DEVELOPMENT BANKS

MEANING

Development Banks are institution which undertakes to perform banking functions as well as
development functions. In short, development banks are development oriented banks. They provide
medium and long term finance to the industrial and agricultural sector; for both private and public
sector.

Banking functions include providing medium and long term capital for economic development
projects, investment, guaranteeing loans, underwriting of issue of debentures and shares and
financial contract both within and outside a country.

Development functions include overcoming shortage of viable projects, development of business

skills and fostering capital market.

Development bank is also a promotional agency which promotes, encourages and stimulates
entrepreneurial environment and development spirit among dormant and fledging entrepreneurs.

Development Financial Institutions are different from Commercial Banks in the sense that they do
not mobilize savings from the people but invest their own resources in a productive manner.

OBJECTIVES OF DEVELOPMENT BANKS

1. The main objective is to serve as an agent of development in various sectors of the economy
namely, industry, agriculture and international trade.
2. Development Bank aims at promoting industrial growth by providing funds to the industrial
sector to start new business venture, expansion and diversification of business in new sector.
These funds are utilized to achieve several objectives that lead to accelerate industries and
economic growth.
3. To assist the central and state government in planning and thus achieving its economic policies.
As these institutions were set up under the strong control of the Central and State Governments,
they serve as the tool of the government in achieving its economic objectives.
4. To serve as a promotional agency which promotes, encourages and stimulates entrepreneurial
environment and development spirit by providing a number of facilities, funds and incentives
among dormant and fledging entrepreneurs.
5. To serve as an agent for filling the credit gaps which arises out of absence of capital market,
absence of adequate facilities for financing industries and other market imperfections.
6. To help in maintaining regionally balanced economic growth;