Promotional role of development banks in India

The pace of development cannot be accelerated by providing financial assistance alone. There are factors which inhibit industrialization of an underdeveloped country. It is essential to make a correct diagnosis of those factors and plan things accordingly. The growth potential of different areas, the availability of natural resources, demand conditions, infrastructure facilities, etc. should be taken into account before deciding the pattern of industrialization of various places. The task of identification of growth potentialities and preparation of feasibility studies is not an easy task. It requires huge finances and technical expertise which is beyond the competence of entrepreneurs of under-developed countries. It is in this area where development banks can play crucial role. In addition to providing the traditional role of providing financial assistance, development banks in India are undertaking promotional role also. Some of the areas where these banks are participating are:

(1) Surveys of Backward Areas

Under the Industrial Development Bank of India, development institutions conducted industrial potential surveys in June, 1970 with a view to identify specific project ideas for implementation in those areas. These surveys studied the availability of resources, demand potential and availability of infrastructures facilities. In 1982, Government of India identified 83 districts in the country where no medium or large scale industrial units existed. IOBI jointly with IFCI and ICICI launched a programme for identifying industrial opportunities and needs for. These project ideas were further screened and developed for arriving at some firm decision about their implementation. IDBI conducted feasibility studies and cleared projects for implementation.

(2) Inter-Institutional Groups (IIG’s)

With a view to provide a forum to the national and state financial institutions, IDBI constituted 23 IIG’s in various states and union territories These groups aimed to help accelerate the process of industrial development in a state with particular emphasis on less developed areas, An attempt was also made to evolve suitable strategies for industrial development within the framework of national and state policies and local requirements. IDBI has been constantly reviewing the functioning of these groups so as to evolve suitable measures for malting them effective.

(3) Establishing Technical Consultancy Organizations (TCO’s)

There is a need for technical consultancy at the time of selling up a new unit and at the time of making change like modernization, expansion, diversification, etc. The small and medium scale units cannot pay high fees of consultancy agencies. With a view to help these entrepreneurs, financial institutions set up 17 consultancy organization for providing consultancy at nominal rates. These organizations provide consultancy services to small and medium entrepreneurs, commercial banks, state-level financial institutions and other agencies engaged in industrial promotion and development. The consultancy services covered so far include market surveys, preparation of feasibility and project reports, entrepreneur ship development programmes, diagnostic studies and rehabilitation schemes for sick units, services for implementing projects on turn-key basis. TCO’s have been giving thrust to modernization small and medium scale sectors also. In this respect they have undertaken in depth studies of specific sub- sectors of small scale industry so as to identify their modernization needs and prepare modernization programmes.

(4) Entrepreneurial Development Programmes (EPP’s)

Industrial development of a country is directly influenced by the quality of entrepreneurs it has produced, with a view to impart requisite training to entrepreneurs. IDBI has been encouraging entrepreneurial development programmes. It has mainly used the agency of TCO’s for drawing up and conducting these programmes to cater to the needs of entrepreneurs from small and medium scale sectors. IDBI meets up to 50 per cent of the cost of such programmes and the balance cost is met by state governments or other sponsoring institutions.

Development banks have also been trying to strengthen the infrastructure for conducting entrepreneurial development programmes. The main thrust has been to institutionalize entrepreneurship activities, generating, sharpening and sharing knowledge through research documentation and publication, developing a cadre of professionals. A major step in this area was the setting up of Entrepreneurship Development Institute of India, Ahmedabad in 1983. The objective of this institution was to train EPP trainers, providing resource inputs running model development programmes, conducting.

(5) Technological Improvements

Development banks, especially IDBI have been helping small and medium sectors in developing and upgrading of their technology so that they arc able to match the pace of development. These banks also encourage entrepreneurs to adopt sophisticated technology with the help of academic and research institutes and also to encourage entrepreneurship among science and technology graduates. Development banks have done a good job in promoting industrial activities in various parts of the country. The development of backward areas is a gigantic task in India. Private entrepreneurs cannot measure to this task of their own. So development banks are expected to play an important role in this regard. These banks should help in setting up new projects by associating private entrepreneurs so that their management is left to them. After a particular stage of a project the development institutions should transfer the responsibility to private sector and same resource should be used to develop more units. Development banks, in co-operation with private sector, can certainly help in accelerating the pace of industrial development.

About Abey Francis

Abey Francis is the founder of MBAKnol - A Blog about Management Theories and Practices - and he's always happy to share his passion for innovative management practices. You can found him on Google+ and Facebook. If you’d like to reach him, send him an email to: [email protected]

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