1

PROJECT REPORT

ON

Customer Services & Financial Analysis Of IDBI BANK

SUBMITTED BY:-

Ankita Gupta

REG NO.-9212400072

for the Partial fulfillment of MBA course

IIBS, Bangalore

Under the guidance of

Minal Sayeesh Naik

Service & Operation Manager

IDBI Bank Ltd

R.T. Nagar

Bangalore

2

DECLARATION

I, Ankita Gupta, the undersigned student of International Institute Of Business

Studies, Bangalore, declare that this project report titled “Customer Services &

Financial Analysis Of IDBI Bank” is submitted in partial fulfillment of the

internship project during the MBA Course in Internatinal Institute of Business

Studies, Bangalore.

The all information, facts & figures used in this project are true and based on my

own finding & experience. The findings and conclusions of the data in this report

are based on my personal study, during the internship.

The information has been used for purely academic purpose.

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ACKNOWLEDGEMENT

There are number of people to acknowledged and thank for their contribution to

this project. Here is a consideration of all those esteem people who have not only

contributed their precious time bit also knowledge and experiences which further

enhanced the project and made more proper .

I acknowledge with reference and offer my thanks with profound gratitude to my

esteemed management and respected academic director prof. k.Ramdas, for giving

me sufficient encouragement and facilities to do my project work.

I thank to Prof. V padhmnabhan, Faculty,IIBS, for being my mentor and whose

continuous support has helped me to make this possible parameter analysis.

I express my courteous affection of gratefulness to , Mrs. Jyothi Mohan, Branch

Head, IDBI Bank Ltd, R.T. Nagar, Bangalore Branch for giving me a golden

opportunity to do the internship and I also acknowledge and offer thanks to Mrs.

Minal Sayeesh Naik, Service & Operation Manager who not only helped me as a

guide but also enthused me with the ardor to scrutinize the substantial financial and

other information and also gave her steady assistance, direction and

encouragement.

Last, but far from least, I express my heartfelt gratitude to all employees and all

those who directly or indirectly contributed their modicum without whose

coordination and support this report would not have been possible.

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CONTENTS

CHAPTER TITLE Page. No

1. General Introduction of Banking Industry 10-14 1.1. An Overview of Banking Industry 10

1.2. Banking Structure in India 10-12 1.3. Present Situation of Banking Industry 12

1.4. New Generation Banking 12

1.5. Retail Banking 13 1.6. Scope of Retail Banking 13-14

2. Introduction to the Study 15-16

2.1. Theoretical background of the Study 15

2.2. Objectives of the Study 15 2.3. Research Methodology 16

3. Company Profile of IDBI Bank 17-21

3.1. Brief Introduction of IDBI Bank 17 3.2. IDBI Bank: A journey from Development

Banking to Commercial Banking 17-18

3.3. Capital Structure of IDBI Bank 18

3.4. IDBI Bank: Highlights of the Annual Report 2009-10

18-19

3.5. SWOT Ananlysis of IDBI Bank 19-21

4. Bank Deposits 22-41

4.1. Introduction 22 4.2. Types of Deposit Accounts 22-23

4.3. Common guidelines of Opening & Operating Deposit Accounts

23-24

4.4. Types of Deposit Accounts in IDBI 24-27

4.5. CASA Deposits performance in IDBI for the past 3 years

27-31

5

4.6. Other Deposit Accounts in IDBI 31-34

4.7. Analysis of Interest Expenses 34-36 4.8. Quantitative Study of Deposits with IDBI

Bank 36-41

5. Bank Loans 42-55 5.1. Basics of Bank Lending 42

5.2. Principles of Lending & Loan Policy 42-43

5.3. Loan Policy 43-46 5.4. IDBI: Retail Loan 47-50

5.5. Comparative Analysis of Lending Operation of Bank on different parameters

50-55

6. Non Depository Services 56-60

6.1. Consumer Cards 56-58

6.2. Phone Banking 58-59 6.3. SMS Banking 59-60

6.4. Account Alerts 60 6.5. Internet Banking 60

7. Capital Market Products 61-62

7.1. Initial Public Offerings 61

7.2. Demat Account 61-62 7.3. 3-in-1-Account 62

8. Investment Advisory Services 63-65

8.1. Mutual Funds 63-64

8.2. Insurance 64 8.3. New Pension System 64-65

9. NRI Services 66-67

9.1. Non Resident External Account 66 9.2. Non Resident Ordinary Account 66-67

9.3. Foreign Currency Non Resident Deposit Scheme

67

9.4. Demat Account 67

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10. Ratio Analysis 68-70 10.1. Capital Adequacy Ratio 68

10.2. Balance Sheet Ratio 69 10.3. Key Operating Indicators 69

10.4. Asset Quality Indicators 69-70

10.5. Business Ratios 70

11 Recommendations 71-72 12 Bibliography 73

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CHAPTER-1

INTRODUCTION

1.1. An overview of Banking Industry:

The Banking Industry is a reliable business that took deposits from investors at a lower interest rate and loaned it out to borrowers at a higher rate. The Banking Industry at its core provides access to credit. In the lenders case, this includes access to their own savings and investments, and interest payments on those amounts. In the case of borrowers, it includes access to loans for the creditworthy, at a competitive interest rate.

Banking is generally a highly regulated industry, and government restrictions on financial activities by banks have varied over time and location. The current set of global bank capital standards are called Basel II. A bank is a financial intermediary that accepts deposits and channels those deposits into leng activities, either directly or through capital markets. A bank connects customers with capital deficits to customers with capital surpluses

Banks have played an important role in the economic development of many

developed country and also emerging economies such as India. Banks are

important not only from the point of view of economic growth but also financial

stability. In India, banks are important mainly for the following three reasons:

a. They take a leading role in the development of other financial

intermediaries and markets.

b. Due to the absence of well developed equity and bond market,

corporate sector depends heavily on banks to meet its financing needs.

c. In India, banks cater to the need of a vast number of savers from the

household sector, who prefer assured income, liquidity & safety of

funds.

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History

Banking in India originated in the last decades of the 18th century. The first banks were The General Bank of India which started in 1786, and the Bank of Hindustan, both of which are now defunct. The oldest bank in existence in India is the State Bank of India, which originated in the Bank of Calcutta in June 1806, which almost immediately became the Bank of Bengal. This was one of the three presidency banks, the other two being the Bank of Bombay and the Bank of Madras, all three of which were established under charters from the British East India Company. For many years the Presidency banks acted as quasi-central banks, as did their successors. The three banks merged in 1921 to form the Imperial Bank of India, which, upon India's independence, became the State Bank of India.

Foreign banks too started to arrive, particularly in Calcutta, in the 1860s. The Comptoire d'Escompte de Paris opened a branch in Calcutta in 1860, and another in Bombay in 1862; branches in Madras and Puducherry, then a French colony, followed. HSBC established itself in Bengal in 1869. Calcutta was the most active trading port in India, mainly due to the trade of the British Empire, and so became a banking center.

The first entirely Indian joint stock bank was the Oudh Commercial Bank, established in 1881 in Faizabad. It failed in 1958. The next was the Punjab National Bank, established in Lahore in 1895, which has survived to the present and is now one of the largest banks in India.

Around the turn of the 20th Century, the Indian economy was passing through a relative period of stability. Around five decades had elapsed since the Indian Mutiny, and the social, industrial and other infrastructure had improved. Indians had established small banks, most of which served particular ethnic and religious communities.

The presidency banks dominated banking in India but there were also some exchange banks and a number of Indian joint stock banks. All these banks operated in different segments of the economy. The exchange banks, mostly owned by Europeans, concentrated on financing foreign trade. Indian joint stock

9

banks were generally under capitalized and lacked the experience and maturity to compete with the presidency and exchange banks.

The period between 1906 and 1911, saw the establishment of banks inspired by the Swadeshi movement. The Swadeshi movement inspired local businessmen and political figures to found banks of and for the Indian community. A number of banks established then have survived to the present such as Bank of India, Corporation Bank, Indian Bank, Bank of Baroda, Canara Bank and Central Bank of India.

