This article throws light upon the top three financial institutions set up for assisting industries:- 1. Industrial Finance Corporation of India (IFCI) 2. Industrial Credit and Investment Corporation of India 3. Industrial Development Bank of India (IDBI).

Financial Institution # 1. Industrial Finance Corporation of India (IFCI):

The Industrial Finance Corporation of India was established 1st July, 1948 by a Special Act of Parliament. It was the first industrial financial institution. It was established to provide medium and long-term credits to the industries in the private sector.

Though of late, it has accommodated public sector undertakings also. Small scale industries, private partnership and other proprietary concerns are excluded from the scope of Industrial Financial Corporation of India since their needs can be met with by the respective State Finance Corporations.


The management of the Industrial Finance Corporation of India is vested in Board of Directors consisting of 12 Directors and one full-time Chairman approved by the Central Government after having consulted ‘Industrial Development Bank of India’.


Four of the directors are nominated by Industrial Development Bank of India; Two by Central Government; Two by Scheduled Banks; Two by Insurance and Financial Institutions; and the remaining two by Co-operative Banks. The Board of Directors will act on business principles with due regard to the interest of trade, industry and general public and obey the instructions of Central Government.

Capital Structure:

The corporation has an authorised share capital of Rs. 20 crores and a paid-up capital of Rs. 17.5 crores divided into shares of Rs. 5,000 each on 31st March, 1981. 50 per cent of the shares are held by Industrial Financial Corporation of India. The remaining 50 per cent by scheduled banks, co-operative banks, insurance companies and investment trusts etc. Individuals are not allowed to hold the shares of the corporation.

The main eligible sources of funds of the Industrial Finance Corporation other than its own capital are:

(i) Ploughing back of profits,


(ii) Borrowings from the market by issue of bonds,

(iii) Loans from the Central Government and foreign credits.

The corporation can also borrow from the World Bank after obtaining permission from the Central Government.

Functions, Forms of Assistance and Objects of Industrial Finance Corporation:

The main functions of Industrial Finance Corporation are:


1. Granting loans and advances to or subscribing to the debentures of industrial concerns payable within 25 years.

2. Underwriting of the issue of stock, shares, bonds or debentures issued by the industrial concerns but must be disposed of within seven years. Underwriting means that when shares and debentures are not taken up by the public, they will be taken by Industrial Finance Corporation of India.

3. Guaranteeing loans floated in the open market by industrial concerns repayable in 25 years.

4. Acting as an agent for the Central Government or for World Bank in respect of loans sanctioned to the industrial concerns.


5. By its new promotional schemes the corporation tends to encourage indigenous technology, allied industries, etc.

Consideration in Sanctioning Assistance:

The Industrial Finance Corporation is very much careful before granting financial assistance to various industries in order to safeguard its investable funds.

In making decisions with regard to finance the industries, the corporation keeps in view the following considerations:

1. The importance of the company asking for assistance in the national economy.


2. The possibility and the cost of the scheme for which financial assistance is required.

3. The technical feasibility and the competence of the management of the company.

4. The profit-earning capacity of the company.

5. The nature of the security offered.


The Industrial Finance Corporation is paying a special attention to projects being established in relatively under-developed areas and relaxes the terms and conditions.

The main objective of granting loans by Industrial Finance Corporation is:

(i) establishment of new industrial undertaking, and

(ii) expansion, modernization or diversification into other lines of production by existing units.

Working of the IFCI:


Since its inception in 1948 till 31st March, 1981, the total financial assistance sanctioned and disbursed by the IFCI amounted to Rs. 1,195.7 crores and Rs. 852.2 crores respectively. Since March, 1974, IFCI is running very successfully Management Development Institute along with Development Banking Centre.

IFCI has also set up Technical Consultancy Organisation in H.P., Rajasthan and M.P. It has also sponsored programmes for identification, promotion and implementation of industrial projects.


The IFCI has rendered a remarkable service to the Indian industries for the last 35 years. Industries which have received financial assistance from the Industrial Finance Corporation of India are those of manufacturing, food, paper, textiles, cement, machinery, chemical and fertilisers, metals and metal production, etc.

Financial Institution # 2. Industrial Credit and Investment Corporation of India:

Industrial Credit and Investment Corporation of India was set up on January 5, 1955 to assist industrial undertakings in the private sector. It was registered as a public limited company. The registered office of the company is at Bombay. This corporation was established on the recommendations of the committee of five top industrialists of India.


The main objects and functions of the corporation are as under:


1. To assist the industrial enterprises within the private sector, which can be in the form of creation, expansion and modernisation of enterprises.

