Development banks

Development banks and their types.

1. DEVELOPMENT BANKS Varsha Rustagi 2016MCOM016 Department of Commerce

2. INTRODUCTION Development banking was started after the World War II. It provided finance to reconstruct the buildings and  industries  which were destroyed in the war. . In a country like India, the emergence of development banking is a post­-independence phenomenon . In India, the first development bank called the Industrial Finance Corporation of India was established in 1948 . DEFINITION “Development banks are financial institutions established to lend (loan) finance (money) on subsidized interest rate. Such lending is sanctioned to promote and develop important sectors like agriculture, industry, import-export, housing and allied activities."

3. MEANING Development bank is essentially a multi-purpose financial institution with a broad development outlook. A development bank may, thus, be defined as a financial institution concerned with providing all types of financial assistance (medium as well as long term) to business units. A development bank is an institution which takes up the job of developing enterprises from its inception to completion . These are national or regional financial institutions designed to provide medium and long term capital for productive investment.

4. ROLES IN FINANCIAL SYSTEM

5. Role of development banks in the Indian economy Capital Formation Support to the Capital Market Rupee Loans Foreign Currency Loans Subscription to Debentures and Guarantees Assistance to Backward Areas Promotion of New Entrepreneurs Impact on Corporate Culture

6. DEVELOPMENT BANKS IN INDIA TYPES AND EXAMPLES

7. Industrial Development Banks : It includes, for example, Industrial Finance Corporation of India (IFCI), Industrial Development Bank of India (IDBI), and Small Industries Development Bank of India (SIDBI).

8. IFCI : The IFCI was the 1st specialised financial institution setup in India to provide term finance to large industries in India. It was established on 1st July, 1948 under The Industrial Finance Corporation Act of 1948. Dr . Emandi Sankara Rao is the current MD and CEO Objectives of IFCI: The main objective of IFCI is to provide medium and long term financial assistance to large scale industrial undertakings, particularly when ordinary bank accommodation does not suit the undertaking or finance cannot be profitably raised by the concerned by the issue of shares.   Functions of IFCI : 1   The corporation grants loans and advances to industrial concerns. 2 Granting of loans both in rupees and foreign currencies. 3 The corporation underwrites the issue of stocks, bonds, shares etc. 4 The corporation can grant loans only to public limited companies and co- operatives but not to private limited companies or partnership firms.

9. IDBI : Industrial Development Bank of India (IDBI) The Industrial Development Bank of India (IDBI) was established on 1 July 1964 under an Act of Parliament as a wholly owned subsidiary of the Reserve Bank of India . Mr. Mahesh Kumar Jain is the Managing Director and CEO. The main objectives of IDBI is to serve as the apex institution for term finance for industry in India. Its objectives include: Co-ordination, regulation and supervision of the working of other financial institutions such as IFCI , ICICI, UTI, LIC, Commercial Banks and SFCs. Supplementing the resources of other financial institutions and there by widening the scope of their assistance. Functions Planning, promoting, developing industries Co- ordinating the working in institutions engaged in financing Undertaking market and investment research Providing technical and administrative assitance Subsidiaries

10. SIDBI : Small Industries Development Bank of India is an independent  financial institution aimed to aid the growth and development of micro, small and medium-scale enterprises in India . Mr. Mohommad Mustafa is the Chairman of SIDBI since August 2017. Set up on April 2, 1990 through an act of parliament, it was incorporated initially as a wholly owned subsidiary of Industrial Development Bank of India (IDBI). Current shareholding is widely spread among various state-owned banks, insurance companies and financial institutions. OBJECTIVE : It is the 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. FUNCTIONS: Enterprise promotion Human resource development Technology upgradation Environmental and quality management Information dissemination Market promotion

11. Agricultural Development Banks : It includes, for example, National Bank for Agriculture & Rural Development (NABARD).

12.   National Bank for Agriculture and Rural Development (NABARD ) It is an apex development bank in  India having headquarters based in  Mumbai and other branches are all over the country. It was established on 12 July 1982 with a special act by the parliament and its main objective was to uplift rural India by increasing the credit flow for elevation of agriculture & rural non farm sector. NABARD is the apex institution in the country which looks after the development of the cottage industry, small industry and village industry, and other rural industries. Functions : Undertakes monitoring and evaluation of projects refinanced by it. NABARD refinances the financial institutions which finances the rural sector. It regulates the institution which provides financial help to the rural economy. It provides training facilities to the institutions working in the field of rural upliftment . It regulates the cooperative banks and the RRB’s.

13. ACHIEVEMENTS OF NABARD Short term assistance long term assistance Assistance to less developed states Assistance to non-farm sector Rehabilitation programmes Assistance to research and development projects Credit plans under the new strategy Integrated rural development programmes Regional rural banks

14. Export-Import Development Banks : It includes, for example, Export-Import Bank of India (EXIM Bank ) Export-Import Bank of India (Exim Bank ): I t is a public sector financial institution created by an Act of Parliament, the Export-import Bank of India Act, 1981 . Headquarter : Mumbai CEO: Shri Yaduvendra Mathur   The business of Exim Bank is to finance Indian exports that lead to continuity of foreign exchange for India. The Exim Bank extends term loans for foreign trade. FUNCTIONS Undertaking merchant banking functions of companies engaged in foreign trade. Providing technical and administrative assistance to the parties engaged in export and import business. Offering buyers’ credit and lines of credit to the foreign governments and banks. Financing of export and import of goods and services both of India and of outside India. Providing finance for joint ventures in foreign countries

15. Housing Development Banks : It includes, for example, National Housing Bank (NHB).   National Housing Bank: The National Housing Bank (NHB) is a state owned bank and regulation authority in  India , created on July 8, 1988  under section 6 of the National Housing Bank Act (1987). The headquarters is in  New Delhi . The institution, owned by the  Reserve Bank of India , was established to promote private real estate acquisition. The NHB is regulating and re-financing social housing programs and other activities like research etc. Its objective is promoting inclusive expansion with stability in housing finance market .   Functions : To promote and develop specialised housing finance institutions for mobilising resources and extending credit for housing. To provide refinance facilities to housing finance institutions and scheduled banks To provide guarantee and underwriting facilities to housing finance institutions  To formulate schemes for mobilisation of resources and extension of credit for housing, especially catering to the needs of economically weaker sections of society  To provide guidelines to housing finance institutions to ensure their healthy growth

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