This paper provides a perception of the financial sector reforms undertaken in India since 1991 through the rise and decline of an All India Development Finance Institution (DFI). It traces the origin of the DFI, the various structural changes it underwent, the changing environment it faced, and its eventual inability to survive. With financial sector reforms, the various options that were there before the DFI is presented and its financial performance is analyzed. This paper also highlights the basic areas that a financial intermediary has to safeguard against for compliance with regulatory norms and long-term viability in a competitive financial system.The Industrial Reconstruction Corporation of India (IRCI) was set up in 1971, as a company under the Companies Act 1956, by the Government of India as an All India Development Finance Institution to financially assist sick and weak industrial units in the country. The services it offered included financial assistance, guarantees, managerial guidance, marketing assistance and other advisory services. The Government of India provided funds for the purpose.

The Industrial Development Bank of India (IDBI), Life Insurance Corporation of India (LIC), Industrial Credit and Investment Corporation of India (ICICI), State Bank of India (SBI) and 14 nationalized banks held the initial paid up capital of Rs. 10 cr of IRCI.IRCI got converted to Industrial Reconstruction Bank of India (IRBI), a statutory corporation, in 1985 and the entire shareholding was taken over by the Government of India. Its activities continued to be providing term loan assistance, equipment leasing and hire purchase assistance to sick and weak industrial units in the country and also line of credit to state level agencies. The Government of India continued to be its source for funds. The Reserve Bank of India (RBI) also provided some funds.