Introduction to the Sector/ Company

INDIAN BANKING INDUSTRYThe pace of development for the Indian banking industry has been tremendous over thepast decade. As the world reels from the global financial meltdown, Indias banking sectorhas been one of the very few to actually maintain resilience while continuing to providegrowth opportunities, a feat unlikely to be matched by other developed markets around theworld.The Indian banking industry has come a long way from being a sleepy business institutionto a highly proactive and dynamic entity. The liberalization and economic reforms havelargely brought about this transformation. The entry of private banks has revamped theservices and product portfolio of nationalized banks. With efficiency being the major focus,the private banks are leveraging on their strengths. To compete with the private banks, thepublic sector banks are now going in for major image changes and customer friendlyschemes. Increasing competition and technology driven products are some of the trendswhich the banking industry is currently experiencing. The technology oriented banking hasbecome one of the latest success mantra in market especially to win over the customers.Due to entry of private banks which are known for technical and financial innovation theirprofessional management has gained a remarkable position in banking sector."A good bank is not only the financial heart of the community, but also one with anobligation of helping in every possible manner to improve the economic conditions of thecommon people" (Anonymous)3EVOLUTION & GROWTH OF BANKING IN INDIAThe reminisce of banking in India can be traced back to the 4th century BC in the 'KautilyaArthashastra',which contains references to creditors and lenders. It also makes a referenceto "Interest on commodities loaned" (PRAYOG PRATYADANAM) to be accounted asrevenue of the state. Thus, lending activities were not entirely unknown in the medievalIndia and the concept such as 'priority of claims of creditors' and 'commodity lending' wasestablished business practices even then. However the real roots of commercial banking inIndia can be traced back to the early eighteenth century with the establishment of the threepresidency banks.THE THREE PRESIDENCY BANKSThe Bank of Calcutta was the first part of the golden triangle- established in June 1806,which was renamed as Bank of Bengal in January 1809. This was followed by theestablishment of the Bank of Madras in July 1843, as a joint stock company, through theirorganization and amalgamation of four banks viz., Madras Bank, Carnatic Bank, Bank ofMadras and the Asiatic Bank. The last presidency bank- Bank of Bombay which was alsolast bank to be set up under the British Raj was established in 1868. The three PresidencyBanks with their 70 branches were merged in 1921 to form the Imperial Bank of India.PRESIDENCY BANKS TO IMPERIAL BANKThe new monolith took on the triple role of a commercial bank, a banker's bank and abanker to the government. Thus proving that the concept of mergers and consolidation aswell as their success in the banking system of India, is not as recent a phenomenon as isoften thought to be. Between the 1865 & 1913a number of Indian private bank emergedwhich are even reigning successfully today.4ESTABLISHMENT OF OTHER PRIVATE BANKSThe first bank which was exclusively set up by Indians was Allahabad Bank, followed byPunjab National Bank Ltd. set up in 1895 with headquarters at Lahore. Other private banksestablished during this period were Bank of India & Central Bank of India established in1911,Bank of Baroda (1908); Canara Bank (1906), Indian Bank (1907) and Bank ofMysore (1913).Until 1935 all the banks which were set up only belonged to the privatesector. In the absence of any regulatory framework, these private owners of banks were atliberty to use the funds as they wanted, they deemed appropriate and resultantly the bankfailure &exploitation of the poor were frequent phenomenon. Therefore in order to control& regulate these banks the Reserve Bank of India was established.ESTABLISHMENT OF RESERVE BANK OF INDIA (1935)The Reserve Bank of India was established on April 1, 1935 in accordance with theprovisions of the Reserve Bank of India Act, 1934.The establishment of this central bank ofthe country ended the quasi-central banking role of the Imperial Bank. The latter ceased tobe bankers to the Government of India and instead became agent of the Reserve Bank forthe transaction of government business at centre at which the central bank was notestablished .Even after the formation as well as nationalization of RBI the growth ofeconomy & banks was very slow and banks still experienced periodic failure. Therefore inorder to streamline the functioning and activities of the 1100 commercial banks presentthen, the Government of India came up with in March 1949, a special legislation, called theBanking Companies Act,1949.THE BANKING REGULATION ACTThe Banking Act 1949 was a special legislation, applicable exclusively to the bankingcompanies. This Act was later renamed as the Banking Regulation Act from March 1966.The Act vested in the Reserve Bank of India the responsibility relating to licensing ofbanks, branch expansion, and liquidity of their assets, management and methods ofworking, amalgamation, reconstruction and liquidation. Thus giving RBI authority alongwith responsibility & igniting the first part of banking transformation in India .The second5path braking & transformation effort took place in 1955 with the establishment of theIndian Banking Sector' State Bank of India.FORMATION OF "THE STATE BANK OF INDIA"In 1951, when the First Five Year Plan was launched, the development of rural India wasgiven the highest priority. The commercial banks of the country including the ImperialBank of India had till then confined their operations to the urban sector and were notequipped to respond to the emergent needs of economic regeneration of the rural areas. Inorder, therefore, to serve the economy in general and the rural sector in particular, the AllIndia Rural Credit Survey Committee recommended the creation of a state-partnered andstate-sponsored bank by taking over the Imperial Bank of India, and integrating with it, theformer state-owned or state-associate banks. An act was accordingly passed in Parliamentin May 1955 and the State Bank of India was constituted on 1 July 1955.However it wassoon realized that State Bank alone is not sufficient for the development of the economy&more government sponsored banks are required & accordingly the plan fornationalization was passedin1968. Thus forming the third turning point in the history ofIndian Banking in India.6

