A

FIELD PROJECT REPORT ON

“INSTITUTIONAL FINANCE FOR INDUSTRIAL

DEVELOPMENT IN INDIA A STUDY OF THE ROLE
OF DEVELOPMENT BANKS”

Submitted in partial fulfillment of the requirement for the

award of degree of

BACHELOR OF COMMERECE (GENERAL)

SESSION (2022-2023)

SUBMITTED TO: - SUBMITTED BY: -

Miss Sandhya Sharma Name: Pawan Kumar

Coordinator – B.com 4th Semester Class: B.com 2nd year

Roll No: 21024063

 STUDENT’S DECLARATION

I ___________________________ Roll No. __________________ am a full-time

bona fide student of IFTM University, Moradabad. I hereby certify that this field

project work carried out by me and the report submitted in partial fulfillment of the

requirements of the programme is an original work of mine under the guidance of the

Ms. Sandhya Sharma and is not based or reproduced from any existing work of any

other person or on any earlier work undertaken at any other time or for any other

purpose and has not been submitted anywhere else at any time.

(Student's Signature)

Date:

(Class Coordinator's Signature)

Date:
 STUDENT’S CERTIFICATE

This is to verify that ARPAN KUMAR has completed HIS B.COM(GENERAL)

work for IFTM UNIVERSITY as per the guidelines issued by IFTM UNIVERSITY
Moradabad. He has worked under my guidance through the year.

The project report submitted by him is Original and Genuine I am satisfied with the
project report submitted by him.

COORDINATOR DIRECTOR

Ms. Sandhya Sharma Prof. Nisha Agarwal

 ACKNOWLEDGEMENT

I would like to express a deep sense of thanks and gratitude my project guide Miss
SANDHYA SHARMA for guiding me immensely through the course of the project.
She always evinced keen interest in my work.

Her constructive advice and constant motivation have been responsible for the
successful completion of this project.

My sincere thanks goes to Prof. Nisha Agarwal, our director Ma’am, for her co-
ordination in extending every possible support for the completion of this project.

I also thanks to my parents for their motivation and support. I must thank my
classmates for their timely help and support compilation of this project.

Last but not the least, I would like to thank all those who had helped directly or
indirectly towards the completion of this project.

Pawan Kumar
 INDEX

Sr. CONTENTS Page No. Remarks

No.

1. INTRODUCTION 1

2. OBJECTIVE OF THE STUDY 3

3. RESEARCH METHODOLOGY 4

4. DATA ANALYSIS 5

5. CONCLUSION 14

6. REFERENCES 15
 INTRODUCTION

In a labor oriented and capital scarce country like India, Small Scale Industries have
Come to occupy an important position in the planned industrialization of the
economy. Most of the Small Scale Industries have a low capital intensity and high
potential for employment generation Small and medium sized enterprises in market
economies are the engines of economic development owing to their flexibility and
adaptability as well as their potential to react to challenges and changing
environments. The Government shows a major interest in supporting
entrepreneurship. As this is one of the means through which new jobs could be
created, which can lead to increase in GDP and raising standard of population. Every
surviving and successful business means new jobs and growth of GDP.
Financial sector plays an indispensable role in the overall development of a country.
The most important constituent of this sector is the financial institutions, which act
as an intermediary for the transfer of resources from net savers to net borrowers. The
Financial institutions have traditionally been the major source of long term funds for
the economy. These institutions provide a variety of financial products and services
fulfil the varied needs of the commercial sectors. They play a vital role in reducing
regional disparities by inducing in providing assistance to new enterprises, small and
medium firms as well as to the industries established in backward areas.
The Government of India in order to provide adequate supply of credit to various
sector of the economy has developed a fine structure of financial institutions in the
country. These financial institutions can be broadly categorized into All India
institutions and State level institutions, depending upon the geographical coverage of
their operations.
At the national level, they provide long and medium term loans at reasonable rate of
Interest. These institutions subscribe to the debenture issue of companies, underwrite
public issue of shares, guarantee loans and deferred payments etc. although the State
level institutions are mainly concerned with the development of medium and small
scale enterprises, but they also provide the similar type of financial assistance as the
national level institutions.

