Page 169 - DCOM304_INDIAN_FINANCIAL_SYSTEM

Indian Financial System

Notes The above mentioned policy initiatives were undertaken by the RBI for strengthening the
regulation and supervision of select all India financial institutions in the context of their financial
performance, the market conditions for resource mobilization and increasing competition from
banks.

Term Loans from Development Banks

Development Finance Institutions (DFIs) or development banks starting with the Industrial
Finance Corporation of India and the State Finance Corporation to assist the promotion and
financing of fixed assets of industrial units have been in existence since 1948. Now, at the all
India level, there are the Industrial Development Bank of India, Industrial Investment Bank of
India Ltd. (IIBI), Industrial Development Finance Company Ltd. and Small Industries
Development Bank of India. There are specialized institutions, IVCT, ICICI Venture and TFCT.
At the state level, there are State Financial Corporations (SFCs) and State Industrial Development
Corporations. Apart from DFIs, there are All-India-Investment Institutions, like the Unit Trust
of India, Life Insurance Corporations of India and General Insurance Corporation of India and
its subsidiaries. All these institutions, DFIs (excluding SFCs) and investment institutions together
sanctioned ` 42,485 crores and dispersed ` 25.942 crores in 2004-05 to industrial units. In the case
of underwriting and direct subscription of shares and debentures, sanctions amounted to ` 8,192
crores and disbursements ` 5,637 crores in 2004-05. Loans sanctioned amounted ` 33,280 crore
and disbursements ` 19,448 crores. The resource flows of five all India financial institutions in
2004-05 were sanctions ` 32,094 and disbursements ` 16,907 crores. Outstanding borrowings of
all five All-India Financial Institutions amounted to ` 30,574 crore. The CRAR of all the AIFIs,
except IFCI and IIBI remained above regulatory minimum in 2003-04. The resources raised by
IDFC and SIDBI among the five all-India Financial Institutions amounted ` 6,617 crores in 2004-
05.

8.7 Development Financial Institutions

8.7.1 Industrial Development Bank of India (IDBI)

The Industrial Development Bank of India (IDBI) which was established in 1964 under an Act of
Parliament is the principal financial institution for providing credit and other facilities for
development of industry coordinating working of institutions engaged in financing, promoting
or developing industrial units and assisting development of such institutions. IDBI has been
providing direct financial assistance to large and medium industrial units and also helping
small and medium industrial concerns, (the small industries sector has been transferred to Small
Industries Development Bank) through banks and state level financial institutions. On July 29,
2004 IBDI was transformed into IDBI Ltd., a company under the Companies Act and a scheduled
bank.

Notes The purpose of setting up IDBI was to propel the wheels of industrial sector to
achieve maximum growth by eliminating the gaps in the capital market and supplying
the sinews of development to all the financial agencies engaged in this work. Keeping this
purpose in mind the Bank set the objectives of providing financial as well as non-financial
support at reasonable cost to all the deserving projects belonging to industries of national
importance and spread over different regions of the country.

164 LOVELY PROFESSIONAL UNIVERSITY