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IDB I F LEXIBONDS 20

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PREAMBLE

IDBI – PUBLIC ISSUE OF UNSECURED BONDS (FLEXIBONDS SERIES 2003-2004)

OF Rs.1500 CRORE WITH AN OPTION TO RETAIN OVER-SUBSCRIPTIONUPTO Rs.1500 CRORE (AGGREGATING Rs.3000 CRORE) TO BE RAISED IN

ONE OR MORE TRANCHES

The Lead Manager – SBI Capital Markets Ltd. had filed a draft Umbrella Offer Document for the Public Issue of

Unsecured Bonds in the nature of Promissory notes (Flexibonds Series 2003-2004) of Rs.1500 crore with an optionto retain an over-subscription upto Rs.1500 crore (aggregating Rs.3000 crore) to be raised in one or more tranches.

The present tranche is for raising Rs.400 crore with an option to retain over subscription upto Rs.400 crore.

The details of all the previous tranches (if any) is as follows:

Tranche No. Date of Issue Size Additional Date of Date of No. of InvestorIssue for the Subscription Despatch of Listing and grievances/

tranche Retained under Bond names of the complaints(Rs. Crore) the Green certificates Stock pending

shoe option Exchanges(Rs.Crore)

1 Dec 1 - 17, 2003 300 288 * * _

* Post issue formalities are being completed

The balance of Rs.800 crore along with any shortfall in the target amount of Rs.400 crore of this tranche maybe raised in one or more tranches in the future but within the period of 12 months from SEBI’s observation

letter dated November 7, 2003.

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ABBREVIATIONS USED

ADB Asian Development Bank

AY Assessment Year

bps Basis points

BSE The Stock Exchange, MumbaiCBDT Central Board of Direct Taxes

CDSL Central Depository Services Ltd.

CIT(A) Commissioner of Income Tax (Appeals)

CMD Chairman & Managing Director, IDBI

CRISIL Credit Rating Information Services of India Ltd.

DER Debt Equity Ratio

DMD Deputy Managing Director, IDBI

FEDAI Foreign Exchange Dealers Association of India

FII Foreign Institutional Investor

FITCH Fitch Ratings India Private Ltd.

FY Financial YearGOI Government of India

HUF Hindu Undivided Family

IBRD International Bank for Reconstruction and Development

ICRA Investment Information and Credit Rating Agency

ICMS IDBI Capital Market Services Ltd.

IDBI/ the Institution/ the Bank Industrial Development Bank of India

ITAT Income Tax Appellate Tribunal

LIBOR London Inter Bank Offered Rate

MTLR Minimum Term Lending Rate

MSTLR Minimum Short Term Lending Rate

NDSCR Notional Debt Service Coverage Ratio

NSDL National Securities Depository Ltd.

NSE National Stock Exchange of India Ltd.

OCBs Overseas Corporate Bodies

RBI Reserve Bank of India

SEBI Securities and Exchange Board of India

SIDBI Small Industries Development Bank of India

SLR Statutory Liquidity Ratio

SWIFT Society for Worldwide Interbank Financial Telecommunication

The Act The IDBI Act, 1964

The Board The Board of Directors of IDBI

TDS Tax Deducted at Source

YTM Yield to Maturity

YTP Yield to Put

SAT Securities Appellate Tribunal

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RISK FACTORS

Internal Factors

(a) Redemption Reserve: Creation of Redemption Reserve is not envisaged for the proposed issue of Bonds. IDBI being a public financial institution has been raising resources both from domestic

market and overseas market in the form of unsecured borrowings. In respect of the monies borrowed

from overseas markets, IDBI has agreed to create pari passu charge if any other lender is offered security on the assets of IDBI. Since the resources raised by IDBI are being utilised for the purpose of its business i.e. providing credit and other facilities to the industry, the assets of IDBI are mostly

in form of loans and advances. Hence it is proposed that the Bonds shall be unsecured in nature in that they shall not be secured against any asset of IDBI. IDBI has appointed a trustee to protect

the interest of the investors. In the event of default, the bondholders may proceed against IDBI in terms of the mechanism given under para ‘Trustees to the bondholders’ on page 26.

(b) Credit Risk: The business of lending carries the risk of default by borrowers.

Any term lending activity is exposed to credit risk arising from the risk of default by the borrowers. IDBI

has put up a systematic credit evaluation process in place. Necessary control measures like maintaininga diversified portfolio with industry-wise, promoter group-wise and specific client-wise exposure limits

are set to avoid concentration of lending to any specific industry segment/ promoter group/ company.

These limits help minimise credit risk. With a view to derisk the portfolio the exposure limits have beenreviewed and exposure by way of Project Finance assistance to greenfield projects have been reducedas a matter of deliberate strategy. A Credit Risk Monitoring Group (CRMG) has been set up at theHead Office to monitor the risk associated with lending to individual projects, business groups and

industries. IDBI monitors the performance of its asset portfolio on a regular basis and also constantlyevaluates the changes and developments in industries to which it has substantial exposure.

(c) Market Risk: Increased interest rate volatility exposes IDBI to market rate risk arising out of

maturity/rate mismatches .

Risk arising from interest rate volatility is inherent to the business of financial intermediation andterm lending. This risk is minimised by linking the interest rates on term lending to a base rate (PLR

/ MTPLR etc), which varies in accordance with overall movement in market rates. Further, the rateapplicable to each tranche of disbursement varies in accordance with the prevailing base rate. In

case of lending pegged to floating rates, they are generally matched by floating rate liability (bothrupee and foreign currency). IDBI manages market risks through active Asset Liability Management(ALM), viz. liquidity, interest rate and foreign exchange risk by way of Gap/Duration Analysis so as

to optimize matching of the Assets and Liabilities. Active Asset Liability Management with effortsto match Duration of Assets and Liabilities as also availability of hedging mechanisms help moderate

the market risk.

(d) Asset Liability mismatch : The maturity profile of assets and liabilities as on March 31, 2003 shows negative gaps in over 1 to 3 years bucket and Over 5 years bucket .

As can be observed from the Table on Maturity profile of Assets and Liabilities given on page 71 there

are negative gaps of Rs.1640 crore in over 1 year to 3 years bucket and Rs.4465 crore in over 5 yearstime bucket. However, the maturity buckets upto 1 year and over 3 years to 5 years have positive gaps

of Rs.1303 crore and Rs.4802 crore. On cumulative basis, there is negative gap in only over 1 to3 years time bucket amounting to Rs.337 crore. This situation has arisen because the balance sheetof IDBI is Assets sensitive and the assets are maturing faster than liabilities. The statement does not

take into account the effect of relending of these repayments from clients and fresh borrowings in future.Any gap resulting in any of the maturity buckets at any future date will be managed dynamically through

suitable structuring of maturity profile of investment products, asset portfolio and liability products.

(e) Credit Rating: The credit rating of outstanding bond issues of IDBI has been revised from “AAA” to “AA+” by CRISIL, from “LAAA to “LAA” by ICRA and from “Ind AAA” to “Ind AA+” by FITCH.

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The revision in ratings reflects the perception of the rating agencies. While CRISIL has reaffirmed its

ratings assigned to Fixed Deposit program of IDBI at “FAAA” and assigned the highest rating “P1+” tothe Term Money Bonds, Commercial Papers and Corporate Deposits of IDBI, it has revised its rating

assigned to the outstanding bond issues and Certificate of Deposit program of IDBI from “AAA” to“AA+”. ICRA has assigned the highest rating “A1+” to Commercial Paper, Term Money Bonds, Inter

Corporate Deposits and Certificate of Deposits of IDBI. The ratings for Fixed Deposit Programme hasbeen reaffirmed at “MAA+”. ICRA has revised its rating from “LAAA” to “LAA” for bonds. FITCH hasrevised its rating from “IndAAA” to “IndAA+” for bonds and Fixed Deposits program. While “AAA”

denotes highest safety in terms of timely payment of interest and principal, “AA+” denotes high safetyof timely payment of interest and principal. “LAA” indicates high safety. Risk Factors are modest and

may vary slightly. The protective factors are strong and the prospect of timely payment of principal andinterest as per terms under adverse circumstances, as may be visualized, differs from LAAA only

marginally.

(f) Contingent Liabilities: As on March 31, 2003, IDBI had contingent liabilities of about Rs.4494 crore on account of Guarantees, Letters of credit, Underwriting Commitments, uncalled monies on

partly paid shares/debentures, claims against IDBI not acknowledged as debt and Disputed Tax claims. As on September 30, 2003 the contingent liabilities aggregated to Rs.4141 crore.

The contingent liabilities are solely on account of normal operations and are subject to the prudentialnorms applicable to lending and investment operations.

(g) Pending Grievances: As on December 31, 2003 there were 3 references pending pertaining to

Flexibonds-2, 5 pertaining to Flexibonds–3, 4 pertaining to Flexibonds-4, 4 pertaining to Flexibonds-5, 6 pertaining to Flexibonds-6, 2 pertaining to Flexibonds-7, 11 pertaining to Flexibonds-9, 13

pertaining to Flexibonds-10, 8 pertaining to Flexibonds-12, 7 pertaining to Flexibonds-13, 17 pertainingto Flexibonds-18 and 4 pertaining to Equity shares. Further no complaint was pending for more than60 days.

(h) Tax Liabilities: As on October 31, 2003, the gross demand raised by the Income Tax Department on account of Income Tax, Wealth Tax and Penalty is Rs.5029.25 crore against which the provision made is Rs.2866.69 crore. The demands include Rs.1462.22 crore in respect of matters in which

IDBI has favourable decisions in its own case in the earlier years. Thus the amount of contingent

liability on account of Tax in dispute is Rs.700.33 crore.Appeals have been filed on matters covered by the disputed amount.

(Please refer to page 81 of this document).

(i) Non Performing Assets (NPA) : The total NPAs of IDBI in amount terms has been increasing over the past 5 years. Movement of Net NPAs over the past 5 years is detailed in the Table on page

60. Net NPAs (percent of total assets) has increased from Rs.6490 crore (12.05%) as on March 31, 1999 to Rs.7330 crore as on March 31, 2003 (14.20%).

IDBI has initiated measures for NPA containment by setting up Close Monitoring Cells and Restructuring

Committees. IDBI actively monitors all assisted companies for timely recovery of dues. With respectto defaulting accounts, IDBI places emphasis on recovery, settlement and containment of NPAs. The

Close Monitoring Cells constantly monitor performance of assisted companies to improve recoveryand initiate pro-active remedial actions. Efforts of Close Monitoring Cells are reinforced by EmpoweredCommittee and High Power Committee at Head Office. These committees assess and advise necessary

restructuring and one-time settlement process. Wherever the long-term viability of assisted companiesis in question, legal measures are initiated and securities are enforced. In cases where financial

restructuring is under consideration, discussions are held with other term lenders as also with workingcapital bankers to have a co-ordinated approach to ensure quicker recovery. A Corporate Debt

Restructuring (CDR) mechanism has been set up to facilitate this. Further, there has been substantialchanges in the legislative and operating environment enabling FIs and banks to aggressively pursue

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recovery of overdues. Besides the Debt Recovery Tribunal (DRT) set up for faster settlement of

recovery litigation, GOI has recently promulgated ‘The Securitisation and Reconstruction of FinancialAssets and Enforcement of Security Interest (SRES) Act, 2002’, enabling FIs and banks to securitise

and reconstruct the financial assets and enforce security of FIs and banks without pursuing the availablelegal route. As on May 31, 2003 IDBI has issued notices to 49 defaulting borrowers with an outstanding

assistance of Rs.1588 crore by invoking provisions under the said Act. Further in 33 cases IDBI hassought consent of other secured creditors for initiating action under the Act. After the SRES Act hascome into effect IDBI has initiated action against chronic defaulters resulting in many defaulters willinglly

coming forward for settlement of their dues. IDBI has been taking recourse to all available methods forrecovery of overdues including reporting to RBI the name of wilful defaulters simultaneous with initiation

of necessary steps for recovery. IDBI has also initiated aggressive One Time Settlement (OTS) measuresto recover overdues. Aggregate of provisions / write offs as a percentage of Gross NPAs stood at 54%

as on March 31, 2003. To facilitate recovery of overdues and reconstruction of weaker assets, IDBI inparticipation with SBI, ICICI Bank and a few other institutions and Banks have set-up an AssetReconstruction Company viz. Asset Reconstruction Company of India Ltd (ARCIL). With the changes

in operating and legislative environment including formation of the ARC coupled with the NPAmanagement measures initiated the NPA levels are expected to be contained/ reduced.

(j) Overdues : The overdues of Videocon Group Companies, in which Shri R. N. Dhoot (industrialistdirector in the Borad of IDBI) was associated, as on January 1, 2004 amounted to Rs.57.62 crore. The

group has indicated it would clear the overdues shortly.

(k) Asset concentration to few industries : The top 5 industries account for 48.17% of the total

outstanding assistance as on March 31, 2003. Large exposures to specific industries will be impacted by global trends in these industries.

IDBI’s loan portfolio is well diversified among industries. The major outstandings are to the iron andsteel, power, cotton textiles, telecom services and petrochemicals, which together accounted for about

48% of the outstandings as at March 31, 2003. As a prudential measure, IDBI has recently revised theexposure limit to individual industry at 10% of its total portfolio or Rs.5000 crore whichever is lower. As

on March 31, 2003 only two industries viz. Iron & Steel (18.31%) and Electricity Generation (12.58%)exceeded the limit. This excess has been largely due to historical factors wherein IDBI had been

extending assistance to core sector projects in line with overall national objectives. IDBI particularlymonitors both domestic and global trends and developments in industries accounting for higher expo-sure within its portfolio and takes necessary actions and remedial measures to maintain its portfolio

quality and reduce any possible adverse impact on its financials.

(l) Change In Balance Sheet size : IDBI’s total asset and liabilities have decreased from Rs.66,643

crore to Rs.63,116 crore during FY 2003.

To improve the asset quality, IDBI has restricted new assistance and extends assistance only onvery selective basis. On the liability side, IDBI has exercised call option on its high cost borrowingsduring the year. Change in the Balance Sheet size is a part of the deliberate strategy of IDBI to

pursue quality asset growth and profitability in operations.

(m) Decrease in profit : The profit after tax of IDBI is Rs.401 crore for FY 2003 as against Rs.424 crore for FY 2002 and Rs.691 crore for FY 2001. IDBI’s profit after tax for the half year ended September

30, 2003 stood at Rs.176 crore as against Rs.152 crore in the corresponding half year ended September 30, 2002.

General economic slowdown in the recent past has led to lower industrial activity. During the last

couple of years credit off-take has been low due to lower industrial growth in spite of fall in interestrates and other steps taken by the Government to boost the industrial performance. Foray of

commercial banks into term lending has also resulted in increased competition to extend assistance

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to creditworthy clients at very competitive rates. Resultant lowering of interest income and overall

squeezing of margin has impacted the profit after tax. However with the expected economic upturnthe position is expected to improve. Further recovery out of written off cases will directly add to the

profit of IDBI.

(n) Return on Assets : The return on average assets has declined from 10.4% in FY 2002 to 9.8%

in FY 2003 while the average cost of funds has also gone down from 9.2% to 8.5% over the same period.

The major factor impacting the returns and costs is the sharp drop in interest rates during the lastfew years. This has resulted in prepayment of borrowing by high credit clients which in turn has,

to some extent impacted credit composition of the portfolio. This coupled with NPAs adverselyaffected return on assets. On the cost front, impact of drop in incremental cost of rupee borrowing

(12.08% in FY 2000 to 11.21% in FY 2001, to 9.81% in FY 2002 and further down to 8.35% in FY2003) and exercising of call option on high cost borrowings by IDBI has resulted in decline in costof borrowing. The average cost of loan funds has reduced from 11.5% in FY 2002 to 10.5% in FY

2003. As may be observed from above, the decline in average cost of funds has been more thanthe decline in average return on assets. Further as mentioned on page 67 of this Offer Document

under the auspicies of GOI, the liabilities of IDBI to Public Sector Banks, Institutions etc. has been

restructured, which will bring down the average cost of funds of IDBI significantly.

(o) Quoted Investments : IDBI has in its portfolio quoted investments aggregating Rs.2730.22 crore

as on March 31, 2003 which are booked at cost whose market value amounted to Rs.2152.54 crore.As on September 30, 2003 its portfolio quoted investments aggregating Rs.5993.78 crore, which

are booked at cost whose market value amounted to Rs.6392.20 crore.As on March 31, 2003, IDBI had debentures of Rs.4389.16 crore in its portfolio. All the debentures

are secured by hypothecation/mortgage of fixed assets. However, in case of debentures amounting to Rs.795 crore, the final security by way of mortgage was yet to be created as on March 31, 2003.

IDBI’s investment portfolio is predominantly of long term and strategic nature. Temporary diminution

in value of securities arises on account of price volatility due to factors and forces affecting thestock market, interest rates, etc. IDBI has been classifying its investment portfolio and makingappropriate provision for diminution in value as per RBI guidelines issued from time to time in this

regard. The investments are classified under the following categories (i) Held to Maturity, (ii)Available for Sale (iii) Held for Trading. These investments were valued according to the prevailing

valuation norms.

(p) Foreign Exchange Risk : IDBI may be exposed to foreign exchange risk on account of changes in foreign exchange rates.

IDBI maintains a currency-wise matching of assets and liabilities. IDBI makes foreign currency

loans on terms that are similar to its foreign currency borrowings thereby transferring the foreignexchange risk to the borrower. In case of certain foreign currency borrowings that are re-lent inrupees, the Govt. of India bears the foreign exchange risk on these borrowings pursuant to certain

agreements between IDBI and GOI. IDBI’s foreign currency cash balances are generally maintainedabroad in currencies matching with the underlying borrowings. IDBI also operates a USD denominated

single currency pool (SCP) and interest rate risks under the SCPs are hedged through basic

SWAPs. IDBI is therefore not exposed to any significant risk on account of foreign exchangefluctuations.

(q) Nature of Bonds : Bonds are unsecured and in the nature of promissory notes transferable by endorsement and delivery. The certificates are valuable documents and should be kept safely.

Duplicate bonds will be issued only in accordance with the procedure specified later in the Offer Document. The bonds are also offered in demat mode.

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External Factors

(a) Changes in Government policies may impact the performance of the industrial sector, which

may in turn affect IDBI

Indian industry has demonstrated remarkable resilience in adjusting to the changed environment

and competition in the wake of the economic reforms initiated by the Government. Further, IDBI’s

diversified portfolio provides a sufficient cushion against any downtrend in a particular industry orsector.

(b) Risk of Competition : Competition in the financial sector has increased and is likely to increase further with the entry of commercial banks and other new players in term lending. IDBI faces

competition both in corporate lending and in raising resources .

While focusing attention on its core business of project financing and infrastructure financing inparticular, IDBI has taken steps to diversify its operations in various other areas like working capitalfinancing, merchant banking, corporate advisory services, forex services, venture capital, non-fund

based activities etc. IDBI, through its subsidiary/ associate companies also addresses the needs ofits clients for commercial banking requirements, depository services, capital market related services,

mutual fund products, information technology services etc.

On the resource-raising front, avenues like Mutual Funds,Charitable and Religious Trusts, Private

insurance companies, Pension Funds, etc. hold good potential. IDBI has over the years strengthenedits reach to retail segment through its public issues of retail bonds and Fixed Deposits marketed

through its 35 branch offices, large agent network, broking outfits and debt market intermediaries.

(c) Disintermediation : Development of the capital markets may lead to disintermediation by borrowers.

With the development and maturing of the capital markets, there has been a distinct shift in thepattern of industrial financing. However, it will be noteworthy that while a part of the financial

requirement of the industrial projects may be met by direct borrowing from the investors, a majorportion will still need to be serviced by financial intermediaries. Consequent to the opening up ofthe economy, large projects in infrastructure, power, petroleum, telecom, etc. with huge financial

outlays are being set up. Their large fund requirements are unlikely to be met by private investmentsalone. Accordingly, the requirement of funds both from lending institutions/banks and the capital

market is likely to increase substantially. Also, the disintermediation brings with it the opportunity for

IDBI to expand its fee based activities.General Risks

Investors are advised to read the risk factors carefully before taking an investment decision in this offering. For taking an investment decision, the investor must rely on his/her own examination of

the issuer and the issue including the risks involved. The Bonds have not been recommended or approved by SEBI nor does SEBI guarantee the accuracy or adequacy of this document .

Notes

1. Allotment against all valid applications for the IDBI Infrastructure (Tax Saving) Bond (2004 B) willbe made on a full and firm allotment basis, upto the issue size Rs.400 crore plus the amount ofover subscription retained by IDBI. Subscribers to the IDBI Infrastructure (Tax Saving) Bond (2004

B) will have priority over subscribers to other bonds for allotment. Therefore, only after all eligibleapplicants for IDBI Infrastructure (Tax Saving) Bond (2004 B) have been allotted, applications for

other bonds will be considered for allotment on proportionate basis.

2. IDBI would like to clarify that inspection by RBI is a regular exercise and is carried out periodically

by RBI for all Banks and Financial Institutions. IDBI is in dialogue with RBI in respect of observationmade by RBI in their report for previous year. The reports of RBI are strictly confidential. RBI does

not allow disclosure of its inspection report and that all the disclosures in the Offer Document areon the basis of Management and Audit Reports of the Issuer.

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INSTRUMENTS AT A GLANCE

Brief particulars of the four types of Bonds offered under the current series are tabulated below.

IDBI Infrastructure (Tax Saving) Bond (2004 B)

Option A Option B Option C Option D

(Annual interest) (Annual interest) (Cumulative) (Cumulative)

Face Value Rs.5,000 Rs.5,000 Rs.5,000 Rs.5,000

Minimum One Bond One Bond One Bond One BondInvestment Rs.5,000 Rs.5,000 Rs.5,000 Rs.5,000

Interest Rate* 5.50% p.a. 5.75% p.a. Refer YTM Refer YTM

Tenor 3 years 5 years 3 year 6 months 5 years

Maturity value Rs.5,000 Rs.5,000 Rs.6,030* Rs.6,615*

Yield to Maturity 5.50% 5.75% 5.50% 5.75%

YTM with tax 11.71% 9.67% 10.52% 9.25%benefits u/s 88 #

Put/ Call option None None None None

* Subject to TDS as applicable. Investors are advised to read the Offer Document for more details.

# Investment made in these bonds will be eligible for tax benefits under Section 88 of the Income Tax Act, 1961.The YTM (with tax benefits) is calculated assuming the investor gets a tax benefit of 15% of the invested amount.

Subscribers to the IDBI Infrastructure (Tax Saving) Bond (2004 B) will have priority over subscribers to other bonds for allotment.

IDBI Money Multiplier Bond (2004 B)

Option A Option B

Issue Price Rs.5,000 Rs.5,000

Minimum Investment One Bond One Bond

Rs. 5,000 Rs. 5,000

Tenor 6 years 11 months 11 years 5 months

Face Value / Maturity Value * Rs.7,500 Rs.10,000

Yield to Maturity 6.03% 6.25%

Put/Call option None None

* Subject to TDS as applicable. Investors are advised to read the Offer Document for more details.

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IDBI Floating Rate Bond (2004 B)

Face Value Rs.5,000

Minimum Investment Two Bond

Rs.10,000

Payment of Interest Semi annual

Tenor 5 years

Interest rate * 100 bps over

Benchmark Rate

Banchmark Rate 5 year G-Sec

Interest Reset Semi annually

Put/ Call Option None

* Subject to TDS as applicable. Investors are advised to read the offer document for more details.

IDBI Regular Income Bond (2004 B)


Face Value Rs.5,000 Rs.5,000 Rs.5,000 Rs.5,000

Minimum Investment Two Bonds Six Bonds Two Bonds Six Bonds

Rs.10,000 Rs.30,000 Rs.10,000 Rs.30,000

Payment of Interest Annual Quarterly Annual Quarterly

Interest Rate* 6.00% p.a. 5.80% p.a. 6.20% p.a. 6.00% p.a.

Tenor 7 years 7 years 10 years 10 years


Put Option None None None None

Call Option None None None None

*Subject to TDS as applicable. Investors are advised to read the Offer Document for more details.

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PART A

INDUSTRIAL DEVELOPMENT BANK OF INDIA

(Established under the Industrial Development Bank of India Act, 1964)

IDBI Tower, WTC Complex, Cuffe Parade, Mumbai 400 005

Tel: (022) 22189117 Fax:(022) 22181294 Grams:INDBANKIND. Website: www.idbi.com

Industrial Development Bank of India (IDBI) offers for public subscription, the following unsecured, redeemable

bonds through a simultaneous public issue (“the issue”).

IDBI Infrastructure (Tax Saving) Bond (2004 B)

IDBI Money Multiplier Bond (2004 B)

IDBI Floating Rate Bond (2004 B)

IDBI Regular Income Bond (2004 B)

The above bonds are collectively referred to in this Offer Document as “IDBI Flexibonds 20” or “Bonds”.

GENERAL INFORMATION

Target Amount

This issue is intended to collectively raise an amount of upto Rs.400 crore, with an option to retain oversubscription

upto Rs.400 crore (i.e. in all, upto Rs.800 crore).

Issue Schedule

The Issue will open for subscription at the commencement of business hours and close at the close of business

hours on the dates indicated below:

OPENING DATE : January 19, 2004

CLOSING DATE : February 12, 2004

DEEMED DATE OF ALLOTMENT : March 5, 2004

Authority for the Issue

The Issue is made pursuant to Section 11(1)(a) of the Industrial Development Bank of India Act, 1964 (IDBI Act).

The Board of Directors of IDBI at its Meeting held on June 20, 2003, passed resolution approving the Umbrella OfferDocument for 2003-2004 for raising Rs.1500 crore with an option to retain additional subscription upto Rs.1500 croreand authorising the Chairman & Managing Director to exercise powers in relation to the Public Issue.

Chairman & Managing Director vide his approval dated January 8, 2004, has authorised Shri O.V.Bundellu/

Shri K.Sivaprakasam, Executive Directors, severally, to sign the Offer Document of Flexibonds-20 on his behalf.

The Issue is made in accordance with the Guidelines for Issue of Capital by Designated Financial Institutions, SEBI

Guidelines 2000. The current issue of IDBI is in accordance with the terms of RBI’s letter No. DBS.FID. 21/09.01.02/

1999-2000 dated June 21, 2000 and DBS.FID No.966/09.01.02/2001-02 dated March 2, 2002 regarding issue ofbonds by Financial Institutions.

IDBI can issue the bonds proposed by it in view of the present approvals and no further approvals in general from

any Government Authority / RBI are required by IDBI to undertake the proposed activity. IDBI, in future, will secureany other required approvals from the statutory authorities, if necessary.

IDBI being a public financial institution has been raising resources both from domestic market and overseasmarket in the form of unsecured borrowings. In respect of the monies borrowed from overseas markets, IDBI has

agreed to create pari passu charge if any other lender is offered security on the assets of IDBI. Since the

resources raised by IDBI are being utilised for the purpose of its business i.e. providing credit and other facilitiesto the industry, the assets of IDBI are mostly in form of loans and advances. Hence it is proposed that the Bonds

shall be unsecured in nature in that they shall not be secured against any asset of IDBI. IDBI has appointed a

trustee to protect the interest of the investors.

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Eligibility of IDBI to come out with the issue

IDBI, its directors or any of its subsidiaries have not been prohibited from accessing the capital market under any order

or directions passed by SEBI. Also, IDBI is eligible to do an issue of bonds under the applicable guidelines pertaining to

Designated Financial Institutions of SEBI (DIP) guidelines.

Terms of the Issue

The Bonds will be subject to the IDBI Act 1964, the Industrial Development Bank of India General Regulations, 1994,Industrial Development Bank of India (Issue and Management of Bonds) Regulations, 1972, Industrial Development

Bank of India Bonds and Deposits (Nomination) Regulations, 1997, relevant statutory guidelines and regulations for

allotment and listing of securities issued from time to time by the Government of India (GOI), SEBI, Reserve Bankof India (RBI) and the Stock Exchanges concerned, the terms of this Offer Document and Application Form.

Objects of the Issue

The Issue is for augmenting the medium to long-term rupee resources of IDBI for the purpose of carrying out its

functions authorised under the IDBI Act.

The Main Object Clause of IDBI as contained in the IDBI Act, 1964 (as disclosed in ‘Part C’ of the Offer Document)enables IDBI to undertake the activities for which the funds are being raised in the present issue. Also, the main objects

of IDBI as contained in IDBI Act, 1964 adequately cover its existing and proposed activities. The funds raised by way ofthis public issue will be utilised for project lending/ investment in shares/debenture, debt servicing and such other

activities as may be permitted under the IDBI Act. Further, the funds raised through Infrastructure Bonds will be used for

lending to infrastructure projects.

Utilization of Funds

IDBI will have access to the funds raised through the Issue as per the provisions of the Guidelines for Issue of

Capital by Designated Financial Institutions, SEBI Guidelines 2000.

Disclaimer

As required, a copy of the Offer Document has been submitted to SEBI. It is to be distinctly understood

that the submission of Offer Document to SEBI should not in any way be deemed or construed that thesame has been cleared or approved by SEBI. SEBI does not take any responsibility either for the financial

soundness of any scheme or the project for which the issue is proposed to be made, or for the correctnessof the statements made or opinions expressed in the Offer Document. The Lead Manager, SBI Capital

Markets Ltd. has certified that the disclosures made in the Offer Document are generally adequate and are

in conformity with the Guidelines for Issue of Capital by Designated Financial Institutions, SEBI Guidelines2000. This requirement is to facilitate the investors to take an informed decision for making investment

in the proposed issue.

It should also be clearly understood that while the Issuer is primarily responsible for the correctness,adequacy and disclosure of all relevant information in the Offer Document, the lead merchant banker is

expected to exercise due diligence to ensure that the Issuer discharges its responsibility adequately in thisbehalf and towards this purpose, the Lead Manager, SBI Capital Markets Ltd. has furnished to SEBI a due

diligence certificate dated September 18, 2003 in accordance with SEBI (Merchant Bankers) Regulations,2000 which reads as follows:

1. We have examined various documents including those relating to litigation like commercial disputes

etc. and other materials in connection with the finalisation of the draft Offer Document pertaining tothe said issue.

2. On the basis of such examination and the discussions with IDBI, its Directors and other officers,

other agencies, independent verification of the statements concerning objects of the issue and thecontents of the documents mentioned in the Annexure and other papers furnished by IDBI, we

confirm that:

a) the Offer Document forwarded to SEBI is in conformity with the documents, materials and

papers relevant to the Issue;

b) all the legal requirements connected with the said issue as also the guidelines, instructions etc.

issued by SEBI, the Government and any other competent authority in this behalf have been duly

complied with; and

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c) the disclosures made in the Offer Document are true, fair and adequate to enable the investorsto make a well informed decision as to the investment in the proposed issue.

3. We confirm that besides ourselves, all the intermediaries named in the Offer Document are registeredwith SEBI and that till date such registration is valid.

The Lead Manager has issued a fresh due diligence certificate dated January 9, 2004 which reiterates the

statements made in the certificate dated September 18, 2003 referred to above and states that allobservations made by SEBI vide letter dated November 7, 2003 have been incorporated in the OfferDocument.

The filing of the Offer Document does not, however, absolve the issuer from any liabilities arising out ofmisstatements in the Offer Document or from the requirement of obtaining statutory or other approvals asmay be necessary for the proposed issue. SEBI further reserves the right to take up, at any point of time,with the lead manager any irregularities or lapses in the Offer Document.

Filing of the Draft Shelf Offer Document

The Draft Shelf Offer Document was filed with SEBI on September 18, 2003 at Mumbai. A copy of this Offer Document,having attached thereto the ‘Material contracts & documents’ referred to elsewhere in the Offer Document, has beendelivered for registration to the Stock Exchange, Mumbai and National Stock Exchange. The complete copy of the saiddocuments has been kept open for public inspection at the Head Office of IDBI. The Lead Managers and the Bank shallmake all information available to the public and investors at large and no selective or additional information would beavailable for a section of investors in any manner whatsoever.

General Disclaimer

IDBI accepts no responsibility for statements made otherwise than in the Offer Document or in the advertisementsor other material issued by or at the instance of IDBI and the Lead Managers and any one placing reliance onany other source of information would be doing so at their own risk.

Fictitious Applications

Any person who -

(a) makes, in a fictitious name, an application to a body corporate for acquiring, or subscribing to, the bonds,or

(b) otherwise induces a body corporate to allot, or register any transfer of, bonds therein to them, or any otherperson in a fictitious name,

shall be liable for legal consequences of such action.

Disclaimer in respect of jurisdiction

This offer of Bonds is made in India to persons resident in India. This Offer Document does not constitute an offerto sell or an invitation to subscribe to the bonds offered herein, in any other jurisdiction to any person to whom itis unlawful to make an offer or invitation in such jurisdiction.

Any person, in whose possession this Offer Document comes, is required to inform himself about and to observeany such restrictions.

Consents

Consents in writing from the Lead Managers, the Principal Marketing Co-ordinator, the Co-Managers, the Trusteesto the Bondholders, the Registrars and the Bankers to the Issue to act in their respective capacities have beenobtained and filed with The Stock Exchange, Mumbai and the National Stock Exchange of India Ltd., along with acopy of this Offer Document and none of them have withdrawn their consent upto the date of delivery of a copy ofthis Offer Document to the said Stock Exchanges. M/s Sorab S. Engineer & Co., Chartered Accountants, (IsmailBuilding, 381, Dr. D. Naoroji Road, Fort, Mumbai - 400 001) Auditors of IDBI, and Tax Consultants to IDBI have giventheir written consent to the inclusion of their report in this Offer Document in the form and context in which they

appear herein and such consent has not been withdrawn upto the date of delivery of a copy of this Offer Documentto the said Stock Exchanges.

Minimum - Maximum Target

The basic issue size is Rs.400 crore with a right to retain oversubscription of any amount upto Rs.400 crore.

Minimum Subscription

The provisions as to minimum subscription are not applicable to the Issue as per the Guidelines for Issue of Capitalby Designated Financial Institutions, SEBI Guidelines 2000. IDBI would be free to retain whatever amount is

received by it subject to a maximum of Rs.800 crore.

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CREDIT RATING

Domestic Rating

An issue of unsecured bonds of Rs.1,500 crore with an option to retain oversubscription upto Rs.1,500 crore filedunder the Umbrella Offer Document for the FY 2003-2004 has been rated “AA+” (pronounced Double A Plus) by

CRISIL, “AA+(ind)” by FITCH Ratings India Pvt Ltd and “LAA” by ICRA

The proposed tranche of bond issue has been rated by three Agencies and the rating details are as below:Institution Rating Category Meaning of the Rating

CRISIL “AA+” Debentures High safety with regard to timely(Credit Rating Information (Rating watch (Bonds) payment of principal and interest.Services of India Ltd) with Developing Though the circumstances providing

implication) this degree of safety are likely tochange, such changes as can beenvisaged are most unlikely to affectadversely the fundamentally strongposition of such issues.

Rating Watch identifies the possibilities ofchanges in CRISIL ratings of debtinstruments. An instrument will be placed onRating Watch when circumstances arise, theimpact of which needs to be evaluated in

terms of the credit rating. The ‘Developing’designation means that a rating may beraised, lowered or reaffirmed. Rating Watch,however, does not imply that a rating willnecessarily change.

FITCH (Fitch Ratings “AA+(ind)” Long Term High credit quality. AA(ind) ratingsIndia Pvt. Ltd.) (The outlook debt indicate a low expectation of credit risk.

on the rating They indicate strong capacity for timely isEvolving) paymentof finanical commitments.This

capacity may vary slightly from time totime because of ecnomic conditions.

FITCH assigns a Rating Outlook to Long Termand Term Deposits Ratings. A Rating Outlookindicates the direction a rating is likely tomove over time. Outlook may be Positive,Stable or Negative. A Positive or Negative

Rating Outlook does not imply arating change is inevitable. Similarly, ratingsfor which Outlook is ‘Stable’ could beupgraded or downgraded before an outlookmoves to Positive or Negative ifcircumstances warrant such an action.Occasionally, FITCH Ratings may be unableto identify the fundamental trend. In thesecases, the Rating Outlook may be describedas ‘Evolving’.

ICRA (Investment “LAA” Debentures, High safety. Risk factors are modestInformation and Credit Bonds, and may vary slightly. The protectiveRating Agency) Preference factors are strong and the prospect

Shares of timely payment of principal andinterest as per terms under adversecircumstances, as may be visualised,differs from ‘LAAA’ only marginally.

As IDBI is a promoter shareholder of CARE, ratings of proposed instruments of borrowings are not being obtainedfrom CARE as a measure of good corporate governance.

International Rating Standard & Poor’s has assigned “BB” (with Stable outlook) long-term foreign currency credit rating to IDBI. Moody’sInvestors Services has assigned a long-term foreign currency debt rating to IDBI of ‘Ba1’. The rating has beenplaced on review for possible upgrade along-with the sovereign India rating. Fitch, the international rating agency,has assigned long-term foreign currency rating of “BB” (with negative outlook) to IDBI. Rating and InvestmentInformation Inc. (R&I) formerly known as Japan Bond Research Institute (JBRI), has in the past accorded foreigncurrency long term rating of ‘BBB’ to IDBI for Samurai Bonds. The bonds have since been repaid.

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Meaning of International Ratings

‘BB’ long term foreign currency rating from Standard & Poor’s : Less vulnerable in the near term than other lowerrated obligors. However it faces major ongoing uncertainties and exposure to adverse business, financial andeconomic conditions, which could lead to the obligor’s inadequate capacity to meet its financial commitments.

‘Ba’ long term foreign currency debt rating from Moody’s : Bonds and preferred stock which are rated Ba are judged to have speculative elements; their future cannot be considered as well-assured. Often the protection of

interest and principal payments may be very moderate, and thereby not well safeguard during both good and badtimes over the future. Uncertainty of position characterizes bonds in this class.

