IFCI was the first industrial financing institution to be set up in India soon after independence. It was set up as a statutory corporation in July 1948 under the Industrial finance corporation of India Act 1948. It has now been converted into a joint-stock company with effect from July 1, 1993, under the Companies Act, 1956 because there was a high NPA increase and it was causing a huge loss to the government and now IFCI is a Non-banking finance company in the finance sector. IFCI is a company currently listed in NSE and BSE and currently has seven subsidiaries and one associate. Currently, it is allowed to access the capital markets only. IFCI has financed various projects such as airports, roads, telecom, power, real estate, manufacturing, services sector, and such other allied industries. During its financing term, it has financed mega-projects like Adani Mundra Ports, GMR Goa International Airport, Salasar Highways, NRSS Transmission, Raichur Power Corporation, and many more projects. The Government of India has placed a fund of Rs 200 crore with IFCI to promote entrepreneurship among the Scheduled Castes and to provide finance to these entrepreneurs at concessional rates.
OBJECTIVES OF IFCI
The main purpose or objective of IFCI is “to make medium and long-term credits more readily available to industrial concerns in India, particularly in circumstances where normal banking accommodations are inappropriate or recourse to capital methods is impracticable”. IFCI provides financial assistance for the setting up of new ventures as well as for the modernization and expansion of existing enterprises. It gives priority to the dispersal of money to the industry, development of backward areas, etc. It pays special attention to the following types of projects:
- Projects located in backward areas.
- Projects based on indigenous technology.
- Projects likely to meet the growing demand for essential commodities.
- Projects promoted by new entrepreneurs and technocrats.
- Projects having potential for export and import substitution.
- Projects that provide plant and machinery, fertilizers, pesticides, and other inputs for agriculture.
FUNCTIONS OF IFCI
IFCI grants loans and advances to or subscribing to debentures of industrial concerns repayable within 25 years and these loans are guaranteed with the central government, loans raised from, or credit arrangements made by industrial concerns with any bank or financial institution outside India. The loans are raised by industrial concerns from the capital market, scheduled banks, or co-operatives, which are repayable within 25 years.IFCI underwrites the issue of shares sad debentures by industrial concerns that be disposed of within 7 years. IFCI provides guarantees for deferred payments for imports of capital goods manufactured in India.
IFCI acts as an agent of the central government and the world bank when loans are sanctioned by them to industrial concerns in India and subscribing directly to the shares of industrial concerns. IFCI also provides a guarantee in the foreign market for the purchase of capital goods. So, IFCI may act as a consultancy, in issue house, an underwriting agency, and a credit agency. IFCI is not merely a lending agency but has assumed the role of a development bank.