On Timely Payment |As Per Prevailing Policy-2% Wef 16.07.2009 |

Annexure D

|1 |Name Of The Scheme |Medium Term Multi Purpose Loan |
|2 |Purpose Of Loan |For Meeting Various Financial Needs Of An Assisted Unit Of The Corporation. |
|3 |Eligibility Criteria |Profitable And Financially Sound Companies Hiving Good Track Record Operating In |
| | |Rajasthan & Should Satisfy The Following Criterion: |
| | |The Company Should Have Been Classified As Standard Asset Of The Corporation. |
| | |The Company Should Have Paid At Least One Third Of Principal Amount Of Term Loan |
| | |Disbursed. |
| | |The Company Should Be In Production For The Last 3 Years, Earning Cash Profits In The |
| | |Last 2 Years. |
|4 |Loan Limit |Maximum Of Rs. 2.00 Crores Subject To Ceiling Of Aggregate Term Loan Of Rs. 10.00 |
| | |Crores. The Loan Shall Be Limited To 70% Of Value Of Fixed Assets. |
|5 |Security Margin |Minimum 25% |
|6 |Promoter's Contribution |Na |
|7 |Debt Equity Ratio |1:1 |
|8 |Interest Rate |Prevailing Rate Of Interest. |
|9 |Repayment Period |5 Years In Quarterly Installments Including Moratorium Period Not Exceeding 6 Months. |
|10 |Mode Of Payment |Post Dated Cheques Of Principal & Interest. |
|11 |Rebate On Timely Payment |As Per Prevailing Policy-2% Wef 16.07.2009 |

Annexure E

|1 |Name Of The Scheme |Hotels & Tourism Related Activities-Heritage Hotels, Midways, Motels, Restaurant, |
| | |Amusement Parks, Ropeways, Waterparks, Resorts, Clubs, Boating, Water Games Etc. |
|2 |Purpose Of Loan |Construction Of New Hotel/Motel/Midway/ Restaurant. |
| | |Expansion/Renovation |
| | |Converting Old Forts & Palaces Into Heritage Hotels. |
| | |Plant & Equipment, Electrification, Air Conditioning, Furniture & Fixtures, Health Club,|
| | |Swimming Pool, Indoor Sport Facilities, Shopping Arcade, Garden Equipment And Other |
| | |Essential Amenities. |
|3 |Eligibility Criteria |Assistance Under The Scheme Will Be Available To The Promoters/Concern(S) Having: |
| | |Clear, Valid And Mortgage Able Land Title. |
| | |Building Plan Approval And Noc From Local Authority. |
| | |Assistance Under The Scheme May Be Availed For Purchase Of Land, Construction Of |
| | |Building, Purchase Of Plant & Machinery, Furniture/Fixtures, Etc. |
|4 |Loan Limit |Rs. 4.00 Crores Loan Of Higher Amount Considered On Selective Basis On Merits. |
|5 |Security Margin |Minimum 25% |
|6 |Promoter's Contribution |Minimum 30% |
|7 |Debt Equity Ratio |1.5:1 |
|8 |Interest Rate |Prevailing Interest Rate. |
|9 |Repayment Period |Up To 8 Years In Quarterly Installments Including Moratorium Period Of 1-2 Years. |
|10 |Mode Of Payment |Post Dated Cheques Of Principal & Interest. |
|11 |Rebate On Timely Payment |As Per Prevailing Policy-2% Wef 16.07.2009 |

