Kerala Financial Corp earmarks Rs 300 crore for bill-discounting system

The new scheme is in addition to the KFC’s line of credit (LOC) scheme for contractors associating with the departments of Public Works and Irrigation.

Published: 25th January 2020 06:41 AM  |   Last Updated: 25th January 2020 06:41 AM   |  A+A-

By Express News Service

THIRUVANANTHAPURAM: There’s good news for LSG contractors, suppliers and other agencies whose pending bills are yet to be cleared by the government. The Kerala Financial Corporation (KFC) has earmarked Rs 300 crore for the bill discounting system devised by the government to overcome the fund crunch.

It may be recalled that development works and routine functioning of various government departments and LSGs were stalled for months, after the government imposed restrictions on treasury payments. In this regard, bills of suppliers and contractors were being kept in a queue system.

However, earlier this month, the Finance department announced the introduction of the bill discounting system, once it became clear that the Central sanctions for the state will be delayed further.

As part of the discounting system, the government will issue a promissory note to contractors and suppliers who can seek advance payment from banks or the KFC. This will be applicable for suppliers, accredited agencies of government departments, institutions and the local self-government department.
The KFC director board on Thursday approved the scheme for the new discounting system.  “This is an excellent opportunity for the KFC to expand our loan portfolio. We are targeting an additional business of Rs 300 crore,” said Sanjay Kaul IAS, CMD, KFC.

The KFC will deduct a 9.5 per cent interest rate from the net payment to the contractor. However, since the government will give 5 per cent interest for the pending aamount, the net interest to be paid by the contractor will be 4.5 per cent. The maximum sanction for corporate and non-corporate entities will be Rs 20 crore and Rs 8 crore respectively.

The new scheme is in addition to the KFC’s line of credit (LOC) scheme for contractors associating with the departments of Public Works and Irrigation. The corporation had earmarked Rs 750 crore in this fiscal to provide loans and LOC for contractors.

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