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development banking in India.

MEANING: The name bank derives from the Italian word banco, desk, used during the Renaissance by Florentines bankers, who used to make their transactions above a desk covered by a green tablecloth A bank is a commercial or state institution that provides financial services, including issuing money in various forms, receiving deposits of money, lending money and processing transactions and the creating of credit. A commercial bank accepts deposits from customers and in turn makes loans, even in excess of the deposits. Some banks (called Banks of issue) issue banknotes as legal tender. Many banks offer ancillary financial services to make additional profit; for example, most banks also rent safe deposit boxes in their branches. Currently in most jurisdictions commercial banks are regulated and require permission to operate. Operational authority is granted by bank a regulatory authority that provides rights to conduct the most fundamental banking services such as accepting deposits and making loans. A commercial bank is usually defined as an institution that both accepts deposits and makes loans; there are also financial institutions that provide selected banking services without meeting the legal definition of a bank. Banks have influenced economies and politics for centuries. Historically, the primary purpose of a bank was to provide loans to trading companies. Banks provided funds to allow businesses to purchase inventory, and collected those funds back with interest when the goods were sold. For centuries, the banking industry only dealt with businesses, not consumers. Commercial lending today is a very intense activity,

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development banking in India.

with banks carefully analysing the financial condition of their business clients to determine the level of risk in each loan transaction. Banking services have expanded to include services directed at individuals, and risks in these much smaller transactions are pooled. A bank generates a profit from the differential between the level of interest it pays for deposits and other sources of funds, and the level of interest it charges in its lending activities. This difference is referred to as the spread between the cost of funds and the loan interest rate. Historically, profitability from lending activities has been cyclic and dependent on the needs and strengths of loan customers. In recent history, investors have demanded a more stable revenue stream and banks have therefore placed more emphasis on transaction fees, primarily loan fees but also including service charges on array of deposit activities and ancillary services (international banking, foreign exchange, insurance, investments, wire transfers, etc.). However, lending activities still provide the bulk of a commercial bank's income. CURRENT SCENAREO: Currently (2007), overall, banking in India is considered as fairly mature in terms of supply, product range and reach-even though reach in rural India still remains a challenge for the private sector and foreign banks. Even in terms of quality of assets and capital adequacy, Indian banks are considered to have clean, strong and transparent balance sheets-as compared to other banks in comparable economies in its region. The Reserve Bank of India is an autonomous body, with minimal pressure from the government. The stated

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policy of the Bank on the Indian Rupee is to manage volatility-without any stated exchange rate-and this has mostly been true. With the growth in the Indian economy expected to be strong for quite some time-especially in its services sector, the demand for banking servicesespecially retail banking, mortgages and investment services are expected to be strong. M&As, takeovers, asset sales and much more action (as it is unraveling in China) will happen on this front in India. In March 2006, the Reserve Bank of India allowed Warburg Pincus to increase its stake in Kotak Mahindra Bank (a private sector bank) to 10%. This is the first time an investor has been allowed to hold more than 5% in a private sector bank since the RBI announced norms in 2005 that any stake exceeding 5% in the private sector banks would need to be vetted by them. Currently, India has 88 scheduled commercial banks (SCBs) - 28 public sector banks (that is with the Government of India holding a stake), 29 private banks (these do not have government stake; they may be publicly listed and traded on stock exchanges) and 31 foreign banks. They have a combined network of over 53,000 branches and 17,000 ATMs. According to a report by ICRA Limited, a rating agency, the public sector banks hold over 75 percent of total assets of the banking industry, with the private and foreign banks holding 18.2% and 6.5% respectively.

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development banking in India.

BANKING SERVICES IN INDIA: With years, banks are adding services to their customers. The Indian banking industry is passing through a phase of customers market. The customers have more choices in choosing their banks. A competition has been established within the banks operating in India. With stiff competition and advancement of technology, the services provided by banks have become more easy and convenient. The past days are witness to an hour wait before withdrawing cash from accounts or a cheque from north of country being cleared in one month in the south. This section of banking deals with the latest discovery in the banking instruments along with polished version of their old systems. A bank is a business which provides financial services for profit. Traditional banking services include receiving deposits of money, lending money and processing transactions. Some banks (called Banks of issue) issue banknotes as legal tender. Many banks offer ancillary financial services to make additional profit; for example: selling insurance products, investment products, or stock broking. Currently in most jurisdictions the business of banking is regulated and banks require permission to trade. Authorization to trade is granted by bank regulatory authorities and provides rights to conduct the most fundamental banking services such as accepting deposits and making loans. There are also financial institutions that provide banking services without meeting the legal definition of a bank.

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development banking in India.

BANKING IN INDIA: Banking in India originated in the first decade of 18th century with The General Bank of India coming into existence in 1786. This was followed by Bank of Hindustan. Both these banks are now defunct. The oldest bank in existence in India is the State Bank of India being established as "The Bank of Bengal" in Calcutta in June 1806. At that point of time, Calcutta was the most active trading port, mainly due to the trade of the British Empire, and due to which banking activity took roots there and prospered. The first fully Indian owned bank was the Allahabad Bank, which was established in 1865.By the 1900s, the market expanded with the establishment of banks such as Punjab National Bank, in 1895 in Lahore and Bank of India, in 1906, in Mumbai - both of which were founded under private ownership. The Reserve Bank of India formally took on the responsibility of regulating the Indian banking sector from 1935. After India's independence in 1947, the Reserve Bank was nationalized and given broader powers.

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development banking in India.

OVERVIEW OF DEVELOPMENT BANKING IN INDIA: The concept of development

banking rose only after Second World War, Successive of the Great Depression in 1930s. The demand for reconstruction funds for the affected nations compelled in setting up worldwide institution for reconstructions. As a result the IBRD was set up in 1945 as a worldwide institution for development and reconstruction. This concept has been widened all over the world and resulted in setting up of large number of banks around the world which coordinating the developmental activities of different nations with different objectives among the world. The course of development of financial institutions and markets during the post-Independence period was largely guided by the process of planned development pursued in India with emphasis on mobilization of savings and canalizing investment to meet Plan priorities. At the time of Independence in 1947, India had a fairly well-developed banking system. The adoption of bank dominated financial development strategy was aimed at meeting the sectoral credit needs, particularly of agriculture and industry. Towards this end, the

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Reserve Bank concentrated on regulating and developing mechanisms for institution building. The commercial banking network was expanded to cater to the requirements of general banking and for meeting the short-term working capital requirements of industry and agriculture. Specialized development financial institutions (DFIs) such as the IDBI, NABARD, NHB and SIDBI, etc., with majority ownership of the Reserve Bank were set up to meet the long-term financing requirements of industry and agriculture. To facilitate the growth of these institutions, a mechanism to provide concessional finance to these institutions was also put in place by the Reserve Bank. The first development bank In India incorporated immediately after independence in 1948 under the Industrial Finance Corporation Act as a statutory corporation to pioneer institutional credit to medium and large-scale. Then after in regular intervals the government started new and different development financial institutions to attain the different objectives and helpful to five-year plans. The early history of Indian banking and finance was marked by strong governmental regulation and control. The roots of the national system were in the State Bank of India Act of 1955, which nationalized the former Imperial Bank of India and its seven associate banks. In the early days, this national system operated along side of a large private banking system. Banks were limited in their operational flexibility by the governments desire to maintain employment in the banking system and were often drawn into troublesome loans in order to further the governments social goals. The financial institutions in India were set up under the strong control of both central and state Governments, and the Government utilized these institutions for the achievements in planning and development of the nation as a whole. The all India financial institutions can be classified under four heads according to their economic importance that are:
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development banking in India.