‘BB’ long term foreign currency rating from Fitch : Indicates that there is possibility of credit risk developing,particularly as a result of adverse economic change over time; However, business or financial alternatives maybe available to allow financial commitments to be met. Securities rated in this category are not investment grade.

Investors are requested to note that a security rating is not a recommendation to buy, sell or hold securitiesand that it may be subject to revision or withdrawal at any time by the agency assigning the rating and thateach rating should be evaluated independently of any other rating.

Details of rating in the past 3 years

CRISIL ICRA FITCH/DCR

FY 2002-2003 AA+ LAA AA+ (ind)

FY 2001-2002 AA+ LAA+ Ind AA+

FY 2000-2001 AAA LAAA Ind AAA

Underwriting

The Issue of Bonds has not been underwritten.

ISSUE MANAGEMENT TEAM

LEAD MANAGERS

SBI Capital Markets Ltd. KJMC Global Market (India) Ltd.202, Maker Tower ‘E’, 168, Atlanta, 16th Floor,Cuffe Parade, Mumbai 400 005. Nariman Point, Mumbai - 400 021.Tel: (022) 2218 9166; Fax: (022) 2218 8332. Tel : (022) 2283 2350, 2284 1542;e-mail : [email protected] Fax : (022) 2285 2892

DSP Merrill Lynch Ltd. RR Financial Consultants Ltd.Mafatlal Centre, 10th Floor, 412-422 Indra Prakash, 4

thFloor,

Nariman Point, Mumbai – 400 021. 21, Barakhamba Road, New Delhi 110 001.Tel (022) 5632 8000 ; Fax (022) 5604 8518 Tel : (011) 335 2496 - 99; Fax : (011) 335 3703

J M Morgan Stanley Pvt. Ltd. Bajaj Capital Ltd.141, Maker Chambers III, Bajaj House, 97 Nehru PlaceNariman Point, Mumbai-400 021. New Delhi – 110 019.

Tel: (022) 5630 3030;Fax (022) 5604 2137 Tel : (011) 641 8903; Fax : (011) 647 6638Enam Financial Consultants Pvt. Ltd. Karvy Investor Services Ltd.2nd Floor, Khatau Building, Karvy House, 46 Avenue 4, Street No. 1,44, Bank Street, Off Shahid Bhagat Singh Road, Banjara Hills, Hyderabad 500 034.Fort, Mumbai - 400 023 Tel: (040) 335 1840; Fax: (040) 335 1989Tel: (022) 2267 7901;Fax: (022) 2266 5613

Kotak Mahindra Capital Co. Ltd.229, Bakhtawar, 1st Floor,Nariman Point, Mumbai – 400 021.Tel (022) 5634 1100; Fax (022) 5682 6632

CO-MANAGERS

Integrated Enterprises (India) Ltd. UTI Securities Exchange Ltd.5A, 5th Floor, Kences Towers, 41, Sir Vithaldas Thackersay Marg; New Marine LineNo.1, Ramkrishna Street, North Usmad Road, Mumbai - 20 Tel : (022) 22030127 Fax:(022) 22030165T. Nagar, Chennai – 600 017. SPA Merchant Bankers Ltd.Tel: (044) 814 3045/46; 25, C- Block, Community Centre, Janak Puri,Fax: (044) 814 4826 New Delhi - 110 058. Tel: (011) 2551 5086

Fax: (011) 2553 2644

AK Capital Services Ltd. Centrum Finance Ltd.Flat No. ‘N’ Sagar Apartments, Bombay Mutual Building, 2nd Floor,6, Tilak Marg, New Delhi - 110 001 Dr. D.N. Road, Fort, Mumbai - 400 001.Tel: (011) 338 2380, 338 8235; Tel: (022) 2266 2434, 2266 4611;Fax: (011) 338 5189 Fax: (022) 2266 3458

Allianz Securities Ltd.C-2, Green Park Extn,

New Delhi - 110 016Tel ( 011) 656 8607, 696 0902 Fax : (011) 696 9478

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CAPITAL STRUCTURE(As on March 31, 2003)

(Rs. Crore)

(A) Authorised Capital

Preference Capital

50,00,00,000 Redeemable Preference Shares of Rs.10/- each 500

Equity Capital

150,00,00,000 Equity Shares of Rs.10/- each 1500 2000

(B) Issued, subscribed and paid-up capital

Equity Capital

65,28,30,400 equity shares of Rs.10/- each 653

(C) Reserves,Funds and Surplus 6325

Including Share Premium Account 1624

(D) Loan Funds

Bonds and Debentures

(i) Issued in Rupees 40618

(ii) Issued in Foreign Currency 1180 41798

Deposits 4330

Borrowings

(i) Issued in Rupees 409

(ii) Issued in Foreign Currency 4951 5360

(D) Present Issue to Public through this Offer Document 400

Notes :

1. The Promoters / Directors / Lead Managers / IDBI have not entered into standby or similar arrangements

for these bonds.

2. The present issue of unsecured bonds by IDBI is made under Guidelines for Issue of Capital by Designated

Financial Institutions, SEBI DIP Guidelines 2000, and therefore, provisions of lock-in of share of the promoters

are not applicable.

3. IDBI has not raised any bridge loan or any other similar financial arrangement, the amount of which would

be repaid out of the proposed public issue of unsecured bonds.4. IDBI being a financial institution is in the business of raising resources and deploying them on an ongoing

basis. However, no specific issue of ‘Security’ in domestic currency by way of a private placement or a public

issue (by means of an Offer Document/ information memorandum, wherein a specific invitation is given toinvestors to subscribe to securities) shall be made during the time when the tranche is open.

5. To the best of knowledge of IDBI, there is no intention of IDBI to significantly alter its capital structure within

a period of 6 months from the date of opening the present issue.

6. In the event of oversubscription beyond the green-shoe option, the basis of allotment shall be decided on

a proportionate manner in consultation with the Stock Exchange, Mumbai and the National Stock Exchange

as per the procedure laid out in para Basis of Allotment on page 29 of the Offer Document.

7. No single applicant in the net offer to the public category can make an application for a number of bonds,

which exceeds the net offer to the public.

8. As on December 31, 2003, there were 2,97,048 shareholders of IDBI.

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SHARE CAPITAL HISTORY OF IDBI

The ownership of IDBI from 1964 to 1976 was with the Reserve Bank of India. The ownership was transferred to

the Government of India with effect from February 16, 1976. The contribution to the share capital, since inception

was made by the RBI (later transferred to the Government of India in 1976 ) / Government of India. Details ofcapital history are as under :

Year@ No. of Face Value Cumulativeequity shares Share Capital

1964-65 1,00,00,000 10,00,00,000 10,00,00,000

1966-67 1,00,00,000 10,00,00,000 20,00,00,000

1970-71 1,00,00,000 10,00,00,000 30,00,00,000

1971-72 1,00,00,000 10,00,00,000 40,00,00,000

1973-74 1,00,00,000 10,00,00,000 50,00,00,000

1977-78 1,00,00,000 10,00,00,000 60,00,00,000

1978-79 3,00,00,000 30,00,00,000 90,00,00,000

1979-80 1,50,00,000 15,00,00,000 105,00,00,000

1980-81 4,00,00,000 40,00,00,000 145,00,00,000

1981-82 5,50,00,000 55,00,00,000 200,00,00,000

1982-83 5,50,00,000 55,00,00,000 255,00,00,000

1983-84 13,00,00,000 130,00,00,000 385,00,00,000

1984-85 3,00,00,000 30,00,00,000 415,00,00,000

1985-86 3,00,00,000 30,00,00,000 445,00,00,000

1986-87 3,00,00,000 30,00,00,000 475,00,00,000

1987-88 2,00,00,000 20,00,00,000 495,00,00,000

1988-89 4,50,00,000 45,00,00,000 540,00,00,000

1989-90 9,70,00,000 97,00,00,000 637,00,00,000

1990-91 6,60,00,000 66,00,00,000 703,00,00,000

1991-92 5,00,00,000 50,00,00,000 753,00,00,000

16.11.1994* (25,30,00,000) (253,00,00,000) 500,00,00,000

25.8.1995 ** 17,30,93,300 173,09,33,000 673,09,33,000

5.6.2000 *** (24,70,00,000) (247,00,00,000) 426,09,33,000

25.8.2000# (1,80,74,300) (18,07,43,000) 408,01,90,00029.3.2001## 24,48,11,400 244,81,14,000 652,83,04,000

@ The financial year upto 1987-88 was July – June year and April-March thereafter.

* Conversion of equity capital into redeemable preference shares, since redeemed.

** Initial Public Offer

*** The Government of India vide notification dated June 5, 2000 converted 24.70 crores equity shares held byit into three year redeemable preference shares of Rs. 10 each aggregating Rs.247 crore carrying dividend@ 13% p.a. Consequently, the equity shareholding of the Government in IDBI stands reduced from Rs.485.58crore (i.e. 72.14%) to Rs.238.58 crore(i.e. 57.76%).

# On August 25,2000 1,80,74,300 partly paid up equity shares of face value Rs. 10/- each were forfeitedConsequently (i) the aggregate face value of Rs. 18,07,43,000 has been reduced from the subscribed andpaid up equity capital (ii) Allotmentmoney in Arrears of Rs.13,55,57,250 has been written down fully and (iii)

Capital Reserve account has been credited by Rs.4,51,85,750 being the amount actually paid up on theforfeited shares. On account of this, Government’s shareholding has gone up to 58.5% with effect fromAugust 25,2000.

## The board of IDBI has recommended bonus in the ratio of 3 equity shares for every 5 equity shares held videBoard resolution dated December 19,2000 which was subsequently ratified in the EGM held on January23,2001.Consequently IDBI has issued 24,48,11,400 fully paid equity shares of Rs.10/- each issued as bonusshares on March 29, 2001 by capitalisation of Capital Reserve of Rs. 4.52 crore and Share Premium of Rs.240.29 crore.

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3. NOTES ON CAPITAL STRUCTURE

(i) The list of top ten shareholders of IDBI on the date of Stock Exchange filing on January 9, 2004 and the number

of shares held by them is as follows.

Sr.No Name of the Shareholder No of Shares

1 Government of India 38,17,28,000

2 Life Insurance Corporation of India 2,85,21,950

3 Unit Trust of India 2,45,00,000

4 State Bank of India 1,71,24,960

5 HSBC Global Investment Funds a/c HSBC GlobalInvest.Funds MAU LTD 1,16,34,198

6 Morgan Stanley Investment Management Inc a/c Morgan Stanley Ind Inv. Fund Inc. 64,05,000

7 HSBC Financial Services (Middle East) Ltd 54,09,521

8 Morgan Stanley Mutual Fund A/C & Morgan Stanley Growth Fund 53,21,000

9 HSBC Equity Fund 32,96,000

10 Export Import Bank of India 32,00,000

(ii) The list of top ten shareholders 10 days prior to the date of Stock Exchange filing and the number of shares

held by them is as follows.






5 HSBC Global Investment Funds a/c HSBC GlobalInvest.Funds MAU LTD 1,16,34,198

6 Morgan Stanley Investment Management Inc a/c Morgan Stanley Ind Inv. Fund Inc. 64,05,000

7 HSBC Financial Services (Middle East) Ltd 54,09,521

8 Morgan Stanley Mutual Fund A/C & Morgan Stanley Growth Fund 53,21,000

9 HSBC Equity Fund 32,96,000


(iii) The list of top ten shareholders of IDBI 2 years prior to the date of Stock Exchange filing and the number

of shares held by them is as follows.







6 The Industrial Finance Corporation of India Ltd. 17,83,800

7 Nagarjuna Fertilizers & Chemicals Ltd. 17,17,000

8 Synducate bank 17,15,2009 ICICI Ltd. 16,94,700

10 Canara bank 16,94,700

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PRINCIPAL TERMS OF THE BONDS

Under the present Offer Document, IDBI offers for public subscription four types of unsecured Bonds. These Bonds

have been structured with several investor-friendly features to meet the needs of different types of investors.

Investors can apply for any or all types of Bonds, as they desire.

This offer of Bonds is made in India to persons resident in India.

The bonds issued herein are subject to applicable prudential norms of RBI, as applicable. The Bonds are also governed

by the Trustee agreement, which stipulates a covenanted DER and NDCSR ratio to be maintained throughout the

currency of the bonds. If IDBI fails to meet the minimum required criteria regarding DER and NDSCR, no dividend shall

be declared for the relevant year except with the approval of the Trustees and the rate of dividend shall not exceed 10%.

IDBI INFRASTRUCTURE (Tax Saving) BOND (2004 B)

Investors in IDBI INFRASTRUCTURE (Tax Saving) BOND (2004 B) will receive interest @ 5.50% p.a. payable

annually for 3 years (option A) or @ 5.75% p.a. payable annually for a period of 5 years (option B). The investor

may also choose from the cumulative options, Option C with maturity of 3 year 6 months (YTM 5.50%) and Option

D with maturity of 5 years (YTM 5.75%). Investment made in these bonds will be eligible for tax benefits under

Section 88 of the Income Tax Act, 1961.

KEY TERMS

The Investor in the IDBI Infrastructure (Tax Saving) Bond (2004 B) will have the following options.

Option A: Annual Interest Option

The Investor receives interest at 5.50% p.a. annually for 3 years.

Option B: Annual Interest Option

The Investor receives interest at 5.75% p.a. annually for 5 years.

Option C: Cumulative Option

The Investor receives cumulative amount of Rs.6,030 per bond at the end of 3 year 6 months.

Option D: Cumulative Option

The Investor receives cumulative amount of Rs.6,615 per bond at the end of 5 years.

Minimum Investment

Each bond has a issue price of Rs.5,000. The minimum investment shall be 1 bond i.e. Rs.5,000 and in multiples

of 1 bond i.e. Rs.5,000 thereafter.

Interest Payment Dates for Option A and Option BInterest on bonds under Option A and Option B accrues from the deemed date of allotment, i.e. March 5, 2004.

Interest will be due and payable on March 5 every year. The first payment of interest for the period from the deemed

date of allotment up to March 4, 2005 will be made on March 5, 2005.

Maturity

Option A : The Bonds under Option A will mature on the expiry of 3 years from the deemed date of allotment

i.e. March 5, 2004. The date of maturity, therefore, will be March 5, 2007. On maturity, the Bonds will be redeemed

at face value (Rs. 5,000).

Option B : The Bonds under Option B will mature on the expiry of 5 years from the deemed date of allotment.

i.e. March 5, 2004. The date of maturity, therefore, will be March 5, 2009. On maturity, the Bonds will be redeemed

at face value (Rs. 5,000).

Option C: The Bonds under Option C will mature on the expiry of 3 year 6 months from the deemed date of

allotment i.e. March 5, 2004. The date of maturity will be September 5, 2007. On maturity, the bonds will beredeemed at the cumulative value of Rs.6,030.

Option D: The Bonds under Option D will mature on the expiry of 5 years from the deemed date of allotment. i.e.

March 5, 2004. The date of maturity will be March 5, 2009. On maturity, the bonds will be redeemed at the

cumulative value of Rs.6,615.

Early Encashment Option / Put Option

There is no early encashment option/put option for investors in IDBI Infrastructure (Tax Saving) Bond (2004 B).

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Call Option

There is no call option for IDBI in the IDBI Infrastructure (Tax Saving) Bond (2004 B).

Priority for Allotment

Allotment against all valid applications for the IDBI Infrastructure (Tax Saving) Bond (2004 B) will be made on a fulland firm allotment basis, upto the issue size Rs.400 crore plus the amount of over subscription retained by IDBI.

Subscribers to the IDBI Infrastructure (Tax Saving) Bond (2004 B) will have priority over subscribers to other bondsfor allotment. Therefore, only after all eligible applicants for IDBI Infrastructure (Tax Saving) Bond (2004 B) have

been allotted, applications for other bonds will be considered for allotment on proportionate basis.

Yield to Maturity

The table of annualised yields to maturity per bond is given below.

Option Tenor Interest rate Amount YTM YTM

payable on (without tax (with taxmaturity (Rs) benefit) benefits)*

A : Annual 3 years 5.50% p.a. Rs.5,000 5.50% p.a. 11.71% p.a.

B : Annual 5 years 5.75% p.a. Rs.5,000 5.75% p.a. 9.67% p.a.

C : Cumulative 3 year & 6 months Refer YTM Rs.6,030 5.50% p.a. 10.52% p.a.

D : Cumulative 5 years Refer YTM Rs.6,615 5.75% p.a. 9.25% p.a.

* The YTM (with tax benefits) is calculated assuming the investor gets a tax benefits of 15% of the invested

amount.

Tax Benefits

CBDT has, vide letter F.No. 178/40/2003-ITA-I dated September 12, 2003 declared Infrastructure Bonds issued byIDBI in the financial year 2003-2004 upto an amount of Rs.3,000 crore as eligible for the purpose of clause (xvi)

of sub-section (2) of Section 88 of the Income Tax Act, 1961 read with Rule 20 of the Income Tax Rules,1962.Accordingly, allottees (sole/first applicant) of the these bonds can avail of tax rebate under Section 88 of IT Act,subject to certain conditions as details under ‘Tax Benefits’ in the Offer Document.

For tax benefits and tax treatment of interest income, please refer ‘Tax Benefits’ later in this document.

An assessee being an Individual or HUF may out of his / its taxable income invest up to Rs. 1,00,000 in these

Bonds along with other eligible modes of investments specified in Section 88 of IT Act and secure a tax rebate

as given in the table on page 37.

Tax Deduction at Source

Payment of interest will be subject to deduction of tax at source as per prevailing tax laws and as specified under

‘Common Terms’ appearing later in the Offer Document.

IDBI MONEY MULTIPLIER BOND (2004 B)

IDBI MONEY MULTIPLIER BOND (2004 B) is issued at a discounted price of Rs.5,000. After the maturity period

of 6 years 11 months in case of Option A and 11 years 5 months in case of Option B, the Bonds will be redeemedat their face value of Rs.7,500 and Rs.10,000 respectively.

KEY TERMS

Discounted Price/ Issue Price

Each Bond under Option A and Option B has a discounted price of Rs. 5,000.

Minimum Investment

The minimum investment is one Bond i.e. Rs. 5,000 and thereafter the investors can apply in multiples thereof.

Maturity

The Bonds will mature on the expiry of 6 years 11 months under Option A and 11 years 5 months under Option B

from the deemed date of allotment. The deemed date of allotment will be March 5, 2004. The Bonds will, therefore,mature on February 5, 2011 and August 5, 2015 under Option A and Option B respectively.

Maturity Value

On maturity, investors can redeem the Bond at their face value of Rs.7,500 and Rs.10,000 for Option A and OptionB respectively.

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Yield To Maturity

The annualized yield to maturity in case of Option A (on redemption after 6 year 11 months) is 6.03% and forOption B (on redemption after 11 year 5 months) is 6.25%.

Early Encashment Option / Put Option

Investors will not have the put option to encash the Money Multiplier Bond (2004 B) prior to the date of maturity.

Call OptionIDBI will not have Call option to redeem the Money Multiplier Bond (2004 B) prior to the date of maturity.

Tax Treatment

For tax benefits, please refer ‘Tax Benefits’ later in the Offer Document.

Tax Deducted at source

Tax will be deducted at source as per the prevailing tax laws and as specified under ‘Common Terms’ appearinglater in the Offer Document.

IDBI FLOATING RATE BOND (2004 B)

Bondholders in IDBI FLOATING RATE BOND (2004 B) shall receive interest semi-annually at a spread of 100 bps(i.e. 1%) over the Benchmark Rate i.e. 5 year G-Sec rate. The interest will be reset semi-annually. The process of

computation of benchmark is explained in this section.

KEY TERMS

Face ValueEach bond has a face value of Rs.5,000/-.

Minimum Investment

The minimum investment is two Bonds i.e. Rs.10,000 and thereafter the investors can apply in multiples of one

Bond i.e. Rs.5,000.

Interest Rate

Investors will receive interest semi-annually at 100 bps over the Benchmark Rate.

Benchmark Rate

Interest Rate on the bonds will be linked to the 5 year Government of India Securities with 5 years residual maturity.The Benchmark Rate will be fixed on the basis of a simple average of the semi-annual yield (simple average of bid

and offer) on the aforesaid security for the 6 business days preceeding the Interest Reset Date i.e. March 5 and

September 5 every year. The benchmark 5 year rate will be the 5 year G-Sec (semi-annual) rate put out by the

Reuters at 12.00 hrs IST on its page 0#INBMK=. If the above mentioned screen has either been renamed or if theidentical information is being presented by Reuters on a different screen (the Replacement screen), the rate will bedetermined by utilising the methodology set out about but with reference to the Replacement screen. If such a rate

does not appear on the Reuter screen 0#INBMK= without a replacement being provided, the rate for the reset will be

the 5 year Benchmark Rate appearing on Reuters page INCMT. If none of the aforesaid benchmark rates are availablefor any reason whatsoever, then the benchmark rate will be decided by IDBI in mutual consultation with the Trustees.

Interest Reset Date

Interest will be reset semi-annually on March 5 and September 5 every year. This rate will be applicable for the next half

year period starting from the said date. The rate applicable for the first half year will be determined as on March 5, 2004

and will be applicable for the half year period from March 5, 2004 to September 4, 2004 and will be payable onSeptember 5, 2004.

Interest Payment Date

Interest will be paid semi-annually on March 5 and September 5 every year throughout the tenor of the bonds. Thefirst payment of interest for the period from the deemed date of allotment up to September 4, 2004 will be due and

payable on September 5, 2004.

Maturity

The Bonds will mature on the expiry of 5 years from the deemed date of allotment i.e. March 5, 2004. The Bonds will,

therefore, mature on March 5, 2009. On maturity, the Bonds will be redeemed at face value (Rs.5,000).

Put Option/ Call Option

There is no put option / call option for the IDBI Floating Rate Bond (2004 B)

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Tax Benefits

For tax benefits, please see under ‘Tax Benefits’ later in this document.

Tax Deduction at Source

Payment of interest will be subject to deduction of tax at source as per prevailing tax laws and as specified under

Common Terms appearing later in the document.

IDBI REGULAR INCOME BOND (2004 B)

Investors in IDBI REGULAR INCOME BOND (2004 B) will receive interest @ 6.00% p.a. payable annually (OptionA) or @ 5.80% p.a. payable quarterly (Option B) for a period of 7 years or interest @ 6.20% p.a. payable annually(Option C) or @ 6.00% p.a. payable quarterly (Option D) for a period of 10 years.

KEY TERMS

Face Value

Each Bond has a face value of Rs. 5,000.

Minimum Investment

Minimum investment shall be Rs.10,000 (2 Bonds), Rs.30,000 (6 Bonds), Rs.10,000 (2 Bonds) and Rs.30,000 (6Bonds) for Option A, Option B, Option C and Option D respectively and thereafter in multiples of one Bond i.e.Rs.5,000.

Interest Rate

Investors have the option to receive interest payments either annually (Option A and C) or quarterly (Option B andD) at the rates mentioned in the table as follows.


Payment of Interest Annual Quarterly Annual Quarterly

Interest Rate 6.00% p.a. 5.80% p.a. 6.20% p.a. 6.00% p.a.

Tenor 7 years 7 years 10 years 10 years


Interest Payment Dates

Option A: Annual Interest Option (Tenor 7 years)

Interest will be due and payable on March 5 every year. The first payment of interest for the period from the deemeddate of allotment up to March 4, 2005 will be be due and payable on March 5, 2005.

Option B: Quarterly Interest Option (Tenor 7 years)

Interest will be due and payable on June 5, September 5, December 5 and March 5 every year. The first paymentof interest for the period from deemed date of allotment up to June 4, 2004 will be due and payable onJune 5, 2004.

Option C: Annual Interest Option (Tenor 10 years)

Interest will be due and payable on March 5 every year. The first payment of interest for the period from the deemeddate of allotment up to March 4, 2005 will be be due and payable on March 5, 2005.

Option D : Quarterly Interest Option (Tenor 10 years)

Interest will be due and payable on June 5, September 5, December 5 and March 5 every year. The first paymentof interest for the period from deemed date of allotment up to June 4, 2004 will be due and payable onJune 5, 2004.

Maturity

The Bonds with Option A and Option B will mature on the expiry of 7 years from the deemed date of allotment andthe Bonds with Option C and Option D will mature on the expiry of 10 years from the deemed date of allotment.

As the deemed date of allotment will be March 5, 2004 therefore Option A and Option B of the IDBI Regular IncomeBonds (2004 B) will mature on March 5, 2011 and Option C and Option D will mature on March 5, 2014. On maturity,

the Bonds will be redeemed at face value (Rs.5000).

Put Option

There is no early encashment/put option for investors in any of the options of IDBI Regular Income Bond (2004 B).

Call Option

IDBI will not have Call option to redeem the Regular Income Bond (2004 B) prior to the date of maturity.

Tax Treatment / Tax Deducted at source

For tax benefits/ TDS please refer ‘Tax Benefits’ later in the Offer Document.

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COMMON TERMS

Terms of Payment

The full amount of issue price of the Bonds applied for should be paid along with the application.

Interest on Application money

Successful applicants will be paid interest on their application money @ 3.50% p.a. from the third day from the dateof deposit of their application upto the deemed date of allotment. Interest on application money will be sent to theinvestor by way of a warrant and will be despatched along with the bond certificate. However in case of RegularIncome Bond, Floating Rate Bond and Option A & B of Infrastructure (Tax Saving) Bond interest on applicationmoney upto Rs.100 will be sent alongwith the first interest cheque.

Investment holding and Market Lot

Investment in the bonds may be held either in “Physical form” or in “Demat form”. The market lot will be one bond.

Denomination of Bond Certificates (Physical form)

Investors may opt for certificates in market lot or consolidated certificate by indicating in the application form. If“Consolidated Certificate” option is chosen, one consolidated Bond Certificate will be issued for each option/bondfor the total number of bonds allotted. Investors may later ask for split of the certificate into market lots at any time.This will be done free of cost once. If “Market Lots” option is chosen, separate Bond Certificate will be issued foreach bond allotted. If no option is indicated, a Consolidated Certificate will be issued. Those investors who wish

to trade on the stock exchanges are advised to opt for certificates in “Market Lots”. Others may opt for “ConsolidatedCertificate” for ease and convenience.

Depository Arrangement

IDBI has entered into depository arrangements with National Securities Depository Ltd. (NSDL) and CentralDepository Services Ltd. (CDSL). Investors will have the option to hold the security in dematerialised form and dealwith the same as per the provisions of Depositories Act, 1996 (as amended from time to time).

IDBI has signed two tripartite agreements in this connection viz.

1) Tripartite Agreement dated September 18, 2000 between IDBI, National Securities Depository Ltd. (NSDL)and the Registrar to Issue, Datamatics Financial Software and Services Ltd.

2) Tripartite Agreement dated November 3, 2000 between IDBI, Central Depository Services Ltd. (CDSL) andthe Registrar to Issue, Datamatics Financial Software and Services Ltd.

Procedure for opting for demat facility

1. Investor(s) should have / open a Beneficiary Account with any Depository Participant of NSDL or CDSL.2. Responsibility for correctness of investor’s age and other details given in the Application Form vis-à-vis

those with the investor’s Depository Participant would rest with the investors. Investors should ensure thatthe names of the sole/all the applicants and the order in which they appear in the application form shouldbe same as Registered with the Investor’s Depository Participant.

3. For opting for Bonds in dematerialized form, the beneficiary account number and depository participant’s IDshall be specified in the relevant columns of the Application Form.

4. If incomplete/incorrect Beneficiary Account details are given in the application form or where the investordoes not opt for the option to receive the Bonds in dematerialized form, the Bonds will be issued in the formof physical certificate(s).

5. The Bonds allotted to investor opting for dematerialized form, would be directly credited to the BeneficiaryAccount as given in the application form after verification. Allotment advice/refund order (if any) would besent directly to the applicant by the Registrars to the Issue but the confirmation of the credit of the bondsto the investor’s Depository Account will be provided to the investor by the investor’s Depository Participant.

6. Investors may choose to opt for part of the total number of bonds applied for in demat form and the balancein physical form. In case of partial allotment, bonds will first be allotted in demat form and the balance if anyin physical form. Separate applications in physical and dematerialised form would be considered as multipleapplications and are liable to be rejected at the sole discretion of IDBI.

7. Interest or other benefits with respect to the bonds held in dematerialised form would be paid to those

bondholders whose names appear on the list of beneficial owners given by the depositories to IDBI as on

the Record Date. In case, the beneficial owner is not identified by the depository on the Record Date dueto any reason whatsoever, IDBI shall keep in abeyance the payment of interest or other benefits, till such

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time the beneficial owner is identified by the depository and intimated to IDBI. On receiving such intimation,IDBI shall pay the interest or other benefits to the beneficiaries identified, within a period of 15 days from

the date of receiving such intimation.

8. Investors may please note that the bonds in demat form can be traded only on the stock exchanges havingelectronic connectivity with NSDL or CDSL.

Electronic Clearing Service for Payment of Interest

Reserve Bank of India has introduced the concept of Electronic Clearing Service (ECS) through the clearing-houseto obviate the need for issuing and handling paper instruments and thereby facilitate improved customer service.

This facility would be available in cities where RBI provides such facility.

As per the guidelines issued by RBI in this regard, the investor is required to give his mandate for ECS with all thedetails. This will help IDBI to credit the interest amount to investor’s account with the concerned bank at the earliest.

The investors will also have the convenience of direct credit to their bank account without the need to receiveinterest warrants by post and deposit the same in their bank accounts. The bank branch will credit the investor’s

account and indicate the credit entry with ECS in the passbook/statement of account.

Investors who have not opted for ECS will be sent interest warrants by post.

Listing

Applications have been made to The Stock Exchange, Mumbai and the National Stock Exchange of India Ltd. for

permission to deal in and for official quotation of the Bonds. The Stock Exchange, Mumbai and the National StockExchange have given their in-principle approvals vide their letters dated October 29, 2003 and November 3, 2003

respectively. IDBI shall complete all the formalities relating to the listing of the bonds within seventy days from the dateof closure of each tranche/issue. If the permissions to deal in and for an official quotation of bonds are not granted by

any of the Stock Exchanges, IDBI shall forthwith repay, without interest, all such moneys received from the applicants

in pursuance of this Offer Document. If such money is not repaid within eight days after the Bank becomes liable torepay it (i.e. from the date of refusal or within 70 days from the date of closing of the subscription list, whichever is

earlier), then the Bank will be liable to repay the money, with interest, as prescribed under applicable regulations.

Nature of Instruments

The Bonds will be unsecured and issued in the form of promissory notes. The Bonds shall rank pari passu, inter se,and subject to any obligations preferred by mandatory provisions of the law prevailing from time to time shall also, as

regards repayment of principal and payment of interest, rank pari passu with all other unsecured unsubordinatedborrowings of IDBI. These Bonds will rank superior to all the existing and future unsecured subordinated borrowings

of IDBI.Tax Deduction at Source

As per the prevailing income tax laws [as applicable for FY 2003-04] :

(a) In case of payment of interest to a bondholder who is an individual, tax is required to be deducted @10%

(plus surcharge as applicable) where the interest payment in the aggregate, during the financial yearexceeds Rs.2,500. However tax will not be deducted where a declaration, in duplicate, in the prescribed

Form is submitted in accordance with the Income Tax Rules and the aggregate amount payable does notexceed the maximum amount not liable to tax.

(b) In the case of payment of interest to entities other than individuals, tax is required to be deducted at source

@ 10% (plus surcharge at applicable rate) except in the case of domestic company where the tax is to bededucted @ 20% (plus surcharge at applicable rate). Investors eligible for exemption from deductions of tax

at source or eligible for a lower rate of taxation may submit declaration in the prescribed Form or a certificate

signed by the Assessing Officer to that effect.

Such a declaration for the financial year 2003-04 may be attached to the Application Form. For subsequent years,the investor will have to submit the prescribed Form every financial year (April-March) to the Registrar and Transfer

Agent (ISIL) separately, atleast two months prior to the date for payment of interest or despatch of post dated interestwarrants as the case may be, failing which the tax will be deducted at source as per prevailing tax laws. Investors

may approach any of IDBI’s offices for copies of prescribed Form. The TDS certificate if applicable is mailed to theinvestors by the Registrars. Investors desirous of receiving one consolidated certificate of Tax Deduction at Source

in case of IDBI Floating Rate Bond (2004 B) and IDBI Regular Income Bond (2004 B) Option B & Option D, mayindicate their request for the same at the appropriate place in the application form.

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within a period of six months from the closure of each of the public issue which was subsequentlyfollowed up with a Trustee Agreement.

l IDBI confirms that the NDSCR ratio covenanted to be maintained in the said agreement has been

maintained as on the date of filing the present document with the Stock Exchange as also in past threeyears.

lIf IDBI fails to meet the minimum required criteria regarding DER and NDSCR, no dividend shall bedeclared for the relevant year except with the approval of the Trustees and the rate of dividend shall

not exceed 10%.

Rights of Bondholder(s)

a) The Bond(s) shall not, except as provided in the Act, confer upon the holder(s) thereof any rights or

privileges available to the members of the IDBI including the right to receive notices or Annual Reports of,or to attend and/or vote, at the General Meeting of the IDBI. However, if any resolution affecting the rights

attached to the Bond(s) is to be placed before the shareholders, the said resolution will be first placed beforethe concerned registered Bondholder(s) for their consideration. Holder(s) of the Bond(s) shall be entitled

to a copy of the Annual Report on a specific request made to the IDBI.

b) The registered Bondholder or in the case of joint-holders, the one whose name stands first in the registerof Bondholder(s) shall be entitled to vote in respect of such Bond(s), resolution(s), either in person or by

proxy, at any meeting of the concerned Bondholder(s) and every such holder shall be entitled to one voteon a show of hands. On a poll, his/her voting rights shall be in proportion to the outstanding nominal value

of Bond(s) held by him/her on every resolution placed before such meeting of the Bondholder(s). The

quorum for such meetings shall be at least five Bondholder(s) present in person.

c) The Bond(s) are subject to the provisions of the IDBI Act 1964, the terms of this Offer Document and

Application Form. Over and above such terms and conditions, the Bond(s) shall also be subject to the other

terms and conditions as may be incorporated in the Trustee Agreement/ Letters of Allotment /Bond Certificates,guidelines, notifications and regulations relating to the issue of capital and listing of securities issued from

time to time by the Government of India and/or other authorities and other documents that may be executedin respect of the Bond(s).

d) The Bonds will be subject to provisions of this Offer Document, application form, IDBI Act 1964, Industrial

Development Bank of India (Issue and Management of Bonds) Regulations 1972, Industrial DevelopmentBank of India General Regulations 1994, IDBI Bonds and Deposits (Nomination) Regulations 1997 and rules

and regulations of Govt. of India, SEBI, RBI and concerned Stock Exchanges as prevailing and to the extent

applicable, will apply in relation to matters not otherwise provided for in terms of the issue of the Bond(s).

e) A register of Bondholder(s) will be maintained in accordance with the aforesaid provisions of the Act and

all interest and principal sums becoming due and payable in respect of the Bond(s) will be paid to theregistered holder thereof for the time-being or in the case of joint-holders to the person whose name stands

first.

f) The bondholders will be entitled to their bonds free from equities and/or cross claims by IDBI against theoriginal or any intermediate holders thereof.

g) Bonds can be rolled over only with the positive consent of the bondholders.

Role, Power and Obligations of Trustees

The major clauses relating to the general rights, powers and discretions of the Trustees shall be as under. Theseare in addition to other powers conferred on the Trustees and provisions for their protection.

a) The trustee shall not be bound to give notice to any person of the execution of the Trustee Agreement orto see to the performance or observance of any of the obligations hereby imposed on the IDBI or in anyway to interfere with the conduct of the IDBI’s business unless and until the rights under the Bonds shall

have become enforceable and the Trustees shall have determined to enforce the same.

b) Save as otherwise expressly provided in the Agreement, the Trustees shall, as regards all trusts, powers,authorities and discretions, have absolute and uncontrolled discretion as to the exercise thereof and to the

mode and time of exercise thereof and in the absence of fraud shall not be responsible for any loss, costs,

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charges, expenses or inconvenience that may result from the exercise or non-exercise thereof and inparticular they shall not be bound to act at the request or direction of the Bondholders under any provisions

of these presents unless sufficient monies shall have been provided or provision to the satisfaction of theTrustees made for providing the same and the Trustees are indemnified to their satisfaction against all

further costs, charges, expenses and liability which may be incurred in complying with such request or

direction;

c) With a view to facilitate any dealing under any provision of these presents the Trustees shall have full power

to consent (where such consent is required) to a specified transaction or class of transactions conditionally;

d) The Trustees shall not be responsible for the monies paid by applicants for the Bonds;

e) The Trustees shall not be responsible for acting upon any resolution purporting to have been passed at anymeeting of the Bondholders in respect whereof minutes have been made and signed even though it may

subsequently be found that there was some defect in the constitution of the meeting or the passing of theresolution or that for any reason the resolution was not valid or binding upon the Bondholders;

f) The Trustees shall have full power to determine all questions and doubts arising in relation to any of the

provisions of the trustee agreement and every such determination bonafide made (whether or not the sameshall relate wholly or partially to the acts or proceedings of the Trustees) shall be conclusive and binding

upon all persons interested hereunder;

g) The Trustees shall not be liable for anything whatsoever except a breach of trust knowingly and intentionallycommitted by the Trustees;

h) The Trustees shall not be liable for any default, omission or delay in performing or exercising any of the

powers or trusts under the trustee agreement expressed or contained or any of them or in enforcing thecovenants or in giving notice to any person or persons of the execution hereof or in taking any other steps

which may be necessary, expedient or desirable for any loss or injury which may be occasioned by reasonthereof unless the Trustees shall have been previously requested by notice in writing to perform, exercise

or do any of such steps as aforesaid by the holders representing not less than three fourths of the nominal

amount of the Bonds for the time being outstanding or by a Special Resolution duly passed at a meetingof the Bondholders and the Trustees shall not be bound to perform, exercise or do any such acts, powers

or things or to take any such steps unless and until sufficient moneys shall have been provided or provisionto the satisfaction of the Trustees made for providing the same by or on behalf of the Bondholders or some

of them in order to provide for any costs, charges and expenses which the Trustees may incur or may have

to pay in connection with the same and the Trustees are indemnified to their satisfaction against all further

costs, charges, expenses and liabilities which may be incurred in complying with such request PROVIDEDNEVERTHELESS that nothing contained in this clause shall exempt the Trustees from or indemnify themagainst any liability for breach of trust nor any liability which by virtue of any rule or law would otherwise

attach to them in respect of any negligence, default or breach of trust which they may be guilty of in relationto their duties under the Trustee Agreement.

