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null imgDEVELOPMENT BANKINGINTRODUCTIONAfter World War II, to reconstruct the buildings and industries and to cover all the losses new bank named DEVELOPMENT BANKS. Development banks are those financial institutions which plays special role in economic development of country. They provide short and long term loans to all the sectors of economy. These financial institutions established to lend loans and finance money. These lending issanctioned to develop sectors like agriculture sector, industrial sector, import – export activities etc.Development bank started after the end of World War II. It helps to reconstruct the building, industries and other sectors to cover all the losses occur in war.But in India development banks had been develop after independence. The development bank provide development of backward areas and also provide employment opportunities.There are several development banks in India and classified into four groups according to sectors;HISTORYThe development bank was established to promote the economic and social development efforts. It was established after Second World War. The number of development banks has been increased rapidly since 1950s as they had been promoted for reconstruction and its branches by international bank. Inter-American development bank which was formed in 1959 was one of the big regional bank, Asian development bank provide growth and cooperation in one region which needed to be develop was established in 1966 and the Africa development bank starts its operations in 1964. Infrastructural and industrial development facilities is provided with finance by all these banks.Both public and private or specific national or regional projects are given loans.HISTORY OF DEVELOPMENT BANKS IN INDIA? The industrial development bank was set up in 1955 and it was set up in 1964 as RBI subsidiary.? India’s first development bank was established in 1948 which was named as State Financial Corporation(SFC) at state level after passing of SFC’s act.? In order to set up the specialised financial institutions the responsibility of detail study had taken by the Reserve Bank of India.? In 1982, NABARD was established for the development of agriculture.? In 1990, Small industries development bank of India(SIDBI) was established.? In 1991, Industrial investment bank of India(IIBI) was established.? In 1976, IDBI become autonomous.? MUDRA bank was set up in 2016.FEATURES OF DEVELOPMENT BANKSThe following features of development bank are:? Specialized financial institutions provide long-term and medium term lending facilities.? Both public and private institutions are provided financial assistance by development banks.? Promotional activities are also undertaken by development banks.? Gap filler is also the role of development bank.? Socio-economic needs are also fulfilled by development bank.? It is a multipurpose financial institution.? Rather than earning profit, the objective of development bank is to serve in public interest.? It does not accept deposits from the public unlike commercial banks.? It promotes saving and investment habit in the community.OBJECTIVES OF DEVELOPMENT BANK1. Provides information about export and domestic market.2. Boost the entrepreneurship spirit.3. Provide finance facility.4. Helps in raising the capital from the market to the companies.5. Undertakes the evaluation of projects.6. Industry and economy is developed as a whole.7. Entrepreneurs are encourage and motivated.8. Promotional activities are undertaken in specific field of operation.9. Preparation of development plans or business plans.10. Fulfill the socio-economic needs.DEVELOPMENT BANKS IN INDIAThe following are the development banks in India:1. Industrial development banks2. Agriculture development banks3. Export – Import development banks4. Housing development banks? Industrial development bank – Industrial development banks includes all those financial institutions which lend loans to industrial sector of country.1. IFCI (INDUSTRIAL FINANCE CORPORATION OF INDIA): It was the first development bank and was converted into a public limited company from 1st July, 1993. The objective of IFCI is to make medium and long term credit to private, public, co-operative and joint sectors in India.2. SIDBI (SMALL INDUSTIES DEVELOPMENT BANK OF INDIA): The SIDBI was established as subsidiary of the IDBI. The existing institutions which are engaged in similar activities are coordinated by SIDBI.3. IDBI (INDUSTRIAL DEVELOPMENT BANK OF INDIA): The IDBI was established as subsidiary of the Reserve Bank but in February 1976 it was made an autonomous institution.? Agriculture development banks– These financial institutions lend loans for agriculture activities like NABARD.NABARD (NATIONAL BANK FOR AGRICULTURAL AND RURAL DEVELOPMENT): NABARD introduces social enterprises and innovations across rural areas of India.? Export-import development banks – These financial institutions are those who lend loans for export and import activities. These institutions are – EXIM bank (export import bank of India).Special attention is provided to the export of capital goods and also encourages capital goods. It also provide refinance facilities in order to plan, promote and finance export-oriented concern.? Housing development banks- It