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Overview of development banksOverview of development banks
and investment institutions inand investment institutions in IIndiandiaFinancial institution
Genesis of financial institutions in India
Objectives of financial institutionsPerformance of FI in India: An evaluation
Challenges of FI in India
Promotional role of Development Banks in INDIA
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Financial institutionFinancial institution
y The term financial institution includes all
kinds of organizations which intermediate
and facilitate financial transactions of both
individual and corporate customers.
y Thus financial institutions refers to all
kinds of financial systems which facilitate
financial transaction in financial market.
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Genesis of financial institutions inGenesis of financial institutions in
IndiaIndiay The need for financial institution in India was feltvery strongly immediately after the attainment ofindependence to fill the gaps in the capitalmarket.
y The Indian capital market at the time was illequipped for providing for the needs of long termindustrial finance.
y The central banking inquiry committee of 1929
also pinpointed the gap.y Towards the end of second word war attention
once again came to be focused on the problem ofindustrial finance in India.
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ContdContd....
y It received the attention of our govt. immediatelyafter liberation of the country.
y IFC(industrial finance corporation) was the firstspecial institution established in India 1948 with aview to making medium and long term capital.
y After this the SFC (state financial corporation)Act was passed in 1951.
y While the IFC limits financial helps to larger
industrial concerns the SFC are intended toextend financial help to smaller enterprises.
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ContdContd..
y In order to fill the gap another institution calledICICI(industrial credit and investment corporation ofIndia) was set up in Jan. 1955.
y Another milestone in the field of institutionalizationof the capital market was the formation of LIC.
y The IDBI (industrial development bank of India) wastherefore set up- it was wholly owned subsidiary ofthe RBI and under its direct control.
y in 1990 SIDBI(small industrial development bank ofIndia) was setup as a subsidiary of IDBI.
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y Three more specialised institutions were
organised
1. RCTC(risk and technology finance
corporation ltd.)
2. TDICI(technology development and
information company of India ltd.)
3. TFCI(tourism financial corporation ofIndia)
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Objectives of financial institutionsObjectives of financial institutions
1. To provide term lending facilities;
2. To subscribe to shares and debentures;
3. To provide indirect financial support to business
enterprises through guarantees, discounting andother facilities;
4. To provide lease financing;
5. To provide banking and non-banking financialfacilities;
6. To furnish managerial, technical andadministrative services to the Indian industry
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Performance of FI in India: AnPerformance of FI in India: An
evaluationevaluation
1. Foundation phase(1948-1958)
2. Expansion phase(1959-1968)
3. Growth with qualitative thrusts
phase(1968-1978)4. Intensified growth with diversification
phase(1978-1988)
5. Unprecedented proliferation with cosmicdiversification and productinnovativeness phase(1988-1998 andonwards)
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phase 1phase 1
This phase witnessed the
formation of four all Indian
financial corporation-IFCI,ICICI,LIC and RFCI and a
few financial corporartion at
state level.
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Phase 2Phase 2
y This period could be regarded as a
decade of growth with stability.
y The existing financial instititutions not
only increased lending business but also
expanded their business to assume to
role or investor , underwriter and
guarantor and made subscriptions to theshares and debentures of industrial
organizations.
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PhasePhase--33
y Tidy growth in operations of the extant
F.I. with qualitative ad innovative thrusts
resulting into the change in basic
character of the institutions to cope withdevelopment needs of the country were
the redeeming features of the decade.
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PhasePhase--44
y This decade can be categorised as a
decade of intensified growth with
diversifications in view of the substantial
expansion business of the financialinstitutions and concenetric
diversification.
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PhasePhase--55
y There has been metamorphic
transformation in the system of working
of FI in India both quantitative and
qualitative aspects of there operations.
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Challenges of FI in IndiaChallenges of FI in India
1. Lack of qualified personnel;
2. Lack of investor awareness;
3. Lack of specialization;
4. Lack of recent data availability;
5. Monopolistic market structure;
6.Dominance of development banks inindustrial financing;
7. Imprudent financial practices
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Development banksDevelopment banksFinancial institutions are those institutions who
provides funds to new and upcoming businesses by
providing equity capital and/or loan capital and also
provide technical and managerial advise.
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Functions
Economic
Growth
Providestechnical
help
Respondsto requests
forassistance
Promotesand
facilitatesspeculation
Regionaldevelopmen
t
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Promotional role ofPromotional role of
Development Banks in INDIADevelopment Banks in INDIA
1. Growth potential surveys of backward areas
y Financial institutions initiated industrial potential surveys ofbackward areas for the purpose of identifying specific projectideas for implementation in the next five to ten years in the
light of their resource endowments, demand potentials andthe availability of infrastructural facilities.
y These surveys are carried out by team of officials withexperience in project scrutiny.
y In the year 1982 government of India announced a list of 83districts in the country which have no medium or large scaleunits, indicated need for special attention.
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2. Project follow up As a result of surveys several project ideas was generated and
was identified. These ideas was further screened and developedfor further implementation. IDBI commissioned feasibility studies
for certain project ideas.
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3. Formation of the Inter Institutional Groups (IIGs)
With a view to give concrete shape to project ideas, an informal
forum of all the agencies concerned with industrial development
was constituted.The twin objectives of IIGs are: To help accelerate the process of industrial development in
state with particular emphasis on less developed areas.
To evolve suitable strategies for industrial development within
the framework of national and state policies and local
requirement.
4.Establishment of Technical Consultancy
Organization(TCOs)
So far 18 TCOs have been established, there main functions are: To identify industrial potential.
To prepare project profiles, feasibility reports.
To identify potential entrepreneurs.
To undertake market research.
To undertake project supervision.
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6.Entrepreneurship development
All India development banks mainly TCOs for drawing up and
conducting EDPs so as to cater the needs of entrepreneurs fromsmall and medium sector.
Another step in this direction is to provide support to
Entrepreneurship Development Institute Of India, set up as a
national resource organization with the basic objective of training
EDP trainers, providing resource inputs, carrying out research anddevelopmental programmes.
7. Support to Science and Technology parks(STEPs)
In order to encourage entrepreneurs to adopt sophisticated
technology with the help of academic and research institutions, to
encourage new class of science and technology entrepreneurs
and create technology culture in industry.eg-Birla institute of
technology STEPs, C.C.shroff Institute STEPs.etc
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8. Technological Development and Up gradation.
IDBI has also assisted in identification and adaptation of suitable
modern technologies. Significant among them are projects relatedto solar cookers, projects for development and testing prototype
plant for generating electricity from tidal waves in Orissa.
9. Promotional SchemesAssistance and guidance in modernization, marketing assistance,
control of pollution, improving productivity of material and human
resources.
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10. Other promotional assistance
IDBI provides support on sustaining basis to established
accredited voluntary agencies(VAs)working for physically/sociallydisadvantaged sections of the society in various parts of the
country with a view to generated self/wage employment in
industrial sector.
IDBI has sponsored conferences/seminars by extending assistance
up to Rs 56.2 laks.
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