This section deals with legislative and regulatory provisions from the view point of a trading member.

The four main legislation the securities market are(a) the securities contract Act 1956, which provides for regulation of transactions in securities through over stock exchanges:(b) the companies Act 1956, which sets out the code for the corporate sector in relation to issues allotment and transfer of securities ,and disclosures to be made in public issues:(c) the SEBI Act 1992 which establishes SEBI to protect investors and develop and regulate securities market: and (d) the Depositories Act1996 which provides for electronic maintenance and transfer of ownership of dematerialised securities.

Securities contact (regulations) Act, 1956:

The securities contact Act 1956 was enacted to prevent undesirable transactions in securities by regulating the business of dealing therein and by providing for certain other matters connected therein. This is the

principal Act, whish governs the trading of securities in India. The definitions of some of the important terms are given below: Recognised Stock Exchange means a stock exchange , which is for the time being recognised by the central government under section 4 of the SC(R)A. Stock Exchange mean any individuals, whether incorporated or not, constituted for the purpose of assisting, regulating or controlling the business of buying, selling or dealing in securities. As per section 2(h), the term Securities includeShares, scrips, stocks, bonds, debentures, debenture stock or other marketable securities of a like nature in or of any incorporated company or other body corporate. Derivative, Units or any other instrument issued by any collective investments scheme to the investors in such scheme,

Security receipts Government securities, Such other instruments as may be declared by the central government to be securities, and Rights or interests in securities. As per section 2(aa) Derivative includeA. a security derived from a debt instrument, share, loan whether secured or unsecured, risk instrument or contract for differences or any other form of security, B. a contract which derives its value from the prices, or index of prices, of underlying securities; Section 18A provides that notwithstanding contained in any other law for the time being in force, contracts in derivative shall be legal and valid if such contracts areI. traded on a recognised exchange:

II. settle on the clearing house of the recognised stock exchange, in accordance with the rules and byelaws of such stock exchanges. spot delivery contract has been defined in section 2(i) to mean a contract which provides for(a) actual delivery securities and the payment of a price therefore either on the same day as the date of the contract or on the next day, the actual period taken for the dispatch of the securities or the remittance of money therefore the post being excluded from the computation of the period aforesaid if the parties to the contact do not reside in the same town or locality; (b) Transfer of the securities by the depository from the account of a beneficial owner to the account of another beneficial owner when such securities are dealt with by a depository. The SC(R) A deal With-

1.stock exchanges, through a process of recognition and supervision, 2.contracts in securities, and 3.Listing of securities on stock exchanges. Reorganisation of stock exchanges By virtue of the provisions of the Act, the business of dealing in securities cannot be carried out without registration from SEBI. Any stock Exchange which is desirous of being recognised has to make an application under Section 3 of the Act to SEBI, which is empowered to grant recognition and prescribed conditions. Every stock exchange is obliged to furnish annual reports to SEBI. The central government and SEBI have the power to supersede the governing body of any recognised Stock Exchange. Contract in Securities Organised trading activity in securities takes place on a recognised stock exchange. If the central government is satisfied, having regard to the nature or the volume of transactions in securities in any state or area, that it is necessary so to do, it may, by notifications in securities in the official Gazette, declare provisions of

section 13 to apply to such state or area, and thereupon every contract in such state or area which is entered into the after date of the notification otherwise than between member shall be illegal.

Listing of securities
Where securities are listed on the application of any person in any recognised stock exchange, such person shall comply with the conditions of the agreement with stock exchange, the company shall be entitled to be furnished with reasons for such refusal and the company may appeal to Securities Appellate (SAT) against such refusal.

SEBI (Insider Trading) Regulations, 1992:

Insider trading is prohibited and is considered an offence vide SEBI (Insider Trading) Regulations, 1992. Dealing in Securities means an act of buying, selling or agreeing to buy, sell or is deal in any securities by any person either as principal or argent. Insider means any person who, is or was concerned with the company or is deemed

to have been connected with the company, and who is reasonably expected to have access, connection, to unpublished price sensitive information in respect of securities of a company or who has received or has had access to such unpublished price sensitive information. A connected person means any person who(1) is a director, as defined in clause (13)0f section of the companies Act,1956 of a company, or is deemed to be a director of that company by virtue of sub clause(10) of section 307of that Act, or (2) occupies the inception as an officer or an employee of the company or holds a position involving a professional or business relationship between himself and the company whether temporary or permanent and who may reasonably be expected to have an access to unpublished price sensitive information in relation to that company. A person is deemed to be a connected person if such personi. Is a company under the same management or group or any subsidiary company therefore within the meaning

