>> November 26, 2009
Definition of Development Bank
A development bank is a financial institution which provides loan and other financial assistance to businessmen for development of enterprise .
Features of Development Bank
- Providing loan for development of business of enterprise .
- Loan is given on project basis not on the basis of security .
- It provides loan at cheap rate of interest .
Functions of Development Bank
1. Providing loan at cheap rate
Development bank takes interest at very low rate and from time to time , they issue new scheme of loan in which rate of interest is very low .
2. Provide advice and guidance
Development bank provides advice to the businessman about which project is best . It is also function of development bank is to guide to businessman about how to use the loan .
3. Providing facility of refinancing of Commercial banks
Large numbers of commercial bank gets the refinance facility from development bank. Refinance means getting the finance for further distribution of loan to customer .
4. Providing underwriting services
These days development bank are also providing the facility of underwriting in which development bank promises to sell all the shares of company . For these services development bank gets some commission from companies .
Lending procedure of Development bank
Checking the project
Customer wants to get the loan , he will apply for same . He will attach his project with his application after this development bank will check the project . It will see the following points .
- What amount of capital is investing by businessman .
- Size of infrastructure .
- What is the major transport facility for distribution of products .
- Availability of raw material
After checking the above points development banks decides to give loan or not .
Other Govt. formalities
Development bank also checks whether the customers has fulfilled all the formalities of govt. or not . Whether he obtained license or not .
Acceptance of loan :
If project is good and customers fulfills all the conditions of govt. , then development bank will accept the project and issues the loan to customers bank account .
After giving loan , development bank guides customers , how to use loan effective way for achievement in project under follow up step .