PROJECT ON

ALTERNATE REVENUE SOURCES FOR THE BANK .

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 Index

Sr. No. Topic Page No

1 Executive Summary 4
2 Objective 6
3 Methodology of Study 7
4 Profile of IDBI Bank 9
5 Banking Scenario of Fee Based Income 11

6 Products & Services offered by IDBI 16

7 Alternate Revenue Sources 21
8 Findings, Conclusion & Suggestions 32
9 Bibliography 35

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 Executive Summary

Alternate revenu e sou rces form a vital p art of incom e for banks and banks are
therefore looking forw ard tow ard s increasing their p rofitability throu gh these
sou rces. Som e sou rces of fee incom e have been available to institu tions for
many years, but have recently taken on a more dominant position in the overall
financial m anagem ent strategies of banks. These inclu d e d ep osit service
charges, cred it card fees, fees associated w ith electronic fu nd s transfer, d em at
etc. Althou gh banks have m ad e significant head w ay in generating trad itional
fee incom e, for banks to rem ain com p etitive w ith other financial institu tions,
they need to exp and their p rod u ct bread th and to im p rove sales, relationship s,
servicing, and investment know-how.

N ew typ es of activities that generate fee incom e inclu d e secu rities brokerage,
film financing, equ ity p articip ation in bu siness, real estate brokerage services,
real estate d evelop m ent, real estate equ ity p articip ation, and insu rance
brokerage activities. Banks also receive fee incom e from a nu m ber of off-
balance sheet items including loan commitments, note issuance facilities, letters
of cred it, foreign exchange services, and d erivative activities (contracts for
futures, forwards, interest rate swaps, and other derivative contracts)

The essential fu nction of a bank is to p rovid e services related to the storing of

valu e and the extend ing cred it becau se bank is a financial institu tion that
provides banking and other financial services

Banks can d iffer m arked ly in their sou rces of incom e. Som e focu s on bu siness
lend ing, som e on hou sehold lend ing, and som e on fee-earning activities.
Increasingly, how ever, m ost banks are d iversifying into fee-earning activities.

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Traditionally fee income has been very stable; but, also traditionally, it has been
a small part of the earnings stream of most banks.

Althou gh the typ e of services offered by a bank depends upon the type of bank
and the country, services provided usually include:

Directly take d ep osits from the general p u blic and issu e Savings
accounts and Current accounts

Earning specials like the fixed deposits, recurring deposits.

Lend out money to companies and individuals

Issue credit cards, ATM, and debit cards

Online banking and Internet banking

Storage of valuables, particularly in a safe deposit box

Granting loans.

Bu t in the cu rrent scenario w ith im m ense com p etition the banks have to look
far beyond the trad itional p ractice. Cu stom ers look for one stop financial
solu tion so the only solu tion left w ith the banks is to d iversify. The interest
rates are d ecreasing so banks have to look for alternate sou rces to generate
revenu e. Also the lend ing & borrow ing rates are red u cing d ay after d ay.
Therefore the banks are going in for investment and advisory services, portfolio
m anagem ent d ep ository services, d ebit/ cred it card s etc. The alternate revenu e
generating sources of IDBI Bank, which will be dealt in detail, are

Banc assurance
Mutual funds
Locker Facility
RBI Bonds
Forex
Demand Drafts/Bankers Cheque
Demat Services.

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 Objectives

1. To study the current revenue sources for banks in India

2. To study the alternate sources of revenue for IDBI Bank

3. To stu d y the contribu tion of each alternative sou rce of revenu e to IDBI
Bank

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 Methodology of the study

In order to fulfill the above objectives, the project was under taken in IDBI bank
Margao branch from 1st Ju ne to 30th Ju ly and inform ation w as collected
through:

Primary Sources:
The p rim ary w as gathered from p ersonal interview s w ith the bank em p loyees
and higher officials. The entire su rvey w as cond u cted in IDBI Bank Margao
branch, w hich consisted of inform ation on u nd erstand ing the level of
aw areness regard ing the alternatives sou rces. Data w as also collected throu gh
observation during the training period of 2 months from 1st June to 30th July.

Secondary sources:
Information was drawn from published journals on insurance, mutual funds, in
hou se m agazines of the bank, Files m aintained by the bank etc. Inform ation
w as also gathered from new sp ap ers and m agazines. Besid es d ata w as also
downloaded from the Internet.