RETIREMENT AND REMOVAL OF TRUSTEES

The trustees shall not retire without other trustee being appointed.

a) The Trustees hereof may retire at any time after giving at least one month’s previous notice in writing to theIDBI in that behalf.

b) The Trustees hereof may be removed by the Bondholders by a Special Resolution duly passed at the

meeting of the Bondholders. The IDBI shall appoint such person or persons as may be nominated by suchResolution as new Trustee or Trustees hereof.

c) For the purposes aforesaid, forthwith upon receipt of the notice of retirement from the Trustees for the timebeing hereof or on the occurrence of the vacancy in the office of the Trustee or Trustees hereof, the IDBIshall convene a meeting of the Bondholders.

Loan Facility against Pledge of Bonds

Investors may avail loan against these bonds from any of the scheduled banks. IDBI will note the bank’s lien on

any of the bonds against which they have extended the loan facility in their normal course of business.

Market Making

IDBI may consider making arrangements for market making in order to provide liquidity.

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e) If the proportionate allotment to an applicant works out to a number that is not a multiple of bonds, theapplicant would be allotted bonds by rounding off to the nearest multiple of one.

f) If the number of bonds allocated on a proportionate basis to any category is more than the bonds allotted

to the applicants in that category the balance available bonds for allotment shall be first adjusted againstany category, where the allocated bonds are not sufficient for proportionate allotment to the successful

applicants in that category. The balance bonds, if any, remaining after such adjustments will be added tothat category comprising applicants applying for the minimum number of bonds.

g) Investors may note that in case of investors applying for more than 1 type of bond and applying for more

than 1 bond, if the number of bonds allotted is less than the number of bonds applied for, the number ofbonds allotted under each type of bond will be proportionate to the number of bonds applied under each

type of bond.

Despatch of Bond Certificates and Refund Orders

IDBI shall ensure despatch of refund orders of value over Rs.1,500/- and bond certificates by Registered Post/Speed

Post only and adequate funds for the purpose shall be made available to the Registrars by the issuer company. Refund

orders of less than Rs.1,500/- shall be mailed under Certificate of Posting at the applicant’s sole risk. Despatch of bondcertificates shall be completed within 10 weeks of the closure of the issue and IDBI shall be liable to pay penal interest

as per applicable regulations for the delay period beyond 10 weeks.

Despatch of Interest Warrant

Interest warrants of value over Rs.5,000/- will be despatched by Registered Post/Speed Post. Interest warrants ofvalue upto Rs.5,000/- shall be mailed under Certificate of Posting at the applicant’s sole risk.

Interest in case of Delay on Allotment/Despatch

IDBI agrees that

a) as far as possible allotment of securities offered to the public shall be made within 30 days of the closureof the public issue;

b) interest shall be paid @ 15% p.a. if the allotment has not been made and/or the refund orders have not

been despatched to the investors within 30 days from the date of closure of the Issue, for the delay beyond30 days.

Rejection of Applications

IDBI reserves the right to accept or reject any application in whole or in part and in either case without assigningany reason therefor. In the event the Bonds applied for are not allotted in full/part, the excess application money,

without interest, in respect of any application will be refunded. Any application for bonds, which is not complete inall respects, may be rejected. The various reasons for rejections could be, but not limited to following: incomplete

or illegible applications, number of bonds applied for less than minimum required number, no information about PAN/

GIR in case of applications of value over Rs.50,000, applications accompanied by cash of more than Rs. 20,000.Applicants are also advised to refer para on ‘General Instructions’ to understand various other reasons for rejection

of applications.

Mode of Refunds

In case of rejection of applications or non-allotment of the Bonds, refunds will be made by cheque or by pay orderdrawn on any Bank payable at centres where the applications were received.

TRANSFER AND REDEMPTION

Transferability of Bonds

Physical CertificatesThe Bonds in physical form being negotiable instruments are transferable by endorsement and delivery by thetransferor. Bondholders should, therefore, note that Bonds are valuable documents and should be kept safely.

The endorsement by the transferor shall be made on the Bond by affixing his signature at the place indicatedthereon. The transferee shall also affix his signature on the Bond at the appropriate place. All endorsements must

be clear. Vernacular endorsement must be translated into English immediately below the endorsement.

At present, no stamp duty is payable on transfer of the Bonds by endorsement and delivery.

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Register of Bondholders

A Register of bondholders containing necessary particulars will be maintained by IDBI, at such place(s) as it maydecide.

Issue of Duplicate Bond Certificates

Industrial Development Bank of India (Issue and Management of Bonds) Regulations, 1972, govern the issue of

duplicate bonds. In terms of the said Regulations, IDBI will publish on behalf of the applicants, details of loss, theftor destruction (mutilation or defacement) of a Bond in the form of a promissory note in a leading newspaper of thearea. Upon satisfying itself about the loss, theft, destruction or defacement of a Bond in the form of a promissory

note, IDBI may issue a duplicate Bond in the form of a promissory note on applicant’s furnishing an indemnity bond

with one or more sureties. No surety is required if the denomination of the bond does not exceed Rs. 50,000. IDBIshall not incur any liability for issuing such Bonds in good faith under this Regulation. IDBI shall have the right to

claim reimbursement of expenses incurred in connection with the issue of duplicate certificate. No fees shall becharged for the issue of Bond certificates in respect of mutilated or defaced certificates or in case of bond certificates

where the cages for recording the transfer of Bond are fully utilised.

Investors are advised to carefully read the relevant provisions of the IDBI (Issue and Management of Bonds)Regulations, 1972 reproduced in Part C of this Offer Document.

WHO CAN APPLY

Applications can be made by:

a) Resident Indian Individuals in their own names or in the name of their minor children as natural/legal

guardians. Individuals can apply in single or joint names (but not exceeding three).

b) Hindu Undivided Families through the Karta of the Hindu Undivided Family. (Applications by HUF would begiven the same treatment as that to applications by individuals).

c) Provident Funds, Superannuation Funds and Gratuity Funds

d) Companies, Body Corporates and Societies registered under the applicable laws in India and authorised toinvest in the Bonds

e) Trusts which are authorised to invest in the Bonds

f) Public Financial Institutions, Statutory Corporations, Commercial Banks, Co-operative Banks and Regional

Rural Banks.

g) Mutual Funds and Insurance companies

Declaration of Bonds as Public Securities

1) The Bonds have been declared as Public Securities as follows:

a) The Endowments Department of Andhra Pradesh has approved investment of surplus funds of theEndowment Institutions/ Trusts in the Bonds of IDBI vide notification No. G.O. Rt No. 292 dated

23.02.1996.

b) Government of Madhya Pradesh has declared Bonds issued by IDBI as public securities under Section

13 of the Madhya Pradesh Trusts Act, 1951.

c) Government of India, Ministry of Surface Transport has declared the Bonds as ‘securities’ under Section88(2) of the Major Port Trusts Act, 1963 vide notification no .PR-15018/14/96-PG dated 23.12.1997.

d) Government of Gujarat, Agriculture and Co-operation Department has permitted Co-operative Societies

to invest their surplus money in Flexibonds of IDBI under Section 71(1)(g) of Gujarat State Co-operativeSocieties Act, 1964 vide its notification-dated 19.12.1997 no. GHKH/67-97-SMB-2097-4249-CH.

2) Applications have been made by IDBI for declaration of these Bonds as Public Securities as follows:

a) To the Government of Maharashtra for declaration of these Bonds as public securities under Section2(12)(d) of the Bombay Public Trusts Act, 1950.

b) To the Government of Gujarat for declaration of these Bonds as public securities under Section 2(12)(d)of the Bombay Public Trusts Act, 1950.

c) To the Government of Rajasthan for declaration of these Bonds as public securities under u/s 2(10)(c)

of the Rajasthan Public Trusts Act, 1959.

Subject to declaration by the State Governments as above, Public Trusts and Co-operative Societies in the above

states will be eligible to invest in IDBI Bonds. In other States, public trusts may invest in the Bonds of IDBI subject

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to the relevant provisions of the respective trust deeds and applicable statutory provisions, if any, governing theirinvestments.

Declaration of Bonds as Public Securities by Government of India under the Indian Trusts Act, 1882

Government of India, Ministry of Finance, Department of Economic Affairs (Capital Market Division) vide notificationF.No. 6/3/CM/2003 dated November 25, 2003, has approved IDBI Flexibonds Series 2003-04, with aggregate value

not exceeding Rs.3000 crore, as Public Securities under section 20(f) of the Indian Trusts Act, 1882.Application by Provident Funds, Superannuation Funds and Gratuity Funds

The Government of India has, vide notification No.F-5(18)-ECB/2001 dated March 6, 2003 permitted Recognised

Provident Funds, Approved Superannuation Funds and Approved Gratuity Funds to invest upto 30% of their in-vestible moneys in the bonds and securities issued, inter alia, by a Public Financial Institution. In addition, 30% of the

investible moneys may be invested in any of the three categories specified in the notification. Recognised Provident

Funds and Approved Superannuation and Gratuity Funds can, therefore, subject to compliance of the terms and

conditions of their Trust Deeds, invest upto 60% of their investible monies in IDBI Bonds.

HOW TO APPLY

Availability of Offer Document and Application Forms

Copies of Offer Document and Application Forms may be obtained from the Head Office, Zonal Offices or the BranchOffices of IDBI, Lead Managers, Principal Marketing Co-ordinator, Co-Managers and Bankers to the Issue named

herein or from their branches as stated in the Application Form. Copies of Application Forms and Offer Documentmay also be obtained through members of recognised Stock Exchanges.

GENERAL INSTRUCTIONS

Investors are advised to comply with the following General Instructions:

1. Instructions for filling in Application Forms

a) Application for the Bonds must be in the prescribed form and completed in BLOCK LETTERS in English

as per the instructions contained therein.b) Thumb impressions and signatures other than in English, Hindi or any of the other languages specified

in the Eighth Schedule of the Constitution of India must be attested by a Magistrate or a Notary Public

or a Special Executive Magistrate under his/her official seal.c) Application Form Number (including the prefix) should be mentioned on the reverse of the cheque/draft.

Where applications without number are used, the number may be obtained at the time of deposit withthe Collection Centres.

d) A separate cheque/draft must accompany each application form.

2. If the applicant does not indicate the desired option clearly on the application form or if the option is notticked on the application form, then Option A of the respective Bonds shall be allotted to such an applicant

for the amount applied for, subject to the application being for an amount not less than the minimuminvestment amount required for the respective option. If bond type is not indicated in the application form

then IDBI Regular Income Bond Option A would be allotted to the investors. The decision of IDBI will be finalin this regard.

3. Applications under Power of Attorney

In the case of applications made under Powers of Attorney or by limited companies, corporate bodies, trustsetc a certified copy of the Power of Attorney and/or the relevant authority, as the case may be, alongwitha certified copy of the Memorandum and Article of Association and byelaws as the case may be must belodged separately at the office of the Registrars to the Issue, Datamatics Financial Software & Services Ltd,simultaneously with the submission of the Application Form, indicating the serial number of the Application

Form and the name of the bank and the branch or the IDBI Collection Centre where the application issubmitted.

4. PAN/GIR Number

Where application is for a total value of Rs. 50,000 or more, the applicant, or in the case of an applicationin joint names, each of the applicants, should mention his/her Permanent Account Number (PAN) allottedunder the Income Tax Act, 1961 or where the same has not been allotted, the GIR No. and the Income TaxCircle/Ward/District. In case neither the PAN nor the GIR No. has been allotted, or the Applicant is notassessed to income tax, the appropriate information should be mentioned in the space provided. ApplicationForms without this information will be considered incomplete and are liable to be rejected.

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5. Joint Applications in the case of Individuals

Applications may be made in single or joint names (not more than three). In the case of joint applications,all payments will be made out in favour of the first applicant. All communications will be addressed to theapplicant whose name appears first at the address stated in the Application Form.

6. Multiple Applications

An applicant should submit only one application (and not more than one) for the total number of Bondsrequired. Applications may be made in single or joint names (not more than three). Two or more applicationsin single or joint names will be deemed to be multiple applications, if the sole and/or first applicant is oneand the same. IDBI reserves the right to accept or reject in its absolute discretion all or any multipleapplications in conformity with relevant statutory guidelines. Separate applications for Bonds in demat andphysical mode shall be treated as multiple applications.

7. Bank Account Details

The applicant must fill in the relevant column in the application form giving particulars of Savings Bank/ Current Account number and name of the bank with whom such account is held, to enable the Registrarsto the Issue to print the said details in the refund order / interest warrant. This is in the interest of theapplicant for avoiding misuse of the refund order / interest warrant. Furnishing this information is mandatoryand applications not containing such details are liable to be rejected.

Investors desirous of holding the bonds in demat form may please refer to the paragraph on ‘DepositoryArrangement’ in this Offer Document.

PAYMENT INSTRUCTIONS(a) Payment may be made by way of cash (not exceeding Rs.20,000) or cheques/drafts drawn on any bank,

including a Co-operative Bank which is situated at and is a member or sub-member of the Bankers’ ClearingHouse located at the bank collection centre where the Application Form is submitted. Outstation cheques/ bank drafts or cheques/bank drafts drawn on a bank not participating in the clearing process will not beaccepted. Money orders/Postal orders will also not be accepted.

(b) All cheques/drafts must be made payable to “IDBI FLEXIBONDS” and crossed “A/C PAYEE ONLY”.

(c) Applications complete in all respects must be submitted at any of the bank branches designated for collectionof such applications mentioned in the application form.

The applicants are advised in their own interest to remit the money along with the Application Form bymeans of an account payee cheque or a bank draft. Charges for the bank draft are to be borne by theinvestor and should not be deducted from the amount payable on application.

SUBMISSION OF COMPLETED APPLICATION FORMS

Bankers to the Issue

Applications, duly completed and accompanied by cash/cheque/demand draft must be lodged before the closure of

the Issue with the Bankers to the Issue or their designated branches as mentioned in the Application Form.

Applications should not be sent to the Lead Managers, Co-Managers or Principal Marketing Co-ordinator.

IDBI Collection Centres

Applications, duly completed and accompanied by cheque/demand draft may also be lodged with the IDBI CollectionCentres as mentioned in the Application Form. The IDBI Collection Centres are not authorised to accept cash. They

will accept Applications accompanied by cheque or demand draft. Applications sent through post should reach IDBIbefore the issue closes for subscription. The envelope should be marked ‘IDBI Flexibonds-20 Application’.

Additional Collection Centres

Applications, duly completed and accompanied by cheque/demand draft may also be lodged with all branches of

IDBI Home Finance Ltd. and Stock Holding Corporation of India Ltd. (SHCIL) as mentioned in the Application Form.These Collection Centres are not authorised to accept cash and/or Applications sent through post.

Acknowledgements

No separate receipts will be issued for the application money. However, the Bankers to the Issue or their approved

collecting branches and the Collection Centres receiving the duly completed Application Form will acknowledgereceipt of the application by stamping and returning to the applicant the Acknowledgement slip at the bottom of each

Application Form.

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UNDERTAKING FROM THE ISSUER

IDBI hereby undertakes that

(a) The complaints in respect of the issue would be attended to expeditiously and satisfactorily.

(b) IDBI would get the instruments listed on time and would take necessary steps for the purpose.

(c) The requisite funds for despatch of refunds/certificates by Registered Post will be made available to the

Registrars

(d) IDBI shall co-operate with the rating agencies in providing true and adequate information.

INVESTOR RELATIONS AND GRIEVANCE REDRESSAL

Arrangements have been made to redress investor grievances expeditiously. All grievances related to the Issue

quoting the Application Number (including prefix), number of Bonds applied for, amount paid on application and

Bank and Branch / IDBI Collection Centre where the Application was submitted, may be addressed to the Registrarsat the following address.

Registrars to the Issue

Datamatics Financial Software & Services LtdPlot No A 16 & 17 MIDC, Part B Crosslane, Marol, Andheri (East), Mumbai - 400 093.

Tel : (022) 2837 5519 - 24; Fax : (022) 2835 0217; e-mail : [email protected] and Transfer Agent

Investor Services of India Ltd.IDBI Building, Plot No.39-41Sector 11, CBD Belapur, Navi Mumbai - 400 614

Tel. : (022) 27579645 Fax : (022) 27579650 e-mail : [email protected]

Applicants may also get in touch with the Investor Relations Department of IDBI for assistance, at the followingaddress:

Deputy General ManagerDomestic Resources Department (Customer Relations Management Cell)

Industrial Development Bank of India

7th Floor, IDBI Tower, WTC Complex, Cuffe Parade, Mumbai - 400005Tel : (022) 22189117 / 22151051, Fax : (022) 22180930 e-mail : [email protected]

ISSUE EXPENSES

The expenses of the Issue payable by IDBI including brokerage, fees to the Issue Management team and the

Auditors, fees to the Credit Rating agencies, fees and reimbursement of expenses to the Registrars and Bankersto the Issue, printing and distribution expenses, Issue advertisement expenses, Listing fees and other expenses areestimated to be around Rs.20 crore and will be met out of the proceeds of the Issue.

The terms and conditions of appointment of the Issue Management Team and Registrars to the Issue are as set

out in their letters of appointment / MoU, copies of which are available for inspection.

Brokerage

IDBI will pay brokerage to all the members of recognised Stock Exchanges, Bankers to the Issue and agents of IDBI

on applications bearing their stamp in the Broker/Agent column in the following manner.

A) For IDBI Infrastructure (Tax Saving) Bond (2004 B) :

1) For individuals and HUFs, investing upto Rs.1 crore, Brokerage will be

l For investment in Option A & C : @ 0.70% of amount allotted

l

For investment in Option B & D : @ 0.80% of amount allotted.In addition to above Rs.20/- per application (if allotted) would be paid on application amounting to Rs.20,000

and above on single application form.

2) For individuals and HUFs, investing above Rs.1 crore, brokerage will be paid @ 0.25% of amount

allotted.

3) For other investors, brokerage will be paid @ 0.25% of amount allotted.

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2. To Other Eligible Institutions

2.1. Investment in bonds by charitable/religious trusts will qualify as eligible investments under Section 11(5) of

the IT Act.

2.2. A mutual fund registered under the SEBI Act or regulations made thereunder or such other mutual fund setup by a public sector bank or a public financial institution or authorized by Reserve Bank of India and notified

by the Central Government will, subject to the provisions of Chapter XII-E be exempt from income tax onall its income, including income from investments in bonds under the provisions of Section 10(23D) of the

IT Act.

2.3. Section 10(25) of the IT Act, inter alia, exempts from tax, any income received by a Recognized ProvidentFund, an approved Superannuation Fund or an approved Gratuity Fund. As per the pattern of investment

laid down in Rule 67 [as amended by Income Tax (Seventh Amendment) Rules, 1997] of the Income Tax

Rules, Recognized Provident Funds, Approved Superannuation Funds and Approved Gratuity Funds caninvest up to 40% of the “investible money” in bonds and securities issued by a Public Financial Institution

or a public sector company. They can also invest an additional 20% of the “investible money” in any of thethree permitted categories mentioned in the Rules, including the category of bonds / securities of a public

financial institution. Therefore in the aggregate 60% of the “ investible money “ can be invested in the bonds

/ securities of the public financial institution. The subscription to the bonds being issued under this OfferDocument, within the permissible limits, would satisfy the requirements of the said Rule.

3. Tax provisions relating to various Bonds :3.1. IDBI Infrastructure (Tax Saving) Bond

Interest payable on these bonds with Annual Interest Option in any financial year will be taxable in that year.

In case of Cumulative Options, the interest income/capital gains would be calculated as given under IDBI

Money Multiplier Bonds.

Tax Rebate under Section 88(2)(xvi)

CBDT has approved Infrastructure (Tax Saving) Bond forming part of the present Issue for the purpose of

Section 88(2)(xvi) of the Income Tax Act, 1961 vide their letter F.No.178/40/2003-ITA-I dated September 12,2003. Therefore, investment in the Infrastructure (Tax Saving) Bond will be eligible for rebate under Section88 within the limits mentioned in that Section provided that the bonds are not “sold or otherwise transferred”

at any time within a period of three years from the date of investment.

An assessee being an Individual or HUF may out of his / its taxable income invest up to Rs.1,00,000 in theseBonds along with other eligible modes of investments specified in Section 88 and secure a tax rebate as

given in the following table.

(a) Income {before deduction u/s 16 (i.e. standard deduction)and salary income being 90% of such income} upto Rs. 1,00,000/- 30% of the qualifying amount.

(b) For gross total income upto Rs.1,50,000/- 20% of the qualifying amount.

(c) Gross Total Income above Rs.1,50,000/- below Rs.5,00,000/- 15% of the qualifying amount.

(d) Gross Total Income above Rs.5,00,000/- Nil

Rebate under section 88 is available provided the bonds are held for a minimum period of 3 years. Bondholdersintending to pledge the bonds as a security for availing loans, are advised to consult their tax advisors, as

in terms of section 88(7A) of the Act, such pledge of the bonds could be construed as a sale or transfer,resulting in non availability of the benefit under section 88.

3.2. IDBI Money Multiplier Bond

Small non-corporate investors investing upto an aggregate face value of Rs.1 lakh

CBDT has clarified the position regarding Deep Discount Bonds for small non-corporate investors investingupto an aggregate face value of Rs.1 lakh, by its letters dated March 12 and May 27, 1996 as follows:

“ It is clarified that the difference between the issue price and the redemption price of Deep Discount Bonds

will be treated as interest income assessable under the IT Act. On transfer of bonds before maturity, thedifference between the sale consideration and the issue price will be treated as Capital Gains/Loss, if the

assessee purchased them by way of investment. However, in the case of an assessee who deals inpurchase and sale of bonds, securities, etc. the profit or loss shall be treated as trading profit or loss.”

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Board of Directors

The present composition of Board is as follows :

Name Tenure Age Qualification Other Directorships/ Membership

1. Shri M. Damodaran As may be 56 Graduate in Administrator Chairman and Managing decided by Economics Administrator of the Specified

Director GOI (Rank holder) Undertaking of the UTIIndustrial Development University of Chairman & Managing Director

Bank of India, Madras UTI AMC Pvt. Ltd.

Cuffe Parade, Graduate in Law Chairman

Mumbai 400 005 (First Division) The India Infrastructure Fund Ltd

University of UTIIAS (Maurit ius) Ltd.,Delhi UTI - Investment Advisory

Services Ltd.

The India Media, Internet &Communication Fund Ltd.

(IMIC Fund)UTI - Investor Services Ltd.

UTI - Securities Ltd.India Fund

Infrastructure Leasing &

Financial Services Ltd.Chairman of Governing

Council - Indian Instituteof Capital Markets

Director

National Stock Exchange ofIndia Ltd.

The India IT Fund Ltd.Indian Airlines Ltd.

Export Import Bank of India

India Growth FundIAL Airport Services Ltd.

Infrastructure DevelopmentFinance Co. Ltd.

National Securities Depository Ltd.IDBI Bank Ltd.

IDBI Home Finance Ltd.

Asset Reconstruction Company(India) Ltd.

2. Shri Lakshmi Chand As may be 58 Graduate (English) Director

Secretary, Ministry of decided by Post Graduate Exim BankCommerce & Industry, GOI (Economics)

Department of IndustrialPolicy & Promotion,

Government of India,

Udyog Bhavan,New Delhi-110011

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c) During the period April 1, 2002 – March 31, 2003

Name of Director Change Date of Change Reason

Shri S. K. Purkayastha Ceased 19th July, 2002 Relinquished charge as Govt. nominee

Shri D.C. Gupta Appointed 19th July, 2002 Appointed vice Shri. S. K. Purkayastha

Shri R.V.Gupta Appointed 3rd August, 2002 Elected by share-holders at AGM

Dr. J.J. Irani Appointed 3rd August, 2002 Elected by share-holders at AGM

Shri M.G. Bhide Appointed 3rd August, 2002 Elected by share-holders at AGM

Shri T.M. Nagarajan Retired 30th September, 2002 Retired as Whole-time Director(Deputy Managing Director)

Shri D.C. Gupta Ceased 31st October, 2002 Relinquished charge as Govt. nominee

Smt. Vineeta Rai Appointed 31st October, 2002 Appointed vice Shri D.C. Gupta

d) During the period April 1, 2003 – January 8, 2004

Dr. J. J. Irani Resigned 20th June, 2003 Resigned as Director

Shri V. Govindarajan Ceased 2nd July, 2003 Relinquished charge as Govt. nominee

Shri Rajeeva Ratna Shah Appointed 2nd July, 2003 Appointed vice Shri. V. Govindarajan

Smt. Vineeta Rai Ceased 10th July, 2003 Relinquished charge as Govt. nominee

Shri N.S. Sisodia Appointed 10th July, 2003 Appointed vice Smt. Vineeta Rai

Shri H.L. Zutshi Appointed 23rd August, 2003 Elected by Share-holders at AGM

Shri P. P. Vora Ceased 30th September, 2003 Expiry of term of office

Shri M. Damodaran Appointed 1st October, 2003 Appointed as Chairman & Managing Director

Shri Rajeeva Ratna Shah Ceased 27th November, 2003 Relinquished charge as Govt. nominee

Shri Lakshmi Chand Appointed 27th November, 2003 Appointed vice Shri Rajeeva Ratna Shah

MANAGEMENT

Chairman and Managing Director

Shri M. Damodaran

Principal Executive Officers

Name & Age Date of Qualifications Details of Work SharesDesignation (yrs) joining Previous employment Experience held

IDBI Total in inIDBI IDBI

Shri J.N. 58 Dec. 3, B.Tech Production In-Charge, 35 y 29 y NILGodbole, 1974 (Chem. Engg.) Narmada Valley 4 m 1 mExecutive Director (Hons), Chemical Industries

A M I I E . Pvt. Ltd.

Shri A.K. 57 Apr.24, B.Tech.(Civil) Asst. Executive 35 y 31 y 320Doda, 1972 (Hons), CAIIB Engineer, Central Water 1 m 8 mExecutive Director & Power Commission

Shri R. 56 Sep.29, B.E. (Mech), Asst. Superintendent, 33 y 25 y NILJayaraman Iyer, 1978 D.I.E. WG Forge & Allied 4 m 3 mExecutive Director Industries Ltd.

Shri K. 55 Apr. 12, B.Com, A.C.A, Superintendent (Credit) 30 y 21 y 320Sivaprakasam, 1982 I.C.W.A, C.S(Inter) Union Bank of india 11 m 8 mExecutive Director CAIIB, L.L.B

Shri O.V. 53 Oct. 29, M.Sc, M.F.M, Manager 30 y 22 y NILBundellu, 1981 CAIIB-I Indian Bank 1 m 2 m

Executive DirectorShri S. 59 Jan. 17, B.E (Elec.) Asst. Engineer 34 y 24 y 320Gajendran, 1979 Tamilnadu Electricity Board 11 mDirector- JNIDB

Shri G.M. 57 July 14, B.Sc, B.L, CAIIB, Law Officer 35 y 25 y 320Ramamurthy, 1978 Praveen, D.L.L, Canara Bank 5 mLegal Adviser D.C.L, D.T.L, C.S

All the Principal Executive Officers shown in above table are on the rolls of IDBI as permanent employees as on the dateof filing.

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Changes in Auditors

M/s. V. Sankar Aiyar and Company was the Auditors for IDBI till 1996-97. Subsequently, M/s. G.P. Kapadia and

Company and M/s Ray & Ray were appointed as the Auditors and thereafter M/s Ray & Ray and M/s M.P. Chitaleand Co were the Auditors of IDBI. From FY 2002-03 M/s Sorab S. Engineer & Co. and M/s Suri & Co. are the

Auditors of IDBI.

HUMAN RESOURCESAs on December 31, 2003, IDBI had 2,805 employees (figures excludes staff on deputation - 22, on study leave

- 6, on foreign leave - 2) of whom 1,421 are officers including professionals in accountancy, management,engineering, law, computers, economics and banking. IDBI has a good and cordial relationship with its employees

and their Association/Union. Since inception in 1964, no major industrial action has been resorted to by IDBI’s

employees. During the last three years there were 3 occasions of general strike resorted to by a section of IDBI’semployees.

PRODUCTS AND SERVICES

IDBI provides project related finance for the establishment of new industrial projects as well as for expansion,

diversification and modernisation of existing industrial enterprises. In view of the changed financial needs of theindustries, IDBI has also designed other products to meet the short term funding, core working capital and treasury

requirements of the industrial clients. IDBI also extends non-fund based assistance, advisory services, forex

services etc,. IDBI has also set up specialised subsidiaries and associates to extend mutual fund products, capitalmarket services, banking services as also Registrar and transfer agent services.

IDBI currently offers the following major products and services to industrial concerns:

1. DIRECT FINANCE

The expression “direct finance” refers to the provision of finance directly to an industrial unit without the

involvement of an intermediary financial institution. During FY 2002-03, approximately 91% of total sanctionsand 94% of total disbursements of IDBI were accounted for by direct finance.

(a) Project Finance

Project Finance involves providing credit and other facilities to medium and large scale units for the

establishment of new projects as well as for expansion, diversification or modernisation of existingindustrial units. Project finance is granted directly to units established as companies in private, joint and

public sectors, and to co-operatives.

As part of Project Finance, IDBI provides term loans in Rupee and in Foreign currency repayable over5-10 years depending upon the debt servicing capacity of the borrowing unit, and secured by a charge

over the immovable/ movable assets. It also provides financial guarantees, usually in foreign currency,to cover deferred payments and to enable corporates to raise loans from overseas. IDBI’s guarantees

are of near sovereign nature and have been an important segment of operations in the recent years.

Infrastructure financing continues to be the Bank’s thrust area with IDBI financing projects involving largefinancial outlay to power, telecom and port projects. Assistance to infrastructure projects

during 2002-03 amounted to Rs.440 crore (sanctions) and Rs.813 crore (disbursements).

(b) Equipment Finance and Asset Credit

Under Equipment Finance, rupee and foreign currency loans are given to industrial units conforming to

certain minimum financial criteria for the purpose of financing acquisition of specific items of machinery

and equipment. Such loans are secured by charge on specific assets and generally have a maturity of

upto 6 years including moratorium. Under Asset Credit Facility a line of credit is extended to industrialunits for financing their normal capital expenditure over a specified period. Such credit is normallyextended for a period of upto 5-6 years and is secured by a charge on the assets so acquired.

(c) Working Capital

IDBI provides loans to corporates for meeting core working capital requirements. The loan is grantedin the nature of a term loan either rupee or foreign currency for meeting the core component of theworking capital requirements of the company assessed for period upto 18 months.

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(e) Direct Discounting of Bills

IDBI provides facilities for direct discounting of bills of exchange and promissory notes which arise fromthe sale of indigenous machinery on a deferred payment basis by a seller to a domestic purchaser.

(f) Underwriting and Direct Subscription

As part of Project Finance and Capital Market activities, IDBI underwrites public and rights issues and

provides direct subscription support in respect of equity as well as debt instruments.

(g) Energy Conservation

IDBI has extended rupee and foreign currency term loans for the acquisition and installation of energyconservation equipment, as also to pollution control and prevention projects in highly polluting industrialsectors. Further, IDBI also provides finance for implementing Ozone Depleting Substances (ODS)Phase-out projects under the Montreal Protocol.

(h) Venture Capital

Venture Capital finance is extended by IDBI for projects involving the development and use ofindigenous technology and for adaptation and development of imported technology, as well as high-risk, high-return ventures. With the development of new economy sectors like technology, media andentertainment, bio-technology, etc. the scope of Venture Capital Fund Scheme has been widenedsince January 2000.

(i) Equity Participation Scheme

IDBI has formulated a separate Equity participation scheme for investment in select companies withhigh growth and profitability potential to facilitate early financial closure of projects.

(j) Film Financing

Consequent upon GOI conferring industry status to the “Entertainment Industry including Films” andapproving the same as an eligible activity for financing under Section 2(c)(xvii) of IDBI Act, 1964, theBank has introduced a scheme for financing the Film Industry.

2. INDIRECT FINANCE

The expression “indirect finance” refers to the provision of finance to industrial concerns through StateFinancial Corporations (SFCs) and State Industrial Development Corporations (SIDCs). In indirect finance,the responsibility for repayment to IDBI rests with the relevant intermediary institution or bank.

(a) Refinancing of Industrial Loans

IDBI grants refinance facilities to SFCs, SIDCs and Banks against their loans to medium-sized industrialconcerns throughout India. IDBI has widened the scope of the Refinance Scheme to cover infrastructure/ Technology Upgradation Fund Scheme projects.

(b) Bills Rediscounting

Bills of exchange discounted by banks arising from the sale of indigenous machinery on deferredpayment terms are rediscounted by IDBI.

(c) Investment in Shares and Bonds of other Financial institutions

IDBI subscribes to the share capital, bonds and debentures issued by SFCs and other financialinstitutions.

(d) Lines of Credit to Institutions

IDBI provides lines of credit to select SFCs and SIDCs by way of resource support.

3. FINANCIAL SERVICES

(a) Merchant Banking IDBI’s Capital Markets Division provides professional advice and services to industry for capital marketissues, loan and guarantee syndication, project advice/appraisal, capital restructuring and mergers andacquisitions.

(b) Forex Services

IDBI opens Letters of Credit (LCs) and effects foreign currency remittances on behalf of its assistedcompanies for import of goods and services. In line with the prevailing guidelines for ExternalCommercial Borrowings (ECBs), the Bank also disburses FC loans for project related Rupee

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Trend in Sanctions and Disbursements March 1999 - March 2003. (Rs. crore)

18939

22060

23178

13505

2889

1706317473

11151

3924

14473

0

5000

10000

15000

20000

25000

1999 2000 2001 2002 2003

S A NCT I O NS

DI S B URS E M E NT S

OUTSTANDING ASSISTANCE PORTFOLIOThe following table provides a breakdown of IDBI’s outstanding portfolio of loans, investments and guarantees asat March 31, 1999 to March 31, 2003. (Rs. crore)

As at March 31 1999 2000 2001 2002 2003

Direct Finance

Rupee Loans 35144 38322 39484 38460 37876

Foreign Currency Loans 7585 8426 6618 6522 5677

Underwriting and direct subscription 5494 5492 6673 7514 6405to shares, bonds and debentures ofIndustrial concerns

Equipment leasing 1089 1245 1300 1148 955

Sub total (A) 49312 53485 54075 53644 50913

Guarantees for loans and 3830 4005 4617 4011 3369deferred payments

Total Direct Finance (B) 53142 57490 58692 57655 54282

Indirect Finance

Refinance of Industrial loans 1767 1310 1666 1643 1490

Bills finance 2336 2031 1443 965 612

Loans to and investments in shares &bonds of financial institutions of which

i) Shares of FIs 1320 1465 1341 1010 1066

ii) Loans to and Bonds of FIs 313 656 140 249 236iii) Consideration receivable form SIDBI1656 1284 755 525 164

iv) Others 355 349 0 0 0

Total Indirect Finance (C) 7747 7095 5346 4392 3568

Total (B+C) 60889 64585 64038 62047 57850

Annual Growth rate (%) 11.2 6.1 (0.9) (3.1) (6.8)

The CAGR in outstandings over the 5-year period ended March 31, 2003 works out to 0.5% in respect of directfinance and (-)1.3% in respect of total outstandings.

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Guarantees given by the Issuer to third parties

The Outstanding guarantees for loans and deferred payments amounted to Rs. 3,369 crores as on March 31,

2003. The guarantees extended are solely on account of normal business operations and are subject to prudential

applicable norms. Guarantees extended by IDBI are normally secured by assets/ way of charge over the fixedassets of the assisted company.

Trend in Outstanding Loan Portfolio during March 1999 - March 2003 (Rs. crore)

INDUSTRYWISE BREAK-UP

IDBI’s loan portfolio is well diversified among industries. The major outstandings are to the iron and steel, power,

cotton textiles, telecom services and petrochemicals, which together accounted for about 48% of the outstandingsas at March 31, 2003. As a prudential measure, IDBI has recently revised the exposure limit to individual industry

at 10% of its total portfolio or Rs.5000 crore whichever is lower. As on March 31, 2003 only two industries viz.

Iron & Steel (18.31%) and Electricity Generation (12.58%) exceeded the limit. This excess has been largely dueto historical factors wherein IDBI had been extending assistance to core sector projects in line with overall national

objectives. The following table shows the breakdown, by industry category, of direct assistance outstanding as atMarch 31, 2003.

Industry Outstanding O/s amt. as Outstanding of top 5 Outstanding of top

amount %of total companies as a % 10 companies as(Rs.crore) outstanding of total o/s to a % of total o/s

the industry to the industry

Iron and steel 9104.90 18.31% 56.27% 73.14%

Electricity Generation 6257.90 12.58% 64.34% 82.25%

Cotton Textiles 4414.66 8.88% 15.49% 25.65%

Telecom Services 2132.63 4.29% 69.86% 98.45%

Petrochemicals 2045.08 4.11% 86.58% 94.45%

Fertilizers 1895.71 3.81% 94.35% 99.58%

Cement 1517.69 3.05% 62.98% 77.55%

Artificial Fibres 1704.43 3.25% 53.86% 68.64%

Chemical (Others) 1082.12 2.18% 28.95% 41.85%

Food (others) 1174.34 2.36% 23.87% 34.77%Basic Industrial Chemicals 1216.21 2.45% 61.96% 80.59%

Services (Others) 912.54 1.84% 52.11% 64.76%

Electronics 1069.87 2.15% 63.11% 74.46%

Drugs & Pharmaceuticals 1080.28 2.06% 59.40% 75.08%

Paper & Paper Products 1250.76 2.52% 48.39% 61.85%

Other Industries* 12003.98 24.14% 14.71% 22.73%

* Total of all industries excluding top 15

6 0 8 8 9

6 4 0 3 8

6 2 0 4 7

5 7 8 5 0

6 4 5 8 5

5 4 0 0 0

5 6 0 0 0

5 8 0 0 0

6 0 0 0 0

6 2 0 0 0

6 4 0 0 0

6 6 0 0 0

1 9 9 9 2 0 0 0 2 0 0 1 2 0 0 2 2 0 0 3

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Industry-Wise Outstandings (%)

Industry-Wise break up of outstandings in respect of top 10 borrowers as a percentage of total Assets as on

March 31, 2003 is given in the table below.

