Development Banks | Economic Institutions | Economies

Development Banks

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Development Banks are the creation of World – War II. Development Banks & Finance corporations are the synonymous. UNO definition; o Developments Banks “an institutions concern primarily with long term capital” o Finance Corporation “as an institutions concern primarily with equity capital and fostering and managing specific companies as well as providing financial support.

Evolution of development banks in India may be studied under the following three heads. a) Private Initiative o Numbers of private banks were set- up in Punjab during the Swadeshi Movement (1906-13).Like HB, PPB, Lahore Bank Ext. o These banks were motivated to finance those institutions which were having Indian touch in operation. o Most of the banks failed during the financial crisis 1913-15. o Post World War I period in India was a boom and large number of companies was floated. o Industrial bank became a fashion of the day during ( 1917-23) o TIB(1917),IIB(1919),MIB(1920),SBFC(1921). o TIB was the largest bank having Rs 12 crores capital and 11 branches, o These all bank failed because;  Inexperience management.  Improper lending.  Unwise investment policy  Absence of proper Diversification

b) State Initiative o May 1916 industrial commission was set-up under the chairmanship of Sir T.H. Holland. o Recommendations of the commission were:

 Special Financial Institutions should be established for long terms financial requirements for
industries.

 The model of industrial bank of Japan should be used for India.  For this purpose appointment of expert committee to go in to detail.
o o GOI appointed an external capital committee under the chairmanship of Sri Basil Blackett in 1924. GOI appointed central banking inquiry committee under the chairmanship of Sri B.N.Mitra  Specialize Financial Institution should be established.  But the foreign expert having different view Is there only one All India Industrial Corporation should be established. Provincial Industrial Corporation should be established for each province. Central banking inquiry committee recommended the formation of provincial industrial corporation.

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The first decade of working IDBI showed that it had established itself on sound line and it would be able to discharge its apex role even more effectively. modernization.D. 1945 Statement of industrial policy was issued. No action was taken place in setting up the financial institutions in India. expansion. It is pioneer in many aspect such as  Underwriting of Issue. In Feb. ICICI was register under the Company Act on January 5. 1948 the bill was finally passed and on March 28. In July 1. On Jan 28.Desmukh RBI presents a bill for an Industrial Finance Corporation n India.  Direct Investment in shares  Capitalization of Foreign currency Loan. IDBI provided loans for the establishment of new projects as well as diversification. The Main objective of the bank was making medium and long terms credit more readily available o industrial concern in India. It was established with the main objective of serving as an apex financial institution to coordinate the functions of all the other financial institutions. At the same time the committee did not work out the detail for their constitutions. technology up gradation for existing industrial enterprise. . 1955. Under the guidance of C.o o It did not rule out the formation of All India Corporation. it receive the assent of Governor – General. IDBI (Industrial Development Bank of India) o o o o o o It was set up in 1964 as a subsidiary of RBI under the IDBI Act 1964 and was made wholly-owned GOI undertaking in 1975. o c) o o o o o o Development After Independence IFCI Planning and Development Department was set up in 1944 in India. ICICI (Industrial Credit and Investment Corporation of India) o o o o Industrial Finance Corporation Bill in 1948 recognizes that All India Corporation would not able to cater the capital need of small and medium industrial concern. It came in operation on April 2 1990. The State Finance Corporation was set up by passing State Finance Corporation Act in 1951. The main objective was enlarge role as a financial institutions for industrial financing SIDBI (Small industrial Development Bank of India) o o A wholly owned subsidiary of IDBI. 1948 the Industrial Financial Corporation of India was established. functions and working limitations. 1976 it was restructure and separated from the control of RBI. On April 21.

The main role of IDFC is infrastructure finance . It was set up on the recommendation of the export group on Commercialization of Dr Rakesh Mohan. This group was recommended there was need of specialize infrastructure finance in India. 1997.IDFC (Industrial Development Finance Corporation) o o o o It was incorporated on Jan 30.

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