KOCHI: Have you ever read the vision statement of Kerala Financial Corporation (KFC), adjudged the best-performing state financial corporation in the country?
Here’s how it reads:
“To emerge as the ‘Best Performing Financial Institution’ by creating an integrated development support for the industrialisation of the State of Kerala, with a special focus on MSME.”
Ironically, KFC, the financial institution that’s supposed to extend loans of up to Rs50 crore – primarily to micro, small and medium enterprises (MSMEs) – has nearly 36 per cent of its total loan book concentrated in just three state-owned entities, none of which is industrial players.
As of March-end 2025, more than a third of Rs8,000 crore KFC’s loans remained with Kerala Infrastructure Investment Fund Board (KIIFB), Kerala Social Security Pension Ltd (KSSPL), and Kerala State Electricity Board Ltd (KSEBL). These three alone account for Rs2,846.91 crore – up from Rs2,741.35 crore a year earlier.
Public sector overload
While KIIFB and KSSPL have ramped up borrowings, KSEBL has trimmed its dues. KIIFB’s loans from KFC surged 40 per cent in FY25 – from Rs833.35 crore to Rs1,166.75 crore.
KSSPL’s borrowings jumped an even sharper 54 per cent, from Rs650 crore to Rs1,000 crore. Meanwhile, KSEBL pared down its exposure to Rs680.16 crore from Rs905.42 crore a year ago.
It’s noteworthy that neither KIIFB nor KSSPL is engaged in industrial activity. KSSPL, in fact, exists to manage social security pensions for Kerala’s economically weaker sections. Yet, these two alone made up over 27 per cent of KFC’s total lending portfolio by March-end.
Even Vizhinjam International Seaport Ltd (VISL) had a loan facility worth Rs352.57 crore from KFC until last year.
Interestingly, it’s the Kerala government’s guarantees for loans availed by KIIFB and KSSPL (including from other sources) that landed the state in the crosshairs of the Central Government, eventually leading to a curtailment of Kerala’s borrowing ceiling in the past years.
Profit surge
KFC posted its highest-ever net profit of Rs98.16 crore in FY25. This was also driven by two windfall factors: Rs84.84 crore recovered from previously written-off loans and Rs74.45 crore earned as interest from bank deposits
As KFC celebrates record profits, the question remains: is the corporation drifting from its MSME-centric mandate, becoming more of a financier to the state government’s own arms than to Kerala’s industrial entrepreneurs?
