Gujarat State Financial Services Ltd. (GSFS) is a wholly owned subsidiary of Government of Gujarat in which Government of Gujarat has 100% holding and is registered with R.B.I as a Non Banking Finance Company. It has been given the mandate by the State Government to manage the surplus funds of various Government of Gujarat controlled organizations and PSUs of the State. Thus it acts as an in- house treasury manager to the various state owned entities. The State Government has directed all the State Government owned entities to park all their surplus funds with GSFS. In view of this, GSFS offers two options to the state owned entities for placement of their surplus funds, namely,
The funds received by GSFS from the Government entities are provided to the other state owned entities, which are in need of funds, at a lower rate as compared to the other banks. This saves them from high borrowing costs. Moreover, GSFS also helps the state government by providing finance at a cheaper rate to enable it to prepay its high cost debts which even run into hundreds of crore of rupees and thereby reduce its substantial interest burden.
In short, the idea of formation of GSFS is to manage in-house funds of state owned entities. This results into the circulation of funds of Government entities within the ambit of State Government and its entities. Therefore, on one hand, the state owned entities get the benefit of getting attractive return on their funds while on the other hand these funds are made available to other such entities at a lower rate as compared to the market rate. All this ultimately provides a favourable impact on to the Government kitty.