Swot Analysis

CONCEPTUAL FRAMEWORK.
The insurance sector in India has come a full circle from being an open competitive
market to nationalization and back to a liberalized market again.
Tracing the developments in the Indian insurance sector reveals the 360-degree turn
witnessed over a period of almost 190 years.

The business of life insurance in India in its existing form started in India in the year
1818 with the establishment of the Oriental Life Insurance Company in Calcutta.

Some of the important milestones in the life insurance business in India are:

1912 - The Indian Life Assurance Companies Act enacted as the first statute to
regulate the life insurance business.

1928 - The Indian Insurance Companies Act enacted to enable the government to
collect statistical information about both life and non-life insurance businesses.

1938 - Earlier legislation consolidated and amended to by the Insurance Act with the
objective of protecting the interests of the insuring public.

1956 - 245 Indian and foreign insurers and provident societies taken over by the
central government and nationalized. LIC formed by an Act of Parliament, viz. LIC
Act, 1956, with a capital contribution of Rs. 5 crore from the Government of India.

The General insurance business in India, on the other hand, can trace its roots to the
Triton Insurance Company Ltd., the first general insurance company established in the
year 1850 in Calcutta by the British.
Some of the important milestones in the general insurance business in India are:

1907 - The Indian Mercantile Insurance Ltd. set up, the first company to transact all
classes of general insurance business.

1957 - General Insurance Council, a wing of the Insurance Association of India,

frames a code of conduct for ensuring fair conduct and sound business practices.

1968 - The Insurance Act amended to regulate investments and set minimum solvency
margins and the Tariff Advisory Committee set up.

1972 - The General Insurance Business (Nationalization) Act, 1972 nationalized the
general insurance business in India with effect from 1st January 1973.

107 insurers amalgamated and grouped into four companies viz. the National
Insurance Company Ltd., the New India Assurance Company Ltd., the Oriental
Insurance Company Ltd. and the United India Insurance Company Ltd. GIC
incorporated as a company.
INSURANCE MARKET IN INDIA

NON-LIFE INSURANCE MARKET

In December 2000, the GIC subsidiaries were restructured as independent insurance
companies. At the same time, GIC was converted into a national re-insurer. In July
2002, Parliamant passed a bill, delinking the four subsidiaries from GIC.

Presently there are 12 general insurance companies with 4 public sector companies
and 8 private insurers. Although the public sector companies still dominate the general
insurance business, the private players are slowly gaining a foothold. According to
estimates, private insurance companies have a 10 percent share of the market, up from
4 percent in 2001. In the first half of 2002, the private companies booked premiums
worth Rs 6.34 billion. Most of the new entrants reported losses in the first year of their
operation in 2001.

With a large capital outlay and long gestation periods, infrastructure projects are
fraught with a multitude of risks throughout the development, construction and
operation stages. These include risks associated with project implementaion, including
geological risks, maintenance, commercial and political risks. Without covering these
risks the financial institutions are not willing to commit funds to the sector, especially
because the financing of most private projects is on a limited or non- recourse basis.

Insurance companies not only provide risk cover to infrastructure projects, they also
contribute long-term funds. In fact, insurance companies are an ideal source of long
term debt and equity for infrastructure projects. With long term liability, they get a
good asset- liability match by investing their funds in such projects. IRDA regulations
required insurance companies to invest not less than 15 percent of their funds in
infrastructure and social sectors. International Insurance companies also invest their
funds in such projects.
Insurance costs constitute roughly around 1.2- 2 percent of the total project costs.
Under the existing norms, insurance premium payments are treated as part of the fixed
costs. Consequently they are treated as pass-through costs for tariff calculations.

Premium rates of most general insurance policies come under the purview of the
government appointed Tariff Advisory Commitee. For Projects costing up to Rs 1
Billion, the Tariff Advisory Committee sets the premium rates, for Projects between
Rs 1 billion and Rs 15 billion, the rates are set in keeping with the committee's
guidelines; and projects above Rs 15 billion are subjected to re-insurance pricing. It is
the last segment that has a number of additional products and competitive pricing.

Insurance, like project finance, is extended by a consortium. Normally one insurer

takes the lead, shouldering about 40-50 per cent of the risk and receiving a
proportionate percentage of the premium. The other companies share the remaining
risk and premium. The policies are renewed usually on an annual basis through the
invitation of bids.

Of late, with IPP projects fizzling out, the insurance companies are turning once again
to old hands such as NTPC, NHPC and BSES for business.
RE-INSURANCE BUSINESS
Insurance companies retain only a part of the risk (less than 10 per cent) assumed by
them, which can be safely borne from their own funds. The balance risk is re-insured
with other insurers. In effect, therefore, re-insurance is insurer's insurance. It forms the
backbone of the insurance business. It helps to provide a better spread of risk in the
international market, allows primary insurers to accept risks beyond their capacity,
settle accumulated losses arising from catastrophic events and still maintain their
financial stability.

While GIC's subsidiaries look after general insurance, GIC itself has been the major
reinsurer. Currently, all insurance companies have to give 20 per cent of their
reinsurance business to GIC. The aim is to ensure that GIC's role as the national
reinsurer remains unhindered. However, GIC reinsures the amount further with
international companies such as Swissre (Switzerland), Munichre (Germany), and
Royale (UK). Reinsurance premiums have seen an exorbitant increase in recent years,
following the rise in threat perceptions globally.

LIFE INSURANCE MARKET

The Life Insurance market in India is an underdeveloped market that was only tapped
by the state owned LIC till the entry of private insurers. The penetration of life
insurance products was 19 percent of the total 400 million of the insurable population.
The state owned LIC sold insurance as a tax instrument, not as a product giving
protection. Most customers were under- insured with no flexibility or transparency in
the products. With the entry of the private insurers the rules of the game have
changed.

The 12 private insurers in the life insurance market have already grabbed nearly 9
percent of the market in terms of premium income. The new business premiums of the
12 private players has tripled to Rs 1000 crore in 2002- 03 over last year. Meanwhile,
state owned LIC's new premium business has fallen.
Innovative products, smart marketing and aggressive distribution. That's the triple
whammy combination that has enabled fledgling private insurance companies to sign
up Indian customers faster than anyone ever expected. Indians, who have always seen
life insurance as a tax saving device, are now suddenly turning to the private sector
and snapping up the new innovative products on offer.

