DEVELOPMENT BANKS

CONCEPT OF
DEVELOPMENT BANKS
Objectives , Functions , Operational And Promotional Activities.
OVERVIEW
Development banks are specialized financial institutions that play a
pivotal role in fostering economic growth and development, particularly
in emerging economies. Unlike commercial banks, which primarily
focus on short-term lending and profit maximization, development
banks are designed to provide long-term financing and technical
assistance to promote economic development.
PRIMARY OBJECTIVES OF DEVELOPMENT BANK
a) Promoting industrial growth

b) Developing backward regions

c) Creating employment opportunities

d) Encouraging technological advancement

e) Promoting entrepreneurship

f) Reviving sick industrial units

FUNCTION OF DEVELOPMENT BANKS

• Term lending

• Equity investment

• Underwriting securities

• Technical assistance

• Promoting savings and investment

• Refinancing
Operational Activities & Promotional Activities
• Operational Activities • Promotional Activities
i. Project appraisal and i. Industrial development
evaluation ii. Agricultural development
ii. Risk management iii. Entrepreneurship
iii. Capacity building development
iv. Infrastructure development iv. Regional development
 INTRODUCTION

The Government of India set up the SIDBI under a special Act of the Parliament in
October 1989.

SIDBI commenced its operations from April 2, 1990 with its head office in Lucknow.

SIDBI has been setup as a wholly owned subsidiary of IDBI

It is the apex institution which oversees, co-ordinates & further strengthens various
arrangements for providing financial and non- financial assistance to small-scale, tiny,
and cottage industries
 OBJECTIVES

Four basic objectives are set out in the SIDBI Charter.

They are:
• Financing
• Promotion
• Development
• Co-ordination
for orderly growth of industry in the small scale sector. The Charter has provided
SIDBI considerable flexibility in adopting appropriate operational strategies to
meet these objectives.
 FUNCTIONS

The important functions performed by of SIDBI include:

1. To initiate steps for technological up-gradation and modernization of
existing units.
2. To expand the channels for marketing the products of SSI sector in
domestic and international markets.
3. To promote employment oriented industries especially in semi-urban
areas to create more employment opportunities and thereby checking
migration of people to urban areas
 Product and Services OF SIDBI

• Direct Finances
• Bills Finance
• Venture Capital Fund Scheme
• Refinance
• Seed Money Scheme
• International Finance
• National Equity Fund Scheme
• Promotional & Development Activities
• Technology Upgradation & Modernization Fund Scheme {TDMF}
IFCI
 INTRODUCTION

IFCI was set-up in 1948 under IFCI act

IFCI was converted into a public limited company in the year 1993

Government holds 71.72% of shares in the company as on 30 September,2024

IFCI was the first development institution established after the independence
 OBJECTIVE

Medium and long-term financial assistance

Financing in Challenging Circumstances

Diversified Financial Services

Financing through Equity

 FUNCTIONS

Granting loans and advances

Loans in Rupees and Foreign currencies

Underwriting of Securities

Guaranteeing Loans

Guaranteeing Deferred Payments

 Organisation and Management

• Head office is located at New Delhi Established regional office in Mumbai,

Kolkata, Chennai, Hyderabad etc.....

• Branch office in Bengaluru, Pune, Jaipur etc...

• IFCI is managed by a Board of Directors, headed by a Chairman

• The Chairman is appointed by Government of India

 Other Activities
Soft loan assistance

Subsidized consultancy

Entrepreneur Development

Management Development

Industrial Development

Preferences in advancing loans

ICICI
 INTRODUCTION

ICICI Limited was established in 1955 by the World Bank.

ICICI Bank has grown from a development bank to a financial conglomerate and has
become one of the largest public financial institutions in India.

ICICI Bank has financed all the major sectors of the economy. covering 6,848 companies
and 16.851 projects. As of March 31,2000.

ICICI Bank has grown from a development bank to a financial conglomerate and has
become one of the largest public financial institutions in India.
 Products and Services

• Travelers Cheque
• Card (Credit cards. Debit cards, Travel cards. Corporate cards, Prepaid cards.
Business cards)
• Loan (Home loan. Personal loan, Two Wheeler loan, Car loan)
• Investment
• Insurance
• NRI Banking
• Deposit
• Business Banking
• Personal Banking
 Future Growth & Prospects

Strategy to comprehensively cover an identified rural geography with branches.

Branches at major agricultural markets.

Franchisees, MFI & corporate partners.

Multi-product suite for catering to various customer segment.

