FINANCIAL INSTITUTIONS FOR THE INDUSTRIES
INDUSTRIAL DEVELOPMENT BANK OF INDIA :
IDBI is the apex banking institution in the field of long-term industrial finance. Set up in 1964 as a wholly owned subsidiary of the Reserve Bank, IDBI was delineated from the Reserve Bank on 16th February. 1976. when its entire share capital was transferred to the Central Govemment. Consequently. its role was also enlarged to enable it to function as the principal financial institution for coordinating the functions and activities of all India term-lending institutions and to SOI11e extent the public sector banks.
The assistance provided by IDBI falls in two categories, Le., (i) direct assistance to large ahd medium industries. and (ii) indirect assistance. Major portion of the direct assistance is provided in the form of Proje.ct loans to industries. Besides. IDBI also pro¬vides. assistance by way of underwriting and direct subscription to the shares/debentures of indHstrial undertakings. IDBI also provides soft loans for the modemisation of all industries. In 1984. IDBI introduced Equipment Finance Scheme. wherein foreign currency loans are made available to industrial con¬cems for import of capital goods and equiFiment not related to any specific project.
Indirect assistance is provided by the Bank to tiny. small and medium enterprises. through other financial institutions in a number of ways. namely:
. (i) by way of refinance of industrial loans granted by State FinanciaI Corporations. State Indus¬trial Development Corporations (SIDCs). Commercial Banks. Co-operative Banks and Regional Rural Banks.
(ii) re-discounting of bills arising out of sale of indigenous machinery on deferred payment basis. and (iii) seed capital assistance granted to new entre¬preneurs generally through SFCs and SIDCs.
IDBI also subscribes to the shares and bonds of SFCs, SIDCs and National Small Industries Corpo¬ration Ltd.
The share capital of IDBI stood at Rs 673 crore as at March 31, 2000. IDBI was wholly owned by the Govemment of India till 1995-96 when it issued 17.31 lakh shares to the public at a premium of Rs 120 per share. The share of the Govemment of India in its share capital was thus reduced to 72.14 per cent. The rest of the share capital is held by financial institu¬tions. insurance companies. banks. domestic compa¬nies and foreign institutional investors. Individuals and others own over 15% of its share capital.
The IDBI raises the bulk of its funds from (i) mar¬ket borrowings by way of bonds, ~d (ii) the borrow¬ings out of National Industrial Credit (Long-Term Op¬erations) Funds of the Reserve Bank. IDBI also takes short-term advances from the Reserve Bank against lodgement of usance bills. During recent years. IDBI has also raised resources in foreign currencies by way of loans and private placement of its bonds in foreign capital markets. Such resources are utilised for financing imports of capital goods and services required by the assisted projects.
IDBI has established a number of subsidiaries. which include the Small Industries Development Bank of India, IDBI Bank Ltd .. IDBI Capital Market Ser¬vices Ltd.
IDBI has co-sponsored a number of financial institutions as well. e.g .. National Stock Exchange of India, Over the Counter Exchange of India. Discount and Finance House of India Ltd.
INDUSTRIAL FINANCE CORPORATION OF INDIA LIMITED :
The Industrial Finance Corporation of India (IFCI) was the first development bank established in India in the year 1948. Its primary objective was to assist industry especially when accommodation from tradi¬tional sources of finance for the creation of fixed as¬sets was felt inadequate or when recourse to capital market was difficult. In 1993 it was converted into a joint stock company to enable it to function with more flexibility. IFCI provides assistance to the indus¬trial concems in various ways which are broadly clas-sified into the following three categories :
(A) Project Finance : Under project finance assistance is provided in the following ways :
(1) Lone;-term loans - both in rupees and foreign currencies.
(2) underwriting of equity. preference and deben¬ture issues,
(3) subscribing to equity. preference and deben¬ture issues.
(4) guaranteeing the deferred payments in respect of machinery imported from abroad or purchased in India, cind
(5) guaranteeing of loans raised in foreign currency from foreign financial institutions.
Finan.cial assistance may be availed of by any lim¬ited company- in the public, private or joint sector¬or by a co-operative society incorporated in India, which is engaged or proposes to be engaged in the specified industrial activities. Such financial assis-tance is available for the setting up of new industrial projects and also for the expansion, diversific.ation, renovation or modernisation of existing ones. The Cor¬poration also provides financial assistance on concessional terms for setting up industrial projects in industrially less developed districts in the States/ Union Territories notified by the Central Government.
(B) Financial Services : Under this category are included the merchant banking and allied services ren¬dered by the IFCl. Besides, financial assistance, not tied to any project, provided by IFCI to industrial units is also included in this category. !FCI, thus, pro¬vides Equipment Financing, Equipment Leasing, Equipment Procurement, Equipment Credit, Instal¬ment Credit, Suppliers' Credit and Buyers' Credit.
(C) Promotional Services cover a wide range of services provided by IFCI : Important amongst them are funds support for technical consultancy, risk capital, venture capital, technology development, tourism development and finance, entrepreneurship devel¬opment, development of science and technology etc.
Resources: The paid-up capital of IFCI (Rs: 353 crores as on 31st March, 1996) has been subscribed by the Industrial Development Bank of India and by scheduled banks, co-operative banks, insurance concems, investment trusts, etc,
The Corporation raises its resources by way of :
(i) issue of bonds in the market,
(ii) borrowing from Industrial Development Bank of India and the Central Govemment, and other financial tnstitutions/organisations and
(iii) foreign credits secured from foreign financial institutions and borrowings in the intemational capi¬tal markets.
(5) guaranteeing of loans raised in foreign currency from foreign financial institutions.
Finan.cial assistance may be availed of by any lim¬ited company- in the public, private or joint sector¬or by a co-operative society incorporated in India, which is engaged or proposes to be engaged in the specified industrial activities. Such financial assis-tance is available for the setting up of new industrial projects and also for the expansion, diversific.ation, renovation or modernisation of existing ones. The Cor¬poration also provides financial assistance on concessional terms for setting up industrial projects in industrially less developed districts in the States/ Union Territories notified by the Central Government.
(B) Financial Services : Under this category are included the merchant banking and allied services ren¬dered by the IFCl. Besides, financial assistance, not tied to any project, provided by IFCI to industrial units is also included in this category. !FCI, thus, pro¬vides Equipment Financing, Equipment Leasing, Equipment Procurement, Equipment Credit, Instal¬ment Credit, Suppliers' Credit and Buyers' Credit.
(C) Promotional Services cover a wide range of services provided by IFCI : Important amongst them are funds support for technical consultancy, risk capital, venture capital, technology development, tourism development and finance, entrepreneurship devel¬opment, development of science and technology etc.
Resources: The paid-up capital of IFCI (Rs: 353 crores as on 31st March, 1996) has been subscribed by the Industrial Development Bank of India and by scheduled banks, co-operative banks, insurance concems, investment trusts, etc,
The Corporation raises its resources by way of :
(i) issue of bonds in the market,
(ii) borrowing from Industrial Development Bank of India and the Central Govemment, and other financial tnstitutions/organisations and
(iii) foreign credits secured from foreign financial institutions and borrowings in the intemational capi¬tal markets.
