Development finance

1. .
Development banks

2. Development Bank
 Development banks are living organism that reacts to the
socio-economic environment and develops the economic
growth of the country
 Development banks are the institutions engaged in the
promotion and development of industry, agriculture and other
key sectors
 Development banks can carefully undertake the role of
financial strength, technical expertise and managerial skill to
bank. Therefore, the process involves cost as well as risk.
 Finally, the development bank may provide all types of
financial assistance in the form of loans, underwriting,
investment and promotional activities economic development
in general and industrial development in particular.

3. Characteristics of Development
Bank (DB)
 DB does not accept deposits from the public like Commercial
bank & other financial institutions, they entirely depends upon
saving mobilization.
 DB is a specialized institution, which provides medium & long
term lending facility to both private & public sector
institutions.
 Objective is to serve for public interest rather than earning
profits.
 DB react to the socio-economic development of the country.
 DB primarily aim to accelerate the rate of growth (i.e)
Specifically help industrialization & economic development in
general.

4. Development Banking in India
 Recommendation for setting up industrial financing institution was made
in 1931 by Central Banking Enquiry Committee but no steps were taken.
 In 1948, the first development bank IFCI came into force for filling the
gap between industrial finance.
 In 1949, RBI had undertaken a detailed study to find out the needs of
financial institutions.
 But due to vast size & economic needs of the country, SFC set up in 1951
for the regional development of medium & small enterprises.
 IFCI & SFC served only a limited purpose, so the GOI set up a dynamic
financial institution called “National Industrial Development Corporation
(NIDC)”.
 In 1955, ICICI established as a Joint Stock Company by GOI, IMF etc.,
for providing active part in underwriting & direct investment of industrial
units.

5. Need for Development Banks
Lay Foundation for Industrialization
 After independence from Colonial rule, there was a need for rehabilitated in economy.
 Underdeveloped & developed countries need to accelerate the pace of
industrialization.
 Due to risk involved in Cement, Engineering, Chemicals & Machinery sectors solid
foundation is needed to fill the vacuum.
Meet capital Needs
 Dearth of capital needed for foster industrial growth in underdeveloped countries
 Due to low level of income of the people & fill the gap between demand and supply
for capital
Need for Promotional Activities
 Besides capital, underdeveloped country is in need of expertise, managerial &
technical skills.
 DB could take up the job of joint sectors & providing managerial resources and
channelize from private auspices to other.
Help Small and Medium Sectors
 Mitigate suffering of small and medium size industries which form a sizeable sector of

6. Functions of Development
Banks
Financial Gap Fillers
a) Apart from providing medium & long term loans, they help industrial enterprises in
other ways
b) DB subscribe the Bonds & Debentures of the companies & helps to raise loans
from foreign & domestic sources.
c) Helps in undertaking to acquire machinery from within & outside the country.
Undertake Entrepreneurial Role
a) Developing countries lack entrepreneurs who can take up the job of setting up new
projects.
b) DB undertake the task of discovering investment projects, provide technical &
managerial assistance, economic & technical research and conducting surveys.
Credit Guarantee
a) Small scale sector is not getting proper financial facility due to risk & insufficient
securities.
b) To overcome this difficulty, many countries including India & Japan have devised

7. Continued…
Refinance Facility
a) DB also extend refinance facility to the lending institutions
b) Fund will not directly lend to the enterprise, the lending institution are
provided fund by DB against loans extended to industrial concerns.
c) Refinance facility are provided by IDBI, SFC, Commercial Bank & Co-
operative Bank.
Joint Finance
a) One of the main features of DB is to take up joint financing with other
financial institutions.
b) DB can involve in short, medium & long term project with one or more
institution and they can share their nature of work in currency dealing,
underwriting shares etc.
c) Members of the consortium will undertake joint appraisal & then decide
the quantum of assistance to be provided by each institution.

