Some major

Financial Institutions
By: Manvi Mehra
2018mba012
NABARD
National Bank for Agricultural and Rural Development.

Objective:
NABARD is an apex Development Bank authorised for providing and regulating credit
and other facilities for the promotion and development of agriculture, small-scale
industries, cottage and village industries, handicrafts and other rural crafts and other
allied economic activities in rural areas with a view to promote integrated rural
development and prosperity and for matters connected there with.
History:
• Reserve Bank of India (RBI), constituted a committee (Shivaraman committee) to
review the arrangements for institutional credit for agriculture and rural
development (CRAFICARD) on 30 March 1979, under the Chairmanship of Shri
B.Sivaraman, former member of Planning Commission, Government of India to
review the arrangements for institutional credit for agriculture and rural
development. NABARD was established with an initial capital of 100 cr., on 12 July
1982 by a special act of parliament 1981, by transferring the agricultural credit
functions of RBI and refinance functions of the then Agricultural Refinance and
Development Corporation (ARDC). NABARD replaced the Agricultural Credit
Department (ACD) and Rural Planning and Credit Cell (RPCC) of Reserve Bank of
India, and Agricultural Refinance and Development Corporation (ARDC)
• NABARD’s activities are governed by a Board of Directors. The Board of Directors
are appointed by the Government of India in harmony with NABARD Act 1981. It
has its headquarters in Mumbai. Government of India holds 99% stake and RBI
holds 1% (initially 72.5%) stake in NABARD.
 Functions of NABARD
•Credit Functions:
• Framing policy and guidelines for rural financial institutions.
• Providing credit facilities to issuing organizations
• Monitoring the flow of ground level rural credit.
• Preparation of credit plans annually for all districts for identification of credit potential.
•Development Functions:
• Help cooperative banks and Regional Rural Banks to prepare development actions plans for themselves.
• Help Regional Rural Banks and the sponsor banks to enter into MoUs with state governments and cooperative banks to improve the affairs of the
Regional Rural Banks.
• Monitor implementation of development action plans of banks.
• Provide financial support for the training institutes of cooperative banks, commercial banks and Regional Rural Banks.
• Provide financial assistance to cooperative banks for building improved management information system, computerization of operations and
development of human resources.
•Supervisory Functions:
• Undertakes inspection of Regional Rural Banks (RRBs) and Cooperative Banks (other than urban/primary cooperative banks) under the provisions of
Banking Regulation Act, 1949.
• Undertakes inspection of State Cooperative Agriculture and Rural Development Banks (SCARDBs) and apex non- credit cooperative societies on a
voluntary basis.
• Provides recommendations to Reserve Bank of India on issue of licenses to Cooperative Banks, opening of new branches by State Cooperative Banks
and Regional Rural Banks (RRBs).
• Undertakes portfolio inspections besides off-site surveillance of Cooperative Banks and Regional Rural Banks (RRBs).
Small Industries Development Bank of India (SIDBI)

The SIDBI was established as a wholly owned subsidiary of Industrial Development Bank
of India (IDBI) under a special Act of the Parliament 1988 and started its operations on
April 2, 1990. It took over the responsibility of administering Small Industries
Development Fund and National Equity Fund which were earlier administered by IDBI. It
is the Principal Financial Institution for the Promotion, Financing and Development of
the Micro, Small and Medium Enterprise (MSME) sector and for Co-ordination of the
functions of the institutions engaged in similar activities. It is managed by a team of 10
Board of Directors. The authorised capital of the Bank is Rs. 1000 crore and the Paid up
capital is Rs. 450 crore.
• Modes of Finance
• SIDBI provides direct, indirect and micro finance facilities.
• Direct Finance: In the form of Term Loan Assistance, Working Capital Assistance,
Support against Receivables, Foreign Currency Loan, Scheme of Energy Saving for
MSME sector, equity support etc.
• Indirect Finance: The Indirect assistance in the form of Refinance is provided to
Primary Lending Institutions (PLIs), comprising banks, State Level Financial Institutions,
etc. having a wide network of branches all over the country. The main objective of
Refinance Scheme is to increase the resource position of PLIs which would ultimately
facilitate the flow of credit to MSME sector.
• Micro Finance: SIDBI provides micro finance i.e. credit to small entrepreneurs and
businessmen for establish their business.
Functions of SIDBI
• SIDBI refinances loans extended by the primary lending institutions to small scale industrial units, and also
provides resources support to them.
• SIDBI discounts and rediscounts bills arising from sale of machinery to or manufactured by industrial units in the
small-scale sector.
• To expand the channels for marketing the products of Small-Scale Industries (SSI) sector in domestic and
international markets.
• It provides services like leasing, factoring etc. to industrial concerns in the small-scale sector.
• To promote employment-oriented industries especially in semi-urban areas to create more employment
opportunities and thereby checking migration of people to urban areas.
• To initiate steps for technological up-gradation and modernization of existing units.
• SIDBI facilitates timely flow of credit for both term loans and working capital to SSI in collaboration with
commercial banks.
• SIDBI Co-Promotes state level venture funds in association with respective state government.
• It grants direct assistance and refinance loans extended by primary lending institutions for financing exports of
products manufactured by small scale units.
 SIDC