of section of (1B) of section 370, or sub section (11) of section 372, of the companies Act,1956 or sub-clause (g) of the case may be: or ii. Is an intermediary as specified in section 12 of SEBI Act,1992, investment company, Asset Management company or an employee or director therefore or an official of a stock exchange or of clearing house or corporation: iii. Is a merchant banker, share transfer agent, register to an issue, debenture trustee, broker, portfolio manager, investment Advisor, sub-broker, investment company or an employee thereof, or, is a member of the Board of trustees of a mutual fund or a member of the Board of Directors of the Asset management company of a mutual fund or is an employee thereof who have a fiduciary relationship with the company; iv. Is a member of the Board of Directors, or an employee, of a public financial institution as defined in section 4A of the companies Act, 1956; or v. In an official or an employee of a self regulatory organisation recognised or

authorised by the Board of a regulatory body; or vi. Is a relative of any of the aforementioned persons; vii. Is a banker of the company? viii. Relatives of the connected persons; Is a concern, firm, trust, Hindu undivided Family, company or association? of persons wherein any of the connected persons mentioned in sub-clause (1) of clause (c) of this regulation or any of the connected persons mentioned in subclauses(4),(5) or (6) of this clause have more than 10% of the holding or interest Price sensitive information means any information which is directly or indirectly to a company and which if published is likely to materially affect the price of securities of that company, The following shall be deemed to be price sensitive informationi. Periodical financial results of the company; ii. Intended declaration of dividends (both interim and final); iii. Issue of securities or buy-back of securities;

Any major expansion plans or execution of new projects; v. Amalgamation, mergers, or takeovers; vi. Disposal of the whole or substantial part of the undertaking: vii. Any significant changes in policies, plans or operation of the company. Unpublished means information which is not published by the company or its agents and is not specific in nature. Speculative reports in print or electronic media shall not be considered as published information.
iv.

Disclosures
Disclosures of interest or holding by directors and officers and substantial shareholders in listed companies-

Initial Disclosures 1. any person who holds more than 5% shares or voting rights in any listed company of in shall disclose to the company, the number of shares or voting rights held by such person, on becoming of allotment, within 4 working days of;-

a) The receipt of intimation of shares: or b) The acquisition of shares or voting rights, as the case may be. 1) Any person who is director or officer of a listed company, shall disclose to the company, the number of shares or voting rights held by such person, within 4 working days of becoming a director or officer of the company. 2) Any person who holds more than 5% shares or voting rights in any listed company shall disclose in shareholding or voting rights even if such change results in shareholding falling below5%, if there has been change in such holding from the last disclosre made under sub-regulation (1) or under this sub-regultion: and such

change exceeds 2% of total shareholding or voting rights in the company. 3) Any person who is a director or officer of a listed company, shall disclose to the company, the total number of shares or voting rights held and change in share holding or voting rights, if there has been a change in such holdings from the last disclosure made under subregulation(2) or under this sub regulation, and the changes exceeds Rupees 5 lac in value or (25000) shares or(1%) of total shareholding or voting rights, whichever is lower. 4) The disclourse mentioned in sub-regulations (3) and (4) shall be made within 4 working days of ;

5) The receipt of intimation of allotment of shares, or 6) The acquisition or sale of shares or voting rights, as the case may be. Disclosure by company to stock exchanges (7) every listed company, within five days of receipt, shall disclose to all stock exchanges on which the company is listed, the information received under sub-regulations (1) (2) (3)&(4). Indian contract Act, 1872: Contract According to section 2(h) of the Indian contract Act, 1872, a contract is an agreement enforceable by law. Therefore, there has to be an agreement to create a contract and secondly, it has to satisfy certain requirements mentioned in section 10 of the Act, i.e., the agreement has to be between parties

component to contract, with their consent, for a lawful object and with lawful consideration, and it should not have been declared as void agreement.

Standard from contracts

with an enormous increase in commercial transactions, the concept of standard from contracts has come into existence. Various business organisation like insurance companies, airways, securities market regulator, other business man etc. generally get the term of the contract printed on a standard from and the other side is simply required to agree to the same, or sometimes to sign in token of his having greed to the terms of the contract so drafted. A standard from contract is a pre-established record of legal terms regularly used by a business entity or firm in transaction with customers. The record specifies the legal terms governing the relationship between the firm and another party. The firm requires the other party to accept the record without amendment and without expecting the other party to know or understand its terms. A Standard Form contract is effective upon acceptance.

Agency contract
An agent is a person employed to do any act for another or to represent another in dealings with third persons, as per section 182 of the Indian contract Act, 1872. The person for whom such act is done, or who is so represented, is called the principal. Principal is bound by the acts done by an agent or the contracts entered into by him self, in person. An agent has a dual capacity: one, he serve as a connecting link between his principal and the third person, second, he can have a contractual relationship with principal. An agent, having an authority to do an act, has authority to do every lawful thing which is necessary to do such act. An agent having authority to carry on a business has to do every lawful thing necessary for the purpose, or usually done in the course, of conducting such business.

