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PROJECT ON

ALTERNATE REVENUE SOURCES FOR THE BANK .

FOR

IDBI BANK LTD. MARGAO GOA

SUBMITTED BY UEANA FERNANDES M.B.A. AUTONOMOUS ROLL NO. SMVIM. 6

UNDER THE GUIDANCE OF PROF.YUVRAJ LAHOTI

ST. MIRA VISHWAKARMA INSTITUTE OF MANAGEMENT PUNE 411048 2004-2006

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Acknowledgement

I would like to express my gratitude to my project guide Mr. Yuvraj Lahoti for his guidance, co-operation and encouragement towards the project. Also I offer my thanks to Mr. Solomon Makasare and Mr. Jeron Fernandes for their kindness and help in completing my project. I also thank my parents for their constant love and support which has encouraged and inspired me at every walk of life and to all my friends who helped me to make this project a successful one. Last but not the least, I would like to thank all the employees of IDBI Bank Margao for making me feel a part of the team. Working with you has been a truly gratifying experience.

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Index
Sr. No. Topic
1 2 3 4 5 Executive Summary Objective Methodology of Study Profile of IDBI Bank Banking Scenario of Fee Based Income Products & Services offered by IDBI Alternate Revenue Sources Findings, Conclusion & Suggestions Bibliography

Page No
4 6 7 9 11 16 21 32 35

6
7 8 9

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Executive Summary
Alternate revenu e sources form a vital part 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 eposit service charges, cred it card fees, fees associated w ith electronic fu nd s transfer, d emat 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 petitive w ith other financial institu tions, they need to expand their prod u ct bread th and to im prove sales, relationships, servicing, and investment know-how.

N ew types of activities that generate fee incom e includ e secu rities brokerage, film financing, equ ity participation in bu siness, real estate brokerage services, real estate d evelop m ent, real estate equ ity participation, and insu rance brokerage activities. Banks also receive fee incom e from a nu m ber of offbalance 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 provid 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 focus 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 type of services offered by a bank depends upon the type of bank and the country, services provided usually include: Directly take d eposits 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 petition the banks have to look far beyond the trad itional practice. 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 epository 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 prim ary w as gathered from personal interview s w ith the bank em ployees 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
th observation during the training period of 2 months from 1st June to 30 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 spapers 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 ployees 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 project w as com pleted 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 Developm ent Bank cam e into existence w ith the Enactm ent of Parliam entary Act in Ju ly 1964 as a subsid iary of Reserve Bank of Ind ia. The ow nership vesting w ith the Governm ent of Ind ia. It w as Designated Principal 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 opening u p of Dom estic Banking sector to p rivate participation as part of overall financial sector reform s, in Septem ber 94, Ind u strial Developm ent bank in association w ith its su bsid iary SIDBI, set u p IDBI Bank Ltd as a private sector comm ercial bank. This initiative has blossom ed into a m ajor su ccess story. IDBI bank, w hich began w ith an equ ity capital 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 position in the Ind ian Banking Ind u stry.IDBI Bank su ccessfu lly com pleted its pu blic issue in February 99, w hich led to its paid u p capital expand ing to Rs 1400 million.

On December 16, 2003 the parliam ent approved the Ind u strial Developm ent bank (Transfer of Und ertaking and Repeal Bill) 2002 to repeal IDBI Act 1964. The Repeal Act is aim ed at Bringing IDBI u nd er the com panies Act for investing it w ith the requ isite operational 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.) 9

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The Merged entity becam e one the Largest Financial Institu tion. With the Strength of the Parent com pany the Bank plans to expand 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 present, w ith the red u ction in interest rates banks are expected to d iversify their incom e profile so that the cu rrent levels of non-interest incom e may 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 graph 2.1 the fee based income for the entire banking scenario for the period 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 respectively. 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 pu blic sector banks, reflecting their high off-balance sheet activities, prim arily

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execu tion of d erivatives and forw ard exchange contracts. Over the last tw o years, pu blic sector banks have also reported su bstantial foreign exchange incom e on the strength of the higher d em and for foreign cu rrency fu nd s from corporate entities, and banks access to foreign cu rrency fu nd s. Of late, private banks have also begun leveraging their balance sheet and cou ld pose a strong com petitive threat to their pu blic sector cou nterparts on this front. Significantly, pu blic sector banks have been losing m arket share in the areas of exchange, com m ission and brokerage to private sector banks over the last few years. Du ring the last few years, private 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 pu blic sector banks (Pu njab N ational Bank, Canara Bank and Bank of Ind ia) and five private 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 pared 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) because 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

Graph revels that the absolu te fee incom e of the pu blic sector banks is expected ly higher than that of their private sector, becau se of the higher scale of operations of the form er. The proportion of exchange and brokerage as a percentage of the total fee income is higher for the private banks. Fee income as a percentage of the average total assets is higher for private banks. The rate of grow th in fee incom e is significantly higher for private sector banks. The better position of private sector banks on the fee incom e front m ay be attribu ted to their larger prod u ct offerings and their technology platform s, w hich are better geared to provide customized solutions to customers.