The growing popularity of the private insurers shows in other ways. They are coining
money in new niches that they have introduced. The state owned companies still
dominate segments like endowments and money back policies. But in the annuity or
pension products business, the private insurers have already wrested over 33 percent
of the market. And in the popular unit-linked insurance schemes they have a virtual
monopoly, with over 90 percent of the customers.

The private insurers also seem to be scoring big in other ways- they are persuading
people to take out bigger policies. For instance, the average size of a life insurance
policy before privatisation was around Rs 50,000. That has risen to about Rs 80,000.
But the private insurers are ahead in this game and the average size of their policies is
around Rs 1.1 lakh to Rs 1.2 lakh- way bigger than the industry average.

Buoyed by their quicker than expected success, nearly all private insurers are fast-
forwarding the second phase of their expansion plans. No doubt the aggressive stance
of private insurers is already paying rich dividends. But a rejuvenated LIC is also
trying to fight back to woo new customers.
COMPARISON OF TERM INSURANCE PREMIUMS (Rs./ Year)
COMPARISON OF TERM INSURANCE PREMIUMS (Rs./ Year)
MINIMUM REQUIRED COMPOUND BONUS RATE (IN %)

WHOLE LIFE INSURANCE PREMIUMS (RS./ YEAR)

 EQUITY SHARE CAPITAL OF LIFE INSURANCE
COMPANIES

Foreign Indian
Name of the insurer 2003-04 2004-05 Promoter Promoter
 
Life Insurers
HDFC Standard Life Insurance Co. Ltd. 255.50 320.00 47.52 272.48
ICICI-Prudential Life Insurance Co. Ltd. 675.00 925.00 240.50 684.50
Max New York Life Insurance Co. Ltd. 346.08 466.08 121.18 344.90
Kotak Mahindra Old Mutual Life Insurance Co. Ltd. 151.26 211.76 55.06 26.00
Birla Sun Life Insurance Co. Ltd. 290.00 350.00 91.00 26.00
TATA-AIG Life Insurance Co. Ltd. 231.00 321.00 83.46 237.54
SBI Life Insurance Co. Ltd. 175.00 350.00 91.00 259.00
ING Vysya Life Insurance Co. Ltd. 245.00 325.00 84.50 26.00
Met life India Insurance Co. Ltd. 160.00 235.00 61.10 173.90
ICICI BANK LIFE INSURANCE Life Insurance Co.
150.07 150.07 39.02 111.05
Ltd.
AMP Sanmar 160.00 217.10 56.45 160.65
AVIVA 242.80 319.80 83.15 236.65
Sahara India 157.00 157.00 0.00 157.00
Sub Total 3238.71 4347.81 1053.93 3293.88
Life Insurance Corporation of India 5.00 5.00 5.00

Total (Life) 3243.71 4352.81 1053.93 3298.88

INVESTMENTS OF LIFE INSURERS IN LIFE FUND
(Rs. In Crore)
  2005 2004
PUBLIC SECTOR  
LIC (A) 361428.87 304436.88
PRIVATE SECTOR  
HDFC STD LIFE 480.77 305.43
MNYL 436.37 241.85
ICICIPRU 970.63 658.45
BSLI 170.06 140.38
TATA AIG 392.76 220.65
KOTAK LIFE 200.67 133.43
SBI LIFE 960.89 367.84
BAJAJ ALLIANZ 382.28 221.91
METLIFE 157.18 120.18
AMP SANMAR 110.71 98.69
ING VYSYA 241.22 75.28
AVIVA 144.95 144.65
SAHARA LIFE 142.48 143.29
TOTAL (B) 4790.98 2872.03
TOTAL (A+B) 366219.85 307308.91

INVESTMENTS OF LIFE INSURERS IN PENSIONS FUNDS

(Rs. In Crore)

  2005 2004
PUBLIC SECTOR  
LIC (A) 11462.03 9244.06
PRIVATE SECTOR  
HDFC STD LIFE 151.91 101.68
MNYL 14.03 2.11
ICICIPRU 166.64 127.59
BSLI 0.06 0.00
TATA AIG 76.78 39.79
KOTAK LIFE 13.36 7.54
SBI LIFE 78.97 15.41
BAJAJ ALLIANZ 9.28 3.81
METLIFE 0.21 0.00
AMP SANMAR 50.45 9.83
ING VYSYA 0.00 0.00
AVIVA 0.00 0.00
SAHARA LIFE 0.06 0.00
TOTAL (B) 561.75 307.77
TOTAL (A+B) 12033.78 9551.83
INVESTMENTS OF LIFE INSURERS IN GROUP INSURANCE
(Rs. In Crore)

  2005 2004
PUBLIC SECTOR  
LIC (A) 42639.42 34068.32
PRIVATE SECTOR  
HDFC STD LIFE 0.00 0.00
MNYL 7.25 1.35
ICICIPRU 0.00 0.00
BSLI 0.00 0.00
TATA AIG 14.70 0.00
KOTAK LIFE 2.05 0.90
SBI LIFE 10.77 2.92
BAJAJ ALLIANZ 1.27 0.95
METLIFE 2.52 0.44
AMP SANMAR 0.00 0.00
ING VYSYA 0.00 0.00
AVIVA 2.85 0.57
SAHARA LIFE 0.02 0.00
TOTAL (B) 41.43 7.15
TOTAL (A+B) 42680.85 34075.47

INVESTMENTS OF LIFE INSURERS IN UNIT LINKED PLANS

(Rs. In Crore)

  2005 2004
PUBLIC SECTOR  
LIC (A) 2758.67 209.87
PRIVATE SECTOR  
HDFC STD LIFE 290.67 60.91
MNYL 20.44 0.00
ICICIPRU 2337.16 780.07
BSLI 1125.72 474.62
TATA AIG 80.81 12.75
KOTAK LIFE 308.33 53.54
SBI LIFE 3.54 0.00
BAJAJ ALLIANZ 369.24 28.61
METLIFE 1.74 0.00
AMP SANMAR 21.40 0.00
ING VYSYA 78.61 20.81
AVIVA 131.13 47.13
SAHARA LIFE 0.00 0.00
TOTAL (B) 4768.77 1478.43
TOTAL (A+B) 7527.45 1688.31
Evolution

Indian Stock Markets are one of the oldest in Asia. Its history dates back to nearly 200 years
ago. The earliest records of security dealings in India are meager and obscure. The East India
Company was the dominant institution in those days and business in its loan securities used
to be transacted towards the close of the eighteenth century.

