FINANCIAL INSTITUTIONS

AND INVESTMENT
MANAGEMENT

UNIT-3
(BY- REENA SHARMA)
DEVELOPMENT FINANCIAL INSTITUTIONS

 Development financial institutions provide long-term

credit for capital-intensive investments spread over a long
period and low yielding rates of return, such as urban
infrastructure, mining and heavy industry, and irrigation
systems.
 They act as critical intermediaries for channelling long-
term finance required for infrastructure and realising
higher economic growth.
 In India, after the 1991 reforms, major DFIs were
converted into commercial banks. However, after these
there were few institutions in the country which could
take care of industrial or infrastructure development.
 Therefore, in order to plug the infrastructure deficit, the
government has taken a positive step by making a
proposal to re-establish the DFIs in India
DFI: BACKGROUND & PRESENT STATUS

 Development banks are different from commercial banks, which mobilize

short- to medium-term deposits and lend for similar maturities to avoid a
maturity mismatch.
 In India, the first DFI was operationalized in 1948 with the setting up of the
Industrial Finance Corporation (IFC).
 DFIs in India like Industrial Development Bank of India (IDBI), Industrial
Credit and Investment Corporation of India (ICICI) and IFCI did play a
significant role in aiding industrial development in the past with the best of
the resources made available to them.
 However, after 1991 reforms, the concessional funding they were getting
from Reserve Bank of India (RBI) and the government was no longer
available in the subsequent years.
 As a consequence, IDBI and ICICI had to convert themselves into universal banks.
 While these DFIs disappeared, a new set of institutions like IDFC (1997),
IIFCL (2006) and more recently, National Investment and
Infrastructure Fund (NIIF) (2015) emerged to focus on funding
infrastructure.
 In budget 2021, with the initial capital base of ₹20,000 crore as committed
by the government, the new DFI, assuming a leverage of around 7 times, can
lend up to ₹1.4 trillion.
NEED FOR DFI
 Infrastructure Building: Inadequate and inefficient
infrastructure leads to high transaction costs, which in turn
stunts an economy’s growth potential.
 Therefore, DFIs makes sense as the Centre government envisages
mobilizing nearly ₹100 lakh crore for the ambitious National
Infrastructure Pipeline.
 International Precedent: Irrespective of the level of
development, countries across the world have set up development
banks to finance key infrastructure and manufacturing projects.
 For instance, the European Investment Bank (EIB) acts like a DFI
for Europe.
 Lack of Finance for Infrastructure: Although India has a
long-term debt market for the government securities and
corporate bonds cut, it is still out of reach of retail investors and
unable to meet the large infrastructure financing needs.
 Economic Crisis Triggered By Covid-19 Pandemic: The
Covid-19 pandemic has exacerbated inequality, the poverty gap,
unemployment, and the economy’s slowing down.
 Thus, infrastructure building through DFIs can help in quick
economic recovery.
 Mobilizing Capital For DFI: To lend for the long term, DFI requires correspondingly
long-term sources of finance.
 In this context, the government may allow equity investment by institutions
having a long term horizon like insurance companies, pension funds to
augment the capital.
 Further, DFI can be adequately capitalized by the sovereign-backed funds,
alternative routes such as capital gains/tax-free bond issues, external
borrowings, and loans from multilateral agencies.

 Administration of DFI: The ownership and organisation structure are critical and
require greater clarity as this would have bearing on the functioning, flexibility,
governance of the institution and its long-term sustainability.

 Functionality of DFI: It is critical to hire experts with a good understanding of

infrastructure, policies, financing and risk management to work with the institution by
offering market-driven lending packages.

 Reaching Out Retail Investors: The government needs to set up institutions and
network platforms to reach retail investors and incentivise and structure the
bonds/instruments so that they are attracted to invest long-term in those instruments.

 Periodic Review of DFI: Periodic reviews are necessary to ensure that the DFI
remains relevant by taking into account changing priorities of the economy and making
consequential adjustments in the role.
OBJECTIVES OF DEVELOPMENT FINANCE
INSTITUTIONS
 The prime objective of DFI is the economic development of
the country
 These banks provide financial as well as the technical
support to various sectors
 DFIs do not accept deposits from people
 They raise funds by borrowing funds from governments and
by selling their bonds to the general public
 It also provides a guarantee to banks on behalf of
companies and subscriptions to shares, debentures, etc.
 Underwriting enables firms to raise funds from the public.
Underwriting a financial institution guarantees to purchase
a certain percentage of shares of a company that is issuing
IPO if it is not subscribed by the Public.
 They also provide technical assistance like Project Report,
Viability study, and consultancy services.
CLASSIFICATION OF DFIS:
 List of important Development Finance Institutions (DFIs)
 1- IFCI: Industrial Finance Corporation of India was established in 1948. It is India's
first Development Finance Institution.
 2- ICICI: Industrial Credit and Investment Corporation of India Limited
was established in the year 1955 by an initiative of the World Bank and was
the first DFI in the private sector. ICICI Limited established its subsidiary company
ICICI Bank Limited in 1944 and in 2002, ICICI Limited was merged into ICICI
Bank Limited, making it the first universal bank of India.
 3- IDBI: Industrial Development Bank of India was set up in 1964 under RBI and
was granted autonomy in 1976. The bank is responsible for ensuring adequate
flow of credit to various sectors and was converted into a universal bank in
2003.
 4- IRCI: Industrial Reconstruction Corporation of India was set up in 1971 to revive
weak units and provide financial & technical assistance.
 5- SIDBI: Small Industries Development Bank of India was established in 1989 as a
subsidiary of IDBI and was granted autonomy in 1998.
 6- EXIM Bank: Export-Import Bank was established in January 1982 to provide
technical assistance and loan to exports.
 7- NABARD: National Bank for Agriculture and Rural Development was established
in July 1982 on the recommendation of the Shivraman Committee and
functions as a refinancing institution.
 8- NHB: National Housing Bank was established in 1988 to finance housing
projects.
 After two important DFIs, namely, ICICI and IDBI were merged with their
banking units, many functions of DFIs are now performed by commercial
banks and these are actively performed by commercial banks that finance
projects like DFIs. Thus, Commercial banks are called universal banks which
provide all kind of financial services under one roof.
 IDBI (IDBI Bank or IDBI)

 The IDBI Bank Limited (IDBI Bank or IDBI) is a development finance

institution under the ownership of Life Insurance Corporation of India and Government
of India.
 It was established in 1964 as Industrial Development Bank of India, a development
finance institution, which provided financial services to industrial sector. In 2005, the
institution was merged with its commercial division, IDBI Bank, forming the present-
day banking entity and was categorised as "other development finance institution"
category.
 Later in March 2019, Government of India asked Life Insurance Corporation to infuse
capital in the bank due to high NPA and capital adequacy issues and also asked LIC to
manage the bank to meet the regulatory norms.
 IDBI was put under Prompt corrective action of the RBI and on 10th March 2021 IDBI
came out of the PCA
 At present direct and indirect shareholding of Government of India in IDBI Bank is
approximately 95%, which Government of India (GoI) vide its communication F.No.
8/2/2019-BO-II dated December 17, 2019, has clarified and directed all Central/State
Government departments to consider IDBI Bank for allocation of Government
Business. Many national institutes find their roots in IDBI like SIDBI EXim , National
Stock Exchange of India, SEBI National Securities Depository Limited.

