ALL INDIA DEVELOPMENT FINANCE INSTITUTIONS (DFIS)

Development Financial Institutions (DFIs) – An overview and role in Indian

economy

The development banks are the financial institutions that are supposed to be the
backbone of public & private sectors and to contribute to economic growth.

The organisations owned by charity institutions do the infrastructure projects or by

the government contribute to national importance. These can or cannot meet the
return standard of commercials. These institutions are responsible for supporting the
long-term financial requirements for infrastructure and giving growth to the Indian
economy. National development banks, investment institutes, state-level
institutes and sector-specific institutions, etc. are together called the
Development financial institutions of India. These institutions create an
intermediate between public and private financial needs.

Role and importance of DFIs in the Indian Economy

The Development Financial Institutions of India play the most important role in the
growth of the Indian Economy. These institutions support the financial pillar
needed for the private or public sectors of our country. These institutes evolved
in India mainly in three phases –

1. From 1945 (from Independence) to 1964

2. From 1964 to the mid-phase of the 1990s

3. After 1993-94.

India had its first DFI bank in 1948 and it is the IFCI bank of India. Thereafter, the
ICICI bank was opened by an initiative of the World Bank in 1955. These institutes
provided needed financial support to the economic agents who played an important
role in the economic growth of India. The development banks are needed to –

 Boost the economic growth of India,

 Enhancement in crediting money for house and infrastructure projects

 Attract the debt rate toward the infrastructure projects.

  Boost long-term finances.

Specialized development financial institutions (DFIs), such as, Industrial Finance

Corporation of India (IFCI), Industrial Development Bank of India (IDBI), National
Bank for Agriculture and Rural Development (NABARD), National Housing Board
(NHB) and Small Industry Development Bank of India (SIDBI), with majority
ownership of the RBI were launched to meet the long-term financing needs of
industry and agriculture in India for driving growth in our economy post-
independence. There have been three phases in the evolution of DFIs in India.

The first phase began with Independence and spreads to 1964 when the
Industrial Development Bank of India was set up.

The second phase stretched from 1964 to the middle of the 1990s when the role
of the DFIs grew in importance, with the funding disbursed by them amounting to
10.3 per cent of Gross Capital Formation in 1990-91 and 15.2 per cent in 1993-94.

In third phase after 1993-94, the prominence of development banking declined

with the decline being particularly severe after 2000-01, as liberalization resulted
in the exit of some firms from development banking and in a waning in the
resources mobilised by other firms.

Categories and classifications of DFIs

There are different types of DFIs in India and those are –

 National Development Bank

 Investment Institutions

 State-level institutions

 Sector specific financial institutions

Some examples of national development banks are IDBI, SIDBI, IRBI, ICICI, IDFC,
IFCI, etc. Some important investment banks are LIC, GIC, UTI, etc. The main state-
level institutions are the SIDCs and the state finance corporations. The Sector-
specific financial institutions are TFCI, NABARD, NHB, HDFC, EXIM Bank, etc.

The DFIs are classified into two types based on their investment types –
  Investment Institutions &

 Sector-Specific Financial Institutions

Those institutions that focus on providing financial support for business operations
are called Investment institutions. They provide support mainly to equity offerings,
financing for capital expenditure, etc.

All Important DFIs of India

Some important DFI banks are

 Industrial Finance Corporation Bank of India was founded in 1948 as the first
DFI bank of India. It is known as IFCI bank and it played a very important role
in the financial growth of India at that time.

 The Industrial Credit and Investment Corporation of India Limited was opened
in 1955 by a World Bank initiative. It is known as the ICICI bank and is the first
private sector bank in India.

o Then came the Industrial Development Bank of India, it was founded in

1964 and in 1976 it was granted autonomy. It is also known as the IDBI
bank and it was established as a universal bank in 2003. It ensured the
adequate flow in crediting money by various private and public sectors.

o The Industrial Reconstruction Corporation of India, also known as the

IRCI bank was opened in 1971 to provide financial support to the weak
units. It saved many of the units from falling apart from the race, which
played an important role in the growth of the Indian economy.

