Page 95 - DMGT512_FINANCIAL_INSTITUTIONS_AND_SERVICES

Financial Institutions and Services

Notes 7.3 Industrial Finance Corporation of India (IFCI)

At the time of independence in 1947, India's capital market was relatively under-developed.
Although there was significant demand for new capital, there was a dearth of providers. Merchant
bankers and underwriting firms were almost non-existent. And commercial banks were not
equipped to provide long-term industrial finance in any significant manner.
It is against this backdrop that IFCI Ltd. emerged as the first development finance institution set
up in 1948 under the IFCI Act in order to pioneer long-term institutional credit to medium and
large industries. It aims to provide financial assistance to industry by way of rupee and foreign
currency loans, underwrites/subscribes the issue of stocks, shares, bonds and debentures of
industrial concerns, etc. It has also diversified its activities in the field of merchant banking,
syndication of loans, formulation of rehabilitation programmes, assignments relating to
amalgamations and mergers, etc.
By the early 1990s, it was recognized that there was need for greater flexibility to respond to the
changing financial system. It was also felt that IFCI should directly access the capital markets for
its funds needs. It is with this objective that the constitution of IFCI was changed in 1993 from a
statutory corporation to a company under the Indian Companies Act, 1956. Subsequently, the
name of the company was also changed to "IFCI Limited" with effect from October 1999.
IFCI has been able to achieve a financial turnaround with the consistent support and cooperation
of all its stakeholders and is now endeavouring to re-position itself.
In addition to its core competence in long term lending to industrial and infrastructure sectors,
IFCI aims to enhance its organizational value through better realization of its Non-performing
Assets (NPAs) and unlocking of value of its investment portfolio including unquoted investments
as well as real estate assets.
Focus

Until the establishment of ICICI in 1956 and IDBI in 1964, IFCI remained solely responsible for
implementation of the government's industrial policy initiatives. It made a significant
contribution to the modernization of Indian industry, export promotion, import substitution,
pollution control, energy conservation and generation through commercially viable and market-
friendly initiatives. Some sectors that have directly benefited from IFCI include:
1. Agro-based industry (textiles, paper, sugar)
2. Service industry (hotels, hospitals)
3. Basic industry (iron & steel, fertilizers, basic chemicals, cement)
4. Capital & intermediate goods industry (electronics, synthetic fibres, synthetic plastics,
miscellaneous chemicals) and Infrastructure (power generation, telecom services).
IFCI has played a key role in the development of cooperatives in the sugar and textile sectors,
besides acting as a nodal agency in both sectors. 371 cooperative societies in these sectors have
been assisted by IFCI.

IFCI has promoted Technical Consultancy Organizations (TCOs), primarily in less developed
states to provide necessary services to the promoters of small- and medium-sized industries in
collaboration with other banks and institutions.

IFCI has also provided assistance to self-employed youth and women entrepreneurs under its
Benevolent Reserve Fund (BRF) and the Interest Differential Fund (IDF).

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