overview of idbi bank 10

7/29/2019 Overview of Idbi Bank 10

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PROJECT REPORT ON

OVERVIEW & FINANCIAL RRPORT OF IDBI

FOR THE PARTIAL FULFILLMENT FORQUALIFYING MCOM. PART 1 EXAMINATION

Degree of Master of Commerce Part1

(BATCH:- 2012-2013)

SUBMITTED BY:-

AARTI .JAYANTILAL. SONI

ROLL No. 6279

FACULTY GUIDE:PROF.PROF.

SUMITTED TO:

UNIVERSITY OF MUMBAI

MULUND COLLEGE OF MULUND

S.N. ROAD, MULUND (W)MUMBAI- 400 080

DECLARATION


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I AARTI SONI student of mulund college of

commerce, S.N. road, Mulund (w) 400 080 studying in

MCOM- 1 here by declare that I have completed the project

onOVERVIEW & FINANCIAL RRPORT OF

IDBI.

During the Academic year 2012-2013. Theinformation submitted is true & original to best of myknowledge.

Date of submission: Signature of Student

12-10-2012

Place: Mulund


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CERTIFICATE

I Prof. ANURADHA & Prof. RANE here by certify

that AARTI SONI of Mulund College of Commerce, S.N

road, Mulund (w). Mumbai 400 080 of

MCOM 1 (Advance Acccountancy) has completed

His\ Her Project on OVERVIEW & FINANCIAL

RRPORT OF IDBI.

During the Academic year 2012-2013

The information submitted is true & original to the best of

my knowledge.

Signature of Signature ofProject Guide Principal

PROF. Dr. Mrs. S.M.DIWANJI

PROF.

Signature of Signature of

Co-ordinator External Examiner

(A.P. KULKARNI)


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ACKNOWLEDGEMENT

"Accomplishment of any task necessarily depends upon the willingness and enthusiastic

contribution of time and energy of many people."

I take this humble opportunity to express my special thanks and portray my deep sense of

gratitude to Prof. & Prof. whose invaluable guidance and supervision in the project

infused in me great inspiration and confidence in making this survey in right earnest. His

masterly guidance from time to time made the study interesting and meaningful.

They were always there for our help and doing away all the difficulties and confusions

that arose during the project period. He also helped me to understand what was actually

required from the project and what was needed to be done.

I would like to thank our respondents for their kind response and their precious time they

provided me to carry our survey based on the data provided by them.

At last I would like to pay my word of thanks to my family members, all my teachers and

my friends who have indebted me by supporting and encouraging me to go on with the

project easily.

OBJECTIVES OF THE STUDY


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1. To understand the corporate history and strategy of IDBI Ltd.

2. To understand the overall business strategies adopted by IDBI Ltd. for the loan

against securities business.

3. To make a comparative analysis of the product and business strategies of IDBI

Ltd. with respect to various private and public sector banks.

4. To formulate the unique and desired corrective measures and innovation to

increase market share and enhance the brand value of IDBI Ltd.

5. To analyze the service quality in the branches of IDBI Bank.

Executive Summary


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IDBI was established in 1964 as a wholly owned subsidiary of the Reserve Bank of India

(RBI). In February 1976 it was de-linked from the Reserve Bank and its entire capital was

transferred to the Central Government. In March 1994 the IDBI Act was amended to

empower the government provided the government holding does not fall below 51%.

RESEARCH METHODOLOGY


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The project report titled IDBI Ltd. has been prepared mainly on the basis of secondary

data.

Secondary data is the data which is made available and considered as the starting point for

the report. This data can be obtained both internally as well as externally. The following

sources were the basis of this project report:-

Internal Sources

The main internal source has been the library of our institute i.e. MAIMS.

IDBI product manual

Annual report of IDBI

Journals of various banks

External Sources

Websites

Magazines

Newspapers

LIMITATIONS OF THE STUDY


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Although the project has been worked out at its best yet there are some limitations, which

cannot be overlooked. Had these limitations been overcome, the findings would be

accurate. Some of these limitations can be discussed as under:

Time constraint

Time was really a limiting factoring the project. It is really difficult to work out such a

project in less time.

Data constraint

All the data that has been collected for this project, has been taken from secondary

sources like websites, magazines, newspapers and book. And such data may be not be

completely accurate and reliable.

Inexperience of researcher

Inexperience of researcher might also have resulted in inaccuracies.


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TABLE OF CONTENTS

Chapter no. Topic Pg no.

1 Introduction 4

2

3

4

5

6

7

8 Concusion


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Chapter No. 1 INTRODUCTION

Introduction Industrial development bank of India:-

The industrial development bank of India (IDBI) was established in 1964 by

parliament as wholly owned subsidiary of reserve bank of India. In 1976, the banks

ownership was transferred to the government of India. It was accorded the status of

principal financial institution for coordinating the working of institutions at national and

state levels engaged in financing, promoting, and developing industries.

IDBI has provided assistance to development related projects and contributed to

building up substantial capacities in all major industries in India. IDBI has directly or

indirectly assisted all companies that are presently reckoned as major corporates in the

country. It has played a dominant role in balanced industrial development.

IDBI set up the small industries development bank of India (SIDBI) as wholly

owned subsidiary to cater to specific the needs of the small-scale sector.

IDBI has engineered the development of capital market through helping in setting

up of the securities exchange board of India(SEBI), National stock exchange of India

limited(NSE), credit analysis and research limited(CARE), stock holding corporation of

India limited(SHCIL), investor services of India limited(ISIL), national securities

depository limited(NSDL), and clearing corporation of India limited(CCIL)

In 1992, IDBI accessed the domestic retail debt market for the first time by issuing

innovative bonds known as the deep discount bonds. These new bonds became highly

popular with the Indian investor.