Sub-agent
A sub- agent is a person employed by, and acting under the control of, the original agent in the business of the agency. Though the general rule is against delegation of authority by an agent or the appointment of

sub-agent, there could be such an appointment in expectation situations recognised by law. Thus, when any act does not need personal performance by the agent himself, or the principal agrees to the appointment of a sub-agent, or the ordinary custom of trade permits the same, or a subagent may be validity appointed by an agent.
When a sub-agent has been properly appointed the position of various parties is as under;

I. The principal is, so far as regards third persons, represented by the sub-agent, and is bound by and responsible for his acts, as if he were an agent originally originally appointed by the principal. II. The agent is responsible to the principal for the acts of the sub-agent. III. The sub-agent is responsible for his acts to the agent, but not to the principal expect in case of fraud or wilful wrong.

Companies Act 1956:

Company law like other fields of business law, came to develop through common law. Companies were mainly voluntary associations of individuals which became

contractual relationships. Over the years, development of contract law led to development of company law, which developed its own principles. The law which governs companies in India at present is the companies act.

Company:
A company is a group of persons associated together for the attainment of a common purpose. The law relating to companies is contained in the act, 1956 as amended up to date.

Definition:
A company is voluntary association of persons. It has a capital which divided into the small parts as known as shares. At the same time it is an artificial person created by a process of law. It has perpetual succession and a common seal. Since it is artificial personnel it has no body or soul.

Types of companies:
Companies may be classified on the basis of the following: 1)Classification on the basis of Liability. 2)Classification on the basis of number of members.

3)Classification on the basis of incorporation. 4)Classification on the basis of control.

Classification on the basis of liability:

(a) Companies limited by shares. (b) Companies limited by guarantees. (c) Unlimited companies. (1) companies limited by shares: in a company limited by shares, the liabilities of the members are limited to the unpaid amount on the shares. The share holders may be called upon to pay the unpaid amount on shares only, during the company.
(2) companies limited by guarantee:

where the liability of the members of a company limited to a fixed amount which the members undertake to contribute to the assets of the company in the event of its being wind up, the company is said to be limited by guarantee. (3) unlimited company:

a company without limited liability is called unlimited company. Every member is liable to the debts of the company as in an ordinary partnership in portion to his interest in the company. An unlimited company may or may not have any share capital. If share capital is have, it may be a public or a private company. It must have its own articles of association.

Classification on the basis of members

There are two types of companies, private and public. Private company means a company which has a minimum paid up capital of only lakh rupees or such higher paid up as may be prescribed and by its articles: a)restrict the right to transfer its shares, if any; b) limits the number of its members to fifty; c)prohibits any invitation to the public to subscribe for any shares in or debentures of the company;

d) prohibits any invitation or acceptance of deposits from persons other than its members, directors or their relatives Public company means a company whicha)is not a private company; b) has a minimum paid-up capital of five lakh rupees or such higher paid-up capital, as may be prescribed; c) is a private company which is a subsidiary of a company which is not a private company. The minimum capital of persons required to form a public company is seven and the minimum number of persons required to form a private company is two.

Shares
The shares or debentures or other interest of any member in a company shall be moveable property, transferable in the manner provided by the articles of the company (section82). A certificate, under common seal of the company, specifying any shares held by any member shall be prima facie evidence of the title of the member to such shares (section84).

Buy-back of securities (section77A)

A company may purchase its own shares or other specified securities out of: a. Free reserve ;or b.The securities premium account: or c. The proceeds of any shares of other specified securitie. Share capital According to section 86, the share capital of a company limited by shares formed after commencement of this Act, or issued after such commencement, shall be of two kinds only, namely; a)Equity share capital with voting rights; or with differential rights as to dividend voting or other wise, and b) Preference share capital. As per section 85, preference share capital means, with reference to any company limited by shares, when formed before or after the commencement of this Act, that part of the share capital of the company which fulfils both the following requirements, namely; a) That as respects dividends, it carries or will paid a fixed amount or an amount calculated at a fixed

rate, which may be either free of or subject to income tax, and b) That as respects capital, it carries on a winding up or repayment of capital, a preferential right to be repaid the amount of the capital paid-up or deemed to have been paid-up, whether or not there is a preferential right to the payment of either or both of the following amounts, namely; (1)any money remaining unpaid, in respect of the amounts specified in clause (a), up to the date of the winding up or repayment of capital, and (2) any fixed premium or premium on any fixed scale, specified in the memorandum or articles of associations of the company. Equity share capital means with reference to any such company, all share capital which is not preferences share capital. Every public company, making intial public offer any security for a sum of rupee of ten crore or more, shall issue

the same only in detematralized from by complying with the requsite provisions of the Depository Act,1996 No allotment shall be made of any shares in or debentures of a company in pursance of a prospecuts issued generally, and no proceedings shall be taken in application made in pursuance of a prospects so issued, until the beginning of the fifth day after that on which the prospectus is first so issued, or such later time, if any, as may be specified in the prospectus (section72). Transfer of shares (section108) A company shall register of shares in, or debentures of, the company if a proper instrument of transfer duly stamped and executed by or on behalf of the transferor and by or on behalf of the transferee and specifying the name, address and occupation, if any, of the transferee, has been delivered to the company along with the certificate relating to the shares or debentures or if no such certificate is in existence, along with the letter of allotment of the shares or debentures

