11.10          ndian     onom
     less fixed rate of interest as compared to the banks          entities—they are busy recovering their dues and
     which could mobilise cheaper deposits to lend                 improving their balance sheet.
     cheaper—the AIFIs seemed to become irrelevant.                      Meanwhile, at present, there are only four
     The AIFIs witnessed a sharp decline in recent                 financial institutions operating in the country as
     years.16 At this juncture the government decided              AIFIs regulated by the RBI, viz., the NABARD,
     to convert them into Development Banks17                      SIDBI, Exim Bank and the NHB.
     (suggested by the Narasimhan Committee-I) to
     be known as the All India Development Banks                   (ii) Specialised Financial Institutions (SFIs)20
     (AIDBs). In 2000, the government allowed                      Two new FIs were set up by the Central
     ICICI to go for a reverse merger (when an elder               Government in the late 1980s to finance risk and
     enterprise is merged with a younger one) with                 innovation in the area of industrial expansion;
     the ICICI Bank—the first AIDB emerged with                    this was India’s trial in the area of venture capital
     no obligation of project financing—such entities              funding.
     in coming times will be known as the universal                     (a) IFCI Venture Capital Funds Ltd (IFCI
     banks18 (allowed to set up as many financial                            Venture), 2000: It was promoted as a Risk
     institutions they wish to, such as insurance,                           Capital Foundation (RCF) in 1975 by
     merchant banks, mutual funds, etc.). In a similar                       IFCI Ltd., a society to provide financial
     move, the IDBI was reverse merged with the IDBI                         assistance to first generation professionals
     Bank in 2002 and the second AIDB emerged. But                           and technocrat entrepreneurs for setting
     it has still the obligation of carrying its project                     up own ventures through soft loans,
     financing duties.                                                       under the Risk Capital Scheme.
          In 2002, the government, proposed to merge                            In 1988, RCF was converted into a
     IFCI and IIBI with the nationalised bank PNB to                         company—Risk Capital and Technology
     ctraete a big Universal Bank. It is believed that                       Finance Corporation Ltd. (RCTC)—
     PNB was unwilling to go for this merger as these                        when it also introduced the Technology
     FIs were running at heavy losses. This move was                         Finance and Development Scheme
     part correct as per the recommendations of the                          (TFDS) for financing development
     Narasimhan Committe-II (to the extent merger is                         and commercialisation of indigenous
     concerned, following its 3-Tier Banking Structure                       technology. Besides, under Risk Capital
     of India), but part against it (the committee                           Scheme, RCTC started providing
     has advised not to merge weak banks/FIs with                            financial assistance to entrepreneurs
     either weak or strong banks/FIs).19 Presently, the                      by way of direct equity participation.
     government is trying to make IFCI and IIBI to                           Based on IFCI Venture’s credentials and
     turn around their business and emerge as profitable                     strengths, Unit Trust of India (UTI),
                                                                             entrusted RCTC with the management of
       16.   Ministry of Finance, Economic Survey 2006-07, (New
             Delhi: Government of India, 2007).                              a new venture capital fund named Venture
       17.   Narasimhan Committee on the Financial System                    Capital Unit Scheme (VECAUS-III) in
             (CFS), 1991 suggested for the conversion of the AIFIs           1991 with its funds coming from the
             into Development Banks.                                         UTI and IFCI. To reflect the shift in the
       18.   It was the S. H. Khan Committee on Development
             Financial Institutions (DFIs), 1998 which forwarded     20.    he write up is ased on information availa le from
             the concept/idea of Universal Banking in India.               SEBI, RBI and different announcements pu lished
       19.   Ministry of Finance, Economic Survey 2011–12 (New             reports of the Ministry of Finance, since 1996
             Delhi: Government of India, 2011), pp. 115–16.                onwards.