Limitations of the study

Limited number of reference books were available
The stu d y w as restricted only to IDBI bank Margao branch and
hence may not be applicable to all banks.
The inform ation available on the internet, Brochu res, internal
magazine, leaflets was limited
The em p loyees in the bank had a bu sy sched u le; therefore there
was delay in getting the data.

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There was difficulty in getting exact income; as such some data was
confidential and not available at the branch level.
The p roject w as com p leted in tw o m onths tim e so the tim e
available was limited

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 Profile Of IDBI Bank.
Ind u strial Develop m ent Bank cam e into existence w ith the Enactm ent of
Parliam entary Act in Ju ly 1964 as a su bsid iary of Reserve Bank of Ind ia. The
ow nership vesting w ith the Governm ent of Ind ia. It w as Designated Princip al
Institu tion for coord inating the w orking of institu tions at national and state
level engaged in financing, promoting and developing Industry.

With the Governm ent op ening u p of Dom estic Banking sector to p rivate
p articip ation as p art of overall financial sector reform s, in Sep tem ber 94,
Ind u strial Develop m ent bank in association w ith its su bsid iary SIDBI, set u p
IDBI Bank Ltd as a p rivate sector com m ercial bank. This initiative has
blossom ed into a m ajor su ccess story. IDBI bank, w hich began w ith an equ ity
cap ital of Rs 1000 m illion, com m enced its first branch at Ind ore in N ovem ber
1995. Thereafter in less than seven years the bank has attained a front ranking
p osition in the Ind ian Banking Ind u stry.IDBI Bank su ccessfu lly com p leted its
p u blic issu e in Febru ary 99, w hich led to its p aid u p cap ital exp and ing to Rs
1400 million.

On Decem ber 16, 2003 the p arliam ent ap p roved the Ind u strial Develop m ent
bank (Transfer of Und ertaking and Rep eal Bill) 2002 to rep eal IDBI Act 1964.
The Rep eal Act is aim ed at Bringing IDBI u nd er the com p anies Act for
investing it w ith the requ isite op erational flexibility to u nd ertake com m ercial
banking bu siness u nd er the Banking Regu lation Act 1949 in ad d ition to the
bu siness carried on and Transacted by it u nd er the IDBI Act 1964. The N ew act
cam e into force in Ju ly 2004. The Board of Both IDBI and IDBI Bank d ecid ed to
m erger both the entities and to form Industrial D evelopment Bank of India.
(IDBI Ltd.)

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The Merged entity becam e one the Largest Financial Institu tion. With the
Strength of the Parent com p any the Bank p lans to exp and its netw ork and
grow on a large scale. IDBI Bank had the privilege to function as a Private Bank
and now as a Government Bank also as its now become a PSU Bank.

As of date the Bank has got a National Network,

Number of Branches: 167

Number of Extension Counters: 6

N u m ber of ATM s: 377

Presence in 99 cities.

Goa had 2 branches and plans of coming up with another 3 in the next 1-year.

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 Banking scenario of Fee based income

Private Banks lead p u blic sector banks in generating fee Incom e. Ind ian banks
are heavily reliant on interest incom e, w hich accou nts for over 80% of their
total incom e. At p resent, w ith the red u ction in interest rates banks are exp ected
to d iversify their incom e p rofile so that the cu rrent levels of non-interest
incom e m ay be m aintained . The fee incom e of banks arises m ainly from
commission, brokerage and exchange transactions.

Fee Income Profile of the entire banking sector

Source: www.icraindia.com

We see from the above grap h 2.1 the fee based incom e for the entire banking
scenario for the p eriod 2000-2004. The incom e earned from com m ission,
exchange & brokerage is 42%, 50%, 55% and 60% for the years 2001, 2002, 2003
and 2004 resp ectively. Incom e from Exchange transaction is the sam e for the
first three years bu t is fou nd d ecreasing in 2004. H ow ever other incom e of the
banks is increasing in 2004.

