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Indian Financial System

Notes The tie up is one of the biggest in insurance sector. The IDBI is the largest financial
institution in INDIA and ING group is one of the largest financial groups in the world.
The IDBI-ING alliance will stretch to both life and general insurance areas. The IDBI will
give foreign equity in the venture to ING as per the prevalent insurance guidelines.

Achievements of IDBI

With a view to performing their channelising function effectively, the IDBI formulated suitable
strategies and operational policies in regard to sanction of assistance and its utilization, forms of
assistance and its purpose as also with respect to sectoral, regional and industrial distribution of
the assistance. The Bank has been found adhering to the norms and sanctioned assistance only to
those fulfilling these norms.
Following its assistance policies the IDBI pumped in burgeoning amount of funds to meet
growing industry demand. It is interesting to observe that the Bank has introduced a slew of
innovative products and services to cater to the varied needs of up and coming enterprises of
plan priority. However, loans constitute the predominant form of assistance of the IDBI. This
can be explained, inter alia, by minimum risk, high core competence and scope for better
earnings.
It is intriguing to note that quite a large proportion of the sanctioned assistance has remained
unutilised for various reasons including time consuming and complex lending procedures. It is,
therefore, suggested that disbursement procedures should be re-examined thoroughly and as
far as possible the same be simplified.
What is most striking to note that the Bank has yet not accorded serious attention to underwriting
business and has failed to develop equity culture in its operations primarily because of its
obsession with avoidance of risk.
Nevertheless the IDBI has devoted its resources for financing up and coming industrial projects,
the thrust of the Bank in recent years has been on infrastructural and core sectors.
Further, a few industrially advanced states of the country continue to receive greater attention
of the IDBI. One of the major factors responsible for this tendency has been the absence of any
explicit policy guidelines being provided by the Government regarding assistance to relatively
underdeveloped states. As a result, the IDBI has followed the line of least assistance and extended
assistance where it could do that most conveniently. In its endeavour to meet the competitive
challenges and to provide wide variety of products and services to customers under one umbrella
and to economise on cost of operations the IDBI is presently seized with the task of transforming
itself to an Universal Bank and for that matter, it has already started holding discussions with
the RBI on the possible regulatory regime once it converts itself into a full-fledged bank. The
Bank is also negotiating with foreign management consultants to hire one of them who could
help it in formulating the universal banking strategy.

However, to be highly competitive and more useful existing role of the Bank will have to be
rationalized. It will have to focus on lending business with market orientation, hone its risk
identification and project management skills and strengthen its infrastructural network.
The IDBI should undertake the underwriting business on a large scale with a view to nursing
new and nascent industrial units. This will certainly solve the financing problems of industrial
enterprises and also bolster up the new issue activity which has been sagging in recent years.

8.7.2 ICICI

Unlike the IDBI, the IFCI and the SFCs, which were set-up as government-owned institutions,
the ICICI was organized as a wholly-owned private institution. In fact, it was one of the

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