8. Underwriting of Securities
a) DB acquire securities of industrial units through direct subscribing or
underwriting or both
b) Banks do not hold these securities on permanent basis, they try to
disinvest these securities in a systematic way which should not influence
market prices of securities & should not lose managerial control
Commercial Banking Business
a) DB normally provide medium & long term funds to industrial enterprises
& their working capital needs of the units are met by commercial banks
b) In developing countries, commercial banks have not take up their job
properly, because traditional approach in dealing with lending &
assistance have not help the industry.
c) So far, there is no uniform practice in development banks regarding
banks functions like accepting of deposits , letter of credit etc.
Continued…

9. Industrial Development Bank of
India (IDBI)
IDBI was set up to accelerate the development of the country. Lot of
financial institutions came into existence after independence and were
catering to a variety needs of the industry. Due to lack of co-ordination
among different institutions, which lead to overlapping and duplication in
their efforts. Particularly some of the gigantic projects of national
importance were not provided with proper financial assistance, because of
this IDBI was established in 1964 as a wholly owned subsidiary of RBI.
IDBI act as an apex institution coordinating functions of all the
financial institutions into a single integrated movement of development
banking and supplementing their resources to industrial concern and
providing financial support to all worthwhile projects of national
importance.
 IDBI formed with an authorized capital of Rs. 50 Crores
 In 1994, the GOI amended certain provisions of IDBI Act and increased
the authorized capital from 2000 crore to 5000 Crore. In 2003, it is

10. Management of IDBI
Management of IDBI consisted with 22 persons including full
time Chairman-cum-Managing Director appointed by Central
Government and other members of the board comprise of a
representative of the RBI
All India Financial Institution (1)
Central Government Officials (2)
Public Sector Banks & SFC (3)
Representatives having special knowledge & experience of
industry (5)
Executive members (10).
Ad-hoc Committee members also constituted to advise
on specific projects. Recently, GOI has sought to cancel the

11. Functions of IDBI
 Coordinate the activities of other institutions providing term finance
to industry and to act as an top institution.
 Provide refinance to Scheduled banks, Cooperative banks, ECGC
and financial institutions by granting medium and long-term loan.
 Provide technical & administrative assistance for promoting the
growth of the industry.
 Undertake market surveys and techno-economic studies for the
development of the industry.
 Grant direct loans and advances to all types of industrial concerns.
 IDBI can also assist concerns engaged in setting up of industrial
estates or R&D of any product in providing technical knowledge.
 IDBI operates various schemes of assistance like Seed Capital,
Development Assistance Fund, Technical Development Fund &

12. Role of IDBI
IDBI not alone provide funding facility for industrial
sector in the country. But also provide long-term loans to
socio economic activities
Development of specified backward areas.
Modernization of Specific industries.
Employment generation.
Identification & encouragement of new entrepreneurs.
Providing support services for creating a deep and
vibrant domestic capital market.
Apart from this, it also played a significant role in the
development of capital market by setting various institutions
like SEBI, NSE, SHCIL etc.

13. Industrial Finance Corporation
of India (IFCI)
At the time of independence in 1947, India's capital
market was relatively under-developed. Although there
was significant demand for new capital, there was a dearth
of providers. Merchant bankers and underwriting firms
were almost non-existent. At the same time, commercial
banks were not equipped to provide long-term industrial
finance in any significant manner. So, there was a need for
renovation and restructuring of industry.
GOI, came forward to set up IFCI in 1948 under
IFCI Act.
The GOI, IDBI, Scheduled Bank, Insurance
companies, Co-operative banks are the shareholders
of IFCI.

14. Management of IFCI
The Corporation consist of 13 members Board of Directors
including Chairman; they are
Chairman is appointed by GOI after consulting IDBI, he can
works on a whole time basis for a period of 3 years.
FOUR are nominated by IDBI.
TWO by Scheduled banks
TWO by Co-operative banks
TWO by other financial companies like Insurance
Companies, Trusts etc.
Apart from this, IDBI appoints THREE outside persons as
directors who are experts in the fields of Industry, Labour and
Economics & the fourth nominee is the Central Manager of IDBI.

15. Main Focus of IFCI
Agro-based industry (Textiles, Paper, Sugar)
Service industry (Hotels, Hospitals)
Basic industry (Iron & Steel, Fertilizers, Basic
Chemicals, Cement)
Capital & intermediate goods industry
(Electronics, Synthetic Fibres, Synthetic Plastics,
Miscellaneous Chemicals) and
Infrastructure (Power generation, Telecom
services).

16. Criterion Considered for
Providing Fund
 Importance of the project for National Economy.
 Employment orientation and labour intensive nature of
the project.
 Export potential of the unit.
 Projects located in backward areas and industrial areas.
 Projects initiated by new or technical entrepreneurs.
 Projects which will harness indigenously available
technology, technical knowhow and raw materials.
 Projects which will be useful to rural areas.

