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The creation of the machinery of the special financing institutions, more appropriately designated in economic literature as 'development banks', as an integral part of the deliberate and conscious attempt by the Government to orient the financial system to the requirements of planned economic development, has been, indeed, an outstanding institutional development in the emergence of an efficient industrial financing mechanism in India.

Among the institutional sources of industrial finance in India, commercial banks are by far the oldest and quantitatively vitally important. In terms of the orthodox view of the theory of deposit banking, bank credit should be restricted to the financing of seasonal and other temporary financial requirements of a self-liquidating nature i.e., for working capital requirements, the permanent needs being met from long-term sources.