By 1830's business on corporate stocks and shares in Bank and Cotton presses took place in
Bombay. Though the trading list was broader in 1839, there were only half a dozen brokers
recognized by banks and merchants during 1840 and 1850.

The 1850's witnessed a rapid development of commercial enterprise and brokerage business
attracted many men into the field and by 1860 the number of brokers increased into 60.

In 1860-61 the American Civil War broke out and cotton supply from United States of
Europe was stopped; thus, the 'Share Mania' in India begun. The number of brokers increased
to about 200 to 250. However, at the end of the American Civil War, in 1865, a disastrous
slump began (for example, Bank of Bombay Share which had touched Rs 2850 could only be
sold at Rs. 87).

At the end of the American Civil War, the brokers who thrived out of Civil War in 1874,
found a place in a street (now appropriately called as Dalal Street) where they would
conveniently assemble and transact business. In 1887, they formally established in Bombay,
the "Native Share and Stock Brokers' Association" (which is alternatively known as " The
Stock Exchange "). In 1895, the Stock Exchange acquired a premise in the same street and it
was inaugurated in 1899. Thus, the Stock Exchange at Bombay was consolidated.

Other leading cities in stock market operations

Ahmadabad gained importance next to Bombay with respect to cotton textile industry. After
1880, many mills originated from Ahmadabad and rapidly forged ahead. As new mills were
floated, the need for a Stock Exchange at Ahmadabad was realized and in 1894 the brokers
formed "The Ahmadabad Share and Stock Brokers' Association".
What the cotton textile industry was to Bombay and Ahmadabad, the jute industry was to
Calcutta. Also tea and coal industries were the other major industrial groups in Calcutta.
After the Share Mania in 1861-65, in the 1870's there was a sharp boom in jute shares, which
was followed by a boom in tea shares in the 1880's and 1890's; and a coal boom between
1904 and 1908. On June 1908, some leading brokers formed "The Calcutta Stock Exchange
Association".

In the beginning of the twentieth century, the industrial revolution was on the way in India
with the Swadeshi Movement; and with the inauguration of the Tata Iron and Steel Company
Limited in 1907, an important stage in industrial advancement under Indian enterprise was
reached.

Indian cotton and jute textiles, steel, sugar, paper and flour mills and all companies generally
enjoyed phenomenal prosperity, due to the First World War.

In 1920, the then demure city of Madras had the maiden thrill of a stock exchange
functioning in its midst, under the name and style of "The Madras Stock Exchange" with 100
members. However, when boom faded, the number of members stood reduced from 100 to 3,
by 1923, and so it went out of existence.

In 1935, the stock market activity improved, especially in South India where there was a
rapid increase in the number of textile mills and many plantation companies were floated. In
1937, a stock exchange was once again organized in Madras - Madras Stock Exchange
Association (Pvt) Limited. (In 1957 the name was changed to Madras Stock Exchange
Limited).

Lahore Stock Exchange was formed in 1934 and it had a brief life. It was merged with the
Punjab Stock Exchange Limited, which was incorporated in 1936.

Indian Stock Exchanges - An Umbrella Growth

The Second World War broke out in 1939. It gave a sharp boom which was followed by a
slump. But, in 1943, the situation changed radically, when India was fully mobilized as a
supply base.
On account of the restrictive controls on cotton, bullion, seeds and other commodities, those
dealing in them found in the stock market as the only outlet for their activities. They were
anxious to join the trade and their number was swelled by numerous others. Many new
associations were constituted for the purpose and Stock Exchanges in all parts of the country
were floated.

The Uttar Pradesh Stock Exchange Limited (1940), Nagpur Stock Exchange Limited (1940)
and Hyderabad Stock Exchange Limited (1944) were incorporated.

In Delhi two stock exchanges - Delhi Stock and Share Brokers' Association Limited and the
Delhi Stocks and Shares Exchange Limited - were floated and later in June 1947,
amalgamated into the Delhi Stock Exchnage Association Limited.

Post-independence Scenario

Most of the exchanges suffered almost a total eclipse during depression. Lahore Exchange
was closed during partition of the country and later migrated to Delhi and merged with Delhi
Stock Exchange.

Bangalore Stock Exchange Limited was registered in 1957 and recognized in 1963.

Most of the other exchanges languished till 1957 when they applied to the Central
Government for recognition under the Securities Contracts (Regulation) Act, 1956. Only
Bombay, Calcutta, Madras, Ahmadabad, Delhi, Hyderabad and Indore, the well established
exchanges, were recognized under the Act. Some of the members of the other Associations
were required to be admitted by the recognized stock exchanges on a concessional basis, but
acting on the principle of unitary control, all these pseudo stock exchanges were refused
recognition by the Government of India and they thereupon ceased to function.
Thus, during early sixties there were eight recognized stock exchanges in India (mentioned
above). The number virtually remained unchanged, for nearly two decades. During eighties,
however, many stock exchanges were established: Cochin Stock Exchange (1980), Uttar
Pradesh Stock Exchange Association Limited (at Kanpur, 1982), and Pune Stock Exchange
Limited (1982), Ludhiana Stock Exchange Association Limited (1983), Gauhati Stock
Exchange Limited (1984), Kanara Stock

Exchange Limited (at Mangalore, 1985), Magadh Stock Exchange Association (at Patna,
1986), Jaipur Stock Exchange Limited (1989), Bhubaneswar Stock Exchange Association
Limited (1989), Saurashtra Kutch Stock Exchange Limited (at Rajkot, 1989), Vadodara Stock
Exchange Limited (at Baroda, 1990) and recently established exchanges - Coimbatore and
Meerut. Thus, at present, there are totally twenty one recognized stock exchanges in India
excluding the Over The Counter Exchange of India Limited (OTCEI) and the National Stock
Exchange of India Limited (NSEIL).

The Table given below portrays the overall growth pattern of Indian stock markets since
independence. It is quite evident from the Table that Indian stock markets have not only
grown just in number of exchanges, but also in number of listed companies and in capital of
listed companies. The remarkable growth after 1985 can be clearly seen from the Table, and
this was due to the favouring government policies towards security market industry.

