Idbi, then and now


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Idbi, then and now

  1. 1. GROUP NO. 1C Ankita Jain Akansha Misra Disha Mahajan Indranil Bhowmick Jyoti Jain
  2. 2. Industrial Development Bank of India (IDBI) <ul><li>Genesis </li></ul><ul><ul><li>1964 - Established as a wholly owned subsidiary of the Reserve Bank of India (RBI) </li></ul></ul><ul><ul><li>Established as a DFI with the following functions: </li></ul></ul><ul><li>Plays the role of coordinator at all India level. </li></ul><ul><li>Providing financial assistance for the establishment of new projects as well as for expansion, diversification, modernisation and technology upgradation of existing industrial enterprises. </li></ul><ul><li>undertakes 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. </li></ul>
  3. 3. <ul><li>Assistance to backward areas by setting up of voluntary agencies, support to Science and Technology Entrepreneurs’ Parks, Energy Conservation, Common Quality Testing Centres for small industries, SIDBI etc.. </li></ul><ul><li>TCOs offer diversified services to small and medium enterprises in the selection, formulation and appraisal of projects, their implementation and review. </li></ul><ul><li>IDBI played a prime role in setting up of the Entrepreneurship Development Institute of India for fostering entrepreneurship in the country. </li></ul><ul><li>Pioneered capital market development </li></ul><ul><ul><li>By setting up National Stock Exchange – an electronic Stock Exchange, NSDL – a Securities Depository, CARE – a Rating Agency, SHCIL – a Depository, etc. </li></ul></ul>
  4. 4. <ul><ul><li>Products and services </li></ul></ul><ul><ul><li>Project finance, equipment finance, asset credit, equipment lease etc. </li></ul></ul><ul><ul><li>Professional advice and services for issue management, project evaluation, corporate restructuring, share valuation etc. </li></ul></ul><ul><ul><li>Set up subsidiaries: </li></ul></ul><ul><ul><li>IDBI Bank </li></ul></ul><ul><ul><li>IDBI Capital Market Services Ltd. </li></ul></ul><ul><ul><li>IDBI Investment Management Company Ltd. </li></ul></ul><ul><ul><li>1976 - 100% ownership transferred to Government of India (GoI) </li></ul></ul><ul><ul><li>1995 - Domestic IPO reduced GoI stake to 52.3%. </li></ul></ul><ul><ul><li>2003 – Acquired Tata Finance Ltd. and entered into retail finance sector. </li></ul></ul><ul><ul><li>2004 – converted into a banking company </li></ul></ul>
  6. 6. <ul><li>Net profit dropped. </li></ul><ul><li>Decline in sanction and disbursements. </li></ul><ul><li>Lack of proper leadership. </li></ul><ul><li>Break-up of deal between DPC(Dhabol power corporation) & Maharashtra govt. </li></ul><ul><li>IDBI’s NPA increased rapidly. </li></ul><ul><li>Improper business practices. </li></ul><ul><li>ICRA downgraded IDBI’s rating in 2001. </li></ul><ul><li>Failed to retain it’s top-rated customers. </li></ul><ul><li>IDBI was not triple-A-rated entity. </li></ul><ul><li>High cost of funds. </li></ul><ul><li>Investors confidence in IDBI has come down drastically. </li></ul>
  7. 7. IDBI’s Financial Performance Over The Year (In Rs. Crore) Particulars 2002-2003 2001-2002 2000-2001 1999-2000 1998-1999 Sanctions 2889 13505 23178 22060 18939 Disbursement 3924 11151 17747 17063 14473 Income 6371 7175 7834 7859 7464 PBT 455 414 734 1027 1300 PAT 401 424 691 947 1258 EPS(in Rs. Crore) 6.15 6.49 10.2 14.07 18.7 Gross NPA 16006 14449 9849 8236 - Net NPA 7308 6500 7675 6488 - Net NPA(in % ) 14.16 11.69 13.44 12.05 -
  8. 9. WAYS OF REVIVAL <ul><li>Reverse merger with its banking subsidiary ‘IDBI Bank’ </li></ul><ul><li>Splitting IDBI into a “good –asset IDBI” and an “NPA IDBI” </li></ul><ul><li>Hive off its stake in IDBI bank of worth Rs 1,500 crore. </li></ul>
  9. 10. Better option is to go for merger with IDBI bank
  10. 12. Contribution of Merger <ul><li>To meet out with emerging challenges and reforms in financial sector, it reshape its role from a development finance institution to a commercial institution. </li></ul><ul><li>This merger provides an array of customer-friendly services to its existing and prospective clients. </li></ul><ul><li>It create a firm foundation for IDBI Ltd. to compete with other banks, supported by strong operational synergies. </li></ul><ul><li>“ The government will hold 51.3% stake in the merged entity,” </li></ul>
  11. 13. Shareholding Pattern : Dec 31, 2008
  12. 14. IDBI Bank Business Chart <ul><li>. </li></ul>
  13. 15. Merger issue <ul><li>The swap ratio -100:142 (100 shares of IDBI for 142 shares of IDBI Bank). </li></ul><ul><li>EGM - February 23 for seeking the approval passed by two-thirds of its shareholders. </li></ul><ul><li>Merged entity which will have </li></ul><ul><li>assets - Rs 78,000 crore </li></ul><ul><li>manpower - over 4,000 </li></ul><ul><li>By adding IDBI Bank’s network to its own. it have </li></ul><ul><li>199 or 200 branches </li></ul><ul><li>300-odd ATM </li></ul><ul><li>Rs 56,000 crore customer asset portfolio </li></ul>
