project idbi banking
TRANSCRIPT
INTRODUCTION
Banking operations are nearly as old as man himself. The form of banking operations has always assumed new dimensions and image with the passage of time and changing socio-economic circumstances. The field of banking operations has been widely expanding so as to have an easy excess in almost every sector of national economy. Thus, the horizons of banking operations are constantly widening with the growing stake of banking sector in socio-economic activities with the rising tempos of development economies the need of mobilizing the savings and deposits of the community at large for investment in growth of project has tremendously increased. The banking sector has developed many new forces for the accomplishment of this goal such as commercial banking, investment banking, mortgage lending , hire and purchase financing, lease financing , merchant banking, social banking, darbari banking, regional banking, co-operative banking, interest free banking, development banking, innovative banking promotional banking and last but not the least entrepreneurial banking.
Hence, the banking sector has been assiduously endeavoring to adopt and mould it policies strategies and admintrative set up to suit the growing needs of traders, farmers, manufacturers, entrepreneurs and consumers in particular and the society at large.
The concept of development bank is not very much old. It has seen the light of the day after world war second in world’s economy. It is true that idea of development bank has originated and developed first of all in the west and has emerged elsewhere later on.
Definition by some authors:
“Development bank is promotional agency which promotes entrepreneurs and stimulates entrepreneurial process of enterprises creation in all sectors of the economy. It creates entrepreneurial efforts to foster, entrepreneurial and development spirits among the youth or economy.”
“The development bank must act as an engine of socio-economic growth in promoting technological transformation so as to achieve the goal of entrepreneurial self reliance in the years to come. The dominant influence thereto exerted by the west in the area of development banking had to be broken. The countries of the third world should break this hegemony and develop their independent style of development banking. They should chart their own frontiers. They have vast untapped, unexplored and unexploited resources and immense human skills and aspirations. The concept of development banking could assume thus new role in helping the third world. So, that it could emerge as the main force for the evaluation of world economy.”
Development banks are the institutions engaged in promotion and development of industry, agriculture and other key sectors.
National or regional financial institutions are designed to provide medium and long term capital for productive investments, such investment is usually accompanied by technical assistance.
Some development banks are government owned while others are private. Many development banks have been established under by guidance of World Bank.
So we can say that the idea of development bank is seeking new dimensions every day. They as an institutional device to accelerate the pace of socio-economic development in undeveloped and developing countries are of comparatively recent origin.
LIST OF DEVELOMENT BANK IN INDIA
• Industrial Finance Co-operation of India (IFCI)
• Industrial Development of India (IDBI)
• Industrial Investment Bank of India (IIBI)
• Small Industries Development Bank of India (SIDBI)
• National Bank for Agriculture and Rural Development (NABARD)
• Export-Import Bank of India (EXIM BANK)
INDUSTRIAL DEVELOPMENT BANK OF INDIA (IDBI)
The course of development of financial institutions and markets during the post-Independence period was largely guided by the process of planned development pursued in India with emphasis on mobilization of savings and channeling investment to meet Plan priorities. At the time of Independence in 1947, India had a fairly well-developed banking system. The first development bank In India incorporated immediately after independence in 1948 under the Industrial Finance Corporation Act as a statutory corporation to pioneer institutional credit to medium and large-scale. Then after in regular intervals the government started new and different development financial institutions to attain the different objectives and helpful to five-year plans.
The early history of Indian banking and finance was marked by strong governmental regulation and control. The roots of the national system were in the State Bank of India Act of 1955, which nationalized the former Imperial Bank of India and its seven associate banks. In the early days, this national system operated alongside of a large private banking system. Banks were limited in their operational flexibility by the government’s desire to maintain employment in the banking system and were often drawn into troublesome loans in order to further the government’s social goals.
The financial institutions in India were set up under the strong control of both central and state Governments, and the Government utilized these institutions for the achievements in planning and development of the nation as a whole.
