What are Development Banks?

Development banks are those which have been set up mainly to provide infrastructure
facilities for the industrial growth of the country. They provide financial assistance for
both public and private sector industries.

Development Banks – Meaning, Objectives, Commercial Banks vs Development Banks

Objectives of Development Banks

The main objectives of the development banks are
1. to promote industrial growth,
2. to develop backward areas,
3. to create more employment opportunities,
4. to generate more exports and encourage import substitution,
5. to encourage modernisation and improvement in technology,
6. to promote more self employment projects,
7. to revive sick units,
8. to improve the management of large industries by providing training,
9. to remove regional disparities or regional imbalance,
10. to promote science and technology in new areas by providing risk capital,
11. to improve capital market in the country.

Differences between Commercial banks and Development banks

The following are some of the differences between commercial banks and development
banks.
 COMMERCIAL BANKS DEVELOPMENT BANKS

Provide short term loans. Provide long term loans.

Accept deposits from commercial

Accept deposits from the public.
banks, Central and State governments.

Provide refinancing tacilities to

Direct finance to customers.
commercial banks.

Play an important role in hire purchase,

Plays an important role in the money market.
lease finance, housing loan.

Public sector banks have their share capital contributed by the

Central and Statement governments
government while private sector banks have share capital contributed
contribute capital.
by the public.

They promote economic growth of the

Promote savings among the public and help commercial activities.
country.