KEY ROLES
 Offering financial aid to the industries: Long-term
financial assistance approximately for 25 years.
 Conduct market research and market analysis to
identify investment opportunities in industrial growth.
 Institutions that promote industrial development are
encouraged to apply.
 Offering administrative and technical assistance to
businesses to promote and expand their operations.
 Managing and directing the actions of institutions
involved in the financial industry.
 Encourage India’s industrial growth to be more
balanced.
DEVELOPMENTAL ACTIVITIES OF IDBI

 Promotional activities
 The financial institution covers a wide variety of marketing activities pertaining to formative
programs for new business owners and specific programs for credentialed volunteer groups for the
economic empowerment of the underprivileged as part of its developmental role.
 This included assistance for Science and Technology Startup companies’ Parks, Energy Conservation,
and Prevalent Quality Checks Centers for small industries and entrepreneurial development,
personality, and wage jobs in the industry sector for the underprivileged through volunteer groups.
 Technical Consultant Organizations
 In partnership with other All-India Banking Institutions, IDBI has developed a group of Technical
Consultant Organizations all across the entire nation to make consulting services affordable to
entrepreneurs, especially new and small companies. TCOs provide a broad array of services to small
and midsize enterprises, including setting priorities, design, assessment, implementation, and
monitoring.
 Entrepreneurship Development Institute
 IDBI played a critical part in establishing the Business Incubation Institute of India to stimulate
private sector investment, realizing that employment creation is significant to industrial
development. IDBI also provides financial assistance to various organizations to conduct research or
surveys involved in industrial growth.

 Conclusion
 IDBI is currently a universal bank trying to cut banking services platforms at its disposal. It is one of
India’s largest financial institutions, with more than 50 years of outstanding experience in finance.
The story began as a DFI, and it now proceeds as a private sector bank to become “a most chosen and
trustworthy bank generating revenue for all stakeholders.”
ICICI

 What is the Full form of ICICI?

 The full form of ICICI is Industrial Credit and Investment
Corporation of India. It was ICICI Bank’s parent organisation
which had been incorporated in 2002 with ICICI Bank. ICICI was
renamed as ICICI bank just after integration, so it is now branded
as ICICI Bank. It has its headquarters in Mumbai, Maharashtra,
India and operates in 17 nations across the globe. In 2014, it was
India’s second-largest investment bank and third-biggest market
capitalization bank.

 The merger of ICICI with ICICI bank seemed like a natural step in
line with its newly adopted universal outlook. This would enhance
value for ICICI shareholders with low-cost deposits, increased fee-
based income, participation in the payment system and transaction
banking services. It would also greatly benefit ICICI Bank
shareholders through a large capital base and scale of operations,
access to corporate relationships built over five decades, new
business segments and more
HISTORY OF ICICI

 In 1955, ICICI was established. ICICI joined the financial sector in 1994 through the
establishment of ICICI Bank as its financial branch.
 In 1998, ICICI Bank became the first bank in India to begin internet banking.
 It was the first Indian bank to be mentioned on the New York Stock exchange in 1999.
 ICICI purchased the Bank of Madura (2001) which was founded in 1943.
 The backward merger parent company into ICICI Bank subsidiary was accepted in 2002 by
bank directors.
 ICICI Bank launched its branches in Canada, the UK and Singapore in 2003. It also set up
representative bank branches in Dubai & Shanghai.
 In 2004, it established an office in Bangladesh for involving in the wide banking industry of
Bangladesh and South Africa.
 ICICI Bank purchased a Russian subsidiary IKB (Investitsionno-Kreditny Bank), in 2005 and
named it ICICI Bank Eurasia. It also set up a branch in Hong Kong & Dubai in the same year.
 It set up a branch in Belgium, Antwerp and representative offices in Jakarta, Bangkok and
Kuala Lumpur in 2006.
 Sangli Bank, which has 158 subsidiaries in Maharashtra and 31 branches in Karnataka, was
established in 2007.
 In 2008, it transformed its New York branch into a branch of ICICI Bank with the approval of
the US Federal Reserve. It opened an office in Frankfurt in the same year.
 It was the first private-sector bank to open a mobile branch in Maharashtra with an ATM in
2013.
 In March 2020, ICICI Bank Ltd.’s board approved a Rs 1,000 crore investment in Yes Bank
Ltd. This investment led to ICICI Bank Limited owning more than five per cent of Yes Bank’s
shareholding.
 Product / Service
 A few of ICICI bank’s standard services and products
are given below.
 Cards include a debit and credit card & business card
 Loans include home, personal, auto and 2-wheeler
loans.
 Investments from tax strategies, mutual funds & PPF
 Insurance includes health, life and general insurance
 Deposit schemes include FD (Fixed Deposit) and RD
(Recurring Deposit) Schemes.
 Business banking that contains a wide variety of
items for current account, internet banking and
mobile banking
INDUSTRIAL FINANCE CORPORATION OF
INDIA (IFCI)
 Industrial Finance Corporation of India (IFCI) is actually the first
financial institute the government established after independence.
The main aim of the incorporation of IFCI was to provide long-term
finance to the manufacturing and industrial sector of the country.

 Industrial Finance Corporation of India (IFCI)
 Initially established in 1948, the Industrial Finance Corporation
of India was converted into a public company on 1 July 1993 and is
now known as Industrial Finance Corporation of India Ltd. The main
aim of setting up this development bank was to provide assistance to
the industrial sector to meet their medium and long-term financial
needs.
 The IDBI, scheduled banks, insurance sector, co-op banks are some of
the major stakeholders of the IFCI. The authorized capital of the
IFCI is 250 crores and the Central Government can increase this as
and when they wish to do so.

FUNCTIONS OF THE IFCI
 The IFCI bank’s main goal is to provide medium-fast loans and advances to
industrial and manufacturing enterprises
 Before making any loans, it considers several variables
 They research the significance of the industry in our country’s economy, the
project’s overall cost, and, eventually, the service performance and
administration
 If the results of the above factors are satisfactory, the IFCI will approve the
loan
 The IFCI bank can also invest in these companies’ debentures on the market
 The IFCI bank also backs up these industrial enterprises’ loans
 The Industrial Finance Corporation of India might choose to underwrite
securities when a company issues shares or debentures
 It also ensures deferred payments on loans taken out in foreign currency
from foreign banks
 The Allied Services and Merchant Banking Department is a separate
division. They handle issues including capital restructuring, loan syndication,
mergers and acquisitions
 The Industrial Finance Corporation of India has promoted three subsidiaries
to boost industrial growth: IFCI Financial Services Ltd, IFCI Insurance and
Services Ltd
 It is responsible for the operation and regulation of these three companies
IFCI AS A BUSINESS FACILITATOR

 In the last few decades, the Industrial Finance Corporation

of India has made a significant contribution to the
development of our economy. Also, it is responsible for the
growth, expansion, and modernization of our industrial
sector.
 The Industrial Finance Corporation of India has also been
beneficial for the import and export industry, the cause of
pollution control, energy conservation, import substitution,
and many such initiatives and industries. Some sectors, in
particular, have seen a lot of benefits. Some of these are
 Agricultural Based Industries like paper, sugar, rubber,
etc.
 Service Industries like restaurants, hospitals, hotels, etc.
 Basic industries in any economy like steel, cement.
Chemicals etc.
 Capital and goods industries like electronics, fibers,
telecom services, etc.
FINANCIAL PRODUCTS OF IFCI

