IDBI Bank to flex arms to pump up business

IDBI Bank is drawing up an elaborate plan through which it will exert its rights on subsidiaries and institutions promoted by it to make them act as feeders for growing its business.

Besides, the public sector bank wants to play to its strengths by offering project appraisal skills to other banks and start development financial institutions in some African countries in association with Export-Import Bank of India (Exim Bank) and local governments.

Also in the works is a proposal to offer loans to enterprises that have received venture capital from the various funds floated by SIDBI Venture Capital Ltd.

In an interaction with the media, Kishor Kharat, Managing Director & CEO, emphasised that there needs to be synergy between his bank and the operations of its subsidiaries and institutions where it is a promoter. This could prove mutually beneficial.

The government appointed Kharat to helm IDBI Bank on August 14. Prior to this, he was Executive Director of Union Bank of India.

IDBI Bank has five subsidiaries — IDBI Capital Market Services Ltd (ICMS), IDBI Intech, IDBI Asset Management Ltd, IDBI MF Trustee Company, and IDBI Trusteeship Services Ltd — and an associate company IDBI Federal Life Insurance Company.

The financial institutions promoted by IDBI Bank in its erstwhile development financial institution avatar include North Eastern Development Finance Corporation (NEDFi), Exim Bank and Small Industries Development Bank of India (SIDBI).

In fact, Exim Bank and SIDBI were carved out of IDBI.

On how the synergies would be created, Kharat cited the example of ICMS. This subsidiary could source loan proposals and IDBI could carry out credit appraisal on the same.

This way the bank can not only earn fee income (for the credit appraisal) but also get an opportunity to participate in loan syndication (take a loan exposure to a company/ project along with other banks). ICMS, for its part, will earn fees for putting together the loan syndication.

Given that the bank has a shortfall in meeting the mandatory priority sector lending target (of 40 per cent of advances), it will try to overcome this by establishing mutually beneficial linkages with NEDFi, said the IDBI chief.

Among others, priority sector lending comprises loans to agriculture, micro, small and medium enterprises, education, housing, and social infrastructure.

NEDFi provides financial assistance to micro, small, medium and large enterprises for setting up industrial, infrastructure and agri-allied projects in the North Eastern Region of India and also microfinance through micro finance institutions/ non-government organisations.

Kharat said IDBI Bank will offer project advisory services to various central ministries and sees a big opportunity to help raise resources for the projects executed by them.

In this regard, he specifically mentioned that the Government has drawn up an ambitious investment plan of ₹8.5 lakh crore in the coming five years for strengthening and modernising the key railway infrastructure in the country.

The strategic three-year plan that is being worked out will be rolled out with effect from April 1, 2016.