IDBI & ICICI

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⭐Industrial Development Bank of India (IDBI): Detailed Overview

1. Establishment and Ownership:

  • Founding: IDBI was established under the Industrial Development Bank of India Act, 1964, as a key institution to support industrial development in India.
  • Ownership Changes:
    • Initial Period (1964-1976): Initially, IDBI operated as a subsidiary of the Reserve Bank of India (RBI), benefiting from the central bank's financial stability and regulatory support.
    • Post-1976: In 1976, IDBI was separated from RBI and its ownership was transferred to the Government of India, enhancing its role in national industrial development.
  • Global Ranking: IDBI is ranked as the tenth-largest development bank in the world in terms of developmental impact and scope.

2. Key Contributions:

IDBI has been instrumental in the establishment and support of several major financial institutions in India:

  • National Stock Exchange (NSE): Contributed to the development of a major securities exchange platform.
  • National Securities Depository Services Ltd. (NSDL): Played a role in establishing India’s first electronic securities depository.
  • Stock Holding Corporation of India (SHCIL): Assisted in the creation of an organization providing depository and related services.

3. Organization and Management:

  • Board of Directors:
    • Composition: Includes a Chairman, Managing Director, a Deputy Governor of the RBI, and 20 other Directors nominated by the Central Government.
    • Role: The board oversees the strategic direction and major decisions of the bank.
  • Executive Committee:
    • Members: Consists of 10 Directors, including the Chairman and Managing Director.
    • Functions: Responsible for sanctioning financial assistance and implementing key decisions.
  • Head Office: Located in Mumbai, with regional offices in major cities including Kolkata, Guwahati, New Delhi, and Chennai, plus 21 branch offices across India.

4. Functions of IDBI:

  • Financial Assistance:
    • Direct Loans and Advances: Provides funding to industrial enterprises without fixed upper or lower limits. This flexibility supports various industrial projects.
    • Guarantees: Offers guarantees for loans acquired by industrial concerns from other financial institutions, aiding in their access to capital.
  • Institution Promotion:
    • Support for Institutions: Promotes and assists institutions engaged in industrial development, fostering a supportive ecosystem for industry growth.
  • Technical and Administrative Support:
    • Assistance: Provides guidance and support in management, expansion, and other aspects crucial for industrial development.
  • Market and Investment Research:
    • Research Activities: Conducts surveys and research to gather insights on industrial trends, helping in informed decision-making for development.

5. IDBI Assistance Types:

  • Direct Assistance:
    • Loans and Advances: Offers financial support directly to industrial concerns, allowing them to undertake and expand industrial projects.
    • Loan Guarantees: Provides guarantees for loans from other financial entities, enhancing credit access for industrial projects.
  • Indirect Assistance:
    • Refinancing: Refinances term loans from other financial institutions, including state financial corporations and commercial banks.
    • Subscription to Shares and Bonds: Invests in shares and bonds of other financial institutions to augment their resources and capabilities.

6. Developmental Activities:

  • Promotional Activities:
    • Entrepreneurship Development: Initiates and supports programs to foster new entrepreneurs and small businesses, including providing consultancy services and support for economic upliftment.
    • Support Programs: Engages in various activities such as entrepreneurship development, energy conservation, and establishing quality testing centers for small industries.
  • Technical Consultancy Organisations (TCOs):
    • Network Establishment: Collaborates with other All-India Financial Institutions to set up a network providing technical and advisory services.
    • Services Provided: Offers project formulation, appraisal, and implementation support, especially to small and medium enterprises (SMEs).
  • Entrepreneurship Development Institute:
    • Role in Establishment: Played a crucial role in setting up the Entrepreneurship Development Institute of India to promote entrepreneurship.
    • Regional Institutes: Helped establish additional institutes in states like Bihar, Orissa, Madhya Pradesh, and Uttar Pradesh.
    • Financial Support: Extends financial backing to organizations conducting relevant studies and surveys to support industrial development.

Key Insights:

  • IDBI’s Impact: IDBI has played a significant role in India’s industrial and economic development through various financial and developmental initiatives.
  • Focus Areas: Its activities span infrastructure development, support for SMEs, and fostering entrepreneurship, contributing to balanced and sustainable industrial growth.
⭐ICICI

Industrial Credit and Investment Corporation of India (ICICI): In-Depth Explanation

1. Establishment and Evolution:

  • Founded:
    • Year: 1955
    • Purpose: Established as a public limited company under the Indian Companies Act, ICICI aimed to support the development of medium and small private sector industries.
  • Ownership Changes:
    • Initial Equity Holders: Originally owned by various companies, institutions, and individuals.
    • Shift to Public Sector: Ownership shifted to public sector institutions such as banks, Life Insurance Corporation of India (LIC), and Central Investment Corporation (CIC) over time.
  • Merger with ICICI Bank:
    • Date: March 2002
    • Outcome: The merger with ICICI Bank resulted in the formation of a universal bank that combined both commercial and development banking functions. Consequently, ICICI as a standalone development financial institution ceased to exist.

