Specialized Financial Institutions like ICICI, UTI, IDBI,

1. Specialized Financial
Institutions
Dr. Mangesh M. Bhople

2. Unit: 4
Specialized Private Financial Institutions:
Objectives and functions of
4.1 IFCI
4.2 IDBI
4.3 ICICI
4.4 SFCs
4.5 UTI
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3. INDUSTRIAL FINANCE CORPORATION OF INDIA
LIMITED (IFCI LTD.)
IFCI, previously Industrial Finance Corporation of India, is an Indian
government owned development bank to cater to the long-term finance needs
of the industrial sector. It was the first development finance
institution established by the Indian government after independence.
Until the establishment of ICICI in 1991, IFCI remained solely responsible for
implementation of the government’s industrial policy initiatives.
In 1993 it was reconstituted as a company to impart higher degree of
operational flexibility. IFCI was allowed to access the capital markets directly.
Subsequently, the name of the company was also changed to “IFCI Limited”
with effect from October 1999.
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4. Objectives
• The main objective of IFCI is to provide medium and long-term
financial assistance to large scale industrial undertakings, particularly
when ordinary bank accommodation does not suit the undertaking or
finance cannot be profitably raised by the concerned issue of shares.
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5. Functions
The corporation grants loans
and advances to industrial
concerns.
Granting of loans both in
rupees and foreign
currencies.
The corporation underwrites
the issue of stocks, bonds,
shares etc.
The corporation can grant
loans only to public limited
companies and co-
operatives but not to private
limited companies or
partnership firms.
https://www.ifciltd.com/
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6. IDBI Bank
IDBI Bank is an Indian government-owned financial service company, formerly known
as Industrial Development Bank of India, headquartered in Mumbai, India. It was established
in 1964 by an Act of Parliament to provide credit and other financial facilities for the
development of the fledgling Indian industry. IDBI Bank is on a par with nationalized banks and
the SBI Group as far as government ownership is concerned. It is one among the 27
commercial banks owned by the Government of India. IDBI bank is considered as government
of India owned bank. It is currently 10th largest development bank in the world in terms of
reach. It has an authorised capital of 3000 cr.
History - Industrial Development bank of India (IDBI) was constituted under Industrial
Development bank of India Act, 1964 as a Development Financial Institution (DFI) and came
into being as on July 01, 1964 as a wholly owned subsidiary of RBI. In 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 India. It was regarded as a Public Financial Institution in terms of the
provisions of Section 4A of the Companies Act, 1956. It continued to serve as a DFI for 40 years
till the year 2004 when it was transformed into a Bank.
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7. • Industrial Development Bank of India Limited: In
response to the felt need and on commercial prudence, it
was decided to transform IDBI into a Bank. For the
purpose, Industrial Development bank (transfer of
undertaking and Repeal) Act, 2003 [Repeal Act] was
passed repealing the Industrial Development Bank of
India Act, 1964.
• In terms of the provisions of the Repeal Act, a new
company under the name of Industrial Development Bank
of India Limited (IDBI Ltd.) was incorporated as a Govt.
Company under the Companies Act, 1956 on September
27, 2004. Thereafter, the undertaking of IDBI was
transferred to and vested in IDBI Ltd. with effect from
October 01, 2004. In terms of the provisions of the Repeal
Act, IDBI Ltd. has been functioning as a Bank in addition to
its earlier role of a Financial Institution.
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8. Objectives
The main objectives of IDBI is to serve as the apex institution for term
finance for industry in India. Its objectives include:
Co-ordination, regulation and supervision of the working of other financial
institutions such as IFCI , ICICI, UTI, LIC, Commercial Banks and SFCs.
Supplementing the resources of other financial institutions and there by
widening the scope of their assistance.
Planning, promotion and development of key industries
and diversification of industrial growth.
Devising and enforcing a system of industrial growth that conforms to
national priorities.
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9. Functions
1. The IDBI has been established to perform the following functions-
2. To grant loans and advances to IFCI, SFCs or any other financial institution by way of refinancing of
loans granted by such institutions which are repayable within 25 year.
3. To grant loans and advances to scheduled banks or state co-operative banks by way of refinancing of
loans granted by such institutions which are repayable in 15 years.
4. To grant loans and advances to IFCI, SFCs, other institutions, scheduled banks, state co-operative banks
by way of refinancing of loans granted by such institution to industrial concerns for exports.
5. To discount or re-discount bills of industrial concerns.
6. To underwrite or to subscribe to shares or debentures of industrial concerns.
7. To subscribe to or purchase stock, shares, bonds and debentures of other financial institutions.
8. To grant line of credit or loans and advances to other financial institutions such as IFCI, SFCs, etc.
9. To grant loans to any industrial concern.
10. To guarantee deferred payment due from any industrial concern.
11. To guarantee loans raised by industrial concerns in the market or from institutions.
12. To provide consultancy and merchant banking services in or outside India.
13. To provide technical, legal, marketing and administrative assistance to any industrial concern or person
for promotion, management or expansion of any industry.