7I. Public Sector Banks: PSB are those in which the majority stake is held by the Governmentof India (GoI). Public sector banks together make up the largest category in the Indianbanking system. There are currently public sector banks in India. They include the SBI andits associate banks, nationalized banks (such as Allahabad Bank, Canara Bank etc) andIDBI Bank Ltd.II. Private Sector Banks: In this type of banks, the majority of share capitalist held by privateindividuals and corporate. Not all Private sector banks were nationalized in 1969, and1980.The private banks which were not nationalized are collectively known as the old privatesector banks and include banks such as The Jammu and Kashmir Bank Ltd., Lord KrishnaBank Ltd etc. Entry of private sector banks was however prohibited during the postnationalizationperiod. In July 1993, as part of the banking reform process and as ameasure to induce competition in the banking sector, RBI permitted the private sector toenter into the banking system. This resulted in the creation of a new set of private sectorbanks, which are collectively known as the new private sector banks.III. Foreign Banks: Foreign Banks have their registered and head offices in a foreign countrybut operate through their branches in India. The RBI permits these banks to operate eitherthrough branches; or through wholly-owned subsidiaries. Foreign banks in India arerequired to adhere to all banking regulations, including priority-sector lending norms asapplicable to domestic banks. In addition to the entry of the new private banks in the mid-90s, the increased presence of foreign banks in India has also contributed to boostingcompetition.IV. Other public sector bank: (Categorization of IDBI Bank Ltd. as OTHER PUBLICSECTOR BANK by RBI) Industrial Development Bank of India Ltd. (since renamed asIDBI Bank Ltd.) was incorporated under Companies Act 1956, as a Limited Company,registered with the Registrar of Companies, Maharashtra, Mumbai vide Certificate ofincorporation dated 27th September, 2004. In terms of the Articles of Association of theIDBI Bank Ltd., the Central Government being a shareholder of the company shall, at all8times, maintain not less than 51% of the Issued Capital of the company. Considering theshareholding pattern, IDBI Ltd. has been categorized under a New Sub-Group "Other PublicSector Banks".Reserve Bank of India has, vide its letter no DBOD. BP. 1630/21.04.152/2004-05 datedApril 15, 2005 confirmed that IDBI Ltd. (since renamed as IDBI Bank Ltd.) may beconsidered as Government-owned bank.IDBI Bank Ltd. to be Treated on PAR with Nationalized Banks / SBIMinistry of Finance has vide its circular no. F.No. 7/96/2005-BOA dated December 31, 2007advised Secretaries of all Ministries/Departments of Government of India that the bank may betreated on par with Nationalized Banks/State Bank of India by Govt. Departments / Public SectorUndertakings / other entities for all purposes, including deposits / bonds / investments / guaranteesetc. and Government business.CURRENT SCENARIOThe industry is currently in a transition phase. On the one hand, the PSBs, which are the mainstayof the Indian Banking system, are in the process of shedding their flab in terms of excessivemanpower, excessive non Performing Assets (Npas) and excessive governmental equity, while onthe other hand the private sector banks are consolidating themselves through mergers andacquisitions.The private players however cannot match the PSBs great reach great size and access to low costdeposits. Therefore one of the means for them to combat the PSBs has been through the merger andacquisition (M& A) route. Over the last two years, the industry has witnessed several suchinstances. For instance, Hdfc Banks merger with Times Bank Icici Banks acquisition of ITCClassic,ING Vysya bank merger with kotak Mahindra bank, Anagram Finance and Bank ofMadura. Centurion Bank, Indusind Bank, Bank of Punjab, is said to be on the outlook. The UTIbank- Global Trust Bank merger however opened a Pandoras box and brought about therealization that all was not well in the functioning of many of the private sector banks.9Private sector Banks have pioneered internet banking, phone banking, anywhere banking, mobilebanking, debit cards, Automatic Teller Machines (ATMs) and combined various other services andintegrated them into the mainstream Banking arena...Meanwhile the economic and corporate sector slowdown has led to an increasing number of banksfocusing on the retail segment. Many of them are also entering the new vistas of Insurance. Bankswith their phenomenal reach and a regular interface with the retail investor are the best placed toenter into the insurance sector. Banks in India have been allowed to provide fee-based insuranceservices without risk participation, invest in an insurance company for providing infrastructure andservices support and set up of a separate joint venture insurance company with risk participation