Incom e on exchange transactions has trad itionally been high in the case of
p u blic sector banks, reflecting their high off-balance sheet activities, p rim arily

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execu tion of d erivatives and forw ard exchange contracts. Over the last tw o
years, p u blic sector banks have also rep orted su bstantial foreign exchange
incom e on the strength of the higher d em and for foreign cu rrency fu nd s from
corp orate entities, and banks access to foreign cu rrency fu nd s. Of late, p rivate
banks have also begu n leveraging their balance sheet and cou ld p ose a strong
com p etitive threat to their p u blic sector cou nterp arts on this front.
Significantly, p u blic sector banks have been losing m arket share in the areas of
exchange, com m ission and brokerage to p rivate sector banks over the last few
years. Du ring the last few years, p rivate sector banks have grow n in size, and
this has served to reinforce their fee income profile.

CAGR of Fee Income of the following banks

An analysis of the fee incom es of the top three p u blic sector banks (Pu njab
N ational Bank, Canara Bank and Bank of Ind ia) and five p rivate sector banks
(ICICI Bank, H DFC Bank, IDBI Bank, UTI Bank and IDBI Bank) reveals the
following:
CAGR of Fee Income

Source: www.icraindia.com

From the above graph 2.2 ICICI Bank s CAGR is the highest as com p ared to the
other banks, follow ed by H DFC Bank, IDBI Bank, UTI Bank and last IDBI Bank

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w ith a CAGR of arou nd 10% w hich is alm ost sam e as Canara bank. Bank of
India has a slightly higher CAGR ie, of around 12%. PNB has the least CAGR of
about 5%. However CAGR of these banks are expected to rise in the near future

The analysis exclu d es State Bank of Ind ia (SBI) becau se of its very large size
and the sp ecial relationship it has w ith the Governm ent of Ind ia (GoI), both of
which have enabled the bank to generate very high fee-based income.

Fee Income Profile for Private and Public Sector Banks

Source: www.icraindia.com

Grap h revels that the absolu te fee incom e of the p u blic sector banks is
exp ected ly higher than that of their p rivate sector, becau se of the higher scale
of op erations of the form er. The p rop ortion of exchange and brokerage as a
percentage of the total fee income is higher for the private banks. Fee income as
a p ercentage of the average total assets is higher for p rivate banks. The rate of
grow th in fee incom e is significantly higher for p rivate sector banks. The better
p osition of p rivate sector banks on the fee incom e front m ay be attribu ted to
their larger p rod u ct offerings and their technology p latform s, w hich are better
geared to provide customized solutions to customers.

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Som e of the recent d evelop m ents that have enabled the p rivate banks increase
their fee incomes are:

1. Thru st on retail grow th that generates fee incom e in the form of

processing fees.
2. Leveraging of technology to w id en cu stom er base for p rod u cts su ch as
credit cards, debit cards
3. Automated teller machine (ATM) cards.
4. Strong focus on cash management activities on behalf of corporate clients.
5. Increase in non-fu nd based exp osu res to corp orate clients in the form of
letters of cred it and gu arantees by the ad op tion of aggressive p ricing
strategies.
Market Share of Commission, Exchange & brokerage

Source: www.icraindia.com

Grap h revels that there has been an increase in the m arket share of
Com m ission, Exchange & brokerage becau se of the increase in sales and
d istribu tion of m u tu al fu nd s, insu rance p rod u cts, bond s of p u blic sector
institu tions/ banks, GOI relief bond s, etc. Increase in focu s on m and ates for
hand ling Governm ent bu siness, p rim arily collection of d irect and ind irect
taxes, w hich is highly rem u nerative and increase in off-balance sheet activities,

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p rim arily in foreign exchange to p rovid e cu stom ers variou s d erivative
products.

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 Products & Services Offered by ID BI Bank.
IDBI Bank offers the entire basket of banking products to its customers with
various add on benefits. The products that it offers are,

Savings Account.

A cu stom ary p rod u ct that every bank offers to all its cu stom ers .A savings
accou nt can be op ened w ith an average qu arterly balance of Rs 5000 (Rs 2500
in select cities) IDBI Bank also offers its cu stom er s the saving accou nt w ith a
range of facilities which include;

Door step account opening

Instant account number and ATM card
Personalized cheque book
Quarterly statement by post
Monthly statement by email
Any period statement by fax
24*7 cash access at atms
Internet banking
SMS banking
Phone banking
Sweep in facility linked to fixed deposits
Demat balance info
Demat statements with portfolio values
Investment advisory services

Any Branch Banking

Deposit / withdrawal cash at any branch

Transfer funds electronically across branches
Deposit local cheques at any branch.