Borrower Industry Outstanding as % to Total Loan Quality of Write off/ total assets as on Disbursed till the asset Provision

March 31, 2003 March 31, 2003*

(Rs. crore)

A Electricity Generation 3.91 548.74 Standard Nil

B Iron & Steel 2.48 1008.75 Standard Nil

C Iron & Steel 1.89 865.77 Standard Nil

D Refineries & Oil Exploration 1.70 731.46 Standard Nil

E Iron & Steel 1.33 729.03 Standard Nil

F Iron & Steel 1.33 558.58 Standard Nil

G Petrochemicals 1.18 1675.37 Standard Nil

H Refineries & Oil Exploration 1.13 2056.99 Standard Nil

I Iron & steel 1.09 500.37 Sub-Standard 74.32

J Petrochemicals 1.08 535.00 Standard Nil

*Total amount disbursed does not indicate total amount outstanding as on March 31, 2003.

Credit Exposure as percentage to Capital funds and as percentage to total assets

As on March 31, 2003 As % to Capital funds As % to Total Assets

The largest single borrower 15.28 3.63

The largest borrower group 24.30 5.77

The 10 largest single borrowers 87.23 20.70

The 10 largest borrower groups 108.33 25.71

Deployment of funds raised by issue of Infrastructure Bonds

In respect of InfrastructureBonds issued by IDBI, the deployment has been in accordance with the relevant taxguidelines. Also the deployment of funds raised under Infrastructure Bonds has been duly certified by the auditors.

I ro n a n d s t e e l

1 9 %

B a s i c I n d u s t r ia lC h e m ic a ls

3 %

S e r v i c e s2 %

E l e c t r o n i c s2 %

D r u g s &

P h a r m a c e u t ic a l2 %

P a p e r & P a p e r

P r o d u c t s3 %

C o t t o n T e x t i le s9 %

T e l e c o m

S e r v i c e s4 %

O t h e r I n d u s t r ie s

2 5 %

P e t ro c h e m ic a l s

4 %

Fer t i l i ze rs4 %

C e m e n t3 %

A r t i f ic i a l F ib res

3 %

C h e m ic a l( O t h e r s )

2 %

F o o d ( o t he r s )2 %

E lec t r i c i ty

G e n e r a t i o n1 3 %

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INVESTMENTS

IDBI’s investment portfolio is predominantly of long term and strategic nature. Temporary diminution in value ofsecurities arises on account of price volatility due to factors and forces affecting the stock market, interest rates,etc. IDBI has been classifying its investment portfolio and making appropriate provision for diminution in valueas per RBI guidelines issued from time to time in this regard. The investments are classified under the followingcategories (i) Held to Maturity, (ii) Available for Sale (iii) Held for Trading. These investments were valued

according to the guidelines in the matter issued by RBI to FIs.

As on March 31, 2003 the portfolio of quoted investments aggregated Rs.2730.22 crore, whose market valueamounted to Rs.2152.54 crore. IDBI had debentures of Rs.4389.16 crore in its portfolio as on March 31, 2003.All the debentures are secured by hypothecation/mortgage of fixed assets.

Debentures on which final security was yet to be created by way of mortgage amounted to Rs.795 crore as onMarch 31, 2003.

Since March 2001, IDBI is active in secondary market transactions in equity. The transactions under SecondaryMarket Operations are conducted in accordance with the policy regarding investment in equities, as formulatedby the Board. The valuation of equity investments is done in accordance with the RBI guidelines.

Provision for Depreciation on Investments

Opening Balance as on April 1, 2002 Rs.56.96 crore

Add : (i) Provisions made during the year Rs.158.79 crore

(ii ) Appropriation, if any, from Investment Fluctuation Reserve Account during the year –

Less :(i) Write off during the year Rs.66.51 crore

(ii) Transfer, if any, to Investment Fluctuation Reserve Account –

Closing balance as on March 31, 2003 Rs.149.24 crore

Note : During the year ended March 31, 2002 and 2003, Rs.25 crore each was appropriated from profits toInvestment Fluctuation Reserve Account and as on March 31, 2003, the balance in the Investment FluctuationReserve Account was Rs.50 crore.

ASSET CLASSIFICATION, INCOME RECOGNITION,PROVISIONING FOR NON-PERFORMING LOANS AND NPA STRATEGY

ASSET CLASSIFICATION

IDBI has evolved a comprehensive health code system for assessing the quality of advances so as to be able

to monitor effectively and follow-up each individual advance. All advances are reviewed at regular intervals withreference to factors like past performance, immediate and future prospects and asset backing. In addition, theborrower’s balance sheets and profit and loss accounts are critically analysed and information relating to creditrecord with other institutions/banks, quality of management, the industrial environment in which the borroweroperates and relevant technological issues is kept up-to-date to enable IDBI to have a complete picture of the riskprofile of its assets.

The quality of portfolio is subjected to continual monitoring, through review by senior executives.

In line with RBI guidelines issued from time to time, the loan portfolio is being classified as performing and non-performing assets for the purpose of income recognition and provisioning. The criteria for the classification are:

Performing/Standard Assets

Loan Assets in respect of which interest and principal are received regularly and where arrears of interest and/ or of principal, if any, do not exceed 180 days as at the end of the financial year, are classified as performingassets (standard assets). A general provision of 0.25% on outstanding standard assets has been made.

Non-performing AssetsLoan assets where interest and/or principal installments are in arrears beyond 180 days are classified as non-performing assets (NPAs). NPAs are further sub-classified into sub-standard, doubtful and loss assets as follows:

Sub-standard assets

Sub-standard assets are those which are non-performing for a period not exceeding eighteen months. In addition,companies which have been exhibiting signs of weaknesses in their viability or whose viability has been weakened

due to delayed implementation are also classified within the sub-standard category.

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Doubtful assets

A doubtful asset is one which has remained non-performing for a period exceeding eighteen months and which

is not considered as a loss asset. A major portion of assets under this category relate to “sick” companies referredto the Board for Industrial and Financial Reconstruction (BIFR) and awaiting finalisation of rehabilitation packages.

Loss assets

A loss asset is one where loss has been identified but the amount has not been written off, wholly or partly. Inother words, such an asset is considered uncollectible and of such little value that its continuance as a bankable

asset is not warranted although there may be some salvage or recovery value.

INCOME RECOGNITION

While income in respect of the performing assets is accounted for on an accrual basis, income from non-

performing assets is recognised only on cash basis ( i.e. treated as income on actual receipt )

PROVISIONING FOR NON PERFORMING LOANS

Loan assets (including bonds & debentures acquired in the primary market) and other assistance portfolios areclassified based on record of recovery as Standard, Sub-standard, Doubtful and Loss. Provision is made for assets

as per Guidelines issued to term lending institutions by Reserve Bank of India, as under:

1. Standard assets – A global provision of 0.25% on outstanding standard assets

2. Sub-Standard Assets – 10% of loan/assistance

3. Doubtful assets – 100 % of unsecured portion plus 20%/30 %/50% of secured portion

depending on the period for which the loan / assistance hasremained doubtful.

4. Loss Assets – The entire loan is written off.

The following table provides a summary of IDBI’s loan assets in accordance with RBI classification in the

last five years.

ASSET CLASSIFICATION AS PER RBI GUIDELINES (Rs. crore)

Gross Provisions Net Assets % to total % of provisions

Assets and write-offs after prov and write-offs(before w/o) (cumulative) and w/o to gross assets

31st March, 1999

Standard 47377 2 47375 88.0 0.0

Sub-standard 4635 450 4185 7.7 9.7

Doubtful 4030 1725 2305 4.3 42.8

Loss 857 857 0 0.0 100.0

Total 56899 3034 53865 100.0 5.3

31st March, 2000

Standard 49425 0 49425 86.6 0.0

Sub-standard 4484 429 4055 7.1 9.6

Doubtful 6017 2397 3620 6.3 39.8

Loss 926 926 0 0.0 100.0

Total 60852 3752 57100 100.0 6.2

31st March, 2001

Standard 48107 0 48107 85.2 0.00

Sub-standard 3518 504 3014 5.3 14.3

Doubtful 8686 3330 5356 9.5 38.3

Loss 1026 1026 0 0.0 100.0

Total 61337 4860 56477 100.0 7.9

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TOP 10 NON PERFORMING ASSETS AS ON 31.3.2003 (Rs. crore)

Sl. Name of the Gross o/s Net o/s* I n d u s t r y

No company

1 Borrower 1 743 669 IRON & STEEL

2 Borrower 2 383 345 VEHICLES3 Borrower 3 392 274 IRON & STEEL

4 Borrower 4 138 96 IRON & STEEL

5 Borrower 5 100 80 SERVICES

6 Borrower 6 114 80 CHEMICALS

7 Borrower 7 82 74 COTTON TEXTILES

8 Borrower 8 77 69 NON FERROUS

9 Borrower 9 76 69 COTTON TEXTILES

10 Borrower 10 76 69 PLASTIC & PLASTIC GOODS

*Net of write off/provision

NPA STRATEGY

Asset Quality

IDBI is focusing on quality lending. It has developed sophisticated credit analysis and loan monitoring system. IDBIhas been following a well formulated conservative accounting policy regarding income recognition even beforeRBI guidelines on the above subject were prescribed. IDBI has strictly followed RBI’s guidelines for assetclassification, income recognition and provisioning. As on March 31, 2003, IDBI’s standard assets constituted85.80% of loan portfolio.

IDBI has initiated several measures for containment of NPAs. The Bank has set up Close Monitoring Cells (CMCs)for constantly monitoring the performance of assisted companies to improve recovery and initiate timely remedialaction. For expeditious decision-making Empowered Committee and High Powered Committee have been set up.IDBI is also currently in the process of fine-tuning a comprehensive recovery policy, which would help in efficientmanagement of its efforts as also standardisation of the systems and procedures across departments and offices.

The composition and functions of the High Powered Committee and the Empowered Committee are as follows:1. High Powered Committee

The Board of IDBI has constituted a High Powered Committee headed by CMD and all the ExecutiveDirectors as members. This committee deals with restructuring and one- time settlement cases of large size.

2. Empowered Committee

The Empowered Committee headed by an Executive Director with Executive Directors and Chief GeneralManagers as members has been constituted to approve restructuring and one time settlement of dues fromclients upto a certain limit.

In order to improve the credit quality, credit approval and delivery systems have been further strengthened.In the case of infrastructure sector a three tier security mechanism – letter of credit, escrow facility andgovernment guarantee has been adopted. Under the escrow cover, the escrowable capacity is being assessedby independent agencies acceptable to the lenders. A condition for opening Trust and Retention Accountis also stipulated for large projects for depositing all funds and proceeds to be utilised in a manner andpriority as agreed to by the Bank and the client. Through this account entire cash flow is monitored during

the implementation period and operation phase of the projects. The Bank often appoints reputed consultantsas Lenders’ engineers for monitoring the implementation of the project, as well as various financial andtechnical parameters during the operation of the project. The Bank has also been resorting to stipulation ofadditional security such as pledge of promoters’ equity and other collateral as also conversion of loan to

equity, etc.

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by various courts in the matter. If the pending court cases are decided and clear directions are issued by the

courts, the institutions and banks will be able to successfully contain the NPAs. IDBI expects a positive result outof all these efforts. It is expected that the defaulting companies would come forward to clear their dues, which

would improve the profitability of the institution. Further, the Act would also deter the presently regular borrowersfrom defaulting in future, thus, preventing accretion of fresh NPAs.

IDBI, in participation with ICICI Bank, SBI and some other institutions/ banks has set up an Asset Reconstruction

Company, viz ARCIL. IDBI has identified 5 cases for transfer to ARCIL and has already completed the transferin respect of 4 cases. IDBI is in the process of identifying further cases for transfer to ARCIL as part of its NPA

resolution.

CORPORATE DEBT RESTRUCTURING (CDR) MECHANISM

To improve the quality of its asset portfolio and arrest any deterioration, IDBI has also initiated action under CDRmechanism.

The objective of CDR is (a) to ensure timely and transparent mechanism for restructuring of corporate debts of

viable entities affected by certain internal and external factors and (b) to minimise the losses to the creditors andother stake holders through an orderly and coordinated restructuring programme.

RBI, in terms of letter dated August 23, 2001 addressed to all the Commercial Banks and Financial Institutionscommunicated the formation of Corporate Debt Restructuring system and its implementation mechanism. The

scope of CDR frame work was enlarged by RBI vide its circular dated February 5,2003.

Eligibility Criteria

Ø The Scheme is applicable only to multiple banking accounts, syndication accounts with outstanding exposure

of not less than Rs. 20 crore by Banks /Institutions

Ø Corporates declared as willful defaulter or who commit misfeasance will not be considered for restructuring

under the CDR system

Ø Reference to the CDR system could be triggered by one or more of the secured creditors who have minimum20 % share in either working capital or term finance or (ii) by the concerned corporate if supported by a bank/

financial institution having stake as at (i) above.

CDR mechanism is expected to ensure quicker response and better co-ordination among lender so as to ensure

smooth operation by the assisted unit after adoption of a restructuring package.

Schemes Approved

As on December 31, 2003, FIs/Banks have submitted 97 applications to the CDR Cell involving an aggregate

amount of Rs.61,223 crore. The CDR Empowered Group has approved final schemes in 63 cases involvingaggregate assistance of Rs.47,784 crore. 17 cases have been rejected/closed. The remaining 17 cases involving

an amount of Rs.10,600 crore are under various stages of processing.

RESOURCE MANAGEMENT

IDBI’s principal sources of outstanding funds are (i) borrowings from the Government and RBI, (ii) borrowings by

way of Government guaranteed bonds (iii) private placement and public issue of unsecured bonds (iv) market

related borrowings including certificates of deposit and fixed deposits, (v) foreign currency borrowings and (vi)internal generation.

(a) Borrowings from the Government

The outstanding borrowings from the Government of India mostly represent loans from the International

Bank for Reconstruction and Development (IBRD) routed through the Government to IDBI. The loans drawn

by IDBI were repayable within 15 years from the date of agreement. As mentioned below, the outstandings

under the IBRD line has been converted into a 20 year liability.(b) Borrowings from Reserve Bank of India

RBI provided resource support to certain institutions, including IDBI, out of the National Industrial Credit(Long-Term Operations) Fund [NIC (LTO) Fund] which was set up by RBI in July 1964. The assistance under

the NIC(LTO) fund was provided by subscribing to bonds and debentures of the institutions as well as bygranting loans. The loans drawn by IDBI are repayable within 15 years from the date of agreement. This

facility has been discontinued from April 1990.

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As provided for in the Union Budget, GOI has since taken over IDBI’s liabilities under NIC(LTO) fund and

converted the same along with outstanding borrowings under IBRD lines of credit into a 20 year liability. Inconsideration thereof IDBI has issued unsecured bonds of Rs.2130 crore with an initial maturity period of

20 years i.e. upto March 30, 2022. The amount comprises Rs.1150 crore and Rs.973 crore towards theoutstandings under NIC(LTO) and IBRD line of credit carrying an interest rate of 8% and 11.88% respectively.

The bonds carry a provision for conversion into equity or roll-over for another 20 year period after the initial

maturity as may be requested by IDBI. The Govt would favourably consider foregoing interest payable onthese bonds in the years when IDBI’s profit is not enough to cover the interest. The bonds qualify for

treatment as Tier I Capital.

(c) Government Guaranteed Rupee Bonds

IDBI’s Government guaranteed bonds enjoy the status of trustee securities and are also approved securities

under the Banking Regulation Act, 1949. The bonds are largely taken up by commercial banks and form partof their statutory liquid assets. Total outstanding as at March 31, 2003 stood at Rs.5672 crore representing

11.02% of total debt. IDBI’s access to this source of finance has been gradually phased out.

(d) Public Issues and Private Placements of Unsecured Bonds

In January 1992, IDBI floated its first public issue of unsecured bonds in India. The issue was successful

and attracted subscriptions in excess of the target amount from over 11 lakh investors. IDBI launched its

second public issue of bonds in March 1993 which also elicited subscription in excess of the target amount.IDBI has also made eighteen more public issue of bonds under Flexi series (Flexi –1 to Flexi –18) during

Feb 96 to March 2003 collecting Rs.14922 crore. In addition to public issues of Bonds which are targetedmainly at retail investors, IDBI also raises funds from Banks, Institutions and wholesale investors such as,

Provident Funds, Charitable Trusts etc. through private placement of bonds.

As of March 31, 2003, the outstanding amount against unsecured bonds (raised through public issues andthrough private placements) stood at Rs.34946 crore representing 67.87% of total debt.

(e) Deposits and Borrowings

Total outstandings of CDs, fixed deposits, term money bonds and other borrowings as at March 31, 2003amounted to Rs.4565 crore representing 8.87% of total debt.

(f) Foreign Currency Bonds

Since 1986, IDBI has issued foreign currency bonds (denominated in Deutsche Mark, US Dollar, JapaneseYen and Swiss Francs) in the international debt markets. Total outstanding as at March 31, 2003 amounted

to Rs.1180 crore representing 2.29% of total debt.

(g) Multilateral and Bilateral Credits, Syndicated Loans and other foreign currency borrowings IDBI has been borrowing in foreign currency from multilateral agencies and international banks on a regular

basis since 1982. It has obtained funding from International Development Agency (IDA)/IBRD for financingvarious sectors viz. small scale industries, cement, fertilisers, electronics etc. and for specific end uses like

Pollution Control. With the exception of the Electronics Line and the Pollution Control Line, all IDA/IBRD

credits have been routed through the Government of India where IDBI’s liability has been rupee denominatedand the exchange risk is borne by the Government.

As part of the Financial Sector Development Project Loan (USD 700 million) for the Indian Banking sector,IBRD has routed the Modernisation and Institutional Development Loan component (USD 150 million) through

IDBI for on lending to eligible banks. ADB has extended three lines of credit to IDBI, one in 1987 for on

lending to small and medium industries (USD 100 million), for Industrial Energy Efficiency Projects (USD 150million) in 1995 and for Infrastructure Projects in private sector (USD 100 million) in 2003.

Over the years IDBI has also raised funds by means of syndicated loans, bilateral credits and privateplacements. Total outstandings under these heads as at March 31, 2003 stood at Rs.4951 crore representing

9.62% of total debt.

(h) Internal Generation

Internally generated funds by way of repayment of loans by borrowing companies, receipt of interest,

guarantee commissions and sale of investments in shares and bonds of companies constitute an important

source of funds for IDBI.

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(i) Equity Issue

In July 1995, IDBI made its first public Issue of Equity Shares. 16.8 crore equity shares of Rs 10 each were

offered to the public at a premium of Rs.120 per share for an aggregate amount of Rs 2184 crore. In addition,1.44 crore shares were offered by the Government of India for sale at the same price, raising the total amount

of the Public Issue to Rs.2371.5 crore.

RESTRUCTURING OF LIABILITIESIn view of the difficulties faced by the certain industries viz. steel, textile, etc. IDBI has been extending relief to

select corporates in these sectors and after examining the viability, by way of reschedulement of principal,

reduction in interest rates/ stepping-up of interest payments in line with the revised cash-flow projections. Sincethere is no corresponding change in the terms of liabilities raised for financing these assets, it creates asset-

liability mismatch. Declining interest rate scenario also is an added problem, as the liabilities to finance theseassets have been raised at higher cost in the range of about 11%-16%. While, wherever call options on the

liabilities are available, IDBI has been exercising the same, in case of other liabilities, IDBI has been discussing

the issue with some of the large investors for accepting prepayment at par or at lower premium. While someinvestors have accepted, many are reluctant to accept prepayments.

In this backdrop, the issue was taken up with the Govt. of India (GOI), to help in reducing interest cost in respect

of IDBI’s liabilities. After a series of discussions with GOI in the matter, a proposal was formulated and the samewas discussed at the meeting of select Banks/ Institutions convened by the Ministry of Finance, GOI on November

26 and December 2, 2002. It was agreed in the meeting that the liabilities of IDBI to public sector Banks/ Institutions/ UTI/ Army Group Insurance Fund will be restructured from the appointed date as under:

(i) The interest rate on the liabilities will be reset to 8% p.a. and the difference between the document rate & 8%

p.a. would be paid by GOI by way of bonds payable on March 31st of each financial year

(ii) All select banks & institutions would on maturity of the existing investment, re-invest the amount in IDBI Bonds

for the same tenor as the initial investment at the then prevailing market rates. Army Group Insurance Fund (AGIF)

would, however, have an option to decide whether to reinvest.

(iii) The characteristics of the bonds on reinvestment viz. SLR/ non-SLR would remain the same as that of original

investment.

The appointed date for restructuring was subsequently conveyed by GOI as March 1, 2003. In order to implementthe restructuring proposal & make it administratively simpler, IDBI, after discussion with GOI, has decided to

continue paying interest at the document rate to the select Banks/Institutions, with the difference to be claimed

by IDBI directly from GOI. Thus, the essence of the proposal now is only reinvestment of amount on maturity atthe then prevailing market rates for the period of original maturity, with no loss to the banks/ institutions.

All the 35 banks/ institutions, except AGIF and UTI, have approved the scheme. AGIF has opted to keep out of

the scheme due to the nature of the fund and as requested by them, their entire outstanding liabilities (Rs. 710.9cr as on March 1, 2003) have been repaid/ prepaid, at par. The matter regarding UTI’s participation is being

discussed separately with GOI.

The total liabilities, which will be reinvested in IDBI Bonds on maturity in terms of the scheme, aggregate toRs.14753 cr. These are falling due over the next 10 years’ period. The total liabilities which will be reinvested in

FY 2003-04 aggregate to Rs.2354 cr.

As mentioned earlier, IDBI would pay interest at the document rate to the select banks/institutions and claim theinterest differential between the document rate and 8% p.a. from GOI. This would have the effect of reduction in

interest cost debited to the P&L Account of IDBI. The total reduction in the interest cost for FY 2002-03 amountsto Rs.354.37 cr representing the interest differential accrued/ reimbursable by GOI. The total interest differential

to be received from GOI over the next 5 years period works out to about Rs.2500 crore. On the liquidity front, therestructuring has resulted in elongating the maturity profile of the liabilities.

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DEBT OUTSTANDING

Set forth below is a summary of IDBI’s outstanding debt as at March 31, 1999 to March 31, 2003

(Rs. crore)

As at March 31, 1999 2000 2001 2002 2003

1. Bonds and Debentures

a. Issued in India 35525 41509 42047 41762 40618

b. Issued outside India 3466 2467 1771 1857 1180

2. Deposits 2092 1753 2639 3384 4330

3. Borrowings

a. From RBI 2000 1740 1440 0 0

b. From GOI 1456 1366 1269 198 174

c. from other sources

(i) Inside India 675 75 0 120 235

(ii) Outside India 7754 8268 7253 6561 4951

Total 52968 57178 56419 53882 51488

Top 25 Borrowings of IDBI under various schemes as on March 31, 2003

Scheme Amount (Rs.Cr) Interest rate (%)* Maturity@ Date of borrowingBorrowing 1 1521 12.40-13.00 5-15 Yrs 11-09-1999

Borrowing 2 1500 12.10-12.30 5-7 Yrs 06-01-2000

Borrowing 3 1492 13.90-14.00 7-17 Yrs 16-11-1998

Borrowing 4 1233 12.50-14.00 3-14 Yrs 27-03-1999

Borrowing 5 1221 Libor+0.34 13 Yrs 21-01-1996

Borrowing 6 1215 12.50-14.00 3-7 Yrs 11-02-1999

Borrowing 7 1174 14.75-16.00 4-10 Yrs 31-01-1997

Borrowing 8 1000 13.10 5 Yrs 8-09-1998

Borrowing 9 871 13.75-14.00 5-7 Yrs 12-12-1998

Borrowing 10 853 13.75-14.00 5-7 Yrs 07-08-1998

Borrowing 11 788 13.75-14.00 5-7 Yrs 05-10-1998

Borrowing 12 763 13.42 7 Yrs 06-10-1997


Borrowing 14 659 11.75-12.00 3-5 Yrs 04-10-2000

Borrowing 15 613 10.50-11.10 3-7 Yrs 30-03-2001

Borrowing 16 588 10.50-11.50 3-6 Yrs 05-01-2001

Borrowing 17 538 10.25-10.50 3 Yrs 02-07-2001

Borrowing 18 537 6.31 14 Yrs 30-03-1995

Borrowing 19 536 8.00-8.30 3-7 Yrs 17-01-2003

Borrowing 20 531 8.25-9.70 3-9 Yrs 25-11-2002

Borrowing 21 516 7.20-8.00 3-10 Yrs 04-03-2003

Borrowing 22 485 7.00-7.60 3-10 Yrs 25-04-2003




* In case of issues offering more than one structure / instrument, interest rate band is indicated

@ In case of issues offering more than one structure / instrument, maturity band is indicated.

Notes

• All borrowings of IDBI are unsecured in nature.

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• The promoters/ directors have not given any personal guarantees for collaterally securing any borrowings.

• IDBI has not defaulted on any of its previous borrowings including the above-mentioned borrowings and has

neither sought any roll over facility on the same.

Call Option to IDBI on previous Flexibonds Public Issues/ Private Placements (March 31, 2003)

Instrument Date Amount (Rs. crore)

Flexibonds-4 Deep Discount Bonds 11.11.2005 59.72

Flexibonds-7 Deep Discount Bonds 11.09.2004 102.27

Flexibonds-11 Regular Income Bonds(Option C) 05.02.2009 47.68Regular Income Bonds(Option D) 05.02.2009 0.46

Flexibonds-15 Growing Interest Bonds 25.11.2004 1.21

Flexibonds-17 Growing Interest Bonds 04.03.2005 2.70

Omni I 2001 A RRB I 02.07.2003@ 255.30

Omni I FII C 03.10.2003@ 250.00

Omni 2002 A RRB I 14.06.2003@ 68.07

Omni 2002 B RRB III 26.09.2007 0.77

@ Call option exercised on the respective dates.

DEBT SERVICING TRACK RECORD

IDBI has a consistent record of paying principal installments and interest on all loans, bonds and deposits on due

dates.

RISK MANAGEMENT

IDBI in the course of its operations is exposed to various risks like Credit Risk (mainly on account of the borrowersand other counter-parties’ inability to meet their repayment commitments), Market Risk (arising out of movement

of market values/interest rates impacting earning potential, fair valuation or realisable value of the portfolio),Liquidity Risk (impacts capacity to raise necessary funds to meet debt servicing requirements and

disbursements), Exchange Risk (arising from movement of exchange rates of foreign currency) and Operational

Risk (includes risks arising from operational processes including technology, manpower, procedures etc,.). Therisk philosophy of the Bank is guided by the twin objectives of enhancement of shareholder value and optimum

allocation of capital.

RISK MANAGEMENT PROCESS

(a) Credit Risk

The credit risk is assessed as a part of project appraisal, which considers various parameters. Management, trackrecord of the promoters and the company, technology, overall capacity, demand and supply scenario, competitors,

industry environment etc are assessed to evaluate the credit risk which will in turn decide the assistance level andthe spread chargeable (credit spread) over the bench mark interest rate. While the appraisal system assesses the

Credit Risk quality, exposure limits set for individual companies, groups and industries facilitate limiting credit risk

quantity. IDBI also has a 10 point grading system of Health codes for its borrowers. Further, IDBI has a data baseof its borrowers which is updated regularly.

Credit risk management both at the transaction level as well as at the portfolio level, aims at building up soundasset quality and long-term profitability of the institution and encompasses activities like risk identification, risk

measurement, risk mitigation and risk-based pricing.

The IDBI Board, in August 2000, approved the proposed implementation of a Credit Risk Management System(CRMS) in IDBI within a period of three years. Pursuant to the above decision, to manage the credit risk pro-

actively, a Risk Management Committee (RMC) was set up in the Bank. The RMC, comprising senior executivesof the Bank, enunciates the overall risk philosophy of the Bank, lays down strategies and policies in accordance

with the former and reviews progress of implementation of the risk management framework. A Credit Risk

Management Group (CRMG) has also been set up to establish a credit rating system suited to the business ofIDBI and the Bank’s specific requirements and eventually to put a Credit Risk Management System in place.

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Maturity profi le of assets and liabil ities of IDBI as on March 31, 2003 is as fol lows : (Rs. crore)

Outstanding Upto Over 1 yr Over 3 yrs Over TotalAmount 1 yr to 3 yrs to 5 yrs 5 yrs

Liabilities

1. Capital 654 0 0 0 654 654

2. Reserves and Surplus 6325 0 0 0 6325 63253. Notes,Bonds & Debentures 40594 4906 12475 3955 19259 40594

4. Deposits 4329 2446 832 835 216 4329

5. Borrowings 6564 1674 2851 1290 748 6564

6. Current Liabilities & Provisions 4650 3259 448 93 850 4650

A. Total 63116 12284 16606 6173 28052 63116

Assets

1. Balances with RBI 5 4 1 0 0 5

2. Balances with other banks 1372 1372 0 0 0 1372

3. Investments 9467 2072 1517 1161 4718 9467

4. Loans & Advances 47584 8195 12737 9687 16965 47584

5. Fixed Assets (excl. Assets on lease) 330 0 0 0 330 330

6. Other Assets 4356 1944 711 128 1574 4356

B. Total 63116 13587 14966 10975 23587 63116

Gap (B-A) 1303 (1640) 4802 (4465)

Cumulative gap 1303 (337) 4465 0

As can be observed from the Table on Maturity profile of Assets and Liabilities given above there are negative gapsof Rs.1640 crore in over 1 year to 3 years bucket and Rs.4465 crore in over 5 years time bucket. However, thematurity buckets upto 1 year and over 3 years to 5 years have positive gaps of Rs.1303 crore and Rs.4801 crore.On cumulative basis, there is negative gap in only over 1 to 3 years time bucket amounting to Rs.337 crore. Thissituation has arisen because the balance sheet of IDBI is Assets sensitive and the assets are maturing faster thanliabilities. The statement does not take into account the effect of relending of these repayments from clients and freshborrowings in future. Any gap resulting in any of the maturity buckets at any future date will be managed dynamicallythrough suitable structuring of maturity profile of investment products and the asset portfolio.

Maturity profile of assets and liabilities of IDBI as on March 31, 2002 was as follows : (Rs. crore)


Liabilities

1. Capital 653 0 0 0 653 653

2. Reserves and Surplus 6042 0 0 0 6042 6042

3. Notes,Bonds & Debentures 41762 6227 13170 11361 11004 41762

4. Deposits 3383 2630 308 165 280 3383

5. Borrowings 8903 3047 2971 1612 1272 8903


A. Total 66643 16452 16959 13149 20083 66643

Assets



3. Investments 10137 1868 2167 1024 5078 101374. Loans & Advances 49898 10162 15631 11355 12751 49898


6. Other Assets 4292 2538 698 44 1012 4292

B. Total 66643 16544 18496 12423 19180 66643

Gap (B-A) 92 1537 (726) (903)

Cumulative gap 92 1629 903 0

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Maturity profile of assets and liabilities of IDBI as on March 31, 2001 was as follows : (Rs. crore)


Outflows

1. Capital 653 0 0 0 653 653

2. Reserves and Surplus 8509 0 0 0 8509 8509

3. Notes,Bonds & Debentures 42047 7078 10367 15146 9456 42047

4. Deposits 2639 2080 348 65 146 2639

5. Borrowings 11733 941 5319 3205 2268 11733


A. Total 71783 15826 16342 18418 21197 71783

Inflows



3. Investments 8761 1740 1885 1030 4106 8761

4. Advances 52183 11189 15548 12061 13385 52183


6. Other Assets 7450 4951 1128 317 1054 7450

B. Total 71783 20902 18577 13408 18896 71783

Gap (B-A) 5076 2235 (5010) (2301)

Cumulative gap 5076 7311 2301 0

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FINANCIALS

CASH FLOW STATEMENT

The Cash Flow Statement of IDBI for the last two years is set out below: (Rs. Crore)

Year ended March 31, 2002 2003Cash flow from Operating Activities

Net Profit before tax and extraordinary items 414.91 455.61

Adjustments for:

(Profit)/Loss on sale of investments (Net) (277.98) (419.45)

Depreciation 223.03 198.59

Discount/Expenses on Bond Issues written off 459.89 203.53

Provisions/write-offs of Loans/Investments & other provisions 3272.87 1109.70

Withdrawn from Reserve u/s 36(1)(viii) of IT Act (2500.26) 0.00

Deferred Tax credit 19.38 38.16

Interest credited to Staff Welfare Fund/other Funds 3.40 3.43

Operating profit before Working Capital changes 1615.25 1589.57

Adjustments for:

Other Assets (17.19) (132.63)

Current Liabilities 931.47 (1059.32)

Net Deferred Tax Liabilities withdrawn from Reserves (293.35) 0.00

Cash generated from operations 2236.18 397.62

Payment of Income Tax/ Interest Tax (159.08) (242.07)

Net Cash Flow from Operating Activities 2077.10 155.55

B. Cash Flow from Investing Activities

Purchase of/Advance towards Fixed Assets (84.84) (32.31)

Addition to Investments [adjusted for application money] (311.67) 703.83

(Net of Sale /Redemption of Investments)

Net Cash (used in)/raised from Investing Activities (396.51) 671.52

C. Cash Flow from Financing Activities

Reduction in share capital 0 0

Decrease in share premium 0 0

Reduction in premium on bond issue 0 0

Loans borrowed (net of repayments made) (2931.63) (2524.65)

Application money in respect of Flexibonds/unsecured bonds (4.47) 29.19

Loans lent, Bills discounted and rediscounted 952.05 1372.58(net of repayments received)

Receipts from borrowers pending appropriation (60.07) (21.84)

Purchase of / advance towards assets for leasing 60.33 38.39

Dividend paid on Equity Shares & tax on dividend (323.91) (97.92)

Expenditure out of Staff Welfare Fund (2.87) (11.42)

Increase in reserve fund - capital reserve on account of forfeiture 0 0

Transfer from Reserve Fund to Provision/TDB 0 0

Sub-total (2310.57) (1215.67)

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(Rs. crore)

Year ended March 31, 2002 2003

Sub-total (2310.57) (1215.67)

Adjustments for:

ADB and ERAS exchange fluctuation 83.97 42.27

Difference in exchange on sale of foreign currency to RBI 0 0

(to be adjusted on repurchase)

Write back to Investment Equalisation Reserve 0 0

Receipts from borrowers in advance (502.87) (105.33)

Swap Adjustment account 6.60 (167.56)

Net cash (used in)/raised from Financing Activities (2722.87) (1446.29)

Net increase in Cash and Cash Equivalents (1042.27) (619.22)

Opening Cash and Cash Equivalents 3038.81 1996.54

Closing Cash and Cash Equivalents @ 1996.54 1377.32

@ Includes balance in call lending account Rs. 214.35 crore (previous year Rs.135.91 crore) and short term funds

under BRS Rs.NIL crore(previous year Rs.20.00 crores).Figures for the previous period have been regrouped wherever considered necessary.

BALANCE SHEET

The Table below presents the summarized Balance Sheet of IDBI as at March 31, 1999 - March 31, 2003

and as at September 30, 2003(Rs. Crore)

As at March 31, 1999 2000 2001 2002 2003 Sept 30,

2003

Cash and Bank Balances 4193 1608 2365 1841 1163 1251

Investments 7853 9617 9709 10607 10180 14766

Loans and Advances 47339 50763 51606 47429 45569 42973

Bills of Exchange and 2336 2111 1443 985 613 467Promissory Notes

Premises 296 310 302 295 292 296

Other Fixed Assets 1143 1283 1349 1193 993 860

Other Assets 5983 6594 5009 4293 4306 4207

Total Assets 69143 72285 71783 66643 63116 64820

Current Liabilities and Provisions 7210 5889 6202 6066 4650 4537

Borrowings 11885 11449 9963 6879 5360 5200

Deposits 2092 1753 2639 3384 4330 4094

Bonds and Debentures 38990 43976 43817 43619 41798 43834

Total Liabilities 60177 63067 62621 59948 56138 57665

(Excluding Capital & Reserve)

Equity Capital 660 660 653 653 653 653Reserves, Funds and Surplus 8306 8558 8509 6042 6325 6502

Total Capital and Reserves 8966 9218 9162 6695 6978 7155

Total Liabilities, Capital & Reserves 69143 72285 71783 66643 63116 64820

Book Value per Equity Share (Rs) 129.2 134.1 139.8 101.9 106.4 109.1

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PROFIT AND LOSS ACCOUNTS

The Table below presents the Profit and Loss Account of IDBI for the years ended March 31, 1999 to

March 31, 2003 and for the half year ended September 30, 2003. (Rs. crore)

Year ended March 31 1999 2000 2001 2002 2003 April-Sept2003

A. INCOME FROM OPERATIONS*

Interest and Discount Income 6359 6225 6191 5862 5219 2103

Income from investments 694 818 757 761 516 337

Commission and Brokerage etc 176 194 188 130 73 28

Net profit on sale of investments 62 382 535 278 419 291

Other income 173 240 164 145 144 46

Total Income 7464 7859 7835 7176 6371 2805

B. EXPENDITURE

Interest on deposits, 5725 6370 6595 6250 5434 2381borrowings, etc.

