FINANCING OF PROJECTS I f\J WEST BEf\JGJ\[

1 0.1 TYPES OF FINANCING

~nanciallnstitutions and Banks offer a wide spectrum of financing options comprising of both fund and non fund based activities. Some of the key types of financing available include:

• Term Loan • Export Finance
• Working Capital Loan • Import Finance
• Equipment Finance
• Cash Credit
• Bridge Loan
• Bill Discounting • Infrastructure Financing
• Factoring • Commercial Paper 10.2 How TO ApPLY FOR TERM LOAN

oil ost of the Public Financial Institutions in the country as well as the State Financial Corporations have

standardized forms for application for term loans. These solicit elaborate information, inter alia, on the promoters,

the company profile and history, full project details including costs, profitability and cash flows, economic justifications, government consents etc. A typical activity list from the viewpoint of the financial institutions vis a vis the project cycle is shown here.

10.2.1 ]\CTIVITY CRi\RT FOR TERM [Er'JDI~G

@he promoter has to go through the following stages while making application for term loan from Financial Institutions or Banks:

• Promoters decide about the project and other parameters like location, raw material etc.

• Preliminary discussions with Fls regarding feasibility

• Appointment of consultants

149

• Preparation of Project Report and application for term loan.

• In-principle decision by Fls to go for detailed appraisal

• Appraisal by Fls

• Amendment of project report if required by Fls after discussions

• Issue of sanction letter for term loan

• Borrower conveys acceptance to the proposal

• Application for bridge loan against the term loan

• Promoters bring their contribution and FI makes disbursement against bridge loan

• Verification of title deeds by borrower to establish clear title to satisfaction of Fls

• Documentation for term loan including creation of security by way of mortgage and adjustment of

disbursements for bridge loan against term loan.

• Disbursement of further loan and implementation of project

• Commencement of commercial production

• Repayment of term loan as per schedule.

10.2.2 DOCUMENTATION FOR TERM LOAN APPLICATION

(2Q(n overview of the typical documentation involved in a Term Loan Application is given below:

• Detailed Project Report

• Application form of bank duly filled in

• Industriallicence/SIA registration, NOC from State Pollution Control Board, Sanction for Power

• Balance Sheet, Profit & Loss Account and Directors Report for minimum 3 years

• Memorandum and Articles of Association

• Cash Budget, in case of working capital borrowing

• Statement of Net wealth of Promoters

• Statement of collateral securities with their market valuation by approved valuer and copies of title deeds

• Copies of board resolutions authorizing execution of loan agreement and signing various documents to be submitted

• Quotations, purchase orders, invoices

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10.3 PRINCIPAL FINANCING INSTITUTIONS
Q.Yn West Bengal the principal domestic Financing Institutions include the following:
A. Commercial Banks:
• Allahabad Bank • Citi Bank • ICiCI Bank
• Andhra Bank • Corporation Bank • Oriental Bank of Commerce (OBC)
• ABN AMRO Bank • Dena bank • Punjab National Bank (PNB)
• American Express Bank • Development Credit Bank • Standard Chartered Bank
• Bank of Baroda • HDFC Bank • State Bank of India
• Bank of India • HSBC • Syndicate Bank
• Bank of Maharashtra • Indian Bank • UCO Bank
• Canara Bank • IDBI Bank • United Bank of India
• Central Bank of India • Indain Overseas Bank • Union Bank of India
• Centurion Bank • Induslnd Bank • Vijaya Bank B. Term Lending Institutions

• Industrial Finance Corporation of India (IFCI) • West Bengal Financial Corporation (WBFC)

• Infrastructure Development Finance Company Ltd. (IDFC) • Industrial Investment Bank of India (IIBI)

C. Other Financial Institutions
• Export Import Bank (EXIM Bank) • National Housing Bank (NHB)
• Indian Renewable Energy Development • National Bank for Agriculture and Rural
Agency Ltd. (IREDA) Development (NABARD)
• Power Finance Corporation • Small Industries Development Bank (SIDBI)
• Tourism Finance Corporation of India Ltd. • National Small Industries Corporation Ltd.
• West Bengal Industrial Development (NSIC)
Corporation Ltd. (WBIDC) • Rural Electrification Corporation
• India Infrastructure Finance Company (IIFC) • Infrastructure Leasing & Financial Services
• Housing and Urban Development Limited (IL&FS)
Corporation Ltd. (HUDCO) • SREI Infrastructure Finance Ltd. (SIFL) 151

