Page 42 - Banking Finance November 2017

ARTICLE

fixed capital expenditure and also to meet their working of their difficulty. In urban areas both the small and
capital needs. medium size industries are getting sufficient finance
from indigenous bankers. But these Indigenous bankers
Sources of Industrial Finance: normally charge exorbitant rate of interest on such
loan.
Following are some of the major sources from which Indian
industries are getting their necessary finance in a regular Y Term-lending Institutions: In view of the inadequacy of
manner: finance from the above mentioned sources, various
Y Shares and Debentures: Indian industries are normally term lending institutions have been developed to ad-
raising a major portion of their capital by selling shares vance loan in order to meet financial requirement of
in low denominations of Rs. 10 each. Share may be a these industries. These institutions include Industrial
preference share or an ordinary share. Debentures are Finance Corporation of India (IFCI), Industrial Credit and
also issued in the capital market by the companies and Investment Corporation of India (ICICI), Industrial De-
in recent years convertible debentures are gradually velopment Bank of India (IDBI), Industrial Reconstruc-
becoming more popular. tion Corporation of India (IRCI), State Financial Corpo-
rations and State Industrial Development Corporations
Y Public Deposits: Another source of industrial finance is
(in different states).
the deposit raised from the public. We can find the
Ahmadabad textile industry was primarily established Y Retained Profits: Retained profits or undistributed prof-
on the basis of public deposit. Besides, Cotton Mills of its of the industries are also being ploughed back into
Mumbai and Sholapur. Tea Gardens of Assam and Ben- the industry for meeting its requirements of replace-
gal have also raised their fixed capital in sufficient quan- ment, modernisation and expansion.
tity through public deposit.
Y Commercial Banks: Commercial banks are also offering Long-Term, Medium-Term and Short-
short-term loans on cash credit basis on the security of Term Finance:
stock and on the additional guarantee of the managing
Long term finance for industries includes those financial
agent. The commercial banks are generally advancing
resources which are advanced to the industries by the banks
loan for meeting working capital needs of the industries
for a period of 3 years and above. Long term finance is quite
in the form of advancing loan, overdraft, and cash credit important for the expansion and modernisation of industrial
facilities against government securities and pledge of
projects and also to meet its fixed capital expenditure re-
stocks.
quirement.
Y Indigenous Bankers: In India indigenous bankers have
been rendering important services to industry in time Long term finance is mostly available from the sale of shares
and debentures, and loan from term lending financial insti-
tutions like IDBI, IFCI, ICICI, Commercial banks etc. Medium
term loan is also available from banks and other financial
institutions.

Short-term finance for industries includes those financial
resources which are advanced by Banks to the industries for
a period of max 12 months. Short-term finance is required
to meet working capital needs and other sundry expenses
of the industrial projects. Commercial banks offer short term
loans on cash credit basis on the security or stocks and over-
draft facilities to the industries. Industries can also raise
short term finance by raising public deposits for one to three
years.

42 | 2017 | NOVEMBER | BANKING FINANCE

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