IDBI BANK LTD.

A PROJECT WORK ON BANKING INDUSTRY (IDBI BANK LTD)

NAME SHWETA KIDE REGISTRATION NUMBER - WRO-0289634 PERIOD OF TRAINING APRIL 09 BATCH TIMINGS 12:00 a.m. to 4:00 p.m.

The Institute Of Chartered Accountants of India ICAI Bhawan, Cuffe parade, Mumbai 400005

IDBI BANK LTD.

IDBI BANK LTD.

Project by:

SHWETA KIDE

I Ms. Shweta kide, student of PCC of the Institute of Chartered Accountants of India has under taken project while doing ITT 100 hrs training from 1st of April 2009 to 25th of April 2009, Batch timings 12:00 a.m. to 4:00 p.m.

Dated: - 2/5 /2009

IDBI BANK LTD.

Preface

Decision making is a fundamental part of the research process. Decisions regarding that what you want to do, how you want to do, what tools and techniques must be used for the successful completion of the project. In fact it is the researchers efficiency as a decision maker that makes project fruitful for those who concern to the area of study.

Basically when we are playing with computer in every part of life, I used it in my project not for the ease of my but for the ease of result explanation to those who will read this project. The project presents the role of financial system in life of persons .I had toiled to achieve the goals desired. Being a neophyte in this highly competitive world of business, I am presenting this hand carved efforts in black and white.

IDBI BANK LTD.

Table of content

Chapter 1

: Industry Introduction & IDBI Bank

Industry Introduction IDBI Bank: Industry /Bank Performance correlation between

Industry and IDBI banks movement.

Chapter 2

: Statistical Analysis

Chapter 3

: Financial Analysis Balance Sheet Audit Report Internal Control

Chapter 4

: Conclusions and Recommendations

Appendix 1

: Questionnaire

Appendix 2

: Reference material

IDBI BANK LTD.

Chapter 1
Industry Introduction & IDBI Bank
Industry introduction: The Indian Banking industry, which is governed by the Banking Regulation Act of India, 1949 can be broadly classified into two major categories, non-scheduled banks and scheduled banks. Scheduled banks comprise commercial banks and the co-operative banks. In terms of ownership, commercial banks can be further grouped into nationalized banks, the State Bank of India and its group banks, regional rural banks and private sector banks (the old/ new domestic and foreign). These banks have over 67,000 branches spread across the country in every city and villages of all nook and corners of the land. The first phase of financial reforms resulted in the nationalization of 14 major banks in 1969 and resulted in a shift from Class banking to Mass banking. This in turn resulted in a significant growth in the geographical coverage of banks. Every bank had to earmark a minimum percentage of their loan portfolio to sectors identified as priority sectors. The manufacturing sector also grew during the 1970s in protected environs and the banking sector was a critical source. The next wave of reforms saw the Nationalization of 6 more commercial banks in 1980. Since then the number of scheduled commercial banks increased four-fold and the number of bank branches increased eight-fold. And that was not the limit of growth. After the second phase of financial sector reforms and liberalization of the sector in the early nineties, the Public Sector Banks (PSB) s found it extremely difficult to compete with the new private sector banks and the foreign banks. The new private sector banks first made their appearance after the guidelines permitting them were

IDBI BANK LTD.

issued in January 1993. Eight new private sector banks are presently in operation. These banks due to their late start have access to state-of-the-art technology, which in turn helps them to save on manpower costs. During the year 2000, the State Bank Of India (SBI) and its 7 associates accounted for a 25 percent share in deposits and 28.1 percent share in credit. The 20 nationalized banks accounted for 53.2 percent of the deposits and 47.5 percent of credit during the same period. The share of foreign banks (numbering 42), regional rural banks and other scheduled commercial banks accounted for 5.7 percent, 3.9 percent and 12.2 percent respectively in deposits and 8.41 percent, 3.14 percent and 12.85 percent respectively in credit during the year [Link] the detail of the current scenario we will go through the trends in modern economy of the country.

IDBI BANK LTD.

Current Scenario: The industry is currently in a transition phase. On the one hand, the PSBs, which are the mainstay of the Indian Banking system are in the process of shedding their flab in terms of excessive manpower, excessive non Performing Assets (Npas) and excessive governmental equity, while on the other hand the private sector banks are consolidating themselves through mergers and acquisitions.

PSBs, which currently account for more than 78 percent of total banking industry assets are saddled with NPAs (a mind-boggling Rs 830 billion in 2000), falling revenues from traditional sources, lack of modern technology and a massive workforce while the new private sector banks are forging ahead and rewriting the traditional banking business model by way of their sheer innovation and service. The PSBs are of course currently working out challenging strategies even as 20 percent of their massive employee strength has dwindled in the wake of the successful Voluntary Retirement Schemes (VRS) schemes.

The private players however cannot match the PSBs great reach, great size and access to low cost deposits. Therefore one of the means for them to combat the PSBs has been through the merger and acquisition (M& A) route. Over the last two years, the industry has witnessed several such instances. For instance, HDFC Banks merger with Times Bank Icici Banks acquisition of ITC Classic, Anagram Finance and Bank of Madurai. Centurion Bank, Indusind Bank, Bank of Punjab, Vysya Bank are said to be on the lookout. The UTI bank- Global Trust Bank merger however opened a pandoras box and brought about the realization that all was not well in the functioning of many of the

IDBI BANK LTD.

private sector banks.

Private sector Banks have pioneered internet banking, phone banking, anywhere banking, mobile banking, debit cards, Automatic Teller Machines (ATMs) and combined various other services and integrated them into the mainstream banking arena, while the PSBs are still grappling with disgruntled employees in the aftermath of successful VRS schemes. Also, following Indias commitment to the W To agreement in respect of the services sector, foreign banks, including both new and the existing ones, have been permitted to open up to 12 branches a year with effect from 1998-99 as against the earlier stipulation of 8 branches.

