meaning Development banks are financial agencies that provide medium and long term financial assistance and act as catalytic agents in promoting balanced development of country They are engaged in promotion and development of Industry, agriculture and other key sectors.

Development Financial Institutions A financial agencies 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)

Its main emphasis is the welfare of the people Its main emphasis is the welfare of the people. For example the Asian Development Bank's overarching goal is to decrease poverty in Asia and the Pacific. It helps improve the value of people's lives by providing loans and scientific support for a broad variety of development activities.

features Do not accept public deposit Provide medium and long term lending facilities Offer financial assistance to both private and public sector institution They aim to accelerate rate of growth and help in industrialization and economic development

OBJECTIVES Lay Foundations for Industrialization Meet Capital Needs Need for Promotional Activities Help Small and Medium Sectors‘ Accelerate growth of economy To develop entrepreneurial skills

FUNCTIONS Financial Gap Fillers Undertake Entrepreneurial Role Optimum utilization of resources Refinance Facility Credit Guarantee Underwriting of Securities

Role of development banks in financial system Providing Funds Infrastructural Facilities Promotional Activities Development of Backward Areas Planned Development Accelerating Industrialization Employment Generation

Structure of DFIs in INDIA All india fin institution State level institution Other institution

Development Banks in India: ALL INDIA financial instituton: The Industrial finance corporation of India (IFCI)-1948. The industrial Development Bank of India (IDBI)-1964. The national bank for agriculture and rural development(NABARD) 1982 The Industrial Credit and Investment Corporation of India (ICICI)-1955 Etc.

IFCI (INDUSTRIAL Finance CORPORATION OF INDIA) It was established in 1948 First development bank of India Objective was to make medium and long term credits more readily available , particularly to those industries to which banking facilities are not available Head office is in NEW DELHI It was converted into a public limited company on July 1, 1993.

Objectives (a) To provide long and medium-term credit to industrial concerns engaged in manufacturing, mining, shipping and electricity generation and distribution,hotel industry. (b) The period of credit can be as long as 25 years and should not exceed that period; (c) To grant credit to a single concern up to a maximum amount of rupees one crore. This limit can be exceeded with the permission of the government under certain circumstances;

(d) provide assistance to public sector undertaking. (e) assist in setting up new projects as well as in modernization of existing industrial concerns in medium and large scale sector;

Functions The main functions of I.F.C.I. are as under:- i) Granting loans and advances for the establishment, expansion, diversification and modernization of industries in corporate and co-operative sectors. ii) Guaranteeing loans raised by industrial concerns in the capital market, both in rupees and foreign currencies. iii) Subscribing or underwriting the issue of shares and debentures by industries. Such investment can be held up to 7 years.

iv) Guaranteeing credit purchase of capital goods, imported as well as purchased within the country. v) Providing assistance, under the soft loans scheme, to selected industries such as cement, cotton textiles, jute, engineering goods,etc. vi) Providing technical, legal, marketing and administrative assistance to any industrial concern for the promotion, management and expansion of the industrial concern.

vii) Providing equipment to the existing industrial concerns on lease under its ‘equipment leasing scheme’. viii) Rendering merchant banking services to industrial concerns.

MANAGEMENT OF IFCI CHAIRMAN 2 NOMINATED BY CENTRAL GOVT 4 BY IDBI 2 BY SCHEDULED COMMERCIAL BANKS 2 BY COOPERATIVE BANKS 2 BY SHAREHOLDER INSTITUTION 12 DIRECTORS

IDBI(Industrial Development Bank of India) Set up in 1964 It was fully owned subsidiary of RBI but in 1976 delinked from RBI and made as autonomous body of GOI H.O in Mumbai 11 branch offices It is managed by a chairman and MD appointed by central govt, a deputy governor nominated of RBI, 20 other directors.

Cont……. The main objective of setting up IDBI was to set up apex institution to coordinate the activities of other financial institutions and to act as a reservoir on which other financial institutions can draw.

As an apex financial institution, it coordinates the working of other financial institutions. It assists in the development of other financial institutions. It provides credit to large industrial concerns directly. It undertakes other activities for the development of industry.

