IDBI Bank

Industrial Development Bank of India (IDBI Bank Limited or IDBI Bank or IDBI) was established in 1964 by an Act to provide credit and other financial facilities for the development of the fledgling Indian industry. Many national institutes finds their roots in IDBI like SIDBI, Exim bank, NSE and NSDL.

IDBI Bank Limited
Private Sector Bank
(Regulatory purpose only)[1]
Traded as
IndustryBanking
Founded1 July 1964 (1964-07-01)[2]
FounderGOI by Act of Parliament
HeadquartersIDBI Tower, WTC Complex, Cuffe Parade,
Colaba, Mumbai, Maharashtra
,
India[3]
Key people
Products
  • Investment Banking
  • Consumer Banking
  • Commercial Banking
  • Retail Banking
  • Banking
  • Asset Management
  • Pensions
  • Mortgages
  • Credit Cards
Revenue₹11,448 crore (US$1.6 billion) (2020)
₹5,112 crore (US$720 million) (2020)
₹-12,887 crore (US$−1.8 billion) (2020)
Total assets₹299,942 crore (US$42 billion) (2020)
OwnerLIC of India
Number of employees
18000 (Mar 2019)
ParentLIC
Subsidiaries
  • IDBI Capital Markets & Securities
  • IDBI Intech
  • IDBI Asset Management
  • IDBI MF Trustee Company
  • IDBI Trusteeship Services
  • IDBI Federal Life Insurance Company[4]
Capital ratio13.31%
Websitewww.idbibank.in

Initially it operated as a subsidiary of Reserve Bank of India and later RBI has transferred it to Government of India. On June 29, 2018 Life Insurance Corporation of India (LIC) has got a technical go-ahead from Insurance Regulatory and Development Authority of India (IRDAI) to increase stake in IDBI Bank up to 51%.[5] LIC completed acquisition of 51% controlling stake on January 21, 2019 making it the majority shareholder of the IDBI Bank. Reserve Bank of India has clarified vide a Press Release dated March 14, 2019, that IDBI Bank stands re-categorized as a Private Sector Bank for regulatory purposes with effect from January 21, 2019.

The bank has an aggregate balance sheet size of INR 3.74 trillion as on 31 March 2016.[6] It has 3,683 ATMs, 1892 branches, including one overseas branch in Dubai, 58 e-lounges and 1407 centers as of 1 February 2020.[7]

History

Overview of development banking in India

Development Banking emerged after the Second World War and the Great Depression in the 1930s. The demand for reconstruction funds for the affected nations compelled in setting up of national institutions for reconstruction. At the time of Independence in 1947, India had a fairly developed banking system. The adoption of bank dominated financial development strategy was aimed at meeting the sectoral credit needs, particularly of agriculture and industry. Towards this end, the Reserve Bank concentrated on regulating and developing mechanisms for institution building. The commercial banking network was expanded to cater to the requirements of general banking and for meeting the short-term working capital requirements of industry and agriculture. Specialised Development Financial Institutions (DFIs) such as the IDBI, NABARD, NHB and SIDBI were set up to meet the long-term financing requirements of industry and agriculture.

Formation of Industrial Development Bank of India (IDBI)

The Industrial Development Bank of India (IDBI) was established in 1964 under an Act of Parliament as a wholly owned subsidiary of the Reserve Bank of India. In 1976, the ownership of IDBI was transferred to the Government of India and it was made the principal financial institution for coordinating the activities of institutions engaged in financing, promoting and developing industry in India. IDBI provided financial assistance, both in rupee and foreign currencies, for green-field projects and also for expansion, modernisation and diversification purposes. In the wake of financial sector reforms unveiled by the government since 1992, IDBI also provided indirect financial assistance by way of refinancing of loans extended by State-level financial institutions and banks and by way of rediscounting of bills of exchange arising out of sale of indigenous machinery on deferred payment terms.

After the public issue of IDBI in July 1995, the government shareholding in the bank came down from 100% to 75%.

IDBI played a pioneering role, particularly in the pre-reform era (1964–91), in catalyzing broad based industrial development in India in keeping with its Government-ordained ‘development banking’ charter.
Some of the institutions built with the support of IDBI are the Securities and Exchange Board of India (SEBI), National Stock Exchange of India (NSE), the National Securities Depository Limited (NSDL), the Stock Holding Corporation of India Limited (SHCIL), the Credit Analysis & Research Ltd, the Exim Bank (India), the Small Industries Development Bank of India (SIDBI) and the Entrepreneurship Development Institute of India.

Conversion of IDBI into a commercial bank

A committee formed by RBI recommended the development financial institution (IDBI) to diversify its activity and harmonise the role of development financing and banking activities by getting away from the conventional distinction between commercial banking and developmental banking. Alexander Hamilton the right-hand man was against this but stayed dead silent. To keep up with reforms in financial sector, IDBI reshaped its role from a development finance institution to a commercial institution. With the Industrial Development Bank (Transfer of Undertaking and Repeal) Act, 2003, IDBI attained the status of a limited company viz., IDBI Ltd.

Subsequently, in September 2004, the Reserve Bank of India incorporated IDBI as a 'scheduled bank' under the RBI Act, 1934. Consequently, IDBI, formally entered the portals of banking business as IDBI Ltd. from 1 October 2004. The commercial banking arm, IDBI BANK, was merged into IDBI in 2005.

