Looking for the answer to the question below related to Financial Management ?
Which of the following was set up mainly for providing finance to private sector?
D. all of these
The Correct Answer Is:
- C. ICICI
The correct answer is C. ICICI. The Industrial Credit and Investment Corporation of India (ICICI) was primarily set up to provide finance to the private sector in India. Let’s explore why option C is the correct answer and why the other options (A. IDBI, B. IFCI, and D. all of these) are not accurate:
Why Option C (ICICI) is Correct:
1. Private Sector Focus:
ICICI was established in 1955 with the primary objective of providing financial assistance and support to the private sector in India. Its mission was to promote industrial development by extending credit and financial services to private enterprises.
2. Role in Private Sector Growth:
ICICI played a significant role in facilitating the growth of private sector industries in India during the post-independence period when the country was emphasizing industrialization. It provided long-term and medium-term loans to private businesses for various industrial and infrastructure projects.
3. Evolution into a Full-Service Bank:
Over the years, ICICI evolved and transformed into a full-service financial institution, offering a wide range of banking and financial services, including retail banking, corporate banking, asset management, and more. It eventually merged with the Industrial Credit and Investment Corporation of India (ICICI) Bank in 2002 to form ICICI Bank Limited.
Why Option A (IDBI) is Not Correct:
Option A, “IDBI,” is not primarily set up for providing finance to the private sector. The Industrial Development Bank of India (IDBI) was established in 1964 with the primary goal of financing and promoting industrial development in India, including both the public and private sectors.
While IDBI did provide financial support to private enterprises, its mandate extended to public sector projects and development activities as well.
IDBI played a significant role in funding large infrastructure and industrial projects in India, often collaborating with various financial institutions and banks. However, its scope was broader than just supporting the private sector.
Why Option B (IFCI) is Not Correct:
Option B, “IFCI,” is also not primarily set up for providing finance to the private sector. The Industrial Finance Corporation of India (IFCI) was established in 1948 to promote industrial development in India by providing financial assistance, particularly to medium and large-scale industrial enterprises, both in the public and private sectors.
While IFCI did contribute to the financing of private sector projects, its focus was not exclusively on the private sector.
IFCI played a role in providing term loans, underwriting services, and other financial support to various industries, including those in the public sector, during India’s early industrialization phase.
Why Option D (All of these) is Not Correct:
Option D, “all of these,” is not the correct answer because while all three financial institutions (IDBI, IFCI, and ICICI) were involved in providing financial support to various sectors of the economy, they each had their specific areas of focus and mandates.
ICICI was primarily established to provide finance to the private sector, while IDBI and IFCI had broader mandates that encompassed both public and private sector projects.
In summary, ICICI was set up mainly for providing finance to the private sector in India, and its evolution into ICICI Bank reflects its significant role in private sector development.
IDBI and IFCI, on the other hand, had broader mandates encompassing both public and private sector projects, making them less focused exclusively on the private sector. Therefore, option C, “ICICI,” is the correct answer in this context.