Establishment Expenses 76 74 84 117 95 54

Accelerated write-off of Badand Doubtful Debts 2500

Less : Withdrawn from Special (2500)Reserve u/s 36(1)(viii) of IT Act

Depreciation 200 213 230 223 199 89

Other Expenditure 162 175 192 171 188 84

Total Expenditure 6163 6833 7101 6761 5916 2608

Net Profit (NP) before Tax 1301 1027 734 415 455 197

and Extraordinary items

Less : Provision for Tax 75 80 43 (10) (92) (39)

Add : Deferred Tax Credit – – – 19 38 18

NP before Extraordinary items 1226 947 691 424 401 176

Extra-ordinary items ** 33 – – – – -Net Profit as per 1259 947 691 424 401 176Audited Accounts

Prior period items 4 (3) (3) (13) – (7)

Diminution in value of investments – – 68 – – -

Adjusted Profit After Tax 1263 944 756 411 401 169

The above figures have been rounded off to the nearest crore.

* after meeting of bad debts and making provisions for bad and doubtful debts and other necessary and expedient provisions.

** write back of excess income/interest tax provision/lease equalisation adj.

Notes to Adjustments (as stated in the Auditors Report)

1. We have taken the view that adjustments to profits in respect of the following:

• material amounts relating to previous years although events triggering off the profit/loss accrued in a

subsequent year• extraordinary items and

• changes in accounting pol icies

• prior period items are required to be done as per the SEBI guidelines in respect of only those items whichare disclosed in the audited financial statements of the five financial years.

The significant accounting policies followed by IDBI are given in the Auditors’ Report reproduced later in the Offer

Document.

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ACTIVITYWISE BREAKUP OF REVENUE – FY 2003

CONSOLIDATED BALANCE SHEET AS AT MARCH 31, 2003

The consolidated Balance Sheet of IDBI and its subsidiaries is given below (Rs. Crore)

L I A B I L I T I E S

1. Share Capital

Authorised

Equity Shares 1500.00

Redeemable Preference Shares 500.00 2000.00

Issued and paid up

65 28 30 400 Equity Shares of Rs.10 each 652.83

2. Reserves, Funds and Surplus 6796.02

3. Bonds and Debentures

Tier I Bonds 2130.50

Tier II Bonds 3651.13

Other Bonds and Debentures 36181.33 41962.96

4. Deposits 10362.21

5. Borrowings 8461.42

6. Current Liabilities and Provisions 5147.63

7. Minority Interest 152.96

TOTAL 73536.03

A S S E T S

1. Cash and Bank Balances 1881.89

2. Investments 12296.16

3. Loans and Advances 48868.84

4. Bills of Exchange and Promissory

Notes Discounted/Rediscounted 1477.64

5. Premises(At cost less depreciation) 316.63

6. Other Fixed Assets

(At cost less depreciation) 1138.93

7. Other Assets 7555.94

TOTAL 73536.03

I n te r e s t a n d D i s c o u n t

I n c o m e

8 2 %

O t h e r i n c o m e

2 %

N e t p r o f i t o n s a l e o f

i n v e s t m e n t s

7 %

C o m m i s s io n a n d

B r o k e r a g e e t c1 %

I n c o m e f r o m

i n v e s t m e n t s

8 %

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CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2003

The consolidated Profit & Loss a/c of IDBI for the year ended March 31, 2003 and its subsidiaries is given below

(Rs. Crore)

INCOME (Less provisions made during the year for bad and doubtful

debts and other necessary and expedient provisions)1. Interest and Discount etc. 5534.66

2. Income from Investments 1068.08

3. Commission, Brokerage,etc. 156.90

4. Net Gain on sale of investments (not credited to Reserves or

any particular fund or account) 464.77

5. Other Income 200.63

TOTAL INCOME 7425.04

EXPENDITURE

1 Interest paid on Deposits,Borrowings,etc., 5947.51

2 Establishment Expenses 156.38

3 Directors’ & Executive Committee Members’ Fees and Expenses 0.22

4 Auditors’ Fees 0.32

5 Rent,Taxes,Insurance,Lighting, etc. 53.77

6 Law Charges 7.22

7 Postage,Telegrams & Stamps 16.62

8 Stationery,Printing,Advertisement,etc. 28.31

9 Accelerated write-off of bad and doubtful debts 2500.26

Less : Withdrawn from Special Reserve u/s 36(1) (2500.26)

(viii) of IT Act, 1961

10 Depreciation / Amortisation 42.48

11 Depreciation on Leased assets 184.51

12 Other Expenditure 210.43

TOTAL 6647.77

Profit before Tax and Extraordinary Items 777.27

Less : Provision for Income Tax (275.09)

Add : Deferred Tax Credit 41.30

NET PROFIT 543.48

The significant accounting policies and schedules to consolidated balance sheet and profit & loss account

are given in the Auditor’s Report reproduced later in the Offer Document.

KEY RATIOS

Sr Year ended March 31, 1999 2000 2001 2002 2003

No

Profitability and Efficiency Ratios

1 Average cost of funds (%) 9.0 9.2 9.3 9.2 8.52 Average cost of loan funds (%) 11.8 11.8 11.8 11.5 10.5

3 Return on average assets (%) 11.6 11.1 10.9 10.4 9.8

4 Return on average net worth (%) 15.1 10.7 7.3 5.4 5.9

5 Standard assets to total assets (%) 88.0 86.6 85.2 88.36 85.8

6 Average income earning assets (Rs.Cr) 58611 64071 64657 62996 60244

7 Average interest earning assets (Rs.Cr) 51170 55691 57285 55969 52170

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from audit qualifications, material amounts relating to adjustments for previous years and changes in accounting

policies”, of the Auditors Report and this does not take into account consequential adjustments to the Balance

Sheet.

All ratios are rounded off to a single decimal place.

Notes to ratios above alongwith reference serial no.

(1) Average Cost of Funds is interest and financial cost as a percentage of the average of total liabilities.(2) Average cost of loan funds is ratio of interest and financial expenses to average borrowings.

(3) Return on Average Assets is total income net of provisions and write offs, as a percentage of the average

of total assets.

(4) Return on average net worth is Adjusted Profit after tax less dividend on Preference Shares as a percentageof average net worth (excluding earmarked reserves).

(5) Standard assets are assets in respect of which no interest payment/ principal repayment is overdue beyond180 days.

(6) Average Income Earning Assets represent average of total assets less non-income earning assets.

(7) Average interest earning assets consist of average loan assets + bill finance + debentures + equipment leasing.

(9) Interest income before write-offs and provisions.

(10) Interest income consists of income from interest earning assets

(11) Net Profit Margin is Adjusted Profit after tax as a percentage of average Assets

(14) Interest expense include financial expenses on borrowings

(21) Debt Equity Ratio is total borrowings plus contingent liability on account of guarantees issued as a proportion

of net worth less earmarked reserves.

(22) Capital Adequacy Ratio is as per RBI’s circular dated March 29, 1994 and related subsequent guidelines.

Desired v/s Actual Ratios (As on March 31, 2003)

Ratios Desired Actual

Notional Debt Service Coverage Ratio@ 1.2 1.2

Debt Equity Ratio 12:1 7.9:1#

Capital Adequacy Ratio 9 18.7

All ratios are rounded off to a single decimal place.

# As per SEBI guidelines, in case of bonds convertible at the option of investors 50% of the amount is to be

treated as Debt (and the balance 50% as equity). The DER on that basis would be 6.3:1. However, these bonds

are convertible at the request of IDBI (issuer) and not only at the option of GOI (investor).

@ NDSCR has been calculated after excluding prepayments made by IDBI during the year by exercising call

option.

Capital Adequacy Ratio as on March 31, 2003

(a) Capital to Risk weighted Asset Ratio (CRAR) 18.72%

Core CRAR 14.08%

Supplementary CRAR 4.64%

(b) The amount of subordinated debt raised and outstanding as Tier II capital Rs.3481.13 crore

(c) Risk weighted assets

Balance sheet items Rs.57559.95 crore

Off-Balance sheet items Rs. 3406.62 crore

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AVERAGE BALANCES AND AVERAGE INTEREST RATES

The average Balances and average interest rates for the last three years is given in the table below.

March 31, 2001 March 31, 2002 March 31, 2003

Avg Interest Avg Avg Interest Avg Avg Interest Avg

Bal (Rs.Cr) Rate Bal (Rs.Cr) Rate Bal (Rs.Cr) Rate

(Rs.Cr) (%) (Rs.Cr) (%) (Rs.Cr) (%)ASSETS

Rupee loans 48253 6001 12.44 49396 6017 12.18 46070 5196 11.28

FC loans 9032 781 8.64 6573 384 5.85 6099 334.7 5.49

Total assets 57285 6782 11.84 55969 6401 11.44 52170 5530.82 10.60

LIABILITIES

Re borrowings 46920 5968 12.72 46429 5955 12.82 45410.5 5314 11.70

GOI 1318 196 11.06 734 137 18.66 186.1 14.08 7.57

SLR & other Govt.

guaranteed bonds 7715 907 11.76 7005 837 11.94 6118.6 669.41 10.94

Other Borrowings 37886 4915 12.97 38690 4981 12.87 39105.8 4631 11.84

FC borrowings 9879 756 7.65 8721 392 4.50 727.4 228.6 3.14

Total liabilities 56799 6724 11.84 55151 6347 11.51 52684.9 5542.69 10.52

• Average balances are the average of outstandings at the end of the year and at the end of the previous year.

DETAILS OF FIXED AND FLOATING RATE ASSETS AND LIABILITIES(Rs.Crore)

As on March 31, 2003 Assets* Liabilities#

Fixed Floating Total Fixed Floating Total

Rupee 47504 464 47968 45342 16 45357

Foreign Currency 348 5763 6112 592 5538 6130

Total 47853 6227 54080 45934 5554 51488

* Total assets less Fixed assets, investments in equity & MF units, Cash and Current a/c balances.# Total outstanding debt.

MANAGEMENT DISCUSSION

The following discussion and analysis should be read in conjunction with the IDBI’s financial statements and

related notes which appear on the foregoing pages and under the Auditors Report on page (98).

Result of Operations for the half year ended September 30, 2003 compared with the half year ended

September 30, 2002

IDBI’s total income during April-September 2003 was Rs.2,805 crore as against Rs.3,315 crore during April-

September 2002. Total expenditure before depreciation and tax decreased to Rs.2,519 crore from Rs.3,066 crore

during the same period in the previous year. Gross Profit (after interest but before depreciation and tax) amountedto Rs.286 crore as against Rs.249 crore during April-September 2002. After making provisions for depreciation

and tax( net of deferred tax) of Rs.89 crore and Rs.21 crore respectively, Profit after Tax for the half year endedSeptember 30, 2003 stood at Rs.176 crore as against Rs.152 crore during the corresponding period of the

previous fiscal year. Aggregate assets of the Bank as on September 30, 2003 decreased by 0.9% to Rs.64,820

crore over Rs.65,417 crore as on September 30, 2002.

Result of Operations for the year ended March 31, 2003 compared to the year ended March 31, 2002

IDBI’s total income during April-March 2003 was Rs.6371 crore as against Rs.7176 crore during April-March 2002.Total expenditure before depreciation and tax decreased to Rs.5717 crore from Rs.6538 crore during the same

period in the previous year i.e. by Rs.821 crores mainly due to interest cost on loan funds. Gross Profit (after interestbut before depreciation and tax) amounted to Rs.654 crore as against Rs.638 crore during April-March 2002. After

making provisions for depreciation and tax of Rs.199 crore and Rs.92 crore respectively and also after taking into

account deferred tax credit of Rs.38 crore, Profit after Tax for the year ended March 31, 2003 stood at Rs.401 croreas against Rs.424 crore during the corresponding period of the previous fiscal year. Aggregate assets of the Bank

as on March 31, 2003 decreased by 5.3% to Rs.63116 crore over Rs.66643 crore as on March 31, 2002.

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Result of Operations for the year ended March 31, 2002 compared to the year ended March 31, 2001

IDBI’s total income during April-Mar 2002 was Rs.7176 crore as against Rs.7835 crore during April-Mar 2001.Total expenditure before depreciation and tax decreased to Rs.6538 crore from Rs.6871 crore during the sameperiod in the previous year i.e. by Rs.333 crore mainly due to interest cost on loan funds. Gross Profit (afterinterest but before depreciation and tax) amounted to Rs.638 crore as against Rs.964 crore during April-Mar 2001.After making provisions for depreciation and tax of Rs.223 crore and Rs.10 crore respectively and also after taking

into account deferred tax credit of Rs.19 crore, Profit after Tax for the year ended March 31, 2002 stood at Rs.424crore as against Rs.691 crore during the corresponding period of the previous fiscal. Aggregate assets of the Bankas on March 31, 2002 decreased by 7.2% to Rs.66643 crore over Rs.71783 crore as on March 31, 2001.

Result of Operations for the year ended March 31, 2001 compared with year ended March 31, 2000

Interest and discount income during the year ended March 31, 2001 amounted to Rs.6191 crore compared withRs.6225 crore for the previous year (a decrease of 0.5%) IDBI’s portfolio of loans and advances, bills of exchangeand promissory notes discounted or rediscounted decreased at a rate of 3.96% (from Rs.52874 crore to Rs 50779crore) Income from investments amounted to Rs.757 crore compared to Rs.818 crore in the previous year, adecrease of 7.5%. Commision and brokerage income during the year ended March 31, 2001 was Rs. 188 crorecompared to Rs.194 crore earned during the year ended March 31, 2000 (a decrease of 3.1%). Net gain on saleof investments at Rs.535 crore was higher by 40% compared to Rs.382 crore realised in the previous year. Otherincome was Rs.164 crore compared to Rs.241 crore in the previous year, a decrease of 32%. Interest paid ondeposits and other borrowings during the year ended March 31, 2001 aggregating Rs.6595 crore compared toRs.6370 crore spent during the previous year (an increase of 3.5%). The higher rate of growth in interest expenseis mainly on account of rise in rupee borrowings to the extent of Rs.954 crore and repayment of low cost

borrowings on maturity. Miscellaneous other expenditure (including establishment expenses, rent, taxes, insuranceand depreciation) increased by 9.3% from Rs.463 crore to Rs.506 crore.

The resultant profit before tax was Rs.734 crore compared with Rs.1027 crore recorded during the year ended March31, 2000 (decrease of 28.5%) The provision for tax during the year ended March 31,2001 amounted to Rs.43 crore(an effective rate of 5.9%) compared with Rs.80 crore for the year ended March 31, 2000 (an effective rate of 7.8%),Total assets as at March 31, 2001 were Rs.71783 crore, a decrease of 0.7% from Rs.72285 crore as at March 31,2000.

IDBI confirms that

1. There have been no unusual or infrequent events or transactions, since the date of the Auditors Report(November 17, 2003) contained herein.

2. There are no significant economic changes that materially affected or are likely to materially affect income fromcontinued operations.

3. There are no known trends or uncertainties that have had or are likely to have a material adverse impact onthe revenue or income from continuing operations.

4. There have been no changes in the activity of the Issuer which may have had a material effect on thestatement of profit/ loss for the last five years.

5. The Bill proposing the repeal of IDBI Act, 1964 has been approved by both the Houses of Parliament viz. LokSabha (Lower House) and Rajya Sabha (Upper House) on December 8 and December 15, 2003 respectively.The Bill has also received the assent of the President of India. The Bill envisages transfer of all assets andliabilities to a company to be named as “Industrial Development Bank of India Ltd.”. The Bill facilitates the newcompany to become a banking company, without the need to obtain a separate banking license under BankingRegulation Act, 1949. It envisages, inter alia, the conversion of IDBI into a Commercial Bank while continuingto be a Development Bank. The Bank will be given certain regulatory forbearance which include maintenanceof reserve requirements. Brief particulars in this regard are given on page 40 of this Offer Document.

TAXATION

IDBI was exempted from income tax by virtue of specific exemption granted under Sec 35 of the IDBI Act, 1964.IDBI became liable to pay income tax from the assessment year 1992-93 onwards, after Sec. 35 of the IDBI Actwas repealed by Finance (No.2) Act, 1991.

The status of IDBI’s pending tax assessments and appeals as on October 31, 2003 is as follows:

INCOME TAX

Assessment Year Status

1992-93 Appeal againt re-assessment is pending before CIT (A). Penalty proceedingsu/s 271(1)/(c) has been initiated. The demand outstanding Rs.38.91 crores.

1993-94 Appeal against the orginal assessment order and the reassessment order arepending before the CIT(A). Penalty proceedings u/s 271(1)/(c) is alsopending. The demand outstanding is Rs.39.37 crores.

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1994-95, 1995-96, 1996-97 Appeals are pending before the CIT(A) against the original assessment

orders and also the reassessment. Penalty proceeding u/s 271(1)(c) has ben

inititated by the AO. The demand outstanding is Rs.47.86 crores, Rs.197.2crores and Rs.54.24 crores respectively.

1997-98 Appeal is pending before the Income Tax appellate Tribunal against the orderof the CIT(A) on certain issues. There is no outstanding demand. The

assessment has been reopened.

1998-99,99-2000,2000-01 Appeals are pending before the CIT(A) against the Assessment order passed

by the AO. There is outstanding demand of Rs.210.95 crores, Rs.191.16crores and Rs.373.14 crores respectively.

2001-02 & 2002-03 Return of income have been fi led. Adequate provisions have been made to

cover the income tax liability. The Assessment has not completed so far.

WEALTH TAX


2001-2002 to 2002-03 Returns of wealth have been fi led. Adequate provisions have been made to

cover the wealth tax liability. The assessment have been completed so far.

INTEREST TAX


1994-95 to 1996-97 Appeals are pending before the CIT(A) against the Assessment Orders.

There is no outstanding demand. Assessment for these assessment years

have also been reopened.

1997-98 Appeal filed before ITAT against the order of CIT (A). There is no

outstanding demand. Assessment for these assessment years have beenreopened

1998-99 to 2000-01 Appeals are pending before the CIT (A) against the assessment orders. There

is no outstanding demand.

Tax provision as per books : As on October 31, 2003, the gross demand raised by the Income Tax Departmenton account of Income Tax, Wealth Tax and Penalty is Rs.5029.25 crore against which the provision made is

Rs.2866.69 crore. The demands include Rs.1462.22 crore in respect of matters in which IDBI has favourabledecisions in its own case in the earlier years. Thus the amount of contingent liability on account of Tax in disputeis Rs.700.33 crore.

STATEMENT OF TAX COMPUTATION (Rs. crore)

For the year ended March 31, 2001 2002 2003

Tax at notional rate (A) 208 133 121

Tax Shelters

Permanent nature

– Deduction under Sec.36(1)(viii) 14 11 0

– Income exempt from tax 95 99 0

– Indexation Benefit – 39 30

– Reinvestment 110 0 15

Timing DifferenceDifference between tax depreciation and book depreciation (1) (19) (26)

– Other adjustments 9 (9) 10

Total Tax Shelters (B) 228 121 29

Provision for Tax (A – B) (20) (12) 92

* Tax provision for year ended 31.3.2001, 31.3.2002 has been under Section 115JA/115JB of the Income Tax Act, at Rs.43 crores and Rs.10 crore respectively.

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SUBSIDIARIES

IDBI CAPITAL MARKET SERVICES LTD.

IDBI Capital Market Services Ltd (IDBI Capital), a wholly owned subsidiary of IDBI, was established in December

1993 to offer a broad range of financial services. The Company’s business activities include Bond Trading, EquityBroking, Client Asset Management and Depository Services.

IDBI Capital is one of the Primary Dealers accredited by the Reserve Bank of India to act as a market maker inGovernment Securities. The Company, during 2002-03, achieved an outright secondary market turnover in excess

of Rs. 100000 crore in Government Securities for the second time in succession. The Company also achieved a

repo turnover in excess of Rs 125000 crore during 2002-2003. The Company participated in the Securitiesauctions conducted by RBI and achieved a success ratio of 45% in Government Securities and 40% in Treasury

Bills (as against the requirement of 40%). The Company is also at the forefront in building a retail debt marketin India. IDBI Capital is also an active institutional equity broker having memberships of both BSE and NSE. The

company has also acquired Trading and Clearing Memberships on the recently started Derivatives segment ofBSE and NSE. The Company is also one of the largest portfolio manager for pension and provident funds with

assets under management presently being more than Rs 26,000 crore. The Company also acts as an arranger

in the private placement market for institutional and corporate debt and also markets products like equity, debt,mutual fund instruments, RBI relief bonds etc. through its nation-wide network of sub-agents. As a Depository

Participant, the Company offers its institutional and individual clients the facility to maintain their investments insecurities in electronic form.

The abridged Balance Sheet and Profit and Loss Account of IDBI Capital is given below:

ABRIDGED BALANCE SHEET (Rs. crore)

As on March 31, 2001 2002 2003

Paid-up capital 100.0 150.0 200.0

Reserves & Surplus 41.5 238.2 315.4

Current liabilities & provisions (including loans) 1008.1 1606.8 2531.1

TOTAL LIABILITIES 1149.6 1995.0 3046.5

TOTAL ASSETS 1149.6 1995.0 3046.4

PROFIT AND LOSS ACCOUNT (Rs. crore)


Total Income 141.2 469.9 503.9

Total Expenditure 63.6 99.8 136.5

Profit before tax 77.5 370.1 367.4

Profit after tax 45.0 234.0 228.1

EPS (Rs per share) 4.5 15.6 11.4

Book Value (Rs per share) 14.1 26.3 25.77

IDBI BANK LTD.

IDBI Bank Ltd., a new generation private sector bank, incorporated in September 1994, was set up by IDBI to offer

complete range of commercial banking products and services to corporate and retail customers. With globallyskilled management team, focus on technology driven retail banking and emphasis on superior credit quality, IDBI

Bank has been able to build a customer-centric banking franchise on the principles of profitability, growth andquality.For the year ended March 31, 2003, IDBI Bank recorded 36% growth in Net Profits to reach Rs.71.1 crores.

Significant growth in Net Interest Income (over 40%) and Core Fees (over 75%) were the key drivers of profitabilitydelivering return on equity of 21.8%.

IDBI Bank’s distribution now extends to 68 cities across 97 banking outlets and 264 ATMs serving 800,000

customers. IDBI Bank’s Total Deposits grew by 15.2% in FY03 to reach Rs.6032 crore while Savings Depositsgrew by 53% at Rs.853 crores. IDBI Bank’s Customer Assets grew by 26% to cross Rs.5000 crores while Retail

Assets grew 4 times to reach Rs.1608 crores.

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With focus on Retail Deposits (58% of Total Deposits) and Low Cost Deposits (35% of Total Deposits), IDBI Bankwas able to reduce its Average Cost of Deposits to 5.2% in Q4FY03 – one of the lowest in the banking industry.

IDBI Bank now has net NPA/ Net Customer Assets of 0.9% and Provision Cover of 76%. With net NPA/ Net Worthof about 13%, IDBI Bank’s Credit Quality is now amongst the best across banks in India.

The current market price of equity shares of IDBI Bank (as on April 30, 2003 was Rs.23.65). The highest & lowest

price of shares of IDBI Bank during previous 52 weeks was Rs.36 and Rs.18 respectively of National Stock

Exchange.The abridged Balance Sheet and Profit & Loss Account of IDBI Bank Ltd. are as follows.

BALANCE SHEET (Rs. crore)

As on March 31, 2001 2002 2003

Liabilities

Capital 140.0 140.0 140.1


Deposits 3567.5 5234.5 6032.3

Borrowings 783.6 771.4 1041.5

Other Liabilities & Provisions 299.5 334.3 502.5

TOTAL LIABILITIES 4918.7 6641.1 7928.7

ASSETSCash and Bank Balance with RBI 266.6 363.1 600.8

Balances with Banks and Money at call and short notice 124.5 355.5 101.6

Investments 2524.6 2417.8 2410.9

Advances 1725.0 3099.3 4325.2

Fixed Assets 115.5 158.2 164.5

Deferred Tax Asset – 1.3 4.5

Other Assets 162.5 245.9 321.3

TOTAL ASSETS 4918.7 6641.1 7928.8

PROFIT AND LOSS ACCOUNT (Rs. crore)


IncomeInterest 539.1 508.8 598.1

Other Income 69.6 122.5 165.1

TOTAL 608.7 631.3 763.1

Expenditure

Interest expenses 437.5 365.2 396.5

Operating Expenses 102.6 143.0 206.6

Provisions & Contingencies 49.2 70.7 89.0

Total 589.3 578.9 692.0

Profit after Tax 19.4 52.4 71.1

EPS (Rs per share) 1.38 3.74 5.08


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IDBI INTECH LTD.

Business Operations :

a) IDBI Intech Ltd. (INTECH) was set up as a wholly owned subsidiary of IDBI in March, 2000 to undertakeInformation Technology (IT) related activities. It is registered with Software Technology Parks of India (STPI). The

authorised capital of INTECH is Rs.100 crore comprising equity share capital of Rs.75 crore and preference sharecapital of Rs.25 crore. IDBI subscribed an amount of Rs.8.10 crore towards the equity share capital of INTECH.

IDBI has also contributed Rs.3.50 crore as advance towards share capital.b) INTECH continued to service IT needs of IDBI both in terms of Facilities Management Services (FMS) andsoftware maintenance till September 2002 and January 2003 respectively. INTECH has developed and partly

delivered integrated software for the HR and various administration activities of IDBI as well as for Fixed Depositin single man branches. It is proposed to integrate a new payroll module with HR and Admin. software which is

expected to be completed by June 2003.

c) INTECH managed to achieve the breakthroughs in obtaining software development orders from NABARD forFinancial Accounting and from Kerala Finance Corporation for Loan Accounting, Financial Accounting and

Administration and HR. INTECH was awarded contract by Punjab National Bank for conducting acceptance testfor ATMs, Telebanking Software, Branch Automation Software, Servers, and PCs etc. on an all India basis.

d) During the year INTECH has set up a 100 seats Contact Center which would commence commercial production

in May, 2003. Initially the operations would start with 25 seats which would be increased to 100 seats by July 2003.It is proposed to leverage the contact center operations after it is stabilised for procuring BPO assignments.

INTECH has tied up with an USA based Company for providing prospect lists and telemarketing services on

mutually agreed terms and conditions.Technology Partners : INTECH has entered into Microsoft Certified Partner program and was also appointed asCISCO reseller during the year.

Empanelment : INTECH was also empanelled by the following government organisations as the service provider/

IT Vendor.· National Institute of Agricultural Marketing, Rajasthan

· Government of MaharashtraQuality Certification : INTECH was awarded the ISO 9001-2002 quality certification by BVQi. INTECH has also

initiated activities in quality process for CMM Level 3 and the certification is expected to be received by September,

2003. The Company has initiated activities for ISO certification for contact center operations which is expected tobe completed by August, 2003.

Future plans : Based on a review of its existing strengths and opportunities, INTECH has business plans to focuson financial sector, provide value added services through Contact Center, target international development

institutions for financial/loan accounting system, explore opportunities in setting up WAN and related services,

explore International BPO opportunities through Contact Center operations etc.Summarised financial results for the year 2002-2003 : The year 2002-2003 was the second full year of effective

operations of the Company. During the year under review, the aggregate revenue from Sales and Services andother income was Rs. 613 lakh as against Rs. 785 lakh for the previous year. Substantial part of the revenue

was generated from the IT services provided to IDBI. The income had come down during the year underconsideration as maintenance services to IDBI were only for part of the year. Pending orders to the extent of

Rs.110 lakh remained to be executed, the income against which would be booked based on deliverables in the

financial year 2003-2004. The Company also provided services to Delhi Financial Corporation, IREDA, SIDBI, IDBIBank Ltd. IDBI Principal, ISIL, NABARD, Punjab National Bank, etc. The Company earned Profit before tax of Rs.

39 lakh for the year ended March 31, 2003 as against Rs. 42 lakh for the year ended March 31, 2002.The abridged Balance Sheet and Profit and Loss Account of IDBI Intech Ltd. is given below:

BALANCE SHEET (Rs crore)

As on March 31, 2001 2002 2003

Paid up Equity Capital 1.60 1.60 8.10

Adv Towards Share Capital 6.50 6.50 3.50


Current Liabilities & Provisions 1.33 3.61 5.21

Deferred Tax Liabilities – 0.05 0.05

Total Liabilities 9.53 12.08 17.34

Total Assets 9.53 12.08 17.34

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PROFIT & LOSS ACCOUNT (Rs crore)


Total Income 2.17 7.85 6.13

Total Expenditure 2.02 7.43 5.74

Profit Before Tax 0.15 0.42 0.39

Profit After Tax 0.11 0.26 0.20

Basic EPS (Rs per share) 0.66 1.63 0.21


IDBI HOME FINANCE LIMITED

In September 2003, IDBI acquired the entire shareholding of Tata Finance Limited (TFL) (i.e. 4,99,76,746 equity

shares of face value Rs.10 per share) in Tata Homefinance Limited, at par, for total consideration of Rs.49.98crore. The acquisition represents IDBI’s foray into the retail financing sector. The company has since been

renamed as “IDBI Homefinance Limited”. The company offers loans to individuals for purchase / construction /

extension / repairs of residential units. The company also offers individual employee loans through a corporate

Line of Credit, either guaranteed or routed through the employer. The company has implemented a Total HomeLoan solutions (THLS) system with connectivity through lease lines with all its 16 branches. The system is scalableand forms the foundation for future business growth.

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OTHER STATUTORY INFORMATION

Capitalisation Statement

The following table sets out the audited capitalisation of Industrial Development Bank of India as at September 30,2003 and also adjusted to give effect to the present issue of bonds aggregating to Rs.800 crore pertaining to the

present issue. (Rs.crore)

Particulars September 30, 2003 As adjusted for thepresent issue

Short Term Debt (Rupee) (a) 1687 1687

Long Term Debt :

Long Term Debt (Rupee) 41612* 42412Long Term Debt (Foreign currency) 5735 5735

Total Long Term Debts (b) 47347* 48147

Total Debts (c) = (a+b) 49034* 49834

SHARE CAPITAL

Issued, Subscribed and paid-up65,28,30,400 Equity Shares of Rs 10/- each

Total Equity Capital (d) 653 653

RESERVES FUNDS AND SURPLUS

Reserve Fund 3808 3808Share Premium 1624 1624

Special Reserve under Section 36(1)(viii)of the Income Tax Act 1961 111 111

Surplus 652 652

Other Reserves 307 307

Total Reserves & Funds (e) 6502 6502

Total Shareholders’ Funds (f) = (e+d) 7155 7155

Long Term Debt (b)/Equity(f) 6.62 6.73

* Excluding amount raised under Flexibonds-19 public issue for an amount of Rs.600 crore (including

greenshoe option of Rs.300 crore) launched in December 2003 for which post issue formalities are being

completed.

Notes:(1) Debts having a maturity period of one year or more than one year from the date of borrowing have been

treated as Long Term Debts and those having maturity period within a year are treated as Short Term Debts.(2) Amounts in Foreign currencies have been translated into rupees at the FEDAI rates prevailing as on

September 30, 2003.

Outstanding Litigation and material developments

The outstanding litigations as on September 30, 2003 aggregate Rs.385.87 crore with respect to 139 cases. Thereare no outstanding litigations involving IDBI pertaining to matters which are likely to adversely affect the operations

and finances of IDBI. Category wise breakup of the cases is given below:

(Rs.Crore)

Category Number of Cases Amount involved

Suits filed by borrowers 14 320.72Suits filed by other parties 3 48.33

Property disputes 3 16.61Miscellaneous cases 4 0.21

Misc consumer court cases 115 *

Total 139 385.87

*not quantifiable.

The claim made in these cases are being contested by IDBI and in our view, they will not have any material

adverse effect on IDBI. There are no outstanding litigations involving any of the directors of IDBI who are electedby the public shareholders under the IDBI Act.

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Save as otherwise disclosed in the Offer Document, since the date of the last audited Balance Sheet, nocircumstances have arisen which adversely affected or are likely to adversely affect IDBI’s operations or

profitability, or the value of its assets, or its ability to pay its liabilities within the next twelve months.

There are 30 litigation pending as on June 15, 2003 against IDBI Bank Ltd. (a subsidiary of IDBI) involvingan amount of Rs.91.53 crore.

Interest of Present Industrialist Director of IDBIThe industrialist Director of IDBI is interested to the extent of shares held by them and/ or by their friends and relativesor which may be subscribed by them and/ or allotted to them by IDBI.

The Industrialist Director of IDBI is interested to the extent of fees, if any, payable to them for attending meetings of

the Board or Committee and reimbursement of traveling and other incidental expenses, if any, for such attendance asper IDBI Act.

The Industrialist Director of IDBI is not interested in the appointment of or acting as Underwriters, Registrars andBankers to the Issue or any such intermediary registered with SEBI.

The Industrialist Director of IDBI is not interested in any property acquired by the Bank within two years of the date of

Offer Document or proposed to be acquired by it.

Save as stated above, no amount or benefit has been paid or given to the IDBI’s Directors or Officers since its

incorporation nor is intended to be paid or given to any Directors or Officers of IDBI except the normal remuneration

and/or disbursement for services as Directors, Officers or Employees of IDBI.

Stock Market Data

(i) IDBI’s Equity Shares were listed on The Stock Exchange, Mumbai (BSE) and National Stock Exchange ofIndia Ltd. (NSE) in September 1995. The following is the movement in the Share Price of IDBI on The Stock

Exchange, Mumbai and the National Stock Exchange of India Ltd.

Period BSE NSE

High (Rs) Low(Rs) Average(Rs)* High (Rs) Low(Rs) Average(Rs)*

2002 26.50 14.00 20.25 26.65 14.00 20.33

2001 52.25 15.20 33.73 51.05 45.05 48.05

2000 75.10 30.30 52.70 78.95 30.05 54.50

December 2003 62.40 52.45 57.43 62.10 52.25 57.18

November 2003 56.25 50.25 53.25 56.05 50.45 53.25

October 2003 53.25 41.05 47.15 53.05 40.60 52.70September 2003 41.45 34.00 37.73 41.40 33.90 37.65

August 2003 49.00 36.05 42.53 48.55 36.10 42.33

July 2003 45.35 33.40 39.38 45.25 33.55 39.40

* The average price is calculated as (High price + low price)/ 2

(ii) The following table shows number of shares traded on the day High and Low prices of IDBI’s shares wererecorded on BSE & NSE for the period January 2003 to June 2003 :

Month BSE NSE BSE NSE

High High Low Low

Date No. of Date No. of Date No. of Date No. of

Shares Shares Shares Sharestraded traded traded traded

December 2003 08.12.03 1613151 08.12.03 3237094 12.12.03 1074588 12.12.03 2453079November 2003 11.11.03 884560 11.11.03 1871116 24.11.03 216410 21.11.03 607600

October 2003 31.10.03 329846 31.10.03 881662 01.10.03 235933 01.10.03 494659

September 2003 29.09.03 26601000 29.09.03 71149900 05.09.03 58977600 05.09.03 91039700

August 2003 11.08.03 49071700 11.08.03 124956000 25.08.03 40146000 25.08.03 85216400

July 2003 14.07.03 79471900 14.07.03 162386500 01.07.03 30369900 01.07.03 76312400

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(iii) The total volume of shares traded in each month during the six months preceding the date of filing with theStock Exchange is as follows:

No. of shares traded

Period BSE NSE

December 2003 24597581 52272562

November 2003 6837292 15468983

October 2003 25262582 51959460

September 2003 549539600 1215694500

August 2003 1171246700 139755800

July 2003 950180500 2122206000

(iv) As on December 31, 2003, there were 2,97,048 shareholders of IDBI.