All-India Development Banks Specialized Financial Institutions Investment Institutions State-level institutions Other institutions DEVELOPMENT FINANCIAL INSTITUTIONS: Preface The emerging economies in post colonial era faced the difficult choice of appropriate mechanism for chanalizing resources into the development effort. Many of them had inherited capital starved primitive financial systems. Such system could not be relied upon to allocate resources among competing demands in the economy. The task of institution building was too important to be left at the mercy of the market forces at the nascent stage of development. In such a situation several governments in Continental Europe and East Asian economies decided to take matters into their hands and established institutions specifically to cater to the requirements of financial resources for developmental effort. Such institutions were called Development Financial Institutions. Development financing is a risky business. It involves financing of industrial and infrastructure projects which usually have long gestation period. The long tenor of such loans has associated with it uncertainty as to performance of the loan asset. The repayment of the long term project loans is dependent on the performance of the project and cash flows arising from it
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rather than the realisability of the collaterals. The project could go wrong for a variety of reasons, such as, technological obsolescence, market competition, change of Government policies, natural calamities, poor management skills, poor infrastructure etc. The markets and banking institutions were highly averse to such uncertain outcome, besides not possessing enough information and skills to predict with any certainty the outcome. There was also the cost considerations associated with such risky ventures. The long term loan comes with a higher price tag due to the term premium loaded into the pricing. In such a situation the long term financing would be scarce as well as costly so as to render the project financially unviable. DFIs were established with the Government support for underwriting their losses as also the commitment for making available low cost resources for lending at a lower rate of interest than that demanded by the market for risky projects. This arrangement worked well in the initial years of development. As the infrastructure building and industrialization got underway the financial system moved higher on the learning curve and acquired information and skills necessary for appraisal of long term projects. It also developed appetite for risk associated with such projects. The intermediaries like banks and bond markets became sophisticated in risk management techniques and wanted a piece of the pie in the long term project financing. These intermediaries also had certain distinct advantages over the traditional DFIs such as low cost of funds and benefit of diversification of loan portfolios. The Government support to DFIs, in the meanwhile, was also waning either for fiscal reasons or in favour of building market efficiency. Therefore, towards the end of twentieth century the heydays of DFIs were over and they started moving into oblivion. In several economies, having attained their developmental goals, the DFIs were both
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restructured and repositioned or they just faded away from scene. The Indian experience has also more or less traversed the same path. Although India cannot said to have achieved the developmental goals yet, the Government's fiscal imperatives and market dynamics has forced a reappraisal of the policies and strategy with regard to the role of DFIs in the system. EVOLUTION, OBJECTIVES AND FINANCIAL POSITION OF FINANCIAL INSTITUTIONS IN INDIA: A typical structure of financial system in any economy consists of financial institutions, financial markets, financial instruments and financial services. The functional, geographic and sectoral scope of activity or the types of ownership are some of the criteria which are often used to classify the large number and variety of financial institutions which exist in the economy. In its broadest sense the term financial institution would include banking institutions and non-banking financial institutions 1. The banking institutions may have quite a few things in common with the non-banking ones. However, the distinction between the two has been highlighted by Sayers, by characterizing the former as creators of credit, and the latter as mere purveyors of credit 2. This distinction arises from the fact that banks, which are part of payment system, can create deposits and credit but the non-banking institutions, which are not part of payment system, can lend only out of the resources put at their disposal by the savers.

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development banking in India.

DEVELOPMENT FINANCE INSTITUTIONS: An efficient and robust financial system acts as a powerful engine of economic development by mobilizing resources and allocating the same to their productive uses. It reduces the transaction cost of the economy through provision of an efficient payment mechanism, helps in pooling of risks and making available long-term capital through maturity transformation. By making funds available for entrepreneurial activity and through its impact on economic efficiency and growth, a well functioning financial sector also helps alleviate poverty both directly and indirectly. In a developing country, however, financial sectors are usually incomplete in as much as they lack a full range of markets and institutions that meet all the financing needs of the economy. For example, there is generally a lack of availability of long-term finance for infrastructure and industry, finance for agriculture and small and medium enterprises (SME) development and financial products for certain sections of the people. The role of development finance is to identify the gaps in institutions and markets in a countrys financial sector and act as a gap-filler. The principal motivation for developmental finance is, therefore, to make up for the failure of financial markets and institutions to provide certain kinds of finance to certain kinds of economic agents. The failure may arise because the expected return to the provider of finance is lower than the market-related return (notwithstanding the higher social return) or the credit risk involved cannot be covered by high risk premium as economic activity to be financed becomes unviable at such riskbased price. Development finance is, thus, targeted at economic activities or agents, which are rationed out of market. The vehicle for extending

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development finance is called development financial institution (DFI) or development bank. A DFI is defined as "an institution promoted or assisted by Government mainly to provide development finance to one or more sectors or sub-sectors of the economy. The institution distinguishes itself by a judicious balance as between commercial norms of operation, as adopted by any private financial institution, and developmental obligations; it emphasizes the "project approach" - meaning the viability of the project to be financed against the "collateral approach"; apart from provision of long-term loans, equity capital, guarantees and underwriting functions, a development bank normally is also expected to upgrade the managerial and the other operational pre-requisites of the assisted projects. Its insurance against default is the integrity, competence and resourcefulness of the management, the commercial and technical viability of the project and above all the speed of implementation and efficiency of operations of the assisted projects. Its relationship with its clients is of a continuing nature and of being a "partner" in the project than that of a mere "financier Thus, the basic emphasis of a DFI is on long-term finance and on assistance for activities or sectors of the economy where the risks may be higher than that the ordinary financial system is willing to bear. DFIs may also play a large role in stimulating equity and debt markets by (i) Selling their own stocks and bonds; (ii) Helping the assisted enterprises float or place their securities an (iii) Selling from their own portfolio of investments.

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EMERGENCE OF FINANCIAL INSTITUTIONS IN INDIA: As mentioned earlier, DFIs are created in developing countries to resolve market failures, especially in regard to financing of long-term investments. The DFIs played a very significant role in rapid industrialization of the Continental Europe. Many of the DFIs were sponsored by national governments and international agencies. The first government sponsored DFI was created in Netherlands in 1822. In France, significant developments in long-term financing took place after establishment of DFIs such as Credit Foncier and Credit Mobiliser, over the period 1848-1852. In Asia, establishment of Japan Development Bank and other term-lending institution fostered rapid industrializations of Japan. The success of these institutions provided strong impetus for creation of DFIs in India after independence, in the context of the felt need for raising the investment rate. RBI was entrusted with the task of developing an appropriate financial architecture through institution building so as to mobilise and direct resources to preferred sectors as per the plan priorities. While the reach of the banking system was expanded to mobilise resources and extend working capital finance on an ever-increasing scale, to different sectors of the economy, the DFIs were established mainly to cater to the demand for long-term finance by the industrial sector. The first DFI established in India in 1948 was Industrial Finance Corporation of India (IFCI) followed by setting up of State Financial Corporations (SFCs) at the State level after passing of the SFCs Act, 1951.