Trading Pattern of the Indian Stock Market

Trading in Indian stock exchanges are limited to listed securities of public limited companies.
They are broadly divided into two categories, namely, specified securities (forward list) and
non-specified securities (cash list). Equity shares of dividend paying, growth-oriented
companies with a paid-up capital of atleast Rs.50 million and a market capitalization of
atleast Rs.100 million and having more than 20,000 shareholders are, normally, put in the
specified group and the balance in non-specified group.

Two types of transactions can be carried out on the Indian stock exchanges: (a) spot delivery
transactions "for delivery and payment within the time or on the date stipulated when
entering into the contract which shall not be more than 14 days following the date of the
contract" : and (b) forward transactions "delivery and payment can be extended by further
period of 14 days each so that the overall period does not exceed 90 days from the date of the
contract". The latter is permitted only in the case of specified shares. The brokers who carry
over the outstandings pay carry over charges (cantango or backwardation) which are usually
determined by the rates of interest prevailing.

A member broker in an Indian stock exchange can act as an agent, buy and sell securities for
his clients on a commission basis and also can act as a trader or dealer as a principal, buy and
sell securities on his own account and risk, in contrast with the practice prevailing on New
York and London Stock Exchanges, where a member can act as a jobber or a broker only.

The nature of trading on Indian Stock Exchanges are that of age old conventional style of
face-to-face trading with bids and offers being made by open outcry. However, there is a
great amount of effort to modernize the Indian stock exchanges in the very recent times.

Over The Counter Exchange of India (OTCEI)

The traditional trading mechanism prevailed in the Indian stock markets gave way to many
functional inefficiencies, such as, absence of liquidity, lack of transparency, unduly long
settlement periods and benami transactions, which affected the small investors to a great
extent. To provide improved services to investors, the country's first ringless, scripless,
electronic stock exchange - OTCEI - was created in 1992 by country's premier financial
institutions - Unit Trust of India, Industrial Credit and Investment Corporation of India,
Industrial Development Bank of India, SBI Capital Markets, Industrial Finance Corporation
of India, General Insurance Corporation and its subsidiaries and CanBank Financial Services.

Trading at OTCEI is done over the centres spread across the country. Securities traded on the
OTCEI are classified into:

 Listed Securities - The shares and debentures of the companies listed on the OTC can
be bought or sold at any OTC counter all over the country and they should not be
listed anywhere else

 Permitted Securities - Certain shares and debentures listed on other exchanges and
units of mutual funds are allowed to be traded
  Initiated debentures - Any equity holding atleast one lakh debentures of a particular
scrip can offer them for trading on the OTC.

OTC has a unique feature of trading compared to other traditional exchanges. That is,
certificates of listed securities and initiated debentures are not traded at OTC. The original
certificate will be safely with the custodian. But, a counter receipt is generated out at the
counter which substitutes the share certificate and is used for all transactions.

In the case of permitted securities, the system is similar to a traditional stock exchange. The
difference is that the delivery and payment procedure will be completed within 14 days.

Compared to the traditional Exchanges, OTC Exchange network has the following
advantages:

 OTCEI has widely dispersed trading mechanism across the country which provides
greater liquidity and lesser risk of intermediary charges.

 Greater transparency and accuracy of prices is obtained due to the screen-based

scripless trading.

 Since the exact price of the transaction is shown on the computer screen, the investor
gets to know the exact price at which s/he is trading.

 Faster settlement and transfer process compared to other exchanges.

 In the case of an OTC issue (new issue), the allotment procedure is completed in a
month and trading commences after a month of the issue closure, whereas it takes a
longer period for the same with respect to other exchanges.

Thus, with the superior trading mechanism coupled with information transparency investors
are gradually becoming aware of the manifold advantages of the OTCEI.
National Stock Exchange (NSE)

With the liberalization of the Indian economy, it was found inevitable to lift the Indian stock
market trading system on par with the international standards. On the basis of the
recommendations of high powered Pherwani Committee, the National Stock Exchange was
incorporated in 1992 by Industrial Development Bank of India,

Industrial Credit and Investment Corporation of India, Industrial Finance Corporation of

India, all Insurance Corporations, selected commercial banks and others.

Trading at NSE can be classified under two broad categories:

(a) Wholesale debt market and

(b) Capital market.

Wholesale debt market operations are similar to money market operations - institutions and
corporate bodies enter into high value transactions in financial instruments such as
government securities, treasury bills, public sector unit bonds, commercial paper, certificate
of deposit, etc.

There are two kinds of players in NSE:

(a) trading members and

(b) participants.

Recognized members of NSE are called trading members who trade on behalf of themselves
and their clients. Participants include trading members and large players like banks who take
direct settlement responsibility.

Trading at NSE takes place through a fully automated screen-based trading mechanism which
adopts the principle of an order-driven market. Trading members can stay at their offices and
execute the trading, since they are linked through a communication network. The prices at
which the buyer and seller are willing to transact will appear on the screen. When the prices
match the transaction will be completed and a confirmation slip will be printed at the office
of the trading member.

NSE has several advantages over the traditional trading exchanges. They are as follows:

 NSE brings an integrated stock market trading network across the nation.

 Investors can trade at the same price from anywhere in the country since inter-market
operations are streamlined coupled with the countrywide access to the securities.

 Delays in communication, late payments and the malpractice’s prevailing in the

traditional trading mechanism can be done away with greater operational efficiency
and informational transparency in the stock market operations, with the support of
total computerized network.

Unless stock markets provide professionalized service, small investors and foreign investors
will not be interested in capital market operations. And capital market being one of the major
source of long-term finance for industrial projects, India cannot afford to damage the capital
market path. In this regard NSE gains vital importance in the Indian capital market system.

Preamble

Often, in the economic literature we find the terms ‘development’ and ‘growth’ are used
interchangeably. However, there is a difference. Economic growth refers to the sustained
increase in per capita or total income, while the term economic development implies
sustained structural change, including all the complex effects of economic growth. In other
words, growth is associated with free enterprise, where as development requires some sort of
control and regulation of the forces affecting development. Thus, economic development is a
process and growth is a phenomenon.

Economic planning is very critical for a nation, especially a developing country like India to
take the country in the path of economic development to attain economic growth.
Why Economic Planning for India?