Tasks of government diluting their equity from 51 percent to 33 percent in November 2000 has also opened up a new opportunity for the takeover of even the PSBs. The FDI rules being more rationalized in Q1FY02 may also pave the way for foreign banks taking the M& A route to acquire willing Indian partners.

Meanwhile the economic and corporate sector slowdown has led to an increasing number of banks focusing on the retail segment. Many of them are also entering the new vistas of Insurance. Banks with their phenomenal reach and a regular interface with the retail investor are the best placed to enter into the insurance sector. Banks in India have been allowed to provide fee-based insurance services without risk participation, invest in an insurance company for providing infrastructure and services support and set up of a separate joint-venture insurance company with risk participation.

IDBI BANK LTD.

Aggregate Performance of the Banking Industry Aggregate deposits of scheduled commercial banks increased at a compounded annual average growth rate (Cagr) of 17.8 percent during 1969-99, while bank credit expanded at a Cagr of 16.3 percent per annum. Banks investments in government and other approved securities recorded a Cagr of 18.8 percent per annum during the same [Link] FY01 the economic slowdown resulted in a Gross Domestic Product (GDP) growth of only 6.0 percent as against the previous years 6.4 percent. The WPI Index (a measure of inflation) increased by 7.1 percent as against 3.3 percent in FY00. Similarly, money supply (M3) grew by around 16.2 percent as against 14.6 percent a year [Link] growth in aggregate deposits of the scheduled commercial banks at 15.4 percent in FY01 percent was lower than that of 19.3 percent in the previous year, while the growth in credit by SCBs slowed down to 15.6 percent in FY01 against 23 percent a year ago. The industrial slowdown also affected the earnings of listed banks. The net profits of 20 listed banks dropped by 34.43 percent in the quarter ended March 2001. Net profits grew by 40.75 percent in the first quarter of 2000-2001, but dropped to 4.56 percent in the fourth quarter of [Link] the Capital Adequacy Ratio (CAR) front while most banks managed to fulfill the norms, it was a feat achieved with its own share of difficulties. The CAR, which at present is 9.0 percent, is likely to be hiked to 12.0 percent by the year 2004 based on the Basle Committee recommendations. Any bank that wishes to grow its assets need capital at the same time so that its capital as a percentage of the risk assets is maintained at the stipulated rate. While the IPO route was a much-fancied one in the early 90s, the current scenario doesnt look attractive for bank majors. Consequently, banks have been forced to explore capital base. While some are foreign partners to add capital others are employing the M& A route.

IDBI BANK LTD.

Interest

Rate

Scene

The two years, post the East Asian crises in 1997-98 saw a climb in the global interest rates. It was only in the later half of FY01 that the US Fed cut interest rates. India has however remained more or less insulated. The past 2 years in our country was characterized by a mounting intention of the Reserve Bank Of India (RBI) to steadily reduce interest rates resulting in a narrowing differential between global and domestic rates. The RBI has been affecting bank rate and CRR cuts at regular intervals to improve liquidity and reduce rates. The only exception was in July 2000 when the RBI increased the Cash Reserve Ratio (CRR) to stem the fall in the rupee against the dollar. The steady fall in the interest rates resulted in squeezed margins for the banks in general.

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IDBI BANK LTD.

Governmental Policy: After the first phase and second phase of financial reforms, in the 1980s commercial banks began to function in a highly regulated environment, with administered interest rate structure, quantitative restrictions on credit flows, high reserve requirements and reservation of a significant proportion of lended resources for the priority and the government sectors. The restrictive regulatory norms led to the credit rationing for the private sector and the interest rate controls led to the unproductive use of credit and low levels of investment and growth. The resultant financial repression led to decline in productivity and efficiency and erosion of profitability of the banking sector in general. This was when the need to develop a sound commercial banking system was felt. This was worked out mainly with the help of the recommendations of the Committee on the Financial system Shri: M Narasimham, 1991. The resultant financial sector reforms called for interest rate flexibility for banks, reduction in reserve requirements, and a number of structural measures. Interest rates have thus been steadily deregulated in the past few years with banks being free to fix their Prime Lending Rates(PLRs) and deposit rates for most banking products. Credit market reforms included introduction of new instruments of credit, changes in the credit delivery system and integration of functional roles of diverse players, such as, banks, financial institutions and non-banking financial companies (NBFCS). Domestic Private Sector Banks were allowed to be set up, PSBs were allowed to access the markets to shore up their Cars.

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IDBI BANK LTD.

Implications of Some Recent Policy Measures: The allowing of PSBs to shed manpower and dilution of equity are moves that will lend greater autonomy to the industry. In order to lend more depth to the capital markets the RBI had in November 2000 also changed the capital market exposure norms from 5 percent of banks incremental deposits of the previous year to 5 percent of the banks total domestic credit in the previous year. But this move did not have the desired effect, as in, while most banks kept away almost completely from the capital markets, a few private sector banks went overboard and exceeded limits and indulged in dubious stock market deals. The chances of seeing banks making a comeback to the stock markets are therefore quite unlikely in the near future. The move to increase Foreign Direct Investment FDI limits to 49 percent from 20 percent during the first quarter of this fiscal came as a welcome announcement to foreign players wanting to get a foot hold in the Indian Markets by investing in willing Indian partners who are starved of net worth to meet CAR norms. Ceiling for FII investment in companies was also increased from 24.0 percent to 49.0 percent and have been included within the ambit of FDI investment. The economic development of any country depends on the extent to which its financial system efficiently and effectively mobilizes and allocates resources. There are a number of banks and financial institutions that perform this function; one of them is the development bank. Development banks are unique financial institutions that perform the special task of fostering the development of a nation, generally not undertaken by other banks. Development banks are financial agencies that provide medium-and long-term financial assistance and act as catalytic agents in promoting balanced development of the country. They are engaged in promotion and development of industry, agriculture,

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IDBI BANK LTD.

and other key sectors. They also provide development services that can aid in the accelerated growth of an economy.