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FINANCIAL INSTITUTIONS SET UP BETWEEN 1948 AND 1974 Besides IFCI and SFCs, in the early phase of planned economic development in India, a number of other financial institutions were set up, which included the following. NAME OF THE COMPANY ICICI Ltd LIC Refinance Corporation for Industries Ltd Agriculture Refinance Corporation and YEAR OF ESTABLISHMENT 1955 1956 1958

1963 NABARD UTI and IDBI 1964 Rural Electrification Corporation Ltd. and HUDCO Ltd 1969-70 Industrial Reconstruction Corporation of India Ltd. 1971 GIC 1972 It may be noted here that although the powers to regulate financial institutions had been made available to RBI in 1964 under the newly inserted Chapter IIIB of RBI Act, the definition of term financial institution was made precise and comprehensive by amendment to the RBI Act Section 45-I (c) in 1974.

SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA (SIDBI)

PROFILE
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Small Industries Development Bank of India (SIDBI) was established in April 1990 under an Act of Indian Parliament as a wholly-owned subsidiary of Industrial Development Bank of India. SIDBI has since completed 8 years of service to the small scale sector. As at March 31, 1998, SIDBI had total staff strength of 861 comprising of 685 professionals and 176 support staff. SIDBI's statute provides that it should serve as the principal financial institution for: Promotion Financing and Development of industry in the small scale sector and Co-ordinating the functions of other institutions engaged in similar activities. SIDBI became operational on April 2, 1990. The Small Scale Industry (SSI) sector, which is a vibrant and dynamic sub-sector of the India's industrial economy, comprises the area of SIDBI's business. The contribution of the SSIs in terms of production, employment and export earnings has been significant. The objectives of Government policy have been to impart vitality and growth impetus to the sector by removing bottlenecks that affect the growth potential. In the liberalised era and emerging economic scenario, the sector is assured of continued support. ORIGIN & OBJECTIVES

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Small Industries Development Bank of India (SIDBI) was established in April 1990 under an Act of Indian Parliament as the principal financial institution for: Promotion Financing Development of industry in the small scale sector Co-ordinating the functions of other institutions engaged in similar activities Since its inception, SIDBI has been assisting the entire spectrum of SSI Sector including the tiny, village and cottage industries through suitable schemes tailored to meet the requirement of setting up of new projects, expansion, diversification, modernization and rehabilitation of existing units. Small Industries Development Bank of India [SIDBI] as the principal financial institution for promotion, financing and development of industry in the small scale sector, has been assisting the entire spectrum of the SSI sector, including the Tiny, Village and Cottage industries. During the year 2002-03, the aggregate sanctions and disbursements of SIDBI amounted to Rs.10904 crores and Rs.6789 crores respectively. Cumulative assistance, as at the end of March 2003, surged to Rs.86, 158 crores in terms of sanctions and at Rs.59, 101 crores of disbursements, thus recording a compounded annual growth rate of 13.4 % and 11.4 % respectively. Net worth of the Bank is Rs.4075 crores as at the end of March 2003. FUNCTIONS OF SIDBI:
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It refinances loans by the primary lending institutions to small scale It discounts and rediscounts bills arising out of scale of machinery to It extends seed capital/ soft loan assistance under self employment

industrial units. small industrial units or manufactured by small industrial units. scheme for ex- servicemen, National Equity Fund, Mahila Udyog Nidhi, and Mahila Vikas Nidhi through specified lending agencies. These schemes help specified groups like women, ex- servicemen etc.

It grants direct assistance as well as refinance loans extended by

primary lending institutions for financing exports of the products of small industrial units. It extends loans to State Small Industries Development Corporations for providing scarce raw materials to small industrial units and for making their products. It also provides financial help to National Small Industries Corporation for providing leasing.

MISSION

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To empower the Micro, Small and Medium Enterprises (MSME) sector with a view to contributing to the process of economic growth, employment generation and balanced regional development SIDBI Foundation for Micro Credit (SFMC) was launched by the Bank in January 1999 for channelising funds to the poor in line with the success of pilot phase of Micro Credit Scheme. SFMCs mission is to create a national network of strong, viable and sustainable Micro Finance Institutions (MFIs) from the informal and formal financial sector to provide micro finance services to the poor, especially women OBJECTIVE OF SIDBI: The preamble to the Small Industries Development Bank of India Act, 1989 defines the Objective of SIDBI as: "The principal financial institution for the promotion, financing and development of industry in the small scale sector and to co-ordinate the functions of the institutions engaged in the promotion and financing or developing the industry in the small scale sector and for the Matters connected therewith or incidental thereto

In the SIDBI charter, four basic objectives are set out. They are:

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Financing Promotion Development Coordination For orderly growth of industry in the small scale sector. CHANNELS OF ASSISTANCE: SIDBI's financial assistance to small scale sector has three major dimensions: 1. 2. 3. Indirect assistance to primary lending institutions (PLIs); Direct assistance to small units; and Development and Support Services

SIDBI has bagged the prestigious "ADFIAP Development Award 2003" for its Rural Industries Programmes designed to give impetus to rural development by creating sustainable industrial and service enterprises in rural areas.

SUBSIDIARIES
SIDBI Venture Capital Ltd. [SVCL] a wholly owned subsidiary of SIDBI acts as the Asset Management Company of the National Venture Fund for Software and Information Technology. The fund has a committed corpus of Rs.100 crores as on March 31, 2003. SIDBI Trustee Co.Ltd. [STCL] has been set up to carry out trusteeship functions for Venture Capital Funds. Presently STCL is acting as Trustee of National Venture Fund for Software and Information Technology.
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Associate Organisations:
Credit Guarantee Fund Trust Scheme for Small Industries [CGTSI] promoted jointly by Government of India and SIDBI, was launched by the Hon'ble Prime Minister on August 30, 2000. The credit guarantee scheme of CGTSI aims at helping the new and existing industrial units in SSI sector, in getting collateral free credit by way of both term loan and working capital from eligible member lending institutions. Member Lending Institutions include scheduled commercial banks, select Regional Rural Banks and such of the institutions as may be approved by Government of India. Technology Bureau for Small Enterprises [TBSE] was set up by SIDBI in 1995 in collaboration with United Nations Asian & Pacific Center for Transfer of Technology. The Bureau aims at helping SSI units to attain international competitiveness through transfer of latest available technologies from both within and outside the country DEVELOPMENT AND SUPPORT SERVICES The Bank 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. Over the years, the initiatives of SIDBI under promotional and developmental activities have crystallized into the following important areas:

Enterprise Promotion with emphasis on Rural Industrialization

Human Resource Development to suit the SSI sector needs

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Technology Upgradation Quality and Environment Management Marketing and Promotion and Information Dissemination. RANGE OF SERVICES SIDBI REFINANCES: for Loans granted by PLIs for new SSI projects and expansion, technology upgradation,

modernisation, quality promotion. Loans sanctioned by PLIs to small road transport operators, qualified professionals for self-employment, small hospitals and nursing homes and to promote hotels and tourism-related activities. SIDBI DIRECTLY FINANCES: SSI units for new/expansion/diversification/modernisation projects. Marketing development projects which expand the domestic and international marketability of SSI products. Existing well-run SSI units and ancillaries/sub-contracting units/ vendor units for modernisation and technology upgradation. Infrastructure development agencies for developing industrial areas. Leasing and hire purchase companies for offering leasing/hire purchase facilities to SSI units.

