Various Types of Development Banks in India
In this section, we shall learn more about the different types of development banks in India. These include:
- SIDBI (Small Industries Development Bank of India)
- EXIM (Export-Import Bank of India)
- NABARD (National Bank for Agriculture & Rural Development)
- NHB (National Housing Bank)
- IFCI (Industrial Finance Corporation of India)
- IDBI (Industrial Development Bank of India)
Below, let us see in detail about all the above-listed banks in terms of their functions and objectives.
SIDBI
The Small Industries Development Bank of India (SIDBI) was set up in 1990 under an Act of Parliament. It was a wholly-owned subsidiary of the Industrial Development Bank of India. Presently, SIDBI’s ownership is held by 33 government of India-owned/ controlled institutions. SIDBI is headquartered in Lucknow.
SIDBI Functions:
- To take initiatives for technical upgradation and modernization of the existing units.
- To expand the channels for marketing the small-scale industry products in both domestic as well as international markets.
- To promote employment-generating industries, particularly in the semi-urban areas for creating more employment opportunities.
- To keep a check on the migration of the people to urban areas.
NABARD
The is the prime development bank in India. Under the special act by the parliament, the NABARD was set up on 12th July 1982.
Its main focus is to uplift rural India by increasing the credit flow for the promotion of the agriculture and non-farm sector. NABARD is headquartered in Bombay (Maharashtra). It is considered as the apex bank of the country, which takes care of the cottage industry, small and village industries, and other rural establishments.
Role:
- To undertake to monitor and evaluating projects it has been refinancing
- Refinancing the financial institutions that finance the rural sector
- Regulating the institutions that provide financial assistance to the rural economy
- Providing training facilities to the institutions assisting the rural development
- Regulating the cooperative banks and the Regional Rural Banks (RRBs) in India
EXIM Bank
The Export-Import Bank of India (EXIM Bank) is a financial institution created by the Export-Import Bank of India Act of 1981. It is a public sector financial institution. The main aim of the EXIM Bank is to finance the Indian exports that generate foreign exchange for the country. It also extends term loans for foreign trade.
The EXIM Bank is a statutory corporation wholly owned by the government of India. It was established on 01st January 1982 with an aim to finance, facilitate, and promote foreign trade in India.
Functions:
- To finance imports and exports of goods and or services in India as well as in the developing countries in the world.
- To provide a lease for exports and imports of machinery and equipment
- To finance joint ventures in the foreign countries
- To undertake limited merchant banking operations like the issue of shares, bonds, stocks, debentures, etc. of the Indian companies involved in the international trade.
- To provide technical, financial, and administrative assistance to businesses that carry out export and import.
National Housing Bank
The National Housing Bank (NHB) is a state-owned bank and regulatory authority in India established under section 6 of the National Housing Bank Act of 1987. It was created on 08th July 1988. The NHB is headquartered in New Delhi.
The NHB is responsible for regulating and re-financing social housing activities including research, etc. It is owned by the Reserve Bank of India and was established to promote private real estate acquisition. The institution further aims to promote inclusive expansion with stability in the housing finance sector.
Functions
One of the major activities of the NHB includes extending financial assistance to various eligible bodies in the housing sector through:
Refinance: The NHB extends refinancing to various primary lending firms like scheduled banks, housing finance companies, cooperative sector bodies, etc.
Direct Finance: NHB also offers direct finance for integrated land development and shelter projects of public agencies in respect of land development and shelter projects, housing infrastructure projects, etc.
IFCI
The IFCI (Industrial Finance Corporation of India) was the first specialized financial institution to provide term finance to large businesses in India. It was set up under the Industrial Finance Corporation Act (1948) on 01st July 1948.
Objectives of IFCI
The primary objective of the IFCI is to provide long and medium-term financial offerings to large-scale businesses. It especially offers its services when ordinary bank accommodation does not suit the undertaking or the finance cannot be raised in a profitable manner from the issue of shares.
Functions of IFCI
- Setting up a new industrial undertaking
- Expansion and/ or diversification of existing industrial business
- Renovation and modernization of existing businesses
- Meeting the working capital needs of the industries, with some exceptions
IDBI
The Industrial Development Bank of India, popularly known as IDBI, came into existence as a Development Institution under the IDBI Act of 1964. It is headquartered in Bombay, Maharashtra.
The IDBI is regarded as a public financial institution as per the Companies Act 1956. It continued as DPI till 2004 when it was converted into a banking organization. The Industrial Development Bank of India Act of 2003 was passed to convert the DPI into a bank.
Under the name of the Industrial Development Bank of India Ltd., a new company was incorporated as a government company under the Companies Act on 27th September 2004. Thus, w.e.f. 01st October 2004, it came to be known as IDBI Ltd. it works as a bank in terms of the Repeal Act.
The IDBI Bank Ltd. was finally merged with IDBI Ltd. and was known as IDBI Ltd. with effect from 02nd April 2005. It is a public sector bank as the government of India owns more than 70% shareholding of the bank.
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