Development Financial Institutions
What a development financial institution is, what 'refinance' and 'apex institution' mean, and the mandates of NABARD, SIDBI, EXIM Bank, NHB and NaBFID — plus how a DFI differs from a commercial bank.
What you will be able to do
- Define a development financial institution and the apex-and-refinance model.
- Match NABARD, SIDBI, EXIM Bank, NHB and NaBFID to their sectors.
- Explain how a DFI differs from a commercial bank in funding and customers.
- Identify which regulator supervises housing-finance companies after the 2019 change.
What is inside this lesson
- 1What a development financial institution is
- 2Refinance and the apex model
- 3The main all-India DFIs
- 4DFI versus commercial bank
- 5Common confusions
- 6Quick revision
- 7Practice
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What a development financial institution is
A development financial institution (DFI) is set up by statute or by the government to channel long-term finance into a sector that ordinary commercial banks under-serve — agriculture, small industry, exports, housing, infrastructure.
Banks are cautious about very long loans because their own funding (deposits) is short-term and can be withdrawn. A DFI is funded differently — by bonds, borrowings from the government and multilateral agencies, and its own capital — so it can lend for 10, 15 or 20 years and take on projects a bank would avoid.
DFIs do not take deposits from the public. They are wholesale lenders, and many of them lend to banks and other institutions rather than to the final borrower.
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