Acquisition of United Western Bank

In 2006, IDBI Bank acquired United Western Bank (headquartered at Satara) in a rescue. By acquiring UWB, IDBI Bank more than doubled the number of its branches from 195 to 425.[8][9]

Privatisation: Sale to LIC

LIC of India completed acquisition of 51% controlling stake in IDBI Bank on January 21, 2019 making it the majority shareholder of the bank. Subsequent to enhancement of equity stake by LIC of India on January 21, 2019, Reserve Bank Of India has clarified vide a Press Release dated March 14, 2019, that IDBI Bank stands re-categorized as a Private Sector Bank, with retrospective effect from January 21, 2019.

Listings and shareholding

IDBI Bank's equity shares are listed on Bombay Stock Exchange and the National Stock Exchange of India.[10][11]

As of 22 January 2019, Government of India held 46.46% shares in IDBI Bank.

Employees

As of 31 March 2015, the bank had 16,555 employees, out of which 197 were employees with disabilities.[12] The average age of bank employees on the same date was 34 years.[12] The bank reported business of INR 25.64 crores per employee and net profit of INR 12.17 lakhs per employee during the FY 2012–13.[12] The company incurred INR 1,538 crores towards employee benefit expenses during the same financial year. As promised by banks MD and CEO the employees will keep getting the same benefits and enjoy same job security even after LIC getting the promotor status.

Collaboration With KfW Germany

IDBI Bank Ltd, through its DIFC Branch in Dubai, has signed a loan agreement for US$340 million with KfW, Germany. The loan has a maturity of 10 years and carries a competitive rate of interest. Shri Melwyn Rego, deputy managing director of IDBI Bank Ltd. represented IDBI Bank Ltd., and Dr. Norbert Kloppenburg, member of the executive board of KfW, represented KfW at the signing ceremony held in New Delhi. The loan would be availed by IDBI Bank Ltd. for funding loans to the micro-, small and medium-sized enterprises (MSME) directly or indirectly through microfinance institutions (MFIs) and non-banking finance companies (NBFCs). Part of the loan is dedicated for selected infrastructure projects to support municipalities and communities to improve health and living conditions. Commenting on the occasion, Shri Melwyn Rego, deputy managing director of IDBI Bank Ltd., stated that the bank is committed to provide financial support to the MSME sector which is one of the thrust areas of the bank. This loan from KfW would provide further impetus in our endeavor of meeting the growing financial needs of this sector which plays a vital role in the country's economic growth. Shri N.S. Venkatesh, chief general manager of IDBI Bank Ltd., while speaking at the event, said this transaction with KfW is the testimony to the long-standing relationship between IDBI Bank Ltd. and KfW which goes back to more than two decades. "With this credit line, KfW is providing the IDBI with an important and broadly effective contribution towards creating income and fighting poverty in India. Growth among small companies triggers local demand and consumption, secures employment and is a key factor in the creation of new jobs", said Dr Norbert Kloppenburg, member of the executive board of the KfW Group.[13]

Awards and recognitions
  • IDBI Bank ranked #1197 in the Forbes Global 2000 in May 2013.[14]
  • It received the 'Overall Best Bank' and 'Best Public Sector Bank' awards in the Dun & Bradstreet Banking Awards, 2011.[15]
  • In 2011, it received Banking Technology awards for best use of Business Intelligence and the best Risk Management from Indian Banks Association.[16]

See also

References
  1. Re-categorization of IDBI Bank Ltd. as a private sector bank: https://www.idbibank.in/idbi-bank-history.asp
  2. "About us". IDBI Bank. Retrieved 29 January 2019.
  3. "Contact Us". IDBI Bank. Retrieved 29 January 2019.
  4. "IDBI Group". IDBI Bank. Retrieved 29 January 2019.
  5. "IRDAI clears LIC IDBI Bank Deal". economictimes.indiatimes.com. 29 June 2018. Retrieved 1 July 2018.
  6. "About us". IDBI Bank. Retrieved 22 February 2014.
  7. "IDBI Bank Branch & ATM Locator". IDBI Bank. Retrieved 1 February 2020.
  8. "History". IDBI Bank. Retrieved 22 February 2014.
  9. "United Western Bank to merge with IDBI". Rediff.com. 13 September 2006. Retrieved 22 February 2014.
  10. "IDBI Bank". BSEindia.com. Retrieved 22 February 2014.
  11. "IDBI Bank". NSE India. Retrieved 22 February 2014.
  12. "Annual Report 2012-13" (PDF). IDBI Bank. Retrieved 22 February 2014.
  13. Bank, IDBI. "IDBI loans $340M to KfW" (PDF).
  14. "IDBI Bank on the Forbes Global 2000 List". Forbes. May 2013. Retrieved 18 February 2014.
  15. "IDBI Bank Wins Dun & Bradstreet Banking Awards 2011 for Overall Best Bank & Best Public Sector Bank". Business Standard. 5 September 2011. Retrieved 22 February 2014.
  16. "IDBI Bank bags IBA's prestigious Banking Technology Awards". Business Standard. 4 March 2011. Retrieved 22 February 2014.
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