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CHAPTER-5
DEVELOPMENT FINANCIAL INSTITUTION
1. What role do development financial institutions play in the economic development of a country? Give some examples Ans: Developmental Financial Institutions (DFIs) play a crucial role in the economic development of a country by providing institutional finance to various sectors. In India, several DFIs have been established to cater to different financial requirements, particularly for medium-term and long-term projects.
(a) Industrial Finance Corporation of India (IFCI), 1948: IFCI was one of India's first development financial institutions, founded in 1948. Its primary focus was to provide medium and long-term finance to industrial projects, supporting industrial growth and modernization.
(b) State Finance Corporations (SFCs), 1951: State Finance Corporations were set up in 1951 to promote industrialization at the state level. It provides financial assistance to small and medium-sized enterprises (SMEs) and industries. It also offers medium and long-term loans to businesses, supporting their growth and development.
(c) State Industrial Development Corporations (SIDCs), 1956: SIDCs were established in 1956 with the objective of promoting industrial growth within specific states. These corporations are responsible for developing industrial infrastructure, providing financial assistance and creating a conducive environment for industries to flourish.
(d) National Bank for Agriculture and Rural Development (NABARD), 1982: While not a traditional DFI, NABARD serves a similar role in the agricultural and rural sectors. NABARD was founded in 1982 to provide Financial support to agriculture-related activities, rural development projects and rural infrastructure. These DFIs facilitate economic development by offering loans, equity investments and other financial services to sectors that are critical for overall growth. By addressing the medium and long-term financial needs of different industries and sectors, DFIs contribute to job creation, technological advancement and the overall progress of the nation's economy.
2. Discuss the objectives of the Industrial Finance Corporation of India (IFCI)?
Ans: The Industrial Finance Corporation of India (IFCI) was established on July 1, 1948, under the Industrial Finance Corporation of India Act, 1948, It was India's first development bank. It aimed to provide financial support to medium and large-scale industries. In response to economic reforms in 1991, IFCI transformed from a development bank to a public limited company registered under the Companies Act, 1956, on May 21, 1993. Its headquarter is in Delhi and it operates through regional offices in Mumbai, Chennai, Kanpur and Kolkata.
Objectives of IFCI
i. Industrial Credit: It provides long and medium-term credit to industrial concerns engaged in key sectors like manufacturing, mining, shipping and electricity generation & distribution, driving economic development.
ii. Project Support: It assists in setting up new projects and modernizing existing industrial concerns in the medium & large-scale sector, fostering technological progress.
iii. Credit Limit: It grants credit to individual concerns, with a maximum limit of INR one crore, which can be exceeded with government authorization, ensuring financial flexibility.
iv. Loan Guarantees: It acts as a credible guarantor for loans, deferred payments and international transactions, bolstering the trustworthiness of Indian companies abroad.
v.Cooperative & Backward Areas: It supports projects in cooperative and backward areas, offering financial aid, expert guidance and managerial support to uplift small-scale industries.
vi. Long-term Credit: It provides credit spanning up to 25 years, facilitating substantial capital infusion and long-term financial stability for companies.
vii. Underwriting Support: It engages in underwriting and direct subscription of shares and debentures, injecting capital and becoming a steadfast shareholder to foster company growth.
3. Explain the key functions of the Industrial Finance Corporation of India (IFCI)?
Or
What are the Financial Assistance /Promotional Activities /Financial Services functions of IFCI?
Ans: IFCI plays a crucial role in supporting various aspects of industrial development through three main categories: A. Financial Assistance B. Promotional Activities and C. Financial Services.
A. FINANCIAL ASSISTANCE: i. IFCI provides long-term loans and advances to industrial businesses that are payable within a span of 25 years. Additionally, it can convert a portion of these loans into equity shares if it chooses to do so.
ii. The corporation helps industries by underwriting their securities, which includes shares, bonds, or debentures, that need to be sold within 7 years.
iii. IFCI directly invests in the shares and debentures of public limited companies.
iv. When industrial businesses seek loans from banks, IFCI can provide a guarantee, making it easier for these businesses to secure loans on favorable terms.
V. IFCI also offers guarantees for deferred payments when Industries buy capital goods either domestically or internationally.
vi. Acting as an agent of the central government or international organizations like the World Bank, IFCI assists in managing loans granted to industrial businesses.
