 Development
banks are special industrial financing
institutions.
 These banks are mostly set up after World War II
in both developed and underdeveloped countries.
 Development banks do not mobilize savings like
other banks but invest the resources in a
productive manner.
 These banks make significant contribution to
industrial development.
Development Banks are the institutions engaged
in the promotion and development of industry
,agriculture and other key sectors.
 A development bank is an institution which takes
up the job of developing industrial enterprises
from its inception to completion.

 D.M.Mithani
states that , “ A development bank may
be defined as a financial institution concerned with
providing all types of financial assistance (medium
as well as long term ) to business units.
It is a specialized financial institution which
provides medium term and long- term lending
facilities.
 It is a multipurpose financial institution because
besides providing financial help ,it undertakes
promotional activities also.
 Development banks provides financial assistance
to both public and private institutions.
 The role of a development bank is of gap filler.
 Development banks accelerate the rate of growth
through helping in industrialization in specific and
economic development in general.

The objective of development bank is to serve the
public interest rather than earning profits.
 Development banks react to socio-economic needs
of development.

1.
2.
3.
4.
Lay foundations for industrialization.
Meet capital needs.
Need for promotional activities.
Help small and medium sectors.
1.
2.
3.
4.
5.
6.
7.
Financial gap fillers.
Undertake Entrepreneurial Role.
Commercial banking business.
Joint Finance.
Refinance Facility.
Credit Guarantee.
Underwriting of Securities.
1.
2.
3.
4.
5.
6.
7.
8.
9.
Project Appraisal and Eligibility of Applicant.
Technical Appraisal.
Economic Viability.
Assessing Commercial Aspects.
Financial Feasibility.
Managerial Competence.
National Contribution.
Balancing of various Factors.
Loan Sanction.
10.Loan Disbursement.
11.Follow Up.
 The
foreign rulers in India did not take much
interest in the industrial development of the
country.
 The recommendation for setting up industrial
financing institutions was made in 1931 by
Central Banking Enquiry Committee but no
concrete steps were taken.
 In 1949, Reserve Bank had undertaken a detailed
study to find out the need for specialized
institutions.
 It
was in 1948, that the first development bank i.e.
Industrial Finance Corporation of India (IFCI) was
established.
 To cater the needs of the small and medium
enterprises ,in 1951, Parliament passed State
Financial Corporation Act. Under this Act, state
governments could establish financial corporations
for their respective regions.
 After this, National Industrial Development
Corporation (NIDC) was established which could
not serve the ambitious role assigned to it and
restricted itself to modernization and rehabilitation
of cotton and jute textile industry.
 In
1955, The Industrial Credit and Investment
Corporation of India Ltd.(ICICI) was established
as a joint stock company. It provides term loans
and take an active part in the underwriting of and
direct investments in the share of industrial units.
 Then in 1958, Refinance Corporation for Industry
(RCI) was set up by the Reserve Bank of India.
 In 1964,IDBI was set up as an apex institution in
the area of industrial finance ,RCI was merged
with IDBI. IDBI was a wholly owned subsidiary of
RBI and was expected to co-ordinate the activities
of the institutions engaged in financing,
promoting, or developing industry.
 The
State Industrial Development Corporations
were established in the sixties to promote medium
scale industrial units.
 NABARD was set up in 1982, which was
responsible for short term, medium term ,long term
financing of agriculture and other allied activities.