Page 29 - DMGT303_BANKING_AND_INSURANCE

Banking and Insurance

Notes establishment of a number of financial institution at the centre as well as in States and provides
credit facilities to them. These institutions are:

1. Industrial Finance Corporation of India
2. National Industrial Credit (Long Term Operations) Funds
3. Industrial Development Bank of India (IDBI)

4. Industrial Credit and Investment Corporation of India (ICICI)
5. Industrial Reconstruction Bank of India (IRBI)
6. State Financial Corporation (SFCs)

7. Small Industries Development Bank of India (SIDBI)
8. Exim Bank
9. National Housing Bank (NHB)

The RBI has set many other institutions also in the category of industrial development banks.
They are discussed in detail in the chapter “Development Banking”.

Differences Between Central Bank and Other Banks

The Central Bank differs from other financial institutions.
Firstly, the people who are more or less closely connected with other organs of government
control it.
Second, it does not exist to secure the maximum profit, which is the principal aim of a commercial
bank.
Third, the Central Bank must have a special relation with the commercial banks whereby it can
influence the functioning and operations of these institutions in the implementation of the
government’s economic policy.

Fourth, the functions of the Central Bank and the obligations resting upon it are of a very special
character, calling for skill, experience and judgment of a kind different from those required
from a commercial bank.
Thus, the Central Bank is an organ of the government, which influences the working of financial
institutions of the country.

2.4 Nature and Functions of Central Bank

The Central Bank is the apex monetary institution in the money market. It acts as the monetary
authority of the country, and serves as the government bank as well as the bankers’ bank. It
undertakes the major financial operations of the government. It influences the behaviour of
financial institutions to ensure that they support the economic policy of government.

The main function of the Central Bank is to regulate the monetary mechanism comprising of the
currency, banking and credit systems. For this purpose, the bank is given wide powers. Another
important function of the central bank is to conduct the banking and financial operations of the
government. Besides, it discharges certain other functions. These functions are performed with
the service motive and not for making profits.

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