These financial assistances are provided for:
(a) Establishing new industrial ventures.
(b) Expanding or diversifying existing businesses.
(c) Modernizing and upgrading current operations.
(d) Fulfilling ongoing financial obligations and working capital needs of industrial concerns.
B. PROMOTIONAL ACTIVITIES:
i. IFCI plays a role in identifying opportunities for new industrial endeavors, thus contributing to industrial growth.
ii. The corporation aids in the development of small and medium-sized enterprises by guiding them. through the project identification, preparation and implementation processes.
iii. IFCI actively contributes to boosting industrial growth and reducing regional economic disparities.
iv. It has been pivotal in establishing key entities in areas like stock exchanges, entrepreneurship development, consultancy organizations and education and skill enhancement.
V. In partnership with the Indian government, IFCI has allocated venture capital funds to support entrepreneurial activities among the scheduled caste.
vi. IFCI also serves as a primary agency for a credit enhancement guarantee scheme aimed at encouraging entrepreneurs from disadvantaged backgrounds.
C. FINANCIAL SERVICES:
i. IFCI offers corporate counseling for financial restructuring, helping struggling businesses to get back on track.
ii. It assists businesses in negotiating terms and conditions for collaborations with foreign partners.
iii. IFCI plays a critical role in revitalizing financially distressed companies.
iv. The corporation is even willing to finance riskier projects that might not easily find funding elsewhere.
V. IFCI has taken steps to support informed investment decisions by promoting the establishment of ICRA Ltd, a credit rating agency.
vi. It has also set up a Management Development Institute to provide training in modern management techniques to entrepreneurs and individuals from both the public and private sectors. Thus, IFCI plays an essential role in fostering the growth of industries by offering financial assistance, promoting industrial opportunities and providing a range of financial services to the diverse needs of businesses.
4. What is meant by SFCS? What are its objectives and functions?
Ans: The State Financial Corporations Act of 1951 empowers Indian states and union territories to establish State Financial Corporations (SFCs) to provide financial aid to micro, small and medium-scale industries. SFCS offer loans to various types of businesses, including individual trading concerns, partnership firms and both private and public limited companies.
Currently, there are 18 SFCs in India. Among these, 17 were established under the State Financial Corporations Act of 1951. The Tamilnadu Industrial Investment Corporation Limited, initially formed under the Companies Act of 1949, now functions as an SFC. Notably, the Punjab Financial Corporation was the country's first SFC, established in February 1953.
Objectives of State Financial Corporations (SFCs):
i. Providing Long & Medium-Term Loans: SFCs aim to provide industrial concerns with loans repayable within a maximum period of 20 years.
ii. Setting Financial Assistance Limits: These corporations extend financial aid with an upper limit of Rs. 60 lakhs for corporate and cooperative sector enterprises, while the limit is Rs. 30 lakhs for other entities such as partnerships and Hindu Undivided Families.
iii. Supporting Smaller Businesses: SFCs focus on assisting industrial concerns with paid-up share capital and free reserves not exceeding Rs. 3 crores.
iv. Promoting Regional Development: SFCs emphasize the development of backward areas and the growth of small-scale industries to foster overall economic progress and create employment opportunities.
v. Encouraging Ownership Diversity: The objective includes promoting wider ownership in industrial ventures.
vi. Engaging in Refinancing and Equity Finance: SFCS participate in refinancing and equity finance activities on behalf of SIDBI.
vii. Diversified Support to Various Sectors: These institutions provide financial assistance to a wide range of sectors, including road transport, tourism, healthcare and emerging fields like floriculture and poultry Farming.
Functions of State Financial Corporations (SFCs):
i. Loan and Debenture Provision: SFCs grant loans or subscribe to debentures for industrial concerns, typically with a repayment period of up to 20 years, including the option to convert debt into equity.
ii.Loan Guarantees: These corporations offer guarantees for loans repayable within 20 years taken by Industrial concerns.
III. Securities Underwriting: SFCs underwrite the issuance of stocks, shares and bonds by industrial concerns to help them raise capital.
iv. Deferred Payment Guarantees: They guarantee deferred payments related to the purchase of capital goods by industrial concerns.
