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)

INTRODUCTION

Industrial finance is a very complicated problem. It is of vital importance as development of any country depends on industrial development of that country ‘s economy.

Why there is need of finance 1.Long term 2.Medium term 3.Short term

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Long term capital is also known as block capital or fixed

capital. it is needed to acquire-fixed and permanent assets

Medium term capital is required for repairs,

replacements, maintenance of machines and building etc.

Short term capital is needed for purchase of raw

material , and to meet day to day expenses

TYPES OF FINANCIAL INSTITUTIONS IN INDIA

Term lending Refinance institutions Investment institutions State level institutions

TERM LENDING

A term loan is a monetary loan that is repaid in regular payments over a set

period of time. Term loans usually last between one and ten years, but may last as long as

30 years in some cases. A term loan usually involves an unfixed interest rate that will add

additional balance to be repaid.

IFCI

IDBI

ICICI

EXIM

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 Management- BOD total 12 members(4 by idbi,2 by center govt,

6 by shareholders)- -full time chairperson

FUNCTIONS OF IFCI

1) For setting up a new industrial undertaking.

2) For expansion and diversification of existing industrial undertaking.

3) For renovation and modernization of existing concerns.

4) For meeting the working capital requirements of industrial concerns in some exceptional cases.

5) Direct financial support (by way of rupee term loans as well as foreign currency loans) to industrial units for under taking new projects, expansion, modernization, diversification etc.

6) Subscription and underwriting of public issues of shares and debentures.

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Resources of IFCI ownership capital Issue of shares and bonds borrowing from RBI,IDBI AND CENTER

GOVT accepting deposits from public, state govt and

local authorities

IDBI (INDUSTRIAL DEVE. 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.

FUNCTIONS OF IDBI

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.

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3) To discount or re-discount bills of industrial concerns.

4) To underwrite or to subscribe to shares or debentures

of industrial concerns.

5) To subscribe to or purchase stock, shares, bonds and

debentures of other financial institutions.

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With effect from 1 oct,2004 it has renamed as IDBIL. It

has been accepted as a deemed banking co under banking

regulation act. The govt holds the majority (58.47%)

shares of IDBI LTD.

During last 40 years IDBI has given a qualitative

dimension to the process of industrial development of the

country.

FINANCIAL ASSISTANCE BY IFCI/IDBI

Sanction(crores)Purpose IFCI IDBINew projects 15919.6 67498

Expansion /acquisition 6649.2 50627Rehabilitation 115.7 1415Modernization 5459.7 12976Working capital 837 5138

I.C.I.C.I. (INDUSTRIAL CREDIT & INVESTMENT CORPORATION OF

INDIA)

Established in 1955 As a public ltd co, at the initiative of

world bank

Authorized capital of 60 crores and issued capital 22 crores

The objectives of icici are to encourage establishment of new

industries, to help in expansion and modernization, technical

and managerial aid to increase production and employment.

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In October 2001 .BOD Approved ICICI LTD AND ICICI BANK

LTD. With effect from MAY 2002 IT IS SIMPLY ICICI bank .

ICICI is now the largest bank with total assets of more than 3000

billions

More than 700 branches and over 2200 ATM spread all over the

country

It mainly deals in

Retail banking, wholesale banking, project finance, international

business and special assets mgt

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.-

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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. It has the largest no of call centers.

EXIM

Established on1st JAN,1982. Authorized capital 1000 crores and paid up is 650

crores. Exim bank came into existence when

international finance division of idbi was transferred to exim bank in 1982.

Exim started its working from march 1982 The issued capital is wholly subscribed by center

govt

FUNCTIONS OF EXIM

1) Financing of exports and imports of goods and services, not only of India but also of the third world countries;

2) Financing of exports and imports of machinery and equipment on lease basis;

3) Financing of joint ventures in foreign countries;4) Providing loans to Indian parties to enable them

to contribute to the share capital of joint ventures in foreign countries;

CONTINUE… The main objective of exim is to provide financial assistance to

exporters and importers. It has to coordinate the working of those institutions which can promote international trade.

Management is MD+17 other directors representing govt,RBI,ECGC,public sector banks

Resources of EXIM -GOI -RBI -any organization approved by GOI TYPES OF ASSISTANCE -fund based -non fund based

ASSISTANCE BY EXIM

Fund based Pre shipment credit Foreign currency Post shipment credit Deemed exports Loans to commercial

banks for bills discounting

Finance for consultancy and technology

Non fund based Guarantees

REFINANCING INSTITUITIONS

Are those which do not give finance directly but they

create such structure by which the funds are allocated

up to the minimum level.

N.A.B.A.R.D.

S.I.D.B.I.