One of the major objective of planning in India is to increase the rate of economic
development, implying that increasing the rate of capital formation by raising the levels of
income, saving and investment. However, increasing the rate of capital formation in India is
beset with a number of difficulties. People are poverty ridden. Their capacity to save is
extremely low due to low levels of income and high

propensity to consume. Therefor, the rate of investment is low which leads to capital
deficiency and low productivity. Low productivity means low income and the vicious circle
continues. Thus, to break this vicious economic circle, planning is inevitable for India.

The market mechanism works imperfectly in developing nations due to the ignorance and
unfamiliarity with it. Therefore, to improve and strengthen market mechanism planning is
very vital. In India, a large portion of the economy is non-monitised; the product, factors of
production, money and capital markets is not organized properly. Thus the prevailing price
mechanism fails to bring about adjustments between aggregate demand and supply of goods
and services. Thus, to improve the economy, market imperfections has to be removed;
available resources has to be mobilized and utilized efficiently; and structural rigidities has to
be overcome. These can be attained only through planning.

In India, capital is scarce; and unemployment and disguised unemployment is prevalent.

Thus, where capital was being scarce and labour being abundant, providing useful
employment opportunities to an increasing labour force is a difficult exercise. Only a
centralized planning model can solve this macro problem of India.
Further, in a country like India where agricultural dependence is very high, one cannot ignore
this segment in the process of economic development. Therefore, an economic development
model has to consider a balanced approach to link both agriculture and industry and lead for a
paralleled growth. Not to mention, both agriculture and industry cannot develop without
adequate infrastructural facilities which only the state can provide and this is possible only
through a well carved out planning strategy. The government’s role in providing
infrastructure is unavoidable due to the fact that the role of private sector in infrastructural
development of India is very minimal since these infrastructure projects are considered as
unprofitable by the private sector.

Further, India is a clear case of income disparity. Thus, it is the duty of the state to reduce the
prevailing income inequalities. This is possible only through planning.

Planning History of India

The development of planning in India began prior to the first Five Year Plan of independent
India, long before independence even. The idea of central directions of resources to overcome
persistent poverty gradually, because one of the main policies advocated by nationalists early
in the century. The Congress Party worked out a program for economic advancement during
the 1920’s, and 1930’s and by the 1938 they formed a National Planning Committee under
the chairmanship of future Prime Minister Nehru. The Committee had little time to do
anything but prepare programs and reports before the Second World War which put an end to
it. But it was already more than an academic exercise remote from administration.
Provisional government had been elected in 1938, and the Congress Party leaders held
positions of responsibility. After the war, the Interim government of the pre-independence
years appointed an Advisory Planning Board. The Board produced a number of somewhat
disconnected Plans itself. But, more important in the long run, it recommended the
appointment of a Planning Commission.

The Planning Commission did not start work properly until 1950. During the first three years
of independent India, the state and economy scarcely had a stable structure at all, while
millions of refugees crossed the newly established borders of India and Pakistan, and while
ex-princely states (over 500 of them) were being merged into India or Pakistan. The Planning
Commission as it now exists, was not set up until the new India had adopted its Constitution
in January 1950.
Objectives of Indian Planning

The Planning Commission was set up the following Directive principles :

 To make an assessment of the material, capital and human resources of the country,
including technical personnel, and investigate the possibilities of augmenting such of
these resources as are found to be deficient in relation to the nation’s requirement.

 To formulate a plan for the most effective and balanced use of the country’s
resources.

 Having determined the priorities, to define the stages in which the plan should be
carried out, and propose the allocation of resources for the completion of each stage.

 To indicate the factors which are tending to retard economic development, and
determine the conditions which, in view of the current social and political situation,
should be established for the successful execution of the Plan.

 To determine the nature of the machinery this will be necessary for securing the
successful implementation of each stage of Plan in all its aspects.

 To appraise from time to time the progress achieved in the execution of each stage of
the Plan and recommend the adjustments of policy and measures that such appraisals
may show to be necessary.

 To make such interim or auxiliary recommendations as appear to it to be appropriate

either for facilitating the discharge of the duties assigned to it or on a consideration of
the prevailing economic conditions, current policies, measures and development
programs; or on an examination of such specific problems as may be referred to it for
advice by Central or State Governments.

The long-term general objectives of Indian Planning are as follows:

 Increasing National Income

 Reducing inequalities in the distribution of income and wealth

 Elimination of poverty

 Providing additional employment; and

 Alleviating bottlenecks in the areas of : agricultural production, manufacturing

capacity for producer’s goods and balance of payments.
 Economic growth, as the primary objective has remained in focus in all Five Year
Plans. Approximately, economic growth has been targeted at a rate of five per cent
per annum. High priority to economic growth in Indian Plans looks very much
justified in view of long period of stagnation during the British rule
 COMPANY PROFILE

ICICI Prudential Asset Management Company Ltd. is a joint venture between ICICI
Bank, India’s second largest commercial bank & a well-known and trusted name in the
financial services in India, & Prudential Plc, one of the United Kingdom’s largest players
in the financial services sectors.

In a span of over 18 years since inception and just over 13 years of the Joint Venture, the
company has forged a position of preeminence as one of the largest Asset Management
Company’s in the country, contributing significantly towards the growth of the Indian
mutual fund industry.

The company manages significant Mutual Fund Assets under Management (AUM), in
addition to our Portfolio Management Services (PMS) and International Advisory
Mandates for clients across international markets in asset classes like Debt, Equity and
Real Estate with primary focus on risk adjusted returns.

As an Asset Management Company, we have over 18 years of experience and are

currently managing a comprehensive range of schemes of more than 46 Mutual fund
schemes and a wide range of PMS Products for our investors spread across the country.
We service this investor base with our own branch network of around 168 branches and a
distribution reach of over 42,000 channel partners.

ICICI Bank is India's second-largest bank with total assets of Rs. 4,736.47 billion (US$ 93
billion) at March 31, 2012 and profit after tax Rs. 64.65 billion (US$ 1,271 million) for the
year ended March 31, 2012. The Bank has a network of 2,890 branches and 10,021 ATMs in
India, and has a presence in 19 countries, including India.
ICICI Bank offers a wide range of banking products and financial services to corporate and
retail customers through a variety of delivery channels and through its specialised
subsidiaries in the areas of investment banking, life and non-life insurance, venture capital
and asset management.

