Project report on

A Study on Financial Performance at Karnataka State Financial

Corporation
By

SHREEHARSHA SHARMA
1NT17MBA50

Submitted to

NITTE MEENAKSHI INSTITUTE OF TECHNOLOGY

DEPARTMENT OF MANAGEMENT STUDIES

MASTER OF BUSINESS ADMINISTRATION

Under the guidance

Of
INTERNAL GUIDE EXTERNAL GUIDE
Prof. Hemanth Kumar Mr. Anand Hande
ASSISTANT PROFESSOR Manager (personnel)
NMIT, DEPT OF MANAGEMENT STUDIES KSFC

Department of Management Studies

Nitte Meenakshi Institute of Technology
P.N.No. 6469, Yelahanka
Bengaluru – 560064
(Batch 2017-2018)
 BONAFIDE CERTIFICATE
This is to certify that Mr. Shreeharsha Sharma being USN1NT17MBA50, is a bonafide student
of master of business administration, 4th semester NMIT, Bengaluru, affiliated to Visvesvaraya
Technology of University, Belagavi, A Study on Financial Performance at Karnataka State
Financial Corporation is prepared by his under the guidance of Prof .Hemanth Kumar in partial
fulfilment of requirement for the award of the degree of Master of business administration of
Visvesvaraya Technology of University, Belagavi, Karnataka.

Prof. Hemanth Kumar Dr. Harish Babu Dr.H.C. Nagaraj

Internal guide HOD of the department principal
 CERTIFICATE BY EXTERNAL GUIDE
Karnataka State Financial corporation
Bengaluru
This is to certify that Mr. Shreeharsha Sharma final year MBA student of Nitte
Meenakshi Institute of Technology bearing USN: 1NT17MBA50 has completed
his internship, project report on A Study on Financial Performance at
Karnataka State Financial Corporation. as prescribed by the VTU under my
supervision and guidance.

PLACE: Bengaluru Anand Hande

DATE: Manager (Personnel)
 ACKNOWLEDGEMENT

It gives me a great pleasure to thank for the assistance and contribution of many individuals
who have involved at various stages to prepare this report and to make a success.

My sincere thanks to Karnataka State Financial Corporation, for granting permission to

take up internship in the organisation. I am very thankful to every staff member of KSFC,
specially to my external guide Mr. Anand Hande. Manager, personnel KSFC Bengaluru for
the cooperation and guidance provided to me to during the internship and for preparation of
this project.

I express my grateful thanks to Dr. H C Nagaraj principal, Nitte Meenakshi Institute of

Technology, for his motivation and guidance for the study.

I am indebted to Dr. Harish Babu HOD, department of management studies, NMIT for his
encouragement and advice throughout the study. I would like to express my gratitude to internal
guide Prof Hemanth Kumar, department of management studies NMIT, for his guidance,
encouragement and support to complete this project report successfully.

Heartful thanks to all the faculty members, staff of NMIT, and my parents, friends and all other
who helped me during the course of this study.

Place: Bengaluru Shreeharsha Sharma

Date: (1NT17MBA50)
 DECLARATION
I, Shreeharsha Sharma hereby declare that the internship report entitled “A Study on Financial
Performance at Karnataka State Financial Corporation Bangaluru” has been prepared by
me is the original study conducted during the month of July, 2018 under the internal
supervision and guidance of Prof. Hemanth Kumar faculty in MBA department of Nitte
Meenakshi Institute of Technology, Bengaluru, And external guidance of Mr. Anand
Hande, Manager personnel KSFC Bengaluru.

This project work has been submitted to an autonomous Nitte Meenakshi Institute of
Technology affiliated to VTU.

Date: Shreeharha Sharma

Place: Bengaluru (1NT17MBA50)
 Executive Summary

I, the student of Nitte Meenakshi Institute of Technology have done the internship study at
Karnataka State Financial Corporation Bengaluru Karnataka. Entitled “A Study on Financial
Performances”. I have covered the industry profile, company profile, Minsky’s 7s frame work,
SWOT Analysis, Financial statement with ratio analysis, and learning experience nature of the
state financial corporation and the government policy and procedure.

The detailed study about industry profile under that meaning of State Financial Corporation,
nature of the State Financial Corporation and government regulations.

Under the company profile covered about background of the company, promoter’s
information, nature of business carried, vision, mission and quality policy, recent achievement/
awards, product/service profile, area of operations, market competitors and market share of the
Karnataka State Financial Corporation.

The detailed study about organisation product and service profile and their manufacturing units
and performance analysis of financial statement for the past ten years with ratio analysis.

Mckinscy’s 7s frame work has been studied thoroughly during the organisation study like
structure of the company, skills, strategy, system, staff and shared values.

Strength, weakness, opportunity and threats of Karnataka State Financial Corporation as well
as their strategy to overcome the weakness and tactics for facing threats.

Final content of the report is financial statement analysis and statistical and ratio analysis of
the financial corporation. Under the ratio analysis of financial performance of KSFC using
current ratio, liquid ratio, capital structure ratio, profitability ratio net worth ratios are
calculated for analysing the corporation financial health.
 CHAPTER 1
INDUSTRY AND COMPANY PROFILE
1.1 INDUSTRY PROFILE
State Financial Corporation:
The State Finance Corporations (SFCs) are an integral part of institutional finance structure of
a country. Where SFC promotes small and medium industries of the states. Besides, SFC help
in ensuring balanced regional development, higher investment, more employment generation
and broad ownership of various industries.
State Financial Corporations (SFCs) are the level of Non-Banking financial institution which
plays vital role in development of small and medium enterprises of concerned states. There are
18 State Financial Corporations (SFCs), presently in India. ORIGIN OF SFCs: Parliament of
India passed the State Financial Corporation Act on September 28, 1951 empowering the state
governments to establish financial corporations for their respective regions. State Finance
Corporations provide financial assistance either by way of granting loans or advances or
subscribing to debentures of industrial concerns, or by guaranteeing loans raised by industrial
concerns or by underwriting the stocks, shares, bonds and debentures.
The Indian government passed the State Financial Corporation Act in 1951. It is applicable to
all the States.
The authorized Share Capital of a State Financial Corporation should be within the minimum
and maximum limits of Rs. 50 lakhs and Rs. 50 crores as per the SFCs act 1951. Which can be
extended up to Rs 100 crores with approval of Government of India
It is divided into shares of equal value which were acquired by the respective State
Governments, the Reserve Bank of India, scheduled banks, co-operative banks, other financial
institutions such as insurance companies, investment trusts, and private parties.
The State Government guarantees the shares of SFCs. The SFCs can augment its fund through
issue and sale of bonds and debentures also, which should not exceed five times the capital and
reserves.
The board of directors will be consisting of the following,
a) four directors nominated by the State Government whom one director will be a person who
has expert and experience in small scale industries. Suppose a joint financial corporation, the
number of directors shall be such as the State Governments of the participating State may, by
agreement between themselves each participating State Government nominating not more than
two directors.
b) one director appointed by the Reserve Bank of India.
c) two directors nominated by the development bank (SIDBI).
d) three directors they represent schedule bank, cooperative bank.
e) one director elected by the shareholders of the Financial Corporation.
f) Managing director appointed by the State Government, in consultation with SIDBI.

Definitions
In this Act, unless the context otherwise requires,
(a) "Board" means the Board of directors of the Financial Corporation
(b) "Financial Corporation” means the Financial Corporation established for the State under
section 3;
(c) "industrial concern” means any concern engaged in the manufacture, preservation or
processing of goods or in mining or in the generation or distribution of electricity or any other
form of power;
(d) "prescribed" means prescribed by rules or regulations made under this Act;
(e) "Reserve Bank" means the Reserve Bank of India constituted under the Reserve Bank of
India Act, 1934 (II of 1934);
(f) "schedule bank" means a bank for the time being included in the Second Schedule to the
Reserve Bank of India Act, 1934 (II of 1934);
(g) "underwriting" means contract, with or without conditions, to subscribe for stocks, shares,
bonds, or debentures of an industrial concern with a view to the resale of the whole or any
part thereof.

Features of financial institutions are:

a) It is an institution as well as intermediary.

b) It channelizes savings fund into investment fund.

c) It creates financial assets such as deposits, loans, securities etc.

d) Is includes banking and non-banking institution.

f) Abolished with a clear operating function.

g) Regulated by the government and regulating authority.

IMPORTANCE OF STATE FINANCIAL CORPORATION:

State Financial Corporation is the key institution which fund for economic activates. There are
many advantages for having sound and healthy financial institution in an economy. The
importance of State Financial Corporation is explained below.

a) Provide fund: financial institution provides funds for the investment and industrial activities
these are the active sources which offer appropriate source of fund to the requirement of
institution and individuals.

b) Infrastructure facilities: financial institution also offers basic infrastructure facilities

needed for the development of industrial area, tech parks, road and water etc.

c) Promotional activities: promotional activities are undertaken by the financial institutions

to mobilize the fund, reduce the risk of selling financial securities, arrangements of working
and long-term capital of the business.

d) Development of backward areas: apart from the financial activities, financial institutions
also taken some social responsibility of developing the backward areas at free of cost be
offering credit facilities, free education, employment creation etc.
e) Planned development: financial institution intimates all planned developments in the view
of economic growth of the state. All planned developments are coordinate with the government
plan and social welfare.

