List of Top 4 Public Financial Institutions in India!
1. The Industrial Finance Corporation of India (IFCI):
Industrial Finance Corporation is a national level development bank, set up in 1948, with the objective of providing medium and long- term finance to eligible industrial concerns in India. IFCI’s role extends to the entire industrial spectrum of the country.
The main functions performed by IFCI are the following:
1. Finance for new projects and expansion, diversification and modernisation programmes.
2. Equipment Finance and Advances against Usance Bills.
3. Merchant Banking.
4. Promotional services, mainly through sponsored organisations and supported activities in the form of Technical Consultancy Services, Risk Capital Assistance, Up-gradation of Managerial Skills, Entrepreneurship Development and Development Banking.
Financial assistance from IFCI is available to industrial concerns in corporate and co-operative sectors, engaged or to be engaged in manufacture, preservation or processing of goods, shipping, mining, hotel, generation, preservation or processing of goods, shipping, mining, storage or distribution of electricity or any other form of energy, transport, setting up or development of industrial estates, etc.
Till recently, it granted loans only to public limited companies or co-operatives but not to private limited companies or partnerships. By an amendment of the IFCI Act, private limited companies have also been made eligible to get financial assistance from the Corporation. Total assistance approved and disbursed by IFCI up to 1999-00 amounted to Rs. 43,014 crores and Rs.39, 004 crores, respectively.
The limit of assistance to any single concern is now Rs. 1 crore (in the beginning, it was Rs. 50 lakhs). However, under certain circumstances, this can be exceeded with the permission of the Government. The loan is given for a period not exceeding 25 years.
The facilities and services provided by it fall under three categories:
(i) project finance,
(ii) financial services and
(iii) promotional services.
2. State Financial Corporations:
The area of operation of the IFCI is limited in the sense that it deals with large public limited companies, cooperatives and large corporate bodies. But there are both small-scale and medium-scale industries which require financial assistance and, for this purpose, the State Governments have set up 18 SFCs. The Government of India passed the State Financial Corporation Act in 1951 and made it applicable to all the States.
The main functions of a State Financial Corporation are the following:
(i) It can guarantee loans raised by industrial concerns which are repayable within a period not exceeding 20 years and which are floated in the public market.
(ii) It can underwrite the issue of stocks, shares, bonds or debentures of industrial concerns.
(iii) It can grant loans and advances to industrial concerns repayable within a period of time not exceeding 20 years.
(iv) It can subscribe to the debentures floated by industrial concerns.
Though the scope of operations of the SFCs is greater than that of IFCI, still it is not enough. These corporations are also constrained in their scope and working. These corporations assist organised industries and this has restricted their operations. This is because many industries in the small sector are loosely organised and records are not properly kept.
As a result these corporations have financed just about 14% of the small scale units up to 1985. Certain weaknesses have also hindered their growth. For example, the recovery of loans has been far from satisfactory. The arrears, as percentage of outstanding loans, were as much as 25% in 1980-81. These increased further to 29% in 1984-85. This has adversely affected their resources and profitability.
Another weakness is that the share of the loans going to very small units (i.e., those units seeking loans up to Rs. 50,000) has shown a decline in recent times. Moreover, these corporations have achieved very little in rehabilitation of sick units falling in their sphere of operations.
However, the SFCs are granting liberal financial assistance to technician-entrepreneurs. Since their inception up to March 2000, they sanctioned and disbursed loans to the extent of Rs. 32,328 crores and Rs. 26,595 crores, respectively.
3. Industrial Development Bank of India (IDBI):
The Industrial Development Bank of India was set up in 1964 to provide long-term finance to industry. It was set up as a subsidiary of the Reserve Bank of India but was delinked from it in 1976 and was made an autonomous corporation. It is an apex body to co-ordinate the operations of other institutions for providing long-term finance to industry as well as an agency to provide direct financial assistance to industrial units.
