A study of the promotional role of Northeast Development Finance Corporation Ltd. and Assam Financial Corporation in the process of Industrial development of Assam

Development banks were initiated in India with a view to promote rapid industrialization in the country. Development banks have undoubtedly been the most popular tool in the developing countries of the world, being the result of the urge of these countries to strive for development to match the pace of development of the advanced countries of the world. The reliance on development banks as the providers of credit to industries and to the priority sectors and the underprivileged clients was the practice until the start of 1990’s. Since then, a wave of privatization, reduction of resources available to development banks, liquidation of development banks, and steps to improve their governance and supervision set in across different countries of the world. This was due to the growing concern over the performances of development banks in terms of their efficiency and profitability. They exhibited great inefficiencies in identification of viable projects and in management. Unprofitably captivating scarce resources, though not justified, yet there exists a parallel set of belief that development banks are development oriented in their business. That, mere dependence on a single set of parameters, like profitability, recovery or amount of lending, to judge the performance of development banks does not reflect the fulfillment of the objectives of such institutions. The present study therefore makes an attempt to analyze how far the regional level development banks, namely Assam Financial Corporation (AFC) and North East Development Finance Corporation Ltd. (NEDFi) have succeeded in Assam in fostering industrial growth. The basic idea is to critically examine the performance of AFC and NEDFi in how far they have succeeded in fostering overall economic development through increased industrialization. The analysis is carried out using the concept of outreach banks. The study finds that comparatively NEDFi has been promoting a broad-based, versatile industrial machinery to serve the different dimensions of promoting industrialization in the state.