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Existing export-oriented units to enable them to acquire ISO-9000 Series Certification APPROACH: SFMC is the apex wholesaler for micro finance in India providing a complete range of financial and non-financial services such as loan funds, grant support, equity and institution building support to the retailing Micro Finance Institutions (MFIs) so as to facilitate their development into financially sustainable entities, besides developing a network of service providers for the sector. SFMC is also playing significant role in advocating appropriate policies and regulations and to act as a platform for exchange of information across the sector. The launch of SFMC by SIDBI has been with a clear focus and strategy to make it as the main purveyor of micro finance in the country. Operations of SFMC in the next few years, is not only expected to contribute significantly towards development of a more formal, extensive and effective micro finance sector serving the poor in India but also ensure sustainability at all levels viz. at the apex level (SFMC), at the MFI level and at the client level to ensure continuance of such arrangement. Most importantly, SFMC has strived to create a mechanism in which there should be no barriers to growth. Under the dispensation, there is a focus on innovation and action research.

RATING OF MFIs:

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Most micro finance programmes are being operated by NGOs and are not subjected to regulation and supervision as they are registered as Societies or Trusts. Non-regulation of these institutions has worked to their detriment in that these institutions are not able to have smooth access to funds from the financial sector which is wary of lending to such entities. This constraint coupled with the fact that SFMC was launched with a view to upscale the flow of micro credit with enabling policy modifications relating to simplification of the procedures in availment of assistance and substantial relaxation in the security / collateral requirement posed a difficult challenge. Therefore, to meet the requirements of the revised dispensation which called for selection of suitable micro finance intermediaries which could be trusted with bulk assistance without collateral constraints, Capacity Assessment Rating [CAR] was introduced by SFMC as a supplementary tool to judge risk perception. On SFMCs initiative, the rating of MFIs has been started by two agencies. Till March 31, 2005 224 ratings have been commissioned to MCRIL/CRISIL. SFMC has also organized two trainings on CAMEL methodology of ACCION to build the internal capacity of SFMC officers. In addition to SFMC officers, officials from CRISIL, IIFM, Sa-Dhan, RBI, FWWB, and AFCL also attended the above training. MINIMAL SECURITY REQUIREMENT: Credit worthiness is based on the rating of the borrowing institutions instead of availability of security/ collateral requirements. Term Deposit Receipts (TDRs) issued by Scheduled Commercial Banks for an amount equivalent to 10% /5% /2.5% (depending upon geographical area of operation and duration of partnership with SIDBI). CAPACITY BUILDING SUPPORT FOR THE SECTOR:
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SFMCs capacity building efforts are directed not only towards MFIs but also towards smaller/ grassroots institutions engaged in micro finance operations, training, consultancy, rating and impact assessment etc. and other service providers in the form of training, seminars, workshops, orientation and exposure visits. In order to strengthen the supply side of trained manpower, SIDBI has provided support to premier management institutes for courseware development on elective in micro finance. The faculty and resource persons from selected institutions are regularly sponsored for international exposure visits and training programmes. SIDBI has also been regularly sponsoring staff of MFIs, consultants and service providers besides management faculty for short duration training programmes in various areas of micro finance. A number of customised training programmes / workshops on specific areas of micro finance being conducted by reputed training institutions / technical service providers for the field and managerial staff of MFIs are also supported from time to time. Institution building efforts in the area of human resource, systems, and practices are critical for healthy growth of the micro finance sector. Therefore, at the level of MFIs, to hasten up the process of professionalism, SFMC has been providing support for salary of young professionals to be recruited from reputed management institutions for absorption in MFIs. INNOVATIONS & ACTION RESEARCH: SIDBI has taken a number of initiatives in launching / facilitating introduction / market-making of new concepts in the sector. The launch of an electronic portal for information dissemination and knowledge sharing within the sector and development of MIS software for MFIs are some such initiatives. It is also working on an MFI standardization programmes on the lines of the Micro
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Banking Bulletin (MBB), managed by CGAP. Other major initiatives include developing a common chart of accounts for the sector, creating gender and environment awareness, promoting innovations and action research on emerging concepts etc. PROMOTIONAL ACTIVITIES OBJECTIVE: As an apex financial institution for promotion, financing and development of industry in the small scale sector, SIDBI meets the varied developmental needs of the Indian SSI sector by its wide-ranging Promotional and development (P&D) activities. P&D initiatives of the Bank aim at improving the inherent strength of small scale sector on one hand as also economic development of poor through promotion of micro enterprises. In pursuance of its multifaceted P&D activity, synergistic with its business activities aimed at development of the small industries, SIDBI looks forward to a partnership with NGOs, associate financial institutions, corporate bodies, R&D laboratories, marketing agencies, etc., for national level programmes. SIDBI has identified the following thrust areas of P&D activities, which are being undertaken in partnership with various institutions, agencies, and NGOs.

RURAL INDUSTRIAL PROGRAMME

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INTRODUCTION A unique approach for rural industrialization where the emphasis is on stimulating and helping the potential entrepreneurs to set up small enterprises through consultancy outfit positioned by SIDBI. OBJECTIVE: Development of viable and self-sustaining tiny / small enterprises in rural and semi urban India by harnessing local entrepreneurial talent. The Programmes attempts to address the problems such as rural unemployment, urban migration and under-utilization of local skills and resources, and is designed as a comprehensive Business Development Services programmes. The Rural Industries Programmes (RIP) of the Bank provides a cohesive and integrated package of basic inputs like information, motivation, training and credit, backed by appropriate technology and market linkages for the purpose of enterprise promotion. APPROACH: Development of underdeveloped areas: Under RIP, an economically underdeveloped district is identified and an Implementing Agency (IA) Development professionals, Technical consultancy organisation or Non- Government organisation is positioned to provide a comprehensive and integrated package of inputs and business development services to potential entrepreneurs. The identified IA positions a team of professionals at the field level for a period of five year. IA also provides support during post implementation period to ensure sustainability of enterprises.
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Integrated approach: The package of services provided by IA, inter alia, includes identifying and motivating rural entrepreneurs, identification of viable ventures based on local skills and resources, training, appropriate technology linkages and finance tie-up with the formal banking sector. Performance Oriented incentives: Enterprises are grounded on technological and economic considerations. No subsidies or grants are available to entrepreneurs. Besides start-up administrative support, IA is paid performance fee in the range of Rs. 500 to Rs. 7000 per unit promoted, depending on project size. Long term viability and sustainability of the enterprises promoted is an important aspect of RIP. New enterprises require continued support, at least for the first year of their operations. Therefore, an amount of Rs. 1,000 per unit is payable to the IAs by way of post-sanction incentive over and above the initial performance fee for providing escort services to the assisted entrepreneurs and post-sanction work. A sub-sectoral approach is followed to enable the implementing agencies to provide necessary backward and forward linkages to the enterprises. Marketing support: Entrepreneurs are supported for group participation in domestic trade fairs and exhibition cum sale.

