Institutions of developmental finance
A Development Financial institution (DFI) is defined as “an institution endorsed or supported by Government of india primarily to provide development/Project finance to one or more sectors or sub-sectors of the economy. the institution differentiates itself by a thoughtful balance between commercial norms of operation, as adopted by any financial institution like commercial bank and developmental responsibilities.
after independence the role of commercial Banking was limited to WORKING CAPITAL financing on short term basis so thrust of DFis was on long term finance to Industry and Infrastructure-2/”>INFRASTRUCTURE sector in india. india’s first financial institution was operationalised in 1948 and it set up state Financial corporations (SFC’s) at the state level after passing of the SFCs act, 1951, succeeded by the development of industrial Finance corporation of india (IFCI).
DFIs can be classified in four categories of institutions as per their functions:
- National Development Banks e.g. IDBI, SIDBI, ICICI, IFCI, IRBI, IDFC
- Sector specific financial institutions e.g. TFCI, EXIM Bank, NABARD, HDFC, NHB
- Investment Institutions e.g. LIC, GIC and UTI
- State level Institutions e.g. State Finance corporations and SIDCs
The role of DFIs was to recognize the gaps in institutions and markets in our financial sector and act as a gap-filler which was made due to incapability of Commercial Banks to finance big infrastructure projects for long term and support them to attain Growth and financial steadiness. Therefore, Govt. of India set up specialized DFIs in India to fulfil long term project financing requirements of industry and agriculture. The financial institutions in India were set up under the full control of both Central and State Governments. The Government used these institutions for the achievements in planning and development of the nation as a whole.
Specialized development financial institutions (DFIs), such as, Industrial Finance Corporation of India (IFCI), Industrial Development Bank of India (IDBI), National Bank for Agriculture and Rural Development (NABARD), National Housing Board (NHB) and Small Industry Development Bank of India (SIDBI), with majority ownership of the RBI were launched to meet the long-term financing needs of industry and Agriculture In India for driving growth in our economy post-independence. There have been three phases in the evolution of DFIs in India. The first phase began with Independence and spreads to 1964 when the Industrial Development Bank of India was set up. The second phase stretched from 1964 to the middle of the 1990s when the role of the DFIs grew in importance, with the funding disbursed by them amounting to 10.3 per cent of Gross Capital Formation in 1990-91 and 15.2 per cent in 1993-94. In third phase after 1993-94, the prominence of development banking declined with the decline being particularly severe after 2000-01, as Liberalization-2/”>Liberalization resulted in the exit of some firms from development banking and in a waning in the Resources mobilised by other firms.
Historical evolution of Institutions of developmental finance in india
The process started instantly after Independence, with the setting up of the Industrial Finance Corporation (IFCI) in 1948 to embark on long term term-financing for industries. State Financial Corporations (SFCs) were formed under an Act that came into effect from August 1952 to endorse state-level, small and medium-sized industries with industrial finance. In January 1955, the Industrial Credit and Investment Corporation of India (ICICI), the first development finance institution in the private sector, came to be set up, with backing and funding of the World Bank. In June 1958, the Refinance Corporation for Industry was established, which was later taken over by the Industrial Development Bank of India (IDBI). Other DFIs that were launched included the Agriculture Refinance Corporation (1963), Rural Electrification Corporation Ltd. and HUDCO. Two other major steps in institution building were the setting up of IDBI as an apex term-lending institution and the Unit Trust of India (UTI) as an investment institution, both starting operations in July 1964 as subsidiaries of the Reserve Bank of India. There were new initiatives at the level of the states as well in the 1960s. State governments setup State Industrial Development Corporations (SIDCs) to inspire industrial development in their territories.
Specialized financial institutions set up after 1974 included NABARD (1981), EXIM Bank (1982), Shipping Credit and Investment Company of India (1986), Power Finance Corporation, Indian Railway Finance Corporation (1986), Indian RENEWABLE ENERGY Development Agency (1987), Technology Development and Information Company of India, a venture fund later known as IFCI Venture Capital Funds Ltd. and ICICI Venture Funds Management Ltd. (1988), National Housing Bank (1988), the Tourism Finance Corporation of India, set up by IFCI (1989), Small Industries Development Bank of India (SIDBI), with functions relating to the micro, medium and small industries sector taken out of IDBI (1989).
