ACKNOWLEDGMENT
It’s give me a great pleasure to present my project on “study of financial aspect with special focus on IDBI bank.” I am very thankful to our prof. Bhavika karkera, who always helped me to complete my project without her support & motivation this project would not have see the light of the day her review, comments, correction & suggestions have enormously enriched my project. I also here thank to (co-coordinator) prof. Bhavika kakera who give me they may ideas & correction may projects & various books. Relatd to my project & to help me in completion of my project. I am also grateful to our principal MR. V.M .INGAVALE. I also would like. To thank “MRS. ANUJA .P. JADHAV”. Madam who is our librarian and who supported me by giving various book related to my project and to help me in complection of project. Before conducting this project I was having limited knowledge about “study of financial aspect with special focus on IDBI bank”. But this project helped me to expand my knowledge related to project
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INDEX
SR NO 1. 2. 3. 4. 5. 6. .7. 8. Introduction History of financial in India & IDBI Introduction of IDBI Financial market, institutions & financial services in India Profiles of IDBI bank Primary data analysis Secondary data analysis Finding & conclusion • • Bibliography Annexure CHAPTER PAGE NO 3 4 17 28 33 46 56 62
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Introduction
1.
Background of project: I have selected this topic because today industrial development bank of India (IDBI) is one of in dais largest bank. It has essayed significance role in financial system &first as a develop financial institution.
2. Objective of study : 1. To study the scope of IDBI in financial system. 2. To study the major service of IDBI 3. To study the problem which are face by the IDBI?
3.
Limitation of project: there are so many financial systems in bank like IFCI, NABARD, SIDBI ICICI, SFC’S etc. but this study covers only IDBI bank. In this project detailed study of financial system in IDBI is not done.
4.
Research methodology: I have analyses my project with there help of two methods of data collection to primary data & secondary data.
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CHAPTER 1
History of financial services
The term "financial services" became more prevalent in the United States part as a result of the Gramm-Leach-Bliley Act of the late 1990s, which enabled different types of companies operating in the U.S. financial services industry at that time to merge. Companies usually have two distinct approaches to this new type of business. One approach would be a bank which simply buys an insurance company or an investment bank, keeps the original brands of the acquired firm, and adds the acquisition to its holding company simply to diversify its earnings. Outside the U.S. (e.g., in Japan), non-financial services companies are permitted within the holding company. In this scenario, each company still looks independent, and has its own customers, etc. In the other style, a bank would simply create its own brokerage division or insurance division and attempt to sell those products to its own existing customers, with incentives for combining all things with one company... Banks A "commercial bank" is what is commonly referred to as simply a "bank". The term "commercial" is used to distinguish it from an "investment bank," a type of financial services entity which, instead of lending money directly to a business, helps businesses raise money from other firms in the form of bonds (debt) or stock (equity).
Banking services
The primary operations of banks includes
• •
Keeping money safe while also allowing withdrawals when needed Issuance of checkbooks so that bills can be paid and other kinds of payments can
be delivered by post
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•
Provide personal loans, commercial loans, and mortgage loans (typically loans to Issuance of credit cards and processing of credit card transactions and billing Issuance of debit cards for use as a substitute for checks Allow financial transactions at branches or by using Automatic Teller Machines Provide wire transfers of funds and Electronic fund transfers between banks Facilitation of standing orders and direct debits, so payments for bills can be made Provide overdraft agreements for the temporary advancement of the Bank's own Provide internet banking system to facilitate the customers to view and operate Provide Charge card advances of the Bank's own money for customers wishing to Provide a check guaranteed by the Bank itself and prepaid by the customer, such Notary service for financial and other documents
purchase a home, property or business)
• • •
(ATMs)
• •
automatically
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money to meet monthly spending commitments of a customer in their current account.
•
their respective accounts through internet.
•
settle credit advances monthly.
•
as a cashier's check or certified check.
•
Other types of bank services
•
Private banking - Private Banks provide banking services exclusively to high net
worth individuals. Many financial services firms require a person or family to have a certain minimum net worth to qualify for private banking services. Private Banks often provides more personal services, such as wealth management and tax planning, than normal retail banks.
•
Capital market bank - bank that underwrite debt and equity, assist company deals
(advisory services, underwriting and advisory fees), and restructure debt into structured finance products.
•
Bank cards - include both credit cards and debit cards. Bank of America is the
largest issuer of bank cards.]
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•
Credit card machine services and networks - Companies which provide credit card
machine and payment networks call themselves "merchant card provider
Foreign exchange services
Foreign exchange services are provided by many banks around the world. Foreign exchange services include:
•
Currency exchange - where clients can purchase and sell foreign currency Foreign Currency Banking - banking transactions are done in foreign currency. Wire transfer - where clients can send funds to international
banknotes.
• •
Investment services
•
Asset management - the term usually given to describe companies which run
collective investment funds? Also refers to services provided by others, generally registered with the Securities and Exchange Commission as Registered Investment Advisors.
•
Hedge fund management - Hedge funds often employ the services of "prime Custody services - the safe-keeping and processing of the world's securities trades
brokerage" divisions at major investment banks to execute their trades.
•
and servicing the associated portfolios. Assets under custody in the world are approximately $100 trillion. Insurance
•
Insurance brokerage - Insurance brokers shop for insurance (generally corporate
property and casualty insurance) on behalf of customers. Recently a number of websites have been created to give consumers basic price comparisons for services such as insurance, causing controversy within the industry.
•
Insurance underwriting - Personal lines insurance underwriters actually
underwrite insurance for individuals, a service still offered primarily through agents,
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insurance brokers, and stock brokers. Underwriters may also offer similar commercial lines of coverage for businesses. Activities include insurance and annuities, life insurance, retirement insurance, health insurance, and property & casualty insurance.
•
Reinsurance - Reinsurance is insurance sold to insurers themselves, to protect
them from catastrophic losses.
Other financial services
•
Intermediation or advisory services - These services involve stock brokers (private
client services) and discount brokers. Stock brokers assist investors in buying or selling shares. Primarily internet-based companies are often referred to as discount brokerages, although many now have branch offices to assist clients. These brokerages primarily target individual investors. Full service and private client firms primarily assist and execute trades for clients with large amounts of capital to invest, such as large companies, wealthy individuals, and investment management funds.
•
Private equity - Private equity funds are typically closed-end funds, which usually
take controlling equity stakes in businesses that are either private, or taken private once acquired. Private equity funds often use leveraged buyouts (LBOs) to acquire the firms in which they invest. The most successful private equity funds can generate returns significantly higher than provided by the equity markets
•
Venture capital is a type of private equity capital typically provided by
professional, outside investors to new, high-potential-growth companies in the interest of taking the company to an IPO or trade sale of the business.
•
Angel investment - An angel investor or angel (known as a business angel or
informal investor in Europe), is an affluent individual who provides capital for a business start-up, usually in exchange for convertible debt or ownership equity. A small but increasing number of angel investors organize themselves into angel groups or angel networks to share research and pool their investment capital.
•
Conglomerates - A financial services conglomerate is a financial services firm
that is active in more than one sector of the financial services market e.g. life insurance, general insurance, health insurance, asset management, retail banking, wholesale banking, investment banking, etc. A key rationale for the existence of such
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businesses is the existence of diversification benefits that are present when different types of businesses are aggregated i.e. bad things don't always happen at the same time. As a consequence, economic capital for a conglomerate is usually substantially less than economic capital is for the sum of its parts.
•
Debt resolution is a consumer service that assists individuals that have too much
debt to pay off as requested, but do not want to file bankruptcy and wish to pay off their debts owed. This debt can be accrued in various ways including but not limited to personal loans, credit cards or in some cases merchant accounts. There are many services/companies that can assist with this. These can include debt consolidation, debt settlement and refinancing
Market share
The financial services industry constitutes the largest group of companies in the world in terms of earnings and equity market capitalization. However it is not the largest category in terms of revenue or number of employees. It is also a slow growing and extremely fragmented industry, with the largest company (Citigroup), only having a 3 % US market share.[8] In contrast, the largest home improvement store in the US, Home Depot, has a 30 % market share, and the largest coffee house Starbucks has a 32% market share.
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CHAPTER 2
Finance of IDBI Corporate Finance
IDBI Bank is pioneer in the field of corporate finance and offers array of products catering to their diversified requirements. In order to draw focused attention and ensure improved customer service, corporate finance in IDBI Bank operates on three broad corporate verticals viz. Infrastructure Finance, Large Corporate and Mid Corporate Groups. At present the Bank has 32 dedicated Specialized Corporate Branches (SCBs) at key geographical locations wherein corporate density is high and their service requirement is immense. In addition to tailor made products dovetailing niche segment, Corporate finance domain of IDBI Bank has structured products which includes current account with innovative features, bulk & non-bulk deposits, various asset based products as well as transaction banking products like trade finance, cash management services and government agency business of tax collection. Corporate finance group also offers treasury products and loan syndication services to its clients.IDBI Bank continue to scale new heights in Trade Finance business. During the financial year 2010-11, the non-fund based business in LCs and BGs segment grew by 18% crossing `60,000 corer. Fee income from Trade Finance activities rose by 30%. IDBI Bank facilitated Export-Import Trade Finance considerably and launched a multi-currency Remittance product that allows customers the option of making remittance in more than 100 currencies. IDBI Bank is fast emerging as a preferred bank for e-payment of direct and indirect taxes. Tax collection was almost 1 lakh crore during FY2010-11. There has been growing involvement with the Government’s initiatives such as the Central Plan Scheme Monitoring System, Goods & Services Tax and e-initiatives in respect of Stamp Duty collection. In the current year, IDBI Bank initiated payment and receipt related transactions for the Railways and the Government of Haryana. Cash Management Services have been a thrust area ofIDBI Bank. It has established a firm foothold in this business segment and is extending its services to an increasing number of corporate. Prestigious dividend mandates have been obtained from companies, both in public as well as the private sectors.IDBI Bank has also
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earned market recognition for its services as Bankers to Issue for IPO / FPO assignments, especially in the disinvestment programmer of the Government of India, and has emerged as a major player in the retail segment.IDBI Bank’s strategy to continuously upgrade its CMS product offering has been reaping rich reward
Infrastructure Finance
IDBI Bank has increasingly been associated with infrastructure financing and always remained proactive to realize the dreams of the nation in this regard. Infrastructure financing involves long gestation periods and have a distinct risk and return profile requiring innovative structuring. It has been in the forefront in structuring and financing of infrastructure projects in the areas of power, telecom, roads, airports, seaports, railways and logistics, ever since the infrastructure sector was opened to private investment, and a significant share of its aggregate assistance goes to infrastructure sector. Recognizing the critical role of infrastructure development in the growth of national economy and also the huge investment required in the sector, focused approach was followed to provide end-toend solutions to the infrastructure companies viz. corporate advisory, syndication of debt / equity, financial structuring, term loans, working capital, securitization and other related services. IDBI Bank has emerged as leading player in debt syndication field. IDBI Bank has also taken initiatives in funding urban infrastructure projects; renewable energy projects (solar, wind and bio mass-based power projects); seaports and airports under the Public-Private Partnership (PPP) route. With the opening of overseas branch,IDBI Bank is in a position to extend, selectively, foreign currency denominated loans to infrastructure projects.
Retail Finance & Financial Inclusion
IDBI Bank aims to improve its business mix and thereby endeavors to augment composition of retail business. Supportive infrastructure set up in terms of branch network and skilled manpower provides good scope in this regard. At the end of the fiscal,IDBI Bank has 815 domestic branches comprising 238 at metropolitan centers, 307 at urban centers, 184 at semi-urban centers, 86 at rural centers and one overseas. In addition to its plan of expanding branch network, IDBI Bank is in the continuous process of bringing improvement in existing products to increase customer satisfaction level.
