Development financial institutions provide medium and long-term financing to promote key sectors like industry, agriculture, and infrastructure. They include specialized banks like the World Bank, IDBI, SIDBI, and EXIM Bank that offer loans, underwriting, and advisory services. Unlike commercial banks, they do not accept deposits but rather aim to accelerate economic growth and serve public interests. Major development financial institutions were established in India after independence to promote industries and address regional imbalances.

1. Development Financial Institutions
• A financial agency that provide medium
and long-term financial assistance and
engaged in promotion and development of
industry, agriculture and other key sectors.
• Ex: International Bank for reconstruction
and Development (IBRD) also known as
World Bank & International Monetary Fund
(IMF)

2. Development Bank-Features
• A development bank does not accept deposits from the public like
commercial banks and other financial institutions.
• It is a specialized financial institution which provides medium and
long term lending facilities.
• It is a multipurpose financial institution. Besides providing financial
help, it undertakes promotional activities also. It helps an enterprise
from planning to operational level.
• It provides financial assistance to both the private as well as public
institutions.
• The role of development bank is gap filler.
• Development banks primarily aim to accelerate the rate of economic
growth.
• The objective of these banks is to serve public interest rather than
earning profits
• Development banks react to the socio-economic needs of
development.

3. Development Financial Institutions
• Industrial Finance Corporation of India Ltd. (IFCI)
• Industrial Development Bank of India (IDBI)
• Industrial Investment Bank of India Ltd. (IIBI)
• Small Industrial Development Bank of India (SIDBI)
• Export Import Bank of India (EXIM)
• National Bank For Agriculture & Rural Development (NABARD)
• National Housing Bank (NHB)
• Industrial Credit and Investment Corporation of India (ICICI)

4. • In India the need for such special institutions was felt long ago, but they
have been established only after 1948. Except the Industrial Finance
Corporation of India which was set up in 1948, all the other financial
institutions were established in the third quarter of the twentieth century
(1950-1975).
• Some of these Development banks are: State Finance Corporations (1951),
The Industrial Credit and Investment Corporation of India (1955), National
Industrial Development Corporation (1954), The Industrial Development
Bank of India (1964), National Agricultural Development Bank of India
(1982) etc. India is witnessing a harmonization of development banks and
commercial banks during last couple of decades. For example ICICI and
IDBI, the most important specialized development banks were merged with
their commercial banking arms. This is, in fact, a tendency towards
universal banking which is a concept of providing all financial services in
single institution.

5. 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.

6. 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.

7. 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.

8. Industrial Investment Bank of
India (IIBI)
• Industrial Reconstruction Corporation
Limited (IRC) was renamed as Industrial
Reconstruction Bank of India in 1985.
• IRBI then converted in IIBI in 1997.
• It provides finance for industrial
rehabilitation and revival of sick industrial
units through rationalization, expansion,
diversification and modernization.

9. 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.

10. 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.

11. 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.

12. National Housing Bank (NHB)
• Apex bank for housing was established in
1988 under NHB act is a wholly subsidiary
of RBI.
• The objective is to promote housing
finance institutions and to provide financial
and other support to these institutions.
• Inspection of books of accounts, technical,
administrative and advisory assistance to
housing finance institutions etc.

13. Role of Development Financial
Institution
• to promote industrial growth,
• to develop backward areas,
• to create more employment opportunities,
• to generate more exports and encourage import substitution,
• to encourage modernisation and improvement in technology,
• to promote more self employment projects,
• to revive sick units,
• to improve the management of large industries by providing
training,
• to remove regional disparities or regional imbalance,
• to promote science and technology in new areas by providing risk
capital,
• to improve capital market in the country.