Industrial Development Bank of India
was established on July 1, 1964 as a wholly-owned subsidiary of Reserve
Bank of India (RBI) under an Act of Parliament. In view of the manifold
increase in its activities and diverse responsibilities, IDBI was reconstituted
through a legislation in 1976 enacted by Parliament and made the principal
financial institution of the country. The ownership of IDBI was transferred
from RBI to Government of India and various responsibilities relating to
Financial Institutions and other matters connected with institutional finance
previously vested with RBI were entrusted to the reconstituted IDBI. Pursuant
to the amendment to IDBI Act in 1995, IDBI made its initial public offering
of equity shares in July 1995 reducing Government holding to 72.14%. The
amendment was also aimed at providing greater operational flexibility to
IDBI. This would help IDBI in responding to the changing needs of
the industrial sector in a much more prompt and decisive manner. IDBI has
played a pioneering role in fulfilling its mission of promoting industrial
growth in line with national plans and priorities.
Prime Role
The main objective of IDBI is to
provide financial assistance for establishment of new projects as well
as for expansion, diversification, modernisation and technology upgradation
of existing industrial enterprises.
IDBI is vested with the responsibility
of co-ordinating the working of institutions engaged in financing, promoting
and developing industries. IDBI 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 to industrial
development encompasses a wide spectrum of activities. It can finance all
types of industrial concerns covered under the provisions of the IDBI Act.
Over more than three decades of its service to Indian industry, IDBI has
grown substantially in terms of size of operations and portfolio.
Products
IDBI offers a wide range of financial
products. It is constantly making efforts to respond to the financial needs
of the industry by expanding the scope of its existing products and services
and introducing new innovative products.
Project Finance
Project finance is provided for
setting up of new projects as well as for expansion, diversification, modernisation
and technology upgradation of existing enterprises.
IDBI provides assistance to industry
in the form of term loans, both in Indian rupees and foreign currencies,
underwriting/direct subscription to debt instruments/equity and also offers
guarantees in respect of the term obligations of industrial concerns.
IDBI operates special products for
technology upgradation, energy conservation and pollution control. It also
provides venture capital for the development and use of indigenous technology
and adaptation of imported technology.
IDBI offers to its borrowers the
option of both fixed and variable interest rates which are based on IDBI's
risk perception and credit worthiness of the borrowers.
Non-project Finance
IDBI also provides several diversified
financial products of non-project nature to meet the specific needs of
existing enterprises having good performance record and sound financial
position.
IDBI provides asset credit in the
form of line of credit for acquisition of new machinery/equipment. It also
provides credit to industrial units for financing their normal capital
expenditure over a specified period.
IDBI provides equipment finance
in the form of Indian rupee and foreign currency loans for acquisition
of specific machinery/equipment.
Equipment Leasing
IDBI offers both indigenous and
imported machinery/equipment in the form of full pay-out financial lease.
Corporate loans
IDBI provides corporate loans for
capital expenditure and for meeting long term working capital requirements.
Working capital loan
IDBI provides loan component of
working capital finance to companies already assisted by it.
Refinance of industrial loans
Medium scale projects involving
capital costs ranging between Rs.3 crore and Rs.5 crore are generally financed
indirectly by IDBI through refinance of industrial loans granted by state-level
institutions/commercial banks.
Bills finance
IDBI rediscounts bills of exchange
and promissory notes of industrial concerns arising out of sale and purchase
of indigenous machinery and capital equipment on deferred payment basis
and discounted by institutions approved by it. It also directly discounts
bills of exchange and promissory notes of machinery manufacturers.
Services
The merchant banking operations of IDBI
as Category I and leading merchant banker, encompass professional advice
and services to industry for issue management, loan syndication, project
counselling, corporate advice, project appraisal, capital restructuring
and mergers & acquisitions.
IDBI acts as debenture trustee for holders
of debentures issued by companies as also to the non-convertible debenture
issues subscribed by financial institutions, banks and mutual funds on
private placement basis. It also offers odd lot trustee services.
It acts as security agent/mortgage
trustee in respect of loans granted by domestic and foreign lenders to
companies.
IDBI offers a variety of foreign exchange
services namely - spot and forward purchases of currencies for letters
of credit and debt servicing, placement of deposits abroad, swaps, forward
rate agreements and derivative products.