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IDBI Bank is a pioneer in the Indian Banking industry in embarking upon a special mission to bring about “Delight for its customers”. Under this mission,IDBI Bank has introduced Current and Savings account services free from all charges to its customers. With this unique measure, IDBI Bank has been able to attract about nine lakh customers with an initial account opening amount of ` 3200 crore. IDBI Bank is also offering additional interest on fixed deposits above the normal deposit rates to the `Golden-Aged’ customers. As part of customer rendezvous, IDBI Bank celebrated the 100th anniversary of `International Women’s Day’ at 102 branches across the nation. IDBI Bank, in its efforts to realize improved reach to its growing clientele, added 169 ATMs at key locations, taking the total number of ATMs to 1370 as on March 31, 2011. In fact, IDBI Bank envisages utilizing alternate models of ATM deployment so as to increase the pace of expansion of its ATM network. IDBI Bank continuously attempts to develop innovative features and facility in its ATMs. Accordingly, the Bank has the plan of introducing, along with others, ATM enabled payment of direct taxes. IDBI Bank thrusts on promoting Alternate Channels and increasingly endeavors to deliver new products and services through these channels. As a part of these initiatives, IDBI Bank, during the financial year 2010-11, provided the facility of making on-line payments for e-commerce transactions through its debit cards.IDBI Bank also launched a new variant of the debit card, i.e. Women’s Card exclusively for its women customers. Cash back scheme for debit card usage at Point of Sale as well as for e-commerce was also rolled out during the financial year. In addition,IDBI Bank has also enabled its debit cards for withdrawing cash at merchant locations within the permissible limits. It has also tied up with select merchants for offering this facility to the debit cardholders of all the banks in the country. The facility for transfer of funds by IDBI Bank’s customers to other customers of IDBI Bank as well as customers of any other bank through mobile phones is also being introduced in partnership with the National Payment Corporation of India. As a part of its efforts towards making its internet banking service more secure, your Bank has introduced a facility of second factor authentication (by way of an one time password delivered through SMS) before registering any beneficiary for transfer of funds through internet banking. With a view to enhancing customer experience and increasing usage of its internet banking facility, IDBI Bank has also provided the facility of creating
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passwords online by the customers themselves. IDBI Bank has bagged the prestigious mandate of being the partner for Department of Posts in their pre-paid card programmer for their account holders. IDBI Bank is also partnering with Bombay Custom House Agents Association (BCHAA) for issue of an innovative payment instrument to enable epayment of freight, custom duties etc. through a closed user group debit card. IDBI Bank has emerged as one of the dominant and competitive players in the retail finance segment. To meet the diversified needs of the retail customers, an array of innovative products, both Secured and Unsecured, are offered to prospective retail customers. IDBI Bank has launched Mortgage Loan Interest Saver, an innovative product, where borrower can save interest on Loan against Property to the extent of surplus funds parked in his current account linked to loan account. To increase the level of Current Account and Savings Account (CASA), IDBI Bank has introduced Salary account with in-built overdraft facility for salaried individuals, having their salary account with IDBI Bank.IDBI Bank attaches great importance to Education Loan for the meritorious, needy and deserving students. The Bank has a tie-up with Educational institutes for granting education loan. To ensure wider geographical coverage and to tap the latent opportunities,IDBI Bank has increased its footprints by adding 9 new Retail Asset Centers (RACs) during the year. These new centers were started in Tier II and Tier III cities with a view to increase home loans in the ambit of priority sector. With a view to leveraging the relationship with Maruti Suzuki India limited, IDBI Bank has co-sponsored Maruti’s Think Big ChallengeII event for encouraging business ideas and entrepreneurship skill of individuals across 19 cities. To support government initiative of offering financial services to Economically Weaker Section (EWS) and Lower Income Groups (LIG) of the society,IDBI Bank is offering government sponsored scheme called Interest Subsidy Scheme for Housing the Urban Poor (ISHUP) and Education Loan (Central Interest subsidy scheme) to its retail customers. Today IDBI Bank enjoys `Top of Mind Recall’ amongst its peers.IDBI Bank has tied up with over 34 Asset Management Companies (AMCs), including IDBI Mutual Fund to provide a bouquet of diversified financial products to its customers. It is also a distributor of Fixed Income Securities viz. Capital Gain Bonds, Government of India Bonds, and various Tax Saving Bonds. IDBI Bank is registered with Pension Fund Regulatory and Development Authority (PFRDA), as a
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Point of Presence (Pop), for the distribution of New Pension System (NPS), a safe and flexible system, introduced by Govt. of India to provide the citizens with regular postretirement income stream. to cater to the investment and insurance needs of the customers, IDBI Bank offers Life Insurance solutions to suit various customer segments, through IDBI Federal Life Insurance Company Ltd. Your Bank is a Corporate Agent of Bajaj Allianz General Insurance Co. Ltd. to offer `Non-life’ insurance products ranging from asset, health and personal accident. IDBI Bank highly values its relationship with the NRI clients. In its effort to deepen existing relationship and also to build new relationship, it has launched “IDBI Health Care Scheme” under three different packages viz. Platinum, Gold and Economy. Under the scheme, healt check-up facilities are offered to the dependents of NRI clients through a wide network of diagnostic centers. IDBI Bank has entered into an agreement with Al Farmhand Exchange and Oman UAE Exchange during the year for routing remittances from Gulf Countries. With this, the remittance services from Gulf countries can now be availed from 12 Exchange houses. IDBI Bank has also entered into an MOU with UAE Exchange in Gulf Cooperation Council(GCC) countries for sourcing NRI deposits IDBI Bank has various NRI campaigns and NRI customer meets and also participated in NRI events/conferences held in India and overseas to improve the services to NRI customers and expand visibility of NRI products and services.43 IDBI Bank offered Portfolio Investment Scheme (PIS) services to NRIs for investment in the secondary market on both repatriable and non-reparable basis by trading in online as well as offline modes. The trading tie-up includes IDBI Capital Market Services limited for online trading and other major stockbrokers for the purpose of offline trading. IDBI Bank also proposes to extend facilities of online trading to other institutional brokers to cover a larger number of NRI customers. In meeting the objective of Financial Inclusion as articulated by the Government of India,IDBI Bank has initiated Financial Inclusion Plan (FIP) for the first three years ending FY 2013. The Bank is required to cover total 119 villages, with a population of over 2000, by FY 2012, in the states of Maharashtra, Madhya Pradesh, Chhattisgarh, West Bengal, Himachal Pradesh, and Dadra & Nagar Haveli. During the financial year 2010-11, the Bank had met the target of launching Financial Inclusion Plan (FIP) in 55 unbanked villages. The remaining 64 unbanked
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villages will suitably be covered during FY 2012. In addition to these villages, bank will also cover 5000 villages with a population of less than 2000 by FY 2012-13. Apart from the villages, IDBI Bank is also launching Financial Inclusion drive in the urban unbanked habitations. The FIP of IDBI Bank is being implemented by using Information Communication Technology (ICT) based smart card solution through Business Correspondent (BC) model. Services of various Technology Service Providers (TSPs) across geographical segments/locations are being used for Financial Inclusion drive. The TSPs would provide end-to-end solution including management of BCs/Customer Service Points (CSPs). Every customer in the unbanked villages is being provided with a biometric smart card as per Institute for development and research in Banking Technology (IDRBT) specifications and capable of incorporating around ten functions. To start with, the banking services being provided in the allotted villages are in offline mode. IDBI Bank is in the process of developing a platform where the customers can be provided the services on a real-time basis. IDBI Bank has also commenced its Inclusive Banking drive by launching its FIP in 46 unbanked villages and 1 urban poor location in Mumbai. The progress in these villages is being reviewed by top management as part of the Outreach Programmer. Presently, IDBI Bank is only rendering services such as deposit, withdrawals and balance enquiry through smart cards. However, it proposes to extend the facilities for micro credit, insurance, utility payments, etc. As part of the Financial Inclusion initiative, IDBI Bank has signed MOU with Tribal Development Department, Government of Gujarat, for delivering financial servicesM, including all transfers from Government Schemes to the beneficiaries of four tribal blocks of the State of Gujarat. IDBI Bank is also in the process of exploring such partnership with other state governments. IDBI Bank has signed MOU with Unique Identification Authority of India (UIDAI) for acting as a Registrar and implementation of the UIDAI project has already been commenced MSME InitiativesMicro, Small and Medium Enterprises (MSMEs) have been accorded an important role in your Bank’s growth charter. IDBI Bank understands that a sustainable growth model in the long-term can be built only on a strong foundation. With its endeavor to take the MSME Banking facilities proximate to MSME clients, IDBI Bank has set up dedicated MSME Care Centres in 30 major cities. Each MSME desks, mapped
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to one of these cities, have been established in major business areas in the vicinity of these Centres. With that,IDBI Bank has enhanced presence in the MSME space at more than 84 centres covering most of the MSME sectors/ clusters of prominence. IDBI Bank understands various needs of the MSME clients and is always on the lookout to offer new products that are customized to take care of such needs. During FY 2010- 11, IDBI Bank introduced four new products in the MSME space. IDBI Bank launched ‘Loan Against Property’ for the MSMEs to take advantage of their assets/properties lying idle. The Bank introduced ‘SME Smart Line of Credit’ so that MSMEs could take advantage of emerging business opportunities. In addition,IDBI Bank implemented the ‘Artisan Credit Card’ scheme of Indian Banks‘ Association (IBA) to take care of the credit needs of the artisan community of the nation. With a view to move towards cleaner and green energy sources,IDBI Bank joined hands with World Resource Institute (WRI), USA, one of the top international research institutes on a non-exclusive basis in developing a loan product for implementation of Energy Saving projects. Apart from these, your Bank has taken steps to offer tailormade, faster solutions to the MSME clients. To further enrich the MSME loan basket, the Bank has tied-up with Small Industries Development Bank of India (SIDBI) in an exclusive arrangement to jointly finance MSME units, initially in 10 centres viz., Ahmedabad, Bangalore, Chennai, Coimbatore, Delhi, Indore, Jaipur, Lucknow, Ludhiana and Rajkot which would subsequently be rolled out across the country. IDBI Bank understands the important role that the clusters play in the economic health of the MSMEs IDBI Bank organized a cluster development initiative at Coimbatore by holding an interactive session where prominent speakers belonging to different specialized streams of industry offered their ideas, highlighting the problem areas and offering solutions to specific problems of the MSMEs of the cluster. With a view to promote MSME building initiatives taken-up by various Industry Associations, your Bank participated in a number of MSME promotional events throughout the past year. 44
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CHAPTER 3
Introduction of IDBI Bank:
The Industrial Development Bank of India Limited, now more popularly known as IDBI Bank, was established as a wholly- owned subsidiary of Reserve Bank of India. The foundation of the bank was laid down under an Act of Parliament, in July1964. The main aim behind the setting up of IDB I was to provide credit and other facilities for the Indian industry, which was stil in the initial stages of growth and development. In February 1976 , the ownership of IDBI was transferred to Government of India. After the transfer of its ownership, IDBI became the main institution, through which the institutes engaged in financing, promoting and developing industry were tube coordinated. In January 1992, IDBI accessed domestic retail debt market for the first time, with innovative Deep Discount Bonds, and registered path-breaking success. The following year, it set up the IDB I Capital Market Services Ltd. , as its wholly-owned subsidiary, to offer a broad range of financial services, including Bond Trading, Equity Broking, Client Asset Management and Depository Services. In September 1994, in response to RBI's policy of opening up domestic banking sector to private participation, IDBI set up IDBI Bank Ltd., in association withes IDBI. In July 1995, public issue of the bank was taken out, after which the Government’s shareholding came down (though it still retains majority of the shareholding in the bank). In September 2003, IDBI took over Tata Home Finance Ltd, renamed ‘IDBI Home finance Limited’, thus diversifying its business domain and entering the arena of retail finance sector IDBI to become a universal bank Our Banking Bureau
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29 October 2001 Mumbai: The Industrial Development Bank of India (IDBI) is all set to covert itself into a universal bank. IDBI board, at its meeting on 27 October, passed a resolution to become a one-stop shop for all kinds of financial services IDBI would seek to achieve this objective by undertaking a reverse merger with a private or a public sector bank. A draft proposal to this effect will be submitted to the Reserve Bank of India by October 31. Earlier last week, IDBI’s rival, ICICI Ltd, had announced that it would merge with ICICI Bank to create India’s second-largest commercial bank and the country’s first universal bank. IDBI had earlier approached the RBI for an extension of the tenor of an existing soft loan to help it convert into a bank and to maintain additional regulatory requirements. According to analysts, the conversion into a universal, or a one-stop bank, will allow IDBI to access retail deposits of less than one-year maturity, that usually carry low rates of interest. Rating agency Crisis had in July downgraded IDBI’s bonds and certificates of deposits to high.
CHAPTER 4
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HISTORY IDBI BANK
HISTORY IDBI Bank was founded on July 1, 1964 under an Act Parliament. It established as a wholly owned subsidiary of Breathe ownership was transferred to the Government of Indian February 16, 1976 It worked as the main financial institution, whose main goal was to Coordinate with other institutions associated with financing, developing and promoting the industry. With the public issue of IDBI Bank released in July 1995, the share holding of The Government came down below 100%. However, the majority of the Share was still owned by the government, which is currently 52.3%. IDBI Bank started offering a wide array of products and services to its Customers, which covered entire range of industrial activities including Services and manufacturing. In September 2003, IDBI acquired the entire shareholding of Tata Finance Limited in Tata Home Finance Ltd. Since then, the fully owned housing Subsidiary was known as 'IDBI Home Finance Limited'. Next year, on July 29, 2004, the Board of Directors of IDBI and IBDI Bank Approved the merger of IDBI Bank with the Industrial Development Bank of India Ltd. IDBI Bank also acquired United Western Bank in 2006. IDBI Bank is one of the leading public sector banks in India and is also the4th largest Indian bank. Founded in 1964 to provide credit and other facilities to its customers, IDBI Bank currently has 457 centers, 688 branches and 1020 ATMs across the nation. It is world's 10th largest development bank in terms of reach.
IDBI Bank also built several institutions including:1. National Stock Exchange of India (NSE), 2. The Stock Holding Corporation of India (SHCIL) 3. The National Securities Depository Services Ltd. (NSDL) etc The IDBI bank India is a universal bank headquartered in Mumbai offering high class personalized banking and financial aid to their client. They strive toward an effective
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business strategy, proficient and devoted working along with updated technology deliver a top quality banking experience. Currently, they are emerging into their overseas banking competing into global opportunities. As reported last march 31, 2010, the bank already has 1228 ATMs, 725 branches and 486 centers thus recognizing it as the 10th largest development bank in the world. Its turnover is near about 24 crore INSTITUTIONS: Breaking it down by location, they have 215 branches or ATM network in the metro area, 285 in the urban area, and 151 in the semi-urban are and last but not the least, 77 reaching out the rural areas. The IDBI bank has four subsidiaries several institution were also built by the bank wherein included are the NATIONAL STOCK EXCHANGE of India (NSE), the stock holding corporation of India (SHCIL)and the national securities depository services ltd. (NSDL). The shareholding patterns of the company diverse from the different members of the society. SHAREHOLDERS: The largest percentages of the shareholding are the public people. The bank is gradually reaching its vision to be the trusted partner in progress through their soaring standards and efficient work. IDBI bank is a board- managed type organization where in the operation of the bank relies on the chairman and managing directors along with the two deputy managing directors. Decisions over matters are settled through intense board meetings and review.
EMPLOYEES: Employees of the bank are professionals who are competent and experienced. They range from the fields of banking, economics, management, accountancy, engineering, law and computer or information technology. To maintain the working standards and guide the action of the company, a general code of conduct and ethics or coca for
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IDBI bank ltd, directors, officers and employees was generated wherein each member of the company must comply with it.
SERVICE:
IDBI bank provides a wide array of service and product to its customers. It varies for different costumer groups and need. Types of service and product include personal banking, corporate banking, small and medium enterprise (SME) finance and others. Under personal banking, it includes deposits, loan, payments, investment advisory, card, institutional banking, 24 hours banking, preferred banking, NRI service and capital market. Meanwhile corporate banking includes project and infrastructure finance etc, and SME finance comprise of dealer finance and vendor financing, etc.
Objectives
The main objectives of IDBI is to serve as the apex institution for term Finance for industry in India. Its objectives include (1) Co-ordination, regulation and supervision of the working of other financial institutions such as IFCI , ICICI, UTI, LIC, Commercial Banks and SFCs. (2) Supplementing the resources of other financial institutions and thereby widening the scope of their assistance. (3) Planning, promotion and development of key industries and diversifications of industrial growth. (4) Devising and enforcing a system of industrial growth That conforms
Function
The IDBI has been established to perform the following functions(1) To grant loans and advances to IFCI, SFCs or any other financial institution by way of refinancing of loans granted by such institutions which are repayable within 25 year.
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(2) To grant loans and advances to scheduled banks or state co-operative banks by way of refinancing of loans granted by such institutions which are repayable in 15 years?
(3) To grant loans and advances to IFCI, SFCs, other institutions, scheduled banks, state co-operative banks by way of refinancing of loans granted by such institution to industrial concerns for exports.
(4) To discount or rediscount bills of industrial concerns.
(5) To underwrite or to subscribe to shares or debentures of industrial concerns.
(6) To subscribe to or purchase stock, shares, bonds and debentures of other financial institutions.
(7) To grant line of credit or loans and advances to other financial institutions such as IFCI, SFCs, etc.
(8) to grant loans to any industrial concern.
(9) To guarantee deferred payment due from any industrial concern.
(10) To guarantee loans raised by industrial concerns in the market or from institutions.
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(11) To provide consultancy and merchant banking services in or outside India. (12) To provide technical, legal, marketing and administrative assistance to any industrial concern or person for promotion, management or expansion of any industry. (13) Planning, promoting and developing industries to fill up gaps in the industrial structure in India. (14) To act as trustee for the holders of debentures or other securities. Subsidiaries The following are the subsidiaries of IDBI. (1) Small Industries Development Bank of India (SIDBI) (2) IDBI Bank Ltd. (3) IDBI Capital Market Services Ltd. (4) IDBI Investment Management Company Capital Structure and Operations As on September 30, 1996, the authorized Capital of IDBI wasRs.2000 crores. Issued, subscribed and paid up share capital was Rs.828.76crores. Reserves were Rs.6309 crores. Loan funds were Rs.35450 crores The total outstanding loans, investments and guarantee of IDBI stood at Rs.39, 221 crore as on 31st March 1996 From highest safety. It cited poor asset quality and reduced spreads, which analysts say may have made it more difficult for the term lender to tap the market for funds.
