Ad Here  
When nations steal growth from one another… Making ‘my Amaravati’... Small units prefers to remain small... Varuna (rain) in 2015; Vaayu (air) in 2016. Chennai devastated The star of Spencers is no more TN – agglomerate land holdings without alienating ownership Lalu’s envy, India’s pride MHC should not return to its old indisciplined ways TN accounts for the largest recruits by the IT sector Contrarian cousins Limit foreign borrowings to hi-tech, export potential projects... S V Raju – a ‘good’ true liberal Mersal magnified The power-full Hindujas Bihar – Nitish Kumar adopts the Lalu model Tribute – M V Murugappan Robber barons everywhere Don’t seem to feel the pulse… Streamlining mandatory third party cover A proud Madrasi A yen for wastage… The Ports’ Pasha expands into Tamil Nadu Editor's Says Liberal imports idling indigenous capacities GM Technology at last! Building loyalty through the stomach Haul over the coal No Maha Koottani in TN... He saved millions from starvation... Demise of a media baron... Rs.1600 crore paper board plant of TNPL The sea- saw battle continues... Naidu’s return augurs well for Seemandhra Discoms deserve better… L&T: focus on infrastructure and more infrastructure… Build close rapport with business leaders WTO Meet: resolved to meet again Waning interest in public discussions… The ‘Ayyo-yes’ is no more Pharma – overdose of copying An enemy’s enemy is a friend IPL type auction for VCs? Measuring roof tops in terms of KW/MW Quality education through the PPP mode Another Indian music maestro at the UN Where a state respects its litterateurs… Padma Bhushan for A Ramakrishna West Bengal: mindless malignancy How Air-India loses customs... All eyes on Sankara Nethralaya Music happens An inexplicable neglect Lesson from Chandrababu Naidu Kudos to NDTV... Welcome focus on core competence Secularism and anti-Hinduism Permanent secretariat for TN GIM When online building permits work…. Sweeter prospects for sugar IAS invades NDDB... Shale gas and its shallow future He continues the focus on social amelioration B H Kothari - a tribute London, London Narayan A glass full of corruption Tatas moving out of urea production... Gas is the way forward Tough task taking states together Which side are you, Montek? Insurance companies bleeding, yet no decision on increasing FDI limit! Wanted: a second airport for Chennai Tihar, Puzhal not different from Parappana Agrahara Why this malaise in medical education? Why land prices zoom in TN? Welcome thrust on trade in Modi’s foreign visits... Preserving for the future The Swadeshi Trump Naidu will soon build a new Hyderabad Revving up the manufacturing sector Solar thermal shines… Whistle-Stop Tour of Raghuram Rajan Editor's Notes Modi and the lady Excel Generators provide the vital back-up Online not in line with brick and mortar businesses... Delhi Chalo... The balancing act Breaththrough in malaria control F C Kohli - his concerns all embracing EEC at the National Media Centre TGS- The king storyteller More tributes to GR Medical costs hit the roof... For whom the MIDS bell tolls? Protest masters... Bihar elections - the Rajaji formula worked Where is Rajaji? to the lack of interest on the part of these to focus on original research. This despite the much lower costs of such research in India. The industry which thrived on the protection of a closed economy and the advantage of a vast domestic market, has failed to organise its evolution on healthy lines Valli, they are more marginalised Tribute – Manikam Ramaswami Infrastructure funding – lessons learnt Odisha: spectacular win by Naveen Patnaik Adapt Vajpayee dinner diplomacy China invests in India IPL - no surprise this scam Land reclamation from sea appears cheaper! SoA @ 80 Five star activism stalls development activity Shanti and Sadhana through Music Muffled voices for merit… …and of a popular trade leader Moily’s bold thrust Sri Lanka votes for change Convulsions in The Hindu GNS - 100: our first subscriber R Sridhar steps down as CEO of Shriram Capital Delhi returns to BJP Godspeed, Chief Minister JJ Maximising the micro pricing … Of course, Gujarat is vibrant Fortune 500 review Fall in crude prices help in oil sector reform More Shakthi to Das’ elbow Airlines in India: cost and space Cutting the nose to spite the face The why of tax incentives L&T- the specialty of special purpose vehicles Chennai and Kolkata miss opportunity to grow as Delhi and Mumbai Telangana in top gear… Return to king coal for urea... EVM is tamper-proof TIAM turns a full cycle An informal presentation - analytical, forward locking... Delhi is distant New IT products of Ramco in the pipeline… Tribute Not just in-laws (and outlaws); they’ve renowned academics at the helm! Align crops to agro climate endowments… The ‘Jayanthi Tax.’ Nuclear power at the nucleus The rise and fall of Annamalai University Vibrant Gujarat No engine for this car The few handicaps... CSR and CMI: promise of another Srinivasan Ramanujan... PC’s preference for professionals S Ramanathan – a versatile musician, musicologist A friendly business group Russi Mody – a tribute Readers' Mail Eternal support for capitalisation of PS banks Kulandai was a giant A Grand Finale for SN’s MS centenary at the US… Silver Years of Madras Musings Inflation: are we emulating Argentina and Brazil? The brown list of Venkitaramanan Solar, solar everywhere … Noble nonagenarians... Engineering seats go abegging The rise and rise of KCP Auto components surge… No mega rail project for Tamil Nadu Modi storms Silicon Valley Banning booze... Fuel for thought A more liberated TN… Should we change the official year? Scientists urged to take up farmer-oriented research The Jan Dhan bonanza When Ratan Tata visited SRM When small is no larger beautiful.. Delhi is distant… Funding the un-funded The Gulf aviation boom CRS, a jewel among managers, is no more. Welcome GST Air Asia India will set new benchmarks for budget travel Parliament in paralysis... Road development slows down Diamond jubilee of Egmore Samskrt School Dr C Rangarajan returns to Chennai A welcome initiative by the judiciary Cleaning Ganga – relocate tanneries and install electric crematoria Focus on quality of power - its only around 170-180V Strengthen the base... There was flood of milk. Reason: no milk commissioner! This scant respect for Law A Grand Finale for SN’s MS centenary at the US… Marketing expert Balagopal is no more Make standards certification mandatory... CIPET hqrs to stay at Guindy – for the present? Mu Sigma – is no more More Shakti to resource mobilisation... Shipping woes of Chennai companies Welcome changes that testify to Jayalalithaa’s return to health Recognition to role of NBFCs.... When the President was rendered homeless… Paytm karo... A think tank for Chennai Multi-faceted Venkat Roaring Ro-Ro facility Plummeting profits of PSBs Quality silica from Neyveli Computation of GDP – conundrums continue A professional at the helm of IRDA... Intellectual of rare qualities Remembering Indira Sivasailam... Boy, can you beat these? A rich pool of talent not utilised…. Revive development banks... Come elections, come advertisements... For whom the bell tolls? Gay abandon in pricing TN-leverage strength of BHEL, NLC... Polls and promises A C Muthiah – his munificent bequeaths to science Reliance’s TV – 18 ready to launch Tamil News Channel Colour-Chem’s colourful KRVS ONGC at KG Basin Poor representation for Kerala and TN in Cabinet Like Hinduism: many paths to reach God... PPP mode for upgrading Corporation Hospitals More heat than light Towards speedy justice CII projects higher growth… Shaming of Tamils by Tamil farmers at Delhi TELANGANA at last…BUT Tatas moving out of urea production... When TN politicians can emulate Kerala's Kinetic Karnataka Put expensive assets created to use... Wise Presidents Increasing non co-operation of state leaders Cement prices continue to rise… Adharma of opposition politics Alexa – Talking Wikipedia The nuclear option Tax agriculture Fortune for Indian Airlines Things happen by accident and not by design... Rahman at CIC Tribute – UCAL Selvan… Sweet news for TN sugar mills Poor quality of university VCs
Revive development banks...