Details of listing of IDBI and its Subsidiaries

Company Instrument Listed on

IDBI Equity BSE, NSE

Flexibonds BSE, NSE

IDBI Bank Equity BSE, NSE, MPSE

PUBLIC ISSUES

Details of all outstanding public bond issues made in the Indian capital market is furnished in the following table:

Year of Issue Type of Issue Amount Amount Amount Deemed Date of Rede Rating atof Issue retained outsta Date of closure mption the time

(Rs. crore) (Rs. crore) nding Allotment date of Issue

January 1997 Super Deposit Bond 750 1500 1174 January January 31/1/2005

Flexi-2 Monthly Income Bond 31, 1997 23, 1997 31/1/2005

Double Money Bond 31/8/2006

January 1998 Infrastructure Bond 750 985 234 March February 16/3/2005

Flexi-3 16, 1998 18, 1998

September 1998 Regular Income Bond 750 1343 1492 November October 16/11/2005Flexi-4 Growing Interest Bond 16, 1998 17, 1998 16/11/2005

Deep Discount Bond 16/05/2016 ‘CARE

Education Bond 16/11/2007-12 AAA’ by

December 1998 Infrastructure Bond 750 1500 1215 February January 11/2/2006 CARE &

Flexi-5 Growing Interest Bond 11, 1999 15, 1999 11/2/2006 ‘AAA’ by

Multi Option Bond 11/2/2006 CRISIL

Regular Income Bond 11/2/2006

February 1999 Regular Income Bond 750 1500 1233 April 5 March 5/4/2006

Flexi-6 Growing Interest Bond and 15, 1999 5/4/2006

Retirement Bond March 27, 5/4/2008-13

Infrastructure Bond 1999 27/3/2006

July 1999 Regular Income Bond 750 1500 1521 September August 11/9/2004

Flexi-7 Growing Interest Bond 11, 1999 19, 1999 11/9/2004

Deep Discount Bond 11/9/2014

Retirement Bond 11/9/2004

February 2000 Regular Income Bond 300 573 366 March March 27/3/2005 ‘AAA’ by

Flexi-8 Growing Interest Bond 27, 2000 10,2000 27/3/2005 CRISIL &

Infrastructure ‘IndAAA’

(Tax Saving) Bond 27/4/2007 by DCR

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Year of Issue Type of Issue Amount Amount Amount Deemed Date of Redemption Rating atof Issue Retained Outsta Date of Closure Date the time

(Rs. crore) (Rs. crore) -nding Allotment of Issue

November 2000 Regular Income Bond 300 561 588 January December 5/1/2006 ‘AAA’

Flexi-9 Growing Interest Bond 5, 2001 16, 2000 5/1/2006 by

Money Multiplier Bond 5/5/2007 CRISIL

Infrastructure 5/1/2004 “LAAA” by

(Tax Saving) Bond or 5/5/2004 ICRA

February 2001 Regular Income Bond 300 599 613 March March 30/3/2006 and

Flexi-10 Growing Interest Bond 30, 2001 2, 2001 30/3/2006 ‘Ind AAA’

Money Multiplier Bond 30/10/2007 by

Infrastructure 30/3/2004 FITCH

(Tax Saving) Bond or 30/7/2004

December 2001 Regular Income Bond 250 321 324 February January 5/2/2009 or 12 ‘AA+’ by

Flexi-11 Growing Interest Bond 5, 2002 15, 2002 5/2/2007 CRISIL &

Money Multiplier Bond 5/4/2007 or 5/5/2009 ‘LAA+’

Infrastructure 5/2/2005-07-09 by ICRA


February 2002 Regular Income Bond 250 334 334 March February 15/3/2009 or 12 ‘AA+’ by

Flexi-12 Growing Interest Bond 15, 2002 25, 2002 15/3/2007 CRISIL &

Retirement Bond 15/3/2009 or 12 ‘LAA+’

Infrastructure 15/3/2005 or 09 by ICRA

(Tax Saving) Bond or 15/9/2005 & ‘IndAA+’

March 2002 Regular Income Bond 250 319 332 April April 30/4/2009 or 12 by FITCH

Flexi-13 Money Multiplier Bond 30, 2002 10, 2002 30/9/2009 or 30/11/11

Retirement Bond 30/4/2009 or 12

Infrastructure 30/4/2005 or 07


July 2002 Regular Income Bond 200 294 317 September August 12/9/2007 or 09 ‘AA+’ by

Flexi-14 Money Multiplier Bond 12, 2002 16, 2002 12/11/2007 or 12/2/10 CRISIL &

or 12/4/2012 ‘IndAA+’

Retirement Bond 12/9/09 or 12 by FITCH

Growing Interest Bond 12/9/07 & ‘LAA’

by ICRA

October 2002 Infrastructure 300 520 531 November November 25/11/05 or 08

Flexi-15 (tax saving) Bond 25, 2002 2, 2002 or 25/5/06 or 09

Growing Interest Bond 25/11/07

Money Multiplier Bond 25/7/07 or 25/5/10 ‘AA+’ by

or 25/9/12 CRISIL &

Regular Income Bond 25/11/07 or 09 ‘AA+(ind)’

November 2002 Infrastructure 250 536 536 January December 17/1/06 or 08 by FITCH

Flexi-16 (tax saving) Bond 17, 2003 23, 2002 or 17/7/06 & ‘LAA’

Floating Rate Bond 17/1/06 or 08 by ICRA

Retirement Bond 17/1/10 or 13

Regular Income Bond 17/1/10 or 13

January 2003 Infrastructure 300 515 516 January December 4/3/06 or 08


Money Multiplier Bond 4/4/10 or 4/5/12GrowingInterest Bond 4/3/08


March 2003 Infrastructure 350 485 485 April March 25/4/06 or 08


Money Multiplier Bond 25/10/10 or 12

Fixed Option Floating Option Bond 25/4/08


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to ‘LAA’. FITCH has revised the rating from ‘IndAAA’ to ‘IndAA+’. CARE has revised the rating from ‘CARE AAA’

to ‘CARE AA+’. The ratings in respect of Public Issue instruments of IDBI were carried out by CARE (promoted

by IDBI) along with CRISIL, an independent Credit Rating Agency, prior to commencement of SEBI (Credit RatingAgencies) Regulation, 1999. CARE will monitor the rating till the securities rated by it are outstanding.

Investor Grievances

The status report for the total number of grievances received and pending for redressal as on December 31, 2003,is given in the following table:

No. Nature of complaint Pending

1 Letters from SEBI 0

2 Letters from Stock Exchanges 0

3 Non-receipt of Allotment Advice/ Bond Certificate/

Share Certificate/ Duplicate Certificate 0

4 Correction in Bond certificate/ other document 22

5 Change of address/ bank details etc. 23

6 Non-receipt of Brokerage /incentive 7

7 Non-receipt of Interest /dividend Warrants 0

8 Transfer related queries 09 Miscellaneous/ Other queries 32

Total 84

As per IGG Cell of SEBI there were 41 complaints pending as on December 31, 2003. Out of these, 14

complaints have been pending for more than 30 days.

Investor grievance redressal system

To ensure that the Investor grievances are handled expeditiously and satisfactorily IDBI has put up an IGG cell underthe overall supervision of the Compliance Officer to handle all investor grievances. IDBI has appointed a Registrar

and Transfer Agent to effectively deal with Investor grievances. The agreement between IDBI and the Registrars tothe Issue provides for the retention of issue records with the Registrars for a period of at least twelve months from the

last date of dispatch of Letters of Allotment / Bond Certificates / Refund Orders to enable the investors to approach

the Registrars for redressal of their grievances.

Compliance Officer

K P RamakrishnanGeneral ManagerDomestic Resources Department19th Floor, IDBI Tower, WTC ComplexCuffe Parade, Mumbai - 400005Tel : (022) 22189117, 22180479 Fax : (022) 22188137, 22181155e-mail : [email protected]

The investors can also contact the Registrars to the Issue Datamatics Financial Software & Services Ltd at their office

at Plot No. A 16 & 17, MIDC, Part B, Crosslane, Marol, Andheri (East), Mumbai - 400 093, Tel : (022) 2837 5519,Fax : (022) 2835 0217, in case of queries/ grievances, if any, regarding this issue.

As far as possible, IDBI endeavors to resolve the investors’ grievances within 60 days of its receipt.

Registrar & Transfer Agent for the issue will be Investor Services of India Ltd, IDBI Building, Plot No. 39-41, Sector 11,

CBD Belapur, Navi Mumbai - 400 614, Tel : (022) 2757 9645, Fax : (022) 2757 9650.

Promises Vs Performance

The offer document in respect of the previous bond Issues of IDBI did not contain any statement on projectedfinancial or operational performance.

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RISK FACTORS

Internal Factors

(a) Redemption Reserve: Creation of Redemption Reserve is not envisaged for the proposed issue of Bonds.

IDBI being a public financial institution has been raising resources both from domestic market and overseas

market in the form of unsecured borrowings. In respect of the monies borrowed from overseas markets, IDBI has agreed to create pari passu charge if any other lender is offered security on the assets of IDBI. Since

the resources raised by IDBI are being utilised for the purpose of its business i.e. providing credit and other facilities to the industry, the assets of IDBI are mostly in form of loans and advances. Hence it is proposed

that the Bonds shall be unsecured in nature in that they shall not be secured against any asset of IDBI. IDBI

has appointed a trustee to protect the interest of the investors. In the event of default, the bondholders may proceed against IDBI in terms of the mechanism given under para ‘Trustees to the bondholders’ on page

26.

(b) Credit Risk: The business of lending carries the risk of default by borrowers.

Any term lending activity is exposed to credit risk arising from the risk of default by the borrowers. IDBI has putup a systematic credit evaluation process in place. Necessary control measures like maintaining a diversified

portfolio with industry-wise, promoter group-wise and specific client-wise exposure limits are set to avoid con-centration of lending to any specific industry segment/ promoter group/ company. These limits help minimise

credit risk. With a view to derisk the portfolio the exposure limits have been reviewed and exposure by way ofProject Finance assistance to greenfield projects have been reduced as a matter of deliberate strategy. A

Credit Risk Monitoring Group (CRMG) has been set up at the Head Office to monitor the risk associated withlending to individual projects, business groups and industries. IDBI monitors the performance of its asset portfolioon a regular basis and also constantly evaluates the changes and developments in industries to which it has

substantial exposure.

(c) Market Risk: Increased interest rate volatility exposes IDBI to market rate risk arising out of maturity/rate

mismatches .

Risk arising from interest rate volatility is inherent to the business of financial intermediation and termlending. This risk is minimised by linking the interest rates on term lending to a base rate (PLR / MTPLR

etc), which varies in accordance with overall movement in market rates. Further, the rate applicable to each

tranche of disbursement varies in accordance with the prevailing base rate. In case of lending pegged tofloating rates, they are generally matched by floating rate liability (both rupee and foreign currency). IDBI

manages market risks through active Asset Liability Management (ALM), viz. liquidity, interest rate andforeign exchange risk by way of Gap/Duration Analysis so as to optimize matching of the Assets and

Liabilities. Active Asset Liability Management with efforts to match Duration of Assets and Liabilities as alsoavailability of hedging mechanisms help moderate the market risk.

(d) Asset Liability mismatch : The maturity profile of assets and liabilities as on March 31, 2003 shows

negative gaps in over 1 to 3 years bucket and Over 5 years bucket .

As can be observed from the Table on Maturity profile of Assets and Liabilities given on page (71) there arenegative gaps of Rs.1640 crore in over 1 year to 3 years bucket and Rs.4465 crore in over 5 years time

bucket. However, the maturity buckets upto 1 year and over 3 years to 5 years have positive gaps ofRs.1303 crore and Rs.4801 crore. On cumulative basis, there is negative gap in only over 1 to 3 years

time bucket amounting to Rs.337 crore. This situation has arisen because the balance sheet of IDBI is

Assets sensitive and the assets are maturing faster than liabilities. The statement does not take into accountthe effect of relending of these repayments from clients and fresh borrowings in future. Any gap resulting

in any of the maturity buckets at any future date will be managed dynamically through suitable structuringof maturity profile of investment products, asset portfolio and liability products.

(e) Credit Rating: The credit rating of outstanding bond issues of IDBI has been revised from “AAA” to “AA+” by CRISIL, from “LAAA to “LAA” by ICRA and from “Ind AAA” to “Ind AA+” by FITCH.

The revision in ratings reflects the perception of the rating agencies. While CRISIL has reaffirmed its ratings

assigned to Fixed Deposit program of IDBI at “FAAA” and assigned the highest rating “P1+” to the Term Money

Bonds, Commercial Papers and Corporate Deposits of IDBI, it has revised its rating assigned to the outstand-ing bond issues and Certificate of Deposit program of IDBI from “AAA” to “AA+”. ICRA has assigned the highest

rating “A1+” to Commercial Paper, Term Money Bonds, Inter Corporate Deposits and Certificate of Deposits ofIDBI. The ratings for Fixed Deposit Programme has been reaffirmed at “MAA+”. ICRA has revised its rating

from “LAAA” to “LAA” for bonds. FITCH has revised its rating from “IndAAA” to “IndAA+” for bonds and Fixed

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(j) Overdues : The overdues of Videocon Group Companies, in which Shri R. N. Dhoot (industrialist director in theBorad of IDBI) was associated, as on January 1, 2004 amounted to Rs.57.62 crore. The group has indicated it

would clear the overdues shortly.

(k) Asset concentration to few industries : The top 5 industries account for 48.17% of the total outstanding

assistance as on March 31, 2003. Large exposures to specific industries will be impacted by global trends in these industries.

IDBI’s loan portfolio is well diversified among industries. The major outstandings are to the iron and steel,power, cotton textiles, telecom services and petrochemicals, which together accounted for about 48% of the

outstandings as at March 31, 2003. As a prudential measure, IDBI has recently revised the exposure limit toindividual industry at 10% of its total portfolio or Rs.5000 crore whichever is lower. As on March 31, 2003 only

two industries viz. Iron & Steel (18.31%) and Electricity Generation (12.58%) exceeded the limit. This excess

has been largely due to historical factors wherein IDBI had been extending assistance to core sector projects inline with overall national objectives. IDBI particularly monitors both domestic and global trends and develop-

ments in industries accounting for higher exposure within its portfolio and takes necessary actions and reme-dial measures to maintain its portfolio quality and reduce any possible adverse impact on its financials.

(l) Change In Balance Sheet size : IDBI’s total asset and liabilities have decreased from Rs.66,643 crore to Rs.63,116 crore during FY 2003.

To improve the asset quality, IDBI has restricted new assistance and extends assistance only on very

selective basis. On the liability side, IDBI has exercised call option on its high cost borrowings during theyear. Change in the Balance Sheet size is a part of the deliberate strategy of IDBI to pursue quality assetgrowth and profitability in operations.

(m) Nature of Bonds : Bonds are in the nature of promissory notes transferable by endorsement and delivery.The bonds are valuable documents and should be kept safely. Duplicate bonds will be issued only in

accordance with the procedure specified later in the offer document. The bonds are also offered in demat mode.

(n) Decrease in profit : The profit after tax of IDBI is Rs.401 crore for FY 2003 as against Rs.424 crore for

FY 2002 and Rs.691 crore for FY 2001. IDBI’s profit after tax for the half year ended September 30, 2003 stood at Rs.176 crore as against Rs.152 crore in the corresponding half year ended September 30, 2002.

General economic slowdown in the recent past has led to lower industrial activity. During the last couple of

years credit off-take has been low due to lower industrial growth in spite of fall in interest rates and other

steps taken by the Government to boost the industrial performance. Foray of commercial banks into term

lending has also resulted in increased competition to extend assistance to creditworthy clients at verycompetitive rates. Resultant lowering of interest income and overall squeezing of margin has impacted theprofit after tax. However with the expected economic upturn the position is expected to improve. Further

recovery out of written off cases will directly add to the profit of IDBI.

(o) Return on Assets : The return on average assets has declined from 10.4% in FY 2002 to 9.8% in FY 2003

while the average cost of funds has also gone down from 9.2% to 8.5% over the same period .

The major factor impacting the returns and costs is the sharp drop in interest rates during the last few years.

This has resulted in prepayment of borrowing by high credit clients which in turn has, to some extentimpacted credit composition of the portfolio. This coupled with NPAs adversely affected return on assets. On

the cost front, impact of drop in incremental cost of rupee borrowing (12.08% in FY 2000 to 11.21% in FY2001, to 9.81% in FY 2002 and further down to 8.35% in FY 2003) and exercising of call option on high

cost borrowings by IDBI has resulted in decline in cost of borrowing. The average cost of loan funds has

reduced from 11.5% in FY 2002 to 10.5% in FY 2003. As may be observed from above, the decline in

average cost of funds has been more than the decline in average return on assets. Further as mentionedon page (67) of this offer document under the auspicies of GOI, the liabilities of IDBI to Public Sector Banks,Institutions etc. has been restructured, which will bring down the average cost of funds of IDBI significantly.

(p) Quoted Investments : IDBI has in its portfolio quoted investments aggregating Rs.2730.22 crore as on March 31, 2003 which are booked at cost whose market value amounted to Rs.2152.54 crore. As on

September 30, 2003 its portfolio quoted investments aggregating Rs.5993.78 crore, which are booked at

cost whose market value amounted to Rs.6392.20 crore.

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As on March 31, 2003, IDBI had debentures of Rs.4389.16 crore in its portfolio. All the debentures are

secured by hypothecation/mortgage of fixed assets. However, in case of debentures amounting to Rs.795 crore, the final security by way of mortgage was yet to be created as on March 31, 2003.

IDBI’s investment portfolio is predominantly of long term and strategic nature. Temporary diminution in valueof securities arises on account of price volatility due to factors and forces affecting the stock market, interest

rates, etc. IDBI has been classifying its investment portfolio and making appropriate provision for diminutionin value as per RBI guidelines issued from time to time in this regard. The investments are classified under

the following categories (i) Held to Maturity, (ii) Available for Sale (iii) Held for Trading. These investments

were valued according to the prevailing valuation norms.

(q) Foreign Exchange Risk : IDBI may be exposed to foreign exchange risk on account of changes in foreign

exchange rates.

IDBI maintains a currency-wise matching of assets and liabilities. IDBI makes foreign currency loans onterms that are similar to its foreign currency borrowings thereby transferring the foreign exchange risk to the

borrower. In case of certain foreign currency borrowings that are re-lent in rupees, the Govt. of India bearsthe foreign exchange risk on these borrowings pursuant to certain agreements between IDBI and GOI. IDBI’s

foreign currency cash balances are generally maintained abroad in currencies matching with the underlying

borrowings. IDBI also operates a USD denominated single currency pool (SCP) and interest rate risks underthe SCPs are hedged through basic SWAPs. IDBI is therefore not exposed to any significant risk on account

of foreign exchange fluctuations.

External Factors

(a) Changes in Government policies may impact the performance of the industrial sector, which may in

turn affect IDBI

Indian industry has demonstrated remarkable resilience in adjusting to the changed environment andcompetition in the wake of the economic reforms initiated by the Government. Further, IDBI’s diversified

portfolio provides a sufficient cushion against any downtrend in a particular industry or sector.

(b) Risk of Competition : Competition in the financial sector has increased and is likely to increase further with

the entry of commercial banks and other new players in term lending. IDBI faces competition both in corporate lending and in raising resources .

While focusing attention on its core business of project financing and infrastructure financing in particular,

IDBI has taken steps to diversify its operations in various other areas like working capital financing, merchant

banking, corporate advisory services, forex services, venture capital, non-fund based activities etc. IDBI,

through its subsidiary/ associate companies also addresses the needs of its clients for commercial bankingrequirements, depository services, capital market related services, mutual fund products, information technologyservices etc.

On the resource-raising front, avenues like Mutual Funds,Charitable and Religious Trusts, Private insurance

companies, Pension Funds, etc. hold good potential. IDBI has over the years strengthened its reach to retailsegment through its public issues of retail bonds and Fixed Deposits marketed through its 35 branch offices,

large agent network, broking outfits and debt market intermediaries.

(c) Development of the capital markets may lead to disintermediation by borrowers.

With the development and maturing of the capital markets, there has been a distinct shift in the pattern of

industrial financing. However, it will be noteworthy that while a part of the financial requirement of theindustrial projects may be met by direct borrowing from the investors, a major portion will still need to be

serviced by financial intermediaries. Consequent to the opening up of the economy, large projects ininfrastructure, power, petroleum, telecom, etc. with huge financial outlays are being set up. Their large fund

requirements are unlikely to be met by private investments alone. Accordingly, the requirement of funds both

from lending institutions/banks and the capital market is likely to increase substantially. Also, thedisintermediation brings with it the opportunity for IDBI to expand its fee based activities.

General Risks

Investors are advised to read the risk factors carefully before taking an investment decision in this offering.

For taking an investment decision, the investor must rely on his/her own examination of the issuer and the issue including the risks involved. The Bonds have not been recommended or approved by SEBI nor does

SEBI guarantee the accuracy or adequacy of this document .

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Notes

1. Allotment against all valid applications for the IDBI Infrastructure (Tax Saving) Bond (2004 B) will be made

on a full and firm allotment basis, upto the issue size Rs.400 crore plus the amount of over subscription

retained by IDBI. Subscribers to the IDBI Infrastructure (Tax Saving) Bond (2004 B) will have priority oversubscribers to other bonds for allotment. Therefore, only after all eligible applicants for IDBI Infrastructure

(Tax Saving) Bond (2004 B) have been allotted, applications for other bonds will be considered for allotment

on proportionate basis.

2. IDBI would like to clarify that inspection by RBI is a regular exercise and is carried out periodically by RBI

for all Banks and Financial Institutions. IDBI is in dialogue with RBI in respect of observation made by RBIin their report for previous year. The reports of RBI are strictly confidential. RBI does not allow disclosure

of its inspection report and that all the disclosures in the Offer Document are on the basis of Managementand Audit Reports of the Issuer.

3. The Networth of IDBI as on March 31, 2003 was Rs.6945 crore and September 30, 3002 was Rs.7122 crore.

The present issue size is Rs.400 crore with an option to retain oversubscription upto Rs.400 crore.

4. The Book Value per share of IDBI as on March 31, 2003 was Rs.106.4. Cost per share to the promoter of

IDBI i.e. GOI is Rs.10 (i.e. at par).

5. Shri R. N. Dhoot, a director on the board of IDBI, nominated by the Government of India, was on the boardof some of the Videocon group companies in the past. SEBI had taken action against one of the Videocon

group companies viz. Videocon International Ltd. and 3 of its officials. On an appeal filed by VideoconInternational Ltd, the SAT vide its order dated June 20, 2002 has set aside SEBI’s order directing VideoconInternational Ltd. in so far as not to raise money from the public in the capital market for a period of 3 years.

SEBI has filed an appeal against the said SAT order in the Hon’ble High Court of Mumbai and the appealis pending. Shri R.N. Dhoot is, however, not a Director on the Board of Videocon International Ltd., nor does

he figure in the list of 3 officials mentioned above.

6. As on March 31, 2003, loan outstanding to any company with which industrialist director presently on theBoard of IDBI was associated in the past, amounted to Rs.908.64 crore, comprising of loans to (i) 8

companies engaged in the electronics and electronics appliances industry (Rs.567.44 crore) and (ii) acompany in petroleum industry (Rs.341.20 crore). These loans constituted 1.76% of the total loan outstanding

and 13.08% of IDBI’s Net Worth as on March 31, 2003.

7. The bonds may have various features/options. Such features need specific attention of the investor. Forbetter understanding of such common features, investors are requested to refer to the discussion on ‘Glossary

of common terms used in Bond structures’ on page 132 of this offer document.

8. Summary of transactions of IDBI with its subsidiaries for three years ended

(Rs. crore)

March 31, 2001 March 31, 2002 March 31, 2003

Interest income 145.42 5.81 2.91

Dividend, fees, commission and other revenue 93.09 51.51 152.00

Interest expense 5.86 2.57 0.17

Administrative and other expenses 1.75 8.37 7.73

Outstanding Balances

Loans 809.76 1.20 58.00

Investments 648.10 388.10 296.60

Current assets 0.27 19.47 105.73

Long term debt 112.58 50.00 4.61

Current Liabilities 2.20 7.67 8.63

9. The financial information as contained in the Auditor’s Report, including the notes to accounts, significant

accounting policies as well as Auditor’s qualifications have been duly certified by the Auditors of IDBI. Asfar as possible, the Audited numbers have been used for computation of or arriving at the other financial

information contained in the Offer Document. However, such other financial information contained in the

Offer Document except as contained in the Auditor’s Report has been certified by the management of IDBI.

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AUDITOR’S REPORT

The Board of Directors,Industrial Development Bank Of India,IDBI Tower,World Trade Complex,Cuffe Parade, Mumbai 400 005.

Dear Sirs,

We have examined the accounts of Industrial Development Bank of India (IDBI) for the 4 financial years ended31st March 2002. These accounts have been audited by other firms of chartered accountants and for the purposeof preparing this report, we have relied on their audit reports. We have also examined the accounts for the yearended 31st March, 2003 as well as the accounts for the six months ended 30th September, 2003. We report asfollows,

1. The profits of IDBI for the 5 financial years ended 31st March 2003 and for the half-year ended September30, 2003 and Assets and Liabilities as at that date are extracted from the aforesaid accounts which weredrawn-up in accordance with Regulation 14 of the Industrial Development Bank of India Regulations, 1994.

2. The profits read together with the notes appearing hereunder and the Significant Accounting Policies as alsothe notes appearing under the head “Adjustments resulting from audit qualifications, material amountsrelating to adjustments for previous years and changes in accounting policies”, have been arrived at aftercharging all expenses and after making such adjustments and regroupings as are, in our opinion, consideredappropriate and are set out as follows.

3. There is no significant deviation from accounting standards applicable to listed companies. There are nomaterial notes/qualification in the Auditors’ Report which has a significant impact on the financials or bearingon the financial status of the company. Attention is invited to Note 3 to the Profit and Loss A/c. in this reportregarding reimbursement from Government of India on account of interest differential.

We have also examined the attached consolidated Balance Sheet of IDBI and its subsidiaries as at March31, 2003 and the consolidated Profit and Loss A/c. for the year then ended and report that the said financialstatements have been prepared by IDBI in accordance with the requirements of Accounting Standard (AS)21, Consolidated Financial Statements, (AS) 23 Accounting for Investments in Associates in ConsolidatedFinancial Statements and (AS) 27 Financial reporting of Interests in Joint Ventures, issued by the Instituteof Chartered Accountants of India, except to the extent that (a) Statement of calculation of minority interestand, (b) Consolidated Cash flow Statement, have not been furnished.

I. PROFITS ( Rs.crore)

Year ended March 31 1999 2000 2001 2002 2003 April -Sept.2003

INCOME

From operations (After writing off bad debts and/or making provisions for Bad & Doubtful Debts and othernecessary and expedient provisions)A) Interest & Discount 6359 6225 6191 5862 5219 2103B) Income from investments 694 818 757 761 516 337C) Commission & Brokerage, etc. 176 194 188 130 73 28D) Net Profit on Sale

of Investments 62 382 535 278 419 291E) Other Income 173 240 164 145 144 46

TOTAL INCOME 7464 7859 7835 7176 6371 2805EXPENDITUREA) Interest paid on deposits,

borrowings, etc. (see Note 3) 5725 6370 6595 6250 5434 2381

B) Accelerated write-off of bad and –– –– –– 2500 –– ---doubtful debtsLess : Withdrawn from special reserve –– –– –– (2500) –– ---

u/s36(1)(viii) of IT Act, 1961C) Establishment expenses 76 74 84 117 95 54D) Depreciation 200 213 230 223 199 89E) Other Expenditure 162 175 192 171 188 84

GROSS EXPENDITURE 6163 6832 7101 6761 5916 2608PROFIT BEFORE TAXATION 1301 1027 734 415 455 197

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(Rs.crore)

Year ended March 31 1999 2000 2001 2002 2003 Apr-Sept2003

PROFIT BEFORE TAXATION 1301 1027 734 415 455 197

Less : Provision for Taxation (75) (80) (43) (10) (92) (39)

Add : Deferred Tax Income –– –– –– 19 38 18

PROFIT AFTER TAXATION 1226 947 691 424 401 176

Excess Income tax/Interest

tax provision of earlier years

written back 33 — — — - -

BALANCE OF PROFIT 1259 947 691 424 401 176

Balance of profit b/f

from last year 239 289 201 62 316 476

Profit available for

appropriation 1498 1236 892 486 717 652

Transfers to :

Reserve Fund 400 400 300 — — --

Investment Equalisation Reserve 50 125 — –– — --

Investment Fluctuation Reserve — –– –– 25 25 --

Special Reserve u/s 36(1)

(viii) of I.T. Act, 1961 190 142 120 30 75 --

Venture Capital Fund 30 30 50 — — --

IDBI EXIM(J) Special Fund — — — — — --

Staff Welfare Fund 2 2 5 5 — --

Contingency Reserve 200 — — — — --

Capital Reserve — — — 12 31 --

Proposed dividend on

Redeemable Preference Shares — — 25 — — --

Proposed dividend onequity shares 303 303 294 98 98 --

Tax on Dividend 34 33 36 — 12 --

Surplus 289 201 62 316 476 652

TOTAL 1498 1236 892 486 717 652

The above figures have been rounded off to the nearest crore. Wherever the actual figure is less than Rs 50 lakhs,

they have been reflected as 0.

Adjustments resulting from audit qualifications, material amounts relating to adjustments for previous

years and changes in accounting policies (Rs.crore)

Year ended March 31 1999 2000 2001 2002 2003 Apr-Sept

2003

Profit after tax and after extra -

Ordinary items 1259 947 691 424 401 176

Prior period items 4 (3) (3) (13) — (7)

Diminution in value of investments — — 68 — — —

Adjusted Profit after tax 1263 944 756 411 401 169

The above figures have been rounded off to the nearest crore.

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Notes to Adjustments

1. We have taken the view that adjustments to profits in respect of the following:

a) material amounts relating to previous years although events triggering off the profit/loss occured in a

subsequent year.

b) extraordinary items

c) changes in accounting policies, andd) prior period items,

are required to be done as per the SEBI guidelines in respect of only those items which are disclosed

in the audited financial statements of the five financial years.

2. Prior Period Items : These represent the net difference between prior period incomes and prior periodexpenses charged to the Profit and Loss account of the relevant years.

3. Diminution in value of Investments : From the year 2000 – 2001 net appreciation / depreciation in

investments is credited / charged to the Profit and Loss account as against the earlier policy of charging / adjusting the permanent diminution if any in the value of shares, bonds and debentures to the Investment

Equalization Reserve.

Notes to the Profit and Loss Account for the half year ended September 30, 2003.1. Other expenditure for the half year ended September 30, 2003 includes (Rs. Crore)

Management fees, commitment charges etc. on FC Borrowings 3.12

Unsecured Bond Issue Expenses written off 35.69

Repairs & Maintenance & Telephone expenses 4.65

Guarantee Fees on Bonds & FC lines of credit 6.73

Prior period expenditure/ (Income) - Net (4.79)

Miscellaneous expenditure 4.57

Brokerage/Incentives on Bonds and Deposits 4.98

Others 12.58

Total 67.53

2. Other Income for the half year ended September 30, 2003 includes : (Rs.crore)Interest on Bank deposits 5.95

Fees for Financial Services 9.24

Profit (net) on Dealing room activities 1.15

Prior period income 2.01

Management Fees for assistance under DPG/Guarantee --

Miscellaneous Receipts 3.07

Rupee Interest Rate Swap (Hedge) - Gain/(Loss) 13.07

Others 11.67

Total 46.16

3. GOI reimburses the amount representing difference between the document rate of interest and 8% p.a. on IDBI’s

liabilities towards select Banks/Institutions. The interest expenditure debited to Profit and Loss A/c.is after takinginto account such credit of Rs.341 crore for the half year ended September 30, 2003 on paid/accrued basis.

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II. ASSETS AND LIABILITIES

The assets and liabilities as at September 30, 2003 read together with the notes appearing hereunder and

the significant accounting policies adopted, are as set out below:

(Rs.crore)

Assets as at September 30, 2003 Amount Amount

Cash and Bank Balances

a] Cash in hand and balances with RBI 16

b] Balances with other Banks in India

a) On current account 151

b) On deposit account 57

c] Balances with other Banks outside India

a) On current account 66

b) On deposit account 961 1251

Investments (See Note No. 4)

a) Securities of Central and State Govt. 4271

b) In stocks, shares, bonds and debentures of financial institutions 4279

c) In stocks, shares, bonds and debentures of industrial concerns 6216 14766

Loans and advances

a] To Scheduled Banks, State Co-operative Banks and other 1569

Financial Institutions

b] To industrial concerns 41404 42973

Bills of Exchange and Promissory Notes Discounted or Rediscounted 467

Premises (at cost less depreciation) (See Note Nos. 5) 296

Other Fixed Assets (at cost less depreciation) (See Note No. 6) 860

Other Assets (See Note No.7) 4207

TOTAL ASSETS 64820

LIABILITIESBonds and Debentures (See Note No. 2) 43834

Deposits 4094

Borrowings

i] From RBI

a] Secured against stocks, funds and other trustee securities – -

b] Secured against Bills of exchange or promissory notes – -

c] Out of the National Industrial Credit (LTO) Fund – -

ii] From Govt. of India

a] Interest free loan – -

b] Against IDA Line of Credit/World Bank Loan 5

c] Other Loans 3iii] From other sources 603

iv] In Foreign Currency 4589 5200

Current liabilities & provisions (See Note No. 3) 4537

TOTAL 57665

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(Rs.crore)

September 30, 2003 Amount Amount

NET ASSETS 7155

Represented by

Share CapitalIssued, subscribed and paid-up:

65,28,30,400 Equity shares of Rs. 10 each, fully paid up 653

Less: Allotment money in arrears 0 653

Reserves Funds and Surplus (see note 1)

i) Reserve fund 3808

ii) Other funds

a] Staff Welfare Fund 32

b] Venture Capital Fund 179

c] Exchange Risk Administration Fund 0

d] IDBI EXIM(j) Fund 2

iii) Reserves

a] Investment Fluctuation Reserve 50

b] Foreign Currency Fluctuation Reserve 0

c] Premium on bond issue 0

d] Special Reserve under Section 36(1)(viii) of the Income Tax Act, 1961 111

e] Share Premium Account 1624

f] Capital Reserve 44

iv) Surplus 652 6502

TOTAL 7155

The above figures have been rounded off to the nearest crore .

Notes to the Balance Sheet as at September 30, 2003

1. Reserves, Funds and Surplus (Rs. crore)Particulars Balance as at Additions/ Deductions/ Balance as at

1.4.2003 Transfers Transfers 30.9.2003

during the during the

period period

Reserve Fund 3808.04 –– –– 3808.04

Venture Capital Fund 178.99 –– –– 178.99

Staff Welfare Fund 31.33 1.54 0.51 32.36

IDBI-EXIM(J) Special Fund 1.69 --- –– 1.69

Share Premium Account 1624.46 –– –– 1624.46

Special Reserve under Section 36(1) (viii)of the Income Tax Act, 1961 111.35 --- –– 111.35

Investment Fluctuation Reserve 50.00 --- –– 50.00Capital Reserve 43.43 –– --- 43.43

Profit & Loss (Surplus) Account 475.97 176.47 --- 652.44

Total 6325.26 178.01 0.51 6502.76

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2. Bonds and Debentures (Rs.crore)

As on September 30, 2003

(i) Issued in rupees

(a) Bonds and Debentures guaranteed by the GOI 5544.79

(b) Discount/ Zero coupon bonds 566.33

less: discount not w/off (137.24)————————-5973.88

(c) Other bonds and debentures 36713.44————————-

42687.32(ii) Issued in foreign currency

US dollar denominated FRN’s 1146.62

less : discount paid in advance on FRN issue (0.34)————————-

1146.28

Total 43833.60

3. Current Liabilities & Provisions include (Rs.crore)


Prudential provisions against standard assets 123.51

Provision for Taxation 233.04

Provision for Deferred Taxation 217.50

Receipts from borrowers pending appropriation 68.78

Receipts from borrowers in advance 349.28

Income received in advance on Bills etc. 70.33

Interest/ premium payable on Bonds and Deposits 413.03

Application money received on bonds 31.95

Provision for outstanding liabilities (including

Interest accrued but not due) 1878.86

Others 1150.94

Total 4537.22

4. Investments (Rs.crore)

Book Value Market Value

a) Quoted 5993.78 6392.20

b) Unquoted

i) In Financial Institutions / Technical consultancy organizations * 2624.45

ii) In Industrial Concerns 6147.71

The above investments at (a) and (b) have been classified as under as required by RBI guidelines:

Held To Maturity Rs.7526.91 crore

Available For Sale Rs. 6367.80 crore

Held For Trading Rs. 871.23 crore

* Includes investments in units of MFs, the book value of which was Rs.2002.96 crore and the NAV / Assured

redemption value stood at Rs.2066.36 crores.

5. Premises include Leasehold Land of Rs.135.03 crore and Capital work-in-progress of Rs.5.69 crore. Work-in-progress of Rs. 4.22 crore is in respect of a residential building which is under construction on land sub-

leased to the bank. The sub-lease has not yet been ordered for registration in favour of the bank anddisputes having arisen, the matter is sub-judice.

6. The Other Fixed Assets include Assets given on lease amounting to Rs.824.39 crore at cost less depreciation

and after adding the debit balance in Lease adjustment account Rs. 200.25 crore.

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7. Other Assets include (Rs.crore)


Amount recoverable form associate institutions 2.51

Accrued Income 1252.69

Deposits towards lease rentals for premises 33.71

Pre-paid taxes including TDS paid 1345.93

Advances & Housing Loan to staff 91.17

Loans disbursed on behalf of other institutions 40.84

Exchange Fluctuation recoverable under ERAS 19.53

Minimum guaranteed Dividend receivable on shares of SFCs (up to 31.03.1995) 43.02

Application money in respect of Shares/Debentures of Jt.St. Cos./FIs 81.27

Advance towards leased assets 69.46

Unsecured Bond issue exp. not written off 133.54

Others 1093.56

4207.23

8. Foreign currency balances have been translated at the FEDAI rates prevailing as on September 30, 2003.

9. Contingent Liabilities: (Rs.crore)

i) Claims against the Bank not acknowledged as debts 397.95

ii) On account of Guarantees/Letters of Credit issued* 3040.99

iii) On account of underwriting commitment 0

iv) On account of uncalled monies on partly paid shares, debentures etc. 0

v) On account of disputed income tax, interest tax, penalty and interest

demands **700.33

vi) Monies for which the Bank is contingently liable 1.31

* includes guarantees/letters of credit in foreign currency converted at FEDAI rates prevailing as on September30, 2003. ** The gross

demand raised by the Income Tax Department on account of Income Tax, Wealth Tax, Interest Tax, Penalty

and Interest demands is Rs.5029.25 crore against which the provision made is Rs.2866.70 crore. Thedemands include Rs.1462.22 crore in respect of which IDBI has favourable appellate decisions in its own

cases in the earlier years.

10. Estimated amount of contracts remaining to be executed on capital account not provided for (net of advancepaid) is Rs.0.45 crore.

11. Provision for taxation for the year ended September 30, 2003 has been made after considering

a) Deduction under Sec.36(1)(viii) of Income Tax Act, 1961, in respect of which transfer to Special Reservewould be made at the end of accounting year and

b) Amount provided towards sub-standard, doubtful assets and loss assets indicated at note No.E onSignificant Accounting Policies below.

12. Interest and discount etc. includes Rs.125.91crore of Lease Rental Income (net of lease equilisation)

13. Current Liabilities and Provisions include a sum of Rs. 123.51 crore for provision against standard assets.

14. The figures of the Previous year/period have been regrouped whereever required.

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Significant Accounting Policies

A. Income Recognition

1. Income is shown in the Profit & Loss Account net of provisions/ write off / write back during the year

for bad and doubtful debts and also other necessary and expedient provisions.

2. Interest income, lease rentals and other dues are reckoned as accrued, in accordance with the directives

issued by RBI from time to time regarding income recognition.3. Underwriting/guarantee commissions are reckoned on accrual basis.

4. Front-end fees, loan syndication charges, appraisal fees, fees for merchant banking, debenture

trusteeship and other financial services are accounted on cash basis.