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Institutions of Developmental Finance
Developmental finance is the provision of financial resources to developing countries in order to promote economic growth and development. The institutions of developmental finance are the organizations that provide these resources.
The World Bank is one of the most important institutions of developmental finance. It is a multilateral development bank that provides loans to developing countries for a variety of purposes, including infrastructure, Education, and Health care. The World Bank also provides technical assistance to developing countries.
The International Monetary Fund (IMF) is another important institution of developmental finance. It is an international organization that provides loans to countries that are experiencing financial difficulties. The IMF also provides policy advice to countries on how to manage their economies.
The Asian Development Bank (ADB) is a regional development bank that provides loans and grants to developing countries in Asia. The ADB focuses on POVERTY reduction, Infrastructure Development, and regional cooperation.
The African Development Bank (AfDB) is a regional development bank that provides loans and grants to developing countries in Africa. The AfDB focuses on poverty reduction, infrastructure development, and regional integration.
The Inter-American Development Bank (IDB) is a regional development bank that provides loans and grants to developing countries in Latin America and the Caribbean. The IDB focuses on poverty reduction, infrastructure development, and regional integration.
The European Bank for Reconstruction and Development (EBRD) is a multilateral development bank that provides loans and grants to countries in Central and Eastern Europe, the Caucasus, and Central Asia. The EBRD focuses on promoting Economic Development and transition to market economies.
The New Development Bank (NDB) is a multilateral development bank that was founded by Brazil, Russia, India, China, and South Africa. The NDB focuses on infrastructure development, Sustainable Development, and regional cooperation.
The Islamic Development Bank (IDB) is a multilateral development bank that provides loans and grants to Muslim-majority countries. The IDB focuses on poverty reduction, infrastructure development, and social development.
The China Development Bank (CDB) is a state-owned policy bank that provides loans to Chinese companies and projects. The CDB focuses on infrastructure development, energy, and transportation.
The Export-Import Bank of the United States (Ex-Im Bank) is a government-owned bank that provides loans and guarantees to US exporters. Ex-Im Bank helps US companies compete in the global marketplace.
The Japan Bank for International Cooperation (JBIC) is a government-owned bank that provides loans and guarantees to Japanese companies and projects. JBIC focuses on infrastructure development, energy, and transportation.
The Korea Development Bank (KDB) is a state-owned policy bank that provides loans to Korean companies and projects. The KDB focuses on infrastructure development, energy, and transportation.
The Development Bank of South Africa (DBSA) is a state-owned development bank that provides loans and grants to South African companies and projects. The DBSA focuses on infrastructure development, social development, and economic development.
The National Bank for Economic and Social Development of Brazil (BNDES) is a state-owned development bank that provides loans and grants to Brazilian companies and projects. The BNDES focuses on infrastructure development, industry, and agriculture.
The National Development and Reform Commission of China (NDRC) is a government agency that is responsible for planning and coordinating economic development in China. The NDRC is responsible for setting economic targets, approving investment projects, and managing Foreign Exchange reserves.
The Ministry of Finance of India (MoF) is the government ministry that is responsible for managing the Indian economy. The MoF is responsible for collecting taxes, managing Public Debt, and formulating Fiscal Policy.
The Ministry of Economy and Finance of France (MEF) is the government ministry that is responsible for managing the French economy. The MEF is responsible for collecting taxes, managing public debt, and formulating fiscal policy.
The Ministry of Finance of Germany (BMF) is the government ministry that is responsible for managing the German economy. The BMF is responsible for collecting taxes, managing public debt, and formulating fiscal policy.
The Ministry of Finance of Italy (MEF) is the government ministry that is responsible for managing the Italian economy. The MEF is responsible for collecting taxes, managing public debt, and formulating fiscal policy.
