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S.No. Contents Pages 1 Indian Banking and Industry 3-25 2 Financial System 1-6 3 Reserve Bank of India and NABARD 1-18 4 e-banking (Electronic Banking) 1-11 5 Reforms in Banking Sectors 1-9 6 Development Banking 1-5 [3]
CHAPTER 1 INDIAN BANKING AND INDUSTRY Historical Background: The first bank of limited liability managed by Indians was Oudh Commercial Bank founded in 1881. Punjab National Bank was established in 1894. Swadeshi Movement, which began in 1906, encouraged the formation of number of commercial banks. Banking crisis during 1913-1917 and failure of 588 banks in various states during the decade ended 1949 underlined the need for regulating and controlling commercial banks. The Banking Companies Act was passed in February 1949, which was subsequently amended to read as banking regulation Act, 1949. This Act provided the legal framework for regulation of the banking system by RBI. The largest bank- Imperial Bank of India-was nationalized in 1955 and rechristened as State Bank of India, followed by formation of its 7 Associate Banks in 1959. In present time SBI has 5 associate Banks. With a view to bring commercial banks into the mainstream of economic development with definite social obligations and objectives, the government issued an ordinance on 19 July 1969 acquiring ownership and control of 14 major banks in the country. Six more commercial banks were nationalized from 15 April 1980. Banks Nationalization in India: Banking system in India is denominated by nationalized banks. The nationalization of bank in India took place in 1969 by Mrs. Indira Gandhi the then prime minister. The major objective behind nationalization was to spread banking infrastructure in rural areas and make available cheap finance to Indian farmers. Fourteen banks were nationalized on July 19, 1969. These banks were- 1. Punjab National bank 2. Bank of India 3. Union Bank of India 4. Central Bank of India 5. Canara Bank 6. UCO Bank 7. United Bank of India 8. Indian Overseas Bank 9. Dena Bank 10. Allahabad Bank 11. Bank of Maharashtra [4]
12. Syndicate Bank 13. Indian Bank 14. Bank of Baroda The second phase of nationalization of Indian banks took place in the year 1980 on APRIL 15 th. Six more banks were nationalized with deposits over 200 Crores. Banks were- 1. Andhra Bank 2. New Bank of India 3. Vijaya Bank 4. Corporation Bank 5. Oriental Bank of Commerce 6. Punjab and Sindh Bank On Sep 1993 New Bank of India merged up with PNB In June 29 th 2007 State Bank of India shares were taken over from the RBI of Rs. 35531.33 cr. [59.73%-Rs. 1130.35/share] at present there are 26 Public Sector Banks working in INDIA, out of which 19 are nationalized banks. PSBs (Public Sector Banks) 26 In addition to 19 nationalized banks 7 other PSBs are working in India. 1. IDBI 2. State bank of India 3. State bank of Patiala 4. SBBJ 5. State bank of Mysore 6. State bank of Travancore 7. State bank of Hyderabad Definition of Bank: A Bank is a licensed financial institution that acts as an intermediary between the savers and the users of funds. It provides banking and other financial products and service to their customers to source money via deposits and then channelizes the same into lending activities such as providing loans and advances. Role of Banking: Banks provide funds for business as well as personal needs of individuals. They play a significant role in the economy of a nation. Let us know about the role of banking. 1. It encourages saving habit amongst people and thereby makes funds available for productive use. 2. It acts as an intermediary between people having surplus money and those requiring money for various business activities. [5]
3. It facilitates business transaction through receipts and payment by cheques instead of currency. 4. It provides loans and advances to businessmen for short term and long term purposes. 5. It also facilitates import export transactions. 6. It helps in national development by providing credit to farmers, small scale industries and self employed people as well as to large business houses which lead to balanced economic development in the country. 7. It helps in raising the standard of living of people in general by providing loans for purchase of consumer durable goods, houses, automobiles, etc. Features of a Bank: 1. Deals with money: Bank is a financial institution which deals with other people s money i.e. money given by depositors. 2. Individual/firm/company: A bank may be person, firm or a company. A banking company means a company which is in the business of banking. 3. Acceptance of deposit: A Bank accepts money in the form of deposit from the people which are usually repayable on demand or after the expiry of a fixed maturity period. It gives safety to the deposits of its customers and also acts as a custodian of funds for them. 4. Giving Advances: A bank lends out money in the form of loans and advances to people who require it for different purposes. 5. Payment and Withdrawal: A bank provides easy payment and withdrawal facility to its customers in the form of cheques and drafts and thus helps to bring bank s money in circulation. 6. Agency and Utility Services: A bank provides various banking facilities to its customers which include general utility services e.g. payment of insurance, premium, electricity bills, etc on behalf of customers. 7. Profit and Service Orientation: A bank is a profit making organization having service oriented approach. That is, it generates profit by providing service. 8. Ever Increasing Functions: [6]
