Need and importance of institutional finance in india industrial sector
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Introduction:
Finance is considered as the life-force of industry. Without getting adequate finance industrial development is not at all possible. Due to the lack of adequate finance, industrial development in India could not achieve a significant position and shape. Industries require both short term, medium term and long term finance for meeting their requirements of fixed capital expenditure and also to meet their working capital needs.
Long-Term, Medium-Term and Short-Term Finance:
Long term finance for industries includes those financial resources which are advanced to the industries by the banks for a period of 3 years and above. Long term finance is quite important for the expansion and modernisation of industrial projects and also to meet its fixed capital expenditure requirement.
Long term finance is mostly available from the sale of shares and debentures, and loan from term lending financial institutions like IDBI, IFCI, ICICI etc. Medium term loan is also available from banks and other financial institutions for a period above 1 year and up to 3 years.
Short-term finance for industries includes those financial resources which are advanced by hanks to the industries for a period varying between 1 month to 12 months. Short-term finance is required to meet working capital needs and other sundry expenses of the industrial projects. Commercial banks offer short term loans on cash-credit basis on the security or stocks and overdraft facilities to the industries. Industries can also raise short term finance by raising public deposits for one to three years.
Finance is considered as the life-force of industry. Without getting adequate finance industrial development is not at all possible. Due to the lack of adequate finance, industrial development in India could not achieve a significant position and shape. Industries require both short term, medium term and long term finance for meeting their requirements of fixed capital expenditure and also to meet their working capital needs.
Long-Term, Medium-Term and Short-Term Finance:
Long term finance for industries includes those financial resources which are advanced to the industries by the banks for a period of 3 years and above. Long term finance is quite important for the expansion and modernisation of industrial projects and also to meet its fixed capital expenditure requirement.
Long term finance is mostly available from the sale of shares and debentures, and loan from term lending financial institutions like IDBI, IFCI, ICICI etc. Medium term loan is also available from banks and other financial institutions for a period above 1 year and up to 3 years.
Short-term finance for industries includes those financial resources which are advanced by hanks to the industries for a period varying between 1 month to 12 months. Short-term finance is required to meet working capital needs and other sundry expenses of the industrial projects. Commercial banks offer short term loans on cash-credit basis on the security or stocks and overdraft facilities to the industries. Industries can also raise short term finance by raising public deposits for one to three years.
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