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.