BY: SAHIL BERWAL SPARSH BANSAL SOURAV WADHWA

01 03 05

INTRODUCTION
Development banks are the institutions engaged in the promotion and

development of industry, agriculture and other key sectors.

National or regional financial institution designed to provide medium- and

long-term capital for productive investment. Such investment is usually accompanied by technical assistance.
Some development banks are government-owned, while others are private.

Many have been established under the auspices of the World Bank.
Among the largest are the Inter-American Development Bank, the Asian

Development Bank, and the African Development Bank.

MANAGEMENT OF FINANCIAL INSTITUTIONS

DEFINITION
D.M. Mithani:

A development bank may be defined as a

financial institution concerned with providing all types of financial assistance (medium as well as long-term) to business units in the form of loans, underwriting, investment and guarantee operations and development in

general and industrial area.

MANAGEMENT OF FINANCIAL INSTITUTIONS

FEATURES
A development bank does not accept deposits from the public like

commercial banks and other financial institutions who entirely depend

upon saving mobilization.
It is a specialized financial institution which provides medium term and

long-term lending facilities.

It is a multipurpose financial institution. Besides providing financial

help it undertakes promotional activities also. It helps an enterprises from planning to operational level.
It provides financial assistance to both private as well as public sector

institutions.
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CONTD
The role of a development bank is of gap filler, when assistance from

other sources is not sufficient then this channel helps. It does not compete with normal channels of finance.
Development banks primarily aim to accelerate the rate of growth. It

helps industrialization specific and economic development in general.

The objective of these banks is to serve public interest rather than

earning profits.
Development banks react to the socio-economic needs of development.

MANAGEMENT OF FINANCIAL INSTITUTIONS

OBJECTIVES
Lay Foundations for Industrialization
Meet Capital Needs Need for Promotional Activities Help Small and Medium Sectors'

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FUNCTIONS
Financial Gap Fillers Undertake Entrepreneurial Role Joint Finance

Refinance Facility
Credit Guarantee Underwriting of Securities

MANAGEMENT OF FINANCIAL INSTITUTIONS

DEVELOPMENT BANKING IN INDIA

The recommendation for setting up industrial financing institutions was made in

1931 by Central Banking Enquiry Committee but no concrete steps were taken.
In 1949, Reserve Bank had undertaken a detailed study to find out the need for

specialized institutions.
It was in 1949 that the first development bank i.e. Industrial Finance Corporation

of India (IFCI) was established.

In 1951, Parliament passed State Financial Corporation Act. Under this Act state

governments could establish financial corporations for their respective regions.

The IFCI and state financial corporations served only a limited purpose. There was

a need for dynamic institutions which could operate as true development agencies.

MANAGEMENT OF FINANCIAL INSTITUTIONS

CONTD.
The Industrial Credit and Investment Corporation of India (ICICI) were established in 1955

as a Joint Stock Company. Though ICICI was established in private sector but its pattern of shareholding and methods of raising funds gives it the characteristic of a public sector financial institution.
Another institution ,Refinance Corporation for Industry Ltd. (RCI) was set up in 1958 by

Reserve Bank of India, LIC and Commercial Banks.

In 1964, Industrial Development Bank of India (IDBI) was set up as an apex institution in

the area of industrial finance, RCI was merged with IDBI. IDBI was a wholly owned subsidiary of RBI and was expected to co-ordinate the activities of the institutions engaged in financing, promoting or developing industry.
The State Industrial Development Corporations (SIDC's) were established in the sixties to

promote medium scale industrial units.

MANAGEMENT OF FINANCIAL INSTITUTIONS

CONTD
The State Small Industries Development Corporations (SSIDC's) were

also set up to cater to the needs of industry at state level.

The Unit Trust of India (UTI) established in 1964, Life Insurance

Corporation of India (1956) and General Insurance Corporation of India (GIC) set up in 1973 also finance industrial activities at all India level.
In 1982 the Export-Import Bank of India (Exim Bank) was established to

provide financial assistance to exporters and importers.

In order to meet credit needs of agriculture and rural sector, National'

Bank for Agriculture and Rural Development (NABARD) was set up in 1982.
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Role of development banks in financial system

Providing Funds

Infrastructural Facilities Promotional Activities

Development of Backward Areas

Planned Development Accelerating Industrialization Employment Generation
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Industrial Finance Corporation of India Ltd.

Set-up in 1948 to provide institutional credit to medium and large industries.
Project financing: Medium/Long term credit for setting up new project, expansion schemes, financial assistance by way of rupee loans, loans in foreign currencies, underwriting of direct subscription of shares/debentures.

Financial Services and corporate advisory services.

Industrial Development Bank of India

Established in 1964 for coordinating the working of institutions at national level and state levels engaged

in financing, promoting and developing industries. Provides merchant banking & corporate advisory services as a part of its fee based activities. Provide advice & services for issue management, private placement of equity/debt instrument, project evaluation, corporate restructuring etc.

Small Industrial Development Bank of India

Set up in 1990, the principal financial institution for the promotion, financing and development of industries in the small sector and to co-ordinate the functions of other institutions engaged in similar activities. An apex institution, SIDBI makes use of the network of the banks and state financial institutions. Financial Products- Micro finance, venture capital, project finance, assistance for technology development, export finance etc.

Export-Import Bank of India

An apex institution which promotes foreign trade. Creating export capability by arranging competitive

financing at various stages of export cycle. Bank provides export credit on deferred payment terms on exports of indian machinery, manufactured goods and technology services.

National Bank for Agriculture & Rural Development

An apex institution set up for providing & regulating

credit and other facilities for the promotion & development of agriculture, small scale industries, cottage & village industries, handicrafts and other rural crafts and other allied economic activities in rural areas.

Industrial Credit & Investment Corporation of India Ltd.

First development bank in the world to be set up in the private sector
Objective is to provide medium-term & long-term financing to Indian business. ICICI Securities & Finance Co. Ltd. ICICI Venture Funds Management Co. Ltd. ICICI Prudential Life Insurance ICICI Home Finance Co. Ltd. ICICI Investment Management Co. Ltd.

 The Infrastructure Development Finance Company

Limited (IDFC ) India's leading integrated infrastructure finance player providing end-to-end infrastructure financing and project implementation services

 Discount and Finance House of India Ltd.

a unique institution of its kind, was set up in April 1988. The discount has been established to deal in money market instruments in order to provide liquidity in the money market.

 The Sub-Group on Housing Finance for the Seventh Five

Year Plan (1985-90) identified the non-availability of long-term finance to individual households

 It is responsible for the development of industries

in the state by formulating policies that help industry growth, and also by establishing Industrial Estates.

There are three investment institutions:

Life Insurance Corporation of India Ltd.,

Unit Trust of India and

General Insurance Corporation of India.

At state level there are 18 State Finance Corporations

and 28 state industry development corporations.

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Promotional role programs (EPP of Development Banks

Survey of Backward Areas
Inter institutional Groups (IIGs) Establishment technical Consultancy Organisations

(TCOs) Entrepreneurial Development Programs (EPPs) Technological Improvements

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