Question

Consider the following statements regarding specific provisions for the SFC:

1. The provision that members may be appointed on a part-time basis offers flexibility in securing expert services.

2. The provision for re-appointment allows for continuity and utilization of acquired experience.

Which of the statements given above is/are correct?

• A. 1 only
• B. 2 only
• C. Both 1 and 2
• D. Neither 1 nor 2

Answer 1

Answer:

C. Both 1 and 2

State Financial Corporations (SFCs) in India

• SFCs are state-level financial institutions established under the State Financial Corporations Act, 1951.

• They play a crucial role in providing financial assistance to small and medium-sized enterprises (SMEs) within their respective states.

• SFCs are designed to supplement the efforts of the Industrial Development Bank of India (IDBI) at the state level.

Key Provisions and Their Significance:

• Part-time Appointments: The Act allows for the appointment of members on a part-time basis. This is a deliberate provision to enhance flexibility in engaging individuals with specialized expertise or those who may not be available for full-time service. It allows SFCs to draw upon a wider pool of talent and specific domain knowledge without the commitment of full-time employment. This is particularly beneficial for securing services of experienced professionals, academicians, or retired officials who can contribute significantly.

• Re-appointment Provisions: The SFC Act also permits the re-appointment of members. This provision is vital for ensuring continuity in the functioning of the SFC. It allows the corporation to retain the institutional memory and leverage the accumulated experience of its members, leading to more informed decision-making and effective policy implementation. Retaining experienced personnel helps in navigating complex financial landscapes and fostering long-term stability and growth for the industries they support.

• Objective: The primary objective of SFCs is to promote industrial development in their respective states by providing term loans, underwriting shares and debentures, and guaranteeing loans.

• Regulatory Oversight: SFCs are regulated by the Reserve Bank of India (RBI) and are accountable to their respective state governments.

• Evolution: Over time, SFCs have adapted to changing economic environments and have been instrumental in the growth of the industrial sector, especially in regions where larger financial institutions might have a limited presence