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ROLE OF

SPECIALIZED FINANCIAL

INSTITUTIONS

GEETA UDAPIKAR

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CONTENT

Introduction to Financial Institutions in India which provide

financial skims for project management.

1. Commercial bank

2. Industrial Finance Corporations of India (I.F.C.I.) . Industrial !evelopment "ank of India (I!"I)

#. Industrial credit and Investment

corporation of India (ICICI)

$. %mall Industries !evelopment "ank ofIndia(%I!"I)

&. %tate Financial Corporations (%FCs)

'.enture capital funding

. *ngle capitalist

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1.COMMERCIAL BANK.

Commercial "anks are banking institutions that accept

deposits and grant short+term loans and *dvances to

their customers.

In addition to giving short+term loans, commercial

banks also give -edium+term and long+term loan to

business enterprises.

ow+a+da/s some of the commercial "anks are also

providing housing loan on a long+term basis to

individuals. 0here are also man/ ther functions of

commercial banks.

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0he "anking productsfunction of commercial banks areof two t/pes.

(*) 3rimar/ functions4 and

(") %econdar/ functions.

(*) 3rimar/ functions

0he primar/ functions of a commercial bank include

a) *ccepting deposits4 and

b) 5ranting loans and advances.

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%econdar/ functions

a. Issuing letters of credit, travelers che6ue, etc.

b. 7ndertaking safe custod/ of valuables, important document

and securities b/ providing safe deposit vaults or lockers.

c. 3roviding customers with facilities of foreign e8changedealings.

d. 0ransferring mone/ from one account to another4 and from

one branch to another branch of the bank through che6ue, pa/

order, demand draft.

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TYPES OF COMMERCIAL BANK

3ublic %ector "anks9 0hese are banks

where majorit/ stake is held b/ the

5overnment of India or :eserve "ank of

India. ;8amples of public sector banks are9

%tate "ank of India,

ationali<ed banks

ame

*llahabad "ank

*ndhra "ank

"ank of "aroda "ank of India

"ank of -aharashtra

Canara "ank

Central "ank of India

Corporation "ank

!ena "ank

Indian "ank

Indian verseas "ank

riental "ank of Commerce

3unjab = %ind "ank

3unjab ational "ank

%tate "ank of India

%tate "ank of -/sore

%tate "ank of 3atiala

%tate "ank of 0ravancore

%/ndicate "ank

7C "ank

7nion "ank of India

7nited "ank of India

ija/a "ank

http://en.wikipedia.org/wiki/Indian_Overseas_Bank

http://en.wikipedia.org/wiki/Punjab_&_Sind_Bank

http://en.wikipedia.org/wiki/State_Bank_of_India

http://en.wikipedia.org/wiki/State_Bank_of_India

http://en.wikipedia.org/wiki/Punjab_&_Sind_Bank

http://en.wikipedia.org/wiki/Indian_Overseas_Bank

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3rivate sectors "anks9

In case of private sector banks

majorit/ of share capital of the "ank

is held b/ private individuals. 0hese banks are registered as companies

with limited >iabilit/.

1. "ank of 3unjab >td. (since merged with

Centurian "ank)

2. Centurian "ank of 3unjab (since merged with

?!FC "ank)

. !evelopment Credit "ank >td.

#. ?!FC "ank >td.

$. ICICI "ank >td.

&. IndusInd "ank >td.

'. @otak -ahindra "ank >td.

. *8is "ank (earlier 70I "ank)

A. Bes "ank >td.

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INDUSTRIAL FINANCE

CORPORATIONS OF INDIA (I.F.C.I.)

IFCI was established as a statutor/ corporation on 1st

ul/ 1A# b/ special *ct of 3arliament, IFCI *ct, 1A#.

It was converted into a public limited compan/ on ul/1, 1AA.

Its main object is to provide medium and long term

credit to eligible industrial concerns in corporate sectorsof the econom/, particularl/ to those industries to which

banking facilities are not available.