V. Investing in Stocks and Shares: SFCs subscribe to or purchase stocks, shares, bonds, or debentures of industries, up to a maximum of 30% of their subscribed capital.
vi. Agency Services: SFCs act as agents for Central and State Governments, IFCI and other financial institutions, especially in matters related to granting loans.
vil. Technical and Administrative Assistance: They provide support to industrial concerns for the promotion, management and expansion of their operations.
viii. Industry Promotion and Development: SFCS contribute to the planning and development of various industries, which in turn supports the growth of small-scale industries.
ix. Sales Support: These corporations assist small-scale industries by providing sales backup to aid in their development.
x .Financial Assistance Methods: SFCS offer a variety of financial assistance methods, including term loans, direct equity and debenture subscriptions, loan and deferred payment guarantees, bill discounting and seed or special capital.
Thus, we can conclude that State Financial Corporations (SFCs) have clear objectives and perform a range of functions aimed at providing financial support to industrial concerns and fostering industrial development.
5. What do you mean by State Industrial Development Corporations (SIDCs)? What are its objectives and functions?
Ans: State Industrial Development Corporations (SIDCs) were established in the 1960s and early 1970s under the Companies Act, 1956, as wholly-owned entities of state governments. They serve as catalysts for promoting medium and large enterprises, aiding industrial growth and developing infrastructure in their states or union territories. With 28 operating in India, some also function as Small Industries Development Corporations (SFCs) to assist small and medium enterprises. Moreover, 7 SIDCs focus on infrastructure and extension services for the small-scale sector's advancement.
Objectives of SIDCS:
I. Growth of Small-Scale Sector: The primary objective of SIDCS is to drive growth in the small-scale sector by extending loans to medium and large industrial units.
ii. Entrepreneurship and Skill Development: SIDCS contribute to fostering entrepreneurship and enhancing skill development.
iii. Facilitating Infrastructure Development: They play a role in facilitating the development of industrial infrastructure.
iv. Promoting Micro, Small and Medium Enterprises: SIDCs aim to promote micro, small and medium enterprises within their jurisdictions.
V. Providing Marketing Support: SIDCS focus on offering publicity and marketing support to industries.
Functions of SIDCs:
i. Accelerate Industrialization: SIDCS serve as instruments to accelerate industrialization in their respective states.
ii. Financial Support: They provide loans and guarantees to various companies across industries.
ili. Infrastructure Development: SIDCs take on responsibilities such as constructing sheds, developing industrial areas and providing necessary infrastructure.
iv. Promotional Programs: They engage in identifying projects, conducting techno-economic surveys, feasibility studies and entrepreneurial training.
v. Raw Material Procurement: SIDCS procure and supply raw materials from domestic and international markets to support small-scale industries.
vi. Marketing Assistance: They implement schemes for effective marketing assistance to diverse industrial units.
vii. Working Capital Solutions: They address working capital issues faced by various industrial units.
viii. Support to Women Entrepreneurs: SIDCs actively promote and support industrial ventures run by women entrepreneurs.
ix. Skill Development Centers: SIDCs establish Skill Development Centers to train workers in various skills, ensuring a skilled labor pool for small-scale industries.
X. Financial Assistance: SIDCs extend financial support through rupee loans, share/debenture subscriptions, guarantees and inter-corporate deposits.
6. What is NABARD? When was it formed? Discuss its objectives and functions?
Ans: The National Bank for Agriculture and Rural Development (NABARD) was established on July 12, 1982, under an Act of Parliament. It serves as an apex institution, providing and regulating credit for the development of agriculture, small-scale industries, cottage industries, handicrafts and other rural economic activities. NABARD took over the functions of the Agricultural Credit Department (ACD), Rural Planning and Credit Cell (RPCC) of RBI and Agricultural Refinance and Development Corporation (ARDC). Its headquarters is in Mumbai, with branches nationwide.
Objectives of NABARD:
i. Integrated Rural Development Focus: NABARD aims to provide dedicated attention and focused guidance to integrated rural development initiatives.
ii. National Rural Credit Hub: It serves as a central entity for the entire national rural credit system, coordinating its activities effectively.
iii. Additional al Funding: NABARD acts as a source of additional funding for rural credit institutions, bolstering their resources.
iv. Support for Rural Industries: The organization facilitates investment credit for small industries, village/cottage industries, handicrafts, artisans and farmers.
