In India, there are some specialized banks, which cater to the requirements and provide overall support for setting up business in specific areas of activity. They engage themselves in some specific area or activity and thus, are called specialized banks.

There are three important types of specialized banks with different functions:

  1. Export Import Bank of India (EXIM Bank)
  2. Small Industries Development Bank of India
  3. National Bank for Agricultural and Rural Development

Export Import Bank of India (EXIM Bank)

The Export-Import (EXIM) Bank of India is the principal financial institution in India for coordinating the working of institutions engaged in financing export and import trade. It is a statutory corporation wholly owned by the Government of India. It was established on January 1, 1982 for the purpose of financing, facilitating and promoting foreign trade of India. This specialized bank grants loans to exporters and importers and also provides information about the international market. It also gives guidance about the opportunities for export or import, the risks involved in it and the competition to be faced, etc.

The main functions of the EXIM Bank are as follows:

  • Financing of exports and imports of goods and services, not only of India but also of the third world countries
  • Financing of exports and imports of machinery and equipment on lease basis
  • Financing of joint ventures in foreign countries
  • Providing loans to Indian parties to enable them to contribute to the share capital of joint ventures in foreign countries
  • To undertake limited merchant banking functions such as underwriting of stocks, shares, bonds or debentures of Indian companies engaged in export or import
  • To provide technical, administrative and financial assistance to parties in connection with export and import

Small Industries Development Bank of India

This specialized bank grant loan to those who want to establish a small-scale business unit or industry. Small Industries Development Bank of India (SIDBI) was established in October 1989 and commenced its operation from April 1990 with its Head Office at Lucknow as a development bank, exclusively for the small scale industries. It is a central government undertaking. The prime aim of SIDBI is to promote and develop small industries by providing them the valuable factor of production finance. Many institutions and commercial banks supply finance, both long-term and short-term, to small entrepreneurs. SIDBI coordinates the work of all of them.

Functions of Small Industries Development Bank of India (SIDBI):

  • Initiates steps for technology adoption, technology exchange, transfer and upgradation and modernisation of existing units.
  • SIDBI participates in the equity type of loans on soft terms, term loan, working capital both in rupee and foreign currencies, venture capital support, and different forms of resource support to banks and other institutions.
  • SIDBI facilitates timely flow of credit for both term loans and working capital to SSI in collaboration with commercial banks.
  • SIDBI enlarges marketing capabilities of the products of SSIs in both domestic and international markets.
  • SIDB1 directly discounts and rediscounts bills with a view to encourage bills culture and helping the SSI units to realise their sale proceeds of capital goods / equipments and components etc.
  • SIDBI promotes employment oriented industries especially in semi-urban areas to create more employment opportunities so that rural-urban migration of people can be checked.

National Bank for Agricultural and Rural Development

It was established on 12 July 1982 by a special act by the parliament. This specialized bank is a central or apex institution for financing agricultural and rural sectors. It can provide credit, both short-term and long-term, through regional rural banks. It provides financial assistance, especially, to co-operative credit, in the field of agriculture, small-scale industries, cottage and village industries handicrafts and allied economic activities in rural areas

Its important functions are:

  • Takes measures towards institution building for improving absorptive capacity of the credit delivery system, including monitoring, formulation of rehabilitation schemes, restructuring of credit institutions, training of personnel, etc.
  • Co-ordinates the rural financing activities of all institutions engaged in developmental work at the field level and maintains liaison with Government of India, State Governments, Reserve Bank of India (RBI) and other national level institutions concerned with policy formulation
  • Undertakes monitoring and evaluation of projects refinanced by it.
  • NABARD refinances the financial institutions which finances the rural sector.
  • The institutions which help the rural economy, NABARD helps develop.
  • NABARD also keeps a check on its client institutes.
  • It regulates the institution which provides financial help to the rural economy.
  • It provides training facilities to the institutions working the field of rural upliftment.
  • It regulates the cooperative banks and the RRB