Development bank is a specialised financial institution which provides medium and long term finance to business units in the forms of loans, underwriting, investments and guarantees operations, promote entrepreneurship and upgrade knowhow and do-how. It is a multi-purpose financial institution and not just a term-lending institution. 

It does not accept deposits from the public, unlike commercial banks. A development bank does not perform ordinary banking functions. According to William Diamond, “A Development Bank has the opportunity to promote enterprises i.e. to conceive investment proposals and to stimulate others to pursue them or itself to carry them through from the ‘conception’ to ‘realisation’.

Features of Development Bank:

(a) Development bank is a specialised financial institution which provides medium and long term finance to business units.

(b) It is a multi-purpose financial institution and not just a term-lending institution.

(c) It does not accept deposits from the public, unlike commercial banks. A development bank does not perform ordinary banking functions.

(d) Financial assistance is provided by a development bank not only to the private sector but also to the public sector undertakings.

(e) One of its major aims is to promote the saving and investment habit in the community.

(f) Its major role is the gap-filler, i.e. to fill up the deficiencies of the existing financial facilities.

(g) Its motive is to serve the public interest. It works in the general interest of the nation rather than to make profits. A development bank is motivated by social profits.