2. Objectives:

  • Loans to Industrial Projects:
    • Purpose: ICICI provided financial support in the form of loans specifically for industrial projects within the private sector.
    • Focus: Aimed at promoting industrial growth and addressing funding gaps in medium and small enterprises.
  • Promotion of New Industries:
    • Goal: To stimulate the creation of new industries by providing financial and technical assistance.
    • Impact: Facilitated the entry of new players into the industrial sector, contributing to economic diversification.
  • Expansion and Modernization of Existing Industries:
    • Objective: Helped existing industrial enterprises expand their operations and modernize their infrastructure.
    • Support: Offered both financial resources and advisory services to improve productivity and competitiveness.
  • Technical and Managerial Aid:
    • Assistance Provided: Offered guidance and support in technical and managerial aspects to increase industrial efficiency and output.
    • Result: Enhanced the operational capabilities of industries, leading to better performance and growth.

3. Financial Assistance:

  • Long-Term and Medium-Term Loans:
    • Types of Loans: Provided both long-term and medium-term loans in rupees and foreign currency.
    • Purpose: Used for the establishment, modernization, or expansion of industrial projects.
  • Equity and Debentures:
    • Investment: Invested in the equity capital and debentures of industrial enterprises.
    • Objective: Supported businesses by providing equity financing and participating in their financial structure.
  • Underwriting:
    • Function: Underwrote new issues of shares and debentures, helping companies raise capital through public offerings.
    • Benefit: Assisted in capital raising efforts for industrial projects and expansions.
  • Guarantees:
    • Type: Offered guarantees to suppliers of equipment and foreign lenders.
    • Purpose: Reduced the risk for suppliers and lenders, facilitating easier access to equipment and foreign capital.

4. Activities:

  • Project Finance:
    • Types of Financing:
      • Rupee Loans: For purchasing equipment, machinery, construction, and preliminary expenses.
      • Foreign Currency Loans: For acquiring imported capital equipment.
    • Role: Provided essential funding for the setup, expansion, or modernization of industrial projects.
  • Leasing:
    • Commencement: Leasing operations began in 1983.
    • Assistance Provided: Offered leasing for computerization, modernization, energy conservation, export orientation, and pollution control.
  • Project Advisory Services:
    • Advice Provided: Offered advisory services to Central and State Governments and both public and private sector companies.
    • Areas Covered: Policy reforms, value chain analysis, and strategic management.
  • Facilities for Non-Resident Indians (NRIs):
    • Purpose: Provided information about facilities and incentives for NRIs investing in India.
    • Benefit: Facilitated investment by NRIs by offering guidance on available opportunities and incentives.
  • Provision of Foreign Currency Loans:
    • Function: Provided foreign currency loans to help Indian industries acquire essential capital goods from abroad.
    • Purpose: Supported industries in obtaining necessary equipment that could not be sourced locally.
  • Other Institutions Promoted:
    • Housing Development Finance Corporation (HDFC):
      • Purpose: Provided long-term finance for residential housing to middle and lower-income groups.
      • Impact: Enabled broader access to housing finance across different income segments.
    • Credit Rating Information Services of India Ltd. (CRISIL):
      • Purpose: Offered credit rating services to the corporate sector.
      • Role: Assisted in evaluating the creditworthiness of businesses.
    • Technology Development and Information Company of India Ltd. (TDICI):
      • Purpose: Financed technology transfer and provided technology information.
      • Impact: Supported technological advancements and innovation.
    • Programme for the Advancement of Commercial Technology (PACT):
      • Funding Source: US $10 million grant from USAID.
      • Objective: Assisted in market-oriented R&D activities between Indian and US companies.
      • Role: Facilitated collaborative technological research and development.
    • Programme for Acceleration of Commercial Energy Research (PACER):
      • Funding Source: US $20 million grant from USAID.
      • Objective: Supported research and technology development in the Indian energy sector.
      • Impact: Advanced energy-related research and development projects.

Key Insights:

  • Historical Significance: ICICI played a crucial role in industrial financing and development in India before its merger with ICICI Bank.
  • Legacy: Its initiatives led to the establishment of significant financial and development institutions, supporting various sectors and contributing to India's economic growth.