development bank in india and their fucnctions,nabard sidbi, and nbfc

1. Presented by:
Aman sharma
Neha
Dept. of Business Administration
National Institute of Technology ,kurukshetra
1

2. DEVELOPMENT
BANKS
POINT COVERED
 CONCEPT OF
DEVELOPMENT BANK
DEFINATION
FUNTION
TYES
I. INDUSTRIAL
II. AGRICULTURE
III. EXPORT AND
IMPORT
CNTRIBUTION IN
INDIAN ECONOMY
2

3. CONCEPT OF DEVELOPMENT BANK
 In the field of industrial finance, the concept of “Development
Bank” is a recent origin. The origin of development banking
may be traced to the establishment of “Societe Generale
pour favoriser I’Industrie Nationale”in Belgium in 1822.
but the famous institution was the “Credit Mobilier”of france
established in 1852.
 In 1920, Japan
 In 1944, Canada
 In 1945, FCI,ICFC of England.
 In 1966,IRC, UK.
 In 1948,IFC of India.
3

4. DEFINITION OF DEVELOPMENT BANK
 William Diamond and Shirley Bosky consider industrial
finance and development corporation as
“Development Banks”
 A development bank may be defined as financial
institution concerned with the provide all type of
financial assistance to the business unit, in the form
of loan, underwriting, investment, and guarantee
operation, and promotional activity-economic
development in general and industrial development
in particular
4

5. FEATURES OF DEVELOPMENT BANKS
 It is multi-purpose institution
 Provide medium and long term fund.
 It encourage new industrial project
 It also provide financial assistance to PSUs.
 It reduces technical advice and mgt.consultancy
services to assist the mgt. of industrial unit.
 It aim promoting the saving and investment habit in
the community.
 Its motive is to serve public interest rather than to
make profit.
5

6. FUNCTION OF DEVELOPMENT BANKS
 To provide fund to the manufacturing activity that
produce goods which are perfect substitution for
existing import and also for export.
 To provide fund for industrial sector for the growth
of traditional commodity sectors such as textiles,
sugar, jute, cement, steel etc.
 To promote entrepreneur development, energy
construction, pollution control, generation of direct
and indirect employment opportunities as well as
institution building.
6

7. DEVELOPMENT BANKS IN INDIA
 The Industrial Finance Corporation of India
(IFCI),the first development bank of country was
established in 1948. Gradually many other financial
institution were set up.
 Development Bank in india may be classified into
three group. These are
a) Industrial Development Bank
b) Agricultural Development Bank
c) Export- Import Development Bank.
7

8. 8

9. IFCI
INDUSTRIAL FINANCE CORPORATION OF INDIA
 It was established in 1 july 1948.it was the 1st
development bank of india for providing financial
assistance to industrial sector.
 Management
IFCI is managed by the board of director, headed
by the chairman who is appointed by the govt. of
India in the consultation with RBI
9

10. OBJECTIVES OF IFCI
 The objectives of the IFCI are integrated with five
year plan and board national policies formed by the
government from time to time.
 Sectors that are benefited from IFCI
a) The consumer goods industry (textile, paper)
b) The service industry(hotels and hospital).
c) Basic industries(iron & steel, fertilizers, basic
chemicals and cement)
d) Infrastructure (power generation and telecom
services 10

11. ECONOMIC CONTRIBUTION OF IFCI
 Huge amount of sanction and disbursements.
 IFCI has been instrumental in generating employment
 IFCI has been nodal agency for the development of
cooperatives in sugar and textile sector. IFCI extended
assistance to nearly 400 cooperative societies for these
2 sector.
 50% of IFCI’s assistance has been extended for
financing more than 2500 units located in backward
area catalysed investment of aprox. INR 1,22,000 crore.
 IFCI provide subsidies to self employed youth and
women entrepreneur under (BRF) benevolent and (IDF).
11

12. IFCI PROMOTING INSTITUTION
 ICRA for credit rating
 MDI, Management Development institute for
management training and development.
 TFCI, Tourism Finance corporation of india for the
promotion of hotel and tourism industry.
 ILD, Institution of labour development
 RGVN, Rashtriya Gramin Vikas Nidhi
12

13. THE MAIN FUNCTIONS OF IFCI
 Direct financing
 Promotional activities
 Incidental activities.
1. Direct financing :-IFCI grant assistance for setting up of new
industrial projects, expansion of units or diversification, and
renovation and modernization of units. Under IFCI act 1948 the
following are concerns are eligible for direct financing
assistance.
a) ltd companies( private, public, joint sector) incorporated in
India.
b) cooperative societies registered India carrying out at present
or proposing to carry out in the future of the following.
13

14. CONT..
 Production, preservation or processing of goods
 Shipping, mining, hotel industry
 Development of land as an industrial estate
 Generation and distribution of any kind of power
 Provision of specialised knowledge or services
promoting industrial growth and research for
development
 Maintenance, repair, testing of machinery vehicle,
motor boats etc.
14