As per section 111A, the shares or debentures and any interest therein of a public limited company are freely transferable. Annual return (section159&160) Every company shall within sixty days on which the annual general meeting is held, prepare and file Annual Return with Registrar of companies. Annual meeting (section166) Every company shall in each year hold in addition to any other meeting as such in the notices calling it. Every AGM shall be called for a time during business hours, on a day that is not a public holiday, and shall be held either at the registered of the company or at some other place within the city, town or village in which the registered office the company is situated. a)15 months from the previous annual general meeting; b) Last day of the calendar year; c)6 months from the close of the financial year , A general meeting of a company may be called by giving at least twenty-one days notice in writing

Dividend (section205) Dividend shall be declared or paid by a company for any financial year; a)Out of the profits company for that year arrived at after providing for depreciating in accordance with the provisions of section 205(2) of the Act, or (b) Out of the profits company for that financial year or years arrived at after providing for depreciation in accordance with those provisions and remaining undisturbed, or Out of both (a and b) or Out of moneys provided by the central government or state government for the payment of dividend in pursuance of a grantee given by that Government. The amount of dividend shall be deposited in a separate bank account within five days from the date of declaration of dividend. The dividend shall be paid within thirty days from the date of its declaration.

Investors Education and Protection Fund (section 205C) The central Government notified the establishment of a fund called the investor Education and protection Fund. The fund shall be credited with; a. Amounts in the unpaid dividend accounts of companies. b.Application moneys received by companies for allotment of any securities and due for refund, c. Matured deposits with companies, d.Matured debentures with the companies, e. The interest accrued on the amounts referred to above, f. The interest or other income received out of the investments made from the Fund: provided that no such amounts referred to in clauses (a) to (d) shall from part of the fund unless such amounts have the date they became due for unpaid for a period of seven years from the date they became due for payment. The Investors Education and protection Fund shall be utilised for promotion of awareness among the investors and for the

protection of the interests of investors in accordance with such rules as may be prescribed.

classification on the basis of incorporation:

On the basis of incorporation, companies may be classification into, I. Charted companies II. Statutory companies III. Registered companies

Charted companies
The crown in the exercise of royal prerogative has the power to create a corporation by the grant of a character to persons assenting to be incorporated. The powers and the nature of business of a charted company is defined by the charter which incorporates either times, trading companies were often created by a royal charter. But later on, companies were formed by registration. After the country independence, these kinds of companies do not exist in India.

Statutory companies:
A company may be incorporated by means of a special act of the parliament or any state

legislature. Such companies are called statutory companies. Generally such companies carried out some special public undertaking. There are mostly concerned with public utilities.

Registerd companies:
Companies registered under the companies act 1956 are called registered companies. Such as the company come into existence when they are registered under the company act and a certificate of incorporation is granted to them by the registrar. Such companies may be limited by shares and limited by guarantee.

Certificates required for formation of companies

Certificate of incorporation: promoters should pay he necessary filling and registration fees. The registrar will examine the documents. If they are found to be correct and in order, he will enter the name of the company in the register. afterwards he will issue a certificate known certificate of incorporation. It contains the name of the company, the date of its issues and the signature of the registrar with the common

seal. This certificates is more less the certificate of birth of a company. It is also called birth certificate of a company. It recognizes the company as a separate legal personality having perpetual succession. The company attains maturity at its birth. The certificate cannot be dispute on any grounds what so ever. the certificate of incorporation, even if it is irregular, cannot be cancelled.

Certificate of commencement of business:

A private limited company can start its business soon after receiving the certificate of incorporation. But a public company cannot do any business and cannot exercise any borrowing powers. It can do so only after obtaining this certificate of commencement of business.

Classification on the basis of control:

On the basis of control companies may be classified into: i. Holding company ii. Subsidiary company

Holding company:
A company which controls the another company is called holding company.

Subsidiary companies:
A company which is controlled by another is called subsidiary company. Sec 4 of the companies act 1956. Providers that a holding company is one of it.

Memorandum of association: It is the basic document of the company. The company is born on the basis of memorandum. Hence, memorandum is called the charter or life giving the company. it is the fundamental and unilateral law of the company. It is the foundation on which he structure of the company stands. It defines and confines the scope of activity of the company. It must be dated and properly stamped. In the case of a private company, it must be signed by at least two persons. In case of a company, it must be signed at least seven persons

Memorandum of association of every company must contain the following clauses:

There are 6 clauses is there in MOM. 1.name clause 2.registered clause 3.object clause 4.lability clause 5.capital clause 6.association or subscription clause
1)

2)

3)

name clause: a company being a legal person, must have a name to establish its identity. A company shall not be registered by a name which in the option of the central government is undesirable and in particular is identical with. Registered office clause: every company shall have registered office from the day it commences, whichever id earlier. All communication and notices are to be addressed to that registered office. Object clause: the clause is the most important in the mom of a company