Annexure F

|1 |Name Of The Scheme |Flexi Loan For Hotels, Hospitals & Nursing Homes |
|2 |Purpose Of Loan |Providing Quick Finance With Flexibility In Utilization Of Loan To Well Established |
| | |Units In Tourism And Health Care Sector For Upgrading, Face Lifting, Modernization, |
| | |Renovation, Additions, Etc. At The Existing Facilities Having Investment In Civil Works,|
| | |Land- Scaping Interiors, Furniture, Equipments Etc. |
|3 |Eligibility Criteria |Existing Unit(S) Having Good Track Record Of Performance And Sound Financial Position, |
| | |Which; |
| | |Have Been In Operation For The Last 3 Years. |
| | |Have Earned Cash Profits In The Preceding 2 Financial Years. |
| | |Not In Default To Financial Institutions/ Banks In The Repayment Of Their Dues. |
| | |Dscr After The Proposed Assistance Is Above 1.5:1. |
|4 |Loan Limit |Maximum Of Rs. 1.00 Crores Subject To Total Debt Exposure In The Unit Including The |
| | |Amount Of Proposed Assistance Shall Not Exceed The Sum Of Prevailing Reserve Price Of |
| | |Land And Valuation Of Building As Per Certified Value. |
|5 |Security Margin |Minimum 25%. Loan Up To 75% Of The Cost Of Modernization, Up Gradation, Renovation, |
| | |Additions, Etc. |
|6 |Promoter's Contribution |Minimum 25% |
|7 |Debt Equity Ratio |1:1 (After Availing The Loan) |
|8 |Interest Rate |Prevailing Interest Rate. |
|9 |Repayment Period |In 5 Years In Quarterly Installments Including Moratorium Period Of 6-12 Months |
| | |Depending Upon Repayment Capacity. |
|10 |Rebate On Timely Payment |As Per Prevailing Policy-2% Wef 16.07.2009 |

Annexure G

|1 |Name Of The Scheme |Credit Scheme For Builders/ Commercial/Residential Complexes |
|2 |Purpose Of Loan |To Provide Quick Finance To Builders To Take Up Commercial/ Residential Complexes To |
| | |Meet The Land Cost, Civil Works And Utility Equipment Like Lift, Dg Set, Etc. |
| | |For Purchase Of Land From Local Authority/ Govt. Authority/Rshb/RIICO Private Parties. |
|3 |Eligibility Criteria |Assistance Would Be Available To The Promoters/Units Having: |
| | |Clear, Valid And Mortgage Able Land Title. |
| | |Approved Building Plan From Appropriate Local Authority. |
| | |Satisfactory Credit Reports And/ Or Record Of Repayment With Financial |
| | |Institutions/Banks. |
|4 |Loan Limit |Not More Than 1.5 Times Of Actual Promoter's Contribution. |
| | |Upto 80% Of Land Value (Excluding Registration Charges) Purchased From Local Authority /|
| | |Govt. Authority/Rshb/RIICO (60% Of Cost Of Land Or Valuation As Per Dlc Rates, Whichever|
| | |Is Less, For Land Purchased Form Private Parties Within Municipal Limits Of Divisional |
| | |Headquarters) |
|5 |Security Margin |Minimum 25% |
|6 |Promoter's Contribution |Minimum 40% |
|7 |Debt Equity Ratio |1.5 : 1 (After Availing The Loan) |
|8 |Interest Rate |Prevailing Interest Rate (Without Benefit Under The Incentive Scheme For Good Borrowers)|
|9 |Repayment Period |5 Years In Quarterly Installments With Moratorium Of 6-12 Months. |
|10 |Mode Of Payment |Repayment Through An Escrow Account* In Which The Sale Proceeds/ Rental Income Of The |
| | |Building/ Area Shall Be Deposited. Noc For Transfer Of Title In Favour Of Purchaser Will|
| | |Be Issued After Deposition Of 60% Of Sale Proceeds As Envisaged Or Actual, Whichever Is |
| | |Higher. |
| | |No Prepayment Premium Shall Be Charged For Prepayment Out Of Sale Proceeds Of Proposed |
| | |Complex. |
|11 |Rebate On Timely Payment |As Per Prevailing Policy. |
|12 |Revival Of Credit Facility |After Full Or Part Repayment Of Term Loan, The Borrower Shall Have Option To Request For|
| | |Revival Credit Facility To The Extent Of Loan Repayment. The Corporation Shall Consider |
| | |Revival Of Such Facility On Payment Of Revival Charges @ 1% Of The Loan Amount. The Loan|
| | |Revival Shall Be At The Prevailing Interest Rate. |

*Escrow Account Is Opened By The Borrowers In Its Bank For Deposition Of Designated Sale Proceeds.

