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All India Financial Institutions

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All India Financial Institutions (AIFI) is a group composed of development finance institutions and investment institutions that play a pivotal role in the financial markets. Also known as "financial instruments", the financial institutions assist in the proper allocation of resources, sourcing from businesses that have a surplus and distributing to others who have deficits - this also assists with ensuring the continued circulation of money in the economy. Possibly of greatest significance, the financial institutions act as an intermediary between borrowers and final lenders, providing safety and liquidity. This process subsequently ensures earnings on the investments and savings involved.[1] In Post-Independence India, people were encouraged to increase savings, a tactic intended to provide funds for investment by the Indian government. However, there was a huge gap between the supply of savings and demand for the investment opportunities in the country.[2]

List of AIFIs

According to Economic Survey 2012-13,[3] at the end of March 2012, there were four institutions regulated by Reserve Bank of India as all-India Financial Institutions:

Industrial Development Bank of India

Main article: IDBI Bank

IDBI is no longer an AIFI and has been converted into a universal bank by the Government of India. The IDBI was established to provide credit for major financial facilities to assist with the industrial development of India. It was established in 1964 by RBI, and was transferred to the government of India in 1976. The government holdings in IDBI, after the IPO, is 51.4%.[4] By the end of September 2004, the IDBI asset base was Rs. 36850 crore.[5]

Functions

  • Direct assistance: helps the industrial sector by granting project loans, underwriting of and direct subscription to the industrial securities (shares and debentures), soft loans, and technical development funds.mn m,n
  • Coordinating functions: coordinates the functions of financial institutions such as ICICI, IFCI, LIC and GIC, with respect to industrial development.[6]
  • Indirect assistance to small and medium enterprises by granting loans. It also refinances industrial loans of the SFC's, SIDCs, commercial banks and RRBs, along with the billing related to the sale of the indigenous machinery.
  • Raising funds from the international money markets.

Diversification of activities of IDBI

Since 1990, IDBI has set up a number of institutes, including:

  • Small Industries Development Bank of India (SIDBI) in 1990[7]
  • IDBI Investment Management Company (IIMCO) in 1994[8]
  • IDBI Capital Market Services Ltd. (ICMS)[9] in 1995
  • IDBI Bank Ltd.

State industrial development corporations

In 1960, the first state industrial development corporations (SIDC)[10] were established in Bihar. These mainly autonomous bodies are controlled by the state government, who may own a stake in the corporation. There are approximately 29 SIDCs in India.

Their main functions include the promotion of rapid industrialization in India. They mainly work at the grass roots level, providing development in the backward and less frequented parts of India. They offer financial leases and offer guarantees. They also administer the schemes of the central and state governments. The projects and surveys of the industrial potential areas are conducted by them, as well as the evaluation of SEZs.[clarification needed]

Mutual funds

The first mutual funds in India were created in 1964[11] by the Unit Trust of India. In 1987, the leading public sector banks of the country, such as SBI and Canara Bank, set up their mutual funds. It became popular after the 1991 liberalization of the Indian economy.

By the end of 2006, there were around 200 mutual funds schemes in India. The amount of assets managed by the mutual funds grew from Rs. 47,000 crores to Rs. 217,707[11] by 31 March 2006. The mutual funds are managed by fund managers for small investors, who often do not have enough information to adequately invest the funds.

Organizations of mutual funds companies in India

Mutual funds in India have five constituents:

  • Sponsors
  • Board of trustees or trust
  • Asset management company
  • Custodian
  • Unit holders

References

  1. ^ https://www.rbi.org.in/Scripts/PublicationReportDetails.aspx?ID=387#1
  2. ^ https://www.rbi.org.in/Scripts/PublicationReportDetails.aspx?ID=387#1
  3. ^ "Archived copy" (PDF). Archived from the original (PDF) on 2013-04-25. Retrieved 2013-04-24.{{cite web}}: CS1 maint: archived copy as title (link)
  4. ^ Dion Global Solutions Limited. "IDBI Bank - Company History". Moneycontrol.com. e-Eighteen.com. Retrieved 11 October 2011.
  5. ^ D. K. Murthy, K. R. Venugopal (2009). Indian Financial System. I. K. International Pvt Ltd.
  6. ^ "IDBI".
  7. ^ "SIDBI".
  8. ^ "IDBI Investment Management Co IIMCO Floor VK Shah Morg Nariman Bhavan Mumbai Maharashtra".
  9. ^ "idbi cap".
  10. ^ "SIDC of himachal pradesh". Archived from the original on 2011-10-05. Retrieved 2011-09-26.
  11. ^ a b "Mutual Funds". Archived from the original on 2011-09-12. Retrieved 2011-09-26.
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