The Bank currently has subsidiaries in the United Kingdom, Russia and Canada, branches in
United States, Singapore, Bahrain, Hong Kong, Sri Lanka, Qatar and Dubai International
Finance Centre and representative offices in United Arab Emirates, China, South Africa,
Bangladesh, Thailand, Malaysia and Indonesia. Our UK subsidiary has established branches
in Belgium and Germany.

ICICI Bank's equity shares are listed in India on Bombay Stock Exchange and the National
Stock Exchange of India Limited and its American Depositary Receipts (ADRs) are listed on
the New York Stock Exchange (NYSE).
Corporate Profile
ICICI Bank is India's second-largest bank with total assets of Rs. 3,562.28 billion (US$ 77
billion) as on December 31, 20013.

Board Members
Mr. K. V. Kamath, Chairman
Mr.SridarIyengar
Mr.Homi R. Khusrokhan
Mr. Lakshmi N. Mittal
Mr.NarendraMurkumbi
Dr.Anup K. Pujari
Mr.AnupamPuri
Mr. M.S. Ramachandran
Mr. M.K. Sharma
Mr. V. Sridar
Prof. Marti G. Subrahmanyam
Mr. V. PremWatsa
Ms.Chanda D. Kochhar,
Managing Director & CEO
Mr.SandeepBakhshi,
Deputy Managing Director
Mr. N. S. Kannan,
Executive Director & CFO
Mr. K. Ramkumar,
Executive Director

Mr.SonjoyChatterjee,
Executive DirectorManagement ICICI Prudential Asset Management
Company(AMC)
Mr.Nimesh Shah- Managing Director & CEO
Mr. B Ramakrishna - Executive Vice President
Mr. RaghavIyengar - Executive Vice President & Head – Retail & Institutional Business
Mr. HemantAgarwal - Head - Operations
Mr. Rahul Rai - Head – Real Estate Business ICICI Prudential Asset Management Company
Limited
 Mr. K. V. Kamath is a mechanical engineer and did his management studies from the
Indian Institute of Management, Ahmedabad. He joined ICICI in 1971 and worked in the
areas of project finance, leasing, resources and corporate planning. In 1988, he joined the
Asian Development Bank and spent several years in south-east Asia before returning to
ICICI as its Managing Director & CEO in 1996. He became Managing Director & CEO
of ICICI Bank in 2002 following the merger of ICICI with ICICI Bank. Under his
leadership, the ICICI Group transformed itself into a diversified, technology-driven
financial services group, that has leadership positions across banking, insurance and asset
management in India, and an international presence. He retired as Managing Director &
CEO in April 2009, and took up the position of non-executive Chairman of ICICI Bank
effective May 1, 2009. He was the President of the Confederation of Indian Industry (CII)
for 2008-09. He was awarded the Padma Bhushan by the President of India in May 2008.
He was conferred the Lifetime Achievement Awards at the Financial Express Best Bank
Awards 2008 and the NDTV Profit Business Leadership Awards 2008; was named
'Businessman of the Year' by Forbes Asia and The Economic Times' 'Business Leader of
the Year' in 2007; Business Standard's "Banker of the Year" and CNBC-TV18's
"Outstanding Business Leader of the Year" in 2006; Business India's "Businessman of the
Year" in 2005; and CNBC's "Asian Business Leader of the Year" in 2001. He has been
conferred with an honorary PhD by the Banaras Hindu University. He is a member of the
Board of the Institute of International Finance, a Director on the Board of Infosys

Technologies and a member of the Board of Governors of the Indian Institute of

Management, Ahmedabad.

Products

Insurance Solutions for Individuals

ICICI Prudential Life Insurance offers a range of innovative, customer-centric products that
meet the needs of customers at every life stage. Its products can be enhanced with up to 4
riders, to create a customized solution for each policyholder.

Savings & Wealth Creation Solutions

 ICICI PruLifeStage Wealth II is a unit linked insurance plan that offers multiple choices to
decide how your savings would be invested based on your risk appetite. UIN - 105L118V02

ICICI PruLifeTime Premier is a comprehensive savings plan that offers you a choice of
portfolio strategies for your savings and at the same time secures you against uncertainties of
life. UIN - 105L112V02

ICICI Pru Pinnacle Super is a unit linked insurance plan that gives you the advantage of
varying exposure to equities with downside protection, so that your investments are protected
in financially volatile times. UIN - 105L121V03

ICICI Pru Elite Life is a unit linked insurance plan that offers you multiple choices on how
to invest your savings along with an insurance cover.UIN - 105L125V02

ICICI Pru Elite Wealth is a unit linked insurance plan that offers you the greatest value for
your hard earned savings. Also, you get rewarded with Loyalty Additions from the sixth year
onwards to maximize the return on your investments. UIN - 105L126V02

ICICI PruiAssure Single Premium a conventional non-participating single premium

product that provides you Guaranteed Maturity Benefit and also offers a life cover to take
care of your loved ones in your absence.UIN - 105N123V01

ICICI Pru Guaranteed Savings Insurance Plan is a limited pay endowment product that
allows you to enjoy the benefits of a long term savings plan ensuring that you and your
family are free of any financial worries. UIN - 105N114V02

ICICI Pru Future Secure is a participating endowment life insurance plan that helps you
save for specific goals in the future, while providing protection for your family from financial
distress in case of your untimely demise. Thus the dual benefit of savings and protection it
helps you ensure a secure future for your loved ones. UIN - 105N117V01

ICICI Pru Whole Life provides you with a unique double advantage of savings and
protection that not only allows you to meet your goals but also seeks to ensure that your dear
ones will continue to live their lives in comfort without financial worries in case of
unforeseen eventuality. UIN - 105N116V01

ICICI Pru Save 'n' Protect is plan for those who want to accumulate funds on a regular
basis while enjoying insurance protection. UIN - 105N004V02

ICICI PruCashBak is a single policy that combines the triple benefit of protection, savings
& periodic liquidity. UIN - 105N005V02

Protection Solutions

ICICI PruiCare is a term insurance plan that you can buy online at your convenience at
their home in a simple manner. UIN - 105N122V01

ICICI Pru Pure Protect is a flexible and affordable term product, with which you can
ensure your life and provide total security for your family in case of an unfortunate event.
UIN - 105N084V01

