DISCOUNT & FINANCE HOUSE OF INDIA (DFHI)

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Prepared By:- Akta Shah

:-Introduction:-

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The discount and Finance House Of India (DFHI) has been set up as a specialised money market institution with the objective of providing liquidity to money market instruments and to develop a secondary market. The working group on money market suggested the setting up of DFHI in 1987. In pursuance of the recommendations of the working group, the RBI set up jointly with the Public Sector Banks, and Financial Institutions and established DFHI.Ltd The DFHI was incorporated under the Indian Companies Act, 1956. The DFHI commenced it operations in April, 1988.

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Definition:It is a joint stock company and is jointly owned by RBI, the Public Sector Banks and the all Financial Institutions, which have contributed its paid up capital of Rs.150 Crores. The main objective of establishing DFHI has been to strengthen the short-term money market and make short-term resources available to the institutions. It shall generate the bill culture and bill discipline amongst the banks, financial institutions and the Central and State Govt. Undertakings. The option of borrowing in the call money market and on short-term basis is also open to the DFHI. However, the total amount of credit that the DFHI can borrow either from RBI or from its lender is limited to ten times its net wirth.

:- Functions Of DFHI:-

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The main functions of DFHI are as follows. 1. To discount, rediscount ,buy, sell, underwrite or acquire and sell marketable securities and negotiable instruments including treasury bills and commercial papers. 2. To undertake buy back arrangements in trade and treasury bills as well as securities of local authorities, public sector institutions, Govt. and commercial and non-commercial houses. 3. To carry on business as a lender, borrower, broker or as a broking house in the inter-bank call money market. 4. To promote and support company funds, trusts, and such other organisations for the development and expansion of the money market. 5. As regards short-term commercial bills, the aim of the DFHI is to provide liquidity to commercial bills which have already been rediscounted by banks and financial institutions, thus giving them access to liquid funds.

CONT.
6. 7.

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8. 9.

The operations of DFHI are aimed at imparting greater flexibility to banks in their fund management. Corporate bodies and other institutions will also find it attractive to invest their short-term funds in treasury bills and secondary market will be created by the presence of DFHI. DFHI participants in the call, notice and term markets as a borrower and as a lender. DFHI also purchases and sells T-bills at the auctions, commercial bills, commercial papers, and CDs.

HOUSING FINANCE MARKET

Households, Corporations, Trusts, Provident Funds
Government of India Reserve Bank of India

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State Governments

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Scheduled Banks

State Apex CHFS Housing & Urban Devpt. Corporation Public, Pvt. Agencies Housing Finance Companies

Households & Corporations

LIC : Life Insurance Corporation of India GIC : General Insurance Corporation of India CHFS : Co-operative Housing Finance Societies

Housing Finance : Exponential Growth

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Direct Housing Finance Disbursals Primary Lending Institutions (PLIs) 1. Commercial Banks 2. Housing Finance Companies (HFCs) 3. Co-operative Institutions 4. TOTAL 5. Annual Growth (in %) 2001-02 8566 14614 678 23858 25 2002-03 23553 17832 642 42027 76 2003-04 32816 20862 623 54301 29

(Rs. in crores) 2004-05 45700 26000 -71700 32

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Thanks