The Defects or Problems or Criticism of Industrial Finance in India : Suggestions for Solving the Problem of Industrial Finance

The Defects or Problems or Criticism of Industrial Finance in India

Many reasons exist for the paucity of industrial fi-
nance in our country and due to this adequate assistance cannot be provided to industrialization. The following are the problems facing industrial finance –

  1. Reluctant investment of capital – the people
    in India who have the capital are mostly not in favour of investing in industry and thus industrial finance falls short. People generally prefer to invest in gold, silver etc.
  2. The attitude of commercial banks – a large
    share of the capital with commercial banks in India is in the form of pay-on-demand deposits which does not allow the bank to invest in industrial areas. In this way due to the anti industry ways of the commercial ways the problems of industrial finance remain.
  3. Low levels of income and savings – the in-
    come of mast of the people in India is low. Because of low income they are barely able to fulfil their basic needs of food, clothes and shelter. Thus they cannot be expected to save. In the absence of savings capital is not built and so the problems of industrial finance remain.
  4. Lack of organised flow and capital market –
    in India even after 52 years of independence flow and capital markets are not well organised. There are several villages without a bank which is a hurdle to the government and the Reserve Bank of India both in implementing effective fiscal

5.policies for the industrial needs. Thus proper
capital cannot be made available to the industries. Paucity of specific financial institutions – lack of specific financial institutions in the country is another reason behind the paucity of industrial finance in the country.

6.Insufficient effect of industrial securities on
the common masses – because of illiteracy, inexperience, unawareness, fear of security of money, faulty exchange of wealth etc. the people of India do not invest in industrial securities. Ni this way due to lack of public interest in investing in industrial sector there is always a shortage of industrial finance.

Suggestions for Solving the Problem of Industrial Finance

  1. Financial sources – for spreading the financial
    sources banks should be available in all areas and experts should be appo inted in banks.
  2. Savings – people should be motivated to save via small saving schemes.
  3. Financial institutions – a large number of financial institutions should be set up in the country and long term loans should be provided through commercial banks.
  4. Establishment – investment trust establishment
    should be implemented without delay.
  5. Securities – commercial banks should be devel-
    oped on a large scale.
  6. Commercial Banks – efforts should be made to
    draw the public’s attention towards industrial securities and long term investments of the public should be drawn.
  7. Reserve Bank – the Reserve Bank of India should cooperate towards industrial finance.

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