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OBJECTIVES

0he primar/ role of IFCI is to provide Ddirect financial

assistanceE on medium and long term basis to industrial

projects in the corporate and co+operative sectors. 0he

objectives of the corporation are stated below.

(a) 0o provide long and medium+term credit to industrial

concerns engaged in manufacturing, mining, shipping

and electricit/ generation and distribution.

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• (b) 0he period of credit can be as long as 2$ /ears and

should not e8ceed that period4

• (c) 0o grant credit to a single concern up to a ma8imum

amount of rupees one crore. 0his limit can be e8ceeded

with the permission of the government under certain

circumstances4

• (d) guarantee loans and deferred pa/ments;

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• (e) underwrite and directl/ subscribe to shares and

debentures issued b/ companies4

•

(f) assist in setting up new projects as well as inmoderni<ation of e8isting industrial concerns in

medium and large scale sector4

• (g) assist projects under co+operatives and in

backward areas.

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FUNCTIONS

• 0he main functions of I.F.C.I. are as under9+

• i) 5ranting loans and advances for the establishment, e8pansion,

diversification and moderni<ation of industries in corporate and

co+operative sectors.

• ii) 5uaranteeing loans raised b/ industrial concerns in the

capital market, both in rupees and foreign currencies.

• iii) %ubscribing or underwriting the issue of shares and

debentures b/ industries. %uch investment can be held up to '

/ears.

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• iv) 5uaranteeing credit purchase of capital goods, imported aswell as purchased within the countr/.

• v) 3roviding assistance, under the soft loans scheme, to

selected industries such as cement, cotton te8tiles, jute,engineering goods,etc.

• vi) 3roviding technical, legal, marketing and administrative

assistance to an/ industrial concern for the promotion,management and e8pansion of the industrial concern.

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• vii) 3roviding e6uipment (imported or indigenous) to the e8isting

industrial concerns on lease under its De6uipment leasing schemeE.

• viii) 3rocuring and reselling e6uipment to eligible e8isting

industrial concerns in corporate or co+operative sectors.

•i8) :endering merchant banking services to industrial concerns.

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• In 1AA$+A&, &' of the total financial assistance distributed

b/ IFCI was in the form of rupee term loans, while foreign

currenc/ loans accounted for appro8imatel/ 1' of total

financial assistance. 0hus the two t/pes of assistance

accounted for a total of # of the total financial assistance b/ IFCI. 0he remaining 1& of financial assistance, was in

the form of underwriting, direct subscription, guarantees and

e6uipment leasing.

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INDUSTRIAL DEVELOPMENT

BANK OF INDIA (IDBI)

• 0he Industrial !evelopment "ank of India was set up in ul/

1A&# as a wholl/ owned subsidiar/ of the :eserve "ank of

India.

• 0he purpose was to enable the new institution to benefit from

the financial support and e8perience of :"I.

• *fter a decade of its working, it was delinked from :"I in

1A'&, when its ownership was transferred to the 5overnment of

India.

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• 0he purpose was to allow :"I to concentrate on its central

banking function and allow I!"I to grow into a

developmental agenc/.

• *fter the public issue of e6uit/ shares and sale of a part of

5overnmentEs shareholding in ul/ 1AA$, 5overnmentEs

shareholding in I!"I has been reduced to '2.1#.

• I!"I is now the principal financial institution for

cordinating the working of institutions engaged in financing,

promoting or developing industr/,

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• assisting the development of such institutions and providing

credit and other facilities for the development of industr/. 0hus

the role of I!"I ma/ be stated as under9

• *s an ape8 financial institution, it coordinates the working of

other financial institutions.

• (2) It assists in the development of other financial institutions.

• () It provides credit to large industrial concerns directl/.

• (#) It undertakes other activities for the development of industr/.

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OBJECTIVES• 0he main objectives of I!"I is to serve as the ape8 institution

for term finance for industr/ in India. Its objectives include

• (1) Co+ordination, regulation and supervision of the working of

other financial institutions such as IFCI , ICICI, 70I, >IC,

Commercial "anks and %FCs.

