Purposes and types of DFIs

Development finance institution: Development Finance Institution (DFI) is an institution that finances development projects on a non-commercial basis, which may or may not meet commercial performance standards. Development finance institutions (DFIs) facilitate international capital flows by being an intermediary space between public aid and private investment. DFIs play a crucial role in development as they provide funds to the private sector to make investments, which helps private companies to make investments. In this article, we have discussed in detail the Development Finance Institutes (DFIs) that will be useful for applicants.

What is a development finance institution?

A Development Finance Institution (DFI) is an institution that plays an important role in providing venture capital to the public and private sectors for investments. The owner of development finance institutions is the government or the charity. DFIs are also known as Development Bank or Development Finance Corporation (DFC). The financing provided to private companies is invested mainly in countries where there are many restrictions on the market. The types of financing provided are:

  • Medium (1-5 years)
  • Long term (more than 5 years)

Development Finance Institution (DFI) in Hindi

Objectives of the Development Finance Institution (DFI)

The main objectives of development finance institutions are:

  • The main objective of Development Financial Institute is to stimulate the economy of the country. DFIs provide funds for projects with low capital or when their borrowers cannot obtain them from commercial lenders.
  • DFIs provide financial support to various sectors in the form of subprime loans, equity investments and guarantees. The guarantee to the banks is provided in the name of the companies and the subscriptions for shares, bonds, etc.
  • DFIs do not take deposits from individuals but collect funds. Funds raised are borrowed from governments, insurance companies, pension funds and sovereign wealth funds.
  • Through subscription, funds can be raised from the public. Purchasing a financial institution guarantee guarantees that a certain percentage of stock in a company that issues an IPO will be purchased if it is not subscribed to by the public.
  • Technical assistance such as project report, viability study and advisory services are also provided by the Development Finance Institute.

Categories of Development Finance Institutions (DFIs)

Development Finance Institutions (DFIs) are further classified into different parts as follows:

  • National Development Banks- National development banks include IDBI, SIDBI, ICICI, etc.
  • Sector Financial Institutions- Exim Bank, NABARD, NHB, etc. are part of the sectoral financial institutions.
  • Investment Institutions-The investment institutions are LIC, GIC, UTI, etc.
  • State Level Institutions- SFCs and SIDCs fall under the category of state-level institutions.

Major Development Finance Institutions (DFIs)

Some of the important development finance institutions are listed below:


Industrial Finance Corporation of India (IFCI) is the India’s leading development finance institution. The IFCI was created in 1948.


Industrial Credit and Investment Corporation of India (ICICI) Limited was an initiative of world Bank and was created the year 1955. ICICI Bankthe subsidiary of ICICI Limited was established in 1994. In 2002, ICICI Limited merged with ICICI Bank Limited and became the India’s first universal bank. This became a financial institution which performed the dual function of a commercial bank and a development financial institute. There is still the only private sector DFI.


The Industrial Development Bank of India (IDBI) was established in 1964 under the Reserve Bank of India (RBI) and autonomy was granted in 1976. It was made a Universal Bank in 2003. The IDBI is responsible for maintaining an adequate flow of credit to various sectors.


Industrial Reconstruction Corporation of India (IRCI) was established in 1971. IRCI was made to overcome weak units and provide financial as well as technical assistance.


The Small Industries Development Bank of India (SIDBI) was established in 1989. SIDBI was the subsidiary of IDBI. The autonomy was granted to SIDBI in 1998.

Exim Bank

The Export-Import Bank was created in January 1982. The main purpose of establishing the Exim Bank was to provide technical assistance and export loans.


On the recommendation of Shivraman Committee The National Bank for Agriculture and Rural Development (NABARD) was established in July 1982. NABARD worked as refinancing institution. In the field of agriculture and rural sectors, NABARD acts as the highest institute.


In 1988 The National Housing Bank (NHB) was created. The National Housing Bank was created to finance real estate projects.

Latest Government Jobs Notifications

FAQ: Development Finance Institution (DFI)

Q.1 What is a Development Finance Institution (DFI)?

Rep. Development Finance Institution (DFI) is an institution that provides risk capital for development projects on a non-commercial basis.

Q.2 What are the main objectives of Development Finance Institutions (DFIs)?

Rep. The main objectives of Development Finance Institutions (DFIs) are discussed in the article above.

Q.3 What types of financing does the Development Finance Institution (DFI) provide?

Rep. Two types of financing are provided by DFIs: medium term (1 to 5 years) and long term (more than 5 years).

Q.4 What are some of the important Development Finance Institutions (DFIs)?

Rep. Some important development finance institutions are ICICI, IDBI, NHB, NABARD, SIDBI, etc.

Cases in progress

Development finance institution (DFI): Purposes and types of DFI_60.1

Comments are closed.