A Development Bank is a polygonal development finance institution devoted to improving

the social and monetary development of its associate nations. Its main emphasis is the welfare
of the people. For example the Asian Development Bank's overarching goal is to decrease
poverty in Asia and the Pacific. It helps improve the value of people's lives by providing
loans and scientific support for a broad variety of development activities.

A development bank's policies or programs center on the following priorities:

a) Economic Growth

b) Human Development

c) Gender and Development

d) Good Governance

e) Environmental Protection

f) Private Sector Development

g) Regional cooperation

The main functions of a Development Bank:

a) Increase loans and equity investments to its developing associate countries (DMCs) for
their monetary and social development.

b) Provides technical help for the planning and implementation of development projects and
programs and for advisory services.

c) Promotes and facilitates speculation of public and private capital for growth and
development.

d) Responds to requests for assistance in coordinating growth policies and plans of its
increasing member countries.

Formation of Development Banks In India:

Development banks were set up in India at various points of time starting from the late 1940s
to cater to the medium to long term financing requirements of industry as the capital market
in India had not developed sufficiently. The endorsement of planned industrialization at the
national level provided the critical enticement for organization of Development banks at both
all-India and state levels.

In order to perform their role, Development Banks were extended funds in the shape of Long
Term Operations (LTO) Fund of the Reserve bank of India and government guaranteed
bonds, which constituted main sources of their funds. Funds from these sources were not only
available at concessional rates, but also on a long term basis with their maturity period
ranging from 10-15 years.
On the asset side, their operations were marked by near absence of competition. A large
variety of economic institutions have come into existence over the years to perform a type of
financial actions While some of them operate at all-India level, others are state level
institutions.

Besides providing direct loans, financial institutions also extend economic assistance by way
of underwriting and direct contribution and by issuing guarantees. Recently, some
Development Banks have started extending short term/working capital finance, although long
term lending continues to be their major activity