Development banks are specialized financial institutions. They provide medium and long-term finance to the industrial and agricultural sector. They do term lending, investment in securities and other activities. They even promote saving and investment habit in the public.
The Narasingham committees aid to perform only the promotional and refinancing role. Specialized development financial institutions (DFIs) such as the IDBI, NABARD, NHB and SIDBI, etc., with majority ownership of the Reserve Bank, were set up to meet the long-term financing requirements of industry and agriculture.
The objective of development banks in the growth of the economy are:
The persons who have the capability of starting a business but does not have requisite help approach to financial institutions for help. These institutions help a large number of persons for taking up some industrial activity.
The promotional role of development banks is helpful in increasing the development of a country. They create a new class of entrepreneurs and help the weaker sections of society to be a part of industrial culture. With a view for a long term benefit to social development, banks have new capital schemes which provide financial assistance to the novice entrepreneurs. They help in covering the expense and manpower resources for undertaking the exercise of starting a new unit.
The development bank encourages rustic and provincial development. They give money to beginning organizations in reverse zones. Likewise, they help organizations which are in the venture in less-developed regions.
Financial institutions have helped both direct and indirect employment generation. They have employed many people in their offices. These institutions help in creating employment by financing new and existing industrial units.
The setting up of more industrial units will generate direct and indirect employment, make available goods and services in the country and help in increasing the standard of living. Financial institutions provide requisite financial, managerial, technical help for setting up new units.
Development banks provide funding for the development of the housing sector. It refinances banks and financial institutions which provide credit to the housing sector. It promotes and develops housing and financial institutions.
It organizes the working of all monetary establishments that give credit to farming and rural development. Development banks like the National Bank for Agriculture and Rural Development (NABARD) which give credit to the agriculture and furthermore for country advancement exercises.
It gives Overseas Buyers Credit to purchase Indian capital merchandise. Likewise, urges abroad banks to give account to the purchasers in their nation to purchase capital products from India.
Development banks help to resuscitate (fix) wiped out units. It encourages modernization, rebuilding, and broadening of wiped out units by giving credit and different administrations. The public authority of India (GOI) began the Industrial Investment Bank of India (IIBI) to help wipe out units. IIBI is the principal credit and recreation foundation for a restoration of wiped out units.
Industrial Finance Corporation of India (IFCI): this is for providing medium and long-term credit for the needs of industrial units.
Industrial Credit and Investment Corporation of India (ICICI): it promotes private industry concerns in the country and was set up as a private sector development bank.
Industrial Development Bank of India (IDBI): the IDBI’s it organizes the activities of other development banks and term-financing institutions
Industrial Reconstruction Bank of India (IRBI)’: it provides financial assistance as well as to revive and revitalize sick industrial units in both of the sectors.
Small Industries Development Bank of India (SIDBI): With a view to ensuring a larger flow of financial and non-financial assistance to the small-scale sector.
State-Level Industrial Development Banks:(SFCs and SIDCs): there is a combination of financing agencies and industrial development banks, focusing on backward regions for the development of medium and small-scale industries in respective states.
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