Information about Industrial Finance Corporation of India Ltd. or IFCI.
The Industrial Finance Corporation of India was established on 1st July, 1948 under the Industrial Finance Corporation Act, 1948 to provide financial assistance (medium and long-term) to large-scale industries all over the country. On 1st July, 1997 the name of Industrial Finance Corporation of India was changed as ‘Industrial Finance Corporation of India Limited’.
The main object of Industrial Finance Corporation of India Limited is to provide financial assistance to large-scale industrial units particularly at a time when the normal banking accommodation is inadequate and not forthcoming to assist these industrial units. Industrial enterprises, organized on the basis of proprietary or private limited company basis, cannot take loans from this corporation. Only the public limited companies are eligible to take loans from it.
The main functions of Industrial Finance Corporation of India Limited are as follows:
- To grant medium and long-term loans ranging between Rs. 30 lakhs to Rs. 2 crores to large-sized industrial units which are repayable within a period of 25 years.
- To guarantee loans raised by the industrial units which are repayable within a period of 25 years.
- To underwrite the issue of stocks, shares, debentures or bonds b industrial units but must dispose of such securities within 7 years.
- To issue debentures.
- To accept public deposits up to Rs. 10 crores for a period of five years only.
- To act as an agent for the Central Government and for the World Bank in respect of loans sanctioned by them to industrial units.
- To guarantee deferred payments by importers of capital goods, who are able to obtain this concession from foreign manufacturers.
- Miscellaneous: (i) To provide technical guidance to industrial units as to finance (loans), (ii) To guarantee loans in foreign currency. (iii) To examine utility of loans granted to industrial units, (iv) To guarantee loans raised from scheduled banks and State Co-operative Banks.
The Industrial Finance Corporation or India is managed by a board of directors consisting of 13 members in all, both nominated and elected. The head of the board of directors is called chairman appointed by the Central Government with the consultation of board of directors for a period of three years only. Besides this board of directors, there is also a central committee consisting of five members in all, including president.
The main financial resources of Industrial Finance Corporation of India Ltd. are as follows:
- Share Capital: The authorized capital of the corporation is Rs. 1,000 corers divided into 2 lakhs shares of Rs. 5,000 each. Its paid-up capital on 31st March, 1997 was Rs. 352.81 crores.
- Debentures: The corporation is also authorized to issue debentures and bonds. But their total amount should not exceed ten times of its paid-up share capital plus reserve funds.
- Loans: The Corporation has the power to borrow funds (loans) from Industrial Development Bank of India. Foreign investment Institutions, Central Government and Reserve Bank of India.
- Public Deposits: The Corporation can accept public deposits for a maximum period of five years. Further, the amount of public deposits cannot exceed Rs. 10 crores.
- Reserve Fund: It is another sources of finance of the Corporation.
- Foreign Currency Loans: The Corporation can also accept loans in foreign currency with the prior approval of the central government, such as, loans from International Bank and other International Financial Institutions.
Review of Progress (Operations)
The Corporation is granting loans to large-sized industrial units and industrial cooperative units. The amount of assistance varies from Rs. 30 lakhs to Rs. 2 crores for a period not exceeding 25 years. The assistance extended by the corporation has been to widely dispersed among all industries, such as, power generation, telecom services, textiles, hotels, petroleum refining, iron and steel, cement, ports, sugar etc. Further, the assistance to any one industry has not exceeded 15% of the total outstanding assistance. Besides providing financial assistance, the corporation is also providing underwriting services, technical guidance, modernization assistance etc.
Although the Corporation has been an important source of long-term finance to the large-sized and medium-sized industrial units of the country, yet it has been criticized on several grounds. The main points of criticism are as follows:
- Nepotism and favoritism in granting loans.
- Undue preference to well-established large business concerns.
- Overlooking interests of small business and development of backward regions almost ignored.
- Granting loans to business unit not covered by Five year Plans.
- Very high interest rate.
- Delay in sanctioning loans.
- No participation in equity capital.
- Most of the loans sanctioned to those industrial units which are already organized and financially strong.
- Lays greater emphasis upon giving assistance to consumer goods industries as against basic and capital goods industries.
- The corporation has failed in regional and territorial economic development.
- The assistance is insignificant as compared to the requirements of the industrial unit and hence it has knocked at the doors of other financial institutions.
- The recurring expenses of the corporation are quite high.
In spite of the above criticism, we must recognize that the corporation has done a good job. It has entered in new lines of business. Loans one concession rates are granted to industries situated in backward areas.