AIFI - NABARD, NHB

AIFIs are institutional mechanisms tasked with offering sector-specific long-term financing. 

• Presently, the RBI oversees and supervises numerous AIFIs, commonly referred to as Development Financial Institutions (DFIs). 
• The following are examples of such AIF institutions.

NABARD

Established in 1982 under the National Bank for Agriculture and Rural Development Act of 1981, NABARD is mandated to provide credit to foster economic activities in rural areas, encompassing small-scale enterprises, cottage industries, handicrafts, and rural crafts.

• NABARD supervises and coordinates the operations of rural credit institutions such as RRBs and Rural Cooperative Banks (with the RBI delegating supervisory powers to NABARD for the rural sector while retaining regulatory powers). 
• In matters concerning rural development, NABARD extends support to the government, RBI, and other relevant organizations, offering training and research facilities for banks, cooperatives, and entities involved in rural development endeavors.
• While NABARD does not directly extend credit to individuals, it offers indirect financial assistance through refinancing, whereby it finances organizations providing financial aid to the rural sector. 
• Institutions sanctioned by the central government may receive direct financing from NABARD.

National Housing Bank (NHB)

Established in 1988 under the National Housing Bank Act of 1987, NHB primarily aims to support and enhance housing finance institutions through various financial and non-financial mechanisms at both local and regional levels.

• While NHB doesn't directly extend credit to individuals, it offers indirect financial assistance through refinancing. 
• In essence, NHB finances institutions that, in turn, provide financial assistance to individual borrowers, builders, and other stakeholders in the housing sector.

EXIM bank

Enacted in 1981, the Export-Import Bank of India Act paved the way for the creation of the EXIM bank in 1982.

• The primary objective of the EXIM bank is to provide financial assistance to exporters and importers, serving as the principal financial institution for orchestrating the activities of entities involved in financing the export and import of goods and services, thereby bolstering the nation's international trade.
• It extends direct financial aid to exporters and importers, alongside offering indirect support through refinancing.

Small Industries Development Bank of India (SIDBI)

Established in 1990 under the Small Industries Development of India Act 1989, SIDBI plays a pivotal role as the principal financial institution dedicated to the development, financing, and advancement of the Micro, Small, and Medium-Sized Enterprise (MSME) sector. 

• Additionally, it coordinates the endeavors of institutions engaged in activities pertinent to this sector.
• SIDBI predominantly extends indirect financial assistance to banking institutions through refinancing, empowering them to sustain their lending activities to MSMEs.

MUDRA Bank

The Government of India established MUDRA (Micro Units Development and Refinance Agency Ltd.) as a financial institution dedicated to the development and refinancing of micro-unit enterprises.

• Within the Indian Financial System, MUDRA Ltd, a Non-Banking Finance Company, operates as a subsidiary of SIDBI.
• MUDRA aims to extend financial assistance to the non-corporate sector, specifically small businesses, including small manufacturing units, retailers, fruit and vegetable vendors, hair salons, and artisans in both rural and urban areas, catering to financial requirements up to Rs. 10 lakhs.
• MUDRA offers three distinct types of loans: "Shishu" category provides loans up to Rs. 50,000 for small businesses; "Kishor" category offers loans exceeding Rs. 50,000 up to Rs. 5 lakhs, while the "Tarun" category caters to loans ranging from Rs. 5 lakhs to Rs. 10 lakhs.