Page 165 - DCOM304_INDIAN_FINANCIAL_SYSTEM
P. 165

Indian Financial System




                    Notes          At the  state level,  another type  of  institution,  namely, the  State  Industrial  Development
                                   Corporation (SIDC) was established in the sixties to promote medium and large scale industrial
                                   units in the respective states. The SIDCs promoted a number of projects in the joint sector and
                                   assisted in setting up industrial units. In recognition of the crucial role played by them in the
                                   promotion  of industries in different states, the  SIDCs were made eligible for IDBI refinance
                                   facilities in 1976. Thus, they became an integral part of the development banking system of the
                                   country.

                                   The State Small Industries Development Corporations (SSIDCs) were also established to cater to
                                   the requirements of the industry at the state level. They helped in setting  up and managing
                                   industrial estates, supplying of raw materials, running common service facilities, and supplying
                                   machinery on hire-purchase basis.
                                   By the early sixties, a plethora of financial corporations catering to the financial needs of a
                                   variety of industries had come into existence. However, the need for an effective mechanism to
                                   coordinate  and integrate the activities of the different financial institutions was increasingly
                                   felt. Furthermore, many gigantic projects of national importance were held up as these financial
                                   institutions were not able to supply the necessary capital in view of their own limited resources.
                                   Hence, the establishment of a financial institution with a substantially large amount of capital
                                   resource and capable of functioning independently, unhindered by statutory rigidities, became
                                   inevitable.
                                   The Industrial Development Bank of India (IDBI) was set up in 1964 as an apex institution to
                                   establish an appropriate  working relationship  among financial institutions, coordinate  their
                                   activities, and build a pattern of inter-institutional cooperation to effectively meet the changing
                                   needs of the industrial structure. IDBI was set up as a wholly owned subsidiary of the Reserve
                                   Bank of India. The IFCI became a subsidiary of the IDBI so that it might play an enlarged role. In
                                   February 1976, the IDBI was restructured and separated from the control of the RBI.

                                   An important feature of industrial finance in the country is the participation of major investment
                                   institutions in consortium with other all India financial institutions. The Unit Trust of India
                                   (UTI), established in 1964, the Life Insurance Corporation of India (LIC), established in 1956, and
                                   the General Insurance Corporation of India (GIC), established in 1973, work closely with other
                                   all India financial institutions to meet the financial requirements of the industrial sector.

                                   Specialized institutions  were also  created to  cater to  the needs of the rehabilitation of sick
                                   industrial units, export finance, and agriculture and rural development. In 1971, the Industrial
                                   Reconstruction Corporation of India Limited (IRCI) was' set up for the rehabilitation of sick
                                   units. In January 1982, the Export-Import Bank of India (EXIM Bank) was set up. The export
                                   finance operations of the IDBI were transferred to the EXIM Bank with effect from March 1, 1982.
                                   With a view to strengthening the  institutional network catering to the credit  needs of the
                                   agricultural  and rural  sectors, the  National Bank  for Agriculture  and Rural  Development
                                   (NABARD) was set up in July 1982.
                                   The country is being served by 57 financial institutions, comprising 11 institutions at the national
                                   level and 46 institutions at the state level. These financial institutions have a wide network of
                                   branches and are supported by technical consultancy organisations with IDBI acting as the apex
                                   institution for coordinating their diverse financing and promotional activities. Their strategies,
                                   policies, and industrial promotional efforts sub-serve the national objectives of rapid industrial
                                   growth, balanced regional development, creation of a new class of entrepreneurs, and providing
                                   self employment opportunities.
                                   The national level institutions, known as All India Financial Institutions (AIFIs), comprise six
                                   All India Development Banks (AIDBs), two specialised financial institutions (SFIs) and three
                                   investment institutions. The AIDBs are IDBI, IFCI, ICICI, Industrial Investment Bank of India
                                   Limited (IIBI), Infrastructure Development Finance Company Limited (IDFC) and SIDBI.




          160                               LOVELY PROFESSIONAL UNIVERSITY
   160   161   162   163   164   165   166   167   168   169   170