Development Financial Institution

Development Financial Institution
Development Finance Institutions (DFIs) are specialized financial institutions established to provide
credit and financial services to sectors that are crucial for economic development but may not be
adequately served by traditional banks, such as infrastructure, agriculture, and small and medium
enterprises (SMEs).
These institutions provide access to growth capital, mostly for developmental projects. The key
role of DFIs is to promote economic and social development.
Types of Finance provided are –
Medium (1 – 5 years) and
Long term ( >5 years).
Objectives of Development Finance Institutions

1. The prime objective of DFI is the economic development of the country
2. These banks provide financial as well as the technical support to various sectors
3. DFIs do not accept deposits from people.
4. They raise funds by borrowing funds from governments and by selling their
bonds to the general public
5. It also provides a guarantee to banks on behalf of companies and subscriptions
to shares, debentures, etc.
6. They also provide technical assistance like Project Report, Viability study, and
consultancy services.
Types of DFIs
Industrial Finance Corporation of India (IFCI)

Industrial Finance Corporation of India (IFCI) Ltd. was set up in 1948 as a
Statutory Corporation to provide medium and long-term finance to industry.
The primary business of IFCI is to provide medium to long-term financial
assistance to the manufacturing, services, and infrastructure sectors.
Industrial Development Bank of India (IDBI)

The Industrial Development Bank of India (IDBI) was, initially, set up in 1964 as a
subsidiary of the Reserve Bank of India (RBI) to provide credit and other
financial facilities for the development of the Indian industry.
At present, it’s a full-service commercial bank under the Banking System in India
that supports industrial growth.
Small Industries Development Bank of India (SIDBI)

Small Industries Development Bank of India (SIDBI) was set up in 1990 as an
independent financial institution under the Banking System in India to aid the
growth and development of Micro, Small and Medium Enterprises (MSMEs) in
India.
It acts as the principal financial institution for the promotion, financing, and
development of the MSME sector in India, as well as for coordinating the functions
of institutions engaged in similar activities.
Agricultural Development Banks (ADBs)

ADBs are specialized financial institutions under the Banking System in India
designed to support the agricultural sector by providing financial services and
products tailored to the unique needs and challenges of agriculture.
Major ADBs in India are:
National Bank for Agriculture and Rural Development (NABARD)
National Bank for Agriculture and Rural Development (NABARD) was established
on the recommendations of the B. Srivaraman Committee in 1982 with
the primary responsibility of matters concerning policy, planning, and
operations in the field of credit for agriculture and other economic activities
in the rural areas of India.
NABARD is the main agency for implementing the Rural Infrastructure

Development Fund (RIDF) scheme. In this capacity, it performs the following roles:
Serves as an apex financing agency for the institutions providing investment

and production credit for promoting the various developmental activities in
rural areas.
Refinances the financial institutions that finance the rural sector, including
State Cooperative Agriculture and Rural Development Banks (SCARDBs),
State Cooperative Banks (SCBs), Regional Rural Banks (RRBs), Commercial
Banks, and other financial institutions approved by the RBI.
Supervises the Regional Rural Banks (RRBs).
Export – Import Development Banks

They are specialized financial institutions under the Banking System in India, that
facilitate and promote the country’s international trade by providing financial
assistance to exporters and importers.
Major Export-Import Banks in India are:
Export-Import Bank of India (EXIM Bank)
Export-Import Bank (EXIM Bank) was set up in 1982 to take over the operations
of the international financing wing of the IDBI.
It provides Indian exporters with financial assistance, overseas investment credit,
and technology and import finance, among other services.
Infrastructure Development Banks (IDBs)

IDBs are financial institutions under the Banking System in India, dedicated to
financing the development, construction, and improvement of a country’s
infrastructure projects.
Major IDBs under the Indian Banking System are:
National Housing Bank (NHB)
National Housing Bank (NHB) is a state-owned bank and regulator that supports
housing finance institutions and promotes housing finance schemes in India.
NHB is regulated by the RBI.
India Infrastructure Finance Company Limited (IIFCL)
India Infrastructure Finance Company Limited (IIFCL) provides long-term finance

to viable infrastructure projects in broad sectors of transportation, energy, water,
sanitation, communication, and social and commercial infrastructure.
ICICI – Industrial Credit and Investment Corporation of India Limited
It was established in 1955 by an initiative of the World Bank.
It established its subsidiary company ICICI Bank limited in 1994.
In 2002, ICICI limited was merged into ICICI Bank Limited making it the first universal
bank of the country.
Universal Bank – Any Financial institution performing the function of Commercial Bank
+ DFI
Roles of Development Financial Instituions in India

Development Financial Institutions in India are central to the nation’s
economic strategy, fostering industrial growth and socioeconomic development.
By directing resources towards underserved sectors, they not only spur industrial
growth but also contribute to regional balance and socio-economic development.
As the country targets ambitious economic goals, the role of these Institutions will
be more crucial than ever.
The DFIs play a multifaceted role in India’s economic landscape as can be seen as
follows:
Infrastructure Creation: Their long-term funding enables the development of

critical infrastructure projects, laying the foundation for future economic activity.
Empowering Businesses: They provide loans for capital investments,

infrastructure development, and technological upgrades. This empowers
businesses to grow and modernize.
Promotional Activities: Much more than just simple lending activities, these
banks offer advisory services, and partner with industry bodies to develop specific
sectors.
Promotion of SMEs: Institutions like SIDBI focus specifically on the SME sector,
providing them with necessary financial services and support to help them grow
and thrive.
Export Promotion: The EXIM Bank provides financial assistance to exporters and
importers, and helps in promoting cross-border trade.
Social Development: By facilitating financing for rural and agricultural projects,

they contribute to inclusive growth and poverty alleviation.
Agricultural and Rural Development: NABARD plays a crucial role in financing
agricultural and rural development, supporting a range of activities from irrigation
infrastructure to microfinance institutions that lend to small farmers.

Development Financial Institution

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Development Financial Institution

role of DFIs is to promote economic and social development.

Types of Finance provided are –

Medium (1 – 5 years) and

Long term ( >5 years).

Objectives of Development Finance Institutions

Industrial Finance Corporation of India (IFCI)

Industrial Development Bank of India (IDBI)

Small Industries Development Bank of India (SIDBI)

Agricultural Development Banks (ADBs)

Major ADBs in India are:

National Bank for Agriculture and Rural Development (NABARD)

NABARD is the main agency for implementing the Rural Infrastructure

Serves as an apex financing agency for the institutions providing investment

Supervises the Regional Rural Banks (RRBs).

Export – Import Development Banks

Major Export-Import Banks in India are:

Export-Import Bank of India (EXIM Bank)

Infrastructure Development Banks (IDBs)

Major IDBs under the Indian Banking System are:

National Housing Bank (NHB)

NHB is regulated by the RBI.

India Infrastructure Finance Company Limited (IIFCL)

India Infrastructure Finance Company Limited (IIFCL) provides long-term finance

ICICI – Industrial Credit and Investment Corporation of India Limited

It was established in 1955 by an initiative of the World Bank.

It established its subsidiary company ICICI Bank limited in 1994.

Roles of Development Financial Instituions in India

Infrastructure Creation: Their long-term funding enables the development of

Empowering Businesses: They provide loans for capital investments,

Social Development: By facilitating financing for rural and agricultural projects,

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