The fervour of Swadeshi movement lead to establishing of many private banks in Dakshina Kannada and Udupi district which were unified earlier and known by the name South Canara ( South Kanara ) district. Four nationalised banks started in this district and also a leading private sector bank. Hence undivided Dakshina Kannada district is known as "Cradle of Indian Banking".

Liberalisation

In the early 1990s, the then Narsimha Rao government embarked on a policy of liberalization, licensing a small number of private banks. These came to be known as New Generation tech-savvy banks, and included Global Trust Bank (the first of such new generation banks to be set up), which later amalgamated with Oriental Bank of Commerce, Axis Bank(earlier as UTI Bank), ICICI Bank and HDFC Bank. This move, along with the rapid growth in the economy of India, revitalized the banking sector in India, which has seen rapid growth with strong contribution from all the three sectors of banks, namely, government banks, private banks and foreign banks.

The next stage for the Indian banking has been set up with the proposed relaxation in the norms for Foreign Direct Investment, where all Foreign Investors in banks may be given voting rights which could exceed the present cap of 10%,at present it has gone up to 74% with some restrictions.

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1.2. Banking structure in India:

The Reserve Bank of India(RBI) is the central banking and monetary

authority of India and also act as the regulator and supervisor of

commercial banks in India.

Scheduled Banks in India:

Scheduled banks comprise both the Scheduled Commercial bank and

Scheduled Co-operative banks. Scheduled commercial banks form the

bedrock of the Indian financial system, currently accounting for more then

3/4th of all financial institution assets. SCB/s branches have increased four-

fold since the time of independence.

Public Sector Banks:

In India, there are 27 Public Sector banks which includes SBI and its six associates

and 19 nationalized banks and IDBI.

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Private Sector Banks:

As on March 2011, there were 7 new privates sector banks and 15 old private

sector banks.

Foreign Banks:

In India, there are 32 foreign banks with 293 branches.

Regional Rural Banks:

As on 31st March, 2011, the total number of RRB’s stand at 86.

1.3. Present Situation of Banking Industry:

Banking industry is one of the fastest growing industry. In India, it has increased

manifold and this is mainly because of the growing middle class population whose

aspirations and dreams are financed by the banks.

Banking industry is expected to grow in the coming years as the government is

inclined towards its expansion. In the Budget 2010-11, the government has made

the announcement that more licenses will be provided to those industries who

wants to venture into the Banking industry which is a positive indication.

1.4. New Generation Banking:

The Indian Banking Industry saw dramatic changes in the last decade and so ever

since the advent of liberalization and India’s integration with the worked

economy. This economic reforms and the advent of the private players saw

nationalized banks revamp their services and product portfolio to incorporate

new, innovative and customer- centric schemes. The need to become highly

customer focused forced the slow moving public sector banks to adopt a fast

track approach. These customer friendly programs included revamping the

product and the services schemes like credit cards, hassle free housing loan

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scheme, educational loans and Flexi- deposits. The objective of all these strategies

was very clear to bridge the gap between service and product gap that was

inherent in the banking system.

CHAPTER 2

INTRODUCTION TO THE STUDY

2.1. Theoretical Background of the Study:

The Banking industry in India has undergone a sea of change since the period

of economic reforms since 1991. From an industry almost monopolized by the

nationalized bank till the 90’s, it has now emerged as a conglomerate of

nationalized, foreign and private banks setting new trends in the way banking

is carried out.

The deregulation of interest rates, grant of functional autonomy to the banks

in the area of credit, entry of foreign banks and emergence of private banks

has raised the level of competition fiercely.

Lately, Indian banks are diverting from their bread and butter business of

lending and accepting deposits to other related activities. To sustain the

market share and to maintain profitability, nationalized banks are also trying

to incorporate product diversity and with more focus on customer needs.

More and more banks are adopting the model of Universal Banking. Universal

banking means the banks have all the financial products and services for its

customers.

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2.2. Objectives of the study:

The objective of the study was:

To study the customer Services provided by IDBI Bank

To analyze the growth in IDBI bank

To know the services and products being offered by IDBI Bank

Compare the performance of IDBI Bank with its competitors

2.3. Research Methodology:

The study is mainly based on quantitative data which was provided by the banks.

It is mainly based on unstructured and undisguised observation.

METHODOLOGY OF REASERCH:-

a) Type of research-Descriptive &conclusive

b) Data type –Primary data

c) Data size -100

d) Data collection method –questionnaire

e) Data collection instruments-structured questionnaire

f) Sample unit-All

g) Sample technique –Random

h) Data analysis Tools and techniques –Bar and Pie Charts

4.2. Types of Data:

Primary Data:

In my study I will be using both primary and secondary data. For primary

data collection I have prepared a questionnaire consisting of both open

ended and close ended questions. Questions are prepared in such a way that

maximum information can be obtained from the respondents. This data will

be collected from discussions and interactions by:

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Observation method.

Interviewing method.

Through questionnaires

Secondary Data:

Secondary data means data that are already available that is they refer

to the data which have already been collected and analyzed by someone

else. The sources of secondary data can be given as under.

Books, magazines and newspapers, Internet etc.

Reports and publications of various associations connected with

business and industry banks stock exchanges etc.

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CHAPTER 3

COMPANY PROFILE 3.1. Brief Introduction of IDBI:

Today, Industrial Development Bank of India(IDBI) is one of India’s largest bank. It

has essayed a significant role in the country’s industrial and economic progress

for over 40 years-first as a development financial institution and now as a full

service commercial bank.

Post the 2004 merger of the erstwhile IDBI bank with its parent company(IDBI

ltd),IDBI is now a universal bank. The merger was aimed at consolidating business

across the value chain and reaping the benefits of economies of scale, thus

enabling it to offer an array of customer-friendly service to its existing and

prospective clients.

Today IDBI is the 10th largest bank in India in terms of reach with 1210 ATM’s, 720

branches and 474 centre’s.

3.2. IDBI Bank: A journey from Development banking to Commercial banking:

1st July 1964: IDBI was established by an Act of Parliament, as a wholly owned

subsidiary of Reserve Bank of India, to catalyze the development of a

diversified and efficient structure in the country, in tune with national

priorities.

1976: 100% ownership of IDBI was transferred from RBI to the Govt. of

India(GOI)

1995: Domestic IPO reduced the GOI stake, initially to 72% and post capital

restructuring to 58.1%. The current GOI holding is 53%

2004: On 1st October, IDBI was converted into a banking company( as

Industrial Development Bank of India ltd) to take the entire gamut of banking

activities while continuing to play its secular DFI role

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2005: On 2nd April, IDBI merged its hitherto banking subsidiary(IDBI Bank ltd.)

with itself.

2006: IDBI announced its foray into life insurance business jointly with

Federal Bank and Fortis Insurance International. A memorandum of

Understanding was signed by the three partners on 11th July, 2006 to this

effect followed by a joint venture agreement on November 23, 2006.

2006: IDBI Gilts Ltd was incorporated as a wholly owned subsidiary of the

bank on 13th Dec, 2006 to undertake primary dealership issues.

3.3. Capital Structure:

As on 31st March,2011, the authorized capital was Rs.20101 crores and

reserves and surplus was Rs.9438 crores. Total loan funds stood at Rs. 138202

crores. Total fixed assets including leased assets stood at Rs.2997 crores. Total

deposits stood at Rs. 167667 crores. Total assets of Rs. 13903 crores is with RBI

in the form of SLR and CRR.

3.4. Highlights: As on 31st March, 2011

Business stands at Rs. 3.06 lakh crore.

Deposits at Rs. 1,67,667 crore which shows a growth rate of 49 %.

CASA deposits at 14.59% of the total deposits.

Advances at Rs. 1,38,202 crore, showing a growth of 34% over the

previous financial year.

Total business (deposits + advances) grew by 42% to Rs.3,05,869 crore.

