Impact of development financial institution failure on long term financial requirement of industry in india

Abstract

DFI s i.e. Development Financial Institutions are the specialized vehicle used to provide newlinedevelopment finance to the various sectors and sub sectors of the economy. The main emphasis of newlineDFIs is on long-term finance and on providing assistance for activities or sector of the economy newlinewhere the risk is higher. newlineDue to the withdrawal of concessional financial assistance from the DFI s, which led to the reverse newlinemerger of ICICI and IDBI, the industry is facing difficulty in procurement of long-term debts. newlineThere is lack of institutions, which are dedicated to long term infrastructural lending of the newlineindustry. In an interview, the Ex- Governor RBI Dr. C. Rangarajan said that the closure of DFI s newlinewas a premature decision. He stated that banks on the lines of DFI s are required by industry that newlinecan provide for the infrastructural long-term needs. Recently the reverse merger IDFC another DFI newlinehas instigated the question again those financial institutions on the lines of DFI s are required. The newlineobjective of this research is to find out: newlineand#61623; Why the DFI s required to go for reverse merger? newlineand#61623; Was the decision of closure of DFI s correct? newlineand#61623; Does the industry still require any Long-term credit banks on the lines of DFI s? newlineConsidering the current scenario, where the manufacturing setup is very dependent on the newlineinfrastructural facilities and where the banks are not able to fulfill the requirement of infrastructure newlinecredit. One thing should be considered that we don t have a developed economy that s why the newlineneed for the DFI s still exist. We are not like other developed countries that have achieved newlinedevelopment and do not require such dedicated institutions anymore. This study attempts to find newlineout the relevance of the DFI model in the current situation. If we want to increase employment newlineopportunities then the only important source is industrialization. newlineAs a finance student we were taught about the importance of these specialized institutions, but newlinedown the line we saw that these institutions were closed and converted into