State Financial Corporations Act, 1951

25. Business which Financial Corporation may transact

(1) The Financial Corporation may subject to the provisions of this Act, carry on and transact any of the following kinds of business, namely,-

(a) guaranteeing, on such terms and conditions as may be agreed upon,-

(i) loans raised by industrial concerns which are repayable within a period not exceeding twenty years, and are floated in the public market;

(ii) loans raised by industrial concern from scheduled banks or State co-operative banks 3[or other financial institutions];

(b) guaranteeing, on such terms and conditions as may be agreed upon, deferred payments due from any industrial concerns in connection with its purchase of capital goods within India;

(c) underwriting of the issue of stock, shares, bonds or debentures by industrial concerns;

(ca) transferring for consideration any instruments relating to loans and advances granted by it to industrial concerns;

(d) acting as agent of the Central Government or the State Government or the Development Bank or the Industrial Financial Corporation of India established under the Industrial Financial Corporation Act, 1948 (15 of 1948), or any other financial institution notified in this behalf by the Central Government in respect of any matter connected with, or arising out of, the grant of loans or advances to an industrial concern, or subscription to debentures of an industrial concern] 3[or relating to the business of the Development Bank, Industrial Financial Corporation of India or financial institution];

2[(da) subscribing to, or purchasing of, the stock, shares, bonds or debentures of an industrial concern or any other concern with the prior approval of the Development Bank;]

(e) receiving in consideration of the services mentioned in the preceding clauses such commission as may be agreed upon;

2[(f) retaining as part of its assets any stock, shares, bonds or debentures which it may acquire by subscription or in fulfillment of its underwriting liabilities and disposing of the stock, shares, bonds or debentures so acquired;]

(g) granting loans or advances to, or subscribing to debentures of, an industrial concern, repayable within a period not exceeding 20 years from the date on which they are granted or subscribed to, as the case may be:

13[PROVIDED that the Financial Corporation may, with the prior approval of the Development Bank, exceed the said limit of twenty years up to a further period of ten years:

PROVIDED FURTHER that nothing contained in this clause shall be deemed to preclude the Financial Corporation from granting loans or advances to, or subscribing to debentures of, an industrial concern to which may be attached an option to convert such debentures or loans into stock or shares of the industrial concern:

14[PROVIDED ALSO that] the Financial Corporation may, in the exercise of such option 15[convert the amounts outstanding on such debentures or loans] into stock or shares of the industrial concern and may also subscribe to stock or shares of the industrial concern if such concern increases its subscribed capital by the issue of further stock or shares in accordance with, and subject to, the provisions of section 81 of the Companies Act, 1956 (1 of 1956).

3[Explanation :In this clause, the expression "the amounts outstanding on such debentures or loans" shall means the principal, interest and other charges payable on such debentures or loans as at the time when the amounts are sought to be converted into stock or shares;]

3[(ga) accepting or discounting promissory notes and bills of exchange made, drawn, accepted or endorsed by industrial concerns or by any person selling capital goods manufactured by one industrial concern to another industrial concern;

(gb) undertaking research and surveys for evaluating or dealing with marketing or investments and undertaking and carrying on techno-economic studies or other activities in connection with the development of any industry;

(gc) providing technical and administrative assistance to any industrial concern or any person for the promotion, management or expansion of any industry;

(gd) planning and assisting in the promotion and development of industries;

(ge) doing such other business as the Development Bank may authorize;]

(h) generally, the doing of such acts and things as may be incidental to, or consequential upon, the exercise of its powers or the discharge of its duties under this Act.

(2) [Omitted by Act No. 43 of 1985]

(3) Subject to the provisions of sub-section (5) of section 7, the aggregate of contingent liabilities of the Financial Corporation under clauses (a), (b), (c) and (ca) of sub-section (1) shall not at any time exceed twice the paid up share capital and reserve fund of the Corporation except with the prior approval of the State Government and in consultation with the Development Bank but in no case shall exceed thrice the paid up share capital and reserve fund of the Corporation.

(4) Nothing contained in this Section shall entitle any Financial Corporation to hold shares in any company, whether as pledge, mortgagee or absolute owner, of an amount exceeding thirty per cent of the subscribed share capital of that company or thirty per cent of its own paid up share capital and free reserves, whichever is less.

(5) If, on the commencement of the State Financial Corporations (Amendment) Act, 1972 (77 of 1972), any Financial Corporation is holding shares in excess of the limits specified in sub-section (4), the Corporation shall report the matter forthwith to the Reserve Bank and shall, within such period as the Reserve Bank may allow, so reduce its share holding as to conform to the provisions of that sub-section.

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