? Developmental activities of IDBI
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In fulfillment of its developmental role, the Bank continues to perform a wide range of promotional activities relating to developmental programmers for new entrepreneurs, consultancy services for small and medium enterprises and programmers designed for accredited voluntary agencies for the economic upliftment of the underprivileged. These include entrepreneurship development, self-employment and wage employment in the industrial sector for the weaker sections of society through voluntary agencies, support to Science and Technology Entrepreneurs' Parks, Energy Conservation common. Technical Consultancy Organizations
With a view to making available at a reasonable cost, consultancy and advisory services to entrepreneurs, particularly to new and small entrepreneurs, IDBI, in collaboration with other All-India Financial Institutions, has set up a network of Technical Consultancy Organizations (TCOs) covering the entire country. TCOs offer diversified services to small and medium enterprises in the selection, formulation and appraisal of projects, their implementation and Development review. \ Institute Entrepreneurship
Realizing that entrepreneurship development is the key to industrial development, IDBI played a prime role in setting up of the Entrepreneurship Development Institute of India for fostering entrepreneurship in the country. It has also established similar institutes in Bihar, Orissa, Madhya Pradesh and Uttar Pradesh. IDBI also extends financial support to various organizations in conducting studies or surveys of relevancy
Narasimam committee : recommends that IDBI should give up its direct
financing functions and concentrate only in promotional and refinancing role. But this recommendation was rejected by the government. Latter RBI constituted a committee
24
under the chairmanship of S.H.Khan to examine the concept of development financing in the changed global challenges. This committee is the first to recommend the concept of universal banking. The committee wanted to the development financial institution to diversify its activity. It recommended to harmonies the role of development financing and banking activities by getting away from the conventional distinction between commercial banking and developmental banking. In September 2003, IDBI diversified its business domain further by acquiring the entire shareholding of Tata Finance Limited in Tata Home finance Ltd., signaling IDBI’s foray into the retail finance sector. The fully-owned housing finance subsidiary has since been renamed ‘IDBI Home finance Limited’. In view of the signal changes in the operating environment, following initiation of reforms since the early nineties, Government of India has decided to transform IDBI into a commercial bank without eschewing its secular development finance obligations. The migration to the new business model of commercial banking, with its gateway to low-cost current, savings bank deposits, would help overcome most of the limitations of the current business model of development finance while simultaneously enabling it to diversify its client/ asset base. Towards this end, the IDB (Transfer of Undertaking and Repeal) Act 2003 was passed by Parliament in December 2003. The Act provides for repeal of IDBI Act, corporatization of IDBI (with majority Government holding; current share: 58.47%) and transformation into a commercial bank. The provisions of the Act have come into force from July 2, 2004 in terms of a Government Notification to this effect. The Notification facilitated formation, incorporation and registration of Industrial Development Bank of India Ltd. as a company under the Companies Act, 1956 and a deemed Banking Company under the Banking Regulation Act 1949 and helped in obtaining requisite regulatory and statutory clearances, including those from RBI. IDBI would commence banking business in accordance with the provisions of the new Act in addition to the business being transacted under IDBI Act, 1964 from October 1, 2004, the ‘Appointed Date’ notified by the Central Government. IDBI has firmed up the infrastructure, technology platform and reorientation of its human capital to achieve a smooth transition.
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IDBI Bank, with which the parent IDBI was merged, was a vibrant new generation Bank. The Pvt Bank was the fastest growing banking company in India. The bank was pioneer in adapting to policy of first mover in tier 2 cities. The Bank also had the least NPA and the highest productivity per employee in the banking industry. On July 29, 2004, the Board of Directors of IDBI and IDBI Bank accorded in principle approval to the merger of IDBI Bank with the Industrial Development Bank of India Ltd. to be formed incorporated under the Companies Act, 1956 pursuant to the IDB (Transfer of Undertaking and Repeal) Act, 2003 (53 of 2003), subject to the approval of shareholders and other regulatory and statutory approvals. A mutually gainful proposition with positive implications for all stakeholders and clients, the merger process is expected to be completed during the current financial year ending March 31, 2005. The immediate fall out of the merger of IDBI and idbi bank was the exit of employees of idbi bank. The cultures in the two organizations have taken its toll. The IDBI BANK now is in a growing fold. With its retail banking arm expanding further after the merger of united western Bank. IDBI would continue to provide the extant products and services as part of its development finance role even after its conversion into a banking company. In addition, the new entity would also provide an array of wholesale and retail banking products, designed to suit the specific needs cash flow requirements of corporate and individuals. In particular, IDBI would leverage the strong corporate relationships built up over the years to offer customized and total financial solutions for all corporate business needs, single-window appraisal for term loans and working capital finance, strategic advisory and “hand-holding” support at the implementation phase of projects, among others. IDBI’s transformation into a commercial bank would provide a gateway to low-cost deposits like Current and Savings Bank Deposits. This would have a positive impact on the Bank’s overall cost of funds and facilitate lending at more competitive rates to its clients. The new entity would offer various retail products, leveraging upon its existing relationship with retail investors under its existing
26
Suvidha Flexi-bond schemes. In the emerging scenario, the new IDBI hopes to realize its mission of positioning itself as a one stop super-shop and most preferred brand for providing total financial and banking solutions to corporate and individuals, capitalizing on its intimate knowledge of the Indian industry and client requirements and large retail base on the liability side. IDBI upholds the highest standards of corporate governance in its operations. The responsibility for maintaining these high standards of governance lies with its Board of Directors. Two Committees of the Board viz. the Executive Committee and the Audit Committee are adequately empowered to monitor implementation of good corporate governance practices and making necessary disclosures within the framework of legal provisions and banking conventions.
27
CHAPTER 5
Financial market, institutions, & financial servicing India
Objective & organization
After independence, the government of India started establishing several corporations and other institution to promoter industrial development of the country. As the number of such institution went on increasing, it become necessary to co-ordinate the activities of all these institution in a systematic manner. An attempt was made by the government to gear the entire economy to the needs of rapid industrialization. The necessary for increasing production and increasing the standard of living of people as speedily as possible, was felt very badly. This warranted the establishment of an institution, which will look after the co-ordination of such financial institutions working to achieve this objective. This was responsible for the establishment of industrial development bank of India. The bank was established with the following objective: a) To co-ordinate the activities of the financial institutions established in the country after independence b) To the participate in the activities of such institution if and when necessary. c) To ensure that the activities of all these institution are planned and executed in such a manner that the priorities of the plans are property observed: d) To function as an apex institution for all the financial institution functioning in country:
e) To promote and ensure the success of the being development project in the
country.
f)
The IDBI was separated from the RBI and if started functionin independent
statutory organization.
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Forms of financial assistance provided by the IDBI:
The financial assistance provided bank the IDBI can broadly be classified in to two categories: 1.
2.
Assistance to other financial institution: and Assistance to industrial concerns directly. On its own, or in participation with
other institutions. The IDBI provides assistance to other financial institutions by refinancing the loan or finical assistance given by these institutions to various industries. This work of refinancing was undertaken by the IDBI on 1st July 1964. A refinance corporation for industry was established in India in 1958. This corporation was established with a capital of 25 crores. The entire business of this industrial refinance corporation of India was taken over by the IDBI from 1stseptember 1964. And the facility of refinance was provided through this bank to other institutions providing finance to small scale and other industries. The IDBI come to work as a refinancing agency. The IDBI provides direct finance to various industrial concerns, on its own. This is done by the bank in the way normally adopted by various financial institutions to provide finance: granting loan and advance, subscribing to share capital, underwriting share, purchasing bonds or debentures, etc. the IDBI makes the financial assistance available to various industrial concerns in all these ways, mentioned aboves. A special feature of this bank is the creation of a special fund known as development assistance fund. The fund is to be used for providing assistance to such industries whose anticipate rate of return is very low. The returns may be due to various reasons but the industry must be important enough to deserve such a special consideration. This fund was set up in 1964. The loans, gifts, grants, donations, etc. coming from the
29
central government, were to from the initial capital of this fund. Any profit accruing out of the loans given from this fund was to be ploughed back.
Review of work done by the IDBI (UP TO MARCH, 1991) The cumulative assistance sanctioned by the IDBI since its inception until the end of march 1991, was rs 48560.3 crores and disbursement stood at RS. 34656.4 crores. The IDBI provides finance for various purposes including refinance. Export credit, underwriting and so on. As an apex institution. The IDBI assists SFCs, ICICI and other financial institution by subscribing to their share capital it has given foreign currency loans also. The role played by the IDBI can be understood when we remember that its sanctions about 36% of the total sanctions of all term lending institutions. The table shows the remarkable increase in the share of direct loan. The IDBI s direct loans are over 56% of its total financial assistance. In view of streamlining, the narsinham committee suggested that the IDBI should stop providing direct loans and perform only promotional apex and refinancing role in respect of other institutions like SFCs, SIDBI AND ICICI ETC. Type of assistance 1970-71 1989-81 1990-91
1. Direct loans
29.64
500.05
3,8810.95
2. Refinance of industrial loan
23.45
577.04
897.43
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3. Bill finance 28.48 4. Underwriting and direct 3.33
5. Loan to and investment in
235.08
1,170.26
subscription to share/ debenture 66.82 261.95
share and bonds of financial 8.10 intermediaries. 6. See capital through SFCS / SIDCS -
1.27
664.63
-
-
Table: types of assistance sanctioned by the IDBI (1970-71 TO 1990-91) The table summarizes the various types financial assistance sanctioned by the IDBI, and changes in them over a twenty- year period from 1970-71. The direct assistance provided by the bank mainly goes to the technicians who have started self – employment project, and to project which could not obtain financial assistance from other sources. The IDBI has also provided financial, on a large seale, to the exporters and has, thus helped export.
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IDBI capital market service limited (ICMS)
IDBI capital market service limited (ICMS),a wholly owned su
bsidiary of your bank, established in 1993 offers a full suite of financial product and service to institutional , corporate and retail client. Its business include primary dealing, stock broking, distribution of financial product, merchant banking, corporate advisory services, debt arranging & underwriting, portfolio management of pension / PF fund’ & research service. However, in accordance with revised RBI guidelines, the primary dealing business has been segregated and IDBI Gilts limited has been incorporate as subsidiary of IDBI, for the purpose. ICMS has established itself in the investment banking business having completed seven issues apart from corporate advisory assignments in project appraisal, shares valuation, loan syndication, debt gesturing etc. it has also made initial forays into private equity investment. IDBI seeks to represent and protect the interest of debenture or bondholder through debenture trusteeship: IDBI acts as security agent and mortgage trustee in respect of loan granted by domestic and foreign lenders to companies. IDBI offers forex service to advices clients regarding the necessary of booking forward cover to protect their interest in foreign currency (FC) exposure. IDBI bank offers high technology based top-of the line branded products. Which have been well received by the market It is also a lending player in depository participation service enabling. In addition, IDBI has in its portfolio, other companies that can be revived by undertaking various measures such as strengthening of management, up gradation of
32
technology, infusion of fresh fund, etc. IDBI has announced that it would like to interact with potential estors / clients who may be interested in takeover, merger, or joining as co-promoters etc. in order to achieve the said objective Sources of funds The IDBI also borrows from abroad and sources funds under with foreign financial institution, foreign bank and margin government and operates foreign lines of credit, secured by government. The foreign fund are used for financial of the foreign currency component of the project finance for providing foreign currency loan and financing of imports and to make foreign supplier of capital good, plant and machinery forging countries. It can borrow from the government and the RBI, has been borrowing form the capital market since 1994, through of different varieties of bonds and debenture. It has set up financial fund and a number of subsidiaries for provision of various financial services . the IDBI is converted into a universal bank and with it subsidiaries, including the IDBI bank in 2004-05.
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CHAPTER 6
IDBI Bank Ltd. – A Profile
IDBI Bank Ltd. is today one of India's largest commercial Banks. • • • years, IDBI Bank has essayed a key nation-building role, first as the apex Development Financial Institution (DFI) (July 1, 1964 to September 30, 2004) in (October 1, 2004 onwards). As a DFI, the erstwhile IDBI stretched its canvas
the realm of industry and thereafter as a full-service commercial Bank. beyond mere project financing to cover an array of services that contributed towards balanced geographical spread of industries, development of identified • • Backward areas, emergence of a new spirit of enterprise and evolution of a deep On October 1, 2004, the erstwhile IDBI converted into a Banking company (as and vibrant capital market. Industrial Development Bank of India Limited) to undertake the entire gamut of Banking activities while continuing to play its secular DFI role. Post the mergers of the erstwhile IDBI Bank with its parent • company (IDBI Ltd.) on April 2, 2005 (appointed date: October 1, 2004) and the subsequent merger of the erstwhile The United Western Bank Ltd. with IDBI Bank on October 3, 2006, the tech-savvy, new generation Bank with majority Government shareholding today touches the lives of millions of Indians through an array of corporate, retail, SME and Agric products and services.
•
Headquartered in Mumbai, IDBI Bank today rides on the back of a robust
business strategy, a highly competent and dedicated workforce and a state-of- the-art information technology platform, to structure and deliver personalized and innovative Banking services and customized financial solutions to its clients across delivery channels
34
•
IDBI Bank currently has a balance sheet of more than Rs.1, 72,000 crore and
business size (deposits plus advances) of more than Rs.2, 15,000 crore. As an Universal Bank, IDBI Bank, besides its core Banking and project finance domain, has an established presence in associated financial sector businesses like Capital Market and Investment Banking, Home Finance, Primary Dealership area and more recently, the Life Insurance Business. Recently, IDBI • Bank reorganized its business and structure commensurate with its aspiration to
become a 'Top 5' Bank by asset size & market capitalization by the year 2012. As a first step, to give the organization the focus necessary for accelerated • Growth, the Bank has reorganized its businesses around nine verticals, six
customer verticals, each focusing on distinct customer segments and three business verticals. Going forward, IDBI Bank is strongly committed to work towards emerging as the 'Bank of choice' and 'the most valued financial conglomerate', besides generating wealth and value to all its stakeholders. Corporate Governance IDBI upholds the highest standards of corporate governance in Its operations. The responsibility for maintaining these high Standards of governance lie with its Board of Directors. Two Committees of the Board viz. the Executive Committee and the Audit Committee are adequately empowered to monitor Implementation of good corporate governance practices and Vigilance Department in IDBI Bank A full-fledged Vigilance Department operates at the Bank's Head Office. The Department operates as a channel for providing inputs to the Top Management For carrying out investigation into vigilance related complaints and to suggest Corrective measures for improving the control systems and compliance of lay Down procedures. Making necessary disclosures within the framework of legal Provisions and banking conventions.
