Financial Institition and Investment Management

1. Development Financial Institutions
in India
Ms. Sonam Srivastava

2. Financial Institutions: Development Financial Institution
• While banks have traditionally met short-term working capital requirements of
industry, development finance institutions (DFIs) have mainly catered to the
medium to long-term financing requirements.
• Industrial Finance Corporation of India (IFCI) was the first DFI which was
established to extend long-term finance to industry. This was followed by the
establishment of several DFIs, both in public and private sector.
• DFIs can be classified as
i) term lending institutions such as Industrial Investment Bank of India (IIBI) Ltd,
Export-Import Bank of India (EXIM) and Tourism Finance Corporation of India
(TFCI) Ltd., which provide long-term finance to various sectors
ii) refinance institutions such as National Bank for Agriculture and Rural
Development (NABARD), Small Industries Development Bank of India (SIDBI)
and National Housing Bank (NHB) which provide finance to banking as well as
non-banking financial intermediaries.

3. Objectives of Development Financial
Institutions
• To serve as an agent of development in various
sectors namely industry, agriculture and
international trade.
• To accelerate the growth of the economy
• To allocate resources to higher priority
• To develop entreprenial skills
• To promote the development of rural ares
• To finance housing, small scale industries ,
infrastructure and social utilities.

4. Industrial Finance Corporation of India
(IFCI)
• The industrial finance corporation of India
was established on July 1, 1948.
• It was setup to provide institutional credit to
medium and large industries.
• It was the first institution in financial sector to
be converted into a public limited company on
July 1 1993.
• IFCI is the board run company and its directors
are elected by shareholders.

5. Financing Activities of IFCI
• Project Financing
• Financial Services
• Corporate Advisory services
• Corporate Advisory services to foreign
investors

6. Promotional Activities of IFCI
• IFCI has been instrumental in translating the
governments development priorities into a reality by
contributing to the development of industry exports
infrastructure and generation of employment.
• It has played a pivotal role in removing the regional
imbalances by sanctioning 47% of its total assistance to
2172 units located in backward areas.
• It has played a key role in the development of
cooperatives in the sugar and textiles sectors.
• It has promoted technical consultancy organisations,
primarily in less developed states.

7. Small Industries Development Bank Of
India (SIDBI)
• Small Industries Development Bank of India (SIDBI), set up on April
2, 1990 under an Act of Indian Parliament, is the Principal Financial
Institution for the Promotion, Financing and Development of the
Micro, Small and Medium Enterprise (MSME) sector and for Co-
ordination of the functions of the institutions engaged in similar
activities.
• It was incorporated initially as a wholly owned subsidiary of
Industrial Development Bank of India.

8. • SIDBI offers a chain of financial products covering
micro finance, business, incubation, venture
capital, project finance, assistance for technology
development and marketing of small scale
industries products, exports finance, bills finance,
factoring and guarantees for loans
• SIDBI also provides support services such as
training market information, and advice for
enhancing the inherent strength of small scale
units.

9. Industrial Development Bank of India
(IDBI)
• Industrial Development Bank of India was established
in 1964 by parliament as a wholly owned subsidiary of
the RBI
• In 1976, the bank’s ownership was transferred to the
Government of India
• It was accorded the status of the principal financial
institution of coordinating the working of institutions
at national and state levels engaged in financing,
promoting, and developing industries
• IDBI was merged with its private banking arm IDBI Bank
in 2003-04

10. Infrastructure Development Finance
Company limited (IDFC)
• It was set up on recommendation of Expert Group on
commercialisation of infrastructure product.
• It was set up to facilitate the flow of private finance to
commercially viable infrastructure projects.
• Initially it was focused on road power ports and
telecommunications. Now it has broadened this focus
to the frame work of energy telecommunications and
information technology integrated transportations,
Urban infrastructure and food and agri business
infrastructure.

11. Export Import Bank of India (EXIM)
• Export Import Bank of India is wholly owned
by the Government of India and was set up for
the purpose of financing, facilitating, and
promoting foreign trade in India.
• EXIM bank is the principal financial institution
in the country for coordinating working of
institutions engaged in financing exports and
imports.

12. National Bank for Agriculture and
Rural Development (NABARD)
• NABARD , a development bank, came into existence on July
12 1982 under an act of parliament with an initial capital
of Rs.100 Crore.
• It is an apex institution set up for providing and regulating
credit and other facilities for the promotion and
development of agriculture small scale industries, cottage
and village industries, handicrafts, and other rural crafts
and other allied economic activities in rural areas.
• The functions of NABARD are to facilitate credit flow for
Agriculture and rural development promote and support
policies, practices and innovations conducive to rural
development, strengthen rural credit delivery system
through institutional development and supervise rural
banks.

13. • NABARD extends refinance for both farm and
non farm sector.
• To provide loans to state governments for the
creation of rural infrastructure at reasonable
rates.
• NABARD promoted the idea of organising
thrift and credit groups among the NGOSs as
an add on activities and linking them with
Banks.

14. ICICI
• Industrial Credit and Investment Corporation of India
(ICICI) Limited was an initiative of the World Bank and
was established in the year 1955.
• ICICI Bank, the subsidiary company of ICICI Limited was
established in 1994.
• In 2002, ICICI Limited got merged into ICICI Bank
Limited and became the first universal bank of India.
• This became a Financial institution that performed dual
function both of a Commercial Bank as well as
Development Financial Institute.
• It still remains the only DFI in the private sector.