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IMPORTANCE OF FINANCIAL INSTITUTIONS

The importance of SFIs may be attributed to the following:

1. They constitute an important source of long-term finance to Industry. Over a
period of time, there has been a steady growth in the number of industrial units
assisted, and in the amount of loan sanctioned and distributed by SFIs.
2. SFIs have played an important role in the development of (a) Small scale industry,
and (b) Projects in backward areas.
3. They have helped new and small entrepreneurs in setting up industry.
4. Through their operations involving underwriting of and direct Subscription to the
issue of shares and debentures, they have been important players in the capital
market. These operations have a favorable impact on the ability of industrial
concerns to raise funds from capital market.
5. These institutions have improved the allocation of funds to industry and thus, have
aided in better use of the available resources for the economic development of the
country.

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 OBJECTIVE OF THE STUDY

1. To explain the need and importance of financial institutions

2. To identify the types of such institutions.
3. To discuss the role and objective of industrial development bank.

4. To State the functions of development banks.

5. To describe the functions and objectives of industrial finance corporation of India

IFCI and state financial corporations SFCs.

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 RESEARCH METHODOLOGY

 Although the project was all about telling the role of financial institutions hence
no questionnaire were used in data collection some statistical data had been taken
into account during the completion of entire project.
 Hence various other sources had also been taken into account for data collection
I used sources like books, various books were related to economics, finance
which were telling about the various financial institutions their role and how they
usually help industries in their financial, economic and technical growth not only
the growth but various financial institutions providing security to their assets
which provides peace of mind to them and help them grow freely.
 For telling about various financial institutions like their history, overview and
their shareholders help of Wikipedia and other internet sources had been taken
into account.

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 DATA ANALYSIS
As we know that to start a new company or industry the most important thing is
capital because when a person starts a company it doesn’t mean that he/she must
belong to a rich family every start up needs a financial assistance or financial support
so this kind of services are provided by the various financial institutions which gives
a wings to their ideas
Not only for startups and new companies but these financial institutions helps the
existing industries to grow technically and financially.
This provides a summary for need and role of financial institutions in the growth and
development of industries how the financial institutions helps the company, various
kinds of financial institutions their role in the development of industry their history
shareholders , how the financial institutions works , their key role and the purpose of
their existence.
This consists of three types of financial institutions and their roles and importance:-
1. All India development banks consists of IDBI, SIDBI, IFCI , ICICI,
NABARD.
2. State level institutions consists of SFC, SIDC, SIIC.
3. Investment institutions LIC, GIC , UTI
Other than this it also consists of SIDCs, SSIDCs, SIDO.
Various contents are gathered from number of books some of the contents are taken
from college notes and other sources.

Overview of the organization

IDBI FEDERAL LIFE INSURANCE is one of India’s growing life insurance

companies and offers a diverse range of wealth management protection and
retirement solutions to individual and corporate customers.

IDBI federal life insurance co. Ltd is a three way joint-venture of IDBI bank, an
indian development and commercial bank ; Federal bank ,one of india’s leading
private sector banks and ageas, a multinational insurance giant based out of Europe.

Through a nationwide network of over 2000 branches of IDBI bank and federal
bank, and a sizeable network of advisors and partners , IDBI Federal life insurance

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has achieved presence across the length and breadth of the country . IDBI federal
distributes its products through a multi- channel network consisting of insurance
agents , Bancassurance partners (IDBI Bank, Federal Bank) direct channel, and
insurance Brokers.

IDBI FEDERAL LIFE INSURANCE Co. Ltd.

TYPE : Joint venture

INDUSTRY : Life Insurance

FOUNDED : March 2008

HEADQUARTER : Mumbai India

KEY PEOPLE : Vighnesh shahane, CEO & whole time director

PRODUCTS : Life insurance

No. of employees : 1941 employees on-roll; over 10000 agents

Types of insurance products offered by IDBI federal life insurance

1. IDBI Federal childsurance savings protection plan

2. IDBI Federal incomesurance guaranteed money back insurance plan 7 pay
3. IDBI Federal incomesurance guaranteed money back insurance plan
4. IDBI Federal lifesurance savings insurance plan
5. IDBI Federal lifesurance whole life savings insurance plan
6. IDBI Federal loansurance group insurance plan SP
7. IDBI Federal Termsurance life protection insurance plan
8. IDBI Federal wealth insurance future star insurance plan
9. IDBI Federal wealthsurance growth insurance plan SP
10. IDBI Federal wealthsurance suvidha growth insurance plan

