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Moily’s bold thrust The Jan Dhan bonanza The ‘Ayyo-yes’ is no more Kinetic Karnataka More tributes to GR When small is no larger beautiful.. Making ‘my Amaravati’... Kulandai was a giant Polls and promises Funding the un-funded Should we change the official year? Tribute – M V Murugappan Streamlining mandatory third party cover Welcome changes that testify to Jayalalithaa’s return to health The why of tax incentives Vibrant Gujarat Poor quality of university VCs Where a state respects its litterateurs… The Gulf aviation boom B H Kothari - a tribute Adapt Vajpayee dinner diplomacy CSR and CMI: promise of another Srinivasan Ramanujan... A more liberated TN… Cutting the nose to spite the face A yen for wastage… Lalu’s envy, India’s pride Put expensive assets created to use... 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Welcome focus on core competence Poor representation for Kerala and TN in Cabinet Breaththrough in malaria control Banning booze... Robber barons everywhere When TN politicians can emulate Kerala's EVM is tamper-proof Wise Presidents All eyes on Sankara Nethralaya The rise and fall of Annamalai University ONGC at KG Basin Solar thermal shines… Maximising the micro pricing … Fall in crude prices help in oil sector reform Marketing expert Balagopal is no more Intellectual of rare qualities WTO Meet: resolved to meet again Increasing non co-operation of state leaders Cleaning Ganga – relocate tanneries and install electric crematoria He continues the focus on social amelioration Paytm karo... Computation of GDP – conundrums continue Return to king coal for urea... Not just in-laws (and outlaws); they’ve renowned academics at the helm! Revving up the manufacturing sector Eternal support for capitalisation of PS banks No Maha Koottani in TN... 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MHC should not return to its old indisciplined ways More Shakti to resource mobilisation... Strengthen the base... GNS - 100: our first subscriber An enemy’s enemy is a friend TELANGANA at last…BUT Modi and the lady The nuclear option R Sridhar steps down as CEO of Shriram Capital Editor's Notes 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 London, London Narayan Chennai and Kolkata miss opportunity to grow as Delhi and Mumbai Valli, they are more marginalised Scientists urged to take up farmer-oriented research SoA @ 80 Things happen by accident and not by design... Convulsions in The Hindu Airlines in India: cost and space Noble nonagenarians...
 
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.


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