15. PROMOTIONAL ACTIVITIES
 The schemes for promotional activities of IFCI are:
a) There is 50% reduction in case of rupee loans in IFCIs
normal changes, such as legal and commitment
changes to projects in less development areas.
b) More liberal debt equity ratio
c) Greater equity, reserve capital participation.
d) There is 50% reduction in underwriting commission.
e) Concessional interest rate for rupee loan and foreign
currency sub loans
f) A 25% reduction in rate of commission of deferred
payment guarantees
15

16. INCIDENTIAL ACTIVITIES
 To advice the corporate clients, IFCI offers the
following :
a) FDI advisory services which includes facilitating
foreign business entities.
b) Corporate restructuring advisory services
c) Infrastructure advisory services which includes
facilitation of credit documentation due diligence,
agreement and documentation review.
d) Corporate financing and investment banking
advisory services which includes the placement of
debt and equity merger and amalgamations
strategy.
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17. IDBI
INDUSTRIAL DEVELOPMENT BANK OF INDIA
 IDBI was accordingly established in 1964. and
bank started functioning on 1 july 1994. the central
role of IDBI in the industrial finance system in the
country was defined by the finance minister shri. T
T krishnamachary, while introducing the bill in
parliament for setting up IDBI, in his words.
17

18. OBJECTIVES OF IDBI
a) Coordinating of working of institution engaged in
financing, promoting, and developing industry.
b) Assisting in development of such institution.
The resources of IDBI are:
1. Share capital and reserves.(july 1995)
2. Marketing borrowing by ways of bonds.
3. Borrowing from the govt. and RBI.
4. Deposit and other borrowing.
5. Foreign currency borrowing from world bank , asian
development bank, international markets.
18

19. PRODUCTS AND SERVICES
 IDBI provide finance for establishment of new industrial project
as well as for expansion, diversification, modernization of
existing industrial enterprises. it developed the following
financial institution ,capital market related agencies and training
institution such as:
 EXIM BANK LTD
 Small industries bank of india
 IDBI principal asset mgt. company ltd.
 NSE
 SEBI
 CCIL( clearing corporation of india ltd.)
IDBI has established training institution (JNIDB)
& entrepreneurship development institute of india (EDII) 19

20. FUNCTIONS OF IDBI
a) Planning, promotion, developing industries with a view to fill
the gaps in the industrial structure by conceiving, preparing,
and floating new project.
b) Provide technical and administrative assistance
c) Providing refinance facilities to the IFCI, SFCs
d) Coordinating the activities of financial institution for the
promotion and development of industries.
e) Purchasing or underwriting share and debentures of
industrial concerns.
f) Guaranteeing deferred payment due from industrial concerns
and for loans raised by tem.
g) Undertaking market and investment research, survey, and
techno -economical studies helpful for the development of
industries
20

21. ICICI
INDUSTRIAL CREDIT AND INVESTMENT
CORPORATION OF INDIA
 Industrial credit and investment corporation of india
was incorporate on 5 january 1995 with its
headquarter at mumbai for the specific purpose of
assisting the industrial enterprise within the private
sector. It was sponsored by the world bank with the
sole purpose of promoting new industries and to
assist the expansion and modernization of existing
industries.
21

22. THE OBJECTIVE OF ICICI
 Assisting in the creation, expansion and
modernization of industrial enterprise within the
private sector.
 Encouraging and promoting the participation of
private capital both internal and external in such
enterprises.
 Encouraging and promoting private ownership of
industrial investment and the expansion of
investment markets.
22

23. 23

24. ACTIVITIES OF ICICI
 The ICICI has so far assisted industries manufacture paper,
chemicals and pharmaceutical, electrical equipment, textiles,
sugar, metal ore, lime cement work, etc. the assistance
comprised of foreign currency loan, rupee loan, and
subscription of share and debentures.
 ICICI has shown keen interested in the development of new
industries in backward regions. ICICI has also participation in
soft loan schemes.
 CRISIL was set up by ICICI in association with unit trust of
india to provide credit- rating services to corporate sector.
 ICICI helped in established in (PACT) to assist market
oriented research and development activities. 24

25. PROGRESS OF ICICI
 The merger enhanced the value for the entire ICICI
group:
a) A large capital base and scale of operation
b) Entry into new business segment
c) Higher market share in various business
segment ,particularly fee-based services.
d) Access to the vast talent pool of ICICI and its
subsidiaries.
25

26. CURRENT STATUS OF ICICI
 Today ICICI bank is India’s second-largest bank
with total assets of about INR 1 trillion.
 Customer base = more than 5 million
 Branches = more than 392.
 ATMs = more than 1000
 Call centers and internet banking.
 Its (ADR) are listed in NYSE.
26

27. NBFCS
NON-BANKING FINANCE COMPANIES
 In recent time, the Non-banking Financial
companies have emerged as substantial
contribution to the indian economic growth by
having access to certain deposit segment and
catering to the specialized credit requirement of
certain classes of borrowers.
 The some NBFCs those regulated by RBI includes
1. Mutual Benefit Financial Company (MBFCs)
27