NATIONAL BANK FOR AGRICULTURE & RURAL DEVELOPMENT (NABARB)

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INTRODUCTION: Recently announced National Strategies for accelerating the flow of credit to farm sector include doubling the flow of agricultural credit in 3 years, increase in disbursement from Rs.80,000 crores in 2003-04 to Rs.1,05,000 crores in 2004-05, financing of Atleast 100 new farmers and 2-3 new investment projects in various sub-sectors of agriculture by each of the rural and semi-urban branches of Commercial Banks. In the above context, NABARD's strategies, inter alia, cover formulation and circulation of Model Bankable Schemes and Location Specific Bankable Schemes to the financing banks. NABARD also proposes to identify highly potential zones for undertaking investment activities in various states and organize interactive workshops in these potential zones. The Technical Services Department of NABARD is preparing and bringing model bankable agricultural projects in the areas of Minor Irrigation, Land Development, Plantation & Horticulture, Agricultural Engineering, Forestry and Wasteland, Fisheries , Animal Husbandry and Biotechnology. Besides these traditional areas, State specific area development projects and profiles in the emerging thrust areas of Medicinal & Aromatic Plants, Processing of Fruits & Vegetables have also been prepared for dissemination among financing banks.

GENESIS :

A HIGH LEVEL EXPERT COMMITTEE (CRAFICARD) SET UP BY RBI IN 1979

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RECOMMENDED FORMATION OF A NATIONAL LEVEL ORGANISTION FOR AGRICULTURE AND RURAL DEVELOPMENT. THUS, NABARD CAME INTO BEING ON 12 JULY 1982 UNDER AN ACT OF PARLIAMENT. TOOK OVER FUNCTIONS OF AGRICLTURE CREDIT DEPARTMENT (ACD) AND RURAL PLANNING & CREDIT CELL (RPCC) OF RBI AND AGRICULTURAL REFINANCE AND DEVELOPMENT CORPORATION (ARDC). IS THE APEX INSTITUTION DEALING WITH POLICY, PLANNING AND OPERATIONS IN THE FIELD OF CREDIT FOR AGRICULTURE AND RURAL DEVELOPMENT.

MISSION PROMOTE SUSTAINABLE AND EQUITABLE AGRICULTURE AND RURAL PROSPERITY THROUGH EFFECTIVE CREDIT SUPPORT, RELATED SERVICES, INSTITUTION DEVELOPMENT AND OTHER INNOVATIVE INITIATIVES. OBJECTIVES

FACILITATING CREDIT FLOW FOR AGRICULTURE AND RURAL DEVELOPMENT. PROMOTING AND SUPPORTING POLICIES, PRACTICES AND INNOVATIONS CONDUCIVE TO RURAL DEVELOPMENT. STRENGTHENING RURAL CREDIT DELIVERY SYSTEM THROUGH INSTITUTIONAL DEVELOPMENT MEASURES. FOCUSSING ON POVERTY ALLEVIATION AND EMPLOYMENT GENERATION. SUPERVISING RURAL FINANCIAL INSTITUTIONS (COOPERATIVE BANKS AND REGIONAL RURAL BANKS).

INSTITUTIONS ELIGIBLE FOR REFINANCE

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Commercial Banks, State Agriculture Development Finance Companies(ADFCs), Primary Urban Cooperative Banks(PUCBs) and State Governments

ELIGIBLE PURPOSES

Farm Sector Production Credit (Crop Loans) and Investment Credit Non-farm Sector Investment activities of Artisans, Small Scale Industries, Tiny Sector, Village and Cottage Industries, Handicrafts, Handlooms, etc. Micro Credit Revolving Fund Assistance to SHGs, Voluntary Agencies/NGOs. Loans to State Governments o For Infrastructure Development under RIDF o For Share Capital Contribution to Cooperative Credit Institutions TO AGRICULTURE AND ALLIED

NABARDs SUPPORT ACTIVITIES

NABARD Refinance constitutes 28% of the total Ground Level Credit Flow to Agriculture and Allied Activities. Minor Irrigation and Forestry forms 21% of the total refinance to banks/financial institutions. Aggregate financial support to banks, financial institutions and State Governments during 2001-02 reached a new height of Rs.21,146 crores.

FINANCIAL ASSISTANCE AVAILABLE FROM BANKS/NABARD FOR DAIRY FARMING.

NABARD is an apex institution for all matters relating to policy,

planning and operation in the field of agricultural credit. It serves as an apex

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refinancing agency for the institutions providing investment and production credit. It promotes development through formulation and appraisal of projects through a well organized Technical Services Department at the Head Office and Technical Cells at each of the Regional Offices. Loan from banks with refinance facility from NABARD is available for starting dairy farming. For obtaining bank loan, the farmers should apply to the nearest branch of a commercial or co-operative Bank in their area in the prescribed application form which is available in the branches of financing banks. The Technical Officer attached to or the Manager of the bank can help/give guidance to the farmers in preparing the project report to obtain bank loan.

For dairy schemes with very large outlays, detailed reports will have to

be prepared. The items of finance would include capital asset items such as purchase of milk animals, construction of sheds, purchase of equipments etc. The feeding cost during the initial period of one/two months is capitalized and given as term loan. Facilities such as cost of land development, fencing, and digging of well, commissioning of diesel engine/pumpset, electricity connections, essential servants' quarters, godown, transport vehicle, milk processing facilities etc. can be considered for loan. Cost of land is not considered for loan. However, if land is purchased for setting up a dairy farm, its cost can be treated as party's margin upto 10% of the total cost of project. Nabard has been in the forefront of providing financial succor to the agriculture sector. The emergence of Nabard as an apex institution has empowered it with all matters concerning policy, planning and operations in the field of credit for agriculture and other economic activities in rural

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areas. As envisaged, NABARDs mission is rural prosperity and performs prominently functions such as: 1. financing institutions by providing investment and production credit support for promoting various developmental activities in rural areas 2. Providing measures towards institution building for improving absorptive capacity of the credit delivery system, including monitoring, formulation of schemes for restructuring of credit institutions and training of personnel 3. Co-ordinating rural financing activities of institutions engaged in developmental work at the field level and maintains liaison with state governments, Reserve Bank of India (RBI) and other institutions concerned with policy formulation 4. Undertaking monitoring and evaluation of projects supported by it. This article briefly discusses the credit as well as non-credit based activities of the organization which helps in improving the effectiveness of credit functions.

