A Development Financial institution (DFI) is defined as “an institution endorsed or supported by Government of india primarily to provide development/Project finance to one or more sectors or sub-sectors of the economy. the institution differentiates itself by a thoughtful balance between commercial norms of operation, as adopted by any financial institution like commercial bank and developmental responsibilities.
after independence the role of commercial banking was limited to working capital financing on short term basis so thrust of DFis was on long term finance to industry and infrastructure sector in india. india’s first financial institution was operationalised in 1948 and it set up state Financial corporations (SFC’s) at the state level after passing of the SFCs act, 1951, succeeded by the development of industrial Finance corporation of india (IFCI).
DFIs can be classified in four categories of institutions as per their functions:
- National Development Banks e.g. IDBI, SIDBI, ICICI, IFCI, IRBI, IDFC
- Sector specific financial institutions e.g. TFCI, EXIM Bank, NABARD, HDFC, NHB
- Investment Institutions e.g. LIC, GIC and UTI
- State level Institutions e.g. State Finance corporations and SIDCs
The role of DFIs was
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