 Small Industries Development Bank of India, also known as SIDBI bank was
founded in 1989 as an optional choice of IDBI bank. It filled the gap that IDBI
bank was not able to reach in 1998.

Development Financial Institutions (DFIs) in India can be broadly categorized based

on the sectors they serve and the type of financial assistance they provide. The major
categories are:
1. Sector-Specific DFIs

Industrial Development DFIs: These institutions focus on providing financial support

for industrial growth and modernization.

Examples: Industrial Finance Corporation of India (IFCI), Industrial Credit and

Investment Corporation of India (ICICI), Industrial Development Bank of India (IDBI).

Agricultural and Rural Development DFIs: These institutions focus on financing

agricultural activities, rural development, and rural infrastructure.

Examples: National Bank for Agriculture and Rural Development (NABARD).

Housing Development DFIs: These DFIs provide financial assistance for housing
projects and urban infrastructure development.

Examples: Housing and Urban Development Corporation (HUDCO), National

Housing Bank (NHB).

2. Activity-Specific DFIs

Export-Import DFIs: These institutions support international trade by providing

export and import credit, guarantees, and advisory services.

Example: Export-Import Bank of India (EXIM Bank).

Small and Medium Enterprises DFIs: These DFIs provide financial support
specifically to small and medium enterprises (SMEs) for growth and development.

Example: Small Industries Development Bank of India (SIDBI).

3. All-India Financial Institutions (AIFIs)

These institutions provide comprehensive financial services across various sectors at

the national level. They support the overall development of infrastructure,
agriculture, industry, and export-oriented units.

Examples: IDBI, IFCI, NABARD, SIDBI, EXIM Bank.

4. State-Level DFIs
These are regional institutions that provide long-term finance to industries in their
respective states. They aim to promote industrial growth and reduce regional
disparities.

Examples: State Industrial Development Corporations (SIDCs), State Financial

Corporations (SFCs).

Each of these categories plays a crucial role in ensuring the balanced development of
different sectors of the Indian economy by providing sector-specific or region-specific
financial support.

Objectives of Development Finance Institutions

 The prime objective of DFI is the economic development of the country

 These banks provide financial as well as the technical support to various

sectors

 DFIs do not accept deposits from people

 They raise funds by borrowing funds from governments and by selling their
bonds to the general public

 It also provides a guarantee to banks on behalf of companies and subscriptions

to shares, debentures, etc.

 Underwriting enables firms to raise funds from the public. Underwriting a

financial institution guarantees to purchase a certain percentage of shares of a
company that is issuing IPO if it is not subscribed by the Public.

 They also provide technical assistance like Project Report, Viability study, and
consultancy services.

Some Important DFIs (Sector Specific)

Industry

IFCI – 1st DFI in India. Industrial Corporation of India was established in 1948.

ICICI – Industrial Credit and Investment Corporation of India Limited established in

1955 by an initiative of the World Bank.
  It established its subsidiary company ICICI Bank limited in 1994.

 In 2002, ICICI limited was merged into ICICI Bank Limited making it the first
universal bank of the country.

Universal Bank – Any Financial institution performing the function of Commercial

Bank + DFI

 It was established in the private sector and is still the Only DFI in the private
sector.

IDBI – Industrial Development Bank of India was set up in 1964 under RBI and was
granted autonomy in 1976

 It is responsible for ensuring adequate flow of credit to various sectors

 It was converted into a Universal Bank in 2003

IRCI – Industrial Reconstruction Corporation of India was set up in 1971.

 It was set up to revive weak units and provide financial & technical assistance.

SIDBI – Small Industries development bank of India was established in 1989.

 Was established as a subsidiary of IDBI

 It was granted autonomy in 1998

Foreign Trade

EXIM Bank – Export-Import Bank was established in January 1982 and is the apex
institution in the area of foreign trade investment.

