U.P. FINANCIAL CORPORATION

The Corporation has financed nearly Rs. 3080 crore to more than 40,000 units since inception. Although the loan of Rs.2358 cr. have been repaid, but many of these units turned into Non performing assets, which has been the matter of concern to Corporation. Normally, the loan proposals are examined and processed in two phases.First, at the time of registration and subsequently during appraisal of project. The loan proposals/applications along with project report and other documents received from entrepreneurs are prima-facia examined by ROs for registration purpose.However, A realistic and good appraisal would result in good Recovery from the unit.It is important that R.M.s and the appraisal officers should ensure checking of following parameters, while taking decision of registration of loan proposals

The past background and Bio-data of all the promoters should be carefully checked and examined by R.O. A study conducted by H.O. revealed that 28.5% of the units turned into D-2 and Loss Assets categories due to problems associated with promoters. It is important that the family background, age, educational qualification, experience of similar trades, financial resources, details of property, existing liabilities of all promoters should be checked, verified and properly analyzed. In case of partnership/Company, Regional Manager should check whether the management is cohesive and consists of people who have had a successful track record of working together or are people having diverse back ground. It has been observed that projects promoted by people of diverse background often result in to sick unit. A homogeneous group of limited number of partners /directors with professional qualifications would have better chances of success of project. It is not enough that the promoters have financial resources for the proposed project, the emphasis should also be on the manage rial capabilities of promoters to run the project successfully, even in adverse situation.

Normally, it is presumed that repayment of the loan will come from the cash accrual/profit of the project. However, the possibility of the failure of a project can not be ruled out and repayment of loan would be jeopardized. To avoid such situation, ROs invariably would ascertain the net worth of all the partners /directors and likely possibility of repayment of loan from personal resources of the promoters.

Loan to the existing units whether it is self-financed /Bank /UPFC financed, should normally be considered if the same is making profit for atleast three financial years. In case of UPFC financed unit, the additional loan may only be considered after the gap of two financial years or atleast 25% of the immediate previous loan is repaid.

ROs should check whether the selection of particular project has been made after detailed and careful study of all the aspects by the promoters. Further, what factors have been accounted by the promoters in deciding the particular project and preparation of report. Assessment of the promoters regarding knowledge of the project prepared is necessary as it is observed that the project report and other financial statements are prepared by consultant /chartered accountant and promoters have very little knowledge. The competitive nature of particular industry and item proposed to be manufactured should be carefully studied .The growth trend and economic cycle of the industry are necessary to know so as to ascertain whether the industry is passing /likely to pass in recession phase in coming years. Association of all industrial sectors and many business magazines forecast the growth of industries, and it should also be taken into account at registration stage. Further an assessment of the competitive nature of items/production and risk involved should be made on realistic basis, and loan proposals with high risk involved should be avoided.

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