Development financial institutions (DFIs) have lost their relevance in the present financial system in India and across the globe, RBI Deputy Governor K C Chakravarty said on Saturday.
"DFIs played an important role in the country's development process earlier. But with the advent of universal banking, they have lost their importance now," he said.
Chakravarty, who was speaking on 'IDBI's role as a DFI' organised by United Forum of IDBI Officers and Employees here last night, said that earlier banks did not have access to long-term funds and used to provide short-term working capital.
On the other hand, the DFIs with government support had access to long-term funds and were able to provide term loans.
"But the scenario has changed now. The banks are now having access to long-term funds through pension and insurance funds," he said.
"With these, the DFIs had lost their relevance as they were not able to compete with banks in terms of providing cheap funds", he said.
He said globally also the DFIs had lost their relevance.
"Not only IDBI. Erstwhile DFI, ICICI had also changed into ICICI Bank," he said.
The forum had brought an approach paper demanding that IDBI Bank, which was now a universal bank, be reverted to its earlier DFI status following which it would be able to provide project finance, an area where its expertise lay.
To this, Chakravarty maintained that to pursue development finance, there was no need to have the DFI tag.
"What is required is the soul of a DFI. If IDBI wants to perform, there is no problem. It can do so even in its present avatar," he said.
He said IDBI Bank's performance in terms of priority sector lending was insufficient at 20 per cent against the target of 40 per cent.
IDBI Bank's CASA (Current and Savings account) as a proportion of total deposits was also low at 20 per cent.
Chakravarty urged IDBI Bank personnel to mobilise more CASA deposits which would help them in accessing cheap funds as well as to embrace financial inclusion in a big way.
"So far, the IDBI personnel had been dealing with big corporates. But now they will have to