FUNCTIONS OF STATE FINANCIAL CORPORATION:

1. Financial Assistance to Small Scale Units: the main functions of state financial corporation
are to provide long term finance to the small and medium scale industrial concerns repayable
with in a period of 20 years.
2. Guaranteeing Loan: the SFCs guarantee loans raised by industrial concerns from
commercial banks and cooperative banks repayable within a period of 20 years.

3. Subscription and Underwriting: the state financial corporation subscribes to the

debentures issued by the industrial concerns repayable within 20 years and also underwrites
the issue of stock, share, bonds, and debentures of industrial concern.

4. Guarantee for Deferred Payments: they guarantee the deferred payments for the purchase
of plant, machinery etc. within country.

5. Acting as Agent of Central and State Government: they act as agent of the central or state
governments or some industrial financing institution for the purchase of plant, machinery etc.
within the country.

6. Capital: the share capital of SFCs is fixed by the concerned state government subject to the
minimum of Rs. 50 lakhs and maximum of Rs 50 crores. The share is subscribed by the state
government, RBI, Commercial banks, cooperative banks, other financial institutions and the
public.

State Financial Corporation in India.

State Financial Corporations (SFCs) are the State level financial institutions which play a vital
role in the growth of small & medium enterprises in the concerned States. They offer financial
assistance in the form of direct subscription to debentures/equity, term loans, guarantees,
discounting of bills of exchange & seed/ special capital, etc. SFCs have been set up with the
purpose of catalysing higher investment, engendering greater employment & extending the
ownership base of industries. They have also started offering assistance to newer types of
business activities like tissue culture, floriculture, poultry farming, services related to
engineering, marketing and commercial complexes. In India, there are 18 State Financial
Corporations (SFCs). These are:

 Andhra Pradesh State Financial Corporation (APSFC)

 Himachal Pradesh Financial Corporation (HPFC)

 Madhya Pradesh Financial Corporation (MPFC)

 North Eastern Development Finance Corporation (NEDFI)

 Rajasthan Finance Corporation (RFC)

 Tamil Nadu Industrial Investment Corporation Limited

 Uttar Pradesh Financial Corporation (UPFC)

 Delhi Financial Corporation (DFC)

 Gujarat State Financial Corporation (GSFC)

 The Economic Development Corporation of Goa (EDC)

 Haryana Financial Corporation (HFC)

 Jammu & Kashmir State Financial Corporation (JKSFC)

 Karnataka State Financial Corporation (KSFC)

 Kerala Financial Corporation (KFC)

 Maharashtra State Financial Corporation (MSFC)

 Odisha State Financial Corporation (OSFC)

 Punjab Financial Corporation (PFC)

 West Bengal Financial Corporation (WBFC)

 1.2 COMPANY PROFILE:

KARNATAKA STATE FINANCIAL CORPORATION

An ISO certified corporation. ISO.9001:2008

Registration Date with Number 30th March 1959 FD.28 BIS 59

Branches 4 circles and 32 branches operated all over Karnataka

Government Act State Financial Corporation Act of 1951

Customer Care +918022263322

FAX +91 80 22250126

E-mail [email protected]

Web Site ksfc.in

Number of Employees 861 Employees, of which, CLASS- A officers 256, CLASS- B

Officers 519, CLASS- C officers 86.

 Karnataka State Financial Corporation

Address  KSFC Bhavan
 # 1/1 Thimmaiah Road
 BENGALURU 560052
 Karnataka
 INDIA
 INTRODUCTION:

Karnataka State Financial Corporation is a State level financial institution established

by the State Government in the year 1959 under the State Financial Corporations Act
1951 to meet mainly the long-term financial needs of Micro, Small and Medium
Enterprises (MSMEs) in the State of Karnataka.

Today, while the State economy is making rapid strides in the global market, KSFC is moving
in tandem. As a pioneering and responsive financial institution, KSFC is fine-tuned to fulfil the
plans and aspirations of entrepreneurs by extending all possible assistance. In the 59 years of
its existence, KSFC has contributed most significantly for the growth of SMEs.
The Mysore government at Rs.2 crores fixed the authorized share capital, as compared to this,
todays authorized share capital is Rs 1000 crores and Paid up capital is 93694.06 subscribed
by the state government of Karnataka, small industries development bank of India, and others.
Today while the state economy is making rapid strides in the global market. Karnataka state
financial corporation is moving in tandem, as a pioneering and responsive financial institution,
Karnataka state financial corporation is fine tuned to fulfil the plans and aspirations of
entrepreneurs by extending all possible assistance. Amendments to the SFCs act provide for
wide ranging scope of assistance and operational flexibility, keeping this in view, Karnataka
state financial corporation has reengineered itself to ensure utmost customer satisfaction with
new energy, trust and speed.

Karnataka state financial corporation is an ISO 9001:2008 certified organization proved to have
played a major role in the industrial development of the state, it is the privilege of, Karnataka
state financial corporation to have assisted many industries that are internationally recognized
like the INFOSYS and BIOCON, Origin engineering, Ambrosia ventures, Green path, Reva,
World Largest Solar Power Plant project at Pavagada, etc. creating an employment opportunity
in the state more than two crores directly and indirectly, in the nukes and the corner of the states

1.3 VISION, MISSION AND QUALITY POLICY:

Vision of KSFC:
a) To reach and cover the entire state of Karnataka.
b) To suit the knowledge of each region in terms of infrastructure and natural resources
industrialization and entrepreneurship.
c) A continuous journey towards the development of MSME and entrepreneurs.
d) To gradually reduces the total amount of NPA.
e) Insist the growth of women entrepreneurship in Karnataka.

Mission of KSFC:
KSFC committed to continually nurture, develop and service the Micro, Small and Medium
enterprise. (MSME), sector through need-based product and services.

Quality Policy:
customer satisfaction and review for continual improvement through professional management
and team work.
Quality Objectives:
a) To effectively identify and assist entrepreneurs in establishing successful business
enterprise.
b) Provide quality financial and related services on a continues basis.
c) To continually upgrade our product or services.
d) To motivating and involving employees to achieve set organisational growth target.
e) To encourage the employees to upgrade and enhance the knowledge and skills through the
effective training and development.
f) To transform organisation to a customer centric institution

1.4 PRODUCT OR SERVICE PROFILE:

FINANCIAL SERVICES:
KSFC is a financial super market. It extends all types of financial assistance in the form of
long-term loans, short-term loans (in the form of working capital term loans and corporate
loans) and other financial services. KSFC’s assistance covers almost all types of industrial and
service sectors. The SFCs' Act prescribes broadly the types of activities, which are eligible for
financial assistance from the Corporation. The Act also provides for SIDBI to include newer
areas of activities for financial assistance from time to time. This apart, the Corporation has
also evolved its own schemes under broad guidelines of SFCs' Act depending upon market
potential. The activities which are eligible for financial assistance from the Corporation are
grouped into following three broad categories:

1. Activities as listed out in the SFCs' Act;

2. Activities specifically permitted by SIDBI;
3. Activities formulated by the Corporation.

As listed out in the SFCs' Act:

The State Financial Corporations (Amendment) Act, 2000, provides the list of activities which
can be covered under the list of industrial concern engaged or to be engaged in:

i. Manufacture, preservation or processing of goods;

ii. Mining or development of mines;
iii. Hotel industry;
iv. Transport of passenger or goods by road or by water or by
air (or by rope-way or by lift),
air (or by rope-way or by lift),
v. Generation or distribution of electricity or any other form of power;
vi. Maintenance, repair, testing or servicing of machinery of any description or vehicles or
motor boats or trailers or tractors or vessels.
vii. Assembling, repairing or packing any article with the aid of machinery or power,
viii. Setting up or development of an industrial area or industrial estate;
ix. Fishing or providing shore facilities for fishing or maintenance thereof;
x. Providing weigh bridge facilities;
xi. Providing engineering, technical, financial management, marketing of other services or
facilities for industry;
xii. Providing medical, health care or other allied services.
xiii. Providing software or hardware services relating to information technology,
telecommunications or electronics including satellite linkage and audio or visual cable
communication.
xiv. Setting up or development of tourism related facilities including amusement parks,
convention centres, restaurants, travel and transport (including those at airports), tourist service
agencies and guidance and counselling services to the tourists;
xv. Construction;
xvi. Development, construction and maintenance of roads;
xvii. Providing commercial complex facilities and community centres including conference
halls;
xviii. Floriculture;
xix. Tissue culture, fish culture, poultry farming, breeding and hatcheries;
xx. Service industry, such as altering, ornamenting, polishing, finishing, oiling, washing,
cleaning or otherwise treating or adapting any article or substance with a view to its use sale
transport, delivery or disposal;
xxi. Research and development of any concept technology, design, process or product whether
in relation to any of the matter aforesaid, including any activities approved by the Small
Industries Bank; or
xxii. Such other activity as may be approved by the SIDBI;

Activities permitted by SIDBI:

i. Construction / buying of ready-built showrooms and sales out-lets (only fixed assets are
eligible for financing, items kept for sale are not eligible for financing);
ii. Construction / buying of ready-built area for establishing departmental stores and shopping
malls (only fixed assets are eligible for financing, items kept for sale are not eligible for
financing);
iii. Setting up of Medical Stores (only fixed assets are eligible for financing, items kept for sale
are not eligible for financing);
iv. Setting up of vocational training centres for imparting technical knowledge to entrepreneurs
for setting up and running units efficiently and to produce quality goods; films.
v. Setting up entertainment industry including production of films.

