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Assam Financial Corporation (AFC), incorporated under the State Financial Corporations Act of 1951, is a pioneer financial institution of the North East region for long term finance and the Corporation is playing a major role in the development and industrialization of Assam extending financial assistance to Micro, Small and Medium Enterprises in manufacturing and service sector. Since inception AFC has nurtured more than 6800 projects, spread over the length and breadth of the State. Operating at the grass root level, AFC is playing a significant role for the economic & industrial development of the state by encouraging first generation entrepreneurs shouldering high risk debts and creating employment opportunities for local unemployed youths of the state. During the financial year 2019-20, the momentum of Indian economy slowed down slightly. The GDP growth rate is estimated to be 5% in 2019-20 as compared to 6.8% in 2018-19. The overall industrial sector growth is estimated to be 2.5% in 2019-20 as compared to 6.9% growth in 2018-19. Manufacturing sector is estimated to grow at 2.0% during 2019-20. Services sector is estimated to grow at 6.9% in 2019- 20 as compared to 7.5% in 2018-19. n economy slowed down slightly and as a result, financial institutions and commercial banks faced challenges on various fronts viz. growing NPAs, decline in credit off-take etc. The slowdown in the economy affected the business prospects of the Corporation as well. However, the Corporation has registered satisfactory performance in all the operational areas viz. sanctions, disbursements and recovery.

Financial sector fragilities continue to weigh on India's economic growth momentum, with the high level of non-performing loans on the balance sheets of the public sector banks, constraining their new lending. The slowdown in the economy affected the business prospects of the Corporation as well. However, the Corporation has registered satisfactory performance in all the operational areas viz. sanctions, disbursements and recovery. The performance highlights of the Corporation in the key result areas of sanction, disbursement and recovery are enumerated below for the information of the shareholders:

The total loan sanction amounted to 1970.65 lakh and total loan disbursement amounted to 1732.35 lakh during FY 2019-20 as against 2083.63 lakh & 2014.51 lakh sanctioned & disbursed in the previous year respectively.

The total recovery of loan recorded at 2255.84 lakh during FY 2019-20 which declined from 2588.56 lakh in the previous year due to country wide lock down observed consequent upon outbreak of corona virus from the month of March,2020.

The total income of the Corporation recorded at 825.56 lakh which is declined from 909.73 lakh in the previous year mainly for the slowdown in the economy and other reasons stated above. As a consequence, the Corporation has not been able to earn profit during the year.

The loan portfolio of the Corporation has slightly increased to 6777.38 lakh as on 31-03-2020 from 6640.80 Iakh as on 31-03-2019. The slow growth in loan portfolio was registered mainly due to the reason that there was a decline in the credit demand from the Corporation during FY2019-20 due to stiff market competition and downfall in the economy after the outbreak of COVID-19 worldwide.The portfolio size of the Corporation has been below the sustainable level, affecting the Corporation's operational results adversely.

In micro finance sector, the loan sanction and disbursement amounted to 585.00 lakh and 785.00 lakh respectively during the FY 2019-20 as against 795.00 lakh recorded in both the portfolio in the previous year.The Corporation has sanctioned and disbursed total loan of 5392.26 lakh and 4772.26 lakh respectively in micro finance sector and provided livelihood support to about 50000 women beneficiaries of the state so far. This is worthwhile to mention that in micro finance sector, the Corporation has registered successful loan recovery rate since commencement of operation in the FY 2009-10.

Regarding recovery of loans, like previous years, the Corporation made considerable effort to increase its performance of recovery from bad loans during the year. Accordingly, the Corporation, by virtue of its OTS policy made effort to boost up loan recovery from NPA accounts over and above normal course of recovery. However, the Net NPA level has increased to 22.23 % as on 31.03.2020 from 15.27 % as on 31.03.2019 due to slippage of some accounts from standard to sub standard category during the year. It has been the primary concern of the Corporation to increase its loan portfolio as well as asset quality base to increase its income position and attain self-sustainability. However, the Corporation has not been able to increase its loan portfolio as well as asset quality base during the year siezably. The loss incurred in the year and increase in accumulated loss have resultantly led to dip in the Net Worth position of the Corporation. On the other hand, the CAR slightly improved to 35.77% as on 31-03-2020 as against 47.12% as on 31-03-2019.