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 Current Account.

An account to take care of the business sector. IDBI with its range of Roaming
Current Accounts offers five types of account options to the business sector in
the form of Basic, Special, Bronze, Silver and Gold . Based on the kind of
balance that the cu stom er is w illing to m aintain he can choose the accou nt,
w hich can best su it his need s. The facilities that one gets on his cu rrent
account would be,

1. Free at par cheque book

2. Free demand drafts/pay orders on idbi lactations
3. Free demand drafts on non- idbi bank locations
4. Free electronic fund transfer
5. Free any branch deposit and withdrawal
6. Free outstation cheque collection

Along with other facilities like

Internet banking
ATM Banking
Mobile Banking
Monthly statements
Daily cash and cheque pick up
Sweep in facility

H ow ever this services m ay vary d ep end ing u p on the kind of typ e of accou nt
chosen and also the location of the branch

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Fixed Deposits.

IDBI p resence in this segm ent is by w ay of its Su vid ha Fixed Dep osits. And now
w ith it s becom ing a PSU bank is accom p anied w ith safety, cred ibility and
attractive interest rates. These deposits are backed with added features like,

Anytime access to money

Deposits across tenures of 15 days to 9 years
Various payout options such as,

Monthly / Quarterly Income Plan

For those w ho w ant a p eriod ic retu rn on their investm ent this is the best op tion
that they will receive a monthly or a quarterly payout of interest.

Quarterly Compounding Fixed Deposits

Id eal for those w ho w ant a higher rate of retu rn along w ith a low er risk factor.
In this op tion the interest earned is reinvested so that the investor gets a higher
rate of return.

Recurring Deposits.
Id eal for those w ho w ant to go for regu lar saving s. The cu stom er can choose
any am ou nt that he w ou ld like to d ep osit on a m onthly basis anything betw een
Rs 500 to 1 lakh.

Sweep in Deposits.
Earn a fixed d ep osit rate on you r savings accou nt. In this op tion the client has
to give an instru ction that once his balance reaches a certain am ou nt than
au tom atically a certain am ou nt w ou ld be converted into a Fixed Dep osit.
Whenever the client need s he can w ithd raw the m oney at his convience. The
FD s are m ad e in m u ltip les of Rs 1000 and w henever the client w ithd raw s the
last made FD is broken first so that he does not loose interest.

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 Overdraft Against Fixed Deposits.

In this facility the client can m eet his u rgent financial need s w ithou t breaking
his fixed deposits. He can take overdraft of upto 90% of the FD value.

Senior Citizens Fixed Deposit

The senior citizen enjoys the benefit of getting a higher interest rate of 0.5%
than others.

Preferred Banking.
A Channel which special caters to the select few who fall in the HNI category.
H ere exclu sivity, convience and p rivilege is a norm . Sp ecial benefits and
benefits are offered to the clients in the form of,

Dedicated Relationship Manager

Investment Advisory Services
Special Lounge in the Bank etc.

NRI Services.
Along w ith the N RI accou nt available to non-resid ents they also enjoy a host of
other facilities.

The Bank offers the client to access his fu nd s by w ay of International

Debit card.
Fund Transfer Facility
Foreign exchange
Wealth Management services
Insurance.

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The various types of Accounts that an NRI can opt out for are,

Non Resident External (NRE) Account

The features of this account are

Rupee account
Both principal and interest, fully repatriable
Can be held as savings account, current account and Term deposit
Totally Tax Free.

Non-Resident Ordinary (NRO) Account

The features of this account are,

Rupee Account
Interest earned fully repatriable, Principal non-repatriable
Can be held as a savings account, current account, and term deposit
Ideal account for local rupee funds
Interest taxable at applicable rates
Ideal account to credit income like rent, dividend etc.

Foreign Currency Non Resident (FCNR- B) Scheme.

The features of this account are,

Available in four currencies USD, GBP, EURO, JPY

Available as Fixed Deposits
Interest earned in Foreign currency
Maintained in Foreign currency
No exchange risk
Totally tax free
Both principal and interest, fully repatriable.

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 Alternate Sources of Revenue for the Bank.