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Som e of the recent d evelopm ents that have enabled the private 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 prod 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 exposu res to corporate clients in the form of letters of cred it strategies. Market Share of Commission, Exchange & brokerage and gu arantees by the ad option of aggressive pricing

Source: www.icraindia.com

Graph 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 prod u cts, bond s of pu blic sector institu tions/ banks, GOI relief bond s, etc. Increase in focus on m and ates for hand ling Governm ent bu siness, prim 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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prim arily in foreign exchange to provid e cu stomers various 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 custom ary prod u ct that every bank offers to all its cu stom ers .A savings accou nt can be opened 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. 2. 3. 4. 5. 6. Free at par cheque book Free demand drafts/pay orders on idbi lactations Free demand drafts on non- idbi bank locations Free electronic fund transfer Free any branch deposit and withdrawal 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 epend ing u pon the kind of type of accou nt chosen and also the location of the branch

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Fixed Deposits.
IDBI presence 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 panied 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 period ic retu rn on their investm ent this is the best option 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 option 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 eposit on a m onthly basis anything betw een Rs 500 to 1 lakh. Sweep in Deposits.

Earn a fixed d eposit rate on you r savings accou nt. In this option 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 Deposit. Whenever the client need s he can w ithd raw the m oney at his convience. The FD s are mad e in m u ltiples 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 privilege is a norm . Special 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 epend ing on the schem e objectives. The incom e earned throu gh these investm ents and the capital app reciation realized are shared by its u nit hold ers in proportion 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 opportu nity to invest in a d iversified , professionally 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 stomers are looking at other sou rces of investment 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 prod u cts at their branches. And Mu tual 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. People 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 expertise to invest. If one w ants to m inim ize the risk one has to d iversify the portfolio. Bu t for d iversification one need s hu ge am ou nt of m oney that one m ay not have. At this point one can tu rn to Mu tu al fu nd s for they provid e 22

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expertise 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 appetite. 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 portfolio, w hich w ou ld be an optim 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 revenue 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 prod u cts of variou s com panies 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/ plans m ay go u p or d ow n d epend ing u pon 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 business 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 stomers 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% per annu m . Interest on noncu m u lative bond s w ill be payable at half-yearly intervals. Interest on cu m u lative bond s w ill be com pou nd ed w ith half-yearly rests and w ill be payable on m atu rity along w ith the principal. These investm ents are for long term period and therefore have no liqu id ity. Su bscription 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 repayable on the expiry of 6 (Six) years from the d ate of issu e. N o interest w ou ld accru e after the matu 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 part 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 plays 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 prod 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 pool of skilled professionals. There is a hu ge potential for insu rance and the bank is m aking the best u se of its interpersonal relationship w ith its loyal cu stom ers, as there is a vast u ntapped potential waiting to be mined particularly for life insurance products. Since both bank and Life Insu rance Com pany approach the sam e segm ents of popu lation, the sam e contact can be u sed to arrange for both bank d eposits and life insu rance. It creates a com petitive ad vantage throu gh cross selling synergy. This not only helps in saving of infrastru ctu re costs and generates incom e for the bank bu t also helps in retaining cu stom ers for a longer tim e. It is also possible to d evelop a com posite prod 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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People 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 pany. 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 personnel or no personnel in the absence of proper succession planning. Another d raw back is the inflexibility of the prod u cts i.e. it cannot be tailor m ad e to the requ irem ents of the cu stomer. 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 ps are to be chu rned ou t in ord er to position the Banc assurance prod u cts. One im portant opportu 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 petition prevailing 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 prod u ct prom otions, failu re to integrate m arketing plans, poor 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 pioneer in lau nching the Unit Linked insu rance prod 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 plan, w hich provid es the custom er w ith a pu 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 prod 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 prod u ct gives the client the flexibility to choose the prem iu m he w ou ld like to pay, the nu m ber of years he w ou ld like to pay, the su m assu red he w ou ld like to have on this p olicy. This prod u ct gives the client to choose w here he w ou ld like the insu rance com pany 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 plan w herein the clients gets the m oney on m atu rity and incase of d eath d u ring the p olicy period 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 plan w hich caters to the client need s incase he w ould 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 panies to sell their prod u cts at their branches. Insu rance is now a m ajor sou rce of revenu e to the Bank and they are giving special focus 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 somew here arou nd 10 % 40 % of the prem ium

collected by them . This w ou ld d epend on the type of prod 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 prem iu m collection on a m onth-to-m onth basis. Taking an average of 25% revenu e a prem 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 policy special 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 special 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 account 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 prod 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 policy and a couple of new vehicle insurance on a month-to-month basis.

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Depository Services

A d epository can be com pared 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 epository 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 epository also provid es services related to transactions in secu rities. In Ind ia at present 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 past 4 years. Environm ental factors su ch as risk, prod u ctivity, globalization, regu lation and technology are fou nd to play a significant part in explaining trends in non-interest income of banks

2.

Fees earned by IDBI bank for m ost of the past d ecad e w ere below the national peer grou p, bu t now grow th in IDBI bank non-interest incom e reflects increases in revenu e from w ealth m anagement and financial m arket operations rather than retail banking fees

3.

From the analysis cond u cted in this report w e can see that m ajor part of the income comes from sale of Mutual Funds followed by Bancaasurance.

Conclusion

IDBI banks incom e for m ost of the past d ecad es w as below the national peer grou p before catching u p at the end of the period , 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 profit m argin has risen d u ring the past 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 mu 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 expansion of lockers by getting in 1 more new cabinet.

Risk, prod u ctivity, globalization, regu lation and technological change are all significant forces shaping 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 prod 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 provisions 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 prod u cts like pu 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 ployees 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 pd ates of the bank s perform ance, introd u ction of new prod 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. 2. 3. 4. 5. 6. www.idbibank.com www.amfiindia.com www.birlasunlife.com www.bajajallianz.com www.icraindia.com www.mutualfundsindia.com

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