35
? Implementation of Guidelines of the Central Vigilance Commission (CVC) The Department has been implementing the guidelines laid down by the CVC from time to time for improving Vigilance Administration and has put in place system wherein complaints received, for the public / any other sources, are attended to promote information on the Constitution . Industrial Development Bank of India Industrial Development bank of India (IDBI) was constituted under Industrial Development bank of India Act, 1964 as a Development Financial Institution And came into being as on July 01, 1964 vide Go notification dated June 22, 1964. It was regarded as a Public Financial Institution in terms of the provisions Of Section 4A of the Companies Act, 1956. It continued to serve as a DFI for 40 Years till the year 2004 when it was transformed into a Bank.
? Industrial Development Bank of India Limited
In response to the felt need and on commercial prudence, it was decided to Transform IDBI into a Bank. For the purpose, Industrial Development bank (Transfer of undertaking and Repeal) Act, 2003 [Repeal Act] was passed repealing the Industrial Development Bank of India Act, 1964. In terms of the provisions of the Repeal Act, a new company under the name of Industrial Development Bank of India Limited (IDBI Ltd.) was incorporated as a Govt. Company under the Companies Act, 1956 on September 27, 2004. Thereafter, The undertaking of IDBI was transferred to and vested in IDBI Ltd. with effect from the effective October 01, 2004. In terms of the provisions of the Repeal
36
37
INDUSTRIAL DEVELOPMENT BANK OF INDIA
Milestones | Subsidiary Organizations’ | Product Range The Industrial Development Bank of India (IDBI) is a central co-coordinating agency, which directly and indirectly, is concerned with the problems and questions related to long and medium term financing of industry. An apex financial institution at the national and the state level, it finances and nurtures the Indian industry in a significant way. It primarily focuses on a balanced development of the industrial sector. Government stake today is at 72.14% and can be further reduced to 51%. The core area of operation of IDBI has been project financing. Long term project specific finance through loans, convertible andnon-convertible debentures, and underwriting, direct subscriptions however, continue to form the largest single segment. Reserve Bank Of India (RBI). - In 1976, ownership was transferred to the Government Of India. (GOI) - The Export Import Bank Of India (EXIM Bank) branched off from IDBI's international finance division in 1982. - SIDBI, the Small Scale Industries Development Bank Of India, a wholly owned subsidiary, was started in 1990 to address the specific needs of the Small Scale Industries. - IDBI permitted public ownership in 1994. - IDBI has significantly strengthened the Capital Market in the country through the setting up of the Securities and Exchange Board of India (SEBI), the National Stock Exchange of India Limited (NSEIL), Credit Analysis and Research Limited (CARE), the Stock Holding Corporation Of India Limited. (SHCIL), Investor Services of India Limited (ISIL), National Securities Depository Limited (NSDL). Apart from these Capital Market institutions, IDBI has its own subsidiary institution IDBI Investment Management 38 Company Limited (IIMCO) to manage mutual funds and other investment products for investors.
39
ASBA IPO Payment Option Now apply for IPO through ASBA [Applications Supported by Blocked Amount] Facility provided by IDBI Bank. IDBI Bank savings / current account now makes IPO application a seamless and hassle-free process. Instead of moving out funds from your account for application to an IPO, the amount Why should One investblocked. Fund through IDBI Bank? can now simply be In Mutual IDBI every individual has specific needs and priorities. IDBI needs could vary from Benefits: buying a house, providing for your child’s education, getting your child married, and so on. IDBI needs are very important for us. We can help in fulfilling your dreams by • You don’t need not pay the application money by cheque rather block your bank account assisting you to select the schemes, which would be in consonance with your needs to the extent of the application money, thus continue to earn interest on application money. We work towards building an Investment culture: You do not have to bother about refunds, as in ASBA only an amount proportionate to the It would be our constant Endeavour to inculcate saving and organized investing habit securities allotted is taken from the bank account when your application is selected for in you. We will help you plan your investments and build a healthy mutual fund allotment after the basis of allotment is finalized. portfolio, which would be an optimal solution for your needs. Cultivating an
• •
investment culture will not only help you but also your family. • The application form is simpler.
• •
You deal with the known intermediary i.e. your own bank.
We can be your ‘One StopFinancial
Apart from subscribing to mutual fund schemes through us, you can also take advantage of our banking services and whole range of financial products, like Saving and Current a/c, ATM card, personal loan product, depository services, loan against units \ shares etc. and see your financial needs satisfied under one roof
•
We recommend what is best for you ‘Equity Funds’:Equity funds mainly consist
of stock investments are the most common type of mutual funds. There are various recommended equity schemes in our bouquet of funds. The selection of these funds is bason combination of qualitative and quantitative evaluation of the Indian Mutual Fund universe by a reputed research agency. The selection is reviewed and revised every month. Our team of Relationship Managers provides research based guidance, as per IDBI individual risk profile and requirements. We help you plan for IDBI retirement, preserve IDBI legacy and manage IDBI present and future wealth.
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41
Our endeavor at IDBI Bank has always been to offer you path breaking products and
DEMAT ACCOUNT
Electronic Securities Banking Welcome to world-class banking at IDBI Bank.
Paper securities are passé. Enter the world of dematerialized shares, bonds and other securities. Convert your securities to dematerialized form with IDBI Bank Demat Account. It's as simple as opening a Savings Account. Why Demat with IDBI Bank • Lowest fees
• • • • • •
Statement by emails Demat access through Internet, cell and phone Portfolio valuation on the account statements Online execution of transactions at branches Special rates for stock market intermediaries and sub brokers Transactions update from back-office four times a data
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Benefits of a Demat Account
With IDBI Bank’s Demat Account you can enjoy host of benefits.
Benefits Offered Include:
• • • • • •
Trade without any hassles of writing transfer instruction / cheques. Can place orders from anywhere any time using phone or Internet. Online Share Quotes available. Multiple Product offering . Speedy and Secure Trading. Best of research & market news to help to take informed investment decisions
NRI Services
Special services for the special few Being an NRI (non-resident Indian) and privy to special benefits and privileges in India, its only but natural to expect world class levels – be it banking or any other service. Welcome to IDBI Bank, where you are treated as special and your needs exclusive. While we offer basic NRI banking products like Non Resident Rupee Checking Account, Non Resident Rupee Term Deposits and Foreign Currency Non Resident Deposit, we realise that your requirements are manifold. Hence, we provide seasoned banking professionals to handle your queries and offer value added services. The value-added services we provide range from answers to online tax and foreign exchange related queries and needs with special emphasis on FEMA guidelines issued by The Reserve Bank of India from time to time. Our International Debit Card is designed to offer you the convenience of accessing your funds with us from any ATM and also pay for your purchases from any merchant establishments across the world. You can avail of our advanced funds transfer facility to transfer funds from your account to that of your family members' account held with any IDBI branch
43
across India. Our other services, such as providing free nomination and mandate facility enables hassle free banking operations to your family member authorized by you to operate your account. We provide high-end solutions such as high yielding foreign exchange products, wealth management insurance.
Non-Resident External (NRE)
• • •
Repatriable account for your investment needs Access your account anytime, anywhere with Internet Banking Shop at more than 8.3 million locations withdraw funds in 140 countrie
Non-Resident Ordinary (NRO) • An account for your local income and expenses
• •
Access your account at more than 250 ATM's across the country Pay your bills in India from anywhere in the world .
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PRIMARY DATA ANALYSIS
1. What is the recent GDP growth in IDBI? Sectoral growth GDP: Trends in investments and savings year 2005-06 2006-07 2007-08 2008-09 2009-10 Gross investment 34.7 35.7 38.1 34.5 36.5 33.5 34.6 36.9 32.2 33.7 domestic Gross domestic saving
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EXPATIATION : Investment & industrial scenario during FY 2009-10, Gross domestic investment moved up to 36.5% as compared to 34.5% during previous year. As depicted in figure1 , domestic savings improved to 33.7% during FY 2009-2010 against 32.2% a year before
46
Q2 what is sectoral growth of IIP of IDBI bank? Sectoral growth of IIP (%) Industrial growth measured in terms of movement of index of industrial production IIP remained sluggish with7.8% during FY 2010-2011 as compared to 10.5% during fy 2009-2010. Growth of industrial production exhibited lack of stability and slowed down to a considerable degree during the second half of the fiscal weak growth in capital goods sector is a matter of serious concern which may restrict growth in other segments of industries as well, through its forward and backward linkage
Figure- sectoral growth of IIP(%) 2009-2010 Basic goods Capital goods Intermediate Consumer IIP(general) 7.2 20.9 13.6 6.2 10.5 2010-2011 6.3 9.3 8.8 7.5 7.8
47
Q 3 what is the composition of domestic flotation of IDBI bank?
Table 8.3 composition of domestic flotation (Rescore).
year 2002-03 2003-04 2004-05 2005-06
Debt 3422.2 30660.6 31420.0 49559.2
Equity 7450.0 22031.8 29260.0 31272.6
Composition of domestic flotation (RS.CRORE).
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EXPAIN The above table and graph 8.3 shows that a strong macroeconomic outlook, positive investment climate and encouraging corporate financial results were the main factors during 2005-06. During the year, inventory interest the public issue segment strengthened. Total domestic flotation during 2005-06 was higher at RS.80.8318 corer compared to RS. 60680 corers in 2004-05. Out of the flotation during the current year, equity component was at RS 31272.6 crore.
49
Q 4 What is the composition of deposits of IDBI bank? The composition of deposit is showing below with help of table and graph. Table 8.4 composition of deposits (%). Types of deposit Composition of deposit
Time deposit
70.5
Saving deposit
9.6
Demand deposit
19.9
Explain The above table and graph shows that the time deposits i.e. to 50% is higher than the both saving and demand deposit. The saving deposit as 9.60% and the demand deposit are 9.90%.
50
Q6 what is the average inflation rate in trends of IDBI bank? Table 8.5 trend in average inflation rates (%). year Wholesale price index Crude price index
2002-03 2003-04 2004-05 2005-06
3.4% 5.4% 6.4% 4.4%
4% 3.9% 3.8% 3.9%
8.5 trend in average inflation rates (%).
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Explain Inflation during 2005-06 as measured by movement in wholesale price index (WPI) was lower at 4.05 as at end of March, 2006 compare to 51.6% year ago, mainly due to financial and monetary measures under taken to contain domestic inflation even in a situation of rising crude prices. Average WPI was also at 4.4% as compare to 6.45% the previous year however, continued high global oil prices remain as concern.
52
Q7 what is the credit rating of both domestic and foreign currency borrowing of IDBI bank? The IDBI bank obtains credit rating for both domestic and foreign currency borrowing. The ratings for the rupee resources are indicated in table . Table 8.6 domestic currency borrowing rating (As on march 31,2011) CRISIL ICRA FITCH
Fixed deposits Short
FAAA/STABLE term P1+
MAA+ A1+
tAAA F1+(IND)
Borrowings(certificate of deposit) Long- term rupee bonds AA+/STABLE (senior & lower tiner II bonds) HYBRID- UPPER TIER AA/SABLE II bonds HYBRID-IPDI AA/STABLE LAA/STABLE LAA/STABLE AA-(IND) LAA+/STABLE AA+(IND)
The foreign currency borrowings of your bank are rated by international rating agencies,. Moody’s investor services (moody’s) and standard & poor’s (s&p). the long term foreign currency ratings and bank financial strength ratings ( BFSR) are indicated in table.
53
Ratings for foreign currency borrowings for senior debt (as on march 31,2011) Rating agency Long term rating BFSR
Moody’s investor services ( moody’s)
Baa3
D
Standard & poors (s& p)
BBB-/ STABLE
C
While the foreign currency debt for IDBI bank as assigned by s&p and fiche rating are at par with sovereign ratings, the rating assigned by moody’s is one notch higher than the sovereign rating.
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Secondary data analysis.
Growth in business As on 31.03.2005 30.09.2005 31.03.2006
Deposit
15103
18158
26001
advances
45414
46413
52739
•
Deposits grew by 72% compare to system growth of 18%.
•
Advances grew by order 16% retail advances grew by 50%
•
Retail advances account for 16% of total advances.
Financial highlights march 2006
? Balance sheet grew by 9% RS. 88565 corer (RS 81360)
? Total business at RS 88565 corer growth of 30%
55
? PAT RS .561(Rs.907 crore-6 months).
? QIV PAT RS.201 CRORE (RS.189crore)
? Net NPAS down to 1.01% (1.74%) of net advances.
? Significant progress in assets resolution.
? Recovery from NPA RS .1738 crore of which
? Recovery from fully written off cases RS 1066.
? CRAR- 14.8 TICO I-11.7%
? N II QIV grew by 192% to RS.355 crore
(RS.115 CORE)
93.1 Assets composition
56
STD
SUB-STD
DBTFL
LOSS
MAR-05
47994
571
568
76
SEP-05
48884
123
1999
76
MAR-06
55207
400
643
72
The asset composition of IDBI bank during the year march 2006 is higher than both during March 2005 and September 2005. During the year March 2006 loss is 76 crore and during the year march 2005 and September 2005 loss is same 76 crore in asset composition i.e. it is higher than the year 2006.
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SHAREHOLDING PATTERN
PUBLIC OTHER GOVERMENT INDIN FINANCIAL INSTITUTION
14.9 4.1 52.8 16.2
FOREIGN INSTITUTION INVESTOR
12.3
58
GOI to retained least 51% state at all times IDBI not constrained by 20% full holding limit applicable to other banks, shareholding pattern (06.01.06)
Market price per share (rs)
97.35
Market capitalization (crore) USD BIN Earnings per share (rs) Book value per share (rs) Price to book ratio Network and delivery channels.
? 177branches,4 extension contents
7045 1.56 6.63 86.51 1.13
? 393 ATMS. ? Presence in 103 cities ? Internet banking ? Retail customer base: 5 millions + ? Corporate customers :3000 +
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ANNEXURE
2. What is the recent GDP growth in IDBI?
3. What is the sectoral growth of IDBI bank?
4. What is the composition of domestic flotation of IDBI bank?
5. What are the average inflation rates in trends of IDBI bank?
6. What is the composition of domestic flotation of IDBI bank?
7. What is the credit rating of both domestic & foreign currency?
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Findings and conclusion
From the study of IDBI bank the findings and conclusions which I have amide, are as follows. ? The IDBI bank is the largest development bank bank in India for industrial development.
? Is concluded that IDBI provide all types of service of commercial bank and a
development bank. This shows that IDBI has been also playing important role in the services sector for their customer.