The full form of SIDC states industrial development corporation. The main objective of establishing SIDC was to increase the process
of industrialization in India. Also, it is considered as one of a financial institution to be established in India.
• Functions
• The SIDC is set up by the various states governments. Also, these governments fully own the corporation. SIDC is more than a
financial institution. Thus, they act as an instrument to speed up the process of industrialization in the respective states.
• So, to achieve this process, they provide loans, guarantees, subscription of shares, etc to the companies. Besides loans to the
respective industries, SIDC undertakes various promotional programs like project identification, techno-economic surveys,
preparation of feasibility studies, and entrepreneurial training.
• Also, they provide financial assistance by means like loans, underwriting or direct subscriptions to debentures and shares,
guarantees, etc. Furthermore, they promote joint sector projects along with private promoters. In these types of projects, SIDC
has a 26% share, private co-promoter takes 25%, and the rest goes to the investing public.
• Also, SIDC takes the construction of sheds, development of industrial areas, and provision of various infrastructure facilities. Also,
they take care of the development of various new growth centers. They also undertake various incentive schemes for state
governments. For refinancing, IDBI helps it. They provide it using the term loans.
• Furthermore, SIDC uses bonds to borrow the amount. They also accept the deposits to fund their resources.
IDBI

• Industrial Development Bank of India (IDBI) established under Industrial

Development Bank of India Act, 1964, is the principal financial institution for
providing credit and other facilities for developing industries and assisting
development institutions.
• Till 1976, IDBI was a subsidiary bank of RBI. In 1976 it was separated from RBI and
the ownership was transferred to Government of India. IDBI is the tenth largest bank
in the world in terms of development. The National Stock Exchange (NSE), the
National Securities Depository Services Ltd. (NSDL), Stock Holding Corporation of
India (SHCIL) are some of the Institutions which has been built by IDBI.
Functions of IDBI:
• The main functions of IDBI are discussed below:
• (i) To provide financial assistance to industrial enterprises.
• (ii) To promote institutions engaged in industrial development.
• (iii) To provide technical and administrative assistance for promotion management or
expansion of industry.
• (iv) To undertake market and investment research and surveys in connection with
development of industry.
Industrial Finance Corporation of India (IFCI)

HISTORY
• Initially established in 1948, the Industrial Finance Corporation
of India was converted into a public company on 1 July 1993 and is
now known as Industrial Finance Corporation of India Ltd. The main
aim of setting up this development bank was to provide assistance to
the industrial sector to meet their medium and long-term financial
needs.
• The IDBI, scheduled banks, insurance sector, co-op banks are some of
the major stakeholders of the IFCI. The authorized capital of the IFCI is
250 crores and the Central Government can increase this as and when
they wish to do so.