The objectives of development banks are:

To serve as an agent of development in various sectors, viz. industry, agriculture,

and international trade To allocate resources to high priority areas To foster rapid industrialization, particularly in the private sector, so as to provide employment opportunities as well as higher production To develop entrepreneurial skills To promote the development of rural areas

To finance housing, small scale industries, infrastructure, and social utilities.

In addition, they are assigned a special role in: Planning, promoting, and developing industries to fill the gaps in industrial sector.

Coordinating the working of institutions engaged in financing, promoting or

developing industries, agriculture, or trade, rendering promotional services such as discovering project ideas, undertaking feasibility studies, and providing technical, financial, and managerial assistance for the implementation of projects.

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IDBI BANK LTD.

Industrial development bank of India

The industrial development bank of India(IDBI) was established in 1964 by parliament as wholly owned subsidiary of reserve bank of India. In 1976, the banks ownership was transferred to the government of India. IDBI has provided assistance to development related projects and contributed to building up substantial capacities in all major industries in India. It has played a dominant role in balanced industrial development. IDBI set up the small industries development bank of India (SIDBI) as wholly owned subsidiary to cater to specific the needs of the small-scale sector. IDBI has engineered the development of capital market through helping in setting up of the securities exchange board of India(SEBI), National stock exchange of India limited(NSE), credit analysis and research limited(CARE), stock holding corporation of India limited(SHCIL), investor services of India limited(ISIL), national securities depository limited(NSDL), and clearing corporation of India limited(CCIL).In 1992, IDBI accessed the domestic retail debt market for the first time by issuing innovative bonds known as the deep discount bonds. These new bonds became highly popular with the Indian investor. In 1994, IDBI Act was amended to permit public ownership up to 49 per cent. In July 1995, it raised over Rs 20 billion in its first initial public (IPO) of equity, thereby reducing the government stake to 72.14 per cent. In June 2000, a part of government shareholding was converted to preference capital. This capital was redeemed in March 2001, which led to a reduction in government stake. The government stake currently is 51 per [Link] august 2000, IDBI became the first all India financial institution to obtain ISO 9002: 1994

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IDBI BANK LTD.

certification for its treasury operations. It also became the first organization in the Indian financial sector to obtain ISO 9001:2000 certification for its forex services.

Milestones July 1964: Set up under an Act of Parliament as a wholly-owned subsidiary of Reserve Bank of India. February 1976: Ownership transferred to Government of India. Designated Principal Financial Institution for co-coordinating the working of institutions at national and State levels engaged in financing, promoting and developing industry. March 1982: International Finance Division of IDBI transferred to Export-Import Bank of India, established as a wholly-owned corporation of Government of India, under an Act of Parliament. April 1990: Set up Small Industries Development Bank of India (SIDBI) under SIDBI Act as a wholly-owned subsidiary to cater to specific needs of small-scale sector. In terms of an amendment to SIDBI Act in September 2000, IDBI divested 51% of its shareholding in SIDBI in favour of banks and other institutions in the first phase. IDBI has subsequently divested 79.13% of its stake in its erstwhile subsidiary to date. January 1992: Accessed domestic retail debt market for the first time with innovative Deep Discount Bonds; registered path-breaking success.

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IDBI BANK LTD.

December 1993: Set up IDBI Capital Market Services Ltd. as a wholly-owned subsidiary to offer a broad range of financial services, including Bond Trading, Equity Broking, Client Asset Management and Depository Services. IDBI Capital is currently a leading Primary Dealer in the country. October 1994: IDBI Act amended to permit public ownership upto 49%. July 1995: Made Initial Public Offer of Equity and raised over Rs.2000 crore, thereby reducing Government stake to 72.14%. March 2000: Entered into a JV agreement with Principal Financial Group, USA for participation in equity and management of IDBI Investment Management Company Ltd., erstwhile a 100% subsidiary. IDBI divested its entire shareholding in its asset management venture in March 2003 as part of overall corporate strategy. June 2000: A part of Government shareholding converted to preference capital, since redeemed in March 2001; Government stake currently 58.47%. August 2000: Became the first All-India Financial Institution to obtain ISO 9002:1994 Certification for its treasury operations. Also became the first organisation in Indian financial sector to obtain ISO 9001:2000 Certification for its forex services. September 2003: IDBI acquired the entire shareholding of Tata Finance Limited in Tata Homefinance Ltd, signalling IDBI's foray into the retail finance sector. The housing finance subsidiary has since been renamed 'IDBI Homefinance Limited'.

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IDBI BANK LTD.

July 2004: The Boards of IDBI and IDBI Bank Ltd. take in-principle decision regarding merger of IDBI Bank Ltd. with proposed Industrial Development Bank of India Ltd. in their respective meetings on July 29, 2004.

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IDBI BANK LTD.

IDBI Bank Business Chart

IDBI BANK

RETAIL BANKING

DEVELOPMENT BANK.

SAVING ACCOUNT

CURRENT ACCOUNT

INVESTMENT

PERSONAL SAVING

CORPORATE SAVING

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IDBI BANK LTD.

IDBI Bank Organizational Chart

Chairman

President

Vice president Finance

Vice president H. R.

Vice president Marketing

Vice president Operations

Regional Head

Zonal Head

Divisional Sales Manager

Territory In charge

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IDBI BANK LTD. Chapter 2

Statistical Analysis

Detail: Industry : Banking

Respondent : Customers Table1: Correlation between awareness of customers about IDBI bank & their Age

AGE 20-25 25-30 30-35 35-40 40-45 45-50 50-60 60-ABOVE

NO. OF RESPONSE 25 46 34 23 21 22 24 55

60 50 40 30 20 10 0
20 -2 5 25 -3 0 30 -3 5 35 -4 0 40 -4 5 45 -5 0 50 60 -6 -A 0 BO VE

RESPONSES

NO. OF RESPONSE

AGE GROUP

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IDBI BANK LTD.

