IDBI | Full Form, Functions, Subsidiaries and Services

What is IDBI?

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.

Full Form of IDBI

IDBI stands for Industrial Development Bank of India. IDBI is a financial institution having a number of subsidiaries, which mainly focus on removing the difficulties related to finances.

Functions of IDBI

1. 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.

2. 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.

3. 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.

4. 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.

5. 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.

6. 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.

7. 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.

8. 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.

9. 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.

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.

Subsidiaries of IDBI

After the merger of IDBI Bank with LIC Housing Finance Limited, its subsidiaries are as follows:

1. IDBI Capital Market Services Ltd. (IDBI Capital): IDBI Capital Limited, often referred to simply as IDBI Capital, is a prominent financial services company in India that operates as a subsidiary of IDBI Bank. Established to provide a wide range of financial solutions, IDBI Capital plays a significant role in India’s capital markets and financial industry like stockbroking, merchant banking, portfolio management, investment strategies, financial planning, etc. IDBI Capital conducts in-depth research and analysis on various financial markets and sectors, providing clients with insights and recommendations for informed investment decisions. IDBI Capital has earned a reputation for its expertise and professionalism in the financial services industry. It benefits from the backing and experience of its parent company, IDBI Bank, which was historically involved in industrial and developmental banking.

2. IDBI Intech Ltd.: IDBI Intech is a subsidiary of IDBI Bank that specialises in providing technology-based solutions and services to the banking and financial industry. It offers services like core banking solutions, digital banking solutions, and more. IDBI Intech leverages data analytics and business intelligence tools to help banks gain insights into customer behaviour, make data-driven decisions, and improve their overall performance. IDBI Intech plays a crucial role in supporting banks’ digital transformation efforts. Its technology solutions help financial institutions adapt to changing consumer preferences and industry trends.

3. IDBI Asset Management Ltd.: IDBI Asset Management is a subsidiary of IDBI Bank that is engaged in the business of managing mutual funds and investment portfolios. It offers a variety of mutual fund schemes tailored to meet the diverse financial goals and risk appetites of investors. These mutual fund schemes span different asset classes, including equity, debt, hybrid, and exchange-traded funds (ETFs). In addition to managing funds, IDBI AMC also plays a role in educating investors about mutual funds and financial planning. They conduct investor awareness programs and provide educational resources to help individuals make informed investment decisions.

4. IDBI Trusteeship Services Ltd.: IDBI Trusteeship Services is a subsidiary of IDBI Bank that provides trustee and fiduciary services for various financial products and transactions. One of the primary functions of IDBI Trusteeship Services is to protect the interests of bondholders, debenture holders, and other investors in debt securities. It ensures that issuers of financial instruments meet their obligations and that investors’ rights are upheld. It is important to note that trustee and fiduciary services are essential components of the financial infrastructure, offering security and confidence to investors and market participants. IDBI Trusteeship Services Limited, as a subsidiary of IDBI, plays a significant role in fulfilling this critical function in India’s financial sector.

5. IDBI Capital Markets & Securities Ltd. (ICMS): ICMS is a subsidiary of IDBI Bank engaged in various capital market activities, including trading and investments. ICMS engages in trading activities in the secondary market, facilitating the buying and selling of equities and other financial instruments. It manages investment portfolios on behalf of clients, optimising their investments in line with their financial objectives and risk tolerance. ICMS caters to high-net-worth individuals and institutions by offering wealth management services. It designs customised investment strategies and portfolios to help clients achieve their financial goals.

6. IDBI MF Trustee Company Limited: IDBI MF Trustee Company Limited serves as the trustee for IDBI Mutual Fund schemes. In the context of mutual funds, a trustee is a fiduciary entity responsible for safeguarding the interests of the mutual fund unit holders. The trustee ensures that the mutual fund operates in compliance with the regulations and the trust deed governing the fund. The trustee monitors the activities and operations of the Asset Management Company (AMC) that manages the mutual fund on a day-to-day basis. This includes evaluating the performance of the AMC and ensuring that it adheres to the investment objectives and guidelines set for the fund.

7. IDBI Bank Limited GIFT Branch: The IDBI Bank Limited GIFT (Gujarat International Finance Tec-City) Branch is a branch of IDBI Bank operating within the Gujarat International Finance Tec-City, commonly known as GIFT City. GIFT City is a special economic zone and a global financial and technology hub located in Gandhinagar, Gujarat, India. It is designed to facilitate international financial and technological services and serve as a competitive global financial center. As GIFT City continues to evolve and attract more financial institutions and businesses, the role of the IDBI Bank Limited GIFT Branch may expand to meet the growing demand for financial services and solutions within the GIFT City ecosystem.

8. Kerala Industrial & Technical Consultancy Organization Ltd.: The Kerala Industrial & Technical Consultancy Organization Ltd. (KITCO) is a prominent industrial and technical consultancy organization based in the Indian state of Kerala. Founded in 1972, KITCO has played a crucial role in the industrial and economic development of the region and beyond. KITCO conducts feasibility studies and project reports to help entrepreneurs assess the viability of their business ideas and investment proposals. KITCO provides technical expertise and guidance to industries in areas such as technology selection, process optimization, and quality improvement. While KITCO primarily focuses on Kerala, it also engages in consultancy projects outside the state and even internationally. It collaborates with organizations and governments worldwide to promote industrial growth and knowledge sharing.

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.