 Provides technical assistance and loan to exporters

Agriculture Sector

NABARD – National Bank for agriculture and rural development was established in
July 1982

 It was established on the recommendation of the Shivraman Committee

 It is the apex institution in the area of agriculture and rural sectors

 It functions as a refinancing institution

Housing

NHB- National Housing Bank was established in 1988.

 It is the apex institution in Housing Finance.

Major Development Financial Institutions (DFIs) in India

India has several Development Financial Institutions that have played crucial roles in
the country's economic and financial growth. Below are some of the major DFIs, their
origin, objectives, and the roles they have played in financial growth:

1. Industrial Finance Corporation of India (IFCI)

Origin: IFCI was established in 1948 as the first Development Financial Institution in
India to cater to the long-term financing needs of industries. Initially, it was set up as
a statutory corporation but was later converted into a public limited company in
1993.

Objective: The primary objective of IFCI was to provide medium and long-term
finance to large-scale industries to promote industrial growth.

Role in Financial Growth: IFCI played a crucial role in industrialization by financing

projects in various sectors such as steel, cement, textiles, and chemicals. It also
supported the development of new industries and facilitated the modernization of
existing units.

2. Industrial Credit and Investment Corporation of India (ICICI)

Origin: ICICI was established in 1955 as a private sector DFI, promoted by the
Government of India, the World Bank, and various Indian banks. In 2002, ICICI was
merged with ICICI Bank, transforming it into a full-fledged commercial bank.

Objective: ICICI aimed to provide long-term and medium-term project finance to

industries and promote private sector participation in industrial growth.
Role in Financial Growth: ICICI was instrumental in supporting the private sector
by financing infrastructure, manufacturing, and technology-driven industries. It
played a significant role in facilitating access to foreign capital for Indian businesses
and promoting entrepreneurial development.

3. Industrial Development Bank of India (IDBI)

Origin: IDBI was established in 1964 by an Act of Parliament as a subsidiary of the

Reserve Bank of India (RBI). In 1976, it was delinked from the RBI and became an
independent financial institution. It was later converted into a commercial bank in
2004.

Objective: IDBI's primary objective was to promote industrial development by

providing financial and technical assistance to industries, particularly medium and
large-scale enterprises.

Role in Financial Growth: IDBI played a pivotal role in promoting industrial

development by providing project finance, development finance, and refinancing
facilities. It also supported the growth of backward areas by financing projects in
less-developed regions.

4. Small Industries Development Bank of India (SIDBI)

Origin: SIDBI was established in 1990 as a subsidiary of IDBI to cater specifically to

the financing needs of Small and Medium Enterprises (SMEs).

Objective: SIDBI's primary objective is to provide financial and non-financial support

to SMEs to enhance their competitiveness, productivity, and overall growth.

Role in Financial Growth: SIDBI has played a major role in promoting

entrepreneurship and employment generation by providing credit to SMEs. It also
facilitates the development of rural industries and cottage industries, contributing to
balanced regional growth.

5. National Bank for Agriculture and Rural Development (NABARD)

Origin: NABARD was established in 1982 as a statutory body to promote agriculture
and rural development in India. It was formed by taking over the functions of the
Agricultural Refinance and Development Corporation (ARDC).

Objective: NABARD's primary objective is to provide and regulate credit for

agriculture and rural development. It aims to promote integrated rural development
and secure rural prosperity.

Role in Financial Growth: NABARD has been instrumental in providing refinancing

facilities to commercial banks, regional rural banks, and cooperative banks for
lending to the agriculture sector. It has also promoted rural infrastructure
development through direct and indirect financing, thereby contributing to overall
rural economic growth.

6. Export-Import Bank of India (EXIM Bank)

Origin: EXIM Bank was established in 1982 by the Government of India to facilitate
and promote India’s international trade.

Objective: The main objective of EXIM Bank is to provide financial assistance to

exporters and importers, support international joint ventures, and facilitate overseas
investment.

Role in Financial Growth: EXIM Bank has played a vital role in promoting India's
exports by providing pre-shipment and post-shipment credit, export credit
guarantees, and financing for project exports. It also supports Indian companies in
establishing overseas ventures, thereby contributing to foreign exchange earnings
and economic growth.