• (2) %upplementing the resources of other financial institutions

and thereb/ widening the scope of their assistance.

• () 3lanning, promotion and development of ke/ industries and

diversifications of industrial growth.

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FUNCTION

• 0he I!"I has been established to perform the followingfunctions+

• (1) 0o grant loans and advances to IFCI, %FCs or an/ other

financial institution b/ wa/ of refinancing of loans granted b/ such institutions which are repa/able within 2$ /ear.

• (2) 0o grant loans and advances to scheduled banks or state

co+operative banks b/ wa/ of refinancing of loans granted b/ such institutions which are repa/able in 1$ /ears.

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() 0o grant loans and advances to IFCI, %FCs, other institutions,

scheduled banks, state co+operative banks b/ wa/ of refinancing

of loans granted b/ such institution to industrial concerns fore8ports

(#) 0o discount or rediscount bills of industrial concerns.

($) 0o underwrite or to subscribe to shares or debentures of

industrial concerns.

(&) 0o subscribe to or purchase stock, shares, bonds and

debentures of other financial institutions.

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(11) 0o provide consultanc/ and merchant banking services in

or outside India.

(12) 0o provide technical, legal, marketing and administrative

assistance to an/ industrial concern or person for promotion,

management or e8pansion of an/ industr/.

(1) 3lanning, promoting and developing industries to fill upgaps in the industrial structure in India.

(1#) 0o act as trustee for the holders of debentures or other

securities

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SUBSIDIARIES

0he following are the subsidiaries of I!"I.

(1) %mall Industries !evelopment "ank of India

(%I!"I)

(2) I!"I "ank >td.

() I!"I Capital -arket %ervices >td.

(#) I!"I Investment -anagement Compan/

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CAPITAL STRUCTURE AND

OPERATIONS

•*s on %eptember G,1AA&,

•0he authori<ed Capital of I!"I was :s.2GGG crores.

Issued, subscribed and paid up share capital was :s.2.'& crores.

•:eserves were :s.&GA crores. >oan funds were :s.$#$G crores.

• 0he total outstanding loans, investments and guarantee of I!"I

stood at :s.A,221 crore as on 1st -arch 1AA&.

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INDUSTRIAL CREDIT AND

INVESTMENT CORPORATION OF INDIA

(ICICI)•Industrial Credit and Investment Corporation of India was

established as a joint stock compan/ in the private sector in 1A$$.

•

Its share capital was contributed b/ banks, insurance companiesand foreign institutions including the Horld "ank.

• Its major shareholders now are 7nit 0rust of India, >ife

Insurance Corporation of India and 5eneral Insurance Corporation

and its subsidiaries.

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OBJECTIVES

•0he ICICI has been established to achieve the following objectives9

•(I) 0o assist in the formation, e8pansion and moderni<ation of

•industrial units in the private sector4

•(ii) 0o stimulate and promote the participation of private capital (both

Indian and foreign) in such industrial units4

•(iii) 0o furnish technical and managerial aid so as to increase productionand e8pand emplo/ment opportunities4

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(ii) It subscribes to new issues of shares, generall/ b/

underwriting them4

(iii) It guarantees loans raised from private sources including

deferred pa/ment4

(iv) It directl/ subscribes to shares and debentures4

(v) It provides technical and managerial assistance to industrialunits4

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(vi) It provides assets on lease to industrial concerns. Inother words, assets are owned b/ ICICI but allowed to be

used b/ industrial concerns for a consideration called lease

rent.

(vii) It provides project consultanc/ services to industrial

units for new

projects.

(viii) It provides merchant banking services

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SUBSIDIARIES

1.ICICI %ecurities and Finance Co. >td.

2. ICICI *ssets -anagement Co. >td.

. ICICI Investors %ervices >td.

#. ICICI "anking Corporations >td.