V. Enhanced Credit System: NABARD contributes to improving the credit distribution system through tasks like building institutions, revitalizing credit organizations and training bank staff.
vi. Refinance Facilities: It provides refinance facilities to various financial entities like SLDBs, SCBS, RRBs and commercial banks, aiding rural development endeavors.
vii, Regional Coordination: NABARD coordinates the efforts of diverse agencies engaged in rural development at the regional level. It also maintains connections with the Government of India, RBI, state governments and other national policy-making institutions.
viii. Project Oversight: The organization conducts inspections, monitoring and evaluations of projects that receive refinance support from NABARD.
7. Explain the factions of NABARD.
Ans: The functions of NABARD can be discussed under three heads:
A. Credit Functions
B. Regulatory Functions
C. Developmental Functions
A. CREDIT FUNCTIONS:
i. Refinance Facility: NABARD provides short-term credit to cooperative banks and financial institutions to promote agricultural produce marketing, distribution of agricultural inputs and activities of cottage and small-scale industries.
ii. Medium-term Credit: NABARD offers medium-term credit (1.5-7 years) to State cooperative banks and Regional Rural Banks (RRBs).
iii. Long-term Credit: NABARD extends credit up to 25 years to State cooperative banks, RRBS, Land Development Banks and Commercial Banks.
iv. Conversion Facilities: It offers conversion facility up to 7 years to State cooperative banks and RRBS during draughts, famine, or natural calamities.
V. Credit to State Government: NABARD provides credit to state governments for up to 20 years to support their investment in cooperative credit societies.
vi. Share Capital: NABARD invests in securities or subscribes to share capital of institutions focused on agriculture and rural development.
B. REGULATORY FUNCTIONS:
i. Inspection Authority: NABARD inspects cooperative societies (excluding primary societies) and RRBs, authorized by Banking Regulation Act 1949.
ii. Branch Facilitation: It assists in opening branches of RRBS and cooperative societies through the Reserve Bank of India.
iii. Return Copies: RRBs and cooperative banks sharing returns with RBI must provide copies to NABARD.
iv. Information Authority: NABARD holds the authority to request information and statements from Cooperative Banks and RRBs.
C. DEVELOPMENTAL FUNCTIONS:
i. Credit Planning and Enhancement: NABARD formulates credit plans, enhances research, introduces credit delivery innovations and improves skills of beneficiaries and client banks.
ii. Coordination and Expertise: It coordinates rural credit agencies, develops agricultural and rural problem- solving expertise and aids Government, RBI and other institutions in rural development.
iii. Training and Capital Assistance: NABARD facilitates training, research and assists State Governments in contributing to eligible institutions' share capital.
iv. Counseling and Consultancy: The institution offers counseling, consultancy and conducts training programs for rural entrepreneurs.
V. Integrated Rural Development: NABARD promotes Integrated rural development, backing small industries, cottage industries, village industries and rural artisans using credit and non-credit approaches.
Additional Question Answer
A. Very Short Answer Questions:
1 Mark each
1. In which year was the Industrial Finance Corporation of India established?
Ans:- The Industrial Finance Corporation of India (IFCI) was established in the year 1948.
2. In which year was the NABARD established?
Ans:- The National Bank for Agriculture and Rural Development (NABARD) was established in the year 1982.
3. Write the full form of NABARD.
Ans:- The full form of NABARD is "National Bank for Agriculture and Rural Development."
4. Write the full form of SFCs.
Ans:- The SFCs Stand for State Finance Corporations.
5. Write the full form of SIDCs.
Ans:- The SIDCs stand for State Industrial Development Corporations.
B. Short Answer Questions:2 Marks each
1. State two objectives of the establishment of the Industrial Finance Corporation of India Ltd.
Ans:- Two objectives of the establishment of the Industrial Finance Corporation of India Ltd. (IFCI) were:
a. To provide long-term financial assistance and support to industrial projects in India, especially those in the private sector, to promote industrialization.
b. To facilitate the development of infrastructure and key industries by offering loans, underwriting services, and other financial assistance to promote economic growth.
2. State two objectives of the establishment of the SFCs.
Ans:- Following are the two objectives of the establishment of the SFCs
i. To widen ownership-based industries.
ii. To refinance as well as to provide equity finance on behalf of SIDBI.