4)

5)

6)

because it not only shows the objects for which the company is formed but also determines the extent of the objects. Liability clause: this has to state the nature of liability that the members incur. Such liability may be limited by shares or limited by grantee. In case of liability limited by shares the shareholders may becalled upon to pay only unpaid amount on the shares. In case of limited by gurantee, the shareholders may be called upon to pay the amount guaranteed. This liability clause is omitted from yhe mom of unlimited companies. Capital clause: the mom of company limited by shares must state the authorised at nominal share capital, the different kinds of shares and the nominal value of each share. Association or subscription clause: this clause provides that those who have agreed to subscribe to the mom must signify by their willingness to associate and from a company.

Articles of association :
It contains rules regulations and by laws for the internal management of the company. It states the rights and duties of the members of the company. It is also states the powers of officers and directors of the company. It determines the relationship between the company and its members. It must be printed, divided into parts, and serially numbered it must be signed by each subscribed of the mom in the presence of a witness it must be duly stamped.

The depository Act, 1996

The depositories Act, 1996 was the enacted to provide for regulation of depositories in securities and for matters connected therein or incidental thereto. It came into force from 20th September, 1995. The terms used in the Act are defined as under;
1.

Beneficial owner means a person is recorded as such with a depository.

2.Depository means a company, formed and registered under the companies Act, 1956 which has been granted of registration under subsection (1A) of section 12 SEBI Act, 1992. 3.Issuer means any person making an issue of securities. 4.Participant means a person registered as such under subsection (1A) of section 12 of SEBI Act, 1992. 5. Registered owner means whose name is entered as such as in the register of the issuer.

DBI Bank Limited (BSE: 500116) is an Indian financial service company headquartered Mumbai, India. RBI categorised IDBI as an "other public sector bank". It was established in 1964 by an Act of Parliament to provide credit and other facilities for the development of the fledgling Indian industry.[2] It is

currently 10th largest development bank in the world in terms of reach with 1514 ATMs, 923 branches including one overseas branch at DIFC, Dubai and 621 centers including two overseas centres at Singapore & Beijing.[3] Some of the institutions built by IDBI are the Securities and Exchange Board of India (SEBI), National Stock Exchange of India (NSE), the National Securities Depository Limited (NSDL), the Stock Holding Corporation of India Limited (SHCIL), the Credit Analysis & Research Ltd, the Exim Bank (India)(Exim Bank), the Small Industries Development Bank of India(SIDBI), the Entrepreneurship Development Institute of India, and IDBI BANK, which is owned by the Indian Government.IDBI Bank is on a par with nationalized banks and the SBI Group as far as government ownership is concerned.It is one among the 26 commercial banks owned by the Government of India.The Bank has an aggregate balance sheet size of Rs. 2,53,378 crore as on March 31, 2011. IDBI Bank's operations during the financial year ended March 31, Recent developments

To meet emerging challenges and to keep up with reforms in financial sector, IDBI has taken steps to reshape its role from a development finance institution to a commercial institution. With the Industrial Development Bank (Transfer of Undertaking and Repeal) Act, 2003, IDBI attained the status of a limited company viz. "Industrial Development Bank of India Limited" (IDBIL). Subsequently, the Reserve Bank of India (RBI) issued the requisite notification on 30 September 2004 incorporating IDBI as a 'scheduled bank' under the RBI Act, 1934. Consequently, IDBI, formally entered the portals of banking business as IDBIL from 1 October 2004. The commercial banking arm, IDBI BANK, was merged into IDBI. In March 2008, IDBI Bank entered into a joint venture with Federal Bank and Fortis Insurance International to form IDBI Fortis Life Insurance, of which IDBI Bank owns 48 percent. The company ended the year with over 300 Cr in premiums as on 31 March 2009.The name of IDBI Fortis Life Insurance is now changed to IDBI Federal Life Insurance Co Ltd.

Government of India now owns 65.17% stake in IDBI Bank. Hence IDBI Bank is also referred as 'The New Age Government owned Bank' It has bought 10% stake in upcoming commodity bourse Universal Commo-dity Exchange (UCX) for Rs 10 crore, the bank's top official said. The deal was completed recently. RM Malla, chairman and MD of IDBI Bank, confirmed that the bank had picked up 10% in what will become the country's sixth commodity futures exchange. "The idea behind acquiring equity is to push agriculture loans through this venture," said Malla. "The other advantage is IDBI will be the only bank among the promoters and therefore all transactions of the exchange will be routed through IDBI." A breakthrough initiative in customer service was taken by IDBI Bank (branded as 'Customer Delight Campaign ' when it removed many of the charges from its retail banking services. This step has created a wave in banking industry and put the bank on a developmental pedestal never seen before. Some of the charges waived are-