ICICI PruLifeGuard is a protection plan, which offers life cover at low cost. It is available
in 2 options –level term assurance with return of premium & single premium. UIN -
105N006V02

Child Plans

ICICI PruSmartKid Regular Premium is an endowment regular premium life insurance

plan which comes with a unique Payer Waiver Benefit (PWB). This benefit ensures that in
case of death of the parent, the company pays all future premiums on behalf of the parent.
This means that the child gets money at important stages of his/her student life and education
never suffers due to lack of funds.UIN No - 105N014V02

ICICI PruSmartKid Premier is a ULIP plan which ensures your child’s education continues
even if you are not around. In this Plan you need to invest premiums regularly over a period
of time and the returns that you get will depend on the performance of the underlying fund
performance. UIN - 105L120V01
Retirement Solutions

ICICI Pru Immediate Annuity is a single premium annuity product that guarantees income
for life at the time of retirement. It offers the benefit of 5 payout options. UIN - 105N009V06

Health Solutions

ICICI Pru Hospital Care II is a family floater plan covering your spouse and children. This
fixed benefit hospitalisation and surgical plan complements your existing coverage by
offering payouts over and above any health plan you have, thus availing best possible medical
treatment, without having to bother about the cost of the treatment or quality of care. UIN -
105N108V01

ICICI Pru Crisis Cover is a product that will provide long-term coverage against 35 critical
illnesses, total and permanent disability, and death. UIN - 105N072V01

ICICI Pru Health Saver is a whole of life comprehensive health insurance policy which
provides a hospitalisation cover for you and your family and reimburses all other medical
expenses not covered in the hospitalisation benefit by building a health fund for you and your
family. UIN - 105L087V01

Group Insurance Solutions

ICICI Prudential also offers Group Insurance Solutions for companies seeking to enhance
benefits to their employees.

Group Gratuity Plan: ICICI Prudential Life's group gratuity plan helps employers fund
their statutory gratuity obligation in a scientific manner and also avail of tax benefits as
applicable to approved gratuity funds.

Group Leave encashment Plan: ICICI Prudential Life’s Group offers a market linked and
traditional leave encashment plan designed to aid the employer to build a fund to meet their
future leave encashment liability. The contributions made will be invested as per the chosen
investment plans and will be available for payment of the benefit when it falls due.
Additionally, the product also provides for term cover for all the employees covered under
the policy. UIN - 105L079V01
 Group Term Insurance Plan: ICICI Prudential Life's flexible group term is a one-year
renewable life insurance policy that enables you to provide every member of your team with
an affordable life cover.

Group Term in lieu of EDLI Scheme: ICICI Prudential's Group Insurance Scheme in lieu
of EDLI has been certified by the Employee Provident Fund Organization (EPFO) as a
superior product that provides greater insurance benefits than the cover offered by EPFO.

Credit Assure With Credit Assure, we offer an innovative and affordable term life
insurance plan that covers loans against the unfortunate event of death, with complete
convenience in application. The scheme is simple and hassle-free. In other words, peace of
mind guaranteed.

Flexible Rider Options

ICICI Prudential Life offers flexible riders, which can be added to the basic policy at a
marginal cost, depending on the specific needs of the customer.

Accident & disability benefit: If death occurs as the result of an accident during the term of
the policy, the beneficiary receives an additional amount equal to the rider sum assured under
the policy. If an accident results in total and permanent disability, 10% of rider sum assured
will be paid each year, from the end of the 1st year after the disability date for the remainder
of the base policy term or 10 years, whichever is lesser.

Critical illness benefit: Critical Illness Benefit Rider provides protection against 9 critical
illnesses to the policyholder when attached to the basic plan.

Income Benefit Rider: In case of death of the life assured during the term of the policy,
10% of the rider sum assured is paid annually to the beneficiary, on each policy anniversary
till maturity of the rider. Income Benefit rider is available with Smart Kid Child Plans.
Premiums paid under this rider are eligible for tax benefits under Section 80C.
 Waiver of Premium Rider (WOP): On total and permanent disability due to an accident, all
future premiums for both the base policy and rider(s) will be waived till the end of the term of
the rider or death of the life assured, if earlier.

Waiver of Premium Rider on Critical Illness Rider: This rider waives all your future
premiums of your base policy on occurrence of specified 20 Critical Illnesses. This ensures
that your policy benefits continue as planned.

Awards:

 ICICI Bank has been adjudged winner at the Express IT Innovation Award under the
Large Enterprise category.
 ICICI Bank wins awards under the categories of 'Most Innovative Bank' and 'Most
Innovative use of Multi-Channel Infrastructure' at the Indian Bank's Association's
BANCON Innovation Awards 2013.
 ICICI Bank won the Asian Banking & Finance Retail Banking Award 2013 for the
Online Banking Initiative of the Year
 ICICI Bank won an award under the Social Media category at the InformationWeek
EDGE Award

