State Financial Corporations

After the banking industries started lending to micro, small, and medium industries (MSME), state financial corporations (SFC) were written off as developmental financial institutions. Over the years, SFCs have eroded even their net worth and were found to be constrained for performance because of their business model and structure. However, in the recent past, few SFCs have started showing profit and diversifying their product offerings. This article addresses 10 SFCs in India, analyses their financial status, support offered to them by respective state governments, and the best practices SFCs follow. It also juxtaposes various audit reports for those SFCs and identifies operational issues. The changing landscape for entrepreneurship finance and inherent risk has been contrasted with the financial health of different SFCs. The article identifies the intervention areas for business and finds research agendas to make policy decisions evidence based.