TABLE 2: PERCEPTION OF IDBI AS A BANK

TYPE OF BANK PRIVATE PUBLIC PRIVATE/PUBLIC DON'T KNOW

RESPONSES 50 45 100 55

RESPONSES

D 'T KNOW ON

PRIVAT E PUBLIC

PRIVAT E PUBLIC PRIVAT E/PUBLIC DON'T KNOW

PRIVAT E/PUB LIC

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IDBI BANK LTD.

TABLE 3 : RATING OF CUSTOMERS FOR IDBI BANK AS A GOOD BANK

PARAMETER EFFICIENCY INTERNET BANKING/ATMs PRODUCT RANGE NETWORK PHONE BANKING

RESPONSES 75% 25% 95% 33% 22%

33%

22% 75%

EFFICIENCY INTERNET BANKING/ATMs PRODUCT RANGE NETWORK

95% 25%

PHONE BANKING

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IDBI BANK LTD.

TABLE 4 : COMPARATIVE STUDY WITH MAJOR COMPETITORS ON BASIC PARAMETERS

PARAMETERS/BANKS PRODUCT ADVERTISMENT MANPOWER NET-BANKING PHONE BANKING INVESTMENT SCHEME NETWORK CREDIBILITY

IDBI 20% 3% 10% 3% 10% 5% 2% 20%

ICICI 15% 45% 50% 50% 40% 25% 40% 10%

SBI 30% 15% 2% 10% 5% 50% 40% 40%

PNB 15% 20% 3% 12% 5% 10% 5% 20%

HSBC 10% 7% 25% 8% 30% 5% 3% 5%

CANARA BANK 10% 10% 10% 17% 10% 5% 10% 5%

C OMPAR ATIVE GR AP H S
60% 50% 40% 30% 20% 10% 0%
IC IC I ID BI SB I CA HS NA BC RA BA NK PN B

PERCENTAGE

P RODUCT A DV E RTIS M E NT M A NP OW E R NE T-B A NK ING P HONE B A NK ING INV E S TM E NT S CHE M E NE TW ORK CRE DIB ILITY

BANKS

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IDBI BANK LTD. Chapter 3

Financial Statements
Financials IDBI 12M net up 15.73% to Rs. 729 Crore Highlights of FY08 Financial Results (FY08 Vs FY07) Net profit up 15.73 % to Rs. 729 Crore (up 15.02% to Rs. 245 Crore for Q4) Business up 46.67% to Rs. 1,55,211 Crore Deposits increased by 68.38% to Rs. 72,998 Crore Advances up by 31.60% to Rs. 82,213 Crore Total assets grew by 25.86% to Rs. 1,30,694 Crore Mumbai, April 26, 2008: The Board of Directors of IDBI Bank Ltd. met in Mumbai to consider the financial results for the quarter/year ended March 31, 2008. The results have been audited by the Statutory Auditors. Working results: (Rs. Crore) Q4 2007-08Q4 2006-07 FY 2007-08 FY 2006-07 2628 2185 9656 7373 2250 1814 8021 6346 378 371 1635 1027 2323 1807 8323s 6466 2014 1602 7364 5688 309 205 959 778 305 378 1333 907 60 165 604 277 245 213 729 630

Total Income Interest Income Non-Interest Income Total Expenses Interest expenses Operating expenses Operating Profit Provisions (net) Net Profit

Profitability: IDBI Bank reported a net profit of Rs. 245 crore and Rs 729 crore for the quarter and year ended March 31, 2008 respectively, as against Rs. 213 crore and Rs 630 crore in the corresponding quarter and year ended March 31, 2007 respectively. This amounts to an increase in net profit by 15.73% for the year and 15.02% for the quarter compared to corresponding period last year. Business: As of March 31, 2008, IDBIs total business (deposits and advances) stood at Rs.1,55,211 crore as against Rs.1,05,825 crore as of March 31, 2007,

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IDBI BANK LTD.

registering a growth of 46.67%. Deposits increased by a robust 68.38% year-on-year (y-o-y) to Rs. 72,998 crore from Rs. 43,354 crore outstanding as of March 31, 2007. Advances also increased by 31.60% to Rs. 82,213 crore y-o-y, as compared to Rs. 62,471 crore as at March 31, 2007. As of March 31, 2008, aggregate assets stood at Rs. 1,30,694 crore as against Rs. 1,03,839 crore as on March 31, 2007, registering a growth of 25.86%. Non Performing Assets (NPAs) The gross NPAs and net NPAs as on March 31, 2008 stood at Rs. 1565 crore (1.87%) and Rs. 1083 crore (1.30%) respectively as against Rs. 1232 crore (1.89%) and Rs. 722 crore (1.12%) as on March 31,2007. CAR: IDBI continued to maintain a sound capital base as indicated by its Capital Adequacy Ratio (CAR). As against the stipulated RBI norm of 9%, the Bank's CAR stood at 11.95% (Tier-I: 7.42%) as of March 31, 2008. Significant developments during `April 2007-March 2008 IDBI Bank has been steadily expanding its delivery platform during the year, which, as on date, comprises 499 branches and 779 ATMs, encompassing 308 centres, The Bank plans to make its maiden foray overseas during 2008 by opening branches in Singapore, Dubai and Shanghai in a phased manner. IDBI Bank bagged two special awards- for Best Payments Initiative and Outstanding Achiever of the Year" for the Bank's Head of Technology - for the year 2007 from the Indian Banks' Association, in recognition of its customer-centric IT initiatives. IDBI Bank completed the reorganisation of its business into separate verticals focused on customer groups like Personal Banking, Mid-Corporate, Large Corporate, Infrastructure SME and Agri-business. A separate Recovery vertical has also been created for handling stressed assets. During the quarter, the Bank established a US$1.5 billion Medium Term Note Programme (MTN Programme"). The programme will now enable the Bank to issue various debt instruments in the international capital markets, including Senior Notes, Upper Tier-2 notes and Hybrid Tier-1 notes, under a single documentation platform. This will allow the Bank to quickly take advantage of market opportunities where they arise, increasing the Banks fund raising efficiency. The Bank has set up an Entrepreneurial Development Fund (EDF) with a