Banking is an evolutionary concept. There is a continuous expansion and diversification as regards the functions, services and activities of a bank. 9. Connecting Link: A bank acts as a connecting link between borrowers and lenders of money. Banks collect money from those who have surplus money and give the same to those who are in need of it. 10. Banking Business: A bank main function to do business of banking and this should never be subsidiary to any other business. 11. Name Identity: A banking company under Banking Regulation Act, 1949 is permitted to add the word bank to its name to enable people to know that it is dealing in money and having all the above features... [7]
CHAPTER 2 FINANCIAL SYSTEM Definition: The financial system comprises of a variety of intermediaries, markets, and instruments that are related to one another. It provides the principal means by which savings are transformed into investments. Given its role in the allocation of resources, the efficient functioning of the financial system is critical to a modern economy. The Financial System Funds Funds Financial Institutions Commercial Banks Insurance Companies Mutual Funds Deposits / Shares Provident Funds Non-Banking Financial Companies Loans Suppliers of Funds Individuals Businesses Governments Demanders of Funds Individuals Businesses Governments Financial Markets Funds Money Market Capital Market Securities Funds Securities [8]
Functions of the Financial System: The financial system performs the following interrelated functions that are essential to a modern economy: i. It provides a payment system for the exchange of goods and services ii. It enables the pooling of funds for undertaking large scale enterprises iii. It provides a mechanism for spatial and temporal transfer of resources iv. It provides a way for managing uncertainty and controlling risk v. It generates information that helps in coordinating decentralised decision making vi. It helps in dealing with the incentive problem when one party has an informational advantage. Financial Markets: A financial market is a market for creation and exchange of financial assets. If you buy or sell financial assets, you will participate in financial markets in some way or the other. Classification of Financial Markets: Nature of Claim a. Debt Market b. Equity Market Maturity of Claim a. Money Market b. Capital Market Seasoning of Claim a. Primary Market b. Secondary Market Timing of Delivery a. Cash or Spot Market b. Forward or futures Market Organisational structure a. Exchange-traded Market b. Over-the-counter Market There are different ways of classifying financial markets. 1. Nature of Claim: a. The Debt Market: It is the financial market for fixed claims (debt instruments). b. The equity Market is the financial market for residual claims (equity instruments). [9]
2. Maturity of Claim: a. The market for short-term financial claims is referred to as the money market. Traditionally the cut off between short-term and long-term has been one year though this dividing line is arbitrary, it is widely accepted. Since short-term financial claims are almost invariably debt claims, the money market is the market for short-term debt instruments. b. The market for long-term financial claims is called the capital market. The capital market is the market for long-term debt instruments and equity instruments. 3. Seasoning of Claim: a. Primary Market: It is classify financial markets is based on whether the claims represent new issues or outstanding issues. The market where issuers sell new claims is referred to as the primary market b. Secondary Market: The market where investors trade outstanding securities is called the secondary market. 4. Timing of Delivery: a. Cash or spot Market: It is one where the delivery occurs immediately. b. Forward or futures Market: Forward or futures market is one where the delivery occurs at a predetermined time in future. 5. Organisational Structure: a. Exchange traded Market: It is characterised by a centralised organisation with standardized procedures. b. Counter Market: It is a decentralised market with customized procedures... [10]
CHAPTER 3 RESERVE BANK OF INDIA AND NABARD Reserve Bank of India: History: The Reserve Bank of India is the central bank of the country. Central banks are a relatively recent innovation and most central banks, as we know them today, were established around the early twentieth century. The Reserve Bank of India was set up on the basis of the recommendations of the Hilton Young Commission. The Reserve Bank of India Act, 1934 (II of 1934) provides the statutory basis of the functioning of the Bank, which commenced operations on April 1, 1935. The Bank was constituted to: The issue of banknotes Maintain reserves with a view to securing monetary stability and To operate the credit and currency system of the country to its advantage. Establishment: The Reserve Bank of India was established on April 1, 1935 in accordance with the provisions of the Reserve Bank of India Act, 1934. The Central Office of the Reserve Bank was initially established in Calcutta but was permanently moved to Mumbai in 1937. The Central Office is where the Governor sits and where policies are formulated. Though originally privately owned, since nationalisation in 1949, the Reserve Bank is fully owned by the Government of India. Preamble: The Preamble of the Reserve Bank of India describes the basic functions of the Reserve Bank as to regulate the issue of Bank Notes and [11]
