The Industrial Finance Corporation of India was established in 1948 under the IFCI Act, with the object of making medium and long-term credit more readily available to industrial concerns in India. Today, IFCI’s role extends to the entire industrial spectrum of the country.
While it continues to be one of the important purveyors of direct financial assistance to eligible industrial concerns, no less important is its promotional role whereby it has been helping and developing the small and medium- scale industrial entrepreneurs by providing them much needed guidance through its specialised agencies in project identification, formulation and implementation, develop meat of ancillary and small-scale industries, encouraging the adoption of indigenous technology, etc.
As in the case of the recent amendments to the IDBI Act, the amendment to the IFCI Act has broadened the scope of business of the Corporation and enlarged the list of industrial activities eligible for assistance by inclusion of informatics, health care, etc.
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Direct financing is the Corporation’s main business, the assistance under which can take any one or more of the following forms:
(i) Rupee loans;
(ii) Sub-loans in foreign currencies out of the foreign exchange lines of credit made available to it;
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(iii) Underwriting of and/or direct subscription to the shares and debentures of public limited companies and
(iv) Guaranteeing of
(a) Deferred payments for machinery imported from abroad or purchased within the country;
(b) Foreign currency loans raised by industrial concerns from foreign institutions and
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(c) Rupee Loans raised by industrial concerns from scheduled banks or State Co-operative Banks or the market.
Like the other all-India development banks, IFCI also provides concessional finance to industrial units in notified backward areas.
IFCI has been designated as the nodal point to administer the Jute Modernisation Fund set up by the Government of India and which became operative from November, 1986, with a view to revitalising the jute industry and giving thrust to its modernisation programme.
Further, IFCI has been appointed as agent of the Government of India for making disbursement of loans from the Sugar Development Fund for Rehabilitation and modernisation of sugar units and monitoring the end use of loans and affecting recoveries.
Being a development bank, the IFCI has been undertaking a number of development activities. These include the following:
(i) Guidance to new, tiny, small-scale and medium-scale entrepreneurs in project identification, formulation, implementation, operation, etc.
(ii) Help to new and small entrepreneurs by subsidising the cost of Feasibility/Project Reports, market studies, diagnostic studies, revival of sick units, development of technology and in- house R&D efforts.
(iii) The Risk Capital Foundation (RCF) sponsored by the IFCI (established in 1976) provides risk capital assistance on soft terms to the first generation entrepreneurs to make good the shortfall in the requirement of promoters contribution to the equity capital of the medium and medium- large industrial projects promoted by them in the cost-range of Rs. 2 crores to Rs. 15 crores. No interest is charged on the loans given by RCF, except a nominal service charge. The assistance is normally limited to 50 per cent of the promoter’s contribution excluding the contribution from SLDC and/or other similar public sector financial institutions to the equity of a project.
During 1986-87, the Corporation introduced the Scheme of Interest Subsidy for Encouraging Quality Control Measures in Small-Scale Sector.
Recently, IFCI has set up a Merchant Banking Division (MBD) with its head office at Delhi and bureau in Bombay. The MBD undertakes assignments for capital restructuring, merger and amalgamation, loan syndication with other financial institutions and trusteeship assignments. It guides entrepreneurs in project formulation and raising resources for meeting project costs.