Industrial Development Bank of India's (IDBI) 8,000 agents are in the process of being transferred to IDBI Capital Markets, the equity broking and primary dealership arm of the group. |
After becoming a commercial bank, IDBI can no longer use agents to sell its deposit products, and the large agents force has become redundant for the institution. |
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According to Reserve Bank of India regulations, banks, unlike financial institutions, cannot use agents to sell liability products. |
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IDBI Suvidha fixed deposits are now being sold through IDBI branches after the conversion of the development financial institution into a bank on October 1, 2004. IDBI has about 100 offices of its own, which are being converted into branches. IDBI Bank, which has been merged with IDBI, has another 110 branches. |
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"The agents will now sell initial public offers, mutual funds, RBI Relief Bonds and deposits of financial institutions like the Housing Development Finance Corporation for us. We have signed up all the agents of IDBI so that they have a steady income," said Sushil Muhnot, managing director, IDBI Capital Markets Ltd. |
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The agents earn a commission varying from 0.25-1.00 per cent depending on the tenure of the deposits they sell, with the five year deposit earning the highest commission. |
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In a similar vein, IDBI, on becoming a bank, disbanded its merchant banking division. Having acquired a license from the Securities Exchange Board of India, IDBI Caps has taken on the function since July 2004. |
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IDBI exited the merchant banking business in the interest of corporate governance in order to avoid conflict of interest between the IDBI as a lender and a merchant banker, said sources. |
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IDBI Caps has got about 11 mandates in its new avatar as a merchant banker. It has been involved in project appraisals in the steel, sugar and textiles sectors. It carried out a few equity issues and designed corporate restructuring packages for medium sized companies. |
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