2. To provide finance to private sector industries in the form of medium or long-term loans.

3. To guarantee loans from the banks and financial institutions.

4. To sponsor or underwrite new shares or securities.

5. To make funds available for reinvestment.

6. To provide managerial, technical and administrative advice.


In addition to above, the corporation helps the industry in getting land, building and machinery. It makes direct subscription to industrial securities and guarantees payment of loans made by others.

The corporation provides loan to any limited liability company but not to partnership and proprietary firms. It helps the industry in the planning and execution of investments. It also provides risk capital through direct participation in share capital and underwriting capital issues.


It is managed by a Board of Directors consisting of not less than 5 and not more than 15 members. In addition, the Government can also appoint a Director and there can also be a Director of debenture holders as well.

Financial Resources:

The authorised capital of the corporation is Rs. 25 crores divided into 5 lakhs ordinary shares of Rs. 100 each and 20 lakhs unclassified shares of Rs, 10 each. At the end of March, 1981, the paid-up capital of the corporation was Rs. 24.75 crores, reserves were 34.38 crores, debentures were Rs. 333.65 crores, loans from government were Rs. 5.06 crores, loans from IDBI were Rs. 97.53 crores, foreign currency loans were Rs. 210.71 crores. and other liabilities were Rs. 39,18 crores.

Working of the Corporation:

Since its inception in 1955 till 31 st March, 1981, the total financial assistance sanctioned and disbursed by ICICI amounted to Rs. 1,572.9 crores and Rs. 1,089.3 crores respectively. Maximum grant was given to chemicals and petro-chemical industries followed by basic metal products, machinery-manufacturing industry and textiles. Maharashtra, Gujarat, Tamil Nadu and West Bengal have received largest share of assistance.

Appraisal and Impact:

It is almost accepted that Industrial Credit and Investment Corporation of India has done a remarkable job and shown significant impact on industrial financing of the country. The corporation is playing an important role, a supplier of foreign credit to the industries in India, thereby it has been augmenting available foreign exchange resources of the country.


For promoting and encouraging private foreign capital, it has succeeded in setting up an investment centre. It has also taken active part in carrying out surveys to determine industrial potential in various states.

The corporation has also started giving loans to industries in backward areas at low rate of interest. For better co-ordination, it has set up regional offices for more assistance to backward areas and small units in different regions. Looking at the performance of the past, it can be said that corporation has good future.

Financial Institution # 3. Industrial Development Bank of India (IDBI):

The IDBI came into existence on 1st July, 1964 under the Industrial Development Bank of India Act. It was a wholly owned subsidiary of the Reserve Bank of India. The IDBI was delinked from the Reserve Bank of India and made an autonomous corporation owned by the Government of India with effect from 16th February, 1976.


(i) The main objective of IDBI is to co-ordinate the activities of all the financial institutions in the country.

(ii) It is to refinance such institutions as well as grant loans directly to the industrial concerns.

(iii) It is to promote and develop key industries.


(iv) It is to provide long-term and medium-term finance.


The main functions of IDBI are:

(i) To grant long-term loans repayable within 25 years.

(ii) To grant short-term loans repayable within 10 years.

(iii) To undertake surveys and make investment research.

(iv) To accept or discount the bills of industrial concerns.


(v) To provide financial, technical and administrative assistance to industrial concerns for promotion, management or expansion,

(vi) To locate and fill up the gap in the industrial structure.


The management of IDBI is in the hands of Board of Directors. The directors are appointed by the Central Government. Representatives of various financial institutions are also included in the Board of Directors. Including the chairman, the total number of directors is 22. The regional offices of IDBI are at Calcutta, Bombay, Madras and Delhi.

Financial Resources:

By the end of June 1981, the paid-up capital of the Bank was Rs. 145 crores; Reserves were Rs. 128.90 crores; Bonds and debentures were Rs. 1,189.91 crores; Borrowings from Reserve Bank of India were Rs. 1,322.51 crores; Borrowings from Government were Rs. 169.90 crores; and other liabilities were Rs. 406.51 crores. These funds have been utilised in giving loans to the industrial concerns, co­operative banks, scheduled banks, discounting of bill, investment in securities etc.

Working of the Bank:

Since its inception in 1964 till 30th March, 1982 the total financial assistance sanctioned and disbursed by the bank amounted to Rs. 5,257 crores and Rs. 5,642 crores respectively.

In order to tackle the problem of imbalance in development between states, the IDBI completed industrial potential surveys of all the states. It has promoted the establishment of Industrial Reconstruction Corporation of India and has started Kerala Industrial and Technical Consultancy Organisation.

A similar consultancy service has also been started at Guwahati. The bank is also providing financial assistance to public sector undertakings for the purpose of expansion or diversification. The bank has also helped in the development and growth of indigenous technology and gave encouragement to new entrepreneurs.