Branches increased to 720.

ATM’s increased to 1210.

Profit after tax stood at Rs.1031 crore which shows an increase of 20%.

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Fig 3(a): Graph showing the value of PAT(Profit after tax) for the past 3

financial years.

Conclusion: In 2009-10, PAT has increased by 20% while in 2008-09, it

increased by 18%.

3.5. SWOT of IDBI:

STRENGHTS:

A well diversified customer profile, including blue chip companies,

SME’s, high net worth individual, retail customers, trusts, self help

groups, etc.

A strong capital base with a capital adequacy ratio of 11.31% well above

the regulatory minimum of 9% which ensures that it is well placed for

growth of business.

IDBI has been a robust builder and has helped erect many reputed

institutions like EXIM, SIDBI, NSE, CARE etc.

The value of Non performing assets as a percentage of net advances

has decreased rapidly

0

200

400

600

800

1000

1200

2007-08 2008-09 2009-10

PAT(in crores)

PAT(in crores)

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Fig.3(b): Graph showing that the value of NPA(Non performing asset) for the

given 3 financial years

Conclusion: NPA has decreased rapidly from 1.12 in 2007 to 0.92 in 2009

which is a good sign that the loans are being recovered efficiently.

WEAKNESS:

No doubt the NPA has decreased, but still it is higher if compared to

other banks.

Bank NPA(as % of Net advances) as on 31st March 2010

Punjab National Bank 0.17

State Bank 1.20

Axis Bank 0.40

HDFC Bank 0.63

ICICI Bank 2.09

YES bank 0.33

0

0.2

0.4

0.6

0.8

1

1.2

1.4

2006-07 2007-08 2008-09

NPA(as % of net advances)

NPA(as % of net advances)

19

Conclusion: IDBI NPA stands at 0.92% which is greater then PNB, Axis,

HDFC and YES bank which shows that IDBI still has to put a lot of effort in

order to save itself from the burden of NPA.

OPPORTUNITIES:

Indian economy is the world’s second largest growing economy in the

world and it has created a lot of opportunities for the banking industry.

IDBI being a public sector bank has excelled in all the spheres. It has the

confidence of individuals to big business house which no other bank has

on its side.

THREATS:

Increased competition from foreign banks, which has already has made

its presence felt in the financial services segment.

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CHAPTER 4

CUSTOMER SERVICES

4.1. Bank deposits: Introduction:

One of the important service of the bank is to accept deposits from

public for the purpose of lending. Infact, depositors are the major

stakeholders of the banking system. Since the first episode of bank

nationalization in 1969, banks have been at the core of the financial

intermediation process in India. They have mobilized a sizeable share of

savings of household sector, the major surplus sector of economy.

The safety of depository funds, forms a key area of the regulatory

framework for banking. In India, this aspect is taken care of in the

Banking Regulation Act, 1949. The RBI is empowered to issue

directives/advices on several aspects regarding the conduct of deposit

accounts from time to time. Further, the establishment of the Deposit

Insurance Corporation in 1962 offered protection to bank depositors.

4.2. Types of Deposits Account: Introduction

In India, there are several types of deposits account, but then they can

be broadly classified into the following 3 types:

(i). Current Account

(ii). Savings bank Account

(iii). Term deposit account

(i). Current account:

A current account is a form of demand deposit, as the banker is obliged

to repay these liabilities on demand from the customer. Among the

three broad categories of deposits- current account forms the smallest

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fraction. The primary objective of current account is to provide

convenient operation facility to its customer, via continuous liquidity.

(ii). Savings Account:

Savings deposits are a form of demand deposits, which is subjected to

restrictions on the number of withdrawals as well as the amounts of

withdrawal during any specific period. It cannot be opened by big

trading or business firms.

(iii). Term deposits:

A term deposit is a deposit which received by the bank for a fixed period

after which it can be withdrawn. Term deposits includes deposits such

as fixed deposits/reinvestment deposit/ recurring deposits etc. The term

deposits accounts for the largest share and have remained within the

range of 61-67% of total deposits in the recent years.

4.3. Common guidelines of opening and operating deposit accounts:

To open and operate a banks account, the following guidelines needs to

be followed:

(i). Due Diligence:

A bank before opening any deposit account has to carry out due

diligence under “Know Your Customer” guidelines issued by RBI and or

such other norms or procedures adopted by the bank. The due diligence

process involves the bank having adequate knowledge of the person’s

identity, occupation, source of income and location.

(ii). Minimum balance:

For deposit products like the savings account and current accounts,

banks normally stipulate certain minimum balance to be maintained as

part of the terms and conditions governing operations of such accounts.

(iii). Transparency:

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Failure to maintain minimum balance in the accounts, where applicable

will attract levy of charges as specified by the bank from time to time.

Similarly, the bank will specify charges for issue of cheque books,

additional statements of accounts etc.

(iv). Eligibility:

A savings bank account can be opened by only eligible persons and

certain organizations/agencies as per the guidelines set by RBI. But,

current accounts can be opened by individuals, partnership firms,

private and public limited companies.

(v). Requirement of PAN:

In addition to the due diligence process, under KYC norms, banks are

required by law to obtain a Permanent Account Number from the

prospective account holder.

(vi). Operation of Joint Account:

Deposits account can be hold by an individual or also by group of

individuals in the form of joint account. Accountholders of a joint

account can give mandates on the operation of the account and the

disposal of balances in the event of demise of one or more of the

holders. Banks classify these mandates as ‘Either or Survivor’ and

‘Anyone or Survivor’.

(vii). Power of Attorney:

At the request of the depositor, the bank can register mandate/power

of attorney given by him authorizing another person to operate that

account.

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4.4. Types of Deposit Accounts in IDBI:

(a). Savings Account:

IDBI has two types of savings account:

(i). Super Saving Account

(ii). PowerKidz

(i). Super Savings Account:

The super savings account is a complete financial package which

provides the customer to easy access to money and complete banking

convenience to. It offers a whole range of options for optimal

management of money. In order to enjoy the advantage of Super

savings account, a minimum balance of Rs. 5000 has to be maintained in

the account or otherwise charges has to be levied. Apart from the given

advantages which are already mentioned, the following services are also

provided under this account scheme:

Instant banking

International Debit card

Family Account

Quick money transfer

Easy payments

Bank on the move

Value added services

Travel and gift solutions

(ii). PowerKidz:

With the growing focus on the Kidz segment and its requirement, IDBI

bank realized the importance of introducing a product specially catering to

this market. It is a piggy bank for the kids which will just not keep their

money safe, but they will also earn interest on the same. This will teach

them to operate their account from time to time and will also advise them

from time to time about the various investment options available.

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(b). Current Account:

Current accounts are different from savings account because whereas

deposits in savings account are subjected to interest earnings, current

accounts are not. IDBI provides 5 basic roaming current accounts. One can

open a current account with a minimum balance of Rs.10,000. It should be

noted that the customers are required to maintain an average quarterly

balance(AQB) of Rs.10,000 in order to have an access to the added

advantage of current account.

On current account, IDBI bank provides the following added services:

Multi city and multi branch banking

Electronic funds transfer

National clearing

ATM card

RTGS facility

The five current accounts provided by the IDBI are as follows:

(i). Basic Current Account:

Free home branch cash deposit upto Rs.1 lakh per month

Any branch maximum cash deposit of Rs. 20,000 per day

Any branch maximum cash withdrawal of Rs. 5 lakh per day

for self and Rs.2 lakh for third party

(ii). Special Current Account:

Free PAP( payable at par) upto Rs.75 lakh per month

Free home branch cash deposit of Rs.5 lakh per month

Free any branch maximum cash deposit of Rs.20,000 per day

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Free any branch cash withdrawal of Rs.1 lakh per day

(iii). Bronze Current Account:

Free PAP utilization of upto Rs. 1.50 crores per month

Free home branch cash deposit of upto Rs.10 lakh per

month

Free any branch maximum cash deposit of Rs.20,000 per day

Free any bank maximum cash withdrawal of Rs.1 lakh per

day

(iv). Silver Current Account:

Free PAP utilization of upto Rs.3 crore per month.