7. Housing and Urban Development Corporation (HUDCO)

Origin: HUDCO was established in 1970 by the Government of India to provide long-
term finance for the construction of houses and urban development projects.
Objective: The primary objective of HUDCO is to promote housing for all segments of
the population, with a focus on the economically weaker sections, and support urban
infrastructure development.

Role in Financial Growth: HUDCO has contributed to the development of the housing
sector by providing finance for affordable housing projects. It has also supported the
creation of urban infrastructure, including water supply, sanitation, and
transportation projects, which are essential for sustainable urban growth.

8. National Housing Bank (NHB)

Origin: NHB was established in 1988 as an apex financial institution for housing
finance. It is a wholly-owned subsidiary of the Reserve Bank of India (RBI).

Objective: NHB's main objective is to promote and regulate housing finance

institutions and provide financial assistance for housing projects across India.

Role in Financial Growth: NHB has played a key role in developing the housing
finance market by providing refinancing facilities to housing finance companies and
banks. It also supports affordable housing initiatives, which contribute to the overall
economic growth by stimulating construction activities and generating employment.

Contribution of DFIs to India's Financial Growth

Industrial Growth and Modernization: DFIs like IFCI, ICICI, and IDBI provided
crucial financial support to large-scale industries and helped modernize existing
units. They facilitated the growth of sectors such as steel, chemicals, and textiles,
contributing to India's industrialization.

Support to SMEs: SIDBI has been instrumental in supporting small and medium
enterprises, which are significant contributors to employment generation and
economic growth. By providing tailored financial products, SIDBI has helped SMEs
overcome barriers to growth.

Agricultural and Rural Development: NABARD has played a major role in

improving the productivity of the agricultural sector and promoting rural
development. It has helped bridge the credit gap for farmers and facilitated the
growth of rural infrastructure.

Export Promotion: EXIM Bank has supported India's export sector by providing
credit facilities and guarantees. It has facilitated access to international markets for
Indian businesses and contributed to foreign exchange earnings.

Housing and Urban Infrastructure Development: DFIs like HUDCO and NHB
have supported the housing sector by providing affordable housing finance and
developing urban infrastructure. Their initiatives have contributed to the growth of
the construction industry and improved the quality of life for citizens.

Balanced Regional Development: DFIs have played a key role in promoting

balanced regional development by providing finance to projects in less-developed
regions. This has helped reduce regional disparities and promoted inclusive growth
across the country.

Catalyst for Private Investment: DFIs often acted as a catalyst for private
investment by financing high-risk projects that private investors were hesitant to
support. Their involvement increased confidence in the projects, attracting private
capital, and promoting public-private partnerships.

Promotion of Entrepreneurship: DFIs have supported entrepreneurship by

providing finance to startups and new ventures. Their financial assistance and
advisory services have helped promote a culture of innovation and entrepreneurship
in the country.

The major DFIs in India have thus played a vital role in shaping the economic
landscape of the country. By providing long-term finance and technical assistance to
sectors like infrastructure, industry, agriculture, and housing, they have contributed
significantly to India's overall financial growth and development.

Conclusion
The development of financial institutions in India played a very important role in
increasing the investment and saving rate in infrastructural projects. The capital was
too low in the initial years and the saving rate was around 5 percent of total income.
Development financial institutions of India gave financial and technical support and
promoted housing and infrastructural projects. It helped a lot to improve the capital
of the private and public sectors. Diamond William defined the DFIs as the
institutions that encourage infrastructural projects and give financial support to the
sectors that contribute something to India’s economic growth.

ICICI - The Industrial Credit and Investment Corporation of India Limited

Industrial Credit and Investment Corporation of India (ICICI) was established in 1955
as public limited company under Indian Company Act, for developing medium and
small industries of private sector.