ATM-cum-Debit card annual charges, Transaction charges on other banks' ATMs, Demand Draft/Pay Order charges, RTGS/NEFT charges, Cheque book issuance and utilization charges and many more other charges. It was the winner in two categories in Dun & Bradstreet's Polaris Software Banking Awards 2011. It has now a network of 933 branches, 621 centres and 1514 ATMs as on October 13, 2011. Overview of development banking in India The concept of development banking rose only after Second World War, after the Great Depression in 1930s. The demand for reconstruction funds for the affected nations compelled in setting up a worldwide institution for reconstruction. As a result the IBRD was set up in 1945 as a worldwide institution for development and reconstruction. This concept has been widened all over the world and resulted in setting up of large number of banks around the world which coordinating the

developmental activities of different nations with different objectives among the world. The Narashimam committee had recommended to give up its direct financing functions and to perform only the promotional and refinancing role. However, the S.H.Khan committee, appointed by the RBI, recommended its transformation into a universal bank. The course of development of financial institutions and markets during the postIndependence period was largely guided by the process of planned development pursued in India with emphasis on mobilisation of savings and channeling investment to meet Plan priorities. At the time of Independence in 1947, India had a fairly well developed banking system. The adoption of bank dominated financial development strategy was aimed at meeting the sectoral credit needs, particularly of agriculture and industry. Towards this end, the Reserve Bank concentrated on regulating and developing mechanisms for institution building. The commercial banking network was expanded to cater to the requirements of general banking and for meeting the short-

term working capital requirements of industry and agriculture. Specialised development financial institutions (DFIs) such as the IDBI, NABARD, NHB and SIDBI, etc., with majority ownership of the Reserve Bank were set up to meet the longterm financing requirements of industry and agriculture. To facilitate the growth of these institutions, a mechanism to provide concessional finance to these institutions was also put in place by the Reserve Bank. The first development bank In India incorporated immediately after independence in 1948 under the Industrial Finance Corporation Act as a statutory corporation to pioneer institutional credit to medium and large-scale. Then after in regular intervals the government started new and different development financial institutions to attain the different objectives and helpful to five-year plans. The early history of Indian banking and finance was marked by strong governmental regulation and control. The roots of the national system were in the State Bank of India Act of 1955, which nationalized the

former Imperial Bank of India and its seven associate banks. In the early days, this national system operated alongside of a large private banking system. Banks were limited in their operational flexibility by the governments desire to maintain employment in the banking system and were often drawn into troublesome loans in order to further the governments social goals. The financial institutions in India were set up under the strong control of both central and state Governments, and the Government utilized these institutions for the achievements in planning and development of the nation as a whole. Thus India financial institutions can be classified under five heads according to their economic importance:

All-India Development Banks Specialized Financial Institutions Investment Institutions State-level institutions Other institutions..

Industrial Development Bank of India (IDBI)

The Industrial Development Bank of India (IDBI) was established on 1 July 1964 under an Act of Parliament as a wholly owned subsidiary of the Reserve Bank of India. In 16 February 1976, the ownership of IDBI was transferred to the Government of India and it was made the principal financial institution for coordinating the activities of institutions engaged in financing, promoting and developing industry in the country. Although Government shareholding in the Bank came down below 100% following IDBI s public issue in July 1995, the former continues to be the major shareholder (current shareholding: 65.14%). IDBI provides financial assistance, both in rupee and foreign currencies, for green-field projects as also for expansion, modernisation and diversification purposes. In the wake of financial sector reforms unveiled by the government since 1992, IDBI also provides indirect financial assistance by way of refinancing of loans extended by State-level financial institutions and banks and by way of rediscounting of bills of exchange arising out of sale of indigenous machinery on deferred payment terms.

IDBI has played a pioneering role, particularly in the pre-reform era (1964 91),in catalyzing broad based industrial development in the country in keeping with its Government-ordained development banking charter. Narasimam committee recommends that IDBI should give up its direct financing functions and concentrate only in promotional and refinancing role. But this recommendation was rejected by the government. Later RBI constituted a committee under the chairmanship of S.H.Khan to examine the concept of development financing in the changed global challenges. This committee is the first to recommend the concept of universal banking. The committee wanted the development financial institution to diversify its activity. It recommended harmonising the role of development financing and banking activities by getting away from the conventional distinction between commercial banking and developmental banking. In September 2003, IDBI diversified its business domain further by acquiring the

entire shareholding of Tata Finance Limited in Tata Home finance Ltd., signaling IDBI s foray into the retail finance sector. The fully owned housing finance subsidiary has since been renamed IDBI Home finance Limited. In view of the signal changes in the operating environment, following initiation of reforms since the early 1990s, Government of India has decided to transform IDBI into a commercial bank without eschewing its secular development finance obligations. The migration to the new business model of commercial banking, with its gateway to low-cost current, savings bank deposits, would help overcome most of the limitations of the current business model of development finance while simultaneously enabling it to diversify its client/ asset base. Towards this end, the IDB (Transfer of Undertaking and Repeal) Act 2003 was passed by Parliament in December 2003. The Act provides for repeal of IDBI Act, corporatisation of IDBI (with majority Government holding; current share: 58.47%) and transformation into a commercial bank. The provisions of the Act have come into force from 2 July 2004 in

