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FINANCIAL

INSTITUTIONS
MEANING
Financial institutions provide means and
mechanism of transferring resources from
those who have an excess of income over
expenditure to those who can make
productive use for the same.
ROLE :
 Providing Funds
 Infrastructural Facilities
 Promotional Activities
 Development of Backward Areas
 Planned Development
 Accelerating Industrialization
 Employment Generation
TYPES :
Financial Institutions

Banks Non-Banking Financial Institutions

Organized Unorganized Organized Unorganised


Commercial Banks Indigenous Banks
Cooperative Banks Money Lenders Non-Banking
Financial Companies
Seths, Sahukars

Development Banks Specialized Financial Investment Institutions


Institutions LIC, GIC, UTI
1.All India Development Banks
IDBI, IFCI, ICICI, IDFC, Exim Bank, NABARD
SIDBI, IRCI (IIBL)
2. State Level Development Banks
SFC’s, SIDC’s
INDUSTRIAL
FINANCE CORPORATION
OF INDIA(IFCI)
IFCI :
Government of India came forward to set up the
Industrial Finance Corporation of India. (IFCI) in
July 1948 under a Special Act. The Industrial
Development Bank of India, scheduled banks,
insurance companies, investment trusts and co-
operative banks are the shareholders of IFCI.
The Government of India guaranteed the
repayment of capital and the payment of a
minimum annual dividend
MANAGEMENT :
The Corporation has 13 member Board of Directors.

Chairman : Appointed by Govt. of India after consulting IDBI.


12 Directors : Four are nominated by IDBI
Two by scheduled Banks
Two by Cooperative Banks
Two by other financial
Institutions
Two outside persons as Directors
(Expert in the Fields of Industry, Labour and
Economics)
Financial Resources :
1.Share Capital : The IFCI was set up with an authorised
capital of Rs.10 crores consisting of 20,000 shares of
Rs. 5,000 each. In March 2003 it was Rs. 1068 crores.

2.Bonds & Debentures : The bonds and debentures stood


at figure of Rs. 57.69 crores in 1971 and rose to Rs.
15366.5 crores as on March 31,2003.

3. Borrowings : Borrowings from IDBI and Govt. of India


were Rs. 975.6 crore and total assets Rs.22866 crore on
March 31,2003
Criterion for Investments :
Considerations while selecting a Financial Proposal :

 Importance of project for national economy.


 Employment-oriented and labour-intensive nature
 Export potential of a unit
 Projects located in backward areas
 Projects initiated by new entrepreneurs
 Projects which will help rural areas
 Projects which help in conserving energy
 Projects to be set up in a co-operative sector.
Industries Eligible Under Direct
Financing :
1. Limited companies incorporated in India, in private, public
or joint sector
2. Co-operative societies registered in India, engaged in the
activities related to:
i) Manufacture, preservation
ii) Shipping
iii) Mining
iv) Hotel Industry
v) Generation of Electricity
vi) Transport of Passengers or goods
vii) Maintenance, repair of machinery or vehicles
viii) Assembling, repairing or packing of articles
ix) Fishing
x) Providing special or technical knowledge
xi) Research and Development
Purpose of Direct Assistance :

Setting up of new industrial projects

Expansion of existing units or for


diversification

For renovation and modernisation


FUNCTIONS :

 FINANCIAL ASSISTANCE

 PROMOTIONAL ACTIVITIES
Financial Assistance :
i. Granting Loans
ii. Underwriting the issue of industrial securities
iii. Subscribing shares of public ltd. Companies
iv. Guaranteeing of deferred payments
v. Guaranteeing of loans
vi. Act as agent of the Central Bank
Promotional Activities :
i. Development of Backward Areas
ii. Promotional Schemes
iii. Subsidy for Adopting Indigenous Technology
iv. Meeting Cost of Market Studies
v. Meeting Cost of Feasibility Studies
vi. Promoting Small Scale and Ancillary
Industries.
vii. Revival of Sick Units
viii. Self-development and Self-employment
Scheme
IFCI & Industrial Finance :
1. Financial Assistance :

1970-71 : Rs. 32.3 crores


1995-96 : Rs. 6579.7 crores
2001-02 : Rs. 778.0 crores
2002-03 : Rs. 2035.1 crores (161.6% Increase)
Upto Mar 03 :-
Total Assistance Sanctioned : 45426.7 crores
Total disbursements : 44169.2 crores
2. Product-Wise Assistance :

1. Direct Finance
A. Project Finance
i) Loans : Rupee Loans, Foreign Currency
ii) Underwriting : Shares, Debentures
iii) Deferred payment guarantees
B. Non-Project Finance
i) Equipment Finance
ii) Corporate Loans
iii) Working Capital/short-term loans
iv) Equipment leasing

2. Direct Discounting
3. Loans to and investments in shares/bonds of FIs
3.Purpose-Wise Assistance :

S.No. Purpose Sanctions Disbursements


1. New
2. Expansion/diversification/acquisition
3. Rehabilitation
4. Modernisation /balancing equipment
5. Working Capital
6. Others
TOTAL
Sector-Wise Assistance :

Sr. No Sector Sanctions Disbursements

1. Public
2. Joint
3. Co-operative
4. Private
TOTAL