Free home branch cash deposit of any branch is Rs.20 lakh

per day

Free any branch cash deposit of Rs. 50,000 per day.

Free any branch cash withdrawal of Rs.1 lakh per day.

(v). Gold Current Account:

Free PAP utilization of upto Rs.5 crore per month

Free home branch cash deposit of Rs. 40 lakh per month

Free any branch cash deposit of Rs. 50,000 per day

Free any branch cash withdrawal of Rs. 1 lakh per day

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4.5. CASA (Current account & Savings account) deposits

performance in IDBI for the past 3 financial years:

Year Total deposits(in

crores)

CASA(as % of

total deposit)

CASA

deposits in

crores

2007-08 72998 16.56 12088.46

2008-09 112401 14.78 16122.86

2009-10 167677 14.59 24464.07

Fig 4(a). Graph showing the value of CASA deposits of IDBI for the

past 3 financial years.

0

5000

10000

15000

20000

25000

2007-08 2008-09 2009-10

Deposits in CASA(in crores)

27

Fig 4(b). Graph showing the percentage of CASA deposits of the total

deposits.

Conclusion: From the above two graphs, it is quite clear that the amount

in CASA deposits have increased but the % of CASA deposits as of total

deposits have declined.

Importance of CASA deposits: From a bank’s viewpoint CASA deposits

are low cost deposits as compared to other types of deposits. Current

account is non-interest bearing whereas savings account are interest

bearing which is very low(currently it is 3.5%). To be competitive, it is

important for banks to garner as much low cost deposits as possible,

because by doing so banks can control the cost of raising deposits and

hence can lend at more competitive rates.

0

2

4

6

8

10

12

14

16

18

2007-08 2008-09 2009-10

% of CASA of Totaldeposits

28

Comparison of quantum of CASA deposits of IDBI with other banks:

Bank wise share of CASA deposits as % of total deposits:

March End

Bank 2006 2007 2008 2009

State Bank Group

43.4 42.9 42.0 38.6

Nationalised Bank

38.2 35.4 33.0 29.9

Private Banks

30.4 29.8 32.8 32.9

Foreign Banks

50.5 45.1 44.7 41.7

Fig 4(c). Graph showing CASA deposits as percentage of total deposits for

different banks.

0

20

40

60

80

100

120

140

160

180

200

State BankGroup

NationalisedBank

Private Bank Foreign Bank Total SCB's

2009

2008

2007

2006

29

Conclusion: As it is very clear from the above graph that the volume of CASA

deposits have shown falling trends as compared to the total deposits. It shows

that the Current and Savings account have lost its popularity.

However, one thing has to be noticed here that the volume of CASA deposits in

case of IDBI is very low when compared to other banks.

The main reasons responsible for CASA deposits being less popular are as follows:

(a). The face of today’s customer is changing and now the people are turning

towards those investment where they could earn good profits. The interest which

is being earned on savings account, hardly attracts the modern customers.

Everyone is in the run of making quick money and hence CASA has lost its charm.

(b). There are so many investment opportunities in the market today which

promises better returns that the people have lost interest in saving.

(c). Earlier India was represented by middle class Indians who were risk averse

and wanted to have a safe deposit because they couldn’t handle losses. But today

the customers profile is changing rapidly. The buying power of the people coupled

with the living standard has improved manifold and so the customers have

become aggressive in their investments.

Suggestions: As it is very clear from the above discussion, that CASA deposits are

very important for any bank, as it equips the bank to lend at competitive rates. It

is important for any bank to raise the quantum of CASA deposits.

So, it is highly suggested to IDBI bank that they should take steps in order to

attract its customers more towards current and savings account.

4.6. Other deposits account in IDBI :

(a). Fixed Deposits:

For fixed deposits the BPLR is 14.25% per annum.

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Options available under the IDBI Suvidha Fixed deposits are as follows:

(i). Monthly Quarterly Income Plans:

It is a very good option for people who require interest income at regular

intervals. The interest income will be credited automatically into savings account

at the interval(monthly/quarterly) as specified. The deposit is automatically

renewed on maturity. A balance of Rs.10,000 has to be maintained.

(ii). Quarterly compounding fixed deposit:

This option re-invests the interest earned on deposit, every quarter resulting in a

higher rate of return. There is also an automatic renewal of FD’s on maturity and

hence, the customer does not loose interest even for a single day.

(iii). Recurring deposits:

It is ideal for those customers who want to save a fixed sum every month. Every

month, a fixed sum of money will debited from the savings account and will be

automatically invested in the chosen re-investment plan. There is no tax

deduction on these deposits.

(iv). Sweep in savings account:

This option offers you the flexibility of a savings account combined with the safety

and higher rate of interest of an fixed deposit. One has to open a deposit starting

from Rs.50,000 and can get a free balance saving account. One will get all the

benefit of savings account along with the returns of fixed deposits.

(v). Senior Citizens Fixed deposits:

For senior citizens, the interest rate is 0.50% higher then the normal plans. The

minimum deposit has to start from Rs.10,000 and the tenure ranges from 46 days

to 10 years.

(d). Suvidha tax saving fixed deposit:

31

IDBI Suvidha Tax saving fixed deposit gives the dual benefit of tax exemption

under Section 80(c) and higher returns on your investments with interest rates at

7.5% per annum for regular deposits and 8% for senior citizens.

Along with the above benefits, other benefits are as follows:

Zero balance savings account

Free local Cheque book

International ATM-cum-Debit card

Free Internet Banking facility

(e). Pension Account:

With the help of Pension account, the ole people can get their pension at regular

interval as been mentioned by them. IDBI bank has been authorized to disburse

Central civil and defense pension payments by RBI across our 92 branches.

Additional features:

A zero balance account

Free International Debit-cum-ATM card

Payable At Par facility

Any Branch Banking

ATM services

Phone banking services

Mobile banking etc..

(f). Sabka Account- No Frill account:

IDBI bank introduced Sabka Account with just Rs.250/zero balance for financial

inclusion.

Features of Sabka Account:

Low/Nil average quarterly balance

Debit cum ATM card and Cheque book

32

Multiple ways to access account

Quarterly account statements

Recurring deposits

(g). SuperShakti(Women’s account):

This is a special savings account meant specially for women. Along with this

account, IDBI also offer one zero balance savings account absolutely free for the

child below the age of 18 years.

Added features includes:

Free transactions at other bank ATM’s

An account opening balance of just Rs.1000

An AQB requirement of Rs.5000

Debit card free for the first year, etc..

(h). Jubilee Plus Savings Account:

It is meant for the senior citizens:

Features available are:

An account with a balance of just Rs.5,000(Category A branches),

Rs.2,500(Category B branches), Rs.1,000(Category C branches)

Free sponsors account with AQB of Rs.1000 with the senior citizen account

Auto Sweep out/sweep in facility

Free demand draft at home branch and free pay order.

33

4.7. Analysis of Interest expenses:

IDBI Bank:

Fig 4(d). Graph showing the interest expense incurred by IDBI Bank in the

past 3 financial years.

Conclusion: In the year 2007-08, interest expenses was Rs.7364 crores, in

2008-09 Rs.10306 crores and again in the year 2009-10 it has increased to

Rs.13005 crores.

From this quantitative analysis it is quite clear that the interest expenses is

increasing for the past 3 years and it is mainly because the quantum of

deposit is increasing and the main factor is that the deposits apart CASA

deposits is increasing considerably which is considered to be high cost

deposits.

Interest expenses of IDBI Bank in comparison with other banks:

0

2000

4000

6000

8000

10000

12000

14000

2007-08 2008-09 2009-10

Interest expenses(in crores)

Interest expenses(in crores)

34

Fig. 4(e). Graph showing the Interest expenses of HDFC and Axis Bank in

comparison with IDBI Bank.