terms of a Government Notification to this effect. The Notification facilitated formation, incorporation and registration of Industrial Development Bank of India Ltd. as a company under the Companies Act, 1956 and a deemed Banking Company under the Banking Regulation Act 1949 and helped in obtaining requisite regulatory and statutory clearances, including those from RBI. IDBI would commence banking business in accordance with the provisions of the new Act in addition to the business being transacted under IDBI Act, 1964 from 1 October 2004, the Appointed Date notified by the Central Government. IDBI Bank, with which the parent IDBI was merged, was a new generation Bank. The Pvt Bank was the fastest growing banking company in India. The bank was pioneer in adapting to policy of first mover in tier 2 cities. The Bank has one of the highest productivity per employee in Indian banking industry. On 29 July 2004, the Board of Directors of IDBI and IDBI Bank accorded in principle approval to the merger of IDBI Bank with

the Industrial Development Bank of India Ltd. to be formed incorporated under the Companies Act, 1956 pursuant to the IDB (Transfer of Undertaking and Repeal) Act, 2003 (53 of 2003), subject to the approval of shareholders and other regulatory and statutory approvals. A mutually gainful proposition with positive implications for all stakeholders and clients, the merger process is expected to be completed during the current financial year ending 31 March 2005. Recent developments To meet emerging challenges and to keep up with reforms in financial sector, IDBI has taken steps to reshape its role from a development finance institution to a commercial institution. With the Industrial Development Bank (Transfer of Undertaking and Repeal) Act, 2003, IDBI attained the status of a limited company viz. "Industrial Development Bank of India Limited" (IDBIL). Subsequently, the Reserve Bank of India (RBI) issued the requisite notification on 30 September 2004 incorporating IDBI as a 'scheduled bank' under the RBI Act, 1934.

Consequently, IDBI, formally entered the portals of banking business as IDBIL from 1 October 2004. The commercial banking arm, IDBI BANK, was merged into IDBI. In March 2008, IDBI Bank entered into a joint venture with Federal Bank and Fortis Insurance International to form IDBI Fortis Life Insurance, of which IDBI Bank owns 48 percent. The company ended the year with over 300 Cr in premiums as on 31 March 2009.The name of IDBI Fortis Life Insurance is now changed to IDBI Federal Life Insurance Co Ltd. Government of India now owns 65.17% stake in IDBI Bank. Hence IDBI Bank is also referred as 'The New Age Government owned Bank' It has bought 10% stake in upcoming commodity bourse Universal Commodity Exchange (UCX) for Rs 10 core, the bank's top official said. The deal was completed recently. RM Mala, chairman and MD of IDBI Bank, confirmed that the bank had picked up 10% in what will become the country's sixth commodity futures exchange.

"The idea behind acquiring equity is to push agriculture loans through this venture," said Malla. "The other advantage is IDBI will be the only bank among the promoters and therefore all transactions of the exchange will be routed through IDBI."[4] A breakthrough initiative in customer service was taken by IDBI Bank (branded as 'Customer Delight Campaign [1]' when it removed many of the charges from its retail banking services. This step has created a wave in banking industry and put the bank on a developmental pedestal never seen before. Some of the charges waived areATM-cum-Debit card annual charges, Transaction charges on other banks' ATMs, Demand Draft/Pay Order charges, RTGS/NEFT charges, Cheque book issuance and utilization charges and many more other charges. It was the winner in two categories in Dun & Bradstreet's Polaris Software Banking Awards 2011.

It has now a network of 933 branches, 621 centres and 1514 ATMs as on October 13, 2011. Overview of development banking in India The concept of development banking rose only after Second World War, after the Great Depression in 1930s. The demand for reconstruction funds for the affected nations compelled in setting up a worldwide institution for reconstruction. As a result the IBRD was set up in 1945 as a worldwide institution for development and reconstruction. This concept has been widened all over the world and resulted in setting up of large number of banks around the world which coordinating the developmental activities of different nations with different objectives among the world. The Narashimam committee had recommended to give up its direct financing functions and to perform only the promotional and refinancing role. However, the S.H.Khan committee, appointed by the RBI, recommended its transformation into a universal bank.