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corpus of Rs.10 crore for financing the entrepreneurs in the Small and Medium sector. The Bank took yet another pro-active initiative by introducing an Online application facility for Educational Loans. The Banks life insurance joint venture with Fortis and Federal Bank commenced operations in March 2008. In March 2008, IDBI Bank opened its first City SME Center (CSC) in Mumbai to give a fillip to Small and Medium Enterprises (SMEs) lending. CSC has been established to streamline credit appraisal process to ensure faster turnaround time. More such CSCs would be set up in due course. In February 2008, IDBI Bank entered into a strategic alliance with Motilal Oswal Securities Ltd. (MOSL), to facilitate online trading for the Banks customers. IDBI Bank customers now have the additional option of making investments in equities, derivatives and Initial Public Offerings (IPOs) using the online trading platform of MOSL. Un-audited Financial Results for the Period Ended Dec. 31, 2007 (Rs. Lakh) Year Quarter Ended Year Ended Ended Sr. March 31, March 31, Particulars March 31, March 31, No. 2008 2007 2008 2008 (Unaudite (Unaudite (Audited) (Audited) d) d) Interest earned 224974 181447 802084 634542 1. (a)+(b)+(c)+(d) (a) 174207 149216 650874 524191 Interest/discount on advances/bills (b) Income on 40822 27505 137075 99845 investments (c) Interest on 1105 4294 4648 7632 balances with Reserve Bank of India and other inter bank funds (d) Others 8840 432 9487 2874 2 Other Income 37846 37088 163547 102718 Total Income 262820 218535 965631 737260 3 (1+2) 4 Interest Expended 201378 160177 736441 568749 5 Operating 30943 20521 95879 77847

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IDBI BANK LTD.

Expenses (i)+(ii) (i) Employees cost (ii) Other operating expenses Total Expenditure ((4)+(5) excluding provisions and contingencies) Operating profit before Provisions and Contingencies (3-6) Provisions (other than tax)and Contingencies (Net) Exceptional Items Profit (+)/Loss(-) from Ordinary Activities before tax(7-8-9) Tax expense Net Profit (+) /Loss(-) for the period ((10-11)) Extraordinary items (net of tax expense) Net Profit(+)/Loss(-) for the period((12-13)) Paid-up equity share capital (Face Value Rs.10) Reserves excluding Revaluation Reserves Analytical Ratios (i) Percentage of shares held by GOI

14048 16895

7496 13025

38461 57418

28290 49557

232321

180698

832320

646596

30499

37837

133311

90664

2774

16159

51041

22403

8 9 10 11 12

0 27724

0 21678

0 82270

0 68260

3225 24499

323 21355

9325 72945

5231 63031

13

24499

21355

72945

63031

14

72476

72435

72476

72435

15

604206

547763

604206

5477 63

16 17

52.68

52.71

52.68

52.71

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IDBI BANK LTD.

(ii) Capital Adequacy Ratio (%) a) Basic (not annualized) b) Diluted (not annualized) (iv) NPA Ratios a) Amount of gross NPA Amount of net NPA b) % of gross NPAs % of net NPAs c) Return on assets (annualised) Public 18 Shareholding No. of shares Percentage of Shareholding 11.95 13.73 11.95 13.73

3.38 2.43

2.95 2.95

10.06 10.06

8.70 8.70

156468 108291 1.87 1.30 0.90%

123186 72193 1.89 1.12 0.85%

156468 108291 1.87 1.30 0.67%

123186 72193 1.89 1.12 0.67%

34298583 34257608 34298583 342576088 4 8 4 47.32 47.29 47.32 47.29

Segment Reporting for the year ended March 31, 2008 (Rs. Lakh) Quarter Ended Year Ended Year Ended Sr. March 31, March 31, March 31, March 31, Particulars No. 2008 2007 2008 2008 (Unaudited) (Unaudited) (Audited) (Audited) 1 SEGMENT REVENUE Wholesale banking 2028 86 1852 09 7430 00 6075 12 Retail banking 838 98 506 19 3071 67 2005 63 Treasury 495 90 655 53 1868 37 2443 53 Total 3363 74 3013 81 12370 04 10524 28 Less: - Inter-segment 735 53 828 46 2713 73 3151 67 revenue Net Income from 2628 21 2185 35 9656 31 7372 61 operations 2 Segment Results Profit / (Loss)

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IDBI BANK LTD.