The adoption of bank dominated financial development strategy was aimed at meeting the sectoral credit needs, particularly of agriculture and industry. Towards this end, the Reserve Bank concentrated on regulating and developing mechanisms for institution building. The commercial banking network was expanded to cater to the requirements of general banking and for meeting the short-term working capital requirements of industry and agriculture. Specialized development financial institutions (DFIs) such as the IDBI, NABARD, NHB and SIDBI, etc., with majority ownership of the Reserve Bank were set up to meet the long-term financing requirements of industry and agriculture. To facilitate the growth of these institutions, a mechanism to provide concessional finance to these institutions was also put in place by the Reserve Bank. The Industrial Development Bank of India Limited, popularly known as IDBI Bank is one of the leading public sector banks in India. Categorized as "other public sector bank" by Reserve Bank of India (RBI), IDBI Bank is also the 4th 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 the National Stock Exchange of India (NSE), the Stock Holding Corporation of India (SHCIL) and the National Securities Depository Services Ltd. (NSDL) etc.
The Industrial Development Bank of India (IDBI) was established on 1 July 1964 under an Act of Parliament as a wholly owned subsidiary of the Reserve Bank of India.
IDBI has played a pioneering role, particularly in the pre-reform era (1964–91),in catalyzing broad based industrial development in the country in keeping with its Government-ordained ‘development banking’ charter. In pursuance of this mandate, IDBI’s activities transcended the confines of pure long-term lending to industry and encompassed, among others, balanced industrial growth through development of backward areas, modernization of specific industries, employment generation, entrepreneurship development along with support services for creating a deep and vibrant domestic capital market, including development of apposite institutional framework.
Narasimam committee [4] 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 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 harmonizing the role of development financing and banking activities by getting away from the conventional distinction between commercial banking and developmental banking.
In February 1976, the ownership of IDBI was transferred to the Government of India and it was made the principal financial institution for coordinating the activities of institutions engaged in financing, promoting and developing industry in the country. Although Government shareholding in the Bank came down below 100% following IDBI's public issue 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%.
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. IDBI has played a pioneering role in fulfilling its mission of promoting industrial growth through financing of medium and long-term projects, in consonance with national plans and priorities.
Over the years, IDBI has enlarged its basket of products and services, covering almost the entire spectrum of industrial activities, including manufacturing and services. IDBI provides financial assistance, both in rupee and foreign currencies, for green-field projects as also for expansion, modernization and diversification purposes. In the wake of financial sector reforms unveiled by the Government since 1992, IDBI evolved an array of fund and fee-based services with a view to providing an integrated solution to meet the entire demand of financial and corporate advisory requirements of its clients.
IDBI also provides indirect financial assistance by way of 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 terms. IDBI has played a pioneering role, particularly in the pre-reform era (1964-91),in catalyzing broad based
industrial development in the country in keeping with its Government-ordained 'development banking' charter. In pursuance of this mandate, IDBI's activities transcended the confines of pure long-term lending to industry and encompassed, among others, balanced industrial growth through development of backward areas, modernization of specific industries, employment generation, entrepreneurship development along with support services for creating a deep and vibrant domestic capital market, including development of apposite institutional framework.
Transformation of IDBI:
In order to meet emerging challenges and to keep up with reforms in financial sector, IDBI has taken steps to reshape its role from a development finance institution to a commercial institution. The commercial banking arm, IDBI BANK, was merged into IDBI.
In September 2003, In September 2003, IDBI diversified its business domain and 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.
In March 2008, IDBI Bank entered into a joint venture with Federal Bank and Fortis Insurance International to form IDBI Fortis Life Insurance, of which IDBI Bank owns 48 percent.
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.
IDBI has firmed up the infrastructure, technology platform and reorientation of its human capital to achieve a smooth transition.
Earlier Objectives for establishing the IDBI were:
To create a principal institution for long term finance, to coordinate the institutions working in this field for planned development of industrial sector
To provide technical and administrative support to the industries and to conduct research and development activities for the benefit of industrial sector.
