Consider the following statements: 1. The National Housing Bank the apex institution of housing finance in India, was set up as a wholly-owned subsidiary of the Reserve Bank of India 2. The Small Industries Development Bank of India was established as a whollyowned subsidiary of the Industrial Development Bank of India Which of the statements given above is/are correct?
Contents13
- A1 only
- B2 only
- CBoth 1 and 2
- DNeither 1 nor 2
Show answer
Answer: (C) Both 1 and 2
Explanation:
Statement 1 is correct:
The National Housing Bank (NHB) is the apex institution in India for housing.
It was set up as a wholly owned subsidiary of the Reserve Bank of India (RBI) in 1988 under the National Housing Bank Act 1987.
Statement 2 is correct:
The Small Industries Development Bank of India (SIDBI) was established in 1990 as a wholly owned subsidiary of the Industrial Development Bank of India (IDBI) with the aim to aid in the growth and development of micro, small and medium-scale enterprises (MSME).
Currently, the ownership is held by 34 Government of India owned/controlled institutions.
NHB and SIDBI are apex institutions for housing finance and small industries respectively, with specific parent-subsidiary relationships that define India's development finance architecture.
Both institutions were created as wholly-owned subsidiaries of major financial institutions - NHB under RBI in 1988 and SIDBI under IDBI in 1990.
The question tests knowledge of institutional hierarchy in India's development banking system, focusing on which parent institution established which subsidiary.
National Housing Bank (NHB)
Indian Economy National Housing Bank apex institution housing finance Reserve Bank of India
National Housing Bank: India's Apex Housing Finance Institution
NHB is the apex institution for housing finance in India
Established as a wholly-owned subsidiary of RBI in 1988
Regulates and promotes Housing Finance Companies (HFCs)
Created under the National Housing Bank Act 1987
What is NHB
The National Housing Bank (NHB) is India's principal institution for housing finance, functioning as both a regulator and promoter of Housing Finance Companies (HFCs). It was created to address the housing shortage by developing institutional framework for housing finance.
Key Details
Aspect | Details |
|---|---|
Establishment | 1988 under National Housing Bank Act 1987 |
Parent Institution | Reserve Bank of India (RBI) - wholly owned subsidiary |
Headquarters | New Delhi |
Primary Role | Apex institution for housing finance |
Regulatory Function | Supervises Housing Finance Companies (HFCs) |
Promotional Function | Provides refinance to housing finance institutions |
Functions & Significance
Refinancing: Provides long-term funds to banks, HFCs, and state housing boards for housing loans
Regulation: Supervises and regulates Housing Finance Companies under NHB Act
Policy Development: Formulates policies for orderly growth of housing finance system
Research: Conducts studies on housing finance market and publishes housing finance statistics
Financial Inclusion: Promotes affordable housing through various schemes and initiatives
Trap: Confusing NHB with HUDCO - NHB is apex regulator, HUDCO is development financier
Trap: NHB is subsidiary of RBI, not Ministry of Housing & Urban Affairs
Trap: Established in 1988, not 1987 (Act was passed in 1987)
Small Industries Development Bank of India (SIDBI)
Indian Economy Small Industries Development Bank of India SIDBI Industrial Development Bank of India IDBI
SIDBI: India's Principal Financial Institution for MSMEs
SIDBI is the principal financial institution for MSME sector
Established in 1990 as wholly-owned subsidiary of IDBI
Provides refinance, direct finance, and promotional support to MSMEs
Currently owned by 34 Government institutions (not just IDBI)
What is SIDBI
The Small Industries Development Bank of India (SIDBI) is the apex financial institution dedicated to the promotion, financing, and development of Micro, Small and Medium Enterprises (MSMEs) in India. Originally conceived to fill the credit gap for small industries.
Evolution & Structure
Aspect | Details |
|---|---|
Establishment | April 2, 1990 under SIDBI Act 1989 |
Original Parent | Industrial Development Bank of India (IDBI) - wholly owned |
Current Ownership | 34 Government-owned/controlled institutions |
Headquarters | Lucknow, Uttar Pradesh |
Mandate | Principal financial institution for MSME sector |
Coverage | Pan-India presence with regional and branch offices |
Functions & Services
Refinance: Provides refinance to banks and financial institutions for MSME lending
Direct Finance: Offers direct loans to MSMEs, especially technology-based and export-oriented units
Promotional Activities: Skill development, entrepreneurship development, and technology upgradation
Resource Mobilization: Raises funds from domestic and international markets for MSME financing
Policy Support: Implements government schemes like PMEGP, Credit Guarantee Scheme
Question Context
Statement 2 in the PYQ correctly identifies SIDBI's establishment as a wholly-owned subsidiary of IDBI in 1990. Though ownership has since diversified to 34 government institutions, the original subsidiary relationship with IDBI remains historically accurate.
Trap: SIDBI was subsidiary of IDBI, not RBI or any other institution
Trap: Current ownership is diversified across 34 govt institutions, not just IDBI anymore
Trap: Established in 1990, focus on small industries development, not just banking
Development Financial Institutions in India
Indian Economy
Development Financial Institutions: Structure & Evolution
DFIs provide long-term finance for industrial and infrastructure development
IDBI, IFCI, ICICI were the original all-India DFIs
Most DFIs have been converted to commercial banks or merged
Sector-specific DFIs like NHB, SIDBI, NABARD continue to operate
What are DFIs
Development Financial Institutions (DFIs) are specialized financial institutions created to provide long-term finance for industrial development, infrastructure projects, and specific economic sectors where commercial banks traditionally don't lend due to long gestation periods and higher risks.
Major DFIs & Their Evolution
Institution | Established | Original Purpose | Current Status |
|---|---|---|---|
IFCI | 1948 | Industrial finance | Still operating as DFI |
IDBI | 1964 | Industrial development | Converted to commercial bank (2004) |
ICICI | 1955 | Industrial credit | Merged with ICICI Bank (2002) |
NHB | 1988 | Housing finance | Active - RBI subsidiary |
SIDBI | 1990 | Small industries | Active - MSME financing |
NABARD | 1982 | Rural development | Active - agriculture & rural |
EXIM Bank | 1982 | Export-import finance | Active - trade finance |
Current DFI Structure
# Development Financial Institutions
## All-India DFIs
- IFCI (Industrial Finance)
- EXIM Bank (Trade Finance)
## Sector-Specific DFIs
- NHB (Housing)
- SIDBI (MSMEs)
- NABARD (Agriculture)
- IIFCL (Infrastructure)
## Converted/Merged
- IDBI → IDBI Bank
- ICICI → ICICI Bank
- UTI → Mutual FundTrap: IDBI is now a commercial bank, not a DFI (converted in 2004)
Trap: ICICI merged with ICICI Bank in 2002, original DFI doesn't exist
Trap: Confusing parent-subsidiary relationships - NHB under RBI, SIDBI originally under IDBI