The course of development of financial institutions and markets during the postIndependence period was largely guided by the process of planned development pursued in India with emphasis on mobilisation of savings and channeling investment to meet Plan priorities. At the time of Independence in 1947, India had a fairly well developed banking system. The adoption of bank dominated financial development strategy was aimed at meeting the sect oral credit needs, particularly of agriculture and industry. Towards this end, the Reserve Bank concentrated on regulating and developing mechanisms for institution building. The commercial banking network was expanded to cater to the requirements of general banking and for meeting the shortterm working capital requirements of industry and agriculture. Specialised development financial institutions (DFIs) such as the IDBI, NABARD, NHB and SIDBI, etc., with majority ownership of the Reserve Bank were set up to meet the longterm financing requirements of industry and agriculture. To facilitate the growth of these institutions, a mechanism to provide

confessional finance to these institutions was also put in place by the Reserve Bank. The first development bank In India incorporated immediately after independence in 1948 under the Industrial Finance Corporation Act as a statutory corporation to pioneer institutional credit to medium and large-scale. Then after in regular intervals the government started new and different development financial institutions to attain the different objectives and helpful to five-year plans. The early history of Indian banking and finance was marked by strong governmental regulation and control. The roots of the national system were in the State Bank of India Act of 1955, which nationalized the former Imperial Bank of India and its seven associate banks. In the early days, this national system operated alongside of a large private banking system. Banks were limited in their operational flexibility by the governments desire to maintain employment in the banking system and were often drawn into troublesome loans in order to further the governments social goals.

The financial institutions in India were set up under the strong control of both central and state Governments, and the Government utilized these institutions for the achievements in planning and development of the nation as a whole. Thus India financial institutions can be classified under five heads according to their economic importance:

All-India Development Banks Specialized Financial Institutions Investment Institutions State-level institutions Other institutions..

Industrial Development Bank of India (IDBI) The Industrial Development Bank of India (IDBI) was established on 1 July 1964 under an Act of Parliament as a wholly owned subsidiary of the Reserve Bank of India. In 16 February 1976, the ownership of IDBI was transferred to the Government of India and it was made the principal financial institution for coordinating the activities of institutions engaged in financing, promoting and developing industry in the country.

Although Government shareholding in the Bank came down below 100% following IDBI s public issue in July 1995, the former continues to be the major shareholder (current shareholding: 65.14%). IDBI provides financial assistance, both in rupee and foreign currencies, for green-field projects as also for expansion, modernisation and diversification purposes. In the wake of financial sector reforms unveiled by the government since 1992, IDBI also provides indirect financial assistance by way of refinancing of loans extended by State-level financial institutions and banks and by way of rediscounting of bills of exchange arising out of sale of indigenous machinery on deferred payment terms. IDBI has played a pioneering role, particularly in the pre-reform era (1964 91),in catalyzing broad based industrial development in the country in keeping with its Government-ordained development banking charter. Narasimam committee recommends that IDBI should give up its direct financing functions and concentrate only in

promotional and refinancing role. But this recommendation was rejected by the government. Later RBI constituted a committee under the chairmanship of S.H.Khan to examine the concept of development financing in the changed global challenges. This committee is the first to recommend the concept of universal banking. The committee wanted the development financial institution to diversify its activity. It recommended harmonising the role of development financing and banking activities by getting away from the conventional distinction between commercial banking and developmental banking. In September 2003, IDBI diversified its business domain further by acquiring the entire shareholding of Tata Finance Limited in Tata Home finance Ltd., signaling IDBI s foray into the retail finance sector. The fully owned housing finance subsidiary has since been renamed IDBI Home finance Limited. In view of the signal changes in the operating environment, following initiation of reforms since the early 1990s, Government of India has decided to transform IDBI into a commercial bank without eschewing its

secular development finance obligations. The migration to the new business model of commercial banking, with its gateway to low-cost current, savings bank deposits, would help overcome most of the limitations of the current business model of development finance while simultaneously enabling it to diversify its client/ asset base. Towards this end, the IDB (Transfer of Undertaking and Repeal) Act 2003 was passed by Parliament in December 2003. The Act provides for repeal of IDBI Act, corporatisation of IDBI (with majority Government holding; current share: 58.47%) and transformation into a commercial bank. The provisions of the Act have come into force from 2 July 2004 in terms of a Government Notification to this effect. The Notification facilitated formation, incorporation and registration of Industrial Development Bank of India Ltd. as a company under the Companies Act, 1956 and a deemed Banking Company under the Banking Regulation Act 1949 and helped in obtaining requisite regulatory and statutory clearances, including those from RBI. IDBI would commence banking business in

accordance with the provisions of the new Act in addition to the business being transacted under IDBI Act, 1964 from 1 October 2004, the Appointed Date notified by the Central Government. IDBI Bank, with which the parent IDBI was merged, was a new generation Bank. The Pvt Bank was the fastest growing banking company in India. The bank was pioneer in adapting to policy of first mover in tier 2 cities. The Bank has one of the highest productivity per employee in Indian banking industry. On 29 July 2004, the Board of Directors of IDBI and IDBI Bank accorded in principle approval to the merger of IDBI Bank with the Industrial Development Bank of India Ltd. to be formed incorporated under the Companies Act, 1956 pursuant to the IDB (Transfer of Undertaking and Repeal) Act, 2003 (53 of 2003), subject to the approval of shareholders and other regulatory and statutory approvals. A mutually gainful proposition with positive implications for all stakeholders and clients, the merger process

is expected to be completed during the current financial year ending 31 March 2005.