Before Tax Wholesale banking 223 73 158 98 562 69 380 69 Retail banking 32 40 22 97 221 94 195 56 Treasury 21 11 34 83 38 07 106 38 Total 277 24 216 78 822 70 682 63 Less: I) Interest II) Other unallocable expenditure net of Total profit before 277 24 216 78 822 70 682 63 tax Income taxes 32 25 3 23 93 25 52 31 Net profit 244 99 213 55 729 45 630 32 3 Capital Employed (Segment Assets Segment Liabilities) Wholesale banking 4735 19 4829 73 4735 19 4829 73 Retail banking 1285 61 1330 96 1285 61 1330 96 Treasury 610 78 33 28 610 78 33 28 Unallocated 135 24 8 01 135 24 8 01 Total 6766 82 6201 98 6766 82 6201 98 The Bank has not made any disclosures under the segment `Other Banking Operations' as it is not a significant segment in terms of Accounting Standard 17

CONSOLIDATED FINANCIAL RESULTS OF IDBI LTD AND ITS SUBSIDIARIES FOR THE YEAR ENDED MARCH 31, 2008 Sr. Year Ended 31- Year Ended 31Particulars No. Mar-08 (Audited) Mar-08 (Audited) 1. Interest earned 827538 655644 (a)+(b)+(c)+(d) (a) Interest/discount on advances / 675328 541163 bills (b) Income on investments 138351 100038 (c) Interest on balances with 4648 8338 Reserve Bank of India and other inter bank funds (d) Others 9211 6105 2 Other Income 168773 96038 A Total Income (1+2) 996311 751682 3 Interest Expended 754653 583037

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IDBI BANK LTD.

4 Operating Expenses (e)+(f) (e)Payments to and provisions for employees (f) Other operating expenses B Total Expenditure (3)+(4) ( excluding provisions and contingencies) C Operating profit (A-B) before Provisions and Contingencies D OTHER PROVISIONS AND CONTINGENCIES (net) (i) Provision for non-performing assets (i) Provision for Taxes E NET PROFIT (C-D) F Paid-up equity share capital G Reserves excluding Revaluation Reserves H Earning Per Share (EPS) (Rupees) a) Basic 104573 41672 62901 859226 81346 29550 51796 664383

137085 62426 46845 10785 74659 72476 644878

87299 28468 14332 5717 58831 72435 570452

10.30 10.30

8.12 8.12

b) Diluted

Consolidated Segment Reporting for the year ended March 31, 2008 (Rs. Lakh) Year Ended Year Ended March 31, 2008 March 31, 2008 (Audited) (Audited) 7430 00 3382 93 1901 01 62 82 12776 76 6064 81 2194 88 2452 18 46 92 10758 79

Sr. No. 1

Particulars SEGMENT REVENUE Wholesale banking Retail banking Treasury Others Total

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IDBI BANK LTD.

Less: - Inter-segment revenue Net Income from operations 2 Segment Results Profit / (Loss) Before Tax Wholesale banking Retail banking Treasury Others Total Other unallocable expenditure net of unallocable income Total profit before tax Income taxes Net profit Capital Employed (Segment Assets Segment Liabilities) Wholesale banking Retail banking Treasury Others Unallocated Total 2813 64 9963 12 3241 98 7516 81

554 31 263 45 49 84 -13 16 854 44 -

321 48 225 04 85 16 13 81 645 49 -

854 44 107 85 746 59

645 49 57 17 588 32

4735 19 1299 83 609 10 175 81 186 39 7006 32

4523 04 1489 09 87 96 313 90 14 88 6428 87

Notes: (i) The above results have been taken on record by the Board of Directors of the IDBI Bank [Link] its meeting held on April 26, 2008. (ii) Dividend at Rs. 2 per share on equity shares has been recommended by the Board for adoption by the Shareholders. (iii)Consequent upon takeover of erstwhile United Western Bank Ltd., the Bank had, inter-alia, provided Rs.286,00 Lakh towards certain loans and advances, which were considered by the management as not readily realizable. During the year, the Bank has determined a provision of Rs.236,00 Lakh as no longer required, which has been utilized towards provision for amount receivable against investment in state level financial institutions appearing in other assets, and for provisioning of standard assets. (iv)The transitional liability arising on account of adoption of Accounting

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IDBI BANK LTD.

Standard 15 (Revised 2005) Employee Benefits of Rs.63,22 Lakh is amortised over a period of upto five years commencing from the financial year 2007-08. Out of this, an amount of Rs.13,22 Lakh has been charged to Profit & Loss account during the year. (v) The details of investor complaints are as follows: Recieved Pending as during the on 1/1/08 quarter Shareholders Nil 735 Bondholders 524 25439 Total 648 23213 Category of investors Disposed during the quarter 735 25961 23337 Unresolved at the end of the quarter Nil 2 524

(vi) The figures of the previous accounting periods have been regrouped and adjusted wherever required. By order of the Board Mumbai April 26, 2008 (Yogesh Agarwal) Chairman & Managing Director

Report of the Auditors to the Members of Industrial Development Bank of India Limited
We have audited the attached Balance Sheet of the Industrial Development Bank of India Limited (the Bank) as at March 31, 2008, as also the Profit and Loss Account and the Cash Flow Statement of the Bank for the year ended on that date annexed

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IDBI BANK LTD.

thereto. These financial statements are the responsibility of the Banks management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. The Balance Sheet and Profit and Loss Account have been drawn up in accordance with the provisions of Section 29 of the Banking Regulation Act, 1949 read with Section 211 of the Companies Act, 1956.

We report that

I. We have obtained all the information and explanations, which, to the best of our

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IDBI BANK LTD.

knowledge and belief, were necessary for the purposes of our audit and have found them to be satisfactory.

II. The transactions of the Bank which have come to our notice have been within the powers of the Bank.

III. The returns received from the offices and branches of the Bank have been found adequate for the purposes of our audit.

IV. In our opinion, proper books of account as required by law have been kept by the Bank so far as appears from our examination of those books and proper returns adequate for the purpose of our audit have been received from offices and branches not visited by us.

V. The Banks Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of account and the returns.

VI. In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report comply with the Accounting Standards referred to in sub-section 3(C) of Section 211 of the Companies Act, 1956 read with guidelines issued by the Reserve Bank of India in so far as they apply to the Bank.

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IDBI BANK LTD.

VII. The provisions of Section 274(1)(g) of the Companies Act, 1956 are not applicable in terms of Notification No.G.S.R.829 (E) dated- October 21, 2003 Issued by Department of Company Affairs, Government of India.

