AN OVERVIEW OF INDUSTRIAL FINANCIAL CORPORATION OF INDIA (IFCI)

By: Parag Sanjay Darwade

T.Y.B.Com. – ‘A’

INTRODUCTION

 IFCI is a Public Sector Non-Banking Financial Company. Established as a

statutory corporation in 1948, IFCI is presently listed on BSE and NSE. IFCI
manages 6 subsidiaries and one associate company under it.
 IFCI provides financial assistance for the growth of various industries across the
country. The financial activities include a variety of projects such as airports,
roads, telecom, power, real estate, manufacturing, services sector, and other
such allied projects. During its existence of 70 years, financial assistance was
provided by IFCI for setting up major projects like Adani Mundra Port, GMR Goa
International Airport, Salasar Highways, NRSS Transmission, Raichur Power
Corporation to name a few.
 The company has played a pivotal role in establishing various reputed
intermediaries of the market like Stock Exchanges, Entrepreneurship
Development Organizations, Consultancy Organizations, Educational and Skill
Development Institutes across the country.
 The Government of India has kept a fund of Rs 200 crore with IFCI to promote
entrepreneurship among the Scheduled Castes and to provide finance to these
entrepreneurs at concessional rates. IFCI has also contributed an amount of Rs
50 crore as the lead investor and sponsor of the fund. IFCI Venture Capital Funds
Ltd., a subsidiary of IFCI Ltd., is the investment manager of the fund. This fund is
operational from the financial year 2014-15 and IVCF is continuously striving to
fulfil the objectives of this scheme.
 In addition, the Ministry of Social Justice and Empowerment, Government of
India has designated IFCI as a nodal agency for the implementation of the
“Credit Growth Guarantee Scheme for Scheduled Caste Entrepreneurs” in March
2015, to help the Scheduled Caste community. Entrepreneurship is to be
promoted among the Scheduled Castes by providing financial assistance to
 entrepreneurs through credit enhancement guarantees through member lending
institutions i.e., banks.

CORPORATE STRATEGY

 Providing solutions for various financial needs of the industry.

 To remain competitive, efficient, and sensitive in the economic development of

the country.

 Designing customer-centric solutions.

 Enhance the reputation and image of IFCI.

HISTORY SO FAR

IFCI: 70 Years of History

At the time of independence in 1947, the Indian capital market was relatively less
developed. The demand for capital was increasing rapidly, however, there was a
shortage of capital providers. The commercial banks of that time were not able to
adequately meet the long-term capital requirements. The Industrial Finance Corporation
of India (IFCI) was established by the Government of India on July 1, 1948, through the
IFC Act, 1948, to fill this shortfall in the capital needs of the economy and the demand-
supply gap.
 
IFCI was the first development financial institution in India established to promote
economic growth through the development of infrastructure and industry. Since then,
IFCI has contributed significantly to the growth and development of projects through
continuous cooperation in all three areas - manufacturing, infrastructure and services,
and agriculture. Liberalization in the Indian economy in the year 1991 brought
significant changes in the Indian capital markets and financial system. IFCI was
converted from a statutory corporation to a company under the Indian Companies Act,
1956 to facilitate fundraising directly through capital markets. Consequently, the name
of the company was changed to "IFCI Limited" with effect from October 1999.
 
Since its inception 70 years ago, IFCI has witnessed and weathered all business
economic cycles. IFCI has been able to maintain its financial position especially with the
continued support and cooperation of the Government of India and all its
stakeholders. In addition to its core feature of long-term lending to the industrial and
infrastructure sectors, IFCI is also enhancing its organizational value by improving its
infrastructure and non-core assets and investments. Over the years IFCI has been
instrumental in setting up various institutions (including some of its associates and
associate companies) which are today leaders in their respective fields such as Stock
Holding Corporation of India Ltd. among others. (SHCIL), National Stock Exchange
Ltd. (NSE), LIC Housing Finance Ltd., Tourism Finance Corporation of India Ltd. (TFCI),
Management Development Institute (MDI). Changes in the markets over time led to the
disinvestment of some of the subsidiaries and presently the IFCI Group consists of the
following subsidiaries - Stock Holding Corporation of India Ltd., IFCI Venture Capital
Funds Ltd., IFCI Factors Ltd., IFCI Infrastructure Development Ltd., IFCI Financial
Services Ltd., MPCON, Institute of Management Development and Institute of
Leadership Development.

1948 - Established as India's first development financial institution.

1993 - Became a public limited and listed on the stock exchange.

2015 - Became a government company.

