THIRUVANANTHAPURAM: The Kerala Financial Corporation (KFC) will now be able to issue performance guarantee for public works. The facility, provided by nationalised and scheduled banks so far, will enable the corporation to improve its loan portfolio among government contractors.The KFC expects to do business worth at least Rs 1,000 crore business in a fiscal by way of loans to contractors. “On an average the government sanctions works between Rs 10,000 and Rs 15,000 every year. This will increase by about 15 pc with the Rebuild Kerala works. The new facilities offered by KFC are sure to attract more contractors,” officials said.
Performance guarantee is the amount collected by the government at the time of executing a contract for public works. It will be five per cent of the contract value and the deposit will be retained till the expiry of the defect liability period.
At least 50 per cent of this deposit will be collected in the form of treasury fixed deposit and the rest in the form of guarantee issued by nationalised or scheduled banks and now on from the KFC.The KFC will charge low fees for issuing the guarantee, only 0.5 per cent per quarter, while different banks charge 0.75 per cent or above. Unlike the banks, KFC will not ask the client to make a fixed deposit in addition to the mandatory securities.
The corporation will give 80 per cent of the total amount as loan at about 9.5 per cent interest rate.An early bill discounting facility is the second important offer of the corporation for contractors. KFC will discount 90 per cent of the bill amount to contractor when the bill is approved by the the executive engineer of the department concerned. This will be a boon to contractors as it takes at least 10 months for a bill to be honoured by the government after clearance at different levels.