VIII. In our opinion and to the best of our information and according to the explanations given to us, the said financial statements give the information required by the Banking Regulation Act, 1949 as well as the Companies Act, 1956 in the manner so required for banking companies and give a true and fair view in conformity with the accounting principles generally accepted in India.

In the case of the Balance Sheet, of the state of affairs of the Bank as on March

31, 2008;

In the case of the Profit and Loss Account, the same shows a true balance of Profit for the year ended March 31, 2008 covered by such accounts; and

In the case of the Cash Flow Statement, of the cash flows for the year ended March 31, 2008.

For Khimji Kunverji & Co. Chartered Accountants Shivji K. Vikamsey Partner Membership No. 2242

For Suresh Chandra & Co Chartered Accountants Ved Prakash Bansal Partner Membership No. 500369

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IDBI BANK LTD.

Audit Reports Report on Corporate Governance To the Members of Industrial Development Bank of India Limited

We have examined the Compliance of the conditions of Corporate Governance by Industrial DevelopmentBank of India Limited (hereinafter referred to as the Bank) for the year ended March 31, 2008 as stipulated inClause 49 of the Listing Agreement of the said Bank with Stock Exchange of India.

The compliance of conditions of Corporate Governance is the responsibility of the management. Our examinationwas limited to a review of the procedures and implementation thereof, adopted by the Bank for ensuring thecompliance with the conditions of Corporate Governance. It is neither an audit nor an expression of opinionon the financial statements of the Bank.

In our opinion and to the best of our information and according to the explanations given and representationsmade by the Directors and the Management, we certify that the Bank has complied with the conditions ofCorporate Governance as stipulated in the above-mentioned Listing Agreement.

We state that such compliance is neither an assurance as to the future viability of the Bank nor the efficiency oreffectiveness with which the management has conducted the affairs of the Bank.

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IDBI BANK LTD.

For Khimji Kunverji & Co. Chartered Accountants Sd/Shivji K. Vikamsey Partner Membership No.2242

For Suresh Chandra & Co. Chartered Accountants Sd/Ved Prakash Bansal Partner Membership No.500369

Mumbai April 26, 2008

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IDBI BANK LTD.

Internal Audit

Your Bank has a well-equipped Internal Audit& Regulatory Compliance Department carrying out regular independent appraisal of all activities undertaken by different business units/ support units and its branches. The function is headed by Senior Management Personnel with reporting lines to Chairman and Managing Director (CMD) and Audit Committee of the Board. The audit function maintains its independence and objectivity while carrying out the assignments. It evaluates, on a continuous basis, the adequacy and effectiveness of internal control mechanisms, adherence to policies and procedures and suggests measures to strengthen and streamline controls for timely addressing of various risks. Your Bank adopted riskbased internal audit as its strategy while carrying out the activities. There is an Information System Audit in place as part of Internal Audit Mechanism to address technology and IT security issues commensurate with the nature and complexities of the operations. There exists proper co-ordination between audit and other operational wings for enhancing operational efficiency and finetuning of the processes. Your Bank has, in line with the regulatory requirements, put in place a comprehensive concurrent audit system to supplement the internal audit function. Emphasis is placed on benchmarking your Banks practices and procedures in an endeavour to migrate to the best practices. The Audit Committee of the Board and Internal Audit Committee review the performance, give directions to the internal audit functionaries and review effectiveness of internal control systems as also compliance with regulatory guidelines.

Vigilance Mechanism

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IDBI BANK LTD.

A full-fledged Vigilance Department operates at your Banks Head Office. Zonal Vigilance Cells (ZVCs), set up at each Zonal Offices, co-ordinate the matters relating to vigilance at Zonal/Branch level and facilitate expeditious disposal of cases. The Vigilance Department continued to operate as a channel for providing inputs to the top management for carrying out investigation into vigilance related complaints and to suggest corrective measures for improving the control systems and compliance of laid down procedures. Your Bank has put in place a system wherein complaints received, from the public/any other sources, are attended to promptly and steps are taken to avoid recurrence of such complaints in future. A Vigilance Awareness Week was observed during November 12-16, 2007 at Head Office/Zonal and Branch Offices of your Bank to sensitize the employees about the evils of corruption. Preventive/Surprise Vigilance Visits were conducted to various Branch Offices to examine their functioning and adherence to systems and procedures and corrective measures were suggested, wherever necessary. During the year, six Workshops on Vigilance wareness & Fraud Prevention were conducted at various places across the country to educate the staff members regarding the need to exercise preventive vigilance by them in their day-to-day functions and also in achieving the larger goals of organizational efficiency.

Code of Bank Commitments to Customers

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IDBI BANK LTD.

Your Bank is a member of Banking Codes and Standards Board of India (BCSBI), set up by Reserve Bank of India. The Board of Directors of your Bank has adopted the Code of Banks Commitment to Customers (the Code) for implementation. The Code is voluntary and sets minimum standards of banking practices for banks to follow when they are dealing with individual customers and explains how banks are expected to deal with them for their day-to-day operations. As an integral part of your Banks compliance with the Code, information on the Code is provided to customers through display on the Banks Website, at the Branches, ATMs and with the Customer Statements of Accounts. Copies of the Code have been widely distributed through the branches. Also, a copy of the Code is provided to all new customers sourced after January 1, 2007. In further compliance with the provisions of the Code, posters have been displayed at all Branches of your Bank notifying availability of various policy documents on your Banks website as well as at branches, which can be provided to the customers on demand. Name & contact details of the Code Compliance Officers are also displayed at branches and on the Banks website. Your Bank is undertaking all necessary steps to comply with the evolving BCSBI guidelines on an ongoing basis. Also, it has in place Customer Service Committee of the Board (CSCB) & Standing Committee on Customer Service (SCCS) to ensure that Banks products, processes and services are periodically fine-tuned to meet the desired objective of BCSBI of achieving customer satisfaction. Furthermore, to bring awareness amongst the staff

Future Prospects

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IDBI BANK LTD.