? IDBI performs its development functions like infructure development planning,
promoting and development industries provide technical and administrative assistance for promotion management and expansion of industry. ? IDBI finances other financial institution like IFCI , SFC’ ETC this proper that the IDBI also helps the development of other financial institutes. ? IDBI control its development activity by the methods like undertaking market research investment research and market survey
? Is concluded that basic goods, capital good consumer good shows, a increase
which is not much significant and intermediate good has not shown increase but it has shown decrease
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doc_664694621.doc
It’s give me a great pleasure to present my project on “study of financial aspect with special focus on IDBI bank.” I am very thankful to our prof. Bhavika karkera, who always helped me to complete my project without her support & motivation this project would not have see the light of the day her review, comments, correction & suggestions have enormously enriched my project. I also here thank to (co-coordinator) prof. Bhavika kakera who give me they may ideas & correction may projects & various books. Relatd to my project & to help me in completion of my project. I am also grateful to our principal MR. V.M .INGAVALE. I also would like. To thank “MRS. ANUJA .P. JADHAV”. Madam who is our librarian and who supported me by giving various book related to my project and to help me in complection of project. Before conducting this project I was having limited knowledge about “study of financial aspect with special focus on IDBI bank”. But this project helped me to expand my knowledge related to project
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INDEX
SR NO 1. 2. 3. 4. 5. 6. .7. 8. Introduction History of financial in India & IDBI Introduction of IDBI Financial market, institutions & financial services in India Profiles of IDBI bank Primary data analysis Secondary data analysis Finding & conclusion • • Bibliography Annexure CHAPTER PAGE NO 3 4 17 28 33 46 56 62
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Introduction
1.
Background of project: I have selected this topic because today industrial development bank of India (IDBI) is one of in dais largest bank. It has essayed significance role in financial system &first as a develop financial institution.
2. Objective of study : 1. To study the scope of IDBI in financial system. 2. To study the major service of IDBI 3. To study the problem which are face by the IDBI?
3.
Limitation of project: there are so many financial systems in bank like IFCI, NABARD, SIDBI ICICI, SFC’S etc. but this study covers only IDBI bank. In this project detailed study of financial system in IDBI is not done.
4.
Research methodology: I have analyses my project with there help of two methods of data collection to primary data & secondary data.
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CHAPTER 1
History of financial services
The term "financial services" became more prevalent in the United States part as a result of the Gramm-Leach-Bliley Act of the late 1990s, which enabled different types of companies operating in the U.S. financial services industry at that time to merge. Companies usually have two distinct approaches to this new type of business. One approach would be a bank which simply buys an insurance company or an investment bank, keeps the original brands of the acquired firm, and adds the acquisition to its holding company simply to diversify its earnings. Outside the U.S. (e.g., in Japan), non-financial services companies are permitted within the holding company. In this scenario, each company still looks independent, and has its own customers, etc. In the other style, a bank would simply create its own brokerage division or insurance division and attempt to sell those products to its own existing customers, with incentives for combining all things with one company... Banks A "commercial bank" is what is commonly referred to as simply a "bank". The term "commercial" is used to distinguish it from an "investment bank," a type of financial services entity which, instead of lending money directly to a business, helps businesses raise money from other firms in the form of bonds (debt) or stock (equity).
Banking services
The primary operations of banks includes
• •
Keeping money safe while also allowing withdrawals when needed Issuance of checkbooks so that bills can be paid and other kinds of payments can
be delivered by post
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•
Provide personal loans, commercial loans, and mortgage loans (typically loans to Issuance of credit cards and processing of credit card transactions and billing Issuance of debit cards for use as a substitute for checks Allow financial transactions at branches or by using Automatic Teller Machines Provide wire transfers of funds and Electronic fund transfers between banks Facilitation of standing orders and direct debits, so payments for bills can be made Provide overdraft agreements for the temporary advancement of the Bank's own Provide internet banking system to facilitate the customers to view and operate Provide Charge card advances of the Bank's own money for customers wishing to Provide a check guaranteed by the Bank itself and prepaid by the customer, such Notary service for financial and other documents
purchase a home, property or business)
• • •
(ATMs)
• •
automatically
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money to meet monthly spending commitments of a customer in their current account.
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their respective accounts through internet.
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settle credit advances monthly.
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as a cashier's check or certified check.
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Other types of bank services
•
Private banking - Private Banks provide banking services exclusively to high net
worth individuals. Many financial services firms require a person or family to have a certain minimum net worth to qualify for private banking services. Private Banks often provides more personal services, such as wealth management and tax planning, than normal retail banks.
•
Capital market bank - bank that underwrite debt and equity, assist company deals
(advisory services, underwriting and advisory fees), and restructure debt into structured finance products.
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Bank cards - include both credit cards and debit cards. Bank of America is the
largest issuer of bank cards.]
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•
Credit card machine services and networks - Companies which provide credit card
machine and payment networks call themselves "merchant card provider
Foreign exchange services
Foreign exchange services are provided by many banks around the world. Foreign exchange services include:
•
Currency exchange - where clients can purchase and sell foreign currency Foreign Currency Banking - banking transactions are done in foreign currency. Wire transfer - where clients can send funds to international
banknotes.
• •
Investment services
•
Asset management - the term usually given to describe companies which run
collective investment funds? Also refers to services provided by others, generally registered with the Securities and Exchange Commission as Registered Investment Advisors.
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Hedge fund management - Hedge funds often employ the services of "prime Custody services - the safe-keeping and processing of the world's securities trades
brokerage" divisions at major investment banks to execute their trades.
•
and servicing the associated portfolios. Assets under custody in the world are approximately $100 trillion. Insurance
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Insurance brokerage - Insurance brokers shop for insurance (generally corporate
property and casualty insurance) on behalf of customers. Recently a number of websites have been created to give consumers basic price comparisons for services such as insurance, causing controversy within the industry.
•
Insurance underwriting - Personal lines insurance underwriters actually
underwrite insurance for individuals, a service still offered primarily through agents,
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insurance brokers, and stock brokers. Underwriters may also offer similar commercial lines of coverage for businesses. Activities include insurance and annuities, life insurance, retirement insurance, health insurance, and property & casualty insurance.
•
Reinsurance - Reinsurance is insurance sold to insurers themselves, to protect
them from catastrophic losses.
Other financial services
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Intermediation or advisory services - These services involve stock brokers (private
client services) and discount brokers. Stock brokers assist investors in buying or selling shares. Primarily internet-based companies are often referred to as discount brokerages, although many now have branch offices to assist clients. These brokerages primarily target individual investors. Full service and private client firms primarily assist and execute trades for clients with large amounts of capital to invest, such as large companies, wealthy individuals, and investment management funds.
•
Private equity - Private equity funds are typically closed-end funds, which usually
take controlling equity stakes in businesses that are either private, or taken private once acquired. Private equity funds often use leveraged buyouts (LBOs) to acquire the firms in which they invest. The most successful private equity funds can generate returns significantly higher than provided by the equity markets
•
Venture capital is a type of private equity capital typically provided by
professional, outside investors to new, high-potential-growth companies in the interest of taking the company to an IPO or trade sale of the business.
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Angel investment - An angel investor or angel (known as a business angel or
informal investor in Europe), is an affluent individual who provides capital for a business start-up, usually in exchange for convertible debt or ownership equity. A small but increasing number of angel investors organize themselves into angel groups or angel networks to share research and pool their investment capital.
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Conglomerates - A financial services conglomerate is a financial services firm
that is active in more than one sector of the financial services market e.g. life insurance, general insurance, health insurance, asset management, retail banking, wholesale banking, investment banking, etc. A key rationale for the existence of such
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businesses is the existence of diversification benefits that are present when different types of businesses are aggregated i.e. bad things don't always happen at the same time. As a consequence, economic capital for a conglomerate is usually substantially less than economic capital is for the sum of its parts.
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Debt resolution is a consumer service that assists individuals that have too much
debt to pay off as requested, but do not want to file bankruptcy and wish to pay off their debts owed. This debt can be accrued in various ways including but not limited to personal loans, credit cards or in some cases merchant accounts. There are many services/companies that can assist with this. These can include debt consolidation, debt settlement and refinancing
Market share
The financial services industry constitutes the largest group of companies in the world in terms of earnings and equity market capitalization. However it is not the largest category in terms of revenue or number of employees. It is also a slow growing and extremely fragmented industry, with the largest company (Citigroup), only having a 3 % US market share.[8] In contrast, the largest home improvement store in the US, Home Depot, has a 30 % market share, and the largest coffee house Starbucks has a 32% market share.
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CHAPTER 2
Finance of IDBI Corporate Finance
IDBI Bank is pioneer in the field of corporate finance and offers array of products catering to their diversified requirements. In order to draw focused attention and ensure improved customer service, corporate finance in IDBI Bank operates on three broad corporate verticals viz. Infrastructure Finance, Large Corporate and Mid Corporate Groups. At present the Bank has 32 dedicated Specialized Corporate Branches (SCBs) at key geographical locations wherein corporate density is high and their service requirement is immense. In addition to tailor made products dovetailing niche segment, Corporate finance domain of IDBI Bank has structured products which includes current account with innovative features, bulk & non-bulk deposits, various asset based products as well as transaction banking products like trade finance, cash management services and government agency business of tax collection. Corporate finance group also offers treasury products and loan syndication services to its clients.IDBI Bank continue to scale new heights in Trade Finance business. During the financial year 2010-11, the non-fund based business in LCs and BGs segment grew by 18% crossing `60,000 corer. Fee income from Trade Finance activities rose by 30%. IDBI Bank facilitated Export-Import Trade Finance considerably and launched a multi-currency Remittance product that allows customers the option of making remittance in more than 100 currencies. IDBI Bank is fast emerging as a preferred bank for e-payment of direct and indirect taxes. Tax collection was almost 1 lakh crore during FY2010-11. There has been growing involvement with the Government’s initiatives such as the Central Plan Scheme Monitoring System, Goods & Services Tax and e-initiatives in respect of Stamp Duty collection. In the current year, IDBI Bank initiated payment and receipt related transactions for the Railways and the Government of Haryana. Cash Management Services have been a thrust area ofIDBI Bank. It has established a firm foothold in this business segment and is extending its services to an increasing number of corporate. Prestigious dividend mandates have been obtained from companies, both in public as well as the private sectors.IDBI Bank has also
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earned market recognition for its services as Bankers to Issue for IPO / FPO assignments, especially in the disinvestment programmer of the Government of India, and has emerged as a major player in the retail segment.IDBI Bank’s strategy to continuously upgrade its CMS product offering has been reaping rich reward
Infrastructure Finance
IDBI Bank has increasingly been associated with infrastructure financing and always remained proactive to realize the dreams of the nation in this regard. Infrastructure financing involves long gestation periods and have a distinct risk and return profile requiring innovative structuring. It has been in the forefront in structuring and financing of infrastructure projects in the areas of power, telecom, roads, airports, seaports, railways and logistics, ever since the infrastructure sector was opened to private investment, and a significant share of its aggregate assistance goes to infrastructure sector. Recognizing the critical role of infrastructure development in the growth of national economy and also the huge investment required in the sector, focused approach was followed to provide end-toend solutions to the infrastructure companies viz. corporate advisory, syndication of debt / equity, financial structuring, term loans, working capital, securitization and other related services. IDBI Bank has emerged as leading player in debt syndication field. IDBI Bank has also taken initiatives in funding urban infrastructure projects; renewable energy projects (solar, wind and bio mass-based power projects); seaports and airports under the Public-Private Partnership (PPP) route. With the opening of overseas branch,IDBI Bank is in a position to extend, selectively, foreign currency denominated loans to infrastructure projects.
Retail Finance & Financial Inclusion
IDBI Bank aims to improve its business mix and thereby endeavors to augment composition of retail business. Supportive infrastructure set up in terms of branch network and skilled manpower provides good scope in this regard. At the end of the fiscal,IDBI Bank has 815 domestic branches comprising 238 at metropolitan centers, 307 at urban centers, 184 at semi-urban centers, 86 at rural centers and one overseas. In addition to its plan of expanding branch network, IDBI Bank is in the continuous process of bringing improvement in existing products to increase customer satisfaction level.