3. State two objectives of the establishment of SIDCs.
Ans:- "SIDCs" is a general acronym that can refer to State Industrial Development Corporations or similar entities in various states of India. The objectives of these corporations typically include:
a. Promoting industrial development within their respective states by providing financial and technical assistance to local industries.
b. Facilitating the growth of small and medium-sized enterprises (SMEs) by offering support for setting up and expanding businesses, thereby contributing to economic development at the state level.
4. State two objectives of the establishment of NABARD.
Ans:- Two objectives of the establishment of the National Bank for Agriculture and Rural Development (NABARD) are:
a. To promote sustainable and equitable agricultural and rural development in India by providing credit, financial services, and technical assistance to farmers, rural banks, and other rural institutions.
b. To support the development of the rural economy by channeling resources into agriculture, rural infrastructure, and allied sectors to reduce poverty and improve the living standards of rural populations.
5. Write two functions of the IFCI.
Ans:- Two functions of the Industrial Finance Corporation of India (IFCI) were:
a. Providing financial assistance: IFCI extended loans, underwriting services, and financial support to industrial projects, helping them secure the necessary capital for expansion and development.
b. Investment and promotion: IFCI played a role in promoting and investing in various industries and projects that were considered crucial for economic growth and development in India, particularly in the private sector.
6. Write two functions of the SFCs.
Ans:- Two functions of the State Financial Corporations (SFCs) are:
a. Providing Financial Assistance: SFCs play a crucial role in providing financial assistance to small and medium-sized enterprises (SMEs) and industrial units. They offer term loans, working capital loans, and other financial products to help these businesses with their capital requirements for expansion, modernization, and growth.
b. Promoting Regional Development: SFCs are established with the aim of promoting industrial and economic development in specific regions or states. They help create employment opportunities, stimulate local industries, and contribute to the overall economic growth and development of the region by supporting the growth of small and medium enterprises.
7. Write two functions of the SIDCs.
Ans:- Two functions of the Small Industries Development Bank of India (SIDBI) are:
a. Financing Small and Micro Enterprises: SIDBI primarily focuses on providing financial assistance to small and micro enterprises in India. It offers various credit and financial products tailored to the specific needs of these enterprises, including term loans, working capital loans, and project financing.
b. Development and Promotion of Small Industries: SIDBI plays a pivotal role in the development and promotion of the small-scale sector in India. It supports entrepreneurship development, technology upgradation, and capacity building among small businesses through various programs and initiatives. SIDBI also encourages sustainable and inclusive growth within the small industries sector.
8. Write two functions of the NABARD.
Ans:- Two functions of the National Bank for Agriculture and Rural Development (NABARD) are:
a. Rural Credit and Financial Inclusion: NABARD plays a critical role in extending credit facilities and financial services to rural areas in India. It provides refinancing to cooperative banks, regional rural banks, and other financial institutions engaged in rural lending. NABARD's efforts contribute to improving financial inclusion and empowering rural communities.
b. Agricultural and Rural Development Programs: NABARD implements and supports various agricultural and rural development programs and initiatives. It provides financial assistance for projects related to agriculture, rural infrastructure, and allied sectors like animal husbandry and fisheries. NABARD's activities aim to enhance the productivity and livelihoods of rural communities while promoting sustainable agriculture practices.
C. Long Answer Questions (Type-I):
5 Marks each
1. State the objectives of the establishment of the Industria Finance Corporation of India Ltd.
Ans:- Objectives of the Establishment of the Industrial Finance Corporation of India Ltd. (IFCI):
a. Promoting Industrial Development: One of the primary objectives of IFCI is to promote and develop industries in India. It provides long-term financial assistance to industrial projects, thereby contributing to the growth and expansion of the industrial sector.
b. Filling the Gap in Industrial Finance: IFCI was established to bridge the gap between the availability of funds and the financial requirements of industrial enterprises. It offers term loans, underwriting services, and guarantees to support industrial projects that may face difficulty in raising capital from traditional sources.
c. Encouraging Entrepreneurship: IFCI encourages entrepreneurship by providing financial and technical assistance to entrepreneurs and industrialists. It supports the establishment of new industrial ventures and the expansion of existing ones, fostering economic development.
d. Promoting Balanced Regional Development: IFCI aims to promote balanced regional development by extending its financial services to industries in various parts of the country, including less developed regions. This helps in reducing regional disparities and creating employment opportunities.
e. Facilitating Modernization and Diversification: Another objective of IFCI is to facilitate the modernization and diversification of industries. It supports the adoption of advanced technology and the expansion into new product lines to enhance the competitiveness of Indian industries.