The Government decided to establish the Industrial Development Bank of India for two reasons. Firstly, there was the need for a new financial institution with large financial resources to meet the growing financial requirements of both new and established industrial enterprises. Secondly, there was the need for coordinating the activities of all agencies which are concerned with the provision of finance for industrial development.
The main function of the Industrial Development Bank of India is to finance industrial enterprises such as manufacturing, processing, mining, shipping, road transport and hotels industry. Other major functions of the IDBI are location and filling in of gaps in the industrial structure, marketing, investment, research surveys, techno-economic studies, etc. Since 1970 it has also been promoting surveys of industrial possibilities in backward areas.
The IDBI grants direct assistance by way of project loans, underwriting of and direct subscription to industrial securities, soft loans, technical refund loans and equipment finance loans.
The Bank can guarantee loans raised by industrial concerns in the open market from scheduled banks, the State Cooperative Banks, the Industrial Finance Corporation of India and other “notified” financial institutions.
IDBI extends financial assistance to industrial projects directly under Direct Finance Scheme and indirectly through the State-level institutions and commercial banks under its Refinance and Bills Rediscounting Schemes.
The IDBI can refinance term loans to industrial concerns repayable within 3 to 25 years given by the IFCI, the SFCs and other financial institutions.
An important landmark in the operations of IDBI was the establishment of the Small Industries Development Fund (SIDF) in 1985-86. This Fund will provide a focal point for streamlining and expanding the flow of assistance to the small sector.
It is supposed to provide more effective coordination among the various support organisations set up over the period for the promotion and development of the small-scale sector. In addition to operating the on-going schemes, it will devise new schemes to cater to the special needs of the small sector; such schemes will be operated through various intermediary agencies including SFCs, banks and RRBs.
Promotional efforts to encourage industrial growth constitute an important function of IDBI. IDBI endeavours to see that development impulses are well spread out among all regions and that entrepreneurial base widens in the country. Industrial development of backward areas, accordingly, enjoys priority in its schemes of assistance.
In addition, IDBI lays special emphasis on promotion of small industry, creation of new entrepreneurs, continuous modernisation and technological up-gradation, development of energy-saving systems and encouragement of industrial, technical and economic research in the country.
The Industrial Development Bank of India has recorded an impressive performance in its operations after it has become autonomous in 1976. The total effective sanctions amounted to Rs. 198,811 crores in March 2000. Disbursements amounted to Rs. 134,894 crores. The IDBI is the major source of funds among all the term-lending institutions operating in India.
4. Industrial Credit and Investment Corporation of India (ICICI):
The Industrial Credit and Investment Corporation of India (ICICI) was set up in 1955 under the Indian Companies Act on the basis of the recommendations of a World Bank Group. On the advice of the World Bank Mission, this private limited company was registered in January 1955.
The primary purpose for which the ICICI makes available funds is for the purchase of capital assets in the form of land, building and machinery. Even though there are no fixed limits on the size of assistance granted, ordinarily Rs. 5 lakhs was considered to be the lower limit for a loan.
ICICI aims at stimulating the promotion of new industries, to assist the expansion and modernisation of existing industries and to furnish technical and managerial aid so as to increase production and afford employment opportunities.
The Corporation participates in equity capital, grants long-term or medium-term loans, underwrites new issues of shares and debentures and guarantees loans from other private investment sources. It also provides managerial, technical and administrative advice.
The industries that have so far received the assistance are those manufacturing paper, pharmaceuticals and chemicals, electrical equipment, textiles, sugar, metal ore, lime and cement works, glass manufacture, etc. From its inception up to 1999-00, the total amount of loans sanctioned and disbursed amounted to Rs. 191,474 crores and Rs. 114,199 crores, respectively. In recent years, the Corporation has shown increasing interest in the development of new industries in backward regions.
In 1977, the Industrial Credit and Investment Corporation of India promoted the Housing Development Finance Corporation (HDFC). The main objective was to provide long-term finance to individuals in middle and lower income brackets, co-operatives, etc. for the construction and purchase of residential houses all over the country.