Economy / Banking System In India / Development Banks.
Development Banks.
- Industrial Finance Corporation of India (IFCI):
- Established in 1948.
- Provides long-term capital for industries.
- Industrial Development Bank of India (IDBI):
- Initially a development bank, later transformed into a universal bank.
- Resulted in the formation of IDBI Bank.
- Industrial Credit and Investment Corporation of India (ICICI):
- Merged with ICICI Bank in 2000.
- Evolved into a universal bank.
- Industrial Investment Bank of India (IBI):
- Focus on providing long-term capital for industries.
- Small Industries Development Bank of India (SIDBI):
- Focuses on providing long-term capital to small industries.
- National Bank for Agriculture and Rural Development (NABARD):
- Established to provide long-term capital for agriculture and rural development.
- Export-Import Bank of India:
- Focus on financing and promoting international trade.
- National Housing Bank (NHB):
- Focuses on providing long-term capital for housing projects.
Evolution and Purpose:
- Development banks address the long-term financing requirements of industries and agriculture.
- Established to fill the gap left by commercial banks, which primarily address short-term working capital needs.
- Evolution includes the transformation of some development banks into universal banks (IDBI Bank, ICICI Bank).
- Aim to provide concessional financing to promote industrial and agricultural growth.
Recommendations and Transformations:
- S.H. Khan committee recommended transforming development finance institutions (DFIs) into universal banks.
- Resulted in the formation of IDBI Bank and ICICI Bank, which expanded their services beyond traditional development finance.
Union Budget 2021-22 and Development Financial Institution (DFI):
- Proposal: The Union Budget proposed the creation of a Development Financial Institution (DFI) to accelerate investment in the infrastructure sector.
- Need for DFI: Infrastructure projects require long-term debt financing, and a professionally managed DFI is considered necessary to provide, enable, and catalyze infrastructure financing.
- Corpus: The proposed DFI will have a corpus of Rs 20,000 crores.