Today - Established as NBFC-ND-SI in the economy.

Today - An
established
2015 - Became
NBFC in the
a Government
economy.
1993 - company.
Became a
public limited
company and
1948 - Set up as was listed on
India's first the stock
Development exchange,
Financial
Institution,
FAIR PRACTICE CODE
FAIR PRACTICE CODE (EFFECTIVE FROM 18 JUNE 2021)

FAIR PRACTICE CODE 2015-16

To make fair lending practices transparent, it is proposed to adopt the following Fair
Practice Code of Lending:
The Fair Practice Code applies in the following areas:

 Loan applications and processing

 Loan Appraisal and its Terms/Conditions
 Disbursement of loans including change in terms and conditions
 General
 Responsibilities of the Board of Directors
 grievance redressal system
 Language and means of communication for a Fair Practice Code
  Regulation of excessive interest charged by NBFCGs
 Complaints regarding excess interest charged by NBFCG

LOAN APPLICATIONS AND PROCESSING

1. All transactions with the Borrower(s) shall be in the vernacular language or in a

language that they can understand.
1. All transactions with the Borrower(s) shall be in the vernacular language
or in a language that they can understand.
2. Loan application forms for all products offered by IFCI along with a list of
documents required to be submitted are placed on its
website. Application forms can be obtained from any Regional Office of
IFCI in person or by post. Along with the application form, IFCI will also
charge a processing fee based on the quantum of loan sought by the
borrower which will be refunded if the proposal is not approved. IFCI has
implemented an internal benchmark rate taking into account the
appropriate factors such as borrowing cost of funds, operating cost, the
margin on funds, tax on funds, risk premia, etc. for determining the
interest to be charged on loans and advances and the risk-adjusted return
matrix is prepared. Detailed standard terms and conditions will be made
available on demand by the applicants. In addition to the standard
conditions, other conditions will be determined based on the evaluation
of the offer. During the evaluation, the customers may occasionally be
asked for additional information/documents required for the same, if
deemed necessary. Applications complete in all respects will be
processed within a reasonable time frame. For evaluation of proposals,
IFCI has formulated eligibility criteria as part of its General Lending Policy,
according to which the borrowers are assessed at lower rates internally or
externally. Eligible proposals for loans are placed before the Screening
Committee and other competent authorities. If the proposal is not
approved by the competent authority, the borrower will be informed
accordingly. Additional information/documents required may be called
for occasionally from the customers, if deemed necessary. Applications
complete in all respects will be processed within a reasonable time
frame. For evaluation of proposals, IFCI has formulated eligibility criteria
as part of its General Lending Policy, according to which the borrowers
are assessed at lower rates internally or externally. Eligible proposals for
loans are placed before the Screening Committee and other competent
authorities. If the proposal is not approved by the competent authority,
the borrower will be informed accordingly. Additional
information/documents required may be called for occasionally from the
customers, if deemed necessary. Applications complete in all respects
will be processed within a reasonable time frame. For evaluation of
proposals, IFCI has formulated eligibility criteria as part of its General
Lending Policy, according to which the borrowers are assessed at lower
rates internally or externally. Eligible proposals for loans are placed
before the Screening Committee and other competent authorities. If the
 proposal is not approved by the competent authority, the borrower will be
informed accordingly. According to which the internal or external lower
rate of the borrowers is calculated. Eligible proposals for loans are placed
before the Screening Committee and other competent authorities. If the
proposal is not approved by the competent authority, the borrower will be
informed accordingly. According to which the internal or external lower
rate of the borrowers is calculated. Eligible proposals for loans are placed
before the Screening Committee and other competent authorities. If the
proposal is not approved by the competent authority, the borrower will be
informed accordingly.
3. In addition, IFCI is making appropriate efforts to determine the correct
identity of the borrowers and beneficial ownership, nature of the client's
business, suitability of operations in the accounts relating to the client's
business, etc. to enable IFCI to manage their risk prudently.

2. Loan Appraisal and its Terms/Conditions

To the borrowers through a sanction/proposal letter or any other medium in the

vernacular language or a language understood by them, about the loan amount
sanctioned and all the terms and conditions, the annualized interest rate
applicable thereon, and the method of application thereof. shall be
communicated in writing and thereafter the Borrower(s) shall accept the above
terms and conditions in writing and the said acceptance shall be kept on record
by IFCI. In the loan agreement, the penal interest charged for the repayment of
the loan is given in bold letters. A copy of the loan agreement along with all
enclosures mentioned in the loan agreement will be provided to all the
borrowers at the time of sanction/disbursement of the loan in the vernacular
language or language understood by them.

