Section 13 in The Industrial Development Bank Of India Act, 1964
13.
/615Statement of Objects and Reasons.-The existing arrangements for the provision of credit for the expansion or development of industry are not adequate in relation to the needs of the various enterprises or projects. It is proposed, therefore, to establish a new institution, to be known as the Industrial Development Bank of India. It will be wholly-owned subsidiary of the Reserve Bank of India and will be managed by a Board of Directors consisting of persons who are for the time being the members of the Central Board of the Reserve Bank.2. The Industrial Development Bank of India will be able to co-ordinate the activities of all the institutions which are or may be concerned with the provision of finance for industrial development. It will be in a position to provide refinance to these institutions or to grant direct loans to industrial concerns or to promote and develop key industries, as circumstances may require.3. The provisions of the Bill are explained in detail in the notes on clauses.-S.O.R. Gazette of India, 27-2-1964, Pt, II, section 2, extra. Page 60.Amending Act No. 75 of 1972 - Statement of Objects and Reasons - It has been found from experience gained by the Industrial Development Bank of India in its working, since its establishment in 1964, that it is necessary to amend the Act in certain respects.2. The definition of 'industrial concern under section 2(c) of the Act is proposed to be enlarged to include establishments engaged in maintenance and repairs of vehicles as well as concerns engaged in fishing or in the maintenance of shore facilities for fishing, so as to enable the Industrial Development Bank of India to play its role effectively in all fields as an apex institution for financing and refinancing other institutions.3. Section 9 of the Act dealing with the scope of the business of the Development Bank is proposed to be enlarged in several respects. The Development Bank, at present, refinances loans and advances granted by the Industrial Finance Corporation of India, State Financial Corporations, Scheduled Banks and State Co-operative Banks to industrial concerns. Since some of these institutions give loans and advances for the establishment of industrial estates also but are unable to do so adequately from within their own limited resources, it is proposed to authorize the Development Bank to refinance these institutions in relation to such activities.4. At present the Development Bank is empowered to refinance loans given by the State Financial Corporations, the Industrial Finance Corporation of India, the commercial banks and the co-operative banks for the export of machinery and merchandise. It is now proposed to extend these facilities of refinance to the institutions financing the agencies exporting manufactured capital goods and to the concerns or persons in India executing turn-key jobs in foreign countries. The refinancing facilities extended by the Development Bank are now restricted to the cases where the primary lending institution advances loans repayable within a period of ten years in all cases. It is now proposed to liberalise this provision to cases where the primary lending institutions grant loans to persons in India repayable within a period of 15 years and to persons outside India repayable within a period of 12 years.5. The Development Bank can now accept, discount or rediscount bills of exchange and promissory notes of industrial concerns only. It is proposed to extend this facility to stockiest or agents who sell plant and machinery of manufacturing concerns. The Act enables the Development Bank to subscribe, to shares and debentures of the Industrial Finance Corporation of India, the State Financial Corporations and any other financial institutions notified by the Central Government in this behalf. It is now proposed to enlarge the power so as to enable the Development Bank to participate in the share capital of notified financial institutions promoted outside India as well.6. In the field of exports, it is now proposed to enable the Development Bank to grant loans and advances to any persons exporting products of industrial concerns or to any person outside India in connection with the export of capital goods from India, or for the execution of turn-key projects, outside India by any industrial concern or by any person in India. Financial assistance will therefore be available to parties outside India for importing capital goods from India and also for any activity in connection with it. The Development Bank is also being authorized to perform certain agency functions.7. By a new section 9A, it is proposed to prohibit, subject to certain exceptions, the Development Bank from granting assistance to industrial concerns in which any director of the Development Bank may be having a beneficial interest. The Development Bank is the only institution capable of financing very large projects in the core and heavy investment sectors. It is, therefore, provided that the prohibition may be relaxed in cases where the Development Bank is satisfied that it is necessary in the public interest to finance such an industrial concern if the assistance is given subject to such conditions and limitations as may be prescribed by the Development Bank with the prior approval of the Reserve Bank of India.8. It is considered necessary to effect certain liberalisation in regard to the liability arising out of fluctuations in the rate of exchange during the period of repayment of the foreign currency loans borrowed by the Development Bank from foreign lending agencies. At present the liability arising out of fluctuations in foreign exchange is completely borne by the borrowing industrial concerns. It is now proposed that it need be borne by the borrowers only so long as they have not discharged their liability completely to the Development Bank. After that period the Development Bank will bear the losses arising out of the normal market fluctuations in foreign exchange and the Central Government will bear the losses in respect of fluctuations, such as devaluation of Indian currency or revaluation of foreign currency as may be adverse to Indian currency. Any profit arising from fluctuations in favour of Indian currency is also proposed to be similarly dealt with.9. The Development Bank normally reserves the power to nominate one or more directors on the Boards of assisted concerns. The new section 30A is intended to enable the Development Bank to exercise the power effectively.10. The Bill seeks to achieve these main objects. Opportunity has also been taken to incorporate some other amendments which are found necessary for the smooth working of the Development Bank and are of a consequential or procedural nature. The notes on clauses appended to the Bill explain the position thereof.-Gazette. of India., 8-12-72, Pt. II, section 2, Ext., p. 1544.-.Amending Act No. 52 of 1975 - Statement of Objects and Reasons - It is proposed to restructure the Industrial Development Bank of India in certain respects, so as to enlarge its role as the principal financial institution financing industry and for coordinating the working of other financial institutions engaged in the financing or promotion or development of industry. The financial institutions, in this context, include the Industrial Finance Corporation of India, the Life Insurance Corporation of India, the Unit Trust of India, the Industrial Reconstruction Corporation of India Limited, the State Financial Corporations, all in the public sector, the Industrial Credit and Investment Corporation of India Limited, in the private sector and such other institutions as may be notified by the Central Government in this behalf. Besides these, the State Bank of India, its seven subsidiary banks, the fourteen nationalised banks, scheduled banks and the State Co-operative Banks are also proposed to be brought within the purview of co ordination by the Development Bank as these institutions participate with the Development Bank and other term lending institutions in financing industry.2. The Development Bank is at present a wholly owned subsidiary of the Reserve Bank of India; the Directors on the Central Board of the Reserve Bank constitute the Board of Directors of the Development Bank. It is now proposed to transfer the entire capital of the Development Bank held by the Reserve bank to the Central Government. There will also be a separate Board of Directors for the Development Bank on which the financial institutions and the public sector banks will be represented.
