Finance being the basic requirement of
any enterprise is needed at every stage.
 An entrepreneur must know about his
financial needs before setting up a unit.
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Financial institutions
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A large variety of financial institutions has
come into existence over the years to perform
a variety of financial activities.
While some of them operate at all India level
and others at state level.
All India financial institutions consists of All-India
Development Banks, Specialised Financial
Institutions,
Investment
Institutions
and
Refinance Institutions.
The state level institute comprise 18 state
financial corporations and 26 industrial
development corporations.
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The IFCI,IDBI,IRBI were established under different
acts of Parliament.
The SIDBI was set up for promotion ,financing and
development of small scale and tiny industries.
Specialised Financial Institutions are also operating
in in the areas of export import(EXIM Bank1982),infrastructure(IDFC-1997),tourism(TFCI1989)and venture capital(IVCF,ICICI Venture).
Investment Institution in the business of mutual
funds and insurance activity have also played
significant roles in the mobilisation of household
sector savings.
In the agriculture and rural sector and the housing
sector ,the NABARD and NHB are acting as the
chief refinancing institutions.
It is one of India's leading public sector banks and
4th largest Bank in overall ratings. RBI categorised
IDBI as an "other public sector bank".
It was established in 1964 by an act of
Parliament to provide credit and other facilities for
the development of the Indian industry.
Some of the institutions built by IDBI are
the
Securities
&
Exchange
Board
of
India(SEBI),
National
Stock
Exchange
of
India(NSE), the National Securities Depository
Services Ltd(NSDL), the Stock Holding Corporation
of India(SHCIL), the Credit Analysis & Research
Ltd, the Export-Import Bank of India (Exim Bank).
The Government of India established the
Industrial Finance Corporation of India
(IFCI) on July 1, 1948, as the first
Development Financial Institution in the
country to cater to the long-term finance
needs of the industrial sector.
To grant medium and long-term loans ranging
between Rs. 30 lakhs to Rs. 1crores to large-sized
industrial units which are repayable within a
period of 25 years.
 To underwrite the issue of stocks, shares,
debentures or bonds b industrial units but must
dispose of such securities within 7 years.
 To guarantee loans raised by the industrial units
which are repayable within a period of 25 years.
 Subscribing to debentures floated by the industrial
concerns.
 Providing assistance for setting up new industrial
projects and also for expansion, diversification and
renovation of existing units.
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It was established on 5th January, 1955 to assist
industrial units in the private-sector.
The main objects of ICICI are as follows:
 To assist in the creation, expansion and
modernization at industrial units in the private
sector.
 To encourage the inflow and participation of
foreign capital in the private sector industrial
units.
 To expand the investment market in India
 industrial units in the private sector.
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To sponsor and underwrite new issues.
 To provide medium and long-term loans
to industrial units in the private sector.
 To guarantee loans taken from other
private sources.
 To furnish managerial, technical and
administrative advice to industrial units
by the private sector.
 To purchase the shares and debentures
of new companies.
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It
is
an
independent
financial
institution aimed to aid the growth and
development of micro, small and
medium-scale enterprises in India. Set up
on April 2,1990 through an act of
parliament for:
 Promotion
 Financing
 Development of small scale industry.
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SIDBI’s financial assistance to small scale
sector has three major dimensions :
i) Direct assistance : The objective behind
SIDBI's direct assistance schemes has been
to supplement the efforts of PLIs by
identifying the gaps in the existing credit
delivery mechanism for SSIs. Assistance for
setting up of new SSI units, small hotels,
hospitals/nursing
homes,
technology
upgradation and modernisation is provided
directly through 43 branches of SIDBI.
ii) Indirect assistance : SIDBI's schemes of
indirect assistance envisage credit to SSIs
through a large network of 913 PLIs spread
across the country with a branch network
of over 65,000.The assistance is provided by
way of refinance, bills rediscounting and
resource support in the form of short term
loans/line of credit in lieu of refinance etc.
iii) Development and Support Services : SIDBI
extends development and support services
in the form of loans and grants to different
agencies working for the promotion and
development of SSIs and tiny industries.The
support is given for enterprise promotion with
emphasis on rural industrialisation, HRD
development in the SSI sector, technology
upgradation,
quality
management,
marketing
promotion,
information
dissemination etc.