The area of operation covers the entire State of Karnataka. KSFC has Branches in all the
district headquarters. The industrial units / service sectors established or to be established
within the State are only eligible for assistance. The Branch Offices of the Corporation are
adequately delegated with powers of sanction and disbursement. Generally, requirements of
financial assistance minimum of Rs 5 lakhs to Rs20 crores are handled by the concerned Branch
Office itself, with the approval of delegated authority as per delegation of power given by the
board. Based on the activities permitted under the SFCs’ Act, the Corporation has formulated
various schemes for extending financial assistance. Brief particulars of various schemes are
given under the schemes of the Corporation.

Hire Purchase:
KSFC introduced Hire Purchase scheme which provides a fast-easy alternative to ready cash.
Under this scheme finance is available for procuring vehicles, machinery and equipment’s.

Fund Based Activities:

• Equipment Lease Finance.
• Hire Purchase Scheme.
• Rental Discounting Scheme.
• Bill Discounting Scheme.
• Equity Participation.
• Factoring Facility.
• Subscription to Non-Convertible Debentures.

Non-Fund Based Activities:

• Deferred Payment Guarantee
• Under Writing of Public Issued
• Insurance Activity
• Financial Guarantee

Financial Services:
• Issue Management
• Pre-Issue Project Appraisal
• Foreign Letter of Credit
• Project Report Preparation

The operation of the schemes such as Bill Discounting, Equity Participation, Financial
Guarantee, have been temporarily suspended. The fee based and financial services activities
such as Underwriting of Public Issue, Issue Management, Pre-Issue Project Appraisal and
Project Report Preparation are undertaken by the HP & FS department at head office.

Non-Convertible Debentures:
This scheme was introduced to subscribe the private placement of the debentures issued by the
corporate entities. The proceeds of this debenture issue should be utilised by the companies to
meet their long-term working capital and capital expenditure.

Eligibility Criteria:
Only the corporate entities who satisfy the following norms:
• The Company should fall under the relevant provisions of SFCs' Act with regard to eligibility
for such assistance.
• The company should have been in production for at least 3 years and earned profits.
• The company should have positive net worth.
• The company should not be in default to financial institutions or banks.
• Funds raised through issue of debentures should be utilised to meet long term working capital
margin and up to 50% on capital expenditure.

Limit of Assistance: The minimum limit of assistance will be Rs. 30.00 lakhs and the
maximum limit will be the amounts permissible from time to time under SFCs' Act

Extent of Assistance and the Interest Rate:

The extent of assistance will be determined on the working capital gap and the capital
expenditure requirement. The working capital gap will be calculated by taking the total
requirements of working capital and the bank finance. The coupon rate on NCD facility will
be decided based on the in-house credit rating.
The following is the maximum and minimum loan amount that could be received by the
entrepreneurs:
A. Maximum Limit:
CATEGORY MAXIMUM LOAN

1 Proprietary/ partnership / trust Rs 800. 00 lakh

2 Corporate bodies (both private and public) and registered Rs. 2000.00 lakh
cooperative societies.

B. Minimum Loan Size:

CATEGORY MINIMUM LOAN
1 Minimum assistance Rs 5.00 lakh

2 Medical & veterinary doctors RS 2.00 lakh

Interest subsidy/ subvention scheme for entrepreneurs belonging to all category of

entrepreneurs at 4% net interest rate.
To establish MSMEs manufacturing enterprises and allied services for new investment on
building plant and machinery, minimum loan RS 5.00 lakh. Maximum loan RS 500.00 lakh for
manufacturing enterprises and RS 200.00 for manufacturing and allied services.

To establish MSMEs industry/services sector and expand/ diversity and modernise existing
units by women entrepreneurs, minimum loan RS 5.00 lakh. Maximum loan RS 200.00 lakh
interest subsidy 10% from the Government of Karnataka.

To establish MSMEs industry/services sector and expand/ diversity and modernise existing
units by SC/ST entrepreneurs, minimum loan RS 10.00 lakh. Maximum loan RS 10.00 crores
interest subsidy 10% from the Government of Karnataka.

Sanction and Disbursement Power:

The branch offices of the corporation are adequately delighted with a power of sanction and
disbursement.
KSFC has decentralised system of working. Term loans from Rs 5.00 lakh to RS 100.00 lakh
are proceed at branch office and sanctioned by the branch managers/ AGMs/ DGMs as the case
may be. Term loans above RS 100 lakh are proceed at branch office and sanction at the Head
Office by the General Managers. Up to RS 150.00 lakh, executive director’s up to Rs. 300.00
lakh, managing Director up to RS 500.00 lakh, Executive committee up to RS. 1000.00 lakh
and the board above RS.1000.00 lakh.

Factoring:
Criteria:
• SSI / MSI units who have a minimum three years track record with consistent
profitability and positive net worth.
• SSI / MSI unit should sell its finished products under deferred payment.
• The unit should not be in default to institutions.
• Bill to be discounted must relate to domestic trade debts arising in the usual course
of supplier’s business.
• Based on credit sale of the company for last three years limit will be fixed for utilisation for
each individual case to be reviewed every year.
• The company should provide disclaimer letter from the bank / s who have provided working
capital indicating that the supply bills are not financed by the bank and they have no charge on
the proceeds of the bill. All advance payments are paid to suppliers account to the bank
providing working capital.
• The customers of the company should be reputed or the company should have dealings with
these customers for a minimum period of two years regularly.
• The factoring facility will be provided only from head office.
• Legal documents must be executed by the company to the satisfaction of the Corporation.
• The supplier must submit a monthly statement indicating sale and collections.

Extent of Assistance: 80% of the invoice value including insurance, freight and taxes as
upfront payment subject to the maximum exposure of Rs. 150.00 lakhs per unit including all
other fund-based limits provided to the unit by the Corporation.

Deferred Credit Period: The maximum credit period of the bills eligible for
discounting would be 180 days.

Interest Rates: The current interest rate will be 13.50% p.a. inclusive of interest tax
(interest will be in tune with market conditions) The Corporation will charge penal
interest as under:
• For delays between 00-30 days: 2% p.a.
• For delays between 30-60 days: 3% p.a.
• For delays between 60-90 days: 4% p.a.
Other Charges: Factoring charge of 2% will be charged on the limits (to be paid up
front) at the time of sanction.
Initial processing fee: Rs. 2000/- for factoring limit up to Rs. 25 lakhs and Rs.5,000/-
above Rs. 25 lakhs.
Processing charges Fee for renewal: Non-refundable fee of ½% age on the limit
requested for sanction. At 0.25% of the factoring limit renewed.
Factoring fee: 2% of additional factoring limit (paid up front before availing
additional limit).

OTHER FINANCIAL SERVICES:

General Insurance
KSFC has entered into a strategic alliance with United India Insurance Company, IFFCO-
TOKIO General Insurance Company to market the Non-Life Insurance Products. This would
enable the clients of KSFC to have credit and the insurance under one roof. The premium tariffs
applicable are same as the other
insurance companies and at no extra service charges. An exclusive Insurance Cell with well
trained staff is in operation at Head Office.
The details of the general perils covered are:
• Fire
• Earth quake
• Burglary
• Machine breakdown
• Marine
• Cash safe / transit
• Fidelity guarantee
• Household Insurance
• Personal Accident Cover
• Medical Insurance
• Vehicle Insurance
• Bankers Indemnity
• Trade and Office
• Electronic Equipment.
• Travel Insurance.