Savings and investment products

 IDBI
(Industrial Development Bank
of India)
About IDBI
• Industrial Development bank of India ,was
established in 1964 by act of Parliament
• It’s headquarter is in Mumbai
• It is India’s 10th largest bank in the world in terms of
reach,with 3350 ATMs,1853 branches, including one
overseas branch at Dubai, ands 1382 centers.
• It is one of 27 commercial banks owned by
Governement of India
Subsidiaries
The following are the subsidiaries of IDBI.
•Small industries development bank of India (SIDBI).
•IDBI bank Ltd.
•IDBI Capital Market Services Ltd.
•IDBI Assets Management Company.

Roles of IDBI
Co-ordinates the activities of other development banks and terms
financing institutions in the capital market of the country.
•Direct assistance.
•Indirect assistance.
Timeline of IDBI
IDBI was constituted under IDBI Act 1964 and came on being July
1964
01,2004.

It was on felt need and commercial prudence ,it was

2004
decided to transform IDBI into a Bank.

2006 The United Western Bank(UWB),a satara private based sector bank was amalgamated
with IDBI.The merger came into effect on October 03,2004.

To truly capture its widened business functions,name of the Bank

2008
was changed to IDBI Bank Ltd w.e.f. from May 07,2008.

2011 Two wholly owned subsidiary of IDBI Bank Ltd, IDBI Home
Finance ltd. And IDBI Gilts were amalgamated with IDBI Bank Ltd.

2019 The bank was categorized as a Pvt Sector Bank for

regulatory purposes by RBI w.e.f 21 January 2019
Subsidiaries
The following are the subsidiaries of IDBI.
•Small industries development bank of India (SIDBI).
•IDBI bank Ltd.
•IDBI Capital Market Services Ltd.
•IDBI Assets Management Company.

Roles of IDBI
Co-ordinates the activities of other development banks and terms
financing institutions in the capital market of the country.
•Direct assistance.
•Indirect assistance.
Functions of IDBI Bank
Financial Institution Coordination: Capital Market Promotion: IDBI plays a
•Oversight: IDBI oversees the activities of vital role in promoting the development
other development banks and financial of India's capital markets. This includes
institutions in India. This ensures that these facilitating the issuance of securities,
institutions are adhering to regulatory providing advisory services to issuers,
guidelines and promoting sustainable and enhancing market liquidity.
economic growth.

Capacity Building: IDBI Infrastructure Financing: IDBI Venture Capital and Private
provides technical assistance provides financial assistance Equity: IDBI supports the growth
and training to other financial for the development of of innovative businesses through
institutions to enhance their infrastructure projects, such venture capital and private equity
capabilities and efficiency. This as power plants, investments.
helps to strengthen the overall transportation networks, and
financial system. communication systems.
Key Difference from other Development
Banks
Commercial Banking Operations: While other development banks may
primarily focus on providing financial assistance and promoting
development, IDBI Bank also operates as a commercial bank.

Capital Market Activities: IDBI Bank is actively involved in capital

market activities, such as underwriting securities, providing advisory
services, and participating in debt markets.

Target Audience: IDBI primarily caters to large industrial enterprises,

while SIDBI targets small-scale industries and entrepreneurs.
 About IRBI
• IRBI stands for the “Industrial Reconstruction Bank of India.” The government
changed the Industrial Reconstruction Corporation of India (IRCI) into the
Industrial Reconstruction Bank of India (IRBI) in 1984. IRBI took over from IRCI in
March 1985. IRBI was a primary reconstruction body, promoting industrial
growth and solving industrial issues.

• The IRBI provided help to medium-sized, large, small, and very small sector
enterprises. Additionally, it provided help through advising, sales,
reconstruction, and merchant banking. IRBI has unconstrained power to take
any action necessary to end industrial health.

• RBI was a primary reconstruction body, promoting industrial

growth and solving industrial issues.
History IRBI
• The formation of IRBI happened in the year 1971 with the aim of helping failing
industries. Its reconstruction happened. Further, the new name came as Industrial
Investment Bank of India (IIBI). But, by the late 2010s, IIBI lost its relevance due to the
emerging new generational asset reconstruction firms.
• Further, it could not find any buyer for the takeover because there were no appealing
assets and a lack of networking. The appointment of chairman of the Allahabad Bank
of Kolkata Branch happened to bring the system of IIBI back to better conditions. But,
the government decided to close the operation of the IIBI due to the non-viability of
the functioning of the Bank.
• The bank had a 200-crore rupee authorized capital, of which 50 crore rupees were the
initial paid-up capital. The bank had the authority to raise more funds by borrowing
from the Reserve Bank of India (RBI) and other organizations.
Functions of IRBI
There are many functions that IRBI performs. Some of the important functions laid in
the statute:

Firstly, to provide financial aid to struggling industrial units.

