Saturday, 7 January 2017

The Industrial Finance Corporation Act, 1948

At the time of independence in 1947, India's capital market was relatively underdeveloped. Although there was significant demand for new capital, there was a dearth of providers. Merchant bankers and underwriting firms were almost non-existent. And commercial banks were not equipped to provide long-term industrial finance in any significant manner.
It is against this backdrop that the government established The Industrial Finance Corporation of India (IFCI) on 1 July 1948. The newly established DFI was provided access to low-cost funds through the central bank's Statutory Liquidity Ratio or SLR which in turn enabled it to provide loans and advances to corporate borrowers at concessional rates.
This arrangement continued until the 1990s when it was recognized that there was need for greater flexibility to respond to the changing financial system. It was also felt that IFCI should directly access the capital markets for its funds needs. It is with this objective the constitution of IFCI was changed in 1993 from a statutory corporation to a company under the Indian Companies Act, 1956. Subsequently the name of the company was also changed to 'IFCI Limited ' with effect from October 1999.
The main objective of IFCI is to provide medium and long term financial assistance to large scale industrial undertakings, particularly when ordinary bank accommodation does not suit the undertaking or finance cannot be profitably raised by the concerned by the issue of shares.
The functions of the IFCI base as follows:
(i) The corporation grants loans and advances to industrial concerns.
(ii) Granting of loans both in rupees and foreign currencies.
(iii) The corporation underwrites the issue of stocks, bonds, shares etc.
(iv) The corporation can grant loans only to public limited companies and co-operatives but not to private limited companies or partnership firms.

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