The chairman & managing director of North Eastern Development and Finance Corporation (NEDFi) speaks to Roopak Goswami of The Telegraph about the corporationís achievements in the region and its future plans.
Starting with a broad question, has NEDFi been able to accomplish its objective and does it now have a strong footing?
A. With its mandate of catalysing economic development in the Northeast by identifying, financing and nurturing eco-friendly and commercially viable industrial, infrastructure and agro-horticultural projects in the region, the corporation has been able to accomplish to a large extent what it was set up for. It now has a firm footing, ready to face future challenges.
Over the past 16 years, the corporation has been able to establish itself as the premier development financial institution of the Northeast, providing support to first generation entrepreneurs of the region. With cumulative loan sanctions of Rs 2,481 crore in a wide spectrum of sectors spread all over the eight northeastern states, NEDFi has made a significant contribution to the regionís economy.
The loan products of the corporation are structured mainly towards development of the micro, small and medium enterprises (MSME) segment, which is a key driver of economic growth and capital formation in the region.
For development of the micro and small enterprises (MSE) sector, the corporation has taken the initiative to identify and nurture potential first generation local entrepreneurs and provide them finance on easy terms to set up viable industrial projects.
Under NEDFiís schemes like NEEDS, WEDS, JEDS, SNEHH and IDEA, entrepreneurs can avail of loans at a comfortable interest rate of 8 per cent for projects up to Rs 50 lakh.
While the MSME sector continues to be the major focus area of the corporation, in respect of larger projects, especially in the infrastructure sector, the corporation plays the role of a catalyst for channelling investment into the region by participating in consortium lending.
Q. Non-performing assets have been a major concern for every financial institution in the Northeast and your corporation is no exception. What is the present NPA level and can it ever come down to zero? What is the corporationís strategy to reduce NPA in the region?
A. During past five years, our gross NPA level has come down drastically from around 25 per cent to the present 5.3 per cent and net NPA from seven per cent to around 1.39 per cent. Our immediate target is to reduce the gross and net NPA to four per cent and one per cent respectively. The strategies followed by us are counselling of defaulters, upgrading market intelligence, reviewing sector exposures, restructuring dues in genuine cases, compromise settlements and take legal action as a last resort.
Q. What is your business plan for Twelfth Plan and how will it be financed? Have you sent it to DoNER ministry?
A. Till the end of Eleventh Plan period, our cumulative sanction and disbursement were Rs 2,481 crore and Rs 1,616 crore. For the Twelfth Plan period, we have projected a total sanction of Rs 6,400 crore and disbursement of Rs 4,700 crore and the requirement for achieving these targets will be met from recovery of existing loans, fund support from the Centre and market borrowings. The detailed plan has been submitted to DoNER ministry.
The projections, however, may change, considering the global economic scenario and its impact on the financial sector.
Q. Identification of projects for funding in the region has been a difficult task. What has been your strategy and have you been able to succeed in that?
A. A number of strategies have been adopted. We have set up business facilitation centres with an objective to provide advisory services and guidance to potential entrepreneurs with project costs up to Rs 50 lakh.
NEDFi is also working in association with Sidbi for setting up such centres in the entire region. To facilitate hand-holding support to the budding entrepreneurs as well as to guide the existing entrepreneurs, five centres have so far been opened by NEDFi at Aizawl, Gangtok, Shillong, Silchar and Agartala.
We have opened an entrepreneursí corner at our head office in Guwahati to offer free counselling to potential entrepreneurs in matters of all industrial queries such as sourcing of raw material, project management, preparation of detailed project reports, site visits, marketing and financial linkages. The corporation also conducts business meets from time to time in the different states of the region to identify potential entrepreneurs.
There is also a Rural Self Employment Training Institute (RSETI) centre for practical livelihood training at Nalbari to provide free short-duration courses to rural unemployed youth in practical employment-oriented courses to help them avail bank finance and eventually become self-employed. We have initiated several programmes to promote alternative livelihood avenues through promotion of designer candles and products made from water hyacinth and banana bark.
Q. In states like Meghalaya, sanctioning loans has been difficult for financial institutions owing to varied problems. What has been your strategy, and has it been a success?
A. This year we organised entrepreneur meets at Agartala, Imphal, Aizawl, Lunglei, Nagaon, Dibrugarh, Tinsukia and Silchar. We organised such a meet at Shillong in July and received enquiries for projects like hotels, restaurants, beauty parlours, bakeries, residential schools and packaged drinking water, among others. We are also planning to organise such meets in the second week of December in Tura. Besides, regular visits are being made to prospective entrepreneurs for business mobilisation.
Q. Where does NEDFi stand in comparison to other regional financial institutions in the country and in the Northeast?
A. NEDFi is not only a lending institution but also plays the development role of promoting, nurturing and hand-holding local entrepreneurs in their effort to earn a livelihood and contribute to the economic development of the region. NEDFi, thus, has a more symbiotic relationship with local entrepreneurs of the region as compared to other institutions.
Q. Microfinance has suddenly become a big business in the region. What has the corporation done in microfinance sector and what are its plans in the future?
A. With a view to contribute to financial inclusion at the grassroots, NEDFi launched its microfinance initiative to reach out to rural beneficiaries in remote areas of the region through established NGOs or microfinance institutions. The scheme has really helped the rural entrepreneurs/borrowers to take up various income generating activities and, in the process, has brought them into the financial net. Till date, cumulative sanctions under this sch-eme stand at Rs 165.35 crore in 460 projects covering 2,48,274 beneficiaries, out of which 2,21,387 are women ó 89 per cent of the total beneficiaries.
Apart from finance and capacity-building support, NEDFi has also extended equity support to a few microfinance institutions in order to strengthen their base.
In order to be able to extend financial assistance to members of the more underserved and disadvantaged sections of the society, the corporation has entered into an agreement with National Backward Classes Finance & Development Corporation to route funds to the members belonging to the backward classes at subsidised interest rates as low as 2 per cent.
Q. What are the new financial products expected to be launched by the corporation in the next fiscal?
A. To encourage growth of the MSE segment in the Northeast, we are shortly launching a special scheme for projects costing between Rs 50 lakh and Rs 200 lakh, incorporating various customer-friendly features including low rates of interest. We are also developing new schemes aimed at encouraging promoters to take up projects in the agri-allied sector.
Q. Is the corporation looking at the plantation sector?
A. NEDFiís mandate is to promote industry and infrastructure in the region. While it has been assisting tea-processing units, the plantation sector has not been a priority area.
Q. There must have been some failings in the corporation. What are those and what is the corporation doing to overcome these?
A. NEDFi started its operation in the region where the challenges were numerous ó the difficult terrain, the remote habitation zones, lack of banking habits of first generation entrepreneurs, not to mention vitiation of the industrial atmosphere by insurgency. Default in loan repayment was a major problem that impeded the corporationís growth. It has overcome the bottlenecks and is now firmly on the growth path.
NEDFi is planning to support more local entrepreneurs, which will, in turn, contribute significantly to the economic development of the region in the coming years.