banks are special industrial financing
These banks are mostly set up after World War II
in both developed and underdeveloped countries.
Development banks do not mobilize savings like
other banks but invest the resources in a
These banks make significant contribution to
states that , “ 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.
It is a specialized financial institution which
provides medium term and long- term lending
It is a multipurpose financial institution because
besides providing financial help ,it undertakes
promotional activities also.
Development banks provides financial assistance
to both public and private institutions.
The role of a development bank is of gap filler.
Development banks accelerate the rate of growth
through helping in industrialization in specific and
economic development in general.
The objective of development bank is to serve the
public interest rather than earning profits.
Development banks react to socio-economic needs
Lay foundations for industrialization.
Meet capital needs.
Need for promotional activities.
Help small and medium sectors.
foreign rulers in India did not take much
interest in the industrial development of the
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
was in 1948, that the first development bank i.e.
Industrial Finance Corporation of India (IFCI) was
To cater the needs of the small and medium
enterprises ,in 1951, Parliament passed State
Financial Corporation Act. Under this Act, state
governments could establish financial corporations
for their respective regions.
After this, National Industrial Development
Corporation (NIDC) was established which could
not serve the ambitious role assigned to it and
restricted itself to modernization and rehabilitation
of cotton and jute textile industry.
1955, The Industrial Credit and Investment
Corporation of India Ltd.(ICICI) was established
as a joint stock company. It provides term loans
and take an active part in the underwriting of and
direct investments in the share of industrial units.
Then in 1958, Refinance Corporation for Industry
(RCI) was set up by the Reserve Bank of India.
In 1964,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
the institutions engaged in financing,
promoting, or developing industry.
State Industrial Development Corporations
were established in the sixties to promote medium
scale industrial units.
NABARD was set up in 1982, which was
responsible for short term, medium term ,long term
financing of agriculture and other allied activities.