The growth story in the domestic economy remained robust over past half of the decade. After a smooth sailing, the policy makers are worried about possible slowdown against the envisaged growth beyond 9% during the ensuing Plan period. The recent upsurge in inflation due to higher food prices is a major challenge for global leaders and financial experts. This would encourage fiscal authority to improve upon supply chain management and would call for increased investment in agriculture. It would lead to monetary tightening which may stymie credit demand. To buttress the growth impetus, all efforts are underway to increase domestic investment, financed predominantly by domestic savings. The participatory growth model with emphasis on balance growth would increasingly be adopted as a strategy to reduce the rural-urban divide. Improved utilization of capital as reflected in lower incremental capital output ratio resulting from successive economic reforms processes, led to increased efficiency gains, manifesting itself in acceleration in investment and output growth. This has resulted in a change in the composition of Indias GDP with the emergence of new growth drivers. In fact Indias moving to a higher growth trajectory is also a result of the non-farm growth accounting for close to 83% of GDP. As India is increasingly becoming the global services hub, it is expected that the domestic economy would exhibit better growth despite pull down pressure. Whether it is Bharat Nirman or any other fiscal agenda to further strengthen the infrastructure, effective execution of these iterated measures would catalyse the economic activities with improved value addition and efficiencies. Your Bank, during the financial year, gained enormous strength in terms of positioning through expansion of its network, realigned its organisation structure to achieve greater customer focus, offering wider and superior array of products, improved

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IDBI BANK LTD.

manpower and increasingly emphasising its policy dimensions to enhance customer delight. The strong corporate relationship of your Bank along with its efficacy in the field of financial engineering would further enable your Bank to increase its portfolio in the envisaged lines. With the establishment of international branches, your Bank could increasingly meet the requirements of its valuable customers. Your Banks strategic policy to diversify its portfolio to derisk through granularity would further enhance its client base and its service spectrum. Proactive preparations coupled with improved economic scenario, as exhibited from the strong fundamentals, would provide opportunities to take business to higher level

Chapter 4
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IDBI BANK LTD.

Conclusions and Recommendations :
Conclusions

1. Consumers have good awareness level about IDBI bank as well as about its
services and products they offer. 2. The advertising campaign has successfully been able to increase the market share of IDBI

3. The modern days technology like internet banking, phone banking, used by IDBI
bank for providing banking services has sent positive signals in the mind of consumer.

4. The network of IDBI is lagging behind a little than its competitors like ICICI bank
and HDFC bank. 5. It can be distilled from data that IDBI bank has good market share as compared to its competitors considering the amount of resources deployed by them in the market.

Recommendations

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IDBI BANK LTD.

1. More resources should be allocated in the market all over as there is big
untapped market so it becomes necessary for IDBI bank for taking an edge over the competitors.

2. A short advertising campaign will produce good results in a short span of times,
so to gain long term benefits is very necessary for IDBI bank to carry on this campaign with more intensity.

3. Besides opening more branches it should also look for opening some extension
counter 4. As Government is the majority share holder in the shares of IDBI bank, which makes this bank more reliable than other private banks, this thing can be used in the favour of IDBI bank by making people aware about this fact and winning their faith. 5. The bank should come up with more branches & developments also in Rural area.

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IDBI BANK LTD.

Appendix1: Questionnaire
NAME AGE. SEX: MALE/FEMALE

ADDRESS:... CITYPIN CODE.... CONTACT NO. 1. DO YOU KNOW ABOUT IDBI BANK LTD.? YES 2. IDBI BANK IS A PRIVATE BANK PUBLIC BANK PRIVATE/PUBLIC BANK DONT KNOW NO

3. RANK THE IDBI BANK ON THE FOLLOWEING FEATURES (RANK 1 FOR BEST AND 5 FOR WORSE ON 1 TO 5 SCALE) EFFICENCY INTERNET BANKING/ATMs PRODUCT RANGE MANPOWER NETWORK PHONE BANKING

4. YOU WOULD LIKE TO BE A CUSTOMER OF BANK BECAUSE 5. YOU WOULD NOT LIKE TO BE A CUSTOMER BANK BECAUSE 6. NAME THE BANK WHICH COMES IN YOUR MIND AT VERY FIRST AND WHY?

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IDBI BANK LTD.

7. DO YOU THINK IDBI BANK NEED MORE ADVERTISMENT? YES NO

8. YOUR LEVEL OF SATISFACTION WITH IDBI BANKVERY SATISFIED SATISFIED NORMAL DISSATISFIED VERY DISAT.

9. IF YOU WILL HAVE OPTION AGAINEST IDBI BANK YOU WILL GO FOR SBI ICICI PNB OTHER

10. DO YOU REMEMBER THE COMMERCIAL OF IDBI BANK? YES NO

11. WHEN DID YOU LAST SEE THE ADVERTISEMENT OF IDBI BANK? 0-5 DAYS BACK 11-15 DAYS BACK BACK 6-10 DAYS BACK MORE THAN 15 DAYS

12. IDBI BANK LTD. IS A GOOD BANK FORSERVICE PEOPLE PERSONS POLITICIANS ALL OF ABOVE 13. NAME IDBI BANK LTD. GIVE BLUE-PRINT IN YOUR MIND OFHIGH NETWORK HI-TECH BANK OTHER (PLEASE FINANCILALLY EFFICIENT BANK CUSTOMER FRIENDLY SPECIFY) GENERAL PUBLIC BUSINESS

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IDBI BANK LTD.

Appendix 2: Reference Material
[Link] [Link] [Link] R.S. Sharma, Business statistics, First India Print, India, 2004, Aaker Kumar and Day, Marketing research, 6th Ed.,john willy & sons,1997. ICFAI Journal of Banking The Economics times The Times of India

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