In 1994, IDBI Act was amended to permit public ownership up to 49 per cent. In

July 1995, it raised over Rs 20 billion in its first initial public (IPO) of equity, thereby


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reducing the government stake to 72.14 per cent. In June 2000, a part of government

shareholding was converted to preference capital. This capital was redeemed in March

2001, which led to a reduction in government stake. The government stake currently is 51

per cent.

In august 2000, IDBI became the first all India financial institution to obtain ISO

9002: 1994 certification for its treasury operations. It also became the first organization in

the Indian financial sector to obtain ISO 9001:2000 certification for its forex services.

IDBI is one of the All India Development Bank in India. In addition, it is the apex

banking institution in the field of long term industrial finance and functions as the

principal financial institution for coordinating the functions and activities of all India term

lending institutions and to some extent the public sector banks.

The merger of IDBI Bank with the IDBI Ltd. in the year 2004 had made the IDBI

Ltd. as the public sector bank (PSU) with the Government stake holding of 51.4% and the

new company has been incorporated on Sept.27, 2004 and the Registrar of the companies,

Mumbai issued the certificate for commencement of business to IDBI Ltd. on Sept.28,

2004.

Consequently, the IDBI formally entered the portals of banking business as IDBIL

(Industrial Development Bank Of India Limited) from Oct.1, 2004 over and above the

business currently being transacted.

MILESTONES

July 1964: Set up under an Act of Parliament as a wholly owned


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subsidiary of Reserve Bank of India.

February 1976: Ownership transferred to Government of India.

Designated Principal Financial Institution for coordinating the working of institutions

at national and State levels engaged in financing, promoting and developing industry.

March 1982: International Finance Division of IDBI transferred

to Export-Import Bank of India, established as a wholly owned corporation of

Government of India, under an Act of Parliament.

April 1990: Set up Small Industries Development Bank of India (SIDBI) under

SIDBI Act as a wholly owned subsidiary to cater to specific needs of small-scale

sector. In terms of an amendment to SIDBI Act in September 2000, IDBI divested

51% of its shareholding in SIDBI in favour of banks and other institutions in the first

phase. IDBI has subsequently divested 79.13% of its stake in its erstwhile subsidiary

to date.

January 1992: Accessed domestic retail debt market for the first time with

innovative Deep Discount Bonds; registered path-breaking success.

December 1993: Set up IDBI Capital Market Services Ltd. as a wholly owned

subsidiary to offer a broad range of financial services, including Bond Trading,

Equity Broking, Client Asset Management and Depository Services. IDBI Capital is

currently a leading Primary Dealer in the country.

September 1994: Set up IDBI Bank Ltd. in association with SIDBI as a private

sector commercial bank subsidiary, a sequel to RBI's policy of opening up domestic

banking sector to private participation as part of overall financial sector reforms.

October 1994: IDBI Act amended to permit public ownership up to 49%.


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July 1995: Made Initial Public Offer of Equity and raised over Rs.2000 crore,

thereby reducing Government stake to 72.14%.

March 2000: Entered into a JV agreement with Principal Financial Group, USA for

participation in equity and management of IDBI Investment Management Company

Ltd., erstwhile a 100% subsidiary. IDBI divested its entire shareholding in its asset

management venture in March 2003 as part of overall corporate strategy.

March 2000: Set up IDBI Intech Ltd. as a wholly owned subsidiary to undertake

IT-related activities.

June 2000: A part of Government shareholding converted to preference capital,

since redeemed in March 2001; Government stake currently 58.47%.

August 2000: Became the first All-India Financial Institution to obtain ISO

9002:1994 Certification for its treasury operations. Also became the first organization

in Indian financial sector to obtain ISO 9001:2000 Certification for its forex services.

March 2001: Set up IDBI Trusteeship Services Ltd. to provide technology-driven

information and professional services to subscribers and issuers of debentures.

February 2002: Associated with select banks/institutions in setting up Asset

Reconstruction Company (India) Limited (ARCIL), which will be involved with the

strategic management of non-performing and stressed assets of Financial Institutions

and Banks.

September 2003: IDBI acquired the entire shareholding of Tata Finance Limited in

Tata Home finance Ltd, signaling IDBI's foray into the retail finance sector. The

housing finance subsidiary has since been renamed 'IDBI Home finance Limited'.


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December 2003: On December 16, 2003, the Parliament approved The Industrial

Development Bank (Transfer of Undertaking and Repeal Bill) 2002 to repeal IDBI

Act 1964. The President's assent for the same was obtained on December 30, 2003.

The Repeal Act is aimed at bringing IDBI under the Companies Act for investing it

with the requisite operational flexibility to undertake commercial banking business

under the Banking Regulation Act 1949 in addition to the business carried on and

transacted by it under the IDBI Act, 1964.

July 2004: The Industrial Development Bank (Transfer of Undertaking and Repeal)

Act 2003 came into force from July 2, 2004.

July 2004: The Boards of IDBI and IDBI Bank Ltd. take in-principle decision

regarding merger of IDBI Bank Ltd. with proposed Industrial Development Bank of

India Ltd. in their respective meetings on July 29, 2004.

September 2004: The Trust Deed for Stressed Assets Stabilization Fund (SASF)

executed by its Trustees on September 24, 2004 and the first meeting of the Trustees

was held on September 27, 2004.

September 2004: The new entity "Industrial Development Bank of India" was

incorporated on September 27, 2004 and the Registrar of Companies issued

Certificate of commencement of business on September 28, 2004.

September 2004:Notification issued by Ministry of Finance specifying SASF as a

financial institution under Section 2(h)(ii) of Recovery of Debts due to Banks &

Financial Institutions Act, 1993.


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September 2004:Notification issued by Ministry of Finance on September 29,

2004 for issue of non-interest bearing GOI IDBI Special Security, 2024, aggregating

Rs.9000 crore, of 20-year tenure.

September 2004: Notification for appointed day as October 1, 2004, issued by

Ministry of Finance on September 29, 2004.

