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, import-export, housing and allied activities.
In General sense, Development banks are those financial institutions whose prime goal (motive) is to finance the primary (basic) needs of the society, Such funding results in the growth and development of social and economic sectors of the nation.
Development Banks In India:
Development banking was started after the World War 2. It provides finance to reconstruct the buildings and industries which were destroy in the war. In India, Development Banks was started immediate after independence.
Development banks are classified into following four groups.
1. Industrial Development Banks:
It includes, for example, Industrial Finance Corporation of India (IFCI), Industrial Development Bank of India (IDBI), and Small Industries Development Bank of India (SIDBI).
2. Agricultural Development Banks:
It includes, for example, National Bank for Agriculture & Rural Development (NABARD).
3. Export-Import Development Banks:
It includes, for example, Export-Import Bank of India (EXIM Bank).
4. Housing Development Banks:
It includes, for example, National Housing Bank (NHB).
Industrial Finance Corporation of India (IFCI) is the first development bank in India. It started in 1948 to provide finance to medium and large-scale industries in India.
Features of development banks:
Following are the main characteristic features of a development banks:
- It is a specialised financial institution.
- It provides medium and long term finance to business units.
- Unlike commercial banks, it does not accept deposits from the public.
- It is not just a term-lending institution. It is a multi-purpose financial institutions.
- It is essentially a development oriented Bank. Its primary object is to promote economic development by promoting investment and entrepreneurial activity in a developing economy.
- It encourages new and small entrepreneurs and balanced regional growth.
- It provide financial assistance not only to the private sector but also do the public sector undertakings.
- It aims at promoting the savings and investment habit in the community.
- Its motive is to serve public interest rather than to make profits. It works in general interest of nation.
More Relatable Topic: