IDBI Bank eyes fresh central govt accounts

IDBI Bank is in talks with the ministry of external affairs and ministry of personal & grievances to handle their inward and outward remittances "" two of the 20 odd accounts looked after by the Reserve Bank of India (RBI).

The private sector bank received finance ministry's approval to disburse central civil pension of retired government employees a fortnight back. It has also been recommended by the Gujarat government to collect sales tax, which amounts to over Rs 6,700 crore.

The bank is in talks with state governments of Maharashtra, Rajasthan, Tamil Nadu, Kerala and Delhi to recommend its case to RBI for undertaking similar transactions.

IDBI Bank is very optimistic about bagging sizeable share of both central and state government business since it received RBI nod in August last year to undertake government business. The bank hopes to act as banker for the central ministries and various state governments.

By leveraging on its network, the bank aims at building relationships with government and its employees enabling it to cross-sell other products, offer business solutions and development products for government bodies.

"By leveraging on our distribution channel and undertaking more government business, this gives greater comfort and adds value to our customers that we can fulfill more than just their banking needs. This will also go a long way in enhancing business for the bank," said D C Jain, head of government business group, IDBI Bank.

To date, the bank has collected direct tax to the tune of Rs 580 crore since getting the Central Board of Direct Taxes (CBDT) mandate through 56 of its branches.

Further, five of its branches in Mumbai and Delhi have been approved by the Central Board of Excise and Customs (CBEC) for collection of excise and sales taxes at three of the commissionerates.

Government business "" which used to be the exclusive domain of public sector banks "" has become competitive with the entry of private sector banks. In addition to IDBI Bank, ICICI Bank, HDFC Bank, and UTI Bank have also received RBI approval to undertake government business including tax collection, pension disbursement, and excise.

Private sector banks are keenly eyeing to build volumes in government business. Collections from CBDT alone amounts to Rs 95,000 crore, while that of CBEC is around Rs 1,25,000 crore. State government taxes and disbursements are equally sizeable, stated sources.

With private sector banks operating more efficiently using information technology, they are expected to garner a share of the business.