Life Insurance
KSFC has entered into strategic alliance with Life Insurance Corporation of India, the largest
and oldest Life Insurance Corporation of the country to market its Life Insurance Products. The
Corporation will help the customers in identifying the tailor-made policies suitable for their
future financial needs and extend professional service from procurement of policies to
settlement of claims/payment on maturity to the customers. The clients of KSFC can avail, as
welfare measures to cover critical illness risks / death risks of their employees and also avail
Group Gratuity schemes to cover their statutory liabilities and obtain tax exemptions on
premiums paid. KSFC will arrange presentation of individual and group products to our clients
at their premises. The services are available at no extra cost at Head Office and at all the
branches of the Corporation situated in the district headquarters. The Corporation believes that
Life insurance is not only an investment decision but also a risk protection. The key persons of
the ventures who have availed the loans from KSFC can avail special policies to protect against
the risk of burden of debt in case of happening of any unfortunate event to the key person.
KSFC do have well trained staff for servicing the clients of life insurance at Head Office as
well as Branch Office.

UTI Mutual Fund Products

KSFC has entered into MOU with UTI MF for distributing UTI MF products. UTI Mutual
Fund is one of the leading Mutual Fund in the country. It has got more than Rs.38,358.00 crore
worth of assets under its management. It has got more than 40 schemes of offer, suitable for
short-term, long-term investments in the category of debt funds, balance funds and equity
linked schemes. The individuals, co-operative societies, private limited companies, charitable
trusts and PF trusts, co-operative banks can invest their investible surplus in the UTI Mutual
Fund Products.
The Corporation has got professionally trained persons to guide in the investment process of
UTI Mutual Fund at Head Office and Branch Offices. The service carries no extra charges.
Monitoring Agency:
As per SEBI guidelines any company which is issuing more than Rs. 500 crore shares for
subscription by the public, has to appoint a monitoring agency. KSFC is a notified agency for
this. The work involves inspection of the books of accounts for the six months, until the of the
project to verify and certify that the proceeds of the issue are utilised towards the objects of
the issue declared in the prospectus. The companies planning to issue IPOs can utilise the
services of Corporation for Monitoring Agency assignment as per SEBI guidelines.

Infrastructure Development:
Infrastructure is an integral part of the services sector and plays a crucial role in the industrial
development. With rapid growth of the economy in recent years, the importance and urgency
of infrastructure development has increased. Recognising this, the Corporation as part of
diversification, has taken up infrastructure development projects with public / private
participation. The Corporation has been initially focusing on identifying valuable lands in the
prime localities in and around Bangalore City owned by various government departments /
governmental agencies / registered societies / trusts etc., exploring suitable infrastructure
development on joint venture basis in respect such joint venture projects. The Corporation takes
care of all the financial tie-ups for development of these properties. The expected income out
of different revenue models will be shared with the owners of the properties in appropriate ratio
on mutually agreeable terms and Corporation understanding the after studying economics /
viability.
The proposed joint venture projects will be of world class and state of art technology. It could
be IT park, shopping mall, commercial complex, SEZ, etc., depending upon the location of the
property and commercial potentiality of the place. This new activity will ensure sustained cash
flow for the concerned owner of the property as well for KSFC by way of rentals and other
earnings which will be mutually beneficial to both the institutions. A separate infrastructure
development department is created for this purpose and is fully functional.

1.5 AREA OF OPERATION:

The corporation extends financial assistance for an enterprise in the state of Karnataka with its
network of 32 branches covering all the district of the state.
Karnataka state financial corporation has branches all over the state, each district has a branch
office, in total Karnataka state financial corporation has 4 circle offices monitoring 13 super
“A” grade branch offices, 9 “A” grade branches and 10” B” grade branches.

Karnataka State Financial Corporation Circles and its Branches.

Bengaluru Circle (Circle I) Mysuru Circle (Circle II)

Area Covered Area Covered
1. Branch office of Bengaluru. 1. Branch of Mysuru.
2. Kolar 2. Mandya.
3.Chikkaballapura. 3. Hasan.
4. Ramanagar. 4. Kodagu.
5. Tumkuru. 5. Mangalore.
6. Chamarajanagar.
7. Udupi.
8. Chikkamangaluru.
Dharwad Circle (Circle - III) Kalburgi Circle (Circle – IV)
Area covered Area Covered
1.Branch office of Dharwad. 1. branch office of Kalburgi.
2.Gadag. 2. Raichur
3. Haveri 4. Bidar
4.Karwar. 5. Yadgir
5. Belagavi. 6. koppal
6.Bagalkot. 7. Bellari
7. Shivamogga. 8. Davanagere
8. Chitra Durga. 9. Vijayapura

1.6 COMPETITORS INFORMATION:

Public Sector Banks and Financial Institutions:
1. State Bank of India
2. Canara bank
3. Syndicate Bank
4. Bank of Baroda
6. Corporation Bank
7. IDBI Bank
8. SIDBI
Private Sector Banks and Financial Institutions:
1. ICICI Bank
2. Axis Bank
3. ING —Vysya Bank
4. Citi Financial Bank
5. Federal Bank
 CHAPTER 2

2.1 MCKINNEY’S 7S FRAMEWORK:

McKinsey 7s model was developed in 1980s by McKinsey consultants Tom Peters, Robert
Waterman and Julien Philips with a help from Richard Pascale and Anthony G. Athos. Since
the introduction, the model has been widely used by academics and practitioners and remains
one of the most popular strategic planning tools. which represents the connections between
seven areas and divides them into ‘Soft Ss’ and ‘Hard Ss’. The shape of the model emphasizes
interconnectedness of the elements.

Structure:
Karnataka state financial corporation follows functional organisation structure in its operation.
A functional organization structure is a hierarchical organization structure wherein people are
grouped based on their area of specialization. These people are supervised by a functional
manager with expertise in the same field. This expertise helps him to effectively utilize the
skills of employees, which ultimately helps organizations in achieving its business objectives.
KSFC has a professional management by the most qualified professionals in the field.
Board of Directors follows.,

Shri I.S.N Prasad I.A.S Chairman (Addi Director of Financial Dept.)

Dr. Ekroop Caur I.A.S Managing Director KSFC.
Shri Anil Kumar Jha I.A.S Principal Secretory to Government of Finance Dept.
Smt..Guangan Krishna I.A.S Commissioner of Industrial Development and Director Of I&C
Shri. K.S. Shrikanth I.A.S Deputy General Manager SIDBI
Shri J Jagadish I.A.S Senior Divisional Manager Div. 2nd Jeev Jyoti LIC of India.
Shri Atul Kumar General Manager Syndicate Bank
Shri K.N Rajanna Ex M.L.A President. KSC Apex bank.LTD
CA S Ananthan Charted Accountant.

Table no 1. Karnataka State Financial Corporation Organisational Structure

Skill:
a) KSFC managers and personals are competent to perform their assigned task, have ability to
resolve any problems either directly or in consultation with other financial executives.
b) The corporation has unique combination of skills and professionals on its pay roll- CAs,
MBAs, MCOM, PhD.BE, ME, MTech, LLB, LLM, MA MPhil,
c) Diversity of human resources is the unique skills and strength of the personals.

Style:
democratic style of management is parameter that should be studied pertaining to the day to
day operation. Management styles vary by institution, level of management, and even from
person to person. A good manager is one that can adjust their management style to suit different
environments and employees. An individual’s management style is shaped by many different
factors including internal and external business environments, and how one views the role of
work in the lives of employees.

Strategy:
a) Using service network effectively to reach the MSMEs.
b) Set less rate of interest loan for women entrepreneur.
c) place a strategic movement special assistance scheme for schedule caste and schedule tribe
entrepreneurs for establishing hand looming and textile units.
e) bring the interest rate for 4 percent in respect of all the category entrepreneurs.
f) KSFC’s Main intention was to promote industries in this place for the cause of socio-
economic development of this under-developed area. KSFC has supported around 18
enterprises by extending loans aggregating to Rs.748.00 lakhs during the FY 2017-18 covering
all the major sectors like manufacture, health, tourism, construction & real estate and other
sectors.

System:
a) Each department working independently with proper coordination among other department.
b) Government act as supremo of this state financial corporation.
c) MIS and AIS is using effectively to operating the day to day business.

Staff:
The manpower strength of the Corporation stood at 861 at the end of March 2018 as against
918 at the end of the March 2017. Of which, 861 Employees, of which, CLASS- A officers
256, CLASS- B Officers 519, CLASS- C officers 86.
Identifying the training needs of employees and based on their designated role and individual
skill / capacities, the Corporation provided suitable training to the employees of the
Corporation. During the year 2017-18, 169 employees (58 Class 'A' employees & 111 Class
‘B’ employees) were sent for in-house and external training to different types of training
programmes.

Shared Value:
a) Transparent in all over operations.
b) The corporation has been established with the basic objective of promoting industrial
development in Karnataka.
c) adopting the principles like Responsive, Innovative and Transparent in their daily routine to
achieve their task.

2.2 SWOT ANALYSIS:

A SWOT analysis is designed to facilitate a realistic, fact-based, data-driven look at the
strengths and weaknesses of an organization, its initiatives, or an industry. The organization
needs to keep the analysis accurate by avoiding pre-conceived beliefs or gray areas and instead
focusing on real-life contexts. Companies should use it as a guide and not necessarily as a
prescription.