Broad ly sp eaking the revenu e sou rces of the bank can be d ivid ed into tw o the
one, w hich it rend ers d irectly, and the other throu gh the d istribu tion of Third
party Product of other companies.

Revenu e that is generated throu gh the ale of third Party Prod u cts w ou ld be
through

Mutual Funds

A Mu tu al Fu nd is a tru st that p ools the savings of a nu m ber of investors w ho

share a com m on financial goal. The m oney thu s collected is then invested in
capital market instruments such as shares, debentures equity, debt instruments,
m oney m arket instru m ents etc., or a m ix of these secu rities, d ep end ing on the
schem e objectives. The incom e earned throu gh these investm ents and the
cap ital ap p reciation realized are shared by its u nit hold ers in p rop ortion to the
nu m ber of u nits ow ned by them . Thu s a Mu tu al Fu nd is the m ost su itable
investm ent for the com m on m an as it offers an op p ortu nity to invest in a
d iversified , p rofessionally m anaged basket of secu rities at a relatively low cost.
Figure below describes broadly the working of a mutual fund:

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 Working of Mutual fund

Source: www.amfiindia.com

3.1.1 Why IDBI Bank should sell Mutual Funds

In tod ay s econom ic scenario w herein the interest rate of saving going d own
the cu stom ers are looking at other sou rces of investm ent throu gh w hich they
can get a good rate of retu rn w ith a nom inal risk. Instead of loosing the
cu stom er to som eone else the banks itself are offering this p rod u cts at their
branches. And Mu tu al fu nd is one instru m ent, w hich is catching the fancy of
the investors.

Mu tu al fu nd s are consid ered as the investm ent avenu e. Peop le alw ays look for
a higher retu rn. The banks are no longer giving the retu rns they once u sed to
give and there is hard ly any chance of the interest rates going u p . So if one
w ants higher retu rns one has to invest in shares. Bu t one d oes not have the
exp ertise to invest. If one w ants to m inim ize the risk one has to d iversify the
p ortfolio. Bu t for d iversification one need s hu ge am ou nt of m oney that one
m ay not have. At this p oint one can tu rn to Mu tu al fu nd s for they p rovid e

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exp ertise to invest in the stock m arket and also d ebt instru m ents. The fu nd
m anager d ecid es w here to invest and w hy. The investor can select a schem e
accord ing to his investm ent need s and risk ap p etite. Most of the fu nd s give an
ind icative rate before investing and the retu rns eventu ally get close to the
return indicated.

IDBI bank helps one to plan their investments and build a healthy mutual fund
p ortfolio, w hich w ou ld be an op tim al solu tion for all need s. Cu ltivating an
investm ent cu ltu re w ill not only help the cu stom er bu t also their fam ily. And
IDBI Bank gives highest priority to all customer needs.

Besid es sale of Mu tu al fu nd s can serve all one of the best revenu e generating
incom e for the bank. Presently the bank earns 1 - 2% on m u tu al fu nd schem es.
IDBI bank offers a w id e range of m u tu al fu nd p rod u cts of variou s com p anies
like HDFC, ICICI, UTI, HSBC, Reliance mutual funds etc

Advantages of Mutual Funds

Professional Management
Diversification
Convenient Administration
Return Potential
Low Costs
Liquidity
Transparency
Flexibility
Choice of schemes
Tax benefits

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 Risk Factors:
All the investments in the securities market are subject to market risks and the
N AV of schem es/ p lans m ay go u p or d ow n d ep end ing u p on the factors and
forces affecting securities market. Past performance is not necessarily indicative
of the future.

Performance of IDBI Margao Branch in Mutual Funds Sale.

IDBI margao was one of the first banks, which caught the pulse of its customers
in the tow n for Investm ent in Mu tu al Fu nd s and tod ay is a strong force to
reckon with when it comes to investment in Mutual Funds.

In the norm al cou rse of bu siness the bank is able to generate a collection of
arou nd 5-10 lakhs and d u ring the tim e of N FO s from variou s fu nd hou ses it is
able to generate additional 10-15 lakhs on an average.

The Bank generates m axim u m revenu e from the sale of Mu tu al Fu nd s in the

Bank and has got som e d ed icated cu stom ers w ho invest only throu gh IDBI
Bank. For this the bank has got its staff trained so as to u nd erstand the need s of
the customers and offer them the products accordingly.

