Development Banks
Development Banks
Development Banks
The definition of the term 'development banks' can be stated as follows, 1. In General sense, "Development banks are those financial institutions whose prime goal (motive is to finance the primar! (basic needs of the societ!. "uch funding results in the growth and development of social and economic sectors of the nation. #owever, needs of the societ! var! from region to region due to differences seen in its communal structure, econom! and other aspects." $. %s per Banking sub&ect (mainl! in Indian conte't , "Development banks are financial institutions established to lend (loan finance (mone! on subsidi(ed interest rate. "uch lending is sanctioned to promote and develop important sectors like agriculture, industr!, import)e'port, housing and allied activities."
Industrial sector is the d!namic sector of the Indian econom!. This sector contributes to the generation of emplo!ment and income in the countr!. ,unds are provided b! the development banks to start a new business venture, e'pansion and diversification of the business in new sector etc. These funds are utilised to achieve several ob&ectives that leads to accelerate industries and economic growth. Development banking supports the programmes of industrialisation of the countr!, b! promoting entrepreneurial activities.
2. Encouraging entrepreneurs:
Industrialisation helps in curbing economic and social problems thereb! making economies progress. 3merging entrepreneurs are encouraged to give shape to their ideas. Development bank helps those entrepreneurs b! providing funds for commencing new business. :overnment has recognised the importance of entrepreneurs in the industrial development and thus providing number of facilities and incentives to motivate them for undertaking industrial pro&ects.
3. Balanced regional development:
There has been alwa!s an issue related to regional disparities. Development bank helps in curbing these regional disparities b! providing funds to the entrepreneurs at low rate of interest if the organisation is planned in the backward areas. This would lead to the development of all areas thereb! making balanced regional development.
4. Filling gaps:
It is not possible for the commercial banks to fulfill all financial needs of all the customers. %bsence of organised capital market, absence of ade9uate facilities for financing industries arise the problem of slow development of industrialisation. "uch development banks can fulfill the credit gap. The! provide long) term funds for industries where gestation period ma! be longer.
5. elps government:
:overnment formulates financial policies with the help of development banks. The! also help in implementing these policies. ,or e'ample, /%.%1D bank is set up as an ape' development bank for e'tending support to the rural areas. It helps the government in matters relating to the rural development, offers training and research facilities for banks working in the field of rural development, and acts as a regulator for co)operative banks and 11.'s.
/ow let's discuss each important function of development banks one b! one.
Development banks help to revive (cure sick)units. :overnment of India (:?I started Industrial investment .ank of India (II.I to help sick units. II.I is the main credit and reconstruction institution for revival of sick units. It facilitates moderni(ation, restructuring and diversification of sick)units b! providing credit and other services.
1% Entrepreneurship Development
5an! development banks facilitate entrepreneurship development. /%.%1D, "tate Industrial Development .anks and "tate ,inance -orporations provide training to entrepreneurs in developing leadership and business management skills. The! conduct seminars and workshops for the benefit of entrepreneurs.
2% -egional Development
Development banks facilitate rural and regional development. The! provide finance for starting companies in backward areas. The! also help the companies in pro&ect management in such less) developed areas.