17. Prominent Institutions founded
by IFCI
 Management Development Institute (MDI) for Management Training &
Development
 Investment Information and Credit Rating Agency of India Limited
(ICRA) for credit assessment rating
 Tourism Finance Corporation of India (TFCI) for promotion of the Hotel
and Tourism industry
 Institute of Labor Development (ILD) for Rehabilitation and Training of
Displaced and Retrenched labor force
 Rashtriya Gramin Vikas Nidhi (RGVN) for promoting supporting and
developing voluntary agencies engaged in Rural & Urban areas.
 Stock Holding Corporation of India Ltd. (SHCIL)
 Discount and Finance House of India Ltd. (DFHI)
 National Stock Exchange (NSE)
 OTCEI & LIC Housing Finance Ltd.

18. Industrial Credit and Investment
Corporation of India (ICICI)
The idea of setting up of ICICI crystallized as a
result of discussions among the GOI, the World Bank
& certain American financers. A Steering Committee
of five members was formed to pursue the idea. These
efforts culminated in the formation of ICICI as a
public limited company in 1955 to encourage & assist
industrial development & investment in India. The
establishment of ICICI aimed to filling certain gaps in
the institutional facilities for the provision of finance
to industrial undertaking in the private sector.

19. Main Objectives of ICICI
Assist in creation, expansion and modernization
of industrial enterprises within private sector in
India.
Encourage and promote the participants of private
capital in both internal and external enterprises.
Provoke and Uplift the private ownership of
industrial investment and expansion of

20. Functions of ICICI
 Provide loan facility over a period of 15 years
 Provide funds in the form of equity participation.
 Sponsor and underwrite new issues of shares and securities.
 Guarantee loans from the private investment sources.
 Make funds available for reinvestment by removing
investments as rapidly as possible.
 Provide managerial, technical and administrative services to
industry
 Undertake promotional activities for fostering growth in
underdeveloped areas of the country.
 Provide loans in foreign currency towards the cost of
important capital requirements.

21. State Industrial Development
Bank of India (SIDBI)
State Industrial Development Bank of India (SIDBIs) have been
established under the Companies Act 1956, as wholly-owned
undertakings of State Governments.
SIDBI have been set up with the aim of promoting industrial
development in the respective States and providing financial
assistance to small entrepreneurs.
They are also involved in setting up of medium and large industrial
projects in the joint sector or assisted sector in collaboration with
private entrepreneurs or wholly-owned subsidiaries.
They are undertaking a variety of promotional activities such as
preparation of feasibility reports, conducting industrial potential
surveys, entrepreneurship training and development programmes in
developing industrial areas/estates.

22. Continued…
SIDBI was established on April 2, 1990 under the Charter
of Small Industries Development Bank of India Act 1989.
Business domain of SIDBI consists of small scale
industrial units, which contribute significantly to the
national economy in terms of production, employment &
exports.
Small scale industries are the industrial units in which the
investment in plant and machinery does not exceed Rs.10
million.
In addition, SIDBI's assistance flows to the transport,
health care, tourism sectors and also to the professional
and self-employed persons setting up small-sized

23. Objectives & Functions of
SIDBI
Objectives
Financing
Promotion
Development
Co-ordination
Functions
 Renders equity assistance to new promoters, women & Ex-servicemen
under National Equity Fund.
 Provides assistance to voluntary organization working for
development of under privileged women
 Provides technical support to SSU for promotion, development &
Growth.
 Extends financial support to State Industrial Development Corporation
(SIDC) for purchase of material and marketing of SSI products and

24. Operational Policies
The Small Industries Development Bank of India (SIDBI), was
conceived as the principal financial institution at the apex level for
promotion, financing and development of industry in the small, tiny &
Cottage sectors.
SIDBI has an overall responsibility for enacting policy and procedural
guidelines with regard to the operations of SFCs.
SIDBI has since been de-linked from IDBI after the SIDBI Act was
amended last year and as a result, 51% holding of IDBI shares in
SIDBI are in the process of being transferred to Commercial banks and
All-India financial institutions. Further, IDBI's share-holding in SFCs
would also be transferred to SIDBI under the SFCs (Amendment) Act,
2000.
All the discretionary powers vested with IDBI in the principal Act,
now vest with SIDBI under the amended Act.
The operational limits prescribed under various provisions of the
amended Act could be increased by the State Governments on the