keeping of reserves with a view to securing monetary stability in India and generally to operate the currency and credit system of the country to its advantage. Central Board: The Reserve Bank s affairs are governed by a central board of directors. The board is appointed by the Government of India in keeping with the Reserve Bank of India Act. Appointed / nominated for a period of four years. Constitution Official Directors: Full time: Governor and not more than four Deputy Governors. Non-Official Directors: Nominated by Government: ten Directors from various fields and one government Official. Others: four Directors one each from four local boards. Functions: General superintendence and direction of the Bank s affairs. Local Boards: One each for the four regions of the country in Mumbai, Calcutta, Chennai and New Delhi Membership: consist of five members each appointed by the central government for a term of four years. Functions: To advise the Central Board on local matters and to represent territorial and economic interests of local cooperative and indigenous banks; to perform such other functions as delegated by Central Board from time to time. 1. Issue of Currency Notes : Under section 22 of RBI Act, the bank has the sole right to issue currency notes of all denominations except one rupee coins and notes. The one-rupee notes and [12]
coins and small coins are issued by Central Government and their distribution is undertaken by RBI as the agent of the government. The RBI has a separate issue department which is entrusted with the issue of currency notes. 2. Banker to the Government : The RBI acts as a banker agent and adviser to the government. It has obligation to transact the banking business of Central Government as well as State Governments. E.g.:- RBI receives and makes all payments on behalf of government, remits its funds, buys and sells foreign currencies for it and gives it advice on all banking matters. RBI helps the Government both Central and state to float new loans and manage public debt. The bank makes ways and meets advances of the government. On behalf of central government it sells treasury bills and thereby provides short-term finance. 3. Banker s Bank and Lender Off Last Resort : RBI acts as a banker to other banks. It provides financial assistance to scheduled banks and state co-operative banks in form of rediscounting of eligible bills and loans and advances against approved securities. RBI acts as a lender of last resort. It provides funds to bank when they fail to get it from other sources. It also acts as a clearing house. Through RBI, banks make inter-banks payments. 4. Controller of Credit : RBI has power to control the volume of credit created by banks. The RBI through its various quantitative and qualitative techniques regulates total supply of money and bank credit in the interest of economy. RBI pumps in money during busy season and withdraws money during slack season. 5. Exchange Control and Custodian of Foreign Reserve : RBI has the responsibility of maintaining fixed exchange rates with all member countries of IMF. For this, RBI has centralized all foreign exchange reserves (FOREX). RBI functions as custodian of nations foreign exchange reserves. It has [13]
to maintain external value of monetary fiscal and trade policies and exchange control.. RBI achieves this aim through appropriate 6. Collection and Publication of Data : The RBI collects and complies statistical information on banking and financial operations of the economy. The Reserve Bank Of India Bulletin is a monthly publication. It not only provides information, but also results of important studies and investigations conducted by reserve bank are given. The Report on currency and finance is an annual publication. It provides review of various developments of economic and financial importance. 7. Regulatory and Supervisory Functions : The RBI has wide powers of supervision and control over commercial and cooperative banks, relating to licensing, establishment, branch expansion, liquidity of Assets, management and methods of working, amalgamation, re-construction and liquidation. The supervisory functions of RBI have helped a great in improving the standard of banking in India to develop on sound lines and to improve the methods of their operation. 8. Clearing House Functions: The RBI acts as a clearing house for all member banks. This avoids unnecessary transfer of funds between the various banks. 9. Development and Promotional Functions : The RBI has helped in setting up Industrial Finance Corporations of India (IFCI), State Financial Corporations (SFCs), Deposit Insurance Corporation, Agricultural Refinance and Development Corporation (ARDC), units Trust of India (UTI) etc. these institutions were set up to mobilize savings, promote saving habits and to provide industrial and agricultural finance. RBI has a special Agricultural Credit Department (ACD) which studies the problems of agricultural credit. For this Regional Rural banks, Cooperative, NABARD etc. were established. The RBI has also taken measures to [14]
promote organized bill market to create elasticity in Indian Money Market in order to satisfy seasonal credit needs. Thus RBI has contributed to economic growth by promoting rural credit, industrial financing, export trade etc. [15]