September 2004: RBI issues notification for inclusion of Industrial Development

Bank of India Ltd. in Schedule II of RBI Act, 1934 on September 30, 2004.

October 2004: Appointed day - October 01, 2004 - Transfer of undertaking of

IDBI to IDBI Ltd. IDBI Ltd. commences operations as a banking company. IDBI

Act, 1964 stands repealed.

January 2005: The Board of Directors of IDBI Ltd., at its meeting held on January

20, 2005, approved the Scheme of Amalgamation,envisaging merging of IDBI Bank

Ltd. with IDBI Ltd. Pursuant to the scheme approved by the Boards of both the

banks, IDBI Ltd. will issue 100 equity shares for 142 equity shares held by

shareholders in IDBI Bank Ltd. EGM has been convened on February 23, 2005 for

seeking shareholder approval for the scheme.

CHAPTER NO 2 History Of IDBI

History Of IDBI:-


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The genesis of Industrial Development Bank Of India Ltd can be traced to the

establishment of the IDBI, its predecessor entity, in 1964, by an Act of Parliament to

provide credit and other facilities for the development of industry.

IDBIs charter was later broad-based to also encompass the responsibilities of principal

financial institution for coordinating the working of National and State level institutions

engaged in financing, promoting and developing industry.

IDBI was established in 1964 as a wholly owned subsidiary of the Reserve Bank of India

(RBI). In February 1976 it was de-linked from the Reserve Bank and its entire capital was

transferred to the Central Government. In March 1994 the IDBI Act was amended to

empower the government provided the government holding does not fall below 51%.

Consequently, the Bank made its first public issue of equity in July 1995, which was the

largest equity offering in the Indian Stock Market till then.

The majority of its shares are still held with Central Government though the percentage

holding of Government has declined to 58.47% as at the end of March 2002.

The authorized capital of Erstwhile IDBI stood at Rs.1500 crores in conformity with the

provision of Banking Regulation Act. The paid up capital of the company is at Rs.653

crores.

During the four decades of its existence, IDBI has been instrumental not only in

establishing a well developed, diversified and efficient industrial and institutional

structure but also adding a qualitative dimension to the process of industrial development

in the country.


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Cumulative assistance sanctioned and disbursed by IDBI, since inception up to the end -

September 2004 aggregated around Rs.22, 30,000 Crores and Rs. 1,78,000 Crores

respectively. IDBIs asset base stood in the vicinity of Rs. 63,850 Crores at the end of

September 2004.

Institution Building

IDBI has been actively involved in the development of a robust institutional framework

for the domestic financial sector. It played a significant role in the setting up of several

Financial Institutions viz. Export-Import Bank of India (EXIM Bank); Small Industries

Development Bank of India (SIDBI); North Eastern Development Finance Corporation

Ltd. (NEDFi); and the Asset Reconstruction Company (India) Ltd. (ARCIL).

IDBI also participated in the setting up of various capital market-related institutions viz.

Securities & Exchange Board of India (SEBI); National Stock Exchange of India Ltd.

(NSE); Stock Holding Corporation of India Ltd. (SHCIL); Credit Analysis & Research

Ltd. (CARE); National Securities Depository Ltd. (NSDL); IDBI Trusteeship Services

Ltd.(ITSL) and Clearing Corporation Of India Limited (CCIL).

IDBI played a key role in the development of the Jawaharlal Nehru Institute of

Development Banking (JNIDB) and the Entrepreneurship Development Institute of India

(EDII) as training institutes.

IDBI has also been associated with the Entrepreneurship Development in the industrially

less developed states of India. Thus it has performed the role of the institution builder.


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Subsidiaries of IDBI

After the de-linking of Small Industries Development Bank of India from the IDBI with

effect from March 27,2000. IDBI has the following three subsidiaries, viz IDBI Bank Ltd.

(commercial bank) (IDBI Ltd.'s shareholding: 55.38%); IDBI Capital Market Services

Ltd. (financial services/ primary dealership company) (IDBI Ltd's shareholding: 100%)

and IDBI Home finance Ltd. (housing finance company)(IDBI Ltd's shareholding:100%).

SHAREHOLDING PATTERN AS ON SEPTEMBER 30, 2004

(%)

Government 58.47

Employees 0.09

Public 13.90

HUF 0.16

Bodies Corporate 3.62

Banks 5.06

FIIs 8.29

SFCs 0.03

Fis 0.67

MFs 2.52

OCBs 0.07

Trusts 0.06

Insurance Companies 5.76

NRIs 0.72

Others 0.58

Total 100.00

IDBI Bank Ltd.

IDBI Bank Ltd. is a commercial bank, set up by IDBI and SIDBI in September 1994.


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It provides the complete range of banking facilities. During 1998-99, IDBI Bank Ltd.

issued 4 crores-equity shares of Rs.10 each at a premium of Rs.8 per share to the public.

Thus IDBIs share in the equity capital of the bank has fallen from 80% to 57%. SIDBI

also holds shares in the IDBI Bank Ltd.

The IDBI Bank Ltd. has a robust business model which focuses on careful choice of

market segments having revenue potential, expansion of products suite for supporting

future growth and profitability, leveraging technology infrastructure for enhanced

customer services and strong risk management committed to high quality assets and

earnings.

IDBI Home Finance Ltd.

In order to make a foray into retail financing, the erstwhile IDBI, in September 2003,

acquired the entire shareholding of Tata Finance Ltd. in Tata Home Finance Ltd., at par

for a total consideration of Rs.49.98 crore. The company has since been renamed as

"IDBI Home Finance Limited

After becoming a subsidiary of IDBI Ltd., IHFL obtained an A1+ rating (highest short-

term rating) from ICRA, which facilitated the raising of funds at lower rates.

IHFL has implemented a Total Home Loan Solutions (THLS) system with connectivity

through leased lines with all its 16 branches. The system is scalable and forms the

foundation for future business growth.