4.8. Quantitative Analysis of Deposits with IDBI Bank

Savings deposit in IDBI Bank:

Year Saving deposits(Rs. in crores)

2007-08 4821

2008-09 5498

2009-10 8787

0

2000

4000

6000

8000

10000

12000

14000

HDFC IDBI Axis

Interest expenses(in crores)

Interest expenses(in crores)

35

Fig.4(f). Graph showing that the volume of saving deposits in the past 3

financial years has increased.

Saving deposit of IDBI bank in comparison with other banks:

Fig.4(g). Graph showing the volume of Saving deposit of IDBI Bank in

comparison to Axis and HDFC Bank(trends as on Sep. 2010)

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

2007-08 2008-09 2009-10

Saving deposits(in crores)

Saving deposits(in crores)

0

50000

100000

150000

200000

250000

300000

350000

HDFC IDBI Axis

Saving Depsoits(Rs. Incrores)

36

Demand deposits in IDBI Bank:

Year Demand deposits(in crores)

2007-08 7268

2008-09 11119

2009-10 15673

Fig .4(h). Graph showing that the volume of demand deposits have increased

considerably during the past 3 financial years.

Demand deposits of IDBI Bank in comparison with other banks:

0

5000

10000

15000

20000

2007-08 2008-09 2009-10

Demand deposits(in crores)

Demand deposits(incrores)

37

Fig. 4(i). Graph showing the demand deposits of IDBI bank in comparison

with HDFC and Axis Bank.

Term deposit in IDBI Bank:

Year Term deposit(Rs. in crores) 2007-08 60908

2008-09 95782 2009-10 143206

0

5000

10000

15000

20000

25000

30000

35000

40000

Axis HDFC IDBI

Demand deposits(in crores)

Demand deposits(Rs. Incrores)

0

20000

40000

60000

80000

100000

120000

140000

160000

2007-08 2008-09 2009-10

Term deposit(in crores)

Term deposit(in crores)

38

Fig 4(j). Graph showing the increament in the term deposits in IDBI Bank

since the past 3 financial years.

Term deposit of IDBI Bank in comparison with HDFC and Axis Bank:

Fig.4(l). Graph showing the volume of Term deposit of IDBI Bank in comparison to

HDFC and Axis Bank(trends as on Sep. 2010)

Conclusion:

Percentage increase in savings, demand and term deposits in terms of IDBI

Bank:

Year % increase in savings deposits

% increase in demand deposits

% increase in term deposits

2009 14.04 52.98 57.25

2010 59.82 40.95 49.51

From the above figures it is quite clear that savings deposit has increased

almost four fold and this is mainly because the people tended to be more

risk averse during the period of economic downturn and wanted to save

themselves from unwanted risk. Demand deposits and term deposits both

has come down, but still term deposits accounts for almost 60-70% of the

0

20000

40000

60000

80000

100000

120000

140000

160000

HDFC Axis IDBI

Term deposits(in crores

Term deposits(in crores

39

total deposits with IDBI Bank and remains to be the most popular among

the lot.

Apart from the above findings, it is also clear that IDBI bank has less volume

of savings and demand deposits when compared to Axis and HDFC Bank,

but the volume of term deposits is higher in case of IDBI Bank.

40

CHAPTER 5

Bank Loan 5.1. Basics of bank lending:

Banks extend credit to different categories of borrowers for a wide variety

of purposes. Bank credit is provided to households, retail traders, SMEs,

corporate, the Govt. undertaking etc. in the economy

When dealing with bank loan it is important to demarcate the difference

between retail lending and wholesale lending.

Retail lending is for financing the purchase of consumer durables, housing

or even day-to-day consumption. But on the other hand, wholesale lending

meet the need for capital investment, and operations of private corporates

and the government undertakings.

5.2. Principles of Lending and Loan policy:

To lend, bank depends heavily on the deposits from the public. Banks act as

the custodian of the deposits. Since depositors require safety and security

of their deposits, want to withdraw deposits whenever they need and also

expect good returns on their deposits, bank lending must necessarily be

based on the principle that reflects the concern of the depositors and these

principles includes:

(a). Safety: Banks need to ensure that the deposits are safe with them.

Since the repayment of loans depend on the borrowers capacity to repay,

the banker must be satisfied before lending that the person concerned will

be in a position to repay the loan within time. In addition to this banker also

asks for security and it is important that this security must be adequate,

readily marketable and without any encumbrances.

(b). Liquidity: In order to maintain liquidity, banks must ensure that money

lent out by them is not locked up for a long time. Further, more important

is that money should come back as per the repayment schedule.

41

(c). Profitability: To remain viable, a bank must earn adequate profit on its

investment. This calls for adequate margin between the interest rates and

the deposits rate.

(d). Risk diversification: To mitigate risk, banks should lend to a diversified

customer base. Diversification should be in terms of geographic location,

nature of business etc.

5.3. Loan Policy:

Loan policy outlines lending policy and establishes operating procedures in

all aspects of credit management. The Credit Policy Committee of individual

banks prepares the basic credit policy of the bank, which has to be

approved by the Board of Directors of the bank.

The loan policy typically lays down the lending guidelines in the following

areas:

(a). Level of credit-deposit ratio:

A bank can lend out only a certain portion of its deposits, since some part

of the deposits has to be maintained as Cash Reserve Ratio(CRR) deposits,

and an additional part has to be maintained for investing in securities as

Statutory Liquidity Ratio.

CD Ratio:

Following is the CD Ratio of IDBI bank for the past 3 financial years:

42

Fig 5(a). Graph showing the CD ratio of IDBI bank for the past 3 financial

years.

Analysis of the CD ratio for Public sector banks:

Bank 2007 2008 2009

SBI 76.13 76.72 73.44

PNB 60.76 73.87 70.99

UCO Bank 72.45 68.93 68.65

0

20

40

60

80

100

120

140

160

2007 2008 2009

CD Ratio of IDBI Bank

CD Ratio of IDBI Bank

43

Fig 5(b). Graph showing the CD Ratio for SBI, PNB and UCO bank for the past 3

financial years

Analysis of the CD Ratio of the private sector banks:

Bank 2007 2008 2009

Axis Bank 62.73 68.09 63.48 HDFC Bank 68.74 62.94 69.24

ICICI Bank 84.97 92.30 99.98

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2007 2008 2009

UCO Bank

PNB

SBI

44

Fig 5(c). Graph showing the CD ratio for three major private banks in India.

(b). Targeted portfolio mix:

CPC (Credit Policy Committee) always aims at a targeted portfolio mix keeping I n

view both return and risk. To achieve this end, it lays down the guidelines on

choosing the preferred areas of lending.

(c). Hurdle ratings:

There are a number of diverse risk factors which is associated with the borrowers.

Banks should have a comprehensive risk rating system that serves as a single

point indicator of diverse risk factors of a borrower.

(d). Pricing of loans:

Borrowers with weak financial position are placed in high risk category and are

provided credit facilities at a higher price. The higher the credit risk of the

borrower, higher will be the cost of borrowing.

(e). Collateral security:

As part of the prudent lending policy, banks usually advance loans against some

security. Sometimes loans are extended as ‘clear loans’ for which only the

personal guarantee of the borrower is taken.

0

50

100

150

200

250

2007 2008 2009

ICICI Bank

HDFC Bank

Axis Bank

45

5.4. IDBI: Retail loans:

IDBI provides a wide range of loans to its customer base which has been

mentioned below:

(a). Home loan:

Features of Home loan:

Tenor of a home loan can be upto 25 years for a resident individual

whereas for an NRI the maximum tenure is 15 years subject to maximum

age of 60 years at maturity.

Loan can be applied for a maximu of 85%of the property value subject to

property discretion.

As far as the interest rates are concerned BPLR is 12.75%.

