Development Banks 🏗️

Definition: Development Banks (also called Development Financial Institutions or DFIs) are specialized institutions established to provide long-term finance and support for industrial development and infrastructure.

Commercial Banks vs Development Banks:

• Commercial Banks: Short-term loans (Working capital). Accept public deposits.
• Development Banks: Long-term loans (Project finance). Do NOT accept public deposits (usually).

Major Development Banks in India 🇮🇳

1. IFCI (Industrial Finance Corporation of India)

• First DFI in India (Est. 1948).
• Role: Provide medium/long-term credit to industries.
• Status: Now a NBFC-ND-SI (Non-Banking Financial Company).

2. IDBI (Industrial Development Bank of India)

• Est: 1964 (as subsidiary of RBI, later independent).
• Role: Apex institution for industrial finance.
• Transformation: Converted into a Commercial Bank in 2004 (IDBI Bank Ltd). Now owned by LIC/Govt.

3. ICICI (Industrial Credit and Investment Corporation of India)

• Est: 1955 (World Bank initiative).
• Role: Private sector DFI.
• Transformation: Merged with its subsidiary (ICICI Bank) in 2002. Now a universal bank.

4. IIFCL (India Infrastructure Finance Company Ltd)

• Est: 2006.
• Role: Finance huge infrastructure projects (Roads, Ports, Power).

5. NaBFID (National Bank for Financing Infrastructure and Development)

• Newest DFI (Est. 2021).
• Role: To bridge the infrastructure financing gap.

Functions of Development Banks 🛠️

1. Project Finance: Long-term loans for setting up factories/projects.
2. Underwriting: Guaranteeing subscription of shares/bonds of companies.
3. Guarantee: Guarantees for deferred payments/foreign loans.
4. Techno-Economic Support: Helping companies with project reports, feasibility studies.
5. Promotional Role: Developing entrepreneurship.

Quiz Time! 🎯

💡 Final Wisdom: "Development Banks build the factories, roads, and power plants of the nation. They think in decades, not quarters!" 🏗️⏳

🎉 UNIT I COMPLETE! You have mastered the Indian Banking Structure. From Commercial Banks to RBI to DFIs!

Next Unit: Unit II: Banker and Customer Relationship - The legal bond! 🤝