 Products Related to Loans

 The Industrial Finance Corporation of India was the country’s first financial institution
aimed at growth, created on July 1, 1948, to meet the abiding financing needs of the
industrial sector. IFCI bank has been a driving force behind the restructuring of Indian
industry, trade facilitation, trade liberalisation, and the fostering of breakthrough industries,
among other commercially viable and market-friendly operations, since its inception.
 Projects related to Finance
 IFCI bank experts can provide personalised banking solutions to address the rising and
diverse demand for various levels of projects – greenfield, formerly industrial, diversification,
and modernisation of existing infrastructure and manufacturing projects – thanks to their
deep understanding of sectoral dynamics.
 Highways, Power, including renewable power, Oil & Gas, Ports,
telecommunications, Aircraft, Basic Metallurgy, Real Estate, Pharmaceuticals, Electronics,
Textiles, Smart Cities & Urban Infrastructure, and others are among the sectors covered by
Project Finance.
 Projects on Corporate Finance
 IFCI bank serves many customers, including small, mid-sized, and big corporations. Through
Loan Against Shares, Balance Sheet Funding, Lease Rental Discounting, Long Term
Working Capital requirements, Promoter Funding, Capital Expenditure, and recurring
Maintenance Capex, IFCI provides financial solutions in corporate finance.
 Structured Finance
 IFCI bank also offers Structured Debt products to its clients, assisting in providing effective
financial solutions for various needs, including acquisition financing, pre-IPO financing,
sponsor financing and Off-Balance Sheet Structured Solutions, among others.
NATIONAL BANK FOR AGRICULTURE AND RURAL
DEVELOPMENT (NABARD)

 National Bank for Agriculture and Rural Development

(NABARD) has released a study named, ‘Achieving
Nutritional Security in India: Vision 2030’, in
December 2020. The report assesses the trends for
nutritional security and identifies determining factors
that have a significant effect on reducing malnutrition
levels in India..

 NABARD is India’s apex development bank – National

Bank for Agriculture and Rural Development. With
headquarters in Mumbai, NABARD has branches
across India.
 Important Facts about NABARD
 It came into existence on 12th July 1982
 Its origin lies withCRAFICARD was formed on 30th March 1979.

B. Sivaraman was the chairman of the committee.
 Who owns NABARD? - Government of India
 What is the vision of NABARD?- Rural prosperity
 Who are NABARD subsidiaries? - NABKISAN Finance Limited (NABKISAN)

NABSAMRUDDHI Finance Limited (NSFL)
 NABFINS Limited (NABFINS)
 NABFOUNDATION
 NABCONS (NABARD Consultancy Services)
 NABVENTURES Limited
 NABSanrakshan Trustee Company Private Limited
 Government Schemes with NABARD - partnershipDairy Entrepreneurship
Development Scheme
 Commercial production units of organic inputs

Agriclinic and Agribusiness Centres Scheme

National Livestock Mission

GSS – Ensuring End Use of Subsidy Released

Interest subvention Scheme
 New Agricultural Marketing Infrastructure
 NABARD Official Websitehttps://www.nabard.org/
FUNCTIONS OF NABARD
 The functions of NABARD are described below.
 In order to build an empowered and financially inclusive rural India,
NABARD has specific departments that work towards the desired goals.
These departments can be collectively categorized into three majors units:
 Financial
 Developmental
 Supervision
 The financial support necessary to build rural infrastructure is provided by
NABARD.
 Preparation of district-level credit plans by NABARD are used to guide and
motivate the banking industry to achieve required targets.
 NABARD also supervises the Regional Rural Banks (RRBs) and Cooperative
Banks along with developing their banking practices and integrating them to
the Core Banking Solution (CBS) platform.
 What is the CBS platform?
 Core Banking Solution (CBS) is a networking of branches, which enables
customers to operate their accounts, and avail banking services from any
branch of the Bank on the CBS network, regardless of where he maintains
his account. The customer is no longer the customer of a Branch. He becomes
the Bank’s Customer.

 .
 NABARD also helps handicraft artisans sell their products
by training and providing a marketing platform for them.
 NABARD has partnered with various leading global
organisations and institutions affiliated with the World
Bank that have played a role in transforming agriculture.
 It offers advisory services and financial assistance provided by
these international partners to help in consultation with rural
development and other agricultural practices
 Important Contributions of NABARD
 Kisan Credit Card Scheme:

This scheme was introduced in 1998 in association with
RBI to provide crop loans.
 RuPay Kisan Cards:

All farmer clients were provided with RuPay cards trying to
bring a technological change in the rural financial sector.
SIDBI - SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA

 Small Industries Development Bank of India (SIDBI) offers a

wide range of finance schemes to the Micro, Small, and
Medium Enterprises (MSME) industry. Loan amounts can range
from Rs.10 lakh to Rs.25 crore. Loan repayment tenures can go
up to 10 years. These loans, which are offered at attractive
interest rates, help provide necessary capital for the growth
and expansion of MSMEs. Loans above Rs.1 crore can be
availed without any collateral required. Loan subsidies are also
available.
 Objective of SIDBI
 The main objective of SIDBI is to offer loans to MSMEs to help
in addressing the development and financial gaps in the
ecosystem of MSMEs. The company aims to ensure that the
MSME sector is globally competitive, vibrant, and strong.
KEY FUNCTIONS OF SIDBI

 Listed below are the chief functions of SIDBI:

• Aid financial institutions (cooperation and commercial banks) lending to small-scale industries in the
Small and Medium Enterprises (MSME) sector to ensure their financial health.
• Offer SIBDI direct loans to companies categorized in the Small and Medium Enterprises (MSME)
sector.
• Carry out marketing initiatives for small-scale industries on a global scale.
• Offer venture funding possibilities for industries in the Small and Medium Enterprises (MSME) sector.
• Promotion of employment and upgradation of technology in the sector.
• Offer job opportunities for individuals who wish to work in the sector. SIDBI recruitment updates are
displayed on the website - https://www.sidbi.in/en/careers/archived
• Loan offers for development and maintenance of small-scale industries in the country.
• Marketing of small-scale industries on a global scale.
• Promotion of employment-oriented industries in the small-scale industry sector.
• Ensure technology upgradation in the small-scale industry.
• Ensures the financial health of cooperation banks and commercial banks' lending to small-scale
industries.
• Promotion of venture funds.
REGIONAL RURAL BANKS
 Meaning
MUDRA LOAN
 MUDRA Loan is offered under the Pradhan Mantri Mudra Yojana (PMMY).
MUDRA stands for Micro-Units Development and Refinance Agency. Under
this scheme, borrowers can avail business loans ranging from Rs.50,000 to
Rs.10 lakh on the basis of the Sishu, Kishor, and Tarun categories.
 What is the Pradhan Mantri Yojana Scheme?
 Pradhan Mantri Yojana was launched in 2015 with the aim to help small
scale businesses expand and attain success. Companies from both profit and
non-profit sector can avail a loan under this scheme and can avail a loan of
up to Rs.10 lakh to kickstart their business.
 Types of companies that can avail a loan under the Pradhan Mantri Yojana
scheme are:
• Railway Recruitment Boards (RRB’s)
• Micro Finance Institutions (MFIs)
• Commercial Banks
• Non-Banking Financial Corporations (NBFCs)
• Small Finance Banks
 Types of Mudra Loan Products
 There are three types of mudra loan schemes, namely Tarun, Kishor, and Shishu.