Home loans(Floating)

Loan tenure ROI(%) p.a

Up to 25 years

Up to Rs.30 lacs 8.75%

30-50 lacs 9.00%

50 lacs & above 9.25%

Home loan(fixed)

Options ROI(%) p.a

Fixed for 3 years 10.75%

Fixed for 5 years 11.00%

46

(b). Loan against property:

Loan is also available to the customers against property and the loan can be

used for marriage, education, business, purchase or improvement of

property, medical treatment etc.

Features of loan against property:

Tenor up to 15 years

Fixed and floating rate of interest

Free legal and technical assistance

(c). Education Loan:

Features of IDBI Education loan:

Maximum loan amount:

o Study in India: Rs.10 lakhs

o Study abroad: Rs.20 lakhs

Loan margin:

o Upto Rs.4 lac- Nil

o Above Rs. 4 lac:

Studies in India- 5% of the total course expenditure

Studies abroad- 15% of the total course expenditure

Expenses covered under loan:

o Fees payable to college/school/hostel

o Travel expenses

o Essentials for completion of the course

o Caution deposit/building fund

o Purchase of books

Repayment terms:

The repayment of loan has to begin after the course period + 1 year or 6

months after getting a job, whichever is earlier. The loan has to be repaid

within 5-7 years with the maximum tenor of 84 months.

47

BPLR is 12.75% p.a

For loan up to Rs.4 lakhs, it is 11.75% whereas for the loan amount above

Rs.4 lakhs, it is 12.75%.

For education loan, no collateral security is needed for a loan up to Rs.4

lacs. For loan amount in the range of Rs. 4 -7.5 lacs, collateral security is

required in the form of a third party gurantee. For loan amount exceeding

Rs.7.5 lacs, collateral security is required in the form of land/building.

(d). Personal Loan:

It is a loan designed to meet various personal requirements of the salary

holders with IDBI Bank Ltd.

Features:

Loan Amount:

o Minimum: Rs.25000

o Maximum: Rs.5 lakh

Minimum net salary:

o Minimum: Rs.15,000

o Maximum: Rs.25,000

Tenor:

o Minimum 12 months

o Maximum 36 months

Rate of interest is 13% p.a

(e). Loan against securities:

IDBI Bank provides loan to its customer against securities like shares, GoI

bonds, mutual fund units, type insurance policies etc.

Features:

The most important factor is that the customer can enjoy the benefit of

securities and along with it, is not required to pay any EMI on the loan

amount.

Interest is charged only on the utilized amount

48

(f). Reverse Mortgage loans:

IDBI introduces Reverse Mortgage loans for senior citizens. IDBI introduced

this loan because in the past few years, there has been an considerable

increament in the cost of good health care facilities along with little social

security. Reverse mortgage seeks to monetize the house as an asset and

specifically the owners equity in the house.

(g). Auto loan:

Features of Auto loan:

Repaymemt period up to 60 months

Eligibilty:

For salaried employees:

o Min age of the applicant: 22 years

o Max age of the applicant: 60 years

o Min 2 years in service

o Min annual income of Rs. 1,50,000/-

For Self-Employed Professionals:

o Min age of the applicant: 22 years

o Max age of the applicant: 65 years

o Min 2 years in profession

o Min. Annual income of Rs.1,50,000/-

49

5.5. Comparative analysis of lending operation of banks on different

parameters:

(a). Loan:

IDBI Bank:

Year Total advances(in crores)

2007-08 82213

2008-09 103444

2009-10 138202

Fig 5(d). Graph showing the total advances of IDBI bank in the past 3 financial

years.

Conclusion: It is very clear that that the total advances in the past 3 financial years

has increased considerably which is a good sign.

Comparison of the deposit and credit in terms of IDBI Bank:

Year Total deposits(in crores) 2007-08 72998

2008-09 112401 2009-10 167667

0

20000

40000

60000

80000

100000

120000

140000

2007-08 2008-09 2009-10

Total advances(in crores)

Total advances(in crores)

50

Conclusion: An important fact arises here that in the year 2009, total deposits

increased by 53.97% against 2008 but the total advances have shown an

increment of 25.82% which is just the half of the of total deposits. Again for the

year 2010, the total deposit has increased by 49.16%(which is less then the

previous year) and the total advances has shown an remarkable increment of

33.6%.

This shows that IDBI bank is stressing on availing loans which is a good sign and

with the increment in total deposits, it is expected that the quantum of the total

advances will also go up.

IDBI bank in comparison with other banks:

Below is the quantum of total advances(in crores) with respect to three

major private banks:

Bank 2007-08 2008-09 2009-10

HDFC Bank 63426.9 98883 125830

IDBI Bank 82213 103444 138202

Axis Bank 59661.4 81556.77 104343.13

Conclusion: HDFC 55.9%, 27.52, 25.82, 33.6, 36.69, 27.93

From the above figures it is quite clear that in the financial year 2008-09, IDBI

Bank has shown an increase of 25.82% in total advances and again in the year

2009-10, it has increased by 33.6%.

When compared this figures to HDFC Bank, it is seen that in 2008-09 and 2009-10,

it has increased by 55.9% and 27.52%. In case of Axis Bank, it has increased by

36.69% and 27.93% for the financial year 2008-09 and 2009-10 respectively.

Both HDFC Bank and Axis Bank has shown a falling trend and compared to it, IDBI

Bank has shown an increasing and favorable trend.

51

NPA (Non Performing Asset) analysis of IDBI Bank in comparison with other

banks:

o NPA for IDBI bank as percentage of total advances for the past 3

financial years:

Year NPA(as % of net advances)

2007-08 1.30 2008-09 0.92

2009-10 1.02

NPA or Non Performing assets is that asset of a bank which ceases to

generate regular income for the bank. In other words, when a bank

lends loan and it fails to get the principal amount and interest on

time, then it is known as Non Performing asset.

From, the above figures it is quite clear that the NPA as % of net

advances has come down from 2008 to 2010. But still there are loop

holes in the loan lending process as a consequence because from

2009 to 2010, the NPA has shown an increament of 0.1% which is not

a good sign.

o NPA of IDBI Bank in comparison with other banks for the year 2009:

Bank NPA(as % of net advances)

IDBI Bank 0.92

PNB 0.17

SBI 1.20

Axis Bank 0.40

HDFC 0.63

52

Fig.5(f). Graph showing the net NPA as % of net advances for some of

the major banks in India.

Conclusion: As it is very clear from the above graph, that none of the

banks in India, have been able to completely get rid of the non

performing assets but again they are in a position to control it. IDBI

Bank still has a high NPA when the above banks come into scene. And

its important for the bank to stricten its lending policy so that the

value of NPA could be brought down.

Net NPA as % of Net advances for some other banks for the financial year

2009:

Public Sector Banks:

Bank NPA(as % of net advances)

Syndicate Bank 0.77

UCO Bank 1.18

United bank of India 1.48

Union Bank of India 0.34

Vijaya Bank 0.83

Private Sector Banks:

0

0.2

0.4

0.6

0.8

1

1.2

IDBIBank

PNB SBI AxisBank

HDFC

NPA(as % of net advances)

NPA(as % of netadvances)

53

Bank NPA( as % of Net advances)

ICICI Bank 2.09

Kotak Mahindra Bank 2.33

Indusind Bank 1.14

YES Bank 0.33

Development Credit Bank 3.88

Conclusion: From the above two tables, it is quite clear that the public sector

banks are better in terms of managing the NPA when compared to the private

sector banks which is showing a very high value for NPA. ICICI Bank and

Development Credit Bank need to revise their standards in order to avoid NPA.

From the above analysis, it is quite clear that IDBI bank has done a good work in

this context, but still there is a long way to go.

54

CHAPTER 6

NON DEPOSITORY SERVICES

6.1. Consumer cards:

Gold Debit-cum-ATM card:

Features of Gold Debit-cum-ATM card:

o This card can be used to transact at IDBI Bank ATMs. It has also got

international validity and can be used abroad to make purchases at

merchant locations and withdraw local currency.

o In addition to the insurance cover for lost/stolen cards, this card also

helps its customer to avail of the following insurance covers:

Personal accident cover- Rs.5 lakh

Loss of checked baggage-Rs.50,000

Purchase protection- Rs.20,000 for 90 days

Fire and burglary for household contents- Rs.50,000

o This card enables its customer to withdraw cash up to Rs.75,000/-

and make purchases worth Rs.75,000 in a day.

o Loyalty redemptions: customer will gain 1 loyalty point for every

Rs.100/- spent on the Gold Debit-cum-ATM card. Each point can be

redeemed for a cash credit of Re.1 to your savings account.