5. Discount received in respect of Bills discounted/rediscounted, Commercial paper and Certificate ofDeposits is apportioned over the period of usance of the instruments.

6. The amount of Lease Equalisation representing the difference between the annual lease charge and thedepreciation provided on leased assets in the books is adjusted in the Profit & Loss a/c with

corresponding adjustment to the value of leased assets through a separate lease adjustment account.

7. The minimum dividend guaranteed by State Governments on shares held in the State FinancialCorporations under section 6 of the State Financial Corporations Act, 1951 is recognised on realisation

basis.

8. Final dividend on shares held in Industrial Concerns and Financial Institutions is recognised as incomeon dates of declaration and interim dividend is recognised as income when received.

B. Investments

1. In terms of extant Guidelines of the Reserve Bank of India, the entire investment portfolio is categorisedas “Held to Maturity” “Available for sale” and “Held for trading”. The investments under each category

are further classified as i) Government securities ii) other approved securities iii) Shares iv) Debentures& Bonds v) Subsidiaries / joint ventures vi) Others (CP, Mutual Fund Units, etc).

2. The debentures/bonds/equity and preference shares deemed to be in the nature of advance, are subject

to the usual prudential norms.

3. Investments acquired with the intention to hold till maturity are categorised under Held to Maturity. Such

investments are carried at acquisition cost unless it is more than the face value, in which case thepremium is amoritised over the period remaining to maturity. Diminution, other than temporary, in the

value of investments in subsidiaries / joint ventures under this category is provided for each investment

individually. Profit on sale of investments in this category are appropriated to the capital reserve accountat the end of financial year.

4. Investments acquired with the intention to trade by taking advantage of the short-term price/ interest ratemovements are categorised under Held for Trading. The investments in this category are revalued as

a whole and net appreciation/ depreciation is recognised in the profit & loss account, with corresponding

change in the book value of the individual scrips.

5. Investments which do not fall within the above two categories, are categorised under Available for Sale.

The individual scrips under this category are revalued at yearly intervals and net depreciation under any

of the six classifications mentioned above, is recognised in the profit & loss account. Net appreciationunder any classification is ignored. The book value of individual scrips is not changed.

6. The basis for periodical valuation of investments categorised as Held for Trading and Available for Saleare as follows:

• Treasury bills are valued at carrying cost;

• In respect of traded /quoted investments, the market price is taken as available from the trades / quotes on the stock exchanges, price of SGL Account transactions, price list of RBI and prices

declared by PDAI / FIMMDA periodically; and

• The unquoted shares / units are valued at break-up value / repurchase price & Net Asset Value.The unquoted fixed income securities are valued on YTM basis with appropriate mark-up over the

YTM rates for Central Government securities of equivalent maturity.

7. Investments are shown net of provisions.

8. Profit/Loss on sale of investments are booked on accrual basis.

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C. Fixed Assets and depreciation

1. Fixed Assets are shown at cost less depreciation.

2. Depreciation on assets acquired during the course of leasing business is provided on straight-line

method pro-rata from the month in which lease rentals commence over the primary period of lease.

3. (a) Depreciation is provided on :i) Motor vehicles on Straight Line Method.

ii) Other Fixed Assets on Written Down Value Method.

(b) No depreciation is provided on assets sold/or discarded during the year.

4. Leasehold land is amortised over the period of lease.

D. Foreign Currency Transactions

1. Income and Expenditure is accounted at the actual exchange rates of remittance. Amounts pending

remittance are accounted at the closing FEDAI rates. Foreign Currency assets and liabilities aretranslated at closing FEDAI rates.

2. Forward Exchange Contracts and the net-income/expenditure thereon are accounted for on the

settlement date.

E. Provisions For Assets

As per RBI Guidelines, loan assets and other assistance portfolios (including debentures in the nature of

advances) are to be classified as Standard, Sub-standard, Doubtful and Loss subject to provision / writeoff on an annual basis, as under:

1. Standard Assets 0.25% of loan/assistance

2. Sub-Standard assets 10% of loan/assistance.

3. Doubtful assets 100 % of unsecured portion plus 20% /30% /50% of securedportion depending on the period for which the loan/assistance

have remained doubtful

4. Loss Assets The entire assistance is to be provided/written off.

On the above basis and keeping in view the record of recovery and other relevant factors the

requirements of provisions/write-off are being determined.

Loan Assets are shown net of provision/write-offs for sub-standard/doubtful/loss assets.

F. Retirement Benefits

The Gratuity, Leave encashment and Pension Liability determined based on actuarial valuation at the year-

end, is fully provided for.

G. Interest Expenditure on Borrowings

The Interest Expenditure on Borrowings is accounted for on accrual basis.

H. Expenditure / Discount On Bond Issues

The expenses relating to issue of bonds and discount, if any, on the issue are amortized equitably over the

tenure of the bonds/over the period upto which the earliest redemption expires.

I. Securitisation Transation:

Financial assets securitised are derecognised in the books and the gains/loss on securitisation are recognised

in the year of securitisation. Expenditure incurred for securitisation are charged off in the year of securitisation.

J Accounting Standards

Mandatory Accounting Standards as applicable to the Bank in accordance with RBI Guidelines issued from

time to time are followed.

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CONSOLIDATED BALANCE SHEET AS AT MARCH 31, 2003

The consolidated Balance Sheet of IDBI and its subsidiaries as on March 31, 2003 is given below

(Rs. crore)

L I A B I L I T I E S Schedule March 31, 2003

No1. SHARE CAPITAL

Authorised


50 00 00 000 Redeemable Preference Shares 500.00

of Rs.10 each 2000.00

Issued and paid up


2. RESERVES, FUNDS AND SURPLUS I

i) Reserve Fund 3946.08

ii) Statutory Reserves 36.42iii) Reserve u/s 45 IC of RBI Act 118.17

iv) Other Funds

a) Staff Welfare Fund 31.33

b) Venture Capital Fund 178.99

c) Exchange Risk Admn. Fund II

d) IDBI EXIM(J) Special Fund 1.69

v) Reserves

a) Share Premium 1642.81

b) Special Reserve under Section 36(1)(viii) 6.35

of IT Act, 1961

c) Sp. Res. created and maintained u/s 36(1)(viii) 105.00

of IT Act, 1961

d) Capital Reserve 51.82

e) Investment Fluctuation Reserve 64.28

vi) Surplus 613.08 6796.02

3. GIFTS,GRANTS,DONATIONS AND BENEFACTIONS

i) From Government

ii) From Other Sources ––

4. BONDS AND DEBENTURES III

Tier I Bonds 2130.50

Tier II Bonds 3651.13Other Bonds and Debentures 36181.33 41962.96

5. DEPOSITS 10362.21

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(Rs. crore)

L I A B I L I T I E S Schedule March 31, 2003

No

6. BORROWINGS

i) From Reserve Bank of India

a) Secured against stocks,funds and other 1000.00

trustee securities

b) Secured against bills of exchange or

promissory notes

c) Out of National Industrial Credit(Long Term

Operations) Fund

d) Others

ii) From Government of India

a) Interest-free loan

b) Other Loans

1. Against IDA /World Bank Loan 5.37

2. Others 168.37

iii) From Other Sources 2336.98

iv) In Foreign Currency IV 4950.70 8461.427. CURRENT LIABILITIES AND PROVISIONS V

Deferred Tax Liab 237.06

Other Liabilities and Provisions 4910.57 5147.63

MINORITY INTEREST 152.96

TOTAL 73536.03

CONTINGENT LIABILITIES VI

(Rs. Crore)

A S S E T S Schedule March 31, 2003

No.

1. CASH AND BANK BALANCES

i) Cash in hand and balances with Reserve Bank 605.78of India

ii) Balances with other Banks in India

a) On Current Account 514.27

b) On Deposit Account 259.63

iii) Balances with other Banks outside India

a) On Current Account 67.46

b) On Deposit Account 434.75 1881.89

2. INVESTMENTS VII

i) In securities of Central and State Governments 2739.81

ii) In stocks,shares,bonds & debentures of 2766.57

financial institutions

iii) In Stocks,shares,bonds & debentures of 6789.78 12296.16industrial concerns

3. LOANS AND ADVANCES

i) To Scheduled banks, State Co-operative Banks

and other Financial institutions 1801.81

ii) To industrial concerns 47012.63

iii) Call money 54.40 48868.84

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(Rs. crore)

A S S E T S Schedule No. March 31, 2003

4. BILLS OF EXCHANGE AND PROMISSORY

NOTES DISCOUNTED/REDISCOUNTED 1477.64

5. PREMISES(At cost less depreciation) 316.63

6. OTHER FIXED ASSETS

(At cost less depreciation) 1138.93

7. OTHER ASSETS VIII

Deferred Tax Asset 4.46

Other Assets 7551.48 7555.94

TOTAL 73536.03

Notes forming part of Accounts XII

CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2003 (Rs. crore)

INCOME (Less provisions made during the year for bad and Schedule No

doubtful debts and other necessary and expedient provisions)

1. Interest and Discount etc. 5534.66

2. Income from Investments 1068.08

3. Commission, Brokerage,etc. IX 156.90

4. Net Gain on sale of investments (not credited to Reserves or

any particular fund or account) 464.77

5. Other Income X 200.63

TOTAL 7425.04

EXPENDITURE

1 Interest paid on Deposits,Borrowings,etc., 5947.51

2 Establishment Expenses 156.38

3 Directors’ & Executive Committee Members’ 0.22fees and Expenses

4 Auditors’ Fees 0.32

5 Rent,Taxes,Insurance,Lighting, etc. 53.77

6 Law Charges 7.22

7 Postage,Telegrams & Stamps 16.62

8 Stationery,Printing,Advertisement,etc. 28.31

9 Accelerated write-off of bad and doubtful debts ––

Less : Withdrawn from Special Reserve u/s 36(1) ––

(viii) of IT Act, 1961

10 Depreciation / Amortisation 42.48

11 Depreciation on Leased assets 184.5112 Other Expenditure XI 210.43

TOTAL 6647.77

Balance of Profit carried down 777.27

Provision for Income Tax (275.09)

Deferred Tax Income 41.30

Balance of profit transferred to Appropriation Account 543.48

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Year ended March 31, 2003 (Rs. crore)

Balance of profit transferred from Profit & Loss Account 543.48

Balance of Profit brought forward from last year 478.90

TOTAL 1022.38

APPROPRIATIONS1 Transferred to Statutory/ General Reserves 107.97

2 Transferred to Special Reserve created & maintained 75.00

u/s.36(1)(viii) of IT Act, 1961

3 Transferred to Capital Reserve 33.38

4 Transferred to IDBI EXIM(J) Special Fund 0.12

5 Transferred to Staff Welfare Fund 0.00

6 Transferred to Investment Fluctuation Reserve 40.00

7 Proposed Dividend / Interim Dividend on Equity shares 106.40

8 Tax on Proposed Dividend 13.51

9 Deferred tax adjustment of earlier years -

10 Balance of profit 646.00

TOTAL 1022.38

Minority interest 32.92

Balance of profit carried to Balance Sheet 613.08

SCHEDULES FORMING PART OF ACCOUNTS

I Reserves, Funds and Surplus (Net of Minority Interest) (Rs. crore)

Balance on Additions/Transfers Deductions/transfers Balance on

1-Apr-02 during the period during the period 31-Mar-03

i) Reserve Fund 3916 3 0 0 3946

ii) Statutory Reserves 26 10 0 36

iii) Reserve u/s 45 IC of RBI Act 58 60 0 118iv) Capital Reserve 20 32 0 52

v) Investment Fluctuation Reserve 31 34 0 65

vi) Venture Capital Fund 179 0 0 179

vii) Staff Welfare Fund 39 4 12 31

viii) IDBI Exim (J) Special Fund 2 0 0 2

ix) Share Premium Account 1643 0 0 1643

x) Special Reserve under Section 6 0 0 6

36(1)(viii) of the Income Tax

Act,1961

xi) Special Reserve created & 30 75 0 105

maintained u/s 36(1)(viii) of theInc Tax Act,1961

xii) Profit & Loss (surplus) account 438 670 495 613

Total 6388 915 507 6796

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(Rs. crore)

II Exchange Risk IDBI

Administration Fund

Initial Contribution 5

Interest/Other Income 54Premium 218

Settlement with ERAF (526)

Amount recd. from /paid toGOI 111

(138)

Less: Exchange Fluctuation (-)

(Deficit) (138)

Receivable from/(payable to ) 138---------

Government of India

Under the Exchange Risk Administration Scheme(ERAS), the Government of India has agreed to extend support to theFund when it is in deficit and recoup its contribution in the event of surplus. The IDBI has a claim on Exchange Risk

Administration Fund (ERAF) to the extent of deficit represented by the Exchange Fluctuation on ERAS Account pro-vided there is positive balance in the ERAF Account. If the balance is insufficient, the claim will be on Government of

India.

As per decision of Government of India the above scheme has been foreclosed w.e.f. January 31, 2003. A part of thebalance outstanding has been received subsequent to the date of the balance sheet and for the balance amount a

claim is to be filed on Government of India. Also refer Schedule VIII on other assets

III Bonds and Debentures (March 31, 2003) (Rs.crore)

(i) Issued in Rupees

a. Bonds and Debentures guaranteed by Govt. of India 5672

b. Discount/Zero Coupon Bonds 597

Less Discount not written off (162)c. Other Bonds and Debentures 34677

(ii) Issued in Foreign Currency

US Dollar denominated FRNs 1187

Less Discount paid in advance on FRN issue (8)

Total 41963

IV Borrowings in Foreign Currency (March 31, 2003) (Rs.crore)

Lines of credit

a. Multilateral 1306

b. Bilateral 2050

Bank Loans

a. Syndicated 1329

b. Bilateral 237

Others 29

Total 4951

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V Current Liabilities & Provisions (March 31, 2003) (Rs. crore)

Prudential provisions against standard assets 149

Provision for Taxation 468

Provision for Deferred Taxation 237

Receipts from borrowers pending appropriation 89

Receipts from borrowers in advance 597

Income received in advance on Bills etc. 94

Interest/premium payable on Bonds and Deposits 313

Dividend payable on equity shares 106

Provision for tax on dividend 14

Application money received on Bonds 31

Provision for outstanding liabilities (incl. interest accrued but not due) 1867

Others 1183

Total 5148

VI Contingent Liabilities (March 31, 2003) (Rs. crore)

(i) Claims against the Bank not acknowledged as debts 399

ii) On account of Guarantees/Letters of Credit issued * 4258

iii) On account of underwriting commitment 0

iv) On account of uncalled monies on partly paid shares, debentures etc. 2

v) On account of disputed income tax, interest tax, penalty

and interest demands pending in appeal not provided for 723**

vi) Monies for which the Bank is contingently liable 772

Total 6154

* includes guarantees/LCs in Foreign currency converted at FEDAI rates prevailing as on March 31,2003

** The gross demand raised by Income Tax Dept. on account of Income Tax, wealth Tax, Interest Tax, Penalty andInterest demands on IDBI is Rs.4969 crore against which the provision made is Rs.2814 crore. The demands include

Rs.1462 crore in respect of which IDBI has favourable appellate decisions in its own cases in the earlier years.

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(Rs.crore)

VII Investments (March 31, 2003) Book Value Market Value

a) Quoted 4471 3937

b) Unquoted

i) Investment in GOI Securities

ii) In Financial Institutions/Technical Consultancy Organisations* 1815

iii) In Industrial Concerns 6010

The above investments at (a) and (b) have been classifed as under as required by RBI guidelines

Held to Maturity 5995

Available for sale 5713

Held for trading 588

* Includes Investments of IDBI in units of MFs, the book value of which was Rs.809 crore and the NAV

assured redemption value stood at Rs.812 crore.

(Rs. crore)

VIII Other Assets (March 31, 2003)

Amount recoverable from associate institutions 77

Accrued Income 1289

Deposits towards lease rentals for premises 34

Pre-paid taxes including TDS 1633

Advances & Housing Loan to staff 88

Loans disbursed on behalf of other institutions 41

Exchange Fluctuation recoverable under ERAS 138

Minimum guaranteed Dividend receivable on shares of SFCs 43

Application money in respect of Shares/Debentures of Jt.St. Cos./FIs 81

Advance towards leased assets 70

Unsecured Bond issue exp. not written off 147

Preliminary expenses not written off 5

Deferred tax asset 5

Others 3905

Total 7556

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(Rs. crore)

IX Details of Commission , Brokerage etc. 2002-03

Up-front fee on loans sanctioned 9

Guarantee commission 62

Underwriting commission and Front end fees 1

Others 85

Total 157

X Other Income 2002-03

Interest on Bank deposits 43

Fees for Financial services 22

Profit(net) on Dealing room activities 2

Management fees for assistance under DPG/Guarantee 1

Miscellaneous receipts 22

Prior Period income

Others 111

Total 201

XI Other Expenditure 2002-03

Management fees,commitment charges etc.on FC borrowings 4

Guarantee Fees on Bonds & FC lines of credit 15

Unsecured Bond Issue Expenses written off 72

Repairs , Maintenance & Telephone expenses 23

Prior Period Expenditure(Net)

Brokerage/incentives paid on Bonds and Deposits 10

Miscellaneous expenditure 12

Preliminary expenses written off ––

Others 74

Total 210

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XII Notes forming part of the Accounts

1. Basis of accounting :

The financial statements are prepared as per historical cost convention in accordance with the statutory provisions

and accounting principles generally accepted in India

2. Principles of consolidation :

a) The consolidated financial statements include the accounts of Industrial Development Bank of India (parent

company) and all of its majority owned subsidiary companies.

b) The financial statements of the Bank and its subsidiary companies have been combined on a line by line basisby adding together the book-values of like items of assets, liabilities, income & expenses.

c) All significant inter company accounts and transactions resulting in unrealised profits or losses are eliminated

on consolidation.

d) The subsidiary companies considered in the consolidated financial statements are :

Name of the company % equity capital held as at

March 31, 2003

IDBI Bank Ltd. (IBL) 57.11%

IDBI Capital Market Services Ltd. (ICMS) 100%

IDBI Intech Ltd. (IIL) 100%

e) Though the bank holds more than 20% of voting power in certain entities, the same are not treated as investmentin an Associate under AS 23, mainly either due to lack of significant influence or such investments are not

considered as material investments requiring consolidation as an Associate under AS 23.

f) IDBI does not presently have any joint ventures requiring proportionate consolidation as defined under AS 27.

3. Significant Accounting Policies

A. Income Recognition

i. Income is shown in the Profit & Loss Account net of provisions/write off / write back during the year for bad and

doubtful debts and also other necessary and expedient provisions.

ii. Interest income, lease rentals and other dues are reckoned as accrued, in accordance with the directives

issued by RBI from time to time regarding Income Recognition.

iii. Underwriting/guarantee commissions are reckoned on accrual basis.

iv. Front-end fees, loan syndication charges, appraisal fees, fees for merchant banking, debenture trusteeship

and other financial services are accounted on cash basis.

v. Discount received in respect of Bills discounted/rediscounted, Commercial paper and Certificate of Depositsis apportioned over the period of usance of the instruments.

vi. The amount of Lease Equalisation representing the difference between the annual lease charge and the

depreciation provided on leased assets in the books is adjusted in the Profit & Loss a/c. with correspondingadjustment to the value of leased assets through a separate lease adjustment account

vii. The minimum dividend guaranteed by State Governments on shares held in the State Financial Corporationsunder section 6 of the State Financial Corporations Act, 1951 is recognised on realisation basis.

viii. Final dividend on shares held in Industrial Concerns and Financial Institutions is recognised as income ondates of declaration and interim dividend is recognised as income when received.

ix. Revenue from software contracts is recognised on achievement of milestone basis. Sale of products isrecognised on transfer of property of goods as per agreed terms. Annual Technical Services is recognised

proportionately over the period in which the services are rendered.

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x. In case of IDBI’s stockbroking subsidiary, the difference between the acquisition cost and redemption value of

discounted debt securities, held as on the Balance Sheet date, is apportioned on time basis and recognisedas accrued income.

In respect of discounted debt securities, discount earned represents the excess of sales and redemptionproceeds and the value of closing stock over purchases and the value of opening stock of such securities.

Total consideration paid or received on purchase or sale, on outright basis, of coupon-bearing debt securitiesis identified separately as principal consideration and accrued interest. Amount paid as accrued interest on

purchase, and received on sale, of such securities is netted and reckoned as expense or income by way ofinterest.

Interest on fixed coupon debt securities, held as on the Balance Sheet date, is accrued for the expired periodat the coupon rate. Interest on floating rate securities is accrued at rates determined as per the terms of the

issue.

Profit or loss on sale of securities represents the excess of sales and redemption proceeds and the value ofclosing stock over purchases and the value of opening stock of such securities and is recognised on the basis

of settlement dates.

Where, in a primary floatation of securities, the value of securities devolved or allotted exceeds or is equal tothe value of securities underwritten, the whole of the underwriting fee received is reduced from the cost of the

security. Where the value of securities devolved or allotted is less than the value of securities underwritten,

that proportion of the underwriting fee received is reduced from the cost as the value of securities devolved orallotted bears to the value of securities underwritten and the balance fee received is considered as income.

B. Investments

i. In terms of extant Guidelines of the Reserve Bank of India, the entire investment portfolio is categorised as“Held to Maturity”, “Available for Sale” and “Held for Trading”. The investments under each category are

further classified as (i) Government securities; (ii) Other approved securities; (iii) Shares; (iv) Debentures &bonds; (v) Subsidiaries / Joint Ventures; (vi) Others (CP, Mutual Fund Units, etc.)

ii. The debentures/bonds/equity and preference shares deemed to be in the nature of advance are subject to the

usual prudential norms.

iii. Investments acquired with the intention to hold till maturity are categorised under “Held to Maturity”. Suchinvestments are carried at acquisition cost unless it is more than the face value, in which case the premium is

amortised over the period remaining to maturity. Diminution, other than temporary, in the value of investments

in subsidiaries/joint ventures under this category is provided for each investment individually. Profit on sale ofinvestments in this category are appropriated to the Capital Reserve Account at the end of financial year.

iv. Investments acquired with the intention to trade by taking advantage of the short term price/interest ratemovements are categorised under “Held for Trading”. The investments in this category are revalued as a

whole and net appreciation/depreciation is recognised in the Profit & Loss Account, with corresponding changein the book value of the individual scrips.

v. Investments which do not fall within the above two categories, are categorised under “Available for Sale”. The

individual scrips under this category are revalued at yearly intervals and net depreciation under any of the sixclassifications mentioned above, is recognised in the Profit & Loss Account. Net appreciation under any

classification is ignored. The book value of individual scrips is not changed.

vi. The basis for periodical valuation of investments categorised as “Held for Trading” and “Available for Sale” areas follows :

Treasury bills are valued at carrying cost;

• In respect of traded/quoted investments, the market price is taken as available from the trades/quotes on

the Stock Exchanges, price of SGL Account transactions, price list of RBI and prices declared by PDAI/ FIMMDA periodically; and

• The unquoted shares/units are valued at break-up value/repurchase price and Net Asset Value. The

unquoted fixed income securities are valued on YTM basis with appropriate mark-up over the YTM rates

for Central Government securities of equivalent maturity.

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vii. Investments are shown net of provisions.

viii. Profit/Loss on sale of investments are booked on accrual basis.

ix. In case of IDBI’s stockbroking subsidiary, securities and other financial assets acquired and held for earning

income by way of dividend and interest and for the purpose of capital appreciation are classified as long terminvestments and are valued at their cost of acquisition. Decline in their value, if any, other than temporary, is

recognised.

Securities acquired with the intention of short-term holding and trading are considered as stock-in-trade andregarded as current assets.

Securities held as stock-in-trade category wise are valued at lower of cost or market/fair value. Cost is derived

by following the FIFO method considering only outright transactions. Market value is determined based onmarket quotes for actual trades and where such quotes are not available, fair value is determined, in the case

of debt securities, with reference to yields on securities of similar maturity and credit standing, and in the case

of equities, with reference to the break-up value as per the last balance sheet. Each type of security is regardedas a separate category and depreciation or appreciation is aggregated under each category. Net depreciation,

if any, for each category is provided and net appreciation, if any, is ignored.

C. Repo Transactions in case of IDBI’s stockbroking subsidiary:

i. The difference between total consideration paid on purchase, and received on sale, is treated as interest and

shown as interest expense on Repo Transactions and interest income on Reverse Repo transactions. Intereston transactions outstanding, as on the Balance Sheet date, is accrued for the expired period at the contract

rate.

ii. Securities held as stock-in-trade, as on the Balance Sheet date, include securities purchased in ReverseRepo transactions and exclude securities sold in Repo transactions. Securities purchased in Reverse Repo

transactions are valued at lower of cost or market value.

iii. Accrued interest paid on purchase, on Reverse Repo transactions outstanding as on the Balance Sheet date,is shown under current assets as Reverse Repo Interest Adjustment Account. Accrued interest received on

sale, on Repo transactions outstanding as on the Balance Sheet date, is shown under current liabilities as

Repo Interest Adjustment Account. The difference between holding rate and the repo rate, in respect of Repotransactions outstanding as on the Balance Sheet, is shown as Repo Price Adjustment Account.

D. Derivatives in case of IDBI’s stock broking subsidiary

i. In case of IDBI’s stockbroking subsidiary, Initial Margin payable at the time of entering into futures contract isadjusted against the deposits with the exchanges in the form of fixed deposits and cash deposits.

ii. The difference in the settlement price or exchange closing price of the previous day and exchange closing

price of the subsequent day, paid to or received from the exchange is treated as Mark to Market Margin. Thebalance in the Mark to Market Margin Account represents the net amount paid or received on the basis of

movement in the prices of open interest in futures contracts till the balance sheet date. Net debit balance in the

Mark to Market Margin Account is charged off to revenue whereas net credit balance is shown under currentliabilities.

iii. Premium paid or received on purchase and sale of options and the difference paid or received on exercise of

options is accounted as Purchases or Sales. In case of open interest in options sold as on the balance sheetdate, the premium received is shown under current liabilities.

E. Fixed Assets and Depreciation

i. Fixed Assets are shown at cost less depreciation. All costs relating to the acquisition and installation of fixedassets are capitalised.

ii. Depreciation on assets acquired during the course of leasing business is provided on straight line method pro-

rata from the month in which lease rentals commence over the primary period of lease.

ii i. (a) Depreciation is provided on

i) Motor Vehicles on Straight Line Method.

ii) Other Fixed Assets on Written down Value Method.

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(b) No depreciation is provided on assets sold/or discarded during the year.

iv. Leasehold land is amortised over the period of lease.

F. Foreign Currency Transactions

i) Income and Expenditure is accounted at the actual exchange rates of remittance. Amounts pending remittance

are accounted at the closing FEDAI rates. Foreign Currency assets and liabilities are translated at closingFEDAI rates.

ii) Forward Exchange Contracts and the net income/expenditure thereon are accounted for on the settlementdate.

G. Provisions For Assets

As per RBI guidelines, loan assets and other assistance portfolios (including debentures in the nature of advances)

are to be classified as Standard, Sub-standard, Doubtful and Loss subject to provisions/write-off on an annualbasis, as under :

1. Standard Assets - 0.25% of loan/assistance

2. Sub-standard assets - 10% of loan/assistance.

3. Doubtful assets - 100 % of unsecured portion plus 20% /30% /50% of secured portion depending on the

period for which the loan/assistance haveremained doubtful.

4. Loss Assets - The entire assistance is to be provided/ written off.

On the above basis and keeping in view the record of recovery and other relevant factors, the requirements ofprovisions/write-off are being determined.

Loan Assets are shown net of provision/write-off for sub-standard/doubtful/loss assets.

H. Securitisation Transaction

Financial assets securitised are derecognised in the books and the gains/loss on securitisation are recognised inthe year of securitisation. Expenditure incurred for securitisation are charged off in the year of securitisation.

I. Retirement Benefits

The Gratuity, Leave encashment and Pension Liability determined based on actuarial valuation at the year end, is

fully provided for.

J. Interest Expenditure on Borrowings

The Interest Expenditure on borrowings is accounted for on accrual basis.

K. Expenditure / Discount On Bond Issue

The expenses relating to issue of bonds and discount, if any, on the issue are amortized equitably over the tenureof the bonds/over the period upto which the earliest redemption expires.

L. Accounting Standards

Mandatory accounting standards as applicable to the bank in accordance with the RBI guidelines issued from timeto time are followed

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4. Contingent Liability (March 31, 2003) (Rs. crore)

a. Claims against the Bank not acknowledged as debt 399

b. On account of Guarantees/Letters of Credit issued * 4258

c. On account of underwriting commitment 0

d. On account of uncalled monies on partly paid shares, debentures etc. 2

e. On account of disputed income tax, interest tax, penalty and interest ** 723

demands pending in appeal not provided for

f. Monies for which the Bank is contingently liable 772

* Includes Guarantees/LCs in foreign currency converted at FEDAI rate prevailing as on March 31, 2003

** The gross demand raised by the Income Tax Dept. on account of Income Tax, Wealth Tax, Interest Tax, Penalty

and Interest Demands on IDBI is Rs.4968.56 crore against which the provision made is Rs.2814.36 crore. The

demands include Rs.1462.22 crore in respect of which IDBI has favourable appellate decisions in its own cases inthe earlier years.

5. Estimated amount of contracts remaining to be executed on capital account not provided for (net of advance paid)

is Rs.16 crore.

6. Forward Exchange Contracts amounting to Rs.11698 crore have not been included in Contingent Liabilities.

7. In compliance with the accounting standard AS- 22 relating to “Accounting for Taxes on Income” issued by The

Institute of Chartered Accountants of India, the bank has recognised Rs.41 crore as deferred tax credit in the Profit& Loss Account for the year ending March 31, 2003.

8. During the year 2002-03, Financial Assets having an aggregate outstanding of Rs.583 crores have been securitised

for a consideration of Rs.630 crore resulting in a gain of Rs.47 crore. The net gain is included under the headInterest and Discount Income in the Profit and Loss A/c.

9. IDBI’s stock broking subsidiary has been raising Demand Loan from the Reserve Bank of India from time to time

against the pledge of Dated Govt. Securities and Treasury Bills, under the Scheme of Liquidity Support to Primary

Dealers. The Company has also been availing Liquidity Adjustment Facility from the Reserve Bank of India,against the pledge of Dated Govt. Securities and Treasury Bills. The outstanding Demand Loan and Liquidity

Adjustment Facility as on 31.3.2003 is Rs. NIL and Rs.1000 crore against the pledge of Dated Govt. Securities/

Treasury Bills for face value of Rs.NlL and Rs.1050 crore respectively.

For Sorab S. Engineer & Co.

Chartered Accountants

sd/-

Mumbai N.D.Anklesaria

November 17, 2003 Partner

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PART C

Extracts of relevant provisions of The Industrial Development Bank of India Act, 1964

Preamble

An Act to establish the Industrial Development Bank of India as the principal financial institution for co-ordinating,in conformity with national priorities, the working of institutions engaged in financing, promoting or developing

industry, for assisting the development of such institutions for providing credit and other facilities for thedevelopment of industry and for matters connected therewith and further to amend certain enactments.

Definitions

Section 2

In this Act, unless the context otherwise requires, -

(a) “Board” means the Board of Directors of the Development Bank.

(b) “Development Bank” means the Industrial Development Bank of India establ ished underSection 3.

Corporate Status

Section 3(2)

The Development Bank shall be a body corporate with the name aforesaid having perpetual succession and acommon seal with power, subject to the provisions of this Act, to acquire, hold and dispose of property and tocontract and may, by that name, sue or be sued.

Capital

Section 4

(1) The authorised capital of the Development Bank shall be two thousand crores of rupees divided into one

hundred and fifty crores fully paid-up equity shares of rupees ten each and, subject to the provisions of

section 4E, fifty crores of fully paid-up redeemable Preference shares of rupees ten each.

(2) The Development Bank may, from time to time, by a resolution in general meeting, increase the authorised

capital to an amount not exceeding five thousand crores of rupees consisting of such number of equity

shares and redeemable preference shares as it deems fit.

Section 4C

(1) The issued capital of the Development Bank of seven hundred and fifty three crores of rupees which standsfully vested in and subscribed by the Central Government immediately before the commencement of the

Industrial Development Bank of India (Amendment) Act, 1995 shall, on such commencement, stand divided

into seventy five crores and thirty lakhs equity shares of rupees ten each.

(2) The Board may, from time to time, increase the issued equity share capital of the Development Bank by

allotment of shares to such persons and on such terms and conditions as the Board may determine:

Provided that no increase in the issued equity capital shall be made in such a manner that the CentralGovernment holds at any time less than fifty-one percent of the issued equity capital of the Development

Bank.

Section 4D

(1) The Development Bank may, by a resolution passed in a general meeting of the shareholders, reduce its

share capital in any way.(2) Without prejudice to the generality of the foregoing power, the share capital may be reduced

by -

(a) extinguishing or reducing the liability on any of its equity shares in respect of share capital not paid up;

(b) either with or without extinguishing or reducing liability on any of its equity shares, cancelling any paid

-up share capital which is lost, or is unrepresented by available assets; or

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(c) either with or without extinguishing or reducing liability on any of its equity shares, paying off any paid-up share capital which is in excess of the wants of the Development Bank.

(3) In any general meeting referred to in sub-section (1), the resolution for reduction of share capital shall be

passed by shareholders entitled to vote, voting in person, or where proxies are allowed, by proxy, and thevotes cast in favour of the resolution are not less than three times the number of the votes, if any, cast

against the resolution by shareholders so entitled and voting.Conversion of equity shares into redeemable preference shares

Section 4E

(1) The Central Government may, at any time after the commencement of the Industrial Development Bank ofIndia (Amendment) Act, 1995 by notification in the Official Gazette, convert such number of equity shares

held by it not exceeding fifty crores as it may decide into redeemable preference shares.

(2) The redeemable preference shares referred to in sub-section (1) shall -

(a) carry such fixed rate of dividend as Central Government may specify at the time of such conversion, and

(b) neither be transferable nor carry any voting rights.

(3) The redeemable preference shares referred to in sub-section(1) shall be redeemed by the Development

Bank within three years from the date of such conversion in such instalments and in such manner as the

Board may determine.

Management of the Development Bank

Section 5

(1) The general superintendence, direction and management of the affairs and business of the Development

Bank shall vest in a Board of directors which may exercise all powers and do all such acts and things, asmay be exercised or done by the Development Bank and are not by this Act expressly directed or required

to be done by the Development Bank in general meeting.

(2) The Board may direct that any power exercisable by it under this Act shall also be exercisable in such casesand subject to such conditions, if any, as may be specified by it, by the chairman, managing director or the

whole-time director.

(3) Subject to the provisions of this Act, the Board in discharging its functions shall act on business principleswith due regard to public interest.

Constitution of the Board

Section 6

(1) The Board shall consist of the following, namely :-

(a) a chairman and a managing director appointed by the Central Government:

Provided that the same person may be appointed to function both as chairman and as managingdirector;

(b) one whole-time director appointed by the Central Government on the recommendation of the Board;

(c) two directors who shall be officials of the Central Government nominated by the Central Government;

(d) three directors from amongst persons having special knowledge of, and professional experience in,science, technology, economics, industry, banking, industrial co-operatives, law, industrial finance,

investment, accountancy, marketing or any other matter, the special knowledge of, and professionalexperience in, which would, in the opinion of the Central Government, be useful to the Development

Bank, nominated by the Central Government; and

(e) such number of directors elected, in the prescribed manner, by shareholders other than the CentralGovernment, whose names are entered on the register of shareholders of the Development Bank ninety

days before the date of the meeting in which such election takes place on the following basis, namely:-

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(i) where the total amount of equity share capital issued to such shareholders is ten per cent or lessof the total issued equity capital, two directors;

(ii) where the total amount of equity share capital issued to such shareholders is more than ten per

cent but less than twenty-five per cent of the total issued equity capital, three directors;

(iii) where the total equity share capital issued to such shareholders is twenty five per cent, or more

of the total issued equity capital, four directors:

Provided that until the assumption of charge by the elected directors under this clause, the CentralGovernment may at any time nominate such number of directors, not exceeding four, from amongst

persons having special knowledge of and professional experience in, science, technology, economics,

industry, banking, industrial co-operatives, law, industrial finance, investment, accountancy, marketing orany other matter, the special knowledge of, and professional experience in, which would, in the opinion

of the Central Government, be useful to the Development Bank for carrying out its functions.

(2) The chairman, managing director and the whole-time director shall hold office for such term not exceedingfive years as the Central Government may specify in this behalf and any person so appointed shall be

eligible for re-appointment.

(2A) Notwithstanding anything contained in sub-section (1), the Central Government shall have the right toterminate the term of office of the chairman, managing director or the whole-time director, as the case may

be, at any time before the expiry of the term specified under sub-section (2) by giving him notice of not lessthan three months in writing or three months’ salary and allowances in lieu of such notice; and the chairman,

the managing director or the whole-time director , as the case may be, shall also have the right to relinquish

his office at any time before the expiry of the term specified under sub-section (2) by giving to the CentralGovernment notice of not less than three months in writing.

(3) The chairman, the managing director or the whole-time director shall receive such salary and allowances as

may be determined by the Central Government.

(3A) The Central Government may, at any time, remove the chairman, the managing director or the whole-time

director, as the case may be, from office.

Provided that no person shall be removed from his office, under this sub-section, unless he has been givenan opportunity of showing cause against his removal.

(4) A nominated director shall hold office during the pleasure of the authority nominating him.

(4A) Subject to the provisions of sub-section (4), -

(a) every director nominated under clause (d) of sub-section (1) shall hold office for such term not exceedingthree years as the Central Government may specify in this behalf and thereafter until his successor

assumes office, and shall be eligible for re-nomination:

Provided that no such director shall hold office continuously for a period exceeding six years; and

(b) every director elected under clause (e) of sub-section (1) shall hold office for three years and thereafteruntil his successor assumes office, and shall be eligible for re-election:

Provided that no such director shall hold office continuously for a period exceeding six years.

