Performance of Development Financial Institutions in India

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PERFORMANCE OF DEVELOPMENT FINANCIAL INSTITUTIONS IN INDIA

EVOLUTION:

After the end of World War-II there was great need for speedy industrial expansion in the whole world. Both winners and losers had to resurrect and to rebuild their economies from the ruins of war. Development Financial Institurions (DFI) were set up in almost all the countries of the world and the models were suited to their economic, social and cultural values.

Similarly in India there was scarcity of finance which was a big hurdle in way of industrial development. The means of providing finance for large scale industries were not adequate. Moreover new enterprises, projects in backward areas and the projects which by their very nature involve huge capital and the projects with long gestation periods owing to the nature of the technology or product sophistication found it difficult to mobilise funds. To cater to these kinds of projects for which adequate long term financing were required , the Government of India decided to set up a series of financial institutions to provide funds to the large industrial sector. These DFIs were set up on the model of “Industrial Bank Of Japan”.Also with the introduction of Five Year Plans the need for these kind of financial institutions was felt all the more.

INDUSTRIAL FINANCIAL INSTITUTIONS IN INDIA:

The major post-independence institutional innovations of relevance to long and medium term finance for the industry can be grouped as below:

National Level Industrial Development Banks
Industrial Development Bank of India (IDBI)
Industrial Finance Corporation of India (IFCI)
Industrial Credit and Investment Corpn. of India (ICICI)
Small Industries Development Bank of India (SIDBI)
Industrial Reconstruction Bank of India (IRBI)
Shipping Credit and Investment Company of India (SCICI)

Specialised Financial Institutions
Technology Development & Information Company of India Limited (TDICI) Risk Capital & Technology Finance Corporation Limited (RCTC) Tourism Finance Corporation of India (TFCI)

Investment Institutions
Unit Trust of India (UTI)
General Insurance Corporation of India (GIC)
Life Insurance Corporation of India (LIC)

State Corporations
State Industrial Development Corporations
State Finance Corporations

Over the years a well-knit structure of financial institutions has evolved in the country, which comprises 11 institutions at the national level and 46 at the State level. DFIs IN INDIA AND THEIR MAIN OBJECTIVES :

|Name of DFI |Year Established |Form of Organisation |Main Objectives | |IFCI |July 1948 |IFCI Act 1948 |Provide medium and long term credit to industrial concerns including | | | | |cooperatives which could not raise funds by capital issue or normal banking | |SFCs |1951 | |Provision of long and medium term financial assistance by way of term loans,| | | | |underwriting etc to small and medium scale units and rendering of | | | | |promotional services for entrepreneurs in these sectors | |ICICI |Jan 1955 |Public Limited Co. |For financing the foreign exchange component of industrial projects and for | | | | |promoting industrial enterprises in the private sector by way of term | | | | |financial assistance | |SIDCs |1960 | |Grant of financial assistance, direct...
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