It raises funds by way of market borrowing by way of bonds and deposits, borrowing from Govt. and RBI, borrowing abroad in foreign currency and lines of credit.
Earlier functions of IDBI were:
Direct loans (rupee as well as foreign currency) to industrial undertakings as defined in the Act to finance their new projects, expansion, modernization etc.
Soft loans for various purposes including modernization and under equipment finance scheme
Underwriting and direct subscription to shares/debentures of the industrial companies.
Sanction of foreign currency loans for import of equipment or capital goods.
Short term working capital loans to the corporate for meeting their working capital requirements.
Refinance to banks and other institutions against loans granted by them.
To explain more what basic objectives undertaken by IDBI were:
Industrial Development Bank of India (IDBI) is the 10th largest bank in the world in terms of development. The National Stock Exchange (NSE), The National Securities Depository Services Ltd. (NSDL), Stock Holding Corporation of India (SHCIL) is some of the institutions which have been built by IDBI. IDBI is a strategic investor in a plethora of institutions which have revolutionized the Indian Financial Markets. IDBI is vested with the responsibility of co-coordinating the working of institutions engaged in financing, promoting and developing industries. It has evolved an appropriate mechanism for this purpose. IDBI also undertakes/supports wide-ranging promotional activities including entrepreneurship development programmes for new entrepreneurs, provision of consultancy services for small and medium enterprises, upgradation of technology and programmes for economic upliftment of the underprivileged.
IDBI's role as a catalyst
IDBI's role as a catalyst to industrial development encompasses a wide spectrum of activities. IDBI can finance all types of industrial concerns covered under the provisions of the IDBI Act.
With over three decades of service to the Indian industry, IDBI has grown substantially in terms of size of operations and portfolio.
Developmental Activities of IDBI
Promotional activities
In fulfillment of its developmental role, the Bank continues to perform a wide range of promotional activities relating to developmental programmes for new entrepreneurs, consultancy services for small and medium enterprises and programmes 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 Quality Testing Centres for small industries.
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 review.
Entrepreneurship Development Institute
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 relevance to industrial development.
Of late, with the reforms in the financial sector, IDBI has taken steps to re-shape its role from a development finance institution to a commercial institution. It has floated its own bank IDBI Bank as also a Mutual Fund.
IDBI Bank, with which the parent IDBI was merged, was a vibrant new generation Bank. This Private 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.
The Industrial Development Bank of India Limited commonly known by its acronym IDBI is one of India's leading public sector banks and 4th largest Bank in overall ratings. RBI categorized IDBI as an "other public sector bank". It was established in 1964 by an Act of Parliament to provide credit and other facilities for the development of the fledgling Indian industry. It is currently 10th largest development bank in the world in terms of reach with 1228 ATMs, 725 branches and 486 centers.
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 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. The latest major campaign launched by IDBI is that they are not charging anything for the services like issuing cheaque book, making demand draft, pass book issuance, ATM charges etc.
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.
SUBSIDIARIES
IBDI Bank has the following subsidiaries:
• IDBI Capital Market Services Limited
• IDBI Home Finance Limited
• IDBI Intech Limited
• IDBI Gilts Limited
CORPORTE SEVICES OFFERED BY IDBI:
IDBI Bank offers a wide array of products and services to its customers. For different customer groups and needs, there are different types of products and services including Personal Banking, Corporate Banking, SME Finance and Agri Business etc.
CORPORATE BANKING
Following products and services are offered by IDBI Bank for the corporate:
• Project Finance
• Infrastructure Finance
• Syndication, Underwriting & Advisory Services
• Carbon Credits Business
• Working Capital
• Cash Management Services
• Trade Finance
• Tax Payments
• Derivatives
• Technology Upgradation Fund Scheme (TUFS)
• Film Financing Scheme
• Direct Discounting Bills
• Rehabilitation Finance