Speech Delivered by Mrs Asha Swarup, IAS, Chairperson at the 42nd  Annual General Meeting of Himachal Pradesh Financial Corporation held on 27.07.2010

Ladies and Gentlemen,
          It gives me pleasure to present the 43rd Annual Report and Accounts of Himachal Pradesh Financial Corporation for the year ended on 31st March, 2010. The Corporation’s financial performance during the year under review has demonstrated some strength amid uncertain economic environment.

          Indian economic environment was fairly mixed and uncertain during 2009-10. The first half of the year was over cast by the monsoon failure resulting in a sharp decline in food grain production, a continued slow down in final consumption expenditure, a muted demand for institutional credit and a negative growth in both exports and imports. However, in the second half of the year  counter cyclical policies, a pick up in global economy and a recovery in capital inflows helped India to overcome the  adverse effects of monsoon and see a quick rebound in the economy.

          The inflation, after remaining subdued during the first half of the year, increased at a faster pace in the second half and came close to 10% in March, 2010. At the same time, driven by manufacturing and mining sectors, the industrial production recovered from 1.1% in April, 2009 to 15% in February  2010. Rapid growth in both inflation and industrial production prompted Reserve Bank of India to normalize its monetary policy and move its focus from crisis management to recovery management.  

          While the demand for institutional credit remained highly subdued and skewed throughout the year under review, credit costs increased for several banks with the maturing of restructured loans. Moreover higher level of Government market borrowing and resultant volatility in the bond yields posed tough challenge  for banks and Financial Institutions. This was the scenario in which Himachal Pradesh Financial Corporation worked during 2009-10.

Sanctions
          During 2009-10, the Himachal Pradesh Financial Corporation sanctioned total loans of Rs. 30.22 crores against Rs. 30.39 crores during the previous year and thus loans sanctioned remained almost at the last year’s level. During 43 years of operation, the Corporation has sanctioned total loans of Rs 726.56 crores. In the year 2009-10, the Corporation also cancelled loans of Rs. 14.15 crores which were lying unavailed since long and were unlikely to be availed. The Small Scale Industrial Units were sanctioned loans of Rs.28.65 crores and thus account for 94.80% of the total loan sanctions during the year.

Disbursements
          The Himachal Pradesh Financial Corporation disbursed total loans of Rs. 20.26 crores during 2009-10 against a disbursement of Rs. 17.53 crores during the previous year and thus recorded a growth of 14.9%. Since inception and upto 31.3.2010, the Corporation has made total loan disbursements of Rs. 535.67 crores. At the close of the year, the Corporation had pending commitments of Rs. 25.37 crores.
Recoveries

          During 2009-10, the H.P. Financial Corporation made total recoveries of Rs. 38.77 crores against recoveries of Rs. 37.83 crores during the previous year and recorded a growth of 2.5%.  At the close of the financial year an amount of Rs. 132.60 crores remained in default including default in respect of cases where suits have been filed by Corporation amounting to a total of Rs 101.07 crores.
Resources

          During this year, the State Government released equity of Rs. 51.00 crores  to the Corporation (Rs. 20 crores during the previous year) as pass through vehicle for investment in HRTC,  which has been invested in HRTC. The HRTC has not so far issued share certificates in respect of investment made by the Corporation in years 2008-09 and 2009-10 and, therefore, the Corporation has not been able to issue share certificates in favour of the Government of Himachal Pradesh. Thus, the entire equity amount of Rs. 71.00 crores has been kept in the share application money head. The paid up capital of the Corporation, therefore, stands at previous year’s level of Rs. 28.57 crores. During this year, SIDBI released Rs. 18.00 crores by way of Line of Credit to H.P. Financial Corporation and the HPFC repaid  an amount of Rs. 11.74 crores which was due on account of  previous borrowings. During 2009-10, the Corporation also raised Rs. 3 crores through Non SLR bonds and redeemed bonds amounting to Rs. 4.48 crores. The Corporation also raised an amount of Rs 6.50 crores from the Project Specific LoC sanctioned by  the Kangra Central Cooperative Bank Ltd and made repayments of Rs 2.12 crores to it.
Profit & Loss

          The Corporation switched over to Mercantile System of Accounting from the earlier Cash System of Accounting with effect from 1st April, 2009.  During 2009-10 the Corporation earned revenues of Rs. 17.76 crores against Rs. 16.64 crores in the previous year and incurred an expenditure of Rs. 23.80 crores against Rs. 20.80 crores during the previous year. During this year, provisions amounting to Rs 5.27 crores were also reversed in the books of accounts and thus the Corporation suffered loss of Rs. 0.80 crore against a loss of Rs. 4.16 crores during the previous year.
Management of NPAs

          Management of Non Performing Assets (NPAs) is a big challenge before the H P Financial Corporation. As per the MoU signed with SIDBI and the State Government during June 2004,   the Corporation has to maintain overall NPAs level at less then 10%. During the last quarter of the financial year, the Corporation focused on a few big defaulting units and persuaded them to regularize their accounts. By doing so, the Corporation succeeded in bringing down net NPAs from 40.18% in March, 2009 to 9.91% in March, 2010.

Future Strategy
          The future strategy of the Corporation is to:

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

I thank you all for attending this Annual General Meeting and hope the Corporation will continue receiving your cooperation in future also.