ED unit 4
Institutional finance:
A. Industrial Development Bank of India (IDBI):
The Industrial Development Bank of India (IDBI) was established in 1964 by an Act of
Parliament.
It was set up to provide financial assistance for the development of industries in India.
Initially, it worked under the Reserve Bank of India and later became an autonomous
institution.
Objectives of IDBI
1. To promote industrial development in the country.
2. To provide financial assistance to industries.
3. To encourage industries in backward and rural areas.
4. To support small and medium enterprises.
5. To provide technical and managerial guidance.
6. To promote new entrepreneurs.
7. To provide refinance to other financial institutions.
8. To support modernization and expansion of industries.
9. To encourage export-oriented industries.
10. To help sick industries to recover.
Functions of Industrial Development Bank of India:
Direct Finance (Direct help to industries)
Gives project loans for new industries.
Underwrites shares and debentures of companies.
Provides soft loans to support weak units.
Gives technical development fund loans.
Provides equipment finance loans.
Indirect Finance (Help through other banks)
Refinances other development banks.
Rediscounts bills of industries.
Provides seed capital for new projects.
Special Assistance
Promotes Development Assistance Fund.
Provides loans under special schemes.
Gives grants for development work.
Conducts surveys for industrial growth.
, ED unit 4
General Assistance (Promotional support)
Helps in marketing activities.
Encourages investment promotion.
Supports research activities.
B. Industrial Finance Corporation of India (IFCI)
1. IFCI was established in 1948 under the IFCI Act.
2. It provides financial assistance to industrial units in India.
3. It gives rupee and foreign currency loans to industries.
4. It underwrites and subscribes to shares and debentures.
5. It provides equipment finance, leasing, and hire-purchase finance.
6. It offers merchant banking services like project report preparation and issue of
shares.
7. It gives consultancy to NRI investors and advice to sick industrial units.
8. It provides risk capital and venture capital for new industries.
9. IFCI raises funds through share capital, bonds, debentures, and borrowings.
10. Its shareholders include IDBI, banks, insurance companies, investment trusts, and co-
operative banks.
11. It runs promotional schemes like interest subsidy for women entrepreneurs.
12. It gives consultancy fee subsidy for marketing assistance to small-scale industries.
13. It encourages modernization of tiny and small-scale units.
14. It supports pollution control in small and medium industries.
15. It promotes research for industrial development.
16. It helps in setting up management development institutes for training.
17. IFCI’s lending encourages concentration of wealth and capital.
18. It follows a discriminatory policy against medium and small units.
19. There are delays in sanctioning and disbursing loans.
20. It fails to control defaulting borrowers properly.
21. Loans are sometimes not used for the intended purpose.
22. IFCI fails to take strict action against misuse of funds.
C. Industrial Credit and Investment Corporation of India (ICICI)
1. ICICI was set up in 1955 under the Companies Act.
2. It was started to provide financial assistance to industries in India.
3. Its main objective is to promote industrial growth, expansion, and modernization.
4. It encourages private sector participation in industrial development.
5. It provides direct loans to industrial units.
6. It gives loans in foreign currency for importing machinery and technology.
7. It undertakes underwriting of shares and debentures.
8. It provides guarantees to industries.
9. It subscribes to shares and debentures of companies.
10. It provides long-term loans to industries.
11. It offers foreign currency loans for industrial projects.
12. It gives venture capital assistance to new and risky projects.
13. It provides merchant banking services.
14. It gives technical and financial advice to industries.
Institutional finance:
A. Industrial Development Bank of India (IDBI):
The Industrial Development Bank of India (IDBI) was established in 1964 by an Act of
Parliament.
It was set up to provide financial assistance for the development of industries in India.
Initially, it worked under the Reserve Bank of India and later became an autonomous
institution.
Objectives of IDBI
1. To promote industrial development in the country.
2. To provide financial assistance to industries.
3. To encourage industries in backward and rural areas.
4. To support small and medium enterprises.
5. To provide technical and managerial guidance.
6. To promote new entrepreneurs.
7. To provide refinance to other financial institutions.
8. To support modernization and expansion of industries.
9. To encourage export-oriented industries.
10. To help sick industries to recover.
Functions of Industrial Development Bank of India:
Direct Finance (Direct help to industries)
Gives project loans for new industries.
Underwrites shares and debentures of companies.
Provides soft loans to support weak units.
Gives technical development fund loans.
Provides equipment finance loans.
Indirect Finance (Help through other banks)
Refinances other development banks.
Rediscounts bills of industries.
Provides seed capital for new projects.
Special Assistance
Promotes Development Assistance Fund.
Provides loans under special schemes.
Gives grants for development work.
Conducts surveys for industrial growth.
, ED unit 4
General Assistance (Promotional support)
Helps in marketing activities.
Encourages investment promotion.
Supports research activities.
B. Industrial Finance Corporation of India (IFCI)
1. IFCI was established in 1948 under the IFCI Act.
2. It provides financial assistance to industrial units in India.
3. It gives rupee and foreign currency loans to industries.
4. It underwrites and subscribes to shares and debentures.
5. It provides equipment finance, leasing, and hire-purchase finance.
6. It offers merchant banking services like project report preparation and issue of
shares.
7. It gives consultancy to NRI investors and advice to sick industrial units.
8. It provides risk capital and venture capital for new industries.
9. IFCI raises funds through share capital, bonds, debentures, and borrowings.
10. Its shareholders include IDBI, banks, insurance companies, investment trusts, and co-
operative banks.
11. It runs promotional schemes like interest subsidy for women entrepreneurs.
12. It gives consultancy fee subsidy for marketing assistance to small-scale industries.
13. It encourages modernization of tiny and small-scale units.
14. It supports pollution control in small and medium industries.
15. It promotes research for industrial development.
16. It helps in setting up management development institutes for training.
17. IFCI’s lending encourages concentration of wealth and capital.
18. It follows a discriminatory policy against medium and small units.
19. There are delays in sanctioning and disbursing loans.
20. It fails to control defaulting borrowers properly.
21. Loans are sometimes not used for the intended purpose.
22. IFCI fails to take strict action against misuse of funds.
C. Industrial Credit and Investment Corporation of India (ICICI)
1. ICICI was set up in 1955 under the Companies Act.
2. It was started to provide financial assistance to industries in India.
3. Its main objective is to promote industrial growth, expansion, and modernization.
4. It encourages private sector participation in industrial development.
5. It provides direct loans to industrial units.
6. It gives loans in foreign currency for importing machinery and technology.
7. It undertakes underwriting of shares and debentures.
8. It provides guarantees to industries.
9. It subscribes to shares and debentures of companies.
10. It provides long-term loans to industries.
11. It offers foreign currency loans for industrial projects.
12. It gives venture capital assistance to new and risky projects.
13. It provides merchant banking services.
14. It gives technical and financial advice to industries.
