IDBI is a specialised financial institution in India that plays a crucial role in promoting industrial and infrastructure development in the country. It was established in 1964 under an Act of Parliament as a wholly-owned subsidiary of the Reserve Bank of India (RBI) and was later transferred to the Government of India.
IDBI serves as the principal financial institution for providing long-term finance and credit to various industrial and developmental projects.
Functions of IDBI
- Project Financing: IDBI provides financial assistance to industrial and infrastructure projects. It offers long-term loans and credit to companies and organisations for establishing new projects, expanding existing ones, and modernising operations. This support helps in the growth and development of various industries in the country.
- Developmental Banking: As a developmental bank, IDBI plays a crucial role in fostering economic growth and development. It works towards achieving the broader economic and social objectives of the government by providing financial resources and expertise to key sectors of the economy.
- Capital Market Operations: IDBI engages in capital market activities. This includes underwriting securities, facilitating the issuance of bonds and stocks by companies, and participating in the capital market, to raise funds for various purposes. These activities contribute to the efficient functioning of India’s capital markets.
- Investment Banking: IDBI provides investment banking services, which involves advising companies on mergers and acquisitions, capital restructuring, and other financial transactions. It acts as a financial intermediary between businesses, helping them access capital and make strategic financial decisions.
- Rural and Agricultural Development: IDBI extends financial support to rural and agricultural development projects. It plays a role in funding initiatives aimed at improving rural infrastructure, increasing agricultural productivity, and addressing rural poverty.
- Retail Banking (through IDBI Bank): IDBI Bank, a subsidiary of IDBI, offers a range of retail banking services to individuals and small businesses. This includes savings accounts, current accounts, personal loans, home loans, credit cards, and other retail financial products and services.
- Promotion of Priority Sectors: IDBI actively promotes and supports priority sectors identified by the government, such as small and medium-sized enterprises (SMEs), export-oriented industries, and sectors with significant employment generation potential.
- Technical Assistance and Consultancy: IDBI provides technical and consultancy services to assist industrial and infrastructure projects in areas like project planning, feasibility studies, and project implementation.
- International Operations: IDBI also has a presence in international markets and is engaged in financial activities related to international trade and investment. The international operations of IDBI are aligned with India’s broader economic goals of increasing exports, attracting foreign investments, and expanding the global footprint of Indian businesses. It provides export credit to facilitate the export of goods and services from India to international markets. This helps Indian exporters access the necessary funds for the production, marketing, and distribution of their products abroad.
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Products and Services of IDBI
1. Loans and Advances
- Term Loans: IDBI offers term loans to businesses and industries for various purposes, including project financing, expansion, and working capital requirements.
- Infrastructure Financing: IDBI specialises in financing infrastructure projects such as roads, ports, power plants, and more.
- Agricultural Loans: Agricultural loans are extended to support farming activities and related agricultural projects.
- Retail Loans: IDBI Bank, as a subsidiary, offers retail loans to individuals, including personal loans, home loans, auto loans, and education loans.
2. Deposits
- Savings Accounts: IDBI provides savings account services to individuals and businesses, allowing them to save and transact.
- Fixed Deposits: Customers can invest their money in fixed deposits with competitive interest rates.
- Recurring Deposits: These accounts enable individuals to save a fixed amount regularly over a specified period.
- Current Accounts: Current accounts are tailored for businesses and provide transactional services.
3. Corporate and Retail Banking
- Corporate Banking Services: IDBI offers a range of corporate banking services, including cash management, trade finance, and treasury operations.
- Retail Banking Services: IDBI Bank provides retail banking services to individuals, such as savings and current accounts, debit and credit cards, and online banking.
4. Capital Market Services
- Underwriting: IDBI participates in underwriting securities, including initial public offerings (IPOs) and follow-on public offerings (FPOs).
- Merchant Banking: IDBI provides merchant banking services for corporate clients, helping them with financial advisory, capital restructuring, and mergers and acquisitions.
- Portfolio Management Services: IDBI may offer portfolio management services (PMS) to high-net-worth individuals and institutions. PMS involves the professional management of investment portfolios to achieve specific financial goals and objectives. IDBI’s PMS services may include investment advisory, portfolio construction, and ongoing monitoring and rebalancing of portfolios.
5. Investment Banking
- Mergers and Acquisitions (M&A): IDBI provides advisory services to companies engaged in M&A transactions. This includes identifying potential merger or acquisition targets, conducting due diligence, and structuring deals to maximise value for the clients.
- Valuation Services: IDBI helps clients assess the value of businesses or assets, which is crucial for various financial transactions, including mergers, acquisitions, and fundraising.
- Corporate Restructuring: IDBI offers financial advisory services to companies looking to restructure their capital, operations, or ownership. This can involve divestitures, spin-offs, or other strategic changes to improve efficiency and profitability.
6. Technical Assistance and Consultancy
- Project Identification and Feasibility Studies: IDBI’s technical experts assist businesses in identifying viable projects and conducting feasibility studies. This involves evaluating the technical, financial, economic, and operational aspects of a proposed project to determine its potential for success.
- Project Planning and Design: Once a project is identified and deemed feasible, IDBI provides consultancy in project planning and design. This includes creating detailed project reports, outlining the project’s scope, objectives, and execution plan.
- Financial Structuring and Fund Arrangement: IDBI assists in structuring the financial aspects of projects. It helps businesses determine the optimal mix of debt and equity financing, as well as sources of funding, including loans, grants, or equity investments.
Conclusion
The Industrial Development Bank of India (IDBI) has played a significant role in the economic development of India by providing financial support to various industrial and infrastructure projects. Over the years, it has diversified its operations to offer a wide range of financial products and services. However, it is essential to note that IDBI Bank, a subsidiary of IDBI, was merged with LIC Housing Finance Limited in 2019, leading to changes in its banking operations. IDBI continues to operate in various financial services segments and remains a crucial player in India’s financial sector.
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