Question

Answer each of these questions in about fifty words:

Explain the need and importance of Specialized Financial Institutions in India.

Answer 1

As SFIs provide developmental finance, that is, finance for investment in fixed assets, they are also known as ‘development banks’ or ‘development financial institutions’. Establishing of SFIs facilitated:

1. Provision of sufficient long-term funds in the desired sectors in accordance with planned priorities to the industrial units and entrepreneurs.
2. New and small entrepreneurs in setting up industry.
3. Development of: (i) Small scale industry, and (ii) Projects in backward areas.
4. Provision of technical and managerial advice to the entrepreneurs, facilitating thus, in identification, evaluation and execution of new investment enterprises.
5. Underwriting of and direct subscription to the issue of shares and debentures in the capital market of the upcoming ventures.
6. Establishment of enterprises which require extraordinarily large amount of finance for their projects with a long-gestation period.