Name of Scheme Loan Amount

Shishu Up to Rs.50,000
Kishor Rs.50,000 to Rs.5 lakh
Tarun Rs.5 lakh to Rs.10 lakh

Purpose of Pradhan Mantri Mudra Loan Yojana

 MUDRA loans can be taken for a variety of reasons that help in creating employment and generating
income. Here are the main purposes for which Mudra loans are taken:
1. Business loan for shopkeepers, traders, vendors and other activities in the service sector
2. Equipment finance for small enterprise units
3. Working capital loan via MUDRA cards
4. Transport vehicle loans
5. People involved in Agri-allied non-farm income generating activities such as poultry farming, bee-
keeping, pisciculture, etc. can apply for a Mudra Loan.
6. People who use tractors, tillers as well as two wheelers for commercial activities can apply for a Mudra
Loan.
 Types of industries that can avail a loan under the Pradhan
Mantri Yojana scheme are:
• Business vendors
• Shopkeepers
• Agriculture sector
• Food production industry
• Handicraftsmen
• Small scale manufacturers
• Self-employed entrepreneurs
• Restoration and repair shops
• Service based companies
• Truck owners
STATE FINANCIAL CORPORATIONS

 State Financial Corporations (SFCs) are the financial institutions that were set
up by the state governments in India, post-Independence.
 State Financial Corporations (SFCs) are the financial institutions that were set up
by the state governments in India, post-Independence. The objective was to
provide credit and other support services to small businesses and farmers.
However, over time, SFCs have diversified their operations and now offer a
range of products and services such as capital market operations, venture
capital funding, insurance, etc. In this article, we take a brief look at the history
and role of SFCs in India’s economy.
 At present, there are 18 state finance corporations in India (out of which 17 are
SFCs, according to the SFC Act 1951). Tamil Nadu Industrial Investment
Corporation Ltd. is a state finance corporation incorporated under the Company
Act, 1949.

 Organisation and Management

 The State Finance Corporations are run by a Board of ten directors, which are
appointed by the state government. In general, the managing director is chosen
in consultation with the RBI and named by three other directors by the state
government.
 Three directors are elected by all types of insurance companies, scheduled
banks, investment trusts, cooperative banks, and other financial organisations.
As a result, the state government and quasi-government bodies select the vast
FUNCTIONS OF SFCS
 The various important functions of State Finance Corporations are:
• The SFCs finance fixed assets, such as land, construction, equipment,
and machinery.
• The SFCs assist industrial companies that have paid-up capital and
reserves of less than Rs. 3 crore (or such a higher limit as may be
determined by the central government).
• The SFCs guarantee new industrial units’ stock, shares, debentures,
and other instruments.
• The SFCs offer guarantee loans to scheduled banks, industrial
enterprises, and state cooperative banks that have raised funds on the
capital market. The loans are payable in 20 years and guaranteed by
the SFCs.
• The SFCs also refinance term loans of up to Rs. 20 lakh from other
financial institutions.
• The SFCs help small and medium enterprises by providing loans for the
purchase of plant and machinery, equipment, tools, etc.
• The SFCs also offer venture capital funding to small and medium
enterprises.
• The SFCs provide term loans to sick units for rehabilitation purposes.
• The SFCs also undertake developmental activities such as establishing
industrial estates, providing infrastructure facilities, etc.
PROBLEMS OF SFCS IN INDIA
• The SFCs have been plagued by several problems in recent years,
which have led to their declining role in the Indian economy. Some
major problems faced by SFCs are:
• The SFCs have a high proportion of non-performing assets (NPAs),
which has eroded their capital.
• The SFCs are highly dependent on the state government for capital
infusion, which is often not forthcoming promptly.
• The SFCs have been hit hard by the recent economic downturn, as
many of their borrowers are small businesses and farmers who have
been adversely affected by the slowdown.
• The SFCs are also facing competition from newer players such as
NBFCs and microfinance institutions, which are better equipped to
serve the needs of small businesses and farmers.
• As a result of this, most SFCs in India are connected to the World
Bank and WTO rules. These organizations' choices are thus
influenced by the World Bank and WTO policies as a result of their
agreements. The World Bank has a lot of power over India since it is
the largest development financier in the world. It can easily push for
its ideas to be implemented. It may also have a detrimental impact
on India’s small-scale industry.
WORKING OF SFCS

 In 1951, the Indian government passed a law known as the

State Financial Corporation Act. It applies to all of India’s
states.
 The authorized capital of a state financial corporation must
be within the lower and higher limits of Rs. 50 lakhs and Rs.
5 crores set by the state government.
 The Reserve Bank of India (RBI) and scheduled commercial
banks divided the market into shares of equal value acquired
by each state government, the Ministry of Finance, the RBI,
scheduled commercial banks, co-operative banks, other
financial institutions such as insurance companies,
investment trusts, and private parties.
 The shares of SFCs are guaranteed by the government. The
SFCs may also raise money through issues and sales of
bonds and debentures, which must not exceed ten times the
capital and reserves at Rs. 10 lakh.
LIST OF SFCS IN INDIA
• Andhra Pradesh State Financial Corporation (APSFC)
• Himachal Pradesh Financial Corporation (HPFC)
• Madhya Pradesh Financial Corporation (MPFC)
• North Eastern Development Finance Corporation (NEDFI)
• Rajasthan Finance Corporation (RFC)
• Tamil Nadu Industrial Investment Corporation Limited
• Uttar Pradesh Financial Corporation (UPFC)
• Delhi Financial Corporation (DFC)
• Gujarat State Financial Corporation (GSFC)
• The Economic Development Corporation of Goa (EDC)
• Haryana Financial Corporation (HFC)
• Jammu & Kashmir State Financial Corporation (JKSFC)
• Karnataka State Financial Corporation (KSFC)
• Kerala Financial Corporation (KFC)
• Maharashtra State Financial Corporation (MSFC)
• Odisha State Financial Corporation (OSFC)
• Punjab Financial Corporation (PFC)
• West Bengal Financial Corporation (WBFC)
NBFCS- NON BANKING FINANCIAL CORPORATIONS

 NBFC is a company incorporated as per the Companies

Act,2013, or any other previous act. NBFC is governed by both
the Ministry of Corporate Affairs and the RBI. Though NBFC
provides financial services, it is different from Banks in many
ways. It cannot accept public deposits by allowing people to
open savings/current accounts with it.
 However, NBFCs can receive deposits under any arrangement
or scheme in one lump sum or regular contributions or some
similar method. An NBFC, also, cannot issue cheques and
drafts, drawn on itself.
 NBFCs provide credit and loans at the micro-level. That is
mainly to small, medium scale enterprises, to help them
overcome their liquidity cash insufficiency.
 Through its Personalized Customer Services, Implementation
of Advance technology, and Customized Loan Product, NBFC
helps in providing finance to the economically weaker section
of the society.
DIFFERENCE BETWEEN NBFC &
BANKS
CONDITIONS TO REGISTER AS NBFC

 There are a few requirements that the business has to

meet before applying to RBI for NBFC License.
• The business should be registered as a company under
the Companies Act, 1956, or 2013.
• The minimum capital (Net Owned Fund) requirement is
Rs. 2 crores.
• The principal business of the applicant should be financial
activities. If the financial flow of the business is more than
50% of the total capital asset, then that company can get
NBFC registration.
• It should have at least 1 Director from the financial field or
a senior banker as a Director.
• The CIBIL (Credit Information Bureau Limited) records
should be clean.
BASIC CATEGORY OF NBFC
 NBFC’s are broadly classified in –
1. Terms of liabilities in Deposit and Non- Deposit Accepting NBFCs