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 Sale of RBI Bonds

IDBI bank offers RBI bond s (GOI bond s). These bond s are fu lly taxable. The
bonds were issued in cumulative and non-cumulative form, at the option of the
investor.

The Bond bears interest at the rate of 8% p er annu m . Interest on non-

cu m u lative bond s w ill be p ayable at half-yearly intervals. Interest on
cu m u lative bond s w ill be com p ou nd ed w ith half-yearly rests and w ill be
p ayable on m atu rity along w ith the p rincip al. These investm ents are for long
term p eriod and therefore have no liqu id ity. Su bscrip tion to the Bond s can be
in the form of Cash/Drafts/Cheques.

The money is locked for 6 years but one is guaranteed of the safety and returns.
The Bond s shall be rep ayable on the exp iry of 6 (Six) years from the d ate of
issu e. N o interest w ou ld accru e after the m atu rity of the Bond . There w ill be no
maximum limit for investment in the Bonds.

Revenue From Sale of RBI Bonds.

IDBI is one of the m ain d istribu tors for RBI Bond s in Ind ia. The earn a revenu e
of 2% on the am ou nt collected . As it is one of the m ain d istribu tors it has su b
agents w ho d istribu tors for the sale of Bond s in su ch scenario they have p art
with a part of the revenue to them.

Bu t since the tim e the retu rns on the bond s have becom e taxable they have lost
the sight of the investors, w ho now look at other sou rces for investm ent w here
they can get a tax-free retu rn. As su ch the contribu tion of RBI bond s in the
revenue basket has come down.

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 Bancasssurance.

Banc assu rance p lays in m ajor role in the alternate sou rce of revenu e for the
banks in tod ay s d ay. The bank has got a Tie u p w ith Birla Su n Life Insu rance
for the d istribu tion of Life Insu rance p rod u cts and w ith Bajaj Allianz General
Insurance for the distribution of General Insurance Products.

Banc assurance - A SWOT Analysis on IDBI Bank

Strengths

IDBI Bank greatest strength lies in a hu ge p ool of skilled p rofessionals. There is

a hu ge p otential for insu rance and the bank is m aking the best u se of its
interp ersonal relationship w ith its loyal cu stom ers, as there is a vast u ntap p ed
potential waiting to be mined particularly for life insurance products.

Since both bank and Life Insu rance Com p any ap p roach the sam e segm ents of
p op u lation, the sam e contact can be u sed to arrange for both bank d ep osits and
life insu rance. It creates a com p etitive ad vantage throu gh cross selling synergy.
This not only help s in saving of infrastru ctu re costs and generates incom e for
the bank bu t also help s in retaining cu stom ers for a longer tim e. It is also
p ossible to d evelop a com p osite p rod u ct that com bines the elem ents of bank
deposits and insurance.

Weaknesses

Internet connection and other infrastru ctu ral facilities are not available to som e
of the managers of operating offices.

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Peop le entru sted w ith banc assu rance are relu ctant to w ork beyond office
hou rs, or on holid ays like an ind ivid u al agent, w hich m ay resu lt in hard ship to
the bank and insu rance com p any. At tim es d u e to transfer of officers to other
branches there are instances w hen the cu stom er has to either interact w ith
u ntrained p ersonnel or no p ersonnel in the absence of p roper su ccession
planning.

Another d raw back is the inflexibility of the p rod u cts i.e. it cannot be tailor
m ad e to the requ irem ents of the cu stom er. For Banc assu rance ventu re to
su cceed it is extrem ely essential to have in-bu ilt flexibility so as to m ake the
product attractive to the customer.

Opportunities

Banks' d atabase is enorm ou s. This d atabase has to be d issected variou sly and
variou s hom ogeneou s grou p s are to be chu rned ou t in ord er to p osition the
Banc assu rance p rod u cts. One im p ortant op p ortu nity is health insu rance
especially financing the medical needs of the aged.

Threats

The m ain threat for banc assu rance is the im m ense com p etition p revailing
today. For instance LIC, Prudential ICICI, etc are doing far better than Birla Sun
Life Insurance.

The m ost com m on obstacles to su ccess are lack of a sales cu ltu re w ithin the
bank, insu fficient p rod u ct p rom otions, failu re to integrate m arketing p lans,
p oor sales channel linkages, inad equ ate incentives, resistance to change,
negative attitudes toward insurance and unwieldy marketing strategy.

