Industrial / Development Banks

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,

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. To supply loans by way of refinance. 4. To help small industries ,cottage industries and also artisans.(Craft Industries) 5. To achieve overall rural development.

Contd.
Short term assistance long term assistance

Supervisory Role:
It has a responsibility of conducting inspections of SCBs, DCCBS and Regional Rural Banks (RRBs) under the provision of the banking Regulation Act 1949.

Functions
It serves as a refinancing institution for all kinds of production and investment credit to agriculture, small scale industries, handicrafts and rural crafts etc. Short term and long term credit to State Cooperative Banks, RRBs and other financial institutions approved by RBI It grants long term loans to state Govt. to help Cooperative Credit Societies Provides long term loans to any institute (approved by the Central Govt.) that contributes to the share capital of any institute concerned with the agriculture and rural development 5

Functions
Coordinates the activities of Central and State Govts., The Planning Commission and others entrusted with the development of small scale industries, village and

cottage industries and rural craft etc.

Maintains a research and development fund to promote research to in agriculture and and design rural new
6

development

formulate

programmes and activities

IFCI
Established in July, 1948 (under a special act) To finance the large scale industries. To cope up with the change (i.e. Modernization)

Resources
Earlier RBI, Central Bank & other public sector banks and financial institute. It can issue Bonds and Debentures up to certain limit in the open market. It can borrow from RBI and also from World Bank (for foreign currency) It also accepts deposits from public.
8

Functions
It grants loans and advances to industrial concerns (both in rupee and foreign currency). Not more than 25 yrs. Grants loans to Public Limited Co. (long and medium term to manufacturing, mining, shipping and generation & distribution of electricity) Works as a guarantor of industrial concerns. As an underwriter for stocks, shares, bonds debentures of industrial undertakings. It subscribes to the shares of any concern. Supplements Commercial banks in providing loans. 9

IFCI a sick company

Causes: It is used by the politicians and Finance Ministry of India to finance many doubtful and financially weak enterprises. Lent extensively to Textile mill sector that soon become sick. Heavy accumulation of NPAs

10

Steps
It was converted into Public Limited Company under the Indian Companies Act, 1956. Given freedom to function as a Public Limited Company from July, 1993. Finally Govt. of India agreed to merge it with PNB in January, 2004.

11

 IDBI (1964) (Industrial Development Bank of India)

12

 The Industrial Development Bank of India (IDBI) was established on 1 July 1964 under an Act of Parliament as a wholly owned subsidiary of the Reserve Bank of India. In 16 February 1976, the ownership of IDBI was transferred to the Government of India and it was made the principal financial institution for coordinating the activities of institutions engaged in financing, promoting and developing industry in the country.
13

Functions
Direct Assistance: Project Loans Soft Loans Technical Development Fund Loans Equipment Finance Loans Direct Subscription to and Underwriting of industrial securities (Shares & debentures)
(Project loans more than Rs. 3 crores on the basis of consortium with other financial institutions and commercial banks)
14

Functions
Indirect Assistance: refinance of industrial loans granted by SFCs, SIDCs, Commercial Banks, Cooperative Banks and RRBs rediscounting of bills arising out of sale of indigenous machinery on deferred payment basis seed capital assistance to new enterprises through SFCs and SIDCs

15

Functions
General Assistance: Promotional Activities (like research, surveys and techno-economic studies) Technical and administration assistance for promotion, management and expansion Helping industrialization by planning, promoting & developing new industries

16

Functioning of IDBI
Direct Assistance Assistance to backward areas Refinance of Industrial Loans Assistance to small scale units Balanced Regional Development Soft loan Schemes Foreign Currency Requirement
17

Reconstructing the IDBI

Bureaucrats in Finance Ministry wanted direct control on IDBI To make IDBI independent Not an effective development bank Unable to accelerate the process of industrialization RBI and IDBI having common BoDs Govt. and Dy. Governors were incapable of shouldering the responsibilities cast on them The management of RBI and IDBI made them slaves of procedures
18