2. State the objectives of the establishment of the SFCs.
Ans:- Objectives of the Establishment of the State Financial Corporations (SFCs):
a. Providing Financial Assistance to Small and Medium Enterprises (SMEs): The primary objective of SFCs is to provide financial assistance to small and medium-sized enterprises (SMEs) and industrial units. They aim to meet the capital needs of these enterprises for purposes such as expansion, modernization, and setting up new businesses.
b. Promoting Industrial Growth at the State Level: SFCs are established to promote industrial growth and development within specific states or regions. They contribute to the overall economic development of the state by fostering the growth of local industries and supporting entrepreneurship.
c. Supporting Employment Generation: SFCs play a crucial role in generating employment opportunities, especially in rural and semi-urban areas. By providing financial resources to SMEs, they help these enterprises create jobs, thereby addressing unemployment issues.
d. Regional Development: SFCs contribute to regional development by channeling funds into industries that may not easily access credit from commercial banks. This supports the development of industries in less economically developed areas, reducing regional disparities.
e. Entrepreneurship Development: SFCs often conduct various programs and initiatives to promote entrepreneurship skills and knowledge among individuals. They offer guidance and support to potential entrepreneurs, aiding in the establishment of new ventures.
3. State the objectives of the establishment of SIDCS.
Ans:- Objectives of the Establishment of the Small Industries Development Bank of India (SIDBI):
a. Financing Small and Micro Enterprises (SMEs): SIDBI's primary objective is to provide financial assistance and support to small and micro enterprises in India. It offers a range of financial products and services tailored to the specific needs of these businesses, including term loans, working capital loans, and credit facilities.
b. Promoting Entrepreneurship: SIDBI aims to foster entrepreneurship and promote the development of small-scale industries. It provides financial resources and technical assistance to aspiring entrepreneurs, helping them establish and grow their small businesses.
c. Facilitating Technology Upgradation: Another objective of SIDBI is to facilitate the adoption of modern technology and practices in small and micro enterprises. It supports initiatives that enhance productivity, quality, and competitiveness among these businesses.
d. Development of Ancillary Industries: SIDBI works towards the development of ancillary and support industries that are essential for the growth of the small-scale sector. This includes industries related to manufacturing, processing, and services that complement SMEs.
e. Financial Inclusion: SIDBI plays a crucial role in extending financial inclusion to underserved and economically weaker sections of society. It strives to ensure that small and micro entrepreneurs, including those in rural areas, have access to formal financial services.
4. State the objectives of the establishment of NABARD.
Ans:- Objectives of the Establishment of the National Bank for Agriculture and Rural Development (NABARD):
a. Rural Credit and Financial Inclusion: NABARD's primary objective is to promote rural development by providing credit and financial services to agriculture and rural sectors. It acts as a refinancing institution for cooperative banks, regional rural banks, and other financial institutions engaged in rural lending, thereby enhancing financial inclusion in rural areas.
b. Agricultural and Rural Development Programs: NABARD implements and supports various agricultural and rural development programs and initiatives. It provides financial assistance for projects related to agriculture, rural infrastructure, and allied sectors like animal husbandry and fisheries. NABARD's activities aim to enhance the productivity and livelihoods of rural communities while promoting sustainable agricultural practices.
c. Promotion of Rural Self-Employment: NABARD encourages rural self-employment and entrepreneurship by supporting income-generating activities in rural areas. It provides funding and guidance for initiatives that create employment opportunities and improve the economic well-being of rural households.
d. Development of Rural Infrastructure: NABARD plays a key role in the development of rural infrastructure, including irrigation systems, roads, and storage facilities. By improving infrastructure in rural areas, NABARD aims to enhance agricultural productivity and rural living conditions.
e. Monitoring and Evaluation: NABARD monitors and evaluates the impact of its programs and projects on rural development. It conducts research and data analysis to assess the effectiveness of various interventions and makes necessary adjustments to achieve its developmental objectives.
