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State Financial Corporation Act, 1951


7. Additional capital of the Financial Corporation and its borrowing powers

(1) The Financial Corporation may, in consultation with the Development Bank and the Reserve Bank, issue and sell bonds and debentures carrying interest for the purpose of increasing its working capital and such bonds and debentures 8[shall, if so required by the Financial Corporation, be guaranteed by the State Government] as to the repayment of the principal and the payment of interest at such rate as the State Government may, on the recommendation of the Board based on the advice of the Reserve Bank fix 6[***].

(2) The Financial Corporation may, for the purpose of carrying out its functions under this Act, borrow money from the Reserve Bank-

(a) repayable on demand or on the expiry of a fixed period not exceeding ninety days from the date on which the money is so borrowed against the security of-

(i) stocks, funds and securities (other than immovable property) in which a trustee is authorized to invest trust money by any law for the time being in force in India, or

(ii) such bills of exchange and promissory notes as are eligible for purchase or rediscount by the Reserve Bank or as are fully guaranteed as to the repayment of the principal and payment of interest by the State Government;

(b) repayable on the expiry of a fixed period not exceeding eighteen months from the date on which the money is so borrowed, against securities of the Central Government or of any State Government of the maturity, or subject to the previous approval of the State Government, against bonds and debentures issued by the Financial Corporation and maturing within a period not exceeding eighteen months from the date on which the money is so borrowed and every such bond and debenture shall be guaranteed by the State Government:

PROVIDED that the amount borrowed by the Financial Corporation under clause (b) shall not at any time exceed in the aggregate 9[twice] the paid up share capital thereof.

(2A) No money shall be borrowed by the Financial Corporation from the Reserve Bank under sub-section (2), except with the previous approval of the Development Bank.]

(3) The Financial Corporation may, for the purposes of carrying out its functions under this Act, borrow money from the State Government in consultation with the Development Bank and] the Reserve Bank on such terms and conditions as may be agreed upon.

(4) The Financial Corporation may, with the prior approval of the Development Bank, also borrow money from any financial institution notified in this behalf by the Central Government on such terms and conditions as may be agreed upon.

(5) The total amount of bonds and debentures issued and outstanding, the amounts borrowed by the Financial Corporation under clause (b) of sub-section (2), sub-section (3) and sub-section (4) and of the contingent liabilities of the Financial Corporation in the form of guarantees given by it or underwriting agreements entered into by it shall not 10[* * *] exceed ten times the amount of the paid up share capital and the reserve fund of the Financial Corporation:

3[PROVIDED that the Financial Corporation may, with the prior approval of the Development Bank, exceed the aforesaid limit up to thirty times the amount of the paid up capital and the reserve fund of the Financial Corporation.] 



State Financial Corporation Act, 1951 Back




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