SCHEME FORMULATION FOR BANK LOAN. A Scheme can be prepared by a beneficiary after consulting local technical persons of State animal husbandry department, DRDA, SLPP etc., dairy co-operative society/union/federation/commercial dairy farmers. If possible, the beneficiaries should also visit progressive dairy farmers and

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government/military/agricultural university dairy farm in the vicinity and discuss the profitability of dairy farming. A good practical training and experience in dairy farming will be highly desirable. The dairy co-operative societies established in the villages as a result of efforts by the Dairy Development Department of State Government and National Dairy Development Board would provide all supporting facilities particularly marketing of fluid milk. Nearness of dairy farm to such a society, veterinary aid centre, artificial insemination centre should be ensured. There is a good demand for milk, if the dairy farm is located near urban centre. The scheme should include information on land, livestock markets, availability of water, feeds, fodders, veterinary aid, breeding facilities, marketing aspects, training facilities, experience of the farmer and the type of assistance available from State Government, dairy society/union/federation. The scheme should also include information on the number of and types of animals to be purchased, their breeds, production performance, cost and other relevant input and output costs with their description. Based on this, the total cost of the project, margin money to be provided by the beneficiary, requirement of bank loan, estimated annual expenditure, income, profit and loss statement, repayment period, etc. can be worked out and shown in the Project report. ANNEXURE-I PRICE STABILISATION FUND SCHEME Background

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Deeply concerned with the problems being faced by the growers of coffee, tea, rubber and tobacco due to continued low prices of these commodities for quite some time, Government of India (GoI) has taken a series of measures to ameliorate the hardships being faced by the growers of these crops. The Price Stabilization Fund Scheme is yet another step in the direction of the GoI to demonstrate its commitment to safeguard the interests of these growers. Objective of the Scheme The PSFS aims at providing financial relief to the growers when prices of these commodities fall below a specified level without resorting to the practice of procurement operations by the Government agencies. Duration of the Scheme The Scheme will be operational for a period of ten years subject to a review after five years. Mode of Intervention Under the Scheme, a fund called the Price Stabilisation Fund will be established with contributions from the GoI and entry fee @ Rs.500/- from each grower desirous of participating in the Scheme. The corpus of the Fund shall remain undisturbed and interest earnings alone will be utilized for operational sing the PSFS.

Who can participate in the Scheme? Initially, the Scheme will be open to growers of tea, coffee, rubber and tobacco having operational holdings of 4 hectares or less. Subsequently, coverage of other growers could be considered. How to become a member

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Growers of aforementioned commodities desirous of participating in the Scheme shall apply to the respective Commodity Board in the prescribed form within the date stipulated therefore. The Commodity Boards shall select the members on first come first serve basis with preference being given to the members with the least holding size. The Commodity Boards shall thereafter enroll the eligible grower as member who will be required to deposit an amount of Rs.500/- with the Commodity Board. Opening and maintenance of bank account The member would be provided with an application form to enable him/her to open the PSF account with the designated bank branch. The Commodity Board shall also inform the concerned bank branch for opening the account in the name of the member. The account will be maintained as Savings Bank Account and would be entitled for payment of interest at rates applicable for Savings Bank Account. No service charges of any kind would be levied. Members have to deposit their annual contributions to the account by 31 March every year. GoI contributions to the account would be made not later than 31st May every year. At the end of the duration of the Scheme the entire balance in the account would be payable to the member. ANNEXURE-II Price stabilization fund account guidelines for opening & maintenance of account by banks:

The account will be opened by designated bank branches based on a Certificate of Eligibility issued by the concerned Commodity Board.

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The banks would not insist on introduction of the account holder and would rely on the Certificate issued by the Commodity Board. The accounts would be opened with the deposit of Rs.100/- which will be the minimum balance in respect of these accounts. The accounts would be designated as PSF Accounts. The account would be maintained as Savings Bank Account and would be entitled for payment of interest at the rates applicable for SB Account. No service charges of any kind would be leviable. In accordance with the terms and conditions of the scheme, deposits will be made by the account holders or by the Government of India through the concerned Commodity Board which would be credited to the account. Drawls would be allowed from the account only on receipt of specific advice from the concerned Commodity Board in any particular year. The advice would indicate the extent of drawl that could be allowed to the member. Members have to deposit their annual contributions to the account by a prescribed due date which is presently set as 31st March. The government contributions would be made not later than 31 May every year. When the grower fails to contribute his share to the account by the due date, he will be deemed to be a defaulter. Once the account is in default i.e. if the contribution due from the member is not made by the prescribed due date i.e. by 31 March, the account would be closed. No further deposits of the grower members should be accepted for credit of a defaulters account. No government contributions could be credited to the defaulters account. At the request of the grower member, the balance in the defaulters account could be repaid to the extent of the members contribution with interest thereon. No part of governments contributions and interest thereon should be paid to the defaulter grower members. After payment of the dues to the defaulter the balance representing governments contributions and interest thereof in such account should be remitted back to the Price Stabilization Fund Trust through the concerned Commodity Board.
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Banks have to provide an annual return to the concerned Commodity Board indicating the number of accounts maintained the balance therein and the list of accounts to which government contributions were credited during the year and also a list of accounts which have turned into default with details of accounts closed on account of default. Further details of payments made to the defaulting member as well as amount remitted to the government from the defaulting account, on its closure should also be sent to the Commodity Board every year. The format of these statements would be provided to the banks. At the end of 10 years, the entire balance in the account is payable to the grower members. Performa of application forms for enrolment of members by the Commodity Boards and opening of bank accounts under the PSFS are enclosed. In case of any doubts, clarifications could be obtained from the Price Stabilization Fund Trust / concerned Commodity Board.

ENCLOSURE 1 APPLICATION FOR ENROLMENT OF GROWER MEMBERS IN THE PRICE STABILISATION FUND SCHEME To The_________ ________Board ____________
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Sir, I wish to enroll as a Grower Member in the Price Stabilization Fund Scheme introduced by the Government of India. My details are as under: 1. Name: 2. Fathers Name: 3. Full address: 4. Regn. No. with the Board as a: grower (TBRG NO.) 5. Particulars of holdings of: agriculture lands (in hecters) a) name of the village, taluka/mandal, district & state where the land ids situated. b) Survey No. c) Holding of Agri. Land (Hect.) 6. Name & address of the: bank with account No. 7. Remarks: 8. Details of entry fee of Rs.500/- by way of cash/D.D.: I do solemnly declare that to the best of my knowledge and belief, the above stated information is true, complete and correct. Further, I have read, understood and hereby agree to the terms and conditions of the Price Stabilization Fund Scheme. Signature of the applicant Place: Date: FOR OFFICE USE ONLY WHETHER ELIGIBLE FOR JOINING PSF IF YES, ENROLMENT NO.
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SCHEME

YES/NO

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development banking in India.