3. Disbursement of loans including change in terms and conditions

Any change in the terms and conditions of the loan, including disbursement
schedule, interest rates, service charges, prepayment charges, shall be
intimated to the borrowers in advance in the vernacular language
understandable to them. The above changes in interest rates and charges will be
effective in the future and a clause in this regard will be included in the loan
agreement. apart from this, IFCI reserves the right to re-fix the interest rate/risk
premium on such rescheduled dates as specified in the letter of intent and loan
agreement. The decision to call back the loan/speed up the payment or enhance
the performance under the agreement will be following the loan agreement. IFCI
shall return all the securities on repayment of all dues or recovery of the
outstanding amount of the loan provided IFCI does not have any valid right or
lien for any other claim against the said Borrower(s). If any such right is to be
exercised, IFCI shall intimate to the Borrower(s) the full particulars of the
outstanding claims and the conditions subject to which IFCI is entitled to retain
the securities till the appropriate claim is settled/paid.
 In case of account-specific changes including the interest rate and other
charges/levy, any change in the terms and conditions based on the decisions
taken in the meetings of the consortium of borrowers/lead borrowers will have
to be intimated separately to the borrowers.
In other cases, the same will be intimated through public notice/display of the
IFCI website from time to time.

4. General
1. IFCI shall not interfere with the business of the Borrower(s) on receipt of
fresh information not previously disclosed by the Borrower(s) and except
for the purposes provided in the terms and conditions of the Loan
Agreement. However, IFCI reserves the right to appoint its Nominee
Director(s) on the Board of the Company to protect its interests as
Lender/Investor. If in any case, IFCI receives a request from the
Borrower(s) for transfer of his loan account, the IFCI shall inform the
Borrower(s) of the same within 21 days from the date of receipt of such
objection, i.e., objection, if any. and if such transfer has consented, it shall
be under the transparent contractual terms by law. However, in such
cases, where due diligence is required by law, the said time limit will be
extended accordingly. In the matter of recovery of loans, IFCI shall not
indulge in any act of unfair exploitation of the borrower, such as
persistently harassing the borrower after working hours, using force for
the recovery of loans, etc. The recovery process will be legal and following
the loan agreement. IFCI will ensure that it adequately trains the staff so
that they can properly deal with the customers.
2. To make the appraisal process more effective, IFCI seeks consent from
the proposed Borrower(s) and its Directors/Promoters for obtaining a
credit-related opinion on the same from CIBIL or any other credit rating
agency or Banks/Financial Institutions/NBFCs.

5. Responsibilities of the Board of Directors

1. To make the appraisal process more effective, IFCI seeks consent from
the proposed Borrower(s) and its Directors/Promoters for obtaining a
credit-related opinion from CIBIL or any other credit rating agency or
Banks/Financial Institutions/NBFCs

delegated authority cases approved by

Grievance Redressal Authority upcoming higher authority

Cases approved by officers, not below the level of delegated authority

to the level of general manager Chief General Manager at Head Office

 chief general manager executive direction

Executive Director deputy managing director

deputy managing director Chief Executive Officer and Managing

Director

Chief Executive Officer and Managing board of directors

Director

2. The Grievance Redressal Authority shall make all necessary efforts to

settle and resolve the complaint/dispute preferably within a maximum
period of 30 days.
3. The compliance of the functions of the Fair Practices Code and the
Grievance Redressal Process shall be reviewed periodically (quarterly) at
various levels of the Management and a consolidated report of such
reviews shall be submitted to the Board on a half-yearly basis.

6. Grievance Redressal Officer

1. The complaints shall be addressed directly to the Grievance Redressal
Officer and the same shall be redressed within a maximum period of 30
days from the date of receipt of the complaint.
2. If the complaint/dispute is not redressed within 30 days, the customer
can appeal to the Officer-in-Charge of the Regional Office of DNBS (Full
Contact Details) of Reserve Bank of India under whose jurisdiction the
registered office of IFCI falls. The name of the DNBS and their full contact
details will be displayed in all the offices of IFCI:
The Officer-in-Charge, Department of Non-Banking Supervision, Reserve
Bank of India, 6 Sansad Marg, New Delhi - 110 001, Telephone No. +91-
11-23710538 to 42, Fax No. +91-11-23711250
IFCI: Fair Code of Conduct - Issued vide circular no.2019/11/IRMD/036
dated 15/11/2019

3. The information regarding the grievance redressal procedure adopted by

IFCI along with the particulars of the Grievance Redressal Officer shall be
displayed in the interest of the borrowers and shall also be displayed on
the website of IFCI and in all the offices of IFCI.
7. Fair Practice Code Language and Communication Means

The Fair Practice Code will be made available in Hindi and English language
after the approval of the Board of Directors of IFCI.

