MPFC's Terms & Conditions
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Eligibility Eligibility
Security Security
Margin Margin
Promoter's Contribution Promoter's Contribution
Period of repayment of Loan Repayment Period
Insurance Insurance
Other Conditions Other Conditions


MPFC grants assistance to "Industrial Concerns" as defined in clause (c) of section 2 of "State Financial Corporations Act. 1951", which are located in the state of Madhya Pradesh.

However fee based services can be extended to units located in any part of the country.

In the definition, almost every type of manufacturing and/or process activity and related operations are covered. In addition to it, MPFC also provides assistance to activities in the service sector, as approved by the Industrial Development Bank of India (IDBI).

As per the provisions of the "State Financial Corporation Act. 1951", MPFC can grant assistance to only those concerns whose paid-up capital and fee reserves taken together do not exceed Rs. 20.00 crores. This limit is not applicable to non- fund based activities.

Subject to the limits prescribed under the various schemes, MPFC's total exposure to a single concern under all the schemes taken together shall not exceed Rs. 200.00 lacs in case of partnership and proprietary concerns, and Rs. 500.00 lacs in case of corporate entities.

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MPFC grants loan against security only.

The primary security for the loan is usually a first charge on land, building, plant and machinery etc. acquired/proposed to be acquired. In case of loan under consortium arrangements, pari-passu charge is accepted along with the other participating institutions.

Generally MPFC takes collateral security of land and/or building of the borrower or any third party in addition to primary security.

MPFC also has a floating charge on all the remaining assets of the borrower, subject to the charge in favour of the bankers for working capital.

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Margin is the difference between the value of assets offered as prime security and the amount of loan.

The margins prescribed for loans under various categories are as under:

Category Backward
Small Scale Industries 20% 25%
Medium Scale Industries 25% 40%
Hotel Industry 50% 50%
Tiny Sector 10% 15%
Composite Loan NIL NIL

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The minimum promotor's contribution envisaged in the project is worked out on the basis of Debt-Equity norm and the security margin norm applicable at the time of sanction of the loan. The debt equity ratio is the ratio of loan component and the equity contribution in the total project cost. The maximum amount of assistance shall be lower of the two amounts worked out on the basis of Debt-Equity norm and the security margin norm. The normal lending norm for debt- equity is 1.5:1, however in some specific schemes this norm may be flexible.

The entire promoter's contribution envisaged in the project is desired to be raised by way of capital before first disbursement of the loan installment. However in case the promoters are short of own capital, some amount may be raised as unsecured loans in the form of quasi-capital. The quantum is ascertained during the appraisal of loan proposal.

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The period of repayment of loan is decided on the merits of each case, which generally ranges between 5 to 8 years.

The principal amount of loan is payable normally in half yearly installments with an initial moratorium period of 6 months to two years depending upon the size of the project & stage of the implementation.

Interest is also normally charged on half yearly basis and the months of payment of interest & principal are kept different to even out the liability of the borrowers.

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The assets offered as a security of the loan should be kept insured for their full value during the currency of the loan. The risk normally covered under the insurance are those relating to fire, riots etc., and the specific risks attributable to a specific project which the corporation may specify.

The insurance policy should be taken in the joint names of the corporation and the borrower - with the usual mortgage clause. The first insurance policy and the subsequent renewals of the same should be sent to MPFC as soon as they are effected. In case the same is not sent in time. MPFC has a right to get the same insured on the cost & risk of the borrower unit.

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  • Application for financial assistance duly filled-up and signed be submitted to concerned field office of MPFC in the prescribed form alongwith all necessary details and enclosures as specified in the said application form. Application is to be made in duplicate/triplicate as may be required by the concerned field office.
  • The proprietor/partners should not draw any remunerations, interest on capital, or any other payment and in case of corporate bodies no dividend should be declared till the project commences operations or any installment or interest is in default towards the corporation.
  • The capital and unsecured loans stipulated & raised as per the terms and conditions of sanction should not be withdrawn during the currency of the loan.
  • An undertaking should be given by the promoters that in case of any short fall in the resources due to 'over-run' in the project cost or for any other reasons like non-receipt or delay in receipt of capital subsidy etc. the same shall be met by them from their own sources.
  • The promoters of the concern should give a declaration that no inquiry has been instituted against them/him and/or is pending against them/him or any of them for economic offenses by the Central or State Govt. and they/be shall under take no to do any thing which may constitute such an economic offense.
  • In case the documentation is not done within one year from the date of sanction letter, the sanction loan is automatically canceled.
  • In case full sanctioned amount is not availed within a period of 18 months from the date of sanction, the balance loan is automatically canceled.
  • MPFC has a right to appoint director/directors on the company's board of directors who shall not be required to hold qualification shares and shall also not be liable to retire by rotation.
  • MPFC has a right to inspect the factories, offices, godowns, other business places and also have a right to see all the books of account, voucher and related records etc. and can get the same audited, investigated etc.
  • The concern/company shall not do the following acts, without the prior approval:
    • Undertaking expansion or implementing other scheme involving capital expenditure other then the one for which loan is sanctioned.
    • Change in constitution and/or management.
    • Giving on lease, hire, license the land, building, machineries or any part thereof, or creating any change on the properties mortgaged/hypothecated.
    • Transfer of disposal of the share holdings by the promoter/directors.
    • Change in the scheme approved like in building specification/suppliers of machineries etc.

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