CHAPTER -4 e-banking (ELECTRONIC BANKING) e-banking (Electronic Banking): With advancement in information and communication technology, banking services are also made available through computer. Now, in most of the branches you see computers being used to record banking transactions. Information about the balance in your deposit account can be known through computers. In most banks now a days human or manual teller counter is being replaced by the Automated Teller Machine (ATM). Banking activity carried on through computers and other electronic means of communication is called electronic banking or e-banking. Automated Teller Machine(ATM) Banks have now installed their own Automated Teller Machine (ATM) throughout the country at convenient locations. By using this, customers can deposit or withdraw money from their own account any time. Debit Card: Banks are now providing Debit Cards to their customers having saving or current account in the banks. The customers can use this card for purchasing goods and services at different places in lieu of cash. The amount paid through debit card is automatically debited (deducted) from the customers account. Credit Card: Credit Cards are issued by the bank to persons who may or may not have an account in the bank. Just like debit cards, credit cards are used to make payments for purchase, so that the individual does not have to carry cash. Banks allow certain credit period to the credit cardholder to make payment of the credit amount. Interest is charged if a cardholder is not able [16]
to pay back the credit extended to him within a stipulated period. This interest rate is generally quite high. Net Banking: With the extensive use of computer and internet, banks have now started transactions over Internet. The customer having an account in the bank can log into the bank s website and access his bank account. He can make payments for bills, give instructions for money transfers, fixed deposits and collection of bill, etc. Phone Banking: In case of phone banking, a customer of the bank having an account can get information of his account, make banking transactions like, fixed deposits, money transfers, demand draft, collection and payment of bills, etc. by using telephone. As more and more people are now using mobile phones, phone banking is possible through mobile phones. In mobile phone a customer can receive and send messages (SMS) from and to the bank in addition to all the functions possible through phone banking. Importance of e-banking: e-banking helps to check the account balance whenever the customer wants to without visiting the bank branch Account holder can get the mini-statement and details of their transaction of their account from anywhere. Account holder can transfer funds to other s account anytime of a day even when the bank is not operating. e-banking gives customers the messages of their transaction as and when they are carried out. Account holders having this facility can use e-banking to pay their bills, recharge mobile, etc. [17]
Security Tip for Customers: Customers should never share their account details with anyone. They should not give their debit card PIN to anyone and store it at a safe place. If the card is lost the customer should intimate the same to the police immediately and ask the bank to block the card so that anyone who gets it cannot misuse the debit card. Account holders should not provide their user ID and password for internet banking to anyone. It is better to memorise own PIN and password than keep it in writing to avoid any fraud and theft. Non-Performing Assets (NPA) Non-Performing Assets or (NPA) are assets of banks, which stop generating income for the bank. These are not physical assets of banks but are loans and advances extended by banks to its customers. The loans and advances generate income for the banks as they attract interests from the borrower. When the borrowers do not repay these loans on stipulated time they become NPA for the banks. A loan or advance becomes NPA when: a) Interest payment is due for more than 90 days for a term loan by the borrowers. b) An overdraft or cash credit account is out of order for a period of 90 days. c) In case of bill purchased or discounted it is overdue for more than 90 days. d) Interest payment is due for 2 crop season in case of short term crop loan or 1 crop season for long term crop loan e) Amount of liquidity facility outstanding for more than 90 days in case of a securitization transaction. f) If interest is not paid in full within 90 days from the end of a quarter when the interest has been charged on a loan amount by the bank. An account / cash credit / overdraft should be treated as out of order if the outstanding balance remains continuously in excess of the sanctioned limit / drawing power.. [18]