25. State Financial Corporations
(SFCs)
SFCs are the State-level financial institutions which play a
crucial role in the development of small and medium enterprises in
the concerned States. They provide financial assistance in the form
of term loans, direct subscription to equity or debentures,
guarantees, discounting of bills of exchange and seed or special
capital, etc.
SFCs have been set up with the objective of providing
financial assistance to all types of industrial units in small and
medium scale. As per the SFC Act amended from time to time, they
can assist industrial concern in following activities
Higher investment, generating greater employment and widening
the ownership base of industries.
They have also started providing assistance to newer types of
business activities like floriculture, tissue culture, poultry farming,
commercial complexes and services related to Engineering,

26. Continued
SFC may be from corporate or co-operative sectors or may be
partnership, individual or joint Hindu family business.
SFC provide financial assistance to Manufacture, Mining, Hotel
industry preservation or processing of goods, but also transport
undertakings etc.
Grant financial assistance to any single industrial concern under
corporate or co-operative sector with an aggregate upper limit of
Rs. 60 lakhs. In any other case like partnership, sole
proprietorship or Joint Hindu family the upper limit is Rs. 30
lakhs.
Provide financial assistance generally to those industrial concerns
whose paid up share capital and free reserves do not exceed Rs. 3
crore.

27. Functions of SFCs
 Grant loans & advances to subscribe debentures of industrial
concerns and repayable within a period not exceeding 20 years.
 Guaranteeing deferred payments due from an industrial concern for
purchase of capital goods in India.
 Underwriting Shares, bonds and debentures by industrial concerns.
 Subscribing shares, bonds or debentures of an industrial concern
subject to a maximum of 30 % of the subscribed capital or 30 % of
paid up share capital, whichever is less.
 Acting as agent of Central & State Government, IDBI, IFCI or any
other financial institution in the matter of grant of loan.
 Providing technical & administrative assistance to any industrial
concern or any person for the promotion, management or expansion
of any industry.
 Planning & Assisting in the Promotion & Development of

28. Export Import (EXIM) Bank
 Export-Import Bank of India is the premier export finance
institution of the country, set up in 1982 under the Export-
Import Bank of India Act 1981.
 Government of India launched the institution with a
mandate, not just to enhance exports from India, but to
integrate the country’s foreign trade and investment with
the overall economic growth.
 Since its inception, EXIM Bank of India has been both a
catalyst and a key player in the promotion of cross border
trade and investment.
 Completed 28 years of operations in end of March 2010

29. • Chairman and Managing Director
• 5 Directors: Government of India
• 3 Directors: Scheduled Banks
• 4 Directors : Professionals/Experts
• 1 Director nominated by RBI
• 1 Director nominated by IDBI
• 1 Director nominated by ECGC
Organization
Appointed
by (Govt. of India, ECGC,
Financial Institutions, PS
Banks & Business Community)
BOARD OF DIRECTORS (16)
HEAD
OFFICE
MUMBAI (9)
Domestic
Offices
Mumbai
Kolkata,
Bangalore
Ahmedabad
Guwahati
Delhi
Chennai
Hyderabad
Pune
OFFICES IN INDIA
OFFICES OVERSEAS (5)
Overseas
Offices
Washington D.C.
Singapore
Johannesburg
London
Budapest

30. Objectives of EXIM Bank
“EXIM bank provide financial assistance
to exporters and importers, which is functioning
as the principal financial institution for
coordinating the working of institutions engaged
in financing export and import of goods and
services with a view to promoting the country’s
international trade”
“EXIM bank will act on business principles
with due regard to public interest”

31. Range Of Products & Services
Pre-
Shipment
Export
Marketing
Export
Production
Export
Product
Developmen
t
Import
Finance
Advisory
Services
Investment
Abroad
Post-
Shipment
Presence Across All Stages of Business
Cycle
INFORMATION
Advisory
Services
Knowledge
Building
SUPPLEMENTS FINANCING
PROGRAMMES
Value Based Services