 Ms. ChandaKochhar, MD and CEO has been awarded as the Best CEO - Private
Sector category at the Forbes India Leadership Awards 2013
 ICICI Prudential Life Insurance has been pronounced winner in the 2nd Excellence
Awards and Recongnition for Shared Services, 2012. We won the award in the
category - Shared Services in India - Insurance Domain. 
 These awards have been instituted by All India Management Association (AIMA) &
Delhi Management Association (DMA), in collaboration with Rvalue Consulting as
knowledge partners, to honour,recognize& promote trasformative strategies for shared
services.
 Ms.ChandaKochhar, Managing Director & CEO was awarded the "CNBC Asia India
Business Leader Of The Year Award". She also received the "CNBC Asia's CSR
Award 2011"
 For the third year in a row ICICI Bank has won The Asset Triple A Country Awards
 for Best Domestic Bank in India
 ICICI Bank won the Most Admired Knowledge Enterprises (MAKE) India 2009
Award. ICICI Bank won the first place in "Maximizing Enterprise Intellectual
Capital" category, October 28, 2009
 Ms ChandaKochhar, MD and CEO was awarded with the Indian Business Women
Leadership Award at NDTV Profit Business Leadership Awards , October 26, 2009.
 ICICI Bank received two awards in CNBC Awaaz Consumer Awards; one for the
most preferred auto loan and the other for most preferred credit Card, on September
30, 2009
 Ms.ChandaKochhar, Managing Director & CEO ranked in the top 20 of the World's
100 Most Powerful Women list compiled by Forbes, August 2009
 Financial Express at its FE India's Best Banks Awards, honoured Mr. K.V. Kamath,
Chairman with the Lifetime Achievement Award , July 25, 2009
 ICICI Bank won Asset Triple A Investment Awards for the Best Derivative House,
India. In addition ICICI Bank were Highly commended , Local Currency Structured
product, India for 1.5 year ADR GDR linked Range Accrual Note., July 2009
 ICICI bank won in three categories at World finance Banking awards on June 16,
2009
o Best NRI Services bank
o Excellence in Private Banking, APAC Region
o Excellence in Remittance Business, APAC Region
 ICICI Bank Mobile Banking was adjudged "Best Bank Award for Initiatives in
Mobile Payments and Banking" by IDRBT, on May 18, 2009 in Hyderabad.
 ICICI Bank's b2 branchfree banking was adjudged "Best E-Banking Project
Implementation Award 2008" by The Asian Banker, on May 11, 2009 at the China
World Hotel in Beijing.
 ICICI Bank bags the "Best bank in SME financing (Private Sector)" at the Dun &
Bradstreet Banking awards 2009.
 ICICI Bank NRI services wins the "Excellence in Business Model Innovation Award"
in the eighth Asian Banker Excellence in Retail Financial Services Awards
Programme.
 ICICI Bank's Rural Micro Banking and Agri-Business Group wins WOW Event &
Experiential Marketing Award in two categories - "Rural Marketing programme of
 the year" and "Small Budget On Ground Promotion of the Year". These awards were
given for Cattle Loan 'Kamdhenu Campaign' and "Talkies on the move campaign'
respectively.
 ICICI Bank's Germany Branch has been certified by "StiftungWarrentest". ICICI
Bank is ranked 2nd amongst 57 savings products across 19 banks
 ICICI Bank Germany won the yearly banking test of the investor magazine €uro in
the "call money"category.
 The ICICI Bank was awarded the runner's up position in Gartner Business
Intelligence and Excellence Award for Asia Pacific for its Business Intelligence
functions.
 ICICI Bank's Organisational Excellence Group was recently awarded ISO 9001:2008
certification by TUV Nord. The scope of certification comprised processes around
consulting and capability building on methods of quality & improvements.
 ICICI Bank has been awarded the following titles under The Asset Triple A Country
Awards for 2009:
o Best Transaction Bank in India
o Best Trade Finance Bank in India
o Best Cash Management Bank in India
o Best Domestic Custodian in India

ICICI Bank has bagged the Best Cash Management Bank in India award for the
second year in a row. The other awards have been bagged for the third year in a row.

 ICICI Bank Canada received the prestigious Canadian Helen Keller Award at the
Canadian Helen Keller Centre's Fifth Annual Luncheon in Toronto. The award was
given to ICICI Bank its long-standing support to this unique training centre for people
who are deaf-blind.

ICICI Foundation for Inclusive Growth (ICICI Foundation) was founded by the ICICI Group
in early 2008 to give focus to its efforts to promote inclusive growth amongst low-income
Indian households.

We believe our fundamental challenge is to create a “just” society – one where everyone has
equal opportunity to develop and grow. Towards this end, ICICI Foundation is committed to
making India’s economic growth more inclusive, allowing every individual to participate in
and benefit from the growth process.

We hold a set of core beliefs and values that defines our pathway towards inclusive growth
and guides our five strategic partnerships.
Vision

Our vision is a world free of poverty in which every individual has the freedom and power to
create and sustain a just society in which to live.
Mission
Our mission is to create and support strong independent organisations which work towards
empowering the poor to participate in and benefit from the Indian growth process.
As a key partner in India's economic growth for more than five decades, the ICICI Group
endeavours to promote growth in all sectors of the nation ’s economy. To give focus to its
efforts to promote inclusive growth amongst low-income Indian households, the ICICI Group
founded ICICI Foundation for Inclusive Growth in January 2010.

The foundations of ICICI Group’s approach towards human and social development were
established with the Social Initiatives Group (SIG), a non-profit resource group within ICICI
Bank, in 2000.
charitable trust registered at Chennai vide registration of the Trust Deed with the Sub-
Registrar’s Office at Chennai on January 04, 2010.

The application for registration of the Foundation under section 12AA of the Income tax Act,
1961 (“the Act”) was filed on February 7, 2008 and the application under section 80G of the
Act was filed on February 14, 2008. Subsequently, ICICI Foundation was registered as a
“PUBLIC CHARITABLE TRUST” under Section 12AA of the Act with effect from
February 7, 2008. Further, ICICI Foundation received approval under Section 80G(5)(vi) of
the Act on March 19, 2008. This approval is valid in respect of donation received by ICICI
Foundation from February 14, 2008 to March 31, 2009. Accordingly, ICICI Bank and Group
Companies will be eligible to get a deduction under section 80G on donations made during
this period.
ICICI Foundation has also obtained its Permanent Account Number (PAN) and Tax
deduction Account Number (TAN).
ICICI Group Corporate Social Responsibility Programmers
Read to Lead
Read to Lead is an initiative of ICICI Bank to facilitate elementary education for
disadvantaged children in the age group of 6-13 years. An amount of Rs.25.00 million has
thus far been disbursed to 100,000 children through 30 NGOs. The balance amount of
Rs.75.00 million is planned to be disbursed during the period 2009-2010.
MITRA (ICICI Fellows Programme)
MITRA is an affiliate of CSO Partners that is focused on addressing the challenge of human
resources for civil society organisations (CSOs). In partnership with CSO Partners and
MITRA, ICICI Foundation proposes to launch an ICICI Fellows Programme. An amount of
Rs.55.00 million has been disbursed to MITRA for developing and launching the programme
over the period 2009-2010.
CARE (Disaster Management Unit)
A grant of Rs.5.00 million has been given to CARE in India to enable it to prepare for any
future disasters that may strike and respond immediately with the required relief efforts.
Rang De (Micro Enterprise Development)
Rang De, an affiliate of CSO Partners, has partnered with ICICI Venture to roll out funds for
micro enterprise development in rural and semi-urban locations. The amount of Rs.25.00
million that has been disbursed to them will support micro enterprises to the extent of
Rs.15.00 million and the balance amount of Rs.10.00 million will go towards meeting their
expenses to build the platform.