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Subsidiary for Small Scale Sector
IDBI had been directing considerable
assistance to the small scale sector. In an effort to further intensify
assistance to the small scale sector, IDBI set up a wholly-owned subsidiary,
the Small Industries Development Bank of India (SIDBI), as the principal
financial institution for promoting, financing and developing the industries
in the small scale sector.
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Promotional and Developmental Activities
In fulfilment 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 economic upliftment of the underprivileged. These
include entrepreneurship development, self-employment and wage employment
in industrial sector for weaker sections of society through voluntary agencies,
support to Science and Technology Entrepreneurs' Parks, Energy Conservation,
Common Quality Testing Centres for small industries.
With a view to making available
at 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 Organisations (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.
Realising 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 several other states.
IDBI also extends financial support
to various organisations in conducting studies/surveys of relevance to
industrial development.
Institution building is an important
facet of IDBI's activities. It has set up organisations for entrepreneurship
development and technical consultancy.
In view of the immense importance
of capital markets in industrial development, IDBI took a lead role in
setting up of several institutions for its healthy development. These are
the Securities & Exchange Board of India (SEBI), National Stock Exchange
of India Ltd (NSEIL), Stock Holding Corporation of India Ltd (SHCIL), Credit
Analysis & Research Ltd. (CARE), OTC Exchange of India Ltd. (OTCEI),
Investor Services of India Ltd. (ISIL) and National Securities Depository
Ltd (NSDL).
SEBI is engaged in surveillance
and regulation of the capital market. NSEIL provides comprehensive nation-wide
screen-based trading facilities to investors in line with international
markets. SHCL provides custodial and depository services to financial institutions.
CARE offers credit rating, information and equity research services to
Indian industry and institutions. OTCEI helps small and medium companies
to access capital market. ISIL provides registrar and transfer services.
NSDL has been set up for maintaining records of securities and ownership
details in electronic book entry form. IDBI played a key role in establishing
the Biotech Consortium of India Ltd. to help commercialisation of processes
and products developed in the research institutes in the country in the
field of biotechnology.
IDBI has also set up a mutual fund,
a stock broking subsidiary and a hi-tech commercial bank.
The financial health of IDBI is reflected
in its sound capital adequacy. As on March 31,1998, IDBI had equity capital
of Rs.659.5 crore, net worth of Rs.8003 crore and asset base of Rs.59,957
crore. As at end-March 1998, IDBI had a capital adequacy ratio of 13.7%.
IDBI earned a net profit of Rs.1501
crore for the year 1997-98. Its return on net worth for the year 1997-98
was 19.9% and return on average assets was 2.7%.
IDBI follows sound accounting policies
with regard to asset classification, income recognition and provisioning/write-offs
which are internationally comparable and in line with the norms stipulated
by RBI. As on March 31, 1998, 89.9% of the Bank's loan and other assistance
portfolio was classified as standard.
IDBI has established strong presence
in the international capital markets with several bond issues and obtaining
lines of credit from multilateral and other institutions.
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Organisation and Management
IDBI is managed by a Board of Directors
headed by the Chairman and Managing Director. The Board of Directors comprise
eminent industrialists, professionals, management experts and representatives
of the Central Government. Day-to-day operations of IDBI are carried out
under the supervision of Chairman & Managing Director assisted by Executive
Directors and other executives. IDBI has a pool of competent and experienced
professionals drawn from various disciplines. It has decentralised its
operations and delegated authority to ensure efficient working and responsive
client servicing.
The Bank had commissioned Booz,
Allen & Hamilton (BAH), an international firm of management consultants,
to study its role and advise on strategic repositioning so as to maintain
its leadership position in the financial system. Based on their recommendations
the Bank has implemented the reorganisation process at the head office
and the branch offices. These changes would enable the Bank to streamline
the credit delivery process and enable it to serve its customers better.
An in-house Asset Liability Management (ALM) Committee has been constituted
to monitor liquidity risk, interest rate risk and foreign exchange risk
in a co-ordinated manner. Further, IDBI has also appointed Arthur Andersen
to establish an effective ALM function. The Consultancy firm would, among
other things, help develop ALM policies, establish an appropriate ALM organisation
structure, identify ALM software options and assist IDBI in the pilot implementation
of the ALM information process.
IDBI, with its head quarters in Mumbai,
has a network of five Zonal Offices and 38 Branch Offices covering the
entire length and breadth of the country. |