COMPETITORS OF IDBI FEDERAL

1. HDFC standard life insurance company limited.

2. ICICI prudential life insurance company limited.
3. MAX life insurance Company limited.

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Industrial Financial Corporation of India (IFCI):
To meet the long-term finance needs of entrepreneurs several commission and
committees such as Industrial Commission (1916-18), the External Capital
Committee (925) and the Indian Central Banking Enquiry Committee (1929-31) had
stressed the need for setting up of such institutions, but no action was taken by the
Government. But the great need to finance the over-worked units during the Second
World War period forced the Government to set up Industrial Finance Corporation of
India, which came into existence on the 1st July 1948. The Corporation came into
existence with an aim to provide medium and long term credit to large scale
industries, organized as public limited companies or cooperative societies in India,
engaged or proposing to engage in manufacturing, preservation or pricing of goods,
mining, generation and distribution of electric power or any other source of power,
shipping and hotel industries in India particularly in circumstance when normal
banking accommodation is inappropriate or resource to capital issue method is
impracticable.
IFCI is the first term-financial Institution which was set up in July 1948 by the
Government of India under the IFCI Act 1948 with objective of providing medium
and long-term loans to largest small Industrial concerns in the private sector.
However joint and public sector also have been made eligible for its assistance. It
provide direct rupee and foreign currency loans for new industrial projects and for
expansion diversification, renovation and modernization of existing units It also
underwriter and directly subscribe to industrial security provided financial
guarantees merchant banking services and leave finance.
Main resources of the IFCI are:-
(a) Loan from RBI
(b) (b) Share capital,
(c) Repayment of loans
(d) Retained earning
(e) Loan from Government
(f) Lines of credit from foreign lending agencies and
(g) Commercial borrowings in international capital market.

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It has introduced a number of financial promotional schemes on its own. The letter
includes eight consultancy fee subsidy schemes and two entrepreneurship
development schemes. It has formed IFCI Financial Limited.
Functions of Industrial Finance Corporation of India (IFCI):
The Corporation performs the following functions:
(1) Underwriting the shares, bonds or debentures of industrial enterprises; provided
such stocks, shares or debentures are disposed of by the Corporation within a
period of seven years from the date of acquisition.
(2) Granting loans or subscribing to the debentures of industrial undertakings
repayable within a period not exceeding 25 years.
(3) Guaranteeing loans traded in the public market by the industrial concerns
repayable within 25 years or raided from scheduled banks or stae co-operative
banks.
(4) Subscribing directly to the stock or shares of any industrial concerns.
(5) Guaranteeing deferred payments in respect of import of capital goods by
industrial concerns who are able to make such arrangements with foreign
manufacturers or in connection with the purchase of capital goods manufacturing
in india.
(6) Guaranteeing loans raised from any banks or financial institutions in and country
outside India
(7) Acting as the agent of the central government and IDBI in respect of loans
sanctioned by them to industrial concerns.
(8) Undertaking merchant banking operations.
(9) Providing technical and administrative assistance to any industrial concern for
the promotion management by expansion of any industry.
(10) Undertaking research and surveys for evaluating or dealing with marketing or
investments.

TABLE SHOWS FINANCIAL ASSISTANCE SANCTIONED AND

DISBURSED BY IFCI:

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This table shows that in 190-1991the total amount sanctioned by IFCI was Rs 242.8
crores which rose to 2550.5 crores in 2007-08 and financial disbursed during 1990-
1991 was Rs 2290.1 crores in 2007-2008.