Initially its equity capital was owned by companies, institutions and individuals but at
present its equity capital has been owned by public sector institutions like—Banks,
LIC, CIC and its associate companies. In March 2002, the ICICI was merger with the
ICICI Bank and created a first universal bank in India. With this merger, ICICI does
not exist anymore as a development financial institution.

Objectives:
(i) To provide loans to industrial projects in private sector.

(ii) To stimulate the promotion of new industries.

(iii) To assist the expansion and modernization of existing industries.

(iv) To provide Technical and managerial aid to increase production.

Financial Assistance of ICICI:

To achieve its objectives, ICICI provides financial assistance in various forms
such as:
(i) Long term and medium term loans both in terms of rupee and foreign currency.

(ii) Participating in equity capital and in debentures.

(iii) Underwriting new issues of shares and debentures.

(iv) Guarantee to suppliers of equipment and foreign loaners.

Activities of ICICI:
The activities of ICICI are discussed below:
1. Project Finance:
The project finance is provided to industries for the cost of establishment,
modernization or expansion of manufacturing and processing activities in the form of
rupee and foreign loans, underwriting, subscription to shares and debentures and
guarantees to supply of equipment and foreign donors.

The rupee loan is given for the purchase of equipment and machinery, construction
and preliminary expenses. The foreign currency loans are provided for the purchase
of imported capital equipment.

2. Leasing:
The leasing operations of the ICICI commenced in 1983. Leasing assistance is given
for computerization, modernization/replacement, equipment of energy conservation,
export orientation, pollution control etc.

3. Project Advisory Services:

The Project advisory services are provided to the Central and State Governments and
public sector and private sector companies. Advice to the governments is provided on
policy reforms and on value chain analysis and to private sector companies on
strategic management.

4. Facilities for Non-resident Indians:

The information regarding on facilities and incentives given by the Government of
India to the non-resident Indians for judicious investing in India are offered.

5. Provision of Foreign Currency Loans:

The ICICI has a provision of foreign currency loans and advances to enable Indian
Industrial concerns to secure essential capital goods from foreign countries.
6. Other Institutions Promoted:
(a) ICICI promoted the Housing Development Finance Corporation (HDFC) to provide
long-term finance to individuals in middle and lower income groups, co-operations,
etc., for the construction and purchase on ownership basis of residential houses all
over the country.

(b) Credit Rating Information Services of India Ltd. (CRISIL) set up by ICICI in
association with Unit Trust of India (UTI) to provide credit rating services to the
corporate sector.

(c) Technology Development and Information Company of India Ltd. (TDICI),

promoted by ICICI, to finance the transfer and Up gradation of technology and
provide technology information.

(d) Programme for the Advancement of Commercial Technology (PACT) set up with a
grant of US $10 million provided by USAID (United States Aid) to assist market-
oriented R&D activity, jointly undertaken by Indian and US companies, ICICI has
been entrusted with the administration and management of PACT.

(e) Programme for Acceleration of Commercial Energy Research (PACER) funded by

USAID with a grant of US $ 20 million to support selected research and technology
development proposals in Indian energy sector PACER was also launched by ICICI.

Industrial Development Bank of India (IDBI)

The Industrial Development Bank of India (IDBI) was set up in July 1964, as a wholly-
owned subsidiary of the Reserve Bank of India. It was given complete autonomy in
February 1976.

Today, the IDBI is regarded as an apex institution in the arena of development

banking. The IFCI and the UT1 are the subsidiaries of the IDBI. As an apex
development bank, the IDBI’s major role is to co-ordinate the activities of other
development banks and term-financing institutions in the capital market of the
country.

Objective
The objective of the IDBI includes:
 Coordinating, supervising, and controlling the activities of Financial
Institutions like ICICI, LIC, etc
 The Collection of resources for other financial institutions and providing
financial assistance
 Planning and promoting key industries to enhance industrial growth
 To build a system that adheres to national priorities

The main functions of the IDBI may be stated as follows:

1. Planning, promoting and developing industries with a view to fill the gaps in the
industrial structure by conceiving, preparing and floating new projects.

2. Providing technical and administrative assistance for promotion, management and

expansion of industry.