The social disturbance caused in the state and the country after enactment of Citizenship Amendment Bill reduced recovery of loans as well as the demand for credit from the Corporation during the last quarter of FY:2019-20 which adversely affected the Corporation's performance during the period. The hospitality and the tourism sector were the worst hit due to CAA protest. The positive investment outlook in the state was hit due to violent protests against the new Citizenship Amendment Act.

Subsequently, the outbreak of COVID-19 pandemic has delivered an enormous global shock, leading to steep recessions in many countries. The outbreak of the Covid-19 pandemic is an unprecedented shock to the Indian economy. The economy was already in a parlous state before Covid- 19 struck. With the prolonged country-wide lockdown, global economic downturn and associated disruption of demand and supply chains, the economy is likely to face a protracted period of slowdown. Like other PSEs, AFC has also faced the unprecedented shock of COVID-19 in its operation from the last quarter of the year under review. All assisted units of AFC in MSME and other sectors more particularly tourism sector have been affected severely in their business. Loan recovery position has been affected causing mis-match in liquidity management.

We are thankful that the PE Department, Govt. of Assam has given us an opportunity to highlight the problems faced by Corporation due to outbreak of COVID-19 both in financial and non-financial terms and has recommended a financial package of Rs 3.86 crores for the reduction in its loan recovery during the year under review.

The COVID-19 pandemic has stood as a big challenge for the Corporation in the current year also as the Corporation will face severe liquidity problem due to postponement of installments of standard loans as per RBI guideline for a period of 6(six) months w.e.f. 01-03-2020 causing problem in fresh MSME financing at the time of need.The Corporation has faced following other challenges in the current year due to COVID-19 pandemic:

Inability to meet repayment obligation on account of soft loans availed from the Govt. of Assam. Problems in follow up and monitoring for successful implementation of projects financed. Loan recovery has been severely affected in micro finance sector as the livelihood activities of the poor women beneficiaries have been stopped completely. Problem in engaging manpower in field activities such as recovery visit, inspection etc. Bearing unavoidable establishment cost as activities of AFC has been severely affected during lockdown period and thereafter due to restrictions imposed in movement of people. Additional Provisioning due to RBI Guideline for delayed EMIs on account of standard loan accounts. Possibility of increase in NPA levels of the loans & advances due to suspension/slowdown of economic activities consequent upon outbreak of COVID-19 pandemic.

We are thankful that the Public Enterprise Department, Govt. of Assam has recommended an additional financial package of Rs 2.50 crores to meet the liquidity mismatch by the Corporation in the current year.

I would like to inform you that in the recent decades, AFC has not been able to increase its operations due to capital constraints. At the same time, AFC having its high establishment and operating cost needs to increase its operational volume sizeably to reach its self-sustainability level. I, therefore, seek continued support from the Govt. of Assam for the all-round success of our organization and contribute further for the socio-economic development of the state. The Corporation has already submitted a 3000.00 crores proposal to the Govt. of Assam for financial assistance from external funding agencies such as Multinational Development Bank (MDB)/International Financial Institution (IFI) with an aim to promote development of infrastructure and MSME projects in the state. Further, the Corporation has submitted a 200.00 crores proposal to Govt. of Assam for financial support from the Govt. of India under 15" Finance Commission for expansion of MSME lending and Micro finance operation of the Corporation.

At last, I thank all our stake holders and well-wishers who have contributed for the betterment of the organization. I am confident that the Corporation will be able to overcome all the challenges and reach the self-sustainability level of operation during the coming years with continued support of all.

Dated 25th March, 2021
( Palash Barooah, ACS)

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