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Commonly sold Life Insurance individual life plans in IDBI Bank.

Birla Sun Life Insurance is one the leading players in the life insurance business
in Ind ia. It w as the p ioneer in lau nching the Unit Linked insu rance p rod u cts in
the Market and tod ay is one of the m arket lead ers in this segm ent. Som e of the
products that are sold by IDBI Bank are,

Term Plan.

A p lan, w hich p rovid es the cu stom er w ith a p u re risk cover at a nom inal
cost. Its is like general insu rance only incase of d eath d u ring the tenu re of
the policy does the nominee get the Sum Assured or else if the policy holder
survives during the entire term he does not get anything.

Classic Life Premier.

A p rod u ct, w hich serves the investm ent savvy client w ho likes to have
insurance as well, a decent amount of return on the premiums paid by him.

This p rod u ct gives the client the flexibility to choose the p rem iu m he w ou ld
like to p ay, the nu m ber of years he w ou ld like to p ay, the su m assu red he
w ou ld like to have on this p olicy. This p rod u ct gives the client to choose
w here he w ou ld like the insu rance com p any to invest his m oney. H e has an
option to choose from funds, which have a varying equity exposure ranging
from 0% to 90%, this w ou ld d eterm ine the retu rn that he is going to get on
his investments.

Flexi Save Plus.

This is an end ow m ent p lan w herein the clients gets the m oney on m atu rity
and incase of d eath d u ring the p olicy p eriod he gets the Su m Assu red and the
value of his investments. This also is an investment linked plan.

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 Flexi Cash Flow.

A m oney back p lan w hich caters to the client need s incase he w ou ld like to get
some money on regular intervals. Again also an investment linked plan.

Revenue From Sale of Life Insurance and Margao Branch performance

Tod ay all the banks are entering w ith tie u p s w ith Life Insu rance com p anies to
sell their p rod u cts at their branches. Insu rance is now a m ajor sou rce of
revenu e to the Bank and they are giving sp ecial focu s on this area. They have
their staff trained to sell the products as per the needs of the customers and also
the Life Insurance companies place their representative at the branches to assist
the bank in selling.

The Bank earns a revenu e of som ew here arou nd 10 % 40 % of the p rem iu m

collected by them . This w ou ld d ep end on the typ e of p rod u ct sold and the
duration of the policy.

Life Insu rance sale had ju st started at the m argao branch, as initially the
Insurance Company had no operations in Goa. The Branch has picked up in the
sales right from d ay one. It d oes on an average a bu siness of 2-4 lakhs of
p rem iu m collection on a m onth-to-m onth basis. Taking an average of 25%
revenu e a p rem iu m collection of 4 lakhs w ou ld earn an incom e of arou nd 1
lakh every month for Margao Branch.

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 General Insurance.

IDBI has got a strategic tie up with Bajaj Allianz General Insurance for sale of the
laters products at the branches. With the tie up with Bajaj, IDBI is in a position to
satisfy all the insurance needs of the client at the branch level.

Some common Products offered by IDBI

Family Care.
Is a m ed iclaim p olicy sp ecial tailor m ad e for the accou nt hold ers of IDBI
Bank. In this policy the entire family can be covered under one policy.
Bajaj Allianz has given sp ecial rates to the cu stom ers of IDBI bank. And
only the customers having an account with IDBI bank can take this policy

Vehicle Insurance / House Insurance etc.

The accou nt hold ers can also get their vehicle insu rance d one from IDBI
bank as w ell as H ou se and other insu rable p rod u cts insu red throu gh IDBI
bank.

Revenue From sale of General Insurance

Sale of general insurance generates revenue of around 10-12 % for the bank.
IDBI Margao w as one of the late entrants in the sale of general insu rance and has
m ad e a good start by bringing in good nu m ber of m ed icalaim p olicy and a
couple of new vehicle insurance on a month-to-month basis.

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 Depository Services

A d ep ository can be com p ared to a bank. H old ing a Dem at accou nt is a

paperless, painless and convenient for buying and selling of shares in electronic
form w ith total secu rity and w ithou t any d elays. A d ep ository hold s secu rities
(like shares, d ebentu res, bond s, Governm ent Secu rities, u nits etc.) of investors
in electronic form . Besid es hold ing secu rities, a d ep ository also p rovid es
services related to transactions in secu rities. In Ind ia at p resent w e have tw o
depositories NSDL & CDSL.