3. Providing refinancing facilities to the IFCI, SFCs and other financial institutions
approved by the government.

4. Coordinating the activities of financial institutions for the promotion and

development of industries.

5. Purchasing or underwriting shares and debentures of industrial concerns.

6. Guaranteeing deferred payments due from industrial concerns and for loans raised
by them.

7. Undertaking market and investment research, surveys and techno-economic

studies helpful to the development of industries.

In short, the IDBI is the leader, coordinator and innovator in the field of industrial
financing in our country. Its major activity is confined to financing, developmental,
co-ordination and promotional functions.

With the passing of the IDBI (Amendment) Act, 1986, the IDBI has been empowered
to provide assistance to diverse range of industrial activities including the activities
of services sector of industries like informatics, health care, storage and distribution
of energy and other services contributing to value addition. The scope of business of
the IDBI has also been extended to cover consulting, merchant banking and
trusteeship activities.

Under the 1986 Amendment, the authorised capital of the IDBI has been raised to Rs.
1,000 crores (with the possibility of further increasing it to Rs. 2,000 crores by the
Central Government’s notification) for sustaining the growing tempo of its
operations.

During the year 1986-87, the IDBI provided Rs. 929 crores of direct industrial
assistance by way of project loans, including assistance under the modernisation
scheme, technical development fund scheme, equipment finance scheme and
underwriting of and direct subscriptions to shares and debentures of industrial firms.

It however, sanctioned Rs. 65 billions and disbursed Rs. 40 billions of loans in the
aggregate. The cumulative assistance sanctioned and disbursed by the IDBI 1964-
1987 aggregated to Rs. 227 billions and Rs. 165 billions respectively. During 1995-
96, the IDBI’s financial assistance sanctioned amounted to Rs. 19,469 crore of which
Rs. 10,636 crore were disbursed.

In recent years, the IDBI has started providing assistance to backward areas and
small-scale industries remarkably well.

Conclusion
In short, the IDBI can be explained as the leader who contributes to industrial
financing through its innovation and Coordination. The authorised capital of IDBI was
raised to Rs. 1000 crore under the amendment act of 1986. The role of IDBI has also
been significant in consultation, merchant activities, and trusteeship engagements.
Direct industrial assistance in project loans was provided through modernisation
schemes, equipment finance schemes, and technical development schemes. Recent
years have witnessed the support of IDBI towards the backward areas and small-
scale industries. The entire system of the fund and fee-based services fulfils the
demand for finance and advisory needs. The Industrial Development Bank of India is
the tenth-largest development bank globally.
Industrial Credit and Investment Corporation of India (ICICI)

The creation of Industrial Credit and Investment Corporation of India (ICICI) is

another milestone in the growth of the Indian Capital Market. It was incorporated in
the year 1955, as a company registered under the Companies Act. The ICICI was
incorporated to finance small scale and medium industries in the private sector.

The IFCI and SFCs confined themselves to lending activity and kept away from
underwriting and investing in business though they were authorized to subscribe for
the shares and debentures of the companies and to undertake underwriting business.
Therefore, a large number of up and coming enterprises faced continuous problems
in raising funds in the capital market.

Besides, they were not in a position to secure the desired amount of loan assistance
from the financial institutions due to their thin equity base. To encourage industrial
development in the private sector, a considerable provision of underwriting facility
was considered necessary to accelerate the phase of the industrialization. To fill
these gaps, the ICICI was established.

Objectives of the ICICI

The major objective of the ICICI was to meet the needs of the industry for permanent
and long term funds in the private sector. In general, the major objectives of the
Corporation are:

1. To assist in creation, growth and modernization of business enterprises in the non-

public sector.

2. To encourage and promote the involvement of internal and external capital

sources, in such enterprises.

3. To motivate pvt ownership of industrial investment and to promote and assist in

the expansion of markets.

4. To provide equipment finance.

5. To provide finance for rehabilitation of industrial units.

Functions of the ICICI

In order to accomplish the above objectives, the Corporation performs the following
functions:

1. Providing finance in the form of long-term or medium term loans or equity

participation.