2. Size and Systematically important and other Non-Depositing Holding Companies

3. Kind of activity of the company

 Hence, there are ten different types of NBFCs companies that are discussed below on
the basis of kind of activity –

 1. Asset Finance Company

 It is a financial institution that facilitates the service of financing the
various assets for individuals and the businesses which include
machinery, heavy industrial equipment, production and farming
equipment and large power generators.
 The income arising from there from should not less be than the 60%
of its total assets. UTI AMC, ICICI AMC, BIRLA SUN LIFE AMC are
few examples of asset management company.
 2. Investment Company
 It is a financial institution whose principal business is the acquisition of securities.
In a simple term, these companies take money from the public which invested in
various securities and financial products.
 Thereafter, company deducts its operational cost from the earned profit and later
distribute to shareholders. Bajaj Alliance General Insurance Company, IDFC,
HDFC mutual fund are examples of some Investment company.

3. Loan Company
 Loan Company as its name states is a financial institution which offers loan for
various purposes other than of the AMC which also includes the Housing Finance
Firms.
 LIC finance ltd, PNB Housing Finance Firm, HDFC are some examples of the
Loan companies.

4. Infrastructure Finance Company
 It is a Non- Banking Finance Company –
1. That deploys three- fourth of its total assets in infrastructure loans

2. That has a minimum Net Owned Fund of 300crores

3. That has minimum ‘A’ credit rating or equivalent

4. CRAR of 15%
 Few examples are GMR infrastructure ltd, Hindustan Construction Company
 5. Systematically Important Core Investment Company
 It is a Non- Banking Finance Company –
1. That deploys 90% of its total assets in the form of investment
in shares, stocks, debt or loan group company.

2. Out of 90%, 60% should be invested in equity shares or those

which compulsorily converted later in equity shares.

3. Does not carry any activity referred in section 45(c) or 45(f) of

RBI act 1934.

4. That accepts public funds


6. Infrastructure Debt Fund
 IDFs raise resources through bonds for long-term
infrastructure projects. The bonds are issued in multiple
currencies to ensure that have they had a five –year maturity
for investors.

 7. Microfinance Company - Micro Finance Institution (NBFC-MFI): It is a
non-deposit taking NBFC having not less than 85% of its assets in the nature
of qualifying assets which satisfy the following criteria:
 i. loan disbursed by an NBFC-MFI to a borrower with a rural household
annual income not exceeding INR 1,00,000 or urban and semi-urban
household income not exceeding INR 1,60,000
 ii. loan amount does not exceed INR 50,000 in the first cycle and INR
1,00,000 in subsequent cycles
 iii. total indebtedness of the borrower does not exceed INR 1,00,000
 iv. tenure of the loan not to be less than 24 months for loan amount in excess
of INR 15,000 with prepayment without
 vi. loan to be extended without collateral
 vii. aggregate amount of loans, given for income generation, is not less than
50 per cent of the total loans given by the MFIs
 viii. loan is repayable on weekly, fortnightly or monthly instalments at the
choice of the borrower
 People in the urban, semi-urban or rural area of India need financial help to start
their business and fulfill other requirements but they are hesitant to seek the help
from banks because of the formalities which need to fulfill to get the required
money.
 Now, here the microfinance company come out, they provide financial help to
these underprivileged people. Bandhan Financial Service Ltd, Ujjivan Financial
service are few examples.
 8. NBFC (Factor)
 These types of NBFCs in India are low. These companies usually
buy loans at a much discounted rate from lenders and after that, they
adjust repayment table of the debtor to ensure facile settlement
adding small profit.

9. Mortgage Company
 It is a financial institution where -
• At least 90% of the business turnover is of mortgage guarantee or

• At least 90% of the gross income is from mortgage guarantee

business or

• Net owned Fund is 100 crores


 10. Non- operative Financial Holding Company
 It is a separate category of NBFCs which is wholly owned Non-
operative financial holding company permitted to set up or hold the
bank as well as another financial service with the permission of RBI
under applicable regulatory prescription.

 Deposit and Non-Deposit accepting Non-Banking
Financial Company:
 • Deposit Non-Banking Financial Companies: NBFCs that
can accept deposits from the public, such companies are called
Deposit NBFCs.
 • Non-Deposit Non-Banking Financial Companies: NBFCs
that cannot accept deposits from the public, such companies are
called Non-deposit NBFCs.
 As per the Assets Size NBFCs are categorised in following
Types:
 • Systemically Important: NBFCs whose asset size is of INR
500 crore or more as per last audited balance sheet are considered
as systemically important NBFCs.
 • Non-Systemically Important: NBFCs whose asset size is
below INR 500 crore as per last audited balance sheet are
considered as systemically important NBFCs.
 PENALTY FOR NON-COMPLIANCE • If NBFC's fails to
fulfill any of the compliance or fails to comply with any direction
issued by the Reserve Bank of India, the Reserve Bank of India
may cancel a certificate of registration granted to a Non-banking
Financial Company. • The Reserve Bank of India may also
impose on non-complaint non-banking financial company a
penalty not exceeding twenty-five thousand rupees as per the
provision of Section 58(G)(1)(a).
 CONCLUSION
 In India, the Non-banking Financial Companies (NBFC's)
acquire a new meaning and shown robust growth in recent years.
The NBFC's is such corporations which are not banks, and yet
carry lending activities almost at par with banks. They may also
accept deposits from the public, however, these deposits are term
deposits and not call deposits. An analysis of the past financial
performance of NBFCs suggests that they're emerging as a
crucial source of credit to micro and little enterprises and
infrastructure. the expansion of monetary technology platforms
presages even greater scope and opportunities for the NBFC
sector. the various players within the current market of public-to-
public (P2P) / business-to-business (B2B) / business-toconsumers
(B2C) lending offer novel opportunities for NBFCs to grow further
and are available out as a progressively important part of India’s
economic aspect.
CONCEPT OF INSURANCE
 Life is full of risk. Whether one is inside the house or outside, whether going on
foot or travelling on bicycle, car, bus, train or even by air, the risk to life is always
there. One does not know when the ceiling would fall, a storm or tornado destroy
the house injuring the inmates, theft or dacoity may take place relieving one of
his valuables, going on foot one may be hit by a vehicle coming from behind, the
car may collide with any other object.
 Trains get derailed causing loss of hundreds of lives and injuries to another
hundreds of passengers, or a plane crash brings life to an end. The mishaps
cannot be avoided, they can only be minimized. And even minimized mishaps
may bring miseries to one’s life.
 The concept of Insurance is an idea through which the mishaps can not be ruled
out but can be compensated to some extent. If a fire destroys a factory or
dwelling house, the fire may not be predicted or avoided, but through insurance
the sufferer may be compensated to a great extent. Likewise, in an accident one
may lose his life. The life cannot be restored or compensated, but the loss due to
losing of life may be compensated which may save the dependents from
economic hazards.
 With these objects in mind, the institution of insurance came into being. It
provides security on financial basis to life as well as to property. In advanced
countries every type of insurance is available and a major portion of the earning
is spent on insurance in the shape of premium.
HISTORY OF INSURANCE IN INDIA