28. FUNCTION
 They attract deposits of large accounts by offering
attractive interest rate .
 They provide loan to wholesale and retail merchant,
small industries, self- employment schemes.
 They provides loan without security also. Hence ,
they are able to charge 24 to 36 percent interest
rate.
 They run chit funds, discount hundis, leasing
finance, hire purchase etc.
28

29. SIDBI
SMALL INDUSTRIAL DEVELOPMENT BANK OF INDIA
 The small scale industries sector(SSIs) is vibrant
and dynamic sector of the indian economy. The
contribution of this sector is very important in
generation of employment, production and as well
as in export. The SSIs includes tiny units,
comprises the domain of small industries sector
with total cost up to INR 250 million are also taken
within the area of SIDBI’s operation.
 SIDBI was set up as a wholly owned subsidiary of
IDBI in 1990 under the SIDBI Act 1989 enacted by
the parliament.
29

30. CONT..
 The authorised capital of SIDBI is INR 250 crore
which would be increased to INR 1000 crore.
Consequently upon amendment to SIDBI Act ,51%
of the shareholding of IDBI has been transferred
to SBI, LIC, GIC, and other financial institution
owned or controlled by govt. of india. At present the
shareholder of SIDBI includes 35 banks, Insurance
companies, and financial institution, in addition to
IDBI( hold 49% share in SIDBI).
30

31. PURPOSE
 It is the principal financial institution for:
A. Promoting
B. Financing
C. Development of industry in the small-scale sector.
D. Coordinating the function of other institution engaged
in similar activities
E. Indirect assistance to primary lending institution
F. Direct assistance to small units
G. Development support services.
31

32. FUNCTION
 SIDBI provide seed capital soft loan assistance under the
national equity fund.
 SIDBI co-promoter state level venture fund in association
with respective state govt.
 SIDBI provides both direct and indirect assistance , direct
finance provide through the project financing, equipment
financing, infrastructure financing. Indirect assistance
provided to the RRB, NGO, cooperative banks through
refinancing.
 SIDBI finance project relating transport , health care ,
tourism and self employed persons.
 SIDBI provides leasing, factoring, to small scale industries.
32

33. SIDBI ROLE IN GOVT. POLICIES
 It facilitates creation of an environment for self-
sustaining and growing SSI unit.
a) SIDBI venture capital ltd.
b) Credit Guarantee Fund Trust for small units.
c) SIDBI foundation for micro credit.
d) Technology bureau for small enterprises
33

34. CONT..
 A part of its operational strategy, SIDBI lays
emphasis on :
 Improving the capabilities of SSIs at all levels with a
focus on adaption of modern technology
 Increase in flow of financial assistance to SSIs.
SIDBI was ranked in 25th position, both in term of
capital and assets among all development banks in
the world as per the assessment of “THE
BANKER” ,London in may 2001.
 It is one of the professionally managed organisation
with a considerable emphasis on corporate
governance 34

35. THE MAJOR CHALLENGES FOR SIDBI
 Softer interest rate
 Accelerate the pace of Deregulation of financial
sector
 Decline of re-financing by banks which until were
the major chunk of bank business
35

36. SFCS
STATE FINANCIAL CORPORATION
 SFCs are set under state financial corporation act,
1951.with a principal objective of meeting the credit
needs of medium and small-scale unties located in
backward areas in different states. By the end of
march 2002 there were 18 SFCs, out of which one
Tamil Nadu Industrial Investment Corporation of
India which operates on the line of SFCs
36

37. CONT.
 As per the provision of the SFCs Act 1985, the
corporation can provides assistance to touch small
and medium industrial units whose paid-up capital
and reserve do not exceed INR 3 crores or such
higher limit to INR 30 crores as may be specified by
the central govt. SFCs act as agent of respective
state govt’s IDBI, SIDBI, or any financial institution
notified by state govt. concerned. It also operates
special schemes for artisans and special target
groups such as SC/ST, women, Ex- servicemen
and physically handicapped.
37

38. ACTIVITIES OF SFCS
 SFCs provides long term finance to unit such as
cooperatives, partnership, proprietary concern,
private companies, public companies.
 Maximum limit for partnership as per INR 30 lakhs.
 In case of companies and cooperative societies the
limit is INR 60 lakhs. Its provides mainly through:
a) Underwriting of directly shares, bonds, and
debentures subscribed.
b) Granting of term loan repayable over max. period
of 20 years.
38

39. CONT.
d) Guaranteeing of loans , repayable over a period of
20, raised in the market or from schedule banks or
cooperative banks by industrial concerns.
e) Guaranteeing of deferred payments in connection
with purchase of capital goods, such as
machinery in india.
f) Operating a number of schemes of refinance and
equity type of assistances on behalf of
IDBI,SIDBI.
39

40. CRITICAL APPRAISAL
 The financial resources of SFCs inadequate,
moreover, the face the difficulty of finding funds.
 The SFCs are not able to provide adequate
financial assistance to meet the requirement of
small and medium industries.
 SFCs charge very high interest rate on loans and
other soft loan moreover its condition are hard.
 SFCs face the problem of protection increasing
magnitude of over dues .
 SFCs lack self sufficient organisation set up along
with adequate specialized and trained staff for
ensuring their efficient factoring .
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