Page 171 - DCOM304_INDIAN_FINANCIAL_SYSTEM

Indian Financial System

Notes To meet the specific financial requirements of entrepreneurs in the small, tiny, village and
cottage industries the IDBI took various steps such as launching refinancing packages,
strengthening the structure of state-level institutions and introduction of tailored products such
as automatic refinance facility, composite loans and specific refinance facilities.
The bank also endeavoured to create and widen entrepreneurial base and the related
infrastructure, services, etc, so as to give fill up to sustaining industrial growth of the country. It
set up along with other institutions the Entrepreneurial Development Institute of India (EDII) in
1983 and a number of institutes for Entrepreneurship Development to focus on entrepreneurial
development requirements, particularly in the industrially less developed regions.

The third decade of the Bank's operations witnessed continuance of its consolidation strategy
during the first few years of operations followed by diversification strategy to respond to the
emerging changes in the financial sector and economic environments.
Thus, the two-pronged strategy during the latter part of the third decade was, therefore, on
diversification of products and services offered and on the ability to tap the market for raising
resources at competitive rates.
In addition to project specific financing, the IDBI devised a host of new products to meet the
needs of industrial enterprises including financial products for technology up gradation, venture
capital to provide finance to technocrats for introduction of innovative products/services,
equipment finance for energy conservation and pollution control, asset credit, focus on its non-
fund based activities and financial services making an entry in the areas of Merchant Banking,
Debenture Trust-ship and forex services.
Diversification strategy was also adopted with respect to foreign exchange services. From 1993
it has offered a range of foreign exchange related products in the form of forward cover to
borrowers in respect of their debt services obligations to the Bank or payments against letters of
credit which are backed by rupee loans from the Bank.

The Bank is also planning to offer other liability management products such as interest and
currency swaps, FRAs, etc., to its borrowers.
In addition to non-fund based business, the IDBI has diversified into related areas finance such
as credit rating, investor's services and corporate advisory services.
The Bank also responded to the situation of competing for funds from the market by introducing
new instruments that were tailored to meet the needs of diverse investor groups. The IDBI's
initial foray into the capital market through its unsecured public bond issues proved highly
attractive and received tremendous investor response.
Fee-Based Services

In recent few years the IDBI has embraced fee-based services such as:
1. Merchant Banking: The IDBI has been providing a wide range of merchant banking services
which include pre-project counseling, projects appraisal, placement, of equity with banks,
foreign institutional investors, high net worth investors, mutual funds, institutional
investors and private equity funds, placement of preference shares and debentures with
domestic investors, structuring and syndication of bought-out-deals, loan syndication,
syndication of structured debt instrument, coordinating the financial participation of
multilateral agencies and international banks, issue management offering advice on the
management of tender offer.

The stress of the bank is on managing only select large-sized equity issues, which would
attract investor's interest.

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