Industrial Development Bank of India (IDBI):

For coordinating the activities of the existing financial institutions it became
necessary to set up a new financial institution. Hence a decision was taken by the
Government of India in pursuance of the above object to set up a new institution to
be called Industrial Development Bank of India. The Government of India
introduced the IDBI Bill in Parliament in February 1964 initiating discussion on the
Bill, the then Finance Minister emphasized the need for an institution like
Development Bank to arrange medium and long-term loans for industries.
The IDBI was set up as wholly - owned subsidiary of the RBI on July
1, 1964 under an act of Parliament. In February 1976, the IDBI was declined from
the RBI and since then, it has become apex institution in the field of industrial
finance. The Bank was taken over by the Government of India in 1976. The main

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object of setting up this institution have been to bridge the gap between demand and
supply of finance by providing direct financial assistance to industrial concerns
wherever necessary and to bring into existence an apex body to coordinate activities
of various financial institutions providing term finance to industries. Therefore IDBI
has been created not only as a financial agency but also for the purpose of integrating
activities of all the financial institutions providing short medium and longterm
benefits for the industry.
Functions of IDBI:
The main function of the Industrial Development Bank of India, as its name itself
suggest is to finance Industrial enterprises in both private and public sector.
Financial assistance is provided either directly or through special financial
institutions.
Direct Assistance:
IDBI assists Industrial unit directly by way projectloan underwriting of and direct
subscription to industries securities (Share & Debentures) soft loans, technical
development fund loans and equipment finance loan. IDBI provides direct assistance
for project costing more than Rs. 3 Crore under the Project finance scheme.
Indirect Finance:
IDBI Indirect assistance is provided basically to tiny, small and medium enterprises
mainly.
(i) By way of refinance of Industrial loan granted by SFCs, SIDCs, and commercial
banks, co-operative banks an RRB.
(ii) Rediscounting of bills arising out of safe of Indigenes machinery a deferred
payment basis
(iii) Seed Capital assistance to new enterprise never generally through SFCs &
SIDCs.
Special Assistance: IDBI Act 1964: provide Development Assistance fund. This
fiind to be used by the IDBI to assist those Industrial concems which are not able to
secure funds in the normal course either because of heavy investment or low rate of
return both.
Direct Assistance to Industries: The IDBI has been empowered to finance
industrial concerns directly under the following structural arrangements:
(i) To grant financial accommodation up to a 16 year period for export of capital
goods and other commodities

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 (ii) To grant loans or to subscribe to the shares and debentures of industrial
concerns.
Such loans, advances, and debentures can be convened into equity shares at the
option of the Bank, (iii) To underwrite new issues of Industrial 60 concerns and
accept, discount or rediscount bonafide commercial bills or promissory notes of
industrial concerns, (iv) To guarantee deferred payment due from industrial concerns
for loan raised by them in the market or from scheduled banks etc.
(e) Assistance to other financial institutions: IDBI has carried out the following
refinancing functions: IDBI can refinance term advances of 3 to 25 years maturity
made to industrial concerns by IFCI, SFCs and other financial institutions which
may be notified by the Government. It can similarly refinance term loans of 3 to 10
years maturity made by scheduled banks and State Co-operative Banks. It can also
refinance export credit of 15 years' maturity where primary lending institutions grant
loans to person in India and to parsons outside India repayable within a period of 12
years.
Creation of Development of Assistance funds: The Bank created a development
assistance fund in 1965 with an initial contribution from Central Government. This
fund is intended to provide assistance for industries which for various reasons like,
heavy investment involved or low anticipated return on capital, may not be able to
obtain funds in the normal course. The prior approval of the Central Government is
necessary for any assistance from the Fund.
Soft loan scheme: The soft loan scheme came into existence in November 1976 for
financing the modernization programmer of five selected industries, namely, cotton,
textiles, jute, cement, sugar and specified engineering industries. The scheme aims at
modernisation, replacement and renovation of industry which has become necessary
to achieve a more economic level of production in order to enhance their
competitiveness in domestic and international markets.

Technical Development Fund Scheme: Technical Development Fund Scheme was

introduced in March 1979 with the object of promoting fuller capacity utilization,
technologies upgradation, and export development. The 61 fund can provide foreign
exchange for small value imports with the object of procuring technical know- how,
foreign consultancy service, drawings and designs.

