The long term credit needs of the agricultural sector are met by another type of co-operative institutions known as Land Development Banks. The structure of these banks is a two-tier one – at the State level there are Central Land Development Banks and at the district or taluka level, there are primary Land Development Banks. In a few States, e.g. Gujarat, Jammu & Kashmir and UP., the structure is unitary i.e. there are Apex Land Development Banks which operate direct through their own branches at the district level.
The Land Development Banks meet the requirements of the farmers for developmental purposes viz., provision of equipment like pump-sets, tractors and machinery and land improvement in the form of leveling, bundling, reclamation of land, fencing, sinking of new wells and repairs to old wells, Loans are granted on the security of mortgage of immovable property of the farmers.
The Central Land Development Banks raise their resources by floating debentures in the market. These debentures carry the guarantee of the State Government and are subscribed by the Central and State Governments, Commercial Banks, Life Insurance Corporation and other Land Development Banks as a measure of mutual support. The Land Development Banks have availed of the refinancing facilities provided by the National Bank for Agricultural and Rural Development in respect of the term loans granted by them for the schemes of agricultural development. They also secure short term accommodation from the State Governments, Commercial Banks and the State Co-operative Banks.
Industrial Development bank of India:
IDBI is the apex banking institution in the field of long term industrial finance. Set up in 1964 as a wholly owned subsidiary of the Reserve Bank, IDBI was de-linked from the Reserves Bank on 16th February, 1976 when its entire share capital was transferred to the Central Government. Consequently, its role was also enlarged to enable it to function as the principal financial institution for coordinating the functions and activities of all India term lending institutions and to some extent the public sector banks.
The assistance provided by IDBI falls in two categories, i.e. (1) direct assistance to large and medium industries, and (2) indirect assistance. Major portion of the direct assistance is provided in the form of Project loans to industries. Besides, IDBI also provides assistance by way of underwriting and direct subscription to the shares/ debentures of industrial undertakings. IDBI also provides soft loans for the modernization of all industries. In 1984, IDBI introduced Equipment Finance Scheme, wherein foreign currency loans are made available to industrial concerns for import of capital goods and equipment not related to any specific project.
Indirect assistance is provided by the Bank to tiny, small and medium enterprises, through other financial institutions in a number of ways, namely:
i) by way of refinance of industrial loans granted by State Financial Corporations, state Industrial Development Corporations (SIDCs), Commercial Banks, Co-operative Banks and Regional Rural Banks.
ii) Re-discounting of bills arising out of sale of indigenous machinery on deferred payment basis, and
iii) Seed capital assistance granted to new entrepreneurs generally through SFCs and SIDCs.
IDBI also subscribes to the shares and bonds of SFCs, SIDCs and National Small industries Corporation Ltd.
The share capital of IDBI stood at Rs 673 crore as at March 31, 2000. IDBI was wholly owned by the Government of India till 1995-96 when it issued 17.31 lakh shares to the public at a premium of Rs 120 per share. The share of the Government of India in its share capital was thus reduced to 72.14 percent. The rest of the share capital is held by financial institutions, insurance companies, banks, domestic companies and foreign institutional investors. Individuals and others own over 15% of its share capital.
The IDBI raises the bulk of its funds from (1) market borrowings by way of bonds, and (2) the borrowings out of National Industrial Credit (Long term Operations) Funds of the Reserve Bank. IDBI also takes short term advances from the Reserve Bank against lodgment of usance bills. During recent years, IDBI has also raised resources in foreign currencies by way of loans and private placement of its bonds in foreign capital markets. Such resources are utilized for financing imports of capital good sand services required by the assisted projects.
IDBI has established a number of subsidiaries which include the Small Industries Development Bank of India, IDBI Bank Ltd., IDBI Capital Market Services Ltd.
IDBI has co-sponsored a number of financial institutions as well, e.g. National Stock Exchange of India, Over the Counter Exchange of India, Discount and Finance House of India Ltd.