By the early sixties, Indian had a network of development banks (about 60) which resulted in the duplication in their activities besides competition. The need was thus felt to co-ordinate their activities and to provide them with dynamic leadership in the common task of promoting and developing industries in 'accordance with the national priorities. Consequently, IDBI was set up in 1964 under the IDBI act 1964 not only as a principal development bank, but also to co-ordinate the activities of other development bank at the national and state levels. The bank has been granted wide ranging powers to act as a principal financial promotional and co-ordinating agency.

The financial sectors in India has witnessed radical change after the mid eighties and more so after 1990-91 as result of the economic reforms initiated by government since then. The changing environment has brought about an element of competition and customer orientation in the withdrawal of government's budgetary support to them and raising of the resources from the market at a higher cost have further changed their outlook. In the recent past, these development banks have diversified their activities by entering into new financial service like merchant banking, stock brooking, credit rating, custodial services, and so on to compensate the rising cost of funds. These new development are expected to have their profound impact on there working in general and promotional functions in particular.