Annexure H

|1 |Name Of The Scheme |Medium Term Loan Against Securitization Of Fixed Assets |
|2 |Purpose Of Loan |To Enable Financially Sound Profitable Units With Zero/Low Debt Components, To Raise |
| | |Funds For Investment In Their Unit(S) Or Associate Concerns For New/ Expansion/ |
| | |Diversification Projects(S), Balancing Equipments, Working Capital Needs, Market/ Export|
| | |Development Programmed, Construction Of Corporate Office/Staff Colony, Repayment Of |
| | |Costly Debts Of The Associate Concern(S), Etc. |
|3 |Eligibility Criteria |The Company Should Be In Production For At Least 5 Years And Earning Cash Profits For At|
| | |Least 3 Years. |
| | |The Company Should Have Satisfactory Record Of Repayment With The Financial |
| | |Institutions/ Banks And Unit Should Have Been Classified As Standard Asset As At The End|
| | |Of Previous Financial Year. |
| | |The Company Should Have Repaid At Least 75% Of The Principal Amount Of Term Loan |
| | |Disbursed To It In Last 8 Years. |
| | |The Performance Of The Industrial Sector To Which The Unit Belongs Is Satisfactory And |
| | |Has Not Declined In The Last Three Years. |
| | |The Technology Being Used By The Industry Is In Tune With The Current Trends. |
| | |Debt Service Coverage Ration Of The Company After The Proposed Assistance Is Not Less |
| | |Than 2:1 |
|4 |Loan Limit |30% Of The Value Of Fixed Assets And The Total Term Loan Repaid By The Unit Subject To |
| | |Maximum Of Rs. 2.00 Crores. |
|5 |Security Margin |Minimum 25% |
|6 |Promoter's Contribution |- |
|7 |Debt Equity Ratio |1:1 (After Availing The Loan) |
|8 |Interest Rate |Prevailing Rate Of Interest. |
|9 |Repayment Period |Not More Than 6 Years In Quarterly Installments Including Moratorium Period Which Shall |
| | |Not Be More Than 12 Months. |
|10 |Mode Of Payment |Post Dated Cheques Of Principal & Interest. |
|11 |Rebate On Timely Payment |As Per Prevailing Policy-2% Wef 16.07.2009 |

Annexure I

|1 |Name Of The Scheme |Short Term Loan Existing Good Borrowers |
|2 |Purpose Of Loan |For Meeting Various Requirements Including The Working Capital Needs. |
|3 |Eligibility Criteria |Existing Good Borrowers Of Ricco As Well As Other Financial Institutions Classified As |
| | |Standard Assets As On Close Of The Financial Year. |
| | |The Net Worth And Turnover Of Applicant Shall Be In The Band Of Rs. 25-50 Lacs And Rs. |
| | |100-200 Lacs Respectively Depending On The Amount Of Loan Sought For In The Band Of Rs. |
| | |1-100 Lacs E.G., For Loan Of Rs. 50.00 Lacs The Applicant Should Have Not Worth Of At |
| | |Least Rs. 37.50 Lacs And Turnover Of Rs. 150.00 Lacs. |
| | |The Borrower Should Have Two Years Track Record Of Consistent Turnover And Cash Profits |
| | |With Good Financial Position. |
| | |The Borrower Should Have Two Years Satisfactory Repayment Record With The Financial |
| | |Institutions/ Banks. |
| | |The Overall Debt To Equity Ratio Of The Company/ Firm Should Not Exceed 1.5:1. |
| | |Borrowers Availing Financial Assistance Under This Scheme Shall Not Be Eligible Under |
| | |Incentive Scheme For Good Borrowers. |
|4 |Loan Limit |Not Exceeding Rs. 100 Lacs. |
|5 |Security Margin |Minimum 25% |
|6 |Interest Rate |1% Less Than The Prevailing Rate Of Interest. |
|7 |Repayment Period |Not More Than 1 & 1/2 Years Including The Moratorium Period That Shall Not Be More Than |
| | |3 Months. |
|8 |Up-Front Fee |0.5% Of The Amount Of Term Loan Sanctioned. |
|9 |Facility To Pre Pay |Facility To Pre Pay The Term Loan Without Levy Of Prepayment Premium. |
|10 |Rebate On Timely Payment |As Per Prevailing Policy-2% Wef 16.07.2009 |

BIBLIOGRAPHY

• 40 th annual report

• The catalysist (the official news letter of RIICO)

• Shemes for financial assistance, RIICO

• Industrial land in rajasthan RIICO

• www.RIICO.co.in

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Project implementation and development cell

Appraisal cell check technical & financial feasiblity

Application form

Follow up & recovery cell

Industrial development and infrastructure cell

Corporate fund and taxation cell