Karnataka state financial corporation has its own strength, weakness, opportunity and threats
those they can identify because its internal to the organisation. Those they can difficult to
identify because its external to the organisation. In the same context strength and opportunity
are helpful to the organisation, weakness and threats harmful to the organisation.

Table no 2 SWOT Analysis

Strengths:
a) Government Organization.
b) Wide Network Coverage.
c) Well Qualified and Dedicated Human Resources.
d) Diversified Facilities.
e) Quality service.
f) Flexibility in loan repayment period.
g) One of its major strength is the presence of highly expertise and qualified people.
h) KSFC maintains good industrial relations and also morale.
i) KSFC has a well-developed systems and procedures evolved over a period of time.
j) KSFC gives prominence to quality of service as it is ISO 9001-2008 certified organization.

Weaknesses:
b) Inadaptability.
d) Long Procedure.in some schemes.
Delegation of power is limited.

Opportunity:
a) Development in infrastructure sector
b) The rate of growth of economy also provides an opportunity to extend the financial
assistance to an increasing trend.
c) KSFC can also invest or take up execution of infrastructural projects.
d) plenty of opportunity ahead in investment opportunity at infrastructure projects in
Karnataka.
e) Now a day’s government more concentrate on development of MSMEs at rural area, it is an
opportunity to invest more in MSME project.

Threats:
a) Private Banks like ICICI, HDFC and commercial banks are very aggressive in financing
loans by reducing their lower interest rate and processing time in their corporate finance.
b) Some corporations like IDFC are focusing their operations only on particular area like
infrastructure.
c) Commercial banks are coming up with new innovative ideas for increasing the loan amount.
d) In the globalisation era competition tremendously arises from private sectors each and every
segment following to that KSFC concentrate more on Innovation at financial service.
 2.3 INTRODUCTION ABOUT THE CAPSTONE PROJECT WORK.

Money is the life blood for all the business., take a glance about one of that institution which
is provide financial assistance to micro, small, medium entrepreneurs. My project topic is “A
study on financial performance at Karnataka State Financial Corporation” project report
analyses all the four type of financial analysis like, working capital analysis, activity analysis,
financial structure analysis, profitability analysis by the using of all possible technical tools.
KSFC has a broad way allocating the funds to the different sectors, in that way this project
insists take glance about their financial product and productivity. In the current days bank
suffering from Non-performing Assets (NPA) this project has an intension of focus on different
type of NPA like, standard assets, substandard assets, doubt full debts, loss assets. This project
is helpful to analyse as well as measures the company’s liquidity and operational efficiency
and also focus on how effectively this institution is able to generate revenue in the form of
interest on loan and selling of financial products to MSMEs. This project concerned about
Financial management and its proper management of funds. The finance management must see
that the funds are procured in a manner that the risk, cost & control consideration are properly
balanced in a given situation and there is optimum utilization of funds. Project involves
industry profile, company profile, vision mission and quality policy, area of operation,
literature review, analysis of financial performance by using the advanced financial tools,
hypothesis, scope, function and objective of the study, study of institutional infrastructure and
competitor’s analysis.
Karnataka State Financial Corporation is a state level financial institution established by the
State Government in the year of 1959 under the State Financial Corporation Act 1951 to meet
mainly the long-term financial needs of Small and Medium Entrepreneurs (SME’s) in the state
of Karnataka.
The Karnataka State Financial Corporation, which prior to November 1, 1973, was known as
the Mysore State Financial Corporation, was established on March 30, 1959. The then
Government of Mysore established the Mysore State Financial Corporation by notification No.
ED 28 BIS 59 Dated 30th March 1959.
The Mysore Government fixed Rs. 2 Crores authorized share capital. As compared to this,
today’s authorized share capital is Rs. 500 Crores with a provision that the state Government
of Karnataka, on the recommendation of the Small Industries Development Bank of India,
increases the authorized capital up to Rs. 1000 Crores
In this topic try to cover all possible information regarding scope, function, and its financial
ability to allocate the funds to its customer at the same time this topic focus on loans and
advances provided by the company and its recovery status as well as Nonperforming assets.
This project will prepare according to university guidelines, which will include all the aspects
of banking and institutional information.
 2.4 Topic Chosen for Study
A Study on Financial Performance at Karnataka State Financial Corporation.

2.5 Need for The Study

Karnataka State Financial Corporation was set up under the State Financial Corporation ACT,
1951 with view to providing medium and long-term finance to medium and small industries
and which supplements the financial assistance provided by the all India institutions. KSFC act
as a catalyst for promotion of investment and industrial development in the respective State of
Karnataka. KSFC is playing major role in the state of Karnataka to provide medium and long-
term finance to medium and small industries. If the financial performance of the KSFC is sound
in Promotion of industries, then the other financial will be having less role to play. Hence study
selected to analyse the financial performance of the KSFC.
During the project all the available data’s being used under the statistical analysis about the
company performance. This topic need lot of information regarding to financial statement,
audit report, more than five years balance sheet, company financial policy, information
regarding basic principles about state financial corporation, state and central government
financial policies and its regulation, interest rate on different types of loans, lending policy,
norms and regulations, information regarding area of operation, financial services, different
year cash flow statement. Information regarding company vision mission and quality policy,
information about promoters of the company.

2.6 Detailed Literature Review

A literature review is a text written by someone to consider the critical points of current
knowledge including substantive findings, as well as theoretical and methodological
contributions to a particular topic.
Many studies have under taken while preparing the project. Those research papers
comparatively analysing the different financial institution as well as banks. There has been
proven significance difference between private and public banks and financial institution. And
the rising of Non-Performing Assets is a major drawback for all the financial institution,
examine the study of financial performance and profitability of different financial institution.
This review involves both critical as well as noncritical review regarding to its function in the
Indian economy the main aim of these financial institution is allocating financial resources to
the different economic system, like micro and macroeconomics. Micro economic mainly
concerned about house hold economics and as well as small business which is run by the
women’s in a small shelter.
Gupta and Vasishta (2014) in their Study on Analyse the Operational performance of
HFC. The study reveals the fact that the HFC is playing a vital role in financing and nurturing
small and medium scale industrial units in all the districts of the state, so as to remove regional
imbalance in the industrial growth. Sanctioning and disbursement by HFC been quite
impressive, but recovery position has been very poor because of lack of proper monitoring
system.
Kaur (2015) in her paper “Operational Performance of State Financial Corporation (A
case study of SFC)”, analysed the study into two sections: growth of sanctions and
disbursements, purpose wise, organization-wise and sector-wise analysis of assistance has been
made in section-I and operational performance of SEC has been evaluated from beneficiaries
view point in section-II of this study. It is observed from the study that the purpose-wise
analysis of the assistance by the SFC reveals wide gaps. Rationalization, modernization and
rehabilitation etc. have remained neglected in spite of the fact that these aspects of
industrialization are very important in the changing economic scenarios. The study reveals that
the SFC acts as an engine of growth in the small-scale sector.
Singh (2013) in his study entitled “The role of financial institutions in the Industrial
Development of Punjab.” observed that from amongst the 18 SFCs in the country, Tamil
Nadu state Financial Corporation (T.N. SFC) with sanctions of 92.41% to S.S. I sector
Himachal Pradesh state Financial Corporation (HPSFC) with 59.6% of sanctions to SSI sector
was at the top and bottom of the group respectively. During 1980-84, Punjab Financial
Corporation sanctioned 80% of its loan to SSI sector, thus playing an important role of the
industrialization of Punjab. However, the concentration of industrial activities was limited to
only a few industrially developed districts of Punjab. Verma, Sushma
Rani (2012) in her paper entitled “Performance of in state financial Corporation in
Liberalized era” analysed the performance of SFC in Liberalized era and found that the
performance of SFC is declining year by year and it is not achieving its objectives.
Hermanson etal (2013) financial statement analyses consist of applying analysis tools and
techniques to financial statements and other relevant data to show important relationships and
obtain useful information.
John J. Wild, K.R. Subramanyam & Robert F. Halsey (2012) in his research article on
financial performance he has pointed that he has said that the financial Statement analysis is
the application of analytical tools and techniques to general-purpose financial statements and
related data to derive estimates and inferences useful in business Analysis. Financial statement
analysis reduces reliance on hunches, guesses, and intuition for Business decisions. It decreases
the uncertainty of business analysis.
Susan Ward (2015) in his research article on financial performance he has pointed that
emphasis that financial analysis using ratios between key values help Investors cope with the
massive amount of numbers in company financial statements. For Example, they can compute
the percentage of net profit a company is generating on the funds it has deployed. All other
things remaining the same, 60 a company that earns a higher percentage of Profit compared to
other companies is a better investment option.
Rachchh Minaxi A (2013), in his research article on financial performance he has pointed &
suggested that the financial statement analysis involves analysing the financial statements to
extract information that can facilitate decision making. It is the process of evaluating the
relationship between component parts of the financial statements to obtain a better
understanding of an entity’s position and performance.
Ram Dawar (2014) in his study entitled “Institutional Finance to Small-scale Industries -
Hire Purchase Finance for Plant and Machinery” has made an attempt to examine and
appraise the operation of the hire purchase schemes of the national small Industries corporation
and the state small industries corporation, particularly the Andhra Pradesh small-scale
industrial development corporation and he valuates the performance of hire purchase activities
through institutions and he suggested to establish consulting agencies at less-privileged regions
Anilkumar B Kote (2013)87 in his article entitled “Role of Promotional agencies in
Industrial Development: An analysis in the context of Karnataka State Financial
Corporation” reported KSFC is one among leading state financial corporation in the country.
It is playing a vital role in industrial growth of our state in general and particularly in industrial
backward regions like Hyderabad Karnataka region. Today, while the state economy is making
rapid strides in the global market. Karnataka State Financial Corporation is moving in tandem.
KSFC is fine tuned to fulfil the plans and aspirations of entrepreneurs by extending all possible
assistance. Karnataka State Financial Corporation (KSFC) provides finance to industries. The
SFCs were established with the purpose of promoting the growth of small, medium and large-
scale industries in the country in order to augment the growth of industries and make the nation
self-sufficient. They play a major role in the industrial development of regions. KSFC has been
providing finance, technical know-how, etc., to the small and medium-scale industries in the
states. The study mainly focused to analyse the performance of Karnataka State Financial
Corporation's (KSFC) in giving financial assistance to Small-Scale Industries (SSI) in
liberalized era. They found that KSFC has failed in its objective of balanced development, as
most of the sanctions have been made only to a few districts of Karnataka and a small share of
the total amount sanctioned has gone to the backward districts. Moreover, the percentage share
of arrears is increasing and recovery ratio is decreasing year-by-year. Over the last 59 years in
the state of Karnataka.
Above taken some literature review for my project, these literature review glance about the
different state financial corporation as well as Karnataka state financial corporation