Chapter No. 3 Functions of IDBI


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Functions of IDBI:-

Besides providing assistance to industries directly, IDBI also provides assistance to

industries through other financial institutions and banks. Thus, the assistance provided by

IDBI falls in two categories, viz.

1 Direct finance to large and medium enterprises and

2 Indirect finance through other financial institutions.

Functions

Direct finance Indirect Finance

- Project Finance - Refinance of Term Loans

- Underwriting & subscription - Rediscounting of bills

to shares & debentures - Support to shares &

- Guarantees for deferred Bonds of other institutions

- Payments & Loans - Rehabilitation Financing

- Bills Discounting

- Equipment Finance Scheme

- Film Financing

3.2 Future Prospects

Although IDBI Ltd. commenced its foray into banking on a standalone basis, the merger

of IDBI Bank into IDBI Ltd., a mutually gainful proposition with positive implications for


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all stakeholders and clients in terms of operational synergies, logistics advantages, cost

efficiencies and rationalization of business processes, is expected to be in place before the

end of the current financial year ended March 31, 2005. The Board of Directors of both

IDBI and IDBI Bank accorded in-principle approval for the same on July 29, 2004. The

Board of IDBI Ltd. (IDBI's successor entity) ratified the decision regarding merger of

IDBI Bank with IDBI Ltd. at the meeting held on October 1, 2004. The various

preparatory steps leading up to the proposed merger are already under way.

The Board of Directors of IDBI Limited, at its meeting held on January 20, 2005,

approved the Scheme of Amalgamation, envisaging merger of IDBI Bank Ltd with IDBI

Ltd. Pursuant to the Scheme approved by the Boards of both the banks, IDBI Ltd. will

issue 100 equity shares for 142 equity shares held by the shareholders in IDBI Bank Ltd.

IDBI Ltd. will transfer a portion of its current shareholding in IDBI Bank Ltd., amounting

to 2.5% of the merged entity's share capital, to a Special Purpose Vehicle (SPV) and

extinguish the balance shares currently held by it in the Bank. Post-merger, the Central

Government's shareholding in IDBI Ltd. will be at 51.4%. The appointed date for the

merger has been fixed as October 1, 2004. The Scheme of Amalgamation would need to

be approved by the shareholders of each of the banking companies viz. IDBI Ltd. and

IDBI Bank Ltd. and will become effective on subsequent receipt of final approval of the

Reserve Bank Of India.

The merger of IDBI Bank with IDBI Ltd. seeks to consolidate businesses across the value

chain. The merger will provide a win-win situation for both the institutions and also

enable the merged entity to provide an array of customer-friendly services to its existing

and prospective clients. In a physical sense, this would enable IDBI to complete the


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integration across the board. In a competitive sense, the merger would create a firm

foundation for IDBI to compete with other banks, supported by strong operational

synergies. The merger stood IDBI Ltd. in good stead in its quest for market share in the

intensely competitive financial system and facilitates its passage to the upper echelons of

the emerging financial architecture in India.

The proposed business model underpinning the new organization is one of Strategic

Business Units (SBUs), with one SBU focusing on development finance, with accent on

corporate finance, while the other would focus on commercial banking. There could be

more SBUs, depending on the space that IDBI Ltd. decides to appropriate for itself going

forward.

The transformation into a bank comes on the heels of the establishment of the Stressed

Assets Stabilization Fund (SASF), domiciled in a Special Purpose Vehicle set up by the

Central Government in the form of an Asset Management Trust, to which stressed assets

amounting to Rs. 9000 crore have been transferred. The above initiative would go a long

way in purging IDBI's legacy portfolio of Non-Performing Assets. The Central

Government has accorded SASF the status of a deemed 'financial institution' to enable it

to press a claim for disposal of assets in its portfolio under the aegis of Debt Recovery

Tribunals (DRTs), wherever deemed necessary. The off-balance sheet, cash-neutral

proposition is expected to trigger a concatenation of benefits: a clean and stronger

balance-sheet, consequential positive implication on the organization rating that would

translate into more cost-effective borrowing, both domestically and abroad, and overall

upgrade in the organizations brand equity that would suitably reflect in its stock

valuations, which is already discernible.


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IDBI Ltd. would continue to provide the extant products and services as part of its

development finance role even as a banking company. The Union Budget 2004-05,

presented on July 8, 2004, spelt out a number of positives for financial sector participants,

including IDBI. The focused pursuit of infrastructure development through pooled

investment of Rs. 40,000 crore by the proposed Inter-Institutional Group (IIG),

comprising IDBI Ltd. and select FIs and banks, is expected to stimulate the Bank's

business volumes. Further, the reform of the SARFAESI Act 2002, making it more

equitable for both lenders and borrowers (in the light of the Supreme Court

pronouncements on the subject and apprehension of potential dilution of creditors' rights)

and related enabling amendments in the Debt Recovery Act, 1993, are expected to

strengthen the legal framework for facilitating expeditious recovery of the organizations

dues from delinquent accounts.

In addition to extant services, 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, the Bank would leverage the strong corporate

relationships built up by the erstwhile IDBI 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 also provides a potential gateway to low-

cost banking 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, in due course, offer various retail liability products,


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leveraging upon its present relationship with retail investors under its existing Suvidha/

Flexibond schemes.

IDBI Ltd. would aggressively leverage its strengths - both within and without - to fashion

an enduring improvement in the Bank's performance, quality of its portfolio and its

relative standing in the emerging financial infrastructure. Systems and procedures have

already been streamlined to facilitate the process while the hard and soft infrastructure has

been readied to address the deliverables of the new organization.. Going forward, IDBI

Ltd. seeks to emerge as a top-drawer commercial bank, providing innovative financial and

banking solutions for corporate and individuals and a name to reckon with in the

emerging configuration of institutional finance, both at home and abroad, capitalizing on

its intimate knowledge of Indian industry and client requirements and large retail base on

the liability side in addition to the significant benefits expected to accrue from the ensuing

merger of IDBI Bank with IDBI Ltd.

