In order to render financial assistance to medium and small scale industries, the State Financial Corporation Act was passed by the Parliament on Sept. 28, 1951 under which the State Financial Corporations could be set up. At present, there are 18 SFCS including the Tamilnadu Industries Investment Corporation Limited which was set up in 1949 before the passing of SFCS Act.
Functions of State Financial Corporation
(i) Granting of loans and subscribing to the debentures of industrial concerns repayable within a period of not exceeding twenty years.
(ii) Guaranteeing the loans raised by the industrial undertakings in the capital market or from scheduled banks or from State Cooperative Banks.
(iii) Guaranteeing the deferred payments due from any industrial concerns in connection with the purchase of capital goods within India.
(iv) Subscribing to the stocks, bonds or debentures of an industrial concern out of the funds representing the special class of share capital subscribed by the State Government and the Reserve Bank of India in accordance with the provisions of sec. 4A of the SFCS Act, 1951.
(v) To grant financial assistance to specified concerns like small road transport operators, hotels, tourism related activities, hospital and nursing homes etc.
(vi) SFCS also assist, technically qualified people who find it difficult to bring in enough funds, with a unique scheme known as the Seed Capital/Soft Loan scheme. Higher quantum of assistance is given in case of highly deserving cases.
(vii) SFCS also assume the role of promotional agency, by diversifying their activities to fill in the role of full fledged development banks. A few SFCs have already set up Entrepreneural Guidance cum Assistance Bureau to help entrepreneurs particularly the first generation enterprises.