What is the structure of development banks in india?
Answers
The financial assistance to industry is given in the following four main forms:
(i) Term loans and advances,
(ii) Subscription to shares and debentures,
(iii) Underwriting of new issues, and
(iv) Guarantees for term loans and deferred payments.
The first two forms place funds directly in the hands of companies as subscriptions to shares and debentures are subscriptions to new issues. The last two forms facilitate the raising of funds from other sources. For attracting risk capital into the industry, such underwriting of shares by development banks is at least as important as the direct subscription to these shares.
Guarantees from development banks assure creditors (banks and others) that their credit to industry whether in the form of loans or deferred payments is secured. For development banks, it only involves ‘contingent liabilities,’ that is liabilities which become payable only when the underlying agreements are not fulfilled. Therefore, such liabilities do not lock up funds of development banks, but are instrumental in attracting funds from other sources.
The development banks in India are a post-independence phenomenon (except the land development banks). Their structure is indicated in Figure 8.1. Some of them are for promoting industrial development; some for the development of agriculture; and one for foreign trade. Some are all-India institutions; others are state or lower level institutions.
"The structure of the development banks:
It has basically three categories, viz. Industrial Development Bank, Agricultural Development Bank and EXIM Bank. The first one is again classified as All-India and State Level (SFCs, SIDCs).
All-India Level Banks are further classified in two parts, viz. for large scale industries (IDBI, IFCI etc.) and for small scale industries (SIDBI).
Agricultural Development Banks are categorized in three, i.e. All-India (NABARD), State Level (SLDBs) and Local level (primary land development banks)."