CHAPTER 5 REFORMS IN BANKING SECTORS Banking Sector Reforms: Since nationalisation of banks in 1969, the banking sector had been dominated by the public sector. There was financial repression, role of technology was limited, no risk management etc. This resulted in low profitability and poor asset quality. The country was caught in deep economic crises. The Government decided to introduce comprehensive economic reforms. Banking sector reforms were part of this package. In august 1991, the Government appointed a committee on financial system under the chairmanship of M. Narasimhan. A. First Phase of Banking Sector Reforms / Narasimhan Committee Report 1991: To promote healthy development of financial sector, the Narasimhan committee made recommendations. I) Recommendations of Narasimhan Committee : (1) Establishment of 4 tier hierarchy for banking structure with 3 to 4 large banks (including SBI) at top and at bottom rural banks engaged in agricultural activities. (2) The supervisory functions over banks and financial institutions can be assigned to a quasi-autonomous body sponsored by RBI. (3) Phased reduction in statutory liquidity ratio. (4) Phased achievement of 8% capital adequacy ratio. (5) Abolition of branch licensing policy. (6) Proper classification of assets and full disclosure of accounts of banks and financial institutions. (7) Deregulation of Interest rates. (8) Delegation of direct lending activity of IDBI to a separate corporate body. (9) Competition among financial institutions on participating approach. (10) Setting up asset Reconstruction fund to take over a portion of loan portfolio of banks whose recovery has become difficult. Banking Reform Measures of Government: 1. Lowering SLR And CRR: The high SLR and CRR reduced the profits of the banks. The SLR has been reduced from 38.5% in 1991 to 25% in 1997. This has left more funds with banks for allocation to agriculture, industry, trade etc. [19]
The Cash Reserve Ratio (CRR) is the cash ratio of a banks total deposits to be maintained with RBI. The CRR has been brought down from 15% in 1991 to 4.1% in June 2003. The purpose is to release the funds locked up with RBI. 2. Prudential Norms: Prudential norms have been started by RBI in order to impart professionalism in commercial banks. The purpose of prudential norms include proper disclosure of income, classification of assets and provision for Bad debts so as to ensure hat the books of commercial banks reflect the accurate and correct picture of financial position. Prudential norms required banks to make 100% provision for all Non-performing Assets (NPAs). Funding for this purpose was placed at Rs. 10,000 crores phased over 2 years. 3. Capital Adequacy Norms (CAN): Capital Adequacy ratio is the ratio of minimum capital to risk asset ratio. In April 1992 RBI fixed CAN at 8%. By March 1996, all public sector banks had attained the ratio of 8%. It was also attained by foreign banks. 4. Deregulation of Interest Rates: The Narasimhan Committee advocated that interest rates should be allowed to be determined by market forces. Since 1992, interest rates has become much simpler and freer. (a) Scheduled Commercial banks have now the freedom to set interest rates on their deposits subject to minimum floor rates and maximum ceiling rates. (b) Interest rate on domestic term deposits has been decontrolled. (c) The prime lending rate of SBI and other banks on general advances of over Rs. 2 lakhs has been reduced. (d) Rate of Interest on bank loans above Rs. 2 lakhs has been fully decontrolled. (e) The interest rates on deposits and advances of all Co-operative banks have been deregulated subject to a minimum lending rate of 13%. 5. Recovery of Debts: The Government of India passed the Recovery of debts due to Banks and Financial Institutions Act 1993 in order to facilitate and speed up the recovery of debts due to banks and financial institutions. Six Special Recovery Tribunals have been set up. An Appellate Tribunal has also been set up in Mumbai. [20]
6. Competition from New Private Sector Banks: Now banking is open to private sector. New private sector banks have already started functioning. These new private sector banks are allowed to raise capital contribution from foreign institutional investors up to 20% and from NRIs up to 40%. This has led to increased competition. 7. Phasing Out of Directed Credit: The committee suggested phasing out of the directed credit programme. It suggested that credit target for priority sector should be reduced to 10% from 40%. It would not be easy for government as farmers, small industrialists and transporters have powerful lobbies. 8. Access to Capital Market: The Banking Companies (Acquisition and Transfer of Undertakings) Act was amended to enable the banks to raise capital through public issues. This is subject to provision that the holding of Central Government would not fall below 51% of paid-up-capital. SBI has already raised substantial amount of funds through equity and bonds. 9. Freedom of Operation: Scheduled Commercial Banks are given freedom to open new branches and upgrade extension counters, after attaining capital adequacy ratio and prudential accounting norms. The banks are also permitted to close non-viable branches other than in rural areas. 10. Local Area Banks (LABs: In 1996, RBI issued guidelines for setting up of Local Area Banks and it gave Its approval for setting up of 7 LABs in private sector. LABs will help in mobilizing rural savings and in channeling them in to investment in local areas. 11. Supervision of Commercial Banks: The RBI has set up a Board of financial Supervision with an advisory Council to strengthen the supervision of banks and financial institutions. In 1993, RBI established a new department known as Department of Supervision as an independent unit for supervision of commercial banks. B. Second Phase of Reforms of Banking Sector (1998) /Narasimhan Committee Report 1988: To make banking sector stronger the government appointed Committee on banking sector Reforms under the Chairmanship of M. Narasimhan. It submitted its report in April 1998. The Committee placed greater importance on structural measures and improvement in standards of disclosure and levels of transparency.. [21]