Secondly, to provide banks with advising services relating to unhealthy units, like default,
unauthorized fund diversion, and partner disputes.

Thirdly, to launch a leasing company Under the leasing business model (A corporation purchases a
product and then rents it to a customer for an ongoing fee)

Fourthly, to provide managerial and technical help to ill industrial units.

Fifthly, securing help from other financial institutions and governmental bodies to help struggling
industrial units recover and thrive, and,

Sixthly, to provide commercial banking services for merger, reconstruction, and consolidation.
Current State of IRBI
Like other institutions engaged in the revival of industries, the IRBI was to serve as
the primary credit and reconstruction agency for industrial revival and coordinate
the efforts of other organizations.

The IRBI had the authority to assume control of aided sick industrial units and create
plans for rebuilding.

IRBI sanctioned a total of Rs. 148.9 crores of help during the financial year 1986-
1987. Further, it also disbursed to industrial units Rs. 946 crores by way of term loans
for essential capital expenditure relating to, expansion, etc.

The IRBI announced Rs. 897 crores of sanctions during the financial year 1995-96. In
addition to this, the cumulative sanctions by the IRBI amounted to Rs. 3,521 crores.
Moreover, The IRBI did a disbursement of Rs. 2,404 crores during that year.
THE INDUSTRIAL RECONSTRUCTION BANK
(TRANSFER OF UNDERTAKINGS
AND REPEAL) ACT, 1997
The Industrial Reconstruction Bank (Transfer of Undertakings and Repeal) Act, 1997, was
enacted by the Government of India to facilitate the transfer of certain undertakings of the
Industrial Reconstruction Bank of India (IRBI) to other financial institutions and to repeal the IRBI
Act, 1971.
Key provisions of the Act:
•Transfer of Undertakings: The Act authorized the transfer of specified undertakings of IRBI to
other financial institutions, such as IDBI (Industrial Development Bank of India) and SIDBI (Small
Industries Development Bank of India). These transfers were aimed at consolidating the
functions of these institutions and streamlining the financial sector.
•Repeal of IRBI Act: The Act repealed the Industrial Reconstruction Bank Act, 1971, which had
established IRBI. This effectively dissolved IRBI as a separate entity.
•Transitional Arrangements: The Act provided for transitional arrangements to ensure a
smooth transfer of assets, liabilities, and employees of IRBI to the transferee institutions.
 STATE DEVELOPMENT BANKS
State Development Banks (SDBs) are financial institutions set up by
governments to support economic development in specific regions or
sectors. They primarily focus on providing long-term financing for projects
that contribute to economic growth, infrastructure development, and
social welfare.
Key Features of State Development Banks
Public Ownership: SDBs are typically owned and operated by government entities,
either at the national or state level. This public ownership aligns their objectives with
broader economic and social goals rather than profit maximization.
Long-term Financing :SDBs provide long-term loans, often with lower interest rates than
commercial banks. This makes them suitable for financing large infrastructure projects,
industrial development, and social initiatives .
Focus on Economic Development :SDBs aim to promote economic development by
funding projects that may not attract private sector investment due to perceived risks or
lower profitability. They play a crucial role in funding areas like transportation, energy,
education, and healthcare.
Support for Specific Sectors: Many SDBs focus on key sectors such as agriculture,
housing, and SMEs. They may offer tailored financial products and services designed to
meet the unique needs of these sectors.
EXAMPLE: 1. Small Industries Development Bank of India (SIDBI),1990
2.Industrial Development Bank of India (IDBI),1964
 STATE FINANCIAL CORPORATION

State Financial Corporations (SFCs) in India are specialized financial

institutions set up by state governments to provide financial assistance to
small and medium-sized enterprises (SMEs) and promote industrial
development within their respective states. Established under the State
Financial Corporation Act, 1951, SFCs play a crucial role in enhancing the
industrial landscape of the country, particularly in the regions that lack
sufficient access to capital
 Key Features of State Financial Corporations

State-Level Focus :SFCs operate at the state level, with each corporation tailored to
meet the specific financial needs of industries and businesses within that state.
Financial Assistance: They provide various forms of financial support, including term
loans, working capital loans, equity participation, and project financing to SMEs and
other enterprises.
Promotion of Entrepreneurship: SFCs actively promote entrepreneurship by
providing funding for new business ventures, expansions, and modernization of
existing units .
Support for Infrastructure Development:Besides supporting industries, many SFCs
also finance infrastructure projects that contribute to the overall economic
development of the state
EXAMPLE: 1.Maharashtra State Financial Corporation (MSFC),1964
2.Gujarat State Financial Corporation (GSFC),1968
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