$. Credit :ating Information %ervices of India >td. (C:I%I>)

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&.0echnolog/ !evelopment and Information Compan/ ofIndia >td.(0!ICI)

'. 3rogrammers for the *dvancement of Commercial

0echnolog/.

. 3rogrammer for *cceleration of Commercial ;nerg/

:esearch (3*C;:)

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Financial assistance granted and disbursed b/ ICICI over the

/ears have grown steadil/. ICICI has disbursed a total

financial assistance of :s.#22$ crores during the three months period from Ist *pril 1AA to Gth une 1AA. 0he total

amount sanctioned during this period is :s.A1$ crore.

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STATE FINANCIAL CORPORATIONS (SFCS)

•0o meet the financial needs of small and medium enterprises,

the government of India passed the %tate Financial Corporation

*ct in 1A$1, empowering the %tate governments to establish

development banks for their respective regions.

•7nder the *ct, %FCs have been established b/ %tate

governments to meet the financial re6uirements of medium and

small si<ed enterprises. 0here are 1 %FCs at present.

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OBJECTIVES

(1) 3rovide financial assistance to small and medium industrial

concerns. 0hese ma/ be from corporate or co+operative sectors as

in case of IFCI or ma/ be partnership, individual or joint ?indu

famil/ business. 7nder %FCs *ct, Jindustrial concernK means

an/

concern engaged not onl/ in the manufacture, preservation or

processing of goods, but also mining, hotel industr/, transport

maintenance of machiner/, setting up or development of an

industrial area or industrial estate, etc.

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(2) 3rovide long and medium+term loan repa/able ordinaril/

within a period not e8ceeding 2G /ears.

() 5rant financial assistance to an/ single industrial

concern under corporate or co+operative sector with anaggregate upper limit of rupees %i8t/ lakhs. In an/ other

case (partnership, sole proprietorship or joint ?indu famil/)

the upper limit is rupees 0hirt/ lakhs.

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(#) 3rovide Financial assistance generall/ to those

industrial concerns whose paid up share capital and free

reserves do not e8ceed :s. crore.

($) 0o la/ special emphasis on the development of

backward areas and small scale industries.

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FUNCTIONS OF STATE FINANCIAL

CORPORATION (SFCS)

(1) 5rant of loans and advances to or subscribe to debentures of

industrial concerns repa/able within a period not e8ceeding 2G /ears,

with option of conversion into shares or stock of the industrial

concern.

(2) 5uaranteeing loans raised b/ industrial concerns which are

repa/able within a period not e8ceeding 2G /ears.

() 5uaranteeing deferred pa/ments due from an industrial concern

for purchase of capital goods in India.

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(') 3roviding technical and administrative assistance to an/

industrial concern or an/ person for the promotion,

management or e8pansion of an/ industr/.

() 3lanning and assisting in the promotion and

development of industries.

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VENTURE CAPITAL FUNDING

Venture capital is a means of equity financing for

rapidly-growing private companies.

Finance may be required for the start-up,

development/expansion or purchase of a company.

Venture Capital firms invest funds on a professional

basis, often focusing on a limited sector of specialization

(eg. IT, infrastructure, health/life sciences, cleantechnology, etc.).

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0he goal of venture capital is to build companies so that

the shares become li6uid (through I3 or ac6uisition) and

provide a rate of return to the investors (in the form ofcash or shares) that is consistent with the level of risk

taken.

venture capital financing, the venture capitalist ac6uires

an agreed proportion of the e6uit/ of the compan/ in

return for the funding. ;6uit/ finance offers the

significant advantage of having no interest charges. It is

LpatientL capital that seeks a return through long+term

capital gain rather than immediate and regular interest

pa/ments, as in the case of debt financing.

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NAME OF THE VENTURE CAPITAL

FUND IN INDIA.

Aavishkaar India Micro Venture Capital Fund

Aditya Birla Private Equity Trust

Axis Venture Capital Trust

BTS India Private Equity Fund

Canbank Venture Capital Fund

Green India Venture Fund

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1371393_634683495582905230