State Financial Corporations (SFCs) provide finance to industries. They were established with the purpose of promoting the growth of small, medium and large-scale industries in the country in order to augment the growth of industries and make the nation self-sufficient. They play a major role in the industrial development of regions. SFCs have been providing finance, technical know-how, etc., to the small and medium-scale industries in the states. The main objective of the study is to analyze the performance of Haryana Financial Corporation (HFC) in giving financial assistance to Small-Scale Industries (SSI) in liberalized era. The study is analytical in nature, throwing light on the financing pattern of SSI sector by HFC, covering year-wise, type-wise, industry-wise, constitution-wise, size-wise and district-wise credit sanctions and disbursements in Haryana. The data for the present study have been obtained from the annual reports of HFC. Result shows overall negative growth rates of loans sanctioned as well as of loans disbursed by HFC during the study period. Constitution-wise, size-wise, industry-wise and district-wise classification of the data also reveal poor performance of HFC in the era of liberalization. HFC has also failed in its objective of balanced development, as most of the sanctions have been made only to a few districts of Haryana and a small share of the total amount sanctioned has gone to the backward districts. Moreover, the percentage share of arrears is increasing and recovery ratio is decreasing year-by-year.

Small-Scale Industries (SSI) play a vital role in the economic development of the country. They have a significant role in the socioeconomic upliftment of developing countries, like India. SSI occupy a unique position in the Indian economy for its contribution towards value addition, employment generation, and the expansion of entrepreneurial base and also for the diversification of the industrial sector. The small scale helps in solving the problem of regional imbalances and concentration of industries in few selected areas. The number of small-scale units increased to 20.32 lakh registered units and 108.32 lakh unregistered units during 2006-07. The employment generation of small-scale sector also increased from 129.8 lakh in 1991-92 to 312.52 lakh in 2006-07. The value of output of small-scale sector in 2006-07 was Rs. 471,663 cr, showing an increase of 12.6% over the output of value Rs. 148,884 cr in 2005-06. The percentage share of exports from small-scale sector in the total exports, which was 24.5% in 1981-82 rose to 35% in 2005-06. In the year 2006-07, the exports from SSI amounted to Rs. 150,242 cr showing an increase of 20.8% over the exports of Rs. 124,417 cr in 2005-06. SSI sector accounted for 6% of GDP (Economic Survey 2007-08). Further, the development of small-scale sector has resulted in more equitable distribution of income and wealth.

At the beginning of the 1950s, the government realized that for achieving rapid industrialization, separate institutions should be set up that will cater exclusively to the needs of the small and medium sector. Therefore, the State Financial Corporations (SFCs) Act was passed by the Parliament in 1951 to enable the state governments to establish the SFCs. The basic objective for which the SFCs were set up was to provide financial assistance to small and medium-scale industries and establish industrial estates. The SFCs provide finance in the form of term loans, by underwriting issues of shares and debentures, by subscribing to debentures, and standing guarantee for loans raised from other institutions and from the general public. In this process, the Haryana Financial Corporation (HFC) started functioning in 1967.

The process of economic liberalization and financial sector reforms that initiated in 1991 brought about complete transformation in the economic scenario of the country. As a result of deregulation of the financial sector and gradual move towards universal banking, the SFCs have been steadily losing their ground and facing problems in the competitive environment. The SFCs serve the multiple national objectives of rapid industrial growth, balanced regional development, self-reliance, employment generation, and equitable distribution of income and means of production. The responsibility for the development of small-scale sector in the State of Haryana rests largely with HFC, Haryana State Industrial Development Corporation (HSIDC), and District Industries Centers (DIC). A fairly long experience of working and performance of HFC is available. But very few attempts have been made to study the performance of HFC. The present study attempts to evaluate the performance of the HFC.

Managerial Economics Journal, Haryana Financial Corporation, State Financial Corporations, Industrial Development, Economic Liberalization, Small Scale Industries, Financial Sector Reforms, Universal Banking, Gross Domestic Product, GDP, Industrial Sectors, Commercial Banks, Public Limited Companies, Economic Policies, Economic Development.