OBJECTIVE: the first financial institute the government established after

independence. The main aim of the incorporation of IFCI was to provide
long-term finance to the manufacturing and industrial sector of the
country. Let us study more about IFCI.
Functions of the IFCI

• First, the main function of the IFCI is to provide medium and long-term loans and advances to
industrial and manufacturing concerns. It looks into a few factors before granting any loans. They
study the importance of the industry in our national economy, the overall cost of the project, and
finally the quality of the product and the management of the company. If the above factors have
satisfactory results the IFCI will grant the loan.
• The Industrial Finance Corporation of India can also subscribe to the debentures that these
companies' issue in the market.
• The IFCI also provides guarantees to the loans taken by such industrial companies.
• When a company is issuing shares or debentures the Industrial Finance Corporation of India can
choose to underwrite such securities.
• It also guarantees deferred payments in case of loans taken from foreign banks in foreign currency.
• There is a special department the Merchant Banking & Allied Services Department. They look after
matters such as capital restructuring, mergers, amalgamations, loan syndication, etc.
Export Credit and Guarantee Corporation (ECGC)

• The Export Credit and Guarantee Corporation were set up as a Government

undertaking in 1964 on the recommendation of a study group on export finance.
It works on ‘no profit no loss’ basis.
• The main functions of the corporation are to provide insurance to export risks
and to finance exports. E.C.G.C. helps exporters by furnishing guarantees to the
financial banks in order to enable them to provide sufficient credit facilities.
• It further insures the exporter’s credit risks against both commercial and political
conditions and guarantees payment to the exporters. The corporation provides
various types of insurance covers to suit the varying needs of customers.
• These may be classified into four groups:
• 1. Standard policies which protect the exporters against overseas credit risks.
• 2. Services and construction works policies.
• 3. Financial guarantees.
• 4.Special policies.
Infrastructure Development Finance
Company (IDFC)

• is a finance company that offers finance and advisory services for

infrastructure projects, asset management and investment
banking. The company has now entered the banking industry
with its venture, IDFC Bank
• The Reserve Bank of India (RBI) gave an approval in April 2014 to
two entities among 25 banking aspirants. The non-banking
finance company, IDFC was one of the companies to get the
approval. On 23 July 2015, the firm received banking licence
from the RBI.
• The bank commenced its operations from 1 October 2015
becoming the 91st scheduled commercial bank in India. It is also
the second entrant in the banking sector after a decade. IDFC
began its operations with 23 branches to be set-up in Delhi,
Madhya Pradesh and Mumbai; with 15 branches in three districts
of Madhya Pradesh.
FUNCTIONS

• The bank plans to grow the business of Bharat Banking, a rural unit to Rs. 15,000 crore in
five years.
• The personal and business banking which focuses on retail, small and medium enterprises
(SMEs) and self-employed professionals will begin its operations from January 2016.
• The bank’s aim is to increase the customer base from current 400 corporate customers to
15 million in next five years.
• The bank also aims to get 10-15% net profit growth and will be relying on technology for
customer acquisition instead of opening branches in India.
Non-banking financial companies
(NBFC)

• Non-banking financial companies (NBFC) are companies

registered under the Companies Act, 1956. They are
responsible for providing financial services but are not
regulated by a national or international governing body
and do not hold a full-fledged license for conducting
operations.
• The financial services offered by NBFCs include
disbursement of loans and advances, acquisition of
stocks, shares or bonds etc. They do not accept demand
drafts and are not a part of payment/settlement system
unlike banks. NBFCs are more commonly known in the
forms of microloan organisations, insurance companies,
investment houses and more.
FUNCTIONS:

1. Greater Employment Opportunities and Standard of Living

• NBFCs help attain the objective of macroeconomic policies of creating more jobs in the country by promoting SMEs and private industries
through lending them loans. This increase in new businesses consequently raises the demand for manpower and creates employment.
Furthermore, the Purchasing Power Parity (PPP) of people rises and so does their standard of living.
2. Strengthening of Financial Market
• The financial market relies heavily on Non-banking financial institutions for raising capital. The start-ups and small-sized businesses are
dependent on funds offered by NBFCs and also in order to maintain liquidity. For an effective functioning and balance in the financial
market, NBFCs play a significant role.
3. Supplying long-term credits
• Unlike the regular banks, NBFCs extend long-term credits to infrastructure, commerce and trade companies. The traditional banks expect
timely, schedules and short-term repayment of loans that may not always suit the requirements of these industries. NBFCs, on the other
hand, fund large projects and so promotes economic growth. They also allow industries to participate in equity.
4. Mobilisation of Funds
• Non-banking financial companies help in rotation of resources, asset distribution and regulation of income to shape the economic
development. They enable converting saving into investments and thus helps in the mobilisation of funds/resources in the economy.
5. Growth of National Income
• As NBFCs aim to build capital for several industries – private and otherwise – they aid in accumulating a capital stock for the country. This
directly adds on to the national income and results in the progression of Gross Domestic Product (GDP).
Deposit Insurance and Credit
Guarantee Corporation (DICGC)