Objectives 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. It assists in the development of other financial institutions. It provides credit to large industrial concerns directly. It undertakes other activities for the development of industry.

Function The IDBI has been established to perform the following functions- (1) To grant loans and advances to IFCI, SFCs or any other financial institution by way of refinancing of loans granted by such institutions which are repayable within 25 year. (2) To grant loans and advances to scheduled banks or state co-operative banks by way of refinancing of loans granted by such institutions which are repayable in 15 years.

(3) To grant loans and advances to IFCI, SFCs, other institutions, scheduled banks, state co-operative banks by way of refinancing of loans granted by such institution to industrial concerns for exports (4) To discount or rediscount bills of industrial concerns. (5) To underwrite or to subscribe to shares or debentures of industrial concerns. (6) To subscribe to or purchase stock, shares, bonds and debentures of other financial institutions.

(8) To guarantee deferred payment due from any industrial concern. (7) To grant line of credit or loans and advances to other financial institutions such as IFCI, SFCs, etc. (8) To guarantee deferred payment due from any industrial concern. (9) To guarantee loans raised by industrial concerns in the market or from institutions

Subsidiaries The following are the subsidiaries of IDBI. Small Industries Development Bank of India (SIDBI) (2) IDBI Bank Ltd. (3) IDBI Capital Market Services Ltd. (4) IDBI Investment Management Company

Industrial Credit and Investment Corporation of India (ICICI) Industrial Credit and Investment Corporation of India was established as a joint stock company in the private sector in 1955. Its share capital was contributed by banks, insurance companies and foreign institutions including the World Bank. Its major shareholders now are Unit Trust of India, Life Insurance Corporation of India and General Insurance Corporation and its subsidiaries.

Objectives The ICICI has been established to achieve the following objectives: To assist in the formation, expansion and modernization of industrial units in the private sector; . To stimulate and promote the participation of private capital (both Indian and foreign) in such industrial units; To furnish technical and managerial aid so as to increase production and expand employment opportunities; To encourage inflow and participation of foreign capital in private sector units

Functions of ICICI 1)It provides long-term and medium-term loans in rupees and foreign currencies. 2)It underwrites new issues of shares and debentures. 3)It guarantees loans raised by private concerns from other sources. 4)It provides technical, managerial and administrative assistance to industrial concerns.

Subsidiaries 1.ICICI Securities and Finance Co. Ltd. 2. ICICI Assets Management Co. Ltd. 3. ICICI Investors Services Ltd. 4. ICICI Banking Corporations Ltd. 5. Credit Rating Information Services of India Ltd. (CRISIL)

Continue… ICICI is known for its many firsts. it was first Indian organization to listed in New york stock exchange. Foreign financial investor own around 38% shares . Technology, strategy, low cost branches innovations are key reasons of ICICI success. They are the first to introduce mobile banking, on line financial information, portals to allow accounts and information on line. It was the first to introduce e-commerce

NABARD National Bank for Agriculture and Rural Development (NABARD) is an apex development bank in India  having headquarters based inMumbai (Maharashtra) and other branches are all over the country. It was established on 12 July 1982 by a special act by the parliament and its main focus was to uplift rural India by increasing the credit flow for elevation of agriculture & rural non farm sector and completed its 25 years on 12 July 2007.  It has been accredited with "matters concerning policy, planning and operations in the field of credit for agriculture and other economic activities in rural areas in India". RBI sold its stake in NABARD to the Government of India, which now holds 99% stake

Role of NABARD Provide refinance to lending institution in rural areas Act as coordinator in operation of rural credit institutions Extent assistance to government, RBI and other organisations in matter to rural development Offer training and research facilities for banks, cooperatives and org. working in rural development

OBJECTIVES OF NABARD 1 . To give financial assistance for increasing the agricultural production 2.To supply the long term needs of the rural areas 3.It will be an apex organisation in respect of all matters. 4.To help small industries ,cottage industries and also artisans 5.To achieve overall rural development