N.H.B

NABARD-NATIONAL BANK FOR AGRICULTURE AND RURAL DEVELOPMENT

Started functioning from 1july 1982 Set up with an initial capital of 100 crores, now it is

2000 crores fully subscribed by GOI AND RBI. H.O IN Mumbai, with 28 regional and 391 district

offices It is an apex organization for policies, planning and

operations of agriculture ,SSI ,handicraft and village industries

It mainly deals in three types of functions credit ,developmental ,regulatory functions

FUNCTIONS OF NABARD

1) Inspection and Supervision of Co-operative Banks and Regional Rural Banks

2) Development of Women and Children in Rural Area3) Integrated Rural Development Programme 4) It undertakes monitoring and evaluation of projects

refinanced by it.

4) It promotes research in the fields of rural banking,

agriculture and rural development

SIDBI (SMALL INDUSTRIES DEVLOPMENT BANK OF INDIA)

Set up in oct 1989

Wholly owned subsidiary of IDBI

It is the principal financial institution for

promotion ,financing and development of small scale

industries

In sep 2000 IDBI transferred 51% in favor of banks

and other institutions in the first phase.

FUNCTIONS OF SIDBI

1) It refinances loans and advances provided by the existing lending institutions to the small-scale units.

2) It discounts and rediscounts bills arising from sale of machinery to and manufactured by small-scale industrial units.

3) It grants direct assistance and refinance loans extended by primary lending institutions for financing exports of products manufactured by small-scale units.

4) It provides services like factoring, leasing, etc. to small units.

NHB (NATIONAL HOUSING BANK)

Set up in July 1988

A principal agency to promote housing finance

Wholly owned subsidiary of RBI

Registered With capital of 350 crore which can be

increased to 2000 crores. The board is authorized to

issue increased capital to RBI, center govt.

FUNCTIONS OF NHB

Extending refinance to different primary lenders in respect of

 Eligible housing loans extended by them to individual beneficiaries,

 for project loans extended by them to various implementing agencies.

1) Lending directly in respect of projects undertaken by public housing agencies

for housing construction and development 

of housing related infrastructure.

2) Guaranteeing the repayment of principal and payment of interest on bonds

issued by Housing Finance Companies.

3) Acting as Special Purpose Vehicle for securitising the housing loan receivables.

INVESTMENT INSTITUITIONS

Are those who invest the money collected in further securities and investments outside .LIKE

LIC

GIC

LIC (LIFE INSURANCE CORPORATION

Set up in 1956 LIC was formed by nationalizing 245 life

insurance companies. The main aim was to spread insurance Mobilize savings Investing funds Act as trustees

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promoting a sense of pride and job satisfaction among agents and employees

Diversification by LIC LIC HOUSING FINANCE LIC MUTUAL FUNDS Jeevan bima sahyog assets mgt co(JBSAMC) LIC International EC

VISION & MISSION

Mission "Explore and enhance the quality of life of people through financial security by providing products and services of aspired attributes with competitive returns, and by rendering resources for economic development." 

Vision"A trans-nationally competitive financial conglomerate of significance to societies and Pride of India."

G.I.C. (GENERAL INSURANCE CORPORATION)

 It was incorporated on 22 November 1972. The Government of India (GOI), through Nationalisation

took over the shares of 55 Indian insurance companies and the undertakings of 52 insurers carrying on general insurance business.

Main objective:- GIC was formed for the purpose of superintending,

controlling and carrying on the business of general insurance.

VISION & MISSION

Vision “To be a leading global reinsurance and risk solution provider”

Mission:- Building long-term mutually beneficial relationship with business

partners Practicing fair business ethics and values Applying “state-of-art” technology, processes including enterprise risk

management and innovative solutions. Developing and retaining highly motivated professional team of

employees Enhancing profitability and financial strength befitting the global

position

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.

THE 'DISTRICT INDUSTRIES CENTRE' (DICS)

- The 'District Industries Centre' (DICs) programme was started by the central government in 1978 with the objective of providing a focal point for promoting small, tiny, cottage and village industries in a particular area and to make available to them all necessary services and facilities at one place. The finances for setting up DICs in a state are contributed equally by the particular state government and the central government. To facilitate the process of small enterprise development, DICs have been entrusted with most of the administrative and financial powers. For purpose of allotment of land, work sheds, raw materials etc., DICs functions under the 'Directorate of Industries'. Each DIC is headed by a General Manager who is assisted by four functional managers and three project managers to look after the following activities :

ACTIVITIES OF DISTRICT INDUSTRIES CENTRE (DIC):

- i. Economic Investigationii. Plant and Machineryiii. Research, education and trainingiv. Raw materialsv. Credit facilitiesvi. Marketing assistancevii. Cottage industries

* In each district one agency to deal with all requirements of small and village Industries. This is called “District Industries Centre”

* The District Industries Centres have undertaken various programmes for investment promotion at the grassroot level such as a organizing seminars workshops, extending support for trade fairs and exhibitions organized by various Industries associations.

