Project Planning and Control

IDBI – Functions of Industrial Development Bank of India

The IDBI was established on July, 1964 under the act of Parliament as the principal financial institution in the country. Initially it was set up as wholly owned subsidiary of the Reserve Bank of India. In February, 1976 the IDBI was made an autonomous institution and its ownership passed on from the Reserve Bank of India to the Government of India. The most distinguishing feature of the Reserve Bank is that it has been assigned the role of the principal Financial Institution for coordinating, in conformity with the national priorities, the activities of the institutions engaged in financing, promotion or developing industry. The IDBI has been assigned a special role to play in regard to industrial development. The main functions of IDBI are as follows.

Functions of IDBI

(a) Direct Assistance – IDBI gives direct assistance by way of project loans, underwriting of and direct subscription to industrial securities, soft loan, technical refund loans and equipment refund loans. In direct assistance, it resembles IFCI and ICICI. Various direct finance schemes of IDBI are as follows:

  • Modernisation Assistance Schemes for all industries.
  • Textile Modernisation Fund Scheme.
  • Technical Development Fund Scheme.
  • Venture Capital Fund Scheme.
  • Energy Audit Subsidy Scheme.
  • Equipment Finance for Energy Conservation Scheme.
  • Equipment Finance Scheme.
  • Foreign Currency Assistance Scheme.

(b) Indirect Assistance – IDBI can assist industrial concerns in an indirect manner also, that is, through other institutions. The Bank finances those banks and financial institutions which are lending to industrial concerns. Further, the bank can subscribe to stocks, shares, bonds or debentures of the IFCI, the State Financial Corporations or any other notified financial institutions and thus increase their financial resources and enable them to provide larger assistance to industry. IDBI grants indirect assistance in the following ways :

  • Refinance scheme for industrial loans for small and medium industries.
  • Refinance schemes for modernisation and rehabilitation of Small and Medium industries.
  • Equipment Refinance Scheme.
  • Bills Discounting/Rediscounting Scheme.
  • Seed Capital Scheme.
  • Scheme for concessional assistance for Development of No-industry districts and other backward areas.
  • Scheme for Concessional Assistance for manufacture and industrialisation of Renewable Energy schemes.
  • Scheme for investment in Shares and Bonds of other financial institutions.

(c) Special Assistance – The IDBI Act has provided for the creation of a special fund known as the Development Assistance Fund. This fund is to be used by IDBI to assist those industrial concerns which are not able to secure funds in the normal course because of low rate of return.

(d) Foreign Currency Requirements – IDBI raises foreign funds from international money markets and funding organisation and makes them available to those industrial units which need them.

(e) Small Scale Industries – The IDBI has shown a particular interest in the development of small scale industries of particular interest are the following :

  • Setting up of Small Industries Development Fund to facilitate the development and extension of small scale industries.
  • National Equity Fund Scheme (NEFS) has been launched for providing support in the nature of equity to tiny and small scale industries engaged in manufacturing, cost not exceeding Rs. 5 lakhs.
  • Single Window Assistance Scheme has been introduced for grant of term loans and working capital assistance in industries. new tiny and small
  • Voluntary Executive Corporation Cell (VECC) has been set up to utilise the services of experienced professionals for counselling small units, tiny and cottage units and for providing consultancy support in specific areas.

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