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IDBI Bank is a pioneer in the Indian Banking industry in embarking upon a special mission to bring about “Delight for its customers”. Under this mission,IDBI Bank has introduced Current and Savings account services free from all charges to its customers. With this unique measure, IDBI Bank has been able to attract about nine lakh customers with an initial account opening amount of ` 3200 crore. IDBI Bank is also offering additional interest on fixed deposits above the normal deposit rates to the `Golden-Aged’ customers. As part of customer rendezvous, IDBI Bank celebrated the 100th anniversary of `International Women’s Day’ at 102 branches across the nation. IDBI Bank, in its efforts to realize improved reach to its growing clientele, added 169 ATMs at key locations, taking the total number of ATMs to 1370 as on March 31, 2011. In fact, IDBI Bank envisages utilizing alternate models of ATM deployment so as to increase the pace of expansion of its ATM network. IDBI Bank continuously attempts to develop innovative features and facility in its ATMs. Accordingly, the Bank has the plan of introducing, along with others, ATM enabled payment of direct taxes. IDBI Bank thrusts on promoting Alternate Channels and increasingly endeavors to deliver new products and services through these channels. As a part of these initiatives, IDBI Bank, during the financial year 2010-11, provided the facility of making on-line payments for e-commerce transactions through its debit cards.IDBI Bank also launched a new variant of the debit card, i.e. Women’s Card exclusively for its women customers. Cash back scheme for debit card usage at Point of Sale as well as for e-commerce was also rolled out during the financial year. In addition,IDBI Bank has also enabled its debit cards for withdrawing cash at merchant locations within the permissible limits. It has also tied up with select merchants for offering this facility to the debit cardholders of all the banks in the country. The facility for transfer of funds by IDBI Bank’s customers to other customers of IDBI Bank as well as customers of any other bank through mobile phones is also being introduced in partnership with the National Payment Corporation of India. As a part of its efforts towards making its internet banking service more secure, your Bank has introduced a facility of second factor authentication (by way of an one time password delivered through SMS) before registering any beneficiary for transfer of funds through internet banking. With a view to enhancing customer experience and increasing usage of its internet banking facility, IDBI Bank has also provided the facility of creating
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passwords online by the customers themselves. IDBI Bank has bagged the prestigious mandate of being the partner for Department of Posts in their pre-paid card programmer for their account holders. IDBI Bank is also partnering with Bombay Custom House Agents Association (BCHAA) for issue of an innovative payment instrument to enable epayment of freight, custom duties etc. through a closed user group debit card. IDBI Bank has emerged as one of the dominant and competitive players in the retail finance segment. To meet the diversified needs of the retail customers, an array of innovative products, both Secured and Unsecured, are offered to prospective retail customers. IDBI Bank has launched Mortgage Loan Interest Saver, an innovative product, where borrower can save interest on Loan against Property to the extent of surplus funds parked in his current account linked to loan account. To increase the level of Current Account and Savings Account (CASA), IDBI Bank has introduced Salary account with in-built overdraft facility for salaried individuals, having their salary account with IDBI Bank.IDBI Bank attaches great importance to Education Loan for the meritorious, needy and deserving students. The Bank has a tie-up with Educational institutes for granting education loan. To ensure wider geographical coverage and to tap the latent opportunities,IDBI Bank has increased its footprints by adding 9 new Retail Asset Centers (RACs) during the year. These new centers were started in Tier II and Tier III cities with a view to increase home loans in the ambit of priority sector. With a view to leveraging the relationship with Maruti Suzuki India limited, IDBI Bank has co-sponsored Maruti’s Think Big ChallengeII event for encouraging business ideas and entrepreneurship skill of individuals across 19 cities. To support government initiative of offering financial services to Economically Weaker Section (EWS) and Lower Income Groups (LIG) of the society,IDBI Bank is offering government sponsored scheme called Interest Subsidy Scheme for Housing the Urban Poor (ISHUP) and Education Loan (Central Interest subsidy scheme) to its retail customers. Today IDBI Bank enjoys `Top of Mind Recall’ amongst its peers.IDBI Bank has tied up with over 34 Asset Management Companies (AMCs), including IDBI Mutual Fund to provide a bouquet of diversified financial products to its customers. It is also a distributor of Fixed Income Securities viz. Capital Gain Bonds, Government of India Bonds, and various Tax Saving Bonds. IDBI Bank is registered with Pension Fund Regulatory and Development Authority (PFRDA), as a
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Point of Presence (Pop), for the distribution of New Pension System (NPS), a safe and flexible system, introduced by Govt. of India to provide the citizens with regular postretirement income stream. to cater to the investment and insurance needs of the customers, IDBI Bank offers Life Insurance solutions to suit various customer segments, through IDBI Federal Life Insurance Company Ltd. Your Bank is a Corporate Agent of Bajaj Allianz General Insurance Co. Ltd. to offer `Non-life’ insurance products ranging from asset, health and personal accident. IDBI Bank highly values its relationship with the NRI clients. In its effort to deepen existing relationship and also to build new relationship, it has launched “IDBI Health Care Scheme” under three different packages viz. Platinum, Gold and Economy. Under the scheme, healt check-up facilities are offered to the dependents of NRI clients through a wide network of diagnostic centers. IDBI Bank has entered into an agreement with Al Farmhand Exchange and Oman UAE Exchange during the year for routing remittances from Gulf Countries. With this, the remittance services from Gulf countries can now be availed from 12 Exchange houses. IDBI Bank has also entered into an MOU with UAE Exchange in Gulf Cooperation Council(GCC) countries for sourcing NRI deposits IDBI Bank has various NRI campaigns and NRI customer meets and also participated in NRI events/conferences held in India and overseas to improve the services to NRI customers and expand visibility of NRI products and services.43 IDBI Bank offered Portfolio Investment Scheme (PIS) services to NRIs for investment in the secondary market on both repatriable and non-reparable basis by trading in online as well as offline modes. The trading tie-up includes IDBI Capital Market Services limited for online trading and other major stockbrokers for the purpose of offline trading. IDBI Bank also proposes to extend facilities of online trading to other institutional brokers to cover a larger number of NRI customers. In meeting the objective of Financial Inclusion as articulated by the Government of India,IDBI Bank has initiated Financial Inclusion Plan (FIP) for the first three years ending FY 2013. The Bank is required to cover total 119 villages, with a population of over 2000, by FY 2012, in the states of Maharashtra, Madhya Pradesh, Chhattisgarh, West Bengal, Himachal Pradesh, and Dadra & Nagar Haveli. During the financial year 2010-11, the Bank had met the target of launching Financial Inclusion Plan (FIP) in 55 unbanked villages. The remaining 64 unbanked
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villages will suitably be covered during FY 2012. In addition to these villages, bank will also cover 5000 villages with a population of less than 2000 by FY 2012-13. Apart from the villages, IDBI Bank is also launching Financial Inclusion drive in the urban unbanked habitations. The FIP of IDBI Bank is being implemented by using Information Communication Technology (ICT) based smart card solution through Business Correspondent (BC) model. Services of various Technology Service Providers (TSPs) across geographical segments/locations are being used for Financial Inclusion drive. The TSPs would provide end-to-end solution including management of BCs/Customer Service Points (CSPs). Every customer in the unbanked villages is being provided with a biometric smart card as per Institute for development and research in Banking Technology (IDRBT) specifications and capable of incorporating around ten functions. To start with, the banking services being provided in the allotted villages are in offline mode. IDBI Bank is in the process of developing a platform where the customers can be provided the services on a real-time basis. IDBI Bank has also commenced its Inclusive Banking drive by launching its FIP in 46 unbanked villages and 1 urban poor location in Mumbai. The progress in these villages is being reviewed by top management as part of the Outreach Programmer. Presently, IDBI Bank is only rendering services such as deposit, withdrawals and balance enquiry through smart cards. However, it proposes to extend the facilities for micro credit, insurance, utility payments, etc. As part of the Financial Inclusion initiative, IDBI Bank has signed MOU with Tribal Development Department, Government of Gujarat, for delivering financial servicesM, including all transfers from Government Schemes to the beneficiaries of four tribal blocks of the State of Gujarat. IDBI Bank is also in the process of exploring such partnership with other state governments. IDBI Bank has signed MOU with Unique Identification Authority of India (UIDAI) for acting as a Registrar and implementation of the UIDAI project has already been commenced MSME InitiativesMicro, Small and Medium Enterprises (MSMEs) have been accorded an important role in your Bank’s growth charter. IDBI Bank understands that a sustainable growth model in the long-term can be built only on a strong foundation. With its endeavor to take the MSME Banking facilities proximate to MSME clients, IDBI Bank has set up dedicated MSME Care Centres in 30 major cities. Each MSME desks, mapped
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to one of these cities, have been established in major business areas in the vicinity of these Centres. With that,IDBI Bank has enhanced presence in the MSME space at more than 84 centres covering most of the MSME sectors/ clusters of prominence. IDBI Bank understands various needs of the MSME clients and is always on the lookout to offer new products that are customized to take care of such needs. During FY 2010- 11, IDBI Bank introduced four new products in the MSME space. IDBI Bank launched ‘Loan Against Property’ for the MSMEs to take advantage of their assets/properties lying idle. The Bank introduced ‘SME Smart Line of Credit’ so that MSMEs could take advantage of emerging business opportunities. In addition,IDBI Bank implemented the ‘Artisan Credit Card’ scheme of Indian Banks‘ Association (IBA) to take care of the credit needs of the artisan community of the nation. With a view to move towards cleaner and green energy sources,IDBI Bank joined hands with World Resource Institute (WRI), USA, one of the top international research institutes on a non-exclusive basis in developing a loan product for implementation of Energy Saving projects. Apart from these, your Bank has taken steps to offer tailormade, faster solutions to the MSME clients. To further enrich the MSME loan basket, the Bank has tied-up with Small Industries Development Bank of India (SIDBI) in an exclusive arrangement to jointly finance MSME units, initially in 10 centres viz., Ahmedabad, Bangalore, Chennai, Coimbatore, Delhi, Indore, Jaipur, Lucknow, Ludhiana and Rajkot which would subsequently be rolled out across the country. IDBI Bank understands the important role that the clusters play in the economic health of the MSMEs IDBI Bank organized a cluster development initiative at Coimbatore by holding an interactive session where prominent speakers belonging to different specialized streams of industry offered their ideas, highlighting the problem areas and offering solutions to specific problems of the MSMEs of the cluster. With a view to promote MSME building initiatives taken-up by various Industry Associations, your Bank participated in a number of MSME promotional events throughout the past year. 44
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CHAPTER 3
Introduction of IDBI Bank:
The Industrial Development Bank of India Limited, now more popularly known as IDBI Bank, was established as a wholly- owned subsidiary of Reserve Bank of India. The foundation of the bank was laid down under an Act of Parliament, in July1964. The main aim behind the setting up of IDB I was to provide credit and other facilities for the Indian industry, which was stil in the initial stages of growth and development. In February 1976 , the ownership of IDBI was transferred to Government of India. After the transfer of its ownership, IDBI became the main institution, through which the institutes engaged in financing, promoting and developing industry were tube coordinated. In January 1992, IDBI accessed domestic retail debt market for the first time, with innovative Deep Discount Bonds, and registered path-breaking success. The following year, it set up the IDB I Capital Market Services Ltd. , as its wholly-owned subsidiary, to offer a broad range of financial services, including Bond Trading, Equity Broking, Client Asset Management and Depository Services. In September 1994, in response to RBI's policy of opening up domestic banking sector to private participation, IDBI set up IDBI Bank Ltd., in association withes IDBI. In July 1995, public issue of the bank was taken out, after which the Government’s shareholding came down (though it still retains majority of the shareholding in the bank). In September 2003, IDBI took over Tata Home Finance Ltd, renamed ‘IDBI Home finance Limited’, thus diversifying its business domain and entering the arena of retail finance sector IDBI to become a universal bank Our Banking Bureau
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29 October 2001 Mumbai: The Industrial Development Bank of India (IDBI) is all set to covert itself into a universal bank. IDBI board, at its meeting on 27 October, passed a resolution to become a one-stop shop for all kinds of financial services IDBI would seek to achieve this objective by undertaking a reverse merger with a private or a public sector bank. A draft proposal to this effect will be submitted to the Reserve Bank of India by October 31. Earlier last week, IDBI’s rival, ICICI Ltd, had announced that it would merge with ICICI Bank to create India’s second-largest commercial bank and the country’s first universal bank. IDBI had earlier approached the RBI for an extension of the tenor of an existing soft loan to help it convert into a bank and to maintain additional regulatory requirements. According to analysts, the conversion into a universal, or a one-stop bank, will allow IDBI to access retail deposits of less than one-year maturity, that usually carry low rates of interest. Rating agency Crisis had in July downgraded IDBI’s bonds and certificates of deposits to high.
CHAPTER 4
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HISTORY IDBI BANK
HISTORY IDBI Bank was founded on July 1, 1964 under an Act Parliament. It established as a wholly owned subsidiary of Breathe ownership was transferred to the Government of Indian February 16, 1976 It worked as the main financial institution, whose main goal was to Coordinate with other institutions associated with financing, developing and promoting the industry. With the public issue of IDBI Bank released in July 1995, the share holding of The Government came down below 100%. However, the majority of the Share was still owned by the government, which is currently 52.3%. IDBI Bank started offering a wide array of products and services to its Customers, which covered entire range of industrial activities including Services and manufacturing. In September 2003, IDBI acquired the entire shareholding of Tata Finance Limited in Tata Home Finance Ltd. Since then, the fully owned housing Subsidiary was known as 'IDBI Home Finance Limited'. Next year, on July 29, 2004, the Board of Directors of IDBI and IBDI Bank Approved the merger of IDBI Bank with the Industrial Development Bank of India Ltd. IDBI Bank also acquired United Western Bank in 2006. IDBI Bank is one of the leading public sector banks in India and is also the4th largest Indian bank. Founded in 1964 to provide credit and other facilities to its customers, IDBI Bank currently has 457 centers, 688 branches and 1020 ATMs across the nation. It is world's 10th largest development bank in terms of reach.
IDBI Bank also built several institutions including:1. National Stock Exchange of India (NSE), 2. The Stock Holding Corporation of India (SHCIL) 3. The National Securities Depository Services Ltd. (NSDL) etc The IDBI bank India is a universal bank headquartered in Mumbai offering high class personalized banking and financial aid to their client. They strive toward an effective
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business strategy, proficient and devoted working along with updated technology deliver a top quality banking experience. Currently, they are emerging into their overseas banking competing into global opportunities. As reported last march 31, 2010, the bank already has 1228 ATMs, 725 branches and 486 centers thus recognizing it as the 10th largest development bank in the world. Its turnover is near about 24 crore INSTITUTIONS: Breaking it down by location, they have 215 branches or ATM network in the metro area, 285 in the urban area, and 151 in the semi-urban are and last but not the least, 77 reaching out the rural areas. The IDBI bank has four subsidiaries several institution were also built by the bank wherein included are the NATIONAL STOCK EXCHANGE of India (NSE), the stock holding corporation of India (SHCIL)and the national securities depository services ltd. (NSDL). The shareholding patterns of the company diverse from the different members of the society. SHAREHOLDERS: The largest percentages of the shareholding are the public people. The bank is gradually reaching its vision to be the trusted partner in progress through their soaring standards and efficient work. IDBI bank is a board- managed type organization where in the operation of the bank relies on the chairman and managing directors along with the two deputy managing directors. Decisions over matters are settled through intense board meetings and review.
EMPLOYEES: Employees of the bank are professionals who are competent and experienced. They range from the fields of banking, economics, management, accountancy, engineering, law and computer or information technology. To maintain the working standards and guide the action of the company, a general code of conduct and ethics or coca for
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IDBI bank ltd, directors, officers and employees was generated wherein each member of the company must comply with it.
SERVICE:
IDBI bank provides a wide array of service and product to its customers. It varies for different costumer groups and need. Types of service and product include personal banking, corporate banking, small and medium enterprise (SME) finance and others. Under personal banking, it includes deposits, loan, payments, investment advisory, card, institutional banking, 24 hours banking, preferred banking, NRI service and capital market. Meanwhile corporate banking includes project and infrastructure finance etc, and SME finance comprise of dealer finance and vendor financing, etc.
Objectives
The main objectives of IDBI is to serve as the apex institution for term Finance for industry in India. Its objectives include (1) Co-ordination, regulation and supervision of the working of other financial institutions such as IFCI , ICICI, UTI, LIC, Commercial Banks and SFCs. (2) Supplementing the resources of other financial institutions and thereby widening the scope of their assistance. (3) Planning, promotion and development of key industries and diversifications of industrial growth. (4) Devising and enforcing a system of industrial growth That conforms
Function
The IDBI has been established to perform the following functions(1) To grant loans and advances to IFCI, SFCs or any other financial institution by way of refinancing of loans granted by such institutions which are repayable within 25 year.
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(2) To grant loans and advances to scheduled banks or state co-operative banks by way of refinancing of loans granted by such institutions which are repayable in 15 years?
(3) To grant loans and advances to IFCI, SFCs, other institutions, scheduled banks, state co-operative banks by way of refinancing of loans granted by such institution to industrial concerns for exports.
(4) To discount or rediscount bills of industrial concerns.
(5) To underwrite or to subscribe to shares or debentures of industrial concerns.
(6) To subscribe to or purchase stock, shares, bonds and debentures of other financial institutions.
(7) To grant line of credit or loans and advances to other financial institutions such as IFCI, SFCs, etc.
(8) to grant loans to any industrial concern.
(9) To guarantee deferred payment due from any industrial concern.
(10) To guarantee loans raised by industrial concerns in the market or from institutions.
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(11) To provide consultancy and merchant banking services in or outside India. (12) To provide technical, legal, marketing and administrative assistance to any industrial concern or person for promotion, management or expansion of any industry. (13) Planning, promoting and developing industries to fill up gaps in the industrial structure in India. (14) To act as trustee for the holders of debentures or other securities. Subsidiaries The following are the subsidiaries of IDBI. (1) Small Industries Development Bank of India (SIDBI) (2) IDBI Bank Ltd. (3) IDBI Capital Market Services Ltd. (4) IDBI Investment Management Company Capital Structure and Operations As on September 30, 1996, the authorized Capital of IDBI wasRs.2000 crores. Issued, subscribed and paid up share capital was Rs.828.76crores. Reserves were Rs.6309 crores. Loan funds were Rs.35450 crores The total outstanding loans, investments and guarantee of IDBI stood at Rs.39, 221 crore as on 31st March 1996 From highest safety. It cited poor asset quality and reduced spreads, which analysts say may have made it more difficult for the term lender to tap the market for funds.