5. Write the functions of the IFCI.
Ans:- Functions of the Industrial Finance Corporation of India Ltd. (IFCI):
a. Providing Financial Assistance: IFCI offers various financial products and services, including term loans, underwriting services, and guarantees, to industrial projects in India. It provides the necessary capital for the establishment, expansion, and modernization of industrial enterprises.
b. Project Appraisal: IFCI conducts detailed project appraisal to assess the feasibility and viability of industrial projects seeking financial assistance. This helps ensure that funds are allocated to projects with the potential for success.
c. Promoting Entrepreneurship: IFCI encourages entrepreneurship by extending support and guidance to industrialists and entrepreneurs. It plays a vital role in nurturing new business ventures and facilitating the growth of existing ones.
d. Providing Equity Assistance: In addition to loans, IFCI can provide equity assistance to industrial projects by taking equity stakes in these ventures. This helps in sharing the risks associated with the projects and promoting their success.
e. Market Research and Development: IFCI conducts market research and provides assistance in product development and marketing strategies, contributing to the competitiveness of industries.
f. Supporting Industrial Modernization: IFCI supports industrial modernization efforts by providing financial resources for the adoption of advanced technology and the implementation of efficient production methods.
6. Write the functions of the SFCs.
Ans:- Functions of the State Financial Corporations (SFCs):
a. Providing Financial Assistance to SMEs: SFCs primarily provide financial assistance to small and medium-sized enterprises (SMEs) and industrial units. They offer a range of financial products, such as term loans, working capital loans, and equipment financing, to meet the capital needs of these businesses.
b. Promoting Industrial Growth: SFCs play a pivotal role in promoting industrial growth at the state or regional level. They support the establishment and expansion of local industries, contributing to job creation and economic development.
c. Addressing Regional Disparities: SFCs often focus on addressing regional disparities by providing financial resources to industries in less economically developed areas. This helps reduce regional imbalances and promotes balanced economic growth.
d. Supporting Entrepreneurship: SFCs actively support entrepreneurship by offering guidance, technical assistance, and financial support to aspiring entrepreneurs. They facilitate the establishment of new ventures and the growth of small businesses.
e. Project Appraisal: SFCs conduct thorough project appraisals to evaluate the feasibility and viability of industrial projects seeking funding. This helps ensure that funds are directed toward projects with a higher likelihood of success.
f. Monitoring and Follow-Up: SFCs monitor the progress of projects they finance and provide guidance to address any issues that may arise during the project's implementation. This helps improve the chances of project success and loan repayment.
7. Write the functions of the SIDCs.
Ans:- Functions of the SIDCs (State Industrial Development Corporations):
State Industrial Development Corporations (SIDCs) are government-owned financial institutions in India that play a crucial role in promoting industrial development at the state level. Each state in India typically has its own SIDC, and their functions include:
a. Financial Assistance: SIDCs provide financial assistance to small, medium, and large-scale industries in the form of loans, equity participation, and other financial instruments to support their establishment, expansion, and modernization.
b. Project Promotion: They identify and promote potential industrial projects within their respective states, encouraging entrepreneurs to invest in strategic sectors and regions.
c. Infrastructure Development: SIDCs are involved in the development of industrial infrastructure such as industrial estates, industrial parks, and growth centers. They provide land and infrastructure facilities to industries at affordable rates.
d. Technical Guidance: They offer technical and managerial consultancy services to entrepreneurs and industrialists to help them set up and run their businesses efficiently.
e. Equity Participation: SIDCs often take equity stakes in industrial projects, becoming stakeholders in the success and growth of these enterprises.
f. Support for Special Economic Zones (SEZs): They may participate in the development and management of SEZs, which are designated areas for export-oriented industries, trade, and commerce.
g. Promotion of Export Activities: SIDCs support export-oriented industries and help them access international markets by offering guidance and financial assistance.
h. SME Development: They focus on the development of small and medium-sized enterprises (SMEs) by providing them with financial and technical support.
i. Entrepreneurship Development: SIDCs conduct various programs and training sessions to nurture entrepreneurship and skill development among individuals interested in starting their own businesses.
j. Resource Mobilization: They raise funds through various means such as issuing bonds, mobilizing savings, and obtaining loans from financial institutions to finance industrial projects.