includes NHB (National housing bank) who lend loans to development of housing society.NHB (NATIONAL HOUSING BANK): The NHB was established on 9th July 1988 as subsidiary of Reserve Bank of India. The objective of NHB is to promote both at local and regional level housing finance institutions.Therefore, Overall DEVELOPMENT BANK is one who help all the sectors in financing money to all sectors of India which helps in economic development of country.DEFINITION OF DEVELOPMENT BANK? As per Banking subject” Development banks are financial institutions established to lend (loan) finance (money) on subsidized interest rate. Such lending is sanctioned to promote and develop important sectors like Agriculture, industry, export – import , housing and allied activities. “FUNCTIONS OF DEVELOPMENT BANKS1. To develop small scale industries in India2. To help in the development of agricultural sector3. To promote industrial sector and large scale industries in India4. To finance the housing sector for development in India5. To encourage foreign trade in India6. To promote economic activities in backward regions in India7. To encourage entrepreneurs to enhance the business activities8. To help the sick industrial units9. Contribution towards Capital MarketLet us discuss one by one all the functions of development banks which are mentioned above:1. SMALL SCALE INDUSTRIESDevelopment banks like SIDBI helps the small scale industries by lending loans and financing money and by promoting them which helps in development of SSI (small scale industries). It also provide finance to banks and other financial institutions who provide equipment finance and seed capital etc to SSI units.2. DEVELOPMENT OF AGRICULTURE SECTORNABARD( National bank for agriculture and rural areas) is one of the development banks which was started in 1982 to provide loans and finance money for agriculture activities and it also refinance the banks who provides loan to banks which loan to agricultural sector and also for rural development activities.3. LARGE SCALE INDUSTRIESDevelopment banks helps in the development of large scale industries by providing medium and long term finance to corporate sector. They provide many other services which provide feasible to them to do development activities4. DEVELOPMENT OF HOUSING SECTORDevelopment banks provide finance for the development of housing sector. It was started in 1988. It promotes and develops housing and financial institutions and it also refinance banks and other institutions who lends loan to housing sector5. ENHANCE FOREIGN TRADEDevelopment bank like EXIM BANK (EXPORT -IMPORT BANK) helps to finance and lend loans to exporters and importers to enhance trade. It was started in 1982 and provides short and long term finance. It also encourages abroad banks to provides finance to buyers country in their6. BACKWARD REGION DEVELOPMENTDevelopment provides helps backward regions to develop their areas . They provide finance money to develop companies in backward areas7. ENTREPRENEURSHIP DEVELOPMENTDevelopment banks helps entrepreneurs to provide finance which helps entrepreneurs to enter into new ventures and develop industries and results in economics development of country8. SICK INDUSTRIAL UNITSDevelopment banks helps sick industrial units by lending loans and finance money to those units which are sick and help them to develop .9. CONTRIBUTION TOWARDS CAPITAL MARKETGrowth of capital market is contributed by development bank. Investment is made in equity shares and debentures which are listed in India by development bank and also invest in mutual funds .All these leads to growth of capital market.STRUCTURE OF DEVELOPMENT BANKROLE OF DEVELOPMENT BANK1. PROVIDING FUNDSAs there was low level of capital formation in underdeveloped countries due to low incomes, so people were not able to save funds required for new units and expansion of existing business.The development bank provide finance to people who is capable of starting a business but need some financial help, they can approach these institutions.2. INFRASTRUCTURAL FACILITIESThe economic development of country depend on the availability of infrastructural facilities. Financial institutions prepare the needs of investment for roads, water, sewage, electricity, communication facilities etc.3. PROMOTIONAL ACTIVITIESWhile setting new units an entrepreneur faces a lot of problems like preparation of project reports, feasibility reports, registration formalities etc. All these require so much of time, energy and money. Financial institutions undertake the exercise to provide manpower resources for the establishment of new unit.4. DEVELOPMENT OF BACKWARD AREASIn some areas the facilities of setting new unit are not available, because of this reason entrepreneurs set their business unit in already developed areas. It causes imbalance in the economic development of some areas. In order to bring a balance in the economy the financial assistance is provided by the financial institutions to entrepreneurs for setting new units in these areas. The institutions which provides financial assistance are IFCI, ICICI, IDBI they charge lower interest rate on lending. This brings a balance in the economy and develop the backward area of the country.5. PLANNED DEVELOPMENTFinancial institutions provide help for the planned