8. Regulation of excessive interest charged by NBFCGs

1. Information regarding interest rates and risk classification shall also be
made available on IFCI's website or published in appropriate newspapers
or shall be communicated to the borrower and shall be re-informed as
and when interest rates change. The method of determination of risk
premium as per risk classification is adopted separately by the Integrated
Risk Management Department and the information which is
communicated to the concerned departments. However, in case of
certain risk assumptions, the quantum of which cannot be ascertained,
IFCI reserves the right to change the interest rates accordingly. The rate of
interest shall be annualized rates so that the borrower is aware of the
exact interest rates to be charged.
2. This Code of Conduct will be reviewed once every 2 years or as and when
new guidelines are issued by RBI, whichever is earlier, to enhance the
importance and suitability of the borrowers.
3. In case of any amendment in the RBI Guidelines on Fair Code of Conduct,
the revised RBI Guidelines will be applicable and the existing Fair Code of
Conduct is not in compliance with the updated guidelines/instructions to
any extent.

9. Complaints regarding excess interest charged by NBFCG

1. IFCI has implemented an interest rate model for determining the interest
to be charged on loans and advances, taking into account appropriate
factors such as cost of borrowing of funds, operating cost, the margin on
funds, tax on funds, risk premia, etc. The approach to interest rate and
risk classification and the rationale for charging different rates of interest
to different categories of borrowers will be conveyed to the borrower or
customer in the application form and communicated to the borrower.
2. To bring transparency in interest rate, IFCI has introduced IFCI Benchmark
Rate for Lending.
FINANCIAL PRODUCTS

IFCI Ltd., the country's first development financial institution, was incorporated on 1st
July 1948 as Industrial Finance Corporation of India (IFCI) to meet the long-term
financial needs of industries. Since its inception, IFCI has made a significant
contribution in the field of modernization, export promotion, import substitution, and
energy generation of Indian industry through commercially relevant and market-
oriented efforts.
To continuously meet the needs of the industry and society, IFCI mainly provides the
following services, which are broadly classified into three sectors – Project Financing,
Corporate Finance, and Structured Finance for the entire Industry, Services, and Agro-
based Sector.

PROJECT FINANCING

IFCI's team of professionals has an in-depth understanding of its scope of work and has
been instrumental in providing financial services to meet the growing and diverse
requirements for diversification and modernization of existing projects at various levels
of projects - Greenfield Projects, Brownfield, Infrastructure and Manufacturing Sectors.
Has full qualification.
Various sectors under project finance include renewable energy, telecommunications,
roads, oil and gas, ports, shipping, basic metals, chemicals, pharmaceuticals,
electronics, textiles, real estate, smart cities, and urban infrastructure.
CORPORATE FINANCE

IFCI caters to the diverse needs of the customers of small, medium, and large
companies. IFCI provides financial services in the area of corporate finance through off-
balance sheet funding, loans against shares, lease rent waiver, promoter funding, long-
term working capital requirements, capital expenditure, and regular maintenance
CAPEX.
IFCI also offers short-term loan products (up to one year tenor) to meet various business
requirements including bridge financing and short-term working capital requirements.

AGGREGATION AND COUNSELLING

IFCI has taken the initiative to provide customer-friendly Corporate Advisory Services
and facilitated the financial structure of various Corporate Bodies and Companies. We
provide end-to-end customer customized holistic financial solutions for companies with
our extensive and in-depth experience in project evaluation, documentation, grouping,
product design. In addition, we also provide debt and equity grouping and advisory
services for our client companies.
IFCI has been successful in securing new assignments relating to financial/investment
appraisal, business restructuring, and advisory activities in the area of providing client-
friendly corporate advisory services.

