Indian Industrial Finance Corporation
Indian Industrial Finance Corporation
Establishment – the Indian Industrial Finance Corporation was set up on 1st July, 1948. The main aim of establishing this corporation was to provide financial assistance to those companies or cooperative societies which were incorporated or registered in India and were involved in producing and distribution of goods, hotel, power, gas, electricity etc. Long term loans or medium-term loans are provided by this corporation. On 1st July 1993 the nature of this corporation was changed to that of a company and today it has become Indian Industrial Finance Corporation Limited.It has been registered under the Company Act, 1956.
The aims of Industrial Finance Limited : The following are the aims behind establishment of this limited –
(a) To provide long term and medium – term loans to industries
(b) To provide loans to private and government industrial institutions
(c)To underwrite the securities of industrial institutions and give guarantee for the loans taken by the industrial institutions
(d) Encourage industries.
The Management of Industrial Finance Limited :
The management of this corporation is done by a Board of Directors which has a Chairman and 12 members. The Chairman is appointed by the Central government in consultation with Indian Industrial Development Bank. Four of its members are nominated by the Indian Industrial Development Bank and two by the central government, 6 members are chosen by the scheduled banks, cooperative banks and other institution whose interests are involved. There is a 5 member central committee for the assistance of the Board of Directors The Head office of this corporation is at Delhi and Branch offices at Mumbai, Kolkatta, Chennai, Guwahati, Ahmadabad, Bangalore, ., Kanpur and Patna
The financial sources of Industrial Finance Corporation
1. Share capital – the authorized capital of the
corporation was Rs. 10 crores which was later increased to Rs. 20 crores and is divided into 40,000 shares of 5-5 thousand each. Its paid capital is Rs. 15 crores which is divided into 30,000 regular shares of 5-5 thousand each and has been purchased by various institutions in the following manner – Industrial Development Bank 50%, Cooperative Bank 8%, Scheduled Bank 20%, Life Insurance Corporation and investment firm 22%.
2. Letters of credit – as per its need this corpo-
ration can issue letters of credit and bonds from time to time but the total liabilities should not be more than 10 times the sum of the given money and accumulated funds.
3. Loan from the central government – it has the
right to take loans from the central government.
The Functions of the Industrial Financial Corpora-
tion – the main functions of this corporation are as follows
1. Underwriting – this corporation underwrites
shares and letters of credit. This corporation provides financial assistance to many industrial organizations by underwriting also.
2. Purchase letters of credit – this corporation
also has the right to purchase the letters of credit of the various companies and can also give loans to those companies for that period. The period of purchase of letters of credit and giving loans is 25 years.
The progress of the tasks of Industrial Finance Corporation
1. Financial assistance – till the financial year
1995-96 the corporation had given the financial assistance of Rs. 33695 crores for 4813 projects of which Rs. 19944 crores had already been disbursed.
2. Industry – wise assistance – although this cor-
poration has helped all types of industries yet the industries benefitted the most are the ones which were already well established. Nearly 72% of the assistance was received by sugar, cotton cloth, chemicals, paper and cement industry.
3.State wise financial assistance – region wise,
assistance from this corporation has been received by those states which can be called somewhat developed from industrial point of view. The maximum assistance has been received by Maharashtra. Karnataka, Andhra Pradesh and West Bengal follow.
4. Underwriting function – under section 23 of
the Act the corporation has the rights to underwrite the stock, shares and letters of credit. But if the corporation needs to purchase some securities then it will have to sell them in the capital market within 7 years.
5.Other functions – the corporation has donated
Rs 7 and Rs. 8 lakhs in scholarship in Indian Institute of Management, Ahmadabad and Delhi University respectively for instituting a chair. In both these institutions the teachers of Indian Industrial Finance Corporation are being appointed.