CHAPTER 6 DEVELOPMENT BANKING Industrial Development Bank of India (IDBI): During 1964 the Central Government, felt the need for a Centralised Development Bank for growth of industries. Until then the commercial banks and private banks were doing financing work for the industries. Government therefore established IDBI in order to do a concentrated activity for industrialisation throughout the country. Initially IDBI was a subsidiary of RBI and in 1976 IDBI was converted as a autonomous body. The important feature of IDBI is what it has to play a role of principal financial institution for coordinating the activities of institutions engaged in financial, promoting and developing the industry. Objectives of IDBI: (i) It works as an apex institution for term finance to industries and coordinates the functioning of the agencies financing, promoting and developing the industries. (ii) Play a supportive role to entrepreneurs who are planning and developing the industries. To assist those industries who are required on priority in development of the industrial structure of the nation. (iii) To undertake research work pertaining to service of economic studies and techno commercial studies in connection with development of industries. (iv) Provide finance for the export of engineering goods and service on deferred payment basis. Since its inception IDBI is playing an important role in promotion of small-scale industries. It helps through the refinance scheme of industrial loans and by way of bills discounting. Its assistance to these industries is channelized through 18 State Financial Corporations, 28 State Industrial Development Corporations, Commercial Banks and Regional Rural Banks. It has financed for modernisation schemes, technology upgradation, energy conservation schemes, equipment replacement. Foreign currency assistance and for rehabilitation of small and medium industries. Sources of Funds for IDBI i. By public issue of IDBI bonds. ii. By way of deposits from the public iii. Capital contribution from the central Government iv. Loans taken from RBI and the government v. Borrowings in foreign currency from the international Capital Market vi. From the repayments of earlier loans and recycling of profits. Soft Loans for Renovations: Many of the process industries and engineering industries need to be modernised, renovated to upgrade the technology to be competitive in terms of price and quality and productivity for global competition. Some of the industrial areas needing modernisation are cement, engineering, sugar, cotton textiles and jute industries. The expert committees in each area have recommended various schemes like equipment replacements, process changes, environment protection, by-product usage etc., to achieve higher and more economic outputs from the units. For such schemes IDBI has worked as lead institute for financing through IFCI and ICICI. [22]
These loans are arranged under soft loans scheme which are at concessional rates of interest. Only these types of assistance can sustain very old industries needing modernisation. So far, IDBI is doing both direct financing and indirect financing through other financial institutes in order to play a more effective role of growth and development of industries. The Narasimhan Committee appointed by Central Government in 1991 has recommended that IDBI should work as an Apex Bank and arrange finance through SFCs, ICICI and SIDBI. Industrial Finance Corporation of India (IFCI): IFCI was started in 1948 with the objective of providing medium and long-term credits to various types of industries in India. Its objectives are as follows: (i) To extend financial assistance to industries in as well as Foreign currency as per the necessity. (ii) Direct subscription on shares and debentures of industries. (iii) Underwriting of shares, debentures and issues of industries (iv) Financial assistance for purchase of equipments. (v) Financing to leasing and hire purchase companies (vi) The projects of value more than 300 lakhs are financed by IFCI. The lesser value project are taken care by the IDBI or SFC. (vii) Stand guarantee for loans taken by industries from Commercial Banks or State Co-operative Banks. (viii) Guarantying for deferred payments due from the industries in connection with purchase of capital goods which may be local or imported. (ix) Guarantying loans from outside the country in foreign currency with approval from the Central Government. Sources of Funds of IFCI: (i) By way of shares and debentures. (ii) Borrowing by issue of bonds (iii) From repayment of loans (iv) Recycling of profit earnings. Promotional Schemes of IFCI: Since 1989 IFCI has given a new look to its activities by encouraging growth of indigenous technology, ancillary industries, consultancy services and various traditional industries of rural sector. The schemes are briefed as under: (i) Subsidy for consultancy to industries relating to Dairy Development, Poultry and Fishing and Animal Husbandry. (ii) Subsidy for consultancy to industries related to industries based on Agriculture, Sericulture and Horticulture. (iii) Subsidy to small entrepreneurs in rural, cottage, tiny and small sectors for meeting cost of feasibility studies. (iv) Subsidy for promotion of SSI and Ancillary Industries. (v) Subsidy for market survey and marketing assistance cost to new entrepreneurs. (vi) Subsidy for consultancy in case of energy saving and use of non-conventional energy devices. (vii) Subsidy for pollution control measures.. [23]