State Financial Corporation
(i) After the State Financial Corporation Act 1951, SFCs were set up in many states.
(ii) The aim is to develop small and medium industrial units in their states and neighboring states also.
(iii) It provides loans and underwriting assistance to industrial units having paid-up capital and reserves not exceeding Rs.1 crore.
(iv) The maximum assistance is Rs.60 lakhs.
(v) SFC depends on IDBI for refinance in respect of term loans granted by them, temporary borrowing from the RBI and borrowings from IDBI and by the sale of bonds.
Industrial Development Corporations
(i) They provide financial assistance to industrial concerns by way of loans, guarantees and underwriting of or direct subscriptions to shares and debentures.
(ii) They, conduct techno economic surveys, project identification preparation of feasibility studies and selection and training of entrepreneurs.
(iii) They also promote joint sector projects in association with private promoters.
(iv) SIDCO takes 26%, private co-promoter takes 25% of the equity and the rest is offered to the investing public.
(v) They undertake the development of industrial areas by providing all infrastructural facilities and initiation of new growth centers.
(vi) They administer various state government incentive schemes.
(vii) They get refinance facilities from IDBI.
(viii) They also borrow through bonds and accept deposits.
(ix) They administer various state government incentive schemes.

(i) IDBI is an apex institution which co-ordinates the activities of other financial institutions.
(ii) It was a wholly owned subsidiary of the RBI till Feb 15^th, 1976.
(iii) It was delinked from the RBI on Feb 16_^th, 1976 and became an autonomous corporation fully owned by the Government of India.
(iv) It provides assistance to other financial institutions; and direct assistance to industrial concerns either on its own or in participation with other institutions.
(v) It provides refinance to term loans to industrial concerns given by the IFC, the SFCs, schedule banks and state cooperative banks.
(vi) It has a special fund known as Development Assistance Fund.
(vii) It provides assistance to industries which require heavy investments with low anticipated rate of return.
(viii) Financing of exports was also undertaken till the establishment of EXIM BANK in March,1982.

(i) ICICI was set up on 5th January 1955 as a joint-stock company on the advice of a three-man mission, sponsored by the World Bank and the Government of USA to the Government of India.
(ii) The purpose was to channelize the World Bank funds to industries in India and to build up a capital market.
(iii) The capital of ICICI was held by private companies, institutions and individuals.
(iv) Today, a very large part of its equity capital is held by banks, LIC, GIC and its subsidiaries, as this private institution was nationalized.
(v) It sanctions foreign currency loans to industries.
(vi) This is possible because the World Bank provides foreign currencies.
(vii) Also from 1973, the ICICI raises foreign currency loans in the International Capital market.
(viii) Major portion of its rupee resources is raised from debentures.
(ix) ICICI also borrows from the IDBI and the government.
(x) A major portion of its assistance has gone to the private sector.

1. The money supply increases which places downward pressure on the interest rate.
                                               \(\downarrow \)
2. The lower interest rate stimulates planned investment and aggregate output.
                                               \(\downarrow \)
3. This in turn increases the amount of money demand.
                                                \(\downarrow \)
4. This in turn may cause interest rates to fall by less than they otherwise would had there been
                                                \(\downarrow \)
5. No feedback effect from the increased demand for money hence forth.

History:
(i) Formed on April 1, 1935 in accordance with the RBI Act, 1934
(ii) Nationalized on January 1, 1949 (Fully owned by GOI)
(iii) Headquarter moved from Calcutta to Mumbai in 1937
(iv) Osborne Smith was the first Governor of RBI
Administration:
(i) It is the Central Bank/ Regulator for all bank in India
(ii) Also called “Lender of Last Resort”
(iii) Governors and 4 Deputy Governors along with a central board of directors appointed by the GOI.
Functions:
(i) Issues currency
(ii) Banker to the government. {It collects receipts of funds and makes payments on behalf of the government}
(iv) Regulator of Indian Banking system
(v) Custodian of Forex
(vi) Controller of credit

A. Monetary Policy: Expansionary Vs. Contractionary
Expansionary policy
i. Expansionary policy is cheap money policy when a monetary authority uses its tools to stimulate the economy.
ii. An expansionary policy maintains short-term interest rates at a lower than usual rate or increases the total supply of money in the economy more rapidly than usual.
iii. It is traditionally used to try to combat unemployment by lowering interest rates in the hope that less expensive credit will entice businesses into expanding.
iv. This increases aggregate demand (the overall demand for all goods and services in an economy), which boosts short-term growth as measured by gross domestic product (GDP) growth.
The Contractionary
i. The Contractionary monetary policy is dear money policy, which maintains short-term interest rates higher than usual or which slows the rate of growth in the money supply or even shrinks it.
ii. This slows short-term economic growth and lessens inflation.
iii. Contractionary monetary policy can lead to increased unemployment and depressed borrowing and spending by consumers and businesses, which can eventually result in an economic recession if implemented too vigorously.
B. The Two Faces of Monetary Policy

(i) The agricultural development, an organization is called The Agricultural Refinance Development Corporation.
(ii) It was established by an act of parliament and it started functioning from 1 July, 1953.
(iii) The main aim of ARDC is to bridging the gap in agricultural finance and to extend credit for projects.
Objective of ARDC:
(i) To provide necessary funds by way of refinance to eligible institutions such as the Central land development Banks, State co-operative Banks and Scheduled Banks.
(ii) To subscribe to the debentures floated by the Central land Development Banks, State co-operative Banks, and Scheduled Bank provided they were approved by the RBI.