 1818: The first Insurance company was set up in Calcutta, India

named Oriental Life Insurance Company. Indians were charged more
premium because Indian Lives were considered more risky.
 1823: the Bombay Life Assurance Company came into being.
 1870: Bombay Mutual Life Insurance Society started business and it
removed premium inequalities between Britisher’s and Indians
 1912: First time the legislature brings Insurance under its purview
enacting the Indian Life Assurance Companies Act.
 1938 : Insurance Act was enacted consolidating all insurance laws
into one.
 1956: Post independence, looking at the growing malpractices by
insurance companies the government of India enacts the Life
Insurance Corporation Act, 1956.
 1993: Malhotra Committee was formed to learn more about the life
and general insurances working in india. Among other things It
recommended a regulatory body to be formed.
 1999: A regulatory body named the Insurance regulatory and
development Authority (IRDA) was set up.
TYPES OF INSURANCE
 Insurance is a legal contract between a person and an insurance business in which the
insurer promises to provide financial protection (Sum guaranteed) against unforeseen
events for a certain price (premium). The many types of insurance plans available today
may be grouped into two groups :
• Life Insurance
• General Insurance
 1. General Insurance
 Some of the kinds of general insurance offered in India are as follows :
• Health Care Coverage
• Automobile Insurance
• Homeowners' Insurance
• Insurance against fire
• Insurance for Travel
 2. Life Insurance
 Life insurance comes in a variety of forms. The most prevalent types of life insurance
policies offered in India are as follows :
• Term Life Insurance
• Unit-Linked Insurance Plans
• Whole Life Insurance
• Endowment Plans
• Child Plans for Educations
• Retirement Plans
 Health Care Coverage
 Health insurance is a form of insurance policy that covers the costs of medical treatment.
Health insurance policies either cover or repay the cost of treatment for any included disease
or injury. Various forms of health insurance cover a wide range of medical bills.
 It typically provides defence against :
• Inpatient care
• Critical illness treatment
• post-hospitalization medical bills
• Procedures for day-care
 A few types of health insurance policies also cover resident care and pre-hospitalization costs.
The following are some of the several types of health insurance policies available in India :
 1) Individual Health Insurance
 Provides coverage to a single person.
 2) Family Floater Insurance
 This type of insurance allows your complete family to be covered under one policy, which often
includes the husband, wife, and two children.
 3) Critical Illness Coverage
 A sort of health insurance that covers a variety of life-threatening illnesses such as stroke,
heart attack, renal failure, cancer, and other comparable conditions. When a policyholder is
diagnosed with a serious illness, they get a lump sum payment.
 4) Senior Citizen Health Insurance:
 These insurance policies are designed for people over the age of 60.
 5) Group Health Insurance
 This is a type of insurance that a business provides to its employees.
 Automobile Insurance
 Motor insurances are forms of insurance that provide financial help in the event that your
automobile is involved in a crash. In India, there are several types of motor insurance
coverage available, including :
 1) Car Insurance
 This plan covers privately owned four-wheelers. There are two kinds of automobile insurance
plans: third-party insurance and extended coverage policies.
 2) Bike Insurance
 These are forms of automobile insurance that protect privately-owned two-wheelers in the
event of an accident.
 3) Commercial Vehicle Insurance :
 A sort of automobile insurance that covers any vehicle utilized for commercial purposes.
 Homeowners' Insurance
 A homeowner’s insurance, as the name implies, provides full coverage for the belongings and
infrastructure of your property against physical destruction or damage. In other words, house
insurance protects you from both natural and man-made disasters such as fire, earthquake,
tornado, burglary, and robbery.
 The following are examples of several types of house insurance policies :
 1) Home Building Insurance
 Serves to protect the house's foundation from destruction in the event of a disaster.
 2) Public Liability Coverage
 Protects the insured residential property from any harm caused by a visitor or third-party while
on the premises.
 3) Standard Fire and Special Perils Policy
 Protection against fires, natural disasters (e.g., earthquakes, landslides, and storms, and
floods), and anti-social human-caused activities (e.g., strikes, and riots)
 Life Insurance
 Life insurance policies provide protection against unforeseen circumstances such as the
policyholder's death or incapacity. Aside from providing financial security, many types of life
insurance plans enable policyholders to optimize their savings by making recurring
payments to various equity and debt fund alternatives.
 You may get a life insurance policy to protect your family's financial future against the ups
and downs of life. The insurance coverage includes a substantial sum that will be paid to
your loved ones if something occurs to you. Based on your financial needs, you may pick
the length of the life insurance policy, the amount of coverage, and the payment choice.
The following are the many types of life insurance policies :
• Term Life Insurance
• Unit-Linked Insurance Plans
• Whole Life Insurance
• Endowment Plans
• Child Plan for Educations
• Retirement Plans
 1. Term Life Insurance
 Term insurance is the purest and most inexpensive type of life insurance, allowing you to
choose a high level of coverage for a certain period of time. With a low-cost term life
insurance policy, you can protect your family's financial future (term insurance plans
generally do not have any cash value, and thus, are available at lower rates of premium as
compared to other life insurance products.)
 If you die within the policy time, your nominees will get the agreed sum Assured,
depending on the payment type you choose (some term insurance plans offer multiple
payout options as well)
 2. Whole Life Insurance
 Whole life insurance plans, often known as 'conventional' life insurance plans,
give protection for the policyholder individual's complete life (typically till age
100), as opposed to any other type of life insurance that only provides coverage
for a set number of years.
 While a whole life insurance policy pays a death benefit, it also has a savings
component that helps the policy accumulate cash value over time. Whole life
insurance policies have a 100-year maturity period. If the insured person
survives beyond the maturity age, the entire life insurance policy becomes a
matured endowment.
 3. Endowment
 Endowment plans fundamentally give financial protection against life's risks while
also allowing policyholders to save consistently over a certain length of time. If
the policyholder survives the policy term, the endowment plan matures, and the
policyholder receives a lump sum payment.
 If something occurs to you (as the life insured), the life insurance endowment
policy pays your family (beneficiaries) the whole sum assured.
 4. Unit-Linked Insurance Plan (ULIP)
 ULIPs are insurance policies that combine investment and insurance advantages
into one contract. A portion of your payment for a Unit Linked Insurance Plan is
invested in a range of market-linked equities and debt instruments.
 The leftover premium is used to provide life insurance coverage for the duration
of the policy. ULIPs provide you with the freedom to allocate premiums to
different instruments based on your financial needs and market risk tolerance.
 5. Plans for Children
 Child plans are life insurance policies that assist you in
financially securing your child's life goals, such as higher
education and marriage, even if you are not there. To put
it another way, child plans combine savings and
insurance benefits to help you prepare for your child's
future requirements at the appropriate age.
 The money obtained on maturity can be utilized to help
your child meet his or her financial needs.
IRDAI- INSURANCE REGULATORY DEVELOPMENT
AUTHORITY OF INDIA

