Sectorial Financial institution
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.
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.
There were four institutions regulated by Reserve Bank of India as all-India Financial Institutions:
- Export – Import Bank of India (Exim Bank)
- National Bank for Agriculture and Rural Development (NABARD)
- Small Industries Development Bank of India (SIDBI)
- National Housing Bank (NHB)
- 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.
- Coordinating functions: Coordinates the functions of financial institutions such as ICICI, IFCI, LIC and GIC, with respect to industrial development.
- 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.