Loans From Specialised Financial Institution

Today, perhaps there will be no company of worth naming which has not received financial assistance in one form or the other from the special financial institutions operating in India. It is only after independence that the Indian government took special steps to promote, establish and help the creation of those special financing institutions. The Industrial Finance Corporation of India (IFCI) was established in 1948 and since then dozens of large and or small financing corporations have been created. The Industrial Development Bank of India (IDBI), started in 1964, is the appex body to co-ordinate the activities of all the financial institutions operating in the country.

These institutions with minor variations provide financial assistance in the following forms :
  1. Provision of loans (long-term);
  2. Underwriting of shares and debentures issued by the companies;
  3. Guaranteeing loans and deferred payments etc. on behalf of the companies;
  4. Direct subscriptions to shares and debentures of the companies; and
  5. Re-financing of loans, (this is specially done by the IDBI).

Since the details of their working etc., has been discussed in the subsequent chapter it is enough to note here that these institutions which were created initially to supplement the existing channels in a way to help the main sources have now become so essential that they have become the part of the financial system of the country. The borrowing company has to submit a detailed application form for obtaining loans and other financial assistance from these corporations. They have also to submit a copy of the project report to the financial institutions so that the later can make a thorough appraisal of the borrowers’ financial position as well as the profitability of the proposed plan.

However, with the entry of commercial banks in the long-tern financing of business, these financial institutions are disappearing one after the other. Some of these have even converted or started as Banking Companies. IFCI has disapproved, IDBI, ICICI, HDFC have started and merged with banking units. UTI has also started a UTI Bank.

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