Development Banks in India

Development Banks are the institutions which contribute to the development of industries in any nation and thereby contributing to national development and growth. here we will discuss history of development banks in India since independence.

1. with the ardent efforts and practical approach of Ardeshir Dalai and C.D. Deshmukh, the then planning member and Governor of Reserve Bank of India, Industrial Finance Corporation of India (IFCI) was established in July 1948. The major aim of estblishing IFCI was to support industries and Cooperatives by providing medium and long-term credit.“The first step towards building up a structure of development finance institutions was taken with the establishment of the Industrial Finance Corporation of India in 1948, with a view to providing medium and long-term credit to units in the corporate sector and industrial cooperatives”.

2. In 1951, the State Financial Corporation Act was passed and the State Finance Corporation came into existence to supplement the long-term financing of the Industrial Finance Corporation of India.

3 .In 1954,  The NIDC was established as a wholly owned Government company with the objective of promoting industries which were considered vital for the growth of the economy but could not be easily developed otherwise.

4. In 1955, The Industrial Credit and Investment Corporation of India was set up as a joint-stock company with support from the Government of India, the World Bank, the Commonwealth Development Finance Corporation (CDFC) and other foreign institutions. Its ownership was entirely in the private sector. The prime motive behind the ICICI was to establish a bank, which should be free from any interference from the government and also provide a viable financial structure for the corporate private sector.

5. In 1964, The major reorganisation and strengthening of the structure of specialised financial institutions took place with the establishment of IDBI as an apex institution in the sphere of medium and long-term financing. It was established to coordinate the activities of the existing financial institutions and also to provide them assistance in the financing work by the facility of the refinancing of long-term loans.

6. In 1964, to stimulate and pool the savings of the middle and low-income groups and to enable them to share the benefits and prosperity of the rapidly growing industrialization in the country, one more institution was set up which was new and unique in nature known as the Unit Trust of India.

7.  In April 1971, To cater to the needs of the rehabilitation of sick industrial units, export finance, agriculture and rural development operations, the creation of specialized institutions has been of profound significance., the Government of India has set up the Industrial Reconstruction Corporation of India (IRCI) under the Indian Companies Act mainly to look after special problems of ‘sick’ units and provide assistance for their speedy reconstruction and rehabilitation, if necessary, by undertaking the management of the units and developing infrastructure facilities like transport, marketing etc.

8.  On Jan 1, 1982, The Export-Import Bank of India commonly known as the EXIM Bank was set up  to take over the operations of the international finance wing of the IDBI and to provide financial assistance to the exporters and importers and to function as the principal financial institution engaged in financing of exports and imports of goods and services. The EXIM Bank provides refinance facilities to the commercial banks and financial institutions against their export-import financing activities.

9.  The National Bank for Agriculture and Rural Development (NABARD) was set up in July 1982 with a view to strengthening the institutional network catering to the credit needs of the agriculture and rural sectors. NABARD replace three institutions namely:

  1. Agricultural Credit Department (ACD)
  2. Rural Planning and Credit Cell (RPCC) of Reserve Bank of India,
  3. Agricultural Refinance and Development Corporation (ARDC)

NABARD is responsible for the short-term, medium-term and long-term financing of agricultural and allied activities and for overseeing the rural credit system, which includes cooperative banks and regional rural banks as the primary lending agencies. NABARD also acts as apex institution for Regional Rural Banks (RRBs)

10. In 1990, Small Industrial Development Bank of India (SIDBI) was established to look after small industries, so that small industry could be developed with better focus.  Responsibilities of IDBI was then limited to large industries only. Headquarter of SIDBI is at Lucknow.


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11. In 1997, Industries Development Finance Corporation (IDFC) was established.  It provides finance and advisory services for infrastructure projects as well as asset management and investment banking.