IDBI Bank is a depository participant with both CDSL and NSDL.

Facilities Provided by IDBI Bank on its demat account.

Opening of demat account.

Dematerialization i.e., converting physical certificates to electronic form

Rematerialisation i.e., conversion of secu rities in d em at form into

physical certificates

Pledging/Hypothecation of dematerialized securities against bank loan

Electronic credit of securities allotted in public issues, rights issue

Receipt of non-cash corporate benefits such as bonus in electronic form

Freezing of d em at accou nts, so that the d ebits from the accou nt are not
permitted

Nomination facility for demat accounts

Services related to change of address

Effecting transmission of securities

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 Findings, Conclusions and Suggestions

Findings

1. The average non-interest incom e ratio of the entire banking sector has
risen over the p ast 4 years. Environm ental factors su ch as risk, p rod u ctivity,
globalization, regu lation and technology are fou nd to p lay a significant p art in
explaining trends in non-interest income of banks

2. Fees earned by IDBI bank for m ost of the p ast d ecad e w ere below the
national p eer grou p , bu t now grow th in IDBI bank non-interest incom e reflects
increases in revenu e from w ealth m anagem ent and financial m arket op erations
rather than retail banking fees

3. From the analysis cond u cted in this rep ort w e can see that m ajor p art of
the income comes from sale of Mutual Funds followed by Bancaasurance.

Conclusion

IDBI banks incom e for m ost of the p ast d ecad es w as below the national p eer
grou p before catching u p at the end of the p eriod , thu s bringing them broad ly
into alignm ent w ith other banks. The grow th in the bank s incom e reflects the
increase in revenu e from w ealth m anagem ent. The overall p rofit m argin has
risen d u ring the p ast 1 year d u e to the introd u ction of Bancaau rance, Mu tu al
funds, RBI Bonds etc.

From the analysis w e can conclu d e that m ost of the revenu e for the bank is
collected from m u tu al fu nd s follow ed by banc assu rance. As insu rance has ju st

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been started it will pick up and going ahead it should become a major source of
income to the bank.

Dem at accou nts have also not contribu ted m u ch to the incom e of the bank.
H ow ever incom e from Dem at accou nt w ill increase in the near fu tu re becau se
IDBI Bank is likely to start w ith online trad ing. The locker facility is also a
m ajor sou rce of incom e .The bank has gone in for exp ansion of lockers by
getting in 1 more new cabinet.

Risk, p rod u ctivity, globalization, regu lation and technological change are all
significant forces shap ing the non-interest incom e of banks. N on-interest
income has increased its importance relative to net interest income.

To conclu d e w e can say that IDBI bank has earned a d ecent incom e from
alternate revenue sources.

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Suggestions

The bank m u st have m ore p rod u cts in its m enu like, online trad ing, cred it
cards etc. Also proper positioning of these products should be done.
The Bank has got ju st 2 branches as of now in Goa, they shou ld start more
number of branches so that they can reach out to more people
The bank should set up more ATM machines in the state. At present there are
only 2 ATM s in Goa. Also the bank shou ld m ake p rovisions to set u p ATM s
at some of the key locations.
There has to be well motivated, well guided sales team so as to increase sales
There shou ld be m ore m arketing and brand ing of p rod u cts like p u tting u p
banners or giving sp onsorship etc. In other w ord s there has to be m ore
visibility.
More stress has to be given on the sale of Mu tu al fu nd s. The bank em p loyees
should put in more efforts in making the investors aware of the advantages of
Mutual funds.
The staff has to be rew ard ed w ith d ecent incentives so as to boost sale of
products.
The bank shou ld send Monthly u p d ates of the bank s p erform ance,
introd u ction of new p rod u cts and services etc to the cu stom ers so as to m ake
them aware of the prevailing products and services.
Good service should be provided to existing customers.

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 BIBLIOGRAPHY.

1. www.idbibank.com
2. www.amfiindia.com
3. www.birlasunlife.com
4. www.bajajallianz.com
5. www.icraindia.com
6. www.mutualfundsindia.com

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