1 0.4 SNAPSHOT OF KEY INSTITUTIONS AND FINANCING PROFILES

Institution Brief Profile Types of Financing / Assistance
Commercial Commercial Banks can be Term Loan, Working Capital Finance,
Banks broadly categorized into Export Credit, Project Finance, Lease
nationalized (government Finance, Factoring, Bill Discounting,
owned) and private banks. Loan Syndication, Bridge Loan,
RBI is the centralized Channel Financing
authority regulating and
monitoring the banking
system in India
India Provides financial Project finance: providing credit to
Infrastructure assistance to industries in green-field as well as brown-field
Finance different sectors like projects, Equipment Finance, Short
Company Consumer goods industry, Term Loan, Bill Discounting,
(IFCI) service industries, Advisory Services etc
Infrastructure, heavy
industries etc.
Infrastructure Provides specialized Sectors financed: Energy,
Development finance for projects in Transportation, Telecommunication,
and Finance infrastructure sector IT, SEZs, Tourism, Industrial Parks,
Company Ltd. Urban & Rural Infrastructure
(IDFC)
West Bengal Established under the State Term Loans, Equipment Finance
Financial Financial Corporation Act, Loan, Working Capital Loan,
Corporation 1951 to finance small and Subscription to shares & debentures,
(WBFC) medium scale industries. Bill Discounting etc
Industrial Fully owned by Govt. of Terms loans, Equipment Finance,
Investment India and assists industries Asset Credit, Project Finance,
Bank of India mainly in medium and Working Capital Loan, Underwriting,
(IIBI) large sector Loan Syndication, Project
Consultancy
EXIMBank Finances corporates/ Exports Credits- Supplier's credit, Pre-
exporters, refinances shipment credit, Buyer's credit,
Indian commercial Finance for export oriented units,
Banks and extends term Consultancy services, Guarantees,
credit to overseas
financing institutions Forfaiting (discounting of export
receivables) etc
Indian To promote, develop and Sectors financed: Hydro energy, Wind
Renewable extend financial assistance energy, Bio energy, and Solar energy.
Energy for Renewable Energy and Types of finance - Project Finance &
Development Energy Efficiency Equipment finance
Agency Ltd. /Conservation Projects
(IREDA) 152

Institution Brief Profile Types of Financing / Assistance
Power Finance For providing financial Rupee and Foreign Currency Term
Corporation assistance to units in power Loan, Short Term Loan, Bill
sector Discounting, Equipment Finance,
Lease Finance, Debt Refinancing,
Bridge Loan etc
Tourism Sponsored by IFCI to Rupee Loan, Subscription to
Finance finance tourism projects shares/debentures, Equipment
Corporation Finance, Equipment Leasing,
Merchant Banking & Advisory
Services
West Bengal Provides financing for Types of fmancing:
Industrial setting up and expansion of Long Term Loan:
Development medium and large-scale Amount - No limit,
Corporation industries. Rate of Interest- 9.5%,
Ltd. (WBIDC) Moratorium - upto 18 months,
Repayment period - upto 7 years
Equipment Finance Scheme (EFS):
Amount - No limit,
Rate of Interest- 9% quaterly,
Moratorium - upto 9 months,
Repayment period - upto 5 years
Short Term Loan
(to assisted units)
Max. amount -Rs 4000 thousands
Rate of Interest- 9.25%,
Maximum duration - 9 months
Bridge Loan :
Amount - upto 50% of
admitted claim of State
Government Incentives
Repayment period - 15 months
Interest rate -12% quarterly
Equity Participation:
Contribution depends upon
the merit of individual projects
Special Short Term Loan Scheme:
Amount - No limit, based on valuation
Eligibility - No outstanding term loan
Security - Exclusive first charge on
fixed assets
Rate of interest - 9.25% p.a.
Repayment Period - 12 months
Rebate for timely payments:
Ranging from 0.25% to 1.00% in
respect of Term Loan and EFS
and also for other units making
timely repayments 153

Institution Brief Profile Types of Financing I Assistance
India Wholly owned Govt. Direct lending to eligible projects,
Infrastructure subsidiary formed to Refinance to banks and (Fls), debt
Finance accelerate and increase funding. Currently involved in
Company PPPs in infrastructure power, ports, airports, urban
(IIFC) sector infrastructure, water and tourism.
Housing and Fully owned Gol enterprise Financing housing & infrastructure
Urban with focus on housing and projects such as water, power,
Development utility infrastructure transportation, commercial,
Corporation provision educational institutions, hospitals,
Ltd. (HUDCO) industrial infrastructure,
telecommunications
National Principal agency to Refinance to housing finance
Housing Bank promote Housing Finance companies, banks etc., Project
(NHB) Institutions and to provide Finance.
financial and other support
to such institutions
National Bank Established for promotion Refmance to commercial
for Agriculture and development of banks, Regional Rural
and Rural agriculture, SSI, cottage Banks, Cooperative
Development and village industries, Banks, Production
(NABARD) handicrafts and other rural Credit, Investment
crafts as well as allied Credit, etc
activities in rural areas
Small Principal financial Term Loan, Working Capital Term
Industries institution for promotion, Loan, Bill Discounting etc
Development financing and development
Bank (SIDBI) of SSls
National Small Formed to promote, aid Provides Term Loan, Plant &
Industries and foster the growth of Machinery on hire purchase and lease,
Corporation small industries in the Working Capital Loan, Technical
Ltd. (NSIC) country Support, Export Finance
Rural Financing and promoting Financial assistance for electrification,
Electrification projects covering power pump sets, transmission, sub
Corporation generation, conservation, transmission and distribution system,
transmission and transformers and capacitors
distribution
Infrastructure Co-promoted by the Provides Project Finance, Asset
Leasing & Central Bank of India Finance, Loan Syndication,
Financial (CBI), Housing Investment Banking, Advisory
Services Development Finance Services, Debt Placement, Institutional
Limited Corporation Limited Broking and Merchant Banking
(IL&FS) (HDFC) and Unit Trust of
India (UTI). One of India's
leading infrastructure
development and finance
companies
SREI One ofIndia's largest Areas covered: Infrastructure
Infrastructure private sector Non- Equipment Financing, Infrastructure
Finance Ltd. Banking Financial Project Financing, Renewable Energy
(SIFL) Institutions financing Equipment Financing
infrastructure sector 154