ALL INDIA DEVELOPMENT FINANCE INSTITUTIONS (DFIS)

The organisations owned by charity institutions do the infrastructure projects or by the government contribute to national importance. These can or cannot meet the return standard of commercials. These institutions are responsible for supporting the long-term financial requirements for infrastructure and giving growth to the Indian economy. National development banks, investment institutes, state-level institutes and sector-specific institutions, etc. are together called the Development financial institutions of India. These institutions create an intermediate between public and private financial needs. This study represents a brief description and gives some crucial information about the banks and institutions of Dfis.

Role and importance of DFIs in the Indian Economy

The Development Financial Institutions of India play the most important role in the growth of the Indian Economy. These institutions support the financial pillar needed for the private or public sectors of our country. These institutes evolved in India mainly in three phases –

1. From 1945 (from Independence) to 1964
2. From 1964 to the mid-phase of the 1990s
3. After 1993-94.

India had its first Dfi bank in 1948 and it is the IFCI bank of India. Thereafter, the ICICI bank was opened by an initiative of the World Bank in 1955. These institutes provided needed financial support to the economic agents who played an important role in the economic growth of India. The development banks are needed to –

• Boost the economic growth of India,
• Enhancement in crediting money for house and infrastructure projects
• Attract the debt rate toward the infrastructure projects.
• Boost long-term finances.

Categories and classifications of DFIs

There are different types of Dfis in India and those are –

• National Development Bank
• Investment Institutions
• State-level institutions
• Sector specific financial institutions

Some examples of national development banks are IDBI, SIDBI, IRBI, ICICI, IDFC, IFCI, etc. Some important investment banks are LIC, GIC, UTI, etc. The main state-level institutions are the SIDCs and the state finance corporations. The Sector-specific financial institutions are TFCI, NABARD, NHB, HDFC, EXIM Bank, etc.

The Dfis are classified into two types based on their investment types –

• Investment Institutions &
• Sector-Specific Financial Institutions

Those institutions that focus on providing financial support for business operations are called Investment institutions. They provide support mainly to equity offerings, financing for capital expenditure, etc. 

All Important DFIs of India

Some important Dfi banks are

• Industrial Finance Corporation Bank of India was founded in 1948 as the first Dfi bank of India. It is known as IFCI bank and it played a very important role in the financial growth of India at that time.

• The Industrial Credit and Investment Corporation of India Limited was opened in 1955 by a World Bank initiative. It is known as the ICICI bank and is the first private sector bank in India.

• • Then came the Industrial Development Bank of India, it was founded in 1964 and in 1976 it was granted autonomy. It is also known as the IDBI bank and it was established as a universal bank in 2003. It ensured the adequate flow in crediting money by various private and public sectors.
  • The Industrial Reconstruction Corporation of India, also known as the IRCI bank was opened in 1971 to provide financial support to the weak units. It saved many of the units from falling apart from the race, which played an important role in the growth of the Indian economy.

• Small Industries Development Bank of India, also known as SIDBI bank was founded in 1989 as an optional choice of IDBI bank. It filled the gap that IDBI bank was not able to reach in 1998.

Conclusion

The development of financial institutions in India played a very important role in increasing the investment and saving rate in infrastructural projects. The capital was too low in the initial years and the saving rate was around 5 percent of total income. Development financial institutions of India gave financial and technical support and promoted housing and infrastructural projects. It helped a lot to improve the capital of the private and public sectors. Diamond William defined the Dfis as the institutions that encourage infrastructural projects and give financial support to the sectors that contribute something to India’s economic growth.