The Bank has set a target of opening 500 branches and 500 ATMs by 2008. Idbi Ltd.

currently has 129 branches and 334 ATMs. It expects to grow 25% in business value for

the next three years. With the inauguration of main branch on Chapel Road, IDBI Ltd.

now has three branches at Hyderabad. Referring to the merger of IDBI Bank with IDBI,

the merger has positive implications for all stakeholders and clients of these two entities

from the viewpoint of operational synergies.

CHAPTER NO. 4 PRODUCTS AND SERVICES

Introduction To The Products And Services


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In order to cater to the diverse and customized needs of its corporate clients, IDBI Ltd.

has structured suitable products like equipment finance, asset credit, corporate loan,

working capital loan and bills discounting to variously finance acquisition of equipment

and capital assets, besides meeting capital expenditure and/or incremental long-term

working capital requirements. It also offers structured products like lines of credit to meet

the funding requirements for execution of turnkey contracts. Besides, IDBI Ltd. provides

a wide array of fee-based services.

IDBI Ltd. also provides indirect financial assistance through refinancing of loans

extended by State-level financial institutions and banks and by way of rediscounting of

bills of exchange arising out of sale of indigenous machinery on deferred payment term.

The Bank has a well-diversified wholesale resource base, which includes banks, PSUs,

corporate, provident/pension funds, mutual funds, trusts and multilateral institutions. The

sizeable domestic retail segment is being tapped through innovatively packaged offerings

of unsecured bonds, under the brand-name 'Flexi-bonds', at periodic intervals throughout

the year as well as through competitively priced Fixed Deposits of one year and above

under the 'IDBI Suvidha' brand. The principal instruments of Rupee funds from the

wholesale market are Omni Bonds (private placement and on-tap), Certificates of Deposit,

Term Money Bonds, IDBI Corporate Deposits and Commercial Paper.

IDBI's transformation into a commercial bank also provides a potential gateway to low-

cost banking deposits like Current and Savings Bank Deposits.


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The new entity would, in due course, offer various retail liability products, leveraging

upon its present relationship with retail investors under its existing Suvidha /Flexi bond

schemes.

IDBI Ltd - Role In Primary Market

1 Acting as collection Banker.

2 Funding IPOS.

3 Rendering Depository Services.

IDBI Ltd. - Role In Secondary Market

1 Depository services to investors.

2 Helping/Guiding investors to invest in Mutual Funds.

3 CSGL Account to investors who deal in Government securities.

4 Providing Banking services to investors at very competitive price.

In Short, the following are the categories: -

1 Direct Finance

2 Indirect Finance

3 Corporate Banking

4 Retail Banking

5 Treasury Products

Direct Finance

Project Finance

IDBIprovide long-term finance for new projects, expansion, diversification and

modernization of existing projects. Project finance is provided by the way of: -


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i. Term loans in Indian rupees and foreign currencies.

ii. Underwriting.

iii. Direct subscription to equity capital.

iv. Deferred payment guarantees.

1. Guarantees For Deferred Payments And

Loans

It includes the following categories: -

1. Corporate Loans

Corporate loans are provided in Indian and foreign currencies to financially sound

companies with net worth of not less than Rs.10 crore and having been in

commercial operation for 5 years and making profits consistently for last 3 years.

Such loans are granted to finance capital expenditure and long term working

capital. Assistance is provided from a minimum of Rs.5 crore up to 70% of the

cost of capital goods or raw materials, components, etc., to be purchased.

Promoters contribution must be 30% of the cost of capital goods/ raw materials,

components to be purchased.

2. Working Capital Loans

Such loans are provided to meet the loan component of working capital finance

required by the companies already assisted by IDBI with net worth of not less than

Rs. 15 crores. Assistance is provided up to 805 of the working capital gap with the

minimum of Rs.2 crores. These loans are repayable over a period of 12 to 18

months, with roll over facility at the discretion of IDBI.

Other terms are debt equity ratio not more than 3:1, Current ratio not less than

1.25:1 and Interest coverage not less than 2:1.


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Bills Discounting

IDBI directly discounts the bills of exchange drawn by financially sound companies,

which have been in operation for at least 3 years and have not defaulted to financial

institutions, in connection with sale of machinery Equipment. IDBI fixes annual limit for

discounting of bills, which are repayable over a period of 2 to 7 years. Assistance is

provided up to 100% of the total value (including insurance, taxes and freight). IDBI

requires security in the form of bank guarantee co-acceptance by a bank.

Equipment Finance

Equipment finance is also provided in Indian and foreign currencies for acquiring specific

machinery/ equipment. The eligible borrowing firm must be financially sound company

and should have been in operation for at least 5 years. It should have earned profits during

the last 3 years and must have dividend paying capacity of not less than 2 years. The net

worth of the company must be above Rs.5 crores.

Assistance is provided to the extent of 70% of the cost of equipment plus taxes/ duties,

transportation and installation charges. The amount of loan ranges between Rs.3 crores

and Rs.25 crores. Loan is repaid over 6 tears including moratorium. Management fee is

charged @ 1.05% on the loan amount.

Film Financing

Objective is to provide finance for production of feature films as defined under the

Cinematograph (Certification) Rules, 1983. Advertisement films, short films,

documentaries, etc. are not eligible for financing.


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The eligible borrowing concern should be a corporate entity, promoted by reputed

producers, backed by established directors & other technicians and possessing satisfactory

track record. In case the entity is recently corporative, track record of the main

promoter(s) is considered. The extent of assistance should be :

1 Not less than Rs.2 crore

2 Not exceeding 50% of the estimated cost of the film.

Promoters contribution is not less than 30% of the estimated cost of the film.

