31-07-2012, 10:44 AM
RAJASTHAN FINANCIAL CORPORATION
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INTRODUCTION
A financial institution, in a layman language, can be defined as an institution which deals with credit. It raises money from certain sources and makes funds available to those who need them and helps in the remittance of money from one place to another for their projects to run smoothly.
Amongst this bevy of financial institutions, there are certain institutions which indulge mainly in lending to the small, medium and tiny industries. SME financing has been a part of directed lending of commercial banks. In India, multiple institutions operating in public, private and co-operative sector cater to their credit needs, both for long term as well as working capital. The policy of directed lending has helped canalizing of credit to the sector in the past and the credit outstanding against small business has shown rapid growth.
A variety of these institutions sub serve the SSI sector. Small Industries Development Bank of India (SIDBI) acts as an apex institution for these SSIs for promotion, financing and development of small-scale sector in India. SIDBI is also entrusted with the task of coordinating the functions of other institutions engaged in such activities.
PROJECT APPRAISAL
Project appraisal can be defined as the promoter taking a second look, critically and carefully at a project as presented by the promoter’s person who is in a way involved in or connected with its preparation and who is as such an independent and dispassionate and objective view of the project in its totality as also in respect of its various components. The person who carries out the appraisal of a project is usually an official from the corporation or a team of the institutional officials. Since all ending activities involve risk in a smaller or larger measure, project appraisal aims at sizing up the quality of the project and its long term profitability aims at minimizing the risk of lending by rectifying their weaknesses and improving their quality by incorporating into them, features/safeguards missed by the promoters either because of lack of knowledge or information.
Technical Appraisal
Technical appraisal of the project is essential to ensure that necessary physical facilities required for production will be available and the best possible alternative has been selected to procure them. It includes the study of the manufacturing process, technical arrangement, size of plant, selection and procurement of plant, plant layout, implementation and location of project with reference to the availability of various inputs required for production.
The technical aspects of a project involve:-
Suitability of location & Pollution Control
The location of a project should be suitable in relation to the sources and adequate availability of the raw materials, water, power, transport and communication facilities, skilled labor and also in relation to the markets to be served by the project. In case of projects to be set up in rented premises inspection of the building should invariably be carried out to ensure availability, suitability and adequacy of the buildings proposed to be taken on rent.
Though industrial development significantly contributes to the economic growth but at the same time we should not overlook an important fact that this progress brings along with environmental problem. Water and air pollution resulting from the discharge of effluents is, therefore required to be prevented, for riot disturbing the ecological balance of the State and for keeping the public at large unaffected by the likely hazards of pollution.
Adequacy of land and building
The availability of land has to be examined keeping in view reasonable requirement of holding with allowance for probable future expansion and also the site development requirements. Soil test and the load bearing capacity have also to be ascertained in the case of industries.
The factory buildings should be appropriate for the layout plan for machinery and go downs for the stocks to be maintained. Amenities for the labor necessary under Factories Act should also be provided for. Reasonable requirement for administrative and office building should also be considered. The PWD scheduled rates provide a basis for adopting reasonable estimate for the cost of buildings.
Capacity and usefulness of plant & machinery
The basis for the selection of machines with due regard for the prices and quality, their capacity and availability of spare parts and the delivery times have all to be considered before a decision is taken to finance the project. Detailed specifications have to be studied and the reputation, experience and records of the suppliers have to be verified. If similar plants supplied by the suppliers to other concerns are working well successful operation of the plant is reasonably ensured.
Feasibility of the technical process
In order to examine the suitability of the selected process a study has to be made of the alternative production processes and their relative efficiency. It has to be ensured that the technology adopted is modem. An obsolete technique will not only affect the profitability of the project but may render the entire investment ineffective. It is also advisable to find out whether units making use of the process are working well.
Arrangement for technical know-how
When the promoters of the enterprise and themselves not well qualified in the line, some arrangements for technical know-how become necessary, especially where the process involved is sophisticated. The agreement for securing the necessary expertise should provide for the production of goods of specified quality and also for penalty in case of failure.