SIGNATURE OF THE AUCTION SUPERINTENDENT

ENCLOSURE II APPLICATION FOR OPENING OF BANK ACCOUNT UNDER PRICE STABILISATION FUND SCHEME To THE MANAGER

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(Name of the (Name of the ________________ Date: Sir

Branch) Passport size photograph Bank) with signature/thumb impression

I wish to apply for opening of a bank account in your branch under the Price Stabilization fund Scheme. My details are as under: 1. Name: 2. Fathers Name: 3. Date of Birth: 4. Address: 5. Telephone No. : 6. Registration No. with the: commodity board 7. Name and address of nominee: 8. Relationship with Nominee: 9. Details of existing bank account, if any: I have been enrolled as a member under the Price Stabilization Fund Scheme by the __________ Board (Name of the Commodity Board). I have read, understood and hereby agree to the terms and conditions of the Price Stabilization Fund Scheme. Further all the particulars and information given above are true, correct, and complete and upto date in all respect. SIGNATURE OF THE APPLICANT Certificate by the _____________ Board Date: We certify that Shri/Smt. has been enrolled as a member under the Price Stabilization Fund Scheme and he/she has paid the entrance fee. He/she may
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be allowed to open a bank account under the Price Stabilization Fund Scheme in your branch.

SIGNATURE OF THE AUTHORISED

DEVELOPMENT AND PROMOTIONAL FUNCTIONS: Credit is a critical factor in development of agriculture and rural sector as it enables investment in capital formation and technological upgradation. Hence strengthening of rural financial institutions, which deliver credit to the sector, has been identified by NABARD as a thrust area. Various

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initiatives have been taken to strengthen the cooperative credit structure and the regional rural banks, so that adequate and timely credit is made available to the needy. In order to reinforce the credit functions and to make credit more productive, NABARD has been undertaking a number of developmental and promotional activities such as:o Help cooperative banks and Regional Rural Banks to prepare development

actions plans for themselves.

o Enter into MoU with state governments and cooperative banks specifying

their respective obligations to improve the affairs of the banks in a stipulated timeframe.
o Help Regional Rural Banks and the sponsor banks to enter into MoUs

specifying their respective obligations to improve the affairs of the Regional Rural Banks in a stipulated timeframe.
o Monitor implementation of development action plans of banks and

fulfillment of obligations under MoUs.

o Provide financial assistance to cooperatives and Regional Rural Banks for

establishment of technical, monitoring and evaluations cells.

o Provide organisation development intervention (ODI) through reputed

training institutes like Bankers Institute of Rural Development (BIRD), Lucknow www.birdindia.com, National Bank Staff College, and Lucknow. www.nbsc.in and College of Agriculture Banking, Pune, etc.
o Provide financial support for the training institutes of cooperative banks. o Provide training for senior and middle level executives of commercial banks,

Regional Rural Banks and cooperative banks.

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o Create awareness among the borrowers on ethics of repayment through

Vikas Volunteer Vahini and Farmers clubs.

o Provide financial assistance to cooperative banks for building improved

management information system, computerisation of operations and development of human resources. BIOTECHNOLOGY: INTRODUCTION The success of Horticulture development hinges on selection of desired types of plants and their multiplications. Selection of desired types is based on evaluation of the quantitative and qualitative performance of plants and also in some cases their aesthetic appeal. Over the years, the horticulturists have developed various techniques for selection of desired types of plants and their multiplication. Recently interesting developments have taken place in the field of plant multiplication which involves culture of cells or tissues in laboratory. Traditionally, horticultural plants are multiplied by means of seeds (sexual propagation) or organs other than seeds (asexual or vegetative propagation). These organs are usually stems, leaves or roots. Though multiplication by seeds is the cheapest method, it suffers form certain disadvantages. Plants raised from seeds may not repeat good performance of mother plants. Many horticultural plants take a long time to produce seeds/fruits and many of them do not produce viable seeds or desired quality of seeds. Plants propagated vegetative do not suffer from these disadvantages. However, vegetative propagation is rather a slow, time and space consuming process.

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Besides, it is usually infected with latent diseases. Some plants are also not amenable to vegetative method of propagation, for example, coconut, papaya, oil palm, clove etc. Therefore, scientists started a quest for an alternative method of plant propagation which could overcome the disadvantages of both the methods described above. After many trials and errors in the sixties, plant propagation by tissue culture method, which could overcome disadvantages of propagation by seeds or vegetative organs, was found commercially successful in the case of orchids. Subsequently, the method has been perfected for many other plants (Annexure A). The method (also known as micro-propagation) involves the culture of whole organism from cells or tissues or plant parts in glass (in vitro) on a defined medium under germ free conditions (sterile or aseptic), whereas conventional method of vegetative propagation (macro-propagation) involves culture of parts into whole organisms in natural conditions (in vitro).

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development banking in India.

The Industrial Development Bank of India Limited commonly known by its acronym IDBI is one of India's leading private banks. It was established in 1964 by an Act of Parliament to provide credit and other facilities for the development of the fledgling Indian industry. It is currently the tenth largest development bank in the world. Some of the institutions built by IDBI are The National Stock Exchange of India (NSE), The National Securities Depository Services Ltd. (NSDL) and the Stock Holding Corporation of India (SHCIL) The Industrial Development Bank of India (IDBI) was established on July 1, 1964 under an Act of Parliament as a wholly owned subsidiary of the Reserve Bank of India. In February 1976, the ownership of IDBI was transferred to the Government of India and it was made the principal financial institution for coordinating the activities of institutions engaged in financing, promoting and developing industry in the country. Although Government shareholding in the Bank came down below 100% following IDBIs public issue in July 1995, the former continues to be the major shareholder (current shareholding: 58.47%). During the four decades of its existence, IDBI has been instrumental not only in establishing a well-developed, diversified and efficient industrial and institutional structure but also adding a qualitative dimension to the process of industrial development in the country. IDBI has played a pioneering role in fulfilling its mission of promoting industrial growth through financing of medium and long-term projects, in consonance with national plans and priorities. Over the years, IDBI has enlarged its basket of products and services, covering almost the entire spectrum of industrial activities, including

