Page 161 - DCOM304_INDIAN_FINANCIAL_SYSTEM

Indian Financial System

Notes Repeal) Act, 2003 (53 of 2003), subject to the approval of shareholders and other regulatory and
statutory approvals. A mutually gainful proposition with positive implications for all
stakeholders and clients, the merger process is expected to be completed during the current
financial year ending March 31, 2005.
IDBI would continue to provide the extant products and services as part of its development
finance role even after its conversion into a banking company. In addition, the new entity would
also provide an array of wholesale and retail banking products, designed to suit the specific
needs cash flow requirements of corporates and individuals. In particular, IDBI would leverage
the strong corporate relationships built up over the years to offer customised and total financial
solutions for all corporate business needs, single-window appraisal for term loans and working
capital finance, strategic advisory and "hand-holding" support at the implementation phase of
projects, among others.

IDBI's transformation into a commercial bank would provide a gateway to low-cost deposits
like Current and Savings Bank Deposits. This would have a positive impact on the Bank's
overall cost of funds and facilitate lending at more competitive rates to its clients. The new
entity would offer various retail products, leveraging upon its existing relationship with retail
investors under its existing Suvidha Flexi-bond schemes. In the emerging scenario, the new IDBI
hopes to realize its mission of positioning itself as a one stop super-shop and most preferred
brand for providing total financial and banking solutions to corporates and individuals,
capitalising on its intimate knowledge of the Indian industry and client requirements and large
retail base on the liability side.

IDBI upholds the highest standards of corporate governance in its operations. The responsibility
for maintaining these high standards of governance lies with its Board of Directors. Two
Committees of the Board viz. the Executive Committee and the Audit Committee are adequately
empowered to monitor implementation of good corporate governance practices and making
necessary disclosures within the framework of legal provisions and banking conventions.

Industrial Investment Bank of India Ltd.

The industrial investment bank of India is one of oldest banks in India. The Industrial
Reconstruction Corporation of India Ltd., set up in 1971 for rehabilitation of sick industrial
companies, was reconstituted as Industrial Reconstruction Bank of India in 1985 under the IRBI
Act, 1984. With a view to converting the institution into a full-fledged development financial
institution, IRBI was incorporated under the Companies Act, 1956, as Industrial Investment
Bank of India Ltd. (IIBI) in March 1997. IIBI offers a wide range of products and services, including
term loan assistance for project finance, short duration non-project asset-backed financing,
working capital/ other short-term loans to companies, equity subscription, asset credit,
equipment finance as also investments in capital market and money market instruments.
In view of certain structural and financial problems adversely impacting its long-term viability,
IIBI submitted a financial restructuring proposal to the Government of India on July 25, 2003.
IIBI has since received certain directives from the Government of India, which, inter alias,
include restricting fresh lending to existing clients approved cases rated corporates, restrictions
on fresh borrowings, an action plan to reduce the overhead expenditure, disposal of fixed assets
and a time-bound plan for asset recovery/reconstruction. The Government of India has also
given its approval for the merger of IIBI with IDBI and the latter has already started the due
diligence process.

8.6.3 Types of Development Banks in India

The banks in India are classified under the Indian Banking Act, 1949. Banks are classified in it,
and banking functions are also classified in it.

156 LOVELY PROFESSIONAL UNIVERSITY