International Debit-cum-ATM card:

Features:

o This card enables its customers to access their bank account not only

in India but also in abroad.

o Zero lost card liability insurance

o Loyalty points with great rewards

o Daily card limits:

ATM Rs. 25,000

POS Rs. 25,000

55

o This card can be used only at merchant locations that have an

electronic data capture machine or electronic point of sale machine.

Gift Card:

Features:

o This card enables its holders to purchase goods and services at over

4.70 lakh merchant establishments in India, that accept Visa card.

o Its usable more then once, till the value on the card is exhausted.

o To apply for this service, one ha to fill an application form , deposit

the amount to be loaded on the card by paying cash or cheque.

World Currency Card:

Features:

o This card is accepted everywhere across the world at over 14 million

merchant establishments that accept visa cards and credit cards.

o It is cheaper then the credit cards as:

The annual fee on most international credit cards is much

higher than the nominal fee on the World Currency card

In case of credit cards, the rate of exchange depends on the

rate applicable the day you transact which may be

unfavourable. Whereas, with the World Currency Card, the

rate of exchange is fixed the very day one purchases the card.

Insurance cover is upto a maximum of Rs.2,00,000 per card.

Cash Card:

Features:

o This card is meant mainly for the corporate an easy solution for their

employees for salary disbursement & other reimbursements.

o The corporate opting for IDBI bank cash card can give this card to

their employees for getting their salary disbursed and they need not

open their accounts with the bank for this.

o This card can be loaded for any amount up to Rs.25,000/- per card

per month as per the instructions from the corporate.

56

Kids Debit Card:

Features:

o Daily limit:

Rs.2,000

o Customer stands to earn 2 loyalty points for every Rs.100 spent

using the KIDS card for purchases at merchant establishments.

o This card is valid for 5 years

o This card can be used only in India

o Free SMS alerts will be sent to the guardian/parents for the

transactions above than Rs.5,000/- on KIDS card.

Platinum Debit-cum-ATM Card:

Features:

o The Platinum Debit Card offers cash withdrawal limit of Rs.1 lakh

and purchase at Point of Sale(POS) limit of Rs.2 lakh in a day.

o In addition to the insurance cover for lost/stolen cards, the

customer can also avail of the following insurance covers:

Personal Accident Cover- Rs.5 lakh

Loss of checked baggage- Rs.50,000/-

Purchase protection- Rs.20,000 for 90 days

Fire and burglary for household contents- Rs.50,000

o With the help of this card, one can easily track spends on a regular

basis.

6.2. Phone Banking:

IDBI Bank offers phone banking facility to its customers.

Mentioned below are the services that the customers can avail out

of the Phone banking facility:

Account related services:

Updated balance enquiry

Balance as on date

57

Last five transactions

Statement of account by fax

Request for a cheque book

Hotlisting of ATM or Debit Cards

Bill payment details

Status of cheques issued or deposited

Funds in clearing

Demat account related services:

Details of Demat account

Holding details in ascending or descending order

Holding statements by fax, mail or email

Last five transactions

Transaction statements by fax, mail or email

Billing details

Billing details by Fax, mail or email

Many other services like information about loan accounts,

product information and related services are also provided with

the help of Phone banking facility.

6.3. SMS banking:

SMS banking provides its customer the luxury of banking anywhere,

anytime.

SMS banking for NON-WAP Enabled Mobile phones:

The following services is available for NON-WAP enabled mobile

phones on SMS banking facility:

Balance enquiry

Last three transaction

Cheque payment status

Cheque book

58

Statement request

Demat-free balance holding

Demat- last two transactions

Bill payment

SMS banking for WAP enabled Mobile Phones:

If the customer is a WAP Enabled mobile phone user, the customer

can do interactive banking for eg. If the customer wants to withdraw

cash then the mobile will show the nearest IDBI branch and its phone

number.

6.4. Account Alerts:

The customer with the help of Account alerts can get the alerts on

the mobile in the form of message on the customers inbox ie. when

the account is credited or debited or what is the current account

status.

This days it has become quite popular and more and more users are

switching to it because the charges are quite low.

6.5. Internet Banking:

For getting the added advantage of Internet banking, the customer

has to fill in the channel registration form which is available at our

branches and ATMs

The products and services that are available on the Internet banking

are as follows:

Account information

Demat account information

Online instructions and requests

Customer service in the form of mails/messages, alerts etc

Online payment services

59

CHAPTER 7

CAPITAL MARKET PRODUCTS

7.1. Initial Public Offerings:

ASBA IPO Payment option:

ASBA stands for Applications Supported by Blocked Amount which

is an application for subscribing to an issue, containing an

authorization from the bank customer(who invests in a particular

IPO through ASBA) to block the application money in his bank

account.

SCSB i.e. Self Certified Syndicate Bank is a bank which offers to its

customers the facility of applying to IPO through the ASBA process.

Only an investor who have an account with the SCSB can apply for

an IPO using ASBA payment option.

7.2. Demat Account:

With the help of Demat Account, the customers can convert their

securities to dematerialsied form.

Benefits of Demat account with IDBI:

Minimum transaction Charges: Rs.30/-

Account maintenance Charges: Rs.350/-

Statements on E Mail

Portfolio valuation on the statements

Online execution of delivery instructions

Service available at all branches

Special rates for Stock Market Intermediaries

60

IDBI bank also provides an opportunity to the NRI to invest in shares,

bonds, debentures of Indian companies by opening a demat account.

Services offered:

Dematerialisation: Converting physical shares into electronic

form

Rematerialization: Converting electronic shares into physical

form

Freeze and Defreeze: customer has the option to freeze or

defreeze the operations in his/her account

Pledging: Customer also has the option of pledging the demat

shares and availing loan facility

7.3. 3-in-1 account:

This product is mainly designed for those customers who trade in

securities. In 3-in-1 account saving and demat account are linked to

the online trading account. With this facility customers can trade in

securities at nominal rates and also stand to get invaluable

investment advice which will make their money grow.

Benefits offered:

Trade without any hassles of writing transfer instruction/ cheques

Can place orders from anywhere any time using phone or internet

Online share quotes available

Multiple product offering

Speedy and secure trading

Can open all 3 accounts in a single account opening form

61

CHAPTER 8

INVESTMENT ADVISORY SERVICES

8.1. Mutual funds:

Investing in Mutual Funds through IDBI Bank:

Why to invest in Mutual funds with the help of IDBI Bank?

IDBI helps in fulfilling your dreams by assisting to select the

scheme, which will be in consonance with the needs of the

customer.

IDBI helps to inculcate saving and organized investing habit in

its customer. It will help in planning investments and build a

healthy mutual fund portfolio.

Equity funds which mainly consist of the stock investments

are the most common type of mutual funds. IDBI provides

with various recommended equity schemes.

IDBI’s key focus plans are as follows:

(a). SIP- Systematic Invetment Plan:

SIP is a simple and time honored investment strategy

for accumulation of wealth in a disciplined manner over

long time period.SIP investor gets good rate of returns

compared to one time investor.

With the help of SIP, one can start investing as soon as

the earning is started. Investing a portion of the income

one can meet the greater expenses of type at a later

stage.

(b). ELSS- Equity Linked Saving Schemes:

Features:

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ELSS is having a short lock-in period of only 3 years.

It gives the investor the option of saving tax

Investor can also opt for dividend option and get

some gains in the lock-in period

Some ELSS schemes also offer personal accident

death cover insurance.