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manufacturing and services. IDBI provides financial assistance, both in rupee and foreign currencies, for green-field projects as also for expansion, modernization and diversification purposes. In the wake of financial sector reforms unveiled by the Government since 1992, IDBI evolved an array of fund and fee-based services with a view to providing an integrated solution to meet the entire demand of financial and corporate advisory requirements of its clients. IDBI also provides indirect financial assistance by way of refinancing of loans extended by State-level financial institutions and banks and by way of rediscounting of bills of exchange arising out of sale of indigenous machinery on deferred payment terms. IDBI has played a pioneering role, particularly in the pre-reform era (1964-91),in catalyzing broad based industrial development in the country in keeping with its Government-ordained development banking charter. In pursuance of this mandate, IDBIs activities transcended the confines of pure long-term lending to industry and encompassed, among others, balanced industrial growth through development of backward areas, modernization of specific industries, employment generation, entrepreneurship development along with support services for creating a deep and vibrant domestic capital market, including development of apposite institutional framework. In September 2003, IDBI diversified its business domain further by acquiring the entire shareholding of Tata Finance Limited in Tata Home finance Ltd., signaling IDBIs foray into the retail finance sector. The fully-owned housing finance subsidiary has since been renamed IDBI Home finance
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Limited. In view of the signal changes in the operating environment, following initiation of reforms since the early nineties, Government of India has decided to transform IDBI into a commercial bank without eschewing its secular development finance obligations. The migration to the new business model of commercial banking, with its gateway to low-cost current, savings bank deposits, would help overcome most of the limitations of the current business model of development finance while simultaneously enabling it to diversify its client/ asset base. Towards this end, the IDB (Transfer of Undertaking and Repeal) Act 2003 was passed by Parliament in December 2003. The Act provides for repeal of IDBI Act, corporatisation of IDBI (with majority Government holding; current share: 58.47%) and transformation into a commercial bank. The provisions of the Act have come into force from July 2, 2004 in terms of a Government Notification to this effect. The Notification facilitated formation, incorporation and registration of Industrial Development Bank of India Ltd. as a company under the Companies Act, 1956 and a deemed Banking Company under the Banking Regulation Act 1949 and helped in obtaining requisite regulatory and statutory clearances, including those from RBI. IDBI would commence banking business in accordance with the provisions of the new Act in addition to the business being transacted under IDBI Act, 1964 from October 1, 2004, the Appointed Date notified by the Central Government. IDBI has firmed up the infrastructure, technology platform and reorientation of its human capital to achieve a smooth transition. On July 29, 2004, the Board of Directors of IDBI and IDBI Bank accorded in principle approval to the merger of IDBI Bank with the Industrial Development Bank of India Ltd. to be formed incorporated under the Companies Act, 1956 pursuant to the IDB (Transfer of Undertaking and Repeal) Act, 2003 (53 of
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2003), subject to the approval of shareholders and other regulatory and statutory approvals. A mutually gainful proposition with positive implications for all stakeholders and clients, the merger process is expected to be completed during the current financial year ending March 31, 2005. IDBI would continue to provide the extant products and services as part of its development finance role even after its conversion into a banking company. In addition, the new entity would also provide an array of wholesale and retail banking products, designed to suit the specific needs cash flow requirements of corporate and individuals. In particular, IDBI would leverage the strong corporate relationships built up over the years to offer customised and total financial solutions for all corporate business needs, single-window appraisal for term loans and working capital finance, strategic advisory and hand-holding support at the implementation phase of projects, among others. IDBIs transformation into a commercial bank would provide a gateway to low-cost deposits like Current and Savings Bank Deposits. This would have a positive impact on the Banks overall cost of funds and facilitate lending at more competitive rates to its clients. The new entity would offer various retail products, leveraging upon its existing relationship with retail investors under its existing Suvidha Flexi-bond schemes. In the emerging scenario, the new IDBI hopes to realize its mission of positioning itself as a one stop super-shop and most preferred brand for providing total financial and banking solutions to corporates and individuals, capitalising on its intimate knowledge of the Indian industry and client requirements and large retail base on the liability side.

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IDBI upholds the highest standards of corporate governance in its operations. The responsibility for maintaining these high standards of governance lies with its Board of Directors. Two Committees of the Board viz. the Executive Committee and the Audit Committee are adequately empowered to monitor implementation of good corporate governance practices and making necessary disclosures within the framework of legal provisions and banking conventions. Industrial Development Bank of India (IDBI) is the tenth largest bank in the world in terms of development. The National Stock Exchange (NSE), The National Securities Depository Services Ltd. (NSDL), Stock Holding Corporation of India (SHCIL) is some of the institutions which have been built by IDBI. IDBI is a strategic investor in a plethora of institutions which have revolutionized the Indian Financial Markets. IDBI Bank, promoted by IDBI Group started in November 1995 with a branch at Indore with an equity capital base of Rs. 1000 million.

MAIN FUNCTIONS

OF IDBI:

IDBI is vested with the responsibility of co-ordinating the working of institutions engaged in financing, promoting and developing industries. It has evolved an appropriate mechanism for this purpose. IDBI also

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undertakes/supports

wide-ranging

promotional

activities

including

entrepreneurship development programmes for new entrepreneurs, provision of consultancy services for small and medium enterprises, up gradation of technology and programmes for economic upliftment of the underprivileged. IDBIs ROLE AS A CATALYST: IDBI's role as a catalyst to industrial development encompasses a wide spectrum of activities. IDBI can finance all types of industrial concerns covered under the provisions of the IDBI Act. With over three decades of service to the Indian industry, IDBI has grown substantially in terms of size of operations and portfolio. DEVELOPMENTAL ACTIVITIES OF IDBI: PROMOTIONAL ACTIVITIES: In fulfillment of its developmental role, the Bank continues to perform a wide range of promotional activities relating to developmental programmes for new entrepreneurs, consultancy services for small and medium enterprises and programmes designed for accredited voluntary agencies for the economic upliftment of the underprivileged. These include entrepreneurship development, self-employment and wage employment in the industrial sector for the weaker sections of society through voluntary agencies, support to Science and Technology Entrepreneurs' Parks, Energy Conservation, Common Quality Testing Centers for small industries. TECHNICAL CONSULTANCY ORGANIZATIONS:

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With a view to making available at a reasonable cost, consultancy and advisory services to entrepreneurs, particularly to new and small entrepreneurs, IDBI, in collaboration with other All-India Financial Institutions, has set up a network of Technical Consultancy Organizations (TCOs) covering the entire country. TCOs offer diversified services to small and medium enterprises in the selection, formulation and appraisal of projects, their implementation and review. ENTERPRENEURSHIP DEVELOPMENT INSTITUTE: Realising that entrepreneurship development is the key to industrial development; IDBI played a prime role in setting up of the Entrepreneurship Development Institute of India for fostering entrepreneurship in the country. It has also established similar institutes in Bihar, Orissa, Madhya Pradesh and Uttar Pradesh. IDBI also extends financial support to various organisations in conducting studies or surveys of relevance to industrial development.

RECENT DEVELOPMENTS: To meet emerging challenger and to keep up with reforms in financial sector, IDBI has taken steps to reshape its role from a development finance institution

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to a commercial institution. With Industrial Development Bank (Transfer of Undertaking and Repeal) Act, 2003, IDBI attained the status of a limited company viz. "Industrial Development Bank of India Limited" (IDBIL). Subsequently, the Central Government notified October 1, 2004 as the 'Appointed Date' and RBI issued the requisite notification on September 30, 2004 incorporating IDBI Ltd. as a 'scheduled bank' under the RBI Act, 1934. Consequently, IDBI, the erstwhile Development Financial Institution of the country, formally entered the portals of banking business as IDBIL from October 1, 2004, over and above the business currently being transacted. As of July, 2006 the employees association of the IFCI have sought its merger with the Bank.

QUESTIONAIRE
How does the development bank help in development of country? 52

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How the working of development bank different from commercial & co operative banks? What is the role of RBI & Government in development banking sector? What are your achievements after liberalization? Future prospects in post liberalization period Which sector do you finance? Do u undertake commercial activities? Changes that took place after the merger of IDBI?

BIBLIOGRAPHY
www.Google.com 53

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www.Sidbi.com

www.idbi.com

www.nabard.com

www.wekipedia.com

Visit to IDBI BANK.

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