A part of the equity contribution (not exceeding 20% of th0e estimated cost of the film)

may be raised in the form of advances from distributors against sale of territories,

music/video rights, etc.

Indirect Finance

Re- Finance Of Term Loans

Objective is to finance medium scale industries. IDBI provides: -

i. Line of Credit (LOC) to all SFCs/SIDCsii. Refinance to banks only in States of Bihar, Himachal Pradesh, Jammu & Kashmir,

Orissa and States in the North East.

The eligible borrowing concerns should be:

i. Refinance of loans or advances granted by SFCs / SIDCs / SIICs, Financial

Institution, Banks etc.

ii. Should not be SSI

iii. Cost of project not to exceed Rs. 12 crore under LOC scheme.

iv. Proposals meeting the norms and parameters of Refinance Scheme

Promoters contribution is @ 25% of project cost and the up front fee is @ 1% on each

disbursement under LOC. The repayment period include:

i. LOC: Maximum 8 years


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ii. Refinance: Maximum -10 years and Normal repayment period: 3-10 years

Re-Discounting Of Bills

Objective is to cover or promote sale of indigenous machinery / equipment. The eligibility

includes the bills / promissory notes made, drawn, accepted or endorsed by any

manufacturer, user or any person selling capital goods. The extent of assistance is the

minimum amount of rediscounting of bills/promissory notes is fixed at Rs.10, 000 and

100% of value of invoice. The repayment period includes the minimum and maximum

deferred payment period covering a set of bills / promissory notes is two years and 5

years respectively and maximum period may be extended up to 7 years, on selective basis,

with the prior approval of IDBI.

Rehabilitation Financing

IDBI has in its portfolio certain potentially viable, weak and sick companies, which can

be revived by way of merger /takeover. Rehabilitation Finance Department (RFD), a

specialized department, created to achieve the said objective, is on the lookout for

resourceful parties interested in takeover/merger or joining in as co-promoter.

In addition, IDBI has in its portfolio, other companies which can be revived by

undertaking various measures such as strengthening of management, up gradation of

technology, infusion of fresh funds, etc.IDBI would like to interact with potential

investors / clients who may be interested in takeover, merger or joining as co-promoters

etc. in order to achieve the said objectives.

Corporate Banking

Lending Products


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i. Working capital and Term Loans

ii. Supply Chain Management

Vendor financing

Dealers financing

iii. Loans Against Credit Card Receivables

iv. Loans Syndication

Government Business

i. Tax Collection

ii. Pension Disbursals

Cash Management

i. Current Account & Deposits

ii. Collection & Disbursement Solutions

iii. Debt Servicing

iv. E- Banking Solutions

Trade Finance

i. International / Domestic Letter Of Credit

ii. Performance & Financial Guarantee

iii. Import/ Export Remittance & Collections

iv. Trade Advisory

Retail Banking


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At IDBI Bank, its not enough to offer a great banking experience. Its equally important

to understand the various banking needs and answer them well in advance. In just two

years, IDBI has already launched more than 35 sophisticated products. Some of these

categories are: -

Choice Of Accounts

i. Instant Savings Account

ii. Roaming Current Account

iii. Demat Account

iv. NRI Services

v. Corporate Payroll Account

Anytime, Anywhere Banking

i. SMS Banking

ii. Internet Banking

iii. Phone Banking

iv. ATM Banking

Loans

i. Home Loans

ii. Personal Loans

iii. Loans Against Securities

iv. IPO Financing

v. ME Overdraft

Privilege Banking

i. Preferred Customer Banking

ii. Power Plus Saving Account


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Investment Advisory Services

i. Mutual Funds

ii. Life Insurance

iii. Bonds & Debentures

Beyond Banking

i. ATM Next

ii. Talking ATMs

iii. Easy Fill Mobile Prepaid Services

iv. Bill Payment

Card Products/ Services

i. World Currency Card

ii. International Debit - cum - ATM Card

iii. Merchant Services

iv. Internet Payment Gateway

Treasury Products

Inward & Outward Remittance

Forward Contracts

Travellers Cheque, Currency

Currency Travel Card

Customized Risk Management Solutions

Interest Rate and Currency Swaps

INR and Foreign Currency Option

Exotic Swaps and Options

Constituent SGL Accounts

Structured Finance Solutions

Debt Syndication and Distribution


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Chapter No. 5 FINANCIAL REPORT OF IDBI

Working results:

( Rs. inCrore)

( Crore)

Q4 2011-

12

Q4 2010-

11

FY 2011-

12

FY 2010-

11

Total Income 6857 5701 25489 20685

Interest income 6080 5024 23370 18542

Non-Interest

Income 777 677 2119 2143

Total Expenses 5662 4534 21432 16527

Interest

expenses 4869 3917 18825 14272Operating

expenses 793 617 2607 2255

Operating

Profit 1195 1167 4057 4158

Provisions (net) 424 651 2025 2508

Net Profit 771 516 2032 1650

Profitability:

IDBI reported a net profit of 771 crore for the quarter and 2,032 crore for the year ended

March 31, 2012, as against 516 crore and 1,650 crore in the corresponding quarter and year

ended March 31, 2011. This amounts to an increase in net profit by 49% as compared to the


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corresponding quarter and by 23.15 % for the year.

Total business (deposits and advances) as of March 31, 2012 stood at 3,91,651 Crore as

against 3,37,584 Crore as of March 31, 2011, registering a growth of 16.02%.

Deposits increased to 2,10,493 Crore at end-March 2012 from 1,80,486 crore at end-

March 2011, with a growth of 16.63%. .

Advances increased by 15.32% to 1,81,158 crore at end-March 2012 from 1,57,098 crore

as at end- March 2011.

As of March 31, 2012, aggregate assets stood at 2,90,837 crore as against 2,53,377 crore

as on March 31, 2011, registering a growth of 14.78%.