*All the services and support required by for MSME units under the single roof of the District Industries Centre. The Centre has a separate wing to look-after the special needs of cottage and house-hold industries as district from small industries.

AdministrationGeneral Manager is the head of the District Industries Centre. The post of General Manager is of Joint / Deputy Commissioner level. The General Manager has senior officers to assist him, such as Manager (Raw Material), Manager (Credit), Manage (Economic Investigation), Manager (Marketing) Industrial Promotion Officer(IPO) and Technical Officer cum Project Manager (PM)

ESTABLISHMENT

- All the services and support required by small entrepreneurs is provided under the single roof of the District Industries Centre. For example of Gujarat’s district Centre.

Till 1997gujrat has set up 23 district Industrial Centers , few of them are : Amreli, Bhavnagar, Kutch, Junagadh, Sabarkantha, Banaskantha, Panchmahal, Bharuch, Surendranagar, Mehsana, Valsad, Surat, Vadodara, Kheda, Ahmedabad, Rajkot ,Jamnagar ,Ganadhinagar etc.

MONITORING OF DICS - The functioning of DICs and their achievement is monitored by

Industries Commissioner, Meeting of General Managers are organized frequently to evaluate the performance and also help in resolving difficulties in implementation of different schemes. To resolve the problems of industries/industrialists, there are two types of committee at the district level. * District Industrial Executive Committee (DIEC)DIEC is constituted for solving industry related problems And promoting industrial growth. District Collector is the Chairman of this Committee and General Manager of DIC is the Member Secretary. The other members of the DIEC are President of District Panchayat, DDO, MP, MLAs, Prominent persons active in Industries in the district and members of all district level industries associations. * Single Window Industrial Follow up Team (SWIFT)Entrepreneurs face many difficulties when they start new industries. They have to deal with many government agencies and get many clearances. SWIFT helps them in guiding solving their problems at a single spot. This committee is working under the District Collector, General Manager of DIC is the Member Secretary and District Development Officer is Vice President of SWIFT. All industries related officers in the district are members of this committee.

OBJECTIVES OF DISTRICT INDUSTRIES CENTRE (DIC)

- The important objectives of DICs are as follow :

i. Accelerate the overall efforts for industrialization of the district.ii. Rural industrialization and development of rural industries and handicrafts.iii. Attainment of economic equality in various regions of the district.iv. Providing the benefit of the government schemes to the new entrepreneurs.v. Centralization of procedures required to start a new industrial unit and minimization- of the efforts and time required to obtain various permissions, licenses, registrations, subsidies etc.

FUNCTIONS OF DISTRICT INDUSTRIES CENTRE (DIC):

- i. Acts as the focal point of the industrialisation of the district.ii. Prepares the industrial profile of the district with respect to :iii. Statistics and information about existing industrial units in the district in the large, Medium, small as well as co-operative sectors.iv. Opportunity guidance to entrepreneurs.v. Compilation of information about local sources of raw materials and their availability.vi. Manpower assessment with respect to skilled, semi-skilled workers.vii. Assessment of availability of infrastructure facilities like quality testing, research and development, transport, prototype development, warehouse etc.viii. Organises entrepreneurship development training programs.ix. Provides information about various government schemes, subsidies, grants and assistance available from the other corporations set up for promotion of industries.x. Gives SSI registration.xi. Prepares techno-economic feasibility report.xii. Advices the entrepreneurs on investments.xiii. Acts as a link between the entrepreneurs and the lead bank of the district.

xiv. Implements government sponsored schemes for educated unemployed people like PMRY scheme, Jawahar Rojgar Yojana, etc.xv. Helps entrepreneurs in obtaining licenses from the Electricity Board, Water Supply Board, No Objection Certificates etc.xvi. Assist the entrepreneur to procure imported machinery and raw materials.xvii. Organise marketing outlets in liaison with other government agencies. RegistrationEM Part-I acknowledgementEM Part-II acknowledgementC.S.P.O.Lubricating, Oil, Grease LicenceRecommendationLand recommendation for N.A.agencies.

Incentive Scheme

SeminarsDistrict or Taluka LevelBuyer-Seller & ExhibitionOthers ActivitiesRecovery of Package Loan margin Money Loan & SubsidyWelfare of Salt Workers and Recovery of Royalty from Salt Workers.Follow up of Industrial Approvals.Follow up of units which have availed benefits under incentives schemesSelf Employment schemeRecommendation of loan applications under Vajpayee Bankable SchemeRecommendation of loan application under PMEGP SchemeManav Kalyan Yojana – Tool kits to artisans.

Co-operative Package Scheme

Package SchemeHandloom Development SchemeTraining & Production centreWoolen Carpet CentreWeaving SchemeRecovery of Loan & Share contribution of Co-operative SocietiesLiquidation of Industrial SocietyPreparation of Project ProfilesAudit of Industrial SocietyGramodyog Vikas KendraHastakala Mela