2.7 Research Gap

Since the new changes bring competition in the present scenario, this present study consists
major player in Karnataka that is under government under taking financial institution, while
researcher under go in that time difficult to get information regarding Non-Performing Asset
and somewhere taking information from regional wise, it might be create a gap while preparing
the project at KSFC.

2.8 Hypothesis
Ho= There is no significant growth in sanctions and recovery of credit of KSFC during the
study period.
Ha= There is significant growth in sanctions and recovery of credit of KSFC during the study
period.

2.9 Methodology Adopted

the detailed methodology adopted for carrying out the present study is outlined below the
methodology discusses elaborately the type of research objective and scope of the study, source
and collection of data, period of study and techniques used for the study. The limitation of the
study is also included in this section.
The present study is analytical in nature as it attempts to make use of facts or information
already available and analyse these to make a critical evaluation of the information.
Following are the sources of data collection:
(1) Annual Reports of the KSFC.
(2) Manual of instruction on loan and advances
(3) Books
(4) Articles and Research papers
(5) Internet
Using following technique to analyse financial performance at KSFC:
Statistical Techniques:
1. Standard Deviation.
2. Co- efficient of correlation.
3. Regression Analysis.
4. t-test.
5. ANNOVA.
Using Ratios for financial analysis

2.10 Scope of The Study

Karnataka state financial corporation (KSFC). Has been selected as a sample unit for the
present study. The scope of the study is limited to the analysis of accounting figures over a
period of 10 years, that is from 2008-09 to 2017-18. It involves a comparison of the ratio of
KSFC over time, time is present ratio are compared with the past ratio of KSFC itself. It
indicates the direction of change in the performance improvement, deterioration or constancy
over years.
To draw the conclusions a number of mathematical, financial and technical tools and
techniques have been used in this study. The analysis has been carried out basically to know
the working of the organisation and ascertain the strength and weakness of the corporation.

2.11 Objective of The Study

To determine fundamental objective of KSFC.
To determine profitability of KSFC.
To verify financial performance under the technical analysis.
To study the growth and performance of KSFC in Karnataka state.
 2.12 Limitations of The Study
The limitations of the study are as follows:
1. The study includes all the limitations, which are inherent in the data
collected from the above-mentioned sources.
2. While computing the percentages and average, the figures have been
approximated, and as such the totals at times may not exactly tally.
3. Limitations of tools and techniques that have been applied for the
analysis is also worth mentioning.
4. Comparability and ambiguity of data are one of the major limitations
of the study.
Financial analysis can be done by comparing the data of different years of KSFC
Since business conditions vary considerably in various financial institution and
industry there can be difference in services, accounting policies, level of
efficiency, calibre of management and so on…
 CHAPTER 4
4.1 FINANCIAL ANALYSIS AND INTERPRETATION
Financial analysis is the process of evaluating businesses, projects, budgets and other finance-
related entities to determine their performance and suitability. Typically, financial analysis is
used to analyse whether an entity is stable, solvent, liquid or profitable enough to warrant a
monetary investment. When looking at a specific company, a financial analyst conducts
analysis by focusing on the income statement, balance sheet, and cash flow statement.
Finance is the essential need of all economic operations. It is an input of production,
distribution and development of in industrial concerns the supply of funds regulates such
industrial activities. In absence of finance, neither the programs would be completed nor would
the concerns be able to make fair returns to the investors. Therefore, the financial requirements
of an industry need prompt and proper attention.
Industrial concerns were procuring their financial requirements, in the pre-industrialization era
in India, mainly from private lenders, friends, and relatives and obtaining a loan from
commercial banks. But now the pattern of financing industries has changed remarkably. A
large number of financial institutions have been set up by both Central and State Governments
in order to supply the needs of financing the industrial unit's viz. large, medium and small scale.
These institutions have been entrusted with a variety of functions and responsibilities, i.e.
financing large, medium and small-scale industries. In such institutions, Karnataka State
Financial Corporation is one.
The present study is based on secondary data collected from the Karnataka State Financial
Corporation (KSFC) annual reports to examine the loan sanction and disbursement by KSFC
under different year and schemes in the Karnataka State (India). under this report financial
analysis done through, using statistical tool namely correlation, standard deviation, regression
ANNOVA and t test these statistical tools helpful to conclude financial analysis using the
proper available data. Along with ratio analysis by using of current ratio and cash ratio, both
the ratio is very useful to find the short term and long-term ability of financial obligation of
Karnataka State Financial Corporation. These statistical and ratio analysis shows gradually
increases in financial performance of Karnataka State Financial Corporation. Ten years annual
reports, statistical operation reports, KSFC magazines, lending policy interest rate on different
plans are gave its response to the formation of financial analysis. Tables, graphs make easy to
understand the financial analysis, financial analysis (statistical and ratio) computed based on
the advanced excel worksheets. Find t- critical two tailed test, variance and differential
freedom, statistical F values t- stat values are very considerable for deciding the weather null
hypothesis or alternative hypothesis to justify the financial analysis.
 Correlation:
Correlation is a statistical measure that indicates the extent to which two or more variables
fluctuate together. A positive correlation indicates the extent to which those variables increase
or decrease in parallel; a negative correlation indicates the extent to which one variable
increases as the other decreases.
Table no 3 Correlation ( Rs in crores)
year sanction X recovery Y xy x2 y2
2008-09 565.24 501.22 283309.59 319496.25 251221.488
2009-10 631.49 554.94 350439.06 398779.62 307958.404
2010-11 731.63 586.71 429254.63 535282.45 344228.624
2011-12 817.32 660.9 540166.78 668011.98 436788.81
2012-13 944.06 792.89 748535.73 891249.28 628674.552
2013-14 909.26 836.52 760614.17 826753.74 699765.71
2014-15 675.15 814 549572.1 455827.52 662596
2015-16 731.94 841.1 615634.73 535736.16 707449.21
2016-17 733.43 884.73 648887.52 537919.56 782747.173
2017-18 842.13 787.9 663514.22 709182.93 620786.41
∑x=7581.65 ∑y=7260.91 ∑xy=5589928.57 ∑x2=5878239.53 ∑y2=5442216.38

10*(5589928.57) -(7581.65) (7260.91)

r = √[10 ∗ 5878239.53 − 587239.53][10 ∗ 5442216.38 − 542216.38]

r = 0.5710
analysis based on the above table, here sanction and recovery take as a two variable and those
variables consider to find the positive or negative relation between two variables. From the
year 2008-09 to 2017-18 consider the data for this analysis, from 2008-09 to 2013-2014 the
recovery amounts are considerably low against the sanction. But in the year of 2014-2015 to
2016-17 recovery gradually increases against the sanction. That sanction amounts include
previous year unrecorded income. Therefore, overall analysis shows positive correlation in this
financial analysis. Positive correlation expresses relationship between two variables in which
both variables move in tandem that is in the same direction which means variables in positive.
Correlation range between -0.5 and around 0.5 through actual numbers depending on a variable
risk tolerance. Here both variables act coordinatively therefore the chances avoid the negative
correlation is more.
Standard Deviation:
Standard deviation is a number used to tell how measurements for a group are spread out from
the average mean, or expected value. A low standard deviation means that most of the numbers
are close to the average. A high standard deviation means that the numbers are more spread out

