Development Finance Institution Commerce YouTube Lecture Handouts Part 3

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Development Finance Institution: Role, Features, Classification, Evolution | Commerce

Unit Trust of India (UTI)

  • UTI Mutual Fund was carved out of the erstwhile Unit Trust of India (UTI) as a SEBI registered mutual fund from 1 February 2003.
  • UTI Mutual Fund is the oldest and one of the largest mutual funds in India
  • UTI Mutual Fund has a nationwide distribution network spread across the length and breadth of the country. Its distribution network comprises over 48000 AMFI/NISM certified Independent Financial Advisors and 174 Financial Centers.
  • UTI Mutual Fund has been the pioneer for launching various schemes viz.
    • UTI Unit Linked Insurance Plan (ULIP) with life and accident cover (Launched in 1971) ,
    • Mastershare (Launched in 1986) ,
    • India՚s first Offshore Fund – India fund (Launched in 1986) ,
    • UTI Wealth Builder Fund, the first of its kind in the Indian mutual fund industry combining different asset classes i.e.. . , equity and gold which are lowly correlated.

State Finance Corporations (SFCs)

  • The State Finance Corporations (SFCs) are an integral part of institutional finance structure of a country.
  • The Indian government passed the State Financial Corporation Act in 1951. It is applicable to all the States.
  • SFC help in ensuring balanced regional development, higher investment, more employment generation and broad ownership of various industries.
  • At present in India, there are 18 state finance corporations (out of which 17 SFCs were established under the SFC Act 1951) . Tamil Nadu Industrial Investment Corporation Ltd. which is established under the Company Act, 1949, is also working as state finance corporation.
  • The authorized Capital of a State Financial Corporation should be within the minimum and maximum limits of ₹ 50 lakhs and ₹ 5 crores which are fixed by the State government.
  • It is divided into shares of equal value which were acquired by the respective State Governments, the Reserve Bank of India, scheduled banks, co-operative banks, other financial institutions such as insurance companies, investment trusts, and private parties.
  • The State Government guarantees the shares of SFCs. The SFCs can augment its fund through issue and sale of bonds and debentures also, which should not exceed five times the capital and reserves at ₹ 10 Lakh.
  • All SFCs are dependent upon the rules and regulations made by the state government.
  • SFCs՚ problem is that all decision of these institutions is dependent on the political environment of the state.

Functions of State Finance Corporations

The various important functions of State Finance Corporations are:

  • Provides loans mainly for the acquisition of fixed assets like land, building, plant, and machinery.
  • Aid financial assistance to industrial units whose paid-up capital and reserves do not exceed ₹ 3 crores (or such higher limit up to ₹ 30 crores as may be notified by the central government) .
  • Underwrite new stocks, shares, debentures etc. , of industrial units.
  • Grant guarantee loans raised in the capital market by scheduled banks, industrial concerns, and state co-operative banks to be repayable within 20 years.

Small Industries Development Corporation (SIDC/SIDCO)

  • Small Industries Development Corporations are state-owned companies or agencies in the states of India established in 1995 for the promotion of small-scale industries.
  • Aims to develop industrial infrastructure such as industrial parks and industrial estates along with providing financial assistance.
  • In many state governments, for the promotion of small-scale industries, a separate corporation has been set up which is known as Small Industries Development Corporation.
  • They undertake all kinds of activities for the promotion of small-scale industries. Right from the stage of installation, to the stage of commencing production, these Corporations help small scale industries (SSI) in many ways.
  • In short, they provide infrastructure facilities to small scale industries. Due to the assistance provided by SIDCO, many backward areas in most of the states have been developed. So, SIDCO has also been responsible in spreading the industrial activity throughout several states.
  • A few of the SIDCOs are:
    • Kerala Small Industries Development Corporation Limited
    • Small Industries Development Corporation of Jammu and Kashmir.
  • Tamil Nadu Small Industries Development Corporation Limited (TANSIDCO) .

Objectives of SIDCO

  • Promotes women entrepreneurs
  • Sets up captive power plants
  • Provides Export marketing assistance
  • Provides marketing assistance and acts as advisory body
  • Supplies scarce raw materials
  • Stimulate the growth of industries in the small-scale sector
  • Provision of infrastructure facilities like roads, drainage, electricity, water supply, etc.
  • Promote industrial estates which will provide industrial sheds of different sizes with all basic infrastructure facilities.
  • Provide technical assistance through training facilities to the entrepreneurs
  • Promote skilled labor through the setting up of industrial training institutes
  • Promotes skill development centres

MCQs

1. Name the first development bank of India.

2. Name the state level developmental financial institutions in India.

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