RECENT DEVELOPMENTS IN BANK INDUSTRY

Launch Of Jan Dhan YojanaScheme DetailsPradhan Mantri Jan Dhan Yojana (PMJDY) is a nationwide scheme launched by Indian governmentin August 2014. In this scheme financial inclusion of every individual who does not have a bankaccount is to be achieved .The scheme will ensure financial access to everyone who was not able toget benefits of many other finance related government schemes. These financial services includeBanking/ Savings & Deposit Accounts, Remittance, Credit, Insurance, Pension which will be madeavailable to all the citizens in easy and affordable mode.Account can be opened in any bank branch or Business Correspondent (Bank Mitr) outlet. PMJDYaccounts are being opened with Zero balance. However, if the account-holder wishes to get chequebook, he/she will have to fulfill minimum balance criteria. According to the data issued by financeministry, till September 2014 around 40 million (4 crores) bank accounts have been opened under thePradhan Mantri Jan Dhan Yojana since the scheme launched.However there was another financial scheme (Swabhimaan) launched earlier in which the target ofopening the bank accounts was for villages only. But in Pradhan Mantri Jan Dhan Yojna the entireindividuals irrespective of their area (rural or urban) can get a bank account without depositing any10amount if they fulfill other eligibility criteria. This scheme is very beneficial for the rural populationwhere banking services and other financial institution are rarely available.Under the Jan Dhan Yojna anyone who is India citizen above age of 10 years and does not have abank account, can open the account with zero balance. Account can be opened in any bank branchor Business Correspondent (Bank Mitr) outlet, specially designed for the purpose of opening theaccounts under this scheme. The scheme also provides facility of accidental insurance cover up torupees one lac without any charge for the account holder.The account holders under the jan dhan yojana will be given a RuPay debit card which can be usedat all ATMs for cash withdrawal and at most of the retail outlets for making transaction forpurchases.

BENEFITS OF PRADHAN MANTRI JAN DHAN YOJANAThe Pradhan Mantri Jan Dhan Yojana or more popularly known as PMJDY scheme is planning onrevolutionizing the traditional banking system in India by providing the banking opportunity andinsurance coverage to all including the poor. It is an initiative taken by the Prime Minister NarendraModi who started this ambitious project to help the poor become more financially confident throughthis venture and allowing every citizen the right to have their own bank account and insurancecoverage which was previously impossible for most of the population under poverty.The purpose of this scheme will definitely benefit the overall economy of the country and thescheme provides some lucrative benefits which should certainly be availed and considered. Here islisted some important benefits of the Pradhan Mantri Jan Dhan Yojna (PMJDY) scheme whichwould certainly inspire the country to a more prosperous future for all.Life insurance Benefit: Under the PMJDY scheme the account holders will be given worthRs.30000 insurance coverage if they comply with certain specification of the scheme whichincludes opening an account by January 26, 2015 and having an accidental insurance coverage ofover Rs. 200000.Loan benefits: The account holder can take loan benefit of up to Rs.5000 from the bank after six11months from opening the account. Though the amount might seem insignificant for many but wehave to realize the scheme is directed mostly towards people below the poverty line and who arestruggling desperately to sustain their everyday living. The loan benefit can be a scintilla of hopefor those people who could utilize the loan amount and invest it in a more profitable outcome,particularly in farming or other agricultural prospect.Mobile banking facilities: Though the technology of using smart phones to conduct our banktransactions is not novel anymore but the PMJDY scheme will allow its account holders to avail thesame facilities of checking balance and transferring funds through a normal cell phone which ismore affordable to the general economy.Hence PM Jan Dhan Yojana is indeed a prosperous venture and we certainly hope the PrimeMinister and the mass economy are both benefited through this new venture.