8. Write the functions of the NABARD.
Ans:- Functions of NABARD (National Bank for Agriculture and Rural Development):
NABARD is an apex development bank in India dedicated to fostering rural development and agriculture. It plays a pivotal role in enhancing the credit flow to agriculture and rural sectors. Its functions include:
a. Credit Support: NABARD provides refinance and credit support to rural and agricultural financial institutions like Regional Rural Banks (RRBs) and cooperative banks. It ensures that adequate credit is available for agricultural and rural development purposes.
b. Rural Infrastructure Development: NABARD finances and promotes the development of rural infrastructure, including roads, bridges, irrigation systems, and rural electrification projects.
c. Rural Banking: It supervises and regulates RRBs and cooperative banks to improve the efficiency and effectiveness of rural credit delivery.
d. Microfinance and Self-Help Groups (SHGs): NABARD supports microfinance institutions and SHGs by providing financial assistance and promoting financial inclusion in rural areas.
e. Promotion of Agriculture: NABARD provides funding and technical assistance for various agricultural activities, including crop production, animal husbandry, and agribusiness.
f. Rural Development Programs: It implements and finances rural development programs and schemes initiated by the government to uplift rural communities, such as watershed development, rural livelihoods, and poverty alleviation projects.
g. Research and Development: NABARD conducts research and development activities to improve agricultural and rural development practices, making them more sustainable and efficient.
h. Capacity Building: It provides training and capacity-building programs for farmers, rural entrepreneurs, and agricultural professionals to enhance their skills and knowledge.
i. Promotion of Sustainable Agriculture:NABARD encourages environmentally friendly and sustainable agricultural practices to ensure long-term food security and rural prosperity.
D. Long Answer Questions (Type-2):
1. State the objectives and the functions of the NABARD.
Ans:- The National Bank for Agriculture and Rural Development (NABARD) is a specialized financial institution in India that primarily focuses on rural and agricultural development. Its main objectives and functions are as follows:
Objectives:
1. Promoting Sustainable Agriculture: NABARD aims to promote sustainable and equitable agriculture and rural development by providing financial and technical assistance to various agricultural and rural development initiatives.
2. Rural Infrastructure Development: It seeks to facilitate the development of rural infrastructure, including roads, irrigation, and rural electrification, to enhance agricultural productivity and improve the quality of life in rural areas.
3. Financial Inclusion: NABARD works towards promoting financial inclusion by supporting rural and cooperative banks, self-help groups, and microfinance institutions to provide financial services to the rural poor and marginalized communities.
4. Credit Support: Providing credit support to agriculture and rural development activities is a key objective. NABARD refinances banks and financial institutions for extending loans to farmers, rural artisans, and other rural enterprises.
5. Institution Building: NABARD helps in building strong and sustainable rural institutions like self-help groups, cooperative societies, and farmer producer organizations to empower rural communities and improve their access to resources and markets.
6. Research and Development: It conducts research and development activities to promote innovations and best practices in agriculture and rural development.
7. Promoting Sustainable Livelihoods: NABARD supports various livelihood enhancement programs and income-generating activities to reduce poverty and unemployment in rural areas.
Functions:
1. Refinancing and Credit Support: NABARD refinances cooperative banks, regional rural banks, and commercial banks to provide credit to farmers, rural artisans, and other rural sectors. It ensures the flow of credit to rural areas.
2. Rural Infrastructure Development: It provides financial assistance for the development of rural infrastructure projects such as irrigation, rural roads, and agricultural marketing infrastructure.
3. Promotion of Self-Help Groups (SHGs): NABARD supports the formation and capacity building of SHGs to empower rural women and marginalized communities and enable them to access credit and financial services.
4. Microfinance Development: NABARD plays a significant role in the development and regulation of the microfinance sector, facilitating access to credit for small and marginalized borrowers.
5. Institutional Development: It helps strengthen cooperative institutions and rural banks by providing training, financial assistance, and technical support.
6. Research and Development: NABARD conducts research studies and pilot projects to identify and promote innovative agricultural and rural development practices.
7. Monitoring and Evaluation: NABARD monitors and evaluates the progress and impact of its funded projects and programs to ensure that they meet their intended objectives.
8. International Cooperation:NABARD collaborates with international organizations and agencies to bring in best practices and knowledge sharing in the field of rural and agricultural development.
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