32. Functions of EXIM Bank
 Corporate Banking Group which handles a variety of financing programme
for Export Oriented Units (EOUs), Importers, & Overseas investment by
Indian companies.
 Project Finance or Trade Finance Group handles the entire range of export
credit services such as supplier's credit, pre-shipment credit, buyer's credit,
finance for export of projects & consultancy services, guarantees etc.
 Small & Medium Enterprise has specific financing requirements of export
oriented units.
 Group handles credit proposals from SMEs under various lending
programme of the Bank.
 Export Services Group offers provides advisory & value-added information
services aimed at investment promotion.
 Fee based Export Marketing Services Bank offers assistance to Indian
companies, to enable them establish their products in overseas markets.
 Besides these, the Support Services groups, which includes Research &
Planning, Corporate Finance, Loan Recovery, Internal Audit, Management
Information Services, Information Technology, Legal, HRM & Corporate

33. Non-banking Financial
Companies (NBFC’s)
A NBFC is a company registered under the Companies Act 1956,
which is engaged in business loans and advances
In the recent years, NBFC has captured the Indian financial market,
it is mainly due to greater reach and flexibility in tapping resources
from the household people.
 NBFC have offer greater avenues for higher returns than other well
regulated institutions.
NBFC constitute an important link between banks and the users of
financial services.
Provide retail services to small & medium businesses, road transport
operations etc.
During the last few decades, they emerged as an significant players
and proved to be an important components of capital market.
RBI has endeavoured to bring them under their regulation control
with a view to develop them on sound and healthy lines as a vibrant
segment of the Indian financial system.

34. NBFC Definition
RBI defines, "A NBFC is a company registered under the
Companies Act 1956 and is engaged in the business of loans and
advances, acquisition of shares or stock or bonds or debentures or
securities issued by Government or local authority or other
securities of like marketable nature, leasing, hire-purchase,
insurance business, chit business but does not include any
institution whose principal business is that of agriculture activity,
industrial activity, sale or purchase or construction of immovable
property. Apart from this, a non-banking institution which is a
company and which has its principal business of receiving deposits
under any scheme or arrangement or any other manner, or lending
in any manner is also a non-banking financial company."

35. Concept of NBFCs
 Suppliers of loans and credit facilities.
 Supporting investments in property.
 Trading money market instruments.
 Funding private education.
 Wealth management such as managing portfolios of stocks and
shares and underwrite stock and shares and other obligations.
 Retirement planning.
 Advise companies in merger and acquisition.
 Prepare feasibility, market or industry studies for companies.
 Discounting services e.g., discounting of instruments.

36. Classification of NBFC’s
Development Finance Institutions
Leasing Companies
Investment Companies
Housing Finance Companies
Venture Capital Companies
Discount & Guarantee Houses
Underwriting Practitioners.

37. Guidelines of NBFC’s
 Recent years have witnessed significant increase in financial
intermediation by the NBFCs. This is reflected in the
guidelines proposal.
 Made by the latest Working Group on Money Supply for a
new measure of liquidity aggregate incorporating NBFCs.
 Public Deposits worth Rs.20 crore and above for regulatory
purposes & its purposes have been classified into three
categories:
a) First, accepting Public Deposits.
b) Second, not Accepting public deposits but engaged in financial
business.
c) Core investment companies with 90 per cent of their total assets
as investments in the securities of their group or holding or

38. Progress of NBFCs
 NBFC’s have registered significant growth in recent years both in
terms of number and volume of business transactions.
 NBFCs started in a small way in the 60’s & 70’s, and tried to serve
the needs of savers and investors whose unused the Banking
system. But, in 80’s there was virtually a boom due to enormous
growth in entrepreneurs.
 However, most of them ignored the financial services was
complicated and demanding business, because of continuous raising
and deployment of funds in a judicious manner. But, this involve
consistent identification and entry into newer and optimally
lucrative areas of financial returns. So, along with the growth of
Indian economy, NBFCs have also grown.
 Growth of NBFCs in India was more pronounced in last two
decades. Several factors have contributed to the growth of these

39.  Tailor made services, customer-orientation, minimum
procedures & simplicity, speed of operations, etc. have
attracted more and more customers to them.
 Monetary and credit policy followed in the country in the
recent past has left a section of borrowers outside the
purview of banking system and these NBFCs increasingly
hatred to these sections.
 Comprehensive regulation of the commercial Banks and the
absence or less rigorous regulations over NBFCs have also
contributed to the phenomenal growth in numbers of NBFC
and clientele deposits.
 RBI has started regulating the activities of NBFCs with the
twin objectives of ensuring that they sub serve the financial
system efficiently and do not jeopardize the interest of
depositors.
Continued….

