Bail-out package for IFCI

By Our Special Correspondent

NEW DELHI, AUG. 1. Concerned over the possibility of another financial institution getting into a resource crunch, the Government today approved of a Rs. 1,000-crore bail-out package for the ailing Industrial Finance Corporation of India (IFCI).

As per the proposal, accepted at a meeting between the Finance Minister, Mr. Yashwant Sinha, and the major stakeholders of IFCI today, Rs. 400 crores have been cleared for immediate infusion.

The funds would be contributed by the Industrial Development Bank of India, the Life Insurance Corporation, the General Insurance Corporation and the State Bank, all being stakeholders in IFCI, and it would be in proportion to their equity holding.

The Rs. 400-crore infusion would come in through the issue of convertible debentures with a 20-year maturity period. The long maturity period was necessary to make the loan eligible for Tier- 1 category.

At the meeting, the stakeholders also agreed to ``consider favourably'' the IFCI's request for another Rs. 600 crores to take the total bail-out package to Rs. 1,000 crores, as worked out by IFCI. From these funds, Rs. 720 crores would be required to reach the stipulated capital adequacy norms of 9 per cent. The current capital adequacy of IFCI stands at 6.2 per cent.

Briefing presspersons after the meeting, the Joint Secretary in the Finance Ministry, Mr. U. K. Sinha, and the chairman, IFCI, Mr. P. V. Narasimham, said the IFCI would now restructure its assets as well as its portfolio to turn around the organisation at the earliest. It had about Rs. 1,500 crores locked up in companies which were before the Board for Industrial and Financial Reconstruction (BIFR) while its non-performing assets stood at Rs. 600 crores. Mr. Narasimham hoped the BIFR and the Debt Recovery Tribunals would expedite the cases pending before them so that the locked up money could be recovered.

The IFCI also had Rs. 500 crores outstanding as interest and Rs. 220 crores as principal amount to be paid by the State-level cooperatives for which the respective State Governments had stood guarantee. This recovery process would also be expedited.

It had also been decided to exercise the call option in case of some family bonds and millennium bonds which were issued earlier at 16 per cent interest. Since the lending rates had come down, it was practically impossible to service these bonds at the high interest rate, the IFCI chairman said.

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