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  • W.B.C.S. Main 2018 Question Answer – Commerce And Accountancy –  Brief Idea About IFCI Ltd.
    Posted on November 29th, 2018 in Commerce and Accountancy
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    W.B.C.S. Main 2018 Question Answer – Commerce And Accountancy – Brief Idea About IFCI Ltd.

    1)Give a brief idea about IFCI Ltd. , and discuss its main funtions.

    Industrial Finance Corporation of India (IFCI)

    IFCI Ltd. was set up in 1948 as Industrial Finance Corporation of India, a Statutory Corporation, through `The Industrial Finance Corporation of India Act, 1948’ of Parliament to provide medium and long term finance to industry. After repeal of this Act in 1993, IFCI became a Public Limited Company registered under the Companies Act, 1956. IFCI became a Government controlled company subsequent to enhancement of equity shareholding to 55.53% by Government of India on December 21, 2012. In April, 2015, Government of India has acquired six crore Preference Shares of IFCI Ltd. of Rs.10/- each from six public sector banks.With this, the shareholding of the Government of India in paid-up share capital of IFCI has been increased to 51.04% and IFCI has become a Government Company under Section 2(45) of the Companies Act, 2013. IFCI is also a Systemically Important Non-Deposit taking Non-Banking Finance Company (NBFC-ND-SI), registered with the Reserve Bank of India.Continue Reading W.B.C.S. Main 2018 Question Answer – Commerce And Accountancy – Brief Idea About IFCI Ltd.

    The primary business of IFCI is to provide medium to long term financial assistance to the manufacturing, services and infrastructure sectors. Through its subsidiaries and associate organizations, IFCI has diversified into a range of other businesses including broking, venture capital, financial advisory, depository services, factoring etc. As part of its development mandate, IFCI was one of the promoters of National Stock Exchange (NSE), Stock Holding Corporation of India Ltd (SHCIL), Technical Consultancy Organizations (TCOs) and social sector institutions like Rashtriya Gramin Vikas Nidhi (RGVN), Management Development Institute (MDI) and Institute of Leadership Development (ILD).

    The Government of India, as per the Budget for FY 2014-15 has mandated IFCI for setting up of a Venture Capital Fund under Social Sector initiatives with an aim to promote entrepreneurship among the Scheduled Castes (SC) and to provide concessional finance to them. The fund has been put in place after getting approval of SEBI under AIF regulation, 2012 with contribution of Rs.200 crore from Government of India. IFCI has committed Rs.50 crore as lead investor and sponsor of the Fund. IFCI’s subsidiary IFCI Venture Capital Funds Ltd., is the Investment Manager of the Fund. Government of India has also provided Rs.200 Crore to IFCI Ltd. in March 2015 under the Scheme of Credit Enhancement Guarantee for Scheduled Caste (SC) Entrepreneurs for providing guarantee to banks against loans to young and start-up entrepreneurs belonging to Scheduled Castes with an objective to encourage entrepreneurship in lower strata of the society.

    Functions

    Government of India set up the Industrial Finance Corporation of India (IFCI) in July 1948 under a special Act. This is the first financial institution set up in India with the main object of making medium and long term credit to industrial needs.

    The Industrial Development Bank of India, Scheduled banks, insurance companies, investment trusts and co-operative banks are the shareholders of IFCI. The Union Government has guaranteed the repayment of capital and the payment of a minimum annual dividend.

    The corporation is authorised to issue bonds and debentures in the open market, to borrow foreign currency from the World Bank and other organisations, accept deposits from the public and also borrow from the Reserve Bank.

    The authorised share capital of the IFCI was Rs. 10 crore at the initial stage, According to the Industrial Finance Corporation (Amendment) Act, 1986, the authorised capital of the corporation has been raised from Rs. 100 crore to Rs. 250 crore (the authorised capital may be fixed by the government of India by notification from time to time).

    Functions

    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.

    Organisation and Management

    The Head Office of the IFCI is in New Delhi. It has also established its Regional offices in Bombay, Chennai, Kolkata, Chandigarh, Hyderabad, Kanpur and Guwahati. The branch office of IFCI is located in Bhopal, Pune, Jaipur, Cochin, Bhubaneswar, Patna, Ahmedabad and Bangalore.

    The IFCI is managed by a Board of Directors, headed by a Chairman, who is appointed by the Government of India, in consultation with RBI. The chairman holds his position for a period of 3 years, subject to extension.

    Of the 12 directors, 4 are nominated by the IDBI, three of whom are experts in the fields of industry, labour and economics and the fourth is the General Manager of the IDBI. The remaining 8 directors are nominated.

    Two directors are nominated for a term of 4 years by each of the following-scheduled banks, co-operative banks, insurance companies and investment companies making up eight directors.

    Activities of the IFCI

    The promotional activities of IFCI are explained below

    1. Soft Loan Assistance

    This scheme provides soft loan assistance to existing industries in small and medium sector for developing technology through in-house research and development.

    2. Entrepreneur Development

    IFCI provides financial support to EDPs (Entrepreneur Development Programmes) conducted by several agencies all-over India. In co-operation with Entrepreneurship Development Institute of India.

    3. Industrial Development in Backward Areas

    IFCI also take measures to promote industrial development in backward areas through a scheme of concessional finance.

    4. Subsidised Consultancy

    The IFCI gives subsidised consultancy for,

    (i) Small Entrepreneurs for Meeting the Cost of Project.

    (ii) Promoting Ancillary Industries

    (iii) To do the Market Research.

    (iv) Reviving Sick Units.

    (v) Implementing Modernisation.

    (vi) Controlling Pollution in Factories.

    5. Management Development

    To improve the professional management the IFCI sponsored the Management Development Institute in 1973. It established the Development Banking Centre to develop managerial, manpower in industrial concern, commercial and development banks.

    Working of the IFCI

    The working of the IFCI came in for a large measure of criticism. In the first place, the rate of interest which the corporation charged was extremely high. Secondly, there was a great delay in sanctioning loans and in making the amount of the loans available.

    Thirdly, the ‘corporation’s insistence on the personal guarantee of managing directors in addition to the mortgage of property was considered wrong In the last two decades the corporation had entered into new lines of activity, viz, underwriting debentures and shares and guaranteeing of deferred payment in respect of imports from abroad of plant an equipment by industrial concerns and subscribing to stocks and shares of industrial concerns directly Besides, the performance of IFCI together with the work of other public sector financial institutions has been extremely credit worthy in the last two decades.

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