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It is an apex development bank
in India having headquarters based
in Mumbai (Maharashtra) and other
branches are all over the country. It was
established on 12 July 1982 by a special
act by the parliament and its main focus
was to uplift rural India by increasing the
credit flow for elevation of agriculture &
rural non farm sector and completed its
25 years on 12 July 2007.
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It was set up in April 1971, as a joint stock
company to provide reconstruction and
rehablitition mainly to the ‘sick’units.
The functions of IRBI is modernisation,
rehablitition and expansion of sick units, it
gives consultancy services, gives loans
and advances, underwrites stocks shares
and bonds, provides infrastructural
facilities and raw material.
TDICI is technology venture finance
company set up in 1989, to sanction
project finance to new technology
ventures.
 Till March 2000, TDICI had assisted nearly
350 companies to the extent of Rs. 500
crores.
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It provides information and guidance on the Indian
government's investment procedures, policies,
incentives, infrastructure facilities, and investment
opportunities.
The services that IIC provides are all free. The
location of the head office of Indian Investment
Center (IIC) is New Delhi.
Indian Investment Center also had offices in
London, Singapore, New York,Tokyo, and Abu
Dhabi.
Indian Investment Center (IIC) was able to bring
investments worth around 1,275 crore during 1981
and 1990.
The SFCs are established to help small and medium sized
industrial concerns which include public limited
companies, private limited companies, partnership and
proprietary concerns.
Resources
The authorised capital of SFC is fixed by the state govt.
within the minimum and maximum limits of Rs. 50 lakhs
and Rs. 5 crores respectively. Under the provisions of
SFCs Act 1951, SFCs are authorised to raise resources by
the issue of share capital taken by the respective state
govt., the RBI, scheduled banks, cooperative banks and
other financial institutions such as insurance companies,
investment trust and private parties.
According to section 2(C) of the SFCs Act 1951, the SFCs
can assist an industrial concern engaged or to be
engaged, in any of the following activities:
a) Manufacture, preservation or processing of goods
b) Mining
c) Hotel industry
d) Road transport
e) Generation or distribution of electricity or any other
form of power
f) Development of any area of land as an industrial
estate
g) Fishing or providing shore facilities for fishing or the
manufacture therefore.
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The SFCs provide medium and long term loans to
small and medium scale industries.
Normally, loans are given for acquiring capital assets
like land, building etc.
Loans are given to the new and existing industries as
well.
Amount of loan varies from Rs. 5000 to Rs. 90 lakhs.
The loans are repayable in equal installments spread
over a period of 10 to 12 years and are secured by
the first charge on the fixed assets of the borrowers.
The SFCs are permitted to provide assistance to
industrial concerns by:
i.
Granting loans or advances, or subscribing to
the debentures of industrial concerns; loans to
be repayable within 20 years
ii. Guaranteeing
deferred payments of the
industrial concern which purchases capital
goods within India
iii. Underwriting the issue of stocks, bonds or
debentures of industrial concern, subject to their
being disposed off in the market within 7 years
iv. Providing for discounting of bills of exchange
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The Punjab Financial Corp. has been established
under state financial corp.
Act, 191 for providing medium and long term loans to
small and medium scale industrial undertaking in the
state of punjab.
It generally grants term loans for creation/ acquisition
of fixed assets like land, building, plant and
machinery, provides guarantee against deferred
payments for the purchase of capital goods and
offer underwriting facility of issue of stocks and shares
of companies.
SIDC is set up mainly to give financial assistance to
entrepreneurs and help backward region. SIDCs
have been incorporated either as limited liability
companies under the Indian Companies Act or as
autonomous corp. under state specific Acts. These
acts are wholly owned by state govt. SIDC was set
up in various states in different years. In Punjab, it
was set up in 1966. Some of the SIDCs also function
as SFCs and provide financial support to small
sector. The primary objectives of SIDCs is to foster
industrial growth in the state by undertaking
developmental, promotional and financial
functions.