  14. 16. No. of Branches   Metro  Urban  Semi Urban  Rural 178 173 99 53
  15. 17. <ul><li>IDBI Ltd is now virtually a universal bank. </li></ul><ul><li>total business size of around Rs.1,34,189 crore, </li></ul><ul><li>It uses information technology (IT) platform to structure and deliver personalized banking services and customized financial solutions to its clients. </li></ul><ul><li>Pole position in the technological arena </li></ul><ul><li>-> Card-to-Card Money Transfer </li></ul><ul><li>-> Online tax payment </li></ul><ul><li>-> Visa Off-us mobile recharge facility </li></ul><ul><li>-> Air Ticketing through ATM etc. </li></ul>Benefit
  16. 18. Core income growth
  17. 19. <ul><li>Gateway to low-cost deposits. </li></ul><ul><li>Positive impact on the Bank’s overall cost of funds and facilitate lending at more competitive rates to its clients. </li></ul><ul><li>Highest standards - corporate governance (operations) </li></ul><ul><li>IDBI would continue </li></ul><ul><li>-> Products and services as part of its development finance role. </li></ul><ul><li>-> An array of wholesale and retail banking products, for specific cash flow requirements of corporate and individuals. </li></ul>
  18. 20. <ul><li>The provision coverage to the tune of 97% of gross NPAs is by far the highest in the sector. </li></ul>
  19. 21. Strong Investment Portfolio
  20. 22. Subsidiaries
  21. 25. Network & delivery channels (Current Scenario) <ul><li>504 branches, 496 counters </li></ul><ul><li>871 ATMs </li></ul><ul><li>Presence in 316 important commercial centres in India </li></ul><ul><li>Presence in 100 cities </li></ul><ul><li>Internet banking </li></ul><ul><li>Retail customer base: 5 million + </li></ul><ul><li>Corporate customers: 3000 + </li></ul>
  22. 26. Achievements <ul><li>Awards Won during the year </li></ul><ul><ul><li>IT Team of the Year(2007) Award of IBA5 </li></ul></ul><ul><ul><li>Best IT Security Practices Award of NASSCOM </li></ul></ul><ul><ul><li>Best CTO Award of Cyber Media </li></ul></ul><ul><ul><li>Won two special awards, for “Best Payments Initiative” and “Outstanding Achiever of the Year&quot; (2007) </li></ul></ul><ul><li>Key Projects </li></ul><ul><ul><li>Airline ticketing through ATMs </li></ul></ul><ul><ul><li>Setup of Data Center and Disaster Recovery Center </li></ul></ul><ul><ul><li>Internet Banking Enabled Multi-Functional KIOSK </li></ul></ul><ul><ul><li>Kolkata and Haldia Port Trust Internet Banking Payment and MIS Modules </li></ul></ul><ul><ul><li>Online Payment of Central Excise & Service Tax </li></ul></ul>
  23. 27. New Business Initiatives <ul><li>IDBI completed the reorganization of its business into separate verticals focused on SME, Agri-business, Personal Banking, Mid Corporate, Large Corporate and Infrastructure. </li></ul><ul><li>IDBI Fortis Life Insurance </li></ul><ul><li>IDBI Gilts </li></ul><ul><li>Bank will also open branches in Singapore, Dubai and Shanghai, with either the Dubai or Singapore branch opening likely by the end of March </li></ul><ul><li>Steps initiated for mortgage guarantee business </li></ul><ul><li>Took another initiative in reaching out to the smaller clients by introducing facility of Online application for educational loan. </li></ul><ul><li>Bank introduced a new product for encashment/sale of Foreign Currency by NRI Clients and encashment of Travelers Cheques by Bank’s existing NRI customers. </li></ul>
  24. 28. Business Strategy <ul><li>Optimize mix of corporate and retail banking </li></ul><ul><li>Increase product offering by leveraging corporate relationships </li></ul><ul><li>Rationalize and reorient human resources through on-going training </li></ul><ul><li>Improve technology infrastructure </li></ul><ul><li>Enhance & implement enterprise-wide risk management systems </li></ul><ul><li>Focus on fee based income to boost profitability </li></ul><ul><li>Strengthen brand equity </li></ul><ul><li>Enhance market share </li></ul>
  25. 29. <ul><li>Pursue organic growth opportunities </li></ul><ul><li>Leverage core competency in project financing while creating additional business opportunities in retail & commercial banking </li></ul><ul><li>Inorganic growth domestically through bank acquisitions/ mergers </li></ul><ul><li>Entry into Insurance, Asset Management </li></ul><ul><li>Business operated as separate Retail Banking and Corporate Financing SBU(strategic business units)s </li></ul><ul><li>A common Treasury, Risk Management, Audit, IT and other support operations </li></ul><ul><li>Integrated and Rationalized branch network </li></ul>