Importance • They constitute an important source of long-term finance to industry. • DFIs have played an important role in the development of (a) Small scale industry, and (b) Projects in backward areas. • They have helped new and small entrepreneurs in setting up industry. • DFIs have been a source of technical and managerial advice to the industry. They have also helped in identification, evaluation and execution of new investment projects.
Types of Development Financial Institutions (a) All India Development Banks 1. Industrial Development Bank of India (IDBI) 2.Small Industries Development Bank of India (SIDBI) 3.Industrial Finance Corporation of India (IFCI) 4.Industrial credit and Investment corporation of India (ICICI) 5.National Bank for Agriculture and Rural Development (NABARD) 6.Industrial Investment Bank of India Ltd. (previously, Industrial Reconstruction Bank of India).
Types of DFIs (b) State-level Institutions 1.State Financial Corporations (SFCs) 2.State Industrial Development Corporations (SIDC) 3.State Industrial Investment Corporations (SIIC)
Industrial Development Bank of India (IDBI) • The IDBI was set up in July 1964 as a wholly owned subsidiary of the RBI. Subsidiaries of IDBI (1)Small Industries Development Bank of India (SIDBI) (2) IDBI Bank Ltd. (3) IDBI Capital Market Services Ltd. (4) IDBI Investment Management Company
Objectives • Co-ordination, regulation and supervision of the working of other financial institutions such as IFCI , ICICI, UTI, LIC, Commercial Banks and SFCs. • Planning, promotion and development of key industries and diversifications of industrial growth. • Devising and enforcing a system of industrial growth that conforms to national priorities.
Function • To underwrite or to subscribe to shares or debentures of industrial concerns. • To grant loans to any industrial concern. • To guarantee deferred payment due from any industrial concern. • Planning, promoting and developing industries to fill up gaps in the industrial structure in India.
Industrial Credit and Investment Corporation of India (ICICI) • Industrial Credit and Investment Corporation of India was established as a joint stock company in the private sector in 1955. Objectives • To assist in the formation, expansion and modernisation of industrial units in the private sector; • To stimulate and promote the participation of private capital (both Indian and foreign) in such industrial units; • To furnish technical and managerial aid so as to increase production and expand employment opportunities; • To assist in the development of the capital market through its underwriting activities.
Functions • It provides medium and long-term loans in Indian and foreign currency for importing capital equipment and technical services. • It subscribes to new issues of shares, generally by underwriting them • It guarantees loans raised from private sources including deferred payment • It directly subscribes to shares and debentures • It provides technical and managerial assistance to industrial units • It provides assets on lease to industrial concerns.
NABARD • NABARD is set up by the Government of India as a development bank with the mandate of facilitating credit flow for promotion and development of agriculture and integrated rural development. • With a capital base of Rs 2,000 crore provided by the Government of India and Reserve Bank of India , it operates through its head office at Mumbai, 28 regional offices situated in state capitals and 391 district offices at districts.
NABARD Objectives • Coordinates the rural financing activities of all the institutions and maintains liaison with the GOI , State governments, the RBI and other national level institutions concerned with policy formulation • Prepares, on annual basis, rural credit plans for all the districts in the country. • Promotes research in the fields of rural banking, agriculture and rural development. • Functions as a regulatory authority, supervising, monitoring and guiding cooperative banks and regional rural banks
NABARD Functions • Create awareness among the borrowers on ethics of repayment through Vikas Volunteer Vahini and Farmer’s clubs • Monitor implementation of development action plans of banks and fulfillment of obligations under MoUs • Undertakes portfolio inspections, systems study, besides off-site surveillance of Cooperative Banks and Regional Rural Banks (RRBs) • Preparation of potential-linked credit plans annually for all districts for identification of credit potential
EXPORT-IMPORT BANK OF INDIA • Apex financial institution • Set up by an act of parliament in September 1981 • Wholly owned by government of India • Commenced operations in march 1982
OBJECTIVES • for providing financial assistance to exporters and importers, • for functioning as the principal financial institution for coordinating the working of institutions engaged in financing export and import of goods and services with a view to promoting the country’s international trade • act on business principles with due regard to public interest”
International Trade Facilitating Financing Promoting Through Variety of Financing Programmes Research & Analysis Value Added Business Advisory Services Catalyst for Financing Products Services Projects Operational Philosophy
Functions • SMEs extended export marketing finance to implement strategic export marketing plans aimed at entry into developed country markets and term loans for supply side up gradation • Exim Bank’s extends export Lines of Credit (LOC) to overseas financial institutions, regional development banks and foreign governments and their agencies and Buyers’ Credits (BC) to foreign corporate. • Helps Indian SMEs in their export efforts by proactively assisting in locating overseas buyers/partners for their products/services