40.  In the backdrop of general sickness in the real estate market &
some of the industrial activities coupled with steep decline in
the value of some of the unquoted shares, the NPAs of NBFCs
have registered an upward trend.
 RBI has put in place a comprehensive regulatory and
supervisory framework in order to discharge the heavy statutory
responsibilities to provide indirect protection to the depositors'
interest and strengthening the NBFC sector.
 As a result, growth rate had slowed down gradually leading to a
negative growth rate in 1988.
 However, from 1989 the trend has changed better, there are a
host of reasons that have led to the revival of interest in
financial services.
 Enormous progress of liberalisation & dismantling of economic
control ridden to a great extent opened up larger vistas of
Continued….

41. Continued….
 Registration is being granted to NBFCs on assessment and
evaluation of various factors and as per the criteria laid down in the
RBI Act.
 Applications for registration are subjected to through scrutiny by
RBI has issued up to Aug. 24, 2009, approvals for registration of
336 NBFCs which are permitted to accept public deposits and to
12607 NBFCs which are non-public deposits taking companies.
 A company incorporated under the Companies Act, 1956 and
desirous of commencing business of NBF institution should prior
approval as per RBI Act 1934, should have a minimum net owned
fund of Rs 200 lakh.
 RBI closely supervises NBFC’s, which accept public deposits,
through a comprehensive mechanism comprising on-site
examination, off-site surveillance, a sensitive market intelligence

42. Insurance Sector
Insurance is a contract whereby, in return for the
payment of premium by the insured, the insurers pay the
financial losses suffered by the insured as a result of the
occurrence of unforeseen events. A social device to
reduce or eliminate risk of life and property.
Insurance Regulatory and
Development Authority (IRDA)
Mission:
To protect the interests of the insurance policyholders
and to regulate, promote and ensure orderly growth of the
insurance industry.

43. Functions of IRDA
As per Section 14 of IRDA Act, 1999 lays down the duties,
powers and functions of IRDA.
 Authority shall have the duty to regulate, promote and ensure
orderly growth of insurance business and re-insurance business.
 Without prejudice to the generality of the provisions contained in
sub-section (1), the powers and functions of the Authority shall
include:
a) IRDA can issue to the applicant a certificate of registration,
renew, modify, withdraw, suspend or cancel such registration
b) Protecting the interests of the policy holders in matters
concerning assigning of policy, nomination by policy holders,
insurable interest, settlement of insurance claim, surrender
value of policy and other terms and conditions of contracts of
insurance.

44. Continued…
d) Specify the code of conduct for surveyors and loss assessors.
e) Promoting efficiency in the conduct of insurance business.
f) Promoting and regulating professional organizations connected
with the insurance & re-insurance business.
g) Levying fees & other charges for carrying out the purposes of
this Act.
h) Regulating investment of funds by insurance companies.
i) Regulating maintenance of margin of solvency.
j) Adjudication of disputes between insurers and intermediaries or
insurance intermediaries.
k) Supervising the functioning of the Tariff Advisory Committee
l) Specifying the percentage of life insurance business and general
insurance business to be undertaken by the insurer in the rural
or social sector.

45. Life Insurance
 Life insurance is a contract that pledges payment of an
amount to the person assured (or his nominee) on the
happening of the event insured against.
 The contract is valid for payment of the insured amount
during:
a) The date of maturity.
b) Specified dates at periodic intervals.
c) Unfortunate death, if it occurs earlier.

46. Calculation of Life Insurance
Amount/Premium
 Individuals getting a life insurance cover have to pay the
monthly/quarterly/half yearly/yearly premium/life
insurance rate, which depends on the amount insured.
 Premium amount also increases or decreases with
different life insurance plans, age of the individual etc.
 Company pays the full insurance amount either on the
death of the individual or the expiry of the policy which
ever is earlier.