SECURITY SOCIAL SCHEMES BY PRIME MINISTERWith the aim of widening the process of financial inclusion in the country, Prime MinisterNarendra on May 9, 2015 launched three ambitious social security schemes relating to insuranceand pension named; On his first visit to West Bengal after taking over as prime minister, he kickstarted the "Pradhan Mantri Suraksha Bima Yojana" (accident insurance), "Pradhan Mantri JeevanJyoti Yojana" (life insurance) and "Atal Pension Yojana" at a programme in Nazrul Manch here.The Jan Suraksha Yojana, under which the schemes were launched countrywide, is expected toreduce the number of zero balance bank accounts created under the Jan Dhan Yojana. The schemestarget the poor and unorganised sector that are neither covered by any form of insurance nor getpension.Under the accident insurance scheme, a person will be provided cover of Rs.200,000 for an annualpremium of Rs.12. The cover is for accidental death or permanent total disability.The scheme will be available to people in the age group of 18 to 70 years with a savings bankaccount, who give their consent to join and enable auto-debit on or before May 31 for the coverageperiod - June 1 to May 31 - on an annual renewal basis.12The life insurance scheme will offer a renewable one year life cover of Rs.200,000 to all savingsbank account holders in the age group of 18 to 50 years, covering death due to any reason, for apremium of Rs.330 per annum per subscriber.On the other hand, the pension scheme focuses on the unorganized sector and provides subscribersa fixed minimum pension of Rs.1,000, Rs.2,000, Rs.3,000, Rs.4,000 or Rs.5,000 per month startingat the age of 60 years, depending on the contribution option exercised on entering at an age between18 and 40 years.Thus, the period of contribution by any subscriber under APY would be 20 years or more.The benefit of fixed minimum pension enjoys sovereign guarantee.While the scheme is open to bank account holders in the prescribed age group, the centralgovernment would also co-contribute 50 percent of the total contribution or Rs. 1,000 per annum,whichever is lower, for five years.The government contribution will be for those joining the scheme before Dec 31, 2015, are notmembers of any statutory social security scheme and are not income tax payers.It is estimated that the unorganized sector workers, which constitute 88 percent of the total laborforce of 47.29 crore, as per the 66th Round of NSSO Survey of 2011-12, do not have any formalpension provision. (Source: Jan Dhan Yojana)

