Karnataka state planning panel proposes reforms for KSFC

Bengaluru: The Karnataka State Policy and Planning Commission (KSPPC) has proposed a major overhaul of the Karnataka State Financial Corporation to transform it into a modern, technology-driven development finance institution focused on MSMEs, startups and rural industries.

In a letter to chief minister Siddaramaiah, KSPPC member S Mohanadass Hegde suggested a new amendment law for KSFC to enable governance reforms, digital lending systems and new funding mechanisms.

The proposal seeks to modernise KSFC while retaining government majority ownership and strengthening public accountability through professional management and technology-led operations, said the letter.


The roadmap recommends introducing AI-based credit assessment, GST-linked loan underwriting, Aadhaar-enabled e-KYC, blockchain-backed documentation and real-time monitoring of non-performing assets (NPAs). It also proposes 72-hour loan approvals for small businesses.

The proposal includes plans for corporatisation under a government-owned structure, creation of subsidiaries and partial listing of subsidiaries without diluting state control.

It further suggests raising funds through retail development bonds, green bonds and social impact bonds to strengthen lending capacity for MSMEs and emerging sectors.

The roadmap also focuses on social and inclusive financing through dedicated funds for SC/ST entrepreneurs, women-led businesses and youth startups. It proposes allocating at least 30% of KSFC’s portfolio to green and climate-resilient industries by 2035.

Planned for phased implementation between 2026 and 2035, the proposal aims to expand MSME financing, improve rural industrial growth and reduce regional economic imbalance across Karnataka.

According to the proposal, the reforms could help enable cumulative MSME financing of Rs 1 lakh crore and generate nearly 10 lakh direct and indirect jobs by 2035.

The letter said the reforms are aimed at institutional modernisation and not privatisation, combining public ownership with financial sustainability and digital governance.