The first three decades of industrial development were marked by provision of finance on facile terms. Specialised development banks like ICICI, IDBI, IFCI and state financial institutions lent capital and term loans on attractive terms. The Madras Industrial Investment Corporation (that later became TIIC), set up in 1949, pioneered such industrial development finance both for equity and loans. These institutions have been extremely effective in attracting hordes of new class of entrepreneurs with modest resources of their own. I cite the instance of the evolution of the Padi complex where the famous house of TVS embarked on manufacturing. In 1962, the first of such units, Wheels India Ltd, was inaugurated. This was quickly followed by Sundaram Clayton, Brakes India, Lucas TVS... The funding was simple: for Wheels India, the total initial cost was Rs 200 lakh; around Rs 25 lakh each was contributed as equity by TVS and the collaborator Dunlop of UK. The balance was sourced as a term loan from a development bank.

    Similar was the funding for the other units at Padi that commenced production in quick succession. Dozens of units of Amalgamations, the Rane Group and several companies in the sectors of automobile, textiles, cement and sugar were set up with modest capital outlays with a portion contributed by the promoters and the balance funded through equity/term loans from development banks and SFCs. Until George Fernandes as Industry Minister in the Janata government  mandated public participation for a portion of equity capital, there wasn’t the need felt by promoters to go to the public for capital. In fact, the modest capital base of most southern companies didn't really need public funding. The promoters, for most part, were reluctant to go public.

Development banks, thus did a yeomen service in nurturing entrepreneurship. Hundreds of companies owe their existence to the funding extended by such banks. The latter developed a great deal of expertise in raising resources and in lending these over the medium and long terms. Of course, not all the portfolios ended profitable and there were bad debts and non-performing assets. But on the balance, these did yeomen service for industrial development.

In the 1990s with the opening up of the economy these institutions underwent a massive change. There arose vastly expanded scope for raising deposits from the public. This resulted in the development banks opting to become commercial banks. In the enthusiasm and attraction to grow as large commercial banks, these have lost their earlier thrust for development financing. There is also the mismatch between raising deposits over short term and lending for infrastructure and industry over long term. The resulting huge ballooning of non-performing assets is a cause for serious concern. (see article by S A Raghu page 36)

I feel there is need to return to the old days: of setting up development banks for industry. Specialised infrastructure development financing agencies on the one hand and the MUDRA Bank on the other are welcome initiatives. There is need for such specialised institutions to lend for equity and term loans escpecially for hundreds of mid-sized enterprises on modest  interest rates.

Author :
Reported On :
Sector :
Shoulder :
IE, the business magazine from south was launched in 1968 and pioneered business journalism in south. Through the 45 years IE has been focusing on well-presented and well-researched articles. When giants in the industry stumbled to keep pace with the digital revolution, IE stayed affixed embracing technology.
Read more
Economist Communications Ltd is committed to ensuring that your privacy is protected.
Read more
You agree that your use of this Website and the purchase of the magazine will be governed by these terms and conditions.
Read more
S-15, Industrial Estate,
Chennai - 600 032.
PHONE: +91 44 22501236