IDBI Bank Ltd.Industrial Development bank of India (IDBI) was constituted under Industrial Development bankof India Act, 1964 as a Development Financial Institution and came into being as on July 01,1964 vide GoI notification dated June 22, 1964. It was regarded as a Public Financial Institutionin terms of the provisions of Section 4A of the Companies Act, 1956. It continued to serve as aDFI for 40 years till the year 2004 when it was transformed into a Bank.13In response to the felt need and on commercial prudence, it was decided to transform IDBI into aBank. 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. Interms of the provisions of the Repeal Act, a new company under the name of IndustrialDevelopment Bank of India Limited (IDBI Ltd.) was incorporated as a Govt. Company under theCompanies Act, 1956 on September 27, 2004. Thereafter, the undertaking of IDBI wastransferred to and vested in IDBI Ltd. with effect from the effective date of October 01, 2004. Interms of the provisions of the Repeal Act, IDBI Ltd. has been functioning as a Bank in additionto its earlier role of a financial institution.Merger of IDBI Bank Ltd. with IDBI Ltd.Towards achieving the faster inorganic growth of the Bank, IDBI Bank Ltd., a wholly owned subsidiaryof IDBI Ltd. was amalgamated with IDBI Ltd. in terms of the provisions of Section 44A of the BankingRegulation Act, 1949 providing for voluntary amalgamation of two banking companies. The mergerbecame effective from April 02, 2005.Merger of United Western bank with IDBI Ltd.The United Western bank Ltd. (UWB), a Satara based private sector bank was placed under moratoriumby RBI. Upon IDBI Ltd. showing interest to take over the said bank towards its further inorganic growth,RBI and Govt. of India amalgamated UWB with IDBI Ltd. in terms of the provisions of Section 45 of theBanking Regulation Act, 1949. The merger came into effect on October 03, 2006.Change of name of IDBI Ltd. to IDBI Bank Ltd.In order that the name of the Bank truly reflects the functions it is carrying on, the name of the Bank waschanged to IDBI Bank Limited and the new name became effective from May 07, 2008 upon issue of theFresh Certificate of Incorporation by Registrar of Companies, Maharashtra. The Bank has beenaccordingly functioning in its present name of IDBI Bank LimitedIDBI Bank Ltd. is a Universal Bank with its operations driven by a cutting edge core Banking ITplatform. The Bank offers personalized banking and financial solutions to its clients in the retailand corporate banking arena through its large network of Branches and ATMs, spread across14length and breadth of India. We have also set up an overseas branch at Dubai and have plans toopen representative offices in various other parts of the Globe, for encashing emerging globalopportunities. Our experience of financial markets will help us to effectively cope withchallenges and capitalize on the emerging opportunities by participating effectively in ourcountrys growth process.IDBI Bank is the youngest, new generation, public sector universalbank that rides on a cutting edge core banking Information Technology platform. This enablesthe Bank to offer personalized banking and financial solutions to its clients. The Bank had anaggregate Balance sheet size of Rs.3, 28,997 crore and total business of Rs.4,33,460 crore as onMarch 31, 2014. IDBI Bank's operations during the financial year ended March 31, 2014 resultedin a net profit of Rs. 1121 crore.

Vision of the Bank is TO BE THE MOST PREFERRED AND TRUSTED BANKENHANCING VALUE FOR ALL STAKEHOLDERS.IDBIS PROFILEIDBI Bank Ltd. is today one of India's leading commercial Banks. For over 40 years, IDBIBank has essayed a key nation-building role, first as the apex Development FinancialInstitution (DFI) (July 1, 1964 to September 30, 2004) in the realm of industry and thereafteras a full-service commercial Bank (October 1, 2004 onwards). As a DFI, the erstwhile IDBIstretched its canvas beyond mere project financing to cover an array of services thatcontributed towards balanced geographical spread of industries, development of identifiedbackward areas, emergence of a new spirit of enterprise and evolution of a deep and vibrantcapital market. On October 1, 2004, the erstwhile IDBI Bank converted into a Bankingcompany (as Industrial Development Bank of India Limited) to undertake the entire gamut ofBanking activities while continuing to play its secular DFI role. Post the mergers of theerstwhile IDBI Bank with its parent company (IDBI Ltd.) on April 2, 2005 (appointed date:October 1, 2004) and the subsequent merger of the erstwhile United Western Bank Ltd. withIDBI Bank on October 3, 2006, the tech-savvy, new generation Bank with majorityGovernment shareholding today touches the lives of millions of Indians through an array of15corporate, retail, SME and Agri products and services.Headquartered in Mumbai, IDBI Bank rides on the back of a robust business strategy, acompetent and dedicated workforce and a state-of-the-art information technology platform,to structure and deliver personalized and innovative Banking services and customizedfinancial solutions to its clients across various delivery channels.As an Universal Bank, IDBI Bank, besides its core banking and project finance domain, hasan established presence in associated financial sector businesses like Capital Market,Investment Banking and Mutual Fund Business. Going forward, IDBI Bank is stronglycommitted to work towards emerging as the 'Bank of choice' and 'the most valued financialconglomerate', besides generating wealth and value to all its stakeholders.Focus of the StudyFor better understanding of the concept of working capital and to gain insight about theassessment of working capital and its various methods used in it. The project report is required to focus on IDBI placement in the banking industry and how it selects its clients for working capital funding. Working capital functioning at IDBI. Various working capital products of IDBI Bank Ltd.On basis of focus of study formulate the project objectives

The Group Project will include Objective of the study Industry/ Company Overview and Environment analysis Review of Literature Research Methodology Analysis, interpretation and Recommendations