 The concept of insurance dates back 6,000 years where

individuals back then also sought some kind of safety net. This
need was realized and gave birth to the concept of insurance.
The dictionary meaning of insurance states “an arrangement by
which an organization undertakes to provide a guarantee of
compensation for specified loss, damage, illness, or death in
return for payment of a specified premium”. With the growing
need of this concept of security, it gave rise to life insurance at
first followed by general insurance. Insurance when introduced in
India was under the government regulation. However, to institute
a standalone body to oversee the functioning of the growing
insurance industry, a separate regulatory body was set up known
as the Insurance Regulatory and Development Authority of India
or IRDA.
 IRDA or Insurance Regulatory and Development Authority of
India is the apex body that supervises and regulates the
insurance sector in India. The primary purpose of IRDA is to
safeguard the interest of the policyholders and ensure the growth
of insurance in the country. When it comes to regulating the
insurance industry, IRDA not only looks over the life insurance,
but also general insurance companies operating within the
country.
WHAT ARE THE FUNCTIONS OF IRDA?
• As discussed above, the primary objective of the
Insurance Regulatory and Development Authority of India
is to ensure the implementation of provisions as
mentioned in the Insurance Act. This can be further
understood by its mission statement which is as follows-
• To safeguard the policyholder’s interest while ensuring a
fair and just treatment.
• To have a fair regulation of the insurance industry while
ensuring financial soundness of the applicable laws and
regulations.
• To frame regulations periodically so that there is no
ambiguity in the insurance industry.
WHAT IS THE ROLE AND IMPORTANCE OF IRDA IN
THE INSURANCE SECTOR?
•
India began to witness the concept of insurance through a formal
channel back in the 1800s and has seen a positive improvement
ever since. This was further supported by the regulatory body that
streamlined various laws and brought about the necessary
amendment in the interest of the policyholders. Below mentioned are
the important roles of IRDA –
• First and foremost is safeguarding the policyholder’s interest.
• Improve the rate at which the insurance industry is growing in an
organized manner to benefit the common man.
• To ensure the dealing are carried on in a fair, integral manner along
with financial soundness keeping in mind the competence of the
insurance company.
• To ensure faster and a hassle-free settlement of genuine insurance
claims.
• To address the grievances of the policyholder through a proper
channel.
• To avoid malpractices and prevent fraud.
• To promote fairness, transparency and oversee the conduct of
insurance companies in the financial markets.
WHAT ARE THE TYPES OF INSURANCE POLICIES REGULATED BY
IRDA?

The broad classification of the insurance sector is in two
parts - life and non-life which is also known as general
insurance.
 For life insurance, as the name suggests, it governs the
policies that ensure the safety of your life. But what is
general insurance?
 General insurance covers everything other than life which
includes health insurance, car insurance, two wheeler
insurance, home insurance, commercial insurance, travel
insurance and more. These are some of the critical roles
that IRDA oversees.
 While they are not limited to the above-mentioned roles,
they also include granting registration to insurance
companies to conduct their business in the country.
 It also settles the disputes that arise between the insurer
NEW RULES AND GUIDELINES FOR HEALTH AND MEDICLAIM
INSURANCE BY IRDA:
 The IRDA is the apex body which is responsible for framing
new rules and guidelines for health insurance in the country.
The regulator has issued new IRDA rules for health and
Mediclaim insurance in 2020, and they are:
• Rejection of Claims: The insurer cannot reject a claim if the
policyholder has renewed the policy for eight years without
any break or lapse. This period will be known as the
moratorium period. The insurer cannot appeal to the IRDA for
the rejection of the claim except in case of fraud or in case the
claim is raised against the exclusion of the policy.
• Inclusion of Telemedicine: With the advent of digitalization,
the medical service has changed and one can consult a doctor
through online consultations. IRDA has asked insurers to
include telemedicine consultations in the insurance policy.
• Settlement of Claims: If the insurer delays settling the claim,
then the insurance company is liable to pay interest on the
claim amount. It should ensure the claim is settled within 30 to
45 days from the submission of the last document by the
policyholder.
INSURANCE COMPANIES IN INDIA

• The Insurance sector in India consists of total 57

insurance companies. Out of which 24 companies are
the life insurance providers and the remaining 33 are
non-life insurers. Out which there are 7 public sector
companies. All these companies got the approval from
IRDA.
• Life Insurance Corporation of India is the only public
sector company among the life insurers.
• General Insurance Corporation of India is the only
reinsurer in India recognized by the Insurance Regulatory
and Development Authority.
• And, there are 7 public sector insurers among various
non-life insurance companies
PUBLIC SECTOR INSURANCE COMPANIES

 Life Insurance Corporation of India

 LIC of India was incorporated on 1st September, 1956 by amalgamating 243
Companies by the Act of Parliament called Insurance Act, 1956.
 LIC is governed by the Insurance Act 1938, LIC Act 1956, LIC Regulations 1959
and Insurance Regulatory and Development Authority Act 1999. As on 31st
March, 2016, LIC has 8 Zonal Offices, 113 Divisional Offices, 2048 Branch
Offices, 73 Customer Zones, 1401 Satellite Offices and 1240 Mini Offices in
India.
 The Corporation has Branch Offices in Fiji, Mauritius and United Kingdom. It also
operates through Joint Venture(JV) Companies in overseas Insurance Market,
namely Life Insurance Corporation (International) B.S.C.(c), registered in
Manama (Bahrain); Kenindia Assurance Company Ltd. registered in Nairobi; Life
Insurance Corporation (Nepal) Ltd. registered in Kathmandu; Life Insurance
Corporation (Lanka) Ltd. registered in Colombo and Saudi Indian Company for
Co-operative Insurance(SICCI) registered in Riyadh.
 LIC has also formed a Joint Venture Company Life Insurance Corporation (LIC)
of Bangladesh Limited between Life Insurance Corporation of India, Strategic
Equity Management Ltd and Mutual Trust Bank Ltd on 14.12.2015.
 A Wholly owned subsidiary, Life Insurance Corporation (Singapore) Pte Ltd. has
been established on 30.4.2012. Among the above two joint ventures (JVs),
Kenindia Assurance Co. Ltd., Nairobi, Kenya and Saudi Indian Company for Co-
operative Insurance (SICCI), Riyadh, Kingdom of Saudi Arabia are composite
companies transacting life and non-life business; and two JVs, LIC (Nepal) Ltd.
&SICCI are listed on their respective Stock Exchanges.
 LIC stands for Life Insurance Corporation of India. It started its
operations as a corporate firm in September 1956 after the Life
Insurance of India Act was passed by India’s Parliament in June
1956. The LIC Act came into effect from July 1956. It helped in the
nationalization of the private insurance industry in India. LIC of
India was formed by merging 154 life insurance companies, 16
foreign companies and 75 provident companies. It is one of the
largest financial institutions in India. It has an asset value of over
2,529,390 crores. The headquarters of LIC is in Mumbai,
Maharashtra. The main slogan of LIC is- “Yogakshemam
Vahamyaham” meaning “Your welfare is our responsibility”. It is in
Sanskrit and is obtained from the 22nd verse of the Bhagavad
Gita’s 9th chapter. The chairman of Life Insurance of India is Mr
M.R Kumar.

 Role of LIC in Indian Economy

 LIC is known as India's largest government-owned life insurance
and investment corporation. The main role of LIC is to invest in
global financial markets and different government securities after
gathering funds from people through their various life insurance
policies. At least 75% of these gathered funds are to be invested in
Central and State Government securities, as stated by one of the
LIC rules.
 Functions of LIC- The major functions of LIC are as follows:-
1. Collect people’s savings in exchange for an insurance policy and promote
savings in the country.
2. Protect the capital of the people by investing funds into government securities.
3. Issue insurance policies at affordable rates Provide various loans like direct
loans to industries, housing loans, loans to various national projects at
reasonable interest rates.

