Consider the following statements regarding Development Banks in India:
1. Development banks in India provide long-term finance primarily for capital-intensive industrial and agricultural projects.
2. Development banks in India mobilize short-term savings from the public to fund their long-term lending activities.
Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Explanation Statement 1 is correct : Development banks are primarily set up to provide long-term financing for capital-intensive projects such as large-scale industrial projects and agricultural development. These banks play a crucial role in supporting the infrastructure and industrial sectors by offering financial assistance for projects that require significant investment over a long period.
Statement 2 is not correct : Development banks do not generally mobilize short-term savings from the public in the same way that commercial banks do. Instead, they raise funds through long-term bonds, government support, and by borrowing from the Reserve Bank of India (RBI) and other financial institutions. They are not reliant on short-term deposits from the public to fund their long-term lending activities. They focus on providing long-term credit and do not collect short-term savings from the public like commercial banks.
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