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(i) Automatic Refinancing Scheme: The main features of Automatic refinancing
scheme are as follows: (a) Sanction and disbursement of refinance in respect of loans
up to Rs. 5 lakhs from the eligible institutions to small scale industries including
those in the tiny sector which are normally covered under the IDBI Credit Guarantee
Scheme, (b) The IDBI will not levy commitment charges on credit institutions in
respect of refinances under the ARS (c) Only one general agreement will be taken
from the eligible institution covering drawals of refinance under different schemes of
the IDBI
(j) Rediscounting: IDBI has introduced a scheme for rediscounting of bills against
the sale of machinery to enable the indigenous machine manufacturing industry to
purchase equipment on deferred payment basis.

TABLE SHOWING FINANCIAL ASSISTANCE SANCTIONED AND

DISBURSED BY IDBI

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It shows that m 1990-91 the IDBI sanctioned Rs. 6278.3 crores which rose to Rs.
10799 crores in 2004-05 and financial disbursements during 1990-91 was Rs. 121.2
crores which went upto Rs. 6183.3 crores in 2004-05. There has been a significant
increase in total financial assistance sanctioned and disbursed by IDBI.

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Observation and Findings
Hence our objective was all about finding that what are the roles of financial
institutions in an industrial department therefore we come to know that financial
institution plays an important role in development and growth of a company.
During this project we come to know various kinds of financial institutions such as
IDBI, IFCI, SIDBI which also comes under category of an all India development
banks, different state level institutions like state financial corporation and investment
trust like LIC, GIC AND UTI.
Hence we observe that various financial institutions plays key role in development
of any industry.
There are different financial institutions for different types or for different categories
of industries. For example for agricultural industry there is NABARD (national bank
for agricultural and rural development) this industry helps agricultural industry to
grow other than this there is IDBI which is also for industrial growth.

SIDBI helps small industries to grow it was started in Bihar but most of the shares of
SIDBI are holds by IDBI. Regarding state level institutions it helps state level
industries to grow and provides financial assistance to such kinds of industries.

Now about insurance industry which provides peace of mind and security not only to
the individuals but also to the assets of the company. Insurance industries help
companies to grow securely and peacefully because peaceful growth is mandatory
for growth of any company.
At least they can feel secure that there is someone to look after the loss in case of
any uncertainties.
Hence financial institution is very important and hence play a key role in their
development without financial institution it will be quite difficult for any industry to
grow and achieve their target and financial goals.

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 CONCLUSION
This project is all about the study of role, objectives, functions and progress of
Various kinds of industries with the help of various kinds of financial institutions,
organizations and institutions in the development of entrepreneurship and Micro,
Small and Medium Enterprises.
This chapter also studies the background and state of economy and financial
assistance to SSI by SIDBI, overview of promotional and development initiatives of
SIDBI and their progress. Hence we conclude that any financial institution is the
backbone in growth of any industry whether it is agricultural, textile or any other
kind of industry different financial institution have different kind of role and
different purpose of existence and have number of different ways they help the
industries in their growth.

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 REFERENCES
[1] A.V. Ranganadha Chary & R.R. Paul, Banking and Financial Systems, Kalyani
Publishers 2008 DD
[2] Shashi K. Gupta, Nisha Aggarwal & Neeti Gupta, Financial Institutions and
Markets, Kalyani Publishers, New Delhi, 2005, pp 13.6-13.8.
[3] Afaneh, Jihad Abdullah, Abu Obaid, Kassem Musa, Small Enterprise
Management, Dar Al Yazuri, Jordan, Amman, 2004.

[4] Anwar, Mohamed Said, Banking Department, New University House,

Alexandria, Egypt, 2005.

[5] Harvard university The role of financial institution sectors , report by

Christopher N. Sutton and Beth Jenkins/ John F. kennedy, school of government
\Harvard university
[6] Robert E. wright and vincen 20 Quatrini. Money and Banking: chapter 2 section
5 : Financial intermediaries. Accessed July 24, 2012
[7] Jayati Ghosh (January 2013). D+C development and cooperation/dandc.eu.
[8] ‘Special report on services exports EY Item club June 2014. Retrieved 8
September 2015.
[9] Report on the Working Group on Small Scale Industries with special reference to
Small industries Centre (Tambe Committee), Oct. 1978.

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