List of top four specialised banks of India:- 1. Industrial Development Bank of India 2. Housing Finance Bank 3. EXIM Bank 4. Rural Credit Bank.
Specialised Bank # 1. Industrial Development Bank of India:
The Industrial bank of India popularly known as IDBI was established as wholly owned subsidiary of RBI. It was set up under the Act of Parliament in July 1964 to serve the purpose of providing credit and other facilities to the Industry.
Although there were many other institutions which were providing financial help and credit to develop the industrial sector in the country but the growth and development of Industrial sector was in its initial stage of development.
The main reason was lack of co-ordination among the different Institutes which were engaged in providing credit to Industries. As such in February 1976 the ownership of IDBI was transferred to the Government of India and was delinked from RBI. After such transfer the IDBI became the main Institute to Coordinate the activities of all such institutions which were engaged in financing, promoting and developing Industry.
In January 1992 the bank accessed domestic retail debt market. In 1993 it set up its wholly owned subsidiary known as IDBI Capital market sendees Ltd. As a policy the RBI had decided to open domestic banking sector to private participation. Following the RBI policy the IDBI in association with SIDBI opened IDBI Bank Ltd.
In September 1994 and next year public issue of the bank was taken out in July 1995. With the result Government share holding in the bank was reduced but retained majority of shareholding. The bank showed good results and it took over the Tata Home Finance Ltd. in September 2003 and renamed it as IDBI Home Finance Ltd.
In the year of 2005 the IDBI bank was merged with Industrial Development bank of India and in 2006 it acquired United Western Bank. The main function and role of development financing is continued by the bank. It re-finances the loans given by Scheduled Banks, State Co-operative banks, IFCI, SFCs and other financial institutions.
Specialised Bank # 2. Housing Finance Bank:
Housing Finance in India had been core issue for general public to obtain a Housing Loan either from Nationalised Banks or from other Financial institutions. The gap was generally and to little extend was fulfilled by state financial corporations, Co-operative banks/societies.
But during seventh Five Year Plan the matter was taken up by a committee constituted under the chairmanship of Dr. C. Rangarajan the then Deputy Governor of Reserve Bank of India observed and examined non-availability of long term finance to individual households on any significant scale as a major lacuna impeding progress of Housing Sector and they therefore recommended setting up of National level institution.
The RBI therefore recommended setting up of National Housing Bank. The Government accepted the proposal and National Housing Bank was set up on 9th July, 1988 under the National Housing Bank Act 1887 as an apex level institution for housing.
The basic functions of National Housing banks are described in the preamble of the National Housing Bank Act 1887:
“………. to provide as a principal agency to promote housing finance institutions both at local and regional levels to provide financial and other support to such institutions and for matters connected therewith or incidental thereto……….. ”
NHB has been established to achieve inter alia, the following objectives:
a) To promote a sound, healthy viable and cost effective housing finance system to cater to all segments of the population and to integrate the housing finance system with the overall financial system.
b) To promote a network of dedicated housing finance institutions to adequately serve various regions and different income groups.
c) To augment resources for the sector and channelise them for housing.
d) To make housing finance more affordable.
e) To regulate the activities of housing finance companies based on regulatory and supervisory authority derived under the Act.
f) To encourage augmentation of supply of buildable land and also building materials for housing and to upgrade the housing stock in the country.
g) To encourage public agencies to emerge as facilitators and suppliers of serviced land for housing.
Specialised Bank # 3. EXIM Bank:
The Export and Import Bank of India popularly known as EXIM Banks was established in 1982 under the Export-Import Bank of India Act 1981 mainly for the purpose of enhancing export trade of the country.
In addition to this the bank is required to integrate the country’s foreign trade and investment with overall economic growth Like other Export Credit Agencies the Exim bank has been engaged in providing services like Export Credit, Import Credit, Project financing and credit to export units etc.
In brief the main functions of the bank can be summed up:
Line of Credit:
1. Line Credit.
2. Buyer’s Credit.
3. Supplier’s Credit.
4. Pre-shipment and Post-shipment Credit.
1. Import Loans for capital goods.
2. Bulk Import Loans for raw materials.
Loans for Export Units:
1. Term Loan (Rs.& $) for expansion/diversification/New Projects.
2. Term Loan (Rs.) for overseas equity investments.
3. Term Loan (Rs. & $) for export development/Export marketing/Research & developments.
Projects and Services Export:
These are categorized broadly into:
1. Civil engineering construction projects.
1. Consultancy Services.
2. Capital goods & transport vehicles.
The Exim Bank’s functions are divided into several operating groups including:
Corporate Banking Group:
Which handles a variety of financing programmes for Export Oriented Units (EOUs), Importers, and overseas investment by Indian companies.
Project Finance/Trade Finance Group:
Handles the entire range of export credit services such as supplier’s credit, pre-shipment credit, buyer’s credit, finance for export of projects & consultancy services, guarantees etc.
Lines of Credit Group Lines of Credit (LOC) is a financing mechanism that provides a safe mode of non-recourse financing option to Indian exporters, especially to SMEs, and serves as an effective market entry tool.
Agri Business Group, to spearhead the initiative to promote and support Agri-exports. The Group handles projects and export transactions in the agricultural sector for financing.
Small and Medium Enterprises Group to the specific financing requirements of export oriented SMEs. The group handles credit proposals from SMEs under various lending programmes of the Bank.
Export Services Group offers variety of advisory and value-added information services aimed at investment promotion.
Fee based Export Marketing Services Bank offers assistance to Indian companies, to enable them establish their products in overseas markets.
Besides these, the Support Services groups, which include: Research & Planning, Corporate Finance, Loan Recovery, Internal Audit, Management Information Services, Information Technology, Legal, Human Resources Management and Corporate Affairs.
Specialised Bank # 4. Rural Credit Bank:
The rural credit has been managed in many ways. The system of providing credit for rural development had been looked after by RBI, NABARD, Commercial banks, State Co-operative banks, District co-operative banks and Primary Agricultural Credit societies. But our economy had been lacking a developed Rural Financial system.
In fact with introduction of Co-operatives a formal credit structure for financing agriculture and other rural activities was started in India. With start of Plan era great importance was given to this so far neglected area. The All India Rural Credit Survey Committee (AIRCS) 1954, emphasized for proper development of institutional credit structures for rural financing.
Many other also recommended many more developments like Priority sector lending, lead banks scheme, service area approach, setting up of NABARD etc., are some of outcomes of the repeated review of the system.
Another committee know as Agriculture Credit Review committee(ACRC) 1989 after examination of problems of rural credit recommended greater autonomy for commercial banks, the weakness of RRBs was seen in the system with the non-viability built into them. The co-operatives were sought to be strengthened.
The Narsimham committee on Financial Sector Reforms 1991 inter alia recommended a redefinition of priority sector, gradual phasing out of direct credit programs of aggregate bank credit and deregulation of interest rates.
The institutions thus created, with repeated review of the rural banking, emerged as:
2. Commercial Banks.
3. State Co-operative Banks, District co-operative banks.
4. Primary Agriculture societies.
The routing funds through above institutes have tended to unduly increase the cost of banking. High over dues, bad debts, loan defaults, unviability etc.
Most important role of Rural Credit is being played even today by the Co-operative banks which provide loans for farming, Cattle, hatchery and also for personal needs.