 Objectives of LIC
1. LIC aims to spread awareness about the importance of life insurance among
people living in rural areas and people who are a part of socially and
economically backward classes.
2. It aims to meet several life insurance needs of the community people who are
subjected to change with the changing social and economic environment
3. It aims to conduct business economically while taking into consideration that
the money belongs to the policyholders.
4. It aims to maximize the mobility of people’s savings through attractive
insurance-linked savings.
5. It aims in providing utmost job satisfaction to all the agents and employees of
the corporation and promotes building a co-operative work environment to
deliver efficient service with courtesy to its insured public.
6. It aims to deploy the funds to the best advantage of the investors and the
community as well.
 Types of LIC Life Insurance Plans
 LIC provides numerous schemes to its policyholders.

 It offers different schemes for different categories and

segments of the Indian economy.
 It is the largest insurance policy company in terms of
the number of policies it has issued to date.
 Some of the policies are as follows:-

 LIC’s Jeevan Pragati

 LIC’s Jeevan Labh

 LIC’s Single Premium Endowment Plan

 LIC’S Jeevan Lakshya

 LIC’s Jeevan Tarun

 What are the Basic Policies of the Life Insurance Corporation of India?
 The basic policies in Life Insurance Corporation of India (LIC) are term insurance, cash value
insurance, straight life insurance, and limited payment life insurance. The details of each of
these policies are given below:
 Term insurance: This insurance is like an insurance protection contract, similar to auto
insurance, home insurance, or health insurance. Therefore, it ensures the individual against any
risk of financial loss in case of death and does not include any savings plan. In this insurance
policy, the owner buys a fixed amount of coverage and pays an annual premium based on their
age. The policy is for a fixed period of time and thus the coverage stops if it is not renewed. These
policies are available for five years, ten years or fifteen years where the amount of premium to be
paid remains constant. The life insurance can also be purchased with a condition of 65 years of
age, that is, the insured does not become 65 years of age and in this case, the amount of premium
to be paid increases annually. There is decreasing term life insurance also available wherein the
coverage of the insurance decreases with time so that the annual premium to be paid remains
constant. Term insurances provide maximum coverage to the premium spent.
 Cash value insurance: In this kind of policy, the amount of actual insurance decreases over
time and the savings component of the policy increases over time. This type of insurance is
funded by the premium payments done by the insured along with the earnings of the saving
element in the policy. These insurance policies are of two types: straight life policy and a limited
payment policy that provides coverage to the insured throughout life.
1. Straight life insurance: the insurance is throughout life. In this type of insurance, the
amount of protection decreases as the savings amount increases, though the total coverage of
the policy that includes the protection and savings elements remains the same. The premium
in these policies is higher than the term insurance which is based on the age of the individual
when he or she buys insurance. The premium for this policy remains constant. The face value
of insurance refers to the amount which is paid when the insured person dies.
2. Limited payment life insurance: in this type of policy the insured person pays the total
amount of policy in a limited number of years, that is, usually 20 to 30 years or by the age of
65. After the completion of the term, the policy remains active for the whole life of the insured
if he or she has not withdrawn the amount at any point in time. The amount of premium to be
paid every year in this policy is obviously higher than the straight life policy.
GENERAL INSURANCE CORPORATION OF INDIA
 The General insurance industry was nationalized in 1972 and 107 insurers were
grouped and amalgamated into four Companies – National Insurance Co. Ltd.,
 The New India Assurance Co. Ltd.,
 The Oriental Insurance Co. Ltd. And
 United India Insurance Co. Ltd.
 The GIC was incorporated in the year 1972 and the other four companies
became its subsidiaries.
 In November 2000, GIC was notified as the Indian Reinsurer, and its supervisory
role over its subsidiaries was brought to an end.
 From 21 March 2003, GIC's role as a holding company of its subsidiaries also
came to an end and the ownership of the subsidiaries was transferred to the
Government of India.
 The Corporation has its head office in Mumbai and 3 liaison offices in India
(Delhi, Kolkata and Chennai), 3 branches in foreign countries (London, Dubai
and Kuala Lumpur) and 1 representative office in Moscow.
 It also has 2 foreign subsidiaries (GIC Re South Africa and GIC Re India
Corporate Member Ltd. in UK). As on 31.03.2016 the employee strength of the
Corporation is 558.
 The authorized capital is Ra.1000 crore while the paid-up equity capital of the
company is Rs.430 crore.
 THE NEW INDIA ASSURANCE COMPANY LIMITED
 The company was founded by Sir Dorabji Tata on July 23rd, 1919 and
nationalized in 1973 with merger of Indian companies. The Company has 2329
offices and the employee strength is 18783 as on 31.03.2016. The company
provides insurance services to the customers having over 170 products catering
to almost all segments of general insurance business. The authorized capital and
paid-up equity capital of the company is Rs.300 crore and Rs.200 crore
respectively.
 UNITED INDIA INSURANCE COMPANY LIMITED
 United India Insurance Company Limited was incorporated in 1938. With the
nationalization of General Insurance business in India, 12 Indian Insurance
Companies, 4 Cooperative Insurance Societies and Indian operations of 5
Foreign Insurers, besides General Insurance operations of southern region of Life
Insurance Corporation of India were merged with United India Insurance
Company Limited. The Company has 2080 offices and employee strength of
16345 as on 31.03.2016. The company provides insurance services to the
customers catering to almost all segments of general insurance business. The
authorized capital and paid-up equity capital of the company is Rs.200 crore and
Rs.150 crore respectively.
 THE ORIENTAL INSURANCE COMPANY LIMITED
 The Oriental Insurance Company Ltd was incorporated in the year 1947. In 2003
all shares of the company held by the General Insurance Corporation of India
were transferred to the Government of India. The Company has 1924 offices in
the country and has employee strength of 13923 as on 31.03.2016. The company
provides insurance services to the customers catering to almost all segments of
general insurance business. The authorized capital and paid-up equity capital of
the company is Rs.200 crore.
 NATIONAL INSURANCE COMPANY LIMITED
 The Company was incorporated in the year 1906. After nationalization it was
merged, along with 21 foreign and 11 Indian companies, to form National
Insurance Company Ltd. The Company has 1998 offices all over India and
employee strength of 15079 as on 31.03.2016. The company provides
insurance services to the customers catering to almost all segments of general
insurance business. The authorized capital and paid-up equity capital of the
company is Rs.200 crore and Rs.100 crore respectively.

 AGRICULTURE INSURANCE COMPANY OF INDIA LIMITED

 'Agriculture Insurance Company Of India Limited’ (AIC) was incorporated to
exclusively cater to the insurance needs of the persons engaged in agriculture
and allied activities in India under the Companies Act, 1956 on 20th December
2002. General Insurance Corporation of India (GIC), NABARD and four public
sector general insurance companies have contributed towards the share capital
of the Company. The Authorized Share Capital of the Company is Rs. 1500
crore with initial Paid-up Equity Share Capital of the Company of Rs. 200 crore.
 The Company having received approval from Insurance Regulatory &
Development Authority (IRDA) commenced its business operations w. e. f. 1st
April, 2003. The total number of employees as on 31st March, 2015 is 274 all
over the country. It has its Head Office in New Delhi, 17 Regional Offices in
various State Capitals and 3 one man offices at District levels.
thankyou