DICGC - Deposit Insurance and Credit Guarantee

Corporation. DICGC is a statutory body established –
15 July 1978,It is a subsidiary of RBI since 1962.Its
control authority is governed by RBI. It was established
under DICGC Act , 1961 But it was introduced in India
in 1962.In 1962 , India was the 2nd Country to
Introduced with this scheme. First Country who
introduced DICGC is USA in 1933.Its prime purpose is
to provide insurance of the deposited Money in all
banks. It provide insurance facility for Saving deposit ,
Fixed deposit , Recurring deposit up to a maximum
limit of 1 Lakh for each separate deposits in a bank.
Export-Import Bank of India (EXIM
Bank)

• Export-Import Bank of India (EXIM Bank) is a specialized financial institution, wholly

owned by Government of India, set up in 1982, for financing, facilitating and
promoting foreign trade of India. Including the share capital of ` 1,300 crore received
during the year from Government of India, the paid up capital as on March 31, 2015,
stood at ` 5,059 crore and the Net Worth stood at ` 9,902 crore. Profit after tax of the
Bank for the year 2014-15 amounted to ` 726 crore.
Functions of Exim Bank:
• The important functions of Exim Bank are as follows:
• (i) It provides direct financial assistance to exporters of plant, machinery and related
service in the form of medium-term credit.
• (ii) Underwriting the issue of shares, stocks, bonds, debentures of any company
engaged in exports.
• (iii) It provides rediscount of export bills for a period not exceeding 90 days against
short-term usance export bills discounted by commercial banks.
• (iv) The bank gives overseas buyers credit to foreign importers for import of Indian
capital goods and related services.
• (v) Developing and financing export oriented industries.
THE STATE FINANCE CORPORTAION

• In any of the country, financial system plays an important role in hosting up the
economy. India has established a strong financial system, which helps in economic
growth of a country. It is only the financial system, a major element, without which
no economic activity can smoothly and effectively be conducted
• OBJECTIVE: Promotion, Development & Financing Industries and Service Sector
Enterprises in Micro, Small and Medium sectors in National Capital Territory of
Delhi and Union Territory of Chandigarh. Besides this, some other objectives of
DFCs are: 1. To establish uniformity in regional industries. 2. To bring efficiency in
regional industrial units. 3. To provide incentives to new industries. 4. To provide
finance to small scale, medium sized & cottage industries in state. 5. To develop
regional financial resources
• Functions of SFCs
• Financial Assistance to Small Units
• Guaranteeing Loans
• Subscription and Underwriting
• Guarantee for deferred Payments
• Acting as Agent of Central and State Governments
• Capital
 Regional Rural Bank (RRBs)

Introduction:

Regional Rural Banks are Indian Scheduled Commercial Banks operating at regional level in different States of India. They have been created with a view of serving primarily the
rural areas of India with basic banking and financial services.

History:

The Regional Rural Banks were established on the recommendations of Narsimha Committee on Rural Credit. The committee was of the view that RRBs would be much better
suited than the commercial banks or Co-Operative Banks in meeting the needs of rural areas. Considering the recommendations of the committee the Government of India
passed Regional Rural Banks Act 1976. After passing the Act within a year at least 25 RRBs were established in different parts of India.

The Objectives of Regional Rural Banks:

i. Bridging the credit gaps in rural areas.

ii. To develop such measures which could restrict the outflow of rural deposits to urban areas.

iii. To reduce regional imbalances and increase rural employment generation activities.

Function:

RRBs grant loans to small and marginal farmers, Agricultural laborer, Co-operative societies and to individuals including artisans, small entrepreneurs and persons of small
means.