development of the economy. SIDBI, SFCI’s are some financial institutions which help the small scale sector and IFCI and SIDC’s provide financial help to the large scale sector. Whereas, some institutions help other segments like tourism, foreign trade etc. It also follows the priorities set up by central and state government. Financial institution provides overall help for the development of the country.6. ACCELERATING INDUSTRIALIZATIONThe direct and indirect employment gets generated by setting up of more industrial units. It makes available goods and services in the country and increase the standard of living. The required financial, managerial, technical help is provided by the financial institutions. The key role is played in accelerating the pace of industrialization, since 1947.7. EMPLOYMENT GENERATIONBoth direct and indirect employment generation is provided by the financial institutions. In order to provide employment they employed many persons in their offices. By financing the new and existing industrial units the institutions help in creating employment opportunities. Also, encourages the establishment of new units in backward areas to promote the employment opportunities. Thus, new and better job opportunities are created by the financial institutions.LENDING PROCEDURE OF DEVELOPMENT BANKS1. Project Appraisal and Eligibility of Applicant2. Technical Appraisal3. Economic Viability4. Assessing Commercial Aspect5. Financial Feasibility6. Managerial Competence7. National Contribution8. Balancing of various factors9. Loan Sanction10. Loan disbursement11. Follow UpRECENT DEVELOPMENTS IN NEW DEVELOPMENT BANKBRICS (BRAZIL, RUSSIA, INDIA, CHINA AND SOUTH AFRICA)The NEW DEVELOPMENT BANK (NDB), referred as BRICS Development Bank which is established by BRICS states is a multilateral development bank. At the fourth BRICS summit, the idea of setting bank was proposed in 2012 which was held in Delhi. In this meeting the main theme was to create a development bank. At the 5th BRICS summit the leaders of BRICS agreed to set up the development bank and this meeting was held in Durban, south africa on 27thmarch,2013.The name of the bank was proposed by the Indian Prime Minister Narendra Modi. The New Development bank announced in march 2016 that it is planning to recruit the staff of 100 members from BRICS countries by the end of 2016.On 19th July 2016, the first green financial bonds with issue of size of RMB 3 billion,5 years of tenor in China were successfully issued which was reported by the NDB.On 20 July 2016, in Shanghai the first annual meeting of NDB Board of Governors was held.Bank’s future work and development and a positive assessment to the bank’s work was discussed by the participants in the meeting. The first green financial bond issuance in Renminbi was a milestone event for NDB in the meeting.The NDB Board of Director in 2016 approved seven projects in all members involving financial assisstance. The NDB on 21 december 2016, signed its first loan agreement.OBJECTIVEThe objectives of NDB are as follows:? Infrastructure and sustainable development projects are promoted with development impact in member countries.? It establish a extensive network of global partnerships.? Balanced project portfolio is build for giving a proper respect to their geographic location and other factors.? Multilateral development institutions and national development banks has established a global partnership.PROJECTSFor developing the renewable energy sources the BRICS New Development Bank is planning for a project. The NDB has interest in providing finance to those projects that conform high environmental standards.The president of the NDB , K.V.Kamath at the same time according to him one of the key strategies of bank will be providing finance with motive of getting return on capital invested in projects. The projects that bring benefits and are creative to the local people and environment.Overall, 7 projects in all members of bank was approved by the NDB Board of Director for amount of USD 1.5 bln. Further, USD 2.5 bln of lean was approved by the NDB in 2017.The NDB and Indian government signed a loan agreement on 30th march,2017 approving USD 350 mln provision for Madhya Pradesh. Whereas, on 26th April,2017 loan agreement was signed for the first Brazilian project. The USD 300 mln loan will be provided in Brazil to BNDE, national development banks. The renewable energy projects was signed with first loan agreement by the New Development Bank.CONCLUSIONThe development banks were established for the development of the backward areas by providing them agriculture, export-import and allied activities. The establishment of these financial institution is also helpful in bringing balance in the economy as it provides financial assistance to the persons who are capable of setting new unit but are short of funds. It also provides many benefits which have already been discussed above. All these objectives and its features are very helpful in the overall development of the country. These institutions are still working towards the development of the nation by approving new projects which will again be helpful for the people.REFERENCE:www.chinausfocus.comwww.quora.comwww.adb.orghttps://en.m.wikipedia.orgSUBMITTED TO: SUBMITTED BY:PROF. HEENA ARORA RICHA VERMAB.COM-3rd (GEN)1512011