Table No 4. Analysis of Growth of Sanction (Rs in crores)

Year sanction X 𝑥 − 𝑥̅ (𝑥 − 𝑥)2

2008-09 565.24 -192.76 37156
2009-10 631.49 -126.5 16002
2010-11 731.63 -26.37 695
2011-12 817.32 59.32 3519
2012-13 944.06 186.06 34618
2013-14 909.26 151.26 22880
2014-15 675.15 -82.85 6864
2015-16 731.94 -26.06 679
2016-17 733.43 -24.57 604
2017-18 842.13 84.13 7078
∑X=7581.65 ∑
(𝑥 − 𝑥)2 =130095
𝑥̅ =758

130095
σ=√
10 − 1

σ = 120.22
Without standard deviation, can’t get a handle on whether the data are close to the average
mean or whether the data are spread out over a wide range. Based on the above table can
conclude sanction took as a sample mean and it gives a closer result to the mean average. Above
analysis shows standard deviation is 120.22 is closer to the average mean. If it is spread out of
the range it may be the beyond the control. Standard deviation is a statistical measure of
volatility. Based on the above result we can conclude that, it indicates lower standard deviation
that means it preaches the lower risk. If the result shows more than the average mean than its
consider as greater risk.
Non-Performing Assets:
Anon-Performing Asset is a defined as a credit facility in respect of which the interest and
instalment of principal has remained pat due for a specified period of time. In simple terms, an
asset is tagged as soon performing when it ceases to generate income for the lender.
Karnataka State Financial Corporation maintain single digit of NPA not as some nationalised
bank. Standard deviation helpful measures the risk from the NPA to the institution. Here we
can conclude analysis based on the obtained result which is lower than the mean average.
Table no 5 Standard deviation of NPA

year percent of NPA 𝑥 − 𝑥̅ (𝑥 − 𝑥̅ )2

2008-09 9.27 4.232 17.909824
2009-10 3.45 -1.588 2.521744
2010-11 2.37 -2.668 7.225344
2011-12 3.72 -1.318 1.737124
2012-13 2.78 -2.258 5.098564
2013-14 2.57 -2.468 6.091024
2014-15 5.07 0.032 0.001024
2015-16 8.82 3.782 14.303524
2016-17 5.77 0.732 0.535824
2017-18 6.56 1.522 2.316484
∑X= 50.38 ∑
(𝑥 − 𝑥̅ )2 =57.74048
𝑥̅ 5.038

σ = √57.74048
10 − 1
σ = 2.53
from the above table percent of NPA taken as the mean sample in the 10 years of NPA data, in
the year of 2008-09 it records all time highest 9.27 percent by the next year it shows gradual
changes in the NPA but never reach the two digits of NPA. Compare to the year of 2009-10,
2010-11, 2011-12, 2012-13, 2013-14 NPA increases from the next year 2014-15, 2015-16,
2016-17 and 2017-18.
Standard deviation says measure the spread out from the average mean or expected value low
standard deviation means that most of the numbers are close to the average. A high standard
deviation means that the numbers are more spread out. From the above standard deviation gives
the SD as 2.53 and its closer to the value of average mean.
Table no 6 Analysis Loan recovery and Percent of NPA of MSMES ( Rs in crores)

year recovery AGR percent of NPA AGR

2008-09 501.22 - 9.27 -
2009-10 554.94 5.35 3.45 62.78
2010-11 586.71 5.72 2.37 31.3
2011-12 660.9 12.64 3.72 -56.69
2012-13 792.89 19.97 2.78 26.07
2013-14 836.52 5.5 2.57 7.5
2014-15 814 -2.6 5.07 -97.27
2015-16 841.1 3.32 8.82 -73.96
2016-17 884.73 5.18 5.77 34.58
2017-18 787.91 -10.9 6.56 -13.69

It is inferred from table 4 that the recoveries of loans for Karnataka State Financial Corporation
have been increasing in absolute terms from Rs. 501.22crores in 2013-14 and it has increased
to Rs. 836.52crores in 2016-17, since then it has increases to the extent of Rs.884.73 crores in
2017-18 its declined to 787.91 crores.
As far the annual growth concerned gradually increases in annual growth along with positive
trend in 2009-10,2010-11,2011-12,2012-13, and 2013-14, 2015-16, 2016-17 (5.35%, 5.75%,
12.64%, 19.97%, 5.5%, 3.32%, 5.18%) respectively as compare to their previous year. Since
then it has been negative trend in 2014-15, and 2017-18 (-2.6%, and -10.9%) respectively as
compared to their previous year.
As far as Percentage of NPA concerned, it has continuously decreased from 9.27 per cent in
2008-09 to 5.07 per cent in 2014-15. Further, it has continuously declined from 9.27 to 5.07
per cent in 2014-15. This signifies that the NPAs have drastically declined over few years. after
that it continuously increases from 5.07 to 6.56 in the year of 2014-15 to 2017-18 and in the
2015-16 it shows second time highest over the study period. As far the annual growth
concerned gradually increases in the year of 2009-10, 2010-11, 2012-13,2013-14and2016-17
(62.78%, 31.3%, 26.07%, 34.58%) respectively to their previous year. Since following years,
it shows negative figure actually this is vibrant to the institution because NPV was in decline
trend,2011-12, 2014-15, 2015-16, and 2017-18 (-56.69, -97.27, -73.96, -13.69). respectively to
their previous year.
 Analysis of loan recovery and NPA

1000

800

600

400

200

0 recovery AGR percent of NPA AGR

2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18

Based on the table number 4 above chart was constructed, here numbers are drawn in a flow
chart span of 10 years performance clearly floated in this chat. From the starting point
recovery, annual growth rate of recovery, percent of NPA go hand by hand there is not much
variation among these lines but in respect to the NPA yellow curve shows higher variation in
the year of 2009-10,2012-13, and 2016-17. From the 2008-09 to 2017-18 NPA considerably
down in three year namely 2011-12,2014-15, and 2017-18.
T -Test:
A t- test is a type of inferential statistic, used to determine if there is a significant difference
between the means of two groups, which may relate to certain features. The t- distribution
values, and the degree of freedom to determine the probability of difference between two sets
of data.
Below table focus on two different mean, variance, observation, Pearson correlation and t- test
most usable analysis of hypothesis on different variable
Table No 7. Table Showing T- Test Result for KSFC Sanction and Recovery Statement
t-Test: Paired Two Sample for Means

Sanction X Recovery Y
Mean 758.165 726.091
Variance 14455.3182 18903.887
Observations 10 10
Pearson Correlation 0.57106614
Hypothesized Mean Difference 0
df 9
t Stat 0.84291395
P(T<=t) one-tail 0.21055623
t Critical one-tail 1.83311293
P(T<=t) two-tail 0.42111245
 t Critical two-tail 2.26215716

Based on the value of table number 4 can conclude the hypothesis. Since the calculated t- static
(0.84291395) was less than its critical value (2.26215716). null hypothesis accepted and
alternative hypothesis rejected there for the calculated significant at 5 percent level of
significance for 9 percent degree of freedom. From the above table we can define the
performance of the different variables by the help of variance and Pearson correlation.
From the above calculation it is evident that there is no significant growth in sanction and
recovery at KSFC during the study period.

Regression:
Regression analysis is a set of statistical process for estimating the relationship among
variables. It includes many techniques for modelling and analysing several variables.
ANNOVA:
Analysis of Variance (ANNOVA) is a collection of statistical models and their associated
estimation procedures used to analyse the differences among group means in a sample.
Regression Statistics
Multiple R 0.571066137
R Square 0.326116533
Adjusted R Square 0.2418811
Standard Error 104.6845258
Observations 10
Table No 8 Showing Regression ANNOVA for KSFC Sanction and Recovery Statement

ANOVA
df SS MS F Significance
F
Regression 1 42427.06435 42427.06435 3.8714888 0.084656024
 Residual 8 87670.7995 10958.84994
Total 9 130097.8639

Coeffici Standard t Stat P- Lower Upper Lower Upper

ents Error value 95% 95% 95.0% 95.0%
Interc 395.575 187.229 2.11278 0.0675 - 827.326 - 827.326
ept 0692 2024 5101 798 36.1762 384 36.176 384
4573 246
recov 0.49937 0.25379 1.96760 0.0846 - 1.08462 - 1.08462
ery Y 2573 6533 9911 56 0.08588 843 0.0858 843
3281 833

Based on the value of table number 5 can conclude the hypothesis. Since the calculated multiple
R represent (0.571066137) there exist positive correlation between the sanction and recovery.
R square represent exploratory power or predictive power of independent variables in the
regression model. R square represent is (0.326116533) “36” indicates that the changes in
sanction amount can be predicted to the extent of 36% when we analyse the recovery amount.
From the ANNOVA table the p- value (0.085883281) > 0.05 we accept the null hypothesis
significance level is 0.05 and degree of freedom is 1%.
Above table gives an information about:
Multiple R., this is the coefficient correlation it tells about how strong the liner relationship is
in the above analysis selected data has no relation at all because value less than 1.
Adjusted R square., the adjusted R square adjust for the number of terms in a model. Here 0.24
number of terms in a model.
Standard error of regression., if the coefficient is large compared to the standard error then the
coefficient is probably different from zero. In this analysis coefficient is more than standard
error. (0.49>0.25 or 395.5>187.22).

