FINANCIAL INSTITUTIONS

UNIT 2
 FINANCIAL INSTITUTIONS
 FI refers to those business organisations who play
the role of surplus mobilisers, credit providers
and bodies that provide various financial
services.
 Represent those bodies who basically collect the
surplus funds available (savings) and make it
available to productive outlets.
 Functions of FI
 Raising finance for clients
 Broker in stock exchange
 Project management
 Advisory services
 Management of public issue
 Special assistance to small cos and entrepreneurs
 Revival of sick industrial units
 Portfolio management
 Role of Financial Institutions
 Facilitates capital formation
 Supports capital market
 Offers rupee loan facilities
 Foreign currency loan facilities
 Offers guarantees
 Assistance to backward areas
 Promotion of new entrepreneurs
 Impact on corporate culture
 Categories of financial institutions
 Money market institutions
commercial bank, central bank, acceptance
houses, Non banking financial intermediaries,
bill brokers
 Capital market institutions

stock exchanges, mutual funds, insurance

companies, commercial banks, investment trusts,
specialised financial corporation, developmental
financial institutions etc.
 Classification of financial
institutions
1. Banking institutions
a) scheduled commercial banks
b) scheduled cooperative banks
2. Non banking institutions
a) non banking financial companies
b) development financial institutions ( IDBI, IFCI,
SFC etc)
 IFCI – INDUSTRIAL FINANCE
CORPORATION OF INDIA
 Set up in 1948 as a statutory corporation through
IFCI act and later registered as public ltd
company under co’s act in 1993.
 In the year 2012, GOI acquired 55.3% of equity
shareholding of IFCI and it became a
Government company.
 It’s also an NBFC registered under RBI.
 Head office – New Delhi
 Management – 12 BOD’s and a chairman
 Objectives of IFCI
 Primary objective is to provide medium to long
term financial assistance to the manufacturing,
services and infrastructure sectors.
 Granting of loans both in rupees and foreign
currencies
 Loans only to public limited and cooperatives
and not to private limited companies or firms.
 Functions

1. Loans and advance factors

2. Subscribe of debentures
3. Guarantees of loans
4. Underwriting of securities
5. Deferred payment system
6. Merchant banking services
7. Other financial services
 IDBI – Industrial development
Bank of India
 Established on 1st july 1964 under an act of
parliament as a wholly owned subsidiary of the
RBI.
 On Feb 1976, ownership was transferred to GOI.
 It is the principal financial institution for
coordinating the activities of institutions engaged
in financing, promoting and developing industry
in the country.
 IDBI as a commercial bank
 After acquisition of “TATA home finance Ltd.,
signaling the IDBI changes into retail finance
sector, GOI has decided to transform IDBI into a
commercial bank.
 IDBI provides a gateway to low cost deposits,
competitive lending, offering retail products and
financial services
 Management – board of directors (executive
committee board and audit committee board)
 Objectives
 To grant loans to any industrial concern
 To Guarantee deferred payment due from any
industrial concern
 To Guarantee for industrial loans
 To provide Consultancy and merchant banking
services
 To provide Technical, legal, marketing and
administrative assistance.
 To acts as a trustee for debentures and other securities.
 Functions
 Supplementing resources to financial institutions
 Planning, promotion and development of key industries
 Devising and enforcing a system of industrial growth.
 Granting loans and advances to IFCI, SFC’s and other
FI’s by way of refinancing facility
 Granting loans and advances to Scheduled commercial
and cooperative banks.
 Underwriting and subscription
 Bill rediscounting
 Services offered by IDBI
 Wholesale banking services
 Cash mgt, transactional services, working capital
finance, trade services
 Retail banking services
 Loans (housing, personal, vehicle, mortgage etc)
 Treasury facilities and services
 Local currency, money market, debt securities and
equities, foreign exchange.
 Other services
 Advisory services, debt mgt, pension fund mgt, etc.
 SFC’S – state financial corporation
 First SFC was started by Punjab Govt. in the year
1953 in its state.
 Around 18 SFC’s are there in India with the
operations confined to one state.
 Started to extend financial help to smaller
enterprises.
 Issues shares, bonds and debentures to the public
with the state govt guarantee.
 Management – BOD’s appointed by state Govt.
 Objectives
 Medium and long term financial assistance to
small industrial enterprises
 Underwriting the issue of shares, bonds and
debentures
 Subscription to shares and debentures of
industrial concerns
 Financial and non financial assistance to new &
existing concerns.
 Source of finance to SFC’s
 Their own share capital
 Income from investment and repayment of loans
 Sale of bonds
 Loans from IDBI
 Borrowings from RBI
 Deposits from the Public
 Loans from state govt.
 Functions
 Granting secured loans (pledge, mortgage)
 Loan guarantees
 Long term loans (10-20 years ) to industrial
concerns
 Loans to purchase of fixed assets
 Loans in foreign currency
 Underwriting and subscription (only to industrial
concerns)
 ICICI – Industrial credit and
investment corporation of India
 Established in 1955 as a public limited company for
developing medium and small industries of the private sector

 ICICI Bank was established by the (ICICI), an Indian

financial institution, as a wholly owned subsidiary in 1994 in 
Vadodara.