? Developmental activities of IDBI
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In fulfillment of its developmental role, the Bank continues to perform a wide range of promotional activities relating to developmental programmers for new entrepreneurs, consultancy services for small and medium enterprises and programmers designed for accredited voluntary agencies for the economic upliftment of the underprivileged. These include entrepreneurship development, self-employment and wage employment in the industrial sector for the weaker sections of society through voluntary agencies, support to Science and Technology Entrepreneurs' Parks, Energy Conservation common. Technical Consultancy Organizations
With a view to making available at a reasonable cost, consultancy and advisory services to entrepreneurs, particularly to new and small entrepreneurs, IDBI, in collaboration with other All-India Financial Institutions, has set up a network of Technical Consultancy Organizations (TCOs) covering the entire country. TCOs offer diversified services to small and medium enterprises in the selection, formulation and appraisal of projects, their implementation and Development review. \ Institute Entrepreneurship
Realizing that entrepreneurship development is the key to industrial development, IDBI played a prime role in setting up of the Entrepreneurship Development Institute of India for fostering entrepreneurship in the country. It has also established similar institutes in Bihar, Orissa, Madhya Pradesh and Uttar Pradesh. IDBI also extends financial support to various organizations in conducting studies or surveys of relevancy
Narasimam committee : recommends that IDBI should give up its direct
financing functions and concentrate only in promotional and refinancing role. But this recommendation was rejected by the government. Latter RBI constituted a committee
24
under the chairmanship of S.H.Khan to examine the concept of development financing in the changed global challenges. This committee is the first to recommend the concept of universal banking. The committee wanted to the development financial institution to diversify its activity. It recommended to harmonies the role of development financing and banking activities by getting away from the conventional distinction between commercial banking and developmental banking. In September 2003, IDBI diversified its business domain further by acquiring the entire shareholding of Tata Finance Limited in Tata Home finance Ltd., signaling IDBI’s foray into the retail finance sector. The fully-owned housing finance subsidiary has since been renamed ‘IDBI Home finance Limited’. In view of the signal changes in the operating environment, following initiation of reforms since the early nineties, Government of India has decided to transform IDBI into a commercial bank without eschewing its secular development finance obligations. The migration to the new business model of commercial banking, with its gateway to low-cost current, savings bank deposits, would help overcome most of the limitations of the current business model of development finance while simultaneously enabling it to diversify its client/ asset base. Towards this end, the IDB (Transfer of Undertaking and Repeal) Act 2003 was passed by Parliament in December 2003. The Act provides for repeal of IDBI Act, corporatization of IDBI (with majority Government holding; current share: 58.47%) and transformation into a commercial bank. The provisions of the Act have come into force from July 2, 2004 in terms of a Government Notification to this effect. The Notification facilitated formation, incorporation and registration of Industrial Development Bank of India Ltd. as a company under the Companies Act, 1956 and a deemed Banking Company under the Banking Regulation Act 1949 and helped in obtaining requisite regulatory and statutory clearances, including those from RBI. IDBI would commence banking business in accordance with the provisions of the new Act in addition to the business being transacted under IDBI Act, 1964 from October 1, 2004, the ‘Appointed Date’ notified by the Central Government. IDBI has firmed up the infrastructure, technology platform and reorientation of its human capital to achieve a smooth transition.
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IDBI Bank, with which the parent IDBI was merged, was a vibrant new generation Bank. The Pvt Bank was the fastest growing banking company in India. The bank was pioneer in adapting to policy of first mover in tier 2 cities. The Bank also had the least NPA and the highest productivity per employee in the banking industry. On July 29, 2004, the Board of Directors of IDBI and IDBI Bank accorded in principle approval to the merger of IDBI Bank with the Industrial Development Bank of India Ltd. to be formed incorporated under the Companies Act, 1956 pursuant to the IDB (Transfer of Undertaking and Repeal) Act, 2003 (53 of 2003), subject to the approval of shareholders and other regulatory and statutory approvals. A mutually gainful proposition with positive implications for all stakeholders and clients, the merger process is expected to be completed during the current financial year ending March 31, 2005. The immediate fall out of the merger of IDBI and idbi bank was the exit of employees of idbi bank. The cultures in the two organizations have taken its toll. The IDBI BANK now is in a growing fold. With its retail banking arm expanding further after the merger of united western Bank. IDBI would continue to provide the extant products and services as part of its development finance role even after its conversion into a banking company. In addition, the new entity would also provide an array of wholesale and retail banking products, designed to suit the specific needs cash flow requirements of corporate and individuals. In particular, IDBI would leverage the strong corporate relationships built up over the years to offer customized and total financial solutions for all corporate business needs, single-window appraisal for term loans and working capital finance, strategic advisory and “hand-holding” support at the implementation phase of projects, among others. IDBI’s transformation into a commercial bank would provide a gateway to low-cost deposits like Current and Savings Bank Deposits. This would have a positive impact on the Bank’s overall cost of funds and facilitate lending at more competitive rates to its clients. The new entity would offer various retail products, leveraging upon its existing relationship with retail investors under its existing
26
Suvidha Flexi-bond schemes. In the emerging scenario, the new IDBI hopes to realize its mission of positioning itself as a one stop super-shop and most preferred brand for providing total financial and banking solutions to corporate and individuals, capitalizing on its intimate knowledge of the Indian industry and client requirements and large retail base on the liability side. IDBI upholds the highest standards of corporate governance in its operations. The responsibility for maintaining these high standards of governance lies with its Board of Directors. Two Committees of the Board viz. the Executive Committee and the Audit Committee are adequately empowered to monitor implementation of good corporate governance practices and making necessary disclosures within the framework of legal provisions and banking conventions.
27
CHAPTER 5
Financial market, institutions, & financial servicing India
Objective & organization
After independence, the government of India started establishing several corporations and other institution to promoter industrial development of the country. As the number of such institution went on increasing, it become necessary to co-ordinate the activities of all these institution in a systematic manner. An attempt was made by the government to gear the entire economy to the needs of rapid industrialization. The necessary for increasing production and increasing the standard of living of people as speedily as possible, was felt very badly. This warranted the establishment of an institution, which will look after the co-ordination of such financial institutions working to achieve this objective. This was responsible for the establishment of industrial development bank of India. The bank was established with the following objective: a) To co-ordinate the activities of the financial institutions established in the country after independence b) To the participate in the activities of such institution if and when necessary. c) To ensure that the activities of all these institution are planned and executed in such a manner that the priorities of the plans are property observed: d) To function as an apex institution for all the financial institution functioning in country:
e) To promote and ensure the success of the being development project in the
country.
f)
The IDBI was separated from the RBI and if started functionin independent
statutory organization.
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Forms of financial assistance provided by the IDBI:
The financial assistance provided bank the IDBI can broadly be classified in to two categories: 1.
2.
Assistance to other financial institution: and Assistance to industrial concerns directly. On its own, or in participation with
other institutions. The IDBI provides assistance to other financial institutions by refinancing the loan or finical assistance given by these institutions to various industries. This work of refinancing was undertaken by the IDBI on 1st July 1964. A refinance corporation for industry was established in India in 1958. This corporation was established with a capital of 25 crores. The entire business of this industrial refinance corporation of India was taken over by the IDBI from 1stseptember 1964. And the facility of refinance was provided through this bank to other institutions providing finance to small scale and other industries. The IDBI come to work as a refinancing agency. The IDBI provides direct finance to various industrial concerns, on its own. This is done by the bank in the way normally adopted by various financial institutions to provide finance: granting loan and advance, subscribing to share capital, underwriting share, purchasing bonds or debentures, etc. the IDBI makes the financial assistance available to various industrial concerns in all these ways, mentioned aboves. A special feature of this bank is the creation of a special fund known as development assistance fund. The fund is to be used for providing assistance to such industries whose anticipate rate of return is very low. The returns may be due to various reasons but the industry must be important enough to deserve such a special consideration. This fund was set up in 1964. The loans, gifts, grants, donations, etc. coming from the
29
central government, were to from the initial capital of this fund. Any profit accruing out of the loans given from this fund was to be ploughed back.
Review of work done by the IDBI (UP TO MARCH, 1991) The cumulative assistance sanctioned by the IDBI since its inception until the end of march 1991, was rs 48560.3 crores and disbursement stood at RS. 34656.4 crores. The IDBI provides finance for various purposes including refinance. Export credit, underwriting and so on. As an apex institution. The IDBI assists SFCs, ICICI and other financial institution by subscribing to their share capital it has given foreign currency loans also. The role played by the IDBI can be understood when we remember that its sanctions about 36% of the total sanctions of all term lending institutions. The table shows the remarkable increase in the share of direct loan. The IDBI s direct loans are over 56% of its total financial assistance. In view of streamlining, the narsinham committee suggested that the IDBI should stop providing direct loans and perform only promotional apex and refinancing role in respect of other institutions like SFCs, SIDBI AND ICICI ETC. Type of assistance 1970-71 1989-81 1990-91
1. Direct loans
29.64
500.05
3,8810.95
2. Refinance of industrial loan
23.45
577.04
897.43
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3. Bill finance 28.48 4. Underwriting and direct 3.33
5. Loan to and investment in
235.08
1,170.26
subscription to share/ debenture 66.82 261.95
share and bonds of financial 8.10 intermediaries. 6. See capital through SFCS / SIDCS -
1.27
664.63
-
-
Table: types of assistance sanctioned by the IDBI (1970-71 TO 1990-91) The table summarizes the various types financial assistance sanctioned by the IDBI, and changes in them over a twenty- year period from 1970-71. The direct assistance provided by the bank mainly goes to the technicians who have started self – employment project, and to project which could not obtain financial assistance from other sources. The IDBI has also provided financial, on a large seale, to the exporters and has, thus helped export.
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IDBI capital market service limited (ICMS)
IDBI capital market service limited (ICMS),a wholly owned su
bsidiary of your bank, established in 1993 offers a full suite of financial product and service to institutional , corporate and retail client. Its business include primary dealing, stock broking, distribution of financial product, merchant banking, corporate advisory services, debt arranging & underwriting, portfolio management of pension / PF fund’ & research service. However, in accordance with revised RBI guidelines, the primary dealing business has been segregated and IDBI Gilts limited has been incorporate as subsidiary of IDBI, for the purpose. ICMS has established itself in the investment banking business having completed seven issues apart from corporate advisory assignments in project appraisal, shares valuation, loan syndication, debt gesturing etc. it has also made initial forays into private equity investment. IDBI seeks to represent and protect the interest of debenture or bondholder through debenture trusteeship: IDBI acts as security agent and mortgage trustee in respect of loan granted by domestic and foreign lenders to companies. IDBI offers forex service to advices clients regarding the necessary of booking forward cover to protect their interest in foreign currency (FC) exposure. IDBI bank offers high technology based top-of the line branded products. Which have been well received by the market It is also a lending player in depository participation service enabling. In addition, IDBI has in its portfolio, other companies that can be revived by undertaking various measures such as strengthening of management, up gradation of
32
technology, infusion of fresh fund, etc. IDBI has announced that it would like to interact with potential estors / clients who may be interested in takeover, merger, or joining as co-promoters etc. in order to achieve the said objective Sources of funds The IDBI also borrows from abroad and sources funds under with foreign financial institution, foreign bank and margin government and operates foreign lines of credit, secured by government. The foreign fund are used for financial of the foreign currency component of the project finance for providing foreign currency loan and financing of imports and to make foreign supplier of capital good, plant and machinery forging countries. It can borrow from the government and the RBI, has been borrowing form the capital market since 1994, through of different varieties of bonds and debenture. It has set up financial fund and a number of subsidiaries for provision of various financial services . the IDBI is converted into a universal bank and with it subsidiaries, including the IDBI bank in 2004-05.
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CHAPTER 6
IDBI Bank Ltd. – A Profile
IDBI Bank Ltd. is today one of India's largest commercial Banks. • • • years, IDBI Bank has essayed a key nation-building role, first as the apex Development Financial Institution (DFI) (July 1, 1964 to September 30, 2004) in (October 1, 2004 onwards). As a DFI, the erstwhile IDBI stretched its canvas
the realm of industry and thereafter as a full-service commercial Bank. beyond mere project financing to cover an array of services that contributed towards balanced geographical spread of industries, development of identified • • Backward areas, emergence of a new spirit of enterprise and evolution of a deep On October 1, 2004, the erstwhile IDBI converted into a Banking company (as and vibrant capital market. Industrial Development Bank of India Limited) to undertake the entire gamut of Banking activities while continuing to play its secular DFI role. Post the mergers of the erstwhile IDBI Bank with its parent • company (IDBI Ltd.) on April 2, 2005 (appointed date: October 1, 2004) and the subsequent merger of the erstwhile The United Western Bank Ltd. with IDBI Bank on October 3, 2006, the tech-savvy, new generation Bank with majority Government shareholding today touches the lives of millions of Indians through an array of corporate, retail, SME and Agric products and services.
•
Headquartered in Mumbai, IDBI Bank today rides on the back of a robust
business strategy, a highly competent and dedicated workforce and a state-of- the-art information technology platform, to structure and deliver personalized and innovative Banking services and customized financial solutions to its clients across delivery channels
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•
IDBI Bank currently has a balance sheet of more than Rs.1, 72,000 crore and
business size (deposits plus advances) of more than Rs.2, 15,000 crore. As an Universal Bank, IDBI Bank, besides its core Banking and project finance domain, has an established presence in associated financial sector businesses like Capital Market and Investment Banking, Home Finance, Primary Dealership area and more recently, the Life Insurance Business. Recently, IDBI • Bank reorganized its business and structure commensurate with its aspiration to
become a 'Top 5' Bank by asset size & market capitalization by the year 2012. As a first step, to give the organization the focus necessary for accelerated • Growth, the Bank has reorganized its businesses around nine verticals, six
customer verticals, each focusing on distinct customer segments and three business verticals. Going forward, IDBI Bank is strongly committed to work towards emerging as the 'Bank of choice' and 'the most valued financial conglomerate', besides generating wealth and value to all its stakeholders. Corporate Governance IDBI upholds the highest standards of corporate governance in Its operations. The responsibility for maintaining these high Standards of governance lie with its Board of Directors. Two Committees of the Board viz. the Executive Committee and the Audit Committee are adequately empowered to monitor Implementation of good corporate governance practices and Vigilance Department in IDBI Bank A full-fledged Vigilance Department operates at the Bank's Head Office. The Department operates as a channel for providing inputs to the Top Management For carrying out investigation into vigilance related complaints and to suggest Corrective measures for improving the control systems and compliance of lay Down procedures. Making necessary disclosures within the framework of legal Provisions and banking conventions.
