Gujarat State Financial Corporation has informed BSE about receiving a fine totaling ₹9.88 lakh for non-compliance with corporate governance requirements for the quarter ended December 31, 2025. The disclosure was made through a communication dated March 02, 2026, pursuant to Regulation 30 of SEBI LODR Regulations, 2015.

Fine Details and Breakdown

BSE imposed the fine through an email communication dated February 27, 2026, covering multiple regulatory violations:

Root Cause of Non-Compliance

The primary issue stems from the absence of independent directors on the Board of Directors and its committees. The corporation's governance structure is governed by Sections 10, 15, and 17 read with Section 4(3) of the State Financial Corporations Act, 1951, which mandates that directors are nominees of shareholders, thereby preventing the appointment of independent directors.

Regulatory Changes and Company Response

Prior to September 01, 2021, the corporation enjoyed exemptions and relaxations under the proviso to Regulation 15(2)(b) of SEBI LODR Regulations, 2015, as it was established under Section 3(1) of the State Financial Corporations Act, 1951. However, this proviso was omitted with effect from September 01, 2021.

Following SEBI's advice dated December 20, 2021, to seek amendments to the SFCs Act, 1951, the corporation approached the government through a letter dated December 27, 2021. The company has been following up on this matter and copying BSE on all communications, but is yet to receive a response regarding the requested amendments.

Disputed Fine Component

The corporation has contested the fine of ₹11,800 imposed under Regulation 17(2A), arguing that this regulation applies only to the top 2000 listed entities, and Gujarat State Financial Corporation does not fall within this category. The company noted that BSE had previously waived a similar fine for the quarter ended September 2020 through an email dated April 19, 2021, and has requested BSE to drop this portion of the current fine.

Impact Assessment

The corporation stated that it does not envisage any significant impact from these fines, given the structural constraints imposed by the State Financial Corporations Act, 1951, and its ongoing efforts to seek appropriate amendments to align with SEBI regulations. The company has been receiving similar notices and fines in previous quarters as well.

Gujarat State Financial Corporation (GSFC) has reported deteriorating financial performance for FY25, with the corporation's annual report laid before the Gujarat Legislature on February 16, 2026, showing increased losses and declining revenue streams.

Financial Performance Highlights

The state-owned financial institution recorded significant financial challenges during FY25, with key metrics showing a downward trend across multiple parameters.

Organizational Structure and Workforce

GSFC's operational capacity continued to shrink during FY25, with the corporation experiencing further reduction in its already limited workforce. The staff strength decreased from 16 employees in FY24 to 12 in FY25, representing a significant contraction in human resources.

The effective workforce of eight employees is distributed across three regional offices and the head office, highlighting the corporation's reduced operational footprint.

Corporate Background and Challenges

GSFC operates as a state-level development financial institution established under the State Financial Corporations Act, 1951. The corporation traditionally provided medium and long-term credit to small and medium-scale industrial undertakings in Gujarat. However, the annual report acknowledged the corporation's declining fortunes, particularly following financial sector reforms.

According to the report, GSFC "could not withstand stiff competition from banks and other financial institutions" and was "forced to discontinue its main activities of sanction and disbursement from FY 2001-02." Since then, the corporation has concentrated primarily on recovery of outstanding dues rather than new lending activities.

Regulatory Compliance

The annual report was formally communicated to BSE Ltd on February 25, 2026, in compliance with Regulation 30 of SEBI (LODR) Regulations, 2015. The report's presentation in the Gujarat Legislature fulfills the requirements under Section 38(3) of the State Financial Corporations Act, 1951, ensuring transparency in the corporation's financial reporting to stakeholders and regulatory authorities.