(4B) The shareholders, other than the Central Government, may, after giving to the director a reasonable opportunityof being heard in the manner as may be prescribed, by resolution passed by majority of the votes of such

shareholders holding in the aggregate not less than one-half of the share capital held by such shareholders,

remove any director elected under clause (e) of sub-section (1) and elect another director in his place tofill the vacancy so caused;

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Disqualification of directors

Section 6B

(1) A person shall not be eligible for being elected director under clause (e) of sub-section (1) of section 6, ifhe

(a) has been found to be of unsound mind by a court of competent jurisdiction and the finding is in force;

(b) is an undischarged insolvent;

(c) has applied to be adjudicated as an insolvent and his application is pending;

(d) has been convicted by a court of any offence involving moral turpitude and sentenced in respect thereofto imprisonment for not less than six months and a period of five years has not elapsed from the date

of expiry of the sentence; or

(e) has not paid any call in respect of shares of the Development Bank held by him, whether alone or jointlywith others, and six months have elapsed from the last day fixed for the payment of the call.

Vacation of office by director

Section 6C

(1) The office of a director shall become vacant if he

(a) becomes subject to any of the disqualifications mentioned in section 6B; or

(b) resigns his office by giving notice in writing under his hand and the resignation is accepted; or

(c) absents himself from three consecutive meetings of the Board without obtaining leave of absence from

the Board.

(2) Notwithstanding anything in clause (a) of sub-section (1), the disqualifications referred to in that clause shallnot take effect _

(a) for thirty days from the date of the adjudication, sentence or order;

(b) where any appeal or petition is preferred within thirty days aforesaid against the adjudication, sentence

or conviction resulting in the sentence or order until the expiry of seven days from the date on whichsuch appeal or petition is disposed of; or

(c) where within the seven days aforesaid, any further appeal or petition is preferred in respect of the

adjudication, sentence, conviction or order and the appeal or petition, if allowed, would result in theremoval of the disqualification, until such further appeal or petition is disposed of.

Borrowings and acceptance of deposits by Development Bank

Section 11 (1) (a)

The Development Bank may, for the purpose of carrying out its functions under this Act issue and sell bonds and

debentures with or without the guarantee of the Central Government

Extracts of relevant provisions of Industrial Development Bank of India (Issue and Management of Bonds)

Regulations, 1972

3. Form of the Bond and the mode of transfer thereof, etc.

(1) A Bond may be issued in the form of -

(a) A promissory note payable to, or to the order of, a certain person; or(1A) Not withstanding anything contained in sub-regulation (1) and subject to the provisions of the

Depositories Act,1996, every person subscribing to or holding the Bond under these regulations shall

have the option to hold the same with a depository.

(2) (a) A Bond issued in the form of a promissory note shall be transferable by endorsement and deliverylike a promissory note payable to order.

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(b) No writing on a Bond issued in the form of a promissory note shall be valid for the purpose ofnegotiation if such writing purports to transfer only a part of the amount denominated by the Bond.

(5) No endorsement of a Bond in the form of promissory note or no instrument of transfer in the case of

a Bond in the form of a Stock Certificate shall be valid unless made by the signature of the holder orhis duly constituted attorney or representative inscribed in the case of a Bond in the form of a promissory

note on the back of the Bond itself.4 Trust not recognised

(1) The Development Bank shall not be bound or compelled to recognize in any way, even when having

notice thereof, any trust or any right in respect of a Bond other than an absolute right thereto in the

holder.

Provided that nothing in this regulation shall apply to a depository in respect of Bonds held by it as a

registered owner on behalf of the beneficial owner.

5A Provision for holding of bonds issued in the form of promissory notes by trust/trustee(s)

(1) Without prejudice to the provisions of sub-regulation (1) of regulation 4, the Development Bank may, atthe request of the applicant and without liability to the Development Bank, issue a Bond in the form of

promissory note in the name of a specified trust or trustee(s) of that trust, or, as the case may be, inthe personal name of the applicant, describing him as a trustee, whether as a trustee of the trust

specified in his application or as a trustee without such specifications.

8 Procedure where Bond in the form of a promissory note is Lost, etc.

(1) Every application for the issue of a duplicate Bond in place of a Bond which is alleged to have beenLost, Stolen, Destroyed, Mutilated or Defaced, either wholly or in part shall be addressed to the Office

of Issue, and shall contain the following particulars, namely:

a) Bond No. ____ for Rs _____ of the ____ percent Industrial Development Bank of India Bonds,--------[year];

b) Last half-year for which interest has been paid;

c) The person to whom such interest was paid;

d) The person in whose name Bond was issued (if known);

e) The circumstances attending the Loss, Theft, Destruction, Mutilation or Defacement; and

f) Whether the Loss or Theft was reported to the police

(2) Such application shall be accompanied by:

a) where the Bond was lost in course of transmission by registered post, the Post Office registrationreceipt for the letter containing the Bond;

b) a copy of the police report, if the loss or theft was reported to the police;

c) if the applicant is not a registered holder, an affidavit sworn before a magistrate testifying that the

applicant was the last legal holder of the Bond, and all documentary evidence necessary to traceback the title to the registered holder; and

d) any portion or fragments which may remain of the Lost, Stolen, Destroyed, Mutilated or Defaced

Bond.

9. Publication of notice of loss, theft, etc. in newspaper

(1) The loss, theft, destruction (mutilation or defacement) of a Bond in the form of a promissory note shall

be published on behalf of the applicant in a leading newspaper of the area.

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10 Issue of duplicate bond and taking of indemnity

(1) If the Prescribed Officer is satisfied of the loss, theft, destruction or defacement of the Bond in the form

of a promissory note, he may order issue of a duplicate Bond in the form of a promissory note on

applicant’s furnishing an indemnity bond with one or more sureties;

Provided that if at any time before the issue of the duplicate Bond in the form of a promissory note, the

original Bond is discovered or it appears to the Office of the Issue for other reasons that the order shouldbe rescinded, the matter shall be referred to the Board for further consideration, and in the meantime,all action on the order shall be suspended. An order passed under this sub-rule shall, on expiry of the

three months referred to therein become final unless it is in the meantime rescinded or otherwisemodified; and

Provided that where a Bond in the form of a promissory note lost, stolen, destroyed, mutilated or defaced

is of denomination not exceeding of rupees fifty thousand, a duplicate Bond in the form of Promissorynote may be issued on applicant furnishing an indemnity bond without any such surety;

Provided further that where such application is made with respect to a Bond in the form of a Promissory

note mutilated or defaced, of whatever face value, a duplicate Bond in the form of a Promissory notemay be issued without any such indemnity with or without surety if the Bond in the form of Promissory

note is capable of being identified as the one originally issued;

(2) the Development Bank shall not incur any liability for issuing such Bond in good faith under thisregulation.

(3) A duplicate certificate issued under sub-rule (1) shall be treated as equivalent to the original certificate

for all the purposes of these rules except that it shall not be encashable at an office of Issue other thanthe office of Issue at which such certificate is registered without previous verification.

12 Publication of list of duplicate Bonds

(1) The Development Bank shall publish half yearly in two leading newspapers or in one leading newspaper

and in the Gazette of India in the months of January and July a list of duplicate Bonds issued by theDevelopment Bank.

(2) The list shall contain the following particulars regarding the duplicate Bonds issued by the Development

Bank:

(a) the name of the Issue

(b) the number of the Bond, its value

(c) the name of the person to whom it was issued

(d) the date from which it bears interest

(e) the name of the applicant for a duplicate

(f) the number and date of order passed by the Prescribed Officer for payment of interest or issue

of a duplicate.

15 Person whose title to a Bond of deceased sole holder may be recognised.

(1) The executors or administrators of a deceased sole holder of a Bond (whether a Hindu, Mohammedan,

Parsi or otherwise), or the holder of a succession certificate issued under Part X of the IndianSuccession Act, 1925 (39 of 1925) in respect of the Bond shall be the only persons who may be

recognised by the Office of Issue (subject to any general or special instructions of the Prescribed Officer)

as having any title to the Bond.

21 Discharge of a Bond

(a) When a Bond held in the form of a promissory note becomes due for payment of principal, it shall be

presented at the office of the Development Bank at which interest thereon is payable or at the Officeof Issue duly signed by the holder on its reverse;

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Provided that the Development Bank may having regard to interest of the holder of the Bonds and otherrelevant factors, make the payment of the amount due on the Bond without requiring its presentment

at the office of the Development Bank invoking call option as per the terms of its issue or on maturity.

(b) When a Bond in the form of an entry in the account or held with a depository becomes due for paymentof principal, a duly signed receipt shall be furnished by the holder or beneficial owner, as the case may

be, to the Office of Issue.Extracts of Relevant Provisions of The Industrial Development Bank Of India Bonds And Deposits

(Nomination) Regulations, 1997

3. Nomination in respect of bonds or deposits:-

(1) A nomination made by a holder or as the case may be, all the holders jointly, shall be recognised by

the Development Bank in the circumstances and to the extent specified in these regulations.

(2) A sole holder or all the holders jointly or the surviving holder or holders not being persons (s):-

(i) holding the bond or deposit as holder of an office; or -

(ii) acting for a trust; or

(iii) acting in any other capacity for any other person with a beneficial interest in the bond or deposit,

may nominate one or more persons not exceeding four including a minor, who shall in the event of his

or their death be entitled to the amounts payable by the Development Bank in respect of the bond ordeposit:

Provided that where the nominee is a minor, the holder (s) shall at the time of making the nominationalso appoint any person to receive the amounts due in respect of the bond or deposit in the event of

death of the holder(s) during the minority of the nominee.

Explanation:

Nomination may also be made in favour of Central or State Government, a local authority, any person designated

by virtue of his office or a religious or charitable trust.

4. Substitution or cancellation of nomination:-

(1) A nomination made under sub-regulation (2) of regulation 3 may subsequently be substituted orcancelled.

(2) For a nomination, substitution of nomination or cancellation of nomination to be valid, it shall be madeto the Development Bank in such form containing necessary information as may be approved by the

Development Bank accompanied with the relevant bond or deposit receipt.

(3) A valid nomination, substitution of nomination or cancellation of nomination shall be deemed to beeffective on the date on which it was received by the Development Bank. The nomination, substitution

of nomination or cancellation of nomination shall be registered in the relevant records of the

Development Bank and a suitable endorsement shall be made by the Development Bank on the bondor deposit receipt.

(4) The substitution of nomination or cancellation of nomination shall not be valid in the case of a bond or

deposit held jointly by more than one holders, unless such substitution or cancellation is made by allthe surviving holder(s).

5. Nomination not affected due to issue of new bond or deposit receipt:

The nomination made under these regulations shall not be affected by the issue of a new bond or depositreceipt in lieu of the existing one.

6. Nominee’s right to receive the amount:-

(1) A nomination shall cease to be in force from the date of death of the sole nominee during the lifetime

of the holder.

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(2) Where the nomination is in favour of more than one person, the nominee first named shall alone havethe right to receive the amount due in respect of the bond or deposit, in the event of the death of the

holder(s).

Where the nominee first named has pre-deceased the holder and the holder has not cancelled thenomination or substituted the nomination, the nominee second named shall be entitled to receive the

amount in respect of the bond or deposit of the deceased holder and in the same manner, on death ofa successive nominee, the nominee next named shall be entitled to receive the amount in respect of

such bond or deposit.

7. Deemed cancellation of nomination:-

On the transfer by the holder or the redemption by the Development Bank of any bond, the nomination shall,in respect of such bond, be deemed to have been cancelled and shall cease to be in force from the date

of such transfer or redemption, unless the transferee, in the case of transfer, advises the Development Bankin writing that he does not desire such bond to be transferred to his name.

8. Discharge on payment to the nominee:-

Payment by the Development Bank to the nominee in accordance with the provisions of these regulationsin respect of bond or deposit to which the nomination relates shall constitute a full discharge to the Development

Bank of its liability.

Provided that nothing contained in this regulation shall affect the right or claim which any person may haveagainst the nominee to whom any payment is made under these regulations.

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PART D

MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION

Copies of the contracts and documents, referred to below, all of which have been attached to a copy of this Offer

Document, which has been delivered to The Stock Exchange, Mumbai and National Stock Exchange of India Ltd.,may be inspected at the Head Office of IDBI between 10.00 a.m. and 12.00 noon on any working day between

the date of the Offer Document and the date of closing of the Issue.

Material Contracts and Documents

1. IDBI Act, 1964 (as amended) & IDBI General Regulations, 1994.

2. IDBI (Issue and Management of Bonds) Regulations, 1972 and the IDBI Bonds and Deposits (Nomination)

Regulations, 1997.

3. IDBI’s letters of appointment dated January 7, 2004 to the Lead Managers, Co-Managers, Registrar, Trustees tothe bondholders and Principal Marketing Co-ordinator.

4. Copies of MOU entered into by IDBI with the Lead Managers dated January 8, 2004 and Registrar dated

January 9, 2004.

5. Tripartite Agreement between IDBI, NSDL and Registrar to Issue dated January 20, 1997.

6. Tripartite Agreement between IDBI, CDSL and Registrar to Issue dated October 11, 1999.

7. Notification F.No.24(4)/2003-IF-1 dated September 29, 2003 appointing Shri M. Damodaran as Chairman

and Managing Director.

8. Resolutions of the Board of Directors of IDBI passed at the Meeting held on June 20, 2003 approving the

Umbrella Offer Document for 2003-2004 for raising Rs.1500 crore with an option to retain additional subscription

upto Rs.1500 crore and authorising the Chairman & Managing Director to exercise powers in relation to thePublic Issue.

9. Chairman & Managing Director’s authorisation dated January 8, 2004 to Shri O.V.Bundellu/Shri K.

Sivaprakasam, Executive Directors, severally, to sign the offer document of Flexibonds-20 on his behalf.

10. Copy of letter dated November 7, 2003 from S&P assigning a rating of “BB” (with stable outlook) for IDBI’s

long term foreign currency debt, copy of release dated February 5, 2003 from Moody’s Investors Service

assigning a rating of “Ba1” and copy of release from Fitch dated February 2003 assigning a rating of “BB”(with negative outlook) for IDBI’s long term foreign currency debt.

11. Letter from CRISIL dated July 15, 2003 assigning a “AA+” rating for the unsecured bonds under the umbrella

series 2003-2004 for an amount of Rs.3000 crore and letter dated January 9, 2004 assigning a rating of AA+(Rating Watch with developing implications) for the present issue.

12. Letter from ICRA dated June 28,2002 and July 14, 2003 assigning a “LAA” rating for the unsecured bonds

under the umbrella series 2003-2004 for an amount of Rs.3000 crore and letter dated January 9, 2004assigning a rating of “LAA” for the present issue.

13. Letter from Fitch Ratings India Pvt. Ltd. dated July 14, 2003 assigning a rating of “AA+(ind)” for the

unsecured bonds under the umbrella series 2003-2004 for an amount of Rs.3000 crore and letter datedJanuary 9, 2004 assigning a rating of “AA+(ind)” (the outlook on the rating is evolving) for the present issue.

14. Consent of the auditors Sorab S. Engineer & Co., Chartered Accountants, dated January 6, 2004 for

inclusion of their report on Accounts in the form and context in which they appear and inclusion of their nameas Tax Consultants and Auditors in this Offer Document.

15. The reports of Auditors, Sorab S. Engineer & Co., Chartered Accountants, dated November 17, 2003containing the audited Balance Sheets and Profit and Loss Accounts for the five years ended March 31,

1999, 2000, 2001, 2002, 2003 and the half year ended September 30, 2003.

16. Report on Tax Benefits from Sorab S. Engineer & Co., Chartered Accountants dated January 6, 2004.

17. Copies of the audited Balance Sheets and Profit and Loss Accounts for five years ended March 31, 1999,2000, 2001, 2002, 2003.

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18. Consents of the Lead Managers, Principal Marketing Co-ordinator, Co-Managers, Registrars, Trustees andBankers to act in their respective capacities.

19. Copies of the Initial Listing Applications made to The Stock Exchange, Mumbai and National Stock Exchange

of India Ltd., dated September 17, 2003 for listing of the Bonds.

20. Copy of G.O.Rt. No 292 dated 23.02.1996 issued by the Government of Andhra Pradesh approving investment

of surplus funds of the Endowment Institutions/ Trusts in the Bonds of IDBI.

21. Copy of Notification No. F-11(3)-PD/98, dated June 12, 1998 issued by Government of India, Ministry of Financeauthorising Provident Funds etc to invest in bonds and securities issued by Public Financial Institutions.

22. Copy of the order of Madhya Pradesh Government dated January 15,1996 declaring Bonds issued by IDBI

as Public Securities under Section 13 of M.P. Public Trust Act, 1951.

23. Copy of Notification No.PR-15018/14/96-PG dated 23.12.1997 from Government of India, Ministry of SurfaceTransport declaring the Bonds as ‘public securities’ under Section 88(2) of the Major Port Trusts Act, 1963.

24. Copy of letter from Government of Gujarat, Agriculture and Co-operation Department dated June 22, 1998

confirming their permission to Co-operative Societies to invest their surplus money in Flexibonds of IDBIunder Section 71(1)(g) of Gujarat State Co-operative Societies Act, 1964 vide its notification dated 19.12.97

No. GHKH/67-97-SMB-2097-4249-CH.

25. Copy of notification dated November 27, 2003 issued by Government of India, Ministry of Finance declaringIDBI Flexibonds Series 2003-04 as Public Securities under Section 20(f) of the Indian Trust Act, 1882.

26. Copy of application vide letter no.1248/DRD/Flexi-20 dated January 8, 2004 to Government of Rajasthan for

declaring the Bonds to be issued under the IDBI Flexibonds-20 as public securities under section 2(10)(c)of the Rajasthan Public Trusts Act, 1959.

27. Copy of application vide letter No.1247/DRD/Flexi-20 dated January 8, 2004 to Government of Gujarat for

declaration of the Bonds to be issued under the IDBI Flexibonds-20 as Public Securities under Section 2(12)(d) of the Bombay Public Trusts Act, 1950.

28. Copy of application vide letter No.1246/DRD/Flexi-20 dated January 8, 2004 to Government of Maharashtra

for declaration of the Bonds to be issued under the IDBI Flexibonds-20 as Public Securities under Section2(12)(d) of the Bombay Public Trusts Act, 1950.

29. Copy of letter No.1249/DRD/Flexi-20 dated January 8, 2004 to CBDT seeking deduction for the interest on

IDBI Flexibonds-20 under section 80L of the Income-tax Act 1961.

30. SEBI Observations vide letter No.CFD/DIL/SNB/21606/2003 dated November 7, 2003.

31. Observations of The Stock Exchange, Mumbai vide letter No.DCS/sg/ak/ps/2003 dated October 29, 2003

and of National Stock Exchange of India Ltd. vide letter No.NSE/LIST/55367 dated November 3, 2003.

32. Copy of notification dated September 12, 2003 issued by Govt. of India, Ministry of Finance, Department ofRevenue,CBDT according approval to the Infrastructure Bonds for FY 2003-04 issued by IDBI bonds u/s

88(2)(xvi) of the IT Act, 1961.

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DECLARATION

All relevant provisions of the IDBI Act 1964, IDBI (Issue and Management of Bonds) Regulations, 1972, IDBIGeneral Regulations, 1994, Industrial Development Bank of India Bonds and Deposits (Nomination) Regulations,

1997 and the relevant guidelines issued by SEBI have been complied with and no statement made in this OfferDocument is contrary to the provisions of the said Act/Regulations/Guidelines.

IDBI accepts no responsibility for statements made otherwise than in this Offer Document or in the advertisement

or any other material issued by or at the instance of IDBI and that anyone placing reliance on any other sourceof information would be doing so at his own risk.

SIGNED PURSUANT TO THE AUTHORITY GRANTED BY BOARD OF DIRECTORS OF IDBI AT ITS

MEETING HELD ON THE 20TH DAY OF JUNE, 2003 AND CHAIRMAN & MANAGING DIRECTOR’S

APPROVAL ON THE 8TH DAY OF JANUARY, 2004.

O.V.BUNDELLUEXECUTIVE DIRECTOR

Place : Mumbai

Date : January 9, 2004.

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GLOSSARY OF COMMON TERMS USED IN BOND STRUCTURES.

The debt instruments are being increasingly structured to suit investor preferences with respect to his return

requirements, periodicity of return, investment period etc. With increasingly complex instruments being offered, the

general retail investors are required to understand the implications of various structures in order to choose theright product best suited to him/her and also to make a well informed decision. To make understanding of these

structures easy, some of the commonly used terms relating to a bond structure are explained below. Thediscussion below is not exhaustive and investors are requested to consult their investment / tax consultants from

time to time for specific features offered under bonds issued.

1. Debt Instruments These are the instruments used for borrowing money. Some of the generally usedinstruments are Bonds and Deposits.

(i) Bonds are debt instruments, which are transferable and tradeable. Bonds can be in the form of

Promissory Notes or Debentures. While the two forms are the same in basic essence, they differ interms of legal format, treatment for incidence of tax, stamp duty on issue and transfer etc.

(ii) Deposits are debt instruments, which are non-transferable and non-negotiable. Deposits are in the form

of a receipt.]

2. Structures used in Debt Instruments.

(i) Premium / discount / par :

One often hears that an instrument is issued at par or at a premium or at a discount. This indicates thevalue to be paid for acquiring an instrument with a given face value. For example:

(a) If a bond of Rs. 100 can be bought for Rs.100, the value is at par.

(b) If Rs.105 is to be paid for a Rs.100 bond, the bond is said to be sold at a premium of Rs.5.

(c) Purchasing a Rs.100 bond for Rs.98 is equivalent to saying that it is bought at a discount of

Rs. 2.

Therefore premium or discount indicates the difference between the par value and the acquisition

value. It may be noted that irrespective of the amount at which the bond is acquired, the interest

will be calculated on the par value of the instrument. However, deep discount bonds are issuedat a discount to the face value. On maturity the bonds are redeemed at par/ face value.

Similarly, if an issuer undertakes to redeem the Rs.100 bond at a premium of say Rs.3, on

redemption date the investor will receive Rs.103 towards principal On the same analogy,redemption at discount will mean that the investor will receive less than the par value on

redemption.

(ii) Redeemable / Irredeemable :

A redeemable instrument implies that the principal amount is returned after a specified time period. For

example, a 3 year bond is said to be redeemable after 3 years. Irredeemable means that the principalis held by the borrower perpetually on terms of offer. However no irredeemable bonds can be issued

in India as per the current provisions of law. An example of irredeemable instrument is Equity Shares.

(iii) Secured / Unsecured :

A secured instrument is one for which the borrower offers specific security (in the form of assets) to

support meeting of repayment of principal and payment of interest in the event of default. In case of any

such default, the lender may enforce the security through necessary legal procedures. An unsecuredinstrument indicates that the investors have to depend solely on the performance capabilities of the

issuer / borrower for principal / interest payments.

(iv) Senior / Subordinate Debt :

These two words indicate the order in which the lenders will be paid in case of liquidation of the issuer

/ borrower. In case of liquidation, the assets of the company will be sold and the creditors / lenders will

be paid as per the order subject to various legal provisions. In such an eventuality, an investor in a sub-ordinate debt will be paid only after meeting the payments to investors in senior debt.

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(v) Fixed / Floating interest :

A fixed interest indicates that interest will be paid at an accepted rate expressed as a percentage of the

principal amount. However, if the interest payable on the bond is linked to some other variable rate

(called benchmark) then the rate is said to be floating.

For example, if interest on a Rs.100 bond with 3 year maturity is fixed at 10% p.a. payable annually the

interest payable is Rs.10 each at the end of first, second and third year.

Assume the rate on the above instrument is linked to one year Government Security rate on the firstday of each year (resetting dates). If the interest rate on the first day of first, second and third year

happens to be 10%, 11% and 9%, interest for the three years will be Rs. 10 (Rs.100 x 10%), Rs. 11

(Rs.100 x 11%) and Rs.9 (Rs. 100 x 9%) respectively. This is an example of a floating rate instrumentwherein the rate of interest payable every year will change as per the underlying benchmark. The

benchmark for a floating rate instrument can be linked to rates offered on G-sec, G-sec traded rates,Treasury bills, stock index, commodity prices, inflation rate etc.

The actual interest amount received every year may not be uniform in the case of a floating rate. Further

the actual amount of interest to be received every year in case of floating rate instrument cannot bedetermined at the time of investment.

vi) Return :

The amount of interest paid on an investment is said to be the return. This compensation is paid indifferent forms depending on the bond structure an investor opts for. Some common terms are given

below: -

(a) Interest / coupon rate : This is the rate expressed as a percentage of the par value. For example(1). 10% per annum (2). 9% per annum payable quarterly etc.

(b) Periodicity of payment: This refers to the intervals at which interest is paid by the borrower. For

example 9% per annum payable quarterly means an investment in a Rs.100 bond will get Rs.2.25(100 x 9% x 1/4) at the end of every quarter. Similarly the periodicity of interest payment can also

be monthly, half-yearly etc.

(c) Yield to Maturity: Yield to maturity is the effective annual return an investor will get at the end ofeach year considering that all intermittent payments (interest payments) received are reinvested

at the rate mentioned. Yield also refers to the effective rate of interest per annum. For example.

1. 9% per annum payable annually will result in YTM of 9%2. 9% per annum payable or compounded quarterly will result in yield of 9.31% and

3. 9% per annum payable or compounded monthly will result in yield of 9.38%.

(d) Yield to put/call : This refers to the yield calculated for the period upto the date of put/call

considering all intermittent cash flows to be reinvested at the same rate as the original investment

(e) Discount: When an investment giving a specified maturity amount is offered for a lower issue price(for example Rs.10,000 to be received at the end of 6 years by investing

Rs. 5,000) the instrument is said to be at a discount. The difference between the issue price and

the maturity value (also called as face value) will be the amount of discount. Discount rate andthe yield to maturity will be the same and there will not be any payment of interest between the

date of investment and the maturity date

(vii) Repayment – Bullet and staggered

Bullet repayment :Principal amount will be repaid on the date of maturity

Staggered payment: Principal amount will be repaid in two or more instalments (For example, payment

of 25% each of the principal at the end of 6th, 7th, 8th and 9th year in a 9 year bond)

(viii) Options – Put / Call / Early redemption

Increasingly borrowers/issuers of debt are providing facilities like put/call options or early redemption

provision in the structures offered by them.

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(a) Put option : This is the right given to the investor to return the bond and take back the money onspecific dates between the date of investment and maturity date. This feature imparts liquidity to

the instrument and also permits the investor to take advantage of any favorable interest ratemovement during option period.

(For example- Consider a 9% 5 year bond with put option at the end of 3 years. An investor invests

in the bond taking it as 5 year investment. If the interest after 3 years for a two year bond is 12%p.a., the investor can exercise put option and reinvest for 2 years at 12% thereby increasing his

overall return).

(b) Call option : This is the right retained by the borrower/issuer to call back the bond and return themoney to the investor on specific dates between the date of investment and the maturity date.

Whenever such option is available, the investor should rather look at the returns and investment

period upto the date of first call option.

For example- Consider a 10 year bond with call option at the end of 5 years. An investor invests

in the bond taking it as a 10 year investment. If the issuer exercises option at the end of 5 years,

the investor may or may not be able to get same returns for the balance 5 years by investing inother securities. This uncertainty is called reinvestment risk.

(c) Early redemption

This nomenclature is generally used when the put/call option is not on any specific dates, but canbe exercised over a period before the date of maturity.

(d) Option date and Option notice

As mentioned above, option dates can be anytime between the date of investment and maturitydate. Issuer/investor desirous of exercising the option will have to give specific notice of the same

in advance to the investor /issuer respectively. The exact notice period will be mentioned in the

bond terms.

(ix) Other related terms:

1. Interest payment date

In case of interest bearing instruments the date(s) on which interest will be paid represents interestpayment dates. (For example, If interest is payable for the calendar quarter on the first of the

succeeding month, interest will be paid on April 1 for the period January to March, on July 1 for

the period April to June etc.).

2. Record date

Interest/redemption proceeds are paid to the investors whose names appear on the records of the

issuer as on a particular date which is referred to as Record Date. Investors are required to ensurethat the bonds purchased by them are transferred in their names before the record date, failing

which the issuer will send the payment to the person whose name appears in the register of bondholders.

3. Deemed Date of allotment

Deemed Date of allotment will be the date on which the investment proposed by the applicant is

considered to have been accepted by the issuer. The terms of the bond will come into effect fromthis date even though the actual date of allotment could differ from the deemed date of allotment.

4. Listing

Bonds can be listed on the Stock Exchanges. Generally major issuers list securities in the leadingStock Exchanges. Listing facilitates trading of the securities by the holders thereby imparting

liquidity.

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5. Ranking of various instruments

In case of liquidation of the issuer, the amount due to various types of bond holders will be settled

in the following order.

Secured debt.

Unsecured Senior debt (includes Bonds, Fixed Deposits etc.)

Unsecured Sub-ordinate debt

This in essence will mean that an investor in unsecured sub-ordinate debt will be paid only after

meeting the payments due to the investors in secured debt and unsecured senior debt.

6. Market Making

This is a facility whereby market makers will give two way quotes (Buy / Sell) in the secondary

market. This is done with the intention of creating liquidity to the instrument in the secondary

market. Presence of the market maker for specific securities helps the investors in those securitiesto have additional liquidity

7. Depository Arrangement

Bonds can be dematerialised through a depository. Dematerialisation creates paperless security

thereby reducing the risk of forged documents, does away with consequences of loss of security,reduces transaction time and brokerage. Also the trading in dematerialised securities in the

secondary market does not attract stamp duty.

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HEAD OFFICE:

IDBI Tower, WTC Complex, Cuffe Parade, Mumbai 400 005.

Tel: (022) 22182026/221989117/22161746. Fax: (022) 22188137, 22181155.Grams: INDBANKIND. Website : www.idbi.com

ZONAL OFFICES

IDBI, Chennai IDBI, Guwahati IDBI, Kolkata

115, Anna Salai G.S.Road, 44, Shakespeare Sarani,Saidapet, P. B. No. 1306, Guwahati 781005 P.B.No.16102,Chennai 600015 Assam. Kolkata 700017,

Tamil Nadu Tel.: (0361) 2529520-24 West Bengal.Tel.: (044) 22355201-16 Fax : 2452136 Tel.: (033) 22476818-20

Fax : 22355226/3346 Fax : 22473593

IDBI, Mumbai IDBI, New DelhiIDBI Tower, 5th Floor, Indian Red Cross Society Bldg.1,WTC Complex, Red Cross Road,

Cuffe Parade, P.B.No. 231,Mumbai 400005 New Delhi 110001

Maharashtra Tel.: (011) 23716181-84Tel.: (022) 22160696-98 23711733, 23725480 - 81

Fax : 22160785 Fax : 23711664 / 23718074

BRANCH OFFICES

IDBI, Bangalore

IDBI House,

58, Mission Road,Bangalore 560027,

Karnataka.Tel.: (080) 22245047/8

22275442/22225442/2272

869/22274840/22211335Fax. : 22215194/22213166

IDBI, Bhopal

6, Malviya Nagar,Opp.Raj Bhavan,

Adj. to LIC,Bhopal 462003,

Madhya Pradesh.Tel. : (0755) 2558415/

2555008/ 2762399

Fax : 2554921/ 2220563

IDBI, Bhubaneshwar

IDBI House, Janapath,

P. B. No.190,Bhubaneswar 751022,

Orissa.Tel: (0674) 2542196/

2542572, 2543243Fax : 2543442

IDBI, Chandigarh

S.C.O. 72-73,

Sector 17-B, P.B. No. 27,Chandigarh 160017

Tel.: (0172)2709689/2702781

Fax.: 2703409

IDBI, Chennai115, Anna Salai Saidapet,

P. B. No. 1306,Chennai 600015.

Tamil Nadu.

Tel.: (044) 22355201-16Fax : 22355226/3346

IDBI, CoimbatoreStock Exchange Bldg.,

683-686, Trichy Road,

Coimbatore 641005.Tamil Nadu.

Tel. : (0422) 2310262/67Fax.: 2310257

IDBI, Dimapur

Leirauki, 1st Floor,Khermahal Junction,

P.B.No.173,

Dimapur 797112.Nagaland.

Tel. & Fax : (03862) 225715

IDBI, Hyderabad

D.No. 5-9-89/1&2,

Chapel Road, P.B.No.370,Hyderabad 500001.

Andhra Pradesh.Tel.: (040) 23236846/

5466/6145/4610/3240841

Fax : 23230613

IDBI, Indore2nd Floor, Chaturvedi

Mansion, 26/4, Old Palasia,

Agra-Mumbai Road,Indore 452001

Madhya Pradesh.Tel. (0731) 2563496/2561898

Fax: 2563496

IDBI, Agartala

Chapala Villa

Near Circuit House,Airport Road,

Kunjaban P.O.,Agartala 799006,

Tripura.(0381)

Tel. & Fax : 2324986

IDBI, AhmedabadIDBI Complex,

Nr. Lal Bungalow,Off CG Road.

Ahmedabad 380006,

Gujarat.(079)Tel: 26563911/4994/4149

26565301/822/849/896Fax : 26400814

IDBI, AizwalP.U. Vaivenga Bldg.,Tuikhuahlang,

Aizwal 796001,

Mizoram (0389)Tel. & Fax No. 2325791

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IDBI, Itanagar

VIP Road, Bank Tinali,Itanagar 791111

Arunachal Pradesh.Tel & Fax : (0360) 2211436

IDBI, Jaipur

Anand Bhavan,1st Floor,

Sansar Chandra Road,P.B.No.22,

Jaipur 302001

Rajasthan.Tel.: (0141) 2360581-82/83

Fax : 2372830

IDBI, JammuOffice Block No. O.B. 26,

Grid Bhavan,1st Floor,

rail Head Complex,

Jammu - 180012. J&KTel.: (0191) 2474337

Fax : 2474338

IDBI, Kanpur

Virendra Smriti,2nd Floor, 15/54-B

Civil Lines,Kanpur 208001.

Uttar Pradesh.

Tel.:(0512) 2304232/2304380

2306866, 2306915Fax : 2304286

IDBI, Kochi

Panampilly Nagar,

P.B.No. 4253,Kochi 682036

Kerala.Tel.: (0484) 2318889,

23221571 / 168, 2312964

Fax : 2319042

IDBI, Kolkata44, Shakespeare Sarani,

P.B.No.16102,Kolkata 700017.

West Bengal.

Tel.. (033) 22807924,22478834

Fax : 2475094

IDBI, Ludhiana

B-19-110/4, 2nd floor,203, Carnival Shopping

Centre, Mall Road,Ludhiana 141001.

Punjab.Tel : (0161) 2407436/6541

Fax: 2406541

IDBI, Mangalore3rd Floor, Siddarth Bldg.,

Bal Matta Road,

Mangalore 575001.Karnataka.

Tel.: (0824) 2444952.Fax: 2447029

IDBI, Meerut222-225, Citi Centre,

2nd floor, Begum BridgeRoad, Meerut 250001.Uttar Pradesh.

Tel. & Fax (0121)2528970

IDBI, Mumbai

IDBI Tower, 5th

Floor,WTC Complex,

Cuffe Parade,Mumbai 400005.

Maharashtra

Tel.: (022) 22160696-98

Fax : 221660785

IDBI, Nagpur

F-1, 1st floor,

Vasant Vihar Complex, 6,Shankar Nagar,

West High Court Road,Nagpur 440 010.

Maharashtra

Tel : (0712) 2536505Fax : 2547668

IDBI, New Delhi

Indian Red Cross

Soc.Bldg. 1,Red CrossRoad,P.B.No. 231,

New Delhi 110001Tel. : (011) 23716181-84

23711733, 23725 480-81

Fax : 23711664/80474

IDBI, Panaji

EDC House,

6th Floor,Dr. Atmaram Borkar Road,

Panaji, 403 001.

GoaTel.: (0832) 2223112/1453.

Fax : 2223401

IDBI, Patna

Maurya Centre,

1 Fraser Road, P.B.No.183,Patna 800001.

BiharTel.Nos: (0612) 2223797/

2225676/5535/2230450Fax: 2220758

IDBI, PuneIDBI House, F.C. Road,

Dnyaneshwar PadukaChowk, Shivajinagar,

Pune: 411004

MaharashtraTel. (020)25677481-5

Fax. : 25676132

IDBI, Rajkot201, 235, 236, Star

Chamber, IInd Floor,Dr. Rajendra Prasad Road,

Rajkot 360001.

GujaratTel.: (0281) 2234904

Fax : 2233453

IDBI, Ranchi

Arjan Place, 1st Floor,5 Main Road,

Ranchi 834001.Bihar.

Tel. (0651) 2300357/

2208655Fax: (0651) 2300357

IDBI, ShillongSapphire House,

Don Bosco Road,Laitumkrah, P.B.No.31,

Shillong 793003

Meghalaya.Tel. & Fax: (0364) 2224632

IDBI, ShimlaJeevan Jyoti, Lala Lajpat

Rai Chowk, The Mall,P.B. No.52,

Shimla 171001

Himachal PradeshTel.: (0177) 2258999

Fax : 2254169

IDBI, Surat302, Meridian Tower,

3rd Floor, Nr.RajkumarTheatre, Udhna Darwaja,

Ring Road, Surat 395003Gujarat

Tel: (0261) 28342890/

28348040Fax : 28342890

IDBI, Varanasi

1st

floorD-64/132-K

Anant Complex, Sigra,Varanasi 221010

Uttar Pradesh

Tel : (0542) 2224023/4083Fax : 2224023

IDBI, Vijaywada3A, Alankar Complex,3rd Floor, Gandhi Nagar,

Vijaywada 520003.Andhra Pradesh.

Tel. & Fax : (0866)

2571025.

IDBI, Visakhapatnam

13-26-2, 1st Floor,Apuroopa Arcade,

Jagadamba Centre,

Visakhapatnam 530002.Andhra Pradesh

Tel. (0891): 2565067Fax : 2565267

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