35
? Implementation of Guidelines of the Central Vigilance Commission (CVC) The Department has been implementing the guidelines laid down by the CVC from time to time for improving Vigilance Administration and has put in place system wherein complaints received, for the public / any other sources, are attended to promote information on the Constitution . Industrial Development Bank of India Industrial Development bank of India (IDBI) was constituted under Industrial Development bank of India Act, 1964 as a Development Financial Institution And came into being as on July 01, 1964 vide Go notification dated June 22, 1964. It was regarded as a Public Financial Institution in terms of the provisions Of Section 4A of the Companies Act, 1956. It continued to serve as a DFI for 40 Years till the year 2004 when it was transformed into a Bank.
? Industrial Development Bank of India Limited
In response to the felt need and on commercial prudence, it was decided to Transform IDBI into a Bank. For the purpose, Industrial Development bank (Transfer of undertaking and Repeal) Act, 2003 [Repeal Act] was passed repealing the Industrial Development Bank of India Act, 1964. In terms of the provisions of the Repeal Act, a new company under the name of Industrial Development Bank of India Limited (IDBI Ltd.) was incorporated as a Govt. Company under the Companies Act, 1956 on September 27, 2004. Thereafter, The undertaking of IDBI was transferred to and vested in IDBI Ltd. with effect from the effective October 01, 2004. In terms of the provisions of the Repeal
36
37
INDUSTRIAL DEVELOPMENT BANK OF INDIA
Milestones | Subsidiary Organizations’ | Product Range The Industrial Development Bank of India (IDBI) is a central co-coordinating agency, which directly and indirectly, is concerned with the problems and questions related to long and medium term financing of industry. An apex financial institution at the national and the state level, it finances and nurtures the Indian industry in a significant way. It primarily focuses on a balanced development of the industrial sector. Government stake today is at 72.14% and can be further reduced to 51%. The core area of operation of IDBI has been project financing. Long term project specific finance through loans, convertible andnon-convertible debentures, and underwriting, direct subscriptions however, continue to form the largest single segment. Reserve Bank Of India (RBI). - In 1976, ownership was transferred to the Government Of India. (GOI) - The Export Import Bank Of India (EXIM Bank) branched off from IDBI's international finance division in 1982. - SIDBI, the Small Scale Industries Development Bank Of India, a wholly owned subsidiary, was started in 1990 to address the specific needs of the Small Scale Industries. - IDBI permitted public ownership in 1994. - IDBI has significantly strengthened the Capital Market in the country through the setting up of the Securities and Exchange Board of India (SEBI), the National Stock Exchange of India Limited (NSEIL), Credit Analysis and Research Limited (CARE), the Stock Holding Corporation Of India Limited. (SHCIL), Investor Services of India Limited (ISIL), National Securities Depository Limited (NSDL). Apart from these Capital Market institutions, IDBI has its own subsidiary institution IDBI Investment Management 38 Company Limited (IIMCO) to manage mutual funds and other investment products for investors.
39
ASBA IPO Payment Option Now apply for IPO through ASBA [Applications Supported by Blocked Amount] Facility provided by IDBI Bank. IDBI Bank savings / current account now makes IPO application a seamless and hassle-free process. Instead of moving out funds from your account for application to an IPO, the amount Why should One investblocked. Fund through IDBI Bank? can now simply be In Mutual IDBI every individual has specific needs and priorities. IDBI needs could vary from Benefits: buying a house, providing for your child’s education, getting your child married, and so on. IDBI needs are very important for us. We can help in fulfilling your dreams by • You don’t need not pay the application money by cheque rather block your bank account assisting you to select the schemes, which would be in consonance with your needs to the extent of the application money, thus continue to earn interest on application money. We work towards building an Investment culture: You do not have to bother about refunds, as in ASBA only an amount proportionate to the It would be our constant Endeavour to inculcate saving and organized investing habit securities allotted is taken from the bank account when your application is selected for in you. We will help you plan your investments and build a healthy mutual fund allotment after the basis of allotment is finalized. portfolio, which would be an optimal solution for your needs. Cultivating an
• •
investment culture will not only help you but also your family. • The application form is simpler.
• •
You deal with the known intermediary i.e. your own bank.
We can be your ‘One StopFinancial
Apart from subscribing to mutual fund schemes through us, you can also take advantage of our banking services and whole range of financial products, like Saving and Current a/c, ATM card, personal loan product, depository services, loan against units \ shares etc. and see your financial needs satisfied under one roof
•
We recommend what is best for you ‘Equity Funds’:Equity funds mainly consist
of stock investments are the most common type of mutual funds. There are various recommended equity schemes in our bouquet of funds. The selection of these funds is bason combination of qualitative and quantitative evaluation of the Indian Mutual Fund universe by a reputed research agency. The selection is reviewed and revised every month. Our team of Relationship Managers provides research based guidance, as per IDBI individual risk profile and requirements. We help you plan for IDBI retirement, preserve IDBI legacy and manage IDBI present and future wealth.
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Our endeavor at IDBI Bank has always been to offer you path breaking products and
DEMAT ACCOUNT
Electronic Securities Banking Welcome to world-class banking at IDBI Bank.
Paper securities are passé. Enter the world of dematerialized shares, bonds and other securities. Convert your securities to dematerialized form with IDBI Bank Demat Account. It's as simple as opening a Savings Account. Why Demat with IDBI Bank • Lowest fees
• • • • • •
Statement by emails Demat access through Internet, cell and phone Portfolio valuation on the account statements Online execution of transactions at branches Special rates for stock market intermediaries and sub brokers Transactions update from back-office four times a data
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Benefits of a Demat Account
With IDBI Bank’s Demat Account you can enjoy host of benefits.
Benefits Offered Include:
• • • • • •
Trade without any hassles of writing transfer instruction / cheques. Can place orders from anywhere any time using phone or Internet. Online Share Quotes available. Multiple Product offering . Speedy and Secure Trading. Best of research & market news to help to take informed investment decisions
NRI Services
Special services for the special few Being an NRI (non-resident Indian) and privy to special benefits and privileges in India, its only but natural to expect world class levels – be it banking or any other service. Welcome to IDBI Bank, where you are treated as special and your needs exclusive. While we offer basic NRI banking products like Non Resident Rupee Checking Account, Non Resident Rupee Term Deposits and Foreign Currency Non Resident Deposit, we realise that your requirements are manifold. Hence, we provide seasoned banking professionals to handle your queries and offer value added services. The value-added services we provide range from answers to online tax and foreign exchange related queries and needs with special emphasis on FEMA guidelines issued by The Reserve Bank of India from time to time. Our International Debit Card is designed to offer you the convenience of accessing your funds with us from any ATM and also pay for your purchases from any merchant establishments across the world. You can avail of our advanced funds transfer facility to transfer funds from your account to that of your family members' account held with any IDBI branch
43
across India. Our other services, such as providing free nomination and mandate facility enables hassle free banking operations to your family member authorized by you to operate your account. We provide high-end solutions such as high yielding foreign exchange products, wealth management insurance.
Non-Resident External (NRE)
• • •
Repatriable account for your investment needs Access your account anytime, anywhere with Internet Banking Shop at more than 8.3 million locations withdraw funds in 140 countrie
Non-Resident Ordinary (NRO) • An account for your local income and expenses
• •
Access your account at more than 250 ATM's across the country Pay your bills in India from anywhere in the world .
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PRIMARY DATA ANALYSIS
1. What is the recent GDP growth in IDBI? Sectoral growth GDP: Trends in investments and savings year 2005-06 2006-07 2007-08 2008-09 2009-10 Gross investment 34.7 35.7 38.1 34.5 36.5 33.5 34.6 36.9 32.2 33.7 domestic Gross domestic saving
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EXPATIATION : Investment & industrial scenario during FY 2009-10, Gross domestic investment moved up to 36.5% as compared to 34.5% during previous year. As depicted in figure1 , domestic savings improved to 33.7% during FY 2009-2010 against 32.2% a year before
46
Q2 what is sectoral growth of IIP of IDBI bank? Sectoral growth of IIP (%) Industrial growth measured in terms of movement of index of industrial production IIP remained sluggish with7.8% during FY 2010-2011 as compared to 10.5% during fy 2009-2010. Growth of industrial production exhibited lack of stability and slowed down to a considerable degree during the second half of the fiscal weak growth in capital goods sector is a matter of serious concern which may restrict growth in other segments of industries as well, through its forward and backward linkage
Figure- sectoral growth of IIP(%) 2009-2010 Basic goods Capital goods Intermediate Consumer IIP(general) 7.2 20.9 13.6 6.2 10.5 2010-2011 6.3 9.3 8.8 7.5 7.8
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Q 3 what is the composition of domestic flotation of IDBI bank?
Table 8.3 composition of domestic flotation (Rescore).
year 2002-03 2003-04 2004-05 2005-06
Debt 3422.2 30660.6 31420.0 49559.2
Equity 7450.0 22031.8 29260.0 31272.6
Composition of domestic flotation (RS.CRORE).
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EXPAIN The above table and graph 8.3 shows that a strong macroeconomic outlook, positive investment climate and encouraging corporate financial results were the main factors during 2005-06. During the year, inventory interest the public issue segment strengthened. Total domestic flotation during 2005-06 was higher at RS.80.8318 corer compared to RS. 60680 corers in 2004-05. Out of the flotation during the current year, equity component was at RS 31272.6 crore.
49
Q 4 What is the composition of deposits of IDBI bank? The composition of deposit is showing below with help of table and graph. Table 8.4 composition of deposits (%). Types of deposit Composition of deposit
Time deposit
70.5
Saving deposit
9.6
Demand deposit
19.9
Explain The above table and graph shows that the time deposits i.e. to 50% is higher than the both saving and demand deposit. The saving deposit as 9.60% and the demand deposit are 9.90%.
50
Q6 what is the average inflation rate in trends of IDBI bank? Table 8.5 trend in average inflation rates (%). year Wholesale price index Crude price index
2002-03 2003-04 2004-05 2005-06
3.4% 5.4% 6.4% 4.4%
4% 3.9% 3.8% 3.9%
8.5 trend in average inflation rates (%).
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Explain Inflation during 2005-06 as measured by movement in wholesale price index (WPI) was lower at 4.05 as at end of March, 2006 compare to 51.6% year ago, mainly due to financial and monetary measures under taken to contain domestic inflation even in a situation of rising crude prices. Average WPI was also at 4.4% as compare to 6.45% the previous year however, continued high global oil prices remain as concern.
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Q7 what is the credit rating of both domestic and foreign currency borrowing of IDBI bank? The IDBI bank obtains credit rating for both domestic and foreign currency borrowing. The ratings for the rupee resources are indicated in table . Table 8.6 domestic currency borrowing rating (As on march 31,2011) CRISIL ICRA FITCH
Fixed deposits Short
FAAA/STABLE term P1+
MAA+ A1+
tAAA F1+(IND)
Borrowings(certificate of deposit) Long- term rupee bonds AA+/STABLE (senior & lower tiner II bonds) HYBRID- UPPER TIER AA/SABLE II bonds HYBRID-IPDI AA/STABLE LAA/STABLE LAA/STABLE AA-(IND) LAA+/STABLE AA+(IND)
The foreign currency borrowings of your bank are rated by international rating agencies,. Moody’s investor services (moody’s) and standard & poor’s (s&p). the long term foreign currency ratings and bank financial strength ratings ( BFSR) are indicated in table.
53
Ratings for foreign currency borrowings for senior debt (as on march 31,2011) Rating agency Long term rating BFSR
Moody’s investor services ( moody’s)
Baa3
D
Standard & poors (s& p)
BBB-/ STABLE
C
While the foreign currency debt for IDBI bank as assigned by s&p and fiche rating are at par with sovereign ratings, the rating assigned by moody’s is one notch higher than the sovereign rating.
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Secondary data analysis.
Growth in business As on 31.03.2005 30.09.2005 31.03.2006
Deposit
15103
18158
26001
advances
45414
46413
52739
•
Deposits grew by 72% compare to system growth of 18%.
•
Advances grew by order 16% retail advances grew by 50%
•
Retail advances account for 16% of total advances.
Financial highlights march 2006
? Balance sheet grew by 9% RS. 88565 corer (RS 81360)
? Total business at RS 88565 corer growth of 30%
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? PAT RS .561(Rs.907 crore-6 months).
? QIV PAT RS.201 CRORE (RS.189crore)
? Net NPAS down to 1.01% (1.74%) of net advances.
? Significant progress in assets resolution.
? Recovery from NPA RS .1738 crore of which
? Recovery from fully written off cases RS 1066.
? CRAR- 14.8 TICO I-11.7%
? N II QIV grew by 192% to RS.355 crore
(RS.115 CORE)
93.1 Assets composition
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STD
SUB-STD
DBTFL
LOSS
MAR-05
47994
571
568
76
SEP-05
48884
123
1999
76
MAR-06
55207
400
643
72
The asset composition of IDBI bank during the year march 2006 is higher than both during March 2005 and September 2005. During the year March 2006 loss is 76 crore and during the year march 2005 and September 2005 loss is same 76 crore in asset composition i.e. it is higher than the year 2006.
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SHAREHOLDING PATTERN
PUBLIC OTHER GOVERMENT INDIN FINANCIAL INSTITUTION
14.9 4.1 52.8 16.2
FOREIGN INSTITUTION INVESTOR
12.3
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GOI to retained least 51% state at all times IDBI not constrained by 20% full holding limit applicable to other banks, shareholding pattern (06.01.06)
Market price per share (rs)
97.35
Market capitalization (crore) USD BIN Earnings per share (rs) Book value per share (rs) Price to book ratio Network and delivery channels.
? 177branches,4 extension contents
7045 1.56 6.63 86.51 1.13
? 393 ATMS. ? Presence in 103 cities ? Internet banking ? Retail customer base: 5 millions + ? Corporate customers :3000 +
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ANNEXURE
2. What is the recent GDP growth in IDBI?
3. What is the sectoral growth of IDBI bank?
4. What is the composition of domestic flotation of IDBI bank?
5. What are the average inflation rates in trends of IDBI bank?
6. What is the composition of domestic flotation of IDBI bank?
7. What is the credit rating of both domestic & foreign currency?
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Findings and conclusion
From the study of IDBI bank the findings and conclusions which I have amide, are as follows. ? The IDBI bank is the largest development bank bank in India for industrial development.
? Is concluded that IDBI provide all types of service of commercial bank and a
development bank. This shows that IDBI has been also playing important role in the services sector for their customer.
? IDBI performs its development functions like infructure development planning,
promoting and development industries provide technical and administrative assistance for promotion management and expansion of industry. ? IDBI finances other financial institution like IFCI , SFC’ ETC this proper that the IDBI also helps the development of other financial institutes. ? IDBI control its development activity by the methods like undertaking market research investment research and market survey
? Is concluded that basic goods, capital good consumer good shows, a increase
which is not much significant and intermediate good has not shown increase but it has shown decrease
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doc_664694621.doc