14. Planning, promoting and developing industries to fill up gaps in the industrial structure in India.
15. To act as trustee for the holders of debentures or other securities.
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10. ICICI Bank
The Industrial Credit and Investment
Corporation of India was registered as
a private limited company in 1955. It
was set up as a private sector
development bank to assist and
promote private industrial concerns in
the country.
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11. The ICICI has been established to achieve the
following objectives:
To assist in the formation, expansion and modernization
of industrial units in the private sector.
To stimulate and promote the participation of private
capital (both Indian and foreign) in such industrial units.
To furnish technical and managerial aid so as to increase
production and expand employment opportunities.
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12. Functions of the ICICI
(i) It provides long-term and medium-term loans in rupees and foreign currencies.
(ii) It participates the equity capital of the industrial concerns.
(iii) It underwrites new issues of shares and debentures.
(iv) It guarantees loans raised by private concerns from other sources.
(v) It provides technical, managerial and administrative assistance to industrial concerns.
https://www.icicibank.com/
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13. SFCs
The State Finance Corporations (SFCs) are an integral part of
institutional finance structure of a country. Where SEC
promotes small and medium industries of the states. Besides,
SFC help in ensuring balanced regional development, higher
investment, more employment generation and
broad ownership of various industries.
At present in India, there are 18 state finance corporations (out
of which 17 SFCs were established under the SFC Act 1951).
Tamil Nadu Industrial Investment Corporation Ltd. which is
established under the Company Act, 1949, is also working as
state finance corporation.
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14. Organization and Management
A Board of ten directors manages the State Finance Corporations. The State
Government appoints the managing director generally in consultation with
the RBI and nominates the name of three other directors.
All insurance companies, scheduled banks, investment trusts, co-operative
banks, and other financial institutions elect three directors.
Thus, the state government and quasi-government institutions nominate the
majority of the directors.
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15. Functions of State Finance Corporations
(i) The SFCs provides loans mainly for the acquisition of fixed assets like land, building,
plant, and machinery.
(ii) The SFCs help financial assistance to industrial units whose paid-up capital and
reserves do not exceed Rs. 3 crore (or such higher limit up to Rs. 30 crores as may be
notified by the central government).
(iii) The SFCs underwrite new stocks, shares, debentures etc., of industrial units.
(iv) The SFCs grant guarantee loans raised in the capital market by scheduled banks,
industrial concerns, and state co-operative banks to be repayable within 20 years.
http://www.cosidici.com/40/main.htm
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16. UTI
Unit Trust of India was first Set up in 1st February 1964 under the Unit Trust of India Act, 1963. It
is a statutory public sector investment institution having the main objective to encourage and
mobilize the savings of the community and canalize them into productive corporate investment.
A unit trust is an investment plan in which the funds are pooled together and then invested. The
fund which is pooled is then unitized and the investor who is one party to the unit trust is called a
unitholder, holding a certain number of units.
A second party i.e the manager is responsible for the day-to-day running of the trust and for
investing the funds.
The trustee, governed by the Trust Companies Act 1967, is the third party, and their role is to
monitor the manager’s performance against the trust’s deed.
The deed outlines the objectives and vital information about the trust. Also, the assets of the
trust are held in the name of the trustee and then they are held “in trust” for the unitholders.
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17. Objectives of Unit Trust of India
Unit Trust of India Provides to the investor a safe return of the investment whenever
they require funds. UTI provides daily price record and advertises it in the
newspapers.
Thus, two prices are quoted on a daily basis, the purchase price and the sale price of
the units. This price may fluctuate daily, but the fluctuations are nominal on a
monthly basis.
The price varies between the month of July and the month of June. The purchase
price of the various units is the lowest in the month of July.
to promote and pool the small savings from the lower and middle-income persons
who cannot have direct access to the stock exchange, and
to provide them with an opportunity to share the benefits of prosperity resulting from
rapid industrialization in India.
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18. Functions of UTI
• Mobilize the saving of the relatively small investors.
• Channelize these small savings into productive investments.
• Distribute the large scale economies among small income groups.
• Encourage savings of lower and middle-class people.
• Sell nits to investors in different parts of the country.
• Convert the small savings into industrial finance.
• To give investors an opportunity to share the benefits and fruits of industrialization in the country.
• Provide liquidity to units.
• Accept discount, purchase or sell bills of exchange, warehouse receipt, documents of title to goods etc.,
• To grant loans and advances to investors.
• To provide merchant banking and investment advisory service to investors.
• Provide leasing and hire purchase business.
• To extend portfolio management service to persons residing in other countries.
• To buy or sell or deal in foreign currency.
• Formulate a unit scheme or insurance plan in association with GIC.
• Invest in any security floated by the RBI or foreign bank.
• https://www.utiitsl.com/UTIITSL_SITE/clients.html
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