Balance sheet in Crores

Mar ' 12 Mar ' 11 Mar ' 10 Mar ' 09 Mar ' 08

Sources of funds

Owner's fund

Equity share capital 1,278.38 984.57 724.86 724.78 724.76


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Share application money - 0.99 - - -

Preference share capital - - - - -

Reserves & surplus 16,295.61 11,686.25 7,502.26 6,719.52 6,075.13

Loan funds

Secured loans - - - - -

Unsecured loans 2,10,492.56 1,80,485.79 1,67,667.08 1,12,401.01 72,997.98

Total 2,28,066.55 1,93,157.60 1,75,894.20 1,19,845.31 79,797.88

Uses of funds

Fixed assets

Gross block 4,548.74 4,375.10 4,085.27 3,873.95 3,894.76

Less : revaluation reserve 1,853.93 1,895.77 1,937.72 1,979.56 2,022.07

Less : accumulated depreciation 1,554.43 1,405.82 1,250.35 1,127.40 1,173.59

Net block 1,140.38 1,073.51 897.20 766.98 699.10

Capital work-in-progress 24.50 68.06 162.04 77.56 44.80

Investments 83,175.36 68,269.18 73,345.46 50,047.60 32,802.93

Net current assets

Current assets, loans & advances 5,426.98 4,206.13 4,444.91 4,882.96 4,154.02

Less : current liabilities & provisions 7,439.12 6,753.77 8,030.62 6,160.40 10,261.89

Total net current assets -2,012.14 -2,547.64 -3,585.71 -1,277.45 -6,107.86

Miscellaneous expenses not written - - - - -

Total 82,328.11 66,863.11 70,818.99 49,614.70 27,438.97

Notes:

Book value of unquoted investments - - - - -

Market value of quoted investments - - - - -

Contingent liabilities 1,54,197.43 1,38,274.78 1,28,293.03 1,16,577.14 1,04,037.89

Number of equity sharesoutstanding (Lacs) 12783.82 9845.68 7248.62 7247.81 7247.64

Profit loss account in Crores


Income


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Operating income 25,300.43 20,039.87 17,063.60 12,668.35 9,159.74

Expenses

Material consumed - - - - -

Manufacturing expenses - - - - -

Personnel expenses 1,160.44 1,026.50 756.99 569.24 384.61

Selling expenses 26.22 46.34 45.84 48.38 25.25

Adminstrative expenses 2,265.10 2,309.97 1,173.96 811.35 599.00

Expenses capitalised - - - - -

Cost of sales 3,451.76 3,382.81 1,976.78 1,428.97 1,008.86

Operating profit 3,023.59 2,385.14 2,081.60 933.66 786.47

Other recurring income 101.61 270.27 253.47 113.73 138.48

Adjusted PBDIT 3,125.20 2,655.41 2,335.07 1,047.39 924.94

Financial expenses 18,825.08 14,271.93 13,005.22 10,305.72 7,364.41

Depreciation 116.06 127.04 90.98 52.70 83.50

Other write offs - - - - -

Adjusted PBT -15,815.94 -11,743.56 2,244.09 994.69 841.44

Tax charges 1,104.93 734.94 346.31 127.10 93.25

Adjusted PAT 1,895.88 1,653.01 1,032.57 845.26 728.64

Non recurring items -1.54 -2.69 -1.43 13.28 0.81

Other non cash adjustments 137.25 - - - -

Reported net profit 2,031.59 1,650.32 1,031.13 858.54 729.46

Earnigs before appropriation 2,646.61 2,120.72 1,102.33 879.58 2,044.36

Equity dividend 388.68 344.60 217.46 181.20 144.95

Preference dividend - - - - -

Dividend tax 60.33 55.27 31.47 30.79 22.27

Retained earnings 2,197.60 1,720.85 853.40 667.59 1,877.14

Annual results in brief in Crores


Sales 23,369.93 18,600.82 15,272.63 11,631.62 8,020.84


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Operating profit 19,336.00 14,469.26 11,758.98 9,901.43 6,551.64

Interest 18,825.08 14,271.93 13,005.22 10,305.72 7,364.41

Gross profit 4,056.17 4,157.85 2,726.95 1,377.91 1,333.11

EPS (Rs) 15.89 16.76 14.23 11.85 10.06

Annual results in details


Other income 2,118.78 2,083.65 2,290.96 1,389.92 1,635.47

Stock adjustment - - - - -

Raw material - - - - -

Power and fuel - - - - -

Employee expenses 1,187.05 1,046.24 773.44 582.63 384.61

Excise - - - - -

Admin and selling expenses - - - - -

Research and development expenses - - - - -

Expenses capitalised - - - - -

Other expenses 1,420.41 1,208.45 1,057.98 755.28 574.18

Provisions made 1,426.47 1,876.87 1,682.23 392.28 510.41

Depreciation - - - - -

Taxation 598.09 630.66 13.59 127.10 93.25

Net profit / loss 2,031.61 1,650.32 1,031.13 858.53 729.45

Extra ordinary item - - - - -

Prior year adjustments - - - - -

Equity capital 1,278.38 984.57 724.86 724.78 724.76

Equity dividend rate - - - - -

Agg.of non-prom. shares (Lacs) 3768.50 3432.81 3430.84 3430.03 3429.86

Agg.of non promotoHolding (%) 29.48 34.87 47.33 47.33 47.32

OPM (%) 82.74 77.79 76.99 85.13 81.68

GPM (%) 15.91 20.10 15.53 10.58 13.81

NPM (%) 7.97 7.98 5.87 6.59 7.55

Cash flow in Crores


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Profit before tax 2,629.70 2,280.98 1,044.72 985.64 822.71

Net cashflow-operating activity -3,109.60 3,515.88 3,879.39 2,767.71 2,144.64

Net cash used in investing activity -159.17 -203.22 -307.10 -140.06 -112.14

Netcash used in fin. activity 560.35 2,870.58 -208.77 -167.10 -184.82

Net inc/dec in cash and equivlnt -2,708.42 6,183.24 3,363.52 2,460.55 1,847.68

Cash and equivalnt begin of year 20,766.07 14,582.84 11,219.32 8,758.77 6,911.09

Cash and equivalnt end of year 18,057.65 20,766.07 14,582.84 11,219.32 8,758.77

Directors Report Year End : Mar '12

The Board of Directors of your Bank takes pleasure in presenting its

Report on the business and operations of your Bank for the financialyear ended March 31, 2012.

