The industrial development bank of India was in July 1964. It was brought into existence at a time when there were already a number of institutions in the field.
the reasons, why yet another institution had to be brought into existence are the follows:
First, the existing financial institutions, such as IFCI, ICICI, etc, did not have enough resources of their own to meet the needs of industrial concerns on a long term basis.
Secondly, the commercial bank’s, through having no shortage of investible funds, were not keep to undertake long term finance, because of the absence of adequate refinancing arrangements. This affected their liquidity position.
Thirdly, each of these institutions functioned in an uncoordinated manner, following different policies as to lending and investment of funds.
With the enactment of the public financial institutions Act, 1975 the IDBI has now been made the apex financial institution.
Industrial Development Bank of India was a wholly-owned subsidiary of the Reserve Bank of India till 1976. At the time of its function, it looks over the refinance corporation for the industry which was set up in June 1958.
Since 1986, the authorized capital of IDBI has been raised to Rs 1000 Crores which can be further increased to Rs 2000 crores.
Functions Of Industrial Development Bank of India:
The Industrial Development Bank of India performs the following major functions:
1) As a Financier: IDBIs functions as a financier are outlined below:
A) IDBI extends direct assistance to the industry under its project finance scheme and the technical development fund scheme.
B) It extends indirect assistance by refinancing term loans extended by SIDCs, SFCs, RRBs, and Co-operative/commercial banks to industrial concerns.
C) Seed Capital Scheme is available for providing financial assistance to new entrepreneurs.
D) Financial assistance is also sanctioned to leasing companies for refinancing their leasing and hire purchase schemes.
E) IDBIs bills discounting scheme is meant to help the use of indigenous machinery by industrial concerns.
This facility is mainly provided to sugar, jute, engineering, cotton textiles, and cement industries.
F) Resource support is provided to other financial institutions by subscribing to their shares and debentures.
2) As Promoter And Co-ordinator:
IDBI under this category are the following :
A) In 1990, the IDBI created the small industries Development Bank of India (SIDBI) as its wholly-owned subsidiary.
B) The IDBI has set up a network of technical consultancy organization in collaboration with state-level financial and development institutions and commercial banks.
C) The IDBI coordinates the activities and operations of other lending institutions engaged in financing, promoting or developing industries.
D) It identifies projects which can be implemented in specific backward areas and gives both direct and indirect financial assistance for the implementation of such projects.
E) It has set up a mutual fund, started stockbroking and has also sponsored credit rating agency CARE.
IDBIs Financial Assistance Scheme:
1. Composite loan scheme: Under this scheme, loan up to Rs 50000 is given to artisans, village and cottage industries and industries in the tiny sector for the purchase of equipment and also to meet working capital requirements.
2. Scheme for Physically handicapped persons and SC/ST:
Under this scheme, financial assistance up to Rs50000 is given to physically handicapped persons and persons in the reserved category who are associated with the cottage, village, and tiny industries.
3. Scheme for Tourism related Activities: Under this scheme loan up to Rs. 45 lakes can be granted to entrepreneurs for setting up the restaurant, amusement parks, tourism service agencies.
4. Scheme for marketing organization: For setting up new sales outlets and for undertaking expansion program of existing outlets, financial assistance up to Rs 25 lakhs is given to individuals, partnership firms, private and public limited companies.
5. Scheme for small road transport operation: Through this scheme financial assistance is given to small road transport operators who do not own more than six vehicles. The finance can be utilized to meet working capital requirements and to meet the expenditure towards bodybuilding, cost of chassis.