Ratio Analysis at KSFC:

It is a technical analysis of financial position of a company or organisation. It will give a
complete structure of current and liquidity ratio of organisation.
Current Ratio:
To calculate this ratio for compare current asset to current liabilities. It measures a company’s
ability to pay short- term and long-term obligation, above ratio shows it has strength to meet
the obligation. 2009 to 2018 these year ratios show positive flow of current ratio, except 2014.
 Current assets
Current ratio=
Current liability

Year Current asset Current liability current ratio

2018 26393.67 12184.15 2.16

2017 20277.30 11722.03 1.72
2016 16190.53 15350.29 1.05
2015 11846.32 11130.96 1.06
2014 12683.02 14911.93 0.85
2013 29318.67 13380.87 2.19
2012 15550.42 10549.07 1.47
2011 25545.17 10860.29 2.35
2010 11710.90 9453.41 1.23
2009 17214.15 9292.14 1.85

When current assets adequately available to a financial organisation it will stimulate the
financial performance very properly, which is helpful to meet their organisational goal and
show case their payment of short- and long-term obligation. In the year of 2014, it shows less
than 1 means there are greater liabilities current assets to pay them. Below chart shown
graphically of KSFCs current ability.
 Year Cash& Bank Balance Current Investment Current Liability Cash Ratio
2018 4867.04 48287.87 12184.15 4.36
2017 7718.45 63390.35 11722.03 6.06
2016 7411.39 63465.8 15350.29 4.61
2015 3698.54 63406.93 11130.96 6.02
2014 3843.68 63366.9 14911.93 4.5
2013 4064.5 62848.15 13380.87 5
2012 17442.14 46736.18 13380.87 4.79
2011 3651.58 46611.47 10345.3 4.85
2010 6975.23 52879.37 9453.41 6.33
2009 6498.37 35275.56 9292.14 4.5

Chart Title
30000
25000
20000
15000
10000
5000
0
1 2 3 4 5 6 7 8 9 10

Year Current asset Current liability current ratio

Cash Ratio:
The cash asset ratio is a liquidity metric that indicates a financial institution to pay off short
term debt obligations with its cash and cash equivalents. The formula as given below:
Cash and cash balance + current investment
Cash ratio=

Current liability
Table no 9 Cash Ratio (Rs in crores)

Cash ratio following by many creditors because they want to see if financial institution
maintains adequate cash balance to pay off all of their current debts as they come due. Below
chart shows of KSFCs performance of cash ratio.
 Chart Title

70000
60000
50000
40000
30000 cash ratio
20000
current investment
10000
0 year
1 2 3 4 5 6 7 8 9 10

year cash & bank balance current investment current liabality cash ratio

Table no 10 Analysis of Financial Operation 2018-19

Particular Rs in Crores

sanction 1098.73

disbursement 665.9

recovery 736.35
 Financial Operation

1200
1000
800
600
400
200
0
sanction disbursement recovery

Above table consist of 2018-19 financial operation details which is focus on Sanction,
Disbursement, Recovery. Amount recorded in terms of crores. Disbursement is made after the
fulfilment of sanction condition and execution of legal documents. This process involves little
time hence sanction and disbursement will naturally vary. Recovery is an ongoing process
where NPA resolution will also contribute to the recovery and profitability.

CHAPTER 5
FINDING CONCLUSION SUGGESION

FINDINGS:
The following are the findings with regard to the financial performance of Karnataka State
Financial Corporation.

 The institutions made the provisions as per the prescribed under prudential norms.

 The institution is following system of financial statement

 Annual report from the year of 2008-09 to 2017-18, is taken for the study

 Operational statistical report from the year of 2008-09 to 2017-18.

  Detailed study on sanction, disbursement, recovery, NPA.

 Interest rate on different scheme is collected from the lending policy.

 Receipt of application from applicant.

 The procedure of getting loan in KSFC:

 Receipt of documents (Balance sheet, KYC papers, Different govt. registration no.)
Pre-sanction visit by officers, check for RBI defaulters list, wilful defaulters list,

 CIBIL data, ECGC, Title clearance reports of the properties to be obtained.

 Valuation reports of properties to be obtained from empanelled valuer.

 Preparation of financial data Proposal.

 Sanction/approval of proposal by appropriate sanctioning authority

 Documentations, agreements, mortgages.

 Disbursement of Loan.

 Post sanction activities such as receiving stock statements, review of accounts, etc. (On
regular basis)

 Securities like primary security or collateral security should be provided by the credit
aspirant as per requirement against the loan taken.

 Recovery of credit amount will be done every month on instalment basis.

 The interest rate will be 14%, rebates of 0.5% will be provided for on time and regular
repayment and a penalty of 2% will be applied for late repayment of credits in KSFC.

 For women entrepreneur and ST/SCs there will be a reimbursement of 10% interest,
they should pay only 4% interest rate towards the credit taken.

Conclusion:

Karnataka state financial corporation is a state-owned finance corporation, for financing micro
small and medium entrepreneurs. In the 59 years of KSFC has sanctioned more than 1.74 lakhs
units amounting to tune of rupees 16,118.18 crores creating employment of two crores directly
or indirectly in the state of Karnataka. to MSMEs. Now KSFC sanctioning term loan to MSMEs
under the state subsidy schemes at 4% interest

Provide term loan to finance fixed assets of project in the small scale and the medium scale
sector is the key factor that distinguishes financial institutions like KSFC from commercial
banks which mainly finance working capital. KSFC has well-defined set of objectives and a
clear lending policy based on that term loans are offered. In the 21st century where the finance
market functioning on competition at this age also Karnataka State Financial Corporation
adamantly facing the high level of competition, by the introducing different and innovative
financial scheme. During the study of financial institution functions, based on financial
operation of corporation adopted clearly specified and meticulous rules and norms, those rules
and regulation formed by the Karnataka Government and Small Industrial Development Bank
of India (SIDBI).

While in computation of financial analysis correlation, standard deviation, regression, analysis

of variance is the more important part in the financial analysis, through out the study financial
performance shows positive attitude and better performance. Sanction, recovery, non-
performing assets, are choosing for the study, correlation between the are not less than the
bench mark of the different financial tool. And merely glance about the ten years non-
performing assets position never cross the two digits, but the non-performing assets slowly
growth in recent years.

To some up the financial performance of KSFC the present competitive age appears to be better
however with the adoption of new polices and regulation can reach a commendable growth in
the days to come. KSFC has best practice of accounting with the standard laydown by the
accounting standards. The contribution of KSFC for the industrial growth of the state in
particular and country in general is noteworthy.

SUGGESTIONS:
KSFC should build up good portfolios with calculative risk in sanction and disbursement. To
attract more small and medium enterprises KSFC should campaign its latest interest subsidy
scheme to all the budding and existing entrepreneurs. The momentum of assistance to the SSI
Sector and new projects need to be maintained and increased and it should be ensured that the
corporation does not divert much from its main objective and take up more projects in sectors
other than SME (Small and Medium Enterprise).The corporations can concentrate on below
mentioned suggestions to further improve its credit appraisal procedure and make KSFC as one
among the pioneer in term of loan lending institutions in Karnataka.

1. KSFC should take steps to see that the funds are utilized for the purpose for which it is
sanctioned. Many times, the small and medium enterprise utilize sanctioned funds for other
purpose, which leads to sickness.
2. KSFC major competitors are commercial banks, so as to compare with them the KSFC
should introduce different loan schemes with and undertake awareness programs to promote
these schemes.

3. The growth of NPA is not a significant performance financial institution like KSFC, hence
the institution should closely monitor NPA cases and address NPA by resolutions.

4. A good sanction will give a better result and the performance of such financial statement
will make the institution very strong financially.

5. The terms and conditions of KSFC with regard to credit appraisal procedure, loan sanction
and disbursement should be simplified.

6. KSFC has one generalized term loan and Credit Appraisal procedure for all projects
irrespective of its costs and amount of loan applied for. A shorter procedure, simplified package
and using techniques like NPV and IRR for low cost projects and for small amount of assistance
can reduce time, cost and efforts on part of the corporation on the one hand and on the other
hand entrepreneurs can obtain timely clearance.