During the financial year 2011-12, the performance of your Bank hasshown considerable growth on different fronts driven by strategic

policy initiatives; expansion in branch network, focus on improved

customer service delivery, superior product characteristics, which has

resulted in improvement in key profitability indicators. Your Bank wasable to widen its customer base both by expanding its outreach, as also

by providing a range of innovative products and services. As on March

31, 2012 aggregate deposits and advances of your Bank touched Rs.2,10,493 crore and Rs. 1,81,158 crore reflecting a growth of 16.63% and

15.32%.

Ratios (in %)Mar ' 12 Mar ' 11 Mar ' 10 Mar ' 09 Mar ' 08

Per share ratios


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Adjusted EPS (Rs) 14.83 16.79 14.24 11.66 10.05

Adjusted cash EPS (Rs) 15.74 18.08 15.50 12.39 11.21

Reported EPS (Rs) 15.89 16.76 14.23 11.85 10.06

Reported cash EPS (Rs) 16.80 18.05 15.48 12.57 11.22

Dividend per share 3.50 3.50 3.00 2.50 2.00

Operating profit per share (Rs) 23.65 24.23 28.72 12.88 10.85

Book value (excl rev res) per share (Rs) 137.47 128.69 113.50 102.71 93.82

Book value (incl rev res) per share (Rs.) 151.97 147.95 140.23 130.02 121.72

Net operating income per share (Rs) 197.91 203.54 235.40 174.79 126.38

Free reserves per share (Rs) 102.29 93.88 77.72 70.83 66.69

Profitability ratiosOperating margin (%) 11.95 11.90 12.19 7.37 8.58

Gross profit margin (%) 11.49 11.26 11.66 6.95 7.67

Net profit margin (%) 7.99 8.12 5.95 6.71 7.84

Adjusted cash margin (%) 7.92 8.76 6.48 7.02 8.73

Adjusted return on net worth (%) 10.78 13.04 12.55 11.35 10.71

Reported return on net worth (%) 11.56 13.02 12.53 11.53 10.72

Return on long term funds (%) 124.19 131.48 174.83 151.49 120.38

Leverage ratios

Long term debt / Equity - - - - -

Total debt/equity 11.98 14.24 20.38 15.10 10.74

Owners fund as % of total source 7.70 6.55 4.67 6.21 8.52

Fixed assets turnover ratio 0.09 4.58 4.18 3.27 2.35

Liquidity ratios

Current ratio 0.72 0.62 0.55 0.79 0.40

Current ratio (inc. st loans) 0.02 0.02 0.02 0.04 0.04

Quick ratio 27.11 26.78 19.49 18.98 9.07

Inventory turnover ratio - - - - -

Payout ratios

Dividend payout ratio (net profit) 22.10 24.23 24.14 24.69 22.92

Dividend payout ratio (cash profit) 20.90 22.49 22.18 23.26 20.56


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Earning retention ratio 76.32 75.81 75.90 74.93 77.06

Cash earnings retention ratio 77.69 77.54 77.85 76.40 79.42

Coverage ratios

Adjusted cash flow time total debt 104.62 101.39 149.23 125.17 89.88

Financial charges coverage ratio 0.16 0.18 1.18 1.10 1.13

Fin. charges cov.ratio (post tax) 1.11 1.12 1.09 1.09 1.11

Component ratios

Material cost component (% earnings) - - - - -

Selling cost Component 0.10 0.23 0.26 0.38 0.27

Exports as percent of total sales - - - - -

Import comp. in raw mat. consumed - - - - -

Long term assets / total Assets 0.93 0.94 0.94 0.91 0.88

Bonus component in equity capital (%) 19.15 24.86 33.77 33.77 33.77


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CONCLUSION

After the completion of this project the researcher has come to certain conclusions.

1. It is not only the free services that the customer looks in for but how fast the loan

is being processed for a customer will make the Bank successful. Therefore, IDBI

Bank should have fast loan processing procedure.

2. As Government is the majority share holder in the shares of IDBI bank, which

makes this bank more reliable than other private banks, this thing can be used in

the favour of IDBI bank by making people aware about this fact and winning their

faith.

3. The Bank should lower down the rate of interest so as induced the investors.


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4. Various schemes in LAS should be incorporated in order to increase the consumer

awareness.

5. More branches should be set so that the Bank becomes easily accessible to the

customers and potentials.

6. The bank should provide good facilities to the customers.

7. The modern days technology like internet banking, phone banking, used by IDBI

bank for providing banking services has sent positive signals in the mind of

consumes.

BIBLIOGRAPHY

BOOKS:

Varshney, P.N. and Mittal, D.K., Indian financial

system, Sultan Chand & Sons, 2006

Bhole, L.M., Financial institutions and markets, Tata

McGraw Hill, New Delhi, 1992

Webliograpy

1. www.equitymasters.com
http://www.equitymasters.com/http://www.equitymasters.com/


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2. www.managementparadise.com

3. www.hindubusinessline.com

4. www.idbibank.com

Magazines and Newspapers

Annual Report of IDBI

IDBI product manual

Financial Times

The Economic Times
http://www.managementparadise.com/http://www.hindubusinessline.com/http://www.managementparadise.com/http://www.hindubusinessline.com/

overview of idbi bank 10

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