Page 25 - DCOM208_BANKING_THEORY_AND_PRACTICE

Banking Theory and Practice

Notes banks in India have launched special programmes for intensive development of
industrially least developed areas, commonly referred to as the No-industry Districts
(NID’s) which do not have any large-scale or medium-scale industrial project. Institutions
have initiated industrial potential surveys in these areas.

Promotion of New Entrepreneurs: Development banks in India have also achieved a
remarkable success in creating a new class of entrepreneurs and spreading the industrial
culture to newer areas and weaker sections of the society. Special capital and seed Capital
schemes have been introduced to provide equity type of assistance to new and technically
skilled entrepreneurs who lack financial resources of their own even to provide promoter’s
contribution in view of long-term benefits to the society from the emergence of a new
class of entrepreneurs. Development banks have been actively involved in the
entrepreneurship development programmes and in establishing a set of institutions which
identify and train potential entrepreneurs.

Again, to make available a package of services encompassing preparation of feasibility of
reports, project reports, technical and management consultancy, etc. at a reasonable cost,
institutions have sponsored a chain of 16 Technical Consultancy organizations covering
practically the entire country. Promotional and development functions are as important
to institutions as the financing role. The promotional activities like carrying out industrial
potential surveys, identification of potential entrepreneurs, conducting entrepreneurship
development programmes and providing technical consultancy services have contributed
in a significant manner to the process of industrialization and effective utilization of
industrial finance by industry. IDBI has created a special technical assistance fund to support
its various promotional activities. Over the years, the scope of promotional activities has
expanded to include programmes for up gradation of skill of State level development
banks and other industrial promotion agencies, conducting special studies on important
issues concerning industrial development, encouraging voluntary agencies in
implementing their programmes for the uplift of rural areas, village an cottage industries,
artisans and other weaker sections of the society.
Impact on Corporate Culture: The project appraisal and follow-up of assisted projects by
institutions through various instruments, such as project monitoring and report of nominee
directors on the Boards of directors of assisted units, have been mutually rewarding.
Through monitoring of assisted projects, the institutions have been able to better appreciate
the problems faced by industrial units. It also has been possible for the corporate
managements to recognize the fact that interests of the assisted units and those of institutions
do not conflict but coincide. Over the years, institutions have succeeded in infusing a sense
of constructive partnership with the corporate sector. Institutions have been going through
a continuous process of learning by doing and are effecting improvements in their systems
and procedures on the basis of their cumulative experience.

The promoters of industrial projects now develop ideas into specific projects more carefully
and prepare project reports more systematically. Institutions insist on more critical
evaluation of technical feasibility demand factors, marketing strategies and project location
and on application of modern techniques of discounted cash flow, internal rate of return,
economic rate of return etc., in assessing the prospects of a project. This has produced a
favourable impact on the process of decision-making in the corporate seeking financial
assistance from institutions. In fact, such impact is not continued to projects assisted by
them but also spreads over to projects financed by the corporate sector on its own.
The association of institutions in the management of corporate bodies has considerably
facilitated the process of progressive professionalism of the corporate management.
Institutions have been able to convince the corporate managements to appropriately
reorient their organizational structure, personal policies and planning and control systems.

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