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PFCs finances those who are engaged in:
Manufacture, processing and preservation of goods
Mining or development of mines
Hotel industry
Transport of passengers or goods by road or by water or
by ropeways or by lift
Generation or distribution of power
The setting up of an industrial area or industrial estates
Providing weigh bridge facilities
Promotional activities such as identification of
project ideas, selection and training of
entrepreneurs
ii. Promotion and management of business
iii. Granting financial assistance to industrial units
by way of loans, guarantees lease financing
and also technical and managerial assistance
during the project implementation stage
iv. Acting as agent of the state and central govt.
in operating their schemes for the provision of
special incentives to industrial units coming up
in less developed regions.
i.
The Punjab State Industrial Development
Corporation Limited (PSIDC) was incorporated
in 1966, as an undertaking of the State Govt., to
act as a catalyst for the development of large
and medium scale industries in the State of
Punjab. Since then, PSIDC has been acting as
the prime mover in the State for promotion of
industrial ventures and thus, playing the role of
an ‘ institutional entrepreneur’
PSIDC as a developmental institution has
played a pivotal role and promoted a
number of projects in public sector and also
facilitated emergence of many projects,
through private initiative in the medium and
large scale industrial sectors, by way of
financial and/ or technical collaboration with
leading entrepreneurs/industrial houses in
joint and assistance sectors.
PSIDC extends financial assistance under the
aegis of IDBI and provides term loan upto Rs.
25 million of new industrial projects with
capital cost of Rs. 100 million.
 Under
Equipment
Refinance
Scheme,
industrial companies with good track record
and sound financial position are provided
term loans upto Rs. 50 million for purchase of
equipment for expansion/diversification/
modernization activities.
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PSIDC provides a host of services to
entrepreneurs/ companies, right from
inception of projects to their smooth
implementation,
which
includes
extending cooperation in obtaining all
approval from state and central govt.
Thus, PSIDC virtually acts as a single
source for entrepreneurs/companies for
successfully
establishing
industrial
ventures in the state.
TIIC is wholly owned by govt. of Tamil Nadu and is the first
State level financial institution in the country. It involves
the following activities:
i.
Provision of long term loans for acquisition of land,
building, plant and machinery to tiny, small and
medium scale industries
ii.
Sanctioning term loans for modernisation, expansion
and diversification of existing units on easy terms
iii. Designing special schemes for economically weaker
sections, scheduled castes/tribes entrepreneurs,
physically handicapped persons
iv. Underwriting of shares
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KSSIDC- Government of Karnataka Undertakingwas established for providing basic infrastructural
facilities for the upliftment of small scale industries
in the state of Karnataka.
The corporation gives preference to those
entrepreneurs who deal in high technology,
export – oriented and import substitution
products.
The sheds include factory accommodation, toilet
facilities, storage space, open area outside the
shed.
The objective of the COSIDICI are to:
 Provide and arrange means and facilities for dissemination of
knowledge and information relation to promotion and
development of industries, for exchange of views and ideas on
subjects of common interest to all member corporation
 Promote, protect and develop common interest of the various
member corporation
 Promote co-ordination, collaboration, joint participation and
general understanding among the member corporation
 Sponsor studies, surveys, research& development project
pertaining to industries
 Do all such other things as may be incidental or conducive to
the attainment of all above objectives.
In the field of rural credit and agricultural
development, establishment of NABARD is a
major event.
 The NABARD provides credit to rural sector
through cooperative banks, commercial
banks, regional rural banks and other
financial institutions set upto to finance rural
development.
 The bank ensures co-ordination in operations
of various institutions engaged in the field of
rural credit.
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The KVIC was established in 1956 under the KVIC Act.
It aims to plan, organize and implement programs for
the development of khadi and village industries as
specified in the schedule of KVIC Act 1956.
Initially, only 10 village industries were listed in the
schedule but later 16 more industries were added in
the schedule.
The operational strategy of KVIC includes:
i. To promote rural employment
ii. To intensify industries in rural areas
iii. To standardize and exercise quality control
iv. To provide sale promotion assistance
v. To promote export incentives for design and
development.