FUNCTIONS OF NABARD Credit functions Development functions Regulatory functions Apex institution for rural finance Refinance institutions Contribution of share capital Investment in securities Financial help to non –agricultural sector Training programs Co-ordination of actvities

(REGIONAL RURAL BANKS) R.R.B Meaning The Banks started in Rural Areas. To fill the gap in the Rural credit. Sponsored by Commercial Banks. Restricted to one or two Districts. CCP-504 (B). 8

Regional Rural Banks The establishment of RRB became necessary because the existing institutions would not be able to fill the gaps in the rural credit institutional system. The Regional Rural Banks were set up in 1975 to fulfill one of the objectives of 20 point Economic Program announced by prime minister Indira Gandhi. CCP-504 (B). 8

Regional Rural Banks Objectives of setting up of RRB are : 1.Liquidation of rural indebtedness. 2.Provision of institutional credit to farmers, rural artisans,small entreprenuer and other weaker section. 3.To increase employment opportunities CCP-504 (B). 8

Features of Regional Rural Banks These banks were set up on the recommendations of Narasimham committee. Regional Rural Banks are the subsidiaries of public sector banks. These banks are scheduled commercial banks supported by government but sponsored by commercial banks. CCP-504 (B). 8

Features of Regional Rural Banks Share capital was subscribed by Central Government, State Government and sponsoring bank. Share capital subscribed by Central Government-50%, State Government-35% and sponsoring bank-15%. All types of assistance is given by sponsoring bank during first 5 years. CCP-504 (B). 8

Features of Regional Rural Banks The area of operation of a rural bank is limited to one or two districts. The rate of interest charged by them shall not be higher than the prevailing rates of co-operative societies. These banks get refinance facilities from NABARD These banks also maintain cash reserves of 3% of the total liabilities. CCP-504 (B). 8

Features of Regional Rural Banks Visakha Grameena Bank, Godavari Grameena Bank are examples for RRB. The interests of the depositors are protected by the deposit insurance and credit guarantee corporation. CCP-504 (B). 8

Functions of Regional Rural Banks. RRB perform the following functions. They provide credit facilities to agricultural sector. These bank also collect deposits from the public. Emphasis is given to small and marginal farmers and agricultural labourers. CCP-504 (B). 8

Functions of Regional Rural Banks. They provide subsidiary services like Commercial Banks. They promote all round development of the villages. They also help small business units and self-employment schemes. CCP-504 (B). 8

Factors that impede growth of RRBs Poor recoveries Rigid norms Defective recruitment policy Weak capital base Defective credit deployment

State level institutions State financial corporation State industrial development corporations

State Financial Corporation’s (SFCs) State Financial Corporations (SFCs) :To meet the financial needs of small and medium enterprises, the government of India passed the State Financial Corporation Act in 1951 Under the Act, SFCs have been established by State governments to meet the financial requirements of medium and small sized enterprises. There are 18 SFCs at present.

Objectives OF SFC’S 1) Provide financial assistance to small and medium industrial concerns. 2) Provide long and medium-term loan repayable ordinarily within a period not exceeding 20 years. 3) Grant financial assistance to any single industrial concern under corporate or co-operative sector with an aggregate upper limit of rupees Sixty lakhs. 4) To lay special emphasis on the development of backward areas and small scale industries

Functions of State Financial Corporation 1) Grant of loans and advances to or subscribe to debentures of industrial concerns repayable within a period not exceeding 20 years. 2) Underwriting of the issue of stock, shares, bonds or debentures by industrial concerns. 3) Subscribing to, or purchasing of, the stock, shares, bonds or debentures of an industrial concern subject to a maximum of 30 percent of the subscribed capital, or 30 percent of paid up share capital and free reserve, whichever is less. 4) Planning and assisting in the promotion and development of industries.

SIDC SIDCs have been established under companies act,1956, as a wholly owned undertakings of state govt. They aim of promoting industrial development in respective state and provide financial assistance to small entrepreneurs

functions Grant of financial assistance Promotion and management of industrial concerns Helps in promotional activities Provide risk capital to enterpreneur by way of equity participation