Definition
The term industrial bank refers to a company that lends money and is oftentimes owned by non-financial institutions. Industrial banks provide loans to both individuals as well as companies which are often associated with a specific industry.
Explanation
Also known as an industrial loan company (ILC), an industrial bank provides a relatively narrow set of services to both businesses as well as individuals. The financial services offered by an industrial bank focus on writing loans; however, they also accept deposits from customers that will be FDIC insured.
Industrial banks are oftentimes owned by non-financial institutions but are subject to the same regulations as financial institutions offering similar services. The clients of an industrial bank are frequently individuals that work in a specific industry, and their objective would be to write loans that make it possible to own a home or vehicle. Industrial banks are also established by companies that wish to provide their customers with financing so they can purchase their goods or services. For example, an automobile manufacturer may establish an industrial bank to provide new car loans. In doing so, the manufacturer may be able to provide more attractive interest rates and repayment plans then available at competing financial institutions.