Page 172 - DCOM304_INDIAN_FINANCIAL_SYSTEM

Unit 8: Financial Institutions

Despite subdued stock market condition in the country the IDBI managed successfully 40 Notes
public and right issues involving mobilization of ` 5,136 crores during the period 1996-
2000. During 1999-2000, the bank also executed two assignments for private placement of
equity and bonds aggregating ` 120 crores. The bank also carried out appraisal of a number
of large capital investments planned by 'Navaratna' PSUs.
Corporate Advisory Services: Corporate advisory services rendered by the bank include
equity and business valuation, advice in merges, acquisition and diversities advice on
business and financial restructuring, privatisation advice and restructuring/ rehabilitation
advice for weak units.

Among non-fund business, the IDBI in view of its strengths has focused core on provision
of advisory services to the corporate sector. The Bank has been mandated for several
advisory and syndication assignments in large projects, mainly in power, petroleum,
telecommunications and steel sectors.
The bank has acted as a consultant to the Government of India for its programme relating
to disinvestments of its shareholding in two public sector enterprises. The Bank also
advised on financial restructuring of one of India's largest corporate in the public sector.
Assignments, including those for several reputed public sector undertakings. It also
completed three advisory and during 1999-2000, the IDBI completed 24 project and corporate
advisory syndication assignments involving mobilization of ` 6,085 crores. The Bank has
at present 19 advisory and credit syndication assignments, involving mobilization of
over ` 13,300 crores.
2. Trusteeship Services: The IDBI has been rendering trusteeship services since 1992-93. As a
trustee, it seeks to represent and protect the interest of debenture/bond holders. It also
acts as security agent and mortgage trustee in respect of loans granted by domestic and
foreign lenders to companies.
The Bank accepts trusteeship of those companies which have complied with SEBI guidelines
for issue of debentures/bonds and have fixed assets cover of 1.25:1, debt-equity ratio not
exceeding 2:1, current ratio of 1.33:1 and have obtained satisfactory credit rating in case of
public issue. The trusteeship assignments with the Bank up to end-March 2000 aggregated
404 in number and ` 18,510 crore in value terms.
3. Forex Services: The IDBI opens letters of credit (LCs) and effects foreign currency (FC)
remittances on behalf of its assisted companies for import of goods and services. The Bank
also disburses FC loans for project-related Rupee expenditure, in line with the prevailing
guidelines for External Commercial Borrowings (ECBs). So as to improve the forex services,
the IDBI implemented a forex trader software in 1999-2000 which enables speedier
generation and transmission of LCs and amendments through Society for World-Wide
Inter bank Financial Telecommunications (SWIFT).
4. Treasury Operations: The IDBI has recently set up a separate treasury department with an
Integrated Dealing Room (Comprising Rupee and FC) for exclusively monitoring the
overall liquidity position, investment of surplus funds with the objective of enhancing
fields and to take an integrated view of the developments in both money and forex
markets.

The Bank has been trying to optimize returns on its short-term surplus funds through
efficient treasury operations. Risk management has been a focused area in treasury
operations. The Bank is taking steps for speedy processing of information through state-
of-the-art software package to facilitate quick decision-making.
5. Insurance Business: The IDBI has, of late, decided to enter into insurance business. For this
purpose, it has tied up with the Dutch financial services giant, ING group for insurance.

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