 ICICI, ICICI Bank, and ICICI subsidiaries ICICI Personal

Financial Services Limited and ICICI Capital Services
Limited merged in a reverse merger in 2002.
Objectives

› To grant loans to private sector industrial projects

› Promotion of new industries
› Assist expansion and modernization
› Technical and managerial aid
 Activities of ICICI
 Project finance
 Leasing
 Project advisory services
 Facilities for non resident Indians
 Provision of foreign currency loans
 EXIM BANKOF INDIA
 Set up in 1982 by an act of parliament for the
purpose of financing, facilitating and promoting
India’s foreign trade.
 Fully owned by GOI
 Capital of EXIM
› Loans/grants from central Govt. and RBI
› Lines of credit from institutions abroad
› Funds rose from foreign markets
› Bonds issued in India.
 Objectives of EXIM bank
 To provide financing solutions to Indian exporters to be internationally
competitive.

 Develop mutually beneficial relationships with international community.

 To initiate and participate in international debates central to India’s trade

 Develop relationships with other export dev. Agencies, financing

institutions, and investment promotion agencies.

 To respond and solve the problems of Indian exporters

 Planning, promotion and development of export oriented concerns.

 Undertaking and financing research, surveys and studies of foreign trade

 Functions
 Financing of exports and imports of goods and
services
 Financing for leasing
 Financing for joint ventures
 Granting of loans for share subscription in joint
ventures
 Advisory services
 Technical and non financial assistance
 NSIC
 NSIC (National Small Industries Corporation) is an
ISO certified Indian Government Enterprise under
Micro, Small and Medium Enterprises started in the
year 1955.
  National Small Industries Corporation is working to
aid, foster and promote the growth of MSMEs
(micro, small and medium enterprises) all across the
country.
 NSIC operates all across the nation through a
network of Technical Centres and offices. 
 objectives

 Vision: To become a leading organization

fostering the growth of MSMEs Sector in India.
 Mission: To support and promote MSMEs Sector
by providing combined support services
encircling Finance, Marketing, Technology and
other Allied Services.
 Schemes of NSIC
 Marketing support
› Consortia and Tender Marketing
› Single point Registration for Government
Purchase
› MSME Global Mart B2B Web Portal for MSMEs
› Marketing Intelligence
› Exhibitions and Technology Fairs
› Buyer-Seller meets
 Credit support
› financing for procurement of Raw Material (Short
term)
› Financing for Marketing Activities (Short term)
› Performance and Credit Rating Scheme for small
industries
› Finance through syndication with Banks

 Technology support
› Software Technology Cum Business Parks
› International Consultancy Services
› Incubation of unemployed youth 
 NIDC
 National Industrial Development Corporation
Limited is one of the foremost of the public
sector undertakings India registered in 1954.
 NIDC Limited was set up as a financial
institution which was a part of the Ministry of
Commerce and industry under the Government of
India.
 Current status - liquidated
 RESOURCES OF NIDC
 Multi talented work force
 Technologically advanced computer software and
hardware instruments
 Collaborations with both national and
international companies, development bodies,
research cells, universities, national
 laboratories, and Indian Institutes of Technology
 Wide spectrum of services
offered 
 Industrial management and planning
 Project management and construction
management
 Quality and technical audit
 Industrial and social infrastructure
 Human resources development and management
 Environmental engineering
 Development of application software and
information technology
 Regulatory bodies
 The financial system in India is regulated by
independent regulators in the field of banking,
insurance, capital market, commodities and
pension funds.
 Five major regulatory bodies –

RBI, SEBI, IRDA, FMC, pension fund RDA,

etc.
 RBI
 Is an apex monetary institution of India called as
central bank of the country.
 Established on april 1st 1935 with the provisions
of the RBI ACT 1934.
 Since nationalisation in 1949, RBI is fully owned
by the GOI with its central office at mumbai.
 Governor – [Link] das
 Website view
 Objectives of RBI
 To regulate the issue of Banknotes.
 To secure monetary stability in the country.
 To meet the economic challenges
 To stabilise the internal and external value of money
 For development of organised money market
 To assist for arrangement of industrial finance
 For proper management of public debts
 To establish monetary relations with other countries
 Centralisation of cash reserves
 Organisation structure of RBI
 Refer PDF document of RBI
 Functions / Role of RBI
 Monetary authority
 Manager of exchange control
 Issue of currency
 Developmental role
 Advisor to the government
 Bankers bank
 Acts as national clearing house
 Acts as controller of credit
 Custodian of foreign exchange reserves
 Contd.
 Fights against economic crisis
 Promotion of banking habits
 Publications of economic statistics
 Support of industries and agriculture
 Supervisory functions
› Granting license
› Inspection and enquiry
› Deposit insurance scheme
› Periodical review
› Controls NBFC’s
 Monetary policy of RBI
 is the process by which the monetary authority of
a country, generally the central bank, controls the
supply of money in the economy by its control
over interest rates in order to maintain 
price stability and achieve high economic
growth.[1] In India, the central monetary authority
is the Reserve Bank of India (RBI).
 Objectives of monetary policy
 Price stability
 Controlled expansion of bank credit
 Promotion of fixed investment
 Restriction on inventories and stock
 Promoting efficiency
 RBI measures for NBFC’s
  Non-Banking Financial Company (NBFC) is a
company registered under the Companies Act,
1956 engaged in the business of loans and
advances, acquisition of
shares/stocks/bonds/debentures/securities issued
by Government or local authority or other
marketable securities of a like nature, leasing,
hire-purchase, insurance business, chit funds.
 Non-banking Financial company can commence
or carry on business of a non-banking financial
institution without a) obtaining a certificate of
registration from the Bank and without having a
Net Owned Funds of ₹ 25 lakhs (₹ Two crore
since April 1999).
THANK YOU