STRUCTURED PRODUCT

IFCI provides finance to its clients through Structured Debt/Mezzanine Products and
assists in providing financing of various needs including sponsor financing, acquisition
financing, pre-subscription financing, and off-balance sheet structured services, among
others. provides.
Nodal Agency for Sugar Development Fund

IFCI Ltd. has been acting as the nodal agency of the Government of India (GOI) since the
inception of the Sugar Development Fund (1986) for disbursement, follow-up, and
recovery of SDF loans sanctioned to private sugar factories for modernization-cum-
expansion, setting-up of bagasse-based cogeneration power projects, manufacture of
ethanol from alcohol/molasses, zero liquid discharge (ZLD) distillery projects, case
development schemes, etc.
As a Nodal Agency of GOI, IFCI is primarily responsible for examination/execution of
loan and security documents, the recommendation to GOI for release of funds,
undertaking site visits for verification of physical and financial progress, verification of
utilization of loan monies released by SDF, maintaining loan accounts of borrowers,
recovery of SDF dues, taking legal actions against defaulters, etc.
In addition, IFCI also carries out financial appraisals of projects for availing SDF loans by
sugar mills. The cumulative Sanction and Disbursement under SDF up to March 31,
2017, stood at Rs.6,436 crore and Rs.5,028 crore respectively.

Modified Special Incentive Package Scheme (M-SIPS):

To promote large-scale manufacturing in the Electronics System Design &

Manufacturing (ESDM), Modified Special Incentive Package Scheme (M-SIPS) was
launched by the Ministry of Electronics & Information Technology (MeitY), Govt. of India
in July 2012.  The scheme was initially opened to receive applications for 3 years i.e., till
26th July 2015.  The Government, on 30th January 2017, to further give a boost to
electronic manufacturing in the country, approved the extension of the tenure of the
Scheme (up to 31st December 2018 or till such time that the incentive commitment
reaches Rs. 10,000 crores, whichever is earlier) along with few procedural
simplifications and expansion of the scope of new product categories.  The incentives
under the Scheme would be available for 5 years from the date of approval of the
application under M-SIPS.
The Scheme mainly provides 20-25% subsidy for investment in capital expenditure for
setting up electronic manufacturing units.  It provides incentives for 4 categories of
electronic products and product components.  Units across the value chain starting
from raw materials to assembly, testing, and packaging of these product categories are
included.
MeitY, Govt. of India, has appointed IFCI (being PFI) as a Verification Agency for
verification of claim seeking incentives under the M-SIPS since May 2017.

SPECS & PLI

Ministry of Electronics and Information Technology (MeitY), Government of India has

issued Work Order to IFCI Ltd. to act as the Project Management Agency (PMA) for the
Scheme for Promotion of Manufacturing of Electronics Components and
Semiconductors (SPECS). The Scheme has an outlay of ~INR 3,285 crore ($440 million)
and shall provide an incentive of 25% on capital expenditure for eligible goods on a
reimbursement basis. The Scheme will be open for applications initially for 3 years up
to 31/03/2023 and incentives will be available for the investment made within 5 years
from the date of acknowledgment of the application.
 
Ministry of Electronics and Information Technology (MeitY) has appointed IFCI Ltd. to
act as the Project Management Agency (PMA) for Production Linked Incentive Scheme
(PLI) for Large Scale Manufacturing Scheme, aimed at boosting domestic
manufacturing and attract large investment in the electronic value chain including
electric component and semiconductor packaging. The Scheme has an outlay of ~INR
40,951 crore and shall extend an incentive of 4% to 6% on incremental sales (over the
base year) of eligible goods manufactured in India.
INITIATIVES TAKEN BY MANAGEMENT
Operational –
 Integrated Risk Management System
 Enhancement of Appraisal Skills and Capacity Building
 Integrated IFCI Group Business Development
 Cost Reduction – Operational and Non – Operational
 Revisiting policies of Lending, R&T, HR and other in line with
present market conditions
 Corporate Planning and Policy Initiatives
Strategic –
 Strategic Disinvestment & Monetisation of non-core Assets
 Effective Corporate Communications for Brand & Image building
with stakeholders

Conclusion
From the above study, it is evident that IFCI is one of the best development financial
institutions so it is also conscious of its responsibility in matter of raising financial
resources for assistance to different industrial sectors. IFCI is able to manage financial
resources for project financing for new establishment, modernization, diversification,
rehabilitation. Above study shows that there is drastic variation in financial assistance
of IFCI but management of the institution is so efficient that it handles all the problems
effectively. All these effective measures help IFCI institution for comeback and also get
success through improvement in industrial development. It can be said that IFCI will be
also to strengthen the steps further by having more rigorous follow up of the existing
measures and also search for more effective ways for dealing with the problem of
financial resources. IFCI should also enforce a satisfactory proportion of equity capital
while sanctioning financial assistance to projects. IFCI handles its project financing very
tactfully by applying the policy of financing entrepreneurial projects in broader manner
all over the industrial sectors.

References

IFCI Ltd. (n.d.). Retrieved from https://www.ifciltd.com/

Yadav, H. K. (n.d.). Financial Engineering : A Case Study of IFCI.