Indian information and broadcasting minister, Sushma Swaraj has cleared the way for the Industrial Development Bank of India, the Bank of India and the Reserve Bank of India to grant loans to filmmakers.
The move comes as part of 'Operation Clean-Up', an initiative launched to prevent the use of 'underground' money in film production.
The first Indian Bank-funded movie Aankhein is to be released in April and 12 further film projects have already been funded by the Indian Banks to a total of $15m.
The Industrial Development Bank of India has already committed funding to Indian movies to the tune of $12m and is looking at five proposals amounting to another $8m. It has also earmarked $20m in film funds for the next financial cycle. At the same time, Bank of India has announced a $10m fund for Indian films, while the Reserve Bank of India has authorised Indian banks to fund films up to $1m.
Since the early 1960s the film financing business has been dominated by the star system, whereby Indian movie stars commanded fees in proportion to the box office performance of their recent films. This increased costs of film production since the more successful actors and actresses hogged major proportions of the producers' budget.
Under this system Indian distributors would pay 50% of the film's budget leaving the producer to raise rest from other sources. The 'other' sources have traditionally been conventional moneylenders (who lend at an annual interest rate of 36%-50%); non-conventional but corporate resources and underworld money.
The government funding through banks represents an attempt to shift the Indian Industry from being a cottage industry into a more corporate structure.