The Ministry of Finance of Japan (MOF) is the government ministry that is responsible for managing the Japanese economy. The MOF is responsible for collecting taxes, managing public debt, and formulating fiscal policy.
The Ministry of Finance of the United Kingdom (HM Treasury) is the government ministry that is responsible for managing the British economy. The HM Treasury is responsible for collecting taxes, managing public debt, and formulating fiscal policy.
The Ministry of Finance of the United States (Treasury Department) is the government ministry that is responsible for managing the US economy. The Treasury Department is responsible for collecting taxes, managing public debt, and formulating fiscal policy.
What are the institutions of developmental finance?
The institutions of developmental finance are the organizations that provide financial assistance to developing countries. These organizations include the World Bank, the International Monetary Fund, and the regional development banks.
What are the goals of the institutions of developmental finance?
The goals of the institutions of developmental finance are to promote economic growth and development in developing countries. They do this by providing loans, grants, and technical assistance to governments and private sector organizations.
How do the institutions of developmental finance work?
The institutions of developmental finance work by providing loans, grants, and technical assistance to governments and private sector organizations in developing countries. These loans and grants are used to finance development projects, such as infrastructure projects, education projects, and health projects. The technical assistance is provided to help governments and private sector organizations implement these projects.
What are the benefits of the institutions of developmental finance?
The benefits of the institutions of developmental finance include:
- Increased economic growth and development in developing countries
- Improved infrastructure and Services in developing countries
- Reduced poverty in developing countries
- Increased access to education and healthcare in developing countries
What are the criticisms of the institutions of developmental finance?
The criticisms of the institutions of developmental finance include:
- They are often seen as being too bureaucratic and slow to respond to the needs of developing countries.
- They are often seen as being too focused on economic growth and not enough on social development.
- They are often seen as being too willing to impose conditions on their loans, which can make it difficult for developing countries to repay them.
What is the future of the institutions of developmental finance?
The future of the institutions of developmental finance is uncertain. They are facing a number of challenges, including the global financial crisis, the rise of China, and the increasing number of developing countries that are graduating from low-income status. However, they also have a number of opportunities, such as the need for infrastructure investment in developing countries and the increasing demand for technical assistance.
Question 1
Which of the following is not a development finance institution?
(A) The World Bank
(B) The International Monetary Fund
(C) The Asian Development Bank
(D) The National Bank for Agriculture and Rural Development
Answer
(B) The International Monetary Fund is not a development finance institution. It is an international financial institution that provides loans to countries to help them stabilize their economies and promote economic growth.
Question 2
Which of the following is the largest development finance institution in the world?
(A) The World Bank
(B) The International Monetary Fund
(C) The Asian Development Bank
(D) The European Bank for Reconstruction and Development
Answer
(A) The World Bank is the largest development finance institution in the world. It provides loans to developing countries to help them finance their development projects.
Question 3
Which of the following is the main objective of development finance institutions?
(A) To provide loans to developing countries
(B) To promote economic growth in developing countries
(C) To reduce poverty in developing countries
(D) All of the above
Answer
(D) All of the above are the main objectives of development finance institutions. They provide loans to developing countries to help them finance their development projects, promote economic growth, and reduce poverty.
Question 4
Which of the following is a criticism of development finance institutions?
(A) They are often seen as being too bureaucratic and inefficient
(B) They are often seen as being too focused on lending to large, well-established companies
(C) They are often seen as being too focused on short-term results, rather than long-term development
(D) All of the above
Answer
(D) All of the above are criticisms of development finance institutions. They are often seen as being too bureaucratic and inefficient, too focused on lending to large, well-established companies, and too focused on short-term results, rather than long-term development.
Question 5
What are some of the challenges facing development finance institutions?
(A) The global financial crisis
(B) The rise of China
(C) The increasing number of fragile and conflict-affected states
(D) All of the above
Answer
(D) All of the above are challenges facing development finance institutions. The global financial crisis has made it more difficult for development finance institutions to raise funds. The rise of China has led to increased competition for resources from developing countries. The increasing number of fragile and conflict-affected states has made it more difficult for development finance institutions to operate in these countries.