8.2. Insurance:

(a). Life Insurance:

IDBI provides various life insurance products with the help of IDBI

fortis which is mainly built to look after the life insurance sector. IDBI

Fortis operations are independent of the retail operations of IDBI

branch

(b). General Insurance

8.3. New Pension System:

NPS has the following objectives:

To provide old age income

Reasonable market based returns over long term

Extending old age security coverage to all citizens

NPS allows its customer to choose from any one of the following six

entities:

ICICI Prudential Pension Funds Management Company limited

IDFC Pension fund Management Company Limited

Kotak Mahindra Pension Fund Limited

Reliance Capital Pension Fund Limited

SBI Pension Funds Private limited

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UTI Retirement Solutions Limited

PFRDA is the regulator of the NPS and will endeavour to protect

the interests of the subscribers through prudential forms of

investments.

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CHAPTER 9

NRI SERVICES

IDBI also provides services to the NRI.

NRI – centric bank solutions are as follows:

9.1. Non Resident External Account:

Current/savings/term deposits accounts can be opened under thus scheme.

Funds can be held by NRIs/PIOs in convertible Indian rupees.

Minimum balance required:

1. Current Account: Rs.10,000

2. Savings Account: Rs. 5,000

3. Term Deposits: Rs. 10,000

A joint account can also be opened by two or more individuals, provided all

of them are NRIs. In case of account in the name of a minor, both the minor

and the guardian has to be an NRI.

Balance in the NRE account is exempted from Income tax under the

provisions of Income Tax Act in India.

9.2. Non Resident Ordinary Account (NRO):

This account has to be maintained in local currency.

Features of this account are as follows:

NRIs should have local income or expenses in India. The account can be

savings, current or fixed deposit account.

Interest earned on this account is not exempt from Income tax under the

provisions of Income Tax Act.

Joint account with Resident/ Non Resident can be opened

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Minimum balance required:

1. Current account: Rs. 10,000

2. Savings Account: Rs.5,000

3. Term deposits: Rs. 10,000

9.3. Foreign Currency Non Resident Deposit Scheme:

This account has to be maintained in foreign currencies.

Main features of the account are:

Funds can be held by Non Resident Indian/persons of Indian origin

Fixed deposit accounts maintained only in US Dollars, Sterling Pounds,

Japanese yen and Euro

The deposits can be accepted for a minimum period of 12 months and up

to 36 months. Minimum deposit amount is USD 1,000 or equivalent

Interest payments would be at half yearly

9.4. Demat Account:

An NRI who has invested in shares, bonds and debentures of Indian companies or

would like to do so, can open a demat account under the appropriate category of

NRI Repatriable or NRI Non-Repatriable.

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CHAPTER 10

FINANCIAL ANALYSIS

A.RATIO ANALYSIS

10.1. Capital Adequacy Ratio:

Capital Adequacy Ratio(CAR) which is also known as Capital Risk Weighted Assets

Ratio(CRAR) is a simple measure of the soundness of banks. The ratio is the

capital with the bank as a percentage of its risk weighted assets. This ratio

determines the maximum extent to which the bank can lend.

Tier 1 capital (as on 31st March 2010): Rs.11095 crores

Tier 2 capital (as on 31st March 2010): Rs. 9006 crores

Total Risk weighted assets (as on 31st March 2010): Rs.177688 crores

CAR = Total capital/Total risk weighted assets

CAR= 20101/177688*100= 11.31%

Note:

Tier 1 capital includes paid up capital, statutory reserve, general reserve, balance

in profit and loss account and amalgamation reserve. Outstanding deferred tax

asset is deducted.

Tier 2 capital includes general loan loss reserves, investment fluctuation reserve

and subordinated debt.

CAR of some other banks:

Bank CAR(as on 31st March 2010)

Axis Bank 15.80%

HDFC Bank 16.45%

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10.2. Balance Sheet Ratios:

Ratio 2009-10 2008-09

Net NPAs to Net advances 1.02% 0.92%

Saving bank deposit to Total deposit

5.24% 4.89%

Current account deposit to Total deposits

9.35% 9.89%

Time deposits to Total deposit 85.41% 85.22%

Total risk weighted assets to Total assets

76.07% 81.44%

10.3. Key Operating Indicators:

Particulars 2009-10 2008-09

Non-Interest Income to Total Income

13.04% 11.34%

Efficiency ratio 40.18% 49.26%

Staff expenses to Total income 4.31% 4.37%

Staff expenses to Total expenses 5.10% 5.00%

Overhead efficiency ratio 125.09% 110.35%

10.4. Key Profitability Indicators:

Particulars 2008-09 2009-10

Return on Assets 0.53% 0.62%

Return on Equity 13.14 12.11

Yield on Total assets 9.03% 9.34%

Return on Earning assets 9.38% 9.87%

Low cost funds to Total funds 14.58% 14.78%

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10.5. Asset Quality Indicator:

Particulars(Rs.in crores) 2008-09 2009-10

Gross Advances 103915 138925

Gross NPAs 1436 2129

Gross NPAs as % of Gross advances

1.38 1.53%

Net Advances 103428 138202

Net NPAs 949 1406

Net NPA as % of Net advances

0.92 1.02%

10.6. Business Ratios:

Particulars 2008-09 2009-10

Profit per employee Rs.8.42 lakh Rs.8.44 lakh

Business per employee Rs.21.16 crores Rs.24.17 crores

Profit After Tax Rs.859 crores Rs.1031 crores

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CHAPTER 11

Recommendations

IDBI Bank which began with an equity capital base of Rs. 100 crore in November,

1995, was earlier catering primarily to the corporate clients. In 2001, the bank

decided to focus on retail banking and then there was no looking back.

Today, IDBI Bank is using Finacle, a core banking solution introduced by Infosys.

Before using Finacle, IDBI was using Kindle banking system. But Finacle has

improved its efficiency to meet the daily requirements efficiently. Finacle Core

Banking has helped the bank to handle over 300,000 transactions a day from

750,000 customers accounts.

No doubt today IDBI has made a name for itself in the banking industry, has

strong banking operations and believe in customer satisfaction in every single

way, but there is still a long way to go.

Some steps which IDBI Bank can implement in order to increase its customer base

and to make huge profits are:

(a). Banking industry is expanding at a very fast rate and in order to keep up, it is

suggested that IDBI Bank should try to think on new and more possible avenues

which could increase the attraction in its banking portfolio.

(b). CASA depsoits which is considered to play a very crucial role in the lending

operation of any bank, should be increased considerably. No doubt, for the past

two financial year, it has increased but the increament have been almost

negligible. For this, it is needed that the bank should try out new methods that

the customers are more attracted to this deposits.

(c). Today, the customers are more aggressive and believe in making quick profits.

As a consequence more and more people are interested in making investment in

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mutual funds, stocks and shares. IDBI should also emphasize on its investment

advisory services and capital market products.

(d). The company needs to adequately promote its new scheme. At many

instances it is seen that the customers lack the basic information. This will also

increase its brand awareness and brand recall.

(e). Indian economy is the worlds second largest growing economy and this

motivates people to invest in our country. Taking this into consideration, IDBI

Bank should emphasize more on the NRI services which has a great potential and

needs to be catered.

(f). Non depository services such as Internet banking, SMS banking, Account alerts

are very popular this days. But there popularity is more or less confined only in

the rural areas. It is high time that IDBI Bank should try to find its possibilities in

rural areas where this services are almost unknown.

(g). Banks lending policy has a very crucial role to play. Although, RBI looks after

the lending operations but it is the bank itself which determines the rate of

interest and hence it is important that this decisions are made in such a way that

the bank benefits in the long run. IDBI Bank being a nationalized bank has the

faith of the customers on its side. But the availability of loans depends on the

deposits with the banks. Hence it has to increase its deposits considerably which

requires enumerable steps in this direction.

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BIBLIOGRAPHY

1. NCFM Module on Commercial Banking

2. www.idbi.com

3. IDBI intranet enabled websites

4. Report on Trends and Progress of Banking in India 2008-09