47. Advantages of Insurance
 Protection - Savings through life insurance guarantee full protection
against risk of death of the saver. Also, in case of demise, life insurance
assures payment of the entire amount assured whereas in other savings
schemes, only the amount saved is payable.
 Aid to Thrift - Life insurance encourages 'thrift'. It allows long-term
savings since payments can be made effortlessly because of the 'easy
installment' facility built into the scheme.
 Liquidity - A life insurance policy is also generally accepted as security,
even for a commercial loan.
 Tax Relief - Life Insurance is the best way to enjoy tax deductions on
income tax and wealth tax.
 Money when it is Needed - Life insurance comes as a policy that has a
suitable insurance plan or a combination of different plans that can be
effectively used to meet certain monetary needs that may arise from time-
to-time like those of children's education, start-in-life or marriage
provision or even periodical needs for cash over a stretch of time.

48. Types of Insurance Schemes
 Whole Life Assurance: Insurance company collects
premium from the insured for whole life or till the time of
his retirement and pays claim to the family of the insured
only after his death.
 Endowment Assurance: The term of policy is defined for
a specified period say 15, 20, 25 or 30 years. The insurance
company pays the claim to the family of assured in an
event of his death within the policy's term or in an event of
the assured surviving the policy's term.
 Term Assurance: They provide death risk-cover. Term
assurance policies are only for a limited time, claim for
which is paid to the family of the assured only when he

49. Assurances for Children :
a) Child's Deferred Assurance: claim by insurance company is
paid on the option date which is calculated to coincide with the
child's eighteenth or twenty first birthday. In case the parent
survives till option date, policy may either be continued or
payment may be claimed on the same date. However, if the
parent dies before the option date, the policy remains
continued until the option date without any need for payment
of premiums. If the child dies before the option date, the parent
receives back all premiums paid to the insurance company.
b) School Fee Policy: School fee policy can be availed by
effecting an endowment policy, on the life of the parent with
the sum assured, payable in installments over the schooling
period.
Continued…

50. Annuities: A person entering into an annuity contract agrees to pay a
specified sum of capital (lump sum or by installments) to the
insurer. The insurer in return promises to pay the insured a series
of payments until insured's death. Generally, life annuity is opted
by a person having surplus wealth and wants to use this money
after his retirement.
a) Immediate Annuity: The insured pays a lump sum amount (known
as purchase price) and in return the insurer promises to pay him
in installments a specified sum on a monthly/quarterly/half-yearly/
yearly basis.
b) Deferred Annuity: A deferred annuity can be purchased by paying
a single premium or by way of installments. The insured starts
receiving annuity payment after a lapse of a selected period (also
known as Deferment period).
Continued…

51. Money Back Policy
Money Back Policy:
It is a policy opted by people who want
periodical payments. A money back policy is
generally issued for a particular period, and the
sum assured is paid through periodical payments
to the insured, spread over this time period. In
case of death of the insured within the term of the
policy, full sum assured along with bonus
accruing on it is payable by the insurance

52. Major Players
 Bajaj Allianz Life Insurance
 Birla Sun Life Insurance Company Limited
 HDFC Standard Life Insurance Company Limited
HDFC Standard Life Insurance Company Ltd. is one of India's leading
private insurance companies, It is a joint venture between Housing
Development Finance Corporation Limitedm(HDFC Limited), India's
leading housing finance institution and a Group Company of the Standard
Life Plc, UK.
 ICICI Prudential Life Insurance Company
a) ICICI Prudential Life Insurance Company is a joint venture between
ICICI Bank is one of India's foremost financial services companies-and
Prudential place a leading international financial services group
headquartered in the United Kingdom. ICICI Bank holding a stake of
74% and Prudential plc holding 26%.
b) The company began its operations in December 2000 after receiving
approval from Insurance Regulatory Development Authority (IRDA).
Today, their nationwide team comprises of 2099 branches.

53.  ING Vysya Life Insurance Company Limited
 Life Insurance Corporation of India
 Max New York Life Insurance Company Ltd.
 MetLife India Insurance Company Limited (MetLife)
 Kotak Mahindra Old Mutual Life Insurance
 SBI Life Insurance Company Limited
 Tata AIG Life Insurance Company Limited (Tata AIG Life)
 Reliance Life Insurance
 Aviva Insurance
 Sahara India Life Insurance Company Ltd. (SILICL)
 Shriram Life Insurance Company
 Bharti AXA Life Insurance
 Future Generali
Continued…