2. Sponsoring and underwriting new issues of shares and other securities,

3. Guaranteeing loans from other private investment sources.

4. Making funds available for reinvestment by revolving investment as rapidly as

possible.

5. Providing project advisory services i.e. offering advice –

i. to private sector companies in the pre-investment stages on Government

policies and procedures, feasibility studies and joint venture search, and
ii. to Central and State Governments on specific policy related issues.

Types of financial assistance of the ICICI

The Corporation provides finance-in the following forms:

1. Underwriting of public issues and offer or sale of industrial securities.

2. Direct subscription to such securities.

3. Securing loans in rupees payable over periods up to 15 years.

4. Providing similar loans in foreign currencies for payment of imported capital

equipment and technical service.

5. Guaranteeing payments for credit made by others.

6. Providing credit facilities to manufacturers for promoting sale of industrial
equipment on deferred payment terms.

7. Providing financial services like leasing, installment sale and asset credit.

The ICICI sells securities from its own portfolio to the investors whenever it can get a
reasonable price for them. It does so for the dual purpose of revolving its resources
for new investments and for encouraging the investment habit in others and thereby
promoting a wide spread distribution of private industrial securities. Thus, unlike
normal investors the ICICI does not retain successful investments merely because
they are profitable.

ICICI assisted manufacturing industries in all sectors, that is, the private sector, the
joint sector, the public sector and the cooperative sector but the major beneficiary
was the private sector. ICICI’s assistance comprised of foreign currency loans, rupee
loans, guarantees, and subscription of shares and debentures. The Corporation
showed increasing interest in the development of new industries in backward
regions.

There was a remarkably significant increase in financial assistance by ICICI in recent

years.

Role of the ICICI

The Corporation started a Merchant Banking Division in 1973 for advising its clients
on a selective basis, on raising finances in suitable forms and on restructuring of
finances in the existing companies. It also advises clients on amalgamation proposals.
Assistance is provided in preparing proposals for submission to financial institutions
and banks and for negotiations with them for loans, underwriting etc. This Division
acts as Managers to the issue of capital. Assistance is also provided for completion of
formalities connected with the public issue and of legal formalities for raising loans.

In 1982, the ICICI gave a new dimension to its merchant banking division by offering
to provide counseling for industrial investment in India to non-resident Indians and
persons of Indian origin living abroad. This is likely to prove not only the least
expensive route for technological up gradation but also a source of foreign currency
funds by way of risk capital.

It has set up Venture Capital Funds for the promotion of green field companies and
risk capital investment and joined the other financial institutions in setting up
SHCIL, CRISIL and OTC Exchange of India Ltd. It has recently set up its own bank
and a mutual fund like the UTI.

The Corporation’s vision has been extending far beyond its immediate function of
funding industrial projects. It has been looking at all sectors of the economy and
wherever a need was perceived, has designed either a new concept or a new
instrument, or even a new institution to cater to it. In this regard, its development
activities have encompassed such diverse areas as technology, financing, project
promotion, rural development, human resources development and publications.

It has set up ICICI Brokerage Services Limited in March 1995. It is a 100%

subsidiary of I-SEC. It commenced its securities brokerage activities in 1996. It is
registered with the National Stock Exchange of India Limited and The Mumbai Stock
Exchange.

ICICI set up ICICI Credit Corporation in 1997, which later renamed as ICICI Personal
Financial Services Limited in 1999. It is offering a comprehensive range of goods and
services to retail customers.

ICICI Capital Services Ltd. was originally set up as SCICI securities Ltd. as a wholly
owned subsidiary of erstwhile SCICI Ltd. in 1994. Its object is providing stock
broking services to the institutional clients and undertaking activities such as
underwriting, primary market placements and distribution, industry and company
